Klippan president and chief executive Bengt stensson said it had been, an extremely difficult decision to make, but one that had been forced on the Swedish papermaker due to market forces, and after incurring considerable losses.

Although he declined to divulge the amount of losses incurred he said it would have taken a considerable amount of time before the mill returned to profit, much longer than we had envisaged.

stensson said the machinery at the Fife-based mill site and the plant itself would both now be handed back to Inveresk before the end of the year, with production set to transfer to Klippans three other mills in Sweden.

Inveresk retained ownership of the fixed assets, with Klippan renting the land and machinery for an initial fee.

The announcement came as Klippan reported a pre-tax loss of 2.6m (SEK34.9m) for the first six months of 2003, a reversal on a pre-tax profit of 1.8m for the same period last year.

The company said it had suffered from a weak market for fine paper during the second quarter, with the imbalance between supply and demand resulting in pricing pressure.

This was caused by two main factors, weak advertising spend and the economic climate in Germany.

Klippan announced a cost-cutting programme aimed at making savings of 2.6m in July this year, a move which saw some 103 jobs lost at four of its mills, including Caldwells.

During the first six months of 2003 Klippan reported sales of 69m, an increase of 48% on the first six months of 2002.

Deliveries amounted to 94,547 tonnes, an increase of nearly 30,000 tonnes on last year.

The Caldwells mill has a capacity of around 40,000 tonnes per annum and specialises in production of Klippans Repeat recycled grade.