Warren Buffett’s Berkshire Hathaway saw its quarterly operating profit rise a solid 14% as it ended the three months to September with an even larger pile of cash that it hasn’t been able to use.
The company reported on Saturday that third-quarter operating income rose to $US7.86 billion, from $US6.88 billion a year earlier.
Net income though fell 11% to $US16.52 billion, from $US18.54 billion, thanks to lower realised and unrealised gains from Berkshire’s huge investments in shares, cash, and bonds.
A US accounting rule requires earnings to include the unrealised gains even if Berkshire has no plans to sell the shares and bonds. Buffett and Berkshire have repeatedly said the resulting volatility can mislead investors.
Berkshire ended September with a record $US128.2 billion of cash, despite repurchasing $US700 million of shares (all non-voting securities) in the quarter.
Buffett has gone nearly four years since making a major acquisition for Berkshire, whose stock price has lagged the broader market by the most since 2009.
Class A shares of Berkshire closed Friday at $US323,400, up 5.7% in 2019, well behind the 22.3% gain in the S&P 500. The company’s Class B shares closed at $US215.83, also up 5.7%.
Berkshire’s railroad arm, BNSF, was able to boost profit 5% to $US1.47 billion as cost-cutting helped offset lower revenue as demand for consumer, coal, industrial and agricultural products declined, the latter in part because of Trump’s trade wars especially with China.
Berkshire also blamed US tariffs for cutting into sales of gas turbine and pipe products from its Precision Castparts unit through higher steel and aluminium costs.
Berkshire’s insurance underwriting profit was essentially unchanged at $US440 million in the quarter, as improved results from reinsurance offset higher loss claims at the Geico car insurance arm.
Berkshire warned that Typhoon Hagibis, which caused widespread damage in Japan in October, will hit fourth-quarter underwriting results.
Profit from the company’s huge manufacturing, services and retailing arms rose 2%, to $US2.46 billion, as higher sales from Berkshire’s auto dealer and Clayton Homes mobile home units offset lower revenue from the Duracell battery, Forest River RV, and the clothing and footwear businesses (Fruit of the Loom and New Balance).
And Berkshire said tax credits saw Berkshire Hathaway Energy boost profit 8%, to $US1.18 billion.