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De Beers Earnings Gain from Higher Rough Demand
Jul 28, 2016 3:39 AM
By Rapaport News
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RAPAPORT... De Beers
revenue and earnings increased in the first half as the miner benefited from
stronger rough demand, tighter cost controls and favorable exchange rates.
Revenue
advanced 8.2 percent to $3.27 billion in the six months that ended June 30, parent
company Anglo American reported. Rough diamond sales jumped 11 percent to $3.1
billion, spurred by a 29-percent leap in sales volume which outweighed a
14-percent drop in average realized prices to $177 per carat. Other revenue
from its Element Six industrial diamond unit fell while its Forevermark brand
expanded to 1,874 stores, up 6.5 percent from the beginning of the year.
Underlying
earnings before interest and tax (EBIT) increased 2 percent to $585 million as
consolidated unit costs declined from $82 per carat to $65 per carat.
Underlying earnings rose 5 percent to $379 million.
Rough
demand improved as manufacturers and dealers replenished inventory that were
reduced in the second half of last year. Retailers also restocked in response
to strong holiday sales, which helped strengthen sentiment in the midstream and
enabled manufacturers to work down their polished inventories.
De Beers noted
rough sales tend to slow in the second half and cautioned the market is exposed
to downside risks, including social and political instability.
“Caution in
rough diamond buying is expected to prevail, as the supplies bought by
diamantaires
in the first half are gradually converted into polished,” the company said.
De Beers
reiterated its 2016 production outlook of 26 to 28 million carats, a decline
from 29 million carats last year. Rough production in the first half slid 15
percent to 13.3 million carats, reflecting the company’s decision to reduce
output in response to weaker market conditions at the end of 2015.
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Tags:
Anglo American, China, De Beers, India, Japan, Production, Rapaport News, Rough diamond sales, rough sales, u.s.
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