Sarine Technologies saw an increase in profit in the first half of the year, amid a significant reduction in costs and higher recurring revenues from the addition of new services for synthetic diamonds. 

Profit rose 7% year on year to $1 million in the six months that ended June 30, the Israel-based producer of technology for the diamond industry reported Monday. Overall sales slipped 8% year on year to $21.9 million. The decrease was the result of a 37% decline in sales of traditional capital equipment, due to “less-than-favorable conditions for natural-diamond manufacturing,” Sarine noted. However, an increase in recurring revenues, which comprise more than 70% of overall revenue, partly offset that drop. 

Recurring revenues — from fees clients pay when they use Sarine systems, such as its Galaxy rough scanners — grew 11% as the company introduced some new initiatives at the start of the year. Those included the adaptation of Sarine’s rough-planning technologies for use with synthetic diamonds, as well as the opening of a lab in India primarily to service the country’s “significant” synthetic industry, the company explained. 

“Revenues from lab-grown diamond services in the first half grew significantly, and we believe we are on target to generate 15% to 20% of annual revenues from this segment by year’s end,” Sarine said. “Although near-term challenges persist in the rough-diamond market, our strategic initiatives are designed to foster long-term growth and a stronger market position for Sarine as we expand our services offerings for both the natural-stone and lab-grown diamond markets.”

The company believes revenue will rebound in the long term as the oversupply diminishes and appetite for synthetics decreases due to falling prices. However, its short-term prospects remain weak. 

“The near-term demand for rough natural diamonds is likely to remain soft, with subdued manufacturing activities,” the company noted. “However, demand is expected to improve…[as] the lab-grown diamond market is experiencing rapidly and sharply declining wholesale and retail prices. With much lower absolute profits generated…there are indications of a renewed focus on natural diamonds. We expect this…to rekindle demand for rough natural diamonds and promote the anticipated equilibrium between two segments.” 

Image: The Sarine clarity system. (Sarine Technologies)