Billionaire Warren Buffett's Berkshire Profit Rises 46%

Published: Saturday August 3, 2013 MYT 7:10:00 AM
Updated: Saturday August 3, 2013 MYT 7:12:36 AM
Billionaire Warren Buffett's Berkshire Profit Rises 46%

NEW YORK: Warren Buffett's Berkshire Hathaway Inc on Friday said second-quarter profit rose 46 percent, reflecting improvement in such businesses as car insurance, energy and railroads, and gains from investments and derivatives.

Operating results topped analyst forecasts, reflecting how many of Berkshire's more than 80 businesses are benefiting from a growing U.S. economy.

Net income for the Omaha, Nebraska-based company rose to $4.54 billion, or $2,763 per Class A share, from $3.11 billion, or $1,882 per share, a year earlier.

Operating profit rose 5 percent to $3.92 billion, or $2,384 per Class A share, from $3.72 billion, or $2,252 per share.

Analysts on average expected operating profit of $2,170 per share, according to Thomson Reuters I/B/E/S.

"It's about as good as you could expect," said Jeff Matthews, a Berkshire shareholder and author of "Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett." "Berkshire's earnings are very similar to the economy - not shooting the lights out but still growing."

Revenue rose 16 percent from a year ago to $44.69 billion. Book value per Class A share, Buffett's preferred measure of growth, rose 2 percent from the end of March to $122,900.

Profit rose 10 percent at the Burlington Northern Santa Fe railroad to $884 million as revenue increased from shipping consumer products, industrial products and coal.

Rising demand and prices helped drive a 10 percent increase in profit from its MidAmerican Energyutilities and energy unit to $279 million.

Meanwhile, pretax underwriting gains more than doubled at the Geico car insurance unit to $336 million, as premiums earned grew by 11 percent while underwriting expenses fell.

This helped offset a drop in underwriting gains in reinsurance operations, including General Re, which resulted in part from catastrophe losses tied to European floods.

Other businesses benefiting from increased demand included the NetJets private plane unit and theClayton Homes manufactured housing unit.

HEINZ REDUCES BERKSHIRE CASH STAKE

The quarter also included $622 million of net gains from investments and derivatives, compared with a year-earlier $612 million net loss.

Accounting rules require Berkshire to report these sums with its earnings, and Buffett believes the amounts in any given quarter are often meaningless.

Berkshire's cash stake shrank during the quarter to $35.7 billion from $49.1 billion.

This largely reflected Berkshire's decision to spend about $12.3 billion in June toward the purchase with Brazilian firm 3G Capital of ketchup maker H.J. Heinz Co.

Another $5.6 billion in cash will go toward the purchase of Nevada utility NV Energy Inc by MidAmerican Energy, which is expected to close in the first quarter of 2014.

And this week, building supply unit MiTek Industries said it bought Benson Industries LLC, which designs curtain wall systems for buildings such as One World Trade Center and the United Nations Secretariat, for an undisclosed price.

Berkshire also owns tens of billions of dollars of common stocks such as Coca-Cola Co, International Business Machines Corp and Wells Fargo & Co.

In Friday trading, Berkshire Class A shares closed up $800 at $176,500. Its Class B shares rose 54 cents to $117.82.- Reuters

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