Group turnover was down marginally year-on-year, falling 3.8% to $113.3m (£69.3m) in Q2 and 3.9% to $220.6m for the first half of 2011, as a result of a decline in advertising and retail sales.

The drop in revenues led to reduced operating leverage, which together with increased integration and restructuring expenses and a $1.8m hit resulting from Schawk's withdrawal from a union supplemental retirement and disability fund in California led to a 56% drop in operating income, to $7m.

Schawk also recorded significant shortfalls in pre-tax income, which fell 59.4% to $5.8m in Q2 and 46.4% to $10.1m in H1, and net income, down 74.9% to $4m in Q2 and 63.2% to $6.8m in H1.

President and chief executive David Schawk said: "Our second-quarter 2011 results reflected decreased activity with our advertising and retail clients primarily due to stronger retail promotional activity in the prior-year comparable period.

"In addition, during the first six months of 2011 some consumer packaged goods clients remained cautious given elevated commodity prices and sustained economic uncertainty domestically and internationally."

Schawk's performance in Europe was the only significant highlight in its first-half results, with improvements in both revenues and operating income, although this was offset by poor performance domestically (in North America) and in Asia Pacific, where increasing sales were offset by decreasing margins.

European sales to external clients rose 9.1% to $35.3m for the six months ended 30 June 2011, versus a 2.3% rise in Asia Pacific sales (to $15.4m) and a 5.8% decline in North America sales (to $189m).

And while operating income fell in North America (down 23.5% to $25.4m) and Asia Pacific (down 47% to $1.4m), European earnings soared 120.3% to $3m for the first half, although the bulk of this came in Q1 (Q2 operating income rose 8.2% to $882,000).

David Schawk added that the board saw "opportunities in this challenging economy from three key industry trends: emerging markets, digital markets, and demand for integrated services".

"During the second quarter, we expanded or reached agreements to expand our business with certain key global clients as they pushed into developing and emerging markets and sought to take advantage of our full portfolio of integrated services, including our digital marketing capabilities which were enhanced through our acquisitions in 2010," he said.

"This increased client activity is particularly evident in our European segment, where sales have increased over 18% for the quarter and over 9% for the first six months of 2011 compared to the prior-year periods.

"Furthermore, we continue to believe that existing and prospective clients are seeing the value of our integrated service offering and global capabilities, particularly as they look for ways to differentiate themselves from their competition."