Berkshire reports profit decline but significant cash on hand

Berkshire Hathaway reported a sharp decline in first-quarter profits on Saturday, largely due to lower capital gains, as the conglomerate’s chief executive, Warren E. Buffett, prepares to speak at its annual investor meeting.

These results suggest an increase in operating profit that reflects the actual profits generated by Berkshire’s various businesses and Berkshire’s impressive cash balance – which totaled nearly $189 billion as of March 31 – that reflects the robust health of the company.

The company’s latest results provide the backdrop for the meeting in downtown Omaha, which will be Berkshire’s first since the November death by Charles MungerMr. Buffett’s long-time business partner and alter ego, aged 99.

In the first three months of the year Berkshire reported $12.7 billion Profit attributable to shareholders fell by 64 percent compared to 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 company is now worth about $135.4 billion, down from $174.3 billion at the end of 2023. (Apple CEO Tim Cook attends annual meeting.)

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 Berkshire’s meeting, where tens of thousands of Berkshire shareholders will gather at the CHI Health Center arena in the company’s hometown to watch Mr. Buffett answer questions.

Among the topics he is likely to discuss – in part with the help of his top lieutenants, including his likely successor Gregory Abel – are his outlook for the economy and the November election, as well as where he sees investment opportunities.

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