Russian diamond mining giant Alrosa has reported a significant drop in sales and profits for the first half of 2024, reflecting the impact of international sanctions and a weakening global diamond market.
The state-controlled company, which has faced increasing restrictions due to the ongoing conflict between Russia and Ukraine, saw a 5% year-on-year revenue decline to RUB 179.47 billion ($2.01 billion). Net profit for the same period plunged 34% to RUB 36.63 billion ($411.4 million).
Impact of Sanctions on Alrosa
Since the Russian invasion of Ukraine in February 2022, Alrosa has been subjected to severe sanctions imposed by Western nations, including the United States and the European Union. These sanctions have restricted the company’s access to key markets, particularly in the West. Alrosa no longer provides a breakdown of where its diamonds are sold, highlighting the challenges of the current regulatory environment.
Alrosa acknowledged the difficulties posed by the geopolitical situation, stating, “The sanctions pressure on the company and the increased volatility in the markets are the factors that may affect its ability to continue as a going concern in the future, though not in the immediate future.”
The company’s overall half-year revenue declined by 5%, which is smaller than the drops seen by competitors De Beers and Rio Tinto, who faced similar market conditions. However, Alrosa’s second-quarter results were significantly worse, with revenue falling 34% to RUB 60.79 billion ($677.4 million), and net profit down 73% to RUB 7.3 billion ($81.7 million).
Global Market Challenges
Beyond sanctions, Alrosa, like other major diamond producers, is facing broader challenges in the global market. These include weak demand for rough and polished diamonds, particularly in China, and increasing competition from synthetic diamonds. The company’s statement noted that “the geopolitical situation in the region remained tense as a result of the further development of the situation with Ukraine, which remains extremely unstable.” This tension could continue to affect market dynamics.
Alrosa did not disclose the volume of carats sold or pricing details, but much of the revenue loss took place in the second quarter. Gross profit for the quarter dropped 49% to $266 million, marking a difficult period for the company.
