David Block has his work cut out for him as CEO of Sarine Technologies.
The company’s revenue fell 9% to $39.2 million in 2024 as the manufacturers to which it sells planning and cutting equipment curtailed production. While the Israel-based company turned a profit of $1.1 million, mostly by reducing costs, its share price has been on a downward path for the past two years, falling around 55% since April 2023 on the Singapore Exchange and the Tel Aviv Stock Exchange.
This isn’t so bad compared to other diamond-related businesses, such as Gem Diamonds, Mountain Province and Petra Diamonds, yet the reliance on the volatile midstream is something the company clearly needs to address.
Sarine has expanded its business serving the lab-grown sector, which now contributes around 15% to 20% of revenues. But this is a less lucrative segment given the lower value of synthetics compared with natural.
Diamond rings
With this problem in mind, a few years ago, the Sarine board gave Block a mandate to “also look outside of the diamond industry,” the executive tells Rapaport News. “We always want to see what we can do with our existing assets — experience, knowledge, technology, customer base — to leverage the value for our shareholders.”
This, Block says, can be viewed as two concentric circles. The inner ring represents adjacent sectors such as gemstones and precious metals. The outer one refers to opportunities that have no direct connection to the diamond trade but could benefit from Sarine’s capabilities.
The company has experimented with that inner circle in the past. “Seven or eight years ago, we developed a robot for polishing gemstones” that would carry out automated polishing and planning, Block reports. “We actually completed the development of the product [and] went to market, but we didn’t find that the market was big enough to enable that to be cost effective and scaled.”
Visionary move
Sarine’s latest venture, its potential acquisition of Israeli quality-control company Kitov.ai, belongs to the outer circle. Kitov develops technology for in-manufacturing visual inspection of complex equipment — including Israel’s Iron Dome anti-rocket defense system — using robotics and 3D modeling. The company encountered financial difficulties late last year. Its insolvency trustee restructured the company and secured court approval to sell it to Yossi Rubner, Kitov’s main founder. Rubner is also the owner of RTC Vision, from which Kitov originally spun off in 2014.
Now Sarine has signed a nonbinding letter of intent (LOI) term sheet with a view to buying Kitov from Rubner, subject to due diligence and reaching a final agreement, it announced on February 23. If the takeover goes ahead, Sarine aims for Kitov to be profitable in 2026.
The businesses have worked together before: RTC carried out the image-processing work on Sarine’s Galaxy rough-planning systems and its automated clarity grading.
Kitov itself inspects almost anything except diamonds, which are a completely different type of product with different examination needs, says Block. The business’s core process is taking a product design, feeding it into algorithms, building an inspection plan and capturing the necessary data through robotics, enabling it to analyze where any faults are relative to that design.
“There [are] a lot of similarities [to Sarine’s products] in many ways, and that’s why it interests us — on one hand looking also outside of the diamond industry for potential opportunities, on the other hand ensuring synergy. We are not going and investing in a shoe factory but in something parallel to what we do well. It’s still within our core competencies.”
Sarine has not published a timeline for when it plans to complete the deal, but Block notes that its recent acquisition of the New York-based Gem Certification & Assurance Lab (GCAL) took four to five months of due diligence. (As with the GCAL transaction, Sarine has signed and announced a provisional, nonbinding agreement because of the risk of unauthorized information leaking out during the due diligence process, which involves a lot of people.)
Tough spot
Sarine’s main business is not exactly in crisis, Block insists. The company’s 2024 revenue decline was less severe than for the sector as a whole, he points out. For instance, De Beers’ rough-diamond sales slid 25% to $2.72 billion for the year on a consolidated basis (excluding sales by joint-venture partners) — around 55% lower than 2022’s figure of $6 billion. Sarine’s profitability was “up dramatically” after a loss of $2.8 million in 2023.
“No doubt the industry is in a tough spot,” the executive acknowledges. “I think we are dealing with the situation fairly nicely, considering all the external circumstances. The financials do show that. We [have been investing in] new ventures in the diamond industry over the last [few] years, and we continue to do so.”
Examples include its grading reports and its Most Valuable Planning (MVP) software, which uses artificial intelligence (AI) to determine the best way of cutting a rough diamond. Both of these align with the company’s strategy of shifting from outright equipment sales — which have slumped in recent years — to recurring revenues, which saw a small increase in 2024.
Recurring revenues come from services for which customers pay on a per-use basis, eliminating their need to make large upfront investments in a time of market uncertainty.
Rough to polished
One of the most important projects is its collaboration with De Beers’ Tracr blockchain platform, which sees the two integrate their data systems to enhance traceability for diamonds. The parties announced this on February 25, shortly after US Customs and Border Protection (CBP) informed the trade of a plan — subsequently postponed — to require declarations of a diamond’s country of mining for imports into the country. (The companies had already been integrating technology and testing with clients for months before.)
The Tracr-Sarine arrangement will enable the verification of a diamond’s origin along the pipeline by connecting the rough — which Tracr registers at source — with the polished, which Sarine claims to be able to match to the raw material.
This accords with Block’s belief that traceability must be based on objective scientific verification and not merely declarations, and must begin at the rough source.
“Tracr, once De Beers sells a rough parcel, has no idea what happens to that diamond,” Block notes about the system before the collaboration. “There’s no real data. It’s just declarative data in Tracr up until now. It’s the manufacturer saying, ‘I did this, I did that.’ There’s no real ability to verify it. We had something that…Tracr needs, [and] they have something that we needed. We said, okay, let’s work together so that the market can get everything it needs in a traceability solution.”
Diamond services are forever
As for Kitov, the possible additional of this business “provides [Sarine] with the means to diversify into new fields separate from the diamond industry,” according to the company’s press release about the deal.
But that doesn’t mean it’s about to abandon its core. Block gave a cautiously optimistic outlook for the diamond trade this year, noting that supply levels would be key amid a stable situation on the demand side. Diamond-manufacturing levels should recover after the recent large decline, but the executive hopes this will happen in a responsible way amid decent US demand and ongoing weakness in China.
“The diamond industry is and remains an important part of what we do and who we are,” says Block. “That’s not going away, that’s not changing. But yes, we do look [at] where we can utilize our assets and create additional value.”
Main image: A worker at Sarine’s service center in Ramat Gan, Israel. (Sarine Technologies)
