Sector Report by Bank Austria Economics:
Austrian printers suffer from a lack of demand
- Sales growth of 3 per cent in 2010 not enough to make up for the previous year's losses
- Sector is under massive cost and earnings pressure, which only let up briefly in 2010
- Printing sector is recovering slowly in 2011, but this has had no effect on employment, with the number of jobs falling by another 2 per cent by April
Austria's printers did not experience an economic recovery in 2010. In spite of the positive economic environment, the sector's production levels fell by 3 per cent. Although sales in the printing sector grew by at least 3 per cent to around EUR 2.7 billion, they were still far below pre-crisis levels. According to the latest Sector Report by Bank Austria's economists, printers continue to suffer from a lack of stronger domestic demand. "The unsatisfactory trend in demand and the competitive pressure on the printed goods market are weighing down prices and causing the earnings situation to worsen for companies. Despite good economic development at the moment, little has changed when it comes to the negative situation in the sector and its vulnerability to crises," said Günter Wolf, an economist at Bank Austria.
The sector is under massive cost and earnings pressure as a result of the weak trend in demand and excessively high production capacities at the European level. The economic downturn has further intensified price competition. "Over the past five years, producer prices for printers have declined almost continuously, falling by an annual average of 1.4 per cent. At the same time, their costs have risen," said Wolf, explaining the situation. The relief on the cost front in 2010, when the price of printing paper decreased by an average of 7 per cent in annual comparison, was short-lived. Paper prices started to climb again in the second half of the year and continued to rise virtually unchecked until April 2011, increasing by around 10 per cent in total. It was not until May that the increase in prices came to a halt. During the same period, however, the average producer prices for printed goods decreased slightly.
Günter Wolf continued: "An analysis of the 2008/2009 balance sheets of Austrian printers from the sample provided by the Austrian Institute for SME Research shows that the sector has a very low equity ratio, at an average of 19 per cent. In addition, quite a large portion of printers (39 per cent) are highly indebted and have low earning power as measured by sales profits (1.9 per cent)." Although cost pressure lightened up in 2010, it seems that weak demand has kept printers' earnings from increasing substantially.
Outlook: The sector is growing – but much slower than the industry average
Despite positive economic conditions, it appears that the earnings situation amongst printers has even deteriorated slightly in 2011. With a nearly 2 per cent increase in production in the first quarter of 2011 and a moderate rise in sales of 4 per cent, the sector is growing again, but at a much slower pace than the industry average. As a result, printers have remained cautious when it comes to their capacity planning, as is shown by the persistent decline in employment, at an average of 2 per cent up until April 2011. "However, the economic recovery amongst printers should begin to materialise in 2012 on the back of stable consumer demand and stronger increases in advertising expenditures," said Bank Austria's economist Günter Wolf in his analysis of the situation.
Over the long term, printers will suffer from the weak rise in demand for their products, due in large part to the digital competition faced by print media. However, the process of media digitisation is moving along at a relatively slow pace in the printing sector. "Even though the printers and publishing houses are feeling the massive competitive pressure of new media, they have time to adapt to market changes. It remains to be seen which companies will fall victim to structural changes because they react too slowly. There are certain to be additional market consolidations," said Wolf in summary.
Enquiries: Bank Austria Press Office Austria
Julia Wegenstein, tel. +43 (0) 50505 - 52854
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