Kraft Stake Boosts Berkshire -- WSJ
August 06 2016 - 3:03AM
Dow Jones News
By Maria Armental and Anupreeta Das
Berkshire Hathaway Inc.'s second-quarter profit rose on
investment gains tied to its stake in Kraft Heinz Co. and higher
underwriting profit at car insurer Geico Corp.
Results fell short of analysts' projections.
The conglomerate, led by renowned investor Warren Buffett, has
been turning to acquisitions as a way to drive profit. The
85-year-old Mr. Buffett has made it known he is open to buying more
but, true to his tenets, has also noted the importance of finding
the right manager.
Berkshire already pulls in income from a railroad, utilities,
industrial manufacturers, home builders, branded-food sellers and
even an auto dealership. In January, it folded into its stable
aircraft parts supplier Precision Castparts Corp., in what was its
largest acquisition to date.
At Berkshire's core is an insurance business, which brings in
billions of dollars of "float," the upfront premiums customers pay
and which Berkshire is able to invest for its own benefit.
Insurance float, the engine that has fueled Berkshire's
expansion, rose to $90 billion in the latest period, while
Berkshire's insurance underwriting business, which includes Geico
Corp., swung to a $337 million operating profit.
Insurance-investment income, meanwhile, edged up to $978
million, and operating profit at the noninsurance businesses --
which include the railroad, utilities and energy segments -- rose
13% to $1.89 billion.
Overall, Berkshire's net income rose 25% to $5 billion, or
$3,042 a Class A share, while operating profit, which excludes some
investment results, rose 18% to $4.61 billion, or $2,803 a Class A
share. Revenue rose 6% to $54.46 billion.
Analysts surveyed by Thomson Reuters had projected $2,910.8 a
share in operating profit on $56.47 billion in revenue.
Berkshire reported $394 million in investment gains, a
three-fold increase from the year-ago period, thanks in part to its
stake in Kraft.
Book value, Mr. Buffett's preferred yardstick for measuring net
worth, rose 2.9% to $160,009 per Class A equivalent share as of
June 30. Last year, Berkshire reported a 2.4% increase in book
value for the first six months of the year.
Class A shares closed Friday at $218,010, up 10% for the
year.
Write to Maria Armental at maria.armental@wsj.com and Anupreeta
Das at anupreeta.das@wsj.com
(END) Dow Jones Newswires
August 06, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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