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ALROSA's 3Q Profit -7%, Sales Slide
Dec 4, 2012 4:09 AM
By Avi Krawitz
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RAPAPORT... ALROSA's profit fell 7 percent year on year to $278.7 million (RUB 8.62 billion) during the third quarter that ended on September 30, as it reduced supplies to the market given weak diamond demand. Group revenue declined 32 percent to $898.3 million (RUB 27.79 billion), while revenue from diamond sales dropped 38 percent to $752.3 million (RUB 23.27 billion). Additional revenue originated from other sources, such as transportation, social infrastructure, trading and construction operations.
Analysts at VTB Capital expect a stronger fourth quarter for ALROSA even as soft prices continue to affect sales. “Besides seasonal demand pickup, some sales to the state reserve could be performed as well, with volume posting a dramatic quarter-on-quarter increase,” the analysts wrote in an earnings preview.
ALROSA's diamond sales by volume declined 44 percent year on year to 5.1 million carats, 3.4 million carats of which were gem-quality stones.
Simultaneously, production rose 32 percent to 9.1 million carats. The value of ALROSA’s diamond inventory between January 1 and September 30 grew 32 percent to $897 million (RUB 27.75 billion) as of September 30, 2012.
Rough demand declines were evident in each of ALROSA’s major markets, with sales just to Belgium down 40 percent to $353.6 million (RUB 10.94 billion). Within the Russian Federation, sales fell 22 percent to $308.6 million (RUB 9.55 billion), while sales to India decreased 20 percent to $120.5 million (RUB 3.73 billion) and sales to Israel dropped 30 percent to $68.5 million (RUB 2.12 billion).
Approximately two-thirds of ALROSA’s sales are made through long-term contracts with the remainder sold through its spot transactions and auctions. The company recently signed supply agreements with Tiffany & Co. and Chow Tai Fook.
Sales were also impacted by softer rough prices during the quarter. The average price of ALROSA’s gem-quality diamonds dropped 9 percent to $211.30 per carat, while the average price of its non gem-quality diamonds fell 27 percent to $9.10 per carat.
However, during the first nine months of the year, the average price of ALROSA’s gem-quality diamonds rose 4 percent to $199 per carat, supported by reduction in sales volume in the third quarter. Diamond revenue fell 4 percent to $3.03 billion (RUB 93.8 billion) during the period, with sales volume down 21 percent to 22.3 million carats. Net profit declined 30 percent to $802.9 million (RUB 24.84 billion) for the nine months.
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Tags:
ALROSA
Diamonds
Rapaport
Russia
Tiffany
Chow Tai Fook, Avi Krawitz
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