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Coronavirus punishes Warren Buffett as Berkshire Hathaway takes big writedown

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(Reuters) – Berkshire Hathaway Inc on Saturday announced a $9.8 billion writedown 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 writedown, Berkshire said second-quarter net income surged 87% because of gains in stock investments such as Apple Inc as markets rebounded.

Operating profit fell 10%, 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 writedown 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% 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.

Pandemic damage

Berkshire businesses suffering from the pandemic also include the BNSF railroad, which saw lower shipping volumes, and retailers including See’s candies that temporarily closed stores.

Companies in which Berkshire recently made large investments have also been struggling.

Berkshire recorded a $513 million loss on its 26.6% stake in Kraft Heinz Co (KHC.O), after the food company took several writedowns including for Maxwell House and Oscar Mayer.

Meanwhile, Occidental Petroleum Corp, where Berkshire invested $10 billion last August, has also pummeled by sinking oil prices.

Berkshire’s overall quarterly net income rose to $26.3 billion, or $16,314 per Class A share, from $14.07 billion, or $8,608 per share, a year earlier. That followed a $49.75 billion first-quarter loss.

An accounting rule requires Berkshire to report unrealized stock gains and losses with net results, causing huge swings that Buffett considers meaningless.

Second-quarter operating profit fell to $5.53 billion, or about $3,463 per Class A share, from $6.14 billion, or $3,757 per share, a year earlier.

Revenue fell 11% to $56.8 billion, despite gains in some businesses including Duracell batteries, which rose 16%.

Geico’s pretax underwriting profit increased fivefold to $2.06 billion because people drove less, resulting in significantly fewer accident claims.

But Berkshire said Geico could suffer underwriting losses for the rest of the year, as it awards drivers $2.5 billion of credits on auto and motorcycle policy renewals.

Berkshire ended June with a record $146.6 billion of cash and equivalents, and bought just $797 million of equities in the quarter.

Buffett has since deployed some cash, agreeing to buy some Dominion Energy gas assets for $4 billion and adding more than $2 billion of Bank of America Corp stock.

Reporting and photo: Reuters

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Maldives celebrates arrival of 2024’s 1 millionth tourist

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Maldives on Thursday welcomed the one millionth tourist to visit this year.

The one millionth tourist is a Thai named Sutapa Amonwivat, who arrived from Singapore with her husband and two children. This is her second visit to Maldives.

Maldives Marketing and Public Relations Corporation (MMPRC) and the Ministry of Tourism gave a warm welcome to Sutapa at the Velana International Airport (VIA) Thursday afternoon. She was welcomed at the VIA by tourism minister Ibrahim Faisal, MMPRC Managing Director Ibrahim Shiury and senior officials of various relevant agencies.

After welcoming her with traditional offerings, she was presented with various gifts by the ministry, MMPRC, customs, immigration, Maldives Association of Travel Agents and Tour Operators (MATATO) and Trans Maldivian Airways (TMA).

Maldives reached one million tourists in June, three weeks earlier than last year. The number of tourists reached one million on July 16, 2023.

Maldives expects to reach 2 million tourists this year.

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New air route connects Chongqing to Maldives

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Chongqing Airlines on Monday began its inaugural flights to Maldives.

The Chongqing-Male route, scheduled three times a week, is expected to strengthen the bonds between China and the Maldives, opening up exciting new opportunities for tourism and cultural exchange.

The inaugural flight was welcomed upon its arrival at Velana International Airport (VIA) in Maldives, where local officials and tourism representatives expressed their enthusiasm for this new development.

“We warmly welcome our friends from China to our beautiful islands. This new connection strengthens our bonds and opens up new opportunities for tourism,” the tourism ministry said on X.

Maldives currently welcomes four airlines from China, including China Eastern, Beijing Capital Airlines, Xiamen Airlines.

In January, Maldives government urged tourism stakeholders in both Maldives and China to ramp up efforts to restore China’s position as the primary source market for Maldives tourism, a status held before the onset of Covid-19.

China, being the largest source market for Maldives tourism before the pandemic, saw a resumption of tourist arrivals from January 2023 after a three-year hiatus due to the pandemic. In 2023, the Maldives welcomed 187,118 Chinese tourists, marking a significant recovery in numbers. This year, the Maldives has welcomed the most number of tourists from China, with over 107,940 or 11.5 percent of total arrivals by June 12. 

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CROSSROADS Maldives Introduces Weixin Pay at resorts for seamless guest experience

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CROSSROADS Maldives has introduced WeChat Pay, widely known as Weixin Pay in China, across its world-class resorts, SAii Lagoon Maldives, Curio Collection by Hilton, and Hard Rock Hotel Maldives. This payment option is made available to enhance the convenience and overall experience for guests from China, making their stay in the Maldives more enjoyable and hassle-free.

Understanding the needs of the diverse guests, CROSSROADS Maldives has integrated WeChat Pay into operations, allowing guests from China to easily and securely conduct transactions using a payment method familiar to them. The introduction of WeChat Pay is a testament to CROSSROADS Maldives’ dedication to enhancing guest satisfaction by offering exceptional experiences at every turn. What is also expected through this initiative is that the guests could benefit from better foreign exchange rates, translating to better savings on their expenditures during their stay.

The option is available for guests in-house conveniently at both resorts as well as across the Marina at CROSSROADS Maldives where a wider variety of unparalleled dining and retail experiences are available for all guests. The day visitors from China will also therefore equally benefit from this new introduction at the Maldives’ premier multi-island integrated leisure destination.

SAii Lagoon Maldives, Curio Collection by Hilton, is a vibrant tropical escape that offers unique and locally inspired experiences. The resort features spacious rooms and villas, a variety of dining options, and an array of recreational activities designed to cater to the desires of modern travellers. Guests can escape to the island’s SAiisational natural beauty, enjoy water sports, and indulge in spa treatments, all while relishing the personalised service that defines Hilton’s Curio Collection.

Hard Rock Hotel Maldives brings the iconic Hard Rock spirit to the tranquil shores of the Maldives. This family-friendly resort offers a perfect blend of relaxation and entertainment, featuring music-inspired experiences, live performances, and the brand’s signature amenities. With luxurious accommodations, diverse dining options, and a plethora of activities for all ages, Hard Rock Hotel Maldives ensures an unforgettable holiday experience for every guest.

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