KEY POINTS
- Gemfields expects earnings per share to drop 21% to R11.80.
- The company wrote down its Sedibelo Resources stake to zero.
- Lower revenues and higher costs reduced net profit to $13.7 million.
Gemfields expects to report earnings per share of R11.80 for the six months ending June 30, a 21% drop from the R14.90 reported in the first half of 2023.
The company’s 6.54% shareholding in platinum group metals company Sedibelo Resources has been written down to zero from $4 million at the end of 2023. The write-down reflects a lack of positive developments from Sedibelo, which has suspended operations, and management’s view that medium-term prospects remain bleak. The Sedibelo stake is considered noncore to Gemfields’ business.
Gemfields said it is confident that, after accounting for the Sedibelo write-down, net profit after tax will be $13.7 million (R255.6 million), compared to $18.1 million (R333.7 million) for the first half of 2023. The lower profit is attributed to decreased revenue and higher costs at both Kagem Mining and Montepuez Ruby Mining (MRM), as well as increased net financing costs due to rising debt, which is helping fund MRM’s second processing plant.
The company plans to release its full results on Sept. 27.
Challenges in production and auction revenues
According to a report by Mining Weekly, Gemfields’ two main operating assets, Kagem Mining and MRM, generated revenues of $51.9 million and $68.7 million, respectively, during the period. While demand for rough emeralds and rubies remained strong, production of top-quality gemstones at both mines fell short of expectations.
In August, Kagem’s production saw a significant increase with the completion of its upgraded processing plant, though MRM continues to struggle with weaker gemstone output.
Fabergé, Gemfields’ luxury brand, reported revenues of $6.6 million, down from $8.4 million in the first half of 2023. The decline reflects a softer luxury goods market and the absence of one-off jewelry sales that boosted last year’s results.
“During the period, the group generated auction revenues of $120.6 million, as well as $6.6 million from Fabergé, contributing to a profitable but reduced outcome compared to last year,” CEO Sean Gilbertson said.
“This month, a commercial-quality emerald auction underperformed, adding to our uncertainty. However, we expect stronger results from our higher-quality emerald auction in November and the mixed-quality ruby auction in December,” he said.
“Higher-quality gemstones tend to be more resilient in challenging times, but we remain cautious as the luxury and gemstone sectors face greater uncertainty than in the past three years,” Gilbertson added.
He also noted that the Kagem processing plant upgrade has been completed, while MRM’s second processing plant is on track to finish by mid-2025. “We will continue focusing on working capital and capital allocation while investing in our future,” Gilbertson said.
