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Dominion Diamond's FY Sales Approach $752M

Sale of Harry Winston Boosts Profit to $471M

Apr 2, 2014 6:19 PM   By Jeff Miller
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RAPAPORT... Dominion Diamond Corporation reported that its sales rose 118 percent year on year to $751.9 million, while its cost of sales surged 143 percent to $650.8 million for the fiscal year that ended on January 31. Gross margin as a percentage of sales fell to 13.4 percent from 22.5 percent one year earlier. The company's financing expenses jumped to $27.4 million from $9.1 million and its exploration costs rose to $14.6 million from just $1.8 million one year ago.

Dominion Diamond recorded a profit of $471.2 million, or $5.64 per share, compared with a profit of $35.2 million, or 41 cents per share, one year earlier, as a result of a $502.9 million gain from the sale of Harry Winston Inc. during the period. The company recorded a consolidated net loss from continuing operations attributable to shareholders of $23 million or 27 cents per share compared with a profit of $22.3 million or 26 cents per share one year earlier.

The consolidated net loss included a $3.2 million charge for restructuring the Antwerp office, $10.6 million in expenses related to the cancellation of the credit facilities that had been previously arranged in connection with the Ekati diamond mine acquisition and $11.4 million in Ekati acquisition costs. All charges represented  after-tax figures. Excluding these items and the impact of the sale of opening acquisition inventory that was included at market value in Ekati's cost of sales, Dominion Diamond's  estimated consolidated net profit attributable to shareholders for the year would have been $15.2 million or 18 cents per share.

During the fiscal year, Dominion Diamond sold Harry Winston for $1 billion in March, including the assumption of $250 million in pro forma net debt, and acquired majority interest in the Ekati diamond mine for $553 million, which included $62 million of cash, $154 million in rough diamond inventory and $165 million of supplies.

For the period from April 10, 2013 to January 31, sales from the Ekati mine totaled $399.6 million and it incurred cash production costs of  $303.9 million. Cost of sales for Ekati for the period totaled $392.9 million. Diavik recorded sales of $352.3 million for the entire fiscal year and incurred cash production costs  of $162.6 million. Cost of sales for Diavik during the fiscal year totaled $257.9 million.

Robert Gannicott, the CEO of Dominion Diamond, said, "Our early experience at Ekati continues to exceed our expectations while Diavik also outperforms its planned targets. The diamond market has improved, both in pricing and volume of demand, as the important diamond-consuming economies, led by the U.S., maintain momentum."

For the first three months of 2014, Gannicott said that there has been an upturn in rough diamond prices of just more than 7 percent. This growth is primarily the result of restocking in the U.S. and strong demand in China. Evidence suggests that jewelry sales are also increasing in India, according to Gannicott.

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Tags: acquisition, diamonds, Diavik Diamond mine, Dominion Diamond, earnings, ekati, Harry Winston, Jeff Miller, sales, Shareholders
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