Warren Buffett’s company on Friday reported a 14 percent jump in second-quarter profit as the improving stock market boosted the value of Berkshire Hathaway Inc’s derivative contracts, although the recession continued to weigh on its operating businesses.
The Omaha-based company reported US$3.3 billion in net income, or US$2,123 per share, for the quarter ending June 30.
The figure represents an increase from US$2.88 billion, or US$1,859 per share, in the same period a year ago.
The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of US$1,238.38.
“The headline number looks better because of the derivatives, but it wasn’t the greatest quarter,” said analyst Justin Fuller, who works with Midway Capital Research & Management in Chicago and writes about Berkshire online at www.buffettologist.com.
Berkshire executives typically do not comment on quarterly earnings reports, and they did not respond to an interview request on Friday.
The value of Berkshire’s derivative contracts tied to equity indexes soared during the second quarter, and Berkshire recorded a mostly unrealized US$1.5 billion gain on its derivatives. That result contrasts sharply with the unrealized US$986 million derivative loss Berkshire recorded in the first quarter, and through the first half of this yeat, Berkshire recorded an unrealized US$1.7 billion loss on its derivative contracts.
Berkshire generated revenue of US$29.61 billion in the quarter, down slightly from US$30.09 billion a year ago. The company’s two largest business segments, insurance and utilities, performed moderately well in the quarter, but most of its other subsidiaries struggled because of the weak economy.
In Berkshire’s insurance businesses, which includes Geico and General Reinsurance, underwriting profit fell to US$83 million from US$360 million because the strength of foreign currencies hurt the value of some Berkshire reinsurance reserves that are denominated in foreign currencies such as the euro and British pound.
But insurance investment income offset that by increasing to US$1.16 billion from US$884 million.
Berkshire’s utility division, MidAmerican Energy Holdings Co, contributed US$253 million net income in the quarter. That’s 22 percent higher than the US$208 million net income MidAmerican generated a year ago.
Berkshire said net income plummeted 67 percent at its manufacturing, retail and service businesses to US$239 million from US$719 million, which include many businesses tied to the housing market such as Shaw Carpeting and Acme Brick.
Andy Kilpatrick, the stockbroker-author of Of Permanent Value, the Story of Warren Buffett, said even with the challenges Berkshire’s operating businesses face, Buffett is still delivering better results than many companies.
“He’s grinding out a decent year — one way or another,” Kilpatrick said.
In the first half of this year, Berkshire generated US$1.76 billion in net income, or US$1,136 per share. That’s down 54 percent from the previous year, when Berkshire reported US$3.82 billion net income, or US$2,467 per share.
SEMICONDUCTORS: The firm has already completed one fab, which is to begin mass producing 2-nanomater chips next year, while two others are under construction Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, plans to begin construction of its fourth and fifth wafer fabs in Kaohsiung next year, targeting the development of high-end processes. The two facilities — P4 and P5 — are part of TSMC’s production expansion program, which aims to build five fabs in Kaohsiung. TSMC facility division vice president Arthur Chuang (莊子壽) on Thursday said that the five facilities are expected to create 8,000 jobs. To respond to the fast-changing global semiconductor industry and escalating international competition, TSMC said it has to keep growing by expanding its production footprints. The P4 and P5
DOWNFALL: The Singapore-based oil magnate Lim Oon Kuin was accused of hiding US$800 million in losses and leaving 20 banks with substantial liabilities Former tycoon Lim Oon Kuin (林恩強) has been declared bankrupt in Singapore, following the collapse of his oil trading empire. The name of the founder of Hin Leong Trading Pte Ltd (興隆貿易) and his children Lim Huey Ching (林慧清) and Lim Chee Meng (林志朋) were listed as having been issued a bankruptcy order on Dec. 19, the government gazette showed. The younger Lims were directors at the company. Leow Quek Shiong and Seah Roh Lin of BDO Advisory Pte Ltd are the trustees, according to the gazette. At its peak, Hin Leong traded a range of oil products, made lubricants and operated loading
The growing popularity of Chinese sport utility vehicles and pickup trucks has shaken up Mexico’s luxury car market, hitting sales of traditionally dominant brands such as Mercedes-Benz and BMW. Mexicans are increasingly switching from traditionally dominant sedans to Chinese vehicles due to a combination of comfort, technology and price, industry experts say. It is no small feat in a country home to factories of foreign brands such as Audi and BMW, and where until a few years ago imported Chinese cars were stigmatized, as in other parts of the world. The high-end segment of the market registered a sales drop
Citigroup Inc and Bank of America Corp said they are leaving a global climate-banking group, becoming the latest Wall Street lenders to exit the coalition in the past month. In a statement, Citigroup said while it remains committed to achieving net zero emissions, it is exiting the Net-Zero Banking Alliance (NZBA). Bank of America said separately on Tuesday that it is also leaving NZBA, adding that it would continue to work with clients on reducing greenhouse gas emissions. The banks’ departure from NZBA follows Goldman Sachs Group Inc and Wells Fargo & Co. The largest US financial institutions are under increasing pressure
RSS