JOHANNESBURG - De Beers, the world’s biggest diamond producer by volume, yesterday posted the lowest level of rough diamond sales since 2015, following a sharp drop in its sixth sales cycle, after delaying sales for later this year as customers grapple with the demand weakness.
De Beers, a subsidiary of the global diversified miner, Anglo American plc, said rough auction sales had fallen to $250million (R3.56billion) in the sixth sales cycle of 2019 from $391m in the fifth sales cycle.
The sixth sales cycle was 53percent lower than $530m from the corresponding cycle of the previous financial year.
Due to the lower demand for polished diamonds, De Beers said it had allowed its customers to defer purchases from the July sight to other sales later this year. De Beers holds 10 sight holder sales in Botswana every year and requires customers to show certain levels of demand at sights. De Beers chief executive, Bruce Cleaver, said yesterday that the company’s customers were being squeezed by the global economic turbulence.
“With ongoing macroeconomic uncertainty, retailers managing inventory levels, and polished diamond inventories in the midstream continuing to be higher than normal. De Beers Group provided customers with additional flexibility to defer some of their rough diamond allocations to later in the year,” Cleaver said in a statement. The diamond sellers are feeling the pinch as increasingly orders for diamonds are smaller than they used to be.
Seleho Tsatsi, an investment analyst at Anchor Capital, said yesterday that De Beers had struggled in the first half of the year, with prices down 7percent and volumes down 13 percent..
“Today’s rough diamond sales value for De Beers’ sixth sales cycle of 2019 definitely confirms that. The figure was 53percent lower year-on-year,” Tsatsi said. He said De Beers was the problem child of the Anglo American group.
“At the moment, there is strength in other parts of Anglo’s business - namely iron ore and platinum group metals - that is helping to offset the weakness in other parts of its portfolio like De Beers, coal, copper and manganese,” said Tsatsi.
De Beers’ parent company Anglo American, last month trimmed 2019 diamond production guidance to 31 million carats, down from a previous range of 31 million to 33 million carats to match slumping demand.
The producer’s lower production came as earnings slumped 27 percent in the first six months of 2019 to $518m amid weak demand, with customers struggling to make a profit. De Beers reported a 17 percent fall in revenue to $2.65bn in the period, with rough-diamond sales decreasing 21percent to $2.3bn.
Anglo American said it was now targeting full-year cost and volume improvements of $400m in 2019, down from an earlier target of $500m, after adjusting for lower diamond production.