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RAPAPORT... India’s polished diamond exporters can expect a significant recovery in their business toward mid-2010, according to Fitch Ratings. In a special report on the country’s gem and jewelry industry, Fitch said that its outlook for the sector is “negative to stable,” with slow improvements in liquidity and credit profiles expected for many issuers.
“Fitch expects a significant recovery only toward mid-2010 for diamond polishers who are export-focused, whilst a recovery for export-oriented gold jewellery manufacturers is likely to take longer — in line with the generally expected economic recovery in the respective markets,” the Fitch release stated.
Fitch explained that the large inventory and receivables built up during the downturn are likely to ease and many exporters have already liquidated a portion of their inventory. Inventory and collection periods both ballooned during the downturn, but have shown improvements recently, the agency added.
India’s polished diamond exports fell 8 percent to $1.29 billion in 2009, with a strong fourth quarter salvaging some of the declines experienced earlier in the year. Fourth-quarter exports grew about 55 percent to an estimated $4.13 billion.
Fitch attributed the increase to the slow recovery in retail demand from key markets in the U.S., Europe and Asia. Part of the growth was also due to the weaker Indian rupee against the U.S. dollar, it added. Other factors included the government stimulus, which includes interest rebates that will continue through March 2010, the extension of credit periods and the export duty benefits that are available to the sector.
General jewelry exports fell 22 percent between September and November 2009, Fitch reported, an outgrowth of the effects of the credit crisis in the Middle East. The decrease came despite higher gold prices and a favorable exchange rate, “which implies an even sharper volume decline,” Fitch stated.
The ratings agency noted that the recovery will be spurred by the larger, geographically diversified companies that “have also demonstrated their ability to manage liquidity during the downturn.” The strength of the larger players was evident in their recently published financial results for the fiscal third quarter that ended on December 31, 2009.
Among these, Gitanjali Gems reported that its sales grew 63 percent to $391.5 million, with net profits up 39 percent to $8.8 million. And as Suashish Diamonds' sales rose 117 percent to $67.4 million, its net profits grew to $3.7 million from a net loss of $6.6 million a year earlier. Other Indian jewelry retailers, including Su-Raj Diamond & Jewellery, Shrenuj & Co. and Renaissance Jewellery, also all reported strong sales and net profit growth for the year.
LH
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