Asian pacific graphic arts 2013 australian presentation - state of the printing industry

1313thth Forum of Asian Pacific Graphic Arts Forum of Asian Pacific Graphic Arts1

FAPGA

AUSTRALIA COUNTRY REPORT

February –March 2013 | IndiaFebruary –March 2013 | India

Economic TrendsPrepared by: Hagop Tchamkertenian

National Manager for Policy & Government AffairsPrinting Industries Association of Australia

•Printing Industry growth has been extremely volatile over the past decade• During the past decade the industry has experienced 5 economic downturns• The only time the Australian economy came close to a recession was during the period of the GFC• 24.0 per cent printing industry contraction reported during the GFC

Economic Trends - AustraliaEconomic Trends - AustraliaFAPGA

•During the GFC the rate increased but government intervention via fiscal stimulus packages and supportive monetary policy prevented it from rising to higher levels• Recent period shows a slight upward trend • While at 5.4 per cent it remains the envy of the industrialised world it does pose some policy challenges

Economic Trends - AustraliaEconomic Trends - AustraliaFAPGA

•Headline inflation plummeted during December 2012 quarter• Headline rate remains below RBA’s upper target range of 3 per cent• Underlying inflation is at the lower end of RBA’s inflation target band of 2-3 per cent

Economic Trends - Australia Economic Trends - Australia FAPGA

• The gap between private and public sector wages has been eliminated• The All sector index has started to trend down• For printing businesses labour costs are the second highest cost component after material costs• With unemployment remaining relatively low any increased demand for labour will exert upward pressures on wages


•Retail trade is an important driver of activity for the printing industry• The post GFC period has been soft• The last 6 months have been very weak due to consumers repaying off debt and continued uncertainty about economic prospects


•The Australian dollar has been a star performer in the post GFC period• Significant appreciation recorded against major international currencies• Being a commodity based currency it has benefited from the commodity boom• Positives and negatives for the printing industry from a stronger exchange rate


• Moving towards lower carbon economy - the Carbon Tax/Emissions Trading Scheme is now in operation for 8 months • Ageing population – future labour supply issues, taxation and pension expenditure • Moving people into productive work opportunities – almost 800,000 people are currently on disability pension• Post GFC period characterised by subdued consumption expenditure – consumers are reducing their debts and are reluctant to spend big due to an increasingly uncertain economic environment• Two speed and sometimes three speed economy • Danger of wasting the proceeds of the “resources boom”• High Australian dollar hurting export and import competing sectors • Headline and underlying inflation under control may help moderate wages

Economic Issues Facing Economic Issues Facing Australia Australia

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• When all the components of the “broader” industry are included, the pulp, paper, printing and publishing industry is a significant contributor to the Australian economy.

Economic Profile – Australian Economic Profile – Australian Printing Printing

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• A breakdown of printing industry shows that it is concentrated in the east-coast• The 3 main states of NSW, Victoria and Qld account for 89 per cent of industry sales, employ 86 per cent of the workforce and pay 86 per cent of the wages and salaries

Economic Profile – Australian Economic Profile – Australian Printing Printing

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•The printing industry is showing signs that it has started to recover from the GFC• It remains doubtful whether sales will ever recover to pre-GFC levels anytime soon• Sales have now increased for successive quarters

Economic Trends – Australian Economic Trends – Australian Printing Printing

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•New capital expenditure has been very weak in recent quarters• Investments were brought forward to access the government’s investment allowance during the GFC• June and September 2009 quarters surge due to the investment allowance • March to September 2011 quarters outcomes mostly due to bounce back effect from low point


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• Trade in printed matter has been trending downwards in recent months• Appreciating Australian dollar has not yet caused a surge in imports of printed matter • Structural issues likely the cause – demand for printed matter has not yet recovered to pre-GFC levels• Unlikely that it would either in the short term


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•In revenue terms some traditional media are growing and are forecast to continue to grow•However because the growth rate is much lower than “emerging media”, their share of total advertising expenditure continues to fall•Printing businesses that rely purely on traditional forms of media face weak growth prospects•Those targeting all media have good growth prospects

Economic Trends – Australian Economic Trends – Australian Media Media

Source: PWC

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•Printing Industries Association of Australia internal research shows business confidence remaining positive but trending down• However compared to same period a year earlier, confidence levels are noticeably lower• The GFC impact is also clearly evident in the chart


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• The most recent survey results show increased idle capacity• Approximately 52 per cent of survey respondents reported to be operating at capacity levels of 70 per cent or more• The presence of idle capacity is another reason for the weak investment outcome and outlook


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• Capital expenditure intentions over the six months to June 2013 have weakened significantly• The fall in intentions correlates with the reported fall in capacity utilisation rates


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•Selling prices were reported to have fallen once again on net balance basis during the December 2012 quarter• The latest reported fall represents the 48th consecutive fall!• The outlook is for further modest falls


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•Our survey shows the great reported volatility in net profits of the past have given way to sustained downward reported movements in recent times• Very few net balance increases reported during the past decade• During the GFC period significant margin pressures experienced• The intensity may have slightly moderated but the trend is a downward one


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•After peaking in the December 2008 quarter, material costs started trending downwards• The recent period has been associated with increased cost pressures but the latest quarter shows further moderation • Given the reported reductions in selling prices, any reported moderation in material costs is a welcome development


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•The other major cost factor wages was trending up until the most recent quarter that of December 2012 •The moderation in the latest quarter may partly due to ongoing industry rationalisation/consolidation which is helping up free skilled workers


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•Finance availability started to deteriorate in March quarter 2008 and continues to this day• Labour availability increased during the period of the GFC but over the past 12 quarters modest net balance falls have been reported


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• The economic performance of commercial printing – established sector versus digital printing – emerging sector• On all key economic measures, digital printing sector has outperformed the commercial printing sector• Most of the new investment is also taking place in the digital printing sector


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• The economic performance of commercial printing – established sector versus digital printing – emerging sector• On a range of key economic measures, digital printing sector has outperformed the commercial printing sector• Most of the new investment is also taking place in the digital printing sector


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• One key economic measure that digital printing sector has not outperformed the commercial printing sector is in capacity utilisation• Digital printing sector continues to report lower capacity utilisation levels

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Red Issues:• Price competition• Commoditisation of print• Idle capacity• Price competition from imported print• Shift from hard copy to soft copy• Reduced volumes • Poor cash flow management• Increased bad debts• Lack of management skills• Industry cooperation and trust

Issues Facing Australian Issues Facing Australian PrintingPrinting

Green Issues: • Lack of investment in training• Pace of technological changeOrange Issues:• Environmental perceptions of industry• Lack of government support• Volatile sales• Poor image of industry amongst school leavers• Ageing population• Lack of succession planning • Increasing operational costs – energy• Accessing finance• Difficulties in attracting and training apprentices• Moving beyond “ink on paper”

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1313thth Forum of Asian Pacific Graphic Arts Forum of Asian Pacific Graphic Arts27

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AUSTRALIA COUNTRY REPORT

February – March 2013 | IndiaFebruary – March 2013 | India

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Asian pacific graphic arts 2013 australian presentation - state of the printing industry