Sarine Q4 Revenue up on Month, Down on Year

(IDEX Online) – Sarine Technologies Ltd recorded revenues of $12.9 million in Q4 2017 ended 31 December, an improvement of 15% over Q3 2017.

The increase was mainly attributed to higher sales of diamond manufacturing related capital equipment as business sentiment in the diamond manufacturing sector improved somewhat towards the very end of 2017.

With higher revenues and lower operating expenses, the Group recorded profit from operations of $2.1 million. Owing to a write down in Q4 2017 of $1.0 million of certain deferred and other tax assets, income tax expense rose considerably to $1.4 million. Notwithstanding this, the Group concluded Q4 2017 with a net profit of $0.6 million which compares favorably to the net loss of $0.5 million in Q3 2017.

For the full year, Group revenue was lower at $58.6 million, as sales of capital equipment was affected by the slowdown in diamond manufacturing activities amid higher than normal surplus inventories of polished diamonds in H2 2017 as well as illicit competition in India.

With an installed base of 345 Galaxy® family systems as at 31 December 2017, total recurring income amounted to just under half of Group revenue.

The Group recorded a net profit of $5.8 million in FY2017. The Board has recommended, subject to Annual General Meeting approval, a final dividend of US cents 1.5, bringing total dividends for the year to $12.3 million.

Prospects

Despite challenging industry conditions and illicit competition, Sarine said it achieved the milestone of scanning over 10 million rough diamonds through its Galaxy® family of inclusion mapping systems in 2017. “Against the backdrop of significantly reduced DeBeers sights, we believe this is indicative that we are not losing significant existing business and are expanding our customer base, illicit competition notwithstanding. Notably, as DeBeers sights are now increasing, we are seeing a commensurate increase in our scanning activities, with new scanning records being set,” commented David Block, CEO of the Group.

Going forward, the Group expects sentiments in the midstream industry to improve, as the year-end holiday season sales reduced inventories significantly (to the point of decided shortages of certain categories of goods), and expectations are upbeat for robust Chinese New Year and Valentine’s Day sales. The Group will continue with its active efforts in patent and copyright enforcement to defend its intellectual property rights.

On the retail front, the Group’s target for 2018 is to double the number of stones scanned in 2017. To this end, the Group will continue to focus on growing the customer base for sales programs utilising Sarine Profile. Notably, two significant Chinese chain retailers, JAFF, with some 200 stores, and JASS, will be launching Sarine Profile after the Chinese New Year. Following a recent successful trade show in Japan, the Group expects the adoption of Sarine Profile to increase with 10 new programs being initiated or expanded, and new customers secured, including Vanilla, a high-end Japanese retailer with mega-stores, Bijoupiko and Kawasumi.

To enhance Sarine ProfileTM, the Group is introducing its Sarine Diamond Journey, a graphical depiction of the actual rendition of the stone’s transformation from its unique rough state to a one-of-a-kind polished gem. Besides providing captivating insights of the painstaking craftsmanship behind the unique gem’s creation, the documentation should also help to reinforce customers’ confidence in the responsible sourcing and manufacturing of their diamonds.

On 18 February 2018, the Group formally opened its new Sarine Technology Lab to provide the first ever technology-driven 4Cs diamond grading reports. With the addition to its AI-based accurate, consistent and objective 4Cs automated grading capabilities, the Group is now able to provide these along with all the informative features of its Sarine Profile, its light performance analysis and grading and its new Sarine Diamond Journey in one report, and offer unique packaged services tailored to each retailer’s needs.

Depending on the services sought, the fees could range from $30 to $128 per carat. “Our capabilities to provide all the features from a single lab allow us to offer competitively priced packages that address the full spectrum of our customers’ requirements. Based on this value proposition, we believe we can double the number of polished stones scanned in 2017 and triple the revenue generated there from, as the average selling price increases appropriately,” said Block.