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Interim Financial Results for 2021

29 Jul 2021

Financial and operational metrics (1)

 

Production

volume

Sales

volume

 

Price

Unit

cost*

Group revenue*

Underlying

EBITDA*

EBITDA margin* (6)

Underlying

EBIT*

Capex*

ROCE*

 

’000
cts

’000   
cts(2)

$/ct(3)

$/ct(4)

$m(5)

$m

 

$m

$m

 

De Beers

15,409

 

19,161

 

135

 

59

 

2,900

 

610

 

42

%

377

 

205

 

6

%

Prior period

11,277

 

8,547

119

 

62

 

1,223

 

2

 

49

%

(179)

 

159

 

(4)

%

Botswana

10,687

 

n/a

 

131

 

35

 

n/a

 

226

 

n/a

 

203

 

29

 

n/a

 

Prior period

7,469

 

 

124

 

36

 

 

83

 

 

57

 

29

 

 

Namibia

676

 

n/a

 

578

 

374

 

n/a

 

43

 

n/a

 

25

 

23

 

n/a

 

Prior period

869

 

 

477

 

208

 

 

28

 

 

14

 

30

 

 

South Africa

2,437

 

n/a

 

107

 

48

 

n/a

 

113

 

n/a

 

34

 

122

 

n/a

 

Prior period

1,306

 

 

94

 

71

 

 

26

 

 

(20)

 

58

 

 

Canada

1,609

 

 

55

 

42

 

n/a

 

35

 

n/a

 

5

 

17

 

n/a

 

Prior period

1,633

 

 

56

 

39

 

 

36

 

 

12

 

12

 

 

Trading

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

279

 

11%

 

276

 

1

 

n/a

 

Prior period

 

 

 

 

 

(17)

 

(2)%

 

(20)

 

1

 

 

Other(7)

n/a

 

n/a

 

n/a

 

n/a

 

n/a

 

(86

)

n/a

 

(166

)

13

 

n/a

 

Prior period

 

 

 

 

 

(154

)

 

(222

)

29

 

 

(1) Prepared on a consolidated accounting basis, except for production, which is stated on a 100% basis except for the Gahcho Kué joint operation in Canada, which is on an attributable 51% basis.
(2) Total sales volumes on a 100% basis were 20.8 million carats (30 June 2020: 9.2 million carats). Total sales volumes (100%) include De Beers Group’s joint arrangement partners’ 50% proportionate share of sales to entities outside De Beers Group from Diamond Trading Company Botswana and Namibia Diamond Trading Company.
(3) Pricing for the mining business units is based on 100% selling value post-aggregation of goods. Realised price includes the price impact of the sale of non-equity product and, as a result, is not directly comparable to the unit cost.
(4) Unit cost is based on consolidated production and operating costs, excluding depreciation and operating special items, divided by carats recovered.
(5) Includes rough diamond sales of $2.6 billion (30 June 2020: $1.0 billion).
(6) Total De Beers EBITDA margin shows mining EBITDA margin on an equity basis, which excludes the impact of non-mining activities, third-party sales, purchases, trading downstream and corporate.
(7) Other includes Element Six, downstream, acquisition accounting adjustments and corporate.

Markets

Global consumer demand for diamonds continued to recover from the impact of Covid-19, supported by fiscal stimulus in the US and the roll-out of Covid-19 vaccines. Restrictions on international travel and entertainment over the course of the pandemic resulted in higher discretionary spending on luxury goods, including diamond jewellery.

In the first six months of 2021, the cutting centres achieved strong sales of polished diamonds in response to the ongoing recovery of consumer demand. However, the severe Covid-19 wave in India during April and May reduced capacity at cutting and polishing operations within the key Indian midstream sector, which was further exacerbated by polished diamond grading backlogs in key markets. The relative shortage of polished supply contributed to a positive polished price trend in the first half of 2021.

The recovery of demand in all parts of the pipeline enabled rough diamond producers to destock at the start of 2021. This robust demand, combined with supply constraints arising from production challenges, created a favourable dynamic in the first half of 2021 that also supported higher rough diamond prices.

Financial and operational overview

Total revenue increased significantly to $2.9 billion(1) (30 June 2020: $1.2 billion), with rough diamond sales rising to $2.6 billion(1) (30 June 2020: $1.0 billion), driven by robust rough diamond demand as the midstream pulled through stocks in response to the recovery in consumer demand, with rough diamond sales volumes significantly higher at 19.2 million carats (30 June 2020: 8.5 million carats). The average realised price rose by 13% to $135/ct (30 June 2020: $119/ct), driven by a larger proportion of higher value rough diamonds. The closing price index was 14% above the opening index over the first six months of 2021, reflecting positive consumer demand for diamond jewellery as well as tightness in inventories across the diamond value chain.

Underlying EBITDA increased to $610 million (30 June 2020: $2 million), broadly returning to 2019 levels, owing to the recovery in sales. Unit costs were lower than in the first half of 2020 at $59/ct (30 June 2020: $62/ct), as the benefit of higher production was primarily offset by unfavourable exchange rates.

Capital expenditure increased by 29% to $205 million (30 June 2020: $159 million), largely due to a reduction of sustaining projects during 2020 in response to Covid-19. The Venetia Underground and Jwaneng Cut-9 life-extension projects continued to progress and the new AMV3 vessel for Namibia remains on track for commissioning in 2022.

(1) Total revenue and rough diamond sales for the six months to 30 June 2019 were $2.6 billion and $2.3 billion respectively.

Operational performance

Mining and manufacturing

Rough diamond production increased by 37% to 15.4 million carats (30 June 2020: 11.3 million carats) primarily due to the lower levels of production in the first half of 2020 resulting from Covid-19 related shutdowns and the response to the resultant reduced demand owing to the pandemic.

In Botswana, production was 43% higher at 10.7 million carats (30 June 2020: 7.5 million carats) as production was increased in response to stronger prevailing demand. Production at Jwaneng increased by 44% to 6.3 million carats (30 June 2020: 4.3 million carats), and production at Orapa increased by 41% to 4.4 million carats (30 June 2020: 3.1 million carats), despite the impact of heavy rainfall at the beginning of the year.

In Namibia, production decreased by 22% to 0.7 million carats (30 June 2020: 0.9 million carats) due to planned maintenance of the Mafuta crawler vessel and the continued demobilisation of another vessel.

In South Africa, production increased by 87% to 2.4 million carats (30 June 2020: 1.3 million carats), owing to the impact of the Covid-19 shutdown in the first half of 2020, as well as planned processing of higher grade ore from the final cut of the open pit while the mine transitions to underground operations, where first production is expected in 2023.

In Canada, production was broadly in line at 1.6 million carats (30 June 2020: 1.6 million carats) due to a Covid-19 related temporary shutdown being offset by higher grade and plant throughput.

Brands and consumer markets

The first half of 2021 saw a strong recovery in consumer demand for De Beers’ branded diamond jewellery from both De Beers Jewellers and De Beers Forevermark.

Online jewellery sales continued to show strong growth, reflecting the strong e-commerce growth trend over recent years as consumer buying habits continue to evolve into the digital age.

Operational and market outlook

The strong recovery in consumer demand is expected to continue, as the global economy recovers from the impact of Covid-19. In addition, midstream capacity is expected to increase during the second half of the year, subject to the Covid-19 situation in India.

The longer term transformation of the diamond value chain continues, including a sustained focus on stock level optimisation and distribution of polished diamonds and diamond jewellery, increased online purchasing, and greater focus on the provenance and sustainability credentials of companies and their products. The long term outlook for diamond jewellery demand remains positive, while the lack of new diamond projects means supply is likely to be flat or declining for the foreseeable future.

Full year production guidance is 32–33 million carats (100% basis), subject to trading conditions and the extent of any further Covid-19 related disruptions. Full year unit cost guidance is revised to c.$62/ct (previously c.$55/ct), reflecting the impact of exchange rates, marginally reduced production volumes and Covid-19 related disruptions.