Monday, 19 December, 2011

Tough times for web-offset manufacturers

We have written in earlier years about the inevitable consolidation of the offset press manufacturers and particularly about the leading international manufacturers of high speed web offset presses. As we wrote after the last drupa in July 2008, “The top two manufacturers in the 70,000-plus-cph markets are manroland and KBA and our estimates put manroland ahead of KBA by about US$ 300 million in this category. Together they currently command almost 60% of the market and the other five players share the balance 40%with Goss, perhaps the sales leader of this group in these type of presses. With most of these manufacturers hovering between US$ 250 to 325 million in sales of 70,000 cph plus presses, will all five survive in their present structure on their own?”

In the ensuing years the downturn of the newspaper market in Europe, North America and Japan has continued while new developments such as tablets (iPads) have just been around for less than two years. Some parts of our forecast of consolidation have already come true with Shanghai Electric acquiring Goss International in 2010. In the meanwhile with intermittent interventions by the German government, unsuccessful consolidation discussions have taken place between almost all of the European offset press suppliers: Heidelberg, KBA, manroland, Solna and Wifag. Although unsuccessful thus far, one can reasonably expect some consolidation of the European press manufacturers coming out of the insolvency filing of manroland on 25 November 2011.

The state of the Indian web offset manufacturers
Too often the Indian machinery manufacturers think that they are immune from what is happening in the rest of the world or even in the Indian economy. This is partly a function of their relatively small size whereby they can subsist even lean years when sales plummet to half as they did in the 2008-09 financial year. Nevertheless it is safe to say that over the past decade the Indian web offset manufacturers led by Manugraph and The Printers House have grown into a R600 crore (US$ 125 million) industry. This has happened on the back of increased editions, pagination, circulations and particularly the rapid rise of 4-colour pages of the Indian dailies. Although our newspaper industry can be safely expected to continue to grow in the next decade, it would be foolish to ignore the possibility and need for increased consolidation among the publishers and ultimately some consolidation by the more than 20 local web offset press manufacturers.

Another factor that has kept many of the Indian web-offset press manufacturers alive has been the increased expenditure by the government and by the economy as a whole on education. A good percentage of the web presses bought in recent years are producing educational books. Moreover, as exports of presses have fallen, domestic consumption has taken up the slack.

This is true even for organised manufacturer-exporters such as Manugraph and The Printers House. Both companies have turned their attention on the emerging markets in Asia, Africa, and Latin America and to some extent the Middle East. While one enjoys a good market share in Russia, the other does well in China. Manugraph has, notably, begun the sales of Chinese manufactured converting equipment to the local board packaging industry. Manugraph of course has also taken on the big players by launching and installing its 4 x1 presses in two newspapers which is the first real challenge to the European and Japanese manufacturers from an emerging economy web-offset manufacturer in the 70,000 cph segment.

While both the newspaper and the book printing market will remain healthy in India and the outlook is not gloomy for its web press manufacturers, they will nevertheless also be compelled to think about consolidation. Many of them have not been able to professionalise their companies and they can expect generational issues to impact them as much as they are being impacted by the increased costs of raw materials, engineering inputs and extremely competitive markets at home and abroad.
— Naresh Khanna

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