Jul 27, 2015

De Beers EBIT Down 25% in H1 at US$ 576 mn

Underlying EBIT at De Beers during H1 2015 was down 25% to $576 million (H1 2014: $765 million) primarily due to softer rough diamond demand, resulting in weaker revenue, which was partly offset by lower operating costs and favourable exchange rates, Anglo American reported in its Financial Report for the first six months of 2015.

The company said that unit costs declined by approximately 10% in comparison with H1 2014, with the effects of inflation being more than offset by foreign exchange benefits and cost control.

The report also disclosed that De Beers had incurred a Capex of US$ 363 mn, and had a ROCE of 12% in H1 2015, as against a Capex of US$ 311 mn and had a ROCE of 11% in H1 2014.

De Beers said that in response to the current situation, it had revised production guidance for 2015 down to 29 -31 million carats (on a 100% basis), subject to trading conditions.

Mark Cutifani, Chief Executive of Anglo American said,”De Beers saw a continuation of the market weakness of late 2014 during the first six months of 2015, resulting in a 25% underlying EBIT decrease.”

As earlier reported, total sales during H1 2015 decreased by 21% to $3.0 billion (H1 2014: $3.8 billion), with rough diamond sales decreasing by 21% to $2.7 billion. Lower rough diamond revenue reflected a 27% reduction in consolidated sales volumes to 13.3 million carats (H1 2014: 18.1 million carats).

The report also said that average realised diamond prices increased by 7% to $206/carat (H1 2014: $192/carat) owing to the sale of a stronger product mix, despite a 4% lower average rough price index for the period.

The report stated that “rough diamond demand in the second half of the year will be dependent upon the level of retailer restocking that takes place in preparation for the main jewellery selling season in the fourth quarter. In the meantime, working capital concerns in the midstream are likely to cause some short-term volatility in rough diamond demand”