Damas Reports Full-Year $520 Million Loss as Provisions Rise, Sales Drop

Damas International Ltd., a Dubai- based jewelry maker and retailer, reported a full-year loss as sales fell and it set aside money to cover losses from investments and an erosion in the value of inventory.

The loss in the 12 months through March was 1.9 billion dirhams ($523 million), compared with a profit of 217.3 million dirhams in the 15 months to March 2009, the company said in a statement to Nasdaq Dubai today, without giving a comparable full-year figure. Non-recurring expenses and impairment charges were 1.92 billion dirhams, Damas said. Without the one-time charges, the company had a profit of 9.7 million dirhams.

Damas’s annual revenue declined 31 percent as the sale of gold jewelry fell due to a “significant” increase in gold prices and a drop in demand from the impact of the global economic crisis, the statement said. The company set aside money to cover losses from a decline in the value of investments including joint ventures, slow-moving inventory and money owed to it.

Damas was fined as much as 2.57 million dirhams ($700,000) on March 21 by the Dubai Financial Services Authority and its board was asked to resign after an inquiry found the company’s owners, the Abdullah brothers, withdrew funds without board approval and owe the company 614 million dirhams. The withdrawals triggered a liquidity crunch at the company and a default on loan repayments, which has pushed it to negotiate debt restructuring with 20 creditor banks.

Core business

“Today’s announcement makes clear the healthy performance of the core business of Damas, while also reflecting our prudent approach to provisioning,” Damas said in the statement. Damas maintained a “healthy” gross profit margin of 17 percent “reflecting the quality of its products,” it said.

Damas “expects that within a period of three years in most cases it would get full recovery from the Abdullah bothers, from the gold consignment and from the sale of inventory,” allowing it to write back some of the provisions, Nicholas Hegarty, a Damas board member, said in an interview today.

Damas’ shares didn’t trade today and closed unchanged at 16 cents on Nasdaq Dubai on July 29. The shares have fallen 30 percent this year, valuing the company at $158 million.

Damas continues to negotiate with banks to restructure 3 billion dirhams of debt which involves an extension of maturities, Hegarty said today. There have also been “significant improvements” in the gold market since March, he said.

To contact the reporters on this story: Arif Sharif in Dubai at asharif2@bloomberg.net.

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