Heat-set web printing powers PMP profit

PMP’s core heat-set web printing and distribution business achieved a major improvement in earnings, helping the region’s largest printer meet turnaround forecasts with an increase profit (EBIT) of $70.3 million, up 43 percent in the financial year ended June 31. The improvement came even though revenue fell 1.5 per cent to $774.1 million.

The printing result was underpinned by a solid market and improved sales performance, with print volumes up on the previous year. Fixed costs were reduced, labour productivity improved and raw material costs, paper waste and spoilt work showed marked improvement.
PMP Print in New Zealand also delivered strong earnings gains through volume increases and improved efficiency.

The same cannot be said for the company’s graphic arts division, which is made up of three components; digital imaging, digital media services and print management services. Digital imaging is tied to the volume of print going through and comprises of traditional prepress activities, such as plate making. Given the growth in print volumes it performed well.

The trouble lies with the other two segments. Digital media services provide make-up, design and networking services for customers. According to CEO David Kirk, this market is continuing to fragment and shrink, with falling prices and services being taken in-house. “The business continues to struggle in a rapidly changing market. Earnings will continue to be under pressure there and we see a need to continue to look at the business model and cost structure to be competitive in the market,” he said.

This is the area where 90 employees were made redundant during the year.

While PMP’s print management service is considered a relatively stable business, it has thin margins and was impacted during the year by the loss of a major client. “We don’t think our offer has been as focused or as well delivered as it could be and we’re aiming to improve,” said Kirk.

The Magazine Division – Gordon & Gotch – provided the other sore point in a mostly positive result. The badly handled implementation of a new magazine returns processing system converted a three per cent lift in revenue to $346.9 million into a EBIT loss of $0.2 million compared with a profit of $1.1 million in the previous year.

The company dismissed suggestions that it is overly vulnerable to the loss of major magazine printing contracts – in light of its upcoming renegotiation of major contracts with magazine publisher ACP over the next 12 months. A spokesman said that 25 per cent of the company’s business comes from longer-term magazine contracts and that the core business would survive the loss of a major contract.

This year PMP expects to spend $71 million on new capital equipment for its core printing business and Kirk confirmed the four MAN Roland Lithoman presses, which comprise much of the previously announced $124 million total, are currently being built in Germany with first installations planned for February.