Dave Savastano, Editor11.30.15
There have been many changes within the printing industry, and this evolution is impacting the ink industry. Publication and commercial printing, long the largest portion of the printing ink market, is declining, while packaging and inkjet inks are making new gains.
In 2015, the printing ink industry, which Ink World estimates to be $20 billion worldwide, saw many of the same trends as in recent years. However, there have been major changes within its customer base as well as among its suppliers that are affecting the industry as a whole. Even within the ink industry itself, there were acquisitions in some of the growth areas - in particular inkjet - that are impacting the industry as a whole.
Consolidation Among Customers
Mergers and acquisitions continue to impact the entire printing supply chain. The biggest news from 2015 was undoubtedly the pair of billion-dollar mergers on the packaging printing side that were announced within a month of each other in early 2015.
In January 2015, RockTenn and MeadWestvaco Corporation announced a merger, which was completed in July 2015, forming WestRock. With $15 billion in annual revenue and 42,000 employees in 30 countries, WestRock is the second-largest company in the consumer and corrugated packaging field, behind International Paper.
Meanwhile, in the beverage packaging market, Ball Corporation is proceeding in its deal to acquire Rexam. If it is finalized – which is expected in 2016 – Ball will become the third-largest packaging printing manufacturer, with nearly $15 billion in combined sales.
In a major move, RR Donnelley & Sons Company announced plans to create three independent, publicly traded companies. One will specialize on financial communications and data services; another business will concentrate on publishing and retail-centric print services; and the third business will cover customized multichannel communications management. In addition, February 2015, RR Donnelley acquired Courier Corporation, one of the leading book manufacturers in the US, for approximately $260 million.
In another important move within the printing industry, Taylor Corp. acquired the assets of Standard Register through a chapter 11 sale approved by the Bankruptcy Court in June 2015. The combined company has more than 12,000 employees.
Charles Murray, president, North American Inks, Sun Chemical, noted that consolidation has increased the competitive activity in the market.
“This has a direct effect on prices, which has therefore compressed margins at the converting and the ink level,” Murray said. “This increase in competition puts more emphasis on technology and product differentiation. Product differentiation is becoming increasingly difficult as the supply chain consolidates since the selection of options in raw materials decreases.”
“Printing industry consolidations affect everyone,” said Rick Clendenning, president and CEO of INX International Ink Co. “We have done well in most of these situations by maintaining or growing our position.”
Robert Doerffel, corporate communications, Europe for hubergroup, said that these dynamics are not a recent phenomenon, and there is no major surprise within the fact that a global consolidation of business is taking place. The key is to find the opportunities that emerge from these deals.
“As with everything, there are not only threats, but also opportunities related to the consolidation process,” Doerffel added. “It is all about finding out how, where and when to make the point. With our strategy we are set up for the future, and if required, we will adjust this strategy to match even better to what is required.”
New Geographies and Ink Markets
In terms of mergers and acquisitions, the ink industry wasn’t particularly active in 2015, but there were some notable moves where companies strengthened their regional offering, as well as companies adding to their inkjet portfolio.
For example, the finalization of the JV between Flint Group and Continental Printing Inks/Eagle Ink Systems was a major highlight for Flint Group in 2015. The new entity, Flint Group Africa, combines two of the leading inks and coatings suppliers to the packaging and print media markets in Sub-Saharan Africa.
Sun Chemical strengthened its operations in Southeastern Europe, acquiring the remaining shares of a previous joint venture with Druckfarben Hellas. The JV resulted in five subsidiaries: Sun Chemical Publication Bulgaria, Sun Chemical Croatia, Sun Chemical Publication Greece, Sun Chemical Publication Romania and Sun Chemical Publication Serbia. The companies account for $30 million in sales of inks, coatings and consumables for publication, sheetfed, UV and screenprinting.
“This acquisition reinforces Sun Chemical and DIC’s commitment to the growing Southeastern Europe market as these companies are the market leaders of printing inks and related products in a region where the economies are growing,” Rudi Lenz, president and CEO of Sun Chemical, said at the time of the move.
Toyo Ink was active in Turkey, establishing a new wholly-owned subsidiary in Istanbul.
“The new office, Toyo Ink Turkey Kimya Sanayi A.S., was officially opened on Jan. 12, 2015,” said Yu Adachi, corporate communication department, Toyo Ink SC Holdings Co., Ltd. “We expect the region to turn into an industrial center for our core competency markets of commercial printing, food packaging, automobile and electronics. The new subsidiary has begun the import and sales of Toyo Ink Group products in its inaugural fiscal year. In the future, Toyo Ink Turkey plans to evolve the business with the aim of setting up a local manufacturing base as a regional operational hub.”
Aside from its new subsidiary in Turkey, Adachi said that Toyo Ink Group is opening new plants throughout the Asia-Pacific region.
“The Toyo Ink Group continues to expand its operations in China,” said Adachi. “While the economies along its coastal region appear to be cooling down, markets in southwest China are starting to take off due to a growing middle class and other factors. In April, Sichuan Toyo Ink Mfg., our latest offset ink plant, opened in Chengdu, Sichuan Province. Together with neighboring Chengdu Toyo Ink, a sister subsidiary that began gravure ink operation in 2014, Sichuan Toyo Ink aims to improve the Toyo Ink brand position and cultivate new markets in the region.”
Adachi said that Toyo Ink is also adding to its operations in India.
“India is also another strategic growth region for the Toyo Ink Group,” Adachi noted. “India’s packaging market is growing at an annual rate more than 10% in line with the rise in the number of shoppers at supermarkets. To keep up with demand, Toyo Ink India installed a second gravure ink line at its Delhi factory, raising our production volume at this location to two and a half times the current level.”
INX International Ink opened up two new manufacturing facilities during 2015.
“The two highlights that come to mind at this time is the grand opening of our new solvent ink manufacturing site in Lebanon, OH last summer, and the very successful opening and startup of our inkjet ink manufacturing facility in Prague,” said Clendenning.
“These two new sites were really needed to support our growing business in their respective segments. I congratulate our local and corporate management teams that gave us these two state-of-the-art efficient factories to support existing and new customers. These two sites will allow us to continue to grow in the future.”
hubergroup celebrated its 250th anniversary this year, and made an important move when it combined its Michael Huber München and Hostmann-Steinberg operations.
“Two hundred and fifty years of operation and it was all about ink and colors from the beginning – that makes us incredibly proud,” Doerffel said. “We had a worldwide celebration in all our companies on Sept. 29, 2015. All our employees were invited for food, drinks and a celebration with music and memories. Those were the most special moments in this year.”
“We had a merger between the large traditional companies Hostmann-Steinberg and Michael Huber München, which of course have operated jointly for more than a half century already,” Doerffel said. “Now both brands have vanished, and the resulting single legal entity is operating under the name hubergroup Deutschland GmbH. This step makes internal business easier and more efficient in many ways. The customers have more transparency and can recognize us better as one partner with one name.”
There has been tremendous growth in the field of digital printing, and textile inkjet printing is an area of great opportunity. This has led leading digital printing and ink companies to acquire technology specialists.
Electronics For Imaging, Inc. (EFI) made a move into the high-growth inkjet textile printing with the acquisition of Reggiani Macchine, a water-based inks industrial inkjet print specialist with customers in more than 120 countries. The new subsidiary will be branded as EFI Reggiani.
“For the past five years, we have seen tremendous capacity for digital printing coming online in textiles,” said Mike Wozny, senior product manager for EFI. “Digital’s advantages are significant, whether it is environmental issues, time to market or reduction in inventory. The textile market is 10 times the size of the graphics segment, and less than 10% is printed digitally.”
EFI also acquired Matan Digital Printers, which focuses on superwide-format display graphics and other industrial printing applications.
Dover Corporation completed the acquisition of JK Group SPA, a leading manufacturer of inks and consumables serving the textile printing market, in October 2015. JK’s brands, which include Kiian Digital, J-Teck3 and Sawgrass Industrial, will become an operating company within the Printing & Identification platform of Dover’s Engineered Systems segment.
“Dover considers the digital printing market one of our most important growth areas, and adding the leader in dye sublimation ink to our family makes us even more excited about the future,” said Andy Fincher, Dover Engineered Systems’ president and CEO, about the acquisition.
In May 2015, Sensient Technologies agreed to acquire the assets of Xennia Technology from Royal Ten Cate NV.
“The combination of Xennia’s and Sensient ink portfolios will offer our customers and OEM partners all textile printing technologies from an integrated source: reactive, pigmented, sublimation and acid,” said Dr. Christophe Bulliard, marketing director at Sensient Imaging Technologies SA.
In another deal within the inkjet ink industry, IIMAK acquired American Ink Jet Corporation (AIJ) in June 2015, including all formulas, brands, manufacturing assets and processes from AIJ to produce and distribute inkjet inks used for wide format and desktop printers.
Suppliers and Distributors
Printers and ink manufacturers were not the only companies making acquisitions. One new trend has been breaking up large companies into smaller entities, such as what RR Donnelley is doing. Air Products and Ashland are also utilizing that strategy.
In September 2015, Air Products’ Board of Directors approved the intention to fully separate its Materials Technologies business via a tax-free spin-off to its shareholders. The targeted completion of the Materials Technologies spin-off is before September 2016, subject to typical regulatory approvals.
“This separation will provide shareholders ownership in two leading and focused companies while providing the opportunity to value our Industrial Gases and Materials Technologies businesses independently,” said Seifi Ghasemi, chairman, president and CEO at Air Products.
In September 2015, Ashland Inc. approved a plan to separate Ashland into two independent, publicly traded companies: Ashland, which will focus on specialty chemicals, and Valvoline, which specializes in engine and automobile maintenance.
Within the supply chain, there were some outright acquisitions. Kustom Group acquired the wax compound, ink vehicle and litho overprint business from Lubrizol.
In October 2015, Kraton Performance Polymers, Inc. entered into a definitive agreement to acquire all of the capital stock of Arizona Chemical Holdings Corporation for a cash purchase price of $1.37 billion.
Sun Chemical and its parent company, DIC, acquired Kingfisher Colours Limited, a UK-based decorative cosmetics color manufacturer.
Distributors were also active in mergers and acquisitions in 2015. Azelis Group agreed to acquire KODA Distribution Group (KDG) in October 2015. Under the agreement, KDG will become known as Azelis Americas.
In addition, Maroon Group LLC acquired 100% of the assets of D.B. Becker Co., Inc., and R.E. Carroll, Inc. acquired J.H. Calo Company.
“Supply chain consolidations are in some cases difficult, especially when the consolidations cause supply problems with specific products being discontinued or consolidated,” said Clendenning. “We are dealing with these types of situations as well as we can.”
“While our supplier consolidations have been minimal, we have noticed more suppliers re-organizing themselves internally, possibly reducing the overlap of account managers,” said Ken Klug, director of purchasing for Wikoff Color. “This restructuring has been positive for Wikoff Color, and for our customers, as our suppliers increase efficiency and continue to deliver innovative products. There were some important customer consolidation initiatives in the industry in 2015, but we believe that Wikoff will benefit from those consolidations.”
Changes in the Printing Marketplace
The changes that are occurring in the printing industry - growth in digital printing, packaging and energy curing, while publication and commercial printing are on the decline – are having an impact on ink suppliers. Bill Miller, president, Print Media and Pigments, Chips & Resins for Flint Group, noted that online advertising is one factor hurting the publication printing market.
“The affordability of online advertising continues to shift ad dollars in that direction, in spite of offering lower return on investment compared to print,” said Miller. “The industry has been weathering that trend for years, and the situation won’t change in the foreseeable future. Flint Group prepared for this years ago, and our long-term strategies have helped us remain strong in spite of the ups and downs.
“The trends in Europe are similar, including consolidation as print demand decreases,” Miller added. “Though this certainly creates a challenge for all printers and companies in the graphic arts supply chain, Flint Group’s unwavering customer focus, products, structures and strategies help us maintain a strong customer base in Europe.”
Clendenning said that 2015 has been a pretty good year for INX International Ink Co. “We put an aggressive plan together for this year and with a strong finish, and we should be very close to our expectations,” Clendenning noted. “What has helped all of us this year is that the industry has seen continued stabilization of our raw material costs, especially after what we have gone through the past several years. Also, because we have four product line divisions within INX, we specifically have each one focus on their own customer base and product lines to remain on course throughout the year. This strong focus with specialized resources certainly helps our performance.”
Adachi said that the global economy showed gradual improvements on the strength of the solid economic environment in the US. However, slowing of growth in China is a concern.
“Downside risks are increasing, as seen in the further slowdown in the speed of growth in China,” Adachi added. “In Japan, consumer spending remained stagnant, despite a trend of improvement in corporate earnings. Under these circumstances, the Toyo Ink Group has been promoting its respective businesses in accordance with the Group management policy of ‘striving to launch innovations constantly and enhancing marketing capabilities,’ ‘strengthening global networks from both offensive and defensive perspectives’ and ‘seeking to enhance the value of six management resources as well as group companies,’ which were set as the important issues for management. However, the conditions in the environment for profitability remained harsh due to stagnant demand.”
Toyo Ink saw similar results from the publication ink side.
“In offset inks, Toyo Ink sales of products with high UV sensitivity expanded, not only in Japan but also on a global scale, particularly in Europe,” Adachi said. “However, demand for sheetfed printing, offset rotary printing and newspaper inks continued to fall due to the structural recession resulting from the shrinking printing market associated with digitization. Sales were weak in China and Southeast Asia, reflecting the slowdown of economic activity. Domestic sales of gravure inks for publications remained on a structurally declining trend.”
Packaging ink sales were positive for Toyo Ink.
“Domestic sales of mainstay gravure inks for packaging, mainly for food applications, were strong, and sales of new products expanded,” said Adachi. “These factors contributed to an improvement in operating income. Demand for gravure inks for construction materials started to recover in the latter half of the first quarter. Overseas, sales of eco-friendly inks for packaging in the largest market segment expanded in Southeast Asia and India. Liquid ink sales remained solid mainly in China and Southeast Asia, as sales of middle-grade products increased. Sales of gravure inks for construction materials were also strong in North America.”
Wikoff Color also reported growth in the packaging and digital markets.
“Wikoff Color fared quite well globally in 2015,” said Geoff Peters, Wikoff Color’s president and CEO. “Growth in North America as well as in our international markets was made possible, in part, by continuing to grow in key target markets such as label, flexible packaging and digital technologies.”
Doerffel said that 2015 was a year of larger changes in quite a few companies of hubergroup, which impacts the overall performance of the group.
“In times of changes, even under conditions of perfect preparation, there is always a part of the actions that creates confusion or disturbances,” Doerffel added. “However, in such scenarios it is not smart to draw conclusions too early. Looking at those companies of the group that were regularly operating, the performance was good. Despite the influencing factors, we are expecting a satisfying result.”
“Sales during the first three quarters of 2015 are on par with last year,” said Jim La Rocca, COO of Superior Printing Ink. “We are continuing our programs to renovate some of our branch operations.”
“While the market globally has slowed in 2015, Sun Chemical has continued to make important strides forward that meet the individual needs of our customers by helping them to grow their businesses and succeed,” said Felipe Mellado, chief marketing officer, Sun Chemical.
Crude Oil, Currency and Raw Materials
For ink industry purchasing executives, 2015 was a relatively good year. Presently, crude oil is trading at approximately $44 per barrel; by contrast, in July 2008, it hit its peak at more than $145 per barrel. This has had an impact on key feedstocks, although as Doerffel noted, crude oil is not the only cost that impacts ink manufacturing.
“Crude oil is seemingly cheap and many customers are asking for price reductions, because in the past we were sometimes claiming high crude oil prices would make our products more expensive,” Doerffel said. “Today’s market mechanisms are much more complicated than a simple one-figure-does-it-all explanation would be able to explain what is going on. We are dealing with artificial raw material shortages, with political influence on markets, with severe weather conditions for re-growing raw materials, to mention a few.”
The decline on the euro as opposed to the dollar is another key factor. As of Nov. 9, 2015, one euro was worth $1.074. One year earlier, on Nov. 9, 2014, one euro was worth $1.25; on Nov. 9, 2013, a euro was worth $1.34.
“Crude oil costs have been volatile in 2015, but at this point, these prices are lower compared to one year ago,” said Jan Paul van der Velde, SVP, procurement, sustainability, regulatory and IT at Flint Group. “As a consequence, we see a number of commodities reducing in cost as well (in USD). In the US, this helped to somewhat smooth out the material cost spikes we’ve faced for years. Unfortunately, as a global manufacturer, we have been affected by currency fluctuations. In Latin America, for example, raw material costs have increased significantly in local currencies. The same is true for some Asian countries. In other matters, we have seen notable cost increases in logistics, especially in the US, labor costs and other indirect costs.”
Doerffel agreed that currency rates are a factor that is making life challenging for European ink suppliers, who are buying their raw materials with the stronger US dollar.
“The currency topic is one of huge potential,” Doerffel noted. “Lately, the weak euro has caused quite some discussions we had to go through in connection with the low price for mineral oil. At the end of the day it is all very complex, and it is also part of the business to communicate the full complexity of the raw material topic with our customers, since conclusions can’t be drawn from a single indicator taken from the newspaper.”
Ed Pruitt, chief procurement officer for Sun Chemical, said that 2015 has been a favorable year for raw materials in terms of cost stability and supply performance, but currency rates are a factor. “Since many global commodities are priced based on the US dollar, countries who have seen their currencies weaken over the last year have also experienced significant cost impacts for those globally priced feedstocks and raw materials,” Pruitt added.
Clendenning noted that crude oil fluctuations mainly affect INX’s conventional oil-based offset product lines. “Our customers in these markets expect those costs for the raw materials used in these products should all be directly related to crude oil,” he added. “In many cases they are not, so the savings they expect are not there. Currency fluctuations with the currently strong US dollar have caused some problems with products made here in the states that are exported to other parts of the world. We are dealing with this by trying to utilize some of our other global manufacturing sites to support this business. We are not having much trouble in managing this situation.”
Wikoff Color and Superior Printing Ink report that pricing has been fairly stable during the past year.
“Prices have remained stable since this spring and forecasts indicate raw materials should remain stable for the rest of 2015 and into 2016,” said Klug. ”Currency fluctuations have not impacted our purchases, other than in a few of our locations outside the US.”
“Fluctuations in crude oil prices haven’t resulted in any significant changes in availability or price for us,” said La Rocca. “The same can be said for currency fluctuations.”
Expectations for 2016 and Beyond
Ink industry leaders see opportunities ahead in 2016.
“Wikoff Color anticipates good growth in 2016,” said Peters. “We are forecasting continued increases in our international and digital markets, as well as strong sales in the traditional sectors of our business.”
“My expectations for Superior in 2016 remain positive,” said La Rocca. “Considering 2016 is an election year, some instability to expected trends and projections may occur. However, in the end, we should have a good year.”
Adachi said that the Toyo Ink Group is in a good position for growth in the coming year, with UV likely to be a highlight.
“Although the Japan offset market is expected to contract, we expect to see increased profits for new offset printing products and high sensitivity UV inks,”Adachi reported. “The market for UV inks and highly sensitive UV inks continues to grow, driven by an expanding packaging market with a wider range of base substrates as well as a growing commercial printing market brought about by UV’s superior resistance and cost-saving benefits. We continue to see new investment in UV printing equipment to progress and the rate of conventional oil-based printers switching to UV technology to rise.
“Toyo Ink is committed to developing UV solutions to meet the future needs of the global label and packaging market,” Adachi added. “As such, we plan to establish a new UV ink factory in Japan and improve global SCM to facilitate overseas UV ink production. Having established new offset production facilities in India and Brazil, we are looking to increase profitability by boosting local ink production in these regions. With the establishment of a sales subsidiary in Istanbul earlier in 2015, we have strengthened marketing activities in Turkey and Central Asia. Another priority measure for the Toyo Ink Group is increasing sales in growth markets such as water-based inkjet inks and hard coating agents for electronics.
“Toyo Ink also sees growth for the packaging market in Asia,” Adachi said. “With reinforcements to our gravure ink production capacity in the region and the establishment of a quality system for water-based flexo inks, we expect to strengthen sales, mainly in the China and India markets. We have also been working to strengthen sales of flexo inks in North America and improve the business performance of screen inks by streamlining production efficiency. In Japan, we seek to expand the market share by increasing sales of eco-friendly, high-performance laminating inks and surface printing inks.”
“We are looking forward to a new and promising year of business in 2016,” Doerffel said. “We were busy with a larger pack of homework in 2015. Now that we successfully completed this task, we will again be fully focused on our customers and the new products we have prepared for them.
“The ink industry will most likely remain in a state of heavy competition and the printing industry will be reliably supplied, as always,” Doerffel added. “The choice for the printing industry is mostly about the package they expect from their suppliers. The ink makers all know how to make high quality inks whereas the difference comes with structure and services. With the growing global approach of printers, the global performance of their suppliers is becoming a key decision factor for them – the top bullet point we believe to be ahead of the others.”
“INX is in a good position to continue moving forward in a positive way,” Clendenning concluded. “With our resources, technologies and customer base, we look for continued growth into the future. We are looking at more expansion here in the states as well, and I am looking forward to a successful 2016.”
In 2015, the printing ink industry, which Ink World estimates to be $20 billion worldwide, saw many of the same trends as in recent years. However, there have been major changes within its customer base as well as among its suppliers that are affecting the industry as a whole. Even within the ink industry itself, there were acquisitions in some of the growth areas - in particular inkjet - that are impacting the industry as a whole.
Consolidation Among Customers
Mergers and acquisitions continue to impact the entire printing supply chain. The biggest news from 2015 was undoubtedly the pair of billion-dollar mergers on the packaging printing side that were announced within a month of each other in early 2015.
In January 2015, RockTenn and MeadWestvaco Corporation announced a merger, which was completed in July 2015, forming WestRock. With $15 billion in annual revenue and 42,000 employees in 30 countries, WestRock is the second-largest company in the consumer and corrugated packaging field, behind International Paper.
Meanwhile, in the beverage packaging market, Ball Corporation is proceeding in its deal to acquire Rexam. If it is finalized – which is expected in 2016 – Ball will become the third-largest packaging printing manufacturer, with nearly $15 billion in combined sales.
In a major move, RR Donnelley & Sons Company announced plans to create three independent, publicly traded companies. One will specialize on financial communications and data services; another business will concentrate on publishing and retail-centric print services; and the third business will cover customized multichannel communications management. In addition, February 2015, RR Donnelley acquired Courier Corporation, one of the leading book manufacturers in the US, for approximately $260 million.
In another important move within the printing industry, Taylor Corp. acquired the assets of Standard Register through a chapter 11 sale approved by the Bankruptcy Court in June 2015. The combined company has more than 12,000 employees.
Charles Murray, president, North American Inks, Sun Chemical, noted that consolidation has increased the competitive activity in the market.
“This has a direct effect on prices, which has therefore compressed margins at the converting and the ink level,” Murray said. “This increase in competition puts more emphasis on technology and product differentiation. Product differentiation is becoming increasingly difficult as the supply chain consolidates since the selection of options in raw materials decreases.”
“Printing industry consolidations affect everyone,” said Rick Clendenning, president and CEO of INX International Ink Co. “We have done well in most of these situations by maintaining or growing our position.”
Robert Doerffel, corporate communications, Europe for hubergroup, said that these dynamics are not a recent phenomenon, and there is no major surprise within the fact that a global consolidation of business is taking place. The key is to find the opportunities that emerge from these deals.
“As with everything, there are not only threats, but also opportunities related to the consolidation process,” Doerffel added. “It is all about finding out how, where and when to make the point. With our strategy we are set up for the future, and if required, we will adjust this strategy to match even better to what is required.”
New Geographies and Ink Markets
In terms of mergers and acquisitions, the ink industry wasn’t particularly active in 2015, but there were some notable moves where companies strengthened their regional offering, as well as companies adding to their inkjet portfolio.
For example, the finalization of the JV between Flint Group and Continental Printing Inks/Eagle Ink Systems was a major highlight for Flint Group in 2015. The new entity, Flint Group Africa, combines two of the leading inks and coatings suppliers to the packaging and print media markets in Sub-Saharan Africa.
Sun Chemical strengthened its operations in Southeastern Europe, acquiring the remaining shares of a previous joint venture with Druckfarben Hellas. The JV resulted in five subsidiaries: Sun Chemical Publication Bulgaria, Sun Chemical Croatia, Sun Chemical Publication Greece, Sun Chemical Publication Romania and Sun Chemical Publication Serbia. The companies account for $30 million in sales of inks, coatings and consumables for publication, sheetfed, UV and screenprinting.
“This acquisition reinforces Sun Chemical and DIC’s commitment to the growing Southeastern Europe market as these companies are the market leaders of printing inks and related products in a region where the economies are growing,” Rudi Lenz, president and CEO of Sun Chemical, said at the time of the move.
Toyo Ink was active in Turkey, establishing a new wholly-owned subsidiary in Istanbul.
“The new office, Toyo Ink Turkey Kimya Sanayi A.S., was officially opened on Jan. 12, 2015,” said Yu Adachi, corporate communication department, Toyo Ink SC Holdings Co., Ltd. “We expect the region to turn into an industrial center for our core competency markets of commercial printing, food packaging, automobile and electronics. The new subsidiary has begun the import and sales of Toyo Ink Group products in its inaugural fiscal year. In the future, Toyo Ink Turkey plans to evolve the business with the aim of setting up a local manufacturing base as a regional operational hub.”
Aside from its new subsidiary in Turkey, Adachi said that Toyo Ink Group is opening new plants throughout the Asia-Pacific region.
“The Toyo Ink Group continues to expand its operations in China,” said Adachi. “While the economies along its coastal region appear to be cooling down, markets in southwest China are starting to take off due to a growing middle class and other factors. In April, Sichuan Toyo Ink Mfg., our latest offset ink plant, opened in Chengdu, Sichuan Province. Together with neighboring Chengdu Toyo Ink, a sister subsidiary that began gravure ink operation in 2014, Sichuan Toyo Ink aims to improve the Toyo Ink brand position and cultivate new markets in the region.”
Adachi said that Toyo Ink is also adding to its operations in India.
“India is also another strategic growth region for the Toyo Ink Group,” Adachi noted. “India’s packaging market is growing at an annual rate more than 10% in line with the rise in the number of shoppers at supermarkets. To keep up with demand, Toyo Ink India installed a second gravure ink line at its Delhi factory, raising our production volume at this location to two and a half times the current level.”
INX International Ink opened up two new manufacturing facilities during 2015.
“The two highlights that come to mind at this time is the grand opening of our new solvent ink manufacturing site in Lebanon, OH last summer, and the very successful opening and startup of our inkjet ink manufacturing facility in Prague,” said Clendenning.
“These two new sites were really needed to support our growing business in their respective segments. I congratulate our local and corporate management teams that gave us these two state-of-the-art efficient factories to support existing and new customers. These two sites will allow us to continue to grow in the future.”
hubergroup celebrated its 250th anniversary this year, and made an important move when it combined its Michael Huber München and Hostmann-Steinberg operations.
“Two hundred and fifty years of operation and it was all about ink and colors from the beginning – that makes us incredibly proud,” Doerffel said. “We had a worldwide celebration in all our companies on Sept. 29, 2015. All our employees were invited for food, drinks and a celebration with music and memories. Those were the most special moments in this year.”
“We had a merger between the large traditional companies Hostmann-Steinberg and Michael Huber München, which of course have operated jointly for more than a half century already,” Doerffel said. “Now both brands have vanished, and the resulting single legal entity is operating under the name hubergroup Deutschland GmbH. This step makes internal business easier and more efficient in many ways. The customers have more transparency and can recognize us better as one partner with one name.”
There has been tremendous growth in the field of digital printing, and textile inkjet printing is an area of great opportunity. This has led leading digital printing and ink companies to acquire technology specialists.
Electronics For Imaging, Inc. (EFI) made a move into the high-growth inkjet textile printing with the acquisition of Reggiani Macchine, a water-based inks industrial inkjet print specialist with customers in more than 120 countries. The new subsidiary will be branded as EFI Reggiani.
“For the past five years, we have seen tremendous capacity for digital printing coming online in textiles,” said Mike Wozny, senior product manager for EFI. “Digital’s advantages are significant, whether it is environmental issues, time to market or reduction in inventory. The textile market is 10 times the size of the graphics segment, and less than 10% is printed digitally.”
EFI also acquired Matan Digital Printers, which focuses on superwide-format display graphics and other industrial printing applications.
Dover Corporation completed the acquisition of JK Group SPA, a leading manufacturer of inks and consumables serving the textile printing market, in October 2015. JK’s brands, which include Kiian Digital, J-Teck3 and Sawgrass Industrial, will become an operating company within the Printing & Identification platform of Dover’s Engineered Systems segment.
“Dover considers the digital printing market one of our most important growth areas, and adding the leader in dye sublimation ink to our family makes us even more excited about the future,” said Andy Fincher, Dover Engineered Systems’ president and CEO, about the acquisition.
In May 2015, Sensient Technologies agreed to acquire the assets of Xennia Technology from Royal Ten Cate NV.
“The combination of Xennia’s and Sensient ink portfolios will offer our customers and OEM partners all textile printing technologies from an integrated source: reactive, pigmented, sublimation and acid,” said Dr. Christophe Bulliard, marketing director at Sensient Imaging Technologies SA.
In another deal within the inkjet ink industry, IIMAK acquired American Ink Jet Corporation (AIJ) in June 2015, including all formulas, brands, manufacturing assets and processes from AIJ to produce and distribute inkjet inks used for wide format and desktop printers.
Suppliers and Distributors
Printers and ink manufacturers were not the only companies making acquisitions. One new trend has been breaking up large companies into smaller entities, such as what RR Donnelley is doing. Air Products and Ashland are also utilizing that strategy.
In September 2015, Air Products’ Board of Directors approved the intention to fully separate its Materials Technologies business via a tax-free spin-off to its shareholders. The targeted completion of the Materials Technologies spin-off is before September 2016, subject to typical regulatory approvals.
“This separation will provide shareholders ownership in two leading and focused companies while providing the opportunity to value our Industrial Gases and Materials Technologies businesses independently,” said Seifi Ghasemi, chairman, president and CEO at Air Products.
In September 2015, Ashland Inc. approved a plan to separate Ashland into two independent, publicly traded companies: Ashland, which will focus on specialty chemicals, and Valvoline, which specializes in engine and automobile maintenance.
Within the supply chain, there were some outright acquisitions. Kustom Group acquired the wax compound, ink vehicle and litho overprint business from Lubrizol.
In October 2015, Kraton Performance Polymers, Inc. entered into a definitive agreement to acquire all of the capital stock of Arizona Chemical Holdings Corporation for a cash purchase price of $1.37 billion.
Sun Chemical and its parent company, DIC, acquired Kingfisher Colours Limited, a UK-based decorative cosmetics color manufacturer.
Distributors were also active in mergers and acquisitions in 2015. Azelis Group agreed to acquire KODA Distribution Group (KDG) in October 2015. Under the agreement, KDG will become known as Azelis Americas.
In addition, Maroon Group LLC acquired 100% of the assets of D.B. Becker Co., Inc., and R.E. Carroll, Inc. acquired J.H. Calo Company.
“Supply chain consolidations are in some cases difficult, especially when the consolidations cause supply problems with specific products being discontinued or consolidated,” said Clendenning. “We are dealing with these types of situations as well as we can.”
“While our supplier consolidations have been minimal, we have noticed more suppliers re-organizing themselves internally, possibly reducing the overlap of account managers,” said Ken Klug, director of purchasing for Wikoff Color. “This restructuring has been positive for Wikoff Color, and for our customers, as our suppliers increase efficiency and continue to deliver innovative products. There were some important customer consolidation initiatives in the industry in 2015, but we believe that Wikoff will benefit from those consolidations.”
Changes in the Printing Marketplace
The changes that are occurring in the printing industry - growth in digital printing, packaging and energy curing, while publication and commercial printing are on the decline – are having an impact on ink suppliers. Bill Miller, president, Print Media and Pigments, Chips & Resins for Flint Group, noted that online advertising is one factor hurting the publication printing market.
“The affordability of online advertising continues to shift ad dollars in that direction, in spite of offering lower return on investment compared to print,” said Miller. “The industry has been weathering that trend for years, and the situation won’t change in the foreseeable future. Flint Group prepared for this years ago, and our long-term strategies have helped us remain strong in spite of the ups and downs.
“The trends in Europe are similar, including consolidation as print demand decreases,” Miller added. “Though this certainly creates a challenge for all printers and companies in the graphic arts supply chain, Flint Group’s unwavering customer focus, products, structures and strategies help us maintain a strong customer base in Europe.”
Clendenning said that 2015 has been a pretty good year for INX International Ink Co. “We put an aggressive plan together for this year and with a strong finish, and we should be very close to our expectations,” Clendenning noted. “What has helped all of us this year is that the industry has seen continued stabilization of our raw material costs, especially after what we have gone through the past several years. Also, because we have four product line divisions within INX, we specifically have each one focus on their own customer base and product lines to remain on course throughout the year. This strong focus with specialized resources certainly helps our performance.”
Adachi said that the global economy showed gradual improvements on the strength of the solid economic environment in the US. However, slowing of growth in China is a concern.
“Downside risks are increasing, as seen in the further slowdown in the speed of growth in China,” Adachi added. “In Japan, consumer spending remained stagnant, despite a trend of improvement in corporate earnings. Under these circumstances, the Toyo Ink Group has been promoting its respective businesses in accordance with the Group management policy of ‘striving to launch innovations constantly and enhancing marketing capabilities,’ ‘strengthening global networks from both offensive and defensive perspectives’ and ‘seeking to enhance the value of six management resources as well as group companies,’ which were set as the important issues for management. However, the conditions in the environment for profitability remained harsh due to stagnant demand.”
Toyo Ink saw similar results from the publication ink side.
“In offset inks, Toyo Ink sales of products with high UV sensitivity expanded, not only in Japan but also on a global scale, particularly in Europe,” Adachi said. “However, demand for sheetfed printing, offset rotary printing and newspaper inks continued to fall due to the structural recession resulting from the shrinking printing market associated with digitization. Sales were weak in China and Southeast Asia, reflecting the slowdown of economic activity. Domestic sales of gravure inks for publications remained on a structurally declining trend.”
Packaging ink sales were positive for Toyo Ink.
“Domestic sales of mainstay gravure inks for packaging, mainly for food applications, were strong, and sales of new products expanded,” said Adachi. “These factors contributed to an improvement in operating income. Demand for gravure inks for construction materials started to recover in the latter half of the first quarter. Overseas, sales of eco-friendly inks for packaging in the largest market segment expanded in Southeast Asia and India. Liquid ink sales remained solid mainly in China and Southeast Asia, as sales of middle-grade products increased. Sales of gravure inks for construction materials were also strong in North America.”
Wikoff Color also reported growth in the packaging and digital markets.
“Wikoff Color fared quite well globally in 2015,” said Geoff Peters, Wikoff Color’s president and CEO. “Growth in North America as well as in our international markets was made possible, in part, by continuing to grow in key target markets such as label, flexible packaging and digital technologies.”
Doerffel said that 2015 was a year of larger changes in quite a few companies of hubergroup, which impacts the overall performance of the group.
“In times of changes, even under conditions of perfect preparation, there is always a part of the actions that creates confusion or disturbances,” Doerffel added. “However, in such scenarios it is not smart to draw conclusions too early. Looking at those companies of the group that were regularly operating, the performance was good. Despite the influencing factors, we are expecting a satisfying result.”
“Sales during the first three quarters of 2015 are on par with last year,” said Jim La Rocca, COO of Superior Printing Ink. “We are continuing our programs to renovate some of our branch operations.”
“While the market globally has slowed in 2015, Sun Chemical has continued to make important strides forward that meet the individual needs of our customers by helping them to grow their businesses and succeed,” said Felipe Mellado, chief marketing officer, Sun Chemical.
Crude Oil, Currency and Raw Materials
For ink industry purchasing executives, 2015 was a relatively good year. Presently, crude oil is trading at approximately $44 per barrel; by contrast, in July 2008, it hit its peak at more than $145 per barrel. This has had an impact on key feedstocks, although as Doerffel noted, crude oil is not the only cost that impacts ink manufacturing.
“Crude oil is seemingly cheap and many customers are asking for price reductions, because in the past we were sometimes claiming high crude oil prices would make our products more expensive,” Doerffel said. “Today’s market mechanisms are much more complicated than a simple one-figure-does-it-all explanation would be able to explain what is going on. We are dealing with artificial raw material shortages, with political influence on markets, with severe weather conditions for re-growing raw materials, to mention a few.”
The decline on the euro as opposed to the dollar is another key factor. As of Nov. 9, 2015, one euro was worth $1.074. One year earlier, on Nov. 9, 2014, one euro was worth $1.25; on Nov. 9, 2013, a euro was worth $1.34.
“Crude oil costs have been volatile in 2015, but at this point, these prices are lower compared to one year ago,” said Jan Paul van der Velde, SVP, procurement, sustainability, regulatory and IT at Flint Group. “As a consequence, we see a number of commodities reducing in cost as well (in USD). In the US, this helped to somewhat smooth out the material cost spikes we’ve faced for years. Unfortunately, as a global manufacturer, we have been affected by currency fluctuations. In Latin America, for example, raw material costs have increased significantly in local currencies. The same is true for some Asian countries. In other matters, we have seen notable cost increases in logistics, especially in the US, labor costs and other indirect costs.”
Doerffel agreed that currency rates are a factor that is making life challenging for European ink suppliers, who are buying their raw materials with the stronger US dollar.
“The currency topic is one of huge potential,” Doerffel noted. “Lately, the weak euro has caused quite some discussions we had to go through in connection with the low price for mineral oil. At the end of the day it is all very complex, and it is also part of the business to communicate the full complexity of the raw material topic with our customers, since conclusions can’t be drawn from a single indicator taken from the newspaper.”
Ed Pruitt, chief procurement officer for Sun Chemical, said that 2015 has been a favorable year for raw materials in terms of cost stability and supply performance, but currency rates are a factor. “Since many global commodities are priced based on the US dollar, countries who have seen their currencies weaken over the last year have also experienced significant cost impacts for those globally priced feedstocks and raw materials,” Pruitt added.
Clendenning noted that crude oil fluctuations mainly affect INX’s conventional oil-based offset product lines. “Our customers in these markets expect those costs for the raw materials used in these products should all be directly related to crude oil,” he added. “In many cases they are not, so the savings they expect are not there. Currency fluctuations with the currently strong US dollar have caused some problems with products made here in the states that are exported to other parts of the world. We are dealing with this by trying to utilize some of our other global manufacturing sites to support this business. We are not having much trouble in managing this situation.”
Wikoff Color and Superior Printing Ink report that pricing has been fairly stable during the past year.
“Prices have remained stable since this spring and forecasts indicate raw materials should remain stable for the rest of 2015 and into 2016,” said Klug. ”Currency fluctuations have not impacted our purchases, other than in a few of our locations outside the US.”
“Fluctuations in crude oil prices haven’t resulted in any significant changes in availability or price for us,” said La Rocca. “The same can be said for currency fluctuations.”
Expectations for 2016 and Beyond
Ink industry leaders see opportunities ahead in 2016.
“Wikoff Color anticipates good growth in 2016,” said Peters. “We are forecasting continued increases in our international and digital markets, as well as strong sales in the traditional sectors of our business.”
“My expectations for Superior in 2016 remain positive,” said La Rocca. “Considering 2016 is an election year, some instability to expected trends and projections may occur. However, in the end, we should have a good year.”
Adachi said that the Toyo Ink Group is in a good position for growth in the coming year, with UV likely to be a highlight.
“Although the Japan offset market is expected to contract, we expect to see increased profits for new offset printing products and high sensitivity UV inks,”Adachi reported. “The market for UV inks and highly sensitive UV inks continues to grow, driven by an expanding packaging market with a wider range of base substrates as well as a growing commercial printing market brought about by UV’s superior resistance and cost-saving benefits. We continue to see new investment in UV printing equipment to progress and the rate of conventional oil-based printers switching to UV technology to rise.
“Toyo Ink is committed to developing UV solutions to meet the future needs of the global label and packaging market,” Adachi added. “As such, we plan to establish a new UV ink factory in Japan and improve global SCM to facilitate overseas UV ink production. Having established new offset production facilities in India and Brazil, we are looking to increase profitability by boosting local ink production in these regions. With the establishment of a sales subsidiary in Istanbul earlier in 2015, we have strengthened marketing activities in Turkey and Central Asia. Another priority measure for the Toyo Ink Group is increasing sales in growth markets such as water-based inkjet inks and hard coating agents for electronics.
“Toyo Ink also sees growth for the packaging market in Asia,” Adachi said. “With reinforcements to our gravure ink production capacity in the region and the establishment of a quality system for water-based flexo inks, we expect to strengthen sales, mainly in the China and India markets. We have also been working to strengthen sales of flexo inks in North America and improve the business performance of screen inks by streamlining production efficiency. In Japan, we seek to expand the market share by increasing sales of eco-friendly, high-performance laminating inks and surface printing inks.”
“We are looking forward to a new and promising year of business in 2016,” Doerffel said. “We were busy with a larger pack of homework in 2015. Now that we successfully completed this task, we will again be fully focused on our customers and the new products we have prepared for them.
“The ink industry will most likely remain in a state of heavy competition and the printing industry will be reliably supplied, as always,” Doerffel added. “The choice for the printing industry is mostly about the package they expect from their suppliers. The ink makers all know how to make high quality inks whereas the difference comes with structure and services. With the growing global approach of printers, the global performance of their suppliers is becoming a key decision factor for them – the top bullet point we believe to be ahead of the others.”
“INX is in a good position to continue moving forward in a positive way,” Clendenning concluded. “With our resources, technologies and customer base, we look for continued growth into the future. We are looking at more expansion here in the states as well, and I am looking forward to a successful 2016.”