What’s Helping Berkshire’s Manufacturing Segment



Manufacturing segment

In 1Q18, Berkshire Hathaway’s (BRK.B) manufacturing revenue rose YoY (year-over-year) to $12.9 billion from $12.1 billion due to growth across industrial, consumer, and building products, reflecting favorable domestic manufacturing policies.

The Trump administration’s trade policy and lower tax could benefit Berkshire’s manufacturing companies in future quarters, and the company could add more manufacturing (VIS) companies due to these favorable policies.

Currently, Berkshire has stakes in chemicals, metals, agriculture, and other industrials. Its major investments include:

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  • Lubrizol, specialty chemicals
  • Precision Castparts, complex metal products
  • International Metalworking Companies, metal cutting tools
  • Shaw, building products
  • John Manville, engineered products
  • Benjamin Moore, paints
  • MiTek, residential and commercial construction and engineering products
  • Duracell, batteries

Asset managers (XLF) BlackRock (BLK), Goldman Sachs (GS), and Blackstone (BX) are targeting innovative and specialized manufacturing to generate superior returns.

Operating margins

The manufacturing sector’s margins have improved in recent years, mainly due to technology deployment and lower corporate tax. Berkshire’s manufacturing earnings before tax rose 24% YoY in 1Q18 to $1.9 billion, aided by acquisitions and business growth.

In 2017, Berkshire had manufacturing revenue of $50.0 billion and earnings before tax of $6.9 billion. It is expected to see higher before-tax earnings in 2018 thanks to acquisitions, a favorable macro environment, and policy changes.

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