Underutilization of plant capacity plus pricing pressures made for a difficult 2003 for three of the book industry's major printers. Book division sales last year fell at Quebecor World, R.R. Donnelley and Banta Corp. Weakness in the education market was cited as the major factor in the sales decline, although executives conceded that overall there are too many printers chasing too little work.
None of the three companies were optimistic that business will improve in 2004; Banta was the most upbeat, with CEO Stephanie Streeter telling analysts that she expects 2004 sales in the book division to be "comparable" to those of 2003. She said any growth would likely come from an improved economy that would lead to higher tax collections and possibly more spending on educational materials. There is also a chance that the federal mandate for more school testing could lead to "more print activity."
Banta was also encouraged that book division sales improved in the fourth quarter and were slightly higher in 2003 than in the last quarter of 2002. For the full year, however, book division sales fell 9%. In addition to being "battered" by tight state budgets and a weak adoption cycle, Banta said revenue in the book division was hurt by more publishers buying their own paper. Although that trend slowed somewhat in the fourth quarter, paper sales declined by $24 million last year.
Unlike Banta, Donnelley had a poor fourth quarter, which contributed to a 6% decline in net sales at its book group for 2003. Sales finished the year at $663.3 million, down from $705.4 million in 2002. In the fourth quarter, sales plunged 14%, to $154.9 million. The company attributed the disappointing last quarter sales to weaker than expected reprint orders in the education and specialty book segments in November and December.
Sales in Quebecor World's North American printing operations were hurt by price declines and the decision by publishers to trim inventories, said COO David Boles. Company executives were very cautious about prospects for improvement in all market segments in 2004, including books. Boles did say that the company continues to upgrade its book printing platform, pointing in particular to the addition of more digital printing capabilities that will give the company the ability to offer more short-run and customized publishing options in addition to its long-run service. The digital printing operations will be concentrated in the company's plants in Leominster, Mass., and Dubuque, Iowa.
Despite the weak market, executives at both Quebecor and Banta said they are looking at making acquisitions this year.
And in a major personnel move, Michael Allen, who had been executive v-p of print solutions at Donnelley, was named president of Banta's print segment. The group includes the book division as well as the publications, direct marketing and catalogue groups.
