Berkshire Hathaway has a whopping loss of $43.8 billion; operating results are improved

Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan//File Photo

Aug 6 (Reuters) – The fall in U.S. stock prices punished Berkshire Hathaway Inc’s ( BRKa.N ) bottom line in the second quarter as the company run by billionaire Warren Buffett posted a loss of $43.8 billion.

Berkshire still generated nearly $9.3 billion in profit from its operating businesses, as improvement from reinsurance and the BNSF railroad offset a loss at auto insurer Geico, where auto parts shortages 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 the strengthening US dollar boosted profits from the company’s European and Japanese debt investments.

Berkshire also slowed its stock purchases, including its own, although it ended June with $105.4 billion in cash and cash equivalents it could still distribute.

“It shows the fickle nature of markets,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which invests more than $8 billion, 17% of which is in Berkshire. “It’s business as usual at Berkshire Hathaway.”

Investors follow Berkshire closely 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 fixed income such as the energy company of the same name, 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 have persisted” as new COVID-19 variants emerge and due to geopolitical conflicts including Russia’s invasion of Ukraine.

But it said direct losses to the company have not been material, despite the impact of higher costs for materials, shipping and labor.

RESULT SWITCH

Net earnings suffered from Berkshire’s $53 billion loss from investments and derivatives.

Shares in three major holdings — Apple Inc ( AAPL.O ), Bank of America Corp and American Express Co ( AXP.N ) — each fell more than 21%, compared with a 16% decline in the Standard & Poor’s 500 ( .SPX ).

Accounting rules require Berkshire to report the losses with earnings even if they don’t buy and sell anything.

Buffett encourages investors to ignore the swings, and Berkshire stands to make money if its shares rise over time.

In 2020, for example, Berkshire lost nearly $50 billion in the first quarter as the pandemic took hold, but earned $42.5 billion for the full year.

The quarterly net loss was equal to $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 were $1.06 billion.

Geico’s pretax loss of $487 million was more than offset by a pretax gain of $976 million in property and casualty reinsurance and a 56% jump 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 volume and higher fuel costs, while profits at Berkshire Hathaway Energy rose 4%.

Berkshire bought back 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 fell 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 takeover of insurer Alleghany Corp ( YN ) in the fourth quarter.

Reporting by Jonathan Stempel in New York; editing by Jason Neely and Diane Craft

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