Namdeb posts giant loss

[] — NAMDEB, the partnership company between the Namibian government and diamond giant De Beers, on Wednesday reported a loss before tax of N$555m for the 2009 year, compared to a N$1.98bn profit in 2008, mainly due to a decrease in revenue.

Diamond sales revenue at N$3.37bn is 40% lower than in 2008 as a result of the lower carats sold along with a decline in the rough diamond prices.

Lower revenue was partially offset by a decrease in production costs due to
initiatives by the company in response to the global recession.

Carats sold decreased by 25% to 1 383 carats from 1 813 carats the previous year
with carats produced decreasing by 56% to 929 carats from 2 122 carats as a result of the impact of the global recession on worldwide diamond demand.

The difference in the reduction of sales and production was made up from diamond
inventory carried forward from 2008.

Namdeb managing director Inge Zaamwani-Kamwi noted that the global diamond
industry, in line with most products in the luxury goods sector, was severely affected by the global recession in 2009.

Zaamwani-Kamwi said this was due to a combination of three principal factors -high stock levels throughout the diamond pipeline, constricted liquidity in the industry, and lower levels of retail and consumer demand – leading to substantially lower demand for rough diamonds.

In the consumer markets global demand for diamond jewellery declined for the full
year, although the fourth quarter showed an improved and positive trend on 2008.

Demand remained strong in the developing markets of India and China with US
Christmas trading results showing the first year-on-year increase since September

Industry inventory and debt levels reduced as the year progressed.

On the outlook for 2010, Zaamwani-Kamwi said that 2009 presented some of the most challenging trading conditions the diamond industry has ever experienced.

But as a result of Namdeb’s actions, the company’s production levels and cost base
have been aligned with the reduced demand.

Zaamwani-Kamwi said inventory and debt levels have also been reduced and with better than expected consumer sales in the fourth quarter, sentiment has improved markedly from a year ago.

“However, Namdeb will continue to take a cautious and prudent approach to production and sales levels for 2010,” Zaamwani-Kamwi said.

Consumer demand for diamond jewellery is beginning to recover, driven in part by the strength of the developing markets of China and India.

However, with the fragility of the world economy and perceived weakness of the global recovery post recession, the company would only expect a gradual increase in production levels, sales and prices, Zaamwani-Kamwi said.