CHAPTER VIII

Profitability and Capitalization

PROFITS

It is extremely difficult to determine the profitability of the
industry as published dividends do not indicate whether adequate
allowances were being made for depreciation and plant replacement.
There is a great paucity of data regarding the first part of the period,
and the results of individual firms may or may not be characteristic
of the profit-earning capacity of the industry at the time,

In 1904 Jeans divided British iron and steel firms into two
categories: (i) those making high profits; (2; those making low or
no profits. The firms in group (1} were found to possess one or more
of the following advantages: the manufacture of specialities, the
control of raw materials, low capitalization.

When the period opens the British industry was undoubtedly

profitable, but during the seventies the dividends diminished and

in the late nineties practically disappeared. The profitability of the

industry has, in fact, always followed Carnegie's dictum that it wras

* either prince or pauper.

From 1890 to 1900 there is evidence that good profits were being
earned in the U.S.A. In 1899 profits made on pig iron in Pittsburgh
wore enormous, while big profits were also made in steel.

TABLE 8l

PROFIT ON PIG IRON IN THE U.S.A., 1890-1900

Average Cost
Selling

Margin of

Tear
of Production
Price
Mean
Profit
Mean
Percent

1890
62/0
66/6 to 94/6
80/6
4/6 to 32/6
18/6
23

1891
5*/0
60/6 to 66/0
63/3
9/6 to 15/0
12/3
*9'5

1892
53/°
55/6 to 62/6
58/9
2/6 to 9/6
6/0
xo

1893
45/6
44/9 to 55/6
50/1
-0/9 to 10/0
4/7
9*0

1894
34/6
41/3*052/6
46/10
6/9 to 18/0
12/4
26

1895
38/0
40/0 to 68/6
54/3
2/0 to 30/6
16/3
30

1896
48/0
44/o to 53/6
48/9
-4/0 to 5/6
o/9
i'5

189?
38/0
37/9 to 43/o
40/4
—0/3 to 5/0
a/4
6-0

1898
39/o
40/0 to 42/6
4*/3
i/o to 3/6
2/3
5*5

»899
41/0
44/0 to 100/0
72/0
3/o to 59/0
3^/0
43

1900
61/6
53/6 to 100/0
76/9
-8/01038/6
15/3
20