The release of the June 2012 quarter Printing Industry Trends Survey Report show that trading conditions in the printing and associated industries remained challenging, with most indicators pointing downwards.
While business sentiment bounced back from the previous quarter, which was also the lowest level since the period of the global financial crisis, the overall softness of trading conditions caused the national industry capacity utilisation rate to fall to its lowest level in the 25 year history of the survey.
Hagop Tchamkertenian, national manager for policy and government affairs, Printing Industries, stated that the June 2012 quarter outcomes represent the 18 consecutive quarter where reported industry outcomes came in below expected outcomes for a host of economic indicators.
Pivotal June 2012 quarter developments reported by the survey respondents include:
- Reduced orders and production;
- Reduced sales and net profits;
- Reduced employment and overtime levels;
- Reduced investments in buildings and plant and machinery during the past six months;
- Finance reported harder to obtain for the 18 consecutive quarter;
- Labour availability reported to have deteriorated for the 10 consecutive quarter;
- Increased material and wage costs;
- Selling prices reported to have fallen for the 46 consecutive quarter;
- Reduced levels of raw material stock levels: and
- Increased numbers of outstanding debtors.
On the pivotal indicator of capacity utilisation rates, the June quarter results shows that 41.7 per cent of respondents were operating at capacity/activity levels of 70.0 per cent or over, and outcome that is significantly lower than the 48.3 per cent proportion reported for the same period a year earlier.
Some 89.8 per cent of survey respondents ranked lack of orders as the primary barrier to increasing production levels, an outcome that is slightly lower than the 90.4 per cent proportion reported during June quarter 2011
According to 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 September 2012 quarter is expected to yield the following results:
- Net balance increases in orders, production, sales and net profits;
- Reduced employment and overtime levels;
- Reduced availability of finance;
- Increased availability of labour;
- Further modest falls in selling prices;
- Reduced 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 (September and December 2012 quarters) the survey respondents expect:
- Modest increases in plant and machinery investments; and
- Reduced investment activity in buildings.
The outlook for general business expectations over the next six months remains largely optimistic with respondents from New South Wales, South Australia, and Victoria forecasting improvements, respondents from Western Australia and Queensland are expecting no change, while Tasmanian respondents are forecasting deterioration.
Respondents from South Australia reported the highest utilisation rates with 61.5 per cent of respondents operating at capacity utilisation levels of 70 per cent or more, followed by respondents from New South Wales (54.5 per cent), Victoria (43.8 per cent), Tasmania (33.3 per cent), Queensland (13.3 per cent), and Western Australia (11.1 per cent).
Most sectors are forecasting improvements or no change to take place in general business conditions during the next six months, while Labels and Books, Magazines, Periodicals and Newspapers are forecasting deterioration in business conditions. Over the outlook period the most optimistic sectors are Other Packaging and Paper Converting and Digital Printing.
Relatively higher capacity utilisation/activity levels were reported by the Folding Cartons, Digital Printing, Books, Magazines, Periodicals and Newspapers, Screen Printing, Labels, Graphic Arts Machinery and Supplies, and Paper Merchants sectors. Considerable levels of excess capacity were reported in General Promotional and Commercial, Trade Binding, Business Forms and Continuous Stationery, Security Printing, and Other Packaging and Paper Converting sectors.
With most sectors reporting deterioration or no change in investment in plant and machinery, reported improvements were confined to the Labels, Digital Printing and Books, Magazines, Periodicals and Newspapers sectors during the six months to June 2012. With the exceptions of Labels, Books, Magazines, Periodicals and Newspapers, Other Packaging and Paper Converting, Digital Printing and Screen Printing (all forecasting increase), over the six months to December 2012 the sectors are either forecasting no change or reduced investment in plant and machinery.
In terms of general observations the deterioration in trading conditions reported during the June 2012 quarter was largely inline with reported outcomes a year earlier. A notable area of concern remains capacity utilisation rates which deteriorated significantly during the June quarter when compared to the situation a year earlier.
Another ongoing development concerns the long term employment intentions which continue to record significant deterioration especially amongst the largest employing businesses.
The June quarter also saw costs on a net balance basis trend up across the board. The expectations for both material and wage costs both trended up during the quarter. This is a significant development given that selling prices once again deteriorated during the quarter and expectations are for more deteriorations albeit a modest one over the forecast period.
Expectations on debtors were met with the actual outcome matching the expected outcome. Nevertheless, the industry does continue to have a cash flow problem given that the number of outstanding debtors continues to increase from one quarter to the next.
Tchamkertenian said that industry forecasts for a range of key indicators remain positive but modest. The key will now be whether the reported outcomes for the September quarter match the forecasts. He says, “Over the past four and half years the industry has tended to remain optimistic in its projections concerning trading conditions. Over that timeframe however, the reported outcomes have tended to be well below the expected outcomes he said.
Tchamkertenian also added that the next six months would be critical as the industry gets used to operating under the Carbon Tax. “Industry sentiment does not seem at this stage to be affected by the operation of the Carbon Tax given that sentiment actually improved during the June quarter compared to the previous quarter. The next two quarters should provide us with a reasonable indicator as to how the printing industry is being impacted by the operation of the new tax”, he stated.
Survey notes: The June 2012 Printing Industry Trends Survey was distributed to 295 companies. A total of 108 companies responded to the latest survey out of a sample of 295 companies generating a response rate of 37 per cent.
Breakdown of respondents from states are as follows: New South Wales 33; Victoria 32; Queensland 15; South Australia 13; Western Australia 9; and Tasmania 6.