The release of the March 2012 quarter Printing Industry Trends Survey Report confirms that trading conditions in the printing and associated industries deteriorated in line with seasonal factors.
One concerning aspect of the latest industry results is that business sentiment has now fallen to its lowest level since the period of the global financial crisis.
Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, stated that 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.
On the critical indicator of capacity utilisation rates, the March quarter results shows that 54.3 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, and outcome that is slightly higher than the 51.9 per cent proportion reported for the same period a year earlier.
Some 86.7 per cent 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 per cent proportion reported during March quarter 2011.
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 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.
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.
Respondents from Queensland reported the highest utilisation rates with 62.5 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from Western Australia (60.0 per cent), New South Wales (54.5 per cent), Victoria (51.9 per cent), South Australia (50.0 per cent), and Tasmania (40.0 per cent).
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.
Relatively higher capacity utilisation/activity levels were reported by the Graphic Reproduction, Cheques and Securities and Digital Printing sectors. 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.
As most sectors reported no change or increased investment in plant and machinery, the reported deteriorations were confined to the Labels, Screen Printing, General Promotional and Commercial, and Trade Binding sectors during the six months to March 2012.
With the exceptions of General Promotional and Commercial and Trade Binding (forecasting decline), over the six months to September 2012 the sectors are either forecasting no change or increased investment in plant and machinery.
In terms of general observations the deterioration in trading conditions reported during the March 2012 quarter is largely aligned with season influences. While capacity utilisation rates have not deteriorated compared to the situation a year ago, this is of little comfort as overall capacity utlisation 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.
The cash flow position of industry participants continues to come under pressure with reported outstanding debtors during the March quarter once again exceeding the expected outcome.
Mr Tchamkertenian said that industry forecasts for a range of key indicators have now firmed and should hopefully result in a pick up of economic activity in the printing and associated industries over the next three months.
“Over the past four years or so, 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” he said.
Mr Tchamkertenian added a potential interest rate cut by the Reserve Bank of Australia could help industry projections to materialise.
“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 added.
Printing Industries Association of Australia.
www.printnet.com.au
