De Beers profits crushed

24th Jul 2009 08:21

First half profit plunged by nearly 80% at De Beers, the world's largest diamond miner, as the recession forced people to rethink plans for an expensive rock.Profit before finance charges and tax fell to just $140m in the first six months of 2009 from $662m a year ago. Sales more than halved to $1.7bn from $3.7bn in 2008.Things looked a little better on a three-month basis, with a recovery from a first quarter loss of $153m to a profit of $293m in Q2 on sales up to $1.3bn from $400m.De Beers, which is 45% owned by Anglo American, talked of "extremely difficult" trading conditions, with a dive in demand forcing a 73% cut in production to 6.6 million carats in the first half.Much of that reduction came in the first quarter when output sank 91% year-on-year to 1.1 million carats. Mines in South Africa and Canada mothballed during the period have now reopened.Production for the full year is expected to be about half that reported in 2008.Sales of rough diamonds were down by 57% in the six months to $1.4bn, although the second quarter enjoyed a "significant" pick-up in sales, more than double the figure for the first three months.Overall costs were slashed by over 50% from the previous year. The company saved $612m over the six months, cutting capital expenditure by $241m and axing 23% of its workforce.De Beers admitted that at the retail level, demand remains subdued in the major US market, but says the rate of decline in demand has slowed, paving the way for improvement in the second half. "Demand from emerging markets, mainly China and India, remains positive," it said.