Press Release Archive - 2003

Anglo American plc (“AA plc”) arrives at its headline earnings in respect of De Beers by accounting for its equity interest and the 10% preference shares which it holds in DB Investments (“DBI”).

AA plc will therefore report headline earnings of US$324 million for the year ended 31 December 2002 from its investment in DBI, as reconciled in the table below:

(1) AA plc grosses up its preference share income to the operating profit level and accounts for its (non-equity) share of operating profit, exceptional items, investment income and net interest, tax and minorities, in the same way as it accounts for its equity share of these balances. This treatment is in accordance with FRS9, paragraph 33, which indicates that where preference shares are an integral part of the investor's long-term interest, it is appropriate to include the non-equity interest with equity in determining the investor's overall share of an associate's results. The headline earnings attributable to AA plc's US$70 million preference share income are arrived at by adjusting for a proportion of exceptional items (-US$7 million) and goodwill amortisation (+US$24 million) in the same way as the equity share is calculated.
(2) As a result of the De Beers' partial interest in Debswana Diamond Company (Proprietary) Limited (one of the shareholders in DBI), AA plc accounts for an additional 3.65% of DBI's post-tax equity earnings.

The above figures are unaudited.

De Beers Société Anonyme
(Incorporated under the laws of Luxembourg)

FOR THE YEAR ENDED 31 DECEMBER 2002

By the end of 2001 following a better than expected Christmas season, inventory of polished diamonds held by the retail trade had been significantly reduced and stocks of rough in the cutting centres were also low. During the first half of 2002, the retail sector reversed the trend of the previous year by replenishing polished inventory in anticipation of growth in consumer demand.

However, despite a promising first half, consumer confidence began to erode in the second half of the year, especially in the US, due to fears of deflation, rising unemployment, sharply declining stock markets and the prospect of a war in the Middle East. Nevertheless, global retail sales of diamond jewellery for the year as a whole held up reasonably well and preliminary indications are that they were about 3 per cent higher than the previous year. Encouragingly, reports from the trade suggest that over the all important Thanksgiving and Christmas season in the US, jewellery sales outperformed general retail sales and that diamond jewellery outperformed the jewellery category, no doubt in part due to a marked increase in quality advertising spend by the diamond trade, the development of multiple brands and innovative marketing programmes. Elsewhere, good growth was reported from the Middle East, India, China and the UK, but Continental Europe was disappointingly flat. Japan continued to decline.

Throughout the year, demand for rough diamonds was strong as the cutting centres responded to the increased demand for polished diamonds from the retail trade, in addition to which the cutting centres, encouraged by low interest rates, were prepared to finance higher levels of stock. These two factors, combined with the further advantage available to the clients of the DTC, the marketing arm of De Beers, of being offered consistent assortments of rough diamonds at competitive prices, enabled the DTC sales to reach US$5.15 billion, 15.7 per cent more than in 2001. This was reflected in De Beers' results for the year. Headline earnings at US$570 million were 12 per cent ahead of 2001 on a like for like basis (after stripping out the impact of De Beers' investment in Anglo American plc). Diamond stocks were reduced by nearly US$1 billion during the year which was the main contributor to the exceptionally strong operating cash flow of US$1.6 billion generated over the period. This enabled De Beers to reduce the amount outstanding on its Senior Debt by US$1,065 million by way of the scheduled March 2002 repayment of US$355 million and a voluntary prepayment of US$710 million in December 2002.

2003 is likely to prove a challenging year for the diamond industry in view of continued geopolitical concerns and greater economic uncertainty. The DTC's sales prospects will depend on the timing and scale of global economic growth, a recovery in consumer confidence and the level of stocks that the trade pipeline will be comfortable to hold.

Following a detailed and constructive dialogue with the European Commission on its Supplier of Choice strategy, De Beers has received clearance from the Commission to proceed with its implementation. The formal launch of the legal framework of Supplier of Choice is planned for the middle of the year.

The European Commission has recently taken the procedural step in formally communicating to the parties a number of its concerns relating to the five year trade agreement between De Beers and the Russian diamond producer, Alrosa, which they notified to the Commission for clearance in March 2001. Both parties are committed to continuing to engage with the Commission to address the concerns it has raised.

The Board of directors of De Beers sa has proposed to the shareholders that Dr Mark Berry and Mr Gareth Penny be appointed as directors at the forthcoming Annual General Meeting due to take place in April 2003.

De Beers announces results for the year as follows:

De Beers Société Anonyme
Consolidated Income Statement
for the year ended 31 December 2002

(Abridged)

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 twelve months ended 31 December2001. De Beers Société Anonyme Consolidated Balance Sheet 31 December 2002 (Abridged)

Notes and Comments

1. The pro forma results of the prior period have been presented so as to highlight the impact of income from Anglo American plc (AAplc) included therein.
2. Amortisation in respect of the goodwill arising on the acquisition of DBCM and DBCAG by DBsa amounting to $144 million has been expensed in the current year (2001:$83 million).
3. 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.
4. Cash has been offset against interest bearing debt.
5. The first repayment of $355 million on the $3 550 million Senior Debt facility was made on 29 March 2002 and a voluntary prepayment of $710 million was made on 9 December 2002 which reduced the debt to $2 485 million. The $1 billion revolving facility was not utilised during the period under review.

Visit the official De Beers group website for more in formation on the Company and where you can view and download a selection of images – www.debeersgroup.com. As an additional resource for images, please visit www.newscastonline.com.