De Beers blames tough markets as first-half profits wiped out

DIAMOND PRODUCER De Beers, which is a majority shareholder in Shannon-based firm Element Six, said difficult markets had all but wiped out its first-half profit.

De Beers owns 60 per cent of industrial diamond company Element Six, based in Shannon, Co Clare, which earlier this week decided to close its Irish manufacturing and distribution unit in a move that will lead to the loss of 370 jobs. The remaining shareholder in Element Six is Umicore.

A spokesman for the Co Clare company said talks with unions about the redundancies had started and would resume next Wednesday.

Unions have been critical about the redundancy package on offer of one week per year of service plus statutory, saying this is considerably less than the terms of a recent voluntary package provided by Element Six.

De Beers yesterday posted a 99 per cent fall in first-half net profit to $3 million (€2.1 million) and said demand remained subdued in the huge US market that accounts for half of all diamond jewellery sales but was holding up in the emerging economies of China and India.

The global luxury goods market has been hit hard by the global downturn as consumers feel uncomfortable splashing out on designer watches and handbags, but De Beers said couples were not cutting back on wedding and engagement rings.

“The trading conditions in the first half of this year were extraordinarily difficult . . . the bounce-back you started to see in the second quarter I think will you will see continue on through the third quarter,” the managing director, Gareth Penny, told reporters.

China and India, which make up about one-fifth of the global market, could grow to one-third of worldwide sales in five-six years, Mr Penny said.

The group had total net debt of $4.06 billion at the end of June, giving a gearing level of 40 per cent, up from $3.8 billion at the end of 2008. – (Additional reporting: Reuters)