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Sarine Warns of Severe Earnings Impairment

Maker of cutting equipment expects revenue to drop in second and third quarters.
Apr 28, 2020 8:51 AM   By Rapaport News
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RAPAPORT... Sarine Technologies expects the coronavirus pandemic to have a heavy impact on revenue in the second and third quarters amid shutdowns in its major markets.

“We cannot yet forecast what our business results will be for the rest of [the second quarter] or the subsequent quarters of 2020,” the maker of equipment used in diamond manufacturing said Sunday. “We are assuming that even following the lockdowns…being lifted…the return to normal will not be immediate. We expect to see ongoing impairment of our business.”

The closure in India, which is under lockdown until May 3, will hit Sarine hardest, as the country’s polishing industry is responsible for approximately 75% of the company’s revenue, it said. Since the shutdown began, Sarine has had “virtually no business” from the region, the company added.

Indian manufacturers are expecting to implement a one-month voluntary freeze on rough imports from May 15 in an effort to ease liquidity challenges during the current period of slow demand. Manufacturers project a very gradual resumption of operations after the lockdown. 

“Obviously, a lot hinges on the overall economic conditions that will prevail, and on consumer sentiment,” Sarine explained. “Overall, we expect [our second-quarter] business results to be severely impaired by the COVID-19 pandemic, with effects lingering into [the third quarter] as well.”

1Q profit

The declines will offset the profit that Sarine expects to post for the first quarter, which was primarily completed before the COVID-19 outbreak.

Profit for the three months ending March 31 will be between $3.25 million and $3.75 million, the company said. That compares with a loss of $1.4 million reported for the same period last year. Revenue rose 51% to $16.5 million, Sarine estimated.

The increase was driven by strong sales of the company’s Galaxy products, as manufacturers increased factory output and rough buying during the period. Sarine sold 50 units during the quarter, compared to its previous record of 39. This figure included the Solaris system, which it has not sold for close to two years, it noted. A record number of stones were also scanned using Sarine’s equipment, generating a rise in recurring revenues.

Image: Sarine headquarters in Hod HaSharon, Israel. (Sarine Technologies)
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Tags: COVID-19, Galaxy, Rapaport News, Sarine, Sarine Technologies
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