Berkshire Hathaway's Earnings Plummet

Higher losses on investments and derivative contracts hurt the company's net earnings, while weak performance in its financial and financial products segment dragged down revenue in the fourth quarter.
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On February 27, 2009,

Berkshire Hathaway

(BRK.A) - Get Report

reported a 96.0% decline in its Q4 FY08 net earnings due to higher losses on investments and derivative contracts. Net earnings plummeted to $117.00 million or $76.00 per share from $2.95 billion or $1,904.00 per share during Q4 FY07. The latest consensus estimate was for earnings of $1,486.50 per share.

During Q4 FY08, BRK.A's revenue dropped 12.3% to $24.59 billion from $28.04 billion a year ago, dragged down by weak performance from its finance and financial products segment.

Revenue from the insurance and other segment inched down 1.6% to $23.73 billion, hurt by losses from its investments. Within this segment, insurance premiums earned increased 5.1% to $6.62 billion. Sales and service revenues grew 8.4% to $16.44 billion, while interest, dividend, and other investment income rose 5.9% to $1.38 billion. However, investment losses stood at $706.00 million compared to a gain of $1.36 billion in the year-ago quarter. In addition, revenue from the utilities and energy segment surged 34.9% to $4.24 billion, helped by an 18-times increase in other revenue. Moreover, the financial and financial products segment recorded negative revenue of $3.38 billion compared to positive revenue of $771.00 million, adversely affected by the loss on derivative contracts. Within this segment, interest income dipped marginally to $430.00 million, while investment gain dropped 50.0% to $1.00 million. Finally, losses from derivatives expanded to $4.61 billion from $429.00 million in Q4 FY07.

Berkshire increased its stake in Posco, the South Korean steelmaker, to 5.2% from 4.5% in FY07.

For FY08, BRKA's total revenue slipped 8.8% to $107.79 billion from $118.25 billion in FY07. Moreover, net income slumped 62.2% to $4.99 billion, or $3,224.00 per share, from $13.21 billion, or $8,548.00 per share, a year ago.