The recently released December 2010 quarter Printing Industry Trends Survey Report shows that trading conditions registered strong improvements in the printing and associated industries.
The reported improvement however failed to prevent business sentiment registering a major deterioration compared to the previous quarter. As a consequence of the deterioration, business sentiment is also noticeably lower than the corresponding outcome a year ago.
According to Mr Hagop Tchamkertenian, Printing Industries National Manager for Policy and Government Affairs, reported industry outcomes for the December 2010 quarter were once again below expected outcomes for a range of economic indicators for the twelfth consecutive quarter.
Pivotal December 2010 quarter developments reported by the survey respondents include:
Increased orders and production;
Increased sales and net profits;
Increased employment and overtime levels;
Reduced investment in buildings but increased investment in plant and machinery during the past six months;
Finance reported harder to obtain for the 12th consecutive quarter;
Labour availability reported to have deteriorated for the fourth consecutive quarter;
Moderating material and wage cost pressures;
Selling prices reported to have fallen for the 40th consecutive quarter;
Increased levels of raw material stock levels: and
Increased numbers of outstanding debtors.
On the critical indicator of capacity utilisation rates, the December 2010 quarter result shows that 75.2 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, significantly up on the 63.0 per cent reported outcome of the previous quarter and slightly up from the 70.9 per cent proportion reported this time last year.
Some 76.2 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is lower than the 88.0 per cent proportion reported during the September 2010 quarter and the 87.3 per cent proportion reported during December quarter 2009.
According to Mr Tchamkertenian over the outlook period industry respondents are forecasting net balance improvements to take place in a number of key economic indicators.
Based on these forecasts the March 2011quarter is expected to yield the following results:
Moderate net balance increases in orders, production, sales and net profits;
Reduced employment and overtime levels;
Reduced availability of finance and labour;
Lower selling prices;
No change in stock levels;
Further net balance increases in all production cost categories - average wages, other labour costs, and average material costs; and
Increased number of outstanding debtors.
Over the next six months (March and June 2011 quarters) the survey respondents expect:
Increased investment in plant and machinery investments; and
Increased investment activity in buildings.
Respondents from South Australia reported the highest utilisation rates with 91.0 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from Western Australia (81.8 per cent), Victoria (77.8 per cent), Queensland (75.0 per cent), Tasmania and New South Wales (66.7 per cent each).
The outlook for general business expectations over the next six months remains favourable across most states. The most optimistic state over the outlook period continues to be South Australia with a net balance of 27.3 per cent followed by Victoria with a net balance of 20.0 per cent.
While a significant number of sectors are forecasting improvements to take place in general business conditions during the next six months, the Paper Merchants, Folding Cartons, General Promotional and Commercial, Books, Magazines, Periodicals and Newspapers, and Trade Binding sectors are forecasting deterioration.
Over the outlook period the most optimistic sectors are the Digital Printing and Other Packaging and Paper Converting.
The December 2010 quarter outcome shows capacity utilisation/activity levels were reported as being higher in the Cheques and Securities, Labels, Paper Merchants and Greeting Cards, Calendars and Diaries sectors. Considerable levels of excess capacity were reported in the Screen Printing, Business Forms and Continuous Stationery, and Other Packaging and Paper Converting sectors.
With most sectors reporting increased investment or no change in plant and machinery, reported deteriorations were confined to the Greeting Cards, Calendars and Diaries and Screen Printing sectors during the six months to December 2010.
The product sectors are either forecasting increased investment or no change in plant and machinery over the next six months, while the Greeting Cards, Calendars and Diaries and Screen Printing sectors are forecasting reduced investments.
In terms of emerging trends, capacity utilisation rates keep improving in line with improvements in trading conditions. In the area of production costs and specifically material costs, the strong Australian dollar continues to provide relief. Wages which represent another significant cost area moderated slightly during the quarter but selling prices continue to come under pressure.
Mr Tchamkertenian said the challenge facing industry participants now is to manage the expected moderation in trading conditions over the next quarter.
“While the Australian dollar is likely to continue to provide some welcome relief on the material cost front, printing business operators are likely to face challenges to their margins brought about by continued pressure on selling prices and weaker trading conditions” he said.
Mr Tchamkertenian said the strong December quarter came as a surprise as a survey released last month by another employer association had shown that the printing industry had contracted.
“The divergence in the reported outcomes are likely due to differing sample sizes for our industry segment as the Printing Industry Trends Survey continues to have a much larger sample and response rate, hence its ability to deliver more reliable and accurate outcomes for the printing industry” he said.
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.
Printing Industries Association of Australia
www.printnet.com.au
