De Beers Sales Increase 27% on Higher Diamond Demand, Prices

De Beers, the supplier of about a third of the world’s rough diamonds, reported a 27 percent increase in sales last year on higher demand for the luxury gems in the U.S., China and India.

Sales of unpolished and uncut diamonds by Diamond Trading Co., De Beers’ trading arm, rose to $6.5 billion from $5.1 billion a year earlier, the Johannesburg-based company said today in a statement. Average prices increased 29 percent during the year, pushing net income to $939 million from $546 million. Output declined 5.2 percent to 31.3 million carats.

“We expect to see continued growth in global diamond jewelry sales, albeit at lower levels than the exceptional 2011 growth,” the company said in the statement. Production is expected to remain stable this year, Chief Executive Officer Philippe Mellier said on a conference call today.

De Beers, whose largest shareholder Anglo American Plc (AAL) is boosting its stake to as much as 85 percent, has benefited from rising demand in Asia’s emerging markets as economic growth outpaces the global average. Rough-diamond prices probably rose an average 15 percent last year as producers struggled to keep pace with consumption, RBC Capital Markets said in January.

In November, 45 percent shareholder Anglo bid $5.1 billion to buy the Oppenheimer family’s 40 percent in De Beers. The Botswana government, which holds the remaining stock, said Jan. 8 it may say in March whether it will exercise an option to increase its holding to 25 percent. The sale is expected to be completed by the end of the third quarter, Mellier said.

Earnings ‘Disappointing’

Earnings before interest, tax, depreciation and amortization rose 21 percent to $1.7 billion dollars, the company said. That compared with an estimate of $1.86 billion, including fourth-quarter output, by Barclays Plc’s investment banking arm, Barclays Capital.

“These somewhat disappointing results reveal a difficult second half for De Beers,” Barclays Capital analysts wrote in an e-mailed note to clients.

OAO Alrosa (ALRS), De Beers’ biggest global competitor, expects to report a 29 percent gain in 2011 sales to a record $4.45 billion, the company said Dec. 19. RBC Capital Markets that month forecast De Beers sales of about $6.4 billion.

De Beers mines diamonds by itself and in joint ventures in South Africa, Canada, Botswana and Namibia. A carat is equal to a fifth of a gram.

Anglo American retreated as much as 4.2 percent, the biggest intraday decline since Dec. 12, to 2,739 pence and was 3.8 percent lower at 2,750.50 pence at 12:19 p.m. in London. The FTSE 100 retreated 0.7 percent.

To contact the reporter on this story: Jana Marais in Johannesburg at jmarais@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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