ElUGEN^ FOHCADE South AustTian-Lo-mbaraisLTi T? at 1 Ways THE UNIVERSITY OF ILLINOIS LIBRARY 385. 43G F 74-8s£- ‘ i .i. ‘ I •ir 1 The following is a Translation of an article in “ La Semaine Financiered of the 2nd 8epte7nhei\ 1865 . — IVe are requested l)y many of our subscribers to give tliem some explanations toucliing tlie position of tlic Soutli Austrian- Lombardian Company^ in respect of a certain pamphlet lately published Avith the CAddent object of shaking the con- : fidence of the Shareholders in that Company. We feel that :r our first duty toAA^ards the shareholders AAdio liaA^e addressed ^ themseh^es to us, is to lay before them again a true state- ment of the figures, and likcAvise of the chief characteristics "^^of this undertaking, Avhich have been so audaciously dis- figured in the pamphlet in question. It v/ill be time here- ' after, should it become necessary for us to do so, to enter i into the secondary and accessory details of this controversy, and to expose the motives Avhich have induced such an I aggression. We shall confine ourselves at present to the k most important and decisive points, that is, to the figures, and Ave shall thus afford the public the means of correctly appreciating tlie conclusions AAdiich have been put fortli. - fi A : 2 The author of the pamphlet^ by giving an estimate of the returns of the Austrian-Lombardian Lines,, and by basing his calculations upon the probable revenue of the lines,, attempts to give to his figures an official character, and pretends that they are extracted from the accounts published by the Company. Our readers v>^ill judge for themselves what measure of confidence such assertions deserve on re^dewing the gross errors which Ave shall presently expose to them. Let us dissect, in the first place, the cost of the net -works completed. The pamphlet in question fixes it at 1,207 millions, and distributes that amount in the following manner : — Expenditure up to the 31st December, 1864 812,339,915 Balance due upon the purchase-money of the Trieste line 40,776,417 Presumed cost of the 417 kilometres in course of construction, or to be constructed 134,482,500 State lines lately purchased from the Italian Government 210,000,000 Capitalisation of the subventions which Avill be payable by the Com- pany for the tunnelling of Mount Cenis and of the Helvetic Alps 10,000,000 Total 1,207,598,832 52 3 We detect in tliis pretended statement of accounts^ tlircc enormous and inexcusable errors. Tlie author has in fact in a second edition of liis pamphlet,, corrected several mis- quotations in his figures ; he certainly ought not to have passed over the three following grave errata : 1. The amount still due to the Austrian Government is 25 millions^ and not 40 millions. Hero we have an author , priding himself on his consummate skill as an accountant,, and resting himself upon official returns. W e must, there- fore, conclude one of tlirec things — either that he has not perused the appendix No. 4 to the last report or the general balance sheet of the Company, which is novf in the hands of the shareholders, or, then, if he has read it, he did not under- stand it, and, if he did understand it, he has been guilty of arbitrarily substituting a false amount instead of the true amount. Indeed, on the debit side of the balance sheet alluded to, we find the following item : — Due to the state upon the purchase price of the line -from Vienna to Trieste 25 millions. On the credit side the cost of purchase of the line from Vienna to Trieste, which originally was 175 millions, is set down at 159 millions. There v/as, in fact, a deduction made from this sum to the amount of 15,776,417 francs representing the rolling stock and the supply of materials in stock which were included in the inventory, and which it follows were placed to the credit of the stock account. 2. The author of the pamphlet eommits a not less par- donable levity v/hen he fixes at 134,482,500 francs the cost of the 417 kilometres of the lines in course of construction or to be constructed. He did not understand, or Vvould not take 4 into his consideration that the 812 millions of the expendi- ture cliargeahie up to the 31st of December, 1864, embody a considerable portion of the cost of the lines thus designated. The outlay chargeable to these lines, completed or nearly so, was already partly included in the item of the total expendi- ture computed on the 31st of December, 1864. These lines are the following : Agram-Karstadt (46 kilometres) which was opened this day ,* Aedenburg-Kanisa (164 kilometres) already opened ; Parme-Rovigo (45 kilometres completed, but not yet opened; Sesto-Calande and Galerata (37 kilomtees) already opened. Thus we see that out of the 417 Idiom toes there were 292 kilometres very nearly completed. The author of the pamphlet was not, therefore, in any way justi- fied in basing his calculations apart from these 417 kilo- metres, and in adding the hypothetic expenditure to the 812 millions. The outlay to be incurred after the closing of the accounts on the 31st of December, 1864, is therefore reduced to 61 millions for the Bruner line, which was estimated at 72 millions, and out of which there had been laid out already 1 1 millions, and to about 36 millions required to complete the works upon various lines, and for the repairs upon the Trieste line. The amount to be added to the 812 millions upon this head would consequently be 97 millions, and not, therefore, as afhrmed in the pamphlet, as the result of a blundering misstatement — 134 millions — difference, 37 millions. 3. Finally, the arbitrary capitalisation of 10 millions, purporting to represent the subventions on account of the tunnels through the Alps is entirely devoid of any founda- tion. In the first place it is not true that the Company is 5 bound to pay any subvention for the tunnelling of Mount Cenis ; and as for any subvention that the Company might have to pay for the tunnelling of the Helvetic Alps_, it is evident that the Company would be but too glad to pay it, for it would be an outlay which, from the nature of the undertaking, would bring to the Company a most profitable traffic. We have thus laid bare three grave errors : one of 15 millions, one of 37 millions, and one of 10 millions ; together 67 millions, wittingly or lightly propounded Ijy the author of the pamphlet in laying down his own estimate of the cost of the Austrian-Italian lines. We believe that we have satisfac- torily demonstrated the little reliance that can be placed upon the figures advanced by the pamphlet, and consequently upon the inferences deducted from them. On a future day, should there be occasion for it, we will expose the errors and fallacies committed by the v/riter of that pamphlet in his estimate of the cost of the works, of the expenditure, and of the net revenue. But before entering into this subject, so as to render clear and distinct the ideas of our readers, we feel bound to lay before them, according to our views, basing ourselves upon positive data, and relying on the most moderate estimates what in our judg- ment are the true position and prospects of the Austrian- Italian Lines. The position of the South Austrian-Lombardian Company may be summed up as follows : — 6 Tlie Capital sunk up to tlie 31 st of Decem- ber^ 1864<^ was 812,000,000 The estimated Capital which would still be requii’ed was calculated at 129,000,000 ' Total 941,000,000 The lines purchased from the Italian Govern- ment, including the additions thereto, comprehended in the Convention of 1865, will cost 209,000,000 The cost of j)ntting the same into working order, valued at 17,500,000 francs, will be saved in the working of the lines General totalf .... 1,150,000,000 This Capital of 1,150 millions will be realised as follows : — In bonds . . . ; 775,000,000 In shares 375,000,000 Equal total 1,150,000,000 Let us now examine the liabilities and the probable returns. ■* This is but a natural compensation arising from the gain in interest derived by the Company, on account of the payment by instalments by the Company to the Government. t The item of 345 millions still required to be outlaid on the 31st December, 1864, will be spread over four years, with the exception of some 20 millions to be reserved for 1869. 7 The charge upon the boiicls; iiicludmg their redemption^ may be set down at 6-J- per cent, on an average^ or say upon 775 millions, at As to the returns, the traffic returns for 1864 were The increase realised on the 19tli of August, 1885, was .... 2,450,000 The increase for the remaining months of the year, con- sidering the accumulation in the traffic which generally takes place at this period, may be computed very moderately at 2,000,000 Probable receipts in 1865 upon the old lines Upon the lines purchased from the State, guaranteed amount after deducting the working of the branches on account of various other companies Lines to be opened in 1865, 255 kilometres The probable receipts for 1865 will there- fore be 49,080,000 63,550,000 4,450,000 68,000,000 25,500,000 4,000,000 97,500,000 8 If we noAv wish to form a reasonable and moderate estimate of the position in which the Company will be in 1868^ it will be necessary to ascertain what will be the likely increase that may be obtained during three years upon the receipts for 1865. If we therefore take into account — 1. That most of the lines have been only recently opened. 2. The unfavourable circumstances which impeded the development of the traffic in 1863 and 1864_, and which had the effect of causing the returns upon the Trieste Line to fall by about 4 millions^, and those upon the Hungarian Line by about 3 millions under the receipts of the two preceding years. 3. The influence that the opening of new lines will exercise over those already opened. 4. The considerable improvement,, which it is but reason- able to anticipate,, in working the State Lines recently acquired by the Italian Government. 5. The favourable results which must be expected from the amalgamation of the said lines with the old Italian lines belonging to the Company, whether we simply take into consideration the development in the traffic, or the saving that will be effected in the working of the lines. 9 6. The improvement in the trafhe which will result from the modifications which are about to be introduced in the Austrian customs tariff. It will be admitted that an increase of 4 per cent, per annum would be a moderate estimate; and the more so since the return of the lines worked in 1862 to be added to the present yearns return; u^ould alone suffice to realise it. We may therefore set down the probable increase that will be realised from the present time until the end of 1868 at a minimum of 12;500;000 Which would raise the total receipts in 1868 from the lines completed already; to . . 12;500;000 The Bruner LinC; which is to be opened in the course of another twelve or eighteen months will add to that amount at least 10;000;000 Total receipts for 1868 120;000;000 We may without hesitation admit that the per-centage in the expenditure will diminish rather than increase ; because; if on the one side the Bruner line offers over an extent of 125 kilometres some difficulties in the working; on the other side the 255 kilometres which have been added to the net-work in 1865; are on a level; and can be worked very economically ; and furthermore; it is a well known fact that the expense of working the lines does not increase in the same proportion as the increase in the returns. 10 However^ if we take tlie amount for 1864 (63 per cent.) and apply it to 1868^ tlie net receipts in tlie latter would be ... . 75,600,000 To this must be added the amount especially guaranteed for the Italian central lines, which proceeds are not included in the estimate given above, viz 6,500,000 Total net receipts for 1868 82,100,000 Deducting therefrom the charge upon the bonds mentioned 49,080,000 There remains 33,020,000 To be applied to the general expenditure and to the payment of dividends. Up to the present time the general expenditure and the taxes, which now amount to about 2 millions, have been covered by the proceeds of the sale of stock ; this will not be the case after 1868. But taking into account the taxation imposed upon the Company at the present time, the 33 millions net remaining would be more than sufficient to allow a dividend of 40 francs to be made, and to meet the general expenditure, including the taxes. But parting from 1869, the tax upon the revenue derived from the Austrian lines will be chargeable to the Company, and some apprehension is naturally felt as to the effect that it will exercise upon the dmdends. In the first place it is important to observe that this tax, according to the terms of the Concession, is only applicable 11 to the net revenue ealeulated upon the two-thirds of the former capital of the Company^ such as it was previous to the acquisition of the lines recently purchased from the Italian States. This tax which is rated at the exorbitant charge of per cent.^ would involve,, should it be enforced in the same manner as at that period^ a much smaller outlay than is fantastically predicted by the pamphlet^ but which would nevertheless amount to nearly four millions. It would no doubt be a heavy charge^ but it is more than probable that this excessive tax^ vdiich indeed is almost un- productive^ will be,, if not abolished^ at least perceptibly reduced long before 1868. All well informed persons in Austria are of the same opinion on this subject. This becomes still more probable^ when we consider that most of the Companies in Austria being incorporated under the system of guaranteed interests^ it follow^s that the State itself would in the end have to pay the tax. Under any circumstances,, this tax cannot be chargeable until 1869^ and consequently the Company has the advantage of four years to run free. It u’ould be premature to specu- late upon so distant and even in itself doubtful events an event which^ if it does take place^ v/ill not happen for at least five years to come. As to the capitalists who only seek to make their invest- ments advantageously and in serious undertakings^ and who do not dabble in ephemeral exchange speculations^ they should consider the Austrian-Italian Railway undertaking from a 12 liigii and general point of view ; and to them the estimates whieh we have now presented to them, however re-assiiring f they may seem, are bnt simply some of the elements whieh must he appreeiated in so great an undertaking. The results which may he expected from a great net-work depend chiefly upon the importance of the lines composing it. The main lines, those serving for international communication, and especially communicating with well situated sea ports, and which traverse wealthy and productive tracts of country well populated, are destined to have a future of which it is not in the power of man to foresee the limits ; and it is especially from these lines that we may expect the most rapid progress in the traffic. The Austrian-Italian section consists of : — 1. A Grand Junction Line, connecting Vienna and Trieste, and connecting the Adriatic and likewise the Mediter- ranean with Vienna and the eastern portion of Ger- many, and which yields already 60,000 francs per kilometres, say 580 2. A main line from Trieste to Genoa, hy w'ay of Venice, Verona, and Milan, say. 625 3. A main line from Verona to KuflPstein, hy way of Bruner, opening a communication between the Mediterranean and Italy with Central Germany, say 345 4. A line from Florence towards France, by way of Bologna, Modena, Parma, Alexandria, Tunis, and Mount Cenis, having an extent of 490 Carried forward. 2,040 13 Brought up 2,040 5. A line from Florence to Venice, brandling upon the foregoing at Bologna, and at Venice upon the No. 2 line, of the length of 110 6. A line from Pestli to Trieste, branching olF at Pragarhoff upon the No. 1 line, of the length of 360 7. A line from Milan to Turin, completing the great main line from Trieste to France, say 140 Forming a total of, . . . 2,650 kilomdres of first-class main lines upon a total extent of 3,740 kilometres. A¥hen we, therefore, consider the great advancement made by the chief main lines existing in Europe, after a certain number of years of their being worked, it is not possible to suppose that the lines ive have here enumerated will remain stationary, and that they are not destined sooner or later to make great progress. True it is, that the result of late years has been charac- terised by a state of transition. The undertaking under our especial notice, has met with extraordinary and exceptional circumstances. The Italian War, the interposition of a frontier in the very midst of a net-work of Bailways belong- ing to the Company vdiich followed, the depreciation in the Austrain currency, a dearth in Hungary, such are the well- known causes which so unfavourable influenced the traffic, Init which being essentially transient, have for the most part already vanished. To be in a position to appreciate the future of this under- taking, it is necessary to face the elements wliich comprise it, 14 and no one would venture to stigmatise tlie result of tlie last two ycars^ experience as a too rigorous starting point. Finally the organisation of this undertaking offers to the shareholders a peculiar advantage which timid capitalists should take into consideration especially. The guarantees obtained by the Acts of Concession can be^ and are separately and independently applicable to seven distinct groups. Amongst tliese^ the three chief ones are^ the Yienna Line_, the Trieste Line and branches^ the Italian State Lines^ and the Bruner Line_, all of which already give^ or will shortly yield a sufficient revenue to meet abundantly the claims of tlie capital sunk in them j and^ as regards the other lines^ it is not to be doubted that tliey uill produce over and above the amount guaranteed by tlie State. Nevertheless^ should it so happen that any of them_, as was the case with the Central Italian group of lines^ which in the first year of its working did not yield the amount guaranteed^ should fall short of the amount guaranteed^ the state would be bound to make it good without taking into account the profits realised by tlie other groups of lines. The Italian States, whose guarantee has been held up as worthless and illusory^ has already and in fact fulfilled the guarantee clause during the last tv/o years to the amount of millions of francs^ to Vvdiich they became liable. Therefore^ should the receipts on the Hungarian line_, by reason of analogous circumstances to those which befell in 1863;, fail below 5Aoths of the capital laid out_, the State v^ould l)e bound to make good the difference without taking into account the profits derived from the other lines. Finally;, it is necessary to add;, that the amount guaranteed upon the Italian lines is 28 millions in tlie grosS;, and that in the event of tliat amount not being realised,, the 15 Government is bomid to make it good, and that without any reimbursement on the part of the Company. Siieh are the true figures, the real facts, and the high considerations which it has seemed to us worthy of laying before the shareholders of the Austrian-Lombardian Lines at the present juncture, and which, in our opinion, ought to have the effect of preventing them from becoming a prey and the dupes of unscrupulous and ephemeral speculators. Hereafter, and after thus having made evident the position of the Company, v/e reserve to ourselves to discuss in detail the manoeuvres and polemics of which these speculators have availed themselves. EUGENE FORCADE. ^S.v- I- . 1 ' V/, r. . f \ .1 V' * . p- ■-J ■« ,, o' ' 'v .V ' ■*? it. f' 'l' J . *• i ■ * " ^i,', .t A. * mi y. •^l. ^ \ V . - • 4 ^ *<■ * . I