“As efforts to contain the spread of the COVID-19 pandemic accelerated in the second half of March and continued through April, most of our businesses were negatively affected, with the effects to date ranging from relatively minor to severe,” Berkshire said in the filing.
The company’s overall revenue rose slightly from the year ago quarter, to $61.3 billion. But Berkshire said Saturday that the essential businesses it owns — its railroad, utilities and energy, and insurance units, “slowed considerably in April.”
And the company added “several of our retailing businesses and certain manufacturing and service businesses are being severely impacted due to closures of facilities where crowds can gather, such as retail stores, restaurants, and entertainment venues.”
As a result of the massive shift in consumer behavior, Berkshire said that various subsidiaries have had to furlough employees, cut hourly wages and salaries and reduce capital spending plans in order to preserve capital.
“While we believe that these necessary actions are temporary, we cannot reliably predict when business activities at our numerous and diverse operations will normalize,” the company said. “We also cannot predict how these events will alter the future consumption patterns of consumers and businesses we serve.”
Most of the Berkshire losses were attributable to the enormous drops in the value of the companies that Berkshire owns in its investment portfolio rather than in declines in sales and profits at its own subsidiaries.
Berkshire said it wrote down the value of its equity investments by a whopping $54.5 billion. Its operating earnings, a measure that Buffett prefers to focus on, rose nearly 6% to $5.9 billion in the quarter.
Berkshire Hathaway has had large losses in the past, but those were attributable more specifically to its own investments rather than a downturn in the broader economy.
Investors now are wondering whether Berkshire will look to invest even more in top US firms in light of the Covid-19 outbreak. After all, the company is sitting on a gigantic pile of cash, and disclosed Saturday that it now has $137.3 billion on its balance sheet.