De Beers diamond sales set to lose their sparkle

Demand for diamonds was surprisingly strong in the first half of this year, but the business is expected to lose some of this sparkle in the second half, De Beers said yesterday.

The privately-owned company also announced that it would provide HIV-positive employees in South African with anti-retroviral drugs, the main medical treatment for prolonging the life of those carrying the disease.

Despite the faltering world economy, De Beers, which supplies two-thirds of the world's rough diamonds, saw sales jump 8.5 per cent to $2.84bn (£1.85bn) for the first six months of 2002. The company said this was because of a better-than-expected 2001 Christmas season for diamond jewellery retail sales. The high demand meant that inventories of diamonds in the retail trade ran low and the industry was restocking during the first half of this year.

"I think the second half is not going to be as effervescent as the first," said Gary Ralfe, managing director at De Beers.

Mr Ralfe said that, for the first time in June, De Beers had outlined the amount and type of diamonds it planned to offer clients for the rest of 2002.

"In June they protested that this would be too little, but now they are probably feeling a bit more relaxed.... Clients still seem to have confidence for the year, but they have tempered their confidence in view of the bear market in stock markets."

De Beers is 45 per cent owned by Anglo American, the FTSE 100 mining giant. The diamond group reported pre-tax profits, before income from Anglo American, of $351m for the first half. This was down from $497m in 2001 but the company said the 2002 figure was not comparable as it included expenses from its delisting last year.