Alrosa Sales Hit by Weak Rough Demand

RAPAPORT… Alrosa’s sales fell in the third quarter as the rough-diamond market slowed ahead of the Diwali festival.

The company reported rough sales of $848 million during the period, which was 13% lower than a year ago, according to Rapaport records. The decline reflected a drop in rough demand experienced during the summer.

Amid the slowdown, Alrosa permitted clients to reject up to 50% of their allocations by volume at the August and September contract sales, in contrast to the usual 30% allowance, market sources said. Clients’ actual rejection rate was at normal levels, an Alrosa spokesperson said.

Meanwhile, the average price achieved from Alrosa’s sales declined 3% year on year to $114 per carat, according to Rapaport calculations. The company’s average price achieved in 2017 has been lower due to higher-than-usual sales of lower-quality goods.

“Alrosa’s revenue results in 2017 were impacted by sales of additional volumes of small goods with a low price, which remained unclaimed in the Indian market last year but were in demand in [the first half of 2017],” the spokesperson explained.

Consequently, sales in the first nine months of the year declined 6% to approximately $3.3 billion, Alrosa reported. The volume of sales increased 6% to 31.8 million carats, slightly above the company’s production for the period.

Group output grew 6% to 29.5 million carats in the nine months, mainly due to increased mining at alluvial deposits and certain key assets, including Udachny and Karpinskogo, explained Igor Sobolev, Alrosa’s first vice president. Production in the third quarter decreased 6% to 10.3 million, largely attributable to a 20% decline in the Mirny division, where a major flood caused a shutdown of the mine in early August.

The miner reaffirmed its production outlook for the year, projecting an increase of 5% to 39.3 million carats, and maintained a positive outlook for the fourth quarter.

“The third quarter and beginning of autumn is traditionally a period of low activity on the market,” the spokesperson said. “However, retail sales continue to show good results, which gives reason to expect an improvement in market activity in preparation for the winter holiday season.”