De Beers Group Reports Lower Sales of Rough

June 19, 2001

De Beers Group Reports Lower Sales of Rough

Rough diamond sales fell 25% in the first half of 2001 compared to the same period in 2000, reports the Diamond Trading Co., De Beers marketing arm. In 2000, first-half sales for DTC reached $3.5 billion, but first-half sales in 2001 totalled only $2.6 billion.

De Beers officials say declining sales were expected given the slowdown of the global economy – the U.S. economy in particular. The U.S. is the world's largest diamond market and consumes nearly half of the worlds diamond production for resale at the retail level.

Diamond sales for the first half of 2001 are still up compared to the same periods in 1998 and 1999. According to DTCs same-period figures, sales are still close to 60% higher compared with 1998 and just slightly over 1999s figures.

Sales of polished diamonds fell dramatically at Christmas, the most important selling season for diamonds, which in turn led to excess inventory held by jewelers. The overstock caused re-orders of polished goods to slow down, in turn reducing profitability and putting small lower-end diamond categories under price pressures. DTC says the global indications are that retail sales of diamond jewelry are 5-7% lower in 2001 than at the same time in 2000.

In spite of the disappointing results, DTC remains optimistic diamond sales will pick up again in the second half of 2001, depending of the extent of the economic recovery, especially in the U.S. and Far East. DTC says sales in Japan were also weak, reflecting that countrys sustained economic slump. Europe continued to show modest increases in sales.

Meanwhile, the De Beers group confirms it's putting its Supplier of Choice strategy on hold pending decisions made by the European Competition Commission regarding the De Beers Group business venture with giant European retailer LVMH.

- by Robert Weldon, G.G.