Berkshire agrees on Buffett successor
today.reuters.co.uk
Sat Mar 4 : By Jonathan Stempel
NEW YORK (Reuters) - Billionaire investor Warren Buffett on Saturday said Berkshire Hathaway Inc.'s board of directors has chosen his successor, but he did not name the person or say when the change might happen.
The insurance and investment company also said quarterly profit surged 54 percent, helped by a gain from its stake in Gillette Co., which was bought by Procter & Gamble Co. (PG.N: Quote, Profile, Research).
Berkshire (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) trimmed its bet against the U.S. dollar, but said it is buying more shares in international businesses. It ended the year with $44.66 billion (25.44 billion pounds) of cash, and Buffett said "major acquisitions" are necessary to produce "truly satisfactory gains" in operating earnings.
In his annual letter to Berkshire shareholders, Buffett, 75, said the board designated a successor from among three "reasonably young and fully capable" internal candidates.
Buffett, the world's second richest person, has run the Omaha, Nebraska-based Berkshire since 1965.
"Berkshire's board has fully discussed each of the three CEO candidates and has unanimously agreed on the person who should succeed me if a replacement were needed today," Buffett wrote.
He added, though: "I feel terrific."
Last month, Buffett announced plans to leave Coca-Cola Co.'s (KO.N: Quote, Profile, Research) board so he could spend more time running Berkshire.
Analysts and published reports have identified at least five potential successors from Berkshire-owned companies.
"I really don't worry about Berkshire's operations," said Keith Trauner, who helps invest $3.3 billion at Fairholme Capital Management in Short Hills, New Jersey, including 15 percent in Berkshire. "I worry more about the investment side, where Berkshire will almost certainly not be as strong without Buffett. That does not mean it will be bad."
PFOFIT RISES
Berkshire's fourth-quarter profit rose to $5.13 billion, or $3,331 per share, from $3.34 billion, or $2,172, a year earlier. Revenue rose 27 percent to $25.37 billion.
Results included a $3.25 billion after-tax gain from the Gillette takeover. Berkshire had owned 9.7 percent of the razor maker's shares. Buffett has no plans to sell Procter shares.
For all of 2005, net income rose to 17 percent to $8.53 billion, or $5,538 per share, despite $3.4 billion of losses from Hurricanes Katrina, Rita and Wilma. Revenue rose 10 percent to $81.66 billion.
Insurance units, which include Geico and General Re Corp. and are the biggest contributor to results, had a mixed year.
Geico, the auto insurer, posted a 13.3 percent increase in earned premiums. This offset an 11 percent drop at General Re, including a 27 percent decline in North American property and casualty premiums driven by cancellations and non-renewals.
Three former General Re officers pleaded innocent last month to charges they conspired to inflate insurer American International Group Inc.'s (AIG.N: Quote, Profile, Research) results.
DOLLAR BET
Berkshire reduced its stake in foreign currency contracts to $13.8 billion in nine currencies from $21.4 billion in 12 currencies a year earlier.
The currency bet caused a $58 million loss in the fourth quarter, when the U.S. Dollar Index <.DXY>, which measures the greenback's value against six currencies, rose 1.7 percent. Berkshire lost $955 million on currencies in 2005.
Buffett said he remains bothered by the U.S. trade deficit, which rose 17.5 percent last year to a record $725.8 billion.
However, he said Berkshire bought more non-dollar-denominated shares in companies that earn much of their profits outside the United States.
"He has had on occasion specific investments in foreign stocks, but this is different," said Thomas Russo, who helps invest more than $2 billion at Gardner Russo & Gardner in Lancaster, Pennsylvania, including 8 percent in Berkshire. "He doesn't sound like he's making one-off purchases."
Berkshire also bought large amounts of stock in Wal-Mart Stores Inc. (WMT.N: Quote, Profile, Research) and Wells Fargo & Co. (WFC.N: Quote, Profile, Research).
Berkshire's Class A shares closed Friday at $87,490, and its Class B shares at $2,911.40. The Class A shares rose just 0.8 percent in 2005, while the Standard & Poor's insurance index <.SPX> rose 12.5 percent.
Buffett was recently worth $40 billion, according to Forbes magazine. Only Microsoft Corp. (MSFT.O: Quote, Profile, Research) Chairman Bill Gates, a Berkshire director and Buffett bridge partner, was worth more.
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