NEW YORK, Nov 5 — Warren Buffett’s Berkshire Hathaway Inc on Saturday posted a US$2.69 billion (RM12.7 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, meanwhile, rose by 20 per cent, as Berkshire benefited from increased demand and prices for new home sales, industrial products and energy, while rising interest rates helped generate more income from insurance investments.
Berkshire took advantage of declining equity markets to add more stocks to its US$306 billion portfolio, buying a net US$3.7 billion in the quarter and building a now 20.9 per cent stake in the oil company Occidental Petroleum Corp.
It also bought back more of its own stock but was cautious, repurchasing US$1.05 billion, similar to the second quarter.
The Omaha, Nebraska-based conglomerate’s cash hoard ended September at US$109 billion, up from US$105.4 billion in June. It spent US$11.6 billion last month to buy an insurance business, Alleghany Corp.
Berkshire’s conservatism may reflect the “significant disruptions” that it said it still sees in supply chains and from events it cannot control, such as the Covid-19 pandemic and Russia-Ukraine conflict.
It also said rising costs hurt results at two of its best-known businesses, the BNSF railroad and Geico auto insurer.
‘Hunkering Down’
“The concern is which of the rising expenses are going to become more permanent,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, who invests more than US$1 billion in Berkshire.
Russo said results reflect “an enterprise hunkering down and conserving resources while it awaits large ‘elephants,’” a term Buffett uses to describe large acquisitions.
The quarterly net loss, equal to US$1,832 per Class A share, compared with a profit of $10.34 billion, or $6,882 per share, a year earlier.
Operating profit 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 were bolstered by the strengthening US dollar, which added US$858 million to the value of Berkshire’s non-dollar denominated debt, and a 21 per cent increase in insurance investment income.
Income from US Treasuries and other debt nearly tripled to US$397 million, as the Federal Reserve aggressively raised short-term interest rates to combat inflation.
Profit rose 6 per cent from Berkshire Hathaway Energy and 20% from manufacturing, service and retail businesses including Clayton Homes. Berkshire said, though, that higher mortgage rates will likely cut into future home sales.
That helped offset a US$2.7 billion after-tax loss from Ian, a strong Category 4 hurricane that slammed into Florida on September 28. Insurance modelers and executives said storm damages could far exceed US$50 billion.
In 2022, Berkshire’s stock has outperformed the Standard & Poor’s 500 .SPX, falling just 4% compared with the index’s 21 per cent decline.
BNSF, GEICO
Profit at BNSF fell 6 per cent as expenses jumped by one-third, including an 80 per cent surge in fuel costs, some of which the railroad passed on to customers through surcharges.
Geico, meanwhile, suffered its fifth straight quarterly underwriting loss, reflecting “significant cost inflation” from damages claims, used car prices and shortages of car parts.
Net results included $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 the changes even if it buys and sells nothing. This causes large quarterly swings in results that Buffett says are usually meaningless.
Buffett, 92, has run Berkshire since 1965.
Investors closely watch Berkshire because of his reputation, and because results from itsdozens of operating units often mirror broader economic trends.
Those units also include estate brokerage, and consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies. — Reuters
