World number-one rough diamond miner De Beers, 45% held by Anglo American, is expected to have had its best first-half sales performance in the six months to June 2004 since its 2000 financial year, a survey of four analysts shows.
Sales at De Beers’s marketing arm, the Diamond Trading Company (DTC), for the six months to June are expected to be $3,15-billion, up 8% from sales of $2,92-billion in the same half-year period in 2002, a survey of four analysts shows.
Analysts’ forecasts ranged from $3,008-billion to $3,4-billion.
However, analysts warned that due to De Beers’s low level of disclosure, predicting the group’s DTC sales had proved difficult to accurately forecast.
De Beers will release its interim results on Friday July 23.
“All the sales of rough diamonds from the sights this year has been sharply ahead of last year. The increase has mainly been due to De Beers’s supplier-of-choice programme and the decline in available diamond stocks,” an analyst said.
Supplier of choice is the DTC’s sales and marketing strategy aimed at growing consumer demand for diamond jewellery.
During the course of 2004, De Beers has officially increased the average price at which it sells its rough diamonds by 8%.
An initial increase of 3% was made at the DTC’s January sight and was driven by a strong Christmas in Western markets coupled with double-digit growth in Asia and the Middle East, improvements in the Japanese economy and good demand in China.
These factors led to restocking in the diamond pipeline and increased demand.
A further 5% increase in the DTC’s price lists was made at the group’s March sight.
The group holds 10 sights a year for its 84 sight holders worldwide.
However, DTC’s rough diamond price list is likely to remain unchanged for the rest of the year, as the company indicated in March its willingness to keep prices unchanged for a number of sights.
The DTC, earlier in the year, indicated that its sales from the first quarter of 2004 had been strong, with the strongest diamond sales having been achieved in the United States, Japan, other Asian markets, the United Kingdom and France.
The strong results in the US had been driven, in part, by sales of three-stone jewellery and the Right Hand Ring (a campaign targeting American woman), the DTC added.
The US is the world’s key market for diamond jewellery with more than 50% of the value of world sales concluded in the country.
In March, De Beers MD Gary Ralfe said that his group expected growth of 7% in world diamond jewellery demand for 2004, compared with 2003 when global diamond jewellery demand grew by 6,7%.
Total 2003 global diamond jewellery revenue has been estimated at $56,4-billion, Ralfe said.
In South Africa, De Beers is facing a potential threat from the proposed amendments to the Diamonds Act and the draft Royalty Act, which proposes an 8% royalty on revenue.
In Anglo American’s 2003 financial year, De Beers contributed $386-million or 23% of the group’s headline earnings. — I-Net Bridge