Reasons to be Cheerful (July 2011)
If one conference could act as a barometer as to the state of the industry, then Banknote 2011 would indicate that the mercury is rising.
There has been plenty of news in the past two years or so to indicate otherwise. Coinciding with, although not a direct consequence of, the economic meltdown of 2008, a number of events have conspired to cast a pall over the industry. Over capacity and the rocketing of raw material prices have been two key factors. The serious allegations surrounding Securency, the problems at De La Rue, production and quality issues that have held up the introduction of various major currencies and caused more widespread nervousness among those developing or contemplating the inclusion of new features, the looming loss of a major source of business in India for overseas suppliers - and an overall picture emerges of an industry on edge and under pressure.
Some of these pressures, however, are either being resolved, or the uncertainties they have caused are dissipating as the industry adjusts to the new market realities.
The problems with the $100 bill, for example, now appear to be resolved. Similarly, it is understood that problems with the new euro series are nearing resolution, while the Swiss series is back on track for introduction next year.
Matters appear to be coming to head now with Securency and, for the new management, struggling with market confidence at a time when the company's product are performing better than ever, this can't come soon enough.
Matters are no further forward at De La Rue following the ritual blood-letting of last year when production problems emerged at its mill. But investor confidence appears to be returning following a restructuring programme by the new CEO that aims to return the company to previous levels of profits.
This will be a hard task, made harder by the fact that it is unlikely to be producing any more paper for India, the largest single customer in the market for paper and features. But taking the long-term view, this is a contract that is going away anyway - affecting all the suppliers in due course. Birmal Julka of the Indian Directorate of Currency made very plain at Banknote that plans for self-sufficiency in paper production and security features are steaming ahead. The market will simply have to adjust, and while the large contracts for external suppliers will not exist in the future, in their place will be new opportunities.
Key to this, of course, as in any industry that has to adjust to new market conditions, is investment and innovation. And this is certainly a bright spot in the industry. Seldom have so many new technologies been presented at a conference, demonstrating that innovation is very much at the fore despite, or maybe because of, the problems of the last couple of years.
There are other positive signs elsewhere in the industry too. Spectra Systems, as we report in this issue, has successful raised nearly £13m through its recent flotation, more than twice the amount it originally hoped for and a clear sign of investor confidence in the sector.
Another is next year's higher production volumes for the euro. And with the issue of the second series approaching, such levels are likely to be maintained and increased in the next few years.
An industry's demise or resurgence is seldom the result of a single event, but rather an accumulation of individual factors, some large, others small. The current developments, taken collectively, point towards a more positive future for the industry. Challenges remain - for individual companies and for the industry as a whole. But, on balance, there are certainly reasons to be more cheerful than in the recent past.
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