De Beers Final Results
Anglo American PLC
06 February 2003
News Release
6 February 2003
De Beers Societe Anonyme today reported headline earnings for the year ended 31
December 2002 of US$570 million.
Anglo American plc ("AA plc") arrives at its headline earnings in respect of De
Beers by accounting for its equity interest and the 10% preference shares which
it holds in DB Investments ("DBI").
AA plc will therefore report headline earnings of US$324 million for the year
ended 31 December 2002 from its investment in DBI, as reconciled in the table
below:
Reconciliation of headline earnings
US$ million Total Equity Non-equity
(pref. shares) (1)
• DBI headline earnings - IAS (100%) 570 - -
• GAAP adjustments (IAS 39) 23 - -
• DBI headline earnings - UK GAAP (100%) 593 486 107
• AA plc's 45% equity interest 219 219 -
• Additional 3.65% equity interest (2) 18 18 -
• AA plc's portion of the preference shares 87 - 87
(1)
• AA plc headline earnings 324 237 87
(1) AA plc grosses up its preference share income to the operating profit level
and accounts for its (non-equity) share of operating profit, exceptional items,
investment income and net interest, tax and minorities, in the same way as it
accounts for its equity share of these balances. This treatment is in
accordance with FRS9, paragraph 33, which indicates that where preference shares
are an integral part of the investor's long-term interest, it is appropriate to
include the non-equity interest with equity in determining the investor's
overall share of an associate's results. The headline earnings attributable to
AA plc's US$70 million preference share income are arrived at by adjusting for a
proportion of exceptional items (-US$7 million) and goodwill amortisation
(+US$24 million) in the same way as the equity share is calculated.
(2) As a result of the De Beers' partial interest in Debswana Diamond Company
(Proprietary) Limited (one of the shareholders in DBI), AA plc accounts for an
additional 3.65% of DBI's post-tax equity earnings.
The above figures are unaudited.
De Beers Societe Anonyme
(Incorporated under the laws of Luxembourg)
Thursday 6 February 2003
RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2002
By the end of 2001 following a better than expected Christmas season, inventory
of polished diamonds held by the retail trade had been significantly reduced and
stocks of rough in the cutting centres were also low. During the first half of
2002, the retail sector reversed the trend of the previous year by replenishing
polished inventory in anticipation of growth in consumer demand.
However, despite a promising first half, consumer confidence began to erode in
the second half of the year, especially in the US, due to fears of deflation,
rising unemployment, sharply declining stock markets and the prospect of a war
in the Middle East. Nevertheless, global retail sales of diamond jewellery for
the year as a whole held up reasonably well and preliminary indications are that
they were about 3 per cent higher than the previous year. Encouragingly,
reports from the trade suggest that over the all important Thanksgiving and
Christmas season in the US, jewellery sales outperformed general retail sales
and that diamond jewellery outperformed the jewellery category, no doubt in part
due to a marked increase in quality advertising spend by the diamond trade, the
development of multiple brands and innovative marketing programmes. Elsewhere,
good growth was reported from the Middle East, India, China and the UK, but
Continental Europe was disappointingly flat. Japan continued to decline.
Throughout the year, demand for rough diamonds was strong as the cutting centres
responded to the increased demand for polished diamonds from the retail trade,
in addition to which the cutting centres, encouraged by low interest rates, were
prepared to finance higher levels of stock. These two factors, combined with
the further advantage available to the clients of the DTC, the marketing arm of
De Beers, of being offered consistent assortments of rough diamonds at
competitive prices, enabled the DTC sales to reach US$5.15 billion, 15.7 per
cent more than in 2001. This was reflected in De Beers' results for the year.
Headline earnings at US$570 million were 12 per cent ahead of 2001 on a like for
like basis (after stripping out the impact of De Beers' investment in Anglo
American plc). Diamond stocks were reduced by nearly US$1 billion during the
year which was the main contributor to the exceptionally strong operating cash
flow of US$1.6 billion generated over the period. This enabled De Beers to
reduce the amount outstanding on its Senior Debt by US$1,065 million by way of
the scheduled March 2002 repayment of US$355 million and a voluntary prepayment
of US$710 million in December 2002.
2003 is likely to prove a challenging year for the diamond industry in view of
continued geopolitical concerns and greater economic uncertainty. The DTC's
sales prospects will depend on the timing and scale of global economic growth, a
recovery in consumer confidence and the level of stocks that the trade pipeline
will be comfortable to hold.
Following a detailed and constructive dialogue with the European Commission on
its Supplier of Choice strategy, De Beers has received clearance from the
Commission to proceed with its implementation. The formal launch of the legal
framework of Supplier of Choice is planned for the middle of the year.
The European Commission has recently taken the procedural step in formally
communicating to the parties a number of its concerns relating to the five year
trade agreement between De Beers and the Russian diamond producer, Alrosa, which
they notified to the Commission for clearance in March 2001. Both parties are
committed to continuing to engage with the Commission to address the concerns it
has raised.
The Board of directors of De Beers sa has proposed to the shareholders that Dr
Mark Berry and Mr Gareth Penny be appointed as directors at the forthcoming
Annual General Meeting due to take place in April 2003.
De Beers announces results for the year as follows:
De Beers Societe Anonyme
Consolidated Income Statement
for the year ended 31 December 2002
(Abridged)
US Dollar millions
Pro forma
12 months to 12 months to
31 December 2002 31 December 2001
Diamond sales
-DTC 5 154 4 454
-Other 380 413
Trade investment and other income 592 639
6 126 5 506
Deduct:
Cost of sales 4 444 3 839
Depreciation and amortisation (Note 2) 250 198
Sorting and marketing 398 453
Exploration and research 126 130
Corporate expenses (Note 3) 42 39
Net diamond account 866 847
Add:
Investment income 8
Surplus on realisation of fixed assets and investments 94
866 949
Deduct:
Net interest paid 144 65
Costs related to reorganisation and restructuring 44 110
Net income before taxation and income from AAplc 678 774
Taxation 271 280
Net income after taxation but before income from AAplc 407 494
Attributable to outside shareholders in subsidiaries 14 8
Own earnings before income from AAplc 393 486
Share of retained income of joint ventures 41 6
Total net earnings before income from AAplc 434 492
Income from AAplc
- dividends 156
- share of retained income 128
Total net earnings 434 776
Headline earnings
Total net earnings before income from AA plc 434 492
Adjusted for:
Amortisation of intangible fixed assets 163 108
After tax surplus on realisation of fixed assets less costs
related to restructuring and provisions
(27) (26)
Exceptional and non-trading items of joint ventures (65)
Headline earnings before income from AA plc 570 509
Income from AA plc 328
Headline earnings 570 837
Cash available from operating activities 1 611 638
De Beers Societe Anonyme (DBsa) (formerly DB Investments) acquired 100%
ownership of De Beers Consolidated Mines Limited (DBCM) and De Beers Centenary
AG (DBCAG) on 8 June 2001. Accordingly, the comparative results for De Beers
shown above have been prepared on a pro forma basis to include the results of
DBCM and DBCAG for the full twelve months ended 31 December2001.
De Beers Societe Anonyme
Consolidated Balance Sheet
31 December 2002
(Abridged)
US Dollar millions
31 December 2002 31 December 2001
4 023 3 578
Shareholders' interests
Outside shareholders' interests 96 83
4 119 3 661
Net interest bearing debt (Note 4) 1 716 3 152
Other liabilities 958 984
6 793 7 797
4 405 4 340
Fixed assets
Investments and loans 33 42
Diamond stocks and other assets 2 355 3 415
6 793 7 797
Notes and Comments
1. The pro forma results of the prior period have been presented so as to
highlight the impact of income from Anglo American plc (AAplc) included
therein.
2. Amortisation in respect of the goodwill arising on the acquisition of
DBCM and DBCAG by DBsa amounting to $144 million has been expensed in the
current year (2001 : $83 million).
3. The implementation of the Group's strategic plan has resulted in a business
focus entirely on diamond mining and trading activities. Accordingly
recurring corporate expenses have been charged to the diamond account -
comparatives have been restated to reflect this change.
4. Cash has been offset against interest bearing debt.
The first repayment of $355 million on the $3 550 million Senior Debt
facility was made on 29 March 2002 and a voluntary prepayment of $710
million was made on 9 December 2002 which reduced the debt to $2 485
million. The $1 billion revolving facility was not utilised during the
period under review.
Contacts:
De Beers London:
Lynette Hori +44 20 7430 3509/+44 7740 393260
De Beers South Africa
Brian Roodt +27 11 374 6582
Pride Mogorosi +27 11 374 7155
Visit the official De Beers group website for more in formation on the Company
and where you can view and download a selection of images -
www.debeersgroup.com. As an additional resource for images, please visit
www.newscast online.com.
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