2005

De Beers Profits Sink In First Six Months of Year

August 2005

De Beers’ profits for the six months ended June 30, 2005, were 8% lower than the equivalent period in 2004, and headline earnings were 21% lower at $336 million.

In a statement, De Beers said the decrease in earnings was attributed to the impact of a weaker dollar and “to tighter margins arising largely from a significant reduction in stockpile realizations.” Headline earnings were further impacted by the negative swing of $46 million in the group’s share of retained earnings of joint ventures.

Other news in the report:

* Despite mixed economic data, demand for diamond jewelry in the U.S. was up 6% in the first half over the same period last year. Large chains and high-end independents have shown the strongest results and polished prices have started to edge up on the consumer level.

But it noted performance in other markets was mixed, and the local currency value of global diamond jewelry is estimated to be higher by 5% than 2004.

* Sales by the Diamond Trading Company, the marketing arm of De Beers, for the first six months totaled $3.2 billion, 8% higher than the equivalent period in 2004. The DTC also raised rough prices on two occasions.

* Group production was 23.7 million carats, an increase of 23% over the same period in 2004, which was the reason De Beers gave for taking on new sightholders last month. The company also announced its stock levels were risen by about $400 million compared with June 2004. This was something of a surprise, since De Beers has said that it will stop stockpiling.

It closed by noting that the market for rough diamonds remains firm and De Beers expect that, unlike in previous years, sales in the second half will match those of the first half and that the stocks will reduce.