AVIATION: The Fortunes of War

U.S. investors got a classic example last week of the hazards in estimating wartime corporation profits. Out with their annual reports were Cessna Aircraft Co. and Beech Aircraft Corp.—both reporting for the fiscal year ended Sept. 30. Both companies are small, smart and fast-growing; both specialize in plywood, twin-engined training planes; both have recently gone into gliders; both have factories in Wichita, Kans. Yet their earnings were as different as down & up:

Down was Cessna which tripled sales to a record $37,589,000 while profits flopped 60% to $738,000. Big reason for the slump: last year Cessna feasted on fat foreign orders (at 10-20% profit margins); this year it rationed along on U.S. Government contracts (2% margins). Besides this Cessna set aside $5,302,000 for Federal taxes, $4,800,000 for price refunds to the Government, and $1,254,000 for “policy adjustments and conversion from war to peace,” when Cessna hopes to build “the family car of the air.”

Up was Beech which boomed sales sevenfold to a smacking $59,593,000, jacked profits 410% to a record $2,418,000. Beech also set aside huge sums for Federal taxes ($6,429,000) and price refunds ($7,200,000). But Beech worried less about war’s end, set up no special cash fund for peacetime conversion (although it has paid off the RFC, bought its plants outright). Result : more profits available to stockholders now, perhaps less preparation for things to come.