Evening star., 1942-01-01
Big Companies Face
Varied Outlook in
War Period
Moderate Earnings
Goins Recorded by
Majority in l94l
6y Cambridge Associates.


the first and the last year of "busi-
ness as usual" in the 1940s. AS a
result of the sudden entrance OF
the Nation into worldwide conflict
In December, after the attack on
Pearl Harbor, 1t seems certain that
1912 will bring sharp acceleration
In the trends only barely under
way in 1941.
Taxes, corporate and personal,
must and will be raised soon and
sharply. Production in plants work.
Ing on munitions and other goods
necessary to the conduct OF the war
will expand to the maximum, while
alongside them industries catering
to the consumer, excepting foods
and similar necessities, will be
sharply restricted or even closed
down by the application of strict
wartime rationing and ALLEGATION OF
vital raw materials.
Despite the increase in taxes in
l941 over the preceding year. profits
of almost all large industries con-
tinued in an upward trend last year.
The increases, however, were con-
fined to relatively modest proper
tions with very few corporate groups
able to show an advance of over
10 per cent in comparison with
1940 Most industries, despite huge
sales increases. were able to carry
very little of the new volume
through to net income account. On
the other hand. where profits were
reduced from the preceding years
levels, as with the automobile man
ufacturerS and tobacco companies,
the drop in earnings was very mod
crate and still permitted of salts
factory payments to stockholders.
Depend on War.
AS we attempt to appraise the
effects of all-out war on the COM
plex and interdependent system
which we have come to know as
American business. the fog of war
surrounds our calculations almost
as much as 1t does those of our
military commanders.
The length of the war, the ability
of Britain. Russia and China to
maintain their resistance to the
Axis and hold their advance bases
from whicn our offensive power,
marshaled in 1912 and 1943. may
be hurled against the enemy in
decisive action-these and other
imponderables have a bearing upon
any appraisal of those companies
which will be hurt least and those
hurt most by the necessary sacrifice
which the conduct of a world war
requires.
Very few companies and probably
no industry can expect. from here
on through the war, to benefit from
the war activity. Rather it is a
question of which ones will best
be able to survive the war, pay a
living wage to their stockholders for
the duration and look forward to
a good peacetime demand for its
products accumulated through the
war years.
Bread and Butter Dividends.
Those industries, like the ma
chine tool, chemical. steel, railroad
equipment and aviation manufac-
turers, which will be working round
the clock 365 days year for the
duration, will none the less find
that taxes and probably increased
labor and other costs will restrict
their net profits to or slightly under
the 1941 and even 1910 results.
Yet. by and large, the stockhold-
ers in these industries may we'll
count upon good bread-and-butter
dividends from such war industries
as these for as long as the war
lasts. Their concern will rather be
the ability of their companies, enor-
mouSly expanded by war necessity
to readjust themselves to the re-
turn of a peacetime economy.
At the opposite extreme are
those producers and distributors of
such consumers durable goods and
equipment, as autos. refrigerators.
hardware and other things in which
the metal is a major element of raw
material, whose main worry for the
duration of hostilities will not be
taxes, but how to adapt their IA
cilities somehow to war goods pro-
duction and thereby get the bare
rations they need to survive and
remain in business. On the other
hand, such industries can look
forward to the end of war when
a huge demand for their peacetime
products would have accumulated.
In between these prince and
pauper industries of the war period
will lie the many lines of business
which cater to the essentials of
both peace and war time living.
Food, clothing and, to lesser
extent, shelter are required for
soldiers and civilians alike. Such
companies as manufacture and sell
these essential consumption goods
will not suffer for want of demand
from their products. but they will
suffer profit restrictions as rising
taxes and other costs push against
the normally small profit margin on
which they conduct their business.
High Volume, Low Profits.
Food professors. grocery stores.
variety chains, utilities, textile and
shoe manufacturers and the tobacco
companies will be concerned. as
always with preserving the profit
margin on the sales dollar and
not about the sales. The war with
its in1ationary tendencies and taxes
will inevitably restrict profit ac-
complishmentS in these consumer
goods industries, but stockholders
should still benefit by a fair divi-
dend rate to tide them over until
costs on their relative stable sales
start dropping after the war ends.
Considering that judgment on
the duration and development OF a
worldwide war can be at best only
an intelligent guess, and considering
that those industries which should
be hurt least by the impact OF
total war will benefit least in the
probable peacetime conditions fol.
lowing the war, it is doubtful if
those who depend upon security
ownership for income can do better
LAVE ClIhInc ran