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ALROSA's 3Q Profit -7%, Sales Slide

Dec 4, 2012 4:09 AM   By Avi Krawitz
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RAPAPORT... ALROSA's  profit fell 7 percent year on year to $278.7 million (RUB 8.62 ‎billion) during the third quarter that ended on September 30,  as it reduced supplies to the market given weak diamond demand. ‎Group revenue declined 32 percent to $898.3 million (RUB 27.79 billion), while revenue ‎from diamond sales dropped 38 percent to $752.3 million (RUB 23.27 billion). Additional revenue originated from other sources, such as transportation, social infrastructure, trading and construction ‎operations. ‎

Analysts at VTB Capital expect a stronger fourth quarter for ALROSA even as soft prices continue to ‎affect sales. “Besides seasonal demand pickup, some sales to the state reserve could be ‎performed as well, with volume posting a dramatic quarter-on-quarter increase,” the ‎analysts wrote in an earnings preview. ‎

ALROSA's diamond sales by volume declined 44 percent year on year to 5.1 million carats, 3.4 million ‎carats of which  were gem-quality stones.

Simultaneously, production rose 32 percent to 9.1 million ‎carats. The value of ALROSA’s diamond inventory between January 1 and September 30 grew 32 percent to $897 million (RUB 27.75 billion) as of September 30, 2012. ‎

Rough demand declines were evident in each of ALROSA’s major markets, with sales just to Belgium down ‎‎40 percent to $353.6 million (RUB 10.94 billion). Within the Russian Federation, sales fell ‎‎22 percent to $308.6 million (RUB 9.55 billion), while sales to India decreased 20 percent ‎to $120.5 million (RUB 3.73 billion) and sales to Israel dropped 30 percent to $68.5 million ‎‎(RUB 2.12 billion). ‎

Approximately two-thirds of ALROSA’s sales are made through long-term contracts with the ‎remainder sold through its spot transactions and auctions. The company recently signed ‎supply agreements with Tiffany & Co. and Chow Tai Fook.

Sales were also impacted by softer rough prices during the ‎quarter. The average price of ALROSA’s gem-quality diamonds dropped 9 percent to ‎‎$211.30 per carat, while the average price of its non gem-quality diamonds fell 27 percent ‎to $9.10 per carat. ‎

However, during the first nine months of the year, the average price of ALROSA’s gem-‎quality diamonds rose 4 percent to $199 per carat, supported by reduction in sales ‎volume in the third quarter. Diamond revenue fell 4 percent to $3.03 billion (RUB 93.8 ‎billion) during the period, with sales volume down 21 percent to 22.3 million carats. Net ‎profit declined 30 percent to $802.9 million (RUB 24.84 billion)  for the nine months.   ‎
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Tags: ALROSA Diamonds Rapaport Russia Tiffany Chow Tai Fook, Avi Krawitz
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