the volume of production. The truth of this statement w o u l d be hard to prove in the case of TUNGSRAM since it was in these years that the company changed its production profile and gave up producing railway security systems, telephone exchanges and telegraph-equipment. For this reason we only consider the production figures of the surviving units, the Lamp Manufacturing Department and the Audion Depart-ment: -: .:
Fiscal year 1925 1930
Incandescent lamp production
15,088,000 pes 23,429,000 pes
Radio tube production 252,000 pes 1,123,000 pes
Regarding the first and the last year's figures of the above specified period it is clear that the volume of production of the t w o major products increased con-siderably. In the same time, the value of the company's assets decreased as a result of the already mentioned changes in the production profile.
Fiscal year 1925-1926 1926-1927 1927-1928 1928-1929 1929-1930
The value of factory site, buildings, equipment in Pengos
18,733,672 18,733,672 14,276,056 . 14,276,056 : 14,675,465
The cost of automatization carried out during the worst years of inflation was included in the high figure of the first year, and was quoted in the balance sheet already in stable Pengo. The fact that the previously described growth of production was achieved w i t h o u t enlarging the factory shows the success of the modernization programme in the case of incandescent lamp produc-tion. But automatization did not yet bring the
anticipat-' • anticipat-' • : : , • ; . • • • . ^ • • • • , - - P ,
-ed results in every field. For example, there was no significant drop in the cost of production, which would otherwise be expected in cases of such marked in-creases in the volume of production.
The profitability of incandescent lamp production went as follows (per lamps, in fillers):
proceeds (less the costs of marketing)
Production costs
Other costs (opening costs, interests, depreciation charges, etc.)
Total costs Total profit
1926/27 89 49.3
22.9 72.2 16.8
1927/28 89 47.6
25.5 73.1 15.9
As a result of the automatization, the production costs of incandescent lamp manufacturing decreased, but this was offset by an even greater increase in the operating costs. This way the profitability of incandes-cent lamp manufacturing suffered an — admittedly marginal — setback. Nevertheless, it still stayed over 15 percent and, as such, remained a profitable busi-ness. • '
(This analysis did not feature in the financial reports.) The rentability of electrical vacuum tube manufactur-ing showed some improvements in 1928—1930, but this branch was still at an early stage of development.
There were further profits f r o m the payments owing to the installation of the automatic telephone exchanges of Budapest by Standard Rt. — although this, again, was not included in the reports. From all this we can infer that TUNGSRAM'S actual profits considerably exceeded those admitted in the reports. There were a number of ways to conceal the actual profit. From the next table it is clear that the stocks very heavily featured in the balance sheets.
Fiscal year 1925-1926 1926-1927 1927-1928 1928-1929 1929-1930
Value in Pengos 10,587,325
9,978,397 6,442,193 6,833,512
~ ' 8,390,266
In general, the stocks held the company's sixmonth requirements, and in the case of the finished lamps, its eight-month projected sales. The relatively high level of stocks concealed some real difficulties; for example, the basic materials mostly included metals which were extremely difficult to come by. The size of the stocks of finished lamps is explained by certain stock systems and the lagging transportation. With the exception of 1928—1930, there were always about 10 million lamps stocked up. But the large stocks also permitted to conceal some internal reserves.
Certain reserves were openly declared in the reports. A very important entry in the balance sheets was the depreciation deductions which reached extremely high percentage in the case of TUNGSRAM. Just to give an idea, let's take the fiscal year of 1929—1930, when the factory building and equipments were esti-mated to be worth of 14,675,465 Pengos. This has to be compared with the same year's depreciation figure of 12,715,465 Pengos.
The section dealing w i t h debits and claims in the reports gives an opportunity to draw some interesting conclusions.
Fiscal year 1925-1926 1926-1927 1927-1928 1928-1929 1929-1930
Claims (debtors) 8,792,619 12,235,132 10,463,495 11,403,495 10,654,230
Debits (creditors) 7,198,679 8,889,125 2,985,171 3,586,071 2,690,485
From the entries listed under Debits it is clear that TUNGSRAM hardly ever had to rely on creditors during the second half of the 192$, since it had sufficient working capital at that time.
During the same years the company's total claims grew significantly and exceeded its debits many times over. A number of realistic factors contributed to the high figures in its outstanding claims; for example, it took a couple of years to settle the PHOEBUS accounts or to sort out the finances w i t h the com missioned sales agents which were often working in remote areas. The situation was similar in the case of the subsidiary firms. Actually, it w o u l d be very difficult to find out about the real financial state of the subsidiaries, since the reports did not have the appropriate statistics. We do have some information on the subsidiaries from other sources, although not about each year. The Viennese Watt factory showed a profit of 286,000 Pengos in 1928, Cyrkon of Warsaw closed the same year with roughly similar profits, the profits of Tokod Glass Factory SC. reached 280,000 Pengos, and the profits of Klara Glass Factory of Ujantalvolgy, 340,000 Pengos. A large part of the subsidiaries' profits were swallowed up by TUNGSRAM either through over-charging them for the basic materials and the inter-mediate products supplied to t h e m , or — exactly the other way around — through paying less for the basic materials bought f r o m t h e m .
For the lack of internal financial reports, the real profitability of TUNGSRAM is best revealed from the reports of the accountants of the bank, itself financially interested in the company, Pesti Hungarian Commer-cial Bank.
An examination of TUNGSRAM'S books in 1929 sums up the company's actual financial status in the follow-ing table (in Pengos):
TUNGSRAM 58
(i) (ii) (iii) (iv)
the plan
(a subjective estimate) bonds (based on actual Stock Exchanges figures) stocks (without remainders) debtors (less the creditors setting up a pension fund
A grand total of
7,000,000 18,235,000 18,235,000 6,596,000 12,209,000 44,040,000
,v
*y
The final figure shows that the actual value of the 412,500 TUNGSRAM shares was 44 million Pengos in
1929. This implied that the shares having a nominal value of 40 Pengos were w o r t h 106.5 Pengos each, or to put it in other way, they feched 250 percent of their nominal value!
Just before the w o r l d w i d e depression of 1929—1933 TUNGSRAM was in a very strong financial position.
This fact greatly helped the company to survive the years of Depression w i t h o u t serious shocks. In fact, the company made use of the slump in the housing industry and heavily invested in construction works.
Building No. 34 was designed in 1928 and the con-struction of several buildings took place in 1930—
1931. These developments have determined the fac-tory's image right until the latest times.
Building No. 36, the Research Laboratory and the Recreation Centre were all built in this period. The company even had reserves to exploit the grave financial situation of its old adversary, the Kre-menetzky factory, and by pressing the Viennese com-pany into a deal, TUNGSRAM was able to improve its positions both in the incandescent lamp cartel and on the domestic market.
^'^K
v y
• - ' * •
• • ^ « .