Warren Buffett's Berkshire Hathaway reports $50 bn Q1 net loss
02 May 2020
Hit hard by the spreading corona virus, both in business and in the market, Warren Buffett’s Berkshire Hathaway Inc has reported a consolidated net loss of $49.75 billion in the January-March quarter of 2020, against a net income of $21.66 billion in the similar quarter of the previous year.
Berkshire’s first-quarter net loss of $49.75 billion reflected a $30,653 loss per Class A share, or $54.52 billion of losses on the company’s stock value and other investments. Net earnings were $21.66 billion, or $13,209 per share, a year earlier.
Quarterly operating profit, which Buffett considers a better performance measure, rose 6 per cent to $5.87 billion, or about $3,624 per Class A share, from $5.56 billion, or about $3,388 per share in the previous year quarter.
But year-earlier results reflected a charge for investments linked to what prosecutors called a Ponzi scheme at a solar company, which Berkshire did not know about.
Operating profit at Berkshire’s businesses fell 3 per cent, with declines at BNSF, utilities and energy units, and manufacturing, service and retailing operations such as Precision Castparts, which Berkshire bought for $32.1 billion in 2016.
The company said it is being hit hard by the coronavirus pandemic, and that business performance is suffering in several major operating segments.
Berkshire Hathaway chairman and value investor Warren Buffett said the conglomerate has sold its entire equity position in the US airline industry, which included United, American, Southwest and Delta Airlines, worth over $4 billion in December.
“The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way,” he said during Berkshire’s annual shareholder meeting Saturday, which was virtual this year. “I don’t know if Americans have now changed their habits or will change their habits because of the extended period.”
Berkshire said most of its more than 90 businesses are facing “relatively minor to severe” negative effects from COVID-19, the illness caused by the novel coronavirus and now punishing the global economy, with revenue slowing considerably in April even at businesses deemed “essential.”
The BNSF railroad saw shipping volumes of consumer products and coal fall, while Geico set aside money for car insurance premiums it no longer expects to collect. Some businesses cut salaries and furloughed workers, and retailers such as See’s Candies and the Nebraska Furniture Mart closed stores.
Buffett also allowed Berkshire’s cash stake to rise to a record $137.3 billion from $128 billion at the end of 2019.
Geico was able to post a 28 per cent gain in pre-tax underwriting profit because people drove less, resulting in fewer claims for crashes. Still, the insurer, like others, is offering relief on premiums to policyholders.
Berkshire stock price has fallen 19 per cent in 2020, compared with a 12 per cent drop in the Standard & Poor’s 500, despite Buffett’s prediction that Berkshire would outperform in down markets. Falling stocks also caused a $1.39 billion pre-tax loss on derivatives contracts.