By Dr. Joe Webb on April 17th, 2014
Q4-2013 US commercial printing industry profits were positive for the first time since Q4-2010, at an estimated $870 million for a fourth calendar quarter.
For the year, profits were $4.34 billion. On an inflation-adjusted basis, that was the highest level of industry profits since 2007. This is despite there being $28 billion less printing shipments, 8,000 fewer printing establishments, and 73,000 fewer employees. It was the best profits per establishment ($173,000) since 2000 ($300,000). (click to enlarge)
Profits per employee increased to higher levels since 2000.
Industry consolidation is a big factor in this report. It is not just mergers and acquisitions, but also plant closures and bankruptcies, and the opening of new businesses that absorb the best and most appropriate resources of the closed plants, and also the strategic changes that surviving companies make as they respond and anticipate marketplace changes, absorbing the sales volume of departed competitors.
The elimination of weak companies, poor management, and irrelevant equipment reduces the drag on industry profits. The reason for negative Q4 profits in recent years may have been the closure of businesses that were on calendar tax years, as they took their final lumps all at once. Companies that continued to expect the historical business surge from holiday retail promotions, and never got it, may have finally been purged from the system. That historical pattern has not been valid since 2007 and is now a distant history.
Remember, there is no such thing as “business as usual.” Staying profitable requires constant attention to the marketplace, and a willingness to abandon hopeless resources and invest in new ones. The pressure of digital media will only intensify, and demand creative and courageous management approaches. Avoid defensive consolidation and seek consolidation partners that add new product capabilities, increase customer account penetration, and create new customer opportunities.
We must state that the Q4-2013 data are subject to revision by the Commerce Department in their next release of data in June. In May, the Commerce Department will release updated shipments data going back five years. Initial reports of profits in the past have been revised down to disappointing levels, but they have sometimes been revised up.
Enjoy the good news while we can, recognizing that there are exceptional print businesses that have been doing well throughout the volume downturn.
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