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De Beers Sales Flat in 1H

Jul 26, 2013 3:48 AM   By Avi Krawitz
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RAPAPORT... De Beers rough diamond sales were flat at $3 billion during the first half of 2013 after prices rose 6 percent, Anglo American reported. Group sales, which include the De Beers  Forevermark diamond brand and Element 6 technology unit, were flat at $3.3 billion.

Anglo American noted that De Beers accounted for 18 percent of its own group operating profit during the six months compared with only 7 percent one year earlier. Operating profit rose 3 percent to $571 million, while earnings before interest, tax, depreciation and amortization (EBITDA) rose 17 percent to $788 million. Anglo American raised its stake in De Beers from 45 percent to 85 percent in August 2012 when it bought the Oppenheimer family’s share in the company.

Anglo American reported that its underlying earnings from the diamond division were $295 million (representing its 85 percent stake), compared  to $172 million a year earlier when it had a 45 percent holding. Spokespersons for De Beers explained that on a full reporting basis, underlying earnings were slightly down from the $385 million reported by the company last year.

“While polished diamond prices have increased slightly during the period, trading conditions remained challenging for our rough market partners,” said Philippe Mellier, the De Beers CEO  (pictured). “In the first half of 2013, De Beers rough diamond prices recovered some of the losses experienced in the second half of 2012, with an improved product mix offsetting the lower price index.”

The price increases followed a 12 percent price decline in the second half of 2012. The company explained that its average realized price was 2 percent higher than prices achieved in the same period in 2012 as an improved product mix more than offset the lower price index.

Mellier noted that while polished prices edged up due to moderate retailer restocking, high cutting center inventory, tight midstream liquidity and a weakening rupee continued to create challenges for the rough market.

De Beers expects moderate growth in diamond jewelry demand in the second half of the year supported by improving sentiment in the U.S. market and continued growth in China, albeit at a slower pace, while India and Japan are forecast to remain more uncertain due to their respective currency volatility, which is expected to affect growth in dollar terms, the company sated.

The company added that, overall, despite the fragility of the global economic recovery, macro-economic conditions are generally supportive of global growth in the polished diamond market in 2013 at levels slightly above 2012.

This past week, Anglo American reported that De Beers group production rose 6 percent year on year to 14.295 million carats. The company expects full year production to be in line with 2012 of around 28 million carats. 
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Tags: Anglo American, Avi Krawitz, De Beers, diamonds, Forevermark, Jewelry
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