De Beers: Upbeat Financial Results for 2005

February 10, 2006

De Beers: Upbeat Financial Results for 2005

De Beers' 2005 turned out to be a good one financially for the diamond giant, despite financial setbacks related to the settlements of civil class-action suits filed against the company in the U.S. and substantial funds earmarked to facilitate black empowerment transactions in South Africa.

De Beers reported that earnings were up 26% over 2004 figures, at $782 million. Headline earnings were also up at $824 million, before the payment of $250 million to settle the class-action suits. De Beers credits a specific deferred tax gain of $148 million for part of the boost. De Beers also reported a diamond sales record of $6.5 million solidly 15% above the previous year's figures. In 2005, following actions in 2002-2004, De Beers says it made a final distribution of $250 million to facilitate black empowerment transactions.

The De Beers Group's production, including joint ventures in Botswana and Namibia, was 49 million carats in 2005, of which a whopping 31.9 million carats came from its Debswana venture. De Beers also closed some unprofitable mines in South Africa, namely the underground operations at Kimberley as well as Koffiefontein mines.

"There are indications of a 6%-7% growth of diamond jewelry sales in 2005," De Beers officials remarked at a press conference. It also noted that American retailers had a "satisfactory" Christmas selling season, with high-end independent jeweler and Internet sales outperforming the market. Japan and the Asia-Pacific region grew in single-digit advances, as did China. De Beers says the most significant growth was in the Asia-Arabian zone, which reports double-digit growth. De Beers ushered in higher prices for diamond rough at its sights in 2005, through two price increases that averaged an 9.5% increase over 2004. De Beers says that the outlook for diamond rough remains healthy, with demand strong and steady at diamond cutting centers, despite higher-than-average stocks reported at the beginning of 2005.

De Beers also reported the retirements at the end of February of two key officers: Gary Ralfe, managing director, and Paddy Kell, finance director. Ralfe will assume a role as non-executive director on the De Beers SA Board. Gareth Penney and Stuart Brown, respectively, succeed the two retirees.

by Robert Weldon, G.G.

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