Rio Tinto rode the wave of higher commodity prices and saw results from its cost cutting drive to record a 90% increase in net profit to $8.8 billion in 2017, and their diamond operations got in on the party, with profits climbing 96% to $92 million. Revenue jumped 15% to $706 million from $613 million, as demand for rough diamonds heated up following the normalization of the Indian market post-demonitization - the currency shift the government initiated in November 2016. Earnings before interest, tax, depreciation and amortization (EBITDA) grew 20% to $287 million.
Petra Diamonds Limited has announced strong results for the six months to 31 December 2016 (H1 2017), with rough diamond production, revenues and carats sold all seeing substantial increases. Revenues were up 48% to US$228.5 million (H1 FY 2016: US$154.0 million) or US$217.6 excluding exceptional diamonds, with net profit after tax up more than 35% to US$35.2 million (H1 FY 2016: US$2.2 million loss) and an EBITDA margin of 38% (H1 FY 2016: 31%), indicating increased profitability. Petra's carats sold in the first half jumped 47% to 1.9 Mcts.
Diamond industry analyst Edahn Golan takes a close look at US consumers' polished diamond purchasing trends based on data that retail metrics research firm NPD collected from nearly 4,000 specialty jewelry retailers. Golan says that, "One of the biggest issues in the diamond industry, especially in the manufacturing sector, is a lack of impartial and detailed data about consumer purchasing habits.
Comparing the current mentality of the diamond industry - in particular the midstream manufacturers - to that of mass production in the textile industry, Ehud Arye Laniado argues that the way to restore dwindling profitability is by restoring the luxury aspect of diamonds, and not by slashing labor costs, seeking favorable tax regimes and free trade zones. "How is it possible that an industry that manufactures luxury products is operating as though it provides low cost, price-point driven items?
Diamond industry analyst Avi Krawitz addresses the bouyant rough diamond sales by De Beers and ALROSA in January, but notes that this has led many to wonder whether it is sustainable. To wit, does the seemingly improved sentiment truly reflect rising consumer demand, or is it another case of overreach on the part of manufacturers? For while "sightholders were quick to point out that the market mood is currently “much more positive,” it is important that stakeholders are aware of the factors that have underpinned the sudden turnaround in rough diamond demand."
"Diamond sector profitability came under the spotlight in 2015 due to sluggish consumer demand in emerging markets and high rough prices relative to the resulting polished", writes Avi Krawitz for Rapaport Magazine. "Consequently, the year was one the industry would rather forget as it was characterized by excess supply and consolidation. Polished prices fell as manufacturers held large quantities of diamonds that were difficult to sell.
Louis Pearl, rough diamond consultant and gemologist, takes a hard look at eroding profit margins throughout the diamond pipeline from a historical perspective and - for a change - does not place all the blame on the major miners.
Deviating from his standard m.o., in his latest "Diamond Intelligence Briefing" Chaim Even-Zohar (CEZ) gives De Beers CEO Phillipe Mellier center stage by laying out his argumentation from his Dec. 8 address to Anglo American's top executives and shareholders about the current situation and future prospects of the diamond giant.
JCK's "Diamond Dialogues", a series meant to take a wider look at the diamond industry and the forces that shape it, has published a thought-provoking presentation by Erik Jens, head of diamond and jewelry clients for ABN Amro, the largest bank in the industry. Jens discusses how other industries, oil in this case, cope with profitability woes, why bankers are wary of the diamond business, and the disruptive change that is quickly heading our way. Jens' considerations reach far and wide.
India's Gem & Jewellery Export Promotion Council (GJEPC) and the Bharat Diamond Bourse (BDB) of Mumbai gave a delegation from Botswana, led by the country's vice president, Mokgweetsi Eric Keabetswe Masisi, a presentation on India's diamond business, while the sides also discussed the challenges facing the global diamond trade. GJEPC Chairman Praveenshankar Pandya said: “You are the largest producers of rough diamonds and we are the largest manufacturing center.
Industry analyst Ehud Laniado provides a detailed examination of the polished diamond production process and, not surprisingly, finds that manufacturers' margins are close to zero, if not actually negative. "As I have said repeatedly, the fundamentals of the diamond industry must change to drive profit. The aforesaid proves that rough diamonds are not priced to allow profit for the diamond pipeline midstream. High rough diamond prices push polished diamonds to retail at a high price without assurance that consumer demand exists at that pricing level.
"The sun is the best disinfectant," wrote Louis Brandeis, who later became a United States Supreme Court judge. By saying that, he outlined the principle of transparency in public systems as a remedy for corruption.
But the sun can also cause burns and permanent damage. When transparency of information is implemented incorrectly, it may harm the interests which it is suppose to serve.
Ehud Arye Laniado takes an insighful look at the state of the industry only a month ahead of JCK Las Vegas and notes that, "2015 already appears to be a year of fighting for survival and capital preservation ... it seems that the industry is only looking forward to 2016." The most significant trend is that despite dwindling demand for higher price point diamonds and manufacturers declining large amounts of rough and reducing polishing, miners have lowered production rather than prices, demonstrating their confidence in the future.
The net profit of ALROSA diamond company under RAS jumped by 2.9 times in the first quarter of 2015 to 17.706 billion rubles against 6.118 billion rubles a year earlier, according to the company's data. ALROSA's revenue increased by 1.5 times and amounted to 61.639 billion rubles as compared to 41.504 billion rubles in the first quarter of 2014. During the first quarter of 2015, ALROSA produced 8.4 million carats of diamonds (an increase of 6% year on year).
"The excess fragmentation we are facing in parts of the diamond sector must be addressed to allow the diamond industry as a whole to operate more effectively and to provide the new generations of professionals with more sustainable opportunities to flourish in our sector. We can draw lessons from more consolidated industries."
"Is this the new face of the diamond industry – thriving diamond mining companies and very profitable primary rough sources at the top of the pipeline, followed by money-losing manufacturers that are forced to pay their last dollar for rough diamonds, only to then sell their polished at the lowest possible price at events formatted like bazaars or on online platforms? Now it is to the industry to reconsider its marketing strategy and logic."
Ehud Laniado comments on the state of the diamond industry in his blog "Clash of Civilizations"