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Magazine > Industry News > News Content

De Beers CEO Penny to exit company

7/25/2010 7:05:21 PM

London--De Beers Chief Executive Officer Gareth Penny will step down this fall after five years at the helm of the world's largest diamond mining company, a tenure that included guiding De Beers through one of the worst financial crises in history.

The announcement came Friday morning as the London-based company announced its financial results for the first six months of the year, ended June 30. On the heels of a brutal 2009, De Beers saw total sales jump 74.1 percent in the first half of 2010 to $2.979 billion, up from $1.711 billion in the first half of last year.

Sales of rough diamonds by the Diamond Trading Co. (DTC), De Beers' marketing arm, jumped to $2.6 billion, an 84 percent increase compared to $1.4 billion in the first half of 2009. The company attributed the increase in sales to both re-stocking by the trade overall and continued growth in the emerging markets of India and China.

Nicky Oppenheimer, De Beers Group chairman, said in a news release that the first-half results were a testament to the leadership of Penny, who navigated the company through the downturn and positioned it for future growth by "taking short-term pain for long-term gain."

De Beers slashed its global workforce by 25 percent in 2009, reduced its cost base by 45 percent and made the unprecedented move of halting production completely at a number of mines in reaction to the global economic meltdown.

"Gareth has made an enormous contribution throughout his 22 years with the company and, most recently, five years as CEO," Oppenheimer said in the release. "He has been a passionate and effective leader during some of the most difficult challenges De Beers has faced in its long history. I have full confidence in the experienced management team that Gareth has assembled, who will carry on our current course to deliver shareholder value."

While De Beers did not elaborate further on his decision to leave, Penny, 48, told Bloomberg that he felt it was the "right time" to step down. He will remain as CEO until the end of September and then work part-time for the rest of the year.

Penny told Bloomberg that he isn't sure what his next step is at this point.

The search is on for a replacement and, in the interim, Chief Financial Officer Stuart Brown and Chief Commercial Officer Bruce Cleaver will act as joint CEOs, according to the release.

In looking ahead, the release states that while De Beers is encouraged by strengthening demand, the global economic climate remains fragile, particularly in the United States, Europe and Japan. The company is proceeding cautiously with "measured optimism" into the second half of the year, looking to the emerging markets of India and China for growth.

Other highlights from De Beers' first-half results include:

-- Carats recovered in the first half totaled 15.4 million, more than double the 6.6 million recovered in the first half of 2009.

-- After a fatality-free year in 2009, De Beers reports that there were no fatalities at any of its operations in the first half of 2010.

-- DTC rough diamond prices are now, on average, comparable to prices in June 2008, before the recession.

-- There was double-digit growth in consumer demand in India and China and a "modest improvement" in the United States. In addition, De Beers Diamond Jewellers, De Beers' retail joint venture with Moet Hennessy Louis Vuitton (LVMH), saw a "healthy rebound" in sales in the first half.

-- De Beers is considering its next move in the class-action lawsuit filed against it in the United States. Last week, the U.S. Court of Appeals for the Third Circuit opted to reject the $295 million settlement reached in the case in 2006, further delaying payouts for those involved.

-- During the first half of 2010, De Beers was served with another class-action suit in the Province of Ontario. The class action, together with the existing class action in British Columbia, is following the usual legal process.

-- At De Beers' July 22 board meeting, Anthony Oppenheimer and Sir Chips Keswick retired as directors of the company after nearly 30 and 17 years of service, respectively. James Teeger will assume the chairmanship of the board audit and remuneration committees.

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