Industry bounces back from a tough trading year

While performance still fell below expectations for the December quarter, the industry holds a rosy outlook over future business prospects. Improvements in trading conditions have lifted industry confidence to a six year high, with printers significantly more assured about their future business prospects than they were this time last year. This is despite an expected deterioration in selling prices, which are forecast to deteriorate once again following 20 consecutive quarters of reported falls

Hagop Tchamkertenian, manager of industry and commercial policy at Printing Industries, claims the results indicate that business picked up significantly for Australian printers during the December quarter.

“The industry seems to have rebounded in the December quarter, reflecting the influence of seasonal factors,” claims Tchamkertenian. “Key economic indicators like orders, production, sales and net profits have all improved.”

Skilled labour availability continues to remain one of the main problems for companies operating in the printing industry, and expectations point to the continuation of the problem. Despite or perhaps because of this capital expenditure expectations are at their highest level since September quarter 1994.

Participant companies collectively employing a workforce of approximately 10,000 people from 15 printing and associated sectors. Other important developments during the December 2005 quarter include:

Increased employment and overtime levels;

Increased investment in plant and machinery;

Finance reported more easier to obtain;

Labour availability was reported to have deteriorated once again for the sixth consecutive quarter;

Increases reported across all cost categories;

Reduced selling prices for the 20th consecutive quarter;

Reduced levels of raw material stocks; and

Increased numbers of outstanding debtors.

On the critical issue of capacity utilisation rates, the December 2005 quarter results show that 66.9 per cent of respondents were operating at capacity levels of 70.0 per cent or over, up from the 63.0 per cent proportion reported last quarter but down on the 74.4 per cent level reported this time last year.

The quarter saw 81.8 per cent of respondents ranking lack of orders as the primary barrier to increasing production, lower than the 87.4 per cent proportion reported during the previous 2005 quarter, but higher than the 76.9 per cent proportion reported this time last year.

Industry respondents remain optimistic that the March 2006 quarter will be characterised by strong trading conditions:

Net balance increases in orders, production, sales and net profits

Further falls in selling prices

Increased availability of finance

Reduced availability of labour

Increased employment but reduced overtime levels

Further increases in all production cost categories - average wages, other labour costs, and average material costs

Reduced stock levels

Increased number of outstanding debtors

The outlook for general business expectations over the next six months remains favourable in all states, with the exceptions of WA (deterioration) and SA (no change). The most optimistic state over the outlook period is Tasmania. Overall, the respondents are forecasting:

Increased investment activity in plant and machinery;

Increased investment activity in buildings.

The December 2005 quarter revealed the highest capacity utilisation rates were reported in Queensland and South Australia, while idle capacity was a serious issue for respondents from Victoria and New South Wales.

High capacity utilisation/activity rates were reported during the quarter by the following product sectors: general promotional and commercial; quick printing; greeting cards, calendars and diaries; graphic arts machinery and supplies and paper merchants.

Considerable levels of excess capacity exist in business forms and continuous stationery; graphic reproduction; screen printing; desktop publishing and other packaging and paper converting sectors.

With the exceptions of the business forms and continuous stationery, and paper merchants and screen printing, which are forecasting no change, the product sectors are expecting improvements in business conditions over the next six months.

Capital expenditure intentions remain positive, with most sectors either forecasting increased investment or no change in plant and machinery during the March and June 2006 quarters.

Any one interested in obtaining a copy of the full survey report can contact Printing Industries on (02) 8789 7300. Copies are available in both electronic and hardcopy, and cost $20 for Printing Industries members and $40 for non-members.