02/15 8:37A NEWS SNAP: Worst May Be Over For De Beers' Diamond Mkt
By Andi Spicer
Of DOW JONES NEWSWIRES
JOHANNESBURG (Dow Jones)--The worst may be over for diamond giant De Beers
SA, the diamond arm of Anglo American PLC. (AAUK) as U.S. confidence picks up
in the aftermath of Sept. 11, the company says.
De Beers reported earlier Friday full fiscal 2001 net income before tax at
$930 million, down 45% from $1.68 billion a year earlier. De Beers normally
accounts for about 20% of Anglo American's profit.
The De Beers results were slightly better than market expectations, said
analysts.
"Sales numbers were above consensus (in the market) and the upturn seems to
have happened in the last quarter," said James Allan, an independent diamond
and mining analyst.
Sept. 11 had dented confidence in the luxury diamond market and inventories
throughout the industry had moved up to high levels as consumer demand fell
away.
More than half of De Beers' sales are generated in the U.S.
"September was a bad month. But half of the year's sales are between
Thanksgiving and Christmas. By then the American people had started to feel
better about themselves as the Afghan war was progressing well and the mood
was more patriotic," said Allan.
"Things could be a lot better for De Beers this time next year," he added.
Keith Francis, sales trader at Barnard Jacobs Mellet Securities Ltd. in
Johannesburg said: "They're good results, coming in above the market. Diamond
stocks at the cutting centers are also low, which indicates the pipeline needs
to be restocked," he says.
On preliminary estimates, De Beers said retail diamond sales were down
around 5% on a year ago, a smaller reduction than originally feared.
On rough, or uncut, diamonds, the company said sales were 22% less on the
year at $4.45 billion due to destocking by the retail trade and lower demand
for diamond jewelry. Total income from sales of diamonds were $5.51 billion,
down from $6.77 billion in 2000, it said.
"At the moment there is considerable optimism that the bottom has been
reached and that the market is improving," said De Beers' Managing Director
Gary Ralfe at a media briefing.
But he warned that there would be no increase in rough (uncut) diamond
prices in the near future and that the emphasis would be on hurrying through
diamonds currently held in the retail pipeline.
"I look forward to seeing polished diamonds moving faster through the
market," said Ralfe, adding that there had been concern that profitability in
the diamond industry as a whole had been low in 2001, but this was improving.
The outlook for De Beers' legal challenges in the U.S. and from the European
Commission were also improving, said Ralfe.
The company had settled a U.S. civil action last year concerning price
fixing in industrial diamonds, but still had to settle criminal indictments
relating to its alleged monopoly activities, said Ralfe.
-By Andi Spicer, Dow Jones Newswires;
andi.spicer@dowjones.com
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