Harsh trading conditions batters industry confidence

The trend reports conducted by the peak industry body have been characterised recently by optimistic forecasts but Hagop Tchamkertenian, manager of industry and commercial policy at Printing Industries, claims these predictions failed to materialise in the latest survey.

“It is of concern to see that the outcomes for the June 2006 quarter were below expectations across a number of key indicators, given the absence of seasonal influences during the period,” says Tchamkertenian.

Chief economic indicators such as orders, production, sales and net profits were all reported to have deteriorated during the June 2006 quarter.

“If you look at the levels of business confidence compared to what it was 12 months ago then the figures are definitely down. It's a logical reaction of an industry suffering from challenging economic conditions and falling demand.”

A lack of orders revealed itself to be the biggest source of concern for printers with a whopping 94.9 per cent nominating it as the primary barrier to increasing production levels. This figure is higher than it has ever been before and represents a significant rise from the 89 per cent during the previous quarter and the 90.4 per cent figure reported this time last year.

On the other hand, capacity utilisation rates showed an improvement with 60.7 of respondents operating at levels of 70 per cent or more, a rise from the 56.8 per cent figure reported both last quarter and this time last year. Queensland, Victoria and Tasmania reported the highest capacity utilisation rates while idle capacity continues to be an issue in New South Wales.

Changes in investment patterns are also emphasised in the latest survey. After a period of robust spending the industry is now entering a period where investments are moderating, with capital expenditure intentions for plant and equipment at their lowest levels since the March 2001 quarter.

Industry respondents expect the upcoming quarter to deliver increases in orders, production, sales and net profits, along with falls in selling prices and the availability of labour. Respondents are also expecting increases in production cost categories like wages, labour costs and material expenses, reduced stock levels and a rise in the number of outstanding debtors.

Respondents are forecasting over the next six months a plateau in the level of investment in plant and machinery and reduced investment in buildings. General business expectations remain favourable over the next six months in all states with the exception of Tasmania.

High capacity utilisation rates were reported in the following product sectors during the June 2006 quarter: Cheques and Securities, Labels, Paper Merchants, Folding Cartons, and General Promotional and Commercial.

Considerable levels of excess capacity seem to exist in the Business Forms and Continuous Stationery, Graphic Reproduction, Screen Printing, Desktop Publishing, Book Binding and Quick Printing sectors.

With the exceptions of the Graphic Reproduction and Desktop Publishing sectors who are forecasting deterioration, most product sectors are expecting improvements in business conditions over the next six months.

While capital expenditure intentions remain weak over the next six months, the following sectors are forecasting increased investment General Promotional and Commercial, Cheques and Securities, Business Forms and Continuous Stationery, Other Packaging and Paper Converting and Greeting Cards, Calendars and Diaries.

Skilled labour availability continues to remain a problem for companies operating in the printing industry and expectations point to the problem continuing. Selling prices are forecast to deteriorate once again despite the fact that the industry has experienced 22 consecutive quarters of reported falls. The rise in the number of outstanding again highlights the difficulty the industry faces when it comes to managing cash flow.

Any one interested in obtaining a copy of the full survey report can contact Printing Industries. Hard copies of the report cost $20 for members and $40 for non-members. Electronic copies of the report are also available on request and cost $20 for members and $40 for non-members.