The release of the December 2011 quarter Printing Industry Trends Survey Report confirms that trading conditions picked up in the printing and associated industries. Despite the welcome improvement, business sentiment fell compared to the previous quarter and is now lower compared to the same period a year earlier. According to Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, the December 2011 quarter represents the 16th consecutive quarter where reported industry outcomes came in below expected outcomes for a range of economic indicators. Two economic indicators ¡V overtime levels and selling prices exceeded expectations.
Pivotal December 2011 quarter developments reported by the survey respondents include:
* Increased orders and production;
* Increased sales and net profits;
* Reduced employment but increased overtime levels;
* Reduced investments in buildings but increased investments in plant and machinery during the
past six months;
* Finance reported harder to obtain for the 16th consecutive quarter;
* Labour availability reported to have deteriorated for the 8th consecutive quarter;
* Increased material and wage cost pressures;
* Selling prices reported to have fallen for the 44th consecutive quarter;
* Reduced levels of raw material stock levels: and
* Increased numbers of outstanding debtors.
On the critical indicator of capacity utilisation rates, the December 2011 quarter results shows that 62.7 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 75.2 per cent proportion reported for the same period a year earlier.
Some 78.2 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 76.2 per cent proportion reported during December 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 March 2012 quarter is expected to yield the following results:
* Very modest net balance increases in orders, production, sales and net profits;
* Reduced employment and overtime levels;
* Reduced availability of finance;
* Increased availability of labour;
* Recovery 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 (March and June 2012 quarter) the survey respondents expect:
* Modest net balance increase in investment in plant and machinery; and
* No change on net balance basis in investment activity in buildings.
Respondents from Western Australia reported the highest utilisation rates with 76.9 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from South Australia (75.0 per cent), Queensland (62.5 per cent), Victoria (60.0 per cent), New South Wales (57.6 per cent), and Tasmania (50.0 per cent).
The outlook for general business expectations over the next six months remains largely favourable given respondents from New South Wales, South Australia, Victoria and Queensland are forecasting improvements, while respondents from only two states - Western Australia and Tasmania are expecting
deterioration.
Most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while Labels, Folding Cartons, Books, Magazines, Periodicals and Newspapers and Trade Binding are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are Other Packaging and Paper Converting and Digital Printing.
Relatively higher capacity utilisation/activity levels were reported by the Paper Merchants, Other Packaging and Paper Converting, Digital Printing, and Graphic Reproduction sectors. Considerable levels of excess capacity were reported in General Promotional and Commercial, Cheques and Securities, Business Forms and Continuous Stationery, Trade Binding, Folding Cartons, Graphic Arts Machinery and Supplies, Screen Printing and Labels sectors.
With most sectors reporting no change or increased investment in plant and machinery, reported deteriorations were confined to the Trade Binding, Screen Printing, Business Forms and Continuous Stationery, and Labels sectors during the six months to December 2011. The product sectors are either forecasting no change or increased investment in plant and machinery over the next six months, while the Business Forms and Continuous Stationery sector is forecasting reduced investments.
In terms of general observations and emerging trends, while there has been a welcome improvement in reported industry activity levels, capacity utilisation rates continue to remain low. Also of concern are long term employment intentions which registered a significant deterioration during the December 2011 quarter.
While selling prices fell once again the reported net balance outcome represented the best outcome since December quarter 2008. Given ongoing material and wage pressures we may be getting closer to a point where industry selling prices start to recover.
The cash flow position of industry participants continues to come under stress with reported outstanding debtors during the December quarter significantly exceeding the expected outcome.
Mr Tchamkertenian said that industry forecasts for a range of key indicators are barely positive and hence remain extremely vulnerable to changing economic circumstances.
"The latest Printing Industry Trends Report indicates that cost pressures are once again resurfacing within the industry especially in the area of material costs which will necessitate appropriate managerial response. With the industry having a poor record in recent years of fulfilling its expectations, last week¡¦s decision by the Reserve Bank of Australia not to provide some monetary stimulus may now undermine those very modest industry forecasts going into the March 2012 quarter" he said.
According to Mr Tchamkertenian given that the December quarter is normally associated with robust industry activity, the low capacity utilisation rates reported during the quarter confirm that underlying economic conditions continue to remain soft.
"I think increasingly what we are witnessing is the operation of a three-speed economy. You have fragmented growth along broad industry lines comprising of resources, manufacturing and services. And unfortunately there is not much being done to manage this uneven growth profile" he added.
Mr Tchamkertenian said Printing Industries is fully aware about the economic challenges facing the printing and associated industries and is working on a number of key initiatives such as the 'industry transformation model', the transition to cleaner printing technology workshops, and the group buying arrangements that all aim to foster a more sustainable and commercially viable industry.
Survey notes: 110 companies participated in the latest survey generating a response rate of 37 per cent.
Breakdown of respondents from states are as follows: New South Wales 33; Victoria 30; Queensland 16; Western Australia 13; South Australia 12; and Tasmania 6.
Printing Industries Association of Australia
www.printnet.com.au
