Russian diamond mining giant ALROSA announced that its revenue in H1 2017 fell by 17% in current value terms to $2.66 billion (RUB 155.6B), while net profit tumbled by 46% to $840M (RUB 48.9B). The company writes that its, "Weaker financial performance in H1 2017 vs H1 2016 was caused by the market and macroeconomic factors such as 18% ruble appreciation against the US dollar and a 15% drop in the average price of the diamonds sold as a result of changes in the diamond mix." As for questions regarding their output, ALROSA says their initial 2017 production target of 39.2 million carats remains unchanged despite the Mir mine tragedy. Sergey Ivanov, Chief Executive Officer of PJSC ALROSA said, "Production volumes missing due to the accident at the Mir underground mine in 2017 will be set off by higher diamond output at other mines, primarily the Jubilee pipe."
As noted ealier, by the end of 2016, ALROSA had accumulated large inventories of small-size, low-priced rough diamonds that had not been purchased because of the monetary reform in India. These inventories were cleared in H1 2017 thanks to improved demand. In Q2 2017, the volumes and sales mix stabilized with the average price of diamonds sold growing by 20% from the first quarter to the second, the company said. They add that, "As a result of the cost management program, the Company's production costs in H1 2017 increased by less than 1%, with diamond production rising by 14%. The 12% increase in the cost of goods sold was driven by the 12% growth in volumes of diamond sales." EBITDA fell 35% to $1.24 billion (RUB 72.8 bn), while net cash flow to fell 36% to $860M (RUB 50.3B).
"ALROSA's H1 2017 results were influenced by macroeconomic factors beyond the Company's control," said Sergey Ivanov, Chief Executive Officer of PJSC ALROSA. "It stands to note here the effectiveness of the cost optimization program adopted by the Company. In H1 2017, we succeeded in keeping our production costs flat and reducing other expenses, including switching to cheaper energy sources, capping the utilization of materials and equipment and boosting procurement efficiency." The appreciation of the ruble against the dollar, in which diamonds are traded, skewed the figures downward, while in 2016 their strong H1 was equally buoyed by ruble depreciation against US dollar compared to H1 2015.