DE Beers Returns to Profit, DTC Sales $5.08 Billion in 2010 (Update 2)

The diamond giant reported on Friday morning that strong demand drove up DTC rough diamond prices by an average of 27 percent, passing over the price levels that existed prior to the economic crisis as the diamond industry rebounds.

Net earnings of $546 million and underlying earnings of $598 million are a turn around from the $743 million loss posted in 2009. EBITDA grew to $1.43 billion, an increase of 118 percent over 2009.

Increased production and runaway prices were at the core of De Beers' financial comeback. The company also implemented a considerable cost reduction that included a cut in staff.

A shareholders investment of $1 billion allowed the group to conclude a refinancing of its entire international and South African. The tenors of all facilities have been extended to August 2013. At the end of 2010, De Beers’ non shareholder debt was $1.76 billion, down from $3.20 billion at the end of 2009.

Debswana mined 22.218 million carats in 2010, up 25.3 percent from the 17.734 million carats mined in 2009. DBCM mined 7.556 million carats in South Africa, up 57.5 percent; mining in Canada yielded 1.751 million carats (+53.6 percent) and Namdeb mined 1.472 million carats (+58.5 percent).

"2010 was an extraordinary year that saw De Beers rapidly move from stabilization to strong recovery," the company said in an unsigned directors' comment.

It cautioned that while the price of rough diamonds has recovered strongly, "the industry is not back to pre-recessionary levels in terms of production or sales and a high degree of global uncertainty remains."

It also noted a pickup in restocking and a rebound in consumer demand, especially in China and India and better than expected in the U.S., adding that it expects continued growth, "albeit at a lower rate. The world is not yet back to where it was prior to the onset of the economic crisis, and risks to growth remain."

De Beers expects production to reach 38 million carats in 2011, hinting at reaching a 40 million carat production in 2012.

The one issue that was glaringly absent from the company's announcement was when it plans to appoint a new CEO. The company has been operating without a full-time permanent CEO since Gareth Penny was shown the door last July.