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TORONTO - Diamonds are in vogue again but the industry is changing as demand for the jewels in the rapidly growing Asian markets is outpacing that in Western countries, says Harry Winston Diamond Corp. (TSX:HW).
"We produced and sold more rough diamonds into a market that has paid higher prices for them," chairman and CEO Robert Gannicott told analysts on a conference call to discuss the integrated diamond company's much-improved second-quarter results.
The Toronto-based diamond miner and retailer is witnessing a recovery driven by increasing demand for diamond jewelry and luxury brands, especially in key developing markets such as China where consumer wealth is quickly growing, Gannicott said.
"It's not simply a recovery of the diamond world as it used to be, though, but rather a broadened demand especially from expanding economies in Asia at the expense of still muted recovery in the U.S. and ... in Europe."
Harry Winston shares jumped more than 17 per cent, or $1.89 to $12.64 in midday trading Thursday on the Toronto Stock Exchange, a day after the company reported it reversed a year-earlier loss.
The company, which reports in U.S. currency, said its second-quarter profit was US$16.5 million, or 22 cents a share, improving from last year's second quarter loss of $24.5 million, or 22 cents a share, as it enjoyed a significant jump in sales.
Revenue was up 62 per cent to US$153.7 million from $94.8 million as rough diamond sales rose 89 per cent to US$86.8 million amid a 62 per cent increase in prices and a 17 per cent increase in sales volume.
Retail sales at Harry Winston's high-end diamond stores were up 37 per cent to US$66.9 million on improved results in Europe, Asia and the U.S.
Sales were up 40 per cent in Asia, a market that is growing in importance to the company's plans for growth. About half of the company's retail sales now come from Eastern Asia, Gannicott said.
Revenue from Russia and the Middle East has also improved.
However, the U.S., which consumed about of half of the world's diamonds before the recession, is still struggling to regain retail confidence during a broader uncertain economic recovery in that country, Gannicott said.
Gannicott said he expects the company to continue on its path of recovery in the third quarter.
Rough diamond production from Harry Winston's 40 per cent owned Diavik mine in the Northwest Territories for the three months ended June 30 was 650,000 carats, compared with 570,000 carats a year earlier.
Harry Winston announced last month that it had repurchased a nine per cent indirect interest in Diavik, Canada's largest diamond mine, from Kinross Gold Corp. (TSX:K) for US$220 million in shares, cash and debt. Kinross has also decreased its stake in the Toronto-based diamond company to 8.5 per cent from 19.9 per cent.
Harry Winston had sold the stake in the mine during the depths of the recession when it desperately needed cash and the price of gold was soaring, giving gold companies money to spare.
The mine is controlled by 60 per cent owner Rio Tinto (NYSE:RTP), one of the world's biggest resources companies.
Toronto-based Harry Winston is an integrated diamond company, involved in both mining and retailing the precious stones. Besides Diavik, it has high-end retail stores throughout the world.
