Berkshire posts Q3 loss on rising inflation, hurricane impact

Warren Buffett’s Berkshire Hathaway Inc on Saturday posted a US$2.69 billion (RM12.77 billion) third-quarter loss as rising inflation, falling stock investments and a big loss from Hurricane Ian offset improvement in many of the conglomerate’s businesses.

Operating profit nevertheless rose by 20%, topping analyst forecasts.

Berkshire benefited from increased demand and prices for new home sales, industrial products and energy, while the US Federal Reserve’s inflation-fighting campaign helped Berkshire generate more income from insurance investments.

“On balance, results were strong and demonstrated resilience given the impact of inflation, higher interest rates and supply chain challenges,” said Jim Shanahan, an Edward Jones & Co analyst with a “buy” rating on Berkshire.

Buffett’s company took advantage of declining equity markets to add more stocks to its US$306 billion portfolio, buying a net US$3.7 billion and building a now 20.9% stake in Occidental Petroleum Corp.

Berkshire also bought back more of its own stock but was cautious, repurchasing US$1.05 billion, similar to the second quarter. It also bought back some stock in October.

Berkshire said rising costs from fuel and accidents hurt respective results at two of its best-known businesses, the BNSF railroad and

Geico auto insurer.

Cathy Seifert, a CFRA Research analyst with a “hold” rating for Berkshire, said the company may be “at an inflection point, not unlike the economy”, where it will need to contain costs to prepare for slowing demand and a possible recession.

“Bottom line, this was a healthy quarter, but one needs to be concerned over its trajectory over the next 12 months,” Seifert said.

The quarterly net loss equalled US$1,832 per Class A share, and compared with a profit of US$10.34 billion, or US$6,882 per share, a year earlier.

Results included US$10.45 billion of losses from investments and derivatives, as the stock prices of many large Berkshire investments other than Apple Inc fell.

Accounting rules require Berkshire to report such changes even if it buys and sells nothing. This causes large quarterly swings in results that Buffett says are usually meaningless.

Operating profit, meanwhile, rose to US$7.76 billion, or about US$5,294 per Class A share, from US$6.47 billion, or US$4,331 per share, a year earlier.

Results improved despite a US$2.7 billion after-tax loss from Ian, a strong Category 4 hurricane that slammed into Florida on Sept 28. Revenue rose 9%, while expenses rose 7%. – Reuters