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Profits per Print Establishment Best Since 2000; Annual Industry Profits Best Since 2007

By 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)

printing profits 041714

Profits per employee increased to higher levels since 2000.

profits per employee 041714

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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  1. 4 Responses to “Profits per Print Establishment Best Since 2000; Annual Industry Profits Best Since 2007”

  2. By David L. Zwang on Apr 18, 2014 | Reply

    So, what do we call you now.. can’t be Dr. Doom….

    It would seem to me that in addition to the general economic turn, this is a reflection of the shift in balance to Digital Print, and the higher margins and workflow efficiencies that it brings. Thoughts?

  3. By Peter Muir on Apr 21, 2014 | Reply

    David, I see Joe more as Dr. Opportunity. The data is the facts…it’s what gets done about it by those who want to seize opportunities who are successful. I’m with you…it’s about digital print and other forms of electronic communication being sold/produced/managed in more efficient and effective workflows.

  4. By Dr Joe Webb on Apr 21, 2014 | Reply

    This is a decrease in “mainstream” print and an increase in shorter-run, less frequent, highly targeted print, which is where data-driven digital works best. At the same time, the profits drag of badly performing companies that are now out of the business is no longer a factor. Remember, industry data are the combination of all companies, good and bad. There are some really good ones out there, who really have some compelling propositions for their clients.

  5. By Gary Ampulski on May 6, 2014 | Reply

    A new interim study has been released which shows how this trend impacts business valuation and how private business owners in the commercial print space can increase the value of their companies up to 5 times before exiting without borrowing a dime.

    The study derives results from consideration of industry benchmarks from 248 respondents to an annual survey conducted by the National Association of Print Leadership (NAPL), government data on the print industry as referenced in this post and a private capital market valuation model applied to the factors that impact investment risk. The model is based on several years of research on the Lower Middle Private Capital Markets and input from more than 835 privately held business owners (segmented by industry and annual sales) who have received offers for their companies in the last eighteen months.

    In addition to company size, margin, growth and cash required to run the business, the valuation model used in this study considers the risks associated with generating a future profit stream as a key component. Through the application of industry benchmarking, cost controls, business process optimization and risk management, key performance indicators have been identified to help private company owners move up the corporate value scale and maximize both the profit and value multiple for their business.

    An executive summary of the study is being published in the May Issue of Printing Industries of America -“The Magazine” and includes a link to the complete study for further review.