Berkshire (BRK. Cash reserves slightly decreased, Q2 net profit halved, Kraft Heinz becomes a "minefield"

According to the Zhitong Finance APP, Berkshire Hathaway (BRK.A.US, BRK.B.US) reported its second-quarter results showing revenue of $92.515 billion, exceeding market expectations of $91.963 billion, but down from $93.65 billion in the same period last year, a year-on-year decrease of 1.2%, compared to $89.725 billion in the first quarter. Net profit attributable to shareholders was $12.37 billion, down 59% year-on-year, reflecting a decline in overall investment income from common stock holdings and a write-down on Kraft Heinz (KHC.US); net profit in the same period last year was $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; 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, down 3.8% year-on-year, compared to $11.6 billion in the same period last year; $9.64 billion in the first quarter, down 14.1% year-on-year, marking the largest decline since a 32.1% drop in operating profit in the third quarter of 2020.

The company's performance was impacted by a decline in insurance underwriting business, while profits in railroads, energy, manufacturing, services, and retail sectors all grew compared to the same period last year.

Berkshire once again issued a stern warning regarding U.S. President Donald Trump's tariff policies and their potential impact on its various businesses. Berkshire stated, "The pace of change in these events, including tensions arising from international trade policies and tariff developments, is accelerating in the first half of 2025." "The ultimate outcomes of these events remain highly uncertain. This is likely to adversely affect most (if not all) of our operating businesses as well as our investments in equity securities, potentially severely impacting our future performance."

As of June 30, 2025, the company's total cash, cash equivalents, and short-term U.S. securities failed to set a new record, declining to $334.1 billion, down from $347.68 billion as of March 31.

In the second quarter, the company, as in previous quarters, did not repurchase its own stock, indicating that Buffett believes the company's market value has been hovering above $1 trillion and is overvalued. However, since Buffett announced he would step down as CEO at the end of the year, Berkshire's Class A shares have fallen 12%, and the company may see opportunities to buy back more of its own stock in the future.

Investment income in the second quarter was $4.97 billion, compared to a net investment loss of $5.038 billion in the first quarter.

As of June 30, insurance float (i.e., net liabilities under insurance contracts) was approximately $174 billion, compared to $173 billion at the end of the first quarter.

As of June 30, 67% of Berkshire Hathaway's equity holdings were concentrated in five companies, with the top five holdings as of June 30 being American Express (AXP.US), Apple (AAPL.US), Bank of America (BAC.US), Coca-Cola (KO.US), and Chevron (CVX.US).

In the second quarter, Berkshire incurred a loss of $3.76 billion on its holdings in Kraft Heinz, reducing the book value to $8.4 billion as of the end of June. Recent reports indicate that Kraft Heinz is considering splitting its business, with Berkshire being its largest shareholder, currently holding about 27% of the outstanding shares Due to the continuous challenges faced by Kraft Heinz in recent years, including declining sales, goodwill impairment, and changing consumer tastes, its stock price has fallen by more than 60%, significantly underperforming the market, resulting in severe paper losses for Berkshire. Berkshire has reduced its participation on the board, signaling a withdrawal from day-to-day operations. In May of this year, Kraft Heinz announced that Berkshire would no longer hold a board seat in the company.

Additionally, recently, after Union Pacific Railroad and Norfolk Southern Railway reached a $72 billion cash and stock deal to create the only transcontinental railroad operator in the United States, industry analysts speculated that Berkshire's railroad company BNSF might explore its own merger options. Buffett typically dislikes participating in bidding wars, but the pressure to scale up in a concentrated industry may lead BNSF to consider acquisitions