The Year in Review
For ink manufacturers, 2011 saw an improvement in sales, but raw materials remain a major concern.
For ink manufacturers, 2011 was in many ways a continuation of 2010, in which sales volume increased, but higher raw material costs impacted the bottom line. The offset side of the ink business continued to see further declines as sheetfed and the newspaper market suffered, while packaging remained stronger.
Meanwhile, there remains major concerns that availability of key ingredients will remain scarce, and the fragile economic recovery may deteriorate.
Charles Murray, president, North American Inks, Sun Chemical, said that overall, Sun Chemical had a comparable year to 2010 in that it continued to recover volume in all sectors. However, many of the same challenges that Sun Chemical and the ink industry in general faced in 2010 continue to persist in 2011.
“The commercial sheetfed market continues to struggle as companies cut back on their marketing collateral and other printing needs,” Mr. Murray noted. “The publication printing market including newspapers worldwide struggled considerably in 2011. In both of these cases, the movement to Internet and other electronic alternatives as well as consolidation have been the key drivers for the continued downturn. The market shift in the publications market has been drastic. Sales in this market have not recovered to pre-recession levels and we don’t expect that they will.
“In the packaging market, we have seen moderate growth in 2011, and we expect to see similar growth in 2012,” Mr. Murray added. “Sun Chemical will continue to see growth in the flexible packaging segment, specifically value-added packaging, as the trend in the market continues to move towards functional and sensory packaging. The packaging market faces different challenges than other market segments, such as migration in Europe, and the push toward smaller package size, recyclability and other efforts to reduce the impact of packaging on the environment, but these challenges are great opportunities for growth at Sun Chemical. We’re working with brand owners and major packaging groups to provide them with solutions for specialized packaging of the future.
“In all cases and markets, our customers are relying on Sun Chemical to maintain an intense focus on value and cost, and we’re doing this by making significant investments in manufacturing capabilities and products, despite the difficult economic times,” Mr. Murray said. “We see these updates to our manufacturing capabilities as investment in our customers. It is another way to live up to our goals and promise as a company to provide our customers with quality, service and innovation. We will continue to raise our focus on the customer by helping them grow their businesses and succeed. That means working for our customers everyday as a partner to further improve our performance on the essentials of our business such as quality, service and innovation in ways that drive productivity or enhance value.”
“It has been a difficult year for us,” said Rick Clendenning, president and CEO of INX International Ink Co. “Most of it is due to the unbelievable raw material cost increases throughout our industry and some of the supply issues we’ve had to overcome with key materials. The increases in material costs are substantial and coming often. In my 40-year career in this industry, I haven’t seen anything like the material pricing we are dealing with today.
“INX will exceed our planned top line growth expectations, but our bottom line took a hit due to the raw material costs and the lag in implementing our own prices increases to customers,” Mr. Clendenning added. “We have seen some performance improvement in the second half of the year after introducing cost reductions to our infrastructure. With these adjustments and two months remaining on the calendar, I’m hopeful of finishing the year strong.”
Siegwerk CEO Herbert Forker said that 2011 was a very special year for Siegwerk.
“In 1911, we brought our first printing inks to market under the Siegwerk brand,” Mr. Forker said. “And today, Siegwerk is a global player serving customers all over the world. In 2011, we have accomplished a variety of important projects: the further expansion of our Global Innovation Network to ensure the exchange of know-how worldwide; the introduction of Xceed, our Siegwerk Excellence Initiative, as an umbrella for all of our continuous improvement measures; and our first global employee survey to improve our company culture and Siegwerk as an employer – just to name a few.
“In terms of sales and volume, we had a successful year,” Mr. Forker continued. “Above all, our flexible packaging business has increased – mainly in emerging markets – closely followed by labels and sheetfed UV. Along with this development and the integration of the water-based experts Environmental Inks in the U.S., this year we increased our staff to 4,500.
The packaging market showed growth in 2011. (Photo courtesy of P&G)
Antoine Fady, CEO for Flint Group, said that 2011 has been a challenging year given the extraordinary increase of raw materials and the global slowing economy.
“However, our long term focus on creating value for our customers remained unchanged,” Mr. Fady added. “Sustainability, product quality, continuous improvement and customer competitiveness remain our focus, as well as managing the cost increase. We assume at this stage that the 2012 challenge will be very similar.”
“For Toyo, sheetfed ink sales were stable while demand for energy curable products continued to grow, particularly in high-performance, energy-curable inks and coatings,” said John Copeland, president and COO of Toyo Ink America, LLC. “Due to the strong visual impact of these inks and coatings, they are growing in use in commercial and package print applications.”
Mr. Copeland noted that in July, Toyo Ink America fortified the organization with an investment in a larger facility in Wood Dale, IL.
“As our customer base continues to expand in North and South America, a more spacious and versatile work space was needed to better support our customers and facilitate our future growth,” Mr. Copeland said. “More than double in size of our former headquarters in Addison, IL, the new facility dramatically boosts our production and technical support capability by affording room for new equipment and an expanded R&D lab. Toyo Ink is fully committed to ensuring our customers in North and South America a steady supply of consistently high quality printing and packaging solutions well into the future.”
“Overall, Wikoff sales are on pace for modest growth in 2011 compared to 2010,” said Geoff Peters, president and CEO of Wikoff Color.
“Despite the economy, CRI has done well with sales and income – significantly better than any of the previous three years,” said George Sickinger, president and CEO, Color Resolutions International. “We attribute this to our focus on the customers and markets in which we bring the most value with our products and services.”
Recovery in the Printing and Ink Industries
Ink industry executives are closely attuned to the printing segments they serve, and they noted that common wisdom is correct in that packaging continues to be solid while the publication segment is struggling.
“In packaging, our traditional markets, specifically in Western Europe, are stabilizing,” Mr. Forker said. “In publication, volumes and margins are continuously decreasing. We continue to see further consolidation of our customer base.”
“The printing and ink industries are definitely still struggling, but some declines have slowed and key segments – packaging, for instance – how growth,” Bill Miller, president Print Media Europe & North America for Flint Group, said. “And while some graphic arts companies have been forced to close their doors, others continue to invest and innovate. Strong companies would likely agree that there is no reason to throw in the towel, but no business can become complacent either.”
“As they say, everything is relative,” added Mike Impastato, vice president strategic marketing, Packaging and Narrow Web at Flint Group. “2010 was very good compared to 2009, and 2011 was good compared to 2010. But I don’t believe the ink industry has yet to fully recover from the depth of the recession in 2009. Some areas have seen a strong recovery and are nearly there, but other areas are still below the pre-recession levels. I believe most packaging-related segments will fully recover in early 2012 if the recovery continues without pause.”
Some ink industry leaders reported that they have seen a limited recovery.
“Overall, I don’t think there has been much recovery,” Mr. Sickinger said. “The strong companies have prevailed while the weak are floundering or being acquired.”
“‘Recovery’ may be too strong a word, but we have definitely seen movement in the right direction in both the printing and ink industries,” Mr. Peters said. “In the printing industry, we continue to see improvement in the packaging and label markets. In the ink industry, we see improvement in the top line, but bottom line growth continues to be under pressure due the rising raw material expenses.”
“We’ve seen a limited recovery in the commercial print and ink industries,” Mr. Copeland said. “Although positive signs exist, recovery remains inconsistent and vulnerable to pricing and demand fluctuations. Toyo is working to flexibly cope with changing market environments and position ourselves for the future, maintaining a strong position as the industry emerges from the recession.”
“We have seen some improvement in certain markets and with some customers, but nothing significant to the point where I would consider it a recovery,” Mr. Clendenning said. “I have some concerns about the offset side of the business within commercial printing markets. It didn’t improve this year and I’m not sure when it will.”
Highlights from 2011
Ink manufacturers noted that there were numerous highlights during 2011. Mr. Forker said that Siegwerk’s 100-year activities were a major celebration for the company.
“As a family business, we focus on people,” Mr. Forker said. “We held a large customer event at our headquarters in June with 300 international guests from the industry. During these ‘INKday’ events, we had expert presentations on topics including the future of packaging, how to create packaging for all five senses and the cross-links between print and online media. In addition, we offered a choice of 26 workshop topics ranging from sustainability to low migration and ink room management, from intelligent packaging to the future of newspaper printing and special effect inks, from high-speed printing to the digital future. Internally, each Siegwerk country organization has been celebrating ‘Siegwerk Family Days’ with employees and their families. Another highlight is for sure the successful integration of Environmental Inks that we acquired in December 2010.”
INX International and Flint Group opened new facilities during the past year.
“This year we opened a new company in Mexico,” Mr. Clendenning said. “INX International de Mexico, S. DE R.L. DE C.V. will enhance our support for our partner and customers in Mexico. We also developed some impressive high performance inks for the packaging market that meet all of the new requirements for our customers. On the digital hardware side, we have also designed a few more digital printers to help our EVOLVE Advanced Digital Solutions brand line attract traditional customers into some type of inkjet solution for their own customers.”
Flint Group completed a major investment to extend Flint Group’s production facility for low migration and low odor inks and base mixing systems in Baranzate, near Milan, Italy.
“This was completed to meet the increasing demand for low migration inks and coatings for the printing of folding carton food packaging, which is the result of a growing trend by packaging converters to stay ahead of national and European wide legislation, Good Manufacturing Practice guidelines and consumer demand,” said Nick Brannan, global vice president, product management, sheetfed inks and pressroom chemicals. “Throughout 2010, we witnessed volumes of low migration ink sales grow dramatically as the European converters react to best practice guidelines from industry bodies like EuPIA (European Printing Ink Association) and national government initiatives. Our Novasens range of inks and coatings delivers outstanding on-press performance, and favorable reactions from existing customers as well as many new ones have helped increase our profile in this important segment. This investment is another clear sign of Flint Group’s strong commitment to the packaging sector.”
“This heralds a new and dynamic phase in our drive to be the supplier of choice to the folding carton food packaging sector,” added Juergen Riedlinger, director, product management for sheetfed inks, Europe at Flint Group. “Our Novasens products have been perfected over many years, in consultation with converters and brand owners, and we believe them to be superior to anything else in the market. Now, with the enlarged facility, we can deliver bigger volumes of these specialist products than ever before, and more than enough to meet projected market growth demand.”
Flint Group announced in October that Doug Aldred had been appointed as president of the Packaging & Narrow Web – Europe and North America. In addition to his new role, Mr. Aldred will also assume responsibility for the global packaging and narrow web strategy, reporting directly to Mr. Fady.
Mr. Peters said that Wikoff Color’s flourishing inkjet ink business has been a highlight.
“We were extremely pleased with the growth in our inkjet business in 2011, and how well we managed our supply chain to keep our customers supplied with inks and coatings as requested,” Mr. Peters said. “We continued the implementation of our new ERP solution, and have completed the installation in 25 of our 27 locations. We were also very pleased with the development and implementation of our premium in-plant solution and the praise we received from our customers for that offering.”
“Doing reasonably well in this economy is a highlight in itself,” Mr. Sickinger observed. “I think the results in any given year are the result of some combination of luck and the adherence to a rigorously followed strategic plan. It is easy to get sidetracked in this volatile economy.”
In today’s challenging economy, our customers need a partner who can help them find ways to reduce costs; a partner that understands the challenges they are facing and provides solutions. This is what we are striving to accomplish at Sun Chemical and 2011 is replete with examples of how Sun Chemical is partnering with customers.
For Sun Chemical, 2011 brought a series of highlights. For the sixth consecutive year, the Brazilian Association of Graphic Arts (ABIGRAF) named Sun Chemical the “Best Printing Ink Supplier” in Brazil at the Fernando Pini Awards ceremony.
In its continuous commitment to be data-driven in its sustainability efforts, Sun Chemical released its 2010 sustainability report in February 2011. Similar to the previous report, performance measurement was provided for seven key sustainability metrics to help customers and consumers understand the company’s environmental impact.
The report shows data collected every year since 2005 from approximately 170 Sun Chemical sites in more than 25 countries. The key sustainability metrics measured in the data include energy consumption/conservation at production and non-production sites, the energy carbon footprint at the production sites, process waste reduction, water consumption, materials safety, and employee safety.
Together with Sun Branding Solutions, its Packaging Brand Lifecycle Management Agency, and its parent company DIC Corporation, Sun Chemical gave visitors at Interpack 2011 first hand insight into its packaging print solutions that allow brands to stand out in terms of sensory appeal and functional performance, as well as compliance.
At BrasilPlast 2011, Sun Chemical introduced a new range of ink and coating solutions for South American flexo and gravure converters which can be used on a variety of plastic substrates to provide sustainability, brand differentiation, low migration solutions, lightweighting, and variable data printing on packaging.
Originally designed for commercial and folding carton printers, the Sun Chemical Dispenser Program, which helps customers decrease their overall ink spend by up to 45 percent, expanded to serve customers in the narrow web tag and label market. Label and narrow web printers can receive the savings and a GFI dispensing unit along with color repeatability and accuracy, to within .001/lb, of their colors. The dispensing unit is provided to the printer at no cost by purchasing a minimum annual amount of Sun Chemical bases and inks.
In September, Sun Chemical launched SunLit Titan. A new sheetfed ink system, SunLit Titan is a very high speed, fast drying ink range that is enabled by the introduction of innovative patented raw materials, leading to an ultra fast setting as well as fast and thorough oxidative drying. Printers can also benefit from the fact that the application of a water-based coating is not required.
Sun Chemical launched a number of new narrow web ink solutions at Labelexpo Europe 2011. SolarFlex Lightning White is a brand new ultra high opacity UV flexo white for maximum hiding power. SolarFlex Nova SL is a low odor ink system based solely on Nestlé’s “positive-list” of photoinitiators and features excellent UV flexo performance properties. SunCure Starluxe is a UV offset product range designed to provide the highest print quality to labels and packaging. The SolarScreen Colours range has been upgraded for higher speed rotary screen printing.
Raw Material Supply Chain
Much has been written about raw materials during the past few years. Prices of many key ingredients have risen dramatically. For ink companies, passing along higher prices to their customers is difficult, meaning that margins are being squeezed.
Meanwhile, availability of certain raw materials is a major challenge, as consolidation and alternative markets have reduced the supply of products to ink manufacturers.
“Higher raw material prices have such a big impact on our business that we have to pass on these costs to our customers,” Mr. Forker said. “We work hard to offset as much of the additional cost as we reasonably can: productivity programs, search for cheaper raw material solutions, purchasing efforts and efficiency measures.
“In the first half of 2011, we have seen further price increases and continued tightness on the supply side,” Mr. Forker added. “Worldwide capacity reductions and new levels of HSE responsibility and sustainability have led to a smaller supply base for defined raw materials and feedstock products. In combination with increasing worldwide demand, this has resulted in a significant and continued inflationary environment for raw materials and continued shortages in 2011. These developments resulted in dramatic volatility of raw material prices, which have to be reflected in more flexible pricing models and shorter contract terms.
“At the moment, we see a mixed picture in the global raw material market,” Mr. Forker added. “While the situation for some materials becomes less tense, other materials continue to face significant price volatility and market tightness.”
“Wikoff did an excellent job in 2011 keeping supply lines open in order to be able to supply our customers without interruption,” Mr. Peters said. “That is not to say that it was easy, but working closely with our raw material suppliers, we were able to keep the supply lines open.
“Cost is unfortunately another matter,” Mr. Peters continued. “Raw material costs rose at an unprecedented rate and it was a challenge trying to pass along the full impact of those increases to our customers. Wikoff worked closely with our customers throughout the year to keep them posted on the raw material situation and yes, we believe that we were successful getting the message clearly communicated to the vast majority of our customers.”
“I see raw material prices starting to come down, especially in the resin area,” Mr. Sickinger said. “I expect other material prices to retract as well. The global economy cannot sustain the increases we have experienced. Ti02 is still a problem in terms of pricing and supply. However, any raw material price relief we are getting will not offset the prior increases and the price pressure we have gotten from customers.”
“Security of supply remains a concern with the situation changing on an almost daily basis,” said Jan Paul van der Velde, senior vice president procurement, Flint Group. “There are a number of key issues with several pigments, in particular blue, green and violets. In addition to these, supply stress has also placed increased pressure on several UV materials, while even mainstream solvents, carbon blacks and Ti02 are in short supply throughout certain parts of the world.
“While predictions can never be truly accurate, we do believe that we will continue to see cost increases in selected areas such as pigments (due to intermediates cost increases and costs of adhering to environmental regulations) and a number of key raw materials,” Mr. van der Velde added. “At this stage there seems to be little opportunity for any significant cost decreases in the market, unless we see a major slowdown in the world economies, however, this could result in not only reductions in raw material costs but reduced demand for inks overall – which could be the worst scenario for everyone.”
“We’ve long been keeping our customers up-to-date about raw material trends, concerns, opportunities and impact,” Diane Parisi, vice president supply chain North America for Flint Group, said. “These topics are also now addressed by trade organizations, at conferences and within the media. At this point, most of our customers are aware of market volatility, understand what we face and appreciate the benefits of a supplier with a global procurement team. Still, we’ll continue to update them on a regular basis. We try to keep them as informed as possible of this ever-changing landscape.”
“We foresee a further tightening of raw material supply,” Mr. Copeland said. “Although we are constantly looking for ways to improve our global supply chain to minimize the impact of this trend, there are cases in which the increases outpace our ability to offset them. The difficulty, in these cases, is that many printers are slow to accept these pricing increases regardless of the reason.”
“In the first half of 2011, we saw a continuation of many of the same raw materials supply issues and shortages that featured so prominently in 2010,” said Ed Pruitt, chief procurement officer, Sun Chemical. “Rosin, solvents (particularly in Europe), acrylics, energy cure resins, carbon black, titanium dioxide, nitrocellulose, phthalocyanine pigments and Violet 23 pigments were all in various stages of tight to very short supply. The drivers for these supply issues were the same factors we wrestled with in 2010, i.e. increased demand from developing markets, feedstock issues, supply limitations and environmental and regulatory constraints in India and China.
“As we look ahead to the balance of 2011 and into next year, we expect to see continuing improvement in the availability of some of the raw materials such as resins and solvents, but we also expect to see continuing pressure on carbon black, titanium dioxide, nitrocellulose, vegetable oils and certain pigments,” Mr. Pruitt added. “Relief for these products will not occur until fundamental improvements are seen in either supply or feedstock availability.”
“A year ago I said everyone is feeling the pressure,” Mr. Clendenning said. “Now as we enter 2012, raw material cost increases remain an issue, but with supply or availability, we’re not concerned. Things seem to be improving a bit and I don’t foresee any availability problems in the short to mid-term. I’m hoping for more stability and a decline in pricing to a more reasonable level for the longer term.”
Expectations for 2012
All things considered, ink industry executives are cautiously optimistic about the future.
“We expect moderate volume growth especially in the packaging area and further decline in publication,” Mr. Forker said. “Everybody is careful with volume growth budgets right now because of the instability of the financial markets. If we are lucky, we will not have a recession and benefit from decreasing raw material prices, at least in some categories.”
“Wikoff Color expects to continue to grow in 2012,” Mr. Peters said. “We will be opening three new manufacturing facilities, allowing us to be in close proximity to the customers we serve in those areas. We expect to see continued growth in our inkjet business and in our business outside the U.S. and Canada. We expect that the ink industry will continue to work its way out of a very challenging economic environment and would not be surprised to see further consolidation in the industry.”
“Even if the economy and industry pick up in 2012 – nd there are no guarantees – onditions won’t be easy,” Mr. Miller said. “Ink suppliers will have to continue to address changing demand, market consolidation and a tough raw material market. Still, Flint Group’s employees, products and plans give me great confidence in our possibilities.”
“Within Europe, we expect to see continued volatility in Print Media demand, further raw materials cost and supply challenges and an increased emphasis on sustainability and environmental requirements,” said Romian Boulet, vice president global sheetfed for Flint Group. “2012 will see the launch of some truly innovative technologies from Flint Group - offering significant Cost-to-Print benefits and environmentally friendly solutions to our customers. So while the economic outlook may remain uncertain, there is still a significant growth opportunity for Flint Group, and we remain confident that our continuing product innovations and existing expertise in pigments, inks, blankets and chemicals will add yet further value to our customers.”
“Just as 2011 was better than 2010, I think 2012 will improve upon 2011,” said Doug Aldred, president Packaging and Narrow Web, Europe and North America for Flint Group. “Barring another recession, most markets will complete their recovery and register positive growth in 2012. Flint Group has built a strong organization both globally and locally and has broad and deep product portfolios specific to the markets we serve. We believe we are well positioned to capitalize on a strengthening ink market.”
“I’m an optimist, so I feel confident that 2012 will be a good year,” Mr. Sickinger said. “CRI is well positioned for growth due to our focus on the right niches and customers that fit our capabilities and strengths.”
“Year 2011 was one of adjustment and expansion for Toyo Ink America,” Mr. Copeland said. “Earlier in the year, coming off the heels of a U.S. operations reorganization that merged the printing ink business with that of the packaging ink and polymers, Toyo Ink America quickly moved to consolidate product offerings and align marketing and production activities. This was also evident at InfoFlex and Pack Expo Las Vegas, where we launched an integrated line of fluid and paste ink solutions and marketed them under a single company. In 2012, we expect to face a soft market for commercial print as printers streamline operations and look for ways to maintain profitability in a sluggish economy.For Toyo, we expect to grow in 2012 as we begin to see results from the strong sales efforts and production and lab enhancements we made in 2011. We see many growth opportunities, particularly in high-end printing and packaging sectors.”
“Whether it is costs, sustainability requirements or compliance issues, the challenges our customers are facing are more challenging than ever and we don’t expect that to stop in 2012,” Mr. Mellado said.
“These challenges our customers have faced required a change in the way they do business. To be able to achieve this, our customers have to know that we are here to help them with their problems. We’re optimistic that Sun Chemical’s investments in quality, service and innovation will help our customers succeed.”
“At INX, we are preparing ourselves for some uncertainty and another tough year,” Mr. Clendenning said. “But with some of our cost reduction activities already in place and some further help from our customers on the price point, we anticipate some overall improvement in our performance.”
For more information on The Year in Review, including key highlights from 2011, see the online version at www.inkworldmagazine.com.