Jul 19, 2019

Sarine Technologies Expects to Post Loss for Q2 2019; Though Revenues Expected to be 5% Higher than Q1 2019

Sarine Technologies Ltd providing an update to the Group’s revenues and profitability for Q2 2019, said that, as earlier stated by the Company, “prevailing negatives in the diamond industry midstream”, had impaired its results in the latter part of 2018, and continued to persist into FY2019 “with negative impact on the Group's financial results”.

“During Q2 2019 our midstream customers continued to experience working capital issues due to credit tightening policies implemented by Indian banks, the uncertainties caused by the advent of lab-grown diamonds (LGD) in the market remained and the ongoing trade disputes between the U.S. and China still dampened the critically important Chinese market,” Sarine stated.

As a result, Sarine’s equipment sales as well as recurring revenues from inclusion mapping services was negatively impacted.

Despite the depressed scenario, Sarine said, “the Group delivered a record 34 Galaxy®-family inclusion mapping systems this quarter, outpacing Q1's record deliveries by one system, additional indication of the market’s growing understanding and appreciation of the value of our technology over the pirated version of same”.

However, the Company explained, all of these systems – which were of the MeteoriteTM model – have significantly “lower gross margins” than the models for larger stones and, coupled with fewer inclusion mapping scans, this continued “to impair” Sarine’s overall gross margin similarly as in Q1 2019.

“Current indications are that our revenues for the second quarter will be some 5% better than Q1, approximately US$ 11.5 million,” the Company reported. “But, due to the above-noted year-over-year reduction in our gross margin, even with our ongoing prudent management of our operational expenses (no significant increase in these except in G&A, which has bumped up sequentially by some US$ 0.3 million, due to the trial phase of our patent litigation during Q2), we currently expect that we will record a net loss similar to that of Q1 2019.”

The Company explained that this loss reflects non-cash expenses (depreciation, amortisation and option-based compensation) of approximately one million dollars.

Sarine is expected to release the full report of its financials for Q2 2019, on August 8, 2019.