Insurance, economy, tariffs weigh on Berkshire Hathaway
NEW YORK: Berkshire Hathaway Inc on Saturday said its quarterly operating profit fell more than analysts expected, as weakness in insurance underwriting, a slowing economy and trade woes weighed on the conglomerate run by billionaire Warren Buffett.
Berkshire’s auto insurer Geico suffered a larger number of accident claims, while competition from foreign producers, lower imports and “trade policy” dampened cargo volumes for consumer and agricultural products at its BNSF railroad.
Earnings also barely budged at Berkshire’s manufacturing businesses, where US tariffs hurt sales of gas turbine and pipe products at its Precision Castparts unit, and its service and retailing businesses.
Second quarter operating profit declined 11 per cent to $6.14 billion, or roughly $3,757 per Class A share, from $6.89 billion, or roughly $4,190 per Class A share, a year earlier.
Analysts on average expected operating profit of $3,851.28 per share, according to Refinitiv IBES.
Berkshire also said quarterly net income rose 17 per cent to $14.07 billion, or $8,608 per Class A share, from $12.01 billion, or $7,301 per Class A share, a year earlier, reflecting higher unrealized gains on Berkshire’s investments.
A US accounting rule requires Berkshire to report such gains with earnings. That rule adds volatility to Berkshire’s net results, and Buffett says it can mislead investors.
The US economy’s annualized growth rate slowed to 2.1 per cent in the second quarter from 3.1 per cent in the first quarter, as an acceleration in consumer spending was partially offset by declining exports, manufacturing and business investment, reflecting the trade war between the United States and China.
Buffett told CNBC in May that a Us-china trade war would be “bad for the whole world,” and a fullscale trade war would be “bad for everything Berkshire owns.”
Berkshire ended June with $122.4 billion of cash and equivalents, reflecting Buffett’s 3-1/2-year drought in finding big acquisitions since buying Precision Castparts.
He has instead invested elsewhere, building a $50.5 billion stake in iphone maker Apple Inc and committing $10 billion in April to help Occidental Petroleum Corp buy rival Anardako Petroleum Corp. Berkshire has also bought back $2.1 billion of its stock this year.