Has Newspaper Advertising Seen the Bottom?

Most advertisers on "Madison Avenue" still believe the advertising community has not seen bottom yet, but see some relief starting in Early 2010. The forecast for the third quarter of 2009 is for newspaper advertising to be down 25% from 2008, and estimates are for a poor forth quarter, but something better than the 3Q2009 decline.
The Newspaper Association of America recently reported a drop in both print and digital ad revenue of 16.6% for 2008, and 2009 will be worse. Beyond the challenges print media has for advertising dollars, retailer's sluggish sales have also hurt spending budgets. Let's hope for strong Holiday promotions!

InPlant Printers Report on Paper Usage

InPlant Graphics just published a survey conducted with nearly 400 InPlant printers.
-Most common paper orders, Colored at #1, Cover Stock, Bond, Copier, Carbonless (near the bottom of the list was Inkjet Paper)
-Generally it is the Inplant Manager or Plant Supervisor that is responsible for ordering paper
-Note: most buying is by function NOT by brand name
-When asked about 'going green', most would go green BUT not if paper is more expensive
-Most inPlants ordered LESS paper so far in 2009 vs this time in 2008
-Most Inplants purchase paper through a local merchant and spent $75,000-$200,000/year on average.

Printers Report Better Profits in Second Quarter

RR Donnelley, World Color Press, Transcontinental, Cenveo, Deluxe, Consolidated Graphics and Standard Register all reported a combined second quarter profit of $122.2 million, a significant improvement over a loss of $21.2 million for the first quarter of 2009. Although this is encouraging the results are still 43% lower than the second quarter for 2008. Every company reported lower revenue, but the pace of decline has slowed.

Wausau Paper to combine business units

Wausau Paper plans to combine its specialty products business and its printing and writing business into one strategic operating unit.
The new business will be called Wausau Paper Mills LLC and will include production plants in Rhinelander, Brokaw and Mosinee in Wisconsin and the Brainerd, Minn facility. The plants manufacture printing and writing papers and technical specialty papers.
The new unit will be led by Henry Newell as senior vice president. Newell is now the senior vice president of printing and writing business.
The firm's towel and tissue business unit (produces "away from home" towel and tissue products) will not be involved with this consolidation.
Earlier this year we reported that Wausau Paper closed a paper mill in Jay, Maine, and a converting facility in Appleton in order to cut costs; these remain shuttered.

Truckers still Aggressively Compete

Transportation is a large cost component for the paper manufactures and respective end users for both inbound raw materials and out bound finished paper grades. Although, recently, signs that overall freight demand has bottomed and is picking up, the less-than-truckload market remains extremely competitive. Many of the bigger carriers continue to offer steep discounts in an effort to grab market share in the down economy.
Still, shippers think prices are going to go up over the next few months.

Struggle Continues to Sell Business Week

Bruce Wasserstein became the second bidder to depart the bidding contest for Business Week. Business Week's owner, McGraw-Hill, is concerned that the value of print media is declining.

Conde Nast Expects to Cut Costs Deeply

Conde Nast recently reported that advertising revenue at virtually every publication has decreased this year with no rebound in sight. Executives are expecting to have to cut spending by up to 25%.

Is Printed Direct Mail Dead?

The editors of Target Marketing Magazine acknowledge that the USA postal service has delivered 12billion less pieces so far in 2009, and that direct mail spending is down; and that email spending and promotions are up; and that there are environmental concerns and pressure for 'greener' promotions. BUT, they have confidence that direct mail spending will increase as the economy improves. They report that 18.8 billion promotional pieces were mailed in the second quarter of 2009 and that the spend will double by 2013. Many marketing exports argue the return on the amount invested for mailed pieces is still better than other medias, and, because the share number of emails have skyrockets, in-boxes have become difficult to manage.
There was a recent survey that revealed over 210 billion emails are sent every day, worldwide. Let’s hope direct mail returns – this is very good for paper demand.

Sonoco Stops Producing Corrugated Tubes

Sonoco has been facing significant reductions in customer orders over the past year and recently made the decision to close the Orrville, OH plant. Sonoco, founded in 1899, is a global manufacturer of consumer and industrial packaging products and provider of packaging services, with more than 300 operations in 35 countries serving customers in some 85 nations. The plant was purchased in 2007 from Caraustar Industries.

Market Pulp Price Increase Flys without Resistance

The newest pulp increase of $40/MTon from all North American NBSK producers went into effect without resistance for buyers in North America, Asia, and Europe. The industry has witnessed lower inventories, higher than expected demand, weaker dollar, and return of a strong Chinese demand. Once fully implemented, the new market list price will be $770/MTon for NBSK (a 10 month high). Note, the major buyers and large spot buyers use the list price as a bench mark for discounted levels. Spot pricing is estimated to be around $620-640/MTon.
As reported in past releases, Catalyst Paper, Domtar, Fraser Paper, Terrace Bay
and Nanaimo Forest Products have announced starting up curtailed equipment in an effort to supply the increased demand.

Magazines Review Measuring Effectiveness of Advertisiments

Mediamark Research & Intelligence (MRI) continues to penetrate the magazine industry and their advertisers to increase advertisers' confidence in the effectiveness of printed advertisements. The MRI system (called AdMeasure) assists in confirming and measuring the reach for magazines' audience.
MRI will measure consumer recall and response to an advertisement.
MRI says AdMeasure will raise print ad measurement to the level of TV and Internet ratings.

More New Paper Grades Introduced

The major paper producers are busy introducing and marketing new paper grades. Along with the Ideal and Octane product introductions we reported earlier, the NewPage mill has also offered Arbor Plus which is a #2 quality sheetfed paper containing 30% recycled fiber and many certifications. Xerox recently marketing a coat one side digital paper for direct marketing applications.
Meanwhile, Verso is now aggressively selling their Clarity Supercalendered grades to compete against the more expensive coated groundwood products. Verso is producing both Clarity A and Clarity B out of the Sartell, MN facility. The product is targeted for catalogues and offers an economic benefit to the traditional #5 groundwood coated grade.
Note, Veros earlier started to produce light weight uncoated Versobook, Versotext, and Versoblend out of the Bucksport, ME mill.

Paper Industry Pocket over $3billion in Tax Credits

The USA pulp & paper mills earned over $3billion in “black liquor” credits for the 1st half of 2009 and are expected to earn even more in 2nd half. The program is scheduled to expire at the end of the year.
A few examples include International Paper has earned $1billion, Domtar, Verso, NewPage and AbitibiBowater have each recording $100million.

Magazines Announce Management Shakeup

In an effort to generate additional revenue in this challenging market, several magazines are making many changes in management. Reader's Digest will be announcing their top management changes this week and Hearst announced several executive positions changing for both O (the Oprah Magazine) and Country Living.

Federal Reserve Reports Recession Ending

Chairman Ben Bernanke reported that the economy has started to grow once again in the current quarter. Also, many analysts predict the economy is growing in the current July-September quarter at anywhere between 3 and 4 percent.
Most of that growth should come from more spending from businesses, which had slashed investments -- often by double-digits -- during the recession.
Consumers are also beginning to spend money, as witnessed by the success from the 'cash for Clunkers' program.
Manufacturing, meanwhile, reported "modest" improvements. Residential real-estate markets, which were hurt during the downturn, also illustrating signs of improvements. But the commercial real-estate market continued to be a drag in most markets.

NewPage to Shutter Coated PM in Maine

NewPage announced they will shut a coated groundwood (publication) paper machine in Rumford, Maine for the last 2 weeks in September. The mill’s output will be reduced by 6,000 tons.

Analyst Comments of Poor Newspaper Advertising Recovery

Wells Fargo researchers recently commented on a potential advertising recovery in third quarter.
The Wells Fargo team said ad revenue has stalled in August while September appears to be starting off weak. Specific focus was on the Gannett Group, a bell weather for the Newspaper industry.

Wells Fargo reduced its Q3 newspaper advertising revenue estimate for Gannett from a decline of 25.5 percent to a decline of 28.8 percent. Local is forecast to fall 22.5 percent, national is anticipated to drop 21 percent and classified is estimated to decrease 40 percent (versus a previous -19 percent, -18 percent and -37 percent respectively).

Overall advertising revenue is expected to fall 20.2 percent in Q4, revised down from a decline of 16.9 percent.

Update on Pulp Markets

As noted in our past releases, the entire pulp market has increased the price of pulp - both softwood and hardwood. If this $40/ton price goes through, and we think it will, the new NBSK 'list' price will rise to $770/mton in USA and $740/mton in Europe, and $650/mton in China. Reports outline the spot transaction price in USA for NBSK will go to $585-615/mton. Producers such as : Catalyst Paper, Domtar, and Fraser Paper, have all announced pulp mill restarts.

Kraft Market Showing Improvement

The Kraft Paper producers in North America have announced a $40-50/ton price increase. The manufacturers report recent strength in order backlogs, a pop in raw materials costs,
capacity curtailments, and the recent weakening of the dollar have all strengthen the market. .

Curtis Mill Purchased

Georgia Pacific and International Paper jointly purchased the old Curtis Mill in Milford, NJ and will clean up the site. The mill produced 175TPD of waxed cereal bag liners.