At its meeting held on December 13, 2019, ALROSA’s Supervisory Board gave its approval for the strategy plan drawn up by Company’s management for the development of its cutting and polishing complex for 2020-2022; as well for integration of the recently acquired Smolensk diamond factory Kristall into the ALROSA Group.

Currently, ALROSA Group’s diamond cutting companies include: Diamonds of ALROSA (with branches in Moscow and Barnaul) and Kristall diamond factory (Smolensk), which was purchased from the state in October this year. Together, they account for more than 60% of diamond cutting and polishing in Russia. 

“The implementation of the Strategy will help to improve the operational efficiency of ALROSA’s consolidated diamond cutting sector,” ALROSA said explaining the thinking behind the move. “This will have a positive impact on the financial results of this business segment. The plan includes a set of measures aimed on the product mix efficiency improvement, production cycle optimisation and a creation of a consolidated sales system for polished diamonds.”

For a start, in order to derive maximum production efficiency, the Company plans to “redistribute” the mix of rough diamonds for cutting. On the one hand, fancy coloured and large colourless diamonds will be cut in Moscow by the highly-skilled operational staff there; and the cutting of colourless diamonds weighing from 1 to 10 carats will be moved to Smolensk, in order to reduce costs. ALROSA estimates that the total cutting volume will exceed 200,000 carats of rough diamonds.

As one of the strategy plan’s main aims is a “centralisation of rough diamonds allocation and polished sales” to reduce administrative and commercial costs, ALROSA feels that the changes in mix will result in “a more representative and stable rough diamond mix”, and increase synergies.

On the other hand, sales of polished goods will be handled by Diamonds of ALROSA.  Eventually, ALROSA plans to create a consolidated sales service for polished diamonds based at this branch. As part of the reorganisation, some   employees of Kristall's sales division will move to the new sales division.

“Many measures of this Strategy follow ALROSA's earlier strategy of its cutting complex development,” said Sergey Ivanov, CEO of ALROSA. “They are based on the same principles as our efforts to improve the efficiency of our Diamonds of ALROSA branch. Largely due to those efforts, in 2019 the branch achieved a positive financial result for the first time in three years. We aim to improve the quality of interaction with customers, develop new sales channels, implement joint marketing programmes with jewellery manufacturers, and introduce more automation and modern technologies. In our opinion, the merger of diamond cutting platforms will make it possible to reduce production costs and get a stable market share for polished diamonds with Russian origin marked by a high quality of cutting.”