ALROSA reported 2017 first half revenue of $2.7 billion (RUB 155.6 billion), pre-tax earnings of $1.2 billion (RUB 72.8 billion) and a net profit of $836.4 million (RUB 48.9 billion), with a net cash flow of $860.5 million (RUB 50.3 billion).
This year's revenue is 6.3 percent below the $2.87 billion reported in H1 2016, while profit has fallen 66.2 percent below the $1.39 billion reported during the period last year.
ALROSA said the weaker financial performance was caused by the market and macroeconomic factors such as the 18 percent ruble appreciation against the US dollar and a 15 percent drop in the average price of the diamonds sold as a result of changes in the diamond mix.
By the end of 2016, ALROSA said it had accumulated inventories of small-size rough diamonds that had not been purchased because of the monetary reform in India. These inventories were cleared in H1 2017 thanks to improved demand. In Q2 2017, the volumes and sales mix stabilised with the average price of diamonds sold growing by 20 percent in a quarter-on-quarter comparison.
The company said a cost management program had kept its H1 production cost increases to under 1 percent, while diamond production rose 14 percent. Additionally, there was a 12 percent increase in the cost of goods sold accompanied by a 12 percent growth in diamond sales volumes.
"ALROSA's H1 2017 results were influenced by macroeconomic factors beyond the company's control,” Chief Executive Sergey Ivanov said. He pointed out that the company’s cost management program, which included measures such as switching to cheaper energy sources, capping the utilisation of materials and equipment and boosting procurement efficiency, had kept production costs flat.
The company maintained its guidance of producing 39.2 million carats this year. "Production volumes impacted by the accident at the Mir underground mine in 2017 will be set off by higher diamond output at other mines, primarily the Jubilee pipe," Ivanov said.