200-year-old Scottish paper mill closes

Tullis Russell Group cites slumping demand as reason for the closure.

May 1, 2015

Tullis Russell Group, based in Markinch, Scotland in the United Kingdom, has announced that its Tullis Russell Papermakers Ltd. subsidiary has been placed into administration, essentially closing down its operations. The company has been making paper in Markinch for more than 200 years.

The company manufactures board products for use in the cards, covers and packaging sectors. It uses predominantly wood-based pulps to make its products but has been using some recycled-content pulp since 2003, according to its website.

Tullis Russell Group's two other operating subsidiaries—Tullis Russell Security & Specialty Coating, based in England; and Tullis Russell Image Transfer, based in South Korea—are unaffected by the move and continue to operate as part of the Tullis Russell Group.

“This is a terribly sad day for employees and their families, the local community and everyone else associated with the business and its proud 206-year history,” says Group CEO Chris Parr. “Since the global recession in 2008 demand across the traditional markets for Papermaker's products has fallen by 40 percent. Our primary raw material, wood pulp, is now trading at consistently higher price levels than ever before and exchange rates have moved structurally against the business. The company has been able to generate new business within the luxury packaging and certain digital applications over this time. However, annual volume is currently 14 percent lower than 2008 levels and the profit margin achieved is substantially weaker.”

To compensate for the decline, the company took a number of steps to cut costs, including opening a biomass plant adjacent to the paper mill.

Despite the cost-cutting measures, the company determined the best strategy to keep the mill operational was to find a buyer for the facility. To accomplish this, the company engaged KPMG to run a comprehensive sales process. Between October 2014 and March 2015 more than 72 parties considered the acquisition, although no company stepped forward to acquire the mill. “This,” Parr added, “unfortunately only confirmed that the business is no longer viable.”

The final straw, according to Parr, was the paper company’s third largest and most profitable customer entering into an insolvency process on April 1, 2015. That, he noted, resulted in the company’s board of directors determining there was no other option than to place the business into administration.