De Beers reports diamond sales rose one percent, earnings down 14 percent

De Beers reports a slight increase in diamond sales for the first-half of 2006, saying that more difficult trading conditions exist in the market for rough diamonds because of the impact of rough diamond demand, higher interest rates, higher gold and platinum prices, and the increased need to manage polished inventory levels.

The Diamond Trading Company reported sales of $3.25 billion in the first-half of 2006, a one percent increase over the same period in 2005. 

Meanwhile, De Beers reported underlying eranings (after adjusting for the impact of currency and interest rate hedging transactions) at $308 million, down 14 percent.

Earnings before interest, taxes, depreciation and amortization (EBITDA) is up two percent to $748 million, while net earnings, before the class action payment and the surplus on sale of a 26 percent interest in De Beers Consolidated Mines are down one percent, which the company says reflects tighter margins and increased exploration spending. Cash flow from operating activities increased from $158 million to $353 million.

Demand for diamond jewelry remained robust with estimated three to four percent growth, De Beers said.

Diamond output in the first half increased by 4 percent to a record 24.7 million carats, De Beers reportedly said.

In its forecast, De Beers said in the short term, it expects rough diamond market conditions to remain challenging, and constrain growth in second half DTC sales.

“On the back of increased DTC marketing expenditure and new marketing initiatives, expectations remain positive for consumer diamond jewelry sales in the second half. This consumer demand growth will, in the medium term, translate into increased demand for rough diamonds,” De Beers said. “In respect of production, despite the closure of a number of South African mines, we expect full year production to be up in the low single digits in carats.”