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Harry Winston's 1Q Revenue +34%, Profit Jumps to $12M

Rough Diamond Sales +44%

Jun 6, 2012 5:56 PM   By Jeff Miller
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RAPAPORT... Harry Winston Diamond Corporation reported first quarter sales rose 34 percent year on year to $192.5 million for the three months that ended on April 30, 2012. Mining segment sales jumped 44 percent to $89 million while luxury brand segment sales, which includes retail, increased 26 percent to $103.5 million. Harry Winston's profit improved to $11.6 million from $3.6 million one year ago.

The company's rough diamond sales improved due to a 116 percent year on year increase in the quantity of stones sold, according to the integrated mining firm. Harry Winston reported selling 1 million carats of rough during the quarter, nearly twice as much as the previous year. However, the average price per carat fell 34 percent in part due to the company holding back higher-priced goods and selling off lower-priced inventory.

Diavik ore production for the first calendar quarter consisted of 1.2 million carats produced from 0.39 million tonnes of ore from the A-418 kimberlite pipe, 0.2 million carats produced from 0.10 million tonnes of ore from the A-154 North kimberlite pipe, and 0.1 million carats produced from 0.04 million tonnes of ore from the A-154 South kimberlite pipe. Also included in production for the calendar quarter was an estimated 0.08 million carats from reprocessed plant rejects. Rough diamond production was 19 percent higher than the comparable calendar quarter of the prior year due to a combination of higher average grade and an increase in ore processed during the quarter.

Sales from the group's luxury segment experienced a 9 percent increase in North America, at $32.3 million, while European sales increased 72 percent to $30.1 million. Sales in Asia, excluding Japan,  increased 42 percent to $20.4 million and sales in Japan increased 42 percent to $20.7 million. During the first quarter, there were no high-value transactions, which carry generally lower-than-average gross margins, compared with $5.2 million in the comparable period of the prior year. The total number of units sold increased by 37 percent over the comparable quarter of the prior year.

Harry Winston expects that global demand for luxury jewelry and watch products will continue to increase, however, the sovereign debt crisis in Europe and the slowdown in the growth of China's economy are challenges that may impact  demand. The company remains confident that the introduction of its new watch and jewelry products, supported by a strong advertising campaign, will contribute to sales growth. Harry Winston plans to open a salon in London by the middle of the fiscal year and a new licensed salon was opened in Moscow, Russia in May. In addition, a licensed salon is expected to be opened during fiscal 2013 in Kuwait City, Kuwait.  The company plans to expand by 30 wholesale watch doors to more than 220 doors by the end of fiscal 2013.

Robert Gannicott, the chairman of Harry Winston, said, "We have improved sales, operating margins and profitability in all sectors of our business compared to the equivalent quarter of the prior year. The Diavik mine continues its transition to underground mining while jewelry and timepiece sales demonstrate our success in broadening the reach of the brand beyond reliance on a small, ultra high-end market."

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Tags: diamonds, Diavik, Harry Winston, Jeff Miller, Jewelry, luxury, results, rough
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