Pre-tax profit increased to 3.8m for the 12 months to December 2005, compared with a loss of 400,000 in the previous year.

Despite this, Inveresks bank borrowings still stand at 9.4m (2004: 15.67m), while sales were down to 36.385m from 40.7m in 2004 and turnover was down to 13.5m from 14m.

"There is very little for either paper manufacturers or merchants to draw comfort from," said Inveresk chief executive Alan Walker (pictured).

"If anything, the dismal trading environment that prevailed on a global basis in 2005 has deteriorated further in 2006, if only due to raw material price increases and soaring energy costs," he said.

Inveresk repeated its intention to ensure consolidation within the paper industry continued so that it could pursue its alternative strategy of becoming a real estate firm.

Inveresk announced that it was involved in "active discussions concerning strategic alliances, mergers and consolidation activities."

Inveresk also outlined plans to develop expansion initiatives in Europe and the Far East "in an effort to achieve full capacity utilisation".

In November last year, Inveresk closed its Carrongrove mill and sold the Gemini board brand, produced there, to Tullis Russell.