Soft diamond market halves De Beers� earnings
Pauline Dikuelo | Thursday February 18, 2016 15:34
The group’s revenue dropped down by 34 percent to $4.7 billion from $7.1 billion recorded in the prior year due to lower rough diamond sales, which declined by 36 percent to $4.1 billion.
This was due to a 39 percent reduction in consolidated sales volumes of 19.9 million carats compared to the 32.7 million carats sold in the prior year, partly offset by a five percent increase in the average realised diamond price.
In a media teleconference this week, London-based De Beers chief financial officer, Gareth Mostyn said 2015 was a difficult time in the diamond industry, which forced them to reduce production costs and capital expenditure.
“The past year was a tough year for the diamond industry, due to the weaker rough diamond demand, De Beers reduced rough diamond production by 12 percent to 28.7 million carats in response to prevailing trading conditions,” said Mostyn.
He said from the final sight in 2014 to the final sight in 2015, the De Beers rough price index declined by 15 percent, adding that the consumer global demand for diamond jewellery for the past year is expected to have declined marginally in US dollar terms from the record levels of 2014, as growth in the US was offset by the economic slowdown in China and the strength of the dollar.
Debswana production also decreased by 16 percent to 20.4 million carats driven by a reduction in tailings production at Jwaneng combined with the bringing forward of planned maintenance at both Jwaneng and Orapa.
However, Mostyn noted that the US, the largest market for polished diamonds at approximately 45 percent of global market value, again saw the strongest growth, albeit at a slower rate than in 2014. The demand for diamond jewellery by Chinese consumers was stable while in India diamond jewellery demand contracted in local currency terms.
The CFO said the rough diamond demand this year will depend on consumer demand for diamond jewellery and the resultant levels of restocking required by retailers and the midstream.
“Diamond production is forecast to range between 26 to 28 million carats, subject to trading conditions. Consistent with this level of production, plans are in place to deliver $200 million cash of savings in production costs, overheads and capital expenditure,” he said.
Mostyn said De Beers Diamond Jewellers maintained its focus on fast growing markets with 35 stores in 12 key consumer markets around the world. They also invested in additional holiday marketing campaigns to further stimulate diamond jewellery gift giving across the key US and China markets, which was positively received by the industry.
“The Forevermark campaign has continued to expand as it is now available in 1,760 outlets across 35 markets, which is a 14 percent increase from 2014.” st-font-family: 'Times New Roman';mso-ansi-language:EN-US;mso-fareast-language:EN-US; mso-bidi-language:AR-SA'>She disclosed that she will be amongst the audience and wishes for Tebogo Seoseng the winner of My Star 2013 to win the Best of the Best season.