By Jonathan Stempel and Jennifer Ablan
NEW YORK (Reuters) - Warren Buffett's Berkshire Hathaway Inc (N:BRKa) (N:BRKb) said quarterly profit doubled to a record high, reflecting a large gain on its stake in Kraft Heinz Co (O:KHC), while operating profit declined on weaker results from insurance underwriting.
Third-quarter net income rose to $9.43 billion, or $5,737 per Class A share, from $4.62 billion, or $2,811, a year earlier.
Operating profit fell 4 percent to $4.55 billion, or $2,769 per share, from $4.72 billion, or $2,876.
Analysts on average expected operating profit of $2,720.60 per share, according to Thomson Reuters I/B/E/S.
Among Berkshire's larger businesses, profit fell 34 percent from insurance underwriting to $414 million, rose 12 percent at the BNSF railroad to $1.16 billion, and rose 13 percent to $786 million at Berkshire Hathaway Energy.
"Overall, quite decent operating earnings," said Jeff Matthews, a principal at the Ram Partners LP hedge fund and author of "Pilgrimage to Warren Buffett's Omaha." "Nothing wrong with that given the weakness in the industrial side of the economy."
Berkshire has close to 90 operating businesses including the General Re reinsurer, Lubrizol chemicals, NetJets business jets and Dairy Queen ice cream. Buffett, 85, has run Omaha, Nebraska-based Berkshire since 1965.
KRAFT HEINZ
Results reflected a roughly $6.8 billion pre-tax gain, or $4.4 billion after taxes, on Kraft Heinz.
Buffett helped finance the July merger that created the food company, whose products include Oscar Mayer sandwich meats, Jell-O and Heinz ketchup, and is its largest shareholder with 26.8 percent stake.
Berkshire had previously owned a majority of the former H.J. Heinz Co, and at the time of the merger had more than doubled its original investment in just two years.
"Even given its large size, Berkshire can still pull off deals and investments that remain meaningful," said James Armstrong, who invests $550 million as president of Henry H. Armstrong Associates in Pittsburgh. He said 20 percent of that sum is in Berkshire.
Private equity firm 3G Capital owns about 24.2 percent of Kraft Heinz and has day-to-day oversight. It announced plans this week to close seven plants and cut 2,600 jobs there.
Berkshire's gain reflects "the hard work 3G has done cutting costs at Heinz and now Kraft," said Matthews, who recently sold his Berkshire stock. "Warren Buffett, the billionaire, is getting richer on cost cuts while 2,600 families are getting poorer. It's a shame."
Quarterly revenue at Berkshire rose 15 percent to $58.99 billion, largely from Kraft Heinz.
Book value, reflecting assets minus liabilities and Buffett's preferred growth gauge, was $151,083 per Class A share as of Sept. 30, up 0.9 percent from the end of June.
Berkshire's prior record profit was $6.4 billion in the second quarter of 2014, also helped by a one-time gain.
Kraft Heinz helped Berkshire offset recent struggles with large investments such as International Business Machines Corp (N:IBM) and American Express Co (N:AXP) and in operating units including the Geico auto insurer, as well as losses from derivatives.
Berkshire said it had lost $2 billion on its IBM stock, or 15 percent of what it paid, as of Sept. 30 but still has "no intention" of selling its shares.
The price of Berkshire's Class A shares is down 10 percent this year, lagging the 2 percent gain in the Standard & Poor's 500 (SPX).
GEICO
Profit from insurance underwriting fell in part because of weakness at General Re and losses on variable annuity guarantee contracts at Berkshire Hathaway Reinsurance Group.
Geico recovered after a poor quarter, seeing pretax underwriting gains drop just 2 percent to $258 million. Like other insurers, Geico has experienced increased losses from accidents as people drive more, causing it to boost premiums.
Berkshire said profit at BNSF was bolstered by "improved operating performance," as the railroad spends $6 billion to add capacity and improve service following shortfalls in 2014.
Buffett is working to finish Berkshire's largest purchase, a roughly $31.7 billion takeover of aerospace parts maker Precision Castparts Corp (N:PCP).
Berkshire had $66.26 billion of cash as of Sept. 30. Buffett has said he plans to spend about one-third of that on Precision Castparts. He wants to keep a $20 billion cash cushion.
In Friday trading, Berkshire Class A shares fell $1,594 to $203,100, and its Class B shares fell 24 cents to $136.33.