De Beers H1 Rough Diamond Sales $1.429 Billion (Update 2)
July 24, 09
De Beers reported on Friday total sales of $1.711 billion in the first half of 2009, of these sales, rough diamond sales were $1.429 billion, the company said in a release. Production totaled 6.6 million carats, most of it mined in the second quarter.
Titled 'decisive action steers De Beers through economic crisis,' the company's half year results underlined the improvements in the second quarter of the year compared to the first. This is the seconded time the company publishes its results unannounced and without a press conference. The first time was when it released the 2008 annual results.
De Beers' pre-tax and pre-finance charges profit reached $140 million. EBITDA stood at $297 million.
Rough diamond sales by the Diamond Trading Company (DTC) and its joint ventures declined 57 percent year-over-year, "due to reduced purchases by Sightholders as they worked to reduce inventory levels and increase liquidity in the face of the global economic downturn."
The company went on to say that "After very difficult trading conditions experienced in Q1, Q2 saw a significant pick-up in sales with the average Sight more than doubling in Q2 compared with Q1."
De Beers succeeded in reducing the group's costs by more than 50 percent compared with last year, as it focused on cash management and preservation.
Production, according to the company, was in line with client demand. The group produced 6.6 million carats during the period, a 73 percent decline from the first half of 2008, a response to decreased demand. DTC sales divided by production shows an average value of about $216.5 per carat, for gem and industrial goods.
The reduction in the first quarter was 91 percent to 1.1 million carats as the company placed its on production holidays. All but one of the mines in
It is anticipated that carat production for the full year will be approximately 50 percent that of 2008, when it produced 48.1 million carats. This will be a second year of declining production. In 2008, diamond production declined 5.8 percent from the 51.1 million carats produced in 2007.
As reported by IDEX Online, De Beers has begun discussions with its lending banks regarding the renewal of a $1.5 billion term loan facility which expires in March 2010. It expects to conclude these discussions before the end of the year.
De Beers’ total net debt is $4.063 billion, of this $734 million are shareholders loans. Bank borrowings stand at $3.22 billion.
In its outlook, De Beers estimates that rough diamond inventories in the cutting centers have reduced by some 30 per cent from their peaks in 2008.
In the second quarter the price of rough diamonds has begun to trend upward. The company in response has raised prices at its Sight last week, the first Sight of the second half of the year. On average, prices were raised by 5-8 percent (See the IDEX Online Rough Diamond Market Report: Growing Demand and High Prices www.idexonline.com/Newsroom/idexonline49)
The company noted a cautious expectation that sales in the subdued
Demand from emerging markets, mainly
"De Beers will continue to take a cautious approach in terms of production, sales and cost management, while anticipating the continued steady recovery of the industry," it said.
"Diamonds have historically performed well in periods following recessions, with significant price growth seen in almost every recovery period dating back to before the 1970s. In the long-term, the fundamentals of the diamond industry remain strong," it added.
It ended it report on an optimistic note, repeating what it says in any presentation. "With no major new diamond discoveries in more than a decade, and with worldwide reserves at an all time low, diamonds will become more scarce. As demand grows in emerging markets it is likely that sales will outpace forecast diamond supply for many years to come."
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