De Beers’ recovery has been fueled by “remarkably strong” demand for diamonds in the United States, CEO Bruce Cleaver tells JCK.
“The best and strongest recovery is in the United States, far more than China,” he says. “The good news is the natural diamond category is remarkably resilient.”
Cleaver notes larger, higher-value goods have done particularly well.
He credits the upswing to the recently passed economic stimulus package, effective marketing, and consumers not spending on travel. But he says there is not a perfect correlation for the latter, as Chinese tourists often purchase jewelry on trips.
Some in the industry are worried that a possible travel rebound could hurt diamond demand, but Cleaver doesn’t see that happening soon, given concern over the COVID-19 Delta variant.
Still, the market is doing so well, it’s causing a bit of nervousness. A recent overview of the diamond pipeline said that in the gem business, “a good year always sets the stage for the next year’s underperformance.” Already, some are warning about a “diamond price bubble.”
Cleaver doesn’t see the boom-and-bust cycle happening this time, noting there is less rough supply in the pipeline, and citing the closure of Argyle and the planned winding down of several other mines. “The levels at the midstream are lower and more in balance than I’ve seen for a while,” he adds.
According to financial results released today, De Beers’ average per-carat price rose 14% in the first half of the year. But those increases are mostly making up for past price decreases, Cleaver says, and its prices are roughly on par with where they were pre-pandemic.
De Beers generated $2.9 billion in revenue for the first six months of 2021, more than double the $1.2 billion it posted for the same period in 2020, when most of the world was in lockdown. Underlying EBITDA (earnings before interest, taxes, depreciation, and amortization) for the period was $610 million in 2021’s first half, as opposed to a paltry $2 million the prior year.
On other topics, Cleaver tells JCK:
• The “one De Beers” strategy that includes bringing Forevermark and De Beers Jewellers under one CEO, and the rebranding of Forevermark as De Beers Forevermark, is a huge project that will take time but will ultimately let the company better utilize its ad spend, he says. He adds the two brands will remain “different businesses.”
He says Forevermark had a “good year,” and De Beers Jewellers had its “best six months ever” in China. The company’s lab-grown Lightbox brand also had a “good year,” and with its production facility up and running in Oregon, Lightbox hopes to expand its distribution.
• As far as Pandora’s move into lab-grown diamonds, Cleaver feels it got “disproportionate” publicity, considering how few natural stones Pandora used before, but adds that a fashion brand is “where we expect lab-grown diamonds to be sold.”
• Cleaver believes that De Beers will “maximize the value” of two blue diamond purchases it recently made with Diacore.
“It takes a lot of effort to sell diamonds like those,” he says. “Opportunities like that come once in a blue moon. We prefer to sell our own production, but we do feel like they will be worth it.”
• While the London-based Cleaver would like to attend the JCK Las Vegas show at the end of August, he currently can’t, because of travel restrictions that limit non-U.S. citizens from entering the country. However, two De Beers executives who also hold American passports—executive vice president Stephen Lussier and chief brand officer David Prager—will be there. De Beers is staging its traditional Thursday morning breakfast at Luxury by JCK on Aug. 26.
• Along with its financial results, Anglo American, which owns 85% of De Beers, announced today it would earmark $100 million for the Anglo American Foundation to pursue different projects. Cleaver says that De Beers plans to make several applications, noting the company has already spent devoted funds to distribute COVID-19 vaccines to producer countries in southern Africa.
(Photo: Getty Images)
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