De Beers chief executive officer Bruce Cleaver talked with JCK Thursday 20th of February, following the release of his company’s preliminary financial results for 2019. The results were, to no one’s surprise, not very good, with total revenue falling 24% and rough diamond sales falling 26%.
But Cleaver feels the market has begun to turn the corner, and here he discusses his sense of the industry, possible changes in the sightholder system, and his reaction to the ruling in his company’s lab-grown patent lawsuit:
JCK: What are your thoughts on your latest results?
Cleaver: It was a difficult year for De Beers. We continue to focus on the future. We continue to invest in Venetia underground and this new ship in Namibia. We spent more money on marketing last year than we have in all the years I’ve been here.
Last year, we kept hearing that the pipeline was clogged. Has that been cleared out?
There’s no question in mind that at sight 10 [for 2019] and sight one [for 2020] there was much more confidence. Stability is better, demand is better, no question. Some but not all of the excess stock in the midstream had eased its way out of the system.
The U.S. season seemed to go pretty well. High-end independents did well. Tiffany did reasonably well. China is recovering, but now we have to concern ourselves with the coronavirus. It’s hard to read exactly what its impact will be.
How about the liquidity issues?
Liquidity is still confined, but if you look at the sightholder community, most of the firms have quite a bit of headroom if they wanted to draw more liquidity. A lot of the good businesses have alternative sources of funding. The challenge has been, in a falling market, with companies that aren’t sightholders. I don’t think sightholders find it that difficult.
Last month, Bloomberg reported that De Beers is considering reducing its number of sightholders.
Some of those reports are premature. We are not at the point where we can give many details on that. We are coming to the end of the contract period. We would like to talk to our customers about what the next contract will look like. We remain deeply committed to the sight system and to long-term contracts with the world’s best diamantaires. But we don’t have any numbers or more details.
Mark Cutifani, CEO of your co-owner Anglo, has said that no buyer will be “unaffected” by the changes in the sight system.
I believe Mark was making a bigger point. His point was the world is changing and that, with digitalization, everyone is looking at contracts differently. I can’t tell you what it will look like, but we are deeply committed to the sight system. It’s something that we need to work on and are looking at internally.
You mentioned that you spent a record amount on marketing last year. Do you expect that to continue?
It’s a good question. It’s a lot of money, and I need to be satisfied that here is an appropriate return on that.
