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De Beers Group Sales -16%, Earnings -49% in 2012

Rough Prices -12%

Feb 15, 2013 3:33 AM   By Avi Krawitz
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RAPAPORT... De Beers group sales fell 16 percent to $6.1 billion in 2012 as rough diamond prices dropped 12 percent during the year. Underlying earnings slumped 49 percent to $506 million.‎

‎“Although rough diamond prices remained broadly stable in the first half of 2012, a ‎combination of weaker polished prices, high levels of cutting-center stock and tightening ‎liquidity in the midstream resulted in a rough diamond price correction during the third ‎quarter,” said Philippe Mellier, De Beers CEO.‎

The company reported Friday that its rough diamond sales fell 15 percent to $5.5 billion during the year ‎due to diminished demand, changing product requirements from its sightholders and the ‎reduced availability of some goods. Sales through De Beers auctions declined 12 percent to ‎‎$356 million.‎

Revenue from De Beers Forevermark unit increased 50 percent as the brand expanded its retail partnerships  40 percent to more than 900 retail outlets. 

De Beers noted that diamond jewelry sales in key markets of the U.S., China and Japan ‎grew at a slower pace than they had in 2011, which, together with an increase in polished diamond ‎inventory levels, resulted in a decline in polished prices during 2012, particularly in the third ‎quarter. A combination of weaker polished prices, high levels of cutting-center stock and ‎tightening liquidity in the midstream influenced a correction in rough prices in the third ‎quarter. However, a modest improvement in consumer demand in most jewelry markets ‎during the fourth-quarter holiday season helped stabilize rough prices toward the end of ‎the year.‎

The company estimated that rough prices declined at the same pace as polished during ‎the year. De Beers expects moderate growth in 2013 as the diamond-manufacturing ‎sector is currently holding high inventory levels, particularly in  high-end goods, and ‎continues to face liquidity challenges.‎

Given the prevailing weak market, De Beers operations focused on maintenance and ‎waste stripping backlogs. As a result, production fell 11 percent to 27.9 million carats in ‎‎2012. The company increased its exploration spend to $59 million. ‎

De Beers ended the year with free cash flow of $697 million, down 15 percent from a ‎year earlier; however, it reduced its debt 61 percent to $722 million, excluding ‎shareholder loans.  ‎
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Tags: Avi Krawitz, De Beers, diamonds, element six, Forevermark, Jewelry, Rapaport
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