De Beers Group, the world’s largest producer of diamonds, reported a 14 percent drop in overall diamond sales and a similar fall in rough diamond sales for the first six months of the year. The company’s profits fell about 50 percent and it announced that it will reduce diamond output from its mines in response to the “challenging” conditions.
The diamond mining and sales company said total sales decreased 14 percent to $3.3 billion for the first six months of 2012, compared with $3.9 billion in the first half of 2011. Sales of rough diamonds by the Diamond Trading Company, the rough diamond distribution arm of De Beers, in H1 2012 were $3.1 billion (including those through joint ventures).
Profit before finance charges and taxation for the first half of 2011 was $502 million, down from $1 billion a year earlier.
The company blamed “lower demand and changing product requirements from sightholders (75 approved buyers of De Beers rough diamonds under long-term contracts),” the company said in a statement. “While overall consumer demand for polished diamonds remained relatively healthy, sightholder demand was impacted by increased stock in the cutting centers, tightening liquidity and challenging conditions in India. However, early indications are that the US market continued to perform well, and the Chinese market, while slowing considerably, still showed positive growth.”
In the first six months of 2012, De Beers’ production totaled 13.4 million carats, compared with 15.5 million carats in the first half of 2011.
Philippe Mellier, chief executive of De Beers, reportedly said the company will continue to reduce its output through the end of the year and allow its sightholders to hold onto their inventories for up to six months, far longer than normal.
In its outlook, De Beers says it “expects trading conditions in the mid-stream to remain challenging during the second half of 2012 … (and) expects to see moderately positive growth in global diamond jewelry sales for the full year 2012, albeit at relatively modest levels, especially when compared to the exceptional growth levels seen in 2011. In the short term, the USA, China, the Gulf and Japan are expected to contribute the bulk of the growth, while India and Europe are expected to remain weak.”
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