Despite sparkling results, Petra Diamonds warns it will be at the low end of its production target

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Petra Diamonds said the diamond market is stabalising (Source: Getty)

The recovering global diamond market helped Petra Diamonds return to net profit in the first half of the year, but the group is "mindful" its production results could be at the bottom end of forecasts.

The figures

The diamond and gemstone producer said revenue increased 48 per cent to $228.5m (£183.8m) from $154m, while net profit after tax increased to $35.1m from a $2.2m loss the previous year.

For the six months to 31 December, adjusted earnings before interest, tax, depreciation and amortisation increased 80 per cent to $87.1m.

Production levels were on track, rising 24 per cent to 2m carats, and diamonds sold increased 47 per cent to 1.9m.

Basic earnings per share were up to 5.27 cents from a basic loss per share of 0.72 cents the year before.

While Petra said it remains on track to deliver full-year production of around 4.4m to 4.6m carats, it said it's "mindful of the potential to be towards the bottom end of this range".

Shares in the FTSE 250-listed miner fell 1.82 per cent at 145.70p in morning trading.

Read more: Petra Diamonds' gleaming results fall slightly below analyst expectations

Why it's interesting

Retail demand for diamonds is improving, Petra said, while "signs of stabilisation in the rough diamond market are evident with steady demand across the majority of size ranges, except in the smaller, lower value categories".

Rough diamond prices remained flat during the period on a like-for-like basis, while some weakness was seen for smaller sizes. The prices of smaller stones have been pressured by India’s demonetisation programme, which has adversely impacted smaller midstream players in the Indian diamond market, said Yuen Low, analyst at Shore Capital.

Petra previously said it would revisit the possibility of dividend resumption with its lender after the interim period, with the aim of resuming dividends as soon as possible. The company said today it plans to restart dividends as it "becomes increasingly cash generative and distribution covenants are met".

Petra also confirmed the group experienced five fatalities in its mines during the period, in addition to the four reported in October, "despite excellent safety records historically".

Read more: A weakening diamond market has pushed this producer to mothball a mine

What Petra Diamonds said

Chief executive Johan Dippenaar said stabilising market conditions and the increased contribution of undiluted ore helped Petra achieve strong operational and financial results.

He added:

We are now reaching an exciting inflection point in the company's development and are on track to start benefiting from a declining Capex profile, a significant increase in Run-of-Mine (ROM) grades and product mix, and the associated improvement in margins and cashflow.

The team is highly committed to maintaining momentum and continuing to achieve operating efficiencies throughout the ramp up of each project in order to accomplish our stated goal of circa 5.3m carats by the financial year 2019, while upholding safety as our number one priority.