Printing Industry Trends survey report show that tough conditions fail to dampen optimism.
The recently released September 2011 quarter Printing Industry Trends Survey Report confirms that trading conditions continue to remain weak in the printing and associated industries. Despite another quarter that saw actual reported outcomes fall short of expectations, business sentiment rose compared to the previous quarter. Despite the improvement, business sentiment continues to remain significantly lower compared to the same period a year earlier.
According to Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, the September 2011 quarter represents the 15th consecutive quarter where reported industry outcomes came in below expected outcomes for a range of economic indicators.
Pivotal September 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 15th consecutive quarter;
Labour availability reported to have deteriorated for the 7th consecutive quarter;
Increased material and wage cost pressures;
Selling prices reported to have fallen for the 43rd consecutive quarter;
Reduced levels of raw material stock levels: and
Increased numbers of outstanding debtors.
On the critical indicator of capacity utilisation rates, the September 2011 quarter results shows that only 54.9 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, and outcome that is lower than the 63.0 per cent proportion reported for the same period a year earlier.
Some 90.2 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is slightly higher than the 88.0 per cent proportion reported during September quarter 2010
According to Mr Tchamkertenian 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 December 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;
Increased availability of 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 (December 2011 quarter and March 2012 quarter) the survey respondents expect:
Marginal net balance reductions in investments in plant and machinery; and
Moderate net balance reductions in investment activity in buildings.
Respondents from South Australia reported once again the highest utilisation rates with 81.8 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from New South Wales (61.8 per cent), Western Australia (54.5 per cent), Queensland (52.6 per cent), Victoria (40.6 per cent), and Tasmania (33.3 per cent).
The outlook for general business expectations over the next six months continues to remain mixed with respondents from New South Wales, South Australia and Western Australia forecasting improvements, Queensland respondents forecasting deterioration, while respondents from Victoria and Tasmania expect no change.
Most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while Books, Magazines, Periodicals and Newspapers are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are the Greeting Cards, Calendars and Diaries and Labels.
Relatively higher capacity utilisation/activity levels were reported in the Graphic Reproduction, Books, Magazines, Periodicals and Newspapers, and Greeting Cards, Calendars and Diaries sectors. Considerable levels of excess capacity were reported by the Screen Printing, General Promotional and Commercial, Folding Cartons, Digital Printing, Trade Binding, Business Forms and Continuous Stationery and Cheques and Securities sectors.
With most sectors reporting no change or reduced investment in plant and machinery, reported improvements were confined to just two sectors – Digital Printing and Graphic Reproduction during the six months to September 2011. As for investment in buildings, with the exceptions of Graphic Arts Machinery and Supplies and Books, Magazines, Periodicals and Newspapers (increases reported), 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 Folding Cartons, Other Packaging and Paper Converting, Business Forms and Continuous Stationery and Labels sectors are forecasting increased investments.
In terms of general observations and emerging trends, while there has been a modest improvement in both business sentiment and reported capacity utilisation rates from their recent lows; long term employment intentions registered a significant deterioration during the September 2011 quarter; selling prices continue to trend downward; there is renewed evidence of build up of material and wage pressures; the largest states – New South Wales and Victoria reported the largest net balance falls in net profits; the cash flow position of industry participants continues to come under stress; and industry expectations generally were once again not met for a range of key industry economic indicators.
Mr Tchamkertenian said that despite the Federal Government securing the numbers to pass its controversial carbon pricing mechanism through parliament, the business climate for printers continues to remain uncertain.
“The Printing Industry Trends Report indicates that cost pressures are once again resurfacing within the industry which will require an appropriate managerial response. The industry now faces ongoing higher energy costs which need to be addressed by both changes to operating processes and consideration being given to adopting cleaner and less energy intensive technology” he said.
According to Mr Tchamkertenian given that the September quarter is normally associated with peak industry activity, the low capacity utilisation rates reported during the quarter confirm that underlying economic conditions remain soft.
“Once again the forecasts for a range of key economic indicators remain positive confirming the general level of overall optimism amongst industry participants. Whether the breakthrough will occur during the December quarter and reported outcomes will match expectations remains to bee seen.” he added.
Mr Tchamkertenian said Printing Industries is fully aware about the economic challenges facing the printing and associated industries and is working on initiatives such as the “industry transformation model” that aims to foster a more sustainable and commercially viable industry.
Survey notes: 113 companies participated in the latest survey generating a response rate of 38 per cent.
Breakdown of respondents from states are as follows: New South Wales 34; Victoria 32; Queensland 19; South Australia 11; Western Australia 11 and Tasmania 6.
Printing Industries Association of Australia.
www.printnet.com.au
