De Beers Sees Sales, Profits Jump in 2016

SourcingFeb 21, 2017

De Beers Sees Sales, Profits Jump in 2016

The diamond miner and marketer said U.S. diamond jewelry demand continued to grow, boosted in part by fourth quarter marketing campaigns.

Rough diamond sales increased 37 percent in 2016, reaching $5.6 billion as demand for polished diamonds continued to grow in the United States. (Photo courtesy of De Beers)
London--De Beers’ sales and profits jumped in 2016 due to stronger rough diamond demand, cost-cutting measures and favorable exchange rates, parent company Anglo American reported Tuesday.

De Beers’ total revenue increased 30 percent from $4.7 to $6.1 billion on the back of a 37 percent increase in rough diamond sales, which totaled $5.6 billion.

Consolidated rough diamond sales volumes rose 50 percent to 30 million carats but the average realized price per carat fell from $207 to $187 due to the drop in rough prices.

Underlying EBITDA (earnings before interest, taxes, depreciation and amortization) rose 42 percent to $1.4 million.

On a market-by-market basis, there was “sustained” growth in demand for diamond jewelry in the United States, which remains De Beers’ No. 1 market globally.

Additional generic diamond marketing in the fourth quarter had a “positive impact” on demand, De Beers’ year-end results stated. There were two new diamond-centric campaigns targeting consumers at the end of last year, Forevermark’s “Ever Us” and the “Real is Rare” campaign from the Diamond Producers Association. 

Rough diamond production, meanwhile, was down 5 percent compared with the previous year to 27.3 million carats due to De Beers’ decision to scale back mining operations following a weak 2015.

Botswana produced the vast majority of De Beers’ diamonds in 2016, accounting for 20.5 million carats, or 75 percent of total production.

De Beers’ second largest producer was its mines in South Africa at 4.2 million carats followed by Namibia (1.6 million) and Canada (1 million).

Production was flat year-over-year in Botswana while declining in South Africa, Namibia and Canada.

In South Africa, the drop was due mainly to the sale of the Kimberley Mines, which was completed in January 2016.

The production decline in Canada was attributed to the closure of the Snap Lake Mine. De Beers said it began flooding the underground portion of the mine in January 2017 after an attempt to find a buyer for Snap Lake failed. 

De Beers Diamond Jewellers, the chain of jewelry stores De Beers operates in partnership with LVMH, had 34 stores in 17 markets worldwide as of the close of 2016. Also last year, the company moved its New York flagship store to a new location on Madison Avenue to complete “the repositioning of the brand in the U.S.”

In 2017, De Beers predicts that production will increase to 31-33 million carats, with rough diamond demand expected to normalize and consumer demand worldwide expected to remain relatively stable.

However, the extent of growth in demand for diamonds will be dependent upon a number of macro-economic factors including the new administration in the U.S. and the strength of the U.S. dollar, De Beers said.
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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