Warren Buffett's Berkshire Hathaway reports $25 billion loss on paper stock losses for 4th quarter

With the biggest value drop of $3 billion in his company's investments, the world's 3rd most richest person has struggled to find attractive acquisitions recently.

Published: 24th February 2019 04:19 PM  |   Last Updated: 24th February 2019 04:19 PM   |  A+A-

Berkshire Hathaway Chairman and CEO Warren Buffett (File | AP)

By Associated Press

OMAHA(NEBRASKA): Warren Buffett's company recorded a $25 billion loss in the fourth quarter because of a big drop in the paper value of several of its stock investments.

Buffett said on Saturday that Berkshire Hathaway's businesses are performing well overall, but it has to record the market value of its stock holdings at the end of each quarter and Buffett has struggled to find attractive acquisitions recently. Berkshire lost $25.4 billion, or $10.31 per Class B share, in the quarter. That's down from last year's profit of $32.6 billion, or $13.19 per B share.

The biggest drop in the value of Berkshire's investments was a $3 billion write off it recorded on its Kraft Heinz stake. Berkshire controls roughly 26 percent of that food maker run by the Brazilian firm of 3G Capital, which is known for its tight cost controls.

Edward Jones analyst Jim Shanahan said the question now is how much Berkshire wants to continue working with 3G Capital, which it teamed up with to buy Kraft and Heinz. Shanahan said the Kraft Heinz investment hasn't paid off as much as initially hoped, and now some question whether 3G's lean operating model can prosper at a consumer goods company that needs significant marketing investments. "I think this relationship has permanently soured," Shanahan said.

In the fourth quarter, Berkshire's revenue grew to $63.7 billion, up from $58.8 billion in 2017. Buffett has long said Berkshire's operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely.

By that measure, Berkshire reported operating earnings of $5.7 billion, or about $2.32 per B share. That's up from $3.3 billion, or about $1.35 per share. The five analysts surveyed by FactSet expected Berkshire to report operating earnings of $9.58 per share for the full year. Berkshire reported operating earnings of $24.8 billion, or about $10.05 per B share. Berkshire said its 2018 revenue grew to $247.8 billion, up from $239.9 billion the previous year.

Shanahan said the operating earnings appeared solid, but he was disappointed Buffett didn't find more ways to use Berkshire's roughly $130 billion in cash and short term investments. Berkshire's BNSF railroad added $5.2 billion to the company's net income last year, up from $4 billion the previous year. The company's utilities added $2.6 billion net income, up from $2 billion.

Berkshire Hathaway Inc. owns more than 90 companies, including the railroad and clothing, furniture and jewelry businesses. Its insurance and utility businesses typically account for more than half of the company's net income. The company also has major investments in such companies as Apple, American Express, Coca-Cola and Wells Fargo & Co.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp