De Beers sales down 7 percent

De Beers reported total group sales were $3.4 billion for the first half of 2007, down 7 percent from $3.66 billion for the same time period in 2006.

Diamond Trading Co. (DTC) sales were down $265 million.

The company said sales were impacted by increased difficulties in sourcing supply and a price correction in the rough-diamond market in the second half of 2006.

In a conference call, De Beers Managing Director Gareth Penny said the primary reason for the sourcing challenge was the decreased Russian supply. The company said it was analyzing the judgment reached by the Court of First Instance in July that annulled the European Commission's decision to accept De Beers commitments to cease buying rough from Alrosa after 2008.

Consumer demand for diamond jewelry remained healthy, and the company said trading conditions and rough-diamond prices improved through the period.

Underlying earnings reached $324 million, up 5 percent from $308 million, due primarily to the favorable impact of a reduction in net finance charges and tax credit. Net earnings dropped from $520 million to $350 million for the period.

Expectations for the second half were upbeat, with consumer demand in emerging markets and the high-end compensating some weakness in the lower-end/mass market in the United States.

"The high-end remains strong and other growth markets, such as China and India, robust," the company stated.

Growth in diamond-jewelry demand is expected to be in the four percent to five percent range for the full year. Rough demand is good and prices are rising, though the expected improvement in second-half sales could be constrained by availability, the company said.

"In the medium term, the positive supply/demand forecast should lead to continued growth in rough-diamond prices which will, together with increased production as our four new mines come fully on stream, drive growth in revenues and earnings for the group," De Beers stated.
Source: nationaljewelernetwork