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De Beers Profit Jumps as Diamond Market Stabilizes

Feb 21, 2017 4:09 AM   By Joshua Freedman
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  Profit more than doubled for De Beers last year as trading conditions in the diamond-manufacturing sector improved and inventory levels stabilized.

Underlying earnings jumped to $667 million in 2016 from $258 million a year earlier, parent company Anglo American said in a statement Tuesday. This came as revenue grew 30 percent to $6.07 billion, reflecting a 37-percent hike in rough-diamond sales to $5.6 billion.

The midstream of the diamond industry returned to buying rough after a 2015 slump in demand that resulted from oversupply of polished and inflated rough prices. Manufacturers started working down their polished inventories in the second half of that year before restocking their rough supplies in 2016. De Beers also lowered prices, with its rough-price index declining 13 percent across 2016.

The miner consequently reduced its rough stockpiles during the year, management said. De Beers production fell 5 percent to 27.3 million carats, while sales volume leapt 50 percent to 30 million carats, meaning it sold a larger volume of stones than it mined.

“2016 generally was a much better year for the diamond industry,” said Bruce Cleaver, De Beers chief executive officer. “The midstream performed much better than 2015, largely as a result of the strong and decisive action we took in 2015 to reduce production in accordance with demand. The fruits of that tough action we took in 2015 was seen through 2016."

The company projected production would rise to 31 to 33 million carats in 2017, “because we see the market has recovered from where it was at the end of 2015,” noted Cleaver.

The company maintained a conservative outlook for the diamond jewelry market given prevailing global macro-economic conditions and geopolitical risk.

Performance will be dependent on a number of macro issues, including the attitude of the new U.S. administration, the strength of the dollar, continued recovery in China and the impact of Indian demonetization, Cleaver explained.

“All other things being equal, we think diamond demand will continue to grow along with GDP growth,” he said.
Tags: Anglo American, Bruce Cleaver, De Beers, Joshua Freedman, Manufacturing, Rough Diamonds, rough prices, Rough Production
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