De Beers 2011 total sales up 26%

Diamond miner De Beers has reported a 26% rise in sales to $7.378-billion for the year ended December 2011 from $5.877-billion a year ago.

During the year the group predicted 31.3-million carats from 33-million a year ago.

Earnings before interest tax, depreciation and amortisation (EBITDA) were 21% higher at $1.721-billion from $1.428-billion.

Underlying earnings grew 62% to $968-million and profit before finance charges and tax was up 37% to $1.522-billion.

In 2011, the DTC achieved its second highest ever level of sales—at $6.5-billion—a 27% increase over 2010.

Exceptional consumer demand
“A year of two halves, H1 2011 saw exceptional consumer demand growth which, when coupled with lower than historical levels of global diamond production, resulted in very strong polished and rough diamond price growth. While reflecting the robust market fundamentals, rough diamond prices in this period included an element of speculative buying in the trading centres,” the company said.

During H2, both retail and cutting centre sentiment was impacted by the challenging macro-economic environment, restricted liquidity (particularly in dollars) in the cutting centres and a slowdown in the rate of growth of consumer demand at retail.

As a result, during the latter half of the year, De Beers experienced lower levels of demand for its rough diamonds and prices receded slightly from the highs seen in the middle of the year.

“However, in total, 2011 was an exceptional year on the demand side, with record levels of consumer demand growth estimated at between 11% and 13% over the full year, and DTC price growth of 29% from 1 January 2011 to 31 December 2011,” it noted.

During H1, in spite of a number of challenges—including heavy rainfall in southern Africa, maintenance backlogs, poor contractor performance, skills shortages and protracted labour negotiations—De Beers produced 15.5-million carats, similar to that of H1 2010. During H2, it produced another 15.8-million carats despite a shift of its operational focus, in light of prevailing rough diamond market trends in Q4.

Continued growth
De Beers utilised this period to address maintenance and waste stripping backlogs in order to better position the mines to increase their rate of production as demand from Sightholders increases.
This is likely to continue for several months into 2012.

De Beers Exploration spent $43-million in 2011 (2010: $47-million) on work programmes focused on 11 347 square kilometres of ground holdings in Angola, Canada, India, Botswana and South Africa. In Angola, the Mulepe-1 advanced stage programme has progressed to the evaluation drilling phase.

Looking ahead, the group said in spite of uncertainty, and barring a global economic shock, it expects to see continued growth in global diamond jewellery sales, albeit at lower levels than the exceptional 2011 growth. This will be driven by the overall strength of the luxury goods market, improving sentiment in the US (the largest diamond jewellery market), continuing growth in China, and the positive impact of the 2011 polished price growth on retail jewellery prices.

On the production front, it will continue to prioritise waste stripping and maintenance backlogs, and we therefore do not expect a material increase in carat production in 2012.

This focus, which began in H2 and will continue during Q1 2012, will position De Beers to ramp-up profitable carat production as Sightholder demand dictates. In the medium to longer term, the industry fundamentals remain positive with consumer demand, fuelled by the emerging markets of China and India, outpacing what will likely be level carat production.—I-Net Bridge

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