Quad/Graphics has been The Incredible Shrinking Printing Company during the past year and a half, closing a dozen printing plants and laying off more than 6,000 employees. But trying to use capital investment to outflank the competition is still embedded in its DNA.
“In this increasingly multichannel marketplace, the Company believes that the printing industry will be driven to make capital investments in new technologies, such as those to deliver targeted and customized print solutions and to deploy multichannel marketing campaigns through the integration of new media,” the company said in its 2011 annual report, released today.
“Quad/Graphics has focused on integrating new media to redefine print for its customers" so that they can "connect with customers and subscribers across multiple channels including print, web, mobile, e-mail, e-book, tablet and in-store." Its non-print ventures include “digital imaging, video, photography, workflow solutions, interactive technology including mobile and social media, and response data analytics services.”
The investment strategy is a far cry from the go-go days of the 41-year-old company, when, according to a reliable source, Quad proposed building a huge new printing plant next door to a paper mill. (Remember when printers were building mega-plants instead of closing them down? You do? Has it occurred to you that you are, like, really old?)
The idea was to reduce logistics costs and cycle times with a complex that could receive logs at one end and output finished catalogs and magazines at the other. But the paper company declined, not wanting to offend its other printer clients.
Some of Quad’s $168 million in capital investment last year went into its remaining printing plants, but for robots and other labor-saving devices rather than lots of new presses and binders.
Quad’s bearish outlook on the traditional printing business explains its eagerness to be more than a printer:
“Competition in the highly fragmented printing industry remains intense. The industry has excess manufacturing capacity created by declines in industry volumes, which is causing the printing industry to face continued downward pricing pressures. In addition, the growth and adaptation of alternative marketing technologies . . . as well as alternative delivery of content has resulted in marketers and publishers allocating their marketing and advertising spend across a wide and expanding selection of non-print media options, which further exacerbates industry overcapacity.”
Wall Street had a “not as bad as we expected” reaction to Quad’s announcement late yesterday that its 4th Quarter sales were down 6% and its EBITDA (operating cash flow) was off 12% from the previous year. The company’s beleaguered stock price, which had dropped 73% in the 19 months since Quad went public, rose 15% today.