De Beers posts 26% increase in profit, paints rosy outlook for 2006

De Beers posts 26% increase in profit, paints rosy outlook for 2006

	Published : Sun, 12 Feb 2006 07:55 By : Cedric Benson Print this Story

LONDON: De Beers, the world's largest diamond producer, has achieved a 26 per cent increase in its 2005 earnings, as demands in Asia and the U.S. reigned at their top.

The company made a profit of $824 million during the year, up from $652 million in 2004. It made a payment of $250 to settle a class action lawsuit in the U.S. Sales rose 15 per cent to $6.5 billion as production grew to a record level of 49 million carats, the company said.

Demand for rough diamonds continues to be steady, said the company. However, stocks of rough as well as polished diamonds at cutting centres were high at the beginning of the new year as were aggregate debt levels, it said. In spite of this, the outlook for the current year is positive "with market growth expected to be similar to 2005 in line with expectations for global economic growth".

De Beers sells diamonds mined by itself in South Africa and through joint ventures in Botswana and Namibia to selected clients in 10 sales during a year known as sights. It also buys diamonds from competitors such as ZAO Alrosa, Russia's state-owned diamond monopoly, to offer at the sales.

Gareth Penny, managing director-designate of the company said retail sales of diamond jewellery recorded a 6 to 7 per cent growth, with India becoming an important market for the precious stone.

He said the company intends to maintain its production levels and it has no plans to increase the prices. Its London-based trading arm Diamond Trading Co. had raised rough diamond prices twice in 2005 by a cumulative 9.5 per cent over 2004 prices.

Penny said the company, which accounts for half of the world's diamond supply, will spend $100 million in 2006 for exploration work in Botswana, Canada, Zimbabwe, India and Australia. The company is into a $115-million marine mining project off the coast of South Africa, which involves mining diamonds from sea beds.

Chairman Nicky Oppenheimer had earlier said the company intends to sell its 26 per cent stake in a South African unit to a new black-owned firm for around $622 million, as part of a government plan for empowerment of the blacks.

De Beers said it has made a contribution to the headline earnings of its 45 per cent stake owner, mining giant Anglo American Plc. to the tune of $430 million.