De Beers 2001 sales down but it expects growth for 2002

The world’s biggest diamond producer, De Beers, said on Friday its profit fell in 2001 as the global economic downturn slashed rough diamond sales, but it said the 2002 market outlook is more optimistic, Reuters reported.

Brighter prospects for the world economy this year are likely to benefit the market, the company said.

“The outlook…for the diamond market looks to be slightly rosier than this time last year,” Managing Director Gary Ralfe reportedly said in a conference call with analysts.

He would not give a sales forecast for De Beers, but said that for the gem industry it supplies, debt levels were coming down and profitability had probably bottomed, Reuters reported.

Asked whether rough diamond prices would go up, he reportedly said: “No, I look forward to increasing our turnover first.”

De Beers is 45% owned by mining giant Anglo American Plc and supplies 65% of the world’s uncut gems.

It reported net earnings before exceptional items of $837 million, down from $1.707 billion in 2000. But De Beers, which was taken private in a landmark $19 billion deal last year, cautioned that the figures were not strictly comparable.

Rough diamond sales fell more than 20% to $4.45 billion from a record $5.67 billion in 2000.

Anglo’s share of De Beers profits was $234 million in the year and the mining group would book another $65 million in headline earnings, as a result of the recent unwinding of its cross shareholdings with the formerly listed De Beers, Reuters reported.

But Anglo shares were little moved by the figures, staying 1.9% down in Johannesburg, in line with weaker commodity stocks, Reuters reported.

De Beers said retail sales of diamond jewelry over the Christmas period were above expectations, and in the crucial American market they looked to be better than Christmas 2000, Reuters reported.

As a result, the around 5% fall in global retail sales in 2001 was less than feared and below the 7% in the first half.

Helped by discounting, diamonds had “found a real niche in the American mood since September 11”, Ralfe reportedly said, referring to diamonds as a symbol of lasting love in uncertain times.

The rough diamond market began 2002 on a more positive footing, but sales for the year would depend on the timing and extent of any global recovery and the level of polished gems the trade was prepared to carry, the company said.

Facing a sharp downturn in global diamond demand, in September De Beers introduced quotas to keep supplies tight in the main cutting and polishing centers.

Asked about the size of the quotas, Ralfe reportedly said that sales by De Beer’s Diamond Trading Co last year were lower than the production available to the trading company, so “we deferred from purchasing less than 10% of production of our producer partners.”

He was hopeful that a European Commission review of De Beers’s marketing plans would be completed this year, Reuters reported.

Ralfe said De Beers was still trying to work out a deal with Angola, Reuters reported. The company suspended investments and prospecting in the gem-rich country in May 2001 after failing to renegotiate a deal with the government. Those talks are now in arbitration.