U.S. billionaire Warren Buffett warned shareholders that the economic downturn will continue to affect Berkshire Hathaway's bottom line in 2009, but said he remains optimistic about his company's, and the nation's, fortunes.
In his annual letter to shareholders, which was released Saturday morning, Buffett outlined what turned out to be the worst of his 44 years running the Omaha-based company.
According to Buffett, Berkshire's profits fell dramatically in 2008, while it recorded nearly US$7.5 billion in investment and derivative losses.
However, he pointed out that Americans have, and overcome, larger economic challenges and predicted a stronger financial future.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Buffett said. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."
In his letter, Buffett outlined for shareholders how Berkshire's retail businesses, which include jewelry and furniture stores, as well as its construction operations such as Acme Brick, performed poorly in 2008 and would continue to do so in 2009.
However, the company's utility and insurance businesses, including Geico, both performed above expectations and served as a balance to the other divisions.
Berkshire posted a net income in 2008 of US$4.99 billion, $3,224 per Class A share,
which is down considerably from the profit of $13.21 billion, or $8,548 per share, in 2007.
Forecasters had predicted that Berkshire would post a profit of $5,534.50 per share in 2008.
Buffett admitted that he made one major mistake last year when he increased Berkshire's stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares in 2008, not long before last year's dramatic drop in energy prices.
Buffett said the move cost shareholders several billion dollars.
He also admitted that he erred when he purchased about $244 million in stock in two Irish banks that he has since had to write down to $27 million.
Buffett estimated that Berkshire's book value - assets minus liabilities - declined 9.6 per cent to $70, 530 per share in 2008. The only other time the company's book value declined with Buffett at the helm was a 6.2 per cent drop in 2001.
Berkshire owns more than 60 companies, which range from insurance to restaurant to retail businesses, and has major investments in companies such as Wells Fargo & Co. and Coca-Cola Co.
With files from The Associated Press
