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Feb 17, 2016
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De Beers targets U.S. market after revenue drops 34 percent

By
Reuters
Published
Feb 17, 2016

De Beers, the world's largest diamond producer by value, is focusing on the U.S. market for growth this year after a sharp decline in 2015 earnings due to lower production and depressed prices.

The miner, 85 percent owned by Anglo American (AAL.L) and 15 percent by the Botswana government, reported a 34 percent drop in its 2015 revenue to $4.7 billion and a 58 percent fall in underlying earnings before interest and tax to $571 million.



"At this stage we still see the U.S. being the primary source of growth for the diamond market. Beyond that so much is down to the economic performance and consumer confidence in China and India and on the exchange rate," De Beers Chief Financial Officer Gareth Mostyn told Reuters in an interview.

"Financial results were disappointing... but the priority for us was to respond in a decisive way through adjusting production, reducing prices and putting more investment behind marketing," he said.

De Beers produced 28.7 million carats in 2015 after lowering its target several times from a high of 32 to 34 million carats, with rough diamond prices falling by 15 percent over the course of last year. It aims to produce between 26 to 28 million carats this year.

Mostyn said diamond demand over the Christmas season and in the new year in the United States had been encouraging, suggesting the U.S. market could drive growth for the diamond industry.

At the first sale of 2016 held in Gaborone in January, De Beers sold $540 million worth of diamonds, a 117 percent jump from $248 million in the last sale of 2015.

Mostyn would not provide forecasts for diamond demand or price trends for 2016, saying it was difficult to predict the sector's growth in China, the company's second-biggest market, in the short term.

"However, in the medium- to long-term, we are very confident about China as all the fundamentals are still strong. India is also a very significant market for us and we remain very positive about the growth that can be stimulated there."

 

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