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Sarine Tech warns of Q1 net loss of between US$1m and US$1.5m

MAINBOARD-LISTED diamond technologies firm Sarine Technologies has warned of a net loss of between US$1 million and US$1.5 million for the first quarter ended March 31, in a Singapore Exchange filing on Thursday after the market close.

It expects to release the full financials for the quarter on May 12.

Sarine noted that in its Feb 24 press release for its 2018 financial results, it had said that "the prevailing negatives in the diamond industry midstream", which hurt its results in the second half of 2018, were likely to continue this financial year.

In the first quarter of 2019, Sarine's midstream customers continued to experience working-capital issues due to credit tightening by Indian banks, and also had to meet the banks' call for return of some previously extended credit by the Indian fiscal year's end on March 31, 2019.

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Adverse sentiment in the industry's midstream is also being driven by uncertainties with the rise of lab-grown diamonds, and the ongoing trade dispute between the United States and China which "continues to dampen the critically important Chinese market", said Sarine. All this has resulted in lower manufacturing activities and thus lower recurring revenues from inclusion mapping services, which Sarine provides.

The company noted that it had nevertheless delivered a record 33 Galaxy-family inclusion mapping systems in the quarter. However, these were of models that have significantly lower gross margins, reducing Sarine's overall gross margin to below 60 per cent.

"There may be some very preliminary indications that the midstream market is beginning to stabilise," said Sarine, adding that the number of stones being scanned by its inclusion mapping systems has risen.

Current indications are that Q1 revenue will be just under US$11 million. With the reduction in gross margin, Sarine expects to record a net loss of US$1 million to US$1.5 million, including non-cash expenses such as depreciation, amortisation and option-based compensation.