Toronto: Canada’s Dominion Diamond Corporation, the world’s third-largest producer of rough diamonds by value, reported a 24 percent slump in second-quarter sales amid subdued demand in Asia. The company swung to a loss as it incurred a one-time charge following the departure of its chief executive officer and an expense on account of currency depreciation.
Sales in the three months that ended July 31 dropped to $209.7 million, from $277.3 million a year ago, according to a statement released on September 10. Dominion reported a loss before income tax of $2.8 million, compared with a quarterly profit of $38.2 million a year ago.
Gross margin slid to 9.5 percent from 20.2 percent. The Canadian miner lowered prices during its latest sale in August in response to muted demand from Chinese retailers, largely for the middle-size range of polished diamonds, it said in the statement. This has brought fiscal year-to-date average prices down by about 5 percent, in line with market prices.
The third calendar quarter is traditionally a slower time for the rough market in advance of the Diwali holiday manufacturing shutdown in India and while the polished market prepares for important end-of-year consumer demand for diamond jewellery in the major consumer markets.
The rough diamond market “failed to maintain any of the momentum evident at the end of Q1 fiscal 2016,” the statement said. “Polished prices continued to stagnate as slow retail growth in China instigated a more cautious approach to purchasing by jewelers,” while Indian retail has yet to return to normal levels of business, it pointed out. Dominion incurred a $9.8 million or $0.11 per share ($7.2 million or $0.08 per share after-tax) one-time charge in connection with the departure of Robert Gannicott as CEO in the second quarter of fiscal 2016.
The weakening of the Canadian dollar against its U.S. counterpart resulted in an income-tax expense of $19.9 million or $0.23 per share. The company, which declared an interim dividend of $0.20 per share, said it generated a positive free cash flow of $22.9 million as a strong operating cash flow of $52.8 million offset against cash capital expenditures of $29.9 million during the period under review.
Dominion expects to generate positive free cash flow for the second half of the fiscal year, according to the statement.
