The five sights hosted by De Beers since the beginning of the year have so far posted sales volume of 17.2 million carats of rough diamonds – which is 10.8 million carats short of meeting the total year target of close to 28 million.
Last week Thursday, De Beers engaged journalists at the Media Forum regarding its 2016 interim results where the company’s Chief Financial Officer Nimesh Patel told Sunday Standard that the sales volume target for the year is somewhere between 26 and 28 million carats. “We are expecting to have done more in the first half than in the second half, that is normal, and is in line with trends we’ve seen in previous years and driven by seasonality in sales,” he said.
Patel highlighted that the sixth sight was ongoing the same day the company was sharing the results, adding that the numbers published reflect the first five sights. De Beers planned 10 sights to take place in 2016, which means that the second half of the total expected sights sales volume remain to be published. Patel said that the results of the sixth sight will be published this week. Although he described the current market to be in ‘reasonable shape and solid demand’ he also highlighted that challenging conditions remain in some of the company’s growth markets, particularly China and India due to their slowing economic growth in contrast to the significant growth rates previously recorded.
Executive Head, Strategy and Corporate affairs Gareth Mostyn said that they recorded a 29 percent increase in diamond sales compared to the same period last year. Patel backed this by expressing confidence on meeting the forecast for the second half of the year.
In terms of profitability, Mostyn said the company registered a growth of 2 percent from the $585 million profit registered in the first half of 2016 compared to the same period last year. He attributed the growth to the strong rough diamond sales. Patel expressed pleasure with the results although they did not manage to meet the target. “It’s not slightly above our expectations and the reason for that predominantly is because we finished 2015 in a weaker and less certain environment,” he said. He explained that De Beers responded to that environment by taking a number of actions which include reducing production volume, investing in rigorous marketing, introducing flexibility. He said this paid off as it translated to a stronger performance in the first half of 2016 as compared to the corresponding period last year.
Mostyn also shared with journalists the three areas that De Beers focused on in terms of investments. The first area of investment was on marketing which in total amounted to $120 million, of which $100 million was the original budget and $20 million an additional budget. Mostyn highlighted special campaigns which were done in America and China around the key selling seasons, which he reported paid off. Another area was the mining side with particular regard to production which took a significant amount of the company’s expenditure. He disclosed that De Beers invested heavily in Debswana through the Jwaneng cut 8 project. “More than three quarters of 500 million tonnes of waste rocks that needed to be moved to access the ore has been mined. We are on track to deliver ore from cut 8 next year,” he said. The third area of investment was described to be an array of smaller pilot projects, an example of which is the diamond reselling activity that was recently launched in America.
Going forward De Beers noted that it will maintain a strong focus in the China and India markets because of the potential that lies there. Mostyn also maintained that America remains a key market particularly that it underpinned growth in the consumer market. America is cited to have a share of 45 percent in the total diamond world market.
