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Semper’s quarterly survey results

August 7, 2007

Q3 Survey Analysis – August 2007

The second quarter responses are now in and they indicate a large drop in profitability last quarter. Respondents reported a 17% drop from the previous period. If your firm experienced a similar situation, you’re not alone. Printing Impressions reports RR Donnelley with a 69.4 million dollar loss for the time significantly.

The question related to sales volume the two weeks before the survey showed a 7% drop in respondents with increased sales. 31% indicated an increase in sales while 49% indicated sales held as is and 21% showing a decrease in sales. Respondents reporting a decrease also dropped.

For the 3rd Quarter a full 72 % of companies feel sales will increase, 23% feel sales will stay the same and 5% are expecting a decrease. This is an overall improvement over the last quarter’s responses. Employers are staying the same regarding hiring, hedging their bet that business will pick up in the coming quarter.
We see some changes in investing in new plant and equipment. Most areas are either staying at the same level or increasing capacity. Under the current economic environment we question the wisdom of this. We understand investing to meet client requirements but the overall capacity of the industry has been growing compared to demand for many quarters now. Several respondents even feel “Too much capacity in this competitive industry” is the biggest concern facing their business. We feel this is part of the reason the consolidations are hitting with such force.

Last quarter we started asking what business segment had the most pricing pressure from clients. Offset had the heaviest pressure at 47%. Strangely this survey shows a drop for offset to 37% and an increase in the copy segment from 18% to 45%. This could be a seasonal variation. As we continue to collect data, we will see trends more clearly.

Two more areas of interest include the question regarding labor costs and hiring issues. Labor costs showed a much higher rate of concern on health insurance costs than the last quarter. We feel that this is due to the time of year, renewals typically hit mid-year so respondents are more aware of the pricing. The second highlight is that hiring issues jumped to the forefront of concerns facing businesses. Please note that labor costs have a separate area, so this section shows an increase in the scarcity of qualified labor. We have recently written an article that may be of interest to companies facing this type of issue: CLICK HERE

In summary, we feel this quarter will likely be a trying one for our industry (55% chance of downturn) as well as the economy in general. Some positives would be a surprise rate reduction by the Fed, or at least an improvement of the bias from inflation to growth. A continued reduction in the price of fuel would also have a positive impact. We feel the current debt scare is actually causing a serious hesitancy in the economy. People are truly concerned and aware that the shake out will take quarters, not weeks, to correct. We feel flexible costs and production planning are the way to go over the next quarters to help ride out this period.
We do hope our prediction is incorrect or that external events act in a very positive manner countering the hesitancy we see. May your quarter be a good one!

Housekeeping issue: we remind all, this quarter’s survey comes at the peak of the vacation season so the pool of responses is at it’s worst. We ask that each quarter you help all of us by immediately responding when you see the survey email. We are always looking for more people interested in taking the survey – referrals are welcome!

Review the report here – CLICK HERE

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