Despite a healthy 16% lift in diamond sales revenues for the first six months of this year, diamond company Alrosa reported this week that the burden of rising costs, particularly a bigger wage bill and financing charges, caused profits to shrink.



An audited report from Price Waterhouse Coopers for the six-month period to June 30, issued on October 1, revealed that diamond sales came to $2.19 billion, an increase of $308 million, or 16%, over the same period of 2011.



Exports accounted for most of the sales aggregate; at $1.64 billion, this figure increased by 20%. Belgium, India, Israel, China, and UAE are the principal destinations for Alrosa’s exports.



India saw its export value jump the most - up 69% compared to a year ago, as direct diamond sales between Russia and India on long-term contracts supplants the indirect trade through Antwerp.



Domestic diamond sales came to $525 million, up just 4%. Cost of sales jumped 45% over the same interval to $1.05 billion, accounted for mostly by rising wages and salaries, depreciation, and cost of materials and services.



Interest charges came to $124 million, up fractionally from a year ago. However, foreign exchange losses, as the ruble weakened against the U.S. dollar, jumped from $34 million last year to $202 million this year.



A cost item called “charity” grew almost sevenfold – to $47 million this year. Bottom-line profit was $503 million, down 38%. Long-term debt shrank 20% to $1.9 billion, but growth in short-term debt more than offset this improvement; from $615 million in the first half of 2011 to $2.3 billion in the six months to June 30.