Alrosa's Rough Sales Steady in Oct. at $254M, Profit Down 38% on Year

Rough Market
08/11/2019 16:30

While Russian diamond mining giant Alrosa's October rough diamond sales remained steady at $253.9 million and even outpaced by $20 million their sales in the same month last year, Q3 (July-Sept.) saw a significant downturn as the market remained difficult and sales volumes declined. Meanwhile, the miner got a bit of sparkle from their polished diamond sales during the month, earning $10.4 million, good for their best polished results of the year by over $2 million. The miner says supply and demand have shown signs of regaining their balance.

Revenue in Q3 2019 fell by 20% (vs. Q2) to $717 million (RUB 45.7b)* from $901 million (RUB57.4b) as the volume of carats sold dropped by 23%, with the sale of gem-quality stones falling 28%. Rough diamond sales were $601 million. The miner said the decline in volume was partially offset by higher average prices realized. On a year/year basis, the Q3 2019 total of $717 million represents a 35% decline from Q3 2018 ($1.1billion, RUB70.1b) due to lower volumes sold and a higher proportion of small-size diamonds in the sales mix. While net profits of $212 million (RUB13.5b) for the quarter were the same as the previous quarter, they are 44% lower than in Q3 2018. 

For the year to date (nine months Jan.-Sept.), Alrosa's revenue is down 27% compared to the first nine months of 2018, with 13% fewer carats (and 14% fewer gem-quality carats) sold. During the first nine months of 2019, Alrosa sold $2.64 billion in rough diamonds and $47.2 million in polished diamonds, compared to $3.59 billion rough and $74.1 million in polished last year. Net profit for the year through September is down 38% to $800 million (RUB51b) from $1.29 billion (RUB82.5b).

“In 9M 2019, the diamond market was impacted by the oversupply of polished diamonds and challenging situation in India’s financial sector," said Alexey Philippovskiy, ALROSA’s CFO. "As major producers have reduced diamond supply by a quarter since the beginning of the year and Indian cutters begin to see stocks gradually winding down, the supply and demand in the diamond pipeline seem to be heading towards balance again. Since early August 2019, the prices and demand have somewhat stabilised resulting in increased monthly sales." He added that Alrosa paid out 100% of the free cash flow for the first half as dividends.

Alrosa has maintained its 2019 guidance at 38.5 million carats of output, with 32-33 million carats sold. The miner expects its annual capex to be $361 million (RUB 23b).

*At an exchange rate of 1 USD = 63.8496 RUB