http://www.businessweek.com/news/2010-05-08/berkshire-says-burlington-northern-netjets-helped-boost-profit.html
By Andrew Frye
May 8 (Bloomberg) -- Warren Buffett?s Berkshire Hathaway Inc., which reported a $3.6 billion first-quarter profit last week, said gains at private flight company NetJets Inc. and railroad Burlington Northern Santa Fe bolstered results.
NetJets had pretax earnings of $57 million in the three months ended March 31, compared with a loss of $96 million in the same period a year earlier, Omaha, Nebraska-based Berkshire said yesterday in its quarterly filing. Burlington Northern, which Berkshire acquired in February, contributed $282 million in earnings to Buffett?s firm.
Berkshire?s results are improving as the economic recovery spurs demand for the luxury flights it operates, the diamonds it sells and the goods it hauls over rails. Buffett, the 79-year- old chief executive officer, said on May 1 that Berkshire is hiring again after cutting more than 20,000 jobs last year.
?Burlington is in a great position to take advantage of the economy improving,? Gerald Martin, a finance professor at American University?s Kogod School of Business in Washington, said before yesterday?s announcement.
Berkshire has advanced 12 percent this year on the New York Stock Exchange after a 2.7 percent increase last year and a 32 percent decline in 2008. The Standard & Poor?s 500 Index is down less than 1 percent since Dec. 31.
Buffett added Fort Worth, Texas-based Burlington Northern, the second-biggest U.S. railroad, to gain access to hauling routes in the U.S. West. The $27 billion takeover, Buffett?s biggest, was an ?all-in wager? on the U.S. economy, Berkshire said. NetJets, a seller of fractional jet ownership for business executives, is operating ?at a very decent profit? after a $711 million loss last year, Buffett said on May 1.
Investment Gain
Berkshire, which was Burlington?s biggest shareholder before the buyout, recorded an investment gain of $979 million in the first quarter tied to the 22.5 percent stake it originally held. Berkshire posted derivative gains of $411 million, including $178 million of gains on its bet on four equity indexes.
Book value jumped to $147.2 billion at the end of March from $131.1 billion on Dec. 31 on the Burlington Northern purchase. Book value per Class A share increased 5.8 percent in the first quarter to $89,374, Berkshire said.
The first-quarter net income, announced by Buffett at Berkshire?s annual meeting, compared with a $1.5 billion loss in the same period a year earlier. It was Berkshire?s fourth straight profit and its biggest since a $4.6 billion net income in the third quarter of 2007.
Segment Results
Profit from regulated businesses, including power producer MidAmerican Energy Holdings, doubled to $555 million on the addition of Burlington Northern, Berkshire said on May 1. Manufacturing, service and retailing units like NetJets, recreational-vehicle unit Forest River and brick-maker Acme Building Brands recorded $477 million of profit, up 85 percent from the year-earlier period.
?Our building products group continues to be adversely affected by relatively low residential and commercial construction activity,? Berkshire said in the filing. ?Our other manufacturers benefited from higher customer demand and the effects of cost-reduction efforts over the past two years.?
Profit from insurance units, including car-coverage specialist Geico and catastrophe-risk underwriter General Re, fell 3.5 percent to $1.16 billion on lower investment income.
Revenue Increases
Revenue jumped 41 percent to $32.04 billion as investment and derivative results swung to a $1.73 billion gain from a $4.98 billion loss. Premiums earned at Geico advanced 5.9 percent to $3.45 billion. Revenue at Berkshire Hathaway Reinsurance, which specializes in large risks, dropped 32 percent to $2.11 billion. Berkshire scaled back underwriting of catastrophes last year, saying that prices had fallen too far.
?We expect premium volume to continue to be constrained until premium rates rise,? Berkshire said.
In the first quarter, Berkshire Hathaway Reinsurance had $82 million in estimated losses tied to the earthquake in Chile. General Re had catastrophe losses of $278 million from the quake, as well as other costs from weather-related incidents in Europe, Australia and New England.
The value of Berkshire?s equity portfolio rose 2.9 percent to $60.8 billion in the three months ended March 31. Its stock purchases totaled $1.64 billion in the first quarter, while sales were $2.28 billion.
Berkshire?s holding of Procter & Gamble Co. fell about 6.2 percent in the three months to $4.73 billion. In that period, the world?s largest consumer-products company rose 4.4 percent on the New York Stock Exchange.
Buffett didn?t immediately respond to an e-mailed request for comment on P&G sent to an assistant. Berkshire sold 9 percent of its P&G stake in the fourth quarter as it raised cash for the Burlington Northern deal
By Andrew Frye
May 8 (Bloomberg) -- Warren Buffett?s Berkshire Hathaway Inc., which reported a $3.6 billion first-quarter profit last week, said gains at private flight company NetJets Inc. and railroad Burlington Northern Santa Fe bolstered results.
NetJets had pretax earnings of $57 million in the three months ended March 31, compared with a loss of $96 million in the same period a year earlier, Omaha, Nebraska-based Berkshire said yesterday in its quarterly filing. Burlington Northern, which Berkshire acquired in February, contributed $282 million in earnings to Buffett?s firm.
Berkshire?s results are improving as the economic recovery spurs demand for the luxury flights it operates, the diamonds it sells and the goods it hauls over rails. Buffett, the 79-year- old chief executive officer, said on May 1 that Berkshire is hiring again after cutting more than 20,000 jobs last year.
?Burlington is in a great position to take advantage of the economy improving,? Gerald Martin, a finance professor at American University?s Kogod School of Business in Washington, said before yesterday?s announcement.
Berkshire has advanced 12 percent this year on the New York Stock Exchange after a 2.7 percent increase last year and a 32 percent decline in 2008. The Standard & Poor?s 500 Index is down less than 1 percent since Dec. 31.
Buffett added Fort Worth, Texas-based Burlington Northern, the second-biggest U.S. railroad, to gain access to hauling routes in the U.S. West. The $27 billion takeover, Buffett?s biggest, was an ?all-in wager? on the U.S. economy, Berkshire said. NetJets, a seller of fractional jet ownership for business executives, is operating ?at a very decent profit? after a $711 million loss last year, Buffett said on May 1.
Investment Gain
Berkshire, which was Burlington?s biggest shareholder before the buyout, recorded an investment gain of $979 million in the first quarter tied to the 22.5 percent stake it originally held. Berkshire posted derivative gains of $411 million, including $178 million of gains on its bet on four equity indexes.
Book value jumped to $147.2 billion at the end of March from $131.1 billion on Dec. 31 on the Burlington Northern purchase. Book value per Class A share increased 5.8 percent in the first quarter to $89,374, Berkshire said.
The first-quarter net income, announced by Buffett at Berkshire?s annual meeting, compared with a $1.5 billion loss in the same period a year earlier. It was Berkshire?s fourth straight profit and its biggest since a $4.6 billion net income in the third quarter of 2007.
Segment Results
Profit from regulated businesses, including power producer MidAmerican Energy Holdings, doubled to $555 million on the addition of Burlington Northern, Berkshire said on May 1. Manufacturing, service and retailing units like NetJets, recreational-vehicle unit Forest River and brick-maker Acme Building Brands recorded $477 million of profit, up 85 percent from the year-earlier period.
?Our building products group continues to be adversely affected by relatively low residential and commercial construction activity,? Berkshire said in the filing. ?Our other manufacturers benefited from higher customer demand and the effects of cost-reduction efforts over the past two years.?
Profit from insurance units, including car-coverage specialist Geico and catastrophe-risk underwriter General Re, fell 3.5 percent to $1.16 billion on lower investment income.
Revenue Increases
Revenue jumped 41 percent to $32.04 billion as investment and derivative results swung to a $1.73 billion gain from a $4.98 billion loss. Premiums earned at Geico advanced 5.9 percent to $3.45 billion. Revenue at Berkshire Hathaway Reinsurance, which specializes in large risks, dropped 32 percent to $2.11 billion. Berkshire scaled back underwriting of catastrophes last year, saying that prices had fallen too far.
?We expect premium volume to continue to be constrained until premium rates rise,? Berkshire said.
In the first quarter, Berkshire Hathaway Reinsurance had $82 million in estimated losses tied to the earthquake in Chile. General Re had catastrophe losses of $278 million from the quake, as well as other costs from weather-related incidents in Europe, Australia and New England.
The value of Berkshire?s equity portfolio rose 2.9 percent to $60.8 billion in the three months ended March 31. Its stock purchases totaled $1.64 billion in the first quarter, while sales were $2.28 billion.
Berkshire?s holding of Procter & Gamble Co. fell about 6.2 percent in the three months to $4.73 billion. In that period, the world?s largest consumer-products company rose 4.4 percent on the New York Stock Exchange.
Buffett didn?t immediately respond to an e-mailed request for comment on P&G sent to an assistant. Berkshire sold 9 percent of its P&G stake in the fourth quarter as it raised cash for the Burlington Northern deal
