De Beers’ revenues fell in the first half of the year as challenging trading environment and weak consumer sentiment pulled diamond prices down.
The company attributed the market’s subdued demand for rough diamonds to higher-than-expected stock levels at the retail and midstream sectors, adding that retail sales in the US took a hit from stock market volatility and US-China trade tensions.
The trade war, coupled with political instability in Hong Kong and a stronger US dollar, also derailed demand outside the US, particularly in China and the Gulf. In the US, retail store closures and destocking also impacted demand, the company said.
Underlying EBITDA (earnings before interest, tax, depreciation and amortization) was down 27 percent to US$518 million while total revenues dipped 17 percent to US$2.6 billion. Rough diamond sales fell 21 percent to US$2.3 billion.
The average rough price index saw a 4 percent decline while the average realised rough diamond price decreased by 7 percent to US$151 per carat.
“The lower rough diamond sales reflected higher-than-expected polished stocks at retailers and the midstream at the beginning of 2019, with overall midstream inventory levels continuing to be high throughout the first half,” De Beers remarked.
Amid a challenging scenario, the company is maintaining a more upbeat outlook in the long term as consumer demand improves and diamond inventories are reduced.
“Underlying GDP growth remains supportive of consumer demand growth and is expected to bring midstream and retailer stocks back to more normalised levels as we move into 2020, subject to an improving macroeconomic environment,” noted the company. De Beers earlier revised its production guidance to around 31 million carats, noting macroeconomic uncertainties.