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Printers Invest in Technology, Muting Materials Cost Increase



Orange County’s biggest printers are willing to drop big bucks to buy new presses.

The biggest reason: Business is on an upswing and they need to operate faster to keep customers happy. Many are predicting single to double-digit percentage sales increases for 2006.

But that doesn’t mean it will be an easy ride.

Printers continue to face a slew of challenges, from hikes in operating costs and paper prices, to demanding clients and finding good people to run operations.

The Business Journal recently asked printers about these issues, as well as for their outlook for 2006 and some of the biggest hurdles they face. Here’s what they had to say.

What’s your outlook for business this year?


KENT BARKOURAS

Chief executive

Myprint Corp.

Irvine

We anticipate a revenue increase of more than 50% in 2006. Why? In March we launched nationally a new release of our software application, eTools 3.0, and have already added more than 10 Fortune 1000 customers in two months, and plan on adding many more.

More than 50% of our sales are a direct result of use of our software. We hired a senior sales executive who is now leading a national sales team to offer eTools to a much larger customer pool. The company’s growth previously had been through word of mouth, and especially growth of existing customer relationships.


BRUCE CARSON

President

The Dot Printer Inc.

We expect business to continue at current levels through the balance of 2006. We have budgeted for a 6% increase for 2006.


DOUG GRANT

Westamerica Graphics Corp.

Foothill Ranch

The Orange County economy as a whole remains strong. Even though some sectors may be declining, others such as medical/pharmaceutical/biotech and financial services,are growing.

At Westamerica Graphics, our client mix spans several diverse industries, which helps to balance our revenue. Rather than being tied to one or two specific industries, our sales rise and fall based on how well we perform in our marketplace.

We’re forecasting a 7% growth in sales for 2006. This is primarily due to increased business from existing clients, as well as some targeted sales to new accounts.


DOUG LEMIEUX

President

We Do Graphics Inc.

Orange

We Do Graphics’ outlook on the economy for the remainder of the year is positive. Since January we have seen an increase in activity in our existing account base as well as new accounts being cultivated, which prompted us to make the decision to install an additional press to increase printing capacity.


DAVID MADISON

Director, sales and marketing

ColorGraphics

Costa Mesa

ColorGraphics continues to attract new customers with our move to a new facility in Costa Mesa and the expanded 3-8 color sheetfed press capacity.

We are very optimistic about the growth of future business within local and national accounts.


PATRICK STEELE

D.M. Steele Co.

Fullerton

We are looking forward to having a great 2006. Business has been phenomenal so far this year and we are anticipating a continuation of the good fortune.

We have very strict quality control procedures and our staff is trained to always look out for our clients. Having these things in place for many years has enabled us to retain our existing clients and bring on new clients who demand very high quality and excellent service.

2006 should be a 20% increase over 2005.


JIM WITT

Executive vice president

Lester Lithograph Inc.

Anaheim

I have an optimistic outlook particularly since we haven’t yet realized the full impact of our merger with Miller Graphics. It’s difficult to pinpoint a percentage gain in sales at this time but a continued increase is anticipated.

What’s the biggest challenge you’ve faced in the past year?

Barkouras of Myprint

The biggest hurdle has been managing revenue growth and scalability, while focusing on continued software development. We have greatly enhanced our vendor/partner relationships so the “managed services” we offer are fundamentally sound inside and out.

Carson of The Dot Printer

The labor market is tight and pricing pressures are still very severe. We have continued to invest in technology and equipment to keep productivity ahead of cost increases.

Grant of Westamerica

One challenge facing printers of all sizes was more restrictive standards on cleanup solvents enacted by the Air Quality Management District in July of last year.

Until solvent manufacturers could develop products that actually worked with the new standards, quality and productivity really suffered in all shops.

Another challenge we continue to experience as we grow is the shortage of highly skilled craftspeople, across all production departments. Finding the right people with the right skills and the right attitudes is not an easy task.

LeMieux of We Do Graphics

We just signed a contract to purchase a Heidelberg Speedmaster SM74-6 color Perfector with Aqueous Coating. We expect to see a 20% to 25% increase in additional sales as well as increased efficiency in our press room.

This addition will also help us address some of the hurdles of the last few years, which have been mainly keeping up with the demanding turnaround times required by our customers.

We have been investing in technology trying to extract more efficiency out of our production process.

Madison of ColorGraphics

The move from a 17,000-square-foot facility in Tustin to a 40,000-square-foot plant in Costa Mesa was our biggest challenge of last year.

Witt of Lester Lithograph

Most recently, the blending of two cultures into one new culture is our biggest challenge. The past 12 months have also included a complete computer-to-plate upgrade in our prepress area and the expansion of warehouse and fulfillment services.

What’s been the impact on the printing industry from the rising costs of paper and ink, more competition and pressure from clients to keep costs low and quality high?

The offset printing industry will continue to consolidate because there are more efficient options available to marketing and procurement managers.

These primarily include digital print on demand options to produce documents, marketing materials, signage and direct mail pieces.

It is not a coincidence that it is better for Myprint that the emphasis has shifted toward efficiency over supply.

We realized years ago that the trend away from offset printing to the digital and Internet world was going to accelerate and that we needed to offer our clients a better solution, one that created substantive results. That is why I believe the eTools software application we offer has been so successful.

The basic ink on paper business is tough.

There is a tremendous imbalance between print capacity and the demand for the capacity.

Most printers have added ancillary services with higher margins and greater value added to provide opportunities for growth and a customer one-stop-shopping experience.

Our margins are certainly getting squeezed, because even though our costs of production are rising, we are not always able to pass these increases on to our clients.

It does force us to rethink everything we do, to be sure we are doing things that add value to our client relationships. Technology can help improve productivity,yet the cost of adding that new technology can be huge.

Most of us in the industry no longer have the “if you build it they will come” mentality of adding equipment.

Technology and equipment investments are wise only when made in the context of real business with real clients.

The successful printing companies have been able to adjust to the changing marketplace. Our fundamental belief is to focus on our core business which is prepress and printing.

Our corporate size also has allowed us to buy materials at cost-effective pricing providing the ability to control costs to customers while continuing to print at a high quality level.

Steele of D.M. Steele

The rising cost of paper doesn’t affect the sheet-fed printers like us, as much as it does the Web printers.

The cost of paper in Web printing is a substantial percentage of the overall job (usually 40% to 50% or more), so they are experiencing some clients lowering quantity to stay within budgets.

With sheet-fed printers, the stock is usually more like 25% and the runs are shorter, so we haven’t seen much of an impact.

Ink hasn’t been an issue this past year. If you are a printer that sells price, it probably was a rocky year.

The client that changes printers to the lowest bidder with each job might have put a pretty good squeeze on those guys by demanding prices that don’t reflect the paper price increase.

But for the printer that has clients demanding quality and performance, it has not been an issue.

Any increase in material costs has always been a challenge to pass on. However, I believe the industry has experienced an upward swing in activity and printers are less hesitant to pass on the additional costs they can’t control.

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