* Loss $0.68/shr vs year-ago EPS $0.35
* Hit by weaker prices, falling retail demand
* Market has improved during first quarter
(In U.S. dollars, unless noted)
By Cameron French
TORONTO, June 4 Harry Winston Diamond Corp
HW.TO fell to a loss in the first quarter due to plunging
diamond demand and a series of one-time items, but the company
said on Thursday the worst of the slump was past and prices
were already on the rise.
Speaking on a conference call, Chief Executive Robert
Gannicott said rough diamond prices have begun to rebound due
to global cuts to diamond production and positive demand from
Asia, while retail traffic at its high-end jewelry stores has
begun to improve after drying up last year.
"(Last year) was a terrible year," said Gannicott.
"This quarter ... we can actually see the beginnings of
He said Harry Winston, which in addition to the retail
chain owns about 30 percent of Rio Tinto's (RIO.L) Diavik
diamond mine in Canada's Arctic, was hit last year by a
triple-whammy of weak demand, soaring capital costs at Diavik,
and lower than expected mined grades.
On the capital cost side, for instance, the company
suffered equipment shortfalls, including large dump trucks that
were delivered without tires due to tire shortages.
The tough conditions prompted mine operator Rio to defer
construction of the underground portion of Diavik and to shut
down the mine for six week periods this summer and winter.
The summer shutdown will take place from July 14 to August
24, but Gannicott said he believed the winter shutdown, which
is scheduled from Dec. 1 to Jan. 11, might be canceled due to
the improving market.
"I personally think the second one is unlikely to occur,
but there's been no real decision on that yet," he said.
However, the company cautioned in a statement that the
global retail environment remains very difficult.
FALLS TO LOSS
For the three months ended April 30, Harry Winston lost
$45.1 million, or 68 cents a share, compared with a
year-earlier profit of $21.3 million, or 35 cents a share.
The loss was exacerbated by a $34.2 million noncash
dilution loss from Kinross Gold's (K.TO) purchase of a direct 9
percent stake in the Diavik mine from Harry Winston. Kinross
also bought a 20 percent stake in the company.
Stripping out the dilution loss, as well as a net foreign
exchange loss and an after-tax gain on an insurance settlement,
Harry Winston lost 10 cents a share, it said.
Quarterly sales fell almost 30 percent to $109.6 million,
declining 29 percent on the mining side and about 30 percent in
the retail business.
In a research note, RBC analyst Irene Nattel said the
results missed her estimate for a net loss of 52 cents a share,
while revenue from both the mining and retail segments also
were weaker than expected.
The company's shares, which have more than tripled after
hitting a 20-year low in mid-March, were up 4 Canadian cents at
C$7.31 on the Toronto Stock Exchange.
(Additional reporting by Euan Rocha; editing by Rob Wilson)