Page 14 - Print21 Nov-Dec 2020

Paper Prospects
Print’s paper prospects
In this time of radical uncertainty, printers making investment decisions to expand or contract their businesses face extraordinary challenges. Relying on natural optimism or pessimism about the state
of the industry is not a sound basis for spending good money on technology, or for bailing out in a panic. While no one can predict the future, Tim Woods has a better handle than most on the trends that are defining the market. Patrick Howard takes time out to talk with the industry’s numbers guru.
Printers are handling this recessionary crisis better than they did the GFC in 2008. Informed by that experience many have
moved quicker, cut harder and deeper, right sizing their businesses before shrinking revenues versus fixed costs drive them to the wall. Importantly, they are sizing up the strategic landscape on the other side of the crisis ready to seize newly identified opportunities. Many are basing
their decisions on solid research, abandoning the gut feeling and fly- by-the-seat-of-your-pants school of
Follow the data
Understanding the dynamics of
the printing industry is key to investment success. The nature
of printing as a huge, diverse and fragmented, industry makes it difficult to get a clear focus on what is driving the market. One of the clearest windows is Wood’s Pulp & Paper Edge, the long-established data analysis and intelligence monthly publication for the pulp and paper industry.
Tracking the amount and cost of paper coming into the country – and
business management that has long characterised the printing industry.
Tim Woods, owner and managing director of Industry Edge, the industry’s research and analytics enterprise, is not surprised.
He is being asked to carry out substantially more strategic assessments for printing companies this time around.
“Last time in the GFC it took mid- to-large companies up to a year or more to look for strategy plays; this time it’s two to three months. They are better prepared, they’ve moved faster. They realise that this too will pass, and they need to be looking towards the future,” he said.
No matter how dramatic or sudden the downturn for the economy as a result of the Covid19 pandemic, the defining parameters for the printing industry are
well entrenched. For those hard heads that believe the science and the data, the trends shaping the commercial printing industry are clear and long-term. Declining demand is a more than decade-long phenomenon. According to Woods, demand for printing paper is less than half what it was ten years ago, and that has nothing to do with the pandemic shutdowns.
“Demand declines are accelerating before our eyes. The decline for paper-based material has accelerated in recent years and it’s not coming
Print prospects: Tim Woods, Industry Edge
back. The long-term trend has nothing to do with Covid; it’s
to do with the move to digital communications. Those who are prepared for it are looking to the future. They know the industry has changed for good,” he said.
Woods predicts there will be fluctuations in the short term, but his belief in the inevitability of the trend is convincing. As a self-described empiricist he believes there will be an upturn in demand when Covid eases, but it won’t really matter.
nearly all printing paper is imported – gives a clear picture of the state of play and the long-term trends. Pulp & Paper Edge gives subscribers up to the minute information to inform decisions and guide strategies. It also gives Woods a unique insight into what makes printing and printers tick. For him, one of the most interesting features is the continuing willingness of printers to invest in new technology.
“It’s quite remarkable that people are still buying and investing against the demand trend. I’m sure there are benefits in going faster, but it’s also a spectacular commitment to quality. Printing is now at an unparalleled level of quality, which is ironic as it’s happening as demand drops.”
The reduction in the amount of printing performed by the local industry is starkly revealed in the import figures as published by P&PE. For the first time since the 1990s
in 2019-20, Australia’s imports of paper and paperboard fell below one million tonnes, mostly driven by
an 11 per cent decline in printing and communication paper. From 1,174,000 tonnes in 2010 the sector suffered a year on year fall of 7.7 per cent to 530,000 tonnes in 2020. The decline in dollar values is even more illustrative with an overall drop of -17.8 per cent from $1,011.5m in 2010 to $490.6m in 2020.
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“You wouldn’t day trade your super and you shouldn’t day trade your strategy based on getting one good job.”
“One swallow does not a summer make,” he says. “Sure, there’s likely to be a flick up when the pandemic ends, but it’s a flick, not a trend. You wouldn’t day trade your super and you shouldn’t day trade your strategy based on getting one good job. It is important to go with the trend. Manufacturing costs are rising faster than CPI, while revenue is rising less than that. Margins are on a tightening 25-year trend.”
14 Print21 NOVEMBER/DECEMBER 2020