De Beers Hopes to Land in U.S.
It could be as early as next year. Company also reports strong first-half sales
and optimism about the holiday season
Taking the first steps toward finally doing business in the U.S. directly, De Beers met with the U.S. State Department and plans to meet with the U.S. Justice Department to clear the barriers by some time in 2004, reports the Financial Times of London. The Justice Department has barred De Beers from selling diamonds directly into the U.S. because of antitrust concerns. Theres also an outstanding indictment against De Beers on a charge of industrial-diamond price-fixing.
Monopoly: Game Over?
De Beers hopes the European Commissions approval of its Supplier of Choice marketing strategy and its joint venture with LVMH to sell diamonds at retail will convince U.S. authorities its no longer a monopoly. The company also hopes its proactive involvement in the Kimberley Process, to prevent the sale of conflict diamonds, will help its case in the U.S.
We want a signal from the Department of Justice that there is nothing illegal about the way De Beers does business, says Gary Ralfe, De Beers managing director. I find it unthinkable in the new De Beers that we cannot market in the U.S. The company also will likely ask for the price-fixing charge to be dropped because the case is closed and its codefendant has had charges dismissed.
De Beers will wait before approaching the Justice Department until the EC rules on whether an agreement to buy $800 million in diamonds from Russias state-owned diamond producer, Alrosa, is anticompetitive. If that is a success and Justice Department meetings resolve the problems, De Beers Chairman Nicky Oppenheimer and Ralfe could attend the opening of De Beers first store on Fifth Avenue in New York City in 2004.
Meanwhile, De Beers announced that despite a slower first quarter for finished diamonds and jewelry, rough diamond sales were stronger all through the first half of 2003. The increase was largely due to low interest rates used to finance growing inventories at cutting centers. De Beers Diamond Trading Co. sales totaled $2,920 million, 2.75% higher than the equivalent period in 2002. DTC also continued to reduce its diamond stocks, generating $600 million in cash. The companys operating cash flow grew to $1.1 billion. De Beers headline earnings after adjustments grew to $308 million this year from $261 million last year.
De Beers officials are cautiously optimistic about the second half of 2003, and say that if trends continue, it hopes to show results ahead of last years.
by Peggy Jo Donahue and Robert Weldon, G.G.
De Beers hopes right-hand rings will increase sales during the holiday season. This spread is from its fall ad campaign for the category.