De Beers posts lower third cycle sales as Covid-19 disruption serves reminder of hazards

Bruce Cleaver, CEO, De Beers

DE Beers reported third cycle rough diamond sales of $440m – a one fifth decline on second cycle sales – and said a fresh wave of the Covid-19 virus in Europe was a signal that the diamond market would be vulnerable to interruptions for the remainder of 2021.

There is no comparable sales number for the third cycle in 2020 as diamond sales were suspended amid the early onset of the Covid-19 pandemic last year (although sales are 24% below third cycle sales for 2019).

A year later, member states of the European Union have reported an increase in Covid-19 infections, including France which has implemented a one month lockdown. A fresh spike of Covid-19 infections has also resulted in the closure of the Bharat Diamond Bourse in India’s city of Mumbai. That could be a sign of hazards to come, said De Beers.

“Following a good holiday season and that trend continuing during the first quarter of 2021, we have again seen solid demand for rough diamonds as we begin a traditionally quieter period of the year for the diamond industry,” said Bruce Cleaver, CEO of De Beers.

“Sales were in line with expectations and both market sentiment and overall industry conditions remain positive,” he added. “However, with pandemic developments in Europe and Mumbai’s recent lockdown resulting in the Bharat Diamond Bourse being closed, it is clear that we will continue to see challenges relating to Covid-19.”

JP Morgan Cazenove said De Beers’ sales number for the third cycle tracked at 37% of its 2021 diamond sales forecast of $4.5bn and therefore marked a strong start to 2021. Anglo American owns 85% of De Beers.

According to a report by Renaissance Capital, diamonds contribute about 6% of its 2021 proportionately consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) forecast for Anglo American. It said the numbers were “disappointing”.

Diamond production guidance from De Beers were adjusted to between 32 to 34 million carats for 2021 compared to guidance of 33 to 35 million carats previously.

Speaking at Anglo American’s 2020 results presentation in February, the group’s CEO, Mark Cutifani, said he expected diamond demand to continue to follow global GDP and personal disposable income which were expected to grow about 3% over the next decade “… as we better target advertising and key customer segments”.

De Beers reported underlying EBITDA of $415m for the 2020 financial year, a 25% year-on-year decline. At 25.1 million carats, production was 18% lower year-on-year.