The Profits of Peace

Biting their nails like so many prospective fathers, businessmen have waited for third-quarter earnings of the "reconversion" quarter. Only then would they know what cutbacks and the shift to peacetime production had done to profits. Last week, as the first batch of reports came out, the nail-biting stopped.

There were few catastrophes, chiefly because the drop in gross income after V-J day was often balanced by the drop in taxes. And many a company, notably those selling consumer goods, was still coasting along on the momentum of the war boom. But if earnings reports were reasonably cheery, they were also often deceptive.

Best example was huge Bethlehem Steel Corp. It made more money this year than last. Yet its net income for the quarter dropped to $22,100,000, little more than half that of the same quarter in 1944. Reason: it wrote off $44,000,000 in deferred amortization (depreciation, purchase of new facilities, etc.), came up with a $27 million deficit and thus cut its taxes so much that it had actually overpaid them in the first part of this year. This tax credit was more than enough to offset the deficit in income, thus gave Bethlehem a reported net profit of $2.05 a share, or 38-c- more than in the same quarter last year.

But this bookkeeping profit did not conceal the fact that steel company earnings are down. U.S. Steel Corp. was a better bellwether. Steelmen estimated that its net profits in the third quarter will be down to around $12,000,000 v. $16,800,000 last year.

The railroads, whose profits have been slipping downward for three years, were hard hit. (They report monthly instead of by quarters.) Typical was Pennsylvania Railroad, with net operating income down to $7,000,000 in September v. $9,555,769 the same month last year. Down too were Chesapeake & Ohio, and Illinois Central, along with virtually all of the rest.

Nevertheless, there were bright spots. Up was Shell Union oil with a net income of $8,628.960 v. $8,030.693. Standard Brands was also up. Businessmen were still keeping their fingers crossed. But Wall Streeters guessed that out of every five companies, profits will be down for three, up for two.

This file is automatically generated by a robot program, so reader's discretion is required.