Falling stock prices contributed to a 40% slump in second-quarter profit for Warren Buffett’s Berkshire Hathaway as derivative contracts lost value amidst the slump in global stocks.

The firm posted $US1.41 billion ($1.58 billion) in losses on derivatives compared with a profit of $US1.53 billion ($1.71 billion) a year ago.

Net income dropped to $US1.97 billion ($2.2 billion) from $US3.3 billion ($3.69 billion) this time last year but the 79-year-old billionaire chairman had cause to cheer an operating profit increase of 72.7% to $US3.07 billion ($3.43 billion).

The February 2010 takeover of railroad operator Burlington Northern Santa Fe was the main contributor, adding $US603 million ($674 million) in the second quarter.

Improved results came from insurance underwriting, the firm’s biggest business, with the car-coverage specialist Geico Corp showing a $US329 million ($368 million) gain compared with $US111 million ($124 million) a year ago.