De Beers Reports Record Rough Diamond Sales

Rough diamonds image courtesy of De Beers Group

De Beers Group said Tuesday that sales of rough diamonds during the first half of 2011 through the Diamond Trading Company (the rough diamond distribution arm of the De Beers) increased 33 percent, year-over-year, to $3.5 billion This is the highest ever sales figure recorded for the first half of the year, buoyed by continued retail demand from the Indian and Chinese consumer markets and stronger than expected demand in America.

The company, which produces more than a third of the world’s rough diamonds, also reported record EBITDA of almost $1.2 billion, a 55 percent increase over the first the first half of 2010, reflecting the impact of “excellent” price growth during the period ended June 30. It predicts continued demand for the remainder of 2011.

“Sales during the period have been exceptional, driven mainly by continued growth in the Middle East, Indian and Asian retail markets and their impact on rough price growth,” De Beers said in a statement. Despite the ongoing turmoil with the global economy, we are encouraged by the continued strong growth in price and demand during the first six months of 2011. De Beers is confident that the exceptional growth in retail markets in India and Asia will continue to drive demand for diamonds.”

The company also said that reports from the recent jewelry tradeshows in Las Vegas “indicate that the all-important Christmas season in the U.S., and Diwali, are set to be strong.”

At a De Beers board meeting in Luxembourg on July 19, Philippe Mellier was appointed CEO of the De Beers Group. The company announced in May that he was being appointed. In the same meeting, Stuart Brown, CFO, said he would be resigning from the board, which will take effect at the end of July. He was with Be Beers for almost 20 years.

De Beers—which owns mines in South Africa, Botswana, Canada and Namibia—said it has continued to focus on efficiency improvements and on maintaining a lower sustainable level of overhead base, which it says has helped the bottom line. In the first six months of 2011, De Beers’ production totaled 15.53 million carats, an increase of 100,000 carats over the same period in 2010.

In its retail activities for the first-half of the year, Forevermark, the De Beers Group owned diamond brand, continues to expand into the retail markets of China, Hong Kong and Japan, and has recently launched in India, Singapore and the Caribbean. The brand is now available in a small number of stores in the U.S., with further expansion planned later this year. During the same period, De Beers Diamond Jewellers (De Beers’ joint venture with LVMH) announced the launch of the brand in China with the opening of its first mainland store in Beijing, its first store in Kazakhstan in Almaty and a new store in Dubai. The company will continue to expand in 2011 with in China and Hong Kong.
 
Element Six, De Beers Group industrial diamond group, “recorded a good first half performance in respect of both sales and profitability, with robust demand across its product ranges,” De Beers said in its earnings report. “Operating performance was impacted by, inter alia, operating challenges and a weak US dollar, but Element Six is well positioned for the remainder of the year.”

De Beers Diamond Sales Decline 14%

De Beers Group, the world’s largest producer of diamonds, reported a 14 percent drop in overall diamond sales and a similar fall in rough diamond sales for the first six months of the year. The company’s profits fell about 50 percent and it announced that it will reduce diamond output from its mines in response to the “challenging” conditions.

The diamond mining and sales company said total sales decreased 14 percent to $3.3 billion for the first six months of 2012, compared with $3.9 billion in the first half of 2011. Sales of rough diamonds by the Diamond Trading Company, the rough diamond distribution arm of De Beers, in H1 2012 were $3.1 billion (including those through joint ventures).

Profit before finance charges and taxation for the first half of 2011 was $502 million, down from $1 billion a year earlier.

The company blamed “lower demand and changing product requirements from sightholders (75 approved buyers of De Beers rough diamonds under long-term contracts),” the company said in a statement. “While overall consumer demand for polished diamonds remained relatively healthy, sightholder demand was impacted by increased stock in the cutting centers, tightening liquidity and challenging conditions in India. However, early indications are that the US market continued to perform well, and the Chinese market, while slowing considerably, still showed positive growth.”

In the first six months of 2012, De Beers’ production totaled 13.4 million carats, compared with 15.5 million carats in the first half of 2011.

Philippe Mellier, chief executive of De Beers, reportedly said the company will continue to reduce its output through the end of the year and allow its sightholders to hold onto their inventories for up to six months, far longer than normal.

In its outlook, De Beers says it “expects trading conditions in the mid-stream to remain challenging during the second half of 2012 … (and) expects to see moderately positive growth in global diamond jewelry sales for the full year 2012, albeit at relatively modest levels, especially when compared to the exceptional growth levels seen in 2011. In the short term, the USA, China, the Gulf and Japan are expected to contribute the bulk of the growth, while India and Europe are expected to remain weak.”

Global Diamond Demand and Prices are Up

During the past couple weeks, diamond centers throughout the world have been reporting on exports and imports of the precious commodity and in every case the results have been strikingly positive when it comes to demand and price.

India
India on Tuesday was the most recent place to report its earnings. The country’s Gem and Jewellery Export Promotion Council provided results for the 2010-11 fiscal year, saying it has had the largest increase in diamond exports in the past three years. The diamond industry is critical to India, which cuts nine out of ten diamonds produced in the world, because it accounts for 16.6 percent of its total merchandise exports.

Total rough and polished diamond exports increased 46.9 percent year-over-year to $43.14 billion, according to GJEPC.

The growth in the sector was primarily driven by polished diamonds, which registered a year-over-year increase of 54.9 percent for FY 2010-11 to $28.25 billion. Polished diamonds accounted for 65.5 percent of the total exports.

The most recent year saw the United Arab Emirates emerge as the largest exporting destination with 47 percent, followed by Hong Kong with 22 percent and the U.S. with 11 percent.

“Today the industry is looking at a staggering growth … the most we have seen in the past three years. India today is looked upon as one of the leading players in the global arena and at GJEPC; we believe that this growth path will continue in the coming year as well,” said Rajiv Jain, GJEPC chairman.

Israel
The Israel Diamond Industry recently presented its first quarter results. Net polished diamond exports for the period increased 45.7 percent in value, year-over-year, to $2.1 billion, according to data by Israel Ministry of Industry, Trade and Labor’s diamond controller Shmuel Mordechai. Net rough diamond exports rose 39.6 percent in value to $1.2 billion.

Net import of polished diamonds for the January to March-period rose 24.9 percent to $1.1 billion. Net rough diamond imports increased 48.5 percent to $1.2 billion for the period.

The United States remained Israel’s largest market with 45 percent of total exports ($694 million). Hong Kong accounted for 26 percent ($506 million), Switzerland 9 percent ($351 million), Belgium 8 percent ($190 million), China 2 percent ($63 million) and the rest of the world 10 percent.

Antwerp
The Antwerp World Diamond Centre Diamond Office, which represents the Belgian diamond industry, recently said polished diamond exports in the first quarter rose 30.1 percent in volume to 2.34 million carats, while its value jumped 30 percent to $3.43 billion.
 
In the January through March period, Belgium exported 34.1 million carats of rough diamonds, a slight decline of 2.1 percent, but in value there was a substantial increase of 29.1 percent to $3.52 billion.
 
For the same period of 2011, Belgium imported 2.43 million carats of polished diamonds, a 21.5 percent increase for the year, with a 26.2 percent rise in price to $3.20 billion.
 
The country imported 31 million carats of rough diamonds, a decrease of 2.2 percent on the year, but in financial terms there was an increase of 40.8 percent to $3.38 billion.

United Arab Emirates
The Dubai Diamond Exchange, a subsidiary of the Dubai Multi Commodities Centre Authority and a diamond trading platform, recently reported that total diamond trade volumes for 2010 reached 268.7 million carats, up 50 percent year-over-year, while the value of the precious gem doubled to $35.1 billion.

Polished diamond imports during the twelve months of 2010 rose 88 percent in volume to 90 million carats ($13.3billionn) and polished diamond exports rose 128% to 73.6 million carats ($14.6billionn). Dubai also recorded a 100 percent increase in the volume of total polished diamonds traded, reaching 163.8 million carats.

Rough diamond imports, rose by up to 13 percent during the year recording 50.4 million carats and exports by 3 percent at 54.7 million carats. However, by value, the increase was much more dramatic. The value of rough diamonds imports rose 83 percent to $3.3 billion and rough diamonds exported rose by 81 percent to $3.8 billion. Furthermore, In addition, Dubai’s rough diamond trade increased by 7 percent to 105 million carats, with the value up by 82 percent to $7.1 billion.

Dubai's top trading partners for the year were India, Belgium, Hong Kong and Switzerland, with growing trade emerging from new markets such as Angola and the Democratic Republic of Congo.


De Beers
You may have noticed that in all of these reports there’s a constant theme of dramatic increases in diamond prices, particularly for rough. Varda Shine, CEO of the Diamond Trading Company, the marketing arm of De Beers Group, says the price reflect market conditions and prices for rough will continue to rise through 2011. De Beers, which accounts for nearly 40 percent of the global diamond supply, plans to increase output by 20 percent to 38 million carats this year and raise rough diamond output further to 40 million carats, Shine said in the Business Standard newspaper in India. However, she noted that the there are no new mines ready to come on line that would help meet demand.

She told the publication that growth is and will continue to be driven by India and China. She added that the DTC expects a decline in Japan due to the March earthquake and tsunami but expects demand to increase in the U.S., which is slowly recovering from a deep recession.

De Beers Diamond Sales Up 27%, Cautious Outlook

The De Beers Group said Friday that total sales increased 26 percent year-over-year to $7.4 billion. Sales of rough diamonds by the Diamond Trading Company, the company’s the rough diamond sales and distribution arm, increased 27 percent for the year to $6.5 billion—the second highest level of sales for the diamond giant. Diamond prices for 2011 rose 29 percent as diamond production fell 5 percent to 31.3 million carats, compared with 2010.

EBITDA for the year increased 21 percent to $1.7 billion with third party debt reduced to $1.3 billion, compared with $1.8 billion in 2010.

De Beers described 2011 as “a year of two halves.” The first “saw exceptional consumer demand growth which, when coupled with lower than historical levels of global diamond production, resulted in very strong polished and rough diamond price growth,” the South African-based company said. “Rough diamond prices in this period included an element of speculative buying in the trading centers.”

However, in the second half of the year demand fell as “both retail and cutting center sentiment was impacted by the challenging macro-economic environment, restricted liquidity (particularly in dollars) in the cutting centers and a slowdown in the rate of growth of consumer demand at retail,” the company said.

De Beers Diamond Jewellers, a diamond jewelry retail venture with LVMH, reported “good growth” in sales across all regions, with greater China particularly strong. “The China opportunity is a priority for De Beers, with further 2012 expansion plans following the opening of stores in Beijing, Tianjin, Dalian and a second Hong Kong store in 2011,” the company said.

De Beers Forevermark diamond brand continued its expansion as it entered India and the U.S. during the second half of the year.  Forevermark is now available in 658 retail doors across nine markets, an increase of 89 percent compared with 2010.

In its outlook, De Beers said that despite economic uncertainty and “barring a global economic shock,” it expects “to see continued growth in global diamond jewelry sales, albeit at lower levels than the exceptional 2011 growth,” driven by luxury goods sales, improving sentiment in the US (the largest diamond jewelry market), continued growth in China, and “the positive impact of the 2011 polished price growth on retail jewelry prices.”

On the production side, the company said it does not expect an increase in diamond carat production in 2012 and that it will “ramp-up profitable carat production as Sightholder demand dictates. In the medium to longer term, the industry fundamentals remain positive with consumer demand, fueled by the emerging markets of China and India, outpacing what will likely be level carat production.”

This should be the last time in the 80-plus-year history of De Beers that it will file an annual report under the ownership of the Oppenheimer family. On November 4, 2011, the family agreed to sell its 40 percent interest of De Beers to its main partner, Anglo American, for $5.1 billion in cash. The transaction is expected to close during the second half of 2012.

On Wednesday, De Beers named Gareth Mostyn as its new CFO and board member.