August 23, 2001
De Beers Announces Sales Drop
De Beers Investments today announced a 25% plunge in the sales of diamonds, compared with the same period for 2000. Last June De Beers announced sales of $3.5 billion, but sales for the same period this year totaled only $2.6 billion. De Beers blames a lingering economic downturn in the U.S. and soft demand worldwide for diamonds for the disappointing interim results. The figures were constructed on a pro-forma basis for comparison, given the recently announced privatization of the De Beers group.
"We think of [the downturn] as a reverse ripple," says Gary Ralfe, De Beers' managing director. "When the global economy is going well, everybody down to the retailer is building inventories. But now the reverse is true." Ralfe adds that due to an overhang or oversupply of polished goods, particularly in the U.S. market, polished exports from cutting centers are down about 20% and rough imports by cutting centers are down about 22%.
"Once the reduction of the overhang is completed, we expect to see signs of modest re-stocking. Much depends on the movement of the U.S. economy and consumer confidence," Ralfe says. De Beers officials also say that while there is an oversupply of diamonds in general, they are aware of shortages in certain categories and sight allocations are taking those factors into consideration.
Ralfe says there's not much optimism at De Beers that there will be a global turnaround in the second half of 2001. But Ralfe points to a silver lining, saying reports from a majority of U.S. independent retailers indicate their overall sales are at the same level or higher than last year's figures.
De Beers also revealed a series of cost-cutting measures in capital expenditure, including the continued sales of non-core assets and delays in development projects at its Premier Mine in South Africa and Snap Lake concession in Canada.
- by Robert Weldon, G.G.