Berkshire Hathaway announces $9.8bn write-down

Warren Buffett, CEO of Berkshire Hathaway. (AFP/File)
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Updated 10 August 2020

Berkshire Hathaway announces $9.8bn write-down

  • Despite the write-down, Berkshire said second quarter net income surged 87 percent because of gains in stock investments such as Apple Inc. as markets rebounded

LONDON: Berkshire Hathaway Inc. on Saturday announced a $9.8 billion write-down and 10,000 job losses at its Precision Castparts aircraft parts unit, as the coronavirus pandemic caused widespread pain at Warren Buffett’s conglomerate.

Despite the write-down, Berkshire said second quarter net income surged 87 percent because of gains in stock investments such as Apple Inc. as markets rebounded.

Operating profit fell 10 percent, cushioned by a temporary bump at the Geico auto insurer, as the pandemic caused “relatively minor to severe” damage to most of Berkshire’s more than 90 operating businesses.

“The write-down was prudent,” said Cathy Seifert, an equity analyst at CFRA Research. “It’s a recognition of what the market has long believed, that the purchase price was rich, and the integration not as smooth as many would have hoped.”

Berkshire, which paid $32.1 billion for Precision in 2016 in its largest acquisition, and which Buffett at the time called a steep price, said COVID-19 caused airlines to slash plane orders, significantly curbing demand for Precision’s products.

Buffett himself soured on airlines during the quarter, selling $6 billion of their stock and telling shareholders on May 2 the industry’s future had become “much less clear to me.”

Berkshire said Precision, which also makes industrial parts, saw revenue fall by one-third and plans an “aggressive restructuring” to shrink operations. Precision ended 2019 with 33,417 employees, and has shed 30 percent of its workforce.

During the quarter, Buffett, who turns 90 on Aug. 30, also took advantage of Berkshire’s underperforming shares by repurchasing $5.1 billion of stock, even as the pandemic reduced other companies’ ability to buy back their own shares.

Berkshire’s stock has significantly underperformed broader markets since the end of 2018, and Seifert said investors should welcome the buybacks.

“Berkshire tends to go against the grain, and when so many companies suspended buybacks, Berkshire did the opposite,” she said. “The market should react positively, because it shows Berkshire is confident in its prospects.”

Those repurchases confirmed Berkshire’s hint in a July 8 regulatory filing it had become more aggressive with buybacks after loosening its buyback policy in 2018.


Indonesia turns focus to energy security and renewables amid pandemic

Updated 24 November 2020

Indonesia turns focus to energy security and renewables amid pandemic

  • Govt. aims to use of opportunity presented by COVID-19 outbreak to make transition

JAKARTA: The fallout from the coronavirus pandemic has presented Indonesia with the opportunity to work toward energy security and switch from conventional to renewable sources, officials have said.

“Indonesia has made various breakthroughs such as making use of biodiesel B30,” Foreign Minister Retno Marsudi said during an online press conference on Sunday, quoting President Joko Widodo’s address during the G20 Summit.

“(We) will be conducting tests on green diesel D100 from palm oil – which will absorb 1 million tons of palm oil produced by farmers – and also install rooftop solar power plants in hundreds of thousands of households,” he added.

Widodo also made a reference to data from the World Economic Forum on the massive potential of the green economy, which could generate up to $10.1 trillion and create 395 million new jobs by 2030.

Earlier this month on Nov. 4, energy and mineral resources minister Arifin Tasrif said that the current difficulties posed by the pandemic had spurred Indonesia to accelerate the energy transition, by developing renewable energy, ensure efficiency and work toward maintaining energy security for lasting energy independence.

Energy security and its steady supply were some of the top concerns voiced by Tasrif during the G20 energy ministers’ meeting in September.

“COVID-19 has created an economic crisis and shrunk energy demands. All G20 members must work together to ensure that the energy market is stabilized and maintain supply affordability. These are a top priority for Indonesia,” Tasrif said at the meeting.

He also lauded Saudi Arabia, the summit host, for pushing ahead with the 4Rs issue – Reduce, Reuse, Recycle, Remove – in the circular carbon economy (CCE) concept, which was endorsed by the energy ministers after their meetings.

Tasrif said the issue was an “important part of reintroducing the role of biofuel and hydrogen in the CCE platform,” and in line with Indonesia’s adoption of the mandatory use of biodiesel – containing 30 percent palm oil and known as B30 – from January this year, specifically in the transport, power plant, industrial and commercial sectors.

Indonesia, the world’s largest palm oil producer, has set a target to use 23 percent of renewable energy by 2025 and 50 percent by 2050, as part of its national energy mix plan.

The government has listed provisions for renewable energy and its conservation among its seven priority programs for next year and allocated 16.7 billion rupiahs ($1.2 million) for environmental preservation efforts in the 2021 budget.

“Our state budget is very much pro-green ... The government is already on the right track with the implementation of energy transition policy,” Arif Budimanta, a special presidential staff on economic affairs, said during an online discussion recently.

He added that President Joko Widodo had been very “hands-on” with the implementation of the energy transition policy and was directly supervising the progress of the policy.

Government officials claimed that the adoption of B30’s mandatory use – the first in the world – has been successful.

However, its target this year had reduced from the initial 9.5 million kilolitres to 8.3 million kilolitres, with 6 million kilolitres realized so far.

Mandatory use is expected to reduce carbon dioxide emissions by 16.9 million tons.

“The switch to a biodiesel program, which has been in place since 2015, has been able to replace almost 25 million liters of imported fossil fuel by June this year, and we have been able to save foreign exchange spending by roughly equivalent of 127 trillion rupiahs,” Eddy Abdurrachman, head of the Palm Oil Plantation Fund Management Agency said during a recent webinar.

Static tests on diesel engines for 1,000 hours of use of the biodiesel blend are underway at the Energy and Mineral Resources Ministry’s research and development lab.

The head of the research and development agency, Dadan Kusdiana, said on Aug. 26 that scientists had managed to conduct studies on the lab’s engine test bench after the COVID-19 outbreak restricted them from testing on the roads.

“We expect to wrap up the tests by the end of the year,” Kusdiana said.