July 25th, 2005
By Charles Wyndham.
On the day that De Beers announced its interim results I happened to be given a copy of The Loupe, which is the DTC’s internal staff magazine. Clearly in an attempt to overload me with joy I also saw a copy of the letter that the DTC’s sales director has sent to sightholders.
I don't really know where to start as I am overwhelmed by such an abundance of rich reading matter.
Let's touch upon De Beers interim results.
If I was reading a school report it was the sort of performance that a master could well have written, "B for effort, could have done better: must try harder".
In other words, it doesn’t say much at all. In fact, I am getting increasingly confused given the extraordinary language used.
It reminds of when I went to Denmark and as I overheard conversations I thought that I was listening to English babbling away in the background, in fact I suddenly realised that I had not understood one word.
Not surprising given that it was Danish I was listening to, but at a distance it sounds remarkably similar to English.
The same can be said for DTC / De Beers speak, namely remarkably close to English.
Sales were up but no more than price increases. Profits were down, due to inter alia, “The decrease in own earnings (being) mostly due to the impact of a weaker dollar and to tighter margins arising largely from a significant reduction in stockpile realisations Headline earnings..(being).. further impacted by the negative swing of US$46 million in the group’s share of retained earnings of joint ventures. This was because of the release last year, as the diamond stockpile was being run down, of higher provisions for unearned profits in diamond stocks purchased from the group’s joint venture partners.”
I have read this a couple of times and am not sure that I understand. I take it to mean that their 21% drop in headline earnings was due to having no stocks to sell, or put the other way around, that they only have intake.
But then I read that stocks as at the end of June have risen by $400 million?
All quite contrary to me. However, the net effect is that cashflow is down and dividends have been reduced by $100 million.
To cut to the quick, DTC has been bumbling along. Their margins are under pressure not only because of what they say but clearly because of the negative impact of the negotiations with the Botswana government. Negative from the De Beers perspective not that of Botswana.
It is this squeeze on margins that is the driving force behind the beloved VAS (Value Added Services).
Two per cent on $6 billion or so will go to some extent in improving the profit margins, and being termed VAS and not a price increase, DTC keeps all of it.
Two days of the next sight are being set aside for sightholders to take the Orient Express down the Usk valley in Wales, about a two hour journey, to listen to a range of speakers about Business Excellence.
After much scratching of heads to come up with some justification for this charge, this is what DTC have come up with. This it is explained “is the first seminar of its kind and indeed the first of our Value Added 'Growth' Services to be made available”.
This gobbledygook and management speak rhubarb is quite fun as long as you can avoid the second one.
Listening to Lord Coe tell everyone, “Against all odds”, how the Brits stuffed the French over the Olympic bid would be fun for any Pom, but none of the sightholders are Poms. What makes this worse is that I do not think that there will be any French there either.
I fail to see the benefits of listening to Bob Geldof, it might be politically correct and convenient for De Beers own political constituents but hardly for a sightholder who, in all probability, is rushing to get his factory back to work after the summer break.
Perhaps DTC should have had a preview of the David Lamb’s (JWT) presentation on understanding consumer needs, that way they may understand that sightholders have better things to do than flog down to Wales.
All should take note of what the Director of Sales pointed out in the newsletter that “attending and using all services offered may not be the best use of your and our time”.
Again, the best place to start may be giving this trip to Wales a miss.
The best advice of all I take from The Loupe, which I mentioned at the beginning of this scribble.
The headline was, “DTC goes back to school.”
December 25th, 2005
December 24th, 2005
December 23rd, 2005
December 17th, 2005
December 13th, 2005
December 12th, 2005