Warren Buffett’s Berkshire Hathaway reported a two-thirds drop in profit in the third quarter from the same period last year, while the cash pile set a new record despite an increase in share buybacks.
The sprawling group said Saturday that its net profit fell to $10.34 billion, or $6,882 per Class A share, in the third quarter.
Berkshire’s operating income, which Buffett favors as a measure of performance because it eliminates volatility in its financial portfolio, rose 18 percent from the previous year to $6.5 billion.
Even as the investment firm ramped up share buybacks to buy back $7.6 billion of its stock in the third quarter, bringing its nine-month total to just over $20 billion, its cash pile increased to a record $149 billion.
Some longtime investors have been frustrated by Buffett’s reluctance to seal a big deal and run Berkshire’s growing cash pile, as the legendary investor has held off on high valuations.
The conglomerate’s diverse business units allowed it to ride the broad economic recovery in the wake of the Covid-19 pandemic, but it has now left it exposed to the subsequent challenges created by the public health crisis.
Although its rail division’s operating revenue rose 11.8 percent from a year ago to $4.59 billion, Berkshire acknowledged that the business “saw an increase in costs for materials, freight and other inputs,” which it attributed to “ongoing disruptions” in the chains. global supply.
Berkshire also warned that it does not expect significant increases in aviation revenue or profits in the near term at Precision Castparts, the metals maker acquired in 2016, due to supply chain disruptions and the ongoing impact of the pandemic on commercial air travel.
Some of the company’s other businesses, which include housing, manufacturing and consumer retail, paint a relatively strong picture of customer demand, but have also been impacted by reduced input availability due to disruptions along the supply chain.
One of the performance weaknesses was Berkshire’s insurance business, which saw losses increase to $784 million in the three months to September due to catastrophic events such as Hurricane Ida in the United States and floods in Europe. However, insurance investment income rose slightly in the third quarter to $1.2 billion from $1 billion during the same period last year.
Class A shares of Berkshire are up 26.3 percent so far this year, on par with the S&P 500.
The fair value of Berkshire’s equity investments rose less than 1 percent to $310.7 billion between June 30 and the end of September. About 70 percent of the value of that portfolio is comprised of four companies; American Express, Apple, Bank of America and Coca-Cola.
Berkshire said it owned $128.4 billion of Apple stock at the end of September, up from $124.3 billion at the end of June, the largest increase in that quartet. Coke investment was the only one of the four that fell during the September quarter.