Gaborone: Anglo American’s group underlying earnings rose 3 percent to $1.284 billion for the first half that ended on June 30 and De Beers contribution of $469 million reflected an increase of 59 percent. The second greatest contribution to Anglo’s profit, of $443 million, came from the iron ore and manganese unit. Anglo’s profit attributable to shareholders jumped 263 percent to $1.464 billion or $1 per share.
De Beers revenue rose 15 percent year on year to $3.823 billion in the first half, which was the highest segment total of Anglo’s business units. Rough diamond sales jumped 15 percent to $3.5 billion. Higher rough diamond revenue was driven by an increase in sales volume of goods net of a 4 percent drop in realized prices, according to Anglo. However, De Beers average price index in the first half was 4 percent higher, with this being offset by a lower product mix.
De Beers recorded an underlying operating profit of $765 million, representing an increase of 34 percent from 2013 due to stronger diamond demand across key markets, resulting in revenue growth, coupled with favorable exchange rates.
De Beers product rose 12 percent year on year to 16 million carats with strong performance by Debswana and the South African operations. Production targets for 2014 were increased just slightly to between 31 million and 32 million carats, up from a previous prediction of between 30 million carats and 32 million carats.
Anglo defined global rough diamond demand as robust in the first half, reflecting a positive outlook for polished diamonds in De Beers key markets such as the U.S., China and India. Stronger consumer demand for polished goods between Thanksgiving Weekend in the U.S. and the Chinese New Year – the key selling season – resulted in higher levels of retailer restocking during the first half.
This past week, De Beers announced a new approach to its rough diamond sales contracts. The new contract period, which will start in March 2015 and run for three years, with an option for De Beers to extend, requires all rough diamond customers to comply with more rigorous financial and governance requirements in order to be eligible for supplies.
De Beers Element Six division achieved sales growth of 10 percent derived from most product groups, particularly oil and gas and precision machining.
Diamond brand Forevermark continues to expand globally, particularly in the core markets of China, Japan, India and the U.S. In May, Forevermark was launched in Turkey and, in July, plans were announced to make the brand available in the U.K. and Ireland. The brand is now available in more than 1,400 authorized jewelry stores in 29 countries, an increase of more than 30 percent on the same point in 2013. More than one million diamonds have now received a Forevermark inscription since the brand’s launch in 2008.
De Beers Jewellers recorded “healthy” same-store sales growth during the first half, according to Anglo, but it declined to provide an exact figure. Sales continued to be driven by its Chinese clientele, both in Asia and in other luxury shopping destinations around the world.
Looking ahead to the second half, De Beers anticipates the usual market slowdown, with continued retail demand driven by China and the U.S. Other markets are also projected to show growth in local currency, with final dollar-equivalent demand levels partly dependent on currency fluctuations. In India, recent elections have resulted in improved economic confidence, which is expected to impact positively on both trading activity in the country’s cutting centers and on rough diamond demand, generally.
