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Berkshire takes $3.8 billion Kraft Heinz writedown, operating profit falls

Berkshire Hathaway, owned by Warren Buffett, wrote down $3.76 billion on its Kraft Heinz stake on Saturday, an admission that the investment, which dates back a decade, hasn't paid off. The company also reported a lower operating profit for the quarter as insurance premiums fell.

Berkshire reported a 59% drop in its quarterly net income due to the writedown and lower investment gains on its common stock.

Operating income for the second quarter fell by 4% to $11.16 billion or $7,760 each Class A share from $11.6 billion in the year prior. Net income dropped to $12.37 from $30.35.

Cash reached a near record $344.1 billion. Berkshire has sold more shares than it purchased for the 11th consecutive quarter. It has also not conducted any stock buybacks and had done so since May 2024.

After Kraft Heinz announced in May that it was considering strategic alternatives including a breakup, Berkshire wrote down $3.76 billion for its 27.4% shareholding. This is equal to $5 billion prior to taxes.

Buffett's company had been carrying Kraft Heinz on its books at above-market value but said economic and other uncertainties, as well as its longer-term plans to remain an investor, made the gap "other-than-temporary," necessitating a writedown.

This is Berkshire’s second writedown for Kraft Heinz after a $3 billion one in 2019. Buffett admitted at the time Berkshire had overpaid for the merger that created the food company in 2015.

Since Buffett announced that he would be stepping down as CEO at the end the year on May 3, Vice Chairman Greg Abel will replace him.

(source: Reuters)