Warren Buffett’s Berkshire Hathaway Takes $3.76B Hit on Kraft Heinz Writedown, Profits Slide in Q2

Warren Buffett’s Berkshire Hathaway saw its second-quarter profit tumble by more than half on account of a hefty $3.76 billion write-down on its Kraft Heinz stake, according to a report published by The Associated Press on Saturday. The iconic food brand, which Berkshire helped merge in 2015, has reportedly been struggling with changing consumer tastes and pressure from healthier, private-label competitors.

According to the report, the Omaha-based conglomerate reported a quarterly profit of $12.37 billion, or $8,601 per Class A share, compared to $30.25 billion, or $21,122 per share, in the same period last year. The drop, the report said, was largely linked to a much smaller paper gain from its investment portfolio this year.

Buffett Admits Misstep

Buffett, who owns over 27% of Kraft Heinz, has long supported the brand but acknowledged the investment was overvalued. 

According to the report, the company’s board representatives resigned this spring as Kraft Heinz began exploring strategic changes, including spinning off key brands.

Operating Earnings Hold Steady

Despite the headline decline, operating earnings, which Buffett says better reflect the company’s real performance, dipped only slightly to $11.16 billion, beating analyst estimates of $7,508.10 per share, the report stated, citing FactSet.

BNSF Railway, one of Berkshire’s key assets, meanwhile, posted a 19% jump in operating profit to $1.47 billion, helping offset weaker results from insurance. Cathy Seifert of CFRA Research told the US-based news agency, “The insurance business has struggled a bit… they’re doing less property and casualty insurance.”

Still Sitting on a Cash Mountain

Meanwhile, Berkshire’s cash reserves remain relatively steady at $344.1 billion, down slightly from $347.7 billion. Buffett has insisted that “attractive deals” remain hard to find.

Despite a 12% drop in its share price since Buffett’s surprise retirement announcement, no share buybacks were made, the report said. “It’s still trading at a premium,” investor Chris Ballard of Check Capital told AP.

Buffett, who steps down as CEO later this year, will remain chairman while Vice Chairman Greg Abel takes the reins.