Printing industry respondents are remaining positive about future economic prospects with a greater proportion of industry respondents expecting improvements to take place in general business conditions relative to those expecting deterioration, this, despite another quarter dominated by soft trading conditions.
The release of the latest issue of the Printing Industry Trends Survey Report for the March 2013 quarter confirms trading conditions in the printing and associated industries remained challenging.
Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, stated that the March quarter outcomes represent the 21st consecutive quarter where reported industry outcomes came in below expected outcomes for a number of key economic indicators.
The survey respondents reported net balance reductions in a number of pivotal industry indicators including production, orders, sales, selling prices, net profits, employment and overtime. It was also reported that both labour and finance was harder to obtain and there was an increase in the number of outstanding debtors. Cost pressures while present during the quarter with reported increases in wages and material costs continued their moderating trend.
On the pivotal industry indicator of capacity utilisation rates, the March quarter results shows that 59.6 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, an outcome that is higher than the 54.3 per cent of respondents who reported for the same period a year earlier.
Some 91.7 per cent of survey respondents ranked ‘lack of orders’ as the primary barrier to increasing production levels, an outcome that is higher than the 86.7 per cent proportion reported during March quarter 2012.
The average debtor days amongst the survey respondents stood at 52 days compared to an average creditor profile of 40 days which implies that the average industry cash flow gap stood at 12 days during the March 2013 quarter. The responses showed that 15.9 per cent experienced positive cash flow with average creditor days exceeding average debtors days; 27.1 per cent reported cash flow as being neutral with average debtor days equalling average debtor days; and 57.0 per cent indicated that they had experienced negative cash flow with average debtor days exceeding average creditor days.
Mr Tchamkertenian notes that over the outlook period industry respondents are forecasting modest net balance improvements to take place in a number of pivotal economic indicators. Based on these forecasts the June 2013 quarter is expected to yield net balance improvements in orders, production, sales and net profits. Further falls in employment and overtime levels are also being forecast but expectations for investments over the six months to September 2013 in plant and machinery remain strongly positive, in fact, the March 2013 quarter forecasts are the most buoyant since December quarter 2005.
The forecasts also point to continued but moderating cost pressures with expectations that wages and material costs will rise by lower net balances during the June 2013 quarter.
For the states the outlook for general business expectations over the next six months remains largely positive with respondents from New South Wales, Victoria, Western Australia and Queensland forecasting improvements on net balance basis, while respondents from South Australia and Tasmania are forecasting deterioration.
Respondents from Western Australia reported the highest utilisation rates with 80.0 per cent operating at capacity utilisation levels of 70 per cent or more, followed by respondents from South Australia (70.0 per cent), New South Wales (62.2 per cent), Queensland (53.3 per cent), Victoria (53.1 per cent), and Tasmania (40.0 per cent).
At sector level, most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while respondents form the Trade Binding sector are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are Screen Printing, Security Printing and Graphic Arts Machinery and Supplies.
Relatively higher capacity utilisation/activity levels were reported by the Labels, Folding Cartons, Security Printing, Other Packaging and Paper Converting, and Graphic Arts Machinery and Supplies sectors. Considerable levels of excess capacity were reported in Trade Binding, Screen Printing, General Promotional and Commercial, and Books, Magazines, Periodicals and Newspapers sectors.
With most sectors reporting either reduced investments or no change in plant and machinery, reported improvements were confined to the Labels, Books, Magazines, Periodicals and Newspapers, Folding Cartons and Screen Printing sectors during the six months to March 2013.
With the exception of Trade Binding (forecasting decline), the sectors are forecasting either increased investment in plant and machinery or no change over the six months to September 2013. The most optimistic forecasts are being made by respondents from the Security Printing and Digital Printing sectors.
In terms of general observations while industry capacity utilisation rates need to lift further to reach more economically sustainable levels, the reported improvement during the March 2013 quarter nevertheless is an encouraging development.
Long term employment intentions continue to remain weak especially amongst the larger employers who are responding to challenging trading conditions by becoming more lean and efficient. Moderating cost pressures for materials and wages are also a welcome development in an operating environment characterised by downward pressure on selling prices.
Mr Tchamkertenian said that while industry forecasts for a range of key indicators remain positive some caution needs to be exercised due to a general poor forecasting record by industry participants over the past 5 years.
“The highlight of the March 2013 quarter is that industry respondents remain optimistic about the industry’s future economic prospects as reflected by the positive sentiment concerning both general business conditions and the reported willingness to undertake further investments”.
“Following the collapse of some prominent industry participants in recent times, survey respondents are reporting increased activity and opportunities have started to flow their way, and some even expressed hope that it could lead to a turnaround in the sheet-fed market as a consequence.
“The trend in printing jobs reducing in both quantity and value continued to be a feature of the market during the March quarter. Other respondents cited the high Australian dollar as being an issue by causing the price of imported goods competing with local production to fall, while some attributed the announcement of the federal election as having a negative impact on industry activity” he concluded.
Survey notes: The March quarter 2013 Printing Industry Trends Survey was distributed to 295 companies. A total of 109 companies responded to the latest survey generating a response rate of 37 per cent.
Breakdown of respondents from states are as follows: New South Wales 37; Victoria 32; Queensland 15; South Australia 10; Western Australia 10; and Tasmania 5.
Printing Industries Association of Australia
www.printnet.com.au
