cmyk Trends
Independent Thinking on the Printing Industry
  • off-set blog
  • Jochen Meissner

An industry that can’t earn a return on capital can’t attract capital in a crisis.

5/6/2015

 
This statement stood out for me in today's WSJ article commenting on the likelihood of further consolidation given the political meddling at a national level in the global auto industry.

I have not posted anything since January, quite frankly because my reports and comments on some of the major players in the industry started to sound repetitive.  The sheetfed market leader Heidelberg every year seems to work its way through three meager quarters and manages a strong fourth to report results that are far away from sound profitability.  "Kurzarbeit" (short work hours) appears to have become a normal capacity management tool for the German part of the industry, instead of the originally intention to use taxpayer money as an exceptional measure to help companies weather a temporary low cycle. 

Order announcements for the web offset equipment makers are conspicuously rare and offer an indication that their customers are still more focused on consolidating the industry than upgrading their equipment. 

And the promised land - digital printing - is maybe not as promising as originally hoped for.  Kodak's share price development since the beginning of its new lease on life may be an indication that the market is questioning the potential of the commercial printing perspective.  (Tomorrow's earnings' call will hopefully provide new insights.)
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Market information is limited and HP's last press release from 2013 stating a number of 100 inkjet presses installed since 2009 is surely outdated. But the relatively low number (even adding the 6,000 Indigo machines that were installed over a much longer period)  makes you wonder about the longer term strategic relevance of commercial digital web printing for a company with $111 BILLION in annual revenue. 
It is now seven years since DRUPA 2008, the event that marked the beginning of the dramatic contraction of the printing equipment industry.  While the companies themselves have shrunk and some have even gone through bankruptcy processes, the basic landscape of the industry has not changed.  I find that quite surprising after seven years, especially since the industry is small enough that political objections - like in the auto industry -  would probably be minimal. Normally one would expect investors to drive more consolidation, that is of course only if they believe the industry can provide a return on capital.  
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