Kraft Stake Boosts Berkshire -- WSJ

By Maria Armental and Anupreeta Das

Berkshire Hathaway Inc.'s second-quarter profit rose on investment gains tied to its stake in Kraft Heinz Co. and higher underwriting profit at car insurer Geico Corp.

Results fell short of analysts' projections.

The conglomerate, led by renowned investor Warren Buffett, has been turning to acquisitions as a way to drive profit. The 85-year-old Mr. Buffett has made it known he is open to buying more but, true to his tenets, has also noted the importance of finding the right manager.

Berkshire already pulls in income from a railroad, utilities, industrial manufacturers, home builders, branded-food sellers and even an auto dealership. In January, it folded into its stable aircraft parts supplier Precision Castparts Corp., in what was its largest acquisition to date.

At Berkshire's core is an insurance business, which brings in billions of dollars of "float," the upfront premiums customers pay and which Berkshire is able to invest for its own benefit.

Insurance float, the engine that has fueled Berkshire's expansion, rose to $90 billion in the latest period, while Berkshire's insurance underwriting business, which includes Geico Corp., swung to a $337 million operating profit.

Insurance-investment income, meanwhile, edged up to $978 million, and operating profit at the noninsurance businesses -- which include the railroad, utilities and energy segments -- rose 13% to $1.89 billion.

Overall, Berkshire's net income rose 25% to $5 billion, or $3,042 a Class A share, while operating profit, which excludes some investment results, rose 18% to $4.61 billion, or $2,803 a Class A share. Revenue rose 6% to $54.46 billion.

Analysts surveyed by Thomson Reuters had projected $2,910.8 a share in operating profit on $56.47 billion in revenue.

Berkshire reported $394 million in investment gains, a three-fold increase from the year-ago period, thanks in part to its stake in Kraft.

Book value, Mr. Buffett's preferred yardstick for measuring net worth, rose 2.9% to $160,009 per Class A equivalent share as of June 30. Last year, Berkshire reported a 2.4% increase in book value for the first six months of the year.

Class A shares closed Friday at $218,010, up 10% for the year.

Write to Maria Armental at maria.armental@wsj.com and Anupreeta Das at anupreeta.das@wsj.com

(END) Dow Jones Newswires

August 06, 2016 02:48 ET (06:48 GMT)

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