ALROSA Group’s revenue in Q3 amounted to RUB 77 bn, down 18% qoq driven by a 20% lower diamond sales volumes and changes in the sales mix partially offset by a higher price index (+10% qoq), the company said in a statement on its financial results based on the International Financial Reporting Standards (IFRS). A 55% yoy growth was due to the low base of Q3 2020 (5.0 m ct in sales vs 9.2 m ct in Q3 2021). 9M revenue increased 2.1x to RUB 261 bn, mainly due to a 2.4x rise in sales volumes.
Q3 EBITDA was RUB 35 bn, down 24% qoq mainly due to lower sales volumes. A 35% yoy increase in Q3 and 2x growth in 9M (to RUB 114 bn) was driven by sales recovery.
Net profit stood at RUB 25 bn, down 17% qoq due to lower return on sales. 9M net profit climbed to RUB 79.2 bn (9M’20: RUB 10.9 bn) on the back of recovering sales volumes and prices.
Q3 Free cash flow (FCF) increased 2x qoq to RUB 24 bn (+8% yoy), driven by the working capital release supported by a rise in advanced payments from customers. 9M FCF expanded to RUB 89.2 bn (9M’20: RUB 14.3 bn).
2021 outlook: Production – ca. 32.5 m ct; Capex – ca. RUB 21 bn (unchanged).
Alexey Philippovskiy, ALROSA’s CFO: “In Q3’21, the demand for diamond jewelry continued to grow in double digits. In the USA, jewelry sales surpassed the 2018–2019 highs by over 50%, while in China demand for jewelry exceeded pre-crisis levels by 10%.
The strong end demand for jewelry and the corresponding demand for polished diamonds since the beginning of the year was initially met thanks to the rough diamond stocks accumulated by producers in 2019–2020. However, by the start of Q3’21, producers had run out of their stocks and began supplying “freshly” produced diamonds. In the coming years, global diamond production will remain 20–25% below the pre-pandemic levels. On the back of the strong demand and limited supply, polished and rough diamond prices rebounded by 9% and 12%, respectively, versus the early 2019 levels.” According to him, the Group’s outlook for the diamond jewelry market remains positive, which, combined with the low inventories in the cutting sector and the structural decrease in global rough diamond output starting 2021 onwards to 110–120 m ct (compared to 140–150 m ct prior to 2019), will help maintain high prices for rough diamonds in the long term.
Vladimir Malakhov, rough&Polished
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