INDUSTRIAL textiles maker Scott & Fyfe returned to the black in the year it transitioned into employee ownership.

However chairman Nick Kuenssberg has warned trading conditions remain "extremely difficult" and the business may slip to a loss in 2013.

Accounts filed at Companies House show that in spite of a fall in turnover from £11.5 million to £10.5m the Tayport, Fife, company recorded a pre-tax profit of £353,000 for 2012.

That reversed the loss of £71,000 it had booked for 2011.

During 2012 Scott & Fyfe made its first steps into employee ownership with Hamish Tough, who had 26% of the business, and sons Richard and David, who each held 37%, selling their shares to an employee benefits trust (EBT).

Accounts filed at Companies House for 2012 said the transfer was completed in December for a price of £5.845m.

In January this year Richard and David Tough subscribed for almost £4m of redeemable preference shares to ensure the company had adequate funding for the forseeable future.

Mr Kuenssberg said 70% of staff had already subscribed to a savings scheme which will be used to buy shares from next March.

He also suggested productivity had improved since the move to employee ownership.

But the company - which makes carpet and underlay backing as well as materials for packaging reinforcement, irrigation, lining pipes, abrasives manufacturing, and the automotive industry - had to cut 19 jobs in May this year because of difficult trading conditions. It also closed a loss-making subsidiary in China during 2012 with Mr Kuennsberg confirming Scott & Fyfe "probably" won't be in profit during its current trading year.

While Mr Kuenssberg expressed sadness at the redundancies he said there were some signs that trading conditions are picking up and the company is now looking for a small number of new staff to add to the 80 people it currently employs.

He said: "It has been extremely difficult but August is beginning to look like it might be coming through and we are actually looking at taking on additional staff.

"At the moment we are looking for a handful of people but as business builds up we will be looking for more."

Export sales are said to be a focus with Europe improving while North America and the Middle East are also expected to rise.

Mr Kuenssberg highlighted Russia as one emerging market where Scott & Fyfe has some sales but expects to grow significantly.

An innovation project run with the design school of Glasgow School of Art and the Institute of Directors is said to have moved the company into a number of new product areas.

While Mr Kuenssberg did not want to reveal exact details he indicated new products included bespoke and higher end items designed for specific customers as well as ranges targeted at the oil and gas industry.

However those are unlikely to start generating revenue until next year.

He said: "As we are business to business it takes a long time to get something in between thinking it up and getting it accepted on more than an experimental basis.

"That can take anything from 12 to 36 months. It would be fair we won't see real benefits in 2013 but would be incredibly disappointed if we didn't see significant benefits in 2014."

Scott & Fyfe can trace its history back around 150 years and was a big player in the Dundee jute trade. It has a museum at its main facility at Tayport.