Tucson Daily Citizen from Tucson, Arizona • Page 40

PAGE 42 A I 1TI TUESDAY, FEBRUARY 5, 1974 ive years Oil industry gains are called in line' NEW YORK (AP) Public data on oil profits and return on investment appear to support the oil companies' contention that their earnings have grown no faster than those other industries over the past five years. Oil executives recently told a.Senate subcommittee investigating the industry's position the energy shortage that despite sharp increases in 1973 the industry's gains were no greater than those of other industries if measured over a five-year period. Many oil companies have reported that their 1973 profits were 50 per cent or more higher than 1972 levels. "The gains appear astronomical, but if you put them in a five-year perspective, they are not out of the ordinary," says Manovvn Kisor, an analyst with Paine, Webber, Jackson Curtis, a Wall Street brokerage firm. Figures from the Federal Commission show that companies' profits rose an average of 5 per.

cent a year past five years, including the first nine months pf 1973. Profits of all manufacturing companies were up an average 9.1 per cent over the same period, FTC figures However, FTC figures report as closely as possible only income from refining operations excluding some international operations. Surveys from New York's First National City Bank which includes income earned by subsidiaries and international operations as well as income from production and refining operations, show that oil corporations' profits have risen an average of 10.5 per cent a year since 19G8, while profits of manufacturing companies generally have risen an average of 10.7 per cent a year over the sa.me period. Oil companies have averaged 10.8 per cent a-year return on net worth since 19G8, according to FTC figures. Manufacturing companies generally achieved an average rate of return of 11.0 per cent, FTC figures show.

Rate of return on total worth is a measure of how much a company makes on its money, much the same as the 6 per cent or so interest paid on a savings account. Out of this money, companies pay for such as dividends to shareholders and investment in new plant and equipment. Americans need patience to deal the Chinese way NEW YORK (AP) Charles Abrams, htead of a marketing firm that specializes in Chinese imports, has two words of advice for Americans who want to do business with China: Patience and sensitivity. "In many ways it is very frustrating to the person who has no patience," says Ab- rarns. "You need some kind of sensitivity-guidance in learning to lUnrJerstand the Chinese melhod'of doing business." Abrams has had a chance to get- acquainted with Chinese officials'-in the two years since the.

China Trade was established, and he admits there were some discouraging moments. "You have to be'patient if you want a long-term relationship with them. Talk to 90 pet- cent of the companies that have approached the Chinese and they'll say they've been writing or cabling with no response at ail. "That happened to us in the beginning too. But after a concerted campaign on our part, they finally replied." Getting an answer is only the'start, however.

All transactions are conducted with government officials, not at the semiannual Canton trade Fair. And the rush of business that must be finalized under tight deadlines can often lead to ruffled feelings. Many American executives walked away from the first trade fair they attended in 1972, after the thaw in relations between China and the States, complaining about the high prices of Chinese goods. But Abrams and his assobi- ate, David Blank, believe some of Americans were there expecting to take unfair advantage of Chinese officials unfamiliar with U.S. 1 bargaining tactics.

Another problem in business dealings is.that many Americans expect instant, acceptance 0 mmunist Chinese despite the relative brief- ness of the two countries' relations. "The Chinese have 180 countries that they've been doing business with for years and they consider them good friends, while they still consider us new friends," says Abrams. Sometimes, he adds, the Chinese will sell a product at lower price to an "old friend" rather than take the higher price offered by new American customers. This recalcitrance can be intensified by U.S. businessmen who insist thai Chinese manufacturers suddenly switch product specifications to suit their special needs, although the product is acceptable to all other foreign customers.

Oil companies, like many other industries, have had steep ups and downs and the five-year performance has been far from consistent. The erratic profit picture has led many analysts to describe 1973 as a "catch-up" year for oil companies. For the past five years, oil companies' profits ran like according to FTC figures: 1968 Up 5 per cent; 1969 up 2 per cent; 1970 no change; 1971 down 2 per cent; 1972 down 10 per cent; and in the first nine months of 1973, up 35 per cent. Explained Bob Lewis, vice president of Citibank: "Last year was a very profitable year for most basic industry. They added a lot of capacity in the late 60s and early 70s that is just beginning to pay off for They've been able to operate at near capacity this year and get price increases as well, in a number of cases." Some other industries have behaved like oils, with lagging past performances but spectacular "catch-up" gains this year.

Among them are papers, steel, nonferrous, metals and mining companies. For example, Reynolds Metals Co. reported a profit of $45 million this year after gains of only $200,000 a year ago. AND U.S. Steel's profits jn 1973 soared 108 per cent to $325.8 million from $157 million in 1972.

While Exxon paced the oil companies with its controversial 59 per cent increase in the past year, IBM a comparable giant ill terms of size, gained 22 per with hardly an eyebrow raised. Yet over the past five years, the two companies have achieved almost identical 83 per cent increases in profits. For each company the five- year picture looked like this: Exxon: 1969 down 2 per cent; 1970 up 2 per cent; 1971 up 14 per cent; 1972 up 1 per cent, and 1973 up 59 per cent. IBM: 19G9 up 11 per cent; 1970 up 9 per cent; 1971 up 5 per cent; 1972 up 18 per cent; and 1973 up 22 per cent. Piaster devaluation to beat inflation 'i FL YTO exico DISCOVER del "Mar The only ir Mexico with American Tille Insurance.

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