The group, which controls almost two-thirds of the world market for diamonds, is expected to post sales of just over $5.4 billion compared to $5.15 billion in 2002, a Reuters survey of seven analysts showed.
Their forecasts were in a tight $5.3 to $5.5 billion range.
They also expected De Beers to contribute over $400 million — more than a fifth — to Anglo American’s headline earnings, which exclude exceptional items and their tax effects. Anglo owns 45 percent of De Beers and is due to report on February 24.
“It’s a combination of good sales volumes and higher prices,” JP Morgan analyst James Wellsted said, referring to his forecast of sales of $5.42 billion in the year. “There was also a drawdown of inventories, so the margins should be higher.”
He saw De Beers contributing some $468 million to Anglo’s headline profits in the year, up from $324 million in 2002.
“The markets for jewellery remain remarkably robust, helped by the ‘supplier of choice’ and additional marketing initiatives,” said Jack Jones of CIBC World Markets in London.
He was referring to the scheme launched in July 2003 aimed at boosting diamond jewellery sales by 50 percent over 10 years.
The strategy involves streamlining distribution and creating the designer branding that exists in other luxury goods, and working with diamond cutters and jewellers to boost marketing.
“I am also expecting a very positive statement on the market outlook for 2004,” thanks to a global economic pickup and as De Beers continues to run down its stockpiles, Jones added.
Charles Kernot of UK brokers Seymour Pierce said second half sales were expected to be particularly good.
“Historically a much greater proportion of sales have been in the first half because of the length of the pipeline. But with De Beers cutting its own stock levels, I suspect that may be reflected in the trade as well, with cutters and polishers and jewellers more willing to buy in the second half,” he said.
In July, De Beers reported a forecast-beating rise in first half sales to $2.92 billion, contributing $248 million to Anglo.
Apart from the higher diamond sales, analysts said another major reason why De Beers would likely have been Anglo’s star performer in 2003 was the more damaging effect of a strong Rand on its other South African-based companies.
Along with Anglo, South Africa’s Oppenheimer family and the government of big producer Botswana are shareholders in the unlisted diamond group.
