De Beers warns repeat of bumper 2011 performance will be difficult

Cape Town: After a bumper year for diamond sales in 2011, De Beers is predicting a period of uncertainty as the Eurozone crisis weighs on the industry but with robust demand for the luxury stones resuming as China and India drive growth.

Philippe Mellier, De Beers chief executive, told the Financial Times that polished diamond sales in China were estimated to have grown by about 30 per cent year on year in 2011, while in India growth was between 10 per cent and 15 per cent.

The strong performance was supported by better than expected sales in the US, where polished diamond sales had grown by about 8 per cent despite its economic woes, Mellier said.

However, De Beers reduced production in the fourth quarter because of "softening demand", a trend Mellier expected to continue for the first few months of this year.

"The only thing I know about the outlook is that it's going to be uncertain — I see more uncertainty now and in the first part of the year than the second part because a lot of [it] is linked to the European crisis," he said. "We will have solid retail demand [but] I don't think we will enjoy ... such a huge growth as we had in 2011."

Earnings up

He said he expected demand to pick up in the second half of the year.

The US remains the dominant market, accounting for 38 per cent of global demand for polished diamonds, while China, India and Japan combined account for just under a third. But De Beers predicts that by 2015, China and India, combined with the oil-rich Gulf states, should account for a similar share of the market as the US.

The growth in emerging markets helped De Beers increase its earnings before interest, tax, depreciation and amortisation by 21 per cent to $1.7 billion (Dh6.24 billion) in 2011, according to annual results announced on Friday.

The company produced 31.3 million carats last year, 5 per cent down on 2010, but its total sales rose 26 per cent to $7.4 billion.

— Financial Times