Berkshire Hathaway Posts Massive $43.8 Billion Loss; operating results are improving

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

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Aug 6 (Reuters) – Falling U.S. stock prices hurt Berkshire Hathaway Inc’s (BRKa.N) second-quarter net profit, as the company run by billionaire Warren Buffett posted a $43.8 billion loss .

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

Rising interest rates and dividend payments helped Berkshire’s insurance units generate more cash from investments, while the strengthening US dollar boosted earnings from the company’s debt investments European and Japanese.

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

“It shows the volatile nature of the 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 business as usual at Berkshire Hathaway.”

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

Berkshire owns dozens of businesses, including stable earners such as its eponymous energy company, several insurers and industrial companies, and familiar consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.

In its quarterly report, Berkshire said “significant disruptions to supply chains and higher costs have persisted” as new variants of COVID-19 emerge and due to geopolitical conflicts, including the invasion of the Ukraine by Russia.

But he said direct losses to the business were not significant, despite the impact of rising material, shipping and labor costs.

EVOLUTION OF BENEFITS

Net results were hurt by Berkshire’s $53 billion losses on investments and derivatives.

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

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

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

In 2020, for example, Berkshire lost nearly $50 billion in the first quarter as the pandemic took hold, but gained $42.5 billion for the full year.

The quarterly net loss was $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 , one year earlier. Foreign exchange 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% increase in after-tax insurance investment income to $1.91 billion. dollars.

Profit rose 10% at BNSF as higher revenue per car from fuel surcharges partially offset lower freight volumes and higher fuel costs, while profit at Berkshire Hathaway Energy rose 4%.

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

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

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

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Reporting by Jonathan Stempel in New York; edited by Jason Neely and Diane Craft

Our standards: The Thomson Reuters Trust Principles.

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