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NAPIM's State of the Industry Report Shows Challenges Ink Industry Faces



By David Savastano, Ink World Editor



Published June 4, 2008
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In recent years, the printing ink industry has faced numerous challenges that have impacted the bottom line. Some of these issues, notably the skyrocketing costs of crude oil and raw materials as well as other operational costs, can not be helped. The state of the printing industry is another problem. On the other hand, holding off for too long on asking for much-needed price increases was a self-inflicted injury.   
   
Either way, the financial numbers reported by the U.S.-based National Association of Printing Ink Manufacturers (NAPIM)  in its 2008 State of the Industry Report continue to show an industry that is trying to climb out of a sizable hole.
   
According to surveys conducted by NAPIM, the volume of ink sales declined by 3.7 percent in 2007 compared to 2006, while dollar value dropped 1.5 percent. While that means that prices did increase somewhat, the drop in ink usage is obviously a cause for concern.
   
Surprisingly, that decline is most clearly reflected in the packaging market, which NAPIM reported dropped 5.5 percent by volume and 4 percent by value. The gravure market had the worst returns, with both solvent- and water-based declining more than 10 percent by volume. Meanwhile, the publication/commercial side of the business dropped 3.2 percent by volume, but only 0.5 percent by dollar value; sheetfed volume rose 0.8 percent, and heatset was fairly stable. Coldset had the steepest decline, at 6.1 percent by volume compared to 2006.
   
With these numbers, it is a little surprising and slightly encouraging that profitability of the ink industry rose a bit in 2007. Earnings before interest and taxes (EBIT) moved up to 2.7 percent, up from 1.9 percent in 2006 and 0.9 percent in 2005; this is still a relatively poor number, but at least it is trending upward. The best results are coming from companies with sales below $50 million. Return on net assets (RONA) more than doubled, to 10 percent from 4.3 percent in 2006.
    
The continued high costs of raw materials remain the biggest concern for ink companies. According to NAPIM, 59.2 percent of operating expenses went to raw materials in 2007, a number which has steadily increased in recent years, and there does not appear to be any end in sight.
   
The past few years have been difficult for many ink manufacturers, and as NAPIM’s 2008 report shows, 2007 was no different in that respect. All things considered, it is likely that more challenges lie ahead for the ink industry.


David Savastano
Ink World Editor
dave@rodpub.com



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