Stronger Demand For Lower-Priced Goods Pushes De Beers H1 Results Down

(IDEX Online) – De Beers reported that revenue decreased by 4 percent to $3.1 billion from $3.3 billion in the same period of last year, driven by lower rough diamond revenue – as expected, given the benefit of strong midstream restocking in H1 2016.

The average realised rough diamond price decreased by 12 percent to $156 per carat, partially offset by a 7 percent increase in consolidated sales volumes to 18.4 million carats. “This reflected stronger demand for lower-value goods in Q1 2017 following a recovery from the initial impact of India’s demonetisation programme in late 2016. The lower-value mix was compensated in part by a higher average rough price index, which was 4 percent higher when compared with H1 2016,” De Beers said.

Preliminary consumer demand data for diamond jewelry for the start of 2017 showed continued growth in the US and slight improvements in China in local currency, the miner said. In India, retailer sentiment improved due to a return to more normal trading conditions following the government's demonetisation programme. Underlying US results reflected the broader changes in consumer behaviour affecting the overall US retail environment, with growth in the independent jewellers’ sector contrasting with some weakness from large chains.

Sentiment in the midstream remains positive following a reasonable Q4 2016 retail season, with evidence of Chinese retailers restocking and demonetisation in India having less impact than anticipated. This has supported good demand for De Beers’ rough diamonds. Spot polished prices remained broadly flat in H1 2017.

Rough diamond production increased by 21 percent to 16.1 million carats (H1 2016: 13.3 million carats), in line with the higher production forecast for 2017, reflecting stable trading conditions as well as the contribution from the ramp-up of the Gahcho Kué mine in Canada.

In its market outlook, De Beers said: “Macro-economic conditions underpinning consumer demand for polished diamonds globally remain supportive of marginal demand growth in 2017. The extent of global growth, however, will be dependent upon a number of macro-economic factors, including the effect of US and China government policies on exchange-rate movements. Correspondingly, midstream demand for rough diamonds is expected to depend on the strength of different markets’ restocking requirements. Forecast diamond production (on a 100 percent basis) for 2017 remains unchanged and is expected to be in the range of 31-33 million carats, subject to trading conditions.