Berkshire posts nearly $50bn loss

Warren Buffett’s Berkshire Hathaway is being hit hard by the coronavirus pandemic, posting a record quarterly net loss of nearly $50 billion (R940 billion) on Saturday and saying performance is suffering in several major operating businesses.

Berkshire said most of its more than 90 businesses are facing “relatively minor to severe” negative effects, with revenue slowing considerably in April, even at businesses deemed essential.

Some businesses cut salaries and furloughed workers, and retailers such as See’s Candies and the Nebraska Furniture Mart closed stores.

Buffett, 89, also allowed Berkshire’s cash stake to rise to a record $137.3 billion from $128 billion at the end of 2019.

That reflected the billionaire’s inability to make large acquisitions for his Omaha, Nebraska-based conglomerate, and caution in buying stocks.

Berkshire said it bought only a net $1.8 billion of stocks in the first quarter. It also said it repurchased $1.7 billion of its own stock, but that was less than in the prior quarter.

Jim Shanahan, an analyst at Edward Jones & Co in St Louis, said: “Historically, Buffett has been so visible in times of crisis, and encouraged investors to take advantage of market selloffs, but if he doesn’t see opportunities even in his own stock, what are we to think?”

Still, Shanahan said Berkshire is “as well positioned as it can be”. He rates Berkshire “buy”.

Berkshire released results before its annual meeting, where Buffett said it sold its “entire positions” in the four largest US airlines: American, Delta, Southwest and United in April.

Berkshire, he said, “made a mistake” investing approximately $7 billion to $8 billion in the sector, which was changed “in a very major way” as the pandemic shut down most air travel.

Berkshire’s first-quarter net loss was $49.75 billion, or $30 653 per Class A share, reflecting $54.52 billion of losses on stock and other investments. Net earnings were $21.66 billion, or $13 209 per share, a year earlier.

An accounting rule requires Berkshire to report unrealised stock losses and gains with net results, causing huge swings that Buffett considers meaningless.

Quarterly operating profit rose 6% to $5.87 billion, or about $3 624 per Class A share, from $5.56 billion, or about $3 388 per share.

Berkshire’s stock price has fallen 19% in 2020.

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