We may well be in the midst of a global recession at the moment, but from the performance of many of the industry's leading suppliers, you would never think it. February is the time of the year when most of the CIT and ATM manufacturers report their annual results, while in April and May it is the turn of the printers and papermakers.

The financial performance of an industry's suppliers is as good an indication as any as to its health. And the glut of good results this month and last shows that the currency industry is in very good health indeed. As we report elsewhere in this issue, the news is universally positive: De La Rue and Giesecke & Devrient have turned in their usual sparkling results, sales at Enschede and Goznak continue to grow, while Fortress is gearing up for new investments to meet actual and anticipated demand.

There are other suppliers, too, that - as part of larger, non-currency related organisations - don't report their results but which, as we can tell from the reports of these organisations, are proving to be one of the few, if only, good performers among their peers.

The picture is a similar one for the sector that handles cash, the main parties in which all appear to be robust. Even Garda, which wobbled in the middle of last year, seems to be back on track.

There has been much comment and speculation in Currency News and elsewhere over the last few months on the impact of the recession and how our industry appears to be defying it . When times are good, they are good for our industry. But when times are bad, they are even better!

Counter-Intuitive

Counter-intuitive though this may seem, it is explicable not only by shorter design cycles, more and improved security features and moves toward clean note policies, but also by straightforward public preference for cash. This is either because the people are turning to cash instead of credit as a means of managing household budgets and controlling expenditure. Or it is because, following the crisis of confidence in financial institutions, property and shares, many savers have converted their assets to currency, storing this in high value notes. The latter is borne out by the reports from the Federal Reserve and the ECB (on the dramatic rise in demand for the $100 and EUR 500 respectively.

Whether the current boom lasts remains to be seen. The last time business was so good was the end of the 1990s and the first part of this decade - prompted by two specific factors which were Y2K and the euro launch. Suppliers pumped up capacity, only to be left with idle machines as demand fell away -  leading to all the problems that over-supply and a buyers' market bring.

This time round, however, there has been no rush to load up capacity. Louisenthal may be expanding, but that is a primarily driven by the nee to upgrade old equipment, while Fortress' plans, if they go ahead, probably have more to do with anticipated demand for its new substrate than present-day capacity contraints. In the main, demand has been accommodated by longer lead-ties, better planning and production optimisastion, with the result that the industry is much positioned now than it was five years ago to cope with the troughs as well as the peaks.

Cash Distribution Struggling

But, in the midst of all this good news, we should not forget that one sector of the industry is not faring so well - namely the suppliers of ATMs and cash distribution solutions. Two of the leaders, in particular, are struggling at the moment - NCR and Diebold. This is partly due to a necessary long-term restructuring and move away from commodity hardware and software towards value-added services and solutions (at which their rival, Wincor Nixdorf ,has been rather more successful). But part of it is due to the economic climate. This is not particularly surprising. The key to this sector is the banking industry, where - given all their current problems - capital investment in replacement and expansion is not a main priority.

It is to be hoped, however, that this situation does not continue. The importance of the ATM and cash handling sector to the continued success - past, present and future - of cash as a medium of exchange cannot be overstated. ATMs have reduced the costs of distributing cash, made it convenient and accessible, and fuelled the requirement for clean, machine detectable, good quality notes.

But while, as a result, so-called 'cash-out' processes have become more efficient and cost-effective in recent years, the costs of 'cash-in' which are approximately twice those of cash-out, remain relatively high. And it is the apparent inefficiencies of the cash-in process that have provided the anti-cash lobby with a useful weapon in their effort to displace notes and coins in favour of alternative methods of transaction.

The anti-cash lobby has been relatively silent in recent times, but it will be back. The development of more efficient practices and systems, together with the deployment of deposit and recycling systems that will do for the cash-in process what ATMs did for cash-out, remains essential.

But the turn of the manufacturers of deposit and recycling systems will come again. Apart from the need to deploy technology to bring down the cash-in costs, banks will have to start investing again as the technology in their ATM estates dates, while many of the countries with emerging economies - which are suffering less from the recession and will begin recovering sooner -  provide fertile ground for expansion.

Last but not least, consumer preference for cash will continue to underpin the industry in all its forms, and provide the road to recovery for the one sector that is not benefiting from the current economic situation.