Berkshire Hathaway (BRK.A.US) Cash Reserves Slightly Down, Q2 Net Earnings Halved, Kraft Heinz Becomes "Red Zone"

According to reports, Berkshire Hathaway's (BRK.A.US, BRK.B.US) second-quarter earnings show that revenue reached $925.15 billion, exceeding market expectations of $919.63 billion, and down 1.2% from the same period last year, which was $936.5 billion. Net earnings attributed to shareholders were $123.7 billion, a 59% drop compared to the same period last year, reflecting the decline in ordinary stock investment returns and write-downs of Kraft Heinz (KHC.US); net earnings for the same period last year were $303.5 billion, while the first quarter was $46 billion. Earnings per share for Class A shares were $8601, down from $21122 last year; for Class B shares, it was $5.73, down from $14.08 last year.

The company's earnings were affected by a decline in insurance premiums, while the profits of railroads, energy, manufacturing, services, and retail industries all increased compared to the same period last year.

The company's Geico auto insurance business saw its pre-tax underwriting profit grow 2% to $18 billion. Due to the increase in expenses to boost policy numbers, the company's underwriting fees rose 40% during the same period.

Berkshire Hathaway's rail subsidiary BNSF saw its earnings rise 19% to approximately $15 billion, with the company attributing this growth to improved productivity and reduced taxes. This subsidiary was acquired by Berkshire in 2010, and recent rumors of a potential merger have been circulating. Analysts speculate that BNSF may explore consolidation options given the industry's trend towards scale.

Berkshire Hathaway's public utility business (including Pacificorp, MidAmerican, and NV Energy) saw its earnings grow 7%. The company indicated it is currently evaluating the impact of President Donald Trump's tax legislation, as this accelerated the phasing out of clean energy production.

Furthermore, Berkshire Hathaway once again warned about the potential impact of Trump's tariffs on its various businesses. The company stated: "The speed and uncertainty of these events, including international trade policy developments and tariff tensions, are likely to accelerate in the second half of 2025." "These events' ultimate outcome remains subject to significant uncertainty, which could have a negative impact on our majority (if not all) operating businesses and investments, thereby potentially severely affecting our future performance."

As of June 30, the company's cash, cash equivalents, and short-term U.S. securities total had decreased for the first time in three years to $3441 billion, down from $3476.8 billion as of March 31.

The company did not repurchase its own shares during the second quarter. As of mid-July, there have been no stock buybacks since May 2024. This suggests that Warren Buffett believes the company's market value is above $1 trillion and overvalued. However, following Warren Buffett's announcement to step down as CEO at year-end, Berkshire Hathaway A shares have dropped 12%, suggesting potential opportunities for the company to increase its share repurchases in the future.

Investment income for the second quarter was $49.7 billion, while investment losses for the first quarter were $50.38 billion. Berkshire Hathaway has continued to sell stocks for the 11th consecutive quarter, with a total of $45 billion sold during the first half of 2025.

As of June 30, the company's insurance float (net negative assets) was approximately $1740 billion, down from $1730 billion as of the end of the first quarter.

As of June 30, Berkshire Hathaway's portfolio holdings were concentrated in five companies: Visa (V.US), Apple (AAPL.US), Bank of America (BAC.US), Coca-Cola (KO.US), and Chevron (CVX.US). The company holds a 67% stake in these companies.

Berkshire Hathaway wrote down the value of its Kraft Heinz holdings by $37.6 billion, or $50 billion before taxes, bringing the carrying value to $84 billion as of June 30. This was the second write-down for Berkshire's Kraft Heinz holdings; previously, in May, Kraft Heinz announced it would consider strategic alternatives, including a potential breakup.

This write-down is Berkshire's second on Kraft Heinz, following a previous write-down of $300 million in 2019. Warren Buffett acknowledged that Berkshire paid too high a price for the combined company in 2015.

Due to recent sales declines, brand erosion, and shifts in consumer preferences, Kraft Heinz has seen its stock price cumulative decline exceed 60%, significantly underperforming the market. This has resulted in significant losses on Berkshire's holdings. Berkshire has reduced its involvement in Kraft Heinz's board of directors and released a signal indicating it would no longer be involved in daily operations.