Appendix – Excel
Moscow, 21 January 2021 – ALROSA, a global leader in diamond production, reports its Q4 2020 diamond production of 7.1 m carats and a q-o-q increase in sales to 17 m carats. 12M 2020 diamond production amounted to 30 m carats, and sales reached 32.1 m carats.
- Q4 ore and gravels output grew 20% q-o-q to 5.6 mt due to resumed operations at some of the assets after their suspension. 12M ore and gravels output amounted to 29.7 mt (down 32%).
- Q4 ore and gravels processing declined 58% q-o-q (down 32% y-o-y) to 4.9 mt driven by seasonal suspension of production at alluvial deposits coupled with long planned maintenance at processing plant No. 14 of the Aikhal Division. The 32% y-o-y decline resulted primarily from crisis response measures taken in 2020. 12M volumes were at 29.7 mt (down 28%).
- Q4 diamond production decreased by 23% q-o-q to 7.1 m cts due to seasonality as well as planned maintenance at processing plant No. 14. 12M production amounted to 30 m cts (down 22%).
- Q4 diamond grade seasonally improved by 80% q-o-q to 1.45 cpt. For 12M, diamond grade came in at 1.01 cpt, with the 8% growth driven by the suspension of operations at less profitable assets.
- Q4 diamond sales grew 3.4x q-o-q and 2.1x y-o-y to 17 m cts, including 12.2 m cts of gem-quality diamonds on the back of recovering demand from both the midstream and end consumers. 12M sales declined 4% to 32.1 m cts.
- Diamond inventories as at the end of Q4 dropped to 20.7 m cts (Q3: 30.6 m cts). Q4 ore and gravels inventories amounted to 26.9 mt, an increase of 4% q-o-q and of 1% y-o-y.
- Q4 average realised price for gem-quality diamonds totalled $91/ct (down 31% q-o-q and 38% y-o-y) amid a larger share of small-size diamonds in the sales mix driven by deferred demand for this category. For 12M, the price stood at $109/ct (down 18%) due to changes in the sales mix as well as the lower average price index (down 10%).
- Average price index gained 2% during Q4 (though Q4 index was down by 2% q-o-q on high base effect at the beginning of Q3 before one-off price correction in August). For 12M, the average price index declined by 10% y-o-y.
- Proceeds from rough and polished diamond sales in Q4 came in at $1,222 m (an increase of 2.1x q-o-q and of 33% y-o-y), including $1,144 m in revenue from rough diamond sales and $78 m in revenue from polished diamond sales. 12M total sales amounted to $2,802 m (down 16%), including $2,652 m in diamond sales.
*For gem-quality diamonds. For quarterly indicators Q1 2017 = 1.00, for annual, 2013=1.00.
Management response to the 2020 crisis
- Production cuts: in May 2020, the Company revised its 2020 production outlook downwards from 34.2 to 28–31 m cts amid the suspension of operations at less profitable assets in order to reduce costs in response to the deteriorating market environment in Q2 caused by COVID-19 (for more details, see the press release on the temporary suspension of mining operations at the Aikhal and Zarya pipes dated 5 May 2020 here, the press release on the downward revision of 2020 production guidance dated 22 May 2020 here and the press release on the production cuts at Severalmaz dated 4 June 2020 here).
- The operational efficiency improvement programme: the Company continued to roll out projects to improve operational efficiency by introducing advanced production and management solutions. An example of these efforts is the development of production systems at mining and processing divisions (for more details, see the press release on the progress in this area in 2020 here).
- Sales policy: the Company offered its customers the most flexible conditions, including a zero buyout obligation under effective contracts, which helped speed up the reduction of stocks in the cutting and polishing sector. To ensure sustainability and stability of the industry, ALROSA kept all flexible trading conditions for its long-term customers during the first trading session of 2021 (for more details, see the press release dated 18 January 2021 here).
- Pricing policy: the Company implements the “price-over-volume” strategy, which helped stabilise rough diamond prices during the crisis. In the middle of 2020, ALROSA made a one-off price correction, spurring trade recovery, which supported price increases at year-end. These efforts also helped the Company sell stocks of small- and medium-size diamonds, including low liquid goods and industrial diamonds. For more details on prices.
Diamond market overview
- First seen in the second half of the year, the recovery of end consumer demand in the key sales markets of the US and China continued into Q4. Many US retailers launched their holiday offers early to ensure a more even distribution of demand and allow for social distancing. As a result, the Christmas holiday season in the US kicked off with strong online sales as the pandemic pushed consumers to shop online. Another sustainable trend in the retail sector is the steady recovery of sales in mainland China, where travel restrictions make Chinese consumers spend more domestically.
- India's cutting and polishing industry increased diamond production as the epidemiological situation allowed COVID-19 restrictions to be eased. Large cutters started operating at 70–90% of their capacity, and the nation's traditional Diwali celebration this year was shorter than usual. Diamond stocks in the cutting sector remained unchanged, which helped prices for polished diamonds to recover and stabilise at pre-COVID-19 levels as jewelry demand rebounded in the second half of the year.
- Demand for rough diamonds. By the end of the year, demand for rough diamonds was strong and stable, driven by a balanced sales policy of major diamond producers seeking to meet real demand, along with a seasonal uptick in demand and robust performance across all segments of the diamond market.
- In early 2021, cutters and polishers are increasing their diamond production to 100% capacity in anticipation of stable orders in Q1 as jewelry businesses and dealers seek to replenish inventories they sold during the holiday season and due to market activity ahead of the Chinese New Year.
Hereinafter, data on Q4 and 12M 2020 production, sales, prices, and inventories is preliminary and may be updated. Data on the diamond market is the Company’s estimate.