Profit climbs 72 per cent at Berkshire Hathaway
03 Nov 2012
Warren Buffett's Berkshire Hathaway Inc saw profit climb 72 per cent in the third quarter thanks to better results from its derivatives book and higher earnings at railroad Burlington Northern Santa Fe.
Net income was up at $3.92 billion, or $2,373 a share, as against $2.28 billion, or $1,380, a year earlier, according to the Omaha, Nebraska-based company's statement released yesterday.
Operating earnings, excluding some investment results, stood at $2,057 a share.
Buffett, made the equity-derivatives bets in the last decade to bet on long-term gains in stock-market indices in the US, Europe and Japan. In case the benchmarks were to fall, as they did in the third quarter, last year, Berkshire would see its liabilities on the contracts climb, pressuring earnings.
Berkshire's Class A shares were down less than 1 per cent to $130,550 yesterday. The company has advanced 14 per cent this year, as against the 12 per cent gain in the Standard & Poor's 500 Index.
Book value, a measure of assets minus liabilities, was up 15 per cent at $111,718 a share compared to the year earlier, the biggest gain since 2010. Buffett who displays the metric prominently on the first page of his annual report said it was the best available indicator of the company's intrinsic value.
With the loss on equity index, derivatives were down to $534 million from $2.09 billion a year earlier and gains from credit- default contracts, in which Buffett bets on the ability of borrowers to repay debt, stood at $316 million as against a loss of $247 million a year earlier.
The legendary investor, completed his biggest takeover, Burlington Northern, in 2010 in a $26.5 billion transaction, which contributed $937 million to earnings, as against $766 million a year earlier on an increase in the volume of shipped consumer products, coal and agricultural goods.