The "disagreement" was reported in The Scotsman newspaper as the group announced its year-end results for 2004.

Walker said both sides were laughing at the report, which was over an agreement by Inveresk in August last year to sell its Boreland Reservoir.

A replacement deal went through in April, which was referred to by the board of Inveresk as "a straight substitution".

However had the deal not been included in the 2004 results it would have changed a 184,000 profit for the year into a 417,000 loss.

Walker said the strength of the Euro had played a big part in affecting the firm's results, especially pre-tax profits.

"Sales pricing is not moving in line with inflation, and when the Euro is strong we suffer due to our exposure to export markets.

"It's a question of paddling a bit harder just to stay on the spot," Walker said.

Sales for the year increased 2.4% to 40.7m, but pre-tax profits slumped from 3.1m in 2003 to just 184,000 in 2004.

Profits were eroded due to adverse currency conditions, in what was described as a difficult year for the group.

Walker said there are currently small signs of improvement in the market, and so far the firm had experienced a good start to 2005.

However he described the current state of the paper sector as a "market for the brave", and said Inveresk was continuing to review its cost base.

Shares fell 1p, or 7.41%, to 12.5p on the news.

Story by Andy Scott