The company blamed the fall - from dollars 379m to dollars 373m - on two factors. Its 50 per cent-owned Botswana affiliate had not reduced production following a cut in its sales to the Central Selling Organisation - the marketing cartel owned by De Beers - and had to bear the cost of stockpiling stones on the surface. In addition De Beers' South African and Namibian mines, which have reduced production by 25 per cent in the past year, have had to bear the redundancy costs of reducing the workforce by a similar amount, or about 5,000 workers.
Analysts are sceptical that these factors are sufficient to account for the poor diamond account figures. 'I can't understand how the profit margin has been eroded by so much on record sales of dollars 2.5bn,' Steve Oke of Smith New Court said.
Another analyst suggested that the high level of first-half sales, which reduced stocks from dollars 3.8bn to dollars 3.2bn, was in part caused by De Beers' trading companies buying from the CSO. A spokesman described this as 'absolute nonsense', adding that the surge was caused by a hiatus in supplies from outside. Second-half sales are expected to be lower, because these factors have largely disappeared and because US demand is likely to be weaker.
Despite this, lower costs helped De Beers' attributable earnings rise by 9 per cent to dollars 353m. Apart from reduced wage bills, De Beers has almost halved prospecting costs to dollars 37m, and the balance sheet has been strengthened by the reduction in stocks. The dividend has been maintained at 25.2 cents.