Sarine Reports Decline in Revenue to $45.7M for Q1-3

(IDEX Online) – Sarine Technologies Ltd recorded a decrease of 15 percent in revenue to $45.7 million in the nine months ended 30 September mainly due to lower sales of capital equipment in the third quarter.

Due to lower revenue and higher operating expenses, net profit declined to $5.1 million in the nine month period.

For Q3 2017, group revenue fell 35 percent to $11.3 million. Due to the decrease in the volume of sales, the group recorded a net loss of $500,000 during the quarter.

"Due to the buildup of higher than normal inventories of polished diamonds in the mid-stream in the third quarter, manufacturers slowed production and reduced capital expenditures," the firm said. "The sales of Sarine’s inclusion mapping systems were also affected by the illicit competition and related uncertainties. Nevertheless, the group did not experience any significant drop in the number of stones processed by its installed base. Recurring revenues remained stable and accounted for over 46 percent of group revenue."

With lower revenue, gross profit declined 16 percent to $30.9 million, with gross profit margin virtually flat at 68 percent. The group also incurred higher operating expenses in 9M 2017. Research and development expenses rose primarily due to increased employee-related expenses resulting from the weakening of the US dollar against the Israeli shekel and higher outsourcing expenses related to the Clarity technology development. Additional sales and marketing expenses were incurred to support the continued expansion of Sarine’s polished diamond retail-sales offerings in the Asia Pacific region, the company said. General and administrative expenses rose with higher third-party professional fees, mainly related to IP protection.

"In spite of slower diamond manufacturing activities in Q3 2017, end-consumer demand in most of the significant retail diamond markets remains robust.

David Block, CEO, said: “Barring any unforeseen negative developments, we expect the polished inventory levels to be reduced by wholesale buying commencing after the holiday season, which typically provides for the return to normal industry activity in Q1. As for the illicit competition, the group is fully committed to defend and enforce its intellectual property rights. Besides taking legal action against violators, the group is also working on additional technological and commercial initiatives on several fronts to curtail and/or contain the illicit activities."

To expand its recurring revenue base, Sarine continues to increase market penetration for sales programs utilizing the Sarine Profile. In addition to planned launches with additional major retail chains in the Asia Pacific region, the rollout has also expanded in North America. The group expects recurring revenues from polished diamond retail-related segment to grow with new customers, program expansion by existing customers and the new automated diamond grading service.

Following the launch of Sarine’s new technologies for automated clarity and color grading of polished diamonds, the group has commenced initial talks with launch customers. Issuance of polished diamond grading reports and initial revenue contribution can be expected from Q1 2018, the firm added.