‘Competitors pricing below cost' remains by far the issue most frequently highlighted by print companies as one of their top three business concerns. 85% of respondents in the latest BPIF 'Printing Outlook' survey (carried out during the first two weeks of July and covering 107 companies employing 8,368 people with a combined turnover of £1 billion) marked this as an issue, followed by ‘late payment’ (31%) and 'survival of major customers' (28%).
Two-thirds of firms maintained selling prices in Q2 whilst 30% made cuts. Although this had been forecast last time around, the worrying aspect is that many printers expect further pain during the third quarter of this year. While again the majority believe that they will be able to keep prices steady, a higher number anticipate reducing prices than increasing them.
The survey also showed that printing demand did not match previously reported expectations in the second quarter. 26% reported a pick-up as previously anticipated, however 36% had to contend with an unexpected drop in order levels. 38% reported no change in demand.
22% of respondents expect demand to pick up in Q3. 70% of printers expect domestic order levels to remain unchanged, compared to just 8% who expect it to weaken.
Nevertheless confidence remains fragile, with trading conditions expected to stay tough. There was a slight improvement in profitability levels within the printing industry during the second quarter. 73% posted profits of 3% or more compared with 68% at the time of the last survey. There was also a shift in those reporting profit levels of between 6-10% with a quarter of firms within this range, up from 19%. Those firms reporting double-digit percentage profits remained unchanged at 9% while companies registering losses stood at 2%, down slightly from 3% three months ago.
The export market was static in the second quarter. The current state of export order books fits with the forecast regarding overseas demand in the third quarter with the majority reporting no change and an exact split among the rest in terms of improvement or deterioration. Although 29% of those surveyed expect export trading conditions to improve - with only 8% expecting them to soften - the impact of a strengthening pound could limit export opportunities.
The number of firms expecting to invest in plant and machinery remains at a high 85%, although this was down slightly from 89% last quarter. A bigger spend is earmarked, with a positive balance of +13 between the number of printers set to invest more than less. This compares with a negative reading of -6 last time around. However, financing remains difficult. While around 80% of respondents report no change in access to finance conditions over the last 12 months, a number of companies have been affected by changing conditions; mostly on the downside.
With the second and third quarters of 2012 characterised by many for the opportunities – or disruptions - stimulated by the Queen’s Diamond Jubilee and the Olympic Games, the Q2 survey asked respondents whether they had secured additional print work as a result of these events. A quarter reported that they had secured additional print work as a result of the Queen’s Diamond Jubilee and 35% reported that they had already secured extra work due to the Olympic Games.
The jobs accounted for range from small-scale local patriotic work for the Jubilee to considerable run special edition work for food and retail clients and contracts for the London Organising Committee of the Olympic and Paralympic Games (LOCOG) and the British Olympics Association (BOA).
However not everyone was so enamoured with these events. A number of respondents believed that trade worsened as a result of the Queen’s Jubilee and there is an expectation, especially from some of those in the London area, that the Olympics will not only be a distraction to employees and clients but cause significant logistical issues to business.
BPIF CEO Kathy Woodward said: “Although it is disappointing that demand failed to meet expectations in the second quarter, it is encouraging that an overall improvement is anticipated in the third quarter, with a knock-on effect for production levels. Clearly confidence remains fragile in a tough trading climate, with price-cutting by competitors and late payment problems uppermost in the minds of many printing firms. However the industry has continued to hold costs stable, invest in new equipment, and maintain employment levels, all of which should help support the pick-up in trade expected over the summer months. It is also encouraging to see that the outlook for exports is holding up well, despite a stronger pound, and I would encourage all printers to actively seek new markets overseas”.