Daily Management Review

Touting US Economy in a Record Year for Berkshire, Warren Buffett Defends 3G


02/28/2016




Touting US Economy in a Record Year for Berkshire, Warren Buffett Defends 3G
Vigorous defenses of an aggressive private equity partner and a maligned mobile home unit was launched by Warren Buffett on Saturday as he used his annual letter to Berkshire Hathaway Inc shareholders.
 
This move was undertaken even as his conglomerate recorded robust profits.
 
Buffett also injected himself into the contentious 2016 U.S. presidential campaign lambasting candidates who talk down the nation's economic future as "dead wrong" - an apparent jab at Republicans and frontrunner Donald Trump. Buffett is also the world's third-richest person and a revered investor.
 
By calling climate change a "major problem for the planet," Buffett, who is backing Democratic candidate Hillary Clinton, also raised a political issue dear to Democrats in his widely-read letter.
 
Berkshire has been run by Buffett, 85, for a half-century and in his letter he made no mention of who might succeed him. He however mentioned that he expects to be around at age 100.
 
While operating profit rose 5 percent to a record $17.36 billion, the Omaha, Nebraska-based company reported a record full-year profit of $24.08 billion, up 21 percent.
 
Operating profit rose a larger-than-expected 18 percent in the fourth quarter as profits were up 32 percent. Berkshire owns roughly 90 businesses in areas as insurance, railroads, energy, food, apparel and real estate. The Forbes magazine reported that Buffett himself is worth $62.1 billion.
 
Buffett defended 3G Capital, a Brazilian firm in which Berkshire owns 51 percent of Kraft Heinz Co, and Berkshire's Clayton Homes mobile home unit as the billionaire spent about 10 percent of his roughly 18,000-word letter on these issues.
 
Compatibility of Buffett with 3G, an aggressive cost cutter led by Brazilian billionaire Jorge Paulo Lemann, was questioned by many shareholders.
 
H.J. Heinz was bought jointly by Berkshire and 3G who teamed up in 2013 and merged it with Kraft Foods last year. Buffett also helped 3G create Restaurant Brands International Inc. by financing the merger of Burger King with Canadian donut chain Tim Hortons. However thousands of jobs were slashed by 3G following these mergers.
 
3G has been "extraordinarily successful," and more ventures are possible, Buffett said while acknowledging that he and 3G "follow different paths" in running businesses.
 
"Jorge Paulo and his associates could not be better partners," Buffett wrote.
 
Predatory lending and discrimination against blacks and Latinos were criticized heavily as Clayton has been faulted in articles in the Seattle Times. The large mobile home builder denies such allegations.
 
Clayton has escaped major regulatory fines despite 65 state and federal reviews in the last two years, said Buffett and called Clayton a careful lender. Management delivers "industry-leading performance," Buffett said.
 
Only a catastrophic cyber, biological, nuclear or chemical attack on the United States posed a "clear, present and enduring danger" to the company, said Buffett while praising Berkshire's earnings power.
 
Buffett also rejected the dour economic outlooks polluting the presidential campaign.
 
The U.S. economy is in a "bubble", Trump has repeatedly said, and he hopes will pop before he takes office.
 
"I don't want to inherit all this stuff," he has said.
 
Buffett said such concerns are overblown.
 
"For 240 years it's been a terrible mistake to bet against America, and now is no time to start. The babies being born in America today are the luckiest crop in history," Buffett said.
 
(Source:www.reuters.com) 






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