Business

Berkshire Hathaway posts massive $43.8 billion loss; operating results improve

Berkshire Hathaway posts massive $43.8 billion loss; operating results improve

Berkshire Hathaway chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, US, May 4, 2019. REUTERS/Scott Morgan//File Photo

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Aug. 6 (Reuters) – The fall in US stock prices punished Berkshire Hathaway Inc (BRKa.N) second-quarter earnings as billionaire Warren Buffett’s company lost $43.8 billion.

Berkshire nevertheless generated nearly $9.3 billion in profits from its operations as reinsurance improvements and the BNSF railroad offset a loss at Geico auto insurer, where auto parts shortages and higher vehicle prices increased accident losses. .

Rising interest rates and dividend payments helped Berkshire’s insurance businesses get more money out of investments, while the strengthening US dollar boosted profits from European and Japanese debt investments.

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Berkshire also slowed down purchases of its shares, including its own, though it ended June with $105.4 billion in cash and equivalents it could still stake.

“It shows the fickle nature of markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which invests more than $8 billion, 17% of which is in Berkshire. “It’s normal business at Berkshire Hathaway.”

Investors are watching Berkshire closely because of Buffett’s reputation and because the results of the Omaha, Nebraska-based conglomerate’s dozens of businesses often reflect broader economic trends.

Berkshire owns dozens of companies, including regular earners such as the energy company of the same name, several insurance and industrial companies, and well-known consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.

In its quarterly report, Berkshire said that “significant supply chain disruptions and increased costs have persisted” as new COVID-19 variants emerge and because of geopolitical conflicts, including Russia’s invasion of Ukraine.

But it said direct losses to the company were immaterial, despite the impact of higher costs for materials, shipping and labor.

PROFIT FOAM

Net income suffered from Berkshire’s losses of $53 billion on investments and derivatives.

Shares of three major holding companies — Apple Inc (AAPL.O), Bank of America Corp and American Express Co (AXP.N) — each fell more than 21%, compared with a 16% drop in the Standard & Poor’s 500 (.SPX).

Accounting rules require Berkshire to report losses with its results, even if it doesn’t buy and sell anything.

Buffett is urging investors to ignore the fluctuations, and Berkshire will make money as the stock rises over time.

In 2020, for example, Berkshire lost nearly $50 billion in the first quarter when the pandemic broke out, but made $42.5 billion for the full year.

The quarterly net loss was equivalent to $29,754 per Class A share, and compared with net income of $28.1 billion, or $18,488 per Class A share, a year earlier.

Berkshire’s operating profit of $9.28 billion, or about $6,326 per Class A share, was up 39% from $6.69 billion, or $4,424 per Class A share, a year earlier. Currency gains on foreign debt totaled $1.06 billion.

Geico’s $487 million pre-tax loss was more than offset by a $976 million pre-tax gain in property and casualty reinsurance, and a 56% jump in after-tax insurance investment income to $1.91 billion.

Earnings were up 10% at BNSF, with higher per-car revenue from fuel surcharges partially offsetting lower freight volumes and higher fuel costs, while Berkshire Hathaway Energy’s earnings were up 4%.

Berkshire has bought back just $1 billion in its own stock, down from $3.2 billion in the first quarter and compared to $51.7 billion in 2020 and 2021.

Its $6.15 billion in share purchases fell from $51.1 billion in the first quarter, when it took large stakes in oil companies Chevron Corp and Occidental Petroleum Corp.

Berkshire expects to complete its $11.6 billion acquisition of insurance company Alleghany Corp (YN) in the fourth quarter.

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Reporting by Jonathan Stamp in New York; Edited by Jason Neely and Diane Craft

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