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Dominion Diamond's Full-Year Sales Jump 22%

Apr 9, 2015 7:41 AM   By Jeff Miller
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RAPAPORT... Dominion Diamond Corporation reported that its sales rose 3.2 percent year on year to $240.6 million in the fourth quarter that ended on January 31. Cost of sales dropped 10.9 percent to $179.8 million, driving up gross margin as a percentage of sales to 25.3 percent from 13.4 percent one year earlier. Profit rose to $3.7 million compared with a loss of $12.3 million; however, the loss attributable to shareholders was narrowed to $546,000, or 1 cent per share, compared with $7.8 million, or 9 cents per share, one year ago. Dominion attributed the consolidated loss to the foreign-exchange-rate income tax impact of $29.1 million or 34 cents per share.

During the fourth quarter, rough diamond sales from the Diavik operation fell 31.6 percent year on year to $81.5 million for approximately 778,000 carats at $105 per carat. Dominion stated that at the close of the period, Diavik's rough diamond inventory amounted to 300,000 carats as of January 31, with a market value of $50 million. Sales from the Ekati mine, however, jumped 39.6 percent to $159.1 million from approximately 897,000 carats at an average price of $177 per carat. Ekati's inventory accounted for 900,000 carats with a market value of approximately $200 million, according to the company.

For the fiscal year, Dominion's sales climbed 21.8 percent to $915.8 million, while cost of sales rose 5.3 percent to $685.7 million. Gross margin as a percentage of sales improved to 25.1 percent compared with 13.4 percent in the previous fiscal year. Profit totaled $72.3 million, down from $471.2 million in the previous year, which included the sale of Harry Winston. Profit attributable to shareholders, however,  rose to $66.2 million, or 78 cents per share, compared with a loss of $23 million, or 27 cents per share one year earlier.

Diavik's revenue was basically flat during the year at $351.6 million from the sale of 3.014 million carats at an average price of $117 per carat. Ekati's revenue jumped 41.2 percent to $564.2 million from the sale of 2.166 million carats at approximately $260 per carat.

Dominion Diamond closed its fiscal year with unrestricted cash and cash equivalents of $457.9 million and restricted cash of $34.6 million, compared with  $224.8 million and $113.6 million, respectively, on January 31, 2014.  During the period, Dominion reported cash flow from operations of $328.9 million, which was well ahead of the $155.2 million in the previous year. In total, Dominion closed the year with 1.2 million carats of rough diamonds in inventory and it estimated market value at approximately  $250 million, with $85 million of inventory available for immediate sale and $165 million worth being prepared.

The mining company increased its working capital to $752.4 million as of January 31, up from $572.1 million one year prior. Dominion decreased its accounts receivable by $300,000, increased other current assets by $3.9 million, increased inventory and supplies by $26.6 million, increased trade and other payables by $13.2 million and increased employee benefit plans by $1 million.

As for market conditions during the year, Dominion confirmed what the trade already knows -- the positive price and demand trends of early in 2014 did not last  and continued constraints by the banks on dealer liquidity pressured overall activity. Nonetheless, Dominion contended that  market conditions turned more positive in January  as the major producers allowed their clients to defer rough diamond purchases.

The board of directors approved a dividend of 40 cents per share to be paid on May 21, 2015 to shareholders of record at the close of business on April 30. The dividend will be an eligible dividend for Canada's income tax purposes, and Dominion intends to pay a regular annual dividend of 40 cents per share on a semi-annual,  interim and final dividend. For the current fiscal year -- 2016 -- the current interim dividend of 20 cents per share is expected to be paid in or around November 2015, and the final dividend is expected to be paid in or around May 2016.

Dan Jarvis, the acting chairman of Dominion, said,  “We have initiated a dividend at a level which we are confident is sustainable, while allowing us to continue to pursue our plans for growth for the company.”


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Tags: Canada, carats, Diavik, dividend, Dominion Diamond, ekati, financial, inventory, Jeff Miller, margin, mining, profit
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