Warren Buffett’s Berkshire Hathaway reported a two-thirds drop in third-quarter profits compared to the same period last year, while its cash flow hit a new record despite rising share buybacks.
The sprawling conglomerate said on Saturday that its net profit fell to $ 10.34 billion, or $ 6,882 per Class A share, in the third quarter.
Berkshire’s operating profit, which Buffett prefers as a performance measure because it eliminates fluctuations in its stock portfolio, rose 18% from the previous year to $ 6.5 billion.
Even though the investment firm stepped up its share buybacks to buy back $ 7.6 billion of its own shares in the third quarter, bringing the nine-month total to just over $ 20 billion, its cash flow has hit a record $ 149 billion.
Some longtime investors have become frustrated with Buffett’s reluctance to close a big deal and cash in on Berkshire’s growing liquidity as the legendary investor has retreated to high valuations.
The conglomerate’s various business units have allowed it to take advantage of the vast economic recovery from the Covid-19 pandemic, but now leave it exposed to the subsequent challenges that the public health crisis has created.
Although operating revenue for its rail division increased 11.8% from a year ago to $ 4.59 billion, Berkshire acknowledged that the company “experienced material costs, freight and other higher inputs, “which she attributed to” ongoing disruptions “in global supply chains.
Berkshire also warned that it did not expect a significant increase in aerospace revenue or profits in the near term at Precision Castparts, the metal fabrication company purchased in 2016, due to disruption in the supply chain. supply and the continuing impact of the pandemic on commercial air travel.
Some of the company’s other activities, spanning housing, manufacturing and retail, paint a relatively robust picture of customer demand, but have also been affected by reduced input availability caused by disruptions along the way. the supply chain.
One of the weak spots in performance was Berkshire’s insurance underwriting business, which saw losses increase to $ 784 million in the three months leading up to September due to catastrophic events such as the Hurricane Ida in the United States and flooding in Europe. However, insurance investment income edged up in the third quarter to $ 1.2 billion from $ 1 billion in the same period last year.
Berkshire’s Class A shares have risen 26.3% so far this year, on par with the benchmark S&P 500.
The fair value of Berkshire’s equity investments rose less than 1% to $ 310.7 billion between June 30 and the end of September. About 70 percent of the value of this portfolio is made up of four companies; American Express, Apple, Bank of America and Coca-Cola.
Berkshire said it held $ 128.4 billion in Apple shares at the end of September, up from $ 124.3 billion at the end of June and marking the largest increase in this quartet. Coke investment was the only one of the four to decline in the September quarter.