Labour crunch begins to hurt

While businesses have reportedly been finding finance easier to obtain, labour was harder to find than ever during the March 2005 quarter according to the Printing Industry Trends Survey. More and more companies are reporting labour availability as a sticky issue for the industry, with expectations remaining poor over the forthcoming outlook period.

According to Printing Industries manager of industry and commercial policy Hagop Tchamkertenian however, labour availability was the only shadow on an otherwise successful quarter. “The results reveal an improvement in industry trading conditions across a number of key economic indicators, including orders, production, sales and employment,” he says.

“The results come in spite of expectations to the contrary during the previous quarter. It's a positive result, particularly considering the March quarter has traditionally proven to be a relatively slow trading quarter for the industry,” says Tchamkertenian.

The general business expectations indicator remained positive during the March 2005 quarter. Compared to the same period a year earlier however, a deterioration is identified that implies businesses in the printing and associated sectors are less confident about business prospects.

Companies participating in the survey employ a workforce of 9,500 people across 15 printing and associated sectors. Other important developments include:

Increased investment in plant and machinery;

Reduced selling prices.

Reduced net profits.
- Reduced levels of overtime.

Finance reported more easier to obtain but labour availability was reported to have deteriorated once again.

Increases reported across all cost categories.

Increased numbers of outstanding debtors.

On the critical issue of capacity utilisation rates, the results show that 60.3 per cent of respondents were operating at capacity levels of 70.0 per cent or over, significantly down from the 74.4 per cent proportion reported last quarter and well below the 70.3 per cent level reported this time last year.

The quarter saw 80.2 per cent of respondents ranking lack of orders as the primary barrier to increasing production levels, an outcome that is higher than the 76.9 per cent proportion reported during the December 2004 quarter, but lower than the 85.2 per cent proportion reported during March quarter 2004.

Industry respondents remain optimistic however that the June 2005 quarter will be characterised by strong trading conditions. According to the respondents the June 2005 quarter is expected to yield the following results:

Net balance increases in orders, production, and sales.

No change in 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.

Declining stock levels.

Increased number of outstanding debtors.

Over the next six months (June and September 2005 quarters) the respondents are forecasting an increased investment activity in plant and machinery, as well as a reduced investment activity in buildings.

The outlook for general business expectations over the next six months remains favourable across most states, with the most optimistic state being Victoria. The March 2005 quarter also revealed that respondents reported the highest capacity utilisation rates in Western Australia and Victoria.

As for the product sectors, high capacity utilisation rates were reported by the following sectors: Greeting Cards, Calendars and Diaries; Other Packaging and Paper Converting; Graphic Reproduction; and Labels.

Considerable levels of excess capacity were emphasised in Book Binding; Desktop Publishing; Cheques and Securities; Business Forms and Continuous Stationery; General Promotional and Commercial; and Quick Printing sectors. The majority of product sectors are forecasting either improvements to take place or no change to occur in business conditions over the next six months.

Capital expenditure intentions remain positive since only the Quick Printing and Folding Cartons sectors are forecasting reductions during the June and September 2005 quarters.

The forecast for selling prices involves another decline, which combined with an expected rise in the number of outstanding debtors over the next three months, will no doubt exert pressure on cash flow and margins.

Those interested in obtaining a copy of the full survey report can contact Printing Industries. Hard copies of the report cost $15 for Printing Industries members and $30 for non-members. Electronic copies of the report are also available on request and cost $15 for members and $30 for non-members.