australian printing industry economic trends and prospects
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Australian Printing Industry Australian Printing Industry
Economic Trends and ProspectsEconomic Trends and Prospects
Presentation by:Presentation by:
Hagop TchamkertenianHagop Tchamkertenian
National Policy & Research ManagerNational Policy & Research Manager
Printing Industries Association of AustraliaPrinting Industries Association of Australia
March 2007March 2007
Presentation OverviewPresentation Overview
Economic performance of the Australian Printing Economic performance of the Australian Printing IndustryIndustry Economic growthEconomic growth Sales and pre-tax profitsSales and pre-tax profits Capacity utilisationCapacity utilisation Capital expenditureCapital expenditure Primary barrier to increased productionPrimary barrier to increased production Production, sales, selling prices and net profits, Production, sales, selling prices and net profits,
debtors, labour availability, average wagesdebtors, labour availability, average wages State by State comparisonsState by State comparisons
Will things get better? An outline of industry Will things get better? An outline of industry challengeschallenges
Is there hope? – Is there hope? – Printing IndustriesPrinting Industries programs and programs and initiativesinitiatives
Interpretation of the ChartsInterpretation of the Charts
The official data is presented in percent or percentage basisThe official data is presented in percent or percentage basis Non-official data sourced from the Printing Industry Trends Non-official data sourced from the Printing Industry Trends
report is mostly presented on balance percent basisreport is mostly presented on balance percent basis Balance percent is calculated by subtracting the proportion of Balance percent is calculated by subtracting the proportion of
respondents reporting improvements from the proportion respondents reporting improvements from the proportion reporting deteriorationreporting deterioration
For example: if 40 percent expect business conditions to For example: if 40 percent expect business conditions to improve and 25 percent expect business conditions to improve and 25 percent expect business conditions to deteriorate then the balance percent is positive 15 percent (40 deteriorate then the balance percent is positive 15 percent (40 less 25)less 25)
While balance percent outcomes do not measure magnitude While balance percent outcomes do not measure magnitude of change for a given indicator, they represent directional of change for a given indicator, they represent directional movement (trend) for a given indicator. Positive balance movement (trend) for a given indicator. Positive balance percentages imply improvementspercentages imply improvements
Compared to Australian economy printing industry remains Compared to Australian economy printing industry remains volatilevolatile
Past 5 years: 11 periods of economic downturn & 4 Past 5 years: 11 periods of economic downturn & 4 recessionsrecessions
Comparative Rates of Growth
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Sep
-03
Dec
-03
Mar
-04
Jun-
04
Sep
-04
Dec
-04
Mar
-05
Jun-
05
Sep
-05
Dec
-05
Mar
-06
Jun-
06
Sep
-06
Dec
-06
Per
cent
Printing
Australian economy
Source: ABS
Printing once of twoPrinting once of two sectors reporting declining activitysectors reporting declining activity Increased reported activity in retail trade, finance, Increased reported activity in retail trade, finance,
property and communications industries good for printing property and communications industries good for printing
industryindustry
Sectoral Growth Rates - Year to December 2006
-2 0 2 4 6 8 10
Communication services
Property & business services
Personal services
Wholesale trade
Finance & insurance
Accomodation, cafes & restaurants
Mining
Retail trade
Health & community services
Food, beverages & tobacco
Printing
Wood & paper products
Manufacturing
Construction
Australian economy
Percent
Source: ABS
Industry sales rebound Industry sales rebound Can sales be sustained? Can sales be sustained?
Sales - Printing
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
Dec
-01
Mar
-02
Jun-
02
Sep-
02
Dec
-02
Mar
-03
Jun-
03
Sep-
03
Dec
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
Mar
-05
Jun-
05
Sep-
05
Dec
-05
Mar
-06
Jun-
06
Sep-
06
Dec
-06
Perc
enta
ge c
hang
e
Source: ABS
Cost pressures again an issue in most recent Cost pressures again an issue in most recent period period
Impact on Margins - Printing
-3.5
-2.5
-1.5
-0.5
0.5
1.5D
ec-0
1
Mar
-02
Jun-
02
Sep-
02
Dec
-02
Mar
-03
Jun-
03
Sep-
03
Dec
-03
Mar
-04
Jun-
04
Sep-
04
Dec
-04
Mar
-05
Jun-
05
Sep-
05
Dec
-05
Mar
-06
Jun-
06
Sep-
06
Dec
-06
Perc
enta
ge c
hang
e
Materials used
Articles produced
Source: ABS
Publishing sector seems to have ability to charge Publishing sector seems to have ability to charge higher prices but not printinghigher prices but not printing
Moving up the value chain does not necessarily Moving up the value chain does not necessarily mean higher pricesmean higher prices
Price Index of Articles Produced
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Sep
-03
Dec
-03
Mar
-04
Jun-
04
Sep
-04
Dec
-04
Mar
-05
Jun-
05
Sep
-05
Dec
-05
Mar
-06
Jun-
06
Sep
-06
Dec
-06
Per
cent
age
chan
ge
Printing and Services to Printing
Publishing
Paper and paper productsSource: ABS
Global pulp prices continue to trend upGlobal pulp prices continue to trend up Prices now passed record levels in monetary termsPrices now passed record levels in monetary terms With Australia a price taker Australian printers may be With Australia a price taker Australian printers may be
faced with price increases over the next couple of yearsfaced with price increases over the next couple of years
Pulp Prices - NBSK
0
100
200
300
400
500
600
700
800
Dec
-00
Feb-
01
Apr
-01
Jun-
01
Aug
-01
Oct
-01
Dec
-01
Feb-
02
Apr
-02
Jun-
02
Aug
-02
Oct
-02
Dec
-02
Feb-
03
Apr
-03
Jun-
03
Aug
-03
Oct
-03
Dec
-03
Feb-
04
Apr
-04
Jun-
04
Aug
-04
Oct
-04
Dec
-04
Feb-
05
Apr
-05
Jun-
05
Aug
-05
Oct
-05
Dec
-05
Feb-
06
Apr
-06
Jun-
06
Aug
-06
Oct
-06
Dec
-06
Feb-
07
US
D/to
nne
Source: FOEX
The data applies to companies with 20 or more The data applies to companies with 20 or more employeesemployees
Extreme volatilityExtreme volatility Latest data shows improvements in pre-tax profitsLatest data shows improvements in pre-tax profits
Pre-tax Profits - Printing
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Dec
-01
Mar
-02
Jun
-02
Sep
-02
Dec
-02
Mar
-03
Jun
-03
Sep
-03
Dec
-03
Mar
-04
Jun
-04
Sep
-04
Dec
-04
Mar
-05
Jun
-05
Sep
-05
Dec
-05
Mar
-06
Jun
-06
Sep
-06
Dec
-06
Per
cen
tag
e ch
ang
e
Source: ABS
Fourth consecutive quarter fallFourth consecutive quarter fall Investment had been very robust until March 2006 quarterInvestment had been very robust until March 2006 quarter May see another decline next quarterMay see another decline next quarter
New Capital Expenditure - Printing
-20.0
-15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Dec
-01
Mar
-02
Jun-
02
Sep
-02
Dec
-02
Mar
-03
Jun-
03
Sep
-03
Dec
-03
Mar
-04
Jun-
04
Sep
-04
Dec
-04
Mar
-05
Jun-
05
Sep
-05
Dec
-05
Mar
-06
Jun-
06
Sep
-06
Dec
-06
Per
cent
age
chan
ge
Source: ABS
Improvement reported during December 2006 quarterImprovement reported during December 2006 quarter But compared to same situation a year earlier industry is But compared to same situation a year earlier industry is
less confident about future business prospectsless confident about future business prospects
Business Expectations - Printing
0
5
10
15
20
25
30
35
40D
'01
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
Bal
ance
%
Source: Printing Industry Trends
Labour and capacity constraints increase in Labour and capacity constraints increase in significance significance
Main Barriers to Increased Production
0
20
40
60
80
100
120D
'01
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
Perc
ent
Capacity
Labour
Orders
Source: Printing Industry Trends
Welcome improvement in capacity utilisation ratesWelcome improvement in capacity utilisation rates For the first time in the past 5 years there has now been For the first time in the past 5 years there has now been
3 consecutive quarters of reported improvements3 consecutive quarters of reported improvements
Capacity Utilisation Index - Printing
55
60
65
70
75
80
85
90
95
Dec
Q01
Mar
Q02
JunQ
02
Sep
Q02
Dec
Q02
Mar
Q03
JunQ
03
Sep
tQ03
Dec
Q03
Mar
Q04
JunQ
04
Sep
tQ04
Dec
Q04
Mar
Q05
JunQ
05
Sep
tQ05
Dec
Q05
Mar
Q06
JunQ
06
Sep
Q06
Dec
Q06
Perc
ent
Source: Printing Industry Trends
Robust expectations have been replaced by weaker Robust expectations have been replaced by weaker intentionsintentions
Consistent with sentiments reflected in official dataConsistent with sentiments reflected in official data
Capital Expenditure Intentions - Printing
0
5
10
15
20
25
D'0
1
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
Bal
ance
%
Source: Printing Industry Trends
Second consecutive quarter riseSecond consecutive quarter rise Net balance lower than same period last yearNet balance lower than same period last year
Level of Production - Printing
-40
-30
-20
-10
0
10
20
30
40
50
D'0
1
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
M'0
7
Bal
ance
%
Actual
ExpectedSource: Printing Industry Trends
Similar pattern to productionSimilar pattern to production Forecast remains positiveForecast remains positive
Level of Sales
-40
-30
-20
-10
0
10
20
30
40
50
D'0
1
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
M'0
7
Bal
ance
%
Actual
ExpectedSource: Printing Industry Trends
Downward trend in selling prices continuesDownward trend in selling prices continues
Selling Prices - Printing
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20D
'01
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
M'0
7
Bal
ance
%
Actual
ExpectedSource: Printing Industry Trends
Improvements in profits likely outcome of cost Improvements in profits likely outcome of cost savingssavings
Net Profits - Printing
-50
-40
-30
-20
-10
0
10
20
30
40
D'0
1
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M'0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
M'0
7
Bal
ance
%
Actual
ExpectedSource: Printing Industry Trends
Cashflow management remains a problem with actual Cashflow management remains a problem with actual outcome exceeding expected outcomeoutcome exceeding expected outcome
Number of Outstanding Debtors - Printing
-5
0
5
10
15
20
25
30
D'0
1
M'0
2
J'02
S'02
D'0
2
M'0
3
J'03
S'03
D'0
3
M '0
4
J'04
S'04
D'0
4
M'0
5
J'05
S'05
D'0
5
M'0
6
J'06
S'06
D'0
6
M'0
7
Bal
ance
%
Actual
Expected
Source: Printing Industry Trends
Labour availability reported down for 10 Labour availability reported down for 10 consecutive quartersconsecutive quarters
Clear implications for labour costsClear implications for labour costs
Labour Availability - Printing
-30
-25
-20
-15
-10
-5
0
5
10
15
20
D'0
1
M'0
2
J'02
S'0
2
D'0
2
M'0
3
J'03
S'0
3
D'0
3
M'0
4
J'04
S'0
4
D'0
4
M'0
5
J'05
S'0
5
D'0
5
M'0
5
J'06
S'0
6
D'0
6
Bal
ance
%
Source: Printing Industry Trends
Unemployment rate at generational low poses problems Unemployment rate at generational low poses problems for printing businesses seeking skilled labourfor printing businesses seeking skilled labour
Strong correlation between falling rates of unemployment Strong correlation between falling rates of unemployment and worsening labour availabilityand worsening labour availability in recent periodin recent period
Labour Market
0
1
2
3
4
5
6
7
8
Per
cent
-30
-25
-20
-15
-10
-5
0
5
10
15
20
Bal
ance
%
Unemployment rate (LHS)
Labour availability printing (RHS)
Source: Printing Industry Trends
Improvement in labour availability
Deterioration in labour availability
December 2006 quarter reported outcome is the highest December 2006 quarter reported outcome is the highest outcome in 11 years.outcome in 11 years.
Further increases expected during March 2007 quarterFurther increases expected during March 2007 quarter
Average Wages - Printing
0
5
10
15
20
25
30
35
40
45
50
D'0
1
M'0
2
J'02
S'0
2
D'0
2
M'0
3
J'03
S'0
3
D'0
3
M'0
4
J'04
S'0
4
D'0
4
M'0
5
J'05
S'0
5
D'0
5
M'0
6
J'06
S'0
6
D'0
6
M'0
7
Bal
ance
%
Actual
ExpectedSource: Printing Industry Trends
State by State State by State Comparison Outcomes Comparison Outcomes
Net balances used for sales, profits, selling prices and investment. Capacity utilisation – results capture proportion of respondents operating at capacity levels of 70 per cent or more
Source: Printing Industry Trends Report
Sales Profits Capacity Utilisation Selling Prices InvestmentNSW 12.8 -5.1 62.5% -18.0 2.9
VIC 21.1 15.8 79.0% -13.2 2.8QLD 40.0 26.7 93.3% 33.3 13.3SA 41.7 0 66.7% -16.7 33.3WA 33.3 -22.2 55.6% -11.1 22.2TAS 25.0 50.0 75.0% -12.5 0.0
State by State State by State Comparison Forecasts Comparison Forecasts
Sales Profits Selling Prices InvestmentNSW 10.5 0.0 -2.6 5.9VIC 10.5 2.6 2.6 11.1QLD 26.7 33.3 46.7 6.7SA 8.3 0 16.7 0
WA -33.3 -33.3 -11.1 -33.3TAS -12.5 -12.5 0.0 37.5
Source: Printing Industry Trends Report
Net balances used for sales, profits, selling prices and investment forecasts
SummarySummaryPrinting IndustryPrinting Industry
Printing industry once again expandingPrinting industry once again expanding Sales and pre-tax profits reported upSales and pre-tax profits reported up New capital expenditure fell for the 4New capital expenditure fell for the 4 thth consecutive consecutive
quarter but this should not be a concern due to the quarter but this should not be a concern due to the recent period of strong investmentsrecent period of strong investments
Improvements reported in orders and salesImprovements reported in orders and sales Idle capacity improved for 3Idle capacity improved for 3rdrd consecutive quarter consecutive quarter Selling prices continue to declineSelling prices continue to decline Cash-flow management remains an issueCash-flow management remains an issue Availability of skilled labour an ongoing concernAvailability of skilled labour an ongoing concern Wage outcomes at 11 year highWage outcomes at 11 year high
Will things get better?Will things get better?
Business climate likely to remain challengingBusiness climate likely to remain challenging
one due to the following factors.one due to the following factors.Environmental factors:Environmental factors: Extended Producer Responsibility for printing and writing Extended Producer Responsibility for printing and writing
papers/office paperspapers/office papers National Packaging Covenant – emphasis on reduced National Packaging Covenant – emphasis on reduced
packagingpackaging Junk Mail Campaigns – targeting direct mail itemsJunk Mail Campaigns – targeting direct mail items
Will things get better?Will things get better?
Globalisation:Globalisation: Offshore tendering Offshore tendering Free Trade AgreementsFree Trade Agreements
Technological:Technological: Developments in multi-mediaDevelopments in multi-media Cost of new technologyCost of new technology
Market conditions:Market conditions: Printed matter treated as a commodity goodPrinted matter treated as a commodity good Managing a hybrid business – manufacturing/servicesManaging a hybrid business – manufacturing/services NSW and to lesser extent Victorian economy less NSW and to lesser extent Victorian economy less
robust than other economies “missing out on robust than other economies “missing out on resources boom”resources boom”
Will things get better?Will things get better?
Recruitment of labour:Recruitment of labour: Difficulties in attracting young people to the industryDifficulties in attracting young people to the industry Skilled labour shortagesSkilled labour shortages Upward pressure on wagesUpward pressure on wagesSuccession planning:Succession planning: Printing Industries Printing Industries research shows that more than 38 research shows that more than 38 per cent of business owners surveyed are planning to per cent of business owners surveyed are planning to exit the industry within 5 years and almost 64 per cent exit the industry within 5 years and almost 64 per cent within the next 10 yearswithin the next 10 years Yet 31 per cent indicated that they had no business Yet 31 per cent indicated that they had no business succession plansuccession plan
Is there hope?Is there hope?
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