Profits down, credit blows out – industry survey

Key economic indicators including net profits, orders, production, sales, employment and overtime levels all deteriorated during the quarter. The printing industry is also living up to its reputation as a sector where clients are increasingly unwilling to pay up on time, with the number of outstanding debtors rising, a situation that is forecast to get even tighter over the September 2005 quarter.

According to Hagop Tchamkertenian, manager of industry and commercial policy at Printing Industries, businesses are growing lax in the area of cash flow. “Because of current industry conditions, many companies are basically providing their clients with banking facilities in order to remain competitive,” he says. “Very few clients are paying within the 30 days, and this creates serious problems for printers – the longer they are left, the greater the chances of bad debts being incurred.”

Despite the tougher conditions operators remain optimistic in terms of their general business expectations. “A significant improvement has taken place that implies businesses in the printing and associated sectors are more confident now about business prospects than they were 12 months ago,” said Tchamkertenian.

Other important developments for the June 2005 quarter include:

Increased investment in plant and machinery

Finance easier to obtain

Labour availability deteriorated further

Increases across all cost categories

Reduced levels of raw material stocks

There is a significant blow-out on the critical issue of capacity utilisation rates, with 56.8 per cent of respondents operating at capacity levels of 70 per cent or over; down from 60.3 per cent last quarter and 61.4 per cent this time last year.

Lack of orders were blamed as the primary barrier to increased production by 90.2 per cent of survey respondents, significantly up from the 80.2 per cent during the March 2005 quarter and slightly higher than the 88.2 per cent reported during June quarter 2004.

Hope springs unfailing

Respondents are optimistic the September 2005 quarter will be characterised by strong trading conditions, and expect it 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 and overtime levels

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

Declining stock levels

The trend of printing companies to invest primarily in equipment and technology was reinforced by the results. Over the next six months (September and December 2005 quarters) the respondents are forecasting increased investment activity in plant and machinery, but reduced investment activity in buildings

Business expectations remain high across Australia over the next six months, with the most optimistic state being Queensland. The highest capacity utilisation rates were also reported in Queensland as well as in Victoria.

In the product sectors, cheques and securities, labels and quick printing all enjoyed high capacity utilisation rates. Considerable levels of excess capacity exist in the book binding, desktop publishing, folding cartons, graphic reproduction, other packaging and paper converting, screen printing, greeting cards, calendars and diaries, business forms and continuous stationery sectors. With the exception of screen printing and folding cartons, which are expected to remain static and deteriorate respectively, improvements are forecast for the product sector over the next six months.

Any one 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.