Alrosa diamonds are on the mend after a horrible quarter

Photo Unsplash @entradaphotography

Russian President Vladimir Putin does not like bad news. And less if the figures that you put in front indicate that the sales of the Alrosa diamonds, company majority controlled by the Russian state “Have fallen to 1920 levels»In the middle of the Bolshevik Revolution. So I told him Ivan Ivanov, CEO of Alrosa to the highest Russian president.

ALROSA CEO Ivanov – To Putin: The failure of diamond sales that occurred in the second quarter was unprecedented. Most experts compare these figures with the 20s of the last century – with a drop in sales of 90-95%

Covid-19 has had devastating effects on the luxury gem industry. In the case of Alrosa diamonds, suffered drops of 95% compared to the same period of 2019. Interestingly, the financial markets have not punished Alrosa’s share excessively, which has risen from 70 rubles to 75 in one year. Even above the selective Russian. Although it is true that the Russian stock market has been affected by the devaluation of the ruble by almost 20%, in the aforementioned period, which has eliminated said profit expressed in euros.

The diamond industry before Covid-19

The industry, even before the outbreak of the coronavirus, at the end of 2019, was not going through its best moments. Various analysts like Libcrtum Capital Markets they echoed their problems, with overcapacity and falling prices. They also announced that recovery was far from taking place and that without knowing the health catastrophe that was coming.

According to Ivan Ivanov, “In the second quarter of 2020, jewelry consumption in key markets declined significantly as a result of measures taken in several countries to contain the spread of Covid-19. Both the retailers and the diamond cutters and polishers had sufficient accumulated stocks. Sufficient supply to meet the decrease in demand. Taking that into account, key mining companies, including Alrosa, decided to support their clients. And they allowed them not to buy the contractual volumes, so that they could reduce their accumulated stocks. Because of that, our activity in the second quarter was as low as we had anticipated. The proceeds from diamond sales have been just $ 87 million. “

Alrosa improvement in September

Sales of rough and polished diamonds in September totaled $ 336.0 million. Including rough diamond sales revenue of $ 328.2 million and polished diamond sales of $ 7.8 million. During the first nine months of 2020, total sales of rough and polished diamonds represented $ 1.58 billion. Including $ 1,508 million in rough diamond sales and $ 71.4 million in polished diamonds.

Alrosa’s sales for September demonstrate continued recovery in demand of diamonds that started in August. So cutters and retailers were gradually normalizing their stock levels. In the key end-user markets of the US and China, jewelers begin to win back customers. A trend well supported by the rapid development of online commerce. However, it’s too early to talk about a steady recovery demand before seeing the results of jewelry sales for the Christmas season, the most important.

Slight increase in demand for diamonds

The retail sector is already showing signs of recovery and in June, demand for jewelry in the US increased by 1.9% year-on-year. Additionally, consumer activity in China also increased. We are seeing the first signs of growth in diamond imports to countries like India as polished diamond exports rebound.

As indicated Evgeny Agureev, Deputy General Manager of Alrosa: “The company’s performance started to improve in August. Since prices have been reduced to stimulate demand and intermediate players sought to cover the shortage that had arisen during the closing. Manufacturers searched for products in September before the Diwali festival in November, which generally closes the Indian cut industry for a few weeks and occurs shortly before America’s important Christmas season. “

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