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De Beers Profit Rises in Turbulent Year

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JOSHUA FREEDMAN • 01-03-2023

De Beers’ sales and profit grew in 2022 as diamond demand from consumers and the trade strengthened in the first half, outweighing a slowdown in the latter part of the year.

Group revenue climbed 18% to $6.62 billion, parent company Anglo American reported Thursday. Rough-diamond sales advanced 22% to $6 billion, with the remainder coming from other businesses including consumer brands and the Element Six synthetic-diamond unit. Underlying earnings jumped 60% to $552 million.

The average selling price for rough rose 35% to $197 per carat. This reflected an increase in the proportion of higher-value goods in the product mix as well as a 23% gain in the company’s rough-price index, which reflects like-for-like valuations.

Conditions in the diamond industry were positive in the first half of 2022 as retailers restocked following a strong 2021 holiday season, Anglo American explained. Polished prices increased during the period as steady consumer demand outweighed the uncertainty that the Russia-Ukraine war created, it added.

However, the economic picture worsened by June as central banks raised interest rates to tackle high inflation, the mining conglomerate said. US diamond-jewelry demand softened in the second half of the year, while remaining above pre-pandemic levels, leading to less restocking among retailers. The midstream amassed polished inventories, putting pressure on prices of finished stones and denting demand for rough, it added.

Covid-19 measures in China from the second quarter onward further dampened growth, management pointed out.

De Beers also appeared to benefit from sanctions on — and consumer boycotts of — Russian diamonds following the country’s February 2022 invasion of Ukraine. The miner said some brands’ increased focus on diamond provenance had “the potential to underpin continued demand for De Beers’ rough diamonds in the medium and longer term.”

The company faces an uncertain 2023, with the consumer market showing mixed indications. The recent holiday season saw retail sales below 2021 but above pre-pandemic levels, De Beers explained.

“Continued softening in global macroeconomic conditions could see a contraction in consumer spending and demand for diamond jewelry, which may result in lower demand for rough diamonds in the near term,” the miner said. “This may be partly mitigated by an increase in demand for diamond jewelry in China, following the removal of Covid-19 restrictions in late 2022.”

Pressure is also building to finalize a supply deal with Botswana, De Beers’ most important mining location. Management has yet to confirm a new agreement with the nation amid media reports suggesting the government wants a larger share of diamond revenues.

Production guidance remains at 30 million to 33 million carats for this year, compared with actual output of 34.6 million carats in 2022. Production increased 7% last year, reflecting improved operational performance as well as efforts to meet strong demand, especially in the first half.

Image: Diamond sorters in Namibia. (Ben Perry/Armoury Films/De Beers)

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