Warren Buffett’s company reported an 87 percent jump in its second-quarter profit as the paper value of its investment portfolio increased with the stock market, but it took a roughly US$10 billion writedown on the value of its aircraft parts manufacturing business because of the economic impact of the COVID-19 pandemic.
Berkshire Hathaway Inc on Saturday said that it earned US$26.3 billion, or US$16,314 per Class A share, during the second quarter. That is up from US$14.1 billion, or US$8,608 per share, a year earlier.
Berkshire said it cut the value of its Precision Castparts Corp unit because of how much the pandemic has hurt air travel and businesses that support that airline industry.
Photo: AFP
Precision Castparts cut about 10,000 jobs, or about 30 percent of its workforce, during the first half of the year as it responded to the reduced demand.
Buffett has long said that Berkshire’s operating earnings offer a better view of quarterly performance, because they exclude investments and derivatives, which can vary widely.
They also exclude the Precision Castparts writedown.
By that measure, Berkshire’s operating earnings declined 10 percent to US$5.5 billion, or US$3,420.48 per Class A share, as most of its businesses were hurt by restrictions related to the pandemic. That is down from US$6.1 billion, or US$3,754.83 per share.
The four analysts surveyed by FactSet expected operating earnings per Class A share of US$3,182.06.
The pandemic’s impact on Berkshire’s businesses was significant, but Edward Jones & Co analyst Jim Shanahan said it might not have been as bad as expected, partly because Geico Co insurance unit and BNSF Railway Co unit performed well during the quarter.
Berkshire was holding nearly US$147 billion cash and short-term investments at the end of the second quarter, but Buffett did use US$5.1 billion during the quarter to repurchase Berkshire shares, which is the biggest buyback since Berkshire relaxed its policy on repurchases in 2018.
Buffett also found a way to use more of that cash after the quarter ended.
First, he early last month agreed to buy Dominion Energy Inc’s natural gas pipeline and storage business for US$4 billion and take on US$5.7 billion of Dominion debt.
Then Buffett’s company bought about US$2.1 billion worth of Bank of America stock late last month and early this month to give it control of 11.9 percent of the bank’s stock.
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