Berkshire profits boosted by railroads

Profits at Berkshire Hathaway's railroad operator, BNSF, jumped in the first few months of this year, even as it poured money into capital improvements, providing some relief as 40,000 shareholders gathered in Omaha for the company's annual meeting.

BNSF has been plagued by operational blunders since bad winter weather at the start of 2014 affected North America, but net earnings in the first three months of 2015 jumped 44 per cent to $1.0bn.

Warren Buffett, Berkshire chief executive, had singled out BNSF for giving unacceptably poor service within his sprawling conglomerate, whose subsidiaries include insurers, utilities, manufacturers and retailers, among many other businesses.

Overall, Berkshire's net earnings rose 9.8 per cent to $5.2bn in the quarter when analysts had been expecting a decline. Earnings per "A" share - Berkshire has two classes of share - were $3,143, more than $200 above the average of analysts' forecasts.

"We attribute operational improvements [at BNSF] to capacity added in 2014 through capital investments for line expansion, system improvement projects, additional equipment, new employee hires and other operational initiatives," the company said in a regulatory filing on Friday.

"We plan to continue our capital expansion and operational improvement initiatives in 2015 in order to meet customer demand and improve and maintain service levels."

BNSF, which Mr Buffett acquired in 2010, is spending $6bn a year on capital investment. The subsidiary would be a "soft spot" for Berkshire's earnings growth over the next few years, a recent Barclays research note predicted, "due to the impact of ongoing service disruptions and less of tailwind from oil-by-rail".

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This year marks the golden anniversary of Mr Buffett taking control of the company and the event, already dubbed the "Woodstock of capitalism", has taken on an additional celebratory air.

As many as 40,000 shareholders are expected to attend, and early birds were able to visit the exhibition centre where the event is being held on Friday to shop at special stalls set up by Berkshire's subsidiary companies.

Visitors were able to stock up on See's Candies, souvenir boxer shorts from Fruit of the Loom, Dairy Queen ice lollies and Heinz ketchup and mustard bottles emblazoned with cartoons of Mr Buffett and Mr Munger.

The FT's live blog of Saturday's meeting can be found here

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