Europe’s printing market has been in the doldrums for longer than expected. The predicted economic recovery after the Iraqi war has failed to take place, plunging the sector into one of its most difficult period for years.

　　Ink makers went into 2003 knowing it would be a hard year. Now they realize it is going to be tougher than they envisaged. They are facing the challenge of finding ways of achieving respectable levels of profitability until Europe’s main economies pick up again.

　　Ink companies are having to accelerate cost-cutting programs, reduce surplus production capacity more drastically and streamline sales and marketing operations.

　　Because of pressures on prices in the major printing product sectors, ink producers have been seeking to expand in niche segments with higher margins. But even some of these are starting to become crowded.

　　Weak profitability is likely to trigger further consolidation moves, particularly among medium-sized players focused on specialty applications.

　　There is also the option of geographical expansion since parts of Europe are doing better economically than others. GDP growth rates in Eastern European countries are, for example, higher than in Western Europe.

　　Even within the EU, levels of economic activity vary. In May, industrial output in the 12-country eurozone went down by 0.9 percent in May, mainly because of the biggest drop in Italy for two years, as well as declines in France and Germany. However, production increased in Greece, Denmark, Belgium and Ireland.

　　Generally, however, the printing sector in much of Europe is struggling. In the U.K., where demand for print products has been stronger than in most other major EU markets, printers have been complaining that they cannot afford to pay a 2.8 percent nationally agreed wage increase for their workers.

　　In its latest survey of its members, the British Printing Industries Federation (BPIF) has found increased overcapacity and lower margins across all sectors. Profits in the U.K. printing sector are expected to fall again this year after declining last year to provide an average pre-tax sales margin of only 4.5 percent.

　　European printing equipment manufacturers have been forced to cut staff and slim down production capacity because of a steep drop in orders.

　　“The printing-press business (has) suffered immensely from restrained investment activity on the part of the printing companies in the wake of the global depression in the advertising and promotion markets,” Rudolf Rupprecht, chairman of MAN AG, owners of MAN Roland, told his company’s annual shareholders meeting in June.

　　“The printing industry has run into an unusually difficult situation such as we have never experienced before,” he added.

　　MAN Roland has embarked on a cost-saving exercise aimed at saving E130 million ($146 million). One measure is to concentrate production of sheetfed presses, of which it is the world’s second largest producer, at its site at Offenbach, Germany. The company is expecting a low-level recovery in the print press sector next year, possibly stimulated by Drupa in May.

　　Heidelberg, the world’s largest printing machinery manufacturer, has warned that its plans for jobs cuts and plant closures announced last year with the aim of saving E280 million ($317 million) annually may have to be more radical because of poor demand.

　　The company is expecting to break even at best in the present fiscal year to the end of March 2004, after a net loss of E138 million in 2002-03.

　　Heidelberg believes that demand may become even weaker. There is a “continuing reticence to invest among industrial printers in virtually all markets,” said Bernhard Schreier, Heidelberg’s chief executive.

　　Orders dropped by 37 percent in April and May, while sales went down by 21 percent. In the last fiscal year, orders fell by 13 percent, with sales decreasing by 18 percent to E4.1 billion.

　　The biggest recent decline in demand has been in the company’s digital and web systems divisions, where sales have plummeted by 50 percent since 2000.

　　Even specialist digital press makers like Xeikon International have reported difficult market conditions, despite indications that digital systems are continuing to make inroads into the commercial printing sector.

　　Much of the slowdown in the European printing sector stems from a slump in promotional activity by companies marketing consumer goods and business-to-business services and products. This has had a big impact on sales of coldset and heatset inks.

　　In the U.K., the latest quarterly survey by the Institute of Practitioners in Advertising, representing advertising and marketing agencies, has found that, with the exception of Internet expenditure, budgets for all types of marketing activity are being cut. This was the fourth successive quarter in which marketing spending has been reduced.

　　However the first faint signs of a recovery in the European printing market have been evident in the pulp and paper industry, which is usually the first to benefit from an upturn.

　　European pulp prices have gone up by more than 20 percent since the end of last year after reaching the bottom of the cycle. But much of the increase in demand for pulp may have been due to inventory building.

　　Stora Enso, a leading European paper producer, believes that the European paper market is now moving in the right direction, particularly since demand is rising in the U.S. “We have returned to the cyclical pattern where Europe follows the U.S. some months later,” said Jukka Haermaelae, Stora Enso’s chief executive.

　　But UPM-Kymmene, the world’s largest maker of publication-grade paper, has warned that the recovery could be a slow process without any significant market turnaround this year.

　　“We don’t expect any improvement in volumes or prices in Europe in the next few months,” Juha Niemalae, UPM’s chief executive, said.

　　The European newsprint market has gone through its worse fall in demand – equivalent to 1 million metric tons or 10 percent – in nearly 50 years.

　　Some observers now doubt that, at least in the short to medium term, demand for newsprint and publishing paper generally will return to its peak level of 2000. This is because of changes in advertising trends, with more promotional funds going into direct marketing and the Internet.

　　Ink Companies React
　　As a result, not surprisingly, the first of the latest consolidation moves within the ink sector has been in coldset and heatset inks.

　　Earlier this year, Flint Ink acquired SICPA’s worldwide business in heatset and coldset inks. At the same time, SICPA took over Flint’s operation in security inks, which it said would enable it to “accelerate its specialization in packaging inks.”

　　In May, Akzo Nobel Inks (ANI) agreed to take over the 70-year-old coldset and heatset business of Trenal S.A., Lessines, Belgium. The acquisition creates one of the top three coldset ink producers in Europe, which will be mainly active in Scandinavia, Germany, the Benelux countries and northern France.

　　“Coldset and heatset inks are big volume businesses so we will be a much more effective operation after this merger with ANI,” said Erwin de Keyser, managing director of Trenal S.A, which was owned by his family. “We have at Lessines one of the most efficient and modern coldset production sites in Europe, so there will be many synergies to be gained by combining with ANI.”

　　Mr. de Keyser’s family, which will be minority shareholders in a new Lessines-based operation run by ANI under the Trenal brand name, has kept 100 percent ownership of Arets Graphics, a fast-growing Belgian UV ink business.

　　“We see a lot of potential for expansion at Arets, whose sales of around E15 million a year are increasing at a double-digit rate,” said Mr. de Keyser. “Arets is in a sector which should remain a niche for five to 10 years.”

　　Other European ink companies are also moving away from commodity-type products to concentrate on specialty segments.

　　Zeller+Gmelin of Germany has been sharply improving the profitability of its ink operation despite the depression in the German print sector.

　　“We’ve moved out of price-driven sectors and instead moved into those which are more rewarding,” said Alex Stevenson, head of Zeller+Gmelin’s ink division, which specializes mainly in UV products.

　　The German part of the division has been following a strategy developed by Intercolour, West Thurrock, southern England, Zeller+Gmelin’s U.K. subsidiary and whose managing director is Mr. Stevenson. Intercolour has been achieving sales margins of nearly 15 percent, and although it is expecting a dip in returns this year, it is still looking for an average margin of approximately 10 percent.

　　“We’ve put a lot of effort into improving the quality of our service at Intercolour,” said Mr. Stevenson. “Our salesmen are fully qualified technicians who are aware of potential problems at our customers so that they can be solved before they happen.”

　　In addition to entering or increasing their presence in growing product markets, ink companies are also investing in gaining a stronger presence in expanding geographical markets, especially in Eastern Europe.

　　In July, Sun Chemical opened a new plant at Marki, near Warsaw, Poland, for both paste and liquid inks. This facility will service the Polish and neighboring markets.

　　“A population of 40 million, coupled with the political and economic stability, makes Poland an attractive location to expand Sun’s presence in Eastern Europe,” said George Kekelidze, Sun’s Eastern European managing director.

　　Paper consumption in Eastern Europe currently averages 55 kilograms per capita per year, against 200 kg in Western Europe, according to the Finnish Forest Industries Federation. When demand is flat within their own domestic sector, ink companies in Western Europe are fortunate to have a market on their doorstep with such bright growth prospects.

[时间：2003-12-22  作者：Bisenet  来源：Bisenet]