Berkshire Hathaway reports 9% drop in 3Q on Tesco investment
08 Nov 2014
Warren Buffett's Berkshire Hathaway reported a 9 per cent drop in the third-quarter as against the same period a year ago, when the company reported substantial investment gains, AP reported.
Berkshire said yesterday it earned $4.62 billion, or $2,811 per Class A share, which declined from $5.05 billion, or $3,074 per share, last year.
Revenue was up 10 per cent to $51.2 billion.
Berkshire wrote down the value of its investment in British retailer Tesco by $678 million, and the company's chairman and CEO told CNBC in an interview last month that the Tesco investment was a mistake.
The company cut its Tesco stake to less than 3 per cent last month, from 5.1 per cent last year.
The Tesco write-down came as part of an overall loss of $107 million on Berkshire's investments and derivatives.
The company last year reported $1.39-billion in investment and derivative gains related mostly to deals made during the financial crisis, making for a difficult comparison this year.
The company recorded huge investment gains last year as it prepared to redeem warrants in General Electric and Goldman Sachs for stock, with Mars and Wrigley also repaying Berkshire for crisis-era investments.
According to Buffet, the operating earnings of Berkshire were a better measure of how the company was performing in any given period, as those figures excluded the value of derivatives and investment gains or losses.
Bloomberg reported that the $678-million impairment on Berkshire's Tesco holding was a rare blunder for Buffett, in an otherwise stellar investment record during his five decades leading.
Tesco shares were down about 34 per cent in the third quarter after the company disclosed its profit estimate was overstated.
According to David Kass, a professor at the University of Maryland's Robert H Smith School of business, it was certainly an anomaly. He added Buffett was not perfect, but his batting average was still high.
The company derives most of its income from scores of operating subsidiaries like railroad BNSF, energy utilities, insurers as also a range of manufacturing and retail operations. Those businesses had a better quarter.
BNSF contributed $1.04 billion to quarterly earnings, as against $989 million a year earlier. Results gained from higher revenue tied to industrial and agricultural products.
The utility unit, renamed Berkshire Hathaway Energy Co in April, added $697 million to earnings as against $472 million a year earlier.
In December, it completed the acquisition of Nevada's largest electric utility in December.
