In a reviewing of FY2023, Sarine said, new services launched by Sarine should benefit FY2024! Significant economic headwinds in the major U.S. and China markets stifled the diamond industry in 2023. In the primary U.S. market concerns of a looming recession dampened consumer sentiment for much of the year, easing towards year-end.
In China, the second most important market for diamond jewellery, negative news relating primarily to the real-estate market and fears of possible banking insolvencies impacted consumer spending and continue to do so. In addition, the rapid expansion of the LGD segment in the U.S. market in 2022 and 2023 disrupted demand for natural diamonds.
In the last months of 2023, the interest rate outlook in the U.S. improved, and this contributed to more buoyant consumer confidence in the critical year-end holiday season. Overall holiday spending was some 5% higher over the preceding year. Significantly, the market disruption caused by LGD may have peaked, as the growth trend of LGD adoption slowed in the second half of 2023.
This may have been due to the sharp decline in LGD wholesale and, more importantly, retail prices, thus reducing retailers’ profits and margins, along with the growing consumer realisation that not all LGD are necessarily green. While it may be too early to call this a new trend, the slowdown could indicate that the natural diamond and LGD segments of the diamond jewellery market are reaching a new equilibrium.
On lower revenue and a change in the revenue mix that includes GCAL, gross profit margin dropped to 64% in FY2023 from 69% in FY2022 with a corresponding decrease in gross profit from US$40.6 million in FY2022 to US$27.4 million in FY2023. Overall expenses fell in H2 2023 due to cost cutting steps taken, and the reduction will accelerate into FY2024 as the Group continues to right size its expenses in FY2024. With the decline in gross profit, the Group reported a loss of US$2.8 million for FY2023, as compared to a profit of US$8.8 million for FY2022.
The Group delivered only 27 Galaxy-family inclusion mapping systems in FY2023. As of December
31, 2023, our installed base was 830 systems.
