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21.03.2008

Sector Report from the Bank Austria Creditanstalt Economics Department:
Printing and publishing sector still under pressure in 2007

  • Sales growth remains below 3 per cent despite positive trend in demand
  • Earnings curtailed by falling prices and rising costs
  • Structural disadvantages reflected in high trade deficit of €490 million for publishing products
  • Sector will maintain moderate growth in 2008 and 2009

Pressure on prices and earnings persists for printing companies and publishing houses in Austria as a result of the specific market and competitive situation. This pressure remained even when the economic environment was favourable, as in 2006 and 2007, when production output in the printing industry rose by an average of 5 per cent a year. These are the highlights of the latest sector report from the Bank Austria Creditanstalt (BA-CA) Economics Department. At the same time, however, sales rose by only 4 per cent a year, indicating that prices have fallen on average in the sector by around 1 per cent. In 2007, sales in the industry increased by less than 3 per cent to € 4.9 billion (preliminary figure). Moreover, printing companies have also been battling significant cost increases for more than two years. These could no longer be offset in full by productivity gains and curtailed earnings in the sector in 2007 at least.

"The sector is highly concentrated in some areas and at the same time some segments are less competitive and very cyclical," commented BA-CA economist Günter Wolf. This is one reason why further cuts in capacity are unavoidable in the printing and publishing industry despite extensive restructuring efforts in the past. In 2007, the number of employees fell by 1 per cent and the jobs that were created for the first time in ten years in 2006 have disappeared again. The sector now has a workforce of around 24,900 employees compared to more than 30,000 in the mid-nineties.

Sales by the publishing houses and printing companies are largely dependent on domestic consumer demand: this is generated directly through spending by private households on reading materials and indirectly through advertising spend by companies. As a result of this dependency on consumption, publishing companies in particular are facing weak growth with saturated demand in many areas. "The proportion of household expenditure spent on books, newspapers and other print media has risen only minimally by 1.4 per cent over the last two decades," explained sector analyst Wolf.

Like the publishing houses, Austria's printing industry also focuses on the domestic market. The export ratio stands on average at 21 per cent, compared to the average for industry of 56 per cent. However, while being close to the customer is often a decisive success factor for printing companies, the low export ratio for publishing products points to weaknesses in the sector. In 2007, the export surplus on catalogues and printed advertising materials of € 74 million was countered by the deficit from books and magazines of € 490 million. The deficit in book exports has been growing virtually unchecked for years, partly because Austria is not generally considered to be an ideal location for book production as it is a small market.

Weaker economic growth in 2008 and 2009 will cost the publishing and printing industry relatively few orders, mainly because consumption will expand slightly. The momentum in the business community's willingness to advertise and the demand for print media will continue and consequently so will demand for print services. Günter Wolf of BA-CA: "Although in future media companies will no longer achieve any major increases in circulation with newspapers and magazines, they are benefiting from further rises in advertising revenue. Similarly, demand for print services is increasing at around the same modest pace of previous years." The pressure from competition and pricing in the sector will not ease and will lead to further consolidation measures and job cuts.

Enquiries: Bank Austria Creditanstalt Press Office Austria
Tiemon Kiesenhofer, Tel. +43 (0) 50505 - 52819
E-mail: Tiemon.Kiesenhofer@ba-ca.com