The year 2008, contradictory in many aspects, for which many enterprises and industries of this country cherished many sanguine hopes, is left in the past. The Russian economy having reached the zenith of its development by early August last year experienced a steep drop being unable to avoid the consequences of the world financial crisis. The beginning of 2009 saw further swelling of crisis phenomena resulting in a sharp devaluation of the Russian rouble against the U.S. dollar and euro. The raw-material trend in the country’s economy due to a multiple decline of oil prices and a slump in demand for raw materials pushed many industries of the Russian economy to the brink of bankruptcy. The rough and polished diamond complex in Russia has also been affected by the global crisis. In this context, the performance of ZAO AK ALROSA in 2008 was determinant for Russia’s rough and polished diamond complex (Fig. 1).
Sourses: 2000-2007 – Reports of ZAO AK ALROSA and OAO ALROSA-Nyurba; 2008 – “Vestnik ALROSA” No. 12, 2008; Plan for 2009, Press Release of ZAO AK ALROSA dated 12.30.2008.
According to the preliminary data, the company’s annual diamond output has virtually remained at its previous level. Diamond sales in dollar terms went up 2%, but the average annual dollar rate decreased about 3% (Table 1). This has reduced the company’s expected net profit, which by preliminary estimates (for September 2008) was to reach 10.23 billion roubles ($411.7 million) in 2008 or down 38% versus 2007 when it was 14.13 billion roubles ($552.7 million). A weaker demand on the world diamond market in the end of 2008 made the company to curtail its international diamonds sales by 30% and sell a large parcel of diamonds worth about $300 million to Gohran, the national repository of the Russian Federation. ALROSA is included in the list of major ‘system-forming’ Russian enterprises, which gives the right to receive additional financing from the Russian government to solve current financial problems.
Table 1
Major Performance Indicators of the ALROSA Group in 2007-2009
|
Denomination |
Unit of measure |
2007 |
2008 |
2009 (plan) |
|
ALROSA, diamond output |
USD mn |
1798.1 |
1796.2 |
1869.3 |
|
ALROSA-Nyurba, diamond output |
USD mn |
572.3 |
535.4* |
493.9* |
|
ALROSA Group, diamond output |
USD mn |
2370.3 |
2331.6 |
2363.2 |
|
ALROSA, rough diamond sales |
USD mn |
2129.5 |
2173.5 |
2061.5 |
|
Polished diamond sales |
USD mn |
156.2 |
157.2 |
239.4 |
|
ALROSA-Nyurba, rough diamond sales |
USD mn |
663.1 |
589.3 |
383 |
|
ALROSA Group, rough diamond sales |
USD mn |
2792.6 |
2920.0* |
2683.9 |
|
ALROSA, major products sales |
USD mn |
2303.2 |
2330.7 |
2300.9 |
|
Revenues from sales of products (works and services) |
USD mn |
2811.7 |
2842* |
2806* |
|
RUR/USD rate |
Rouble |
25.57 |
24.85 |
35.1** 40.0*** |
Sourses: 2000-2007 – Reports of ZAO AK ALROSA and OAO ALROSA-Nyurba; 2008 – “Vestnik ALROSA” No. 12, 2008; Plan for 2009, Press Release of ZAO AK ALROSA dated 12.30.2008.
*Author’s estimates
*Forecast by Ministry of Economic Development of the Russian Federation
* Author’s forecast
Taking into account that all major diamond mining companies are decreasing their diamond output and sales as well as that the USD/RUR rate in 2009 is predicted by experts to grow 40-60%, Russia has really a unique chance to become a world leader in diamond mining. Summing up the above, it may be expected that financial and economic results of ALROSA in 2009 will turn out to be significantly higher than those forecast despite the global economic crisis.
Sources used:
1. Annual Reports of ZAO AK ALROSA for 2000-2007
2. Press-Release of ZAO AK ALROSA for 12.30.2008
3. “Vestnik ALROSA” No. 12.
Yuri Danilov, Senior Research Fellow, Department of Rough and Polished Diamonds Complex Economy, Institute for Regional Economics of the North (Federal State Scientific Entity)
