Warren Buffett’s Berkshire Hathaway Inc said on Friday that its third-quarter profit fell 24 percent from a year ago because of a sharp decline in the value of its equity derivative contracts following the wild swings in the stock market this summer.
Paper losses aside, most of the mammoth company’s business segments, including its railroad, insurance underwriting and manufacturing operations, reported improved earnings for the quarter.
Berkshire said net income was US$2.28 billion, or US$1,380 per Class A share, for the three months ended on Sept. 30. That is down from net income of nearly US$3 billion, or US$1,814 per Class A share, a year earlier.
On a Class B share basis, the company’s earnings amounted to US$0.92 a share, down from US$1.21 a share.
Berkshire’s results fell short of the US$1.20 per Class B share three analysts surveyed by FactSet had expected on average.
Revenues slid to US$33.7 billion from US$36.3 billion last year.
The US-based company recorded a loss from its derivative contracts of about US$1.59 billion, much wider than the loss of US$95 million booked the year before.
“A lot of that will be reversed this quarter because the market’s come back,” said Jeff Matthews, a shareholder who wrote Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett.
All told, Berkshire’s investment gains and derivative losses combined to sap US$1.53 billion from its profit in the third quarter. A year earlier, the company’s derivatives and investments added US$202 million to quarterly net income.
The true value of the derivatives will not be clear for at least several years because they do not mature until an average of about 10 years from now. However, Berkshire is required to estimate their value every time the company reports earnings. Buffett has said he believes the contracts will ultimately be profitable because the premiums are being invested.
Berkshire executives say the company’s operating earnings are a better measure of how the company is performing in any given period because those figures exclude its derivatives and investment gains or losses.
The company said its operating income climbed 37 percent to US$3.81 billion in the quarter from US$2.79 billion a year earlier.
Besides investments, Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry firms, but its insurance and utility businesses typically account for more than half of the company’s net income.
In the latest quarter, most of the company’s business segments turned in annual gains in earnings, led by insurance underwriting.
The segment generated net earnings of US$1.09 billion, up from US$199 million a year earlier.
That included an after-tax gain of about US$855 million as the company reduced its estimate of reinsurance contract liabilities and changes in currency exchange rates.
Japanese technology giant Softbank Group Corp said Tuesday it has sold its stake in Nvidia Corp, raising US$5.8 billion to pour into other investments. It also reported its profit nearly tripled in the first half of this fiscal year from a year earlier. Tokyo-based Softbank said it sold the stake in Silicon Vally-based Nvidia last month, a move that reflects its shift in focus to OpenAI, owner of the artificial intelligence (AI) chatbot ChatGPT. Softbank reported its profit in the April-to-September period soared to about 2.5 trillion yen (about US$13 billion). Its sales for the six month period rose 7.7 percent year-on-year
CRESTING WAVE: Companies are still buying in, but the shivers in the market could be the first signs that the AI wave has peaked and the collapse is upon the world Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday reported a new monthly record of NT$367.47 billion (US$11.85 billion) in consolidated sales for last month thanks to global demand for artificial intelligence (AI) applications. Last month’s figure represented 16.9 percent annual growth, the slowest pace since February last year. On a monthly basis, sales rose 11 percent. Cumulative sales in the first 10 months of the year grew 33.8 percent year-on-year to NT$3.13 trillion, a record for the same period in the company’s history. However, the slowing growth in monthly sales last month highlights uncertainty over the sustainability of the AI boom even as
AI BOOST: Next year, the cloud and networking product business is expected to remain a key revenue pillar for the company, Hon Hai chairman Young Liu said Manufacturing giant Hon Hai Precision Industry Co (鴻海精密) yesterday posted its best third-quarter profit in the company’s history, backed by strong demand for artificial intelligence (AI) servers. Net profit expanded 17 percent annually to NT$57.67 billion (US$1.86 billion) from NT$44.36 billion, the company said. On a quarterly basis, net profit soared 30 percent from NT$44.36 billion, it said. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said earnings per share expanded to NT$4.15 from NT$3.55 a year earlier and NT$3.19 in the second quarter. Gross margin improved to 6.35 percent,
BUST FEARS: While a KMT legislator asked if an AI bubble could affect Taiwan, the DGBAS minister said the sector appears on track to continue growing The local property market has cooled down moderately following a series of credit control measures designed to contain speculation, the central bank said yesterday, while remaining tight-lipped about potential rule relaxations. Lawmakers in a meeting of the legislature’s Finance Committee voiced concerns to central bank officials that the credit control measures have adversely affected the government’s tax income and small and medium-sized property developers, with limited positive effects. Housing prices have been climbing since 2016, even when the central bank imposed its first set of control measures in 2020, Chinese Nationalist Party (KMT) Legislator Lo Ting-wei (羅廷瑋) said. “Since the second half of
RSS