Aug 2 (Reuters) – Warren Buffett’s Berkshire Hathaway stated on Saturday it took a $3.76 billion write-down on its stake in Kraft Heinz through the second quarter, an acknowledgment the decade-old funding hasn’t labored out.
Berkshire additionally reported a 4% decline in quarterly working revenue as insurance coverage underwriting premiums fell. The write-down and decrease features from widespread shares brought about a 59% drop in total internet revenue. Buffett’s conglomerate signaled it stays cautious about market valuations, amid uncertainty about tariffs and development within the broader economic system.
It reported a near-record $344.1 billion money stake, and bought extra shares than it purchased for an eleventh straight quarter. As of mid-July, Berkshire hadn’t repurchased any of its personal inventory since Might 2024.
Buffett, 94, has led Omaha, Nebraska-based Berkshire since 1965, although he plans to step down at year-end.
“Traders are getting antsy and need to search exercise, and nothing is occurring,” stated Kyle Sanders, an analyst at Edward Jones. “Buffett positively views the market as overvalued, and can sit again and look ahead to one thing to return to him.”
Uncertainty about commerce insurance policies, together with tariffs, has turn into a headwind as delayed orders and shipments led to declining income at most of Berkshire’s client companies.
Jazwares, which makes the favored Squishmallows plush toys, noticed income fall 38.5% within the 12 months’s first half.
Analysts considered total outcomes as lackluster.
“Berkshire and the economic system are at an inflection level,” stated Cathy Seifert, a CFRA Analysis analyst. “I don’t assume the market will embrace the mixture of mediocre outcomes, an absence of inventory buybacks, and Berkshire’s current share underperformance amid a administration transition.”
Seifert and Sanders price Berkshire “maintain.”
KRAFT HEINZ
Second-quarter working revenue fell to $11.16 billion, or about $7,760 per Class A share, from $11.6 billion a 12 months earlier. Outcomes included $877 million of forex losses because the U.S. greenback weakened.
Internet revenue, together with features and losses on shares corresponding to Apple and American Specific, fell to $12.37 billion from $30.35 billion. Income fell 1% to $92.52 billion.
Buffett views unrealized funding features and losses, together with on shares Berkshire has no plans to promote, as typically meaningless to understanding his firm. The $3.76 billion after-tax write-down for Berkshire’s 27.4% Kraft Heinz stake, equal to $5 billion earlier than taxes, adopted the struggling meals firm’s announcement it might think about strategic options, which might embrace a breakup.
Berkshire had carried Kraft Heinz on its books at above-market worth however stated financial and different uncertainties, and its longer-term plans to stay an investor, made the hole “other-than-temporary.” The write-down is Berkshire’s second for Kraft Heinz, following a $3 billion write-down in 2019. Buffett acknowledged on the time that Berkshire overpaid within the 2015 merger of Kraft Meals and H.J. Heinz, one in every of his largest funding missteps.
Kraft Heinz has suffered as extra consumers favor more healthy and private-label options. Its roughly 200 manufacturers embrace Oscar Mayer, Kool-Support, Velveeta and Jell-O.
Berkshire additionally carries one other huge funding, its 28.1% stake in Occidental Petroleum at $5.3 billion above honest worth, however reported no want for a write-down.
LAGGING THE MARKET
Shares of Berkshire have fallen greater than 12%, and lagged the Normal & Poor’s 500 by about 22 proportion factors, since Buffett introduced on Might 3 he would step down as chief government at 12 months finish. Vice Chairman Greg Abel, 63, will succeed him, although Buffett will stay chairman. Analysts stated the premium embedded in Berkshire’s inventory value due to the presence of Buffett, arguably the world’s most well-known investor, has eroded, whereas development might gradual within the insurance coverage sector, a serious Berkshire revenue middle.
The dearth of latest investments has additionally been a drag. Analysts imagine Berkshire’s BNSF unit might purchase CSX to create one other transcontinental railroad, after Union Pacific agreed on July 29 to purchase Norfolk Southern.
Buffett reworked Berkshire over six a long time from a troubled and since-closed textile firm right into a $1.02 trillion conglomerate.
Berkshire owns a number of insurers and reinsurers, electrical utility and renewable power companies, a number of chemical and industrial firms, and acquainted client manufacturers corresponding to Dairy Queen, Fruit of the Loom and See’s Candies.
BIG BEAUTIFUL BILL
Berkshire stated the 12% quarterly decline in insurance coverage underwriting revenue stemmed primarily from reinsurance companies and a few smaller insurance coverage companies. Geico, its best-known insurance coverage enterprise, noticed pre-tax underwriting revenue rise 2%, as a 5% enhance in premiums offset a smaller rise in accident losses.
The automotive insurer has been ceding market share to State Farm and Progressive, whereas specializing in enhancing underwriting high quality and expertise and chopping jobs. Analysts stated greater tariffs might be a headwind for Geico if the price of auto components rose, doubtlessly rising losses from accident claims.
BNSF can also be chopping bills. Decrease gasoline prices helped increase quarterly revenue 19% achieve, although income and cargo volumes barely modified.
The power enterprise, Berkshire Hathaway Power, posted a 7% revenue enhance. Berkshire stated it’s evaluating the impression of the One Large Lovely Invoice Act, signed final month by U.S. President Donald Trump, on the “economics and viability” of its renewable power, storage and technology-neutral initiatives.
(Reporting by Jonathan Stempel in New York; Modifying by Alden Bentley, Susan Fenton and Aurora Ellis)
