Berkshire Hathaway's (BRK.A.US) cash reserves slightly decreased, Q2 net profit halved, Kraft Heinz Company becomes a "minefield".

Berkshire Hathaway (BRK.A.US, BRK.B.US) announced its second-quarter performance, showing revenue of $92.515 billion, slightly higher than market expectations of $91.963 billion, a decrease of 1.2% compared to the same period last year with $93.65 billion, and higher than the first quarter's $89.725 billion. Net profit attributable to shareholders was $12.37 billion, a 59% decrease compared to the same period last year with $30.35 billion, and $4.6 billion in the first quarter. Earnings per share for Class A shares were $8,601, down from $21,122 in the same period last year, while earnings per share for Class B shares were $5.73, down from $14.08 in the same period last year. Operating profit was $11.16 billion, a 3.8% decrease compared to the same period last year with $11.6 billion, and $9.64 billion in the first quarter, marking the largest decline since a 32.1% decrease in the third quarter of 2020. The company's performance was affected by a decline in its insurance underwriting business, while profits from its railroad, energy, manufacturing, service, and retail businesses all increased compared to the same period last year. Geico, the company's car insurance company, saw a 2% increase in pre-tax underwriting profit in the second quarter, reaching $1.8 billion. The department's underwriting expenses surged 40% during the same period due to increased spending to increase the number of policies. Operating profit for Berkshire's railroad company, BNSF, increased by 19% to approximately $1.5 billion, which the company attributed to increased productivity and lower tax rates. The subsidiary, acquired by Berkshire in 2010, has recently been the subject of acquisition rumors in light of a $72 billion cash and stock deal between The Pacific Railway Company and Norfolk Southern Railway, creating the only transcontinental railroad operator in the U.S. Industry analysts speculate that BNSF may explore its own merger following this deal. Buffett typically does not like to engage in bidding wars, but the pressure to scale up in concentrated industries may lead BNSF to consider acquisitions. Operating profit for Berkshire's utility business (including Pacificorp, MidAmerican, and NV Energy) increased by 7%. The company stated that it is currently assessing the impact of U.S. President Donald Trump's tax law, which accelerates the gradual phasing out of Clean Energy Fuels Corp.'s production. Furthermore, Berkshire issued a stern warning once again on Trump's tariff policy and its potential impact on its various businesses. Berkshire stated: "The speed at which events are changing, including the escalating tensions involving international trade policy and tariffs, has accelerated in the first half of 2025." "The ultimate outcomes of these events remain considerably uncertain. It is likely that these events will negatively affect a significant portion (if not all) of our operating businesses as well as our investments in equity securities, which could materially impact our future performance." As of June 30, the company's cash, cash equivalents, and short-term U.S. securities did not reach a record high, declining to $344.1 billion, the first decrease in its cash reserves in three years, down from $347.68 billion as of March 31. In the second quarter, the company did not repurchase its own stock. As of mid-July, the company has not repurchased any stocks since May 2024. This suggests that Buffett believes the company's market value has remained above $1 trillion and is overvalued. However, since Buffett announced he will step down as CEO by the end of the year, Berkshire's Class A shares have fallen by 12%, indicating that the company may have more opportunities to increase its holdings of its own stock in the future. Investment income in the second quarter was $4.97 billion, compared to a net loss of $5.038 billion in the first quarter. Berkshire has been net sellers of stocks for the 11th consecutive quarter, selling $4.5 billion in stocks in the first half of 2025. As of June 30, the company's insurance float (net liabilities assumed under insurance contracts) was approximately $174 billion, up from $173 billion at the end of the first quarter. As of June 30, 67% of Berkshire Hathaway's equity holdings are concentrated in five companies: American Express Company (AXP.US), Apple Inc. (AAPL.US), Bank of America Corp (BAC.US), The Coca-Cola Company (KO.US), and Chevron Corporation (CVX.US). Berkshire took a post-tax write-down of $3.76 billion on its 27.4% stake in Kraft Heinz Company, equivalent to a pre-tax write-down of $5 billion, reducing the book value to $8.4 billion as of the end of June. Prior to this, Kraft Heinz Company announced in May that it would consider strategic alternatives, including a potential spin-off. Berkshire has held shares in Kraft Heinz Company at a value higher than market prices, but due to economic and other uncertainties, as well as its long-term holding plan, this valuation difference was deemed "non-temporary" and required a write-down. This write-down is the second that Berkshire has taken on Kraft Heinz Company, having written down $3 billion in 2019. Buffett admitted at the time that Berkshire paid too high a price when it facilitated the merger between Kraft and Heinz in 2015. In recent years, Kraft Heinz Company has faced challenges such as declining sales, goodwill impairments, and shifting consumer tastes, leading to a cumulative drop in stock price of over 60%, significantly underperforming the market and causing severe losses on Berkshire's holdings. Berkshire has reduced its involvement on the board, signaling a step back from daily operations. In May of this year, Kraft Heinz Company announced that Berkshire would no longer hold a seat on its board of directors.