Berkshire profit down 4pc in Q1

May 04, 2014 - 3:30:55 am
Microsoft founder Bill Gates (centre) gets tips from Berkshire Hathaway CEO Warren Buffett on how to throw a newspaper during a competition at a trade show at the Berkshire Hathaway meeting in Omaha, Nebraska yesterday.

OMAHA: Warren Buffett’s Berkshire Hathaway Inc said quarterly profit declined 4 percent, falling short of analyst forecasts, as earnings from insurance underwriting declined and bad weather disrupted shipping at its BNSF Railway unit.

Results nonetheless benefited from strength in many businesses, including a one-third increase from underwriting at its Geico car insurance unit, and improvement at economically-sensitive businesses such as its Clayton Homes mobile home unit.

First-quarter net income fell to $4.71bn from $4.89bn, or $2,977, a year earlier. Quarterly operating profit fell 7 percent to $3.53bn from $3.78bn. Book value per share, Buffett’s preferred measure of growth, rose 2.6 percent from year-end to $138,426 from $134,973. Analysts on average expected operating profit of $2,172 per share.

Results were also hurt by an 80 percent drop in gains from derivatives, mainly related to contracts whose value grows faster when the stock market rises. Berkshire said such gains are “often meaningless” in trying to understand the company. “It’s the medium- to long-term results that count,” said Mark O’Hare, a private investor from Brisbane. 

He said the profit shortfall is “consistent with what Buffett has always said: underwriting results will vary from year to year. The key is that it’s a profitable underwriting result.”

O’Hare was speaking in Omaha, where Buffett and Vice Chairman Charlie Munger are welcoming tens of thousands to Berkshire’s annual shareholder weekend, which Buffett calls “Woodstock for Capitalists.” Reuters

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