Buffett firm has 40 percent loss in 2nd-quarter profit

Warren Buffett’s company reported a 40 percent drop in second-quarter profit Friday because the improvement at Berkshire Hathaway Inc.’s operating companies couldn’t overcome $1.4 billion in paper losses on derivative contracts.

Berkshire’s strong performances from its railroad, insurance and manufacturing businesses was overshadowed by the plummeting value of the Omaha, Neb., company’s derivatives — many of which are tied to the value of four major stock markets.

“To me, the overall picture is strong,” said Andy Kilpatrick, a stockbroker and author of “Of Permanent Value, the Story of Warren Buffett.” “I do think the derivatives mask the underlying thing a lot.”

Berkshire reported $1.97 billion net income, or $1,195 per Class A share. That’s down from $3.3 billion, or $2,123 per share, a year ago. Its revenue grew 7 percent to $31.7 billion.

Berkshire executives typically do not comment on quarterly earnings reports, and they did not respond to an interview request Friday.

 

AIG payments on oil spill will fall partly on taxpayers

Taxpayers took an indirect hit from the oil spill caused by the Deepwater Horizon rig explosion through insurance claims related to the disaster.

AIG, the insurance giant that is 80 percent owned by the government, said it paid about $23 million in claims following the spill in the second quarter, and expects to pay more.

American International Group Inc. said it’s not sure what the eventual total may be.

In addition to claims already filed, more policyholders may step forward. The company said it could see claims related to cleanup costs; property damage; environmental damage, including to the fisheries impacted by the spill; business interruption; bodily injury and wrongful death claims of the workers on the rig; claims for the destruction of the rig itself, and various class actions brought by Gulf Coast residents.

 

Wheat, meat prices may spike if Russia bans exports

The price of America’s daily bread and meat could soar this fall, as surging wheat prices in anticipation of a Russian ban on exports stoked fears about tight supplies.

Grain shortages and rising food prices in 2007 and 2008 sparked riots worldwide, but according to media reports, U.S. farmers have rushed to put out millions of bushels of wheat to bolster worldwide inventories. Wheat prices Friday dropped by 60 cents on the Chicago Board of Trade, voiding Thursday’s price run-up.

Yet analysts warned that consumers might be hit with higher prices at the grocery store in the months ahead because of a convergence of factors. Some countries and consumers may resort to hoarding, which could push prices upward. Speculators and some food companies might seek to exploit public worries.

The price of wheat surged to a two-year high when Russian Prime Minister Vladimir Putin announced the ban Thursday. Wildfires and serious droughts have ravaged a large swath of central Russia this summer, destroying one-fifth of its crop. Russia is one of the world’s largest wheat exporters.

 

Chicago bank shuttered by regulators as failures hit 109

Regulators Friday shut down a small bank in Chicago, lifting to 109 the number of U.S. bank failures this year.

The Federal Deposit Insurance Corp. said it was appointed receiver of Ravenswood Bank.

The failure of Ravenswood Bank is expected to cost the deposit insurance fund $68.1 million.

 

Ford executive to get salary, options worth $16 million

After a five-year wage freeze, Ford Motor Co. Executive Chairman Bill Ford Jr. is getting paid again.

It’s another sign that the automaker is healthy enough to award its top executives generous pay packages. The company recently said it earned $2.6 billion in the second quarter, its fifth-straight quarterly profit.

Ford will be paid $4.2 million in salary and in stock options worth $11.6 million. The total represents pay he has earned over the last two years. He was to be paid Friday.