Berkshire third-quarter profit drops on investments, operating results gain

Fri Nov 7, 2014 7:16pm EST
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By Luciana Lopez and Jonathan Stempel

NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote) (BRKb.N: Quote) said on Friday third-quarter profit fell 9 percent as it took a large writeoff on one of its investments, but operating results easily topped forecasts on improvement in its insurance, energy and railroad operations.

Net income slipped to $4.62 billion, or $2,811 per Class A share in the third quarter, from $5.05 billion, or $3,074 per Class A share, a year earlier.

Operating profit, however, rose 29 percent to $4.72 billion, or $2,876 per Class A share, from $3.66 billion, or $2,228 per Class A share.

Analysts on average expected earnings of $2,593.85 per share, according to Thomson Reuters I/B/E/S.

Much of the drop in profit came from a $107 million loss on Berkshire's investments and derivatives, compared with a year-earlier $1.39 billion gain.

During the quarter, Berkshire wrote off $678 million on its investment in Tesco Plc (TSCO.L: Quote), a British grocery chain being probed by regulators at home over accounting errors. Buffett has been reducing Berkshire's Tesco stake.

In contrast, year-earlier results included big gains on investments that Buffett made during the 2008 financial crisis, including in General Electric Co (GE.N: Quote) and Goldman Sachs Group Inc (GS.N: Quote), and bonds related to candy maker Mars Inc's purchase of rival Wrigley.

Bill Smead, chief investment officer of Smead Capital Management in Seattle, said the swing in investment results took a backseat to the strength of operations at Berkshire's more than 80 companies.   Continued...

Berkshire Hathaway CEO Warren Buffett points after throwing a newspaper during a competition at a trade show, at the company's annual meeting in Omaha, Nebraska May 3, 2014. Warren Buffett's Berkshire Hathaway Inc on Friday said quarterly profit declined 4 percent, falling short of analyst forecasts, as earnings from insurance underwriting declined and bad weather disrupted shipping at its BNSF Railway unit. REUTERS/Rick Wilking(UNITED STATES - Tags: BUSINESS) - RTR3NN77