Berkshire Hathaway reported strong operating profits Saturday, reflecting the actual profits generated by its various divisions, as well as a record pile of cash in the first quarter, underscoring the health of the Warren E. Buffett-led conglomerate.
The results provided a positive backdrop for Berkshire’s annual shareholder meeting in downtown Omaha, the company’s hometown. It is the first meeting of its kind for Buffett’s business empire since the death of Charles Munger, Buffett’s longtime business partner and alter ego, in November at age 99.
Saturday’s results underscore Buffett’s repeated reminder that Berkshire — a collection of companies that includes a major railroad, a major power generation company, insurance companies, consumer brands like Fruit of the Loom and more — is best judged by operating profits. no net income.
For the first three months of the year, Berkshire reported profit attributable to shareholders of $12.7 billion, down 64 percent from the same period last year. The drop was triggered by a sharp decline in the paper value of Berkshire’s vast investment portfolio, although Buffett has long warned shareholders not to ignore fluctuations in the company’s stock holdings.
Berkshire also said it had reduced its huge stake in Apple, which Buffett described as one of his company’s most important holdings, by about 13 percent in the quarter. The value of his stake is now about $135.4 billion, down from $174.3 billion at the end of 2023. (Apple CEO Tim Cook attends the annual meeting.)
But Mr. Buffett said he was still a big fan of Apple and suggested the stock sale was intended to take some profits off the table. “I would say it is extremely likely that at the end of the year Apple will be the largest common stock holding that we currently have,” he told shareholders on Saturday.
Looking at operating profit, Buffett’s preferred metric because it measures the tangible health of Berkshire’s business, the company reported a 40 percent increase to $11.2 billion. This was driven by a more than doubling of Berkshire’s core insurance business, as insurer Geico charged higher premiums per policy and reported fewer claims, while its reinsurance division suffered zero catastrophe losses in the first quarter of this year.
Those gains offset weaker results elsewhere in Buffett’s empire, including an 8 percent decline in net income at BNSF Railroad due to lower fuel shipments relative to consumer goods and lower revenue from fuel surcharges.
Truck stop chain Pilot Travel Centers, which the company took full control of in January, posted a 19 percent drop in net profit as the company reported lower margins on fuel sales and higher operating costs.
And Berkshire said its Western utility PacifiCorp is facing federal and state investigations and lawsuits over its role in wildfires in 2020 and 2022.
The earnings report was released ahead of the Berkshire meeting. Tens of thousands of Berkshire shareholders gathered at the CHI Health Center arena in the company’s hometown to watch Mr. Buffett answer questions.
Among the topics Mr. Buffett raised at the meeting was Berkshire’s cash pile, which he would like to continue building unless a potentially lucrative investment opportunity arose.
However, he noted in his annual letter to investors in February that a huge acquisition like the one that helped him grow his wealth was unlikely, which would limit Berkshire’s future returns.
“We’d like to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money,” Buffett said.
He added that Berkshire was willing to pay its share of federal taxes and praised the United States as a place to do business. He predicted that as the federal deficit continues to rise, so will taxes – and said he was happy Berkshire was paying more than the current tax rate of 21 percent.
Most notable at the meeting, however, was the absence of Mr. Munger, who for decades served as a sounding board for Mr. Buffett, a co-promoter of the company and a comic foil. The meeting began with a lengthy video tribute to Mr. Munger, Berkshire’s vice chairman, and Mr. Buffett repeatedly praised his former business partner.
At one point during the question-and-answer session, Mr. Buffett incorrectly referred to Gregory Abel, his appointed successor as the company’s CEO who was helping answer questions, as “Charlie.”
When Mr. Buffett realized his mistake, the audience applauded.
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2024-05-04 22:29:36
www.nytimes.com
