Buffett says opportunities abound in Asia

By Korea Herald
  • Published : May 7, 2012 - 19:45
  • Updated : May 7, 2012 - 19:45
Berkshire Hathaway chairman targets Asia for reinsurance, ice cream expansion

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said he’s pursuing more opportunities in Asia after boosting reinsurance sales and expanding the Iscar Metalworking Cos. unit on the continent.

“Korea, Japan and you name it,” Buffett, 81, said at Omaha, Nebraska-based Berkshire’s annual meeting.

Buffett visited South Korea, Japan and India last year, and China in 2010. Berkshire owned almost 4 million shares of South Korean steelmaker Posco and a stake in Chinese carmaker BYD Co. as of Dec. 31, according to regulatory filings. Japan, rebounding from a March 2011 earthquake and tsunami, and Thailand, which suffered record floods last year, are among countries where Berkshire has increased sales.

The reinsurance unit has done “far more business in Asia” in recent months that it did a few years ago, he said at the meeting. Berkshire’s International Dairy Queen Inc. ice-cream unit, led by CEO John Gainor, recently opened its 500th store in China, where the Green Tea Blizzard dessert is the No. 1 seller. The subsidiary has more than 270 outlets in Thailand and expanded into Singapore last year.

China “is far and away our fastest-growing market,” Gainor said Sunday in an interview for Bloomberg Television’s “In the Loop” program with Betty Liu.

Asia, a region with the world’s two-fastest-growing major economies, has become a focus for Berkshire as subsidiaries seek new markets. China’s gross domestic product expanded by 9.2 percent last year and India’s by 7.1 percent as U.S. GDP growth slowed to 1.7 percent from 3 percent a year earlier, according to data compiled by Bloomberg. 
Warren Buffett (right), chairman of Berkshire Hathaway Inc., and Bill Gates, chairman of Microsoft Corp., play table tennis during an event at the annual shareholders meeting in Omaha, Nebraska, Sunday. (Bloomberg)

“China’s got some huge companies,” Buffett said. “They may eclipse in market value some of the ones such as Coca-Cola that we’re talking about.”

Berkshire is Atlanta-based Coca-Cola Co.’s biggest owner, with 200 million shares on Dec. 31, a stake of almost 9 percent that was valued at $15.4 billion at the end of last week.

A shareholder at the meeting asked Buffett and Berkshire Vice Chairman Charles Munger what advice they might give China’s political and business leaders.

“We’re not spending much time giving advice,” Munger said. “China’s been doing very well from a tough start. In some ways we should seek advice,” he said.

Demand for electric cars such as those produced by Shenzhen-based BYD will grow and the automaker’s products will take market share in the U.S., Munger said.

“The car market in China is a huge market,” he said. “I think the first cars they start to bring here will be fleets to California.”

Berkshire announced its entry into India’s insurance market last year by selling motor coverage after striking a deal with Pune-based Bajaj Allianz General Insurance.

The company is expanding in Europe, too. CTB Inc., the farm-products firm that Buffett bought in 2002, agreed to acquire Oostzaan, Netherlands-based Meyn Holding BV to expand into neck breakers and eviscerators for chickens.

Buffett, who’s also Berkshire’s chief executive officer, visited Japan in November to tour a factory run by Iscar’s Tungaloy unit, which makes tools for the automobile and aviation industries. He had canceled a trip in March 2011 after the earthquake and tsunami triggered a nuclear meltdown. Buffett said the event created a “buying opportunity” for investors because it wouldn’t change the country’s economic future even as it would take time to rebuild.

Buffett paid $4 billion in 2006 for an 80 percent stake in Tefen, Israel-based Iscar, which also has invested in TaeguTec Ltd., a cutting-tools maker based in Daegu, South Korea.

“The products they sell are going to be sold around the world,” Buffett said of Iscar at the meeting.

Lubrizol Corp., the chemical maker Berkshire acquired in September, is building a manufacturing plant on a 400,000- square-meter property within the Zhuhai Gaolan Port Economic Zone in southern China at a cost exceeding $200 million, Berkshire said in its annual report.

Berkshire units related to aircraft also are expanding in Asia. NetJets Inc., the private-plane operator based in Columbus, Ohio, said in March that it will form a venture in China as rising wealth and trade spurs demand for luxury flights. Millionaires in the Asia-Pacific region outnumbered those in Europe for the first time in 2010, Capgemini SA and Merrill Lynch Global Wealth Management said last year.

The China operations will be part-owned by investors including Hony Capital Ltd. and Fung Investments, and based in Zhuhai, which is an hour from Hong Kong by ferry, NetJets said in a March 26 statement.

Berkshire’s FlightSafety International Inc., which provides flight simulators and aviation-safety training to commercial pilots and the U.S. military, has bolstered its Asia presence. The New York-based firm, along with Gulfstream Aerospace, opened a Hong Kong learning center as the number of training events that FlightSafety has provided to operators of Gulfstream aircraft in the Asia-Pacific region rose 230 percent in the past five years, according to a Feb. 14 statement. (Bloomberg)