Industry Report by UniCredit Bank Austria
- In 2018, printing companies should, at minimum, offset the 1.2 per cent loss in sales from 2017
- The optimistic expectations of entrepreneurs emphasise economic recovery
- Printing companies are directly dependent on the development of the advertising industry
- High innovation activity secures competitiveness for printing companies
The nominal revenue for printing companies in Austria fell by 1.2 per cent to 2.2 billion euros in 2017. Printing companies were not able to continue the economic industry recovery that happened during the second and third quarters of 2017 throughout the end of the year, but they obtained a relatively good result, compared to the long-term average. Printing companies in Austria struggled with low domestic demand, as well as international competition in certain areas.
“The reason that the printing industry barely benefited from the 6% in increased spending for poster, print, and brochure advertising in Austria in 2017 was likely due to the increased outsourcing of print jobs to other EU countries. Deliveries from Germany, the Czech Republic, and Poland contributed the largest portion to the above-average growth of 4.8% in imports with printing and publishing products in 2017. Regarding products, imports of print media increased particularly fast,” says Günter Wolf, Economist at UniCredit Bank Austria. The trade deficit with all products related to printing and publishing increased to 503 million euros in 2017. Of that, 346 million euros were related to books, and 136 million euros were related to print media, including ad inserts.
Economic activity in the printing industry should recover from its low point in 2018
Despite the weak demand, the price pressure in the market for printing materials has already decreased in 2017. Not only did the rate of increase in producer prices accelerate in the previous year, but companies also became more confident in regard to short-term production expectations. Austria’s economy is growing at a high pace at the beginning of 2018. Printing companies should mainly benefit from the increased demand in consumer goods. The favourable economic basic conditions continued to reflect the sentiment indicators for the industry. Together with the relatively high-capacity utilisation rate, this signals a continued recovery of the printing economy in the coming months. An average utilisation of 87% in production capacity for the last two quarters was last reached by printing companies in 2006. Even if we cannot expect strong growth for 2018, printing companies should at least make up for the small reduction in sales in 2017.
Printing companies suffer from a continued state of saturated, weak demand
The economic success of printing companies almost entirely depends on private consumption: on the one hand, from the expenditures of private households for reading materials, and on the other hand, from spending on advertising, which has the purpose of stimulating the buying mood of consumers. Both demand components have been growing very slowly for years and have been saturated in many areas for some time. Based on household expenditures for books, newspapers, and other print media, sales of traditional publishing products nominally increased by less than 1% in Austria over the last four years. The percentage of traditional publishing products as part of the total consumer expenditures even decreased from 1.6 - 1.2% during the last two decades.
In addition, the advertising expenditures for so-called “print relevant” media are decreasing. These expenditures are either used specifically for printing brochures, newspaper supplements, or posters, or they are expenditures that influence the circulation volume of newspapers and magazines indirectly through advertising. This segment made up 60% of the gross advertising expenditures ten years ago, and has been reduced to 45%, or 2.5 billion euros in 2017. The industry is therefore very sensitive to fluctuations in advertising economic activity, or rather, the below-average development of advertising expenditures in “print relevant” media. This means that the economic situation for printing companies will likely suffer from a modest gross sales growth of less than 2% expected by advertising companies, especially due to the fact that this additional income will go mostly towards electronic media.
Austria’s printing companies were able to improve their profit situation over the last few years, but they probably have not yet reached a crisis-proof position. “Based on the sample by KMU Forschung Austria in 2015, the analysis of balance sheets of Austrian printing companies showed that both profits, as well as the average equity ratio, have increased significantly for companies over the last few years. The equity ratio of companies was at 19% in 2009 and is currently at roughly 33%. However, the percentage of companies with significant debt or operating at a loss continues to be very high, with 26% of companies heavily in debt and 38% of companies reporting losses,” says Wolf.
High innovation activity secures competitiveness for printing companies
Austria's publishing houses will continue to publish printed mass media in the future, just as printing companies that operate independently from publishing houses will continue to obtain orders. The success of companies in both industries depends generally on their ability to quickly adjust their production processes to changes in demand. “The high rate of willingness for innovation in Austria’s printing companies is only slightly below the rates in German and British printing companies, which are Europe’s biggest production countries. This is an indicator that they will continue to be competitive in the future,” Wolf concludes. According to an EU innovation survey, 64% of domestic companies innovate actively, compared to 64% of British and 71% of German printing companies.
Inquiries: UniCredit Bank Austria Economics & Market Analysis Austria
Günter Wolf, Tel.: +43 (0)5 05 05-41954;