Berkshire Hathaway (BRK) earnings for the first quarter of 2022

Warren Buffett

Jerry Miller | CNBC

Warren Buffett’s Berkshire Hathaway on Saturday reported a drop in first-quarter profit, as the group was not immune to the slowing US economy.

The company’s net profit was $5.46 billion, down more than 53% from $11.71 billion in the same period last year.

Berkshire’s operating profit – which includes profits from countless group-owned businesses such as insurance, rail and utilities – was flat year-over-year at $7.04 billion. This comes amid a sharp decline in the company’s insurance underwriting activity. Profits for this segment fell nearly 94% to $47 million from $764 million in the same period last year.

Profits from Berkshire’s manufacturing, services and retail segment jumped 15.5% to $3.03 billion in the quarter, while profits for rail and utilities increased slightly.

These operating results came as the US economy contracted in the first quarter for the first time since the onset of the Covid-19 pandemic.

The company also took a big hit from its investments, posting a loss of $1.58 billion amid a broader market downturn. To be sure, Buffett always advises shareholders to ignore these quarterly investment swings.

“The amount of investment gains (losses) in any given quarter is usually meaningless and provides numbers on net earnings per share that can be highly misleading for investors with little or no knowledge of accounting rules,” Berkshire said in a statement on Saturday.

Berkshire share buybacks also slowed to $3.2 billion from $6.9 billion in the fourth quarter of 2021, as the company has been more active closing deals in the fourth quarter than it has been for a long time.

In late March, the company said it had agreed to buy insurance company Alleghany for $11.6 billion – marking Buffett’s largest deal since 2016. Berkshire also revealed a stake in oil giant Occidental Petroleum that is now worth more than $7 billion, along with Position at HP Inc. It is now valued at more than $4.5 billion.

Despite the challenging environment, Berkshire has been an excellent investment this year. Class A stock is up more than 7% for the year — outperforming the S&P 500, which is down 13.3% for 2022. While it’s down from the fourth quarter, the company is still showing a massive cash stash of $106.3 billion through the end of the first quarter.

The company’s latest quarterly numbers come as thousands flock to Omaha, Nebraska for Berkshire’s annual meeting, where Buffett and Vice Chairman Charlie Munger will take questions from shareholders. (CNBC will host the exclusive live broadcast on Saturday starting at 9:45 a.m. ET.)

Some of the topics that Berkshire shareholders will want the pair to discuss include market expectations – given recent inflationary pressures and rising rates – as well as more clarity on the company’s succession plan.

Check out all coverage of CNBC Berkshire Hathaway’s annual meeting here.

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