Nov 7, 2014 6:53 PM

Berkshire's earnings down 9 percent from year ago

The Associated Press

OMAHA, Neb. (AP) Warren Buffett's Berkshire Hathaway reported a 9 percent drop in third-quarter profit versus the same period a year ago, when the company had large investment gains.

Berkshire said Friday it earned $4.62 billion, or $2,811 per Class A share. That's down from $5.05 billion, or $3,074 per share, last year.

Revenue grew 10 percent to $51.2 billion. Buffett is chairman and CEO of the Omaha, Nebraska-based conglomerate.

Berkshire wrote down the value of its investment in British retailer Tesco by $678 million. Buffett told CNBC in an interview last month that the Tesco investment was a mistake. Berkshire cut its Tesco stake to less than 3 percent last month, from 5.1 percent last year.

The Tesco writedown was part of an overall loss of $107 million on Berkshire's investments and derivatives.

Last year the company had $1.39 billion in investment and derivative gains related mostly to deals made during the financial crisis, making for a difficult comparison this year.

Berkshire recorded big investment gains last year as it prepared to redeem warrants in General Electric and Goldman Sachs for stock. Mars and Wrigley also repaid Berkshire for crisis-era investments.

The four analysts surveyed by FactSet expected Berkshire to report earnings per share of $2,560.29.

Berkshire Hathaway officials do not generally comment on quarterly results, and no one responded immediately Friday to an inquiry about on the report.

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's operating earnings were $4.7 billion, or $2,876 per share, during the quarter. That was 29 percent higher than last year's $3.66 billion, or $2,228 per share.

Many of Berkshire's operating businesses performed well during the quarter, and the company reported holding $62.4 billion cash at the end of the quarter, up from $42 billion last year.

Andy Kilpatrick, who wrote "Of Permanent Value, the Story of Warren Buffett," said Berkshire's subsidiaries are generating solid profits, and the company is in good position for a significant acquisition if Buffett finds the right business.

"He's really piling up the cash," Kilpatrick said.

Berkshire's BNSF railroad delivered $1.035 billion net income in the quarter, up from $989 million a year ago as it handled 2 percent more carloads of freight and charged 3 percent more per car on average.

And Berkshire's utility unit generated $697 million net income thanks to last year's addition of NV Energy in Nevada. Last year, the utility division reported $472 million in the quarter.

Berkshire insurance underwriting profit improved to $629 million from last year's $170 million because there were no major catastrophes this year.

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.


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