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Rapaport TradeWire September 24, 2014
Sep 24, 2014 6:00 PM
By Rapaport
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Rapaport Weekly Market Comment
Sept. 24, 2014
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Hong Kong show improves outlook for holiday season but liquidity remains tight with significant buyer price resistance. Polished trading cautious with price-point buyers shifting to lower qualities. Steady Chinese demand before Oct. 1 Golden Week. Rough trading is slow. Petra Diamonds FY revenue +20% to $472M, profit more than doubles to $68M. ALROSA president Fyodor Andreev resigns for medical reasons, senior VP Ilya Ryashchin to serve as interim president. KGC Group to close Antwerp Diamond Bank. THE RAPAPORT PRICE LIST WILL NOT BE PUBLISHED THIS WEEK DUE TO THE JEWISH NEW YEAR. Visit TradeScreen for continuously updated RapNet prices. Best wishes to all for a happy, healthy and prosperous Jewish New Year.
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RapNet Data: Sept. 24
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| Diamonds |
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1,321,876 |
| Value |
$7,740,448,705 |
| Carats |
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1,384,403 |
| Average Discount |
-26.93% |
www.rapnet.com
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Get Current Price List | Subscribe to Rapaport | Join RapNet |
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QUOTE OF THE WEEK
Antwerp’s purchasing power is going to diminish relative to other centers, reducing its trading capacity. There’s also a symbolic aspect. The Antwerp Diamond Bank is one of the industry’s most established and enduring players.
Anish Aggarwal | Gemdax
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Careers@Rapaport
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The Rapaport Group is growing rapidly. If you wish to work with the best and brightest, join us. We have great opportunities for trading managers, gemologists, sales assistants and entry-level positions for our offices in New York, Antwerp and Mumbai. View jobs now.
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INDUSTRY
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Fitch Assigns 'A-,' Stable Outlook on Tiffany & Co.
Fitch Ratings assigned an issuer default rating (IDR) of "A-" to Tiffany & Co. as well as an "A-" to the retailer's senior unsecured facilities and senior unsecured notes. The rating outlook is stable. Fitch explained that this rating reflected Tiffany & Co.'s strong positioning in the mid- to high-tier global luxury jewelry market, supporting mid-single-digit top line growth, high margins, strong liquidity and reasonable credit metrics.
Fitch anticipates that Tiffany & Co. will experience top line growth of between 6% and 6.5%, EBITDA margin to improve modestly -- from 26% (adjusted for any one-time charges) currently -- from strong product mix and pricing and some upside from cost efficiencies. Fitch expects top line growth to be supported by low single-digit comps in the U.S., Japan and Europe along with 6% to 7% comp growth across the Asia-Pacific and about 2.5% to 3% growth contribution from new stores.
Tiffany & Co. plans refinancing to increase its existing $550 million unsecured multi-currency credit facilities ($275 million expires in December of both 2014 and 2016), with $750 million (four-year and five-year, $375 million each). Fitch determined that the refinance would further strengthen Tiffany & Co.'s liquidity profile and support the growth in its global operations. Tiffany is also issuing $500 million of 10-year and 30-year unsecured notes to refinance $400 million in aggregate principal amount. After this transaction, Tiffany will have pushed out its debt maturities past 2020 with only $97 million of debt due September 2016, Fitch explained.
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KBC Prepares to Close ADB
The KBC Group will fold Antwerp Diamond Bank (ADB) operations into KBC Bank NV and no longer accept new loans or business. The decision to close ADB followed the collapse of a planned buyout by the Yinren Group of China and was in accordance with the European Commission on divesting the bank.
Since 2009, KBC has made continuous efforts to find a suitable strategic investor for the bank; however, due to the bank's specific niche business, daily funding needs and difficult economic and market conditions for the industry -- all of those factors were too much of a challenge, according to KBC.
The Antwerp World Diamond Centre (AWDC), however, believed there was still room to find a solution and keep the financing levels of the Antwerp diamond sector in check. About one-third of Antwerp diamond dealers are financed by the bank, primarily small and medium size diamond dealers, for whom finding other sources of financing presents challenges, according to AWDC.
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Andreev Resigns as ALROSA CEO
ALROSA's president and CEO, Fyodor Andreev, will resign from his position due to medical reasons. Ilya Ryashchin, ALROSA's senior vice president, will assume the role of acting president following Andreev's departure.
Andreev announced his decision to step down at the company's weekly management meeting that was held Monday. He will continue to be involved in the company as a member of its supervisory board.
Andreev was appointed CEO on July 15, 2009.
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RETAIL & WHOLESALE
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U.S. Data Reveals Consumer Stress
The U.S. retail economy continues to face headwinds for all but the top 20% of households, according to the latest data. While the "Current Population Survey" conducted by the U.S. Commerce Department confirmed the employment rate has risen every month for more than four years, both Pew Research and the Federal Reserve's consumer surveys concluded that the average household is worse off today than was the case seven years ago.
Only 21% of consumers rate the economy as excellent or good, 54% believe nothing will change anytime soon and they remain pessimistic shoppers, and 21% believe the great recession hasn't ended. Retail growth is primarily being driven by to top 20%, or households earning north of $100,000, and to some extent due to population growth. Still, the monthly Personal Consumption Expenditures index has not returned to pre-recession levels, which presents a continued challenge for retailers.
The median household income for the 2014 population survey was 8% lower than it was in 2007 at $51,939, while 56% of consumers said their salaries have fallen behind the basic cost of living. Households in the middle of the income distribution spectrum earned about $4,500 less than they had six years ago, while families in the top 10%, with annual incomes averaging nearly $400,000, experienced healthy gains. Middle-income households (with a college education) experienced an 11% contraction in salaries to $41,000. Households headed by workers under age 35 have suffered even more as many fail to secure professional wage jobs.
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Deloitte: Expect Moderate Seasonal Growth
Deloitte anticipates that U.S. Christmas-season retail sales for 2014 will increase by between 4% and 4.5% year on year to between $981 billion and $986 billion. Additionally, Deloitte predicts that non-store retail sales, including ecommerce and mail order, will rise between 13.5% and 14%. Deloitte defines the U.S. Christmas retail season as beginning on November 1 and ending January 31. The expected rate of sales growth is a moderate improvement over the 2.8% gain in 2013, the consulting firm stated.
The group concluded that there has been positive wage growth at the top to boost its outlook, coupled with historically low levels of consumer debt across all income levels. Geo-political tensions were not expected to dampen consumer spending, according to Deloitte.
For retailers, though, Alison Paul, the vice chairman of Deloitte, explained that digital customer interactions through both virtual and physical store channels present greater sales opportunities than online or mobile commerce alone. Deloitte said that 84% of shoppers use digital tools before and during their trip to a store. Additionally, those shoppers convert, or make a purchase, at a 40% higher rate than those who do not use such devices.
Deloitte forecasts that digital interactions will influence 50%, or $345 billion worth of retail stores sales this Christmas season.
"Retailers should focus on the right functionality, rather than more functionality, when creating digital experiences this holiday season. Rather than offer their full ecommerce site on a mobile device, for example, retailers may be more effective by helping consumers compare prices, scan through local assortments, and navigate the store," Paul said. "Retailers that better understand how consumers make purchasing decisions, then deliver tools that support that process in a way that is consistent and complementary across online, mobile and store channels — may have the advantage this holiday season."
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Fabrikant-Tara Partners With Zac Posen
Zac Posen and Fabrikant-Tara International signed a deal to create a new collection of handcrafted fine diamond jewelry that will launch shortly. The collection is being described as an infusion of the Zac Posen brand's modern U.S. glamour with the fine details and craftsmanship of Fabrikant-Tara to deliver fashion, bridal and bespoke luxury jewels.
Posen said that the time was right to expand into fine jewelry. The company established House of Z in 2001 and currently produces a range of products through his Zac Posen, ZAC Zac Posen, Z Spoke, and Truly Zac Posen labels including women's ready-to-wear, bridal, social occasion, furs, handbags, accessories and eyewear.
The licensing partnership will help Fabrikant-Tara create further value for its customers and reinforce the diamond firm's focus on branded and co-branded jewelry.
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Dillard's to Offer James Avery Jewelry
James Avery will begin showcasing a selection of branded jewelry at 43 Dillard's Inc. department stores and online in mid-October. James Avery offers a wide selection of hand crafted designs in sterling silver, gold and gemstones and is recognized for its inspiring traditional and contemporary style. Dillard's stated that the retailer has admired James Avery jewelry for many years and believes the product will be a good fit. Dillard's sells jewelry, fashion apparel, cosmetics and home furnishings and reported annual revenue of about $6.2 billion. The retailer operates 278 Dillard's locations and 18 clearance centers across 29 states.
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RJC Recognizes Fairmined Standard 2.0
The Responsible Jewellery Council (RJC) and the Alliance for Responsible Mining (ARM) jointly announced that Fairmined Standard v.2.0 is recognized under the RJC chain-of-custody program for precious metals.
The Fairmined initiative, developed by ARM, is a landmark mining definition for the artisanal and small-scale gold mining sector with an aim to provide the incentive to become certified under the Fairmined Standard.
The initiative's success is dependent on increasing market opportunities for miners across the pipeline and the Fairmined Standard provides brands with three different innovative sourcing models: labeled, incorporated and Fairmined certificates.
The RJC recognition equally serves to help mitigate the potential impact that conflict-mineral due diligence can have on ASM's miners. RJC's chain-of-custody certified refiners can source from Fairmined certified artisanal and small-scale miners, further integrating those gold miners into the formal economy.
This initiative also builds on the recommendations of the OECD Due Diligence Guidance for Responsible Supply Chains – Supplement on Gold that all gold supply chain participants support legitimate producers.
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Dillard's, Argyle, Alex Woo Receive Trademarks
The U.S. Patent & Trademark Office (USPTO) issued the trademark "Dillard's Diamond Collection" to Dillard's Corporation of Little Rock, Arkansas on September 16 with registration number 4606903. The department store chain applied for the trademark on July 18, 2013 as it refers to jewelry made with diamonds. "Dillard's Diamond Collection" was first used in commerce in January 2013.
The Argyle Diamonds Ltd. Company of Australia was awarded the "Argyle Pink" trademark with registration number 4607622 on September 23. The trademark applied to cut and uncut pink diamonds, precious stones, pink sapphires and garnets and jewelry set with pink diamonds.
Alex Woo Inc. of New York City received the U.S. trademark "What's Your Icon" on September 16 with registration number 4605641. "What's Your Icon" was first used in commerce in April 2014 and refers to diamonds, jewelry, watches, precious metals for use in manufacturing sculptures, among other items.
Seraph Designs Ltd. of Hong Kong received the U.S. trademark "LEXTIA" on September 16 with registration number 4604143. The trademark refers to rough and polished gemstones, diamonds, coral, precious metals and their alloys and jewelry along with ornaments, watches and cases. "LEXTIA" was first used in commerce in April 2013.
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Majhgawan Tender Achieves $1M
India's National Mineral Development Corporation's Diamond Mining Project received $1.4 million (Rs 8.62 crore) from the sale of 6,200 carats of rough. In all, 13,200 carats were offered and the largest stone, a 37.68-carat diamond, did not sell. The sale was held in Majhgawan over a two-day period and attracted 120 buyers.
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Denver Hosts Cartier Exhibit
The Denver Art Museum will exhibit "Brilliant: Cartier in the 20th Century," from November 16 to March 15, featuring a stunning assortment of jewelry, timepieces and precious objects created between 1900 and 1975. In addition to items loaned by the Cartier Collection, the exhibition will include loans from museums and private collections from around the world.
Organized in seven thematic sections, the exhibition will feature a special section dedicated to providing a rare look at Cartier-crafted men's items. The installation also highlights original preparatory drawings, historic photographs, advertising materials, film clips and movie stills to provide insight into the evolving cultural setting of the time period that tells the story of aristocracy and aspiration, Art Deco, foreign fascination, masculinity, the art of smoking, age of glamour and icons of style.
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MINING
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Rockwell's Revenue +55%
Rockwell Diamonds' production rose 36% year on year to 9,581 carats in the second fiscal quarter that ended on August 31, while the value of sales rose 55% to $13.2 million. The company sold 8,864 carats, representing a 58% year-on-year increase, while the average price per carat fell 2% to $1,489. Rockwell's diamond inventory on August 31 totaled 5,954 carats, including royalty contract miners' inventory of 3,034 carats.
Specifically from the company's Middle Orange River operations in South Africa during the second quarter, carat production rose 6% to 3,764 carats with volume sales up 43% to 3,810 carats. The value of revenue from this operation rose 36% to $9 million.
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Gemfield's Profit Soars
Gemfields plc. reported that revenue rose to $160.1 million for the fiscal year that ended on June 30, far surpassing revenue of $48.4 million one year earlier. The integrated gemstone mining company's profit surged to $16.3 million compared with a loss of $22.8 million. Gemfields held cash of $36.8 million on June 30 and it estimated that inventory on hand, excluding fuel and other consumables, totaled $86.3 million.
During the company's fiscal year, Gemfields' production of emerald and beryl fell 32.7% to 20.2 million carats.
Three auctions of emerald and beryl mined at Kagem (two of higher quality and one of lower quality) were held in Lusaka, Zambia, generating revenue of $84.4 million. Rough emerald auctions for gems that were not mined directly by the company were held in Jaipur, India, generating revenue of $22 million.
Bulk sampling from Montepuez Ruby Mining Limitada in Mozambique resulted in approximately 6.5 million carats of ruby and corundum, up from less than 2 million carats one year earlier. Gemfields held an inaugural rough ruby auction in Singapore in June, generating revenue of $33.5 million from the sale of 1.82 million carats.
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Diamond Fields Ends Afri-Can Marine Deal
Diamond Fields International Ltd. is terminating an agreement with Afri-Can Marine Mineral Corp., regarding the company's Namibian marine diamond concessions. Diamond Fields will now develop the properties independently and is planning a resource development program with an aim recommence mining before the end of 2015. The offshore explorer expects the first marine survey work to commence in October.
Ian Ransome, the CEO of Diamond Fields, said they had identified a number of potential resource targets on the concessions, which the company will fully explore.
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True North Beings Construction
True North Gems Inc. has mobilized equipment to inaugurate construction of the Aappaluttoq ruby and pink sapphire project located in southwestern Greenland. Nicholas Houghton, the CEO of True North Gems, explained that construction will progress quickly, with immediate objectives to include transporting and installing a pre-fabricated loading dock, moving rolling stock required to commence road construction, establishing living quarters and completing infrastructure, which will enable planned production to commence in 2015.
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ECONWATCH
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Diamond Industry Stock Report
Little change on the index, however, all U.S. retailers were lower except for Blue Nile (+2%) and Charles & Colvard (+3%), while the Far East was mixed with Chow Sang Sang (+3%) and Chow Tai Fook (-3%) setting the trading range. Europe's shares were all lower, led by Kering (-3%), and India was mainly lower, led by Goenka (-12%), while Goldiam (+9%) pulled ahead. Mining shares were mixed with gains led by Gemfields (+5%) and loss leader was Shore Gold (-7%). View the extended stock report.
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Sept. 24 |
Sept. 18 |
Chng. |
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| $1 = Euro |
0.780 |
0.774 |
0.006 |
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| $1 = Rupee |
60.97 |
60.77 |
0.2 |
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| $1 = Israel Shekel |
3.67 |
3.64 |
0.03 |
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| $1 = Rand |
11.13 |
11.09 |
0.04 |
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| $1 = Canadian Dollar |
1.11 |
1.09 |
0.02 |
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| Precious Metals |
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| Gold |
$1,217.00 |
$1,225.50 |
-$8.50 |
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| Platinum |
$1,313.00 |
$1,342.00 |
-$29.00 |
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| Stock Indexes |
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Chng. |
| BSE |
26,744.69 |
27,112.21 |
-367.52 |
-1.4% |
| Dow Jones |
17,210.06 |
17,265.99 |
-55.93 |
-0.3% |
| FTSE |
6,706.27 |
6,819.29 |
-113.02 |
-1.7% |
| Hang Seng |
23,921.61 |
24,168.72 |
-247.11 |
-1.0% |
| S&P 500 |
1,998.30 |
2,011.35 |
-13.05 |
-0.6% |
| Yahoo! Jewelry |
1,149.15 |
1,163.33 |
-14.18 |
-1.2% |
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INDIA MARKET REPORT
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Polished and Rough Trading Activity
India's polish market remains slow and, worse yet, the Hong Kong show failed to meet expectations so sentiment is deteriorating. A small improvement was observed for trading activity in -2 goods and some trade taking place for below 0.18 carats at discounted rates. Dossiers very low in demand and tight liquidity persists.
Read the full report.
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