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Real improvement or more wishful thinking from printers – Hagop Tchamkertenian

Monday, 16 April 2012
By Print 21 Online Article
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“Over the past four years, the industry has tended to be overly optimistic in its projections concerning trading conditions. Now they are once again forecasting improving trading conditions over the June 2012 quarter. It will be interesting to see whether this time, expectations will be met, ” said Tchamkertenian, Printing Industries national manager, commenting on the latest Printing Industry Trends Survey Report.

“An easing of monetary policy conditions would be a welcome development as it would help lift consumer sentiment and drive consumption activity which is an important driver of economic activity in the printing industry,” he said.

On the critical indicator of capacity utilisation rates, the March 2012 quarter results shows that 54.3% of respondents were operating at capacity/activity levels of 70.0% or over, and outcome that is slightly higher than the 51.9% proportion reported for the same period a year earlier.

Queensland had the highest utilisation rates with 62.5% of respondents operating at capacity utilisation levels of 70% or more, followed by respondents from Western Australia (60.0%), New South Wales (54.5%), Victoria (51.9%), South Australia (50.0%), and Tasmania (40.0%).

Tchamkertenian said the results mean the June 2012 quarter is expected to yield the following results:

  • Net balance increases in orders, production, sales and net profits;
  • Reduced employment and overtime levels;
  • No change in availability of finance;
  • Increased availability of labour;
  • Further falls in selling prices;
  • Reduced stock levels;
  • Further net balance increases in all production cost categories – average wages, other labour costs, and average material costs; and
  • Increased number of outstanding debtors.

Over the next six months (June and September 2012 quarters) the survey respondents expect:

  • Increased investment in plant and machinery; and
  • Reduced investment activity in buildings.

Varied outlook persists

The outlook for general business expectations over the next six months remains mixed with respondents from New South Wales, South Australia, and Queensland forecasting improvements, while respondents from Tasmania and Victoria are expecting deterioration, and no change is being forecast by Western Australian respondents.

Most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while trade binding, business forms and continuous stationery, books, magazines, periodicals and newspapers, paper merchants and labels are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are graphic arts machinery and supplies and graphic reproduction.

Some 86.7% of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is slightly lower than the 88.9% proportion reported during March quarter 2011
Print professionals in cheques and securities, digital printing, and graphic reproduction sectors reported relatively higher capacity utilisation/activity levels. Considerable levels of excess capacity were reported in general promotional and commercial, trade binding, graphic arts machinery and supplies, other packaging and paper converting, screen printing, greeting cards, calendars and diaries and labels sectors.

In terms of general observations and emerging trends, the deterioration in trading conditions reported during the March 2012 quarter is largely aligned with season influences. Most sectors are reporting no change or increased investment in plant and machinery during the six-month quarter, while the reported deteriorations are confined to the labels, screen-printing, general promotional and commercial, and trade binding sectors.

While capacity utilisation rates have not deteriorated compared to the situation a year ago, this is of little comfort as overall capacity utilisation rates in the industry continue to remain low. Another emerging issue concerns the long-term employment intentions, which continue to record significant deterioration especially amongst the largest employing businesses.

Costs on a net balance rose across the board but encouragingly the net balance outcomes are indicating a degree of moderation in cost pressures. This is important given that selling prices continue to progress in a distinctive downward direction.

Tchamkertenian says the March 2012 quarter outcomes represent the 17th consecutive quarter where reported industry outcomes came in below expected outcomes for a host of economic indicators.

Pivotal March 2012 quarter developments reported by the survey respondents include:

  • Reduced orders and production;
  • Reduced sales and net profits;
  • Reduced employment and overtime levels;
  • Reduced investments in buildings and plant and machinery during the past six months;
  • Finance reported harder to obtain for the 17th consecutive quarter;
  • Labour availability reported to have deteriorated for the 9th consecutive quarter;
  • Increased material and wage costs;
  • Selling prices reported to have fallen for the 45th consecutive quarter;
  • Reduced levels of raw material stock levels: and
  • Increased numbers of outstanding debtors.

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