De Beers earnings are down, but diamond demand is up

De Beers reported earnings of $345 million for the first half of 2005, an 8% decline than the same period in the previous year. The company also said that headline earnings were 21% lower at $336 million. The company said the decrease in earnings was mostly due to the impact of a weaker dollar and to tighter margins arising largely from a significant reduction in its stockpile.

Group production for the period was 23.7 million cts., an increase of 23% over the same period in 2004, De Beers reported. As a result of the increased production, stock levels have risen by about $400 million compared with June 2004.

However, the company, which is 45 percent owned by Anglo American PLC, said that despite mixed economic data it estimates that the demand for diamond jewelry in the United States is up by 6% in the first half of the year.

“Larger chains and high-end independents have shown the strongest results and polished prices have started to edge up at the consumer level. Performance in other markets was mixed,” the company said in a statement. “The local currency value of global diamond jewelry sales is estimated to be higher by 5% than the equivalent period in 2004. De Beers is currently forecasting growth of 6% in local currency retail demand for the full year due to the level and quality of diamond marketing activity as well as regional macro-economic strength.”

Throughout the first half, demand for rough diamonds from the cutting centers was strong, the company said. Sales by the DTC, the marketing arm of De Beers, for the first six months totalled $3.2 billion, 8% higher than the same period in 2004. The DTC raised its rough diamond prices on two occasions.