Print Markets Reflect Second Quarter Economic Slowdown
Information appearing in the Quarterly Print Market Survey issued by the Printing Industries of America (PIA), Incorporated, reveals that the graphic arts industry mirrored the lackluster performance of the U.S. economy during the second quarter of 2001, marking a slightly greater downturn than the recession 10 years ago.
The information, assembled by PIA chief economist Dr. Ron Davis and research assistant Steve Kodey, reported the U.S. economy only grew 0.7 percent in the second quarter of 2001. Meanwhile graphic-arts industry sales crept along at 0.3 percent during the same period, which is less than the 0.6 percent rate during second quarter of 1991.
Despite the gloomy economic data for the U.S. economy, as well as the graphic arts industry, Ray Roper, PIA president and chief executive officer, reminded graphic arts industry professionals to stay the course and improve their operations.
“Most of the graphic arts executives I talk to made the adjustments needed to keep their heads above water during the slowdown,” said Mr. Roper. “The companies which will end up prospering from this economic downturn will be those which make the best transition from a no-growth to a growth mode of operations when the turnaround comes. The really savvy company owners are already planning for the turnaround.”
Although the industry as a whole witnessed lackluster sales, PIA research indicated it was not endemic of the entire sector. Printers with 20 or fewer employees are experiencing small, but steady sales increases of 1.2 percent. Overall, though, printers experienced average second quarter sales increases of just over 0.25 percent over the same quarter last year.
The survey also reveals that some printers experienced higher sales growth than their competitors. “Even though more than 38 percent of panelists reported sales losses, sales increased in excess of 5 percent for one-third of our panelists and one-fifth of the panelists reported growth over 10 percent.” The second quarter panel consisted of 194 respondents.
The survey also points out some positives for the graphic arts industry, despite the general slowdown in sales. Dr. Davis and Mr. Kodey write, “The cost of paper, one of the largest cost components for printers, increased only 1.6 percent over the past year. This is the lowest increase in paper prices reported by our panel since the fourth quarter of 1998.”
While paper prices remained in check, many graphic arts industry executives bemoaned rising energy costs. Energy and utility costs increased 9.5 percent over the last year with West Coast plants witnessing increases of 18.8 percent.
The Quarterly Print Market Survey also polled panelists’ perceptions on the economy and what actions they are taking to remain competitive during the slowdown.
“In all, ‘economic slowdown’, ‘poor sales’, ‘cash flow problems’, and ‘excess capacity’ were mentioned by a total of 57 percent of all panelists.
“Labor and staffing issues, once the top priority for printers for over two years, were only mentioned by 10 percent of panelists.”
“Almost 80 percent of all respondents indicated they are focused on getting new customers over the past few months. Increasing marketing and promotional efforts to attract business and reducing general expenses were tactics utilized by over 60 percent of panelists, while only 2.6 percent actually closed a plant,” the study reported.
Coldset Profits are Declining
Coldset web printers’ profits declined 0.31 percent between 1999 and 2000, from 5.88 to 5.37 percent, according to figures in the Printing Industries of America (PIA), Inc.’s, annual Ratios survey.
Profits as a percent of value-added revenues grew from 9.46 percent in 1999 to 9.86 percent in 2000. Profit leaders –printers in the top 25 percent of profitability – averaged 15.04 percent before-tax profit on sales, representing a decrease from last year’s reported figure of 15.85 percent. Despite the decline in profit, coldset web printers still outperformed the printing industry as a whole.
In 2000, the majority of printers’ revenues were devoted to three major cost areas – materials (43 percent, with paper alone accounting for 31.62 percent of sales), factory payroll (24.98 percent) and factory expenses (13.71 percent).
The coldset web printing sector is dominated by newspaper printing establishments. According to PIA’s 2001 Print Market Atlas: The Complete Reference Guide to Current Market Trends, there are more than 5,000 such establishments in the United States. Total shipments in this sector amounted to more than $31 billion.