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Industry optimism flies in face of mixed trading conditions

Thursday, 26 October 2006
By Print21

While the trends report for the September quarter indicates industry participants are experiencing mixed trading conditions, Hagop Tchamkertenian, national policy and research manager at Printing Industries, claims respondents still hold a sunny outlook over how their businesses are set to perform over the next three months.

“The report indicates that operators remain optimistic over activity for the next three months, meaning they are expecting conditions to improve across production, sales and selling prices. This is somewhat out of tune with the actual results,” says Tchamkertenian.

“The December quarter is the busiest period of the year, which could explain the increased levels of optimism. But while key areas such as orders, production and sales were all reported to have modestly improved during the September period, it was of concern to see that outcomes were significantly below expectations across a number of other key indicators.”

Some of the key areas that fell below expectations during the September quarter included profits and selling prices, the latter which experienced falls for the 23rd consecutive quarter. Production costs and outstanding debtors were up, employment and overtime levels were down while labour availability again deteriorated for the ninth consecutive quarter.

Printing Industries September 2006 Quarter Report

On the critical issue of capacity utilisation rates, results show that 64 per cent of respondents were operating at capacity levels of 70 per cent or over, up from the 60.7 per cent proportion reported last quarter and marginally up on the 63.0 per cent reported this time last year.

Over 90 per cent of respondents ranked lack of orders as the primary barrier to increasing production levels, an improvement on the record 94.9 per cent level reported during the June 2006 quarter but higher than the 87.4 per cent proportion reported this time last year.

The industry is optimistic the December 2006 quarter will be characterised by stronger trading conditions, expecting it to yield the following results:

  • Net balance increases in orders, production, sales and net profits
  • Recovery in selling prices
  • Increased availability of finance
  • Reduced availability of labour
  • Increased employment and overtime levels;
  • Further increases in all production cost categories: average wages, other labour costs and average material costs
  • Reduced stock levels
  • Increased number of outstanding debtors.

    Over the next six months until March 2007 the respondents are forecasting:

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

    The outlook for general business expectations over the next six months remains favourable across the country, with the most optimistic states being Tasmania, Queensland and Western Australia.

    The September quarter also revealed the highest capacity utilisation rates were reported by respondents from Tasmania, followed by Western Australia, Queensland and Victoria. Idle capacity continues to be a serious issue for respondents in South Australia and New South Wales.

    As for the product sectors, high capacity utilisation and activity rates were reported by the Folding Cartons, Quick Printing, Paper Merchants, Labels, and General Promotional and Commercial.

    Considerable levels of excess capacity seem to exist in the Business Forms and Continuous Stationery, Graphic Reproduction, Screen Printing, Desktop Publishing, Book Binding, Other Packaging and Paper Converting, and Books, Magazines, Periodicals and Newspapers sectors.

    With the exceptions of Graphic Reproduction (forecasting deterioration) and Graphic Arts Machinery and Supplies and Desktop Publishing (forecasting no change), most product sectors are expecting improvements to take place in business conditions over the next six months (December 2006 quarter and March 2007 quarter).

    Capital expenditure intentions remain strong with most sectors either forecasting increased investment in plant and machinery or no change over the next six months. Only a single sector, Graphic Reproduction, is forecasting reduced investment activity over the next six months.

    Any one interested in obtaining a copy of the full survey report can contact Printing Industries. Hard copies of the report cost $20 for members and $40 for non-members. Electronic copies of the report are also available on request and cost $20 for members and $40 for non-members.

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