The release of the latest issue of the Printing Industry Trends Survey Report for the December 2012 quarter shows that trading conditions in the printing and associated industries remained soft, as they have done for the past five years.
However printing industry respondents continue to remain positive about the future with a greater proportion of industry respondents expecting improvements to take place relative to those expecting deterioration, this, despite another quarter dominated by difficult trading conditions.
One noticeable and concerning aspect of the reported outcomes is that the seasonal bounce back that the industry traditionally enjoyed during the December quarter was clearly missing this time round. This is consistent with developments that have taken place in the broader economy such as in the retail industry a significant buyer of print and related services, also reporting subdued trading activity during the December quarter.
Hagop Tchamkertenian, Printing Industries national manager for Policy and Government Affairs, stated that the December quarter outcomes represent the twentieth consecutive quarter where reported industry outcomes came in below expected outcomes for a host of economic indicators.
The survey respondents reported net balance reductions in a number of pivotal industry indicators including production, orders, sales, selling prices, net profits, employment and overtime, and capital expenditure. It was also reported that both labour and finance was harder to obtain and there was an increase in the number of outstanding debtors. Cost pressures were also present during the quarter with reported increases in wages and material costs.
On the pivotal industry indicator of capacity utilisation rates, the December quarter results shows that 51.9 per cent of respondents were operating at capacity/activity levels of 70 per cent or over, an outcome that is noticeably lower than the 62.7 per cent of respondents who reported for the same period a year earlier.
Some 87 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is higher than the 78.2 per cent proportion reported during December quarter 2011.
Tchamkertenian reported that a new area of analysis was introduced during the December quarter following industry feedback. He says, “We now have commenced collecting data on average debtor and creditor days, and over time we will have at our disposal some useful benchmarks.
The average debtor days amongst the survey respondents stood at 51 days compared to an average creditor profile of 40 days, which implies that the average industry cash flow gap stood at 11 days during the December 2012 quarter.
According to the responses, 20.4 per cent experienced positive cash flow; 25.0 per cent reported cash flow as being neutral with average debtor days equalling average debtor days; and 54.6 per cent indicated that they had experienced negative cash flow he confirmed.
Tchamkertenian notes that over the outlook period industry respondents are forecasting modest net balance improvements to take place in a number of pivotal economic indicators.
Based on these forecasts the March 2013 quarter is expected to yield net balance improvements in orders, production, sales and net profits. Further falls in employment and overtime levels are also being forecast, but expectations for investments over the six months to June 2012 in plant and machinery remain positive.
The forecasts also point to continued but moderating cost pressures with expectations that wages, other labour costs and material costs will rise on net balance basis during the March 2013 quarter.
The outlook for general business expectations over the next six months remains mixed with respondents from New South Wales, South Australia, and Queensland forecasting improvements on net balance basis, respondents from Victoria and Western Australia forecasting deterioration, and no change being forecast by respondents from Tasmania.
Respondents from South Australia reported the highest utilisation rates with 61.5 per cent of operating at capacity utilisation levels of 70 per cent or more, followed by respondents from New South Wales (59.4 per cent), Queensland (55.6 per cent), Victoria (51.8 per cent), Tasmania (28.6 per cent), and Western Australia (27.3 per cent).
Most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while Labels, General Promotional and Commercial and Books, Magazines, Periodicals and Newspapers are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are Screen Printing and Graphic Arts Machinery and Supplies.
Relatively higher capacity utilisation/activity levels were reported by the Labels, Digital Printing, Books, Magazines, Periodicals and Newspapers, Graphic Arts Machinery and Supplies, Business Forms and Continuous Stationery and Paper Merchants sectors. Considerable levels of excess capacity were reported in Other Packaging and Paper Converting, General Promotional and Commercial, Trade Binding, Security Printing, Folding Cartons and Screen Printing sectors.
With a large number of sectors reporting reduced investments in plant and machinery, reported improvements were confined to just a single sector comprising of Books, Magazines, Periodicals and Newspapers during the six months to December 2012.
With the exceptions of Other Packaging and Paper Converting (forecasting no change), and Trade Binding, General Promotional and Commercial, Labels and Business Forms and Continuous Stationery (forecasting deterioration), the remaining sectors are forecasting increased investment in plant and machinery over the six months to June 2013.
In terms of general observations the deterioration in trading conditions reported during the December 2012 quarter is a concern and could signal the weakening or even possibly the end of seasonal influences. Also industry capacity utilisation rates continue to remain at historically low levels largely as a consequence of ongoing industry structural and transitional issues.
A further area of concern is industry long term employment intentions which continue to record significant deterioration especially amongst the larger employers who have a greater capacity to adjust their operations and business models to respond to difficult trading conditions.
The December quarter confirmed that while on a net balance basis both material and wage costs were reported to have increased, the reported costs have moderated. The moderating trend is welcome given that selling prices once again deteriorated during the quarter and expectations are for further modest deteriorations over the forecast period.
Tchamkertenian said that industry forecasts for a range of key indicators remain positive however the question of whether the reported outcomes for the March 2013 quarter and beyond will match the forecasts is another issue.
He says, “For five years industry participants have consistently submitted optimistic projections which have largely been unfulfilled for a range of critical industry indicators.
“Another interesting observation is that after two full quarters of the operation of the Carbon Tax business sentiment has now plunged to a four year low. Further data will be required to make a more definitive assessment about the impact of the tax on the printing and associated industries, as no doubt poor trading conditions are also influencing industry sentiment.”
Survey notes: The December 2012 Printing Industry Trends Survey was distributed to 290 companies. A total of 108 companies responded to the latest survey generating a response rate of 37 per cent.
