16 Feb 2015

The De Beers Group had a good year as well as strong financial and operating performance in 2014, De Beers Group head of strategy and corporate affairs, Mr Bruce Cleaver, has said.

Giving an overview of the De Beers Group financial results on February 13, Mr Cleaver said the results that were released by December 31, 2014 indicated that the operating profit increased by 36 per cent to USD 1.4 billion (P13 .5 billion).

This, he said, was made possible particularly by the fact that in the first three quarters of the year, there was good demand for rough diamonds across key markets, particularly the United States of America which resulted in strong revenue growth. The Group, he said realised a strong revenue growth of about 11 per cent, but also had quite some assistance from foreign exchange in Taiwan.

“Since the USD is stronger than many currencies, including the South African and Botswana currencies. This is particularly helpful for the businesses that operate in the Southern hemisphere, because their costs are largely in Rand and Pula, but they sell in USD,” he said. 

In terms of diamond production, Mr Cleaver said the Group’s production was up by about 5 per cent at 32.6 million carats compared to 31.2 million carats in 2013, “slightly ahead of where we were previously, because of very strong performance from Debswana, as both Jwaneng and Orapa mines did very well.”

De Beers Group, he said continued to focus on its key brands- Forevermark being the core brand This brand Mr Cleaver said was doing very well and was now available in more than 1 500 retail stores around the world in 34 markets, including now 400 in America, which he said was the biggest market. 

The purpose of being in business, Mr Cleaver said was really to make profit, but with a clear purpose, adding that De Beers Group had invested a considerable amount of money and would continue to do so over the coming years. 

He said the Group would invest USD 3 billion (P29 009 400 000) in 2016 to develop one new mine in Canada, which was probably the biggest new diamond mine to be built in 10 or 20 years. In addition, he said the Group was also extending the lives of two of its very important mines, namely Jwaneng Cut8 and a flagship mine in South Africa.

“Obviously, each of the investments we make have a strong retrospect which creates jobs all the way from the mine back to where goods are being produced and its helpful in developing our supply change,” he said.

In 2014, Mr Cleaver said De Beers Group spent about USD 700 million (P6 768 860 000) investing in mines- the new mine in Canada and keeping the existing mines going. He said the Group plans to invest somewhere between USD 800 million (P7 735 840 000) and USD 850 million (P8 219 330 000) across the world, in 2015. This, he said was a tremendous illustration of its commitment to the industry and how positive it was about the future of the diamond business.

“There is always the threat of undisclosed synthetic and/or manufactured diamonds coming into the natural pipeline and we spend tremendous amount of time and money on maintaining consumer confidence and building machines that can detect undisclosed synthetic. So, that’s another area where we always invest our profits heavily in,” he added. 

Furthermore, Mr Cleaver said De Beers Group global production for 2015 was forecast to be between 32 and 34 million carats, but this was subject to market demand.

As De Beers Group, he said they still remained very positive in relation to the diamond industry. He said 2015 was likely to be a slightly very tight year, but were very positive about the medium to long tern fundamentals of the diamond business. 

“We see on any analysis that the growth in demand by consumers for diamonds should abstract the growth in the production, when you look at all the production around the world. So, that’s one of the reasons we find confidence in when we invest all this money around the world, because mid to long term we think that the fundamentals of this business are very good,” he said.

The year 2015, the Group Head of Strategy and Corporate Affairs said was likely to be a slightly difficult year than 2014, but probably a little bit slower. The Group’s initial estimates for growth in diamonds jewelry, Mr Cleaver said was between three and four per cent- largely lower than 2014. However, he said the good news for them in the diamond world, was that the main markets were in economies that continued to do well. 

“The US is our biggest market and that’s an economy that recovered the quickest from the economic recession and it’s in quite a good shape. This resulted in healthy diamond jewellery sales growth throughout the year. Our next two biggest markets are in China and India. 

China, he said had immersive growth potential, adding that India was also well positioned.

However, he said the China market “probably won’t grow fast in the future as it has been in the past, but that is because the base from which it’s growing has gotten bigger. The Chinese economy doubled in five in the last five years, so you wouldn’t expect for the new base growth to get higher than before, but we feel very confident about strong growth for in China.”  ENDS