London: De Beers, the world’s top diamond producer, said it expected a better second half, when reporting that tough markets had all but wiped out its first-half profit.
“After very difficult trading conditions experienced in Q1, Q2 saw a significant pick-up in sales,” De Beers said on Friday.
“At the retail level, demand remains subdued in the major US market. As the rate of decline in demand has slowed, however, the second half should see improvement.”
De Beers, 45%-owned by mining group Anglo American Plc, diamond market, said net profit in the first six months of the year tumbled 99% to $3 million from $316 million a year ago.
The firm, which controls about 40% of the rough diamond market, said unpolished diamond sales slid 57% to $1.4 billion.
De Beers, with mines in Botswana, South Africa, Namibia and Canada, slashed output and production fell 73% to 6.6 million carats. It cut overall costs by more than 50% and reduced the global workforce by 23%.
“The industry has been severely impacted by the global economic environment being the most difficult in decades,” it said. “De Beers will continue to take a cautious approach in terms of production, sales and cost management, while anticipating the continued steady recovery of the industry.”
Demand from emerging markets, however, such as China and India, remained positive, it said.
The group had total net debt of $4.06 billion at end-June, giving a gearing level of 40% and up from $3.8 billion at end-2008.
Shareholders in De Beers gave the group an interest-free loan of $500 million in the first half and analysts have said the group may have to request more help, but there was no mention of that in the statement.
De Beers was in talks with banks on the renewal of a $1.5 billion term loan facility that expires in March 2010, it said.
“These discussions are ongoing and management expects to conclude the outcome during the course of the second half.”