BPIF Printing outlook survey shows signs of summer recovery
Thursday, September 30, 2010
Press release from the issuing company
More than half of the respondents to the latest Printing Outlook survey, published by the BPIF this week, have reported no change in trading conditions during the summer months. However the survey also revealed that a third of firms saw an improvement, with just 11% stating that the market had deteriorated in that period. The latest survey was carried out online during the period 1-13 September 2010 and consisted of 90 companies employing 10,197 people with a turnover of £1.2 billion
This positive balance of +22 is ahead of the good performance registered three months earlier and compares very favourably with the situation at the same time last year, when a negative balance of -12 reflected the market's weakness. Trading conditions lived up to printers' expectations this summer. Although the market is still in recovery mode, the majority of survey respondents forecast a stable autumn. Printing capacity utilisation has improved, with lead times beginning to lengthen. Even though two-thirds of firms are still working within a four-week time slot, this compares with 85% three months ago.
Both order levels and production have both responded to gradual market improvement, with almost two-fifths (39%) of print firms reporting an increase in domestic order levels during the summer. Although just 18% of print firms expect general trading conditions to improve, no less than 70% predict a rise in domestic order levels through the autumn months. A knock-on effect for output is predicted, with three-quarters believing production will rise.
There has been an unexpected cut in employment levels this quarter, with a third of printers shedding jobs. While the number of firms taking on more staff was close to that predicted, at19% compared with 18%, close to a third of firms cut the size of their workforce when only 12% had expected to do so. This negative balance was the worst reading for a year and is somewhat surprising given the recent recovery within the market place.
Some firms were able to raise prices, although others were forced to cut rates in order to compete for business. However there is positive balance between the two this quarter. Although this balance is a marginal one, it is first that the survey has seen for two years. The expectation of rising demand and the need to offset rising raw material costs has led to 31% of firms anticipating raising output prices during the autumn. At the same time though, 8% believe that they will have to reduce levels in the period.
Fewer firms reported narrower margins. Here the summer result once again ran close to forecast, with a balance of +1 versus a projection of –5 last time. This brought to an end nine consecutive surveys in which the numbers that saw margins narrow outweighed those that recorded improvement. Unfortunately though, profit levels are not benefiting from this: the number of firms making a loss this time actually grew, with 15% failing to make a profit compared with 3% at the time of the last survey.
Further paper and board price hikes are expected during the autumn months, whilst only a third of UK printers have been able to pass the full impact of rising paper prices on to their customers. Printers' expectations that costs for their prime raw material would continue to rise during the summer were borne out, with no less than 89% having to accept increases. Further price pressure is expected over the coming three months by 81% of survey respondents, the remainder believing that prices will stabilise at existing levels. A further 57% managed to offset part of the additional charge by raising prices to some degree, while 10% swallowed the entire cost burden. More than half of firms revealed that print volumes have been unaffected by paper and board price increases. A further 36% were unsure whether print runs had suffered, which left 13% stating that volumes had been adversely affected.
Two-fifths of printers surveyed said that they had experienced a problem with supply shortages this year.
The survey reports mixed feelings among respondents regarding prospects for exports, as concerns regarding currency rates loom large. Conditions for exporting are set to deteriorate over the next three months according to the 44% of printers that export in sufficient quantities, with currency exchanges movements, price levels, delivery dates, and economic conditions in key overseas markets all cited as causal factors. At the same time, over a third of firms believe that conditions for exporting will actually improve.
The vast majority (91%) of firms surveyed are investing in plant and machinery, with 36% expecting to spend more over the coming 12 months. A further 62% of printers are looking to make alterations to existing buildings, with a balance of +11 set to spend more.
Print and packaging insolvencies are now below their equivalent 2009 level. Latest data from the Begbies Traynor Red Flag Alert statistics reveals that 70 print and packaging companies became insolvent in the second quarter of 2010, down from 111 in the preceding quarter. It seems likely that insolvencies will rise slightly in the third quarter of 2010 but it is perhaps more significant they should remain below corresponding figures for 2009 and 2008. Meanwhile the level of bad debt remains a cause for concern for many printers. Although some is evidence of an increase in the availability of credit lines with suppliers and bank lending, the financing environment remains poor and the cost of bank lending facilities continues to climb for those that have access to them.
Prospects for the autumn look reasonably good. The balance between those companies expecting an improvement in market conditions, as compared to those expecting deterioration, stood at +15. That said, almost four-fifths believe that the trading environment will be little changed. Reflecting a better overall situation this year compared to last, 56% of survey respondents believe that the coming three months will show an improvement on the same period in 2009.
Corporate Affairs Director Andrew Brown says "With the majority of respondents reporting stable or improved conditions over the summer, this quarter's Printing Outlook results are very encouraging, as is the prospect of a further period of stability over the autumn. However the industry is still trading well below pre-recession levels and there are continuing uncertainties with regard to whether the improved UK economic conditions will hold up in the period ahead. Paper price increases, public sector cutbacks in print spend, and over-capacity leading to sub-cost pricing in the market all remain common causes for concern for our members, and profit levels remain weak."
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