By Jonathan Stempel
November 5 (Reuters) – Warren Buffett’s Berkshire Hathaway Inc. BRKa.N saturday displayed a $2.69 billion loss in the third quarter while rising inflation, falling equity investments and a big loss from Hurricane Ian offset the improvement in many conglomerates companies.
OOperating profit, meanwhile, rose 20% as Berkshire benefited from higher demand and prices for new home sales, industrial products and energy, while higher interest rate helped to generate more income through insurance investments.
Berkshire took advantage of the stock market decline to add more actions to its $306 billion portfolio, purchase net $3.7 billion in the quarter and building a now 20.9% stake in the oil company Western Petroleum Corporation OXY.N.
He also bought back more of his own shares, but was cautious, buying back $1.05 billion, similar to the second trimester.
The Omaha, Nebraska-based conglomerate’s cash hoard ended September at $109 billion, down from $105.4 billion in June. He spent $11.6 billion last month to buy an insurance company, Alleghany Corp.
Berkshire’s conservatism may reflect the “significant disruptions” it said it still sees in supply chains and events it cannot control, such as the COVID-19 pandemic and the Russia-Ukraine conflict. .
He also said rising costs had hurt results at two of his best-known companies, railroad BNSF and car insurer Geico.
” HANG ON “
“The concern is which of the growing expenses are going to become more permanent,” said Tom Russo, a partner at Gardner, Russo & Quinn in Lancaster, Pennsylvania, which invests more than $1 billion in Berkshire.
Russo said the results reflect “a company that hides and conserves resources while waiting for big ‘elephants,'” a term Buffett uses to describe big acquisitions.
The quarterly net loss, equal to $1,832 per Class A share, compared with earnings of $10.34 billion, or $6,882 per share, a year earlier.
Operating profit rose to $7.76 billion, or about $5,294 per Class A share, from $6.47 billion, or $4,331 per share, a year earlier.
Results were supported by the strengthening US dollar, which added $858 million to the value of Berkshire’s non-dollar-denominated debt, and a 21% increase in income from insurance investments.
Income from US Treasuries and other debt nearly tripled to $397 million as the Federal Reserve aggressively raised short-term interest rates to fight inflation.
Profits rose 6% for Berkshire Hathaway Energy and 20% for manufacturing, service and retail businesses, including Clayton Homes. Berkshire said, however, that higher mortgage rates would likely reduce future home sales.
It helped offset a $2.7 billion after-tax loss caused by Ian, a powerful Category 4 hurricane that hit Florida on September 28. Insurance model makers and executives said storm damage could well exceed $50 billion.
In 2022, Berkshire’s stock outperformed the Standard & Poor’s 500 .SPXdown just 4% from the index’s 21% decline.
BNSF’s profit fell 6% as expenses jumped by a third, including an 80% increase in fuel costs, some of which the railway passed on to customers through surcharges.
Geico, meanwhile, suffered its fifth straight quarterly underwriting loss, reflecting “significant cost inflation” from damage claims, used car prices and auto parts shortages.
The net results included $10.45 billion in investment and derivatives losses as share prices of many large investments in Berkshire other than Apple Inc. AAPL.O tear down.
Accounting rules require Berkshire to report changes even if it doesn’t buy or sell anything. This causes large quarterly fluctuations in results that Buffett says are generally meaningless.
Buffett, 92, has run Berkshire since 1965.
Investors are watching Berkshire closely because of its reputation and because the results of hisdozens of operating the units often reflect broader economic trends.
These units also include real estate brokerage and consumer brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.
(Reporting by Jonathan Stempel in New York; Editing by Mark Potter and Chizu Nomiyama)
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