Berkshire Hathaway's Q1 Operating Profit Drops 14% Amid Wildfires, FX Losses

Berkshire Hathaway, the conglomerate led by Warren Buffett, reported a decline in operating profit for the first quarter of this year. The decrease was attributed to losses from wildfires and fluctuations in foreign exchange rates. Despite this, the company's cash reserves surged to a record high of $347.7 billion, indicating a struggle to find suitable investment opportunities.

The operating profit for the quarter decreased by 14% to $9.64 billion, or approximately $6,703 per Class A share, compared to $11.22 billion in the same period last year. The net income also saw a significant drop, falling by 64% to $4.6 billion, or $3,200 per Class A share. This decline was largely attributed to unrealized losses in equity holdings, including those in Apple Inc.

For the third consecutive quarter, Berkshire did not repurchase its own shares and has been a net seller of stocks for the tenth consecutive quarter. The company bought $3.18 billion worth of stocks while selling $4.68 billion worth. Berkshire's report did not provide detailed information on how U.S. President Donald Trump's tariff policies might impact the company's performance, stating only that there is "significant uncertainty" and that the company "cannot reliably predict" the potential effects on product costs, supply chain costs, and customer demand.

The financial results included an $11 billion insurance payout due to wildfires in the Los Angeles area in January. This loss nearly halved the overall net income from the insurance business to $1.34 billion. The wildfire losses offset improvements in Geico's performance, where increased premiums and reduced accident claims drove a 13% increase in pre-tax underwriting profit.

The financial data also reflected a $7.13 billion foreign exchange-related loss due to the depreciation of the U.S. dollar, compared to a $5.97 billion gain in the same period last year. These results were released ahead of Berkshire's annual shareholder meeting in Omaha, a major event that attracts tens of thousands of attendees.

Buffett, now 94, has led Berkshire for 60 years, transforming it from a struggling textile company into a diversified conglomerate with businesses ranging from Geico Insurance to BNSF Railway, Berkshire Hathaway Energy, Dairy Queen, and See's Candies. Berkshire's stock performance has outpaced the broader market, and many investors view the company as a safe haven against potential economic disruptions, including tariffs.

In other business segments, tariffs may temporarily benefit BNSF Railway, which reported a 6% increase in profit. BNSF noted an increase in consumer goods transportation, including imports from the West Coast and automobiles, indicating a surge in demand for freight services ahead of the tariffs' implementation. Berkshire Hathaway Energy also performed well, with profits rising by 53% due to broad earnings growth and reduced losses in the HomeServices real estate brokerage division.

However, Berkshire's manufacturing, service, and retail businesses saw a 1% decline in profits. While the company's automotive dealerships benefited from increased sales of new and used cars, the home goods and other retail sectors faced challenges due to "intensified competition, weak demand, and increased economic uncertainty."