Varda Shine Predicts More Rough Supply

Diamond Trading Company (DTC) CEO Varda Shine met with the media at the Taj Mahal Palace and Tower Hotel on 12 April, 2010. Mahiar Borhanjoo, Executive Director of Sales and Sightholder Services of DTC, and Binita Cooper, Managing Director of Forevermark Diamonds Private limited, India were also present at the meeting. Regarding De Beers mining activity, Varda said that the company was going up in their production by 25 per cent from the previous year and that they were aiming between 30 and 32 million carats of production which they believe would give sufficient rough supply to the cutting centres.

Focus on Rejuvenating Diamond Business :
Earlier in the day the company had announced its extension for the Supplier of Choice (SOC) contract by one year. Citing the reason to be the economic downturn in the last 18 months and hoping the extension would allow for people to focus on their businesses and ensure that the industry uses 2010 as the engine to get the diamond industry closer to the world that is wanted in the future, moving towards a bigger market and looking to see growth this year, Varda said, “We thought it would be much better for all diamond businesses to really focus their energy on rejuvenating their business, on making sure that we are focusing on creating consumer demand, on making sure that we are all looking to move towards growth from the last couple of years. That was really the main reason for the announcement.” She added that there are not going to be changes in the existing contract and stated that DTC is still committed to the same principles as when the Supplier of Choice was launched. The principles included financial transparency, ethical behaviour, value addition and creating consumer demand.

Year of Mixed Fortune :
Talking about the year 2009, Varda said it was a year of mixed fortune starting in a very difficult environment following fourth quarter of 2008 which witnessed a decline in purchases of diamond jewellery during the Christmas season, especially in the United States of America by 20 per cent. She quoted, “The whole pipeline and business got into a situation where they stocked less or stopped buying. The Q1 of 2009 was the beginning of a year that was impacted by what had happened at Christmas 2008.” She went on to say that by the end of first half of the year, there was some stabilization in the business. People saw that they could buy and sell. This helped create some confidence in the trade itself. Albeit there was not much restocking by the retailers in 2009, they were very much waiting to see what Christmas season 2009 was going to be like. In addition the cutting and polishing centres had started to slowly work again but on lower levels as compared to the previous years. Though by the end of the year, there had been some small growth, she indicated that the industry had not gone back to the growth that was witnessed in 2007-08.

India & China Double Digit Growth:
According to Varda, compared to Japan that had witnessed a 10 to 15 per cent decline due to the strength of the dollar, India and China had witnessed a double digit growth with India having a growth of 15 to 17 per cent and China garnering a growth of 14 to 15 per cent in diamond consumption. Talking of the diamond rough growth she said, “Overall we estimate that last year finished at -4 to -6 per cent. However if we take into account where we started in 2009, it is actually a good result. It actually started in a very low Q1 moving to better Q2, Q3 and Q4 and we have seen it continuing into a better Q1 2010.” She further quoted, “This year our first three Sights were three times of that of the year 2009. We have also seen American retailers starting to restock as they have sold over the Christmas season better than their expectations. Therefore we are seeing people in India are able to sell their polished to the retailer and that actually is helping revitalizing and energizing the business. So it is fair to say that we are seeing some improvement. We are moving in the right direction. But I would think it is also important to say that we are actually reaching the level of a ‘new normal’.”

Balance with New Normal :
Explaining about the company’s striking a balance with the new normal she said, “We have been doing that for the last 18 months quite seriously. First of all, the thing that once the recession started, we seriously had to look at our costs. We realized that we would not be able to sell what we sold in year 2008. We had to take some actions as far as the mining companies are concerned and to produce less because we could not just inculcate costs without being able to sell the diamonds. As we knew that we were going to sell less, we had to cut our costs significantly by 50 per cent.

Mining Based Sales Up:
“The way we are now looking at the business is how we learn, how we do business more efficiently, how do we do things in a better way? This year we actually are looking at what is the level of growth that is going to be? What is right level of sales and based on that the mining companies are doing their mining plans and based on that we are doing our sales. We have sold more in Q1 because we knew that there is going to be restocking following the Christmas season. So we made more goods available to our customers. So we are all the time striking a balance and it is not just making one decision and stick to it. It is very much there in the business where you are constantly reviewing and constantly improving.”