Buffett’s Berkshire suffers in pandemic even as Apple boosts profit

NEW YORK: Warren Buffett's Berkshire Hathaway Inc reported lower quarterly operating results on Saturday and said the coronavirus pandemic may cause further damage, even as gains in stocks such as Apple Inc fuelled a more than $30 billion overall profit.

While some Berkshire operating businesses have rebounded from their spring depths, low interest rates hurt profit from insurance businesses, and its Precision Castparts aircraft and industrial parts unit projected thousands of additional job losses.

Berkshire also repurchased a record $9.3 billion of its underperforming stock in the third quarter, as Buffett remained unable to find the huge acquisitions he wants to spur growth.

Buybacks totaled $16 billion from January to September, and Berkshire appeared to spend at least $2.3 billion more on stock repurchases in October because its share count dropped.

Third-quarter operating profit fell 32% to $5.48 billion, or about $3,488 per Class A share, from $8.07 billion a year earlier.

Berkshire's net income, meanwhile, rose 82% to $30.1 billion, or $18,994 per Class A share, from $16.5 billion, or $10,119 per share.

Net results included $24.8 billion of gains from investments such as Apple. That stock rose 27% during the third quarter and at $111.7 billion is by far Berkshire's biggest stock holding.

Berkshire may have sold some Apple stock because the stake should have been a few billion dollars higher, based on previously disclosed stakes, if none was sold.

Net results are volatile because an accounting rule requires Berkshire to report gains and losses on its stock holdings even if it does no buying and selling.

The company posted a $26.3 billion second-quarter profit, but lost nearly $50 billion in the first quarter. It ended September with $145.7 billion of cash and equivalents.

Berkshire bought Precision for $32.1 billion in 2016 in its largest-ever acquisition, but the business has been hit hard by the pandemic, including through a $9.8 billion second-quarter writedown.

Precision's third-quarter pretax profit fell 80%, and expects by year end to have shed 40% of its workforce from the end of 2019.

That equates to roughly 13,400 jobs, or 3,400 more than Berkshire previously disclosed had been lost.

While Berkshire took no major writedowns in the third quarter, it said they may be needed in the fourth quarter if the pandemic's impact proves worse than it expects.

Profit from insurance operations fell 58% to $802 million, reflecting lower results at its Geico car insurer, losses from Hurricanes Laura and Sally, and lower income from investments as interest rates tumble.

Geico awarded drivers $2.5 billion of credits on policy renewals earlier this year, and Berkshire said its accounting for those credits will likely hurt underwriting results through March 2021.

Year-over-year profit fell 8% at the BNSF railroad, reflecting lower shipping volumes.

Results improved in Berkshire's energy businesses, and profit at its real-estate brokerage more than doubled as low interest rates drove more people to buy homes.

"The market will be encouraged by the buybacks," said Cathy Seifert, an analyst at CFRA Research with a "hold" rating on Berkshire. "Many companies halted buybacks to preserve resources during the pandemic, though because Berkshire doesn't pay a dividend the amount it is returning to shareholders pales bit."