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Damiani Reports 80 Percent Drop in First-Quarter Earnings

Sales slumped in Italian jewelry firm's home market as production costs increased.

MILAN – Damiani SpA reported a near 80 percent drop in first-quarter earnings after sales slumped in the jeweler’s core market of Italy and revenues fell due to non-recurring items.

For the three months ended June 30, net profits declined to 2.1 million euros or $3.3 million. Excluding 7.6 million euros or $11.9 million of non-recurring revenues related to real estate operations reported in the first quarter of 2007, net profits dropped 40 percent from 3.5 million euros or $5.5 million.
 
Consolidated revenues decreased 22.3 percent to 39.2 million euros or $61.3 million.

The decline in earnings was also affected by an increase in production and distribution costs, including more than 50 new hires and six new directly operated stores. Damiani said it expected to see a return on those investments over the balance of the year, particularly in the run-up to Christmas, traditionally the jeweler’s strongest period.

Operating profits, excluding the non-recurring revenues, nearly halved to 3.8 million euros or $5.9 million.

In Italy, sales fell 16.4 percent to 26.4 million euros or $41.3 million, which Damiani attributed to a general slowdown in wholesale channels. Dollar figures are converted from euros at average exchange rates.

In the Americas, revenues dipped 2.2 percent to 2.3 million euros or $3.6 million. Stripping out currency fluctuations, these gained 8 percent.

Damiani fared better in Japan, where sales jumped 18.5 percent to 2.2 million euros or $3.4 million and in the rest of the world, where revenues increased 17.8 percent to 8.3 million euros or $13 million, driven mainly by gains in Russia and the former Soviet Republic markets.

Damiani, which last week ruled out delisting from the Milan Stock Exchange STAR segment for small companies, less than a year after floating, released the results after the close of trading on Thursday. The company’s stock closed up 0.3 percent Thursday to 1.76 euros or $2.72.

Damiani also announced the appointment of executive director Stefano Graidi as manager responsible for the internal control system of the group.