Profit jumps 29 per cent at Berkshire Hathaway as proceeds from financial crisis deals roll in
Nov 4, 2013 / 9:16 am
OMAHA, Neb. - Warren Buffett's company reported a 29 per cent jump in third-quarter profit as it collected some of the proceeds from deals made during the financial crisis.
Berkshire Hathaway earned $5.05 billion, or $3,074 per Class A share, during the quarter. That's up from $3.92 billion, or $2,373 per Class A share, in the same period last year.
Berkshire's revenue grew 13 per cent to $46.5 billion.
The biggest factor in the results was a $1.2 billion investment gain Berkshire recorded as it prepared to redeem warrants in General Electric and Goldman Sachs for stock. Mars and Wrigley also repaid Berkshire this fall for a crisis-era investment.
Berkshire said Mars and Wrigley repaid $5.08 billion plus interest on Oct. 1 for money it loaned Mars to help it acquire Wrigley.
Berkshire's operating companies, which include major insurers like Geico, big utilities like MidAmerican Energy and an eclectic mix of manufacturing, retail and service businesses, generally performed well in the quarter.
"Their core businesses, excluding insurance, were actually much better than I expected," Edward Jones analyst Tom Lewandowski said.
The BNSF railroad contributed $989 million to Berkshire's quarterly profit as it hauled 4 per cent more carloads of freight and increased prices 1 per cent. That's up from $937 million last year.
Berkshire Hathaway officials do not generally comment on quarterly results, and no one was available Friday to comment on the report.
Andy Kilpatrick, who wrote "Of Permanent Value, the Story of Warren Buffett," said Berkshire is on track for all solid year with so many of its subsidiaries growing steadily.
Berkshire held roughly $42 billion in cash at the end of the quarter, which leaves about $22 billion for investments because Buffett prefers to keep at least $20 billion on hand.
"Any big acquisition could change things at a moment's notice, and he has the resources to do that," Kilpatrick said.
Berkshire Hathaway acquired half of ketchup maker Heinz in June as part of a $23.3 billion deal. Berkshire teamed up with investment firm 3G Capital to acquire Heinz.
Because Berkshire only owns half of Heinz, it doesn't list it as a subsidiary. Berkshire said it lost $76 million on Heinz in its first months of ownership.
The three analysts surveyed by FactSet expected Berkshire to report operating earnings per Class A share of $2,424.26. Berkshire reported $2,228 operating earnings per A share, which excludes investment gains.
Buffett has said Berkshire's operating earnings are a better measure of how the company is performing in any given period, because those figures exclude the value of derivatives and investment gains or losses.
Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry firms. Its insurance and utility businesses typically account for more than half of the company's net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
Follow Josh Funk online at www.twitter.com/funkwrite
Berkshire Hathaway Inc.: www.berkshirehathaway.com
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