Sarine Technologies Ltd reported a 4% rise in revenue to US$ 11.7 million during the three-month period ended September 30, 2018 (Q3), with improved profitability despite cyclical weakness and other macro-economic challenges in the diamond polishing midstream.

Releasing the results, the Company said that industry sentiments in Q3 2018 were affected by a number of macro-economic factors, including uncertainties surrounding the impact of trade tariffs on China, credit tightening by Indian banks, increased volatility in foreign exchange rates and uncertainties relating to the long-term effects of the advent of lab-grown diamonds (LGD) into the market.

Despite this, the company reported slender increases in profitability with net profit rising to US$ 0.3 million as compared to a loss of US$ 0.5 million a year ago.

Sarine said that the improved results were mainly driven by recurring revenues, particularly from Galaxy® -family inclusion mapping operations. During the quarter, the Group delivered 13 Galaxy® family systems to customers, comprising 11 Meteorite™ models, a Meteor™ model and a Galaxy® system. As of 30 September 2018, total installed base of Galaxy® family systems grew to 390.

With higher revenue, gross profit rose to US$7.5 million. However, gross profit margin was lower at 64% due to the change in revenue mix and higher costs of sales associated with the newly opened Sarine Technologies Laboratories. With the Group’s prudent cost management, overall operating expenditure was lower than the previous corresponding period.

Interestingly, for the first nine months of the year, group revenue remained stable at US$ 46.3 million, of which nearly 50% was contributed by recurring revenue business activities. In particular, revenue from polished diamond retail-related business activities grew almost 20% over the corresponding nine months last year. Due to lower total operating costs and income tax expense, the Group registered a significant increase of 46% in net profit from US$ 5.1 million in 9M 2017 to US$ 7.5 million in 9M 2018.

Sarine also stated that though the near term outlook is clouded by the economic and political uncertainties surrounding the trade spat between China and the United States, demand in the key U.S. market remains robust. Hence, any early resolution of this dispute could accelerate polishing activities significantly in the diamond industry midstream going into 2019.

“Even though the volume of rough diamond sales by DeBeers and Alrosa’ declined by over 4% on a year-on-year basis, we are still seeing rough diamond scanning activities by the Galaxy family installed base at record levels. In fact, Galaxy® related recurring revenues went up by about 6% on the back of the Group’s growing installed base of Galaxy® family systems despite the seasonal weakness in Q3. We are on track to finish FY2018 with an estimated 20% growth in the number of stones scanned for the year,” commented Sarine’s CEO, David Block.