Signs of recovery at De Beers

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Group posts sales uplift as jewellery and rough demand returns

Some sparkle has returned to De Beers as it delivered its full-year results, with a sales uplift and encouraging signs that demand for rough diamonds and diamond jewellery is starting to bounce back.

Consumer demand for diamond jewellery has also started to recover in 2010, although this is largely driven by demand in emerging markets such as India and China. De Beers said that demand in 2009 had dropped by a single-digit percentage.

De Beers reduced operating and production costs for the year by 45% to US$1.1bn (£704m) as demand for rough diamonds dropped and it scaled back production. However, the company said that the beginning of 2010 brought with it an increase in demand for rough stones and it expects this to continue at its second Sight of the year in February.

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Sales jumped 24% in the second half of the year to December 31, achieving a full-year total of US$3.84bn (£2.46bn). EBITDA was US$654m (£418m) for the year and profit before net interest and tax was US$318m (£203m); both down on the previous year’s figures.

During the first half of the year De Beers commenced discussions with its lending banks to renew its outstanding US$3bn (£1.92bn) borrowing facility, of which US$1.5 billion becomes due and payable in March 2010. International and South African financing term sheets have been agreed, and credit approval granted, by the syndicates of lending banks.

De Beers said that its shareholders have shown strong support by agreeing to subscribe for additional equity capital of US$1bn (£639.7m) in proportion to their existing equity holdings, which will enable a reduction in overall debt and strengthen the group’s balance sheet. The detailed documentation of the new financing structure is expected to be concluded before the end of March 2010.

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