Washington: Berkshire Hathaway yesterday said its quarterly operating profit fell more than analysts expected, as weakness in insurance underwriting, a slowing economy and trade woes weighed on the conglomerate run by billionaire Warren Buffett.
Berkshire’s car insurer Geico suffered a larger number of accident claims, while competition from foreign producers, lower imports and “trade policy” dampened cargo volumes for consumer and agricultural products at its BNSF railroad.
Earnings also barely budged at Berkshire’s manufacturing businesses, where US tariffs hurt sales of gas turbine and pipe products at its Precision Castparts unit, and its service and retailing businesses.
Second-quarter operating profit declined 11 per cent to $6.14 billion, or roughly $3,757 per Class A share, from $6.89bn, or roughly $4,190 per Class A share, a year earlier. Analysts on average expected operating profit of $3,851.28 per share, according to Refinitiv IBES.
Berkshire also said quarterly net income rose 17pc to $14.07bn, or $8,608 per Class A share, from $12.01bn, or $7,301 per Class A share, a year earlier, reflecting higher unrealised gains on Berkshire’s investments.
The US economy’s annualised growth rate slowed to 2.1pc in the second quarter from 3.1pc in the first quarter, as an acceleration in consumer spending was partially offset by declining exports, manufacturing and business investment, reflecting the trade war between the US and China.
Buffett had said in May that a US-China trade war would be “bad for the whole world,” and a full-scale trade war would be “bad for everything Berkshire owns.”
Berkshire ended June with $122.4bn of cash and equivalents, reflecting Buffett’s three-and-a-half-year drought in finding big acquisitions since buying Precision Castparts.
He has instead invested elsewhere, building a $50.5bn stake in iPhone maker Apple and committing $10bn in April to help Occidental Petroleum buy rival Anardako Petroleum. Berkshire has also bought back $2.1bn of its stock this year.
The Omaha, Nebraska-based conglomerate operates more than 90 businesses that also include Dairy Queen ice cream, Fruit of the Loom underwear, and its namesake energy company and real estate brokerage.
Insurance underwriting profit fell 63pc to $353 million. Geico’s pre-tax underwriting gain fell 42pc, as a higher ratio of loss claims to premiums earned offset growth in policies written.