Modest business trading conditions fail

Despite the modest trading outcome, business confidence not only has improved compared to the previous quarter, but is higher than the corresponding period a year ago which implies that printing and associated sectors are now more confident about future business prospects than they were 12 months ago.

Participant companies from all states and originating from 16 printing and associated sectors covering the printing industry value chain participated in the March 2007 quarter Printing Industry Trends Survey.

According to Hagop Tchamkertenian, Printing Industries national policy and research manager the industry optimism of last quarter was not reflected in the actual trading outcomes reported during the March quarter. Actual outcomes for a range of key economic indicators such as orders, production, sales and net profits were all below expected outcomes.

Other important March 2007 quarter developments reported by the survey respondents include:

Reduced employment and overtime levels;

Increased investment in plant and machinery and buildings during the past six months;

Finance reported more easier to obtain;

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

Increases reported across all production cost categories;

Selling prices reported to have fallen for the 25th consecutive quarter;

Increased levels of raw material stocks; and

Increased numbers of outstanding debtors.

On the issue of capacity utilisation rates, the March 2007 quarter results show that 64.9 per cent of respondents were operating at capacity levels of 70.0 per cent or over, down from the 72.1 per cent proportion reported last quarter but up on the 56.8 per cent proportion reported this time last year.

The March 2007 quarter revealed that 82.0 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is higher than the 80.3 per cent proportion reported during the December 2006 quarter, but lower than the 89.0 per cent proportion reported during March quarter 2006.

Hagop reported that over the outlook period industry respondents are forecasting substantial net balance improvements to take place in a number of key economic indicators.

Accordingly the June 2007 quarter is expected to yield the following results:

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; and

Reductions in the number of outstanding debtors.
Over the next six months (June and September 2007 quarters) the survey respondents are forecasting:

Increased investment activity in plant and machinery; and

Increased investment activity in buildings.

With the exception of respondents from Tasmania the outlook for general business expectations over the next six months remains favourable in the states. The most optimistic state is Queensland followed by New South Wales.

Respondents from Tasmania reported the highest capacity utilisation rates during the quarter followed by respondents from Queensland. Idle capacity remains a problem for respondents from New South Wales and Western Australia.

While most sectors are either forecasting increased investment or no change in plant and machinery over the next six months, the folding cartons sector is forecasting reduced investment activity.

A close examination of the latest survey outcomes clearly shows some interesting developments. A number of emerging trends are also noticeable such as skilled labour availability continuing to remain a problem for companies operating in the printing industry and industry expectations point to the continuation of the problem. Selling prices continue to fall despite expectations to the contrary.

Material costs seem to be moderating with the net balance outcome during March 2007 quarter being the best outcome since March quarter 2004.

Raw material stocks were also reported to have increased the first such increase since September quarter 2000.

"The appreciating Australian dollar may be responsible for the reported moderation in material costs and the increased stock levels," added Hagop.

Average wage outcomes while still significant on net balance basis have also started to moderate.

Any one interested in obtaining a copy of the full survey report can contact Printing Industries. Hard copies of the report cost $20 for Printing Industries 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. Annual subscription to Printing Industry Trends Report is $60 for members and $120 for non-members.

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