Mazor'sEdge – Page 196 – News and analysis on Berkshire Hathaway

U.S. Market for Duracell Batteries Projected to Grow

Post author By David Mazor
Post date August 12, 2016

(BRK.A), (BRK.B)

Despite some analysts questioning whether Berkshire Hathaway’s 2016 purchase of Duracell from Proctor and Gamble makes long term sense, domestic battery sales look to continue to be a growth area.

Sales of household batteries will reach $4,750 million by the year 2020, up from $4,125 million in 2015, according to Research and Markets’ new report, “Household Batteries: Consumer Market Trends in the U.S.”

According to the report, the compound annual growth rate for the period is projected to be 2.9%.

Three manufacturers dominate the U.S. market for household batteries: Berkshire Hathaway’s Duracell brand; Energizer, maker of both Energizer and Eveready batteries; and Spectrum Brands, which makes Rayovac.

Away-From-Home Market Also Has Growth Potential

For Duracell, the away-from-home battery market also has growth potential. It not only grew 2% from 2012 to 2014, but Duracell’s share of that market grew as well.

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Tags Duracell

GEICO Insurance

GEICO Expansion in Western New York State to Bring 600 Jobs

Post author By David Mazor
Post date August 11, 2016

(BRK.A), (BRK.B)

New York governor Andrew M. Cuomo and GEICO Chairman and CEO Tony Nicely have jointly announced that insurer GEICO plans to expand it regional operations office in Western New York with an additional facility at 150 Crosspoint Parkway, Getzville, New York.

With this expansion, GEICO expects to add more than 600 new jobs in Western New York over the next six years. The company will also invest nearly $11 million to fit out and equip its current and additional offices to accommodate the new jobs.

“GEICO is immensely delighted to bring new career opportunities to the Greater Buffalo area,” said Tony Nicely. “We consider our associates to be one of our greatest assets. That’s why it’s important for us to continue to seek out and add highly talented individuals to our GEICO family.”

According to GEICO, the expansion brings new opportunities for careers in sales, customer service and claims service.

“It’s certainly an exciting time for GEICO and the Western New York area,” said Pionne Corbin, regional vice president. “We look forward to continuing to grow and better serve our associates, policyholders, and the local community.”

GEICO (Government Employees Insurance Company) is owned by Berkshire Hathaway, and is the second-largest private passenger auto insurance company in the United States. The company provided coverage for more than 14 million private passenger customers, insuring more than 23 million vehicles (auto & cycle).

Tags GEICO, Insurance

Kraft Heinz Minority Stock Positions Stock Portfolio

Kraft Heinz Dividend Increase Means Extra $10.57 Million for Berkshire

Post author By David Mazor
Post date August 10, 2016

(BRK.A), (BRK.B)

Kraft Heinz has announced that its Board of Directors approved an increase in the company’s quarterly dividend to $0.60 per share of common stock, an increase of approximately 4.3 percent versus the prior rate of $0.575 per share.

The company, which is 26.78 percent owned by Berkshire Hathaway, posted earnings of $0.85 per share on total revenue of $6.79 billion.

The increase of 4.3 percent will bring Berkshire an addition $10.57 million in dividends.

Tags Kraft Heinz, Stock Portfolio

Dairy Queen

Dairy Queen Heads to the Beach With Franchise Plans in Five Caribbean Countries

Post author By David Mazor
Post date August 9, 2016

(BRK.A), (BRK.B)

Cool treats will be coming to Caribbean island locales. Dairy Queen has announced it will open a total of 24 locations within the next five years in five countries in the Caribbean.

Plans call for the development of DQ Grill & Chill locations in Trinidad and Tobago, DQ Grill & Chill and DQ Treat locations in Jamaica, and DQ Treat locations in St. Lucia, Grenada and St. Maarten.

Currently, there are eight DQ Treat locations in Trinidad, the first of which opened in 2012.

“The international marketplace continues to be a huge opportunity for growth for the DQ system,” says John Gainor, President and CEO of International Dairy Queen, Inc. (IDQ). “We’ll be introducing our DQ Grill & Chill concept to fans in Trinidad and expanding the DQ brand in Jamaica. Our presence in these warm weather countries is a perfect fit for us.”

Royal Treats Ltd., which currently operates eight DQ Treat locations throughout Trinidad and Tobago, has signed a multi-unit, multi-country agreement with American Dairy Queen Corporation (ADQ) to develop the new locations.

“We are excited to be expanding this iconic brand’s footprint,” says John Gillette of the family-owned Royal Treats Ltd. “Residents and tourists will now have more opportunities to experience the same exceptional treats and menu items that they have come to know and expect from the DQ system.”

The DQ system has more than 6,700 locations with more than 2,200 of those units operating outside of the United States.

For more information on Dairy Queen’s world-wide plans, read a Mazor’sEdge special report on Dairy Queen.

Tags Dairy Queen

MiTek

MiTek Opens New Distribution Facility in Plainfield, Indiana

Post author By David Mazor
Post date August 8, 2016

(BRK.A), (BRK.B)

MiTek’s new distribution facility in Plainfield, Indiana, is now fully operational. Offering distribution to a 500-mile radius, the new facility will provide same-day or next-day delivery for a wide range of products, including USP Structural Connectors, USP Epoxy and fasteners, and MiTek truss connector plates.

Offering almost 53,000 square feet of space, MiTek’s new distribution facility will also provide customers with “will call” delivery. Additionally, the facility provides nearly 6,500 square feet of office space where MiTek will provide customer training and support.

The new MiTek distribution facility features 15 dock doors, one oversized drive-in door, and expansive staging bays. Excellent access to key transportation routes is available, including Indianapolis International Airport, I-70, I-455, SR 37, SR 67, and nearby downtown Indianapolis.

“MiTek’s new Plainfield, IN facility will allow rapid delivery – often same-day service – to an expansive 500-mile radius from our new location,” said Todd Asche, Senior Vice President of Operations. “With our recent Houston distribution facility coming fully online and our new Indianapolis facility fully operational, we have made great strides in expanding the reach for MiTek and the products offered by our MiTek Builder Products division.”

About MiTek

Acquired by Berkshire Hathaway in 2001, MiTek is a diversified global supplier of software, engineered products, services, and equipment to the residential, commercial, and industrial, construction sectors. MiTek has operations in more than 40 countries on six continents.

Tags MiTek

Kraft Heinz

No Kraft Heinz Hotdogs at Heinz Field

Post author By David Mazor
Post date August 5, 2016

(BRK.A), (BRK.B)

It might seem logical that Heinz Field, which is the home of the NFL’s Pittsburgh Steelers, would serve Kraft Heinz’s Oscar Meyer hotdogs, but that’s not to be.

On June 28, the Smith Provision Company announced that it entered into a multi-year agreement with Heinz Field, featuring Smith’s Hot Dogs as The Hot Dog of Heinz Field, and Smith’s brand Boski Kielbasa as The Kielbasa of Heinz Field.

“We are thrilled to have developed a partnership with the iconic Pittsburgh Steelers organization,” said Sara Kallner, Vice President of Smith Provision Company. ”

Headquartered in Erie, Pennsylvania, the Smith Provision Company was founded in 1927 by Harry Smith, who operated Smith’s as a small retail butcher shop. The company was bought by the Weber family, which as a fourth generation family owned business, still runs it today.

Oh, well, hopefully Heinz Field will still top the hotdogs with Kraft Heinz’s yellow mustard, ketchup and relish. No telling whether Kraft Heinz’s Grey Poupon mustard will make the cut.

Tags Kraft Heinz

Minority Stock Positions Stock Portfolio

BYD to Bring Battery Storage and Electric Vehicles to the Port of Los Angeles

Post author By David Mazor
Post date August 4, 2016

(BRK.A), (BRK.B)

Chinese auto and battery manufacturer BYD Company Limited is bringing its pure electric service vehicles and a battery storage system to the Port of Los Angeles.

The $26 million Green Omni Terminal Demonstration Project will demonstrate zero emission technologies with Pasha Stevedoring and Terminals L.P.

The project will be the world’s first marine terminal generating all of its energy needs from renewable sources at full build-out.

BYD will provide a 2.6 megawatt battery storage system and two class eight electric yard trucks.

The state-of-the-art BYD battery storage system will be used to store solar power to recharge the BYD electric yard trucks, thus providing a sustainable and truly zero emission operation.

This project will be BYD’s first example of taking transportation off the grid and making it 100 percent renewable and self-sufficient in North America.

BYD expects to deliver the trucks and the battery storage system by the end of 2016.

BYD has been expanding the types of pure electric service vehicles it makes, and recently debuted pure electric forklifts.

Integrated Transportation and Energy Storage

BYD has been emphasizing integrated transportation and energy storage.
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In June, BYD signed a global framework cooperation agreement with Enel, a multinational power company and leading integrated player in the world’s power industry.

BYD notes that the agreement signed by Wang Chuanfu, Chairman and President of BYD, and Ernesto Ciorra, Enel’s Head of Innovation and Sustainability, will pave the way for possible cooperation projects in electrified transportation and energy storage aimed at residential, commercial and industrial applications, all based on BYD’s proprietary Iron-Phosphate batteries.

BYD is 9% owned by Berkshire Hathaway, and Berkshire has seen the value of its investment skyrocket as BYD became a world leader in a wide variety of areas.

What are those areas?

BYD is number one globally in EV vehicles. The company vaulted to the number one spot in 2015 from only being number ranked seventh a year earlier.

BYD is the number one maker of rechargeable batteries, and like Tesla even has rechargeable battery home storage already on the market.

BYD is number one in pure electric buses that come in a variety of sizes. From commuter buses to buses for long distance travel, BYD has been quietly conquering the world, and frankly right now has no major competitors. In April 2016, BYD achieved a major milestone, the production of its 10,000th pure electric bus.

BYD’s also rapidly growing a host of other product lines that include LED lighting, photovoltaic panels for solar farms, and other electric vehicles such as forklifts.

As for solar panels, in the U.S., BYD’s already has a total 109MW using its 270,000 PV modules being developed in California. It also has other projects using its modules, including a 65MW plant in Utah, and a 28MW plant in Arizona.

Perhaps you haven’t heard of BYD, but they are no fly-by-night company. BYD has nearly 180,000 employees working in 22 industrial parks across the globe.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares, and today owns roughly 9.1% of the company.

It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million is now worth roughly $1.77 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

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Tags BYD Co, Stock Portfolio

Berkshire Hathaway Energy

No Oncor for Berkshire Hathaway Energy

Post author By David Mazor
Post date August 3, 2016

(BRK.A), (BRK.B)

NextEra Energy is the winner in the bidding for Oncor Electric Delivery Company, a regulated electric transmission and distribution service provider that serves 10 million customers across Texas. NextEra Energy will pay $18.4 billion in cash and stock.

Berkshire Hathaway Energy was one of the other bidders considered to be in the lead for the prized energy distribution asset.

Oncor has been in and out of auction ever since the April 2014 bankruptcy of its biggest shareholder, Energy Future Holdings. The company went under after being burdened with $40 billion in debt from a 2007 leveraged buyout.

A Texas-Sized Asset

Oncor is a quite a prize. The company has the largest distribution and transmission system in Texas; with approximately 119,000 miles of lines and more than 3 million meters across the state.

Energy Transmission is Great ROE

Back in June 2014, Warren Buffett proclaimed he was ready to put at least $15 billion into energy generation and transmission assets, and at that time Oncor, with a value of roughly $17.5 billion looked like a good fit.

Transmission lines have been high on Berkshire Hathaway Energy’s wish list of late because they are a great way to put Berkshire’s huge insurance float to work for a high return with very low risk.

The AltaLink Example

In April 2014, BHE made a $2.9 billion purchase of Canadian company AltaLink from SNC-Lavalin Group Inc. The acquisition got the company the transmission lines for Calgary, Alberta, and gives it an 8.75-percent after-tax return on equity, with consumers picking up 100-percent of the tab for any new transmission lines.

Like AltaLink, the acquisition of Oncor would have been a perfect fit for Berkshire Hathaway Energy, which currently has $70 billion in assets, including one of the largest portfolios of renewable energy in the world.

Tags Berkshire Hathaway Energy

Commentary NetJets

Commentary: Supersonic Business Jets Will Boost Fractional Jet Ownership

Post author By David Mazor
Post date August 2, 2016

(BRK.A), (BRK.B)

It’s no secret that the fractional jet ownership business has struggled in recent years, with several competitors leaving the market, and the merger of Flexjet and Flight Options. While Berkshire Hathaway’s NetJets is healthy, NetJets Executive Vice President, Sales & Marketing, Patrick Gallagher, noted on AINonline that “We’re growing our market share of a shrinking pie.”

All that may soon change with the coming of a new generation of supersonic business jets, produced by companies such as the Aerion Corporation. The planes will cruise at Mach 1.4, cutting three hours off New York City to Europe, and six hours or more off long Pacific routes.

The planes will give corporate leaders and other high-end travelers a compelling reason to consider fractional ownership.

Even cross-country travel, which draws additional concerns about sonic booms, will be faster. Aerion claims that its Boomless Cruise(sm) flight is feasible at speeds up to Mach 1.2, depending on atmospheric conditions, principally temperature and wind.

The company hopes that the U.S. will adopt International Civil Aviation Organization (ICAO) standards, permitting supersonic speeds over the U.S. Supersonic flights are currently prohibited.

Aerion claims that at speeds around Mach 1.2 a “sonic boom would, essentially, dissipate before reaching the ground.”

Another fledgling supersonic business jet manufacturer, Boston-based Spike Aerospace, calls no sonic booms the “holy grail of the next generation of aircraft.” It hopes to have its 18-passenger jets in the market by the early 2020s.

Even before these jets debut, NetJets is focusing on the growth potential of its long-haul business.

NetJets is looking to expand its long-haul business by offering new pricing incentive programs developed for Challenger 350 and Global shareowners.

NetJets hopes to capture a portion of the business that is currently going on commercial airlines or ad hoc charter by providing operational savings on 3.5-plus-hour flights for Challenger 350 shareholders who have purchased a minimum of 50-plus hours (1/16th of a share).

NetJets’ cross-country program is aimed at flyers travelling cross-country or to Europe on a super-midsize airplane like the Challenger 350. Currently, the average NetJets flight time is two hours, and the goal is to increase the number of hours of flight time.

NetJets and the Supersonic Market

The new supersonic business jets will fall into an interesting category of jets that will have a decided advantage over other private jets, but will be too expensive for most people to own outright.

While the supersonic business jet market offers opportunity, it also comes at a high cost, with the price of each jet at over $100 million.

That’s the perfect opening for fractional ownership companies to plot their growth.

Currently, Flexjet is the only company to place a firm order for the jets. In 2015, they ordered twenty of Aerion’s AS2 aircraft.

The Aerion AS2 is a three-engine jet and is larger than the originally conceived Aerion supersonic business jet. Fuselage length is 160 feet and maximum takeoff weight is 115,000 pounds. Minimum projected range is 4,750 nautical miles with the intention to achieve a range of more than 5,000 nautical miles.

The aircraft will have a 30-foot cabin in a two-lounge layout plus galley and both forward and aft lavatories, plus a baggage compartment that is accessible in-flight. Cabin dimensions widen from entryway to the aft seating area where height is six feet, two inches and cabin width is seven feet, three inches.

Carrying eight to 12 passengers, the AS2 has an intercontinental-capable range of 4,750 nautical miles at supersonic speed.

While, NetJets has yet to announce any orders, it’s clear that only the strongest of the fractional ownership companies will be able to compete in this market, giving them a clear advantage over smaller charter companies, and a major capability advantage over commercial airlines.

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Tags NetJets

BNSF

Judge’s Ruling Puts Future of BNSF’s Port Project in Long Beach’s Hands

Post author By David Mazor
Post date August 1, 2016

(BRK.A), (BRK.B)

Will BNSF be able to build its proposed facility at the Port of Los Angeles? The answer could be in the hands of the City of Long Beach.

A new ruling by California superior court judge Barry P. Goode in favor of Long Beach and the other litigants, and against BNSF Railways, found that the environmental impact report prepared by BNSF needed to be “a more robust and accurate analysis.”

The ruling puts the $500 million rail-yard project at the Port of Los Angeles in jeopardy unless BNSF can quickly work out its differences with environmental groups and the City.

Dubbed the Southern California International Gateway (SCIG), the project would create an intermodal rail facility near the ports of Los Angeles and Long Beach. The ports are located approximately 25 miles south of downtown Los Angeles. The port complex is composed of approximately 80 miles of waterfront, and 7,500 acres of land and water, with approximately 500 commercial berths.

In April, judge Goode put a halt to BNSF’s planned 153-acre intermodal rail facility, siding with citizens’ groups suing over environmental concerns.

The Natural Resources Defense Council, which is the lead plaintiff in the lawsuit, filed the lawsuit in June 2015 in Los Angeles Superior Court on behalf of Harbor residents living near the proposed development that would be built on Port of Los Angeles property.

The Plaintiffs contend the proposed Southern California International Gateway rail yard project violates the California Environmental Quality Act and the state and federal Civil Rights Acts.

Specifically, they assert that the facility will increase cancer rates, chances of children developing asthma, and add to chronic air pollution plaguing the region.

The SCIG is subject to the California Environmental Quality Act, a statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.

BNSF has 60 days from Judge Goode’s most recent ruling to appeal, and it’s unclear whether the SCIG is salvageable.

A Call to Work Things Out

The Long Beach Press Telegram has called for all sides to resolve the issues, in order to not lose the jobs and other benefits the project would bring.

In an editorial published on July 13, the paper stated that, “The editorial board repeats its position that all sides should sit down and try to work out a solution to this issue.”

The paper went on to state: “We have said there are many positives to the project for the entire region. It will provide hundreds of jobs and help relieve congestion near the ports, and make them more competitive with rival ports.

But we’ve also said this economic development should not come at the expense of the health of students and 30,000 residents who live east of the proposed project.”

The mayor of Long Beach, Robert Garcia, noted the impact of the most recent ruling, stating in The Long Beach Press Telegram that “It certainly strengthens our hand, definitely.” Garcia added that “The city is now in a position where we have a court standing on our side.”

Tags BNSF