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De Beers Diamond Sale Results Become Down In the Second Half

2002: Decrease in De Beers Diamond Sale May Kick This Industry Out

Sep. 2002

De Beers reported an 8.5 percent rise in first-half rough diamond sales to $2.84 billion, from $2.62 billion in 2001, in line with analyst projections. The company said it did not expect such good results in the second half, because of 

uncertainty in the market. The second half is also traditionally lower than the first half, because in the first half jewelers and dealers restock after Christmas.

It is surprising that the newly private De Beers keeps announcing its results like it is a public company, although it is part of Anglo-American, which is listed on the London stock exchange. The comp-any, which for years was cash-rich, now is focused on reducing the debt from its delisting. Its interest bearing debt fell to $2.08 billion for the period, from $3.26 billion. We’re sure the De Beers people must be kicking themselves when they watch the market fall; if they waited, they could have gotten the company for far cheaper.

While sales went up, profits dropped 60% to $308 million. Diamond’s margins dropped to 15 percent from 20 percent last year, a sign that De Beers is giving better assortments to its clients.

A De Beers statement said the numbers were good because the industry "began the year in a positive mood following better than expected Christmas retail sales of diamond jewelry, a significant reduction in inventory of polished diamonds held by the retail trade during 2001, and cautious optimism for recovery in the global economy in 2002. Restocking in the retail trade meant that polished demand from the cutting centers was above underlying retail demand in the consumer markets. As a result, polished stocks financed by the cutting centers reduced from $4.1 billion to $3.4 billion."

It said the rest of the year’s results depend on the economy and consumer confidence. It added that "De Beers made further good progress with the European Commission on its Supplier of Choice strategy and anticipates a favorable outcome during the second half of the year." The E.C. is also looking at De Beers’ contract with Russia.

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