Rockwell Diamonds reported that revenues fell 19 percent year on year to $9.2 million in its second fiscal quarter as lower inventories impacted sales. Still the company turned a net profit of $2 million in the three months that ended August 31, compared to a loss of $7.1 million the previous year, as it halved its costs and gained from exchange rate fluctuations.

“It is particularly rewarding that Rockwell reported a net profit of $2 million for the second quarter, underpinned by strong cash flows from its operations,” said James Campbell, Rockwell’s chief executive officer (CEO). “It shows that by focusing and delivering on our strategic imperatives to optimize our current operations and sustainably increasing our production profile, our operations have the potential to deliver strong returns for shareholders.”

The company’s production fell 47 percent to 3,611 carats during the quarter due to its closure of the Holpan mine and production issues at Klipdam and Saxendrift. Rockwell noted that progress is being made to resolve these issues and added that mining at the Tirisano mine, which Rockwell bought in September, will help boost production.

Rockwell sold 3,233 carats during the quarter for an average price of $2,186 per carat, representing a price increase of 109 percent from a year earlier. Revenue from the company’s beneficiation agreement with the Steinmetz Group rose 64 percent to $2.3 million due to increased volumes of polished and certified diamonds in the joint venture, strong demand for polished diamonds and the high quality of diamonds recovered during the quarter.

Rockwell added, however, that while polished price rises continued to lag behind the rough, downstream retailers resisted further increases and trading slowed significantly in July before the summer vacation due to retailer’s reluctance to hold expensive inventory over this period.

As a result, while rough buyers were willing to pay high premiums in June and July, causing rough prices to reach all-time highs, prices corrected by 10 percent to 15 percent in August as financial markets fell and diamond markets returned after the summer vacation, Rockwell explained.

The company maintained that a quick recovery is unlikely as financial markets remain volatile given the economic outlook, while diamond prices continue to soften slightly.

“However, the long term supply and demand fundamentals, driven by substantial uptake of diamonds from China and India and a gradual reduction in supply, should continue to support prices,” Rockwell concluded.

For the first six months of the fiscal year, Rockwell's revenues fell 11 percent to $17.7 million while its net loss improved to $119,914 from a loss of $3.1 million a year earlier.