Sarine Technologies Ltd yesterday released its preliminary update for the third quarter of 2019, stating that though the negative conditions prevailing in the industry in the previous quarter continued, the Group estimated that its revenue would be about 20% up over Q2. Along with continued restraint on expenses, Sarine said it expected to record a nominal profit during the period as a result.

“During Q3 2019 the ongoing trade disputes between the U.S. and China continued to impair demand in the Chinese market by an estimated 10%, and the issue of Lab-Grown Diamonds continued to be a distraction,” Sarine said.

It added that on account of the “significant drop (40% less y-o-y) in the quantities of rough stones entering the production pipeline, as evidenced by the reported reductions in sales at DeBeers' sights and by other mining producers, the excess inventories in the midstream continued to ease and thus the issue of working capital has been somewhat alleviated, at least for the short term”.

Due to the drop in the number of rough stones entering the pipeline, there was a “decrease in the Group's revenues from inclusion mapping services by some 18% sequentially, less than the decrease in the rough quantities being polished”. The company reported that most of this decrease was realised in its service centre activities. A little over half of these are in Israel and Belgium, and these were also affected by the seasonal summer closures of these bourses in August. 

Record deliveries of the Galaxy®-family inclusion mapping systems continued. The 39 delivered in the quarter outpaced Q1's and Q2's record deliveries with a majority (32) of these systems being the MeteoriteTM model, with the remaining being MeteorsTM.

“As a significant portion of the systems were sold under the one-off paradigm with no follow-on per-use revenues, our gross margin has improved somewhat as compared to the first two quarters of the year,” Sarine said. 

The company said that current indications are that revenue in Q3 will be some 20% better than in Q2, or approximately US$ 14 million.

Expenses continuing to be restrained, Sarine said with sequential slight reductions in research and development and general and administrative expenses, the latter due to the company having concluded the current trial phase of its IP litigation in India. It also reported a slight increase in sales and marketing, “to leverage the increased interest in our various offerings for polished diamond retail sales, primarily the Sarine LightTM and Sarine JourneyTM”, adding that as a result of all the above, it was expecting “to record a nominal net profit” during the quarter.