De Beers interim results for the six months ended 30 June 2002
12 August, 2002
Headline earnings for Anglo American are arrived at by taking Anglo American's equity interest in DB Investments plus the 10% preference shares which Anglo American holds in De Beers SA.
Anglo American will therefore report headline earnings for the 6 months to 30 June 2002 from its investment in De Beers of US$ 166 million.
The above figures are unaudited.
The diamond industry began the year in a positive mood following better than expected Christmas season retail sales of diamond jewellery, a significant reduction in inventory of polished diamonds held by the retail trade during 2001 and cautious optimism for recovery in the global economy in 2002. Restocking by the retail trade in the first half of the year meant that polished demand from the cutting centres was above underlying retail demand in the consumer markets. As a result, polished stocks financed by the cutting centres reduced over the period from about $4,1 billion to $3,4 billion. Clients of the DTC, the marketing arm of De Beers, benefited from receiving consistent assortments of rough diamonds at competitive prices which facilitated further investment in marketing.
Against that background, there was strong demand for rough diamonds throughout the period and sales by the DTC for the first six months of 2002 totalled $2 842 million, 8,5 per cent higher than the equivalent period in 2001. Prospects for the remainder of the year will depend on the state of the global economy and consumer confidence, particularly in the USA, which will determine consumer offtake and the level of stock the trade is prepared to hold.
De Beers made further good progress with the European Commission on its Supplier of Choice strategy and anticipates a favourable outcome during the second half of the year.
The new five year $4 billion trade agreement between De Beers and the Russian diamond producer, Alrosa, was formally notified in February to the European Commission for clearance. Both parties are committed to engaging constructively with the Commission to address any concerns it might raise.
In February, De Beers signed a Heads of Agreement with Mvelaphanda Diamonds (Proprietary) Limited, a black empowerment company, on a joint venture committing both parties to grass roots (early stages) exploration for new world-class diamond deposits in the northern part of South Africa. The joint venture agreement was finalised and signed in July.
De Beers has expressed its concern to the South African Government over the lack of certainty and clarity in a number of the provisions of the new Minerals Development Bill. Further, De Beers hopes that the consultative process proposed by Government, which will lead to a new Mining Charter, will confirm the fundamental principles governing industry transformation to which Government and the industry have committed themselves.
De Beers announces interim results as follows:
De Beers Société Anonyme
Consolidated Income Statement
for the half-year ended 30 June 2002
| US Dollar millions | |||||
|---|---|---|---|---|---|
6 months to 30 June 2002 | De Beers 6 months to 30 June 2001 | De Beers 12 months to 31 December 2001 | |||
| Diamond sales | |||||
| - DTC | 2 842 | 2 619 | 4 454 | ||
| - Other | 197 | 238 | 413 | ||
| Trade investment and other income | 305 | 338 | 639 | ||
| 3 344 | 3 195 | 5 506 | |||
| Deduct: | |||||
| Cost of sales | 2518 | 2 278 | 3 839 | ||
| Depreciation and amortisation (Note 2) | 114 | 65 | 198 | ||
| Sorting and marketing | 198 | 193 | 453 | ||
| Exploration and research | 47 | 64 | 130 | ||
| Corporate expenses (Note 3) | 18 | 32 | 39 | ||
| Net diamond account | 449 | 563 | 847 | ||
| Add: | |||||
| Investment income | 7 | 8 | |||
| Surplus on realisation of fixed assets and investments | 2 | 64 | 94 | ||
| 451 | 634 | 949 | |||
| Deduct: | |||||
| Net interest paid (received) | 76 | (17) | 65 | ||
| Costs related to reorganisation and restructuring | 24 | 154 | 110 | ||
| Net income before taxation and income from AA plc | 351 | 497 | 774 | ||
| Taxation | 115 | 182 | 280 | ||
| Net income before taxation but before income from AA plc | 236 | 315 | 494 | ||
| Attributable to outside shareholders in subsidiaries | 6 | 10 | 8 | ||
| Own earnings before income from AA plc | 230 | 305 | 486 | ||
| Share of retained income of joint ventures | 31 | 31 | 6 | ||
| Total net earnings before income from AA plc | 261 | 336 | 492 | ||
| Income from AA plc: | |||||
| - dividends | 165 | 156 | |||
| - share of retained income | 132 | 128 | |||
| Total net earnings | 261 | 633 | 776 | ||
| Headline earnings before income from AA plc | 308 | 401 | 509 | ||
| Income from AA plc | 343 | 328 | |||
| Headline earnings | 308 | 744 | 837 | ||
| Cash available from operating activities | 1 144 | 733 | 638 | ||
De Beers Société Anonyme (DBsa) (formerly DB Investments) acquired 100% ownership of De Beers Consolidated Mines Limited (DBCM) and De Beers Centenary AG (DBCAG) on 8 June 2001. Accordingly, the comparative results for De Beers shown above have been prepared on a pro forma basis to include the results of DBCM and DBCAG for the full six months ended 30 June 2001 and twelve months ended 31 December 2001.
Consolidated Balance Sheet
30 June 2002
(Abridged and unaudited)
| US Dollar millions | |||
|---|---|---|---|
| June 2002 | 30 June 2001 | 31 December 2001 | |
| Shareholders' interests | 3 784 | 3 813 | 3 578 |
| Outside shareholders' interests | 89 | 80 | 83 |
| 3 873 | 3 893 | 3 661 | |
| Provisions for liabilities and charges | 252 | 226 | 224 |
| Net interest bearing debt (Note 4) | 2 081 | 3 264 | 3 152 |
| 6 206 | 7 383 | 7 037 | |
| Fixed assets | 4 284 | 4 414 | 4 340 |
| Investments and loans | 25 | 455 | 42 |
| Diamond stocks and other net assets | 1 897 | 2 514 | 2 655 |
| 6 206 | 7 383 | 7 037 | |
Notes and Comments
- The pro forma results of prior periods have been presented so as to highlight the impact of income from Anglo American plc (AA plc) included therein.
- Amortisation in respect of the goodwill arising on the acquisition of DBCM and DBCAG by DBsa amounting to $72 million has been expensed in the current period. $11 million was expensed in the same period last year and $83 million in the full year.
- The implementation of the Group's strategic plan has resulted in a business focus entirely on diamond mining and trading activities. Accordingly recurring corporate expenses have been charged to the diamond account - comparatives have been restated to reflect this change.
- Cash has been offset against interest bearing debt.
The first repayment of $355 million on the $3 550 million Senior Debt facility was made on 29 March 2002. The $1 billion revolving facility was not utilised during the period under review.