Berkshire profit falls as underwriting loss offsets railroad gains
NEW YORK: Warren Buffett’s Berkshire Hathaway Inc reported a 15 per cent drop in second-quarter profit, as lower investment gains and a loss from insurance underwriting offset improvement in its BNSF railroad business. Operating profit also fell short of analyst forecasts, though Berkshire attributed much of the decline to currency fluctuations and its accounting for a major contract with the insurer American International Group Inc.
Net income for Omaha, Nebraskabased Berkshire fell to $4.26 billion, or $2,592 per Class A share, from $5 billion, or $3,042 per share, a year earlier. Operating profit declined 11 per cent to $4.12 billion, or $2,505 per Class A share, from $4.61 billion, or $2,803 per share.
Analysts on average expected operating profit of about $2,791 per share, according to Thomson Reuters. Buffett believes operating income is a better gauge of how Berkshire and its more than 90 businesses are doing than net income, which fluctuates more because it incorporates investment and derivative gains, which fell 64 per cent from a year earlier.
Book value per share, Buffett’s preferred measure of growth, rose 2.7 per cent from the end of March to $182,816. The company’s stock price, meanwhile, set a record high on Friday, with Class A shares closing up $1,629.80 at $270,000.
“They had a good quarter,” said Bill Smead, Chief Executive of Smead Capital Management Inc in Seattle, which owns Berkshire shares. “The results reflect Berkshire’s positioning in the US economy.”
BNSF saw profit rise 24 per cent to $958 million, helped by high singledigit percentage increases in freight revenue from consumer and industrial products, and double-digit increases from agricultural products and coal.
Profit from manufacturing, service and retailing units rose 10 per cent to $1.66 billion, helped by greater demand for products from its IMC International Metalworking unit.