Little impact seen from De Beers’ return to US

JOHANNESBURG – De Beers’ directors could soon set foot in the United States without fear of arrest if the firm settles a price-fixing charge as expected today, but it will change little else at the world’s biggest diamond group.

Newspapers reported at the weekend that De Beers, 45 per cent owned by mining conglomerate Anglo American Plc, would pay a US$10 million (N$60 million) fine to settle the charges, but analysts said yesterday that would have little financial effect on the firm. The group declined to comment.Because of a long-standing dispute with US antitrust authorities, De Beers board members face arrest if they travel to the United States, where the country has not sold its diamonds directly for years.”For a group the size of Anglo American and De Beers, it’s fairly immaterial,” said one London-based mining analyst of the US$10 million fine.De Beers posted a forecast-topping US$5,5 billion worth of full-year sales in February and earnings of US$676 million.”We’re not expecting a big impact from it,” added a Johannesburg-based analyst.”I think it’s just to tidy their books up globally.”Nor was the ruling likely to have much immediate effect on sales.De Beers currently sells diamonds into the United States – the world’s biggest diamond market – through intermediaries.It said last month the global diamond market grew strongly in the first quarter of 2004 and gave an upbeat outlook for the year.”In terms of actual profits and earnings performance, it’s (settlement) probably not very significant… because De Beers has been able to sell diamonds to people who can sell into the United States,” said Charles Kernot at UK broker Seymour Pierce.Kernot expects the group to post rough diamond sales of US$3,1 billion when it reports half-year results next week compared to US$2,92 billion last year although a strong rand is expected to continue to push up costs and eat into profits.Analysts will also be looking for an update on De Beers’ joint venture with luxury goods firm LVMH but were divided on whether settlement in the United States would help or hinder the glossy retail stores.”If everything goes their way tomorrow, it may be that the joint venture itself isn’t really needed or required,” Kernot said.De Beers is expected to open a store with LVMH in New York soon and one analyst said that may have spurred it towards a settlement and could pave the way for further retail expansion.”The US leg… (of the LVMH joint venture) could become extremely important,” the London-based analyst said.The case will be heard in Columbus, Ohio, today.-Nampa-ReutersThe group declined to comment.Because of a long-standing dispute with US antitrust authorities, De Beers board members face arrest if they travel to the United States, where the country has not sold its diamonds directly for years.”For a group the size of Anglo American and De Beers, it’s fairly immaterial,” said one London-based mining analyst of the US$10 million fine.De Beers posted a forecast-topping US$5,5 billion worth of full-year sales in February and earnings of US$676 million.”We’re not expecting a big impact from it,” added a Johannesburg-based analyst.”I think it’s just to tidy their books up globally.”Nor was the ruling likely to have much immediate effect on sales.De Beers currently sells diamonds into the United States – the world’s biggest diamond market – through intermediaries.It said last month the global diamond market grew strongly in the first quarter of 2004 and gave an upbeat outlook for the year.”In terms of actual profits and earnings performance, it’s (settlement) probably not very significant… because De Beers has been able to sell diamonds to people who can sell into the United States,” said Charles Kernot at UK broker Seymour Pierce.Kernot expects the group to post rough diamond sales of US$3,1 billion when it reports half-year results next week compared to US$2,92 billion last year although a strong rand is expected to continue to push up costs and eat into profits.Analysts will also be looking for an update on De Beers’ joint venture with luxury goods firm LVMH but were divided on whether settlement in the United States would help or hinder the glossy retail stores.”If everything goes their way tomorrow, it may be that the joint venture itself isn’t really needed or required,” Kernot said.De Beers is expected to open a store with LVMH in New York soon and one analyst said that may have spurred it towards a settlement and could pave the way for further retail expansion.”The US leg… (of the LVMH joint venture) could become extremely important,” the London-based analyst said.The case will be heard in Columbus, Ohio, today.-Nampa-Reuters