Modest lift in De Beers’ sales as gradual recovery begins

DE Beers reported a modest increase in rough diamond sales…

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DE Beers reported a modest increase in rough diamond sales for the second sales cycle of its financial year which CEO Al Cook said represented the sector’s “ongoing recovery”.

Sales totalled $430m compared to $374m in the first cycle as retailers restocked “conservatively” after the 2023 holiday season, the group said. Second cycle sales in 2023 were higher at $497m.

“Consumer demand for diamond jewellery is growing in India but remains sluggish in China,” said Cook. “Overall, we expect that the ongoing recovery in rough diamond demand will be gradual as we move through the year.”

Anglo American, which owns 85% of De Beers, wrote down the investment for $1.6bn in 2003 after the business posted a second half loss. Duncan Wanblad, CEO of Anglo, acknowledged there were significant stressors in the group’s diamond business.

“There is a level of uncertainty we can’t deny and we are taking material actions to make it more robust,” he said in February.

In response to difficult market conditions, De Beers has targeted $100m in cost reductions for 2024 while the market recovered. But the diamond price recovery would be U-shaped rather than V-shaped, Wanblad said.

It’s also thought that De Beers will figure highly as Wanblad conducts a portfolio wide review of Anglo’s assets which he said would leave nothing off the table.

The role of De Beers in Anglo American has long been questioned by analysts. Bank of America speculated earlier this month as to whether Anglo would consider monetising De Beers’ retail arm as it was “an under-appreciated source of value”.

“We continue to think that the asset should be disposed of,” said Berenberg Bank analyst Richard Hatch about De Beers in a note in February. “A sale to a luxury business could be sensible, but we remain sceptical as to whether this would be at the carrying value that Anglo includes in its valuation.”

As of December 31, Anglo valued its 85% in De Beers at $7bn, but that “seems too high” a figure, according to US bank Jefferies, which has a valuation of less than $4bn for the diamond producer.

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