Harry Winston Returns to Profit Thanks to Favorable Exchange Rate

Harry Winston Diamond Corporation third quarter net earnings rose to $71.9 million compared to a net loss of $7.4 million in the third quarter of the prior year, the company reported Wednesday. However, its sales declined in the quarter ending October 31.

The firm benefited from a $49 million foreign exchange gain because of the weakening of the Canadian dollar against the U.S. dollar, compared to a $40.6 million foreign exchange loss in the prior year.

Consolidated sales were $148.6 million for the third quarter, declining 15.81 percent compared to $176.5 million in the third quarter of 2007. The decline in sales resulted in a 24 percent decrease in gross margin and a 35 percent decrease in consolidated earnings from operations.

“Current world economic conditions present unprecedented challenges,” Chairman and CEO Robert Gannicott said in a statement. He said Diavik “would remain profitable through diamond pricing that would force the closure of the majority of the world's diamond production.” The company holds s a 40 percent stake in the diamond mine.

Rough diamond sales sank 26 percent to $90.7 million due to reduced production. This lead to a 33 percent decline in rough diamond earnings to $47 million. Production at the mine decreased 26 percent to 0.9 million carats.

The decline in production was a result of low grade mud-rich material at one of the mine pipes. After production returned to normal levels, Harry Winston was hit by the drop in rough diamond prices.

The retail segment of the company enjoyed an 8 increase in sales to $57.9 million, yet a loss from operations of $4 million, growing from a $3.6 million loss in the comparable quarter of the prior year.

“Sales growth in the US and international markets offset continued soft sales in Japan,” according to Harry Winston President Thomas O'Neill.

In regards to the December 4 armed robbery of the store in Paris, O'Neill said, “We continue to cooperate fully with the authorities' on-going investigation and with our insurance company.