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De Beers Net Slips, Sales on Record Pace

De Beers said net earnings dipped 8.9 percent to $348 million in the first half, but full-year sales of rough diamonds will be a record $6.44 billion.

LONDON — Demand for diamonds appears to be rock hard.

De Beers Societe Anonyme said in a statement Monday that while net earnings dipped 8.9 percent to $348 million from $382 million in the first half, full-year sales of rough diamonds will be at least $6.44 billion, which would break last year’s record sales of $5.7 billion. All figures have been given in dollars.

De Beers margins and bottom line suffered in the first half because of depleted stock levels. Until the first half of 2004, De Beers had been dipping into a healthy stockpile of diamonds — and selling them at fat margins. By the second half of last year, however, the stockpile had begun to run low, which is why profit margins were so tight in the first half.

A De Beers spokeswoman said the rise and fall of the diamond stockpile is part of the natural fluctuation of the business. The company’s stock levels depend on how quickly quality diamonds can be mined and how fast they flow through the industry pipeline.

The weak dollar also weighed on net earnings in the period, the statement said.

Gary Ralfe, managing director of De Beers, said during a conference call Monday that the interim profit results were “a little disappointing.” But he was encouraged by the growth in production during the period, and the fact that any potential challenges posed by synthetic diamonds were a long way off.

The company said sales of rough diamonds in the second half would “at least” match those in the first half. First-half sales at the Diamond Trading Co., the marketing arm of De Beers, rose 7.9 percent to $3.22 billion from $2.98 billion.

During the six months ended June 30, the DTC twice raised its rough diamond prices because of worldwide demand for diamond jewelry at retail.

For the full year, the DTC forecast a 6 percent rise in diamond jewelry sales worldwide because of the level and quality of diamond marketing activity as well as regional, macroeconomic strength.

In the first half alone, demand for diamond jewelry was up 5 percent worldwide. In the U.S., demand at retail rose 6 percent, driven mostly by larger jewelry chains and high-end, independent retailers.

This story first appeared in the July 26, 2005 issue of WWD.  Subscribe Today.

Ralfe said during the call that diamond jewelry sales in countries such as India, China and the Gulf States were growing at even faster rates.

“There’s been very good growth in those countries,” Ralfe said. “Eight out of 10 brides in China now get a diamond for their wedding. It’s becoming a new cultural tradition.” He added that last year, diamond jewelry retail sales in India grew 21 percent, followed by the Gulf States at 15 percent, and China with 11 percent.

De Beers also reported that more diamonds are on their way into the windows, glass cabinets and velvet display trays of jewelry stores around the world.

Group production of rough diamonds in the first half was 23.7 million carats, an increase of 23 percent over the same period last year. As a result of increased production, stock levels have risen by about $400 million, compared with June 2004.

The firm added in Monday’s statement that total revenue, which includes joint ventures and other income, was up 8 percent to $3.91 billion from $3.62 billion.