Sun, Aug 06, 2006 - Page 11 News List

Warren Buffett's firm posts 62 percent profit growth

BLOOMBERG

Warren Buffett's Berkshire Hath-away Inc said that second-quarter profit rose 62 percent on investment gains and higher interest income from its insurance units.

Net income climbed to US$2.35 billion, or US$1,522 share, from US$1.45 billion, or US$941, a year earlier, the Omaha, Nebraska-based company said in a statement on Friday on its Web site. Profit excluding the gains was US$2.1 billion, or US$1,332 a share.

Berkshire, which relies on insurance for about half the company's profit, benefited from higher US interest rates after putting policyholders' premiums in short-term "cash" investments.

Income from interest and dividends rose 34 percent to US$782 million after the Federal Reserve raised short-term rates 2 percentage points to 5.25 percent in the year ended June 30.

Buffett, the company's billionaire chairman, also virtually eliminated his foreign currency investments, lowering his forward contracts by US$4.2 billion during the quarter to US$1.2 billion even as the US dollar weakened against major currencies.

Forwards are agreements to purchase foreign currencies on a future date at a preset price.

He predicts the US current account deficit will hurt the nation's currency. Buffett told investors in March he favored a new hedge against the US dollar's decline -- investments in international companies. His first major acquisition, the US$4 billion purchase of an 80 percent stake in Israeli toolmaker Iscar Metalworking Cos, carries new risks, the company said in Friday's filing.

"Berkshire is subject to increased risks from unstable political conditions and civil unrest in international markets" as a result of the purchase, the company said. With the Middle East in new turmoil, "business operations could be adversely affected directly through the loss of human resources and destruction of production facilities."

The company also has substantial operations in Korea, Berkshire said.

Buffett, dubbed the world's greatest investor by biographer Robert Hagstrom, is the second-richest man in the world after Microsoft Corp chairman Bill Gates.

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