Reuters — The fall in U.S. stock prices punished Berkshire Hathaway Inc.’s second-quarter results, as the conglomerate run by billionaire Warren Buffett reported a loss of $43.8 billion on Saturday.
Berkshire still generated nearly $9.3 billion in operating profit, as gains from reinsurance and the BNSF railroad offset fresh losses at auto insurer Geico, where parts shortages and higher used vehicle prices increased the number of accidents.
Rising interest rates and dividends helped insurers generate more cash from investments, while the stronger US dollar boosted profits from European and Japanese debt investments.
Despite the huge net loss, “the results show Berkshire̵7;s resilience,” said Edward Jones & Co. analyst James Shanahan. which rates Berkshire as “neutral”.
“Companies are performing well despite higher interest rates, inflationary pressures and geopolitical concerns,” he said. “It gives me confidence in the company if there is a recession.”
Berkshire also slowed its share buybacks, including its own, although it still had $105.4 billion in cash it could use.
Investors are watching Berkshire closely because of Mr. Buffett’s reputation and because the results of the Omaha, Nebraska-based conglomerate’s dozens of operating units often reflect broader economic trends.
These entities include fixed income such as its namesake energy company, several industrial companies and familiar consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.
“Berkshire is a microcosm of the broader economy,” said Cathy Seifert, a CFRA Research analyst with a “hold” rating on Berkshire. “Many businesses are enjoying improved demand, but they are not immune to higher input costs from inflation.”
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 have not been material, despite higher costs for materials, shipping and labor.
Net earnings suffered from Berkshire’s $53 billion in losses from investments and derivatives, including declines of more than 21% in three major holdings: Apple Inc., Bank of America Corp. and American Express Co.
Accounting rules require Berkshire to report the losses with its earnings even if it buys and sells nothing.
Mr. Buffett urges investors to ignore the fluctuations, and Berkshire stands to make money if the stock rises 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 Standard & Poor’s 500 fell 16% during the quarter.
Berkshire’s quarterly net loss equaled $29,754 per A share and compared with net income of $28.1 billion, or $18,488 per A share, a year earlier.
Operating profit of $9.28 billion, or about $6,326 per A share, was up 39% from $6.69 billion a year earlier.
That included $1.06 billion in foreign exchange gains on foreign debt. Revenue increased 10% to $76.2 billion.
Geico suffered a pretax underwriting loss of $487 million, its fourth straight quarterly loss.