Russian diamond giant ALROSA earns 15.9 billion rubles from selling 41% of "Katoca" company shares
ALROSA, the world-renowned Russian diamond producer, is navigating tough market conditions in the first half of 2025. The company reported a significant decline in sales and revenue, attributable to weak demand, geopolitical tensions, and reduced production to conserve costs.
Sales and Revenue Decline
ALROSA's revenue plummeted by 25% to RUB116.04 billion (AUD2.23 billion) in the first half of 2025 compared to the previous year. This decline was due to less rough diamond availability after pausing some mines and withdrawing from Angolan joint ventures due to sanctions-related market access issues.
Sanction and Export Challenges
Despite the sharp decrease in official exports, Russian diamonds continue to reach European and US markets indirectly. The First Diamond Company (FDC) serves as a significant intermediary, exporting mainly via Armenia, which is not under sanctions.
Demand Issues
The global diamond market is grappling with weak retail sales, particularly in China, and competition from lab-grown diamonds. These factors have led to lower rough and polished diamond sales industry-wide, with De Beers reporting a 44% drop in early 2025.
Consumer Preferences and Sustainability
In response to the growing popularity of lab-grown diamonds, ALROSA has emphasised the carbon neutrality and traceability of its natural diamonds. By highlighting the natural carbon absorption properties of kimberlite and its renewable energy use, the company aims to appeal to sustainability-conscious consumers.
Inventory Imbalances and Price Pressure
Diamond prices have recently fallen due to uncertainty over US tariffs and retailers postponing holiday-season purchases, reflecting inventory imbalances and cautious market behaviour.
Sale of Catoca Stake
ALROSA's exit from its stake in the Angolan Catoca diamond mine, driven by sanctions-related difficulties for the joint venture, has reduced its rough supply and footprint in Africa. This move has impacted availability but also eliminated some geopolitical risk exposure.
Outlook and Financial Performance
ALROSA's EBITDA fell by 42% to 37.1 billion rubles in the first half of 2025. The challenging market situation is expected to persist in the short term, according to ALROSA. BCS notes that the company's results for EBITDA and free cash flow were slightly better than analysts' expectations but that adjusted net profit was below forecasts.
Given the challenging external environment and unstable free cash flow (driven by one-off asset sales), dividends from the company are not expected in the near future. Net profit for ALROSA grew by approximately 11% to 40.6 billion rubles in the first half of 2025.
The diamond and jewelry industry faced pressure from geopolitical and macroeconomic uncertainty in the first half of 2025, as per ALROSA's report. The company's future outlook depends heavily on resolving geopolitical constraints, managing inventory levels, leveraging sustainability credentials, and adapting to changing consumer preferences favouring traceability and carbon-neutral products. However, competition from lab-grown diamonds and ongoing global economic uncertainties continue to cloud the diamond market's short to medium-term prospects.
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The challenging market conditions facing ALROSA, a world-renowned diamond producer, have extended to the entire diamond industry. In the first half of 2025, the industry grappled with weak demand, particularly in China and due to competition from lab-grown diamonds, which led to lower rough and polished diamond sales industry-wide. Additionally, geopolitical tensions have impacted market access, as ALROSA's withdrawal from Angolan joint ventures due to sanctions-related issues reduced its rough diamond availability. The finance sector has also felt the repercussions of these conditions, with ALROSA's EBITDA falling by 42% in the first half of 2025, while the energy sector plays a role in the company's sustainability efforts, as ALROSA aims to appeal to sustainability-conscious consumers by emphasizing the natural carbon absorption properties of kimberlite and its renewable energy use.
