De Beers, the name synonymous with diamonds, reported increased earnings for the six months ended June 30, with both sales volumes and prices increasing significantly following an increase in demand for rough diamonds.
In a statement released today, De Beers reported net earnings of $301 million, up from $3 million a year ago. Production increased by 133 percent to 15.4 million carats and sales of rough diamonds were up 84 percent to $2.6 billion.
"This time last year, in the midst of the global recession, we transformed our business, taking short-term pain for long-term gain," said chairman Nicky Oppenheimer. "One year later, our results for the first half of 2010 show the success we’ve had in managing costs, creating operating efficiencies and improving our balance sheet."
Production and operating costs rose to US$699 million (2009: US$479 million), but only as a result of increased production across the Group. The company said its focus remains on cash management and continuing the efficiency improvements achieved in 2009, when it reduced its cost base globally by 45 per cent, and staffing levels by 25 percent. Many of those gains, it said, have remained permanent without impacting growth.
De Beers remains cautious about its prospects for the second half of the year, however, because of the fragile global economic climate, especially in the important diamond markets of the US, Japan and Europe. “A period of market stabilisation is expected in H2,” the statement said. “With most restocking activity by the trade now largely completed, further demand growth is dependent on increases in consumer demand, and De Beers remains encouraged by the strength of demand in the emerging markets of Asia, particularly China and India.”
De Beers took the opportunity of its earnings report to announce that its CEO of five years, Gareth Penny, has advised the Board that he believes it is an appropriate time for him to step down, after overseeing the response to the global financial crisis and the company’s subsequent recovery.
“These results are a testament to Gareth Penny’s leadership,” Oppenheimer added, “which saw the company through the recession, and positioned it for strong revenue growth as we emerged into recovery. Gareth has made an enormous contribution to De Beers throughout his 22 years with the company and, most recently, five years as CEO. He has been a passionate and effective leader during some of the most difficult challenges De Beers has faced in its long history.”
A process is underway to identify a successor, during which time Stuart Brown (chief financial officer) and Bruce Cleaver (chief commercial officer) will serve as acting joint-CEOs.
