Gemfields Grou. Share News (GEM)

(Sharecast News) - Gemfields said in an update on Wednesday that it expected a first-half net profit after tax of $13.7m, down from $18.1m in the same period last year.

The AIM-traded firm put the decline primarily down to reduced revenue from its key mining assets, Kagem and Montepuez Ruby Mining (MRM), and the write-down of its investment in Sedibelo Resources.

It recorded total auction revenue of $120.6m for the six months ended 30 June, with an additional $6.6m from its luxury brand Fabergé.

However, a weaker-than-expected emerald auction in September had raised concerns over potential market softness, although its management remained optimistic about upcoming auctions in November and December.

Revenue from Kagem fell to $51.9m, while MRM generated $68.7m, both down from the same period last year due to lower-than-expected gemstone production.

Fabergé's performance also softened, with revenue declining from $8.4m in the first half of 2023, reflecting a challenging luxury goods market and the absence of a one-off jewellery sale recorded in the prior year.

Meanwhile, Gemfields said it had fully written down its 6.54% stake in Sedibelo Resources, citing operational suspensions and poor medium-term prospects for the platinum group metals company.

Earnings per share were expected to be 0.6 US cents, down from 0.8 cents in the first six months of 2023.

In South African rand terms, earnings per share would be 11.8 rand cents, a 21% decrease from 14.9 rand cents last year.

Adjusted headline earnings per share, excluding the Sedibelo write-down, were projected at one US cent, down 48% from 1.9 cents.

Despite the challenges, Gemfields noted that it had completed an upgrade of the Kagem processing plant and remained on track to complete MRM's second processing plant by mid-2025.

The company said it was continuing to focus on working capital and capital allocation to navigate the current uncertainties in the luxury and gemstone sectors.

At 1152 BST, shares in Gemfields Group were down 0.85% at 11.65p.

Reporting by Josh White for Sharecast.com.