Lustre returns to Harry Winston

A look at Harry Winston Diamond’s (HW-T, HWD-N) recent financials shows the tale of rising demand for diamonds. Both the company’s luxury retail side and its mining side, strongly rebounded last year.

“This past year we have seen rapid growth in diamond demand, which has had a positive effect on both segments of our business,” said CEO Robert Gannicott in a statement. “New customers in emerging markets, especially Asia, have replaced demand from the traditional markets such as America during the financial crisis.”

Consolidated sales rose to US$624 million for the year ended January 2011 from US$412 million a year earlier. Earnings from operations came in at US$64.5 million compared with a loss of US$22 million the year previous.

Rough diamond sales from the company’s 40%-owned Diavik mine in the Northwest Territories (60% owned by Rio Tinto) increased by 49% to US$279.2 million, while sales from the company’s luxury brand segment increased 53% to US$344.8 million.

And earnings per share swung to 27¢ from a loss of 99¢ a year earlier.

Earnings for the fourth quarter totalled US$9.9 million, or 12¢ per share, compared with a loss of US$3.4 million or 4¢ per share in the same period a year earlier.

In a conference call, Gannicott noted that rough diamond pricing is now “comfortably ahead of its pre-recession highs,” and the polished market is also very healthy.

Harry Winston reported that prices of Diavik diamonds in an April tender were up an average of 15% from the month before.

As for the current year, Gannicott predicts demand for luxury products will continue to drive its luxury segment revenues and earnings higher. And while mining costs will increase at Diavik as the mine continues to move into underground production, he said the increase would be less than originally expected thanks to the use of lower-cost mining methods that will be used to access higher-grade ore at the A-154 South pipe.

Production was down 12% in the first quarter of 2011 due to a combination of plant maintenance and a shift to lower-grade ore, but production at Diavik this year should come in at around 6.9 million carats (compared with 6.5 million carats last year).

In other news, Kinross Gold (K-T, KGC-N) sold its remaining 8.5% stake (7.1 million shares) in Harry Winston in March for $100 million. The gold miner acquired direct and indirect interests in Harry Winston for bargain prices during the recession.

In April, Harry Winston shares traded at $16.19 in a 52-week window of $9.91-17.36. It has 84.2 million shares outstanding.