[imagesource: Simon Dawson / Bloomberg]

July was a pretty rotten month for De Beers, although some of the numbers from their latest report are still pretty astounding.

Sure, July was the single worst month since reporting on the company’s 10 annual sales events started back to 2016, but De Beers still pulled in $250 million.

The bad news? That’s less than half the revenue achieved in the same period since 2016, and in July last year, De Beers realised $533m in sales, with $391m in the fifth sale of 2019.

According to Yuen Low, an analyst at Shore Capital, “rough diamond sales fell off the proverbial cliff in Cycle 6”. BusinessLIVE reports:

Year-to-date sales of $2.6bn are tracking nearly 25% lower than at the same time a year earlier when De Beers had realised $3.4bn.

De Beers, 85% owned by Anglo American, is the world’s largest source of rough diamonds by value.

De Beers and other diamond miners have noted the ongoing weakness in the global rough diamond market, largely stemming from weakness in the Indian market, home to the largest cutting and polishing industry, particularly for small, lower-value diamonds.

This is despite the company ramping up their marketing efforts, with a cool $170 million budget allocated for 2019 alone.

CEO Bruce Cleaver described some “unprecedented” recent decisions the company was forced to take:

De Beers has moved away from its strict sales policies with about 80 handpicked clients attending the sales events called sights, allowing them to roll over rough diamond purchases until later in the year…

“With ongoing macroeconomic uncertainty, retailers managing inventory levels, and polished diamond inventories in the midstream continuing to be higher than normal, De Beers Group provided customers with additional flexibility to defer some of their rough diamond allocations to later in the year,” Cleaver said in a statement on Tuesday.

It’s hoped that sales will pick up towards the end of the year, during the ever-popular holiday season, with the next sales event starting on August 19 and running until August 23.

Back in 2017, people were blaming Millennials for ‘killing’ the diamond industry. Now, there is real cause for concern.

Some hard truths via Moneyweb:

The mostly family-run businesses that cut, polish and trade the world’s diamonds are battling to make a profit as demand slumps because of a surplus of polished stones and as demand for high-end jewellery stagnates. It has also become harder for these companies to access financing.

De Beers sells gems at 10 sales a year in Botswana to a select group of customers, who are expected to accept the price and quantities they’re offered. Membership of the group was once a lucrative coup for anyone in the industry, but some buyers are now struggling to make money as De Beers keeps prices high, even if it means selling fewer stones.

The company, a unit of Anglo American,  had already loosened the rules by letting its customers lower their annual quotas and defer purchases. It also trimmed production plans earlier this month as it seeks to match supply with weaker demand for rough diamonds.

Sorry, but don’t expect poor sales figures to mean cheaper diamonds.

I could go off on a rant about how the diamond industry is completely unnecessary, and we are all being taken for fools when purchasing engagement rings and wedding rings and expensive jewellery, whilst renting apartments and coming up short on sufficient retirement planning, but I’ll pass.

[sources:businesslive&moneyweb]