Russian miner ALROSA, the largest volume producer of diamonds in the world, announced its Q2 and H1 results today, reporting an 8% increase in H1 revenue and 19% rise in net profit year-on-year. The performance was attributed to of higher average diamond selling prices and better sales mix, with profits being further boosted by reduced production costs.

During the first six months revenue reached RUB 168 billion and net profit soared to RUB 58.3 bn, despite an 8% drop in total sales in carat terms, including a 14% decline in sales of gem quality diamonds to 16.4 mn cts. The fall was largely offset by an 18% y-o-y rise in the average selling price for gem quality diamonds, partly due to improved demand and partly on account of a greater share of large diamonds (>10.8 cts). ALROSA said that these specials accounted for a 14% share of Q2 revenue, up from the 5% recorded in Q1 this year.

In Q2, revenue decreased by 25% q-o-q, to RUB 72 bn, mainly due to the drop in sales (-32% q-o-q as a result of the high base effect of Q1 2018), while the 2% growth y-o-y was driven by higher average selling prices, with sales down by 11% y-o-y. Meanwhile, net profit at RUB 25.4 bn remained almost flat compared to Q2 2017 (+1% y-o-y).

ALROSA’s CEO Sergey Ivanov commented on the results:

“The Company delivered strong financial results, reaffirming its industry leadership both in profitability and market share. In the first six months of 2018, higher diamond prices and stringent cost control along with softer rouble drove our EBITDA margin up to 53%. Free cash flow expanded by 23% to RUB 62 bn.

ALROSA maintained its strategic focus on core assets. In early 2018, we disposed non-core gas assets at an auction for RUB 30.3 bn, with the proceeds used to bring down the Company’s debt. As at the end of June 2018, our net debt-to-EBITDA ratio was one of the lowest in the industry at 0.04x. In July 2018, S&P, a global credit rating agency, upgraded ALROSA’s credit rating to an investment-grade level.

The Company’s ability to generate free cash flow enables us not only to bring our leverage down, but also to share cash with our shareholders in the form of dividends. In August, the Supervisory Board approved a new dividend policy with allows to pay dividends of up to 100% of free cash flow twice a year depending on the Company’s leverage.”

The Company said that its guidance for 2018 sales remains unchanged at 39–40 million carats.