Profit at Berkshire's BNSF Drops 25% -- WSJ
07 5월 2016 - 4:04PM
Dow Jones News
Warren Buffett has warned results at the railroad operator will
remain subpar in 2016
By Maria Armental
Cheap natural gas and a drop in shipments drove down
first-quarter results at Burlington Northern Santa Fe, the largest
unit of Warren Buffett's Berkshire Hathaway Inc. conglomerate.
Mr. Buffett, who last Saturday played up his love for the unit
as he released Berkshire's preliminary first-quarter results at the
company's annual shareholders meeting, warned that results at the
railroad operator would remain subpar for the rest of the year due
to lower coal volumes largely tied to power plants' shift to
cheaper natural gas.
In the first quarter, BNSF's revenue fell 15% to $4.77 billion
from the year-ago period as shipping volume fell 5.5%, Berkshire
said Friday. Net profit dropped 25% to $784 million.
The bulk of the revenue decline came from coal freight
shipments, down 39% to $779 million, driven by a 33% volume
decline.
Coal accounted for about 22% of the unit's freight revenue in
2015.
Meanwhile, freight revenue from industrial products fell 18%
while consumer-products freight revenue rose 3%, reflecting a 9%
increase in volume.
Operating expenses for BNSF fell 12%, largely due to lower fuel
prices.
Railroad operators, including Union Pacific Corp. and Canadian
National Railway Co., Canada's largest, have reported similar
declines in freight volumes tied to slumping commodity prices.
BNSF is part of the so-called Powerhouse Six, Berkshire's most
profitable non-insurance businesses, which this year was expanded
to include Precision Castparts Corp.
While cheaper oil largely benefits many of Berkshire's
manufacturing businesses, the current oil-price slump and global
commodity rout lowered sales of the conglomerate's
industrial-products manufacturers. Still, Berkshire ended the
quarter with a 33% increase in industrial-products revenue, largely
due to the Precision Castparts acquisition.
At Berkshire's core is an insurance business, which brings in
billions of dollars of float, which is the upfront premiums
customers pay. Since that money doesn't have to be paid out until
much later, Berkshire is able to invest it for its own benefit.
Berkshire's insurance float was approximately $89 billion as of
March 31.
Earnings at Berkshire's insurance business fell 55% to $213
million for the quarter, driven mainly by lower results at its
reinsurance group.
Overall, Berkshire reported $52.40 billion in revenue for the
first three months of the year, up 8% from the year-ago period.
Book value, a measure of assets minus liabilities that is Mr.
Buffett's preferred yardstick for measuring net worth, rose 1.2%
since the end of 2015 to $157,369 per Class A equivalent share as
of March 31.
Last Saturday, Berkshire reported quarterly net profit rose 8%
to $5.59 billion, or $3,401 a Class A share, while operating
profit, which excludes some investment results, fell 12% to $3.74
billion, or $2,274 a share.
Class A shares closed Friday at $216,999.9, up 0.2% over the
past 12 months.
Berkshire also disclosed that one of its foreign subsidiaries
had business dealings with customers in Iran from June 2013 through
November 2015. The subsidiary, Berkshire said, had since stopped
all shipments to those customers and the company said it had
disclosed Friday the dealings to the U.S. government. Berkshire
said it's investigating the matter with the assistance of outside
counsel.
--Anupreeta Das contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
May 07, 2016 02:49 ET (06:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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