Russian mining giant ALROSA released its financial results for the year ended December 31, 2018 today, reporting a 9% rise in revenue despite an 8% drop in volume of carats sold, resulting in a 15% jump in net profits.

The miner said that during the 12-month period, it sold 38.1 mn carats of diamonds (2017: 41.2 mn cts), including 26.4 mn of gem quality goods (2017: 30.1 mn cts), a decline of 8% and 12% respectively. In value terms, 12M sales rose by 6% to US$ 4.4 bn on the back of stronger prices and improved mix of gem-quality diamonds

On the other hand, revenue rose by 9% to RUB 299.7 million (2017: RUB 275.4 mn) driven by a higher price index and a better sales mix. 

The Company reported that EBITDA grew by 23% to RUB 156 bn supported by top line growth and cost control, while net profit rose to RUB 90 bn (up 15%) on stronger profitability.  Free cash flow (FCF) for 12M 2018 improved by 26% on the back of a stronger operating cash flow (up 20%) as investments were slightly up (by 3%).

ALROSA said that revenue fell by 12% during Q4 2018, while EBITDA dropped 33% on weaker demand for lower priced stones which echoed the situation on the polished diamond market where uncertified melee diamonds saw the strongest price decline due to oversupply, weak rupee and lower liquidity in India.

Alexey Philippovskiy, ALROSA's Deputy CEO, commented on the results: “In 2018, the Company continued to consistently improve its financial position. The key financial drivers included improved market environment (recovery in prices and stronger demand for diamond jewellery in major markets) and management efforts to boost efficiency.”

He added that international rating agencies have acknowledged strong credit quality and unique assets of the Company, and upgraded its credit rating to investment grade.

“Significant free cash flow, low leverage and conservative investment strategy enable the Company to grow dividend payments. The 6M 2018 dividends amounted to ca. RUB 43.7 bn, while the total dividend payments for 2018 stood at RUB 80.7 bn, up 23% compared to 2017,” Philippovskiy stated.

Looking forward, ALROSA said that while diamond jewellery demand remains healthy macro headwinds will continue to impact growth rates both in developed and emerging economies. It also said it expected mid-stream stocks to remain low due to FX volatility and rising financing costs for polishers.

The Company said that its 2019 production outlook is expected to increase to 37.5-38.0 m carats (vs 36.7 m carats in 2018) while the average grade is expected to stabilize at 0.9 ct/t.