Few felt this pinch more than sheetfed offset machinery manufacturers. Press sales fell off a cliff in the GFC. The stories for press makers over the past two years have been of lay-offs, downsizing, restructuring and soul-searching. But as the economic picture starts to look brighter, we are beginning to see a pick up in sales of heavy metal. So is 2011 the year things get better for sheetfed offset?
Hagop Tchamerketenian, national manager for policy and government affairs at the Printing Industries Association of Australia (PIAA), compiled some sobering figures that show the GFC’s impact on the local industry.
Between the June 2008 and June 2009 quarters – seen as the height of the GFC – printing industry sales fell by 22.4% and printing industry “gross value added” fell by 23.1%. The Printing Industry Trends report shows that activity levels in both digital and offset printing declined during this period, but offset had a more severe decline.
Check out the comparisons. The net balance decline in production was 48.8% steeper in offset compared with digital printing. The offset sales decline was 57.6% steeper compared
with digital. The net profit decline in offset was 100% steeper.
Tchamerketenian, and PIAA figures, predict that “it is quite feasible that by 2020, or at the latest by 2025, the digital printing process would become the most common printing process, both in number of applications and industry turnover”.
“For some segments, such as book printing, the surge in digital printing is expected to be even more significant. If current trends continue, digital printing could rise from the estimated current proportion of 15% to about 35% of total book printing revenue by the end of 2015.”
According to a recent presentation by KBA marketing director Klaus Schmidt, the GFC was the catalyst for the biggest slump in the press manufacturing industry in the past 60 years. In 2009, global demand for new sheetfed and web presses plunged from €9.2bn to €3.9bn, and is expected to return to just €7bn in the longer term. Add to that the swingeing cuts of more than 9,000 jobs by the big three German manufacturers, and it’s easy to see that the offset manufacturing sector has been reeling.
Local representatives of the major offset press manufacturers agree that the past two years have been worse than ugly. But despite that, they are modestly optimistic in their outlooks. Are things on the mend?
Andy Vels Jensen, managing director of Heidelberg Australia New Zealand, was typically straightforward in his response. “The question we should ask is, ‘Can it get any worse than 2009 and 2010?’ Personally, I don’t think so. However, I also don’t expect us to be back to the old normal of installing an average of 265 SM printing units every year,” he says.
“The only way I will get anywhere close to pre-GFC revenue numbers in ANZ is to diversify and reinvent the business. This process we have started. The whole industry dynamics have changed, and they will continue to evolve in 2011 to 2012, but not with the kind of pressure points we had in the past two years.”
His counterpart at Manroland Australasia, Steve Dunwell, was cautiously upbeat in his assessment of the current market. “My quick take is Australia and New Zealand are still good markets with a positive – plus realistic – outlook for 2011. Newspapers in our region are very innovative and use technology well. Packaging is buoyant, and for general commercial printers, some continue to
do well and some struggle – no different to past years. I could name 10 good printers making good profits and 10 that will have difficulties.”
KBA Australasia sheetfed general manager Dave Lewis says: “This year will be much better than last year for us, mainly as the industry is coming back from the low base that it reached in the last couple of years. We expect the offset press market to come back to around 80% of where it was three years ago.”
That figure tallies with Dunwell’s estimate. “Since the beginning of the crisis, the German press manufacturers have adapted their manufacturing capacities to the capacities expected for the future. Manroland is assuming a market volume sized at 70-80% of 2007/08,” he says.
Gerard Wintle at Ferrostaal Australia, local agent for Komori presses, sees a slight improvement approaching for the local market. “As the eternal optimist, I would like to think we’d see overall improvement in the market. But you have to be a realist as well; we will only see a small incremental improvement. As the dust settles on the GFC and with the banks tighter than a drum, the prospects of the halcyon days of ‘every week sales’ are gone.”
Different strokes
The GFC had different impacts on markets around the world, reflecting the differing stages of market development. Mature market likes Australia were seriously affected, despite the economy’s relative escape from damage.
“Only a few markets avoided being hit,” says Vels Jensen. “China and Latin America escaped almost unscathed, whereas markets like the US and Canada, Europe, Japan and ANZ took the full brunt of it. The print industry in Australia suffered big time, despite the Australian economy doing well, and it still isn’t back to any new ‘normal level’.
“Printers still get spooked very easily and some are, unfortunately, still hoping for everything to get back to where it was. More companies will need to make serious changes or risk failure,” he adds.
Painful as it might be, some would argue that the printing industry here and overseas was ready for a correction, and the GFC just provided the final push that would have come sooner or later anyway.
Printers tell a similar story. Barry Davis, director at Hyde Park Press in Adelaide, says the company had experienced a slowdown in workloads, like every other printer in the country, but the GFC itself had a delayed impact on the local market.
“I think you’re going to see more companies going under. I think the past 12 months have been harder than the 12 months in which the GFC was having an impact. We certainly felt it more than we did the year before, here in Adelaide.
“The general volumes of work in Adelaide have been slightly less than the previous year, particularly over Christmas, which was busy, but didn’t have the additional workload that it did before,” adds Davis.
According to a statement from Manroland: “The printing industry is undergoing rapid structural changes. It has to reposition itself within a multimedia market and respond to greater market segmentation with improved business and production processes.”
Wintel says: “It forces you to look at your business efficiencies – something that you should do in good or bad times, but it seems we need a catalyst to force our hands. Acceleration into other areas has happened because of the GFC.”
Vels Jensen agrees: “The industry and some printers had already changed; however, the GFC certainly forced people to make some faster decisions and quickly become leaner, more efficient and productive. They quickly found out how friendly their ‘long term bank’ was.
“Although it wasn’t pleasant at the time and brought tragedy to many, I do believe that this period will be seen as an opportunity to improve the business and make overdue changes, while the industry flushes out poorly run businesses.”
Bernard Cheong, managing director of Cyber Australia, distributor of Ryobi presses, agrees that printers need to focus on longer-term business strategies built on better addressing the changing market.
“In the past few years, we’ve seen that the financially strong companies are able to make strategic purchases, whereas the companies with poor financial management would either downsize, or go into administration. For this reason, the total number of companies remaining will decrease. In this case, the market size will not recover to its peak level. These surviving companies are usually very progressive. Also, general cost reduction and establishment of a streamlined production process is essential.”
Impact of digital
Of course, the GFC has not been the only factor in what can only be seen as one of the biggest tests to offset’s dominance. But while digital printing is another threat, ironically, it is digital technology that will likely provide a cornerstone for offset printing’s future through its acceptance
by most commercial printers. The combination of offset and digital print will deliver the prospect of ongoing viability for print shops.
The manufacturers see the possibilities. In November 2010, Manroland and Océ announced a global cooperation in inkjet-based digital printing solutions for use in the graphic arts industry. Locally, Heidelberg and Konica Minolta announced their cooperation at Ipex 2010.
Wintle says: “The digital juggernaut continues in our industry… so we must embrace it and have a vision of the future print market, its existing and future offerings and where digital sits among those. It’s the visionaries who will prosper in this market.”
Most of the manufacturers have also embraced a more holistic view of their business by ramping up service and maintenance divisions, business consultation, supply of consumables and parts, finance and other services outside the ambit of a simple manufacturer. For local representatives, these steps have been crucial for ongoing viability.
Printers are quickly adapting to suit the changing times, and are still investing in offset technology, albeit not at the levels of previous years. For instance, JA Wales Printing in Sydney recently invested in a five-colour Heidelberg Speedmaster SM 74 to improve its productivity, but also to boost its competitiveness.
Director Bob Wales says: “It has all the bells and whistles on the machine, so the technology was as good as we could possibly want, and we had the work to justify it. It’s quicker, the quality is better and the reliability is great. We’ve had nothing but good vibes about the press.
“We have to compete against guys with 40-inch presses. The only way we can do that is with a press with very short makeready on shorter runs. This puts me in a position where I can compete with them because runs are shorter, deadlines are shorter, to the point now where even drying time is an issue.”
But JA Wales Printing offers digital services as well. “We now have nearly as much digital as offset, and we do mailing as well, so it puts us in a pretty unique position with the customers we’ve got. The growth will be in the digital area. I can’t really see the value in investing in more offset machinery now. I can’t see the market there; there’s not enough development in the small offset market.”
However, Wales tempers those remarks with: “I will always have offset because offset is the backbone of the industry as far as I’m concerned, and I will always put as much work on the offset presses as I can. It’s only when I get back to price and delivery times I go to digital. But for jobs over about 2,000, it will go onto offset. I think to compete you’ve got to have both. But I think offset has gone about as far as it can go.”
Hyde Park Press has just installed a five-colour Heidelberg Speedmaster SM 102 perfector to improve its offset operations, and s Barry Davis says: “We have both digital and offset. We’ve also just invested in some digital equipment as well. The digital side has been growing rapidly and has been going in leaps and bounds but we couldn’t survive on digital production alone. We do larger volumes and larger sheet sizes, and the only way you can do those applications, I believe, is with offset.
“We’ve put the latest model Speedmaster in, a perfector so we can do two-over-three or five inline. We traded a two-colour SM 102 perfector and a six-colour Speedmaster perfector for this five-colour. The running speed is really not very different, but the big change is in the makeready times. I expect with the new press we have makereadies in half the time of our older presses.
“I just think of it as printing. The result is that someone has a printed product in front of them, and as long as they’re happy with the quality and the durability, what difference does it make how it was printed?”
Case study Lotsa Printing
North Queensland’s Lotsa Printing has grown exponentially in the past 15 years, from a small family garage in to four facilities straddling Port Douglas, Cairns, Atherton and Townsville, with 37 staff. A new press was installed last year, as was an Agfa platesetter and a Xerox iGen3 digital press. Director Peter Martin used the investments to focus on new ideas for his market.
“We installed a five-colour Ryobi 920 with a coater, and it was set up to do conventional and UV inks. In June, we went full-time with UV ink. On the fifth unit we’re able to put down a varnish and run it through the coater, and the varnish we put down gives a sand-textured finish. And we’re also able to do a spot gloss. That’s inline, one-pass, spot gloss UV. So we’re one of the first in the country to go full-time UV, absolutely alcohol free, with spot gloss UV coatings inline.”
The large investments in technology were focused on unique selling points for the business, alongside better efficiencies in production.
“One of the key drivers for us is we’ve got to be different. I think you have to differentiate yourself, stand out from your also-ran printers. Technology gives us the edge. Our spot gloss ability differentiates our clients’ products and makes us different.”
While the GFC had an undeniable impact, Martin is philosophical not bitter. He used the downturn to analyse performance and was convinced new investment was a better option than simply riding it out.
“The GFC is a cycle. You go into a bad period, you come out of a bad period. The time to do some of these things is in the bad period. I guess the gamble was: is it going to be a two-year bad period or a five-year bad period? We took the position that it was going to a short-term bad period. It was easy to get people to work because unemployment was high. Do the hard work in the bad period and come out in front.”
He acknowledges that some printers won’t stay in business, but there is a silver lining in this consolidation.
“The market is changing, very clearly. It needed change in the supply chain. There were too many printers and too much capacity. There have been some big names go, and many smaller printers. So fewer printers will be better [for the industry]. Whether we’ll ever get back to the heady old days of the late ‘90s, when it was ‘name your price and print the money’, is another matter.
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