Commercial Printing Outlook — Tepid Vote of Confidence
NAPL’s surveys have been consistently finding upward of 60 to 65 percent of its printer panel reporting sales growth. Only around 30 percent of those same printers, though, reported corresponding increases in profitability, and the percentage has been slipping. Rising costs—for employee benefits and consumables—are to blame, since printers are having trouble passing the increases on to customers, Paparozzi explains.
“If you can’t pass cost inflation through to customers, you must offset it by increasing productivity and efficiency or it comes out of your bottom line,” the economist says. “Productivity and efficiency used to be something printers concentrated on during downturns. Now, that effort is just as important during upturns to offset cost increases.”
PIA/GATF’s Ratio Studies show industry profits are still a case of the haves and have nots, Davis adds. In recent years, margins have been creeping back toward their long-run equilibrium of about 3 percent, he notes. Last year, they came in at 2.7 percent.
Profit leaders, those in the top 25 percent, continue to achieve margins in the 8 to 10 percent range regardless of the business challenges, the printing economist adds.
Putting an emphasis on profitability doesn’t mean economic trends become unimportant, clarifies Paparozzi. In fact, he says NAPL began advising printers to keep an eye on the economy starting in late 2006. In order to stay ahead of any shift, the association has been recommending that printers investigate what benchmarks they have internally that might tell them a slowing economy is affecting their clients. Possibilities include the number of requests for quotes received, volume of work on hand and number of sales contacts.
Along with being forewarned, printers should be forearmed, the economist says. “Ask yourself: ‘If business degenerates, where would I be able to cut without jeopardizing my competitiveness?’ We haven’t needed to worry about the economy in recent years. It’s worth thinking about now and spending some time going through this exercise.”