December 10, 2008 / 10:37 PM / in 9 years

UPDATE 1-Harry Winston swings to profit, warns on economy

(In U.S. dollars, unless noted)

TORONTO, Dec 10 (Reuters) - Harry Winston Diamond Corp HW.TO swung to a third-quarter profit on Wednesday, thanks in part to a big foreign exchange gain as the Canadian dollar weakened against its U.S. counterpart, but it said the weak economy is hurting its business.

The Canadian company, which operates the high-end diamond retailer Harry Winston and has a 40 percent stake in the Diavik Diamond mine in Canada’s Northwest Territories, earned $71.9 million, or $1.17 a share, in the period ended Oct. 31.

That was up from a loss of $7.4 million, or 13 cents a share, in the year-before quarter.

The company said the latest result included a $49 million net foreign exchange gain, compared with a $40.6 million net foreign exchange loss a year earlier.

Harry Winston warned its operations aren’t immune to the global economic slowdown.

“The diamond industry is being impacted by the current economic malaise resulting from the global credit crisis,” it said. “Prices in all rough diamond categories have softened.”

Analysts polled by Reuters had expected a profit of 57 cents a share, before exceptional items.

Sales fell to $148.6 million from $176.5 million a year earlier.

The company’s shares rose 41 percent, or C$1.73, to C$5.98 on the Toronto Stock Exchange on Wednesday, prior to the release of the results.

Some analysts speculate that Rio Tinto (RIO.L), which owns the other 60 percent of Diavik, could sell its stake. The global mining giant announced massive spending cuts and layoffs on Wednesday as it battles to offset the collapse of commodity prices.

$1=$1.26 Canadian Reporting by Wojtek Dabrowski; editing by Rob Wilson

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