The rising costs of a natural disaster

The rising costs of  a natural disaster
Printers weren’t spared during the devastating floods. Will they sink or swim, asks Jill Park.

Print does not mix well with water. From the spoilage that dampness can mean for paper stocks to the mechanical damage that water can do to plant equipment, a flood can sink a well-run business (both literally and figuratively) overnight. So what kind of effect have the 2011 floods had on the printing industry and what, if anything, has the industry learned from the experience?

While floods have been widespread – starting halfway up the Queensland coast around Rockhampton and continuing in rural Victoria as ProPrint went to press – the effects have been felt most keenly in south-east Queensland by fact of sheer population density. The Queensland print sector has not been exempt from the natural disaster. Printing Industries’ state manager Neal McLaren estimated at least 10 printers were “severely affected” by the floods in Queensland alone. Multiply that number out exponentially to include every company indirectly affected, and it becomes clear just how significant these floods have hurt the printing community.

Franchise operations Snap and Worldwide Online Printing both have a wide reach across Queensland, with particularly dense concentration in the south-east corner. Up to 10 Snap centres are based close to the danger zone, while more than a dozen Worldwide outlets are situated in and around the flooded region. Snap Sumner Park, Snap Milton and Snap Rocklea all experienced significant flooding, while Snap centres in Fortitude Valley and South Brisbane were “ affected to some degree”. Snap Ipswich escaped unscathed.

Worldwide Online Printing’s Milton and Redlands operations were both out of commission due to flooding. They set up shop in other Worldwide sites (one advantage to being part of a franchise family).

The Milton site of business service chain MBE was inundated by up three metres of water during the flood. Its HP Designjet Z6100 and HP Designjet 5500 were completely submerged. Owner Steven Smedley is believed to have only taken over the business just four months before. According to MBE, the Milton outfit is now operating out of MBE’s Toowong centre.

Community spirit
While hopes sunk as quickly as the waters rose, the industry’s resolve has been buoyed by examples of community spirit. One of Brisbane’s worst affected printers was ABC Printing, which lost a press after flood waters rose to 1.2 metres in the press room on 11 January. Some computers and a six-metre shipping container full of paper were rescued from the premises, but the clean-up cost is still estimated at $3 million. However, thanks to the generosity of an unnamed local printer, ABC was back in operation by 17 January, operating out of this fellow printer’s premises.

“All of our presses were affected and our finishing equipment, but the generosity of the Brisbane community has come to our rescue,” said ABC director Alan Atterton.

“We are probably going to be up to 40% production by the end of the week and hopefully a lot further in two months’ time. Our staff have been incredibly supportive and we are certainly very grateful,” he added.

Atterton said that ABC Printing had insurance for flood damage and is awaiting feedback on its claim.

Other printers had lucky escapes. Geon’s Queensland HQ is located on the banks of the Brisbane River in Eagle Farm. The site prepared itself for the worst as river levels rose. Site manager Anthony Burke cancelled afternoon and evening shifts at the site between 11 and 13 January so staff could avoid the treacherous journey into work in difficult conditions.

“I wasn’t prepared to compromise employees’ safety. I didn’t want people driving on the roads overnight,” he said.

But the river ultimately failed to reach the peak seen in the 1974 floods, and Geon escaped unscathed. “We avoided any damage at all, which is quite unbelievable seeing as we are near the banks of the river,” said Burke.

“Water came up to the top of the rock wall of the banks. There’s another metre of grass before it gets to the factory – that was at high tide. We’d have had to have another good metre for it to reach us.”

Print buyers were also affected by floods. January is the busiest time of the year for educational product design specialist PC Graphic Art, as local schools prepare to start the new school term. The company is based in New Farm, a suburb ringed by the Brisbane River; while it is above the danger area, there was a risk that its print supplier was in harm’s way.

Peter Tissot, director of PC Graphic Arts, had good cause to be twitchy as reports came in of the rising waters. Last October, a massive afternoon deluge in the Queensland capital flooded its longstanding printer, Peninsula Colour (see box). Despite the director’s confidence that Peninsula was covered, the insurance company rejected the printer’s claim, leading to its closure. Tissot was forced to find another print supplier to produce school diaries for the 2011 school year. So as news came in of the rising Brisbane River, Tissot got nervous for his investment. Estimates of the flood peak were changing by the hour.

“On Tuesday [11 January], we heard the flood waters would be at their peak by Wednesday or Thursday. We immediately rang our printer – Printcraft – to gauge whether they would be flooded. Based on the 1974 floods, they said that they wouldn’t be flooded and not to worry.

“But as the news trickled in that the flood waters may be higher than 1974, Printcraft decided to take every precaution and get as much of their completed printing out of their warehouse,” said Tissot.

“We had more than 200 boxes. The big problem was that by this time there were no trucks available to transport our work. So my wife Claire and I decided to use our two little Honda cars to do the job. Already some roads were cut so we had to take a very long route to get there. Printcraft was really helpful and very grateful that we were taking the stock away.”

The pair made the journey three times to collect all 200 boxes, each time hoping they could still get through and the roads weren’t closed. “We managed to do it – just,” adds Tissot.

(After everything, Printcraft didn’t get flooded. Tissot organised with them to collect the diaries from his living room so they could get palletised and ready for distribution to schools.)

Association support
Printing Industries Queensland provided members with an advice line that offers everything from HR support to direction towards government help. The association has been keen to create a network around the worst affected printers so they can help each other in these difficult times.

“Everyone feels a great deal of sympathy and empathy for these businesses that have been flood affected,” said McLeary. “It certainly brings out the best in people. We want to minimise the ongoing economic affects.”

In the short-term, the main focus is ensuring companies continue to operate, if possible. But there is sure to be longer-term problems even on those companies that didn’t go under. The Brisbane
CBD – the heartland for the city’s print buyers – was put out of commission, and is only slowly returning to normal. The knock-on effect on volumes will bite right across the south-east corner of the state.

Suppliers and supply lines were also affected. Greg Street, general manager of CPI Paper, expects more disruptions to come. “We have a number of clients that are in distress in Queensland, but it’s early days in Victoria.

“We have a lot of clients in Queensland and I daresay volumes there will be down in the months to come,” he said.

Nick Hall, Queensland state manager at fine paper merchant KW Doggett agrees: “If people need any help they can approach us as we’d be happy to assist.” Doggetts itself narrowly escaped flooding at its Brisbane site, which is close to the river.

The waiting game
For many businesses, thoughts have now turned to insurance. Those printers affected by flooding are impatiently waiting for feedback from their insurance provider as to whether their claim has been successful.

Most Snap outlets across Australia (though not all) are covered via a group policy that the parent negotiated through broker OAMPS. Each individual franchise owner chooses whether to participate in the company’s insurance policy. Luckily, all the centres that were flooded had flood cover through the group policy.

Snap chief executive Grant Vernon said the franchise parent has been helping franchise owners by co-ordinating the claims through its corporate office. “For individual franchise owners to deal with that by themselves is a bit overwhelming so we are trying to help them in every way that we can,” he said.

Vernon said long-term broker OAMPS has been “excellent”. The company is processing both flood damage and business disruption claims.

“We’ve notified the insurance company of our flood damage claims and they have appointed assessors to all the centres. It’s then up to the assessors to work with the individual franchises. We’ve also told the insurance company that we will be putting in a claim for business disruption.”

Snap will do an analysis of the difference in sales between January 2010 and 2011 and that will be part of the claim. For example, there may be significant clients that are lost as a result of the floods and that would increase the size of the claim.

Insurance houses have been encouraging companies to place their claim as soon as possible. Marsh Insurance, the preferred insurance broker of Printing Industries, has issued a client alert with advice for its customers on what to do if they have affected been flood.

The document advises that flood victims appoint a key contact who coordinates with the insurance company and staff in relation to flood enquiries. Secondly, claimants must take photographic or video evidence of an item’s existence and an item’s condition.

They must quarantine pre-loss information, such as historical sales data, budgets, forecasts etc... and where possible, ensure that all computer files are backed up and copies removed to a separate site. Keeping a detailed log of disruptions to the business following the flood damage is also vital.

As flood water began to recede across many of the hardest hit areas, Prime Minister Julia Gillard called on insurers to be to be compassionate in their interpretation of policies towards flood victims in Queensland and Victoria. At time of writing, the Insurance Council of Australia said the general insurance industry had received 31,300 claims with an estimated insurable value of $1.2 billion. These figures include claims from regional Queensland, the Lockyer Valley, Toowoomba and Brisbane. Therefore, it remains to be seen how many companies will receive adequate payouts.

Going forward, the focus is on rebuilding these states and completing the $15m commission inquiry into the floods; the tough lessons Queensland has learned from this natural disaster will help steer how the government and emergency services respond to future emergencies.

Those companies lucky enough not to be flooded have mostly returned to business as usual, but it will take months before the rest are back in business, if ever. The generosity of the printing industry to its own, and to the wider communities affected by the floods has been massive (see box). Printers have certainly proved their mettle through this experience.

Vendors could experience an upswing in business as the insurance claims trickle through, but there will be those firms that go out of business, whether due to customers closing or insurance not coming through. Suppliers will be affected by this too. It is clear the ramifications will be felt far and wide across the industry.

Helping Out - Charity cases

The generosity of the print industry to those affected by the floods has been overwhelming. Industry donations helped ProPrint raise $14,000 for the Queensland Flood relief Appeal. Other individual companies donated much more. Some businesses have gone so far as to offer their services to fellow printers, giving them somewhere to operate. Here is a small sample of some of the generous acts.

Inkjet Labs
Brisbane-based Inkjet Labs offered residents the chance to salvage water-damaged pictures by cleaning and scanning photos then burning them to disc - free of charge. The company’s only stipulation was that residents bring a maximum of 50 pictures as they anticipated huge demand.

The magazine publisher raised money for flood victims by donating 10 cents from every retail copy sold across its weekly magazine portfolio in the week commencing 17 January. Participating titles include Woman’s Day, Take 5, NW, TV Week, ZOO Weekly, OK!, The Picture, People and Grazia. The total circulation of these magazines is in excess of 1 million copies each week.
After PMP chief executive Richard Allely got the company’s board to sign off a whopping $50,000 donation, his first thought was to inform the staff. He sent out a company-wide email to PMP’s 1,800 Australian employees. Just 24 hours later, the email had caused a charity snowball among staff and clients alike; the grand total had reached $75,000. PMP is now aiming to reach $100,000 for the appeal.

LEP Printers
Trade printer LEP is based on the Sunshine Coast, an area with close links to Brisbane that nevertheless escaped the major flood damage across much of south-east Queensland. Chief executive John Bromfield said: “We are very fortunate in that we have not been directly affected by the recent flooding.” But the company wanted to help, so LEP has pledged $1 to the appeal from every job until 28 February. It hopes to raise $10,000.

Case study - Peninsula Colour

For those many printers anxiously awaiting the results of their insurance claim, the story of Peninsula Colour makes for tough reading. The entire lower floor of the company, based in the suburb of Virginia, was flooded in October last year after a freak storm swept south-east Queensland.

The worst damage was to the printer’s A1 and A2 Komori presses, which were under 18 inches of water. Not long after the flood, director Rock Biddle told ProPrint he was confident of getting a full payout. Printers looked on jealously; which printer wouldn’t jump at the chance of a new-for-old fleet replacement?

Biddle said he was hoping to have the presses replaced and up and running again by January.
Peninsular, which was established in 1989 as a pre-press trade house, was described by one former customer as a good printer with a good reputation. Biddle was looking forward to more years to come, but it was not to be. Peninsula’s insurance company rejected the claim on the grounds that while the company was covered for storm damage, it was not covered for flood damage.

At the time, Biddle said: “We were paid under that policy for a similar incident last year, but with
the size of the claim this time, they’ve denied us.”

Biddle shut the doors and let the staff go. “The staff deserve the opportunity to try and find work elsewhere,” he said.

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