De Beers Reports Rough Sales Rise of 3% for 2004


February 3, 2005

De Beers Reports Rough Sales Rise of 3% for 2004

Despite analysts' predictions that De Beers' 2004 rough diamond sales would be higher, the company announced today that actual Diamond Trading Co. sales were $5.695 billion, only 3% higher than 2003 figures. De Beers also reported another $512 million in "other" diamond sales for 2004, mostly polished diamonds. De Beers' total diamonds sales, both rough and other, came to $6.2 billion.

Headline earnings for De Beers were $652 million, up 11% from 2003's $590 million. Net profits were $498 million, up about 25% from 2003's $398 million. De Beers' diamond stocks at year end were at a similar level to that reported at the end of 2003. De Beers' board of directors recommended to the company's shareholders the issuance of a total ordinary dividend of $450 million, up 13% from 2003's $400 million.

During the year, the DTC raised its rough diamond prices on three occasions, which De Beers said made DTC prices, on average, 14% higher than in 2003. The DTC had a strong first sight in 2005 at which it raised its rough diamond prices by a further 3% on the evidence of the underlying demand growth achieved in 2004 and anticipated in 2005.

De Beers said preliminary indications are that global retail sales of diamond jewelry for the year as a whole were about 6% higher than the previous year in local currency and, because of the continued weakening of the U.S. dollar, about 8% higher in U.S. dollars. Strong areas of growth were Asia-Pacific, India and the Gulf region, with Japan also recording modest growth for the second year running. The U.S., accounting for over 50% of world diamond jewelry sales, reported a solid Christmas season overall, despite concerns over high personal debt levels.

De Beers also reported that its mines produced a total of 47 million carats in 2004, up 7% - or 3 million carats - from 2003. Big boosts in production, previously reported, started with Debswana, De Beers' joint venture with the Government of Botswana, which saw a 2% rise in production to a record 31.1 million carats in 2004.

Namdeb, De Beers' joint venture with the Government of Namibia, saw diamond output rise 28% to 1.86 million carats. Its offshore unit alone saw a record marine production of 865,000 carats.

South African diamond mines' production rose 15% to 13.7 million carats in 2004; notably because of the Kimberley mine. Kimberley alone doubled production to 2 million carats in 2004, due to modern methods of resifting for additional diamonds through mountains of old dirt and kimberlite at the mine.

The weakness of the US dollar, the currency in which diamonds are sold, has put De Beers' older and more marginal South African mines under continued pressure, with five of its seven mines operating at a loss. De Beers says management continues to focus its efforts on further reducing costs and driving efficiencies throughout its operations.

De Beers also said the reorganization of its South African assets is now in the process of being implemented. Accordingly, De Beers Consolidated Mines should be in a position to implement a Black Economic Empowerment transaction during 2005.

– Peggy Jo Donahue

Sign me up for
THIS WEEK @
professionaljeweler.com