Gem Diamonds interim profits drop amid lower prices
Gem Diamonds reported a slump in half-year profit on Thursday as revenue fell amid lower average prices.
In the half to 30 June, pre-tax profit declined to $18.7m from $67.4m in the first half of last year, with revenue down to $91.3m from $167.7m. This came as the average price per carat achieved fell to $1,697 from $2,742. The company also recovered fewer carats, at 56,668 compared to 61,586 in H1 2018.
Gem said pressure on pricing of smaller, commercial type rough diamonds has continued, with inventories in the manufacturing and polished markets still high after a disappointing 2018 holiday season and weak subsequent restocking.
"Furthermore, the persistence of financing challenges specifically in the mid-stream segment has caused cash flow concerns for a number of manufacturing operations," it said.
"This, in many cases, has forced manufacturers to reduce stock levels resulting in increased diamond supply by diamond producers in an already saturated market."
In the medium to long term, prices of rough diamonds are expected to be supported by favourable demand/supply fundamentals, which are underpinned by a continued growth in demand from emerging markets and a limited growth in supply, the company said. In the short term, supply is expected to drop with the depletion of existing mines.
At 1520 BST, the shares were up 1.9% at 73.40p.