STATE-owned diamond dealing company Namib Desert Diamonds (Namdia) recorded a N$95,2 million profit this year – at least N$66 million less than last year.
The company points to lower profit margins and the competition of synthetic diamonds as some of the causes, while saying the 41% drop in profit was to be expected given the circumstances.
One would argue that there was minimal impact from Covid-19 on these figures, as the financial year ended 29 February 2020.
However, the company said in the last quarter of the year, in mid-January 2020, the diamond industry was profoundly adversely impacted by the outbreak of Covid-19.
It said diamond centres worldwide closed and diamond trading declined sharply in February due to economic uncertainty surrounding the Covid-19.
The results as announced early this month, shows that the company, led by former diamond commissioner Kennedy Hamutenya, sold over 253 000 carats for N$1,9 billion.
This translates to an average price of US$528,64 per carat at year end, the company said – around N$8 635,39 at current prices.
Namdia buys rough diamonds from the government and De Beers partnership and sells them in the industry. The company also has an option to cut and polish the diamonds before selling them.
According to the financials in the annual report, for the 2020 financial year, purchases stood at N$1,7 billion, about N$300 million less than 2019 figures, which stood just above N$2 billion.
Comparing the gross profits between the two years, Namdia did relatively better than in 2020. The gross profit margin (gross profit as a percentage of sales) for 2020 was only 10% and in 2019 it was 12%.
This is in line with the company’s lower margin claims and other outside factors it listed, such as the currency depreciation.
A basic analysis of what led to the drop in profit for Namdia shows that the decrease came from low investment income, a N$3,2 million foreign exchange loss, increased operating expenses and a slight increase in finance costs.
Although Namdia’s investment income increased to N$15 million from N$10,6 million in 2019, that was not enough to fill the hole created by the increased negatives.
Though profit earned was low compared to 2019, the company declared an N$80 million dividend this year – at least 84% of the profit earned this year.
Last year, Namdia declared and paid a N$50 million dividend. The 2020 dividend, however, left Namdia with a strong retained earnings figure of N$328 million.
The dividend declared for this year is at about 24% of retained earnings, corrosive to the balance sheet critics say, especially with the uncertainty presented by Covid-19. Dividends as a percentage of retained earnings in 2019 was at 15%.
The company had a healthy balance sheet of N$410 million, just edging up slightly compared to the stock of assets at the end of 2019, which stood at N$409 million.
Namdia said key good points outside the operational performance included the filling of all positions, the transparency in its dealings, and staff training and development.
Furthermore, the company said it contributed to soccer, rugby, hockey, and chess programmes in the country, as well as N$15 million towards the drought relief programme.
Taxes paid into state coffers were N$63 million – including a N$19 million export levy, which is claimable from the tax authorities.
The annual report is available on the company’s website.