Last year, the 2005 State of the Industry Report from the National Association of Printing Ink Manufacturers (NAPIM) clearly showed the dire economic straits the U.S. ink industry finds itself. With earnings before interest and depreciation (EBITDA) at a stunning 0.9 percent and return on net assets (RONA) at 2.9 percent, it was obvious that the ink industry’s economic position was unhealthy at best.
NAPIM recently released its 2006 State of the Industry Report, and while the numbers reported by its members were better than the year before, it would be a stretch to say that the ink industry has turned a corner.
Overall, ink sales rose 4 percent by value, while volume of ink sold declined 2.1 percent, indicating that price increases have been accepted for the most part. Packaging ink sales rose 5.8 percent while volume declined 0.1 percent. Publication and commercial ink sales increased 2.3 percent, while volume dropped 3.2 percent.
As a result, the industry’s profitability has improved, albeit marginally. According to NAPIM, U.S. ink manufacturers’ EBITDA rose to 1.9 percent, a sizable increase from last year’s paltry 0.9 percent, but still far below reasonable standards. RONA was 4.3 percent in 2006; the best news came for companies with sales above $50 million, where RONA increased to 4 percent compared to 0.2 percent in 2005.
The higher costs of raw materials and freight are having a major impact on U.S. ink manufacturers. For every dollar of ink sold, ink manufacturers paid 59.8 cents for raw materials and 6 cents for freight. By contrast, raw material prices averaged 53.1 cents per dollar between 2000-2005, while freight costs averaged 4.6 cents. These higher prices are not likely to be reversed in the near future.
Still, there are opportunities to be mined by ink manufacturers. The Asian ink market is enjoying excellent growth, as noted in my report beginning of page 27, and ink manufacturers are expanding their operations to meet the increased requirements.
RFID and printed electronics are areas that have also generated much interest. This month, European editor Sean Milmo reports from Printed Electronics Europe 2007, beginning on page 16, while I examine the RFID and printed electronics market, starting on page 32. There have been extremely high sales estimates of where these markets might reach, which is drawing much interest from ink manufacturers, major corporations and start-up companies alike. It will be interesting to see how this market evolves in the coming years.