Sign up now for FREE unlimited access to Reuters.com Register Aug 6 (Reuters) – A slide in U.S. stock prices punished Berkshire Hathaway Inc’s ( BRKa.N ) second-quarter results as the company run by billionaire Warren Buffett posted a $43.8 billion loss. But Berkshire delivered nearly $9.3 billion in operating profit as improvement from reinsurance and BNSF railroad offset a loss at Geico auto insurance, where shortages of auto parts and higher vehicle prices increased losses from accidents. Rising interest rates and dividend payments helped Berkshire’s insurance units generate more cash from investments, while a stronger dollar boosted earnings from the company’s European and Japanese debt investments. Sign up now for FREE unlimited access to Reuters.com Register Berkshire also slowed its stock buybacks, 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 has more than $8 billion invested, 17 percent of which is in Berkshire. “It’s business as usual at Berkshire Hathaway.” Investors closely monitor Berkshire because of Buffett’s reputation and because results from the Omaha, Nebraska-based conglomerate’s dozens of operating units often reflect broader economic trends. Berkshire owns dozens of businesses, including stable earners such as its namesake energy company, 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 “significant supply chain disruptions and higher costs remain” as new variants of COVID-19 emerge and due to geopolitical conflicts, including Russia’s invasion of Ukraine. However, he said the immediate losses for the company were not significant, despite the impact of higher costs for materials, shipping and labor.
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Net results were hit by Berkshire’s $53 billion in losses from investments and derivatives. Shares of three major holdings — Apple Inc ( AAPL.O ), Bank of America Corp and American Express Co ( AXP.N ) — fell more than 21 percent each, compared with a 16 percent 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 the volatility, and Berkshire will make money if the stock rises 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. 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, rose 39% from $6.69 billion, or $4,424 per Class A share, a year earlier. Foreign exchange gains on foreign debt totaled $1.06 billion. Geico’s $487 million pretax loss was more than offset by a $976 million pretax gain in property and casualty reinsurance and a 56% rise in after-tax insurance investment income to $1.91 billion. Earnings rose 10% at BNSF, with higher revenue per car from fuel surcharges partially offsetting lower freight volumes and higher fuel costs, while earnings 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 compared with $51.7 billion in 2020 and 2021. Its $6.15 billion in stock purchases was down 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 insurer Alleghany Corp ( YN ) in the fourth quarter. Sign up now for FREE unlimited access to Reuters.com Register Reporting by Jonathan Stempel in New York. edited by Jason Neely and Diane Craft Our Standards: The Thomson Reuters Trust Principles.
