Net income falls 40% at Buffett’s company

Warren Buffett’s Berkshire Hathaway Inc. said Friday that second-quarter profit fell 40%, as declining stock prices depressed the value of his derivative contracts.

Operating profit nevertheless soared 73%, helped by the takeover of railroad operator Burlington Northern Santa Fe Corp., improvement in insurance underwriting results, and a turnaround in performance at the NetJets corporate plane unit.

Net income fell to $1.97 billion, or $1,195 per Class A share, from $3.3 billion, or $2.123, a year earlier.

Excluding investments, operating profit rose to $3.07 billion, or $1,866 per share, from $1.78 billion, or $1,147.

Analysts on average expected operating profit of $1,360 per share, according to Thomson Reuters.

In Friday trading before the earnings news, Berkshire Class A shares closed down $785 at $120,600, and its Class B shares closed down 36 cents at $80.47.

Berkshire recorded $1.41 billion of losses on derivatives, including long-term contracts tied to equity indexes, compared with a year-earlier $1.53 billion profit.

Berkshire must incorporate its derivative gains and losses each quarter on its balance sheets, which added to quarterly earnings volatility. Buffett has nevertheless repeatedly said he expects the contracts to be profitable.