Diamond miner and luxury goods manufacturer Harry Winston reported a significant 52% year-on-year drop in profit, the result of weak rough diamond prices, prompting the producer to withhold diamonds from auction.

The miner reported net profit of $4.8-million or 6c a share for the first quarter ended on July 31, considerably lower than the $10-million or 12c a share achieved in the previous comparable period.

Consolidated revenue from both the mining segment and the luxury brand segment fell 20% to $176.9-milllion, the result of continued market uncertainty driving diamond prices down.

The company sold about 430 000 ct for an average price of $142/ct, compared with about 570 000 ct for an average price per carat of $157 in the comparable quarter of the prior year. The 24% decrease in the quantity of carats sold was mainly the result of the company's decision to hold some inventory until stability returned to the rough diamond market.

The 10% decrease in the company's achieved average rough diamond prices in the second quarter resulted from a decrease in the market price for rough diamonds from the peak achieved in July 2011, partially offset by the sale of the higher-priced goods held back by the company in the first quarter of the current financial year as a result of an observed imbalance in the rough and polished diamond prices for these goods during that period.

"This quarter has seen transaction numbers and margins grow in our luxury goods segment even as we have withheld rough diamonds from a soft diamond market, rather than sell at depressed prices,” CEO Robert Gannicott said in a statement.

Harry Winston had about 700 000 ct of rough diamond inventory with an estimated current market value of about $90-million as at July 31, of which about $65-million represented inventory available for sale.

The company expected the trend of wealth creation in emerging markets, combined with increasing tourism to remain key drivers of increasing demand for luxury jewellery and watch products. Over the long term, consumer brand loyalty for luxury products was expected to remain strong.

The Diavik diamond mine, located in Canada’s North West Territories, in which Harry Winston owns a 40% share, was expected to produce about eight-million carats on a 100% basis. The company’s Toronto-listed stock traded 1.65% higher at C$12.31 on Thursday morning.