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Printers face challenging times

Tuesday, 09 August 2011
By Print21

The recently released June 2011 quarter Printing Industry Trends Survey Report shows that trading conditions continued to remain subdued in the printing and associated industries. The reported deterioration has started to impact on business sentiment that fell to a two year low.

According to Hagop Tchamkertenian, Printing Industries national manager for policy and Government affairs, reported industry outcomes for the June 2011 quarter were once again below expected outcomes for a range of economic indicators for the 14th consecutive quarter.

Pivotal June 2011 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 14th consecutive quarter;
  • Labour availability reported to have deteriorated for the 6th consecutive quarter;
  • Moderating material and wage cost pressures;
  • Selling prices reported to have fallen for the 42nd consecutive quarter;
  • Reduced levels of raw material stock levels: and
  • Increased numbers of outstanding debtors.

On the critical indicator of capacity utilisation rates, the June 2011 quarter result shows that only 48.3 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, and outcome that is significantly lower than the 60.2 per cent proportion reported for the same period a year earlier.

Reported capacity utilisation levels are now close to the levels reported during the period of the Global Financial Crisis.

Some 90.4 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is higher than the 81.6 per cent proportion reported during June quarter 2010

According to Tchamkertenian (pictured) over the outlook period industry respondents are forecasting net balance improvements to take place in a number of key economic indicators.

Based on these forecasts the September 2011 quarter is expected to yield the following results:

  • Net balance increases in orders, production, sales and net profits;
  • Reduced employment and overtime levels;
  • Reduced availability of finance and labour;
  • Lower 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 (September and December 2011 quarters) the survey respondents expect:

  • Modest increases in investments in plant and machinery; and
  • Marginal net balance reductions in investment activity in buildings.

Respondents from South Australia reported the highest utilisation rates with 69.2 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from Queensland (57.9 per cent), New South Wales (50.0 per cent), Victoria (44.8 per cent), Tasmania (42.9 per cent) and Western Australia (10.0 per cent).

The outlook for general business expectations over the next six months remains mixed with respondents from Victoria, South Australia and New South Wales forecasting improvements, Queensland and Tasmanian respondents forecasting deterioration, while respondents from Western Australia expect no change.

While most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, two sectors comprising of Folding Cartons and Books, Magazines, Periodicals and Newspapers are forecasting deterioration in business conditions.

Over the outlook period the most optimistic sectors are the Graphic Reproduction and Other Packaging and Paper Converting.

Relatively higher capacity utilisation/activity levels were reported in the Graphic Reproduction, Books, Magazines, Periodicals and Newspapers, Business Forms and Continuous Stationery sectors.
Considerable levels of excess capacity were reported by the Screen Printing, Other Packaging and Paper Converting and Cheques and Securities sectors.

With most sectors reporting reduced investment or no change in plant and machinery, reported improvements were confined to just two sectors – Trade Binding and Folding Cartons during the six months to June 2011. As for investment in buildings, the sectors reported either no change or reduced investments.

The product sectors are either forecasting no change or reduced investment in plant and machinery over the next six months, while the Labels, Business Forms and Continuous Stationery, Graphic Reproduction and Digital Printing sectors are forecasting increased investments.

In terms of general observations and emerging trends, both business sentiment and reported capacity utilisation rates are now at a 2 year low; long term employment intentions registered a significant deterioration during the June 2011 quarter; selling prices continue to trend downward; evidence is emerging of build up of wage pressures; the largest states – New South Wales and Victoria reported significant falls in selling price and the outlook remains negative; the cash flow position of industry participants continues to deteriorate; and expectations were once again not met for a range of economic indicators.

Tchamkertenian says the business climate for printers is very challenging at the moment and there are a number of issues on the horizon that may add to the uncertainty.

“The proposed Carbon Tax, ongoing increases in energy costs, deteriorating cash flow position and the high Australian dollar are all issues that are impacting on the industry.

“While the high Australian dollar seems to have provided some relief on the material cost front it continues to erode the competitiveness of import competing and export segments of the industry.”

According to Tchamkertenian there is no doubt that the June 2011 quarter reported outcomes have been influenced by the general softness in economic conditions.

“Once again the projected forecasts failed to materialise and while the survey respondents are still forecasting improvement in industry conditions during the September quarter, there has been a noticeable correction to business sentiment levels” he added.

Tchamkertenian says Printing Industries is working on a number of initiatives to help address the current difficult economic conditions faced by the industry. He highlighted the energy efficiency programs, the forthcoming Dynamic Leadership Skills course for print business managers, as well as working with Enterprise Connect to improve the overall competitiveness of printing businesses.

Survey notes: 114 companies participated in the latest survey generating a response rate of 39 per cent. Breakdown of respondents from states are as follows: NSW 36; VIC 29; QLD 19; SA 13; WA 10 and TAS 7.

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