RAPAPORT... Fiscal year 2008 came to a close at Harry Winston Diamond Corporation on January 31, 2008. Revenue for mining and retail combined rose 22 percent to $679.3 million. Profits rose 2 percent to $106.4 million.

Net earnings for fiscal 2008 were hit by a $37 million difference between Canada's dollar and the greenback. In total, a net foreign exchange loss of $43.4 million was recognized due to Canada's stronger currency against those locations where Harry Winston conducts business. Other income, which includes interest income at various banks was $2.8 million, down from $5.1 million in fiscal 2007.

The mining segment posted a 24 percent  increase in sales to $413.8 million, while the retail segment recorded a 17 percent increase in sales to $265.5 million.

Harry Winston completed 10 rough diamond sales during the fiscal year, consistent with the prior year.

Earnings from operations for the mining segment increased 53 percent to $220.7 million. Harry Winston retail reported a loss from operations of $3.1 million compared with earnings of $2.3 million in the prior year. The company contended that the difference reflected increased investment for its continuing international salon expansion. Harry Winston opened five new salons in fiscal 2008.

Salon sales rose 17 percent to $265.5 million. Retail sales were given a boost as customers from China, Russia, and Middle East snapped-up high-end jewelry and watches. Sales in the Asian market increased 35 percent to $71.7 million, sales in the United States rose 15 percent to  $112.5 million, and sales in Europe rose 8 percent to $81.4 million.

European sales were impacted in late October and early November by a robbery at Harry Winston Paris, which forced the store's temporary closure during investigation. Approximately $23.2 million in company-owned retail inventory --at cost-- was stolen from the salon. The company was fully insured against the loss, and recognized a pre-tax gain of $13.5 million in the fourth quarter on settlement of the insurance claim.

The company's share of diamond production at the Diavik Mine, which is recorded on a calendar basis, increased by 22 percent to 4.8 million carats for the year ending December 31, 2007.

"We are pleased with our progress this past year in building an increasingly profitable business," said Robert Gannicott, chairman and CEO. "Our two premium assets, at the most profitable poles of the diamond business, inform each other with respect to pricing and polished diamond supply. This enables rough diamond sales from the mine to be priced quickly and accurately against market changes. It also connects the jewelry and watch business directly to the diamond polishers that are the mine's customers making a more efficient supply chain."

Gannicott said that Harry Winston's mining plans confirm the life of the mine beyond year 2020. "After processing more than 41 million carats of diamonds since production began five years ago, there are still more than 77 million carats in proven and probable reserves with an additional 11 million in inferred resources."

Thomas J. O'Neill, president of Harry Winston, said, "Our retail business continued to grow substantially last year as we achieved record sales. Demand for our highly-designed jewelry continues to be very strong despite uncertain domestic economic conditions. Our customers are truly international clients. We have experienced a noticeable shift in our customer base from what had been a U.S. dominated market to one where the U.S. customer accounts for one third of our global sales. Our new fiscal year is off to a good start in retail sales and we will continue to focus on the high-net worth individuals in markets such as Russia, China, the Middle East and India to drive our luxury diamond jewelry and timepiece business."

On November 9, 2007, Aber Diamond Corporation changed its name to Harry Winston Diamond Corporation.

The company discussed overall market conditions in its annual report.

Rough diamond prices remained strong throughout fiscal 2008, the company found. The upward trend in prices was particularly evident in the larger, better-quality ranges, which began the year positively and continued to rise throughout the year. This positive growth was also evident in smaller, high-quality rough diamonds driven by demand from the watch industry. After softening throughout fiscal 2007, demand for lower end goods experienced robust growth in the second half of fiscal 2008.

At the end of the year, the polished market showed strong sales growth in China, India and the Middle East which offset the more moderate demand from the United States. Prices rose in line with demand, with the lower-quality ranges of polished diamonds benefiting from the continuing scarcity of larger, better-quality goods.