Berkshire Hathaway reports decline in net profit for third straight quarter
09 Aug 2008
Legendary investor Warren Buffett's Berkshire Hathaway Inc has reported a decline in profits for the third straight quarter mainly on the back of pressure from insurance operations. Q2 net income fell 7.6 per cent to $2.88 billion, or $1,859 a share, from $3.12 billion, or $2,018, a year earlier. The Omaha, Nebraska-based company said yesterday, after close of regular trading that profit was $1,465 a share, excluding investment gains.
This beat analyst estimates of $1,352 a share.
Insurances businesses typically provide about half of Berkshire's profit and earnings from underwriting insurance and reinsurance policies fell 43 per cent to $360 million.
''Price competition resulted in fewer opportunities'' to sell reinsurance at acceptable prices, the company said in a regulatory filing.
Berkshire shares are down 18 per cent this year in New York Stock Exchange composite trading, which is their worst first half since 1990.
Analysts said the results did not surprise them at all as the venerable investor had already issued a warning earlier when he said that earnings from 2006 and 2007 should not be expected to continue into 2008.
The worst housing slump since the Great Depression has also had an impact on Berkshire's building-related companies. Earnings fell 26 per cent, to $82 million, at Shaw Industries, the world's largest carpet manufacturer, as sales declined. Profits also declined at furniture stores, jewelry shops and the candy business by 47 per cent to $29 million.
''Pretax earnings in 2008 declined in all of Berkshire's retail operations,'' the company said, citing ''weak local residential housing markets and general economic conditions as well as an overall decline in consumer confidence.''
Earnings from Berkshire's energy and utilities unit decreased 10 per cent to $208 million.
Marmon Holdings Inc, purchased this year, helped increase profit by 11 per cent to $719 million. Its operations include manufacturing and leasing railroad tank cars and making wire and cable products.
Berkshire had about $31 billion in cash as of June 30, most of it in insurance units.
Buffett, ranked the world's richest person by Forbes magazine, has built Berkshire over four decades into a $175 billion holding company.
