De Beers loses sparkle

Jewellery and fashion go hand in studded glove, but diamonds are arguably no longer a girls best friend. Profits at De Beers, the world's largest diamond producer, saw its sales slide in the company's "most difficult" economic trading environment in decades. In the first six months of 2009, it made a profit of $3m (£1.8m), down from $316m a year earlier. As consumers are tightening their purse strings, De Beers has cut more production than diamonds.In the first six months of this year, production was 73% lower than last year at 6.6 million carats - the weight of a diamond is expressed in carats, with one carat equivalent to 0.2 grams.

De Beers will produce roughly half the amount of carats in 2009 that it did in 2008.

Mines in South Africa, Canada, Botswana and Namibia have all taken production holidays as demand fell. This has helped the company reduce inventories of rough diamonds in cutting centres by 30%. It has also shrunk its global workforce by 23%.

While its profit statement may make gloomy reading, De Beers says it has reason for optimism. The rate of decline has slowed so the second half should be better, it said.

Diamond sales, it points out, typically do well after recessions. It pointed to "significant price growth seen in almost every recovery period dating back to the 1970s".

Image: De Beers engagement ring