INTERNATIONAL – Warren Buffett on Saturday signalled his commitment to Kraft Heinz and defended his actions toward Wells Fargo, two of the largest investments at his Berkshire Hathaway, despite mistakes at both that have caused many investors to sour on them.
Buffett, 88, spoke before tens of thousands of people in Omaha, Nebraska, where the Berkshire chairperson and chief executive and vice-chairperson Charlie Munger, 95, fielded more than 50 shareholder and analyst questions for six hours at the centrepiece of a weekend of events.
Kraft Heinz has been a thorn for Berkshire, which in February took a $3 billion (R42.97bn) write-down on its 26.7percent stake because of the packaged foodcompany’ss inability to keep up with changing consumer tastes and reliance on older brands such as Oscar Mayer and Jell-O.
The company was created from the 2015 merger of Kraft Foods and HJ Heinz, the latter of which had been owned by Berkshire and Brazil’s 3G Capital, which runs Kraft Heinz day-to-day.
Buffett defended 3G’s management, saying the combined company is doing well operationally, and that its current problems cannot be blamed on a lack of investment.
But he also maintained that “we paid too much money” for Kraft.
“You can turn any investment into a bad deal by paying too much,” he said, while adding it was “not inconceivable” Berkshire could partner with 3G again on a transaction.
He said 3G had more willingness to take on leverage and “pay up,” but in many cases also had “way better operators.”
Buffett, who became famous in 1991 for criticising Salomon’s practices and becoming interim chairperson to right the mess, also faced a question about his relative silence about Wells Fargo, where Berkshire owns a nearly 10percent stake.
Wells Fargo has spent more than 2½ years addressing fallout from mistreating its customers, including by creating fake accounts, losing two chief executives in the process, including Tim Sloan in March.
Buffett repeated that Wells Fargo “made some big mistakes” in its sales practices, and that “when you find a problem, you have to do something about it.”
He also said chief executives who make big mistakes shouldn’t walk away with their wealth.
But many questionable Wells Fargo practices long predated Sloan’s becoming chief executive, and Buffett and Munger have defended him.
“I don’t think people ought to go to jail for honest errors of judgment,” Munger said, calling Sloan an “accidental casualty.”
Berkshire also reported on Saturday that operating income, a measure of Berkshire’s business performance, rose 5percent, helped by the Geico car insurer and BNSF railroad, though it fell just shy of analyst forecasts.
Results excluded Kraft Heinz, because that company has not released its own quarterly results, Buffett said.
Berkshire also repurchased $1.7bn of stock, reflecting Buffett’s difficulty in finding better uses for the company’s $114.2bn cash hoard. Reuters