Overcapacity an understatement as PBL pushes on with heatset plant

With PMP shareholders licking their wounds after what the media has dubbed the 'year that saw credibility junked', worse may be to come for the catalogue and magazine printer. And perhaps, the Australian heatset web sector as a whole, writes Peter Coleman. Newspaper publishers have sought to minimise their outsourced print costs under the pressure of reduced advertising spending, some are already pushing into the commercial heatset market while others are known to want to build or extend heatset print capacity. PBL Media is expected to fill in the detail of its plans for a major print and distribution centre within weeks or even days, as discussions on the project come to life again with the gradual easing of financial restraints. For PBL, there's the small matter of business lost as a result of those Coles leaflets which were pulped rather than delivered, but a bigger challenge may be preparing for the loss of the PBL's ACP magazine work. Last week chairman Graham Heaney and chief executive Richard Allely were briefing shareholders on PMP's "turbulent and unsatisfactory year". Operating earnings fell 36 per cent on the year, with results also hit by a $36 million write-down of assets and $28 million of restructuring costs. But this week it's back to business, with a company-wide transformation underway and a stated aim to win back the Coles business, already being eaten into by other players such as West Australian Newspapers. Even some smaller jobs are leaving: News Limited's commissioning of a new newspaper plant for the Hobart 'Mercury' in May has led to that newspaper's chunky real estate guide being printed inhouse, rather than at PMP Print's plant in Clayton, Victoria. It's an understatement to say that the problems come at a bad time: PMP Print, which recently re-equipped with high-speed wide-web manroland presses and industrial-scale Ferag finishing equipment, is hungry for volume. But the capacity installed for magazine production (some of it A4) is not necessarily suited to the competitive catalogue market. There's also less newspaper supplement and insert work, with publishers such as WAN and APN meeting more of their own heatset requirement in-house, and some work switched to coldset. Ever-improving coldset newspaper quality - combined with the use of better paper stocks - now means that 'value-added' supplements don't always have to be heatset. The ever-present focus on costs has seen Fairfax switch production of the 'Sunday Life' magazine section from the Sydney 'Sun-Herald' and the 'Sunday Age' - previously printed heatset by IPMG's Hannanprint - to a coldset press at its 'Canberra Times' plant. A further challenge for PMP Print - and most heatset printers - comes in plans by the Hannan family's IPMG printing group set up a facility to print its stable of ACP consumer magazines. Three ultra-wide gravure presses, perhaps half as wide again as the widest available web-offset equipment, are detailed in submissions to government and environmental authorities. There's a view in the industry that the project will not eventuate; that IPMG will abandon large-scale re-equipment if PBL goes ahead with its own production. But it's probably wrong: With the value of IPMG's Hannanprint real estate increasing, the only outcome likely to halt a move to the former Kimberly-Clark site in Scrivener Street, Warwick Farm would be if PMP was forced to put some of its own capacity on the market (unlikely, but not beyond the realms of possibility). Meanwhile, members of the PBL project team were understood to have been in intense negotiations with potential suppliers of the key heatset press equipment, with three major manufacturers back at the table. While it is thought that a choice for the presses had already been made, subject to finance - which at the time of the PacPrint09 exhibition, remained a problem - GXpress understands that a number of options are now being considered. These may include a high level of technical involvement by vendors, not far short of the landmark agreement between News International and Agfa Graphics, which provided for the supply of imaged plates, rather than platemaking equipment for its UK sites. Proposals for equipment from Goss International, manroland and KBA - as well as finishing and ancillary kit - were being discussed, with reports suggesting a discount of 20 per cent may be needed to close the deal. Goss would be able to supply both press and bindery equipment, while manroland presses would typically be teamed with Ferag print finishing, as in the case of the PMP Print installations in Australia. While unable to comment on reports, PBL Media operations general manager John Rowsthorne confirmed that an announcement was imminent, probably "in the next few weeks". Arranging finance remained an issue, but "a number of options are being pursued," he says. All of which still adds up to substantial excess capacity in the industry sector. Shares in letterbox deliverer Salmat - a beneficiary of PMP's shaming - rose almost 50 per cent last year, while PMP's fell by almost the same amount. It’s clear that the heatset segment is not for the faint-hearted … so what price PMP now?