updated 8/7/2009 7:20:14 PM ET 2009-08-07T23:20:14

Warren Buffett’s company reported a 14 percent jump in second-quarter profit as the improving stock market boosted the value of Berkshire Hathaway Inc.’s derivative contracts but the recession continued to weigh on its operating businesses.

On Friday, the Omaha-based company reported $3.3 billion in net income, or $2,123 per share, for the quarter ending June 30. That’s up from $2.88 billion, or $1,859 per share, in the same period a year ago.

The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of $1,238.38.

The value of Berkshire’s derivative contracts tied to equity indexes soared during the second quarter, and Berkshire recorded a mostly unrealized $1.5 billion gain on its derivatives. That result contrasts sharply with the unrealized $986 million derivative loss Berkshire recorded in the first quarter, and it reinforces Buffett’s warning that the derivatives will vary widely quarter-to-quarter.

On average, Berkshire’s derivative contracts won’t expire for another 12 years, but the company is required to estimate their value every time it reports earnings. The true value of the derivatives won’t be clear for several years, but Buffett has predicted they will ultimately be profitable because Berkshire is investing the premiums.

During the second quarter, Berkshire agreed to renegotiate six of the equity-based derivatives to reduce the length of the contracts. As part of that, Berkshire reduced its potential liability on derivatives by about $1.1 billion.

Berkshire generated revenue of $29.61 billion in the quarter, down slightly from $30.09 billion a year ago.

Berkshire said net income plummeted 67 percent at its manufacturing, retail and service businesses to $239 million from $719 million, which include many businesses tied to the housing market such as Shaw Carpeting and Acme Brick. The division also includes luxury businesses like jewelry stores and NetJets corporate jets.

Berkshire’s Class A shares gained $1,150, or about 1.1 percent, Friday to close at $108,100 before the earnings report was released.

Buffett’s company owns more than 60 subsidiaries, including insurance, furniture, clothing, jewelry and candy companies, restaurants, and natural gas firms, and it has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

Warren Buffett's company reported a 14 percent jump in second-quarter profit as the improving stock market boosted the value of Berkshire Hathaway Inc.'s derivative contracts and its investments.

On Friday, the Omaha-based company reported $3.3 billion in net income, or $2,123 per share, for the quarter ending June 30. That's up from $2.88 billion, or $1,859 per share, in the same period a year ago.

The three analysts surveyed by Thomson Reuters on average expected Berkshire to report earnings per share of $1,238.38.

Berkshire generated revenue of $29.61 billion in the quarter, down slightly from $30.03 billion a year ago.

Berkshire owns more than 60 subsidiaries and it has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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