Bheki Mpofu
11 November 2009
Johannesburg — DIAMOND producer Trans Hex swung back to profitability in the six months to September as diamond prices and output stabilised, and its focus on cost containment started to pay off.
CEO Llewellyn Delport said the company would remain cautiously optimistic about the future as it monitored signs of economic recovery in the US -- a major consumer of diamonds -- and management would continue to focus on costs.
The price and demand for diamonds were expected to improve, especially if demand picked up in the US, he said .
The company yesterday reported a profit of R8,7m for the first half compared with a R64,4m loss in the same period last year. Headline earnings from continuing operations were 9,1c per share, against last year's interim headline loss of 52c a share, while the headline loss from discontinued operations was 1,4c as opposed to 7,9c a year ago.
Increased volumes and a weaker rand- dollar exchange rate resulted in a 12,5% increase in sales revenue to R371m, despite diamond prices being lower than in the same period last year. Mining income increased to R32m from a R22m loss in the previous corresponding period.
"We are pleased to have recorded a successful interim period, marking the company's return to profitability. Our focus on stringent cost management yielded reductions in operating costs, while cash generated from operations resulted in a net cash inflow of R42m, against a net outflow of R97m in the previous period," said Delport.
Earlier this year, Trans Hex management said it was in a better position than other diamond producers because it was consuming less cash in its operations in SA and Angola than previously. Several diamond companies closed or slowed operations in the first six months of this year.
"We are cautiously optimistic ... because we are not sure whether the market conditions have fully corrected themselves. Most of the demand and pricing stability has come from markets in the east, but these are also eagerly awaiting to see what is going to happen in the US in the next few months," he said.
Production from the group's South African operations improved from 43670 carats to 45502 carats as a result of improved grades , despite the restructuring of operations. Total sales attributable to these operations amounted to 45m, achieved at an average sales price of 914 a carat. Production from local operations is forecast to be about 100000 carats for this financial year.
"We expect the demand and pricing of our products to be steady over the remainder of the financial year; we will continue to focus on cost and cash control measures as the market shows signs of recovery," Delport said.
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