GAM 101 Chiefs: 'Great Year, Good Outlook'

Generally, sales and profit margins rose, but pricing pressures, capital investments, human resources, and the pace of technological change still pose problems.

By Lisa Cross, Business Editor -- Graphic Arts Online, 11/1/2000

Overall, the executives of the industry's leading companies report that their firms had a great year and are optimistic about the future. The top managers of most of the companies say that profit margins were up in the most recent fiscal year and predicted they would stay up through next year.

William L. Davis, chairman and chief executive of R.R. Donnelley & Sons Company, Chicago, said at the end of the quarter ending September 30, "Our core printing businesses are robust; in fact, for the first time these businesses are earning more than their cost of capital, based on EVA [economic value added]."

Joe R. Davis, chief executive of Consolidated Graphics, Houston, Tex., agrees with industry projections of 5% growth in the next year. Consolidated Graphics, #17 on the list, is a commercial printer and a leading industry consolidator (63 companies are in the network at present), with sales of $625 million.

Managers of Quebecor World Inc., Montreal, which tops this year's list with sales of $6.5 billion, anticipate a robust and buoyant set of business conditions for the printing industry through 2001.

Enhanced by competition

"Demand for advertising space in printed media continues to be enhanced by intense competition between Internet-related companies," notes Charles G. Cavell, chief executive of Quebecor World. "Moreover, the availability of increasingly sophisticated print and distribution technologies bodes well for industry players who have committed to the appropriate capital investments."

Cavell says Quebecor World's most important recent expenditures involved rotogravure retooling in North America, expansion of computer-to-plate technology, and environmental initiatives.

Wayne R. Angstrom, chief executive of St. Ives Inc., a Hollywood, Fla.-based commercial printer with $115 million in sales (#46 on the list), also predicts a prosperous year ahead. "We expect to see the business grow in terms of sales and profits through 2001," he says. "However, price erosion has become a problem and is affecting investment levels. In the past, we could easily pass along added investment costs to customers."

Indeed, reconciling the capital investment required for growth and efficiency gains with price erosion has not been an easy task for printers.

Profits, TO reinvest

"It's a challenge to generate profits that are big enough to continue reinvesting in technology," says Philip Drumheller, chief executive of The Lane Press, Inc., South Burlington, Vt., a publication printer reporting sales of $51 million (#88).

Linda Kopatz, chief executive of insert printer Rhodes Printing Group, Charlestown, Ind. (#47 on the list with sales of $110 million), concurs. She contends that managing the technological investment required to both increase the business and widen profit margins is a formidable task. She says simply, "We strive to get the most value and return on investment from each purchase."

She points out the new importance of production efficiency: "While prices for labor and materials keep rising, customers in the insert market put pressure on our prices. We can combat this only through production efficiencies and improvements."

Driving more efficiency

At Quebecor World, Cavell agrees, saying, "A significant challenge [we] have and will continue to face is the need to continuously drive more efficiency into the competitive printing marketplace. Initiatives such as plant retooling, network rationalization, computer-to-plate deployment, logistics planning, and supply chain management are helping to push operating margins to levels previously considered unattainable."

Jerry Williamson, the chairman of Williamson Printing Corp., Dallas, Tex. (sales of $85 million for the #60 spot on the list), reports, "We will see a softening in the first quarter, but overall 2001 will be a positive year from a business standpoint. Still, it won't be as robust as the previous couple of years."

Alternatively, Bruce M. Smith, chief executive of Berlin Industries, Carol Stream, Ill. (sales of nearly $148 million and #37 on the list), says that growth is cooling and that fierce competition is leading to declining profit margins.

Smith says, "To maintain margins, we are investing in more productive manufacturing processes and avoiding competing with the big boys."

Manpower tops concerns

Printing managers participating in this year's survey identified labor shortages as their number one competitive threat. "Finding and keeping good employees is a top challenge," says Smith of Berlin Industries. "We have to work at keeping our company an exciting place to work and offering competitive wages and benefits so that employees stay."

Drumheller of The Lane Press seconds Smith's motion, saying, "It's tough today to attract and retain talented employees in what is perceived as an old type of business."

Adds Kopatz of Rhodes Printing, "Finding and keeping good employees is our biggest challenge. We have addressed this issue through various incentive programs as well as providing a high-quality work environment."

For Quebecor World, reports Cavell, "Availability of skilled labor is an ongoing challenge. Following our acquisition of World Color Press in 1999, we have taken steps to retain the best and the brightest of both companies' combined work force, including financial incentives, attractive working conditions, autonomy in management decisionmaking, a favorable industrial relations climate, and an envious safety record."

Another top issue befuddling printers is the rapid pace of technology development.

"The most competitive challenge we have is keeping up with technology, which seems to change on a daily basis," says Terry L. Pegram, chief executive of PBM Graphics, Inc., Durham, N.C., #47 on the list with sales of $114 million. "We are continually adding staff to our information technology department and offering training classes for employees."

Quality certification

Adds Angstrom of St. Ives, "We've implemented a lot of capital investments such as CTP, digital prepress, closed-loop color control, enhanced demographic bindery applications, and distribution services to better serve our customers. Also, we've become ISO 9000 certified in the U.S. to allow a focus on more consistent quality and performance."

Angstrom says his company's investments in technology and quality tools are intended to demonstrate its value to print buyers and capture preferred-supplier status.

Developing services that somehow add value to print is a philosophy echoed and expanded by many of the industry's top revenue-generating firms. At New England Business Service, Groton, Mass., new business ventures outside printing include personalized apparel, advertising specialties products, and payroll processing services. The company, with $485 million in sales, appeared in the #21 spot.

Everything tied to printing

"All of the new business ventures [at Quebecor World] are either directly or indirectly tied to the printing industry," says Cavell. "Investments in premedia, the creation of a B2B exchange, and development of a national distribution network are examples of how we are expanding our horizons while maintaining our focus on what we know best."

As Davis of Consolidated Graphics concludes, "In today's world, the commercial printing industry is a communications business that far exceeds ink on paper. In recognizing and responding to the expanded communication needs of our clients, we introduced CGXmedia.com, whose electronic offerings range from many CD-ROM products, eBooks, and electronic journal composition to CGX-OPAL.com--a custom on-line digital asset management system--and CGX-CON.com, an on-line system for print purchasing, ordering, workflow management, and fulfillment."