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Kraft Heinz merger helps double Berkshire profits

Warren Buffett conglomerate owns about 27% of Kraft Heinz stock

Berkshire Hathaway Inc.'s third-quarter profit more than doubled as the completion of the Kraft- Heinz merger boosted the paper value of its stake in the food giant.

The conglomerate Warren Buffett leads said Friday it earned $9.4 billion, or $5,737 per Class A share. That's up from $4.6 billion, or $2,811 per share, in last year's third quarter.

Berkshire's revenue grew 15 per cent to nearly $59 billion. Several of its non-insurance businesses, such as BNSF railroad, performed well, but the results across its nearly 90 companies were mixed.

Berkshire holds about 27 per cent of the stock in the Kraft Heinz Food Co., and it recorded a $4.4 billion after-tax gain as the result of the merger that was completed over the summer.

Buffett has said operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. Berkshire's operating earnings per Class A share were $2,769 this year, down slightly from $2,876 last year.

The four analysts surveyed by FactSet expected Berkshire Hathaway to report operating earnings per Class A share of $2,716.26.

Berkshire officials do not typically comment on the company's quarterly earnings reports, and they did not immediately respond to an interview request on Friday.

BNSF railroad added $1.16 billion to Berkshire's net income, up from $1.04 billion last year thanks to better operations and a 1 per cent increase in total volume.

Berkshire's utility businesses generated $786 million net income, up from $697 million a year ago.

But the operating profit at its insurance companies, which include Geico and General Reinsurance, fell to $414 million from last year's $629 million as the company wrote less reinsurance and covered a $44 million loss related to an explosion in Tianjin, China.

``It's a mediocre quarter,'' S&P Capital IQ analyst Cathy Seifert said. ``This is a large, complex company with a lot of moving parts, but increasingly it seems like the gains are coming from acquisitions.''

On the acquisition front, Berkshire has two large deals in the works that are expected to close in next year's first quarter: Precision Castparts and Procter & Gamble's Duracell battery business.

Berkshire agreed in August to a $32.36 billion buyout of Precision Castparts, a maker of components for aircraft, power plants and other industrial uses, that will be its biggest deal ever once it's approved.

Duracell will be inserted into Berkshire's collection of businesses after Buffett's company hands over the roughly $3.8 billion worth of Procter & Gamble stock it owns. In addition to acquiring Duracell, Berkshire will receive about $1.7 billion cash.

Those deals will certainly charge up Berkshire's profits, but they will also use a significant chunk of the $66.2 billion cash it held at the end of September.

Besides those assets, the Omaha, Nebraska-based conglomerate also owns clothing, furniture, jewelry, specialty chemical and ice cream firms. And it holds major investments in such companies as Coca-Cola Co., IBM and Wells Fargo & Co.

Its Class B shares slipped 98 cents to $135.35 in extended trading after the release of the earnings report.

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