De Beers’ Sales +11% in 2014

Rough diamond sorting - De Beers
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De Beers‘ results were announced this morning. The diamond mining company saw a sharp rise in sales, helped by a jump in average price per carat on its rough diamonds.

De Beers’ Results Summary

Sales: $7.114 billion (+11%)
Carats sold: 32.73 million carats (+5%)
Underlying EBITDA: $1.818 bln
CAPAX: $689 million
Return on CAPEX: 15%

Highlights from the 2014 financial report:

  • De Beers’ underlying EBIT increased by 36% to $1.4 billion (2013: $1.0 billion). The increase was due primarily to solid demand across key markets, particularly the US, which resulted in strong revenue growth.
  • De Beers’ total sales rose 11% to $7.1 billion, with rough diamond sales up 12% to $6.5 billion. Higher rough diamond revenue was driven principally by a 12% increase in consolidated sales volumes to 32.7 million carats. Average realized diamond prices were in line with 2013 at $198/carat, driven by 5% higher average rough price index in 2014, offset by a marginally lower product mix.
  • Consumer demand for diamond jewelry showed positive growth in all the main markets in 2014.
  • The economic recovery gained momentum in the US, the largest consumer diamond market, which resulted in healthy diamond jewelry sales growth.
  • Growth in diamond jewelry demand in China continued, albeit at more modest levels, reflecting slowing economic growth.
  • Macro-economic conditions in India started improving in the final quarter of 2014, following the election of a new government earlier in the year, which boosted consumer confidence, lifting hopes that growth will return.
  • Polished prices ended the year broadly in line with where they started in 2014, with the increase in the first half of the year being offset by a reduction in the second half. Rough diamond prices increased over the course of 2014, albeit with some softness experienced towards the end of 2014 and early in 2015.
  • In July, De Beers announced details of a new approach to its rough diamond Sightholder sales contracts.
  • The new contract period, which will start in March 2015 and run for three years, with an option for De Beers to extend, requires, amongst other things, its rough diamond customers to comply with more rigorous financial and governance criteria in order to be eligible for supply.
  • De Beers’ full year production increase of 5% to 32.6 million carats (2013: 31.2 million carats) reflected a strong performance from Debswana, partly offset by slightly lower production at Snap Lake and Kimberley.
  • Operational Outlook: Diamond production (on a 100% basis) for 2015 is forecast to be in the range of 32 to 34 million carats, subject to market demand.

Full results here.

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