Berkshire Hathaway records massive losses of $ 43.8 billion; operating results are improving

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

Sign up now for FREE unlimited access to Reuters.com

Aug. 6 (Reuters) – Falling US stock prices punished Berkshire Hathaway Inc (BRKa.N )’s second-quarter financial performance as billionaire Warren Buffett’s firm reported a loss of $ 43.8 billion.

Still, Berkshire generated nearly $ 9.3 billion in operating profit as improvements in reinsurance and BNSF’s railroads offset the loss of auto insurer Geico, where shortages of auto parts and higher vehicle prices increased accident losses.

Rising interest rates and dividend payments have helped Berkshire insurers generate more money from their investments, while the strengthening US dollar has increased returns on the firm’s European and Japanese debt investments.

Sign up now for FREE unlimited access to Reuters.com

Berkshire also slowed down its share purchases, including its own, although it ended June with $ 105.4 billion in cash and cash equivalents that it could still use.

“This shows the volatile nature of the markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, who invests more than $ 8 billion, of which 17% is in Berkshire. “In Berkshire, Hathaway goes on as usual.”

Investors are closely watching Berkshire because of Buffett’s reputation and also because dozens of operating units in the Omaha, Nebraska conglomerate often reflect broader economic trends.

Berkshire owns dozens of businesses, including regular earners such as the energy company of the same name, several insurers 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 higher costs continued” as new COVID-19 variants emerge and because of geopolitical conflicts, including Russia’s invasion of Ukraine.

However, it found that the direct losses to the company were not significant, despite the impact of higher material, transportation and labor costs.

SWING OF PROFITS

Net earnings suffered from Berkshire’s $ 53 billion losses in investments and derivatives.

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

Accounting rules require Berkshire to report losses along with the results, even though nothing is buying or selling.

Buffett urges investors to ignore fluctuations, and Berkshire will make money if stocks rise over time.

For example, in 2020, Berkshire lost nearly $ 50 billion in the first quarter as the pandemic hit, but made $ 42.5 billion for an entire year.

The quarterly net loss was $ 29,754 per class A share, compared with a net gain of $ 28.1 billion or $ 18,488 per class A share a year earlier.

Berkshire’s operating profit of $ 9.28 billion, or approximately $ 6,326 per A-share, increased 39% from $ 6.69 billion, or $ 4,424 per A-share, a year earlier. Foreign currency gains on foreign debt amounted to $ 1.06 billion.

Geico’s pre-tax loss of $ 487 million was more than offset by $ 976 million of pretax profit from property and accident reinsurance and a 56% jump in post-tax insurance investment income to $ 1.91 billion.

Profit at BNSF grew 10%, with higher per-car revenues from fuel surcharges partially offsetting lower freight and higher fuel costs, while profit from Berkshire Hathaway Energy increased 4%.

Berkshire bought back just $ 1 billion of its own shares, down from $ 3.2 billion in the first quarter and down from $ 51.7 billion in 2020 and 2021.

Equity purchases of $ 6.15 billion fell from $ 51.1 billion in the first quarter when it acquired a major stake in the 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.

Sign up now for FREE unlimited access to Reuters.com

Jonathan Stempel’s report in New York; editing by Jason Neely and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

Leave a Comment