Warren Buffett's Berkshire Hathaway Inc said Friday that its second-quarter profit fell 15% as costs rose for its various businesses and it earned less from its investments. Berkshire Hathaway and its subsidiaries engage in diverse business activities including insurance and reinsurance, utilities and energy, freight rail transportation, finance, manufacturing, retailing and services. Berkshire owns more than 90companies, including battery maker Duracell, Benjamin Moore paints, Dairy Queen ice cream and car insurance provider Geico.
Net income for the Omaha, Nebraska-based conglomerate fell to $4.26 billion, or $2,592 per Class A share, during the quarter, from the $5 billion, or $3,042 per Class A share, that it reported in the same quarter a year ago. Operating profit declined 11 percent to $4.12 billion, or $2,505 per Class A share, from $4.61 billion, or $2,803 per share. Wall Street analysts on average expected operating profit of about $2,791 per Class A share, according to Thomson Reuters.
Buffett, one of the most successful investors of all time, believes that operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely.
The company said costs rose at its insurance businesses, railroads and financial products providers. Investment income fell while insurance underwriting posted a loss of $22 million compared with a profit of $337 million a year ago.
Revenue rose 6% to $57.52 billion. Berkshire’s Class A shares have climbed more than 10 per cent this year. They rose $1,629.80 to close at $270,000 Friday, before the quarterly results were released.
"They had a good quarter," Bill Smead, chief executive of Smead Capital Management Inc in Seattle, which ownsBerkshire shares told Reuters. "The results reflect Berkshire's positioning in the U.S. economy."
At the company’s annual meeting this year, Mr Buffett said that he or his successors would deploy more capital in acquisitions or through investment in the next decade than he has over his 52 years at the helm” The Financial Times reported.