Harry Winston Q2 Rough Diamond Sales -56%, Retail Sales Fall 40%

Underground work at Diavik was impacted, but rough diamond prices started to recover in the second quarter

Harry Winston Diamond Corporation reported a $24.5 million net loss in the second quarter ended July 31, compared to net earnings of $49.9 million in the second quarter of the prior year. Second quarter sales declined to $94.8 million from $186.1 million the year before.

The firm said the loss was “significantly impacted by a net foreign exchange loss primarily on future income tax liabilities of $25.3 million.”

Rough diamond sales fell 56 percent to $46 million, at an average of $76.7 per carat. The decrease in sales resulted from a combination of a 36 percent decrease in rough diamond prices and a 31 percent decrease in the volume of sales in the second quarter.

Rough diamond production in the quarter was 0.6 million carats, significantly lower than the comparable quarter of the prior year due to a planned decrease in ore production reflecting the softness in the rough diamond market. Earnings from operations for the quarter were $1.7 million compared to $67.5 million for the comparable quarter of the prior year.

The retail segment of Harry Winston recorded a 40 percent decrease in sales to $48.8 million, with a $5.6 million loss from operations.

“During this quarter the diamond industry as a whole adjusted production to the curtailed demand in the intermediate part of the diamond pipeline due to the world economic conditions,” said Chairman and CEO Robert Gannicott.

On the up side, by the end of the quarter rough diamond prices increased 50 percent from the low point in the first quarter, according to Gannicott. Prices continued to improve in the third quarter, he added.

The company noted a 9 percent increase in retail transactions compared to the prior quarter led by increases in the Far East, including Japan. Harry Winston’s retail operations have been unprofitable for some time now.