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Blair Nimmo and Tony Friar were appointed as Joint Administrators of Tullis Russell Papermakers Limited on 27th April 2015.

The Joint Administrators had set a closing date for indicative offers for the business and assets of 12pm on 18th May 2015, but unfortunately no offers were received.

Prior to entering administration, Tullis Russell Papermakers had been widely marketed for sale by its parent company, Tullis Russell Group Limited.  The Group had approached 64 parties worldwide, but unfortunately this process proved to be unsuccessful. 

Following their appointment, the Joint Administrators contacted these parties to establish whether they wished to acquire the business and assets, but the parties reconfirmed their position and did not pursue any interest.

A wider sales process was initiated with the Joint Administrators contacting approximately 200 parties.   

Blair Nimmo, Joint Administrator and Head of Restructuring at KPMG in Scotland, said:

“The level of interest shown in the business and the outcome from Monday’s closing date is disappointing.  The business continues to face considerable economic challenges as a result of weakening global demand for printed materials, rising raw material costs and the strengthening of Sterling against the Euro. 

“We will now be working with the company’s remaining employees to continue to wind down operations and focus on realising the company’s assets.

“Unfortunately that will mean further redundancies but we will continue to work with government agencies to offer support to those affected.”

On appointment of the Joint Administrators’, 325 of Tullis Russell’s 474 staff were made redundant. While some work has been ongoing to meet existing customer orders, a further 21 employees have been made redundant while operations are being wound down.

About KPMG:

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

It was with deep sadness that Tullis Russell Group announced today that its papermaking subsidiary Tullis Russell Papermakers Limited had been placed into Administration by its directors.

The Employee Owned Tullis Russell Group’s two other operating subsidiaries Tullis Russell Security & Speciality Coating based in Bollington Cheshire and Tullis Russell Image Transfer based in Ansan, South Korea are totally unaffected by this move and continue to trade normally under the Tullis Russell Group.

Tullis Russell Papermakers Limited was founded in 1809 and since that date has operated from a 100 acre site in Markinch, Scotland. The company manufactures high quality board for use in the cards, covers and premium packaging sectors.

Group CEO Chris Parr said: “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. Since the global recession in 2008 demand across the traditional markets for papermaker’s products has fallen by 40%, 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 luxury packaging and certain digital applications over this time, however annual volume is currently 14% lower than 2008 levels and the profit margin achieved is substantially weaker.

“In 2009 we successfully negotiated a pioneering scheme with RWE Npower who built and since 2014 have operated a biomass plant on our site initially reducing our annual energy costs by 50%. We have also continued to improve year on year efficiencies and remove cost from our business. Despite these efforts there remains over supply in the global paper market and demand continues to fall. It has become clear to the board that Papermakers is no longer a viable business.

“Recognising this situation the Group and Papermaking boards concluded that the best chance of protecting jobs would be through a trade sale of the papermaking company to a buyer capable of, and committed to developing the Markinch site. The Group engaged KPMG to run a comprehensive sales process and between October 2014 and March 2015 over 72 trade parties have considered and subsequently rejected the opportunity to acquire the business. This has unfortunately only confirmed that the  business is no longer viable.

“This difficult position finally became untenable with the papermaking company’s third largest and most profitable customer entering into an insolvency process on Monday 1 April 2015. The directors of our Papermaking business were therefore faced with no other option than to place the business into Administration.”  

Blair Nimmo and Tony Friar of KPMG LLP were appointed Joint Administrators of Tullis Russell Papermakers Limited on 27^th April 2015, at the request of the company’s directors.

Based in Markinch, Fife the employee-owned company was founded in 1809 and produces high quality paper board for use in cards, covers and premium packaging.

The company has 474 employees, 471 of which are based at Markinch and three operating remotely throughout the UK. 

In the year to 31 March 2014, the company sold 126,000 tonnes of paper and board. It recorded a turnover of £124.6 million, but suffered a pre-tax loss of £3.4 million. It has incurred cumulative losses of £18.5 million over the last five years, largely as a result of weakening demand and pressure on its margins.

The company’s market is in long term decline as media and other outlets move from paper to digitally-based products, resulting in worldwide oversupply and price competition. The company has also faced a number of specific challenges in recent years:

• A significant portion of the company’s sales are to Europe and the recent strengthening of Sterling against the Euro has had an impact on competitiveness
• The cost of the company’s main raw material, wood pulp, is trading at consistently higher levels than historically experienced
• The loss of a major customer due to insolvency proceedings

These factors have, in part, been offset by steps taken by the company to widen its product and customer base and improve the efficiency of its operations. In March 2014 a £200m biomass plant was opened on site in partnership with RWE Npower with the aim to reduce Tullis Russell’s energy costs. 

Despite these efforts, the company remains significantly loss making and this is projected to continue, resulting in severe cashflow issues.

Recognising the structural changes in the industry and the need for consolidation, the directors took steps in October 2014 to seek a buyer for the business. This process continued until this month, but ultimately no party was found.

The directors therefore concluded that they must act in the best interests of the company’s creditors and take steps to appoint administrators.

Given the very difficult trading conditions and that a sale process to seek a buyer for the company had not been successful, the administrators have taken steps to significantly reduce the company’s cost base whilst all options are considered.  Unfortunately, this has resulted in 325 employees being made redundant with immediate effect.  The remaining 149 have been retained to complete some orders.

Blair Nimmo, Joint Administrator and Head of Restructuring for KPMG in Scotland, said: “This is a sad day for the employees of Tullis Russell Papermakers, who have worked hard against the significant headwinds facing the global papermaking sector.  Whilst we will be exploring whether a sale of all or part of the business and asset of the company can be achieved, we have had to take steps to significantly reduce the company’s overheads.  Unfortunately, with trading effectively ceasing, we have had no option but to reduce the size of the workforce.  We will be working with government agencies to minimise the impact on employees. We would encourage any party with an interest in acquiring all, or parts, of the business to make contact with us as soon as possible.” 

Tullis Russell Papermakers Limited is a wholly owned subsidiary of Tullis Russell Group Limited.  The Group’s Coating business based in Bollington, Cheshire and its Image Transfer business based in Ansan, Korea are not affected by the administration and continue to trade as normal.

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.