The recession that the federal government is just admitting we are in is obviously taking its toll on Exxon Mobil, whose profits sagged in the 2nd quarter of 2008. What? Didn’t Exxon post record profits of $11.7 billion, kicking us all when we’re down fighting high gas and food prices? That was certainly the headline today in most newspapers and periodicals (http://biz.yahoo.com/ap/080731/earns_oil.html).
As usual, however, the “record profits” are measured nominally in U.S. dollars, which are literally losing value before the ink is dry on these financial articles. A careful read of the article reveals that Exxon made these record profits on about $138 billion in revenue, giving them a profit margin of 8.48% That’s down from the 1st quarter of 2008 when profits were 9.32%, which was also significantly lower than their 3 year average of 10.08% from 2005-2007.
Considering the fact that the Federal Reserve has embarked on the most inflationary binge in its 95-year history, it is a little disingenuous to characterize a company as making “record profits” by measuring those profits nominally, instead of as a percentage of revenue. While the media is almost as anxious as the government to label “Big Oil” as the villain that is profiting on the hardship of the average American, those Americans would be best served to look in the opposite direction when the media points its finger – especially when it is pointing in the same direction as our federal government.
Just to put things in perspective, Campbell Soup Company had a similar profit margin over the same three-year period, 2005-2007. During that time, Campbell averaged a 10.22% profit margin on about $22.7 billion in revenue. However, unlike Exxon Mobile, whose profits have sagged during the past two quarters, Campbell Soup’s profits exploded – more than doubling – in its last reported quarter. After rising to 13% on $2.1 billion during the quarter ending January 27, 2008, Campbell posted a 28% profit on lower revenues of $1.8 billion during the quarter ending April 27, 2008.
28% profits while food prices are skyrocketing? Outrageous! Children are going without while Campbell’s executives laugh and say “mm-mm good!” Congressional hearings are in order. Perhaps we should seriously consider nationalizing the soup industry. I know that Maxine Waters has kindly offered to take over Big Oil for us, which would undoubtedly result in lower gas prices, improving emissions results, and a white Christmas in South Beach. However, before we worry about filling up our gas-guzzling SUV’s, we need to do something about Big Soup.