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December 11, 1946 CONFIDENTIAL Profits of Large Industrial Corporations for the First Nine Months of 1946 by Eleanor J. Stockwell. Profits after taxes of large industrial corporations, according to preliminary figures for the 629 companies whose earnings are summarized regularly in the Bulletin, were 12 per cent larger in the third quarter of this year than in the second quarter and 54 P e r cent larger than in the third quarter of 1945 • For the first nine months of 1946, profits of these 629 companies were 11 per cent above those for the same period of last year. All year-to-year comparisons, however, reflect to a considerable extent the removal of the excess profits tax in 1946 and, in some cases, large tax credits arising from the carry-back provisions of the revenue laws; available data on profits before taxes for the first nine months of the 2/ear, covering 297 of the 629 companies, indicate a decline of.37 per cent from 1945 to 1946. Profits after taxes Profits after taxes considerably among industrial reconversion problems and the Figures for the third quarter ized in the following table. for the first nine months of 1946 varied groups, reflecting the seriousness of length of time required to settle them. and first nine months of 1946 are summar- In all nondurable goods industries, except oil, and in miscellaneous service groups (particularly trade), profits after taxes were much larger for the first nine months of 1946 than for the same period a year ago. In these industries, reconversion problems were at a minimum, and in most cases the continued high level of output plus higher' selling prices came close to offsetting, or did offset, the increase'in costs® In addition, companies in these groups benefited especially from the removal of the excess profits tax, since profits before taxes were better maintained than in some durable goods groups. Even in the chcmical group, in which profits before taxes appear to have been somewhat lower than in- 1945* the decline in tax provisions mad© possible an increase of about 45 P e r cent in profits after taxes. Producers of such primary products as iron and steel and nonferrous metals, though held back by work stoppages and materials shortages particularly in the early part of the year, have continued to turn out much the' sajrie products which they made during the. xvar, and consequently have not had major problems of product reconversion. As a result profits after taxes, which were lower during the first half of 1946 than in 1945* began to increase substantially in the third quarter. Although profits before taxes appear to have been somewhat lower in the first nine months' of this year than in the same period a year ago, profits after taxes increased 10 per cent in the nonferrous metals group and J2 per cent in iron and steel. - 2 Profits after Taxes of 629 Large Industrial Corporations, Third Quarter of 1946 (dollars in millions) Industrial Group No• of Cos« Total Durable goods Nondurable goods Misc. services 629 351 204 74 676 292 305 79 1,602 537 824 2i+l 47 77 69 11 39 9 10 15 94 43 31 12 6 H 2 IJE 183 89 §0 9 15 29 6 31 39 62 - 36 - 57 - 14 13 5, 107 32 10 - 40 - 83 - 6l 59 40 : r W 68 75 33 l4 9 19 38 43 23 9 5 6 83 91 53 20 H 7 - 25 15 T/ ^k 19 73 - 37 46 58" 49 97 - 28 Durable goods Iron & steel Nonferrous metals Machinery elec. indo other ind. business other Automobiles Other transportation equipment Other durable building misc. metal prod. lumber hshld appl. & furn. . * SZL $rd qtr* 1st 9 mos* Percentage change 2nd qtr. 1946- 1st 9 mos. 19453 r d qtr. 1946 1st 9 hips* 1946 12 16 12 1 11 - 25 1+5 66 Nondurable goods Foods 22 Bev., conf., & tobacco 27 Chemicals 30 Oil 45 Other nondurable J30 paper Jk drugs 18 textiles 15 containers '6 other 7 35 49 67 80 lij2 196 37 1 2 49 ^62 44 76 3k 25 11 4 2 209 83 74 31 12 4 7 12 7 - 6 2/ J±1 84 IqTT 63 106 108 1 Miscellaneous services Trade Amusejneiits Transp. services Other 28 32' J 12 89 101 16 35 1 2/ 3 6 125 71 - 31 50 l/ 2/ 29 13 21 11 Insignificant increase. Insignificant decrease. Confidential 78 196 25 — - 5 - 3 Manufacturers of finished durable goods, such as machinery, automobiles, and transportation equipment, have, faced during I9I4-6 not only the problems of materials shortages and protracted work stoppages but also the problem of reconverting production lines from wartime -to peace-time products• By the end of the third quarter, profits of most of the- large companies in these industries had not yet reflected the rising volume of production, and in spite of large tax credits, profits after taxes were considerably lower in the first nine months of 19I4.6 than in the same period of 19^5• ! n "the automobile and auto accessory groups, however, as is shown in the following table, profits for the third quarter were well above the level of the first half of the year,, Quarterly Profits after Taxes in Selected Industrial Groups, 191+5 and 19^6 (In millions of dollars) 19k5 - 1st 2nd 3rd Uth qtr. qtr. qtr. qtr. 19U6 - 1st qtr. 2nd qtr. 3rd qtr. Automobiles (15 cos.) Auto accessorie; (1+7 cos.) 63 77 h6 53 2l+ 22 13 12 -3k 21 14; - 8 15 21 profits before taxes Data on profits before taxes for the first nine months of 19^5 and 19U6 are available for 297 of the 629 companies in the Bulletin series and are summarised in the following table. In general, the percentages of change in profits after taxes for this smaller sample are of the same order of magnitude as for the 629 companies• As shown in the table, profits before taxes for the first nine months of the year declinedin most major groups from 19^5 *ko I9I4.6, with the largest declines occurring among producers of finished durable goods. Whereas a few nondurable goods groups as well as the trade group showed increases from 19^5 "to 19^6, and the remaining nondurable goods groups and the primary metals groups showed moderate declines, profits before taxes declined 85 per ccnt in the machinery group and 67 per cent in the other transportation equipment group, and auto companies as a group reported a deficit before taxes for the first nine months of 19lf.6« Confidential - k - In all groups, however, tho availability of tax credits arid the reduction in Federal tax liabilities in I9I4.6 because of the removal of the excess profits tax resulted in a much more favorable change in profits after taxes. Declines were more moderate than in profits before taxes, or were changed to moderate-to-large increases, and groups which had shown a moderate increase in profits before taxes showed very large increases (as much as 170 per cent in the case of trade) in profits after taxes. Confidential - 5 Profits Before and After Taxes of 297 Large Industrial Corporations, First Nine Months of 191+6 (dollars in millions) Percentage change Profits be-•Profits affore Fed. ter Fed. 1st 9 mos. 19i|.5-l st 9 mos. 191+6 After Taxes Inc. Taxes Inc. Taxes Before Taxes Industrial Group No* of' Cos. Total Durable goods Nondurable goods Misc. services 297 167 108 22 i,iM 39i 970 8h l,0i|2 362 626 53 158 -37 -67 k h + 6 - 28 •f Uo •f 60 - 7 -10 -85 -98 1/ -2H + h 1/ •f 35 i .9 - 88 1/ 4 39 4118 - 86 - Durable goods Iron & steel Nonferrous metals Machinery elec. ind. other ind. business other Automobiles Other transportation equipment Other durable building misc.. metal prod. lumber hshld appl. & furn. 25 32 33 7 15 5 6 9 222 73 36 3 - 2 27 8 Qk - 50 19 5 - 6 16 h 25 31 37 19 7 1+ 7 58 36 k9 22 10 5 55 55 33 12 6 3 -67 -15 -22 h +20 -32 - 2 4 60 + 50 + 93 +111 - 3 Nondurable goods Foods Bev., conf., & tobacco Chemicals Oil Other nondurable paper drugs textiles other lh 13 15 2U 1+2 17 10 Q y 6 65 91 171 + h6 4 78 + b6 4 1 4 85 + 130 * 32 *2b[2 4 78 Miscellaneous services Trade Other 11 11 + 109 163 273 205 220 80 79 1|2 20 50 51 12 -11 4 6 -15 -10 422 413 + 10 411 2/ 51 33 31 22 +2*8 -38 l/ Deficit in first nine months of 191x6• 2/ Insignificant increase. Confidential - 161 138 25 - 72 +170 1
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