Berkshire Hathaway's 2Q profit jumps 46%

OMAHA (AP) — Berkshire Hathaway's second-quarter profit jumped 46% as
Warren Buffett's company reported big paper gains on the value of its
investments and derivative contracts.

On Friday, Berkshire reported net income of $4.54 billion, or $2,763
per Class A share. That's up from $3.1 billion, or $1,882 per Class A
share, last year.

Berkshire owns an assortment of companies, including clothing,
furniture and jewelry firms. Its insurance and utility businesses
typically account for more than half of the company's net income. It
also has major investments in such companies as Coca-Cola Co. and
Wells Fargo & Co.

The biggest factor behind the big swing in earnings was the estimated
value of Berkshire's investments and derivatives. This year, those
were worth $622 million. Last year, Berkshire recorded a $612 million
paper loss on those.

Berkshire's revenue grew 16% to $44.69 billion as its more than 80
subsidiaries generally performed well.

The three analysts surveyed by FactSet expected Berkshire to report
earnings per Class A share of $2,163.63.

Several years ago, Berkshire sold derivative contracts that are tied
to either the value of several global stock indexes or credit
defaults. Berkshire must estimate the value of those contracts every
time it reports earnings even though the contracts won't mature for at
least several more years.

So the true value of the derivatives won't be known until later, but
they can create big swings in Berkshire's net income from quarter to
quarter.

Without Berkshire's investments and derivatives, the company based in
Omaha reported operating earnings of $3.92 billion, or $2,384 per
Class A share. That's up from $3.72 billion a year ago, or $2,252 per
Class A share.

Berkshire's BNSF railroad performed well in the quarter and
contributed $884 million to the conglomerate's profits, up from $802
million a year ago.

BNSF said volume was up 3% this year and rates improved 2 percent as
the railroad hauled more coal, crude oil and intermodal containers of
products. Berkshire said higher natural gas prices and low utility
stockpiles drove coal demand higher.

Berkshire's insurance businesses, which include reinsurance giant
General Re and car insurer Geico, contributed $530 million to
Berkshire's net income in the quarter. That was down from $619 million
last year mostly because Berkshire recorded $189 million in pretax
losses related to flooding in Europe.
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