Tanzanite firm reduces losses

The following report is published courtesy of East African Business Week

Author: Joseph Elinaza

DAR ES SALAAM, TANZANIA – TanzaniteOne, the largest tanzanite gemstones producer in the world, has reduced losses after tax by 71 per cent by cutting production to contain costs.

The company decided to cut production costs following the impact of global economic downturn on the global luxury goods sector.

Tanzanite is a precious stone used to manufacture jewelry although locals attach a lot of other psychic uses like bringing good luck to a baby.

The company closed 2009 financial year by posting an after tax loss of $2.5 million (or US 2.54 cents per share) compared to the loss of US$ 8.7 million (or US11.62 cents per share) in 2008.

The result for the year was heavily influenced by a significant reduction in sales revenue experienced during the period, which saw sales reduce by 54 per cent compared to the previous year (2008).

The 2009 financial results issued last month showed that the financial result was also adversely affected by the recognition of a provision of $1.0 million for missing tanzanite inventory in South Africa.

The company is currently pursuing insurance and legal channels to recover the loss.

The company’s South African office has since been closed.

Commenting on the results, Mr Bernard Olivier, Chief Executive Officer said due to the economic crisis in the latter half of 2008, the beginning of 2009 saw weak demand for luxury goods and very low gemstone prices.

“As 2009 progressed the Tanzanite price, as mirrored in the diamond industry, made a consistent recovery, a trend reflected in our ongoing sight results,” Olivier said.

In addition to improving prices, the CEO said, “Our work is optimizing and streamlining operations quickly to deliver tangible improvements to TanzaniteOne’s margins.”

Operational optimization resulted in a 19 % increase in recovery of tanzanite compared to our 2008 forecast and 45 % reduction in company operating costs.

TanzaniteOne said its priority is to continue to expand tanzanite production, with high-tech gemstone extraction operations, and achieve production target of 2.2 million carats for 2010.

The company is hopping to better its financial status through its new marketing initiatives targeting growth of the lighter and included material was launched with a target of opening up in new markets, thus expanding the tanzanite distribution.

“Cutting and polishing technologies have been implemented to realize the maximum value that these categories are able to deliver,” part of the financial statement indicates.

despite the losses the firm is still optimistic that the gemstone will attract a wider market since it can only be found in Tanzania. This alone would ensure it is highly competitive.


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