De Beers profits shine with 36% increase
The De Beers Group of Companies, itself a subsidiary of mining firm Anglo American, has reported a 36% increase in operating profits for 2014, rising to $1.4bn (around £910m) compared with the previous year.
Anglo American said in a statement that the increase was due primarily to “solid demand” across key markets, particularly the US, which resulted in strong revenue growth. Operating costs benefited from favourable exchange rate movements, which offset underlying inflationary pressures.
De Beers’ total sales rose 11% to $7.1 billion, with rough diamond sales up 12% to $6.5 billion. Higher rough diamond revenue was driven principally by a 12% increase in consolidated sales volumes to 32.7 million carats. Average realised diamond prices were in line with 2013 at $198/carat, driven by 5% higher average rough price index in 2014, offset by a marginally lower product mix.
The firm statement continued to explain that consumer demand for diamond jewellery showed positive growth in local currency terms in “all the main markets” in 2014. The economic recovery gained momentum in the US, the largest consumer diamond market, which resulted in healthy diamond jewellery sales growth throughout the year.
Growth in diamond jewellery demand in China continued, albeit at more modest levels, reflecting slowing economic growth. Macro-economic conditions in India started improving in the final quarter of 2014, following the election of a new government earlier in the year, which boosted consumer confidence, lifting hopes that growth will return.
Polished prices ended the year broadly in line with where they started in 2014, with the increase in the first half of the year being offset by a reduction in the second half. Rough diamond prices increased over the course of 2014, albeit with some softness experienced towards the end of 2014 and early in 2015.
De Beers’ full year production increase of 5% to 32.6 million carats (2013: 31.2 million carats) reflected a strong performance from Debswana, partly offset by slightly lower production at Snap Lake and Kimberley, with all other regions performing broadly in line with 2013.
Anglo American chief executive, Mark Cutifani, said: The performance of our diamond business, De Beers, is a clear demonstration of the benefits and value of our diversified business model. The integration of De Beers into Anglo American is complete; De Beers contributed $1.4 billion of underlying EBIT in 2014, 28% of – and the second largest contributor to – the group’s total, and delivered a 15% return on capital employed.”
