De Beers’ rough diamond sales in H1 dip 21%

During the first half of 2015, De Beers’ total sales dropped 21 percent to $3.0 billion (H1 2014: $3.8 billion). Its rough diamond sales dipped 21 percent to $2.7 billion. Lower rough diamond revenue reflected a 27 percent reduction in consolidated sales volumes to 13.3 million carats (H1 2014: 18.1 million carats). Average realised diamond prices increased by 7 percent to $206 per carat (H1 2014: $192/carat) owing to the sale of a stronger product mix, despite a 4% lower average rough price index for the period.

The company noted that consumer demand for diamond jewellery in US dollar terms was slow from the end of 2014 and into the first half of 2015 – affected by slow global economic growth, a weaker than expected Q1 in the US and dollar strength. Following this, retailers of jeweler witnessed lower than expected sales, thereby resulting in a stock pile up and lowered purchase of polished diamonds from the midstream and a decline in polished prices. This, combined with liquidity and working capital challenges, has put pressure on midstream finances, negatively affecting rough diamond sales in the first half of the year.

De Beer’s underlying EBIT decreased by 25 percent to $576 million (H1 2014: $765 million), due to softer rough diamond demand. Although it was partly offset by lower operating costs and favourable exchange rates. Also, unit costs declined by approximately 10 percent on y-o-y basis.

The company’s production in the six months dropped 3 percent to 15.6 million carats (H1 2014: 16.0 million carats). Production at Debswana decreased by 4 percent to 11.5 million carats, while at DBCM it increased by 3 percent. Element Six experienced challenging trading conditions in H1 2015.

Forevermark, the diamond brand from De Beers incaresed its global retail footprint by 13 percent over the last 12 months, to over 1,600 retail outlets in 35 markets. It has increased its inscription and grading volumes as it further penetrates into India and China. It opened a new inscription and grading facility in Surat, India. De Beers Diamond Jewellers has 36 stores (of which 13 are franchises) in 12 key consumer global markets.

De beers anticipates rough diamond demand in the second half of the year to be dependent upon the level of retailer restocking for the season in the fourth quarter. It expects short-term volatility as working capitals concerns in the midstream lurk. Global demand for diamond jewellery (in US dollar terms) is predicted to be stable in 2015 with continued strength of the US dollar, coupled with lower consumer diamond demand growth in China. In the mid- to long-term, the prospects for the industry remain positive as the rise in the world’s middle class is expected to underpin stronger growth in demand for diamonds, outstripping growth in production. It forsees a revised production of 29 to 31 million carats (on a 100% basis), subject to trading conditions.