Overcapacity and pricing pressures continued to trouble some of the major printers in this year's second quarter. R.R. Donnelley, Banta Corp. and Quebecor World all cited the two as the major factors in constraining results in their book operations in the most recent period.
Claude Helie, CFO at Quebecor, said printing remains "a challenging market, driven by price." Sales in the company's North American book operations were down in the quarter, due to lower prices and an unfavorable product mix, noted David Boles, head of Quebecor's North American subsidiary. He said that despite the difficult conditions, book printing remains "a solid business." Quebecor is investing in new printing machinery this year and is hoping for a slight improvement in business in the second half of 2004.
Sales in Banta's book printing division fell 1% in the quarter, due to lower revenue in the educational sector. Banta CFO Geoffrey Hibner said that while volume was up, lower prices drove down sales, profits and margins. Hibner said the pricing for new jobs "stabilized" toward the end of the second quarter, noting that Banta was entering the third period with "higher work-in-process inventory" than it began the second quarter.
Sales were also off in Donnelley's book unit, which the company attributed to lower religion volume as well as declines in trade volumes following its participation in printing Harry Potter and the Order of the Phoenix in last year's second quarter. Donnelley CEO Mark Angelson tried to put a positive spin on the results by noting that during the quarter Donnelley had extended contracts with publishers that were worth $150 million. Donnelley was also the exclusive printer for My Life, printing 2.5 million copies in three weeks, Angelson said.
The entire Donnelley company is undergoing a widespread integration process following the February merger with Moore Wallace. The restructuring has led to $64.1 million in charges through the first six months of the year and the elimination of 2,175 positions. The company expects the restructuring to continue throughout the year.
Change for Von Hoffmann
The educational and commercial printer Von Hoffmann will find itself in a new operating structure soon. The printer, co-owned by Kohlberg Kravis Roberts and DLJ Merchant Banking Partners, is being made part of a new group that will consist of Hoffmann, Jostens and Arcade Marketing. The combined companies will be headed by one-time Quebecor World executive Marc Reisch. The three groups combined have sales of $1.4 billion for the 12 months ended March 31.
