Industry battered by second tough quarter - Trend Report
Following the difficult trading conditions experienced during the June 2005 quarter, industry outcomes again fell significantly below expectations. Key indicators such as orders, production, sales, net profits, selling prices and overtime are all reported to have deteriorated over the period.
“The industry has now had two consecutive trading quarters that can best be described as difficult,” says Hagop Tchamkertenian, manager of industry and commercial policy at Printing Industries. The solid start made to the calendar year following a relatively robust March quarter is now a distant memory for many operators struggling with weak industry activity.”
In spite of the difficult trading conditions, operators are expressing more confidence about future business prospects than they were 12 months ago. The general business expectations indicator, as well as general expectations across a number of other key areas, has remained positive in the latest report.
“Industry respondents remain very optimistic that the December 2005 quarter will be characterised by strong trading conditions,” says Tchamkertenian.
Participant companies collectively employing a workforce of approximately 10,000 people from 15 printing and associated sectors. Other important developments during the September 2005 quarter include:
On the critical issue of capacity utilisation rates, results show that 63 per cent of respondents were operating at capacity levels of 70 per cent or over, up from the 56.8 per cent reported last quarter but down on the 70.8 per cent reported this time last year.
The quarter saw 87.4 per cent of survey respondents ranking a lack of orders as the primary barrier to increasing production, an outcome lower than the 90.4 per cent reported during the June 2005 quarter, and significantly higher than the 75.2 per cent proportion reported during September quarter 2004.
Respondents expect the December 2005 quarter to yield the following results:
Over the next six months, respondents are forecasting:
The outlook for general business expectations over the next six months remains favourable as all states, with the exceptions of Western Australia and South Australia, which are expected to deteriorate and remain static respectively. The most optimistic state is Queensland.
Queensland and New South Wales reported highest capacity utilisation rates, while idle capacity was a serious issue for South Australia.
High capacity utilisation rates were reported by the following product sectors: cheques and securities, labels, general promotional and commercial, and greeting cards, calendars and diaries.
Considerable levels of excess capacity exist in the book binding, graphic reproduction, other packaging and paper converting, screen printing, business forms and continuous stationery, and books, magazines, periodicals and newspapers sectors.
With the exception of a deterioration in the folding cartons sector, the product sectors are expecting business conditions to either improve or remain static over the next six months.
Intentions for capital expenditure remain positive, with most sectors either forecasting increased investment or no change in plant and machinery over the next six months.
Labour availability continues to remain a problem for companies operating in the printing industry, with expectations suggesting the problem will continue. Selling prices are forecast to deteriorate once again, and given the expected rise in the number of outstanding debtors during the next quarter, both cash flow and margins are expected to come under pressure.
Any one interested in obtaining a copy of the full report can contact Printing Industries on (02) 8789 7300. Hard copies of the report cost $15 for members and $30 for non-members. Electronic copies are also available.