De Beers Earnings Gain from Higher Rough Demand

Jul 28, 2016 3:39 AM By Rapaport News

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RAPAPORT... De Beers revenue and earnings increased in the first half as the miner benefited from stronger rough demand, tighter cost controls and favorable exchange rates.

Revenue advanced 8.2 percent to $3.27 billion in the six months that ended June 30, parent company Anglo American reported. Rough diamond sales jumped 11 percent to $3.1 billion, spurred by a 29-percent leap in sales volume which outweighed a 14-percent drop in average realized prices to $177 per carat. Other revenue from its Element Six industrial diamond unit fell while its Forevermark brand expanded to 1,874 stores, up 6.5 percent from the beginning of the year.

Underlying earnings before interest and tax (EBIT) increased 2 percent to $585 million as consolidated unit costs declined from $82 per carat to $65 per carat. Underlying earnings rose 5 percent to $379 million.

Rough demand improved as manufacturers and dealers replenished inventory that were reduced in the second half of last year. Retailers also restocked in response to strong holiday sales, which helped strengthen sentiment in the midstream and enabled manufacturers to work down their polished inventories.

De Beers noted rough sales tend to slow in the second half and cautioned the market is exposed to downside risks, including social and political instability.

“Caution in rough diamond buying is expected to prevail, as the supplies bought by diamantaires in the first half are gradually converted into polished,” the company said.

De Beers reiterated its 2016 production outlook of 26 to 28 million carats, a decline from 29 million carats last year. Rough production in the first half slid 15 percent to 13.3 million carats, reflecting the company’s decision to reduce output in response to weaker market conditions at the end of 2015.

Tags: Anglo American, China, De Beers, India, Japan, Production, Rapaport News, Rough diamond sales, rough sales, u.s.