By Andrew Frye
March 26 (Bloomberg) -- Berkshire Hathaway Inc. Vice Chairman Charles Munger said the furniture-rental business he oversees will post “disappointing profits” this year after a loss in 2009 driven by the U.S. economic slump.
CORT Business Services Corp. reported a $1.4 million loss last year, compared with profit of $15.7 million in 2008, Munger said today in his annual letter to shareholders of Wesco Financial Corp., which owns the furniture company. The letter by Munger, 86, was posted today on the Web site of Wesco, which is majority owned by Omaha, Nebraska-based Berkshire.
The results reflect “the hammering caused by the severe economic recession,” said Munger, Wesco’s chairman. “So far, CORT’s business has been melting away faster than CORT can fix it.” CORT, which cut its staff about 19 percent last year to 2,248, is focusing on expenses rather than expanding services, Munger said. While Munger doesn’t forecast another loss, “we expect disappointing profits” at CORT in 2010, he said.
Berkshire, run by billionaire Warren Buffett, owns 80 percent of Wesco. The Pasadena, California-based company makes steel parts, rents furniture and sells insurance to banks and airlines. Munger’s letters and public statements have earned him attention alongside Buffett, and inspired authors to collect his pronouncements in books.
Last year, Munger warned that the economic slump would get worse and said he was following the advice of Benjamin Franklin that “‘a penny saved is a penny earned’ as we trim expenses, albeit in higher denominations.”
The U.S. has lost 8.4 million jobs since the recession began in December 2007, the worst slump in the post-World War II period. The decline has reduced demand for office furniture.
Wesco posted net income of $54.1 million last year, a 34 percent decline from 2008, as Berkshire’s profit rose 61 percent to $8.06 billion. Wesco shares rose 19 percent last year to $343, compared with the 2.7 percent increase in Berkshire’s stock and the 23 percent increase in the Standard & Poor’s 500 Index.
Buffett, 79, writes his own annual letter to Berkshire shareholders. This year, Buffett projected the U.S. residential real estate slump will end by about 2011 and said he wished Berkshire spent more on corporate and municipal bonds in 2009. Buffett was named the third-richest person in the world by Forbes magazine this year. Munger tied for 582nd.
Download the 1977 - 2009 Warren Buffett Letter's to Berkshire Hathaway Shareholders
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