The sentiment of increasing diamond jewelry sales
According to Alexey Philippovskiy, Alrosa Q1 2018 results was able to take full advantage of the improved market environment, which was the main driver behind our strong financial performance, well supported by Alrosa’s cost controls.
He thanks to increasing diamond jewelry sales and diamond prices, the sentiment in the rough diamond market is also positive. Higher demand for medium and large size diamonds in early 2018 led to 27% and 31% increase in the average price of the diamonds and gem-quality diamonds sold, respectively. The hike in sales came on the back of diamond cutters’ restocking due to higher than expected amounts sold by retailers during the New Year holiday season.
Production in Q1 2018, Alrosa Group’s diamond production was about 7.4 million carats, down by 26% quarter-on-quarter and 17% year-on-year. The key factors behind the decline were reduced production at Mir mine following August 2017 accident, processing of lower grade ore from the Jubilee pipe and termination of processing of ore from the Udachnaya pipe after the open-pit mining was completed.
Alrosa sales in Q1 were 13.4 million carats, up by 43% and by the way Q4 2017 figure was still 5% lower than last year. The difference between sales was covered by diamond inventories, which decreased by almost 33% over Q1 2018 and stood at 12.3 million carats as at the end of March 2018, approaching the technological minimum level.
Its’ first quarter revenue reached RUB 96 billion – 58% higher than the last quarter and 13% higher year-on-year. Sequential growth was driven by strong sales, improved product mix and overall growth in prices.
Our Q1 margins expanded to 50%, 9 percentage points above the last year’s results. Company demonstrated strong free cash flow generation and solid financial standing.
“Our production outlook for the year remains unchanged at 36.6 million carats. Our sales are expected to be in the range of 38-40 million carats” said Alexey Philippovskiy.
