Berkshire Hathaway Posts Massive $43.8 Billion Loss; operating results improve

Berkshire Hathaway Chairman Warren Buffett walks through the showroom as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual meeting of shareholders in Omaha, Nebraska, USA, on May 4, 2019. 2019. REUTERS/Scott Morgan//File photo

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

Nonetheless, Berkshire generated nearly $9.3 billion in profit from its operating businesses, as improved reinsurance and the BNSF rail offset a loss at auto insurer Geico, where auto parts shortages and higher vehicle prices Accident losses increased.

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

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

“It shows the fickle nature of the markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, who invests more than $8 billion, 17% of which is in Berkshire. “Business as usual 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 operating units often reflect broader economic trends.

Berkshire owns dozens of businesses, including steady earners like its namesake energy company, several insurers and industrial companies, and familiar consumer brands like 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 Russia’s invasion of Ukraine.

But he said the direct losses to the company have not been material, despite the impact of higher material, shipping and labor costs.

SWINGS IN PROFITS

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 with a 16% drop in 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 shares rise over time.

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

The quarterly net loss equaled $29,754 per Class A share, compared to a net profit of $28.1 billion, or $18,488 per Class A share, a year earlier.

Berkshire’s $9.28 billion operating profit, 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. Foreign exchange gains from foreign debt totaled $1,060 million.

Geico’s $487 million pre-tax loss was more than offset by a $976 million pre-tax gain on property and casualty reinsurance, and a 56% increase in after-tax insurance investment income to $ 1,910 million.

Earnings rose 10% at BNSF, with higher revenue per car due to fuel surcharges partially offsetting lower cargo volumes and higher fuel costs, while Berkshire Hathaway Energy’s earnings rose 4%.

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

His $6.15 billion in share purchases fell from $51.1 billion in the first quarter, when he acquired major 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 from Jonathan Stempel in New York; editing by Jason Neely and Diane Craft

Our standards: the Thomson Reuters Trust Principles.

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