UPDATE 1-Harry Winston CEO says will keep luxury brand for now

Sat Dec 8, 2012 1:06am IST

Related Topics

Stocks

   
Inside the Peshawar school

Inside the Peshawar school

The aftermath inside the Pakistan school where at least 132 students and nine staff members were killed by Taliban gunmen.  Pictures 

* Company sees eventual sale or spin off of retail arm

* Luxury brand is still growing, needs investment

* Shares fall 2.6 pct to C$13.90 on TSX

By Julie Gordon

TORONTO, Dec 7 (Reuters) - Harry Winston Diamond Corp has no plans to sell or spin off its watch and jewelry division from its mining division in the next year, though the retail arm will eventually stand on its own, the company's chief executive said on Friday.

"In the fullness of time, it will certainly either become separated or be sold to someone that can do better with it than we would be able to," Chief Executive Robert Gannicott said in a conference call with investors.

"But clearly that time is not now," he said. "It still requires further investment and it still needs to get through at least another year."

Harry Winston's shares fell more than 2 percent on Friday, the day after the diamond miner and retailer revised down its full-year diamond production targets.

A source close to the matter said in October that the company had looked to sell its watch and jewelry business to concentrate on mining and that it had approached potential buyers. The company later said it was not in active talks regarding any such transaction.

Harry Winston then agreed in November to buy BHP Billiton's Ekati diamond mine in northern Canada for $500 million. It said it would fund the cash deal with existing resources and debt, including a $400 million term loan and a $100 million revolving credit facility.

"In order to purchase Ekati we have taken on a debt facility," said Gannicott. "We don't have any great pressure to dispose of the diamond luxury retail business."

The luxury business, which includes retail salons around the world, functions as an information base for Harry Winston by providing insight into consumer trends, allowing the miner to better anticipate rough diamond demand and pricing.

There is also opportunity for more vertical integration between the mining and retail segment, especially after the Ekati deal closes in early 2013. The Ekati mine produces some 6 percent of the world's diamond supply by value.

Founded by its namesake in 1932, Harry Winston was the first jeweler to lend million-dollar baubles to Hollywood stars to wear on the red carpet. The company owns a 40 percent stake in the Diavik diamond mine in Canada's Northwest Territories, a joint venture with Rio Tinto Plc.

Harry Winston's stock was down 2.6 percent to C$13.90 on Friday on the Toronto Stock Exchange.

SPARKLE RETURNS

After a long slump in rough diamond prices, the company said that things are looking up in the United States, the world's top diamond market.

"We do not expect rapid near-term rises in rough diamond prices," said Gannicott. "But we do believe the corner has been turned in an industry where demand is clearly poised to outstrip supply."

Rough diamond sales in the fiscal third quarter more than doubled to $84.8 million, up from $36.2 million in the year-earlier period, as an increase in the volume of carats sold outweighed a drop in the average price per carat.

Luxury brand sales rose 14 percent to $95.6 million, up from $83.5 million in the same quarter of 2011, and the company said that it expects to continue to increase its market share in the jewelry and watch sectors.

"We've seen strong sales in Japan and an improvement in America, the two most important diamond markets, while Chinese tourists are having a big impact on sales in other centers," Gannicott said.

The company has opened retail salons in China as it looks to tap into the fastest-growing luxury market in the world. It also opened a salon at Harrods department store in London in August and a salon in Geneva, Switzerland, is due to open early next year.

FILED UNDER:

Economic Pulse

REUTERS SHOWCASE

Hope for SpiceJet

Hope for SpiceJet

Former SpiceJet owner leading rescue plan: reports.  Full Article 

Oil Prices

Oil Prices

Oil rallies above $60, heads for 4th weekly decline on glut.  Full Article 

New Airline

New Airline

Tata, Singapore Air venture Vistara to take off on Jan 9.  Full Article 

Reuters Exclusive

Reuters Exclusive

Google aiming to go straight into car with next Android – sources.  Full Article 

Chinese Economy

Chinese Economy

China revises up size of 2013 economy, sees no effect on 2014 growth.  Full Article 

Reuters Poll

Reuters Poll

BSE Sensex to hit 32,980 by December 2015  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage