De Beers has released interim operating performance results for ssix months ended 30 June, 2012, noting positive consumer demand growth and strong long-term fundamentals despite challenging trading conditions.
According to report obtained by Rough&Polished, total diamond sales of De Beers decreased by 14% to $3.3 billion compared to $3.9 billion for the corresponding period of 2011.
Sales of rough diamonds by the Diamond Trading Company (DTC) in H1 2012 totaled $3.1 billion, including sales effected through joint ventures. DTC H1 sales decreased 11.4% from $3.5 billion in H12011 as a result of lower demand and changing product requirements from Sightholders. After a very strong H1 2011, the difficult trading conditions experienced during Q4 2011 continued, as expected, during H1 2012. While overall consumer demand for polished diamonds remained relatively healthy, Sightholder demand was impacted by increased stock in the cutting centres, 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.
DTC price levels remained relatively stable.
Diamond production in 1H 2012 totalled 13.4 million carats having dropped by 13.5% compared to the adequate period of 2011 (15.5 million carats).
EBITDA of $626 million decreased 47 per cent vs H1 2011 ($1,183 million) and is 16 per cent ahead of H2 2011.
De Beers expects trading conditions in the mid-stream to remain challenging during the second half of 2012. De Beers will continue to produce in line with Sightholder demand and invest in stimulating and capturing consumer demand growth.
Provided there are no unforeseen economic shocks, De Beers expects to see moderately positive growth in global diamond jewellery 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.
In the long-term, the fundamentals of the diamond industry remain strong as demand will continue to outstrip supply.
Tatiana Alexandrova, Rough&Polished, Moscow
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