BARONY Universal, the Scottish aerosol maker, has suffered a big rise in losses amid tough times in key supermarket trade prompting its Russian owner to pump millions of pounds into the business to boost its balance sheet.

However, the Scot who founded and runs the Ayrshire business said Barony is an integral part of the Russia-based Arnest Group's expansion plans in Europe.

Stewart Shaw said: "It is reassuring for all stakeholders that they have pledged Barony will be provided with the essential monetary backing to ensure the wellbeing of the business."

Alexei Sagal's Arnest Group acquired an 85% holding in Barony Universal in 2007.

Mr Shaw said he expected to sell his 15% shareholding in Barony Universal this year to Arnest, which has approved plans for a further £5 million investment at the Irvine facility. This will support Barony Universal's efforts to develop new products and manufacturing capacity.

While Barony Universal made its name as a producer of own label products such as anti-perspirants for big retailers, this market has been eroded amid fierce competition from global branded goods owners like Unilever.

Some £2.2m costs associated with establishing the Irvine factory pushed the company into the red in the latest financial year. But Mr Shaw says investment will underpin a successful future for the firm, which employs 140 people in Ayrshire.

Barony Universal has spent about £14m in developing sophisticated manufacturing lines at Irvine and Mr Shaw said the investment announced yesterday would help it move into producing ranges such as self-tanning gels.

The company is also talking to potential customers for new aerosol products including an air-freshener that uses air rather than gas.

The latest accounts for the 19-year-old company show it faced big challenges in the year to December, including fierce competition for business and the complications associated with developing the production facility in the former Simclar electronics manufacturing plant in Irvine. It is focusing on household products at its original plant at Auchinleck.

Barony Universal made a pre-tax loss of £1.8m compared with a deficit of £150,000 in the preceding year, Turnover increased by 3.7% annually, to £24.2m from £23.3m.

Directors wrote: "A high proportion of turnover has traditionally been generated from the major UK retailers own private label brands. This sector has experienced the largest decline in turnover due to aggressive pricing and promotional activity generated by internationally branded products."

The company faced increases in the costs of raw materials such as gas while a delay in relocating to the Irvine plant created a "sizeable negative impact" on expenditure, quantified at £2.197m.

Consequently the major shareholder provided £5.24m further loans net of repayments during the year. A company owned by Arnest Group provided a £2m capital injection after the year end.

The directors added: "The major shareholder has provided written confirmation of his pledge that Barony Universal Products will be provided with the essential monetary backing to enable it to meet its liabilities as they fall due for at least one year."