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Sunday, August 8, 2010

Berkshire Profit Falls 40% on Derivatives Losses - DealBook Blog - NYTimes.com

AUGUST 6, 2010, 6:31 PM

Berkshire Profit Falls 40% on Derivatives Losses

Warren E. Buffett’s company, Berkshire Hathaway, reported late Friday that its second-quarter net income fell 40 percent, as declining stock prices depressed the value of its derivatives contracts, Reuters reports.
Operating profit nevertheless climbed 73 percent, helped by the takeover of the Burlington Northern Santa Fe railroad, improvement in insurance underwriting results and a turnaround in performance at the NetJets corporate plane unit.
More from Reuters:
Berkshire’s net income fell to $1.97 billion, or $1,195 per class A share, from $3.3 billion, or $2.123, a year earlier.
Excluding investments, operating profit rose to $3.07 billion, or $1,866 per share, from $1.78 billion, or $1,147.
Analysts on average had expected an operating profit of $1,360 per share, according to Thomson Reuters I/B/E/S.
Berkshire recorded $1.41 billion of losses on derivatives, including long-term contracts tied to equity indexes, compared with a year-earlier profit of $1.53 billion.
The book value per Bershire class A share, Mr. Buffett’s preferred measure for performance, fell 3 percent to $86,661 as of June 30 from $89,374 as of March 31.
Results included $603 million of profit from Burlington Northern, in the first full quarter since Berkshire in February paid $26.5 billion for the 77.5 percent of the railroad company that it did not already own.
Insurance operations, Berkshire’s biggest business, saw operating profit jump 23 percent, to $1.55 billion, including a sevenfold increase in underwriting profit to $462 million.
Berkshire said NetJets posted a $57.5 million pre-tax profit, compared with a year-earlier $252.5 million loss, after Mr. Buffett installed David Sokol, who is chairman of Berkshire’s MidAmerican Energy Holdings unit, to turn that unit around.
Berkshire Profit Falls 40% on Derivatives Losses - DealBook Blog - NYTimes.com


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