Sarine Tech Says Fewer Rough Sales are Easing Excess Inventories in Midstream

17/10/2019 15:12

In a preliminary update for Q3 2019, Singapore-listed diamond equipment and services provider Sarine noted that "the significant drop (40% less y-o-y) in the quantities of rough stones entering the production pipeline" has temporarily eased the excess inventories in the midstream, "somewhat alleviating" the issue of working capital in the short term.

While the "prevailing negatives" throughout the industry continue to have an impact on the company's results, Sarine notes, "Current indications are that our revenues for the third quarter will be some 20% better than those of the second quarter, approximately US$14 million." In other words, while the market is still challenging Sarine has returned to normal levels of profitability.

Explaining those negatives, Sarine says, "During Q3 2019, the ongoing trade disputes between the U.S. and China continued to impair demand in the Chinese market by an estimated 10%, and the issue of lab-grown diamonds continued to be a distraction. However, due to the significant drop (40% less y-o-y) in the quantities of rough stones entering the production pipeline, as evidenced by the reported reductions in sales at DeBeers' sights and by other mining producers, the excess inventories in the midstream continued to ease and thus the issue of working capital has been somewhat alleviated, at least for the short term." They add, however, that the decline in polishing activity due to the reduced quantities of rough stones entering the pipeline has resulted in a decrease in the Group's revenues from inclusion mapping services by some 18% year-over-year.

Sarine expects to record a nominal net profit this quarter. They expect to release the full report of their financials for Q3 2019 on 10 November.