Warren Buffett - Bloomberg - February
Warren Buffett. Photo by Bloomberg
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Iscar generated record operating earnings last year, stated Warren Buffett in his annual letter to shareholders yesterday.

Berkshire Hathaway, his investment company, also has a CEO lined up to replace the 81-year-old investment legend once he steps down, he said.

Israel's Iscar is one of Hathaway's five largest non-insurance companies, notes the letter. Together, these companies earned more than $9 billion pre-tax in 2011. Each one is expected to set yet another record in 2012.

The report lavishes praise on Iscar and its executives.

"Iscar, our 80%-owned cutting-tools operation, continues to amaze us. Its sales growth and overall performance are unique in its industry," states the letter.

"Iscar's managers - Eitan Wertheimer, Jacob Harpaz and Danny Goldman - are brilliant strategists and operators. When the economic world was cratering in November 2008, they stepped up to buy Tungaloy, a leading Japanese cutting-tool manufacturer. Tungaloy suffered significant damage when the tsunami hit north of Tokyo last spring. But you wouldn't know that now: Tungaloy went on to set a sales record in 2011."

Buffett bought the 80% share in Iscar in 2006, his first acquisition outside the United States.

For most shareholders, one of the main issues in the letter is the matter of Buffett's successor.

The issue has been a huge issue for shareholders for years, but despite steps to clear up who will run its investments, the company has said relatively little about who would step in for the "Oracle of Omaha" as CEO.

That changed to some degree with the letter, in which Buffett made clear there is a replacement for him but did not name the person.

"Your board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire," he said, adding there were two backups.