Industry News by Nemesis

ALROSA Expects Net Income to Rise 2-3x in 2016 Despite Fall in Rough Diamond Prices

October 12, 2016

According to Finmarket.ru, in an article translated and published by Rough-Polished, ALROSA President Andrey Zharkov said in an interview with television channel "Russia 24" that the company will drive its sales to 37 million carats (equal to output) in 2016, a 23% over 2015.

 

ALROSA produced 38.3 million carats in rough diamonds last year, selling 30.1 million of them. 

 

Zharkov attributed the expected increase to the shortage of rough available in the midstream (diamond and jewelry manufacturing) this year, caused by lower sales on the part of diamond producers in 2015 due to a sharp drop in demand from the midstream. As a result of the anticipated increase in sales, Alrosa's diamond stocks of may fall by 5%-6% by the end of 2016 to the level where they were at the start of the year.

 

ALROSA earned $3.6 billion (RUB 224.5) in revenues in 2015, which the company expects to increase by 15% this year. Net profits in 2015 were $500 million (RUB 32.2 billion), which represented a 291% increase over 2014 when the company had a net loss of $270 million (RUB 16.8 billion).

 

In the interview, Zharkov said he expects net profit in 2016 will increase “by a factor of two or three” over 2015 levels, despite anticipating rough diamond prices to fall 2-3% compared to last year. "Initially, while drawing up the budget, we projected a decline of 5-6%. I do not think there will be a rise in prices based on the results of this year, instead I think prices will fall by an average of 2-3%," he said. 

 

Rough-Polished adds that ALROSA has lowered its production target to 37 million carats from 39 million carats in response to falling demand. However, ALROSA is still pursuing the goal to ramp up its diamond output to about 41 million carats in the coming years.

 

Meanwhile, when asked about the prospects of Russia floating another 8% stake in the state-owned shares in ALROSA, Zharkov said, "at present the shareholders composition is balanced … I do not think that the state is going to further reduce its stake. This is a decision that depends entirely on the wishes of the shareholder, but I think that the state is interested to maintain a balanced ownership composition."

 

The miner’s net cash flow permits it to allocate 50% of its net profit to dividends, as it was last year.

 

Source: The Diamond Loupe

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