De Beers heading for second half sales of $1.8bn as diamond recovery continues

Bruce Cleaver, CEO, De Beers

DE BEERS was forecast to report full year sales of about $1.8bn in the second half of its 2020 financial year after the diamond market continued to recover from disastrous market conditions in the first half of the year.

Assuming De Beers hit this mark, it would take full year sales to about $4bn after reporting $1.22bn in first half sales. The company said today it sold some $450m in diamonds for its ninth and penultimate cycle of the year compared to $400m for the ninth cycle in 2019.

“We forecast Anglo to report $1.8bn in diamond sales in 2H; the company currently needs to achieve about $500m in sales to hit our estimates which is in line with what they’ve typically done in the 10th sales cycle,” said Goldman Sachs in a report today.

De Beers said it continued to adopt a flexible approach to rough diamond sales in the ninth cycle, with the sale period extended, in order to accommodate the difficulty of travel currently. “As a result, the provisional rough diamond sales figure quoted for Cycle 9 represents the expected sales value for the period 2 November to 16 November and remains subject to adjustment based on final completed sales,” it said.

Bruce Cleaver, CEO, De Beers Group, said the sales demonstrated further evidence of recovery and reflected “stable consumer demand for diamond jewellery at the retail level in the US and China, and expectations for reasonable demand to continue throughout the holiday season”.

He added, however, that the resurgence of Covid-19 infections in several consumer markets “… presents ongoing risks”.

Petra Diamonds noted this week in commentary to its full-year results ended June 30 that the diamond market was vulnerable as a second wave of Covid-19 disease swept through buying centres, including Europe.

According to a report by Bank of America Securities, recent rough diamond price increases did not imply a recovery in the long-term health of the market.

The diamond market recovered strongly in September with rough prices increasing between 19% and 118% compared to the lowest prices in the 2020 trough, said Bank of America Securities in its report.

It added, however, that the improvement might be a “bounce back” from the 10-year low achieved in the first half of last year and might not be “a reflection of the long-term attractiveness of the diamond industry”. It added, however, that it expected a 10% year-on-year increase in the rough price index of 2021.

“The underlying demand for polished diamonds should rebound as economies reopen, but midstream structural challenges could offset the positive impact for miners,” it said. “Diamond inventories, midstream financing, and margins remain key concerns.”