The preliminary consumer demand data for diamond jewellery for the start of 2017 showed continued growth in the US and slight improvements in China in local currency. In India, retailer sentiment improved due to a return to more normal trading conditions following the government's demonetisation programme. Underlying US results reflected the broader changes in consumer behaviour affecting the overall US retail environment, with growth in the independent jewellers’ sector contrasting with some weakness from large chains.
De Beers noted that sentiment in the midstream remains positive following a reasonable Q4 2016 retail season, with evidence of Chinese retailers restocking and demonetisation in India having less impact than anticipated. This has supported good demand for De Beers’ rough diamonds. Spot polished prices remained broadly flat in H1 2017.
Rough diamond production increased by 21 percent to 16.1 million carats (H1 2016: 13.3 million carats), in line with the higher production forecast for 2017, reflecting stable trading conditions as well as the contribution from the ramp-up of Gahcho Kué in Canada.
At Element Six, revenue and earnings improved following a modest upturn in oil and gas industry demand relative to the first half of 2016. This was offset partially by weaker demand for abrasive materials for road and mining applications.
De Beers acquired LVMH Moët Hennessy Louis Vuitton’s 50 percent shareholding in De Beers Diamond Jewellers (DBDJ), in March this year. With full ownership of the business, De Beers has begun to fully integrate the DBDJ brand and network of 29 stores in 16 key consumer markets. Forevermark’s global footprint rose 11 percent to 2,080 outlets in 25 markets, and also inscribed its two-millionth diamond.
De Beers unveiled its next-generation automated melée screening instrument (AMS2™) and an industry-first synthetic-screening device for stones in set jewellery (SYNTHdetect™).
During 2017, De Beers expects to invest a total of around $140 million in marketing (approximately 20 percent more than in 2016) and has substantially increased its investment in the Diamond Producers Association (DPA) in 2017.
Macro-economic conditions underpinning consumer demand for polished diamonds globally remain supportive of marginal demand growth in 2017. The extent of global growth, however, will be dependent upon a number of macro-economic factors, including the effect of US and China government policies on exchange-rate movements. Correspondingly, midstream demand for rough diamonds is expected to depend on the strength of different markets’ restocking requirements.
De Beers notes that its forecast diamond production (on a 100% basis) for 2017 remains unchanged and is expected to be in the range of 31-33 million carats, subject to trading conditions.
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