04/08/2025

BIZ & FINANCE MONDAY | AUG 4, 2025

17

Berkshire takes US$3.8 billion Kraft Heinz write-down

NEW Buffett’s Berkshire Hathaway said on Saturday it took a US$3.76 billion (RM16 billion) write-down on its stake in Kraft Heinz during the second quarter, an acknowledgment the decade-old investment has not worked out. Berkshire also reported a 4% decline in quarterly operating profit as insurance underwriting premiums fell. The write-down and lower gains from common stocks caused a 59% drop in overall net income. The conglomerate signalled it remains cautious about market valuations, amid uncertainty about tariffs and growth in the broader economy. It reported a near-record US$344.1 billion cash stake, and sold more stocks than it bought for an 11th straight quarter. As of mid-July, Berkshire had not repurchased any of its own stock since May 2024. Buffett, 94, has led Omaha, Nebraska-based Berkshire since 1965, though he plans to step down at year-end. “Investors are getting antsy and want to seek activity, and nothing is happening,” said Kyle Sanders, an analyst at Edward Jones. “Buffett definitely views the market as overvalued, and will sit back and wait for something to come to him.” Uncertainty about trade policies, including tariffs, has become a headwind as delayed orders and shipments led to declining revenue at most of Berkshire’s consumer businesses. YORK: Warren LONDON: Opec+ agreed in principle to boost oil output by 548,000 barrels per day in September, two Opec+ sources said yesterday as the group finishes unwinding its biggest tranche of production cuts amid fears of further supply disruptions from Russia. A decision is expected at a meeting scheduled to begin today, amid fresh American demands for India to stop buying Russian oil as Washington seeks ways to push Moscow for a peace deal with Ukraine. Fresh European Union sanctions have also pushed Indian state refiners to suspend Russian oil purchases. Opec+, which pumps about half of the world’s oil, had been curtailing production for several years to support the market. But it reversed course this year to regain market share, and as US President Donald Trump demanded Opec pump more oil. Opec+ began output increases in April with a modest hike of 138,000 bpd, followed by larger hikes of 411,000 bpd in May, June and July and 548,000 bpd in August. If the group agrees to the 548,000-bpd September increase, it will have fully unwound its previous production cut of 2.2 million bpd, while allowing the United Arab Emirates to raise output by 300,000 bpd. Opec+ still has in place a separate, voluntary cut of about 1.65 million bpd from eight members and a 2-million-bpd cut across all members, which expire at the end of 2026. Sources have said previously the group had no plans to discuss other tranches of cuts. – Reuters

Mistral in talks with VC firms, MGX to raise US$1 billion: FT artificial intelligence startup Mistral is in talks with investors, venture capital firms and Abu Dhabi’s MGX to raise US$1 billion at a valuation of US$10 billion, the Financial Times reported last week, citing people familiar with the matter. The company launched in June Europe’s first AI reasoning model, which uses logical thinking to create a response, as it tries to keep pace with American and Chinese rivals at the forefront of AI development. The funding would accelerate the commercial rollout of Mistral’s Le Chat chatbot and support continued development of its large language models, the report said. MGX and Mistral did not immediately respond to Reuters requests for comment. The startup raised €600 million in a Series B funding round that valued the company at €5.8 billion euros last year. Industry observers consider Mistral as Europe’s best-posi tioned AI company to rival Silicon Valley leaders, though the French firm has yet to achieve com parable market traction or revenue scale. Mistral counts Nvidia, Andreessen Horowitz and Lightspeed Venture Partners among its investors. – Reuters The energy business, Berkshire Hathaway Energy, posted a 7% profit increase. Berkshire said it is evaluating the impact of the One Big Beautiful Bill Act, signed last month by US President Donald Trump, on the “economics and viability” of its renewable energy, storage and technology-neutral projects. – Reuters PARIS: French as Dairy Queen, Fruit of the Loom and See’s Candies. Berkshire said the 12% quarterly decline in insurance underwriting profit stemmed primarily from reinsurance businesses and some smaller insurance businesses. Geico, its best-known insurance business, saw pre-tax underwriting profit rise 2%, as a 5% increase in premiums offset a smaller rise in accident losses. The car insurer has been ceding market share to State Farm and Progressive, while focusing on improving underwriting quality and technology and cutting jobs. Analysts said higher tariffs could be a headwind for Geico if the cost of auto parts rose, potentially increasing losses from accident claims. BNSF is also cutting expenses. Lower fuel costs helped boost quarterly profit 19% gain, though revenue and cargo volumes barely changed.

o Quarterly operating profit drops 4%, net income skids 59%

more than 12%, and lagged the Standard & Poor’s 500 by about 22 percentage points, since Buffett announced on May 3 he would step down as chief executive at year end. Vice-chairman Greg Abel, 63, will succeed him, though Buffett will remain chairman. Analysts said the premium embedded in Berkshire’s stock price because of the presence of Buffett, arguably the world’s most well known investor, has eroded, while growth may slow in the insurance sector, a major Berkshire profit centre. The lack of new investments has also been a drag. Analysts believe Berkshire’s BNSF unit could buy CSX to create another transcontinental railroad, after Union Pacific agreed on July 29 to buy Norfolk Southern. Buffett transformed Berkshire over six decades from a troubled and since-closed textile company into a US$1.02 trillion conglomerate.

Heinz stake, equal to US$5 billion before taxes, followed the struggling food company’s announcement it would consider strategic alternatives, which could include a breakup. Berkshire had carried Kraft Heinz on its books at above-market value but said economic and other uncertainties, and its longer-term plans to remain an investor, made the gap “other-than-temporary”. The write-down is Berkshire’s second for Kraft Heinz, following a US$3 billion write-down in 2019. Buffett acknowledged at the time that Berkshire overpaid in the 2015 merger of Kraft Foods and H.J. Heinz, one of his biggest investment missteps. Kraft Heinz has suffered as more shoppers favour healthier and private-label alternatives. Its approximately 200 brands include Oscar Mayer, Kool-Aid, Velveeta and Jell-O. Berkshire also carries another big investment, its 28.1% stake in Occidental Petroleum at US$5.3 billion above fair value, but reported no need for a write-down. Shares of Berkshire have fallen

Analysts viewed overall results as lackluster. “Berkshire and the economy are at an inflection point,” said Cathy Seifert, a CFRA Research analyst. “I don’t think the market will embrace the combination of mediocre results, lack of stock buybacks and recent share underperformance amid a management transition.” Seifert and Sanders rate Berkshire “hold.” Second-quarter operating income fell to US$11.16 billion, or about US$7,760 per Class A share, from US$11.6 billion a year earlier. Results included US$877 million of currency losses as the US dollar weakened. Net income, including gains and losses on stocks such as Apple and American Express, fell to US$12.37 billion from US$30.35 billion. Revenue fell 1% to US$92.52 billion. Buffett views unrealised investment gains and losses, including on stocks Berkshire has no plans to sell, as often meaningless to understanding his company. The US$3.76 billion after-tax write down for Berkshire’s 27.4% Kraft

Jazwares, which makes the popular Squishmallows plush toys, saw revenue fall 38.5% in the year’s first half. Opec+ said to be agreeable to another big output hike Berkshire owns several insurers and reinsurers, electric utility and renewable energy businesses, several chemical and industrial companies, and familiar consumer brands such

Storage tanks at the Airankol oil field in Kazakhstan. – REUTERSPIC