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De Beers sales swell as demand picks
 by Staff Writer
26-07-2010
The world’s diamond mining giant, De Beers, said Friday that pent-up demand for diamonds drove up its sales by nearly 100 percent in its half year results to June as it made a surprise announcement about the resignation of its Chief Executive Officer, Gareth Penny.
The performance of the company was powered by the company’s initiatives to step-up production that was supported by price surge – across all its mining and sales operations.
“In the first six months of the year, De Beers increased production by 133 percent across its operations to 15.4 million carats (H1 2009: 6.6 million carats). This reflects the impact of a production holiday taken in the first half of 2009, and was in response to increased demand from DTC Sightholders, following a better than expected Christmas season as well as steady improvements in market sentiment,” the company said.
The company further pointed out that its sales arm, DTC International and its joint venture operations in southern Africa experienced strong sales over the period to US $ 2.6 billion, representing an increase of 84 percent compared to the same period last year.
The sales drive was largely attributed to India and China markets, which embarked on restock exercise after the global recession.
“H1 2010 has seen a strong recovery against the low comparisons of H1 2009. With demand for rough diamonds increasing strongly, both sales volumes and prices have increased significantly.
“The increase in DTC H1 sales by 84 percent to US$2.6 billion (H1:2009 US$1.4 billion) is as a result of increased demand from our Sightholders and the market, and reflects an increase in both volume and prices achieved compared to H1 2009. DTC rough diamond prices are now, on average, comparable to June 2008 pre-recession levels,” the company said.
However, operating costs were slightly up to US $ 699 million from US $ 479 million, which was in line with the rise in production over the period. The reduction in cost was partly credited to the cost cutting measures embarked upon last year which saw cost going down 45 percent while staffing slashed by 25 percent.
The company praised the re-capitalisation exercise that was embarked upon by the shareholders early this year in a bid to reposition it.
“In March 2010, together with recapitalisation by its shareholders of US$1 billion, the Group successfully concluded a complex refinancing of all of its international and DBCM’s South African debt. All debt facilities across the world were extended to August 2013.
“At the end of June, net debt amounted to US$1.98 billion compared with US$3.20 billion at the end of December 2009.
“De Beers’ third party debt was US$ 1.87 billion (December 2009: US$3.09 billion), and gearing on this debt, was 28.8 percent compared with 45.2 per cent in December. Gearing on total debt, including US$785 million in shareholder loans and US$107 million of preference share capital, was 42.5 percent (December 2009: 57.9 percent),” it said.
Further, De Beers said it was positioning itself for management change after its Chief Executive of five years Gareth Penny announced his departure.
“Having led De Beers for the past five years, and after overseeing the response to the global financial crisis and the company’s subsequent recovery, the CEO of De Beers, Gareth Penny, has advised the Board that he believes it is an appropriate time for him to step down. The Board would like to thank Gareth for his substantial contribution to De Beers during his 22 years with the company, and wishes him every success as he pursues new opportunities. Gareth will step down in the coming months. A process is underway to identify a successor, during which time Stuart Brown (Chief Financial Officer) and Bruce Cleaver (Chief Commercial Officer) will serve as acting joint-CEOs.
Comments (1)
26-07-2010 by Jason Sarofsky
Amazing that even in this economy there are so many diamond sales!
Thank you,
Jason Sarofsky
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