De Beers Group said Friday that total diamond sales in 2010 increased 53 percent year-over-year to $5.88 billion. Sales of rough diamonds in 2010 by the Diamond Trading Company (the rough diamond distribution arm of De Beers) totaled $5.08 billion, compared with 3.23 billion in 2009.
The company’s earnings before interest, taxes, depreciation and amortization (EBITDA) grew to $1.43 billion, an increase of 118 percent over 2009.
The South African based-company said strong demand in 2010 drove a rebound in the prices of DTC rough diamonds by an average of 27 percent, to levels which are above those which during onset of the economic crisis. A considerably reduced cost base enabled De Beers to be highly cash generative with a free cash flow of $943 million, compared with $35 million in 2009.
As demand for diamonds from the industry increased, so too did De Beers production from its wholly owned and joint venture operations in Botswana, South Africa, Namibia and Canada, the carats recovered in 2010 increased 34 percent to 33 million.
“2010 was an extraordinary year that saw De Beers rapidly move from stabilization to strong recovery,” the world’s leading rough diamond company said in a statement. “The price of rough diamonds has recovered strongly as confidence returned to most parts of the diamond pipeline. Notwithstanding this, the industry is not back to pre-recessionary levels in terms of production or sales and a high degree of global uncertainty remains. While restocking picked up throughout the year, it was also clear that consumer demand rebounded, as evidenced by the extraordinary growth in China and India and the better than expected retail performance in the U.S. during the Christmas buying period.”
In Botswana, Debswana commenced the Cut-8 expansion project at Jwaneng mine. Cut-8 represents the largest ever investment in Botswana and is expected to yield 100 million carats worth approximately $15 billion over the life of the mine, which will be extended until at least 2025.
De Beers continued to expand its proprietary diamond brand, Forevermark, throughout Asia in 2010. Forevermark is now available in 348 doors globally (a 40 percent increase on the beginning of 2009), and will continue to expand in the rapidly growing Chinese market in the year ahead, the company said. Forevermark will launch in India in the first quarter of 2011 and the company said it is in an "exploratory phase" in the US, yielding positive early consumer research."
In March, De Beers concluded the refinancing of all its international and South African debt on satisfactory terms, extending the tenor of facilities to 2013. During November, the Group achieved normalized terms in respect of debt and EBITDA measurements, some two years earlier than planned.
At the end of 2010, net debt excluding shareholder loans, had fallen to $1.76 billion compared with $3.20 billion at the end of 2009.
“While the directors remain cautious about the diamond market in 2011, continued positive growth is expected, albeit at a lower rate,” the company said. “The world is not yet back to where it was prior to the onset of the economic crisis, and risks to growth remain. For the foreseeable future, continued recovery in global economic outlook and strong retail confidence are expected to underpin positive growth in consumer demand for diamond jewelry in 2011.”
The statement continued, “The U.S. market is expected to continue its recovery and the exceptional growth seen in China and India is expected to be sustained. Global economic expansion and retailer sentiment are supportive of further DTC sales growth in 2011, during which time total production for the De Beers Family of Companies is expected to reach 38 million carats, approaching full production which will, as planned, be achieved in 2012.
“In the longer term, the supply and demand dynamics of diamonds remain attractive. Diamonds are a finite resource and western consumer markets are recovering at the same time as demand growth in the emerging markets of China and India is expanding rapidly.”