Alrosa might reduce inventory by 1.5 mln-2 mln carats in 2014
MOSCOW. Dec 6 (Interfax) - Alrosa does not plan to reduce its diamond stocks in the fourth quarter of this year, but might sell 1.5 million-2 million carats of inventory next year, the Russian diamond monopoly's vice president and CFO, Igor Kulichik said.
"We plan to reduce our inventories by about 1.5 million-2 million carats in the near future. Most of the reduction will take place in 2014. We will conclude 2013 with the same inventories we now have," Kulichik said in a conference call on the company's IFRS results for the first nine months of 2013.
Alrosa's inventory now totals about 17 million-18 million carats, virtually unchanged from the beginning of 2013.
Speaking about the situation on the diamond market, Kulichik said average prices in the nine months were 8% lower year-on-year, which explains why sales volume grew faster than revenue in the period. Alrosa reported sales of jewelry quality rough diamonds up 22% to 27.2 million carats in the nine months, while revenue grew 14% to 107.1 billion rubles.
"It's no secret that prices in 2013 are somewhat lower than in 2012," Kulichik said. He said the last price change made by Alrosa's market board in September was very substantial. "In the fourth quarter, we have not made decisions on price changes and there probably won't be changes before the end of the year," he said.
He said the forecast for the fourth quarter is more than optimistic. "Sales in October-November-December are going very well and we have no doubt that all revenue targets for 2013 will be met," Kulichik said.
Asked about the ratio of production to sales, as well as the reasons for the difference in sales growth between jewelry and industrial rough diamonds, the CFO said that it is "not right to compare the volume of production and volume of sales in each quarter."
"Quarterly figures for production volumes and sales volumes don't correlate at all. Sales volumes can be large or small, depending on decisions made by our marketing experts. Our marketing experts and sellers, depending on demand, always sell what they believe is lucrative at the moment. Figures for the volume of gem sales every month can differ considerably and can float in the course of the year. This is due only to the market and marketing, there are no other reasons," Kulichik said.
Alrosa's sales of jewelry quality rough diamonds in the third quarter were down 22% from the previous period to 5.4 million carats, while sales of industrial diamonds jumped 37% to 2.6 million carats.
Kulichik reaffirmed Alrosa's interest in acquiring the Grib pipe in Arkhangelsk Region, which will start mining and selling diamonds in 2014, from Lukoil .
"We know this asset well and are following it. A year ago we talked about the possible sale of this pipe, but our geologists cannot precisely assess what resources the Grib pipe has. Therefore, we decided not to hurry, allow Lukoil to calmly launch production, so that the company itself and we understand what kind of stones there are there. Based on this, it will already be possible to assess the effectiveness of this pipe and the possibility of its purchase by us," Kulichik said.
"If the pipe will be good and interesting, and we find a common language with Lukoil, we're prepared to discuss buying the Grib pipe," Kulichik said.
He also said that 2014 will be a very intense year for Alrosa in terms of capital expenditures, which will total about 38 billion rubles. After 2014, there will be a steady decline in capex due to the end of investment in underground mines.