Debmarine Namibia’s revenue surged by 83% in 2022 to N$13.2 billion from N$7.2 billion in 2021, owing to increased production, positive consumer demand driving price (12%), augmented by a 20% (N$14.9 vs N$16.8) weakening of the Namibia Dollar against the US Dollar.
Chief Executive Officer of Debmarine Namibia Willy Mertens said Earnings Before Interest Tax, Depreciation and Amortisation (EBITDA) increased by 168% to N$6.7 billion due to the increase in revenue, offsetting some cost increases.
“We have also seen improved profitability with EBITDA margin increasing from 35% to 51%. We benefited close to N$1 billion from the improvement in the diamond market and N$1.4 billion from the weakening of the N$ against the US$, with inflation taking out N$400 million. The Benguela Gem contributed N$2.4 billion in her first year to EBITDA with cost pressures taking out N$900 million,” revealed Mertens at a Stakeholder Breakfast Meeting on Thursday.
The CEO noted that one of the company’s biggest highlights for 2022 was undoubtedly the delivery of the Benguela Gem two months ahead of time and 6% (N$1.1 billion) below budget.
The Benguela Gem recovered 480,000 carats of diamonds in 2022, compared to a budget of 281,000.
Debmarine Namibia’s 2022 production of 1.725 million carats is a record production in the company’s short history, accounting for roughly 80% of total diamond production in Namibia.
Mertens stated that the company’s production target for this year is around 2 million carats.
Meanwhile, the 52% increase from 1.136 million in 2021 was primarily due to the introduction of the Benguela Gem in 2022.
The Benguela Gem contributed 28% of Debmarine’s 2022 production, second to the Mafuta, which contributed 36% or 613 thousand carats.
The five drill vessels contributed 36% or 632 thousand carats.
“One of the reasons we embarked upon the Benguela Gem project was to reduce the risk of reliance on the Mafuta and I am happy to report that we succeeded. Putting the 2022 record production in perspective, this number is more than triple from 506 thousand carats (with 6 vessels) compared to when Debmarine Namibia commenced operations,” said the CEO.
Mertens said this was achieved not only through additional capacity, but also through continued innovation and investment in technology.
“Looking at the long term, Atlantic 1 (licence) potential resource endowment – 33 million carats with 36 years of life-of-Mine to 2057. We need to remain innovative and continue to invest in technology to successfully negotiate the future and the challenges it will bring.”
Additionally, consumer demand for diamond jewelry over the period of 2022 performed quite well because Debmarine started from a lower base, as shown by prices rising to levels prior to COVID.
Mertens said this has softened towards the end of 2022 with midstream polished diamond inventories building up in Q4 22 as retailers restocked more cautiously amidst growing economic uncertainty.
“We remain cautiously optimistic for demand to increase as China continues to reopen and inflation rates decreasing in major economies,” he added.
The company’s free cash flow after providing for capital expenditure increased to N$3.6 billion, enabling the payment of a dividend of N$3.1 billion to their shareholders.
Meanwhile, Debmarines overall economic and societal contribution for 2022 stood at N$10.2 billion in various forms: N$1.2 billion to employees, N$3.5 billion to local procurement, N$35 million Social Investment, N$718 million to their financiers as repayment and lastly N$4.7 billion to the Government (as regulatory and shareholder) in Taxes, Royalties and Dividends.
Regarding forecasts, Debmarine is cautiously optimistic that demand will rise as China continues its economic reforms and major economies experience falling inflation rates.
“Although we had a difficult production start to 2023, we expect a moderate improvement on our 2022 production. Will continue to monitor the market in order to respond appropriately when required and our overall strategy remains to Recover diamonds safely and efficiently, leave a positive long-term legacy while delivering sustainable shareholder returns,” said Mertens.
Debmarine Namibia remains the single largest contributor to government revenue (excluding SACU receipts), having directly contributed N$13.8 billion over the past five years (2018-2022) to the National Treasury.
