Berkshire Hathaway Inc. (BRK.A;BRK.B) is a diversified holding company whose subsidiaries engage in insurance, rail freight, energy production and distribution, services, manufacturing, retail and other activities. Berkshire also has a large portfolio of securities and derivatives, which have a major impact on the company's reported financial results.
The company's list of competitors reflects Berkshire's diverse family of companies, including insurers All State Corp. (BEE), Progressive Corp. (PGR), en Jefferies Financial Group Inc. (JEF); freight railroad companies Union Pacific Corp. (UNP) and CSX Corp. (CSX); and utility and energy companies General Electric Co. (GE) en NextEra Energy Inc. (NEE). Berkshire also competes with several manufacturers and retailers.
Key learning points
- Berkshire Hathaway owns companies in insurance, rail transportation, energy generation and distribution, manufacturing and retail.
- The company is also a major stakeholder in many leading companies in the United States, such as American Express and Coca-Cola.
- For the third quarter of 2023, insurance generated the largest revenue and pre-tax profit.
- In January 2024, Berkshire announced that it had purchased the remaining 20% stake in Pilot Travel Centers LLC (PTC) on top of its previous ownership, making Berkshire the sole owner of PTC and controlling 100% of the company.
Berkshire Hathaway's finances
Berkshire in November 2023 announced its financial results for the third quarter of 2023 ended September 30, 2023. Total revenue attributable to its core businesses increased 21.2% to $93.2 billion from the same period in 2022. But including losses of $29.8 billion earned from its investment and derivatives contracts, the company's revenue fell to $63.4 billion.
If of the changes madeGAAPin 2018, the company must include unrealized gains and losses resulting from changes in the investment portfolio in the reported profits. This accounting change contributes to the company's earnings being significantly more volatile than they would otherwise be.
Berkshire's net lossattributable to its shareholdersThe profit before taxes (EBT), which the company uses as a measure of the profitability of its individual business segments, posted a loss of $17 billion in the third quarter of 2023, an increase of 298% compared to the same period a year earlier.
Although the company generated solid revenues from its insurance, rail, utilities and energy businesses, losses on investments resulted in a major hit to profits. Most of the losses came from a big drop in Apple shares. Additionally, the company experienced significantly higher costs in its utilities and energy segment this quarter.
Berkshire Hathaway's business segments
Berkshire provides a breakdown of seven key business segments for revenue and EBT, a measure of profitability before income taxes. Total revenue and EBT for these segments in Q3 2023 were $93.2 billion and $12.1 billion, respectively, excludingprofits and lossesfrom Berkshire's portfolio of investments and derivatives.
To bring the Company's total operating segment revenue into line with the total consolidated revenue referenced in the above section of this article, an $11 million "operating, elimination and other" adjustment must be deducted from the Company's segment revenue business segment of $93.2 billion.
The results below look at revenue before taking into account 'ventures, eliminations and other', and EBT before taking into account investment losses.
Insurance
Berkshire's insurance activities include:
- GEICO, private auto insurance
- Berkshire Hathaway Primary Group, property and casualty policy for commercial accounts
- Berkshire Hathaway Reinsurance Group, for loss excess, quota share and optionalreinsurance
- The insurance business also includes investment income
Revenue grew 18.9% in Q3 2023 to $24.3 billion, and EBT grew 1,433% to $5.9 billion. Insurance revenues constituted 26% of the total and EBT approximately 49.2% of revenues.
BNSF Railroad
Burlington Northern Santa Fe (BNSF), Berkshire's freight company, operates one of the largest systems in North America. BNSF Railway transports coal and consumer, industrial and agricultural products.
BNSF Railway's revenue fell 12.6% to $5.8 billion in the third quarter of 2023, and EBT fell 14.6% to $1.6 billion. Rail transportation accounted for 6.3% of Berkshire's total revenue and generated 13.3% of total EBT.
Berkshire Hathaway-energie
Berkshire Hathaway Energy is a global energy company with subsidiaries that generate and distribute energy and engage in real estate operations.
Of segment revenue fell 3.7% in Q3 2023 to $7.3 billion, and EBT fell 111% to a loss of $147 million. Turnover amounted to 7.8% of the company's turnover and EBT did not contribute to profits due to the loss.
production
Berkshire's manufacturing companies fall into three categories: industrial products, building products and consumer products.
Manufacturing revenue grew 0.92% to $19.2 billion in the third quarter of 2023, and EBT increased 6.7% to $3.1 billion. Production accounted for 20.6% of total sales and 25.5% of total EBT.
McLane Company
McLane is a wholesaler and distributor serving businesses including convenience stores, discount stores, wholesale clubs, pharmacies and more. It is divided into three units: grocery distribution, food service distribution and beverage distribution.
Revenue fell 0.68% to $13.5 billion in Q3 2023, and EBT grew 3.6% to $116 million. McLane accounts for 14.5% of total revenue, but only 0.96% of EBT.
Pilot Reiscentra (PTC)
PTC operates travel centers in North America under the brand names "Pilot" or "Flying J" and has more than 750 travel centers in 44 states and six provinces of Canada. The company is also involved in fuel wholesale and fuel marketing platforms.
Berkshire acquired a controlling stake in PTC in 2023, so there is no comparative data for the same period the previous year. In the third quarter of 2023, the segment accounted for 14.1% of revenue and 2.4% of EBT.
Service and retail
Service industries include food and grocery distribution, professional aviation training, fractional aircraft ownership, and electronic components distribution, as well as media companies and logistics companies.
The retail activities include automotive products, home furnishings and other activities that sell various consumer products.
Segment revenues increased 4% to $9.9 billion in the third quarter of 2023 and EBT decreased 1.3% to $1.2 billion. The segment accounted for 10.7% of total revenue and 9.8% of total EBT.
Gains and losses on investments and derivatives
Berkshire Hathaway also owns a large portfolio of securities and derivatives. The concentrations are in Apple Inc. (AAPL), Bank of America Corp. (BAC), Coca Cola (IS), Chevron- (CVX), en American Express Co. (AXP). The portfolio suffered a loss of $29.8 billion in the third quarter of 2023, compared to a loss of $13.5 billion in the same period in 2022.
The latest developments from Berkshire Hathaway
In January 2024, Berkshire announced that it had purchased the remaining 20% stake in Pilot Travel Centers LLC. The company now owns 100% of PTC, having previously purchased shares in the company.
This is how Berkshire Hathaway reports on diversity and inclusion
As part of our efforts to raise awareness of the importance ofdiversity in companieswe give investors a look at the level of transparency at Berkshire Hathaway and how it reflects its commitment to diversity, inclusion and social responsibility.
Berkshire releases an annual diversity report that breaks down workforce diversity by function, business segment, gender and ethnicity. The company reports the following ethnicity among its employees: Hispanic or Latino, white, black or African American, Asian, Indian Hawaiian or other Pacific Islander, American Indian or Alaska Native, and "two or more races."
