2005 was a difficult year for the industry with no relief from the pressure on margins, says Philip Andersen, Acting CEO, Printing Industries Association of Australia Overall growth was around 6.2 per cent which lagged behind other industry sectors and the economy overall. Industry growth was disparate. On demand print and label sectors continued good growth – labels growing in excess of 12 per cent.
New business models are beginning to emerge driven by technological development, most notably data handling. These models will have significant impact on the sheetfed and web sectors which will progressively diverge into new technology and traditional technology business models.
Both these models will be influenced by a range of internal and external factors, including the introduction of Free Trade Agreements. Agreements are in place with the USA and Thailand and negotiations are continuing with a number of countries in the Asia region including China, Japan and Malaysia. The outcomes will have a marked effect on where and how industry companies use their investment dollars and the kind of business models that will flow from these decisions.
Paper pricing was relatively stable during 2005 but indications are this will change in 2006 reacting to depressed paper industry margins and increasing costs. With oil prices remaining high increased costs will impact on the industry from a number of directions. These can no longer be absorbed and inevitably will lead to higher prices.
Government legislation will affect business models. The WorkChoices legislation will see significant changes in the way businesses operate particularly in the labour management area.
The industry needs to continue to work together to develop a single, uniform standard for environmental labelling that is understood by all, has credibility and consensus support. Demonstrated implementation standards are essential to support the rhetoric if we are to preclude government from introducing its own enforceable standards.
Technology research and evaluation is critical to identifying new opportunities for the industry to both counter and take advantage of the growth in digital information management products, eg RFID labelling. It is also critical to streamlining and integrating services in the creator-to-consumer business paradigm in which printing companies may become involved in the multi purposing and multi delivery of information through electronic management systems. JDF (Job Definition Format) is considered by many to be the new generation solution for this.
Comparing
2005 was not a particularly good year for the industry. From a high in the March 2004 quarter printing sales have steadily declined. There is evidence that this trend may be reversing. Printing investment slowed during 2004 – early 2005, but this trend is quickly reversing with record levels of investment currently in the pipeline. Cost pressures are building and labour availability has become an issue. Capacity utilisation is still poor, although some improvement has been noted in the September 2005 quarter.
Pre-tax profits suffered significantly in 2004. Recovery is underway but expected to be short-lived with higher material prices biting. Paper suppliers have already flagged price rises. However, business confidence is considerably higher than for the same period in 2004.
Selling prices continue to disappoint after 19 consecutive quarters of falls. This is unlikely to change in 2006 and is symptomatic of the commodity based nature of print.
What happens in 2006?
Industry consolidations will continue in 2006 as organisations look at their futures and how to increase capacity utilisation. Investment decisions may increasingly involve looking offshore for business opportunities or partnerships. Streamlined operations, greater use of technology for businesses efficiency to drive down costs will be uppermost in the minds of most people. Leveraging technology to provide new services will grow as companies begin to engage new, non traditional skills to meet client demands and the challenge of technological driven communication.
