Diamond giant De Beers Group says demand for rough gems remains under short-term pressure as travel restrictions in southern Africa remain in place while coronavirus outbreaks have hit India’s cutting centres.
De Beers Group, which has had to conduct its June sale cycle online in Antwerp, has warned significant challenges for rough diamond demand look set to continue in the short-term, given ongoing travel restrictions and the risk of further Covid-19 cases in Indian cutting centres. Both De Beers’ Executive Vice-President- Diamond Trading, Paul Rowley and the company’s Executive Vice President-Corporate Affairs, David Prager maintained that the long-term outlook remains positive. The group says it has a business transformation plan to boost margins by, among other things, modernising the way it sells diamonds.
Paul Rowley said;
“It will take time for business to return to its resilience. The Antwerp sight was promising and we should not ignore the full benefits of technology during this tough period. Our sales model will require us to utilise the online platforms, as it will take time to see people start travelling again. We should not lose the benefits of that, but that does not mean technology should replace the physical meetings going forward.”
“While challenges remain, we expect rough diamond demand to improve in the second half of 2020, supported by the positive signs we are seeing with retail demand for diamond jewellery as markets re-open. We have a resilient business that has come through a range of challenges over our 130-year history – we are focused on leading the diamond sector for the next 130 years.”
Prager said the group is carefully managing the aspects of the business that it can control to support a strong future.
“Our strong balance sheet coming into the crisis meant we could respond quickly, support our partners and continue investments in strategic initiatives, while managing costs in other areas.
We took decisive short-term actions in the first half to preserve cash and support our future, including a comprehensive review of all operating and capital costs across the business. We also substantially reduced rough diamond production for the year in response to the temporarily reduced demand for rough diamonds,” added Prager.
The group aims to continue to maintain strict cost discipline, while focusing on accelerating the transformation of its business that was already underway pre-COVID-19. Responding to Sunday Standard, Prager said the company has been doing research for demand under the tough times of Covid-19.
“It came out that consumers are looking for fewer things that can last, stable pieces that communicate consistency. As it is now a few months away from the Christmas festivities and the Chinese New Year,” he said.
Prager further indicated that the National Diamond Council will soon be launching a new campaign targeting consumers who want to express themselves through purchases that present a clear purpose of sense and connection.
“As the climate improves, consumers will have greater respect for all things natural and seek brands that have an honest mission to be truly sustainable. They will be purchasing luxury goods with greater meaning,” explained Prager.
Asked about the possibility of job losses locally, Rowley said the outcome has not been reached yet as work to review the operations is in progress. De Beers CEO, Bruce Cleaver recently told Reuters that consultations with workers will begin on August 11. He said the business overhaul “is likely to lead to some job losses, but I can’t tell you at this point what that number will be”.
Cleaver said the process would last three months and involve a review of mining, rough sales, retail and the corporate centre, but excludes joint venture businesses in Botswana and Namibia where the miner employs 20 000 people. De Beers, a unit of Anglo American, reported plunging earnings in the first half of 2020 as a drop in rough diamond sales and prices hurt margins. This saw its total revenue shrink by 54% to $1.2 billion, with rough diamond sales falling to $1.0 billion compared to $2.3 billion in the first half of 2019.
Botswana closed all its borders to travellers in March, restricting buyers’ ability to examine rough diamonds available for sale. Debswana, the main producer of rough diamonds in the southern African country, is trimming output this year to match flagging global demand. While officials have declined to give exact estimates, they have said production will be well below the original target of 23 million carats.