(IDEX Online) – Sarine Technologies Ltd has provided further clarification to an update on the Group’s revenues and profitability for Q3 2017.<?xml:namespace prefix = "o" ns = "urn:schemas-microsoft-com:office:office" /?>
"A look back over the last decade at Sarine’s historical third quarter results shows that Group revenues are generally some 20 percent - 40 percent lower sequentially in Q3 versus Q2 (for most of last decade other than in 2011). This is due to the way retail sales take place during the calendar year with more than 50 percent of annual sales being done in the U.S. during the holiday season at the end of the year and into the beginning of the following year (Thanksgiving, Christmas, New Year and Valentine's Day). Similarly, in the Far East the main holiday season centers around the Chinese New Year and Valentine's Day, which also fall in the beginning of the year (end of January through mid-February). Add to these periods the domestic sales in India, mostly during the Diwali holiday season, usually in late October into November, and it becomes evident that a high degree of retail polished diamond sales volume takes place during a relatively short period from November to February. After which time, retailers need to restock depleted inventories.
"As a result, manufacturers generally go into high gear in Q1 and into Q2 manufacturing aggressively to replenish the stocks that the retailers need. The cycle time from buying rough diamonds to being able to offer polished diamonds is typically between 3-6 months (depending on size). There is thus a delay from the time the sales of polished diamonds from manufacturers to retailers start slowing to the time that the manufacturers actually slow their production output. Whenever the wholesale polished diamonds sales start slowing, the manufacturers will still have at least three or more months of rough diamonds that are in the process of being polished, that will eventually add to their inventory. It has become apparent that there is a consistent cycle that towards the end of Q2 or the beginning of Q3 (sometimes earlier and sometimes later), there evolves an oversupply of polished diamonds in the midstream, which creates pressure on polished diamonds' prices.
"Because there is little to no sharing of data between competing manufacturers, the buying of rough diamonds is typically based on the individual manufacturer's expectation of what actual demand for its polished diamonds will be (as well as on varying policies of the producing mining companies who offer the rough diamonds for sale). The intensity of the overstocking varies from year to year and is dependent on many factors - how robust end-consumer demand really was during the selling season in the various markets, how aggressive the producers are at offering rough diamonds, how aggressive the manufacturers are at competing for said rough, at what...