Sarine Technologies Ltd. H1 2025 Financial Results: Analysis and Outlook

Sarine Technologies Ltd., a leading provider of precision technology for the diamond and gemstone industry, released its condensed interim financial statements for the six months ended June 30, 2025. The report reveals the company’s navigation through a challenging industry landscape, significant cost-cutting efforts, and strategic shifts aimed at long-term sustainability.

Key Financial Metrics

Historical Performance Trends

The first half of 2025 marked a significant downturn for Sarine Technologies, with revenue declining by 30% year-over-year, primarily due to turbulence in the natural diamond industry. Gross profit margin also fell to 57% from 63% a year earlier, reflecting the industry’s weaker operating environment. Despite these headwinds, the company maintained positive operating cash flows and ended the period with a higher cash position of \$27.3 million, up from \$26.3 million at year-end 2024.

Cost reduction efforts, including a major streamlining of operations and the transfer of manufacturing to India, helped offset some of the impact of lower sales. Research and development expenses were reduced by capitalizing \$0.7 million of LGD grading development costs, while general and administrative and sales and marketing expenses were also cut substantially.

Exceptional Items and One-Offs

• Gain from Lease Termination: The company realized a \$0.6 million gain from the early termination of an office lease, contributing positively to the bottom line.
• Change in Inventory Estimate: A reduction in inventory write-down provision expenses of \$0.6 million occurred due to reassessment of inventory utilization periods.

Dividend Policy and Shareholder Returns

No interim dividend was declared for H1 2025. In contrast, an interim dividend of US 0.75 cents per share was paid for H1 2024. The company’s stated policy of returning at least 80% of net profit as dividends was exceeded in 2024, but the operating loss in the current period precluded any dividend for H1 2025. The Board cited the lack of profit and the need to preserve cash as reasons for withholding the dividend.

Share Buybacks & Capital Structure

• The company repurchased 758,000 shares during H1 2025 at a cost of \$125,000, continuing its ongoing share buyback program. As of June 30, 2025, there were 341,371,281 shares in issue (excluding dormant shares).
• No new shares were issued, and no options were exercised during the period.

Strategic Initiatives and Corporate Actions

• Diversification: Sarine is considering the acquisition of a 33% stake in Kitov.ai, an AI-based quality inspection company, for \$4.1 million, with an option to increase its stake to 51% via a \$2.6 million convertible loan. This is aimed at diversifying revenue streams beyond the diamond sector.
• Business Streamlining: The company continued aggressive cost-cutting, including moving manufacturing to India, to leverage lower costs and proximity to major customers.

Industry Trends and Outlook

• The natural diamond industry remains pressured by the rise of lab-grown diamonds (LGD), overproduction, and weak demand, especially in China and the US. Recent US tariffs on Indian diamond exports have added further uncertainty.
• Sarine is focusing on expanding its Most Valuable Plan™ (MVP) and cloud-based solutions, as well as its GCAL grading labs for LGD, to capture recurring revenue streams and adapt to shifting industry dynamics.
• The company is also positioning itself as a leader in diamond origin and traceability solutions, collaborating with platforms such as DeBeers’ Tracr™.

Chairman’s Statement

“The natural diamond manufacturing industry, from which the Group still derives most of its revenues, continues to adjust to the ‘new norm’ caused by the continued disruption of the market by lab-grown diamonds (LGD) offerings and weak consumer demand in China. The LGD segment itself also continues to be affected by over-production and oversupply driving declining wholesale and retail prices.

Notwithstanding challenging industry conditions which impaired our revenues in H1 2025 by 30%, as compared to H1 2024, Sarine has made substantial progress in executing the strategic initiatives announced last year. The aggressive business streamlining, coupled with the transitioning of the manufacturing activities to India have mitigated, to a degree, the effect of the decline in revenues. The expansion of our Most Valuable Plan™ (MVP) for optimising the planning of natural rough diamonds to additional stone sizes, the adaptation of our rough planning technologies to LGD, and the opening of a GCAL by Sarine lab in India, have expanded our services portfolio, attracted new customers and are generating new recurring revenue streams. These initiatives also bolster our strategic position for value growth, when market conditions improve and are expected to foster long-term growth as we expand our offerings for the natural stone and LGD markets alike.”

Tone: The Chairman’s statement is measured but ultimately positive, highlighting significant industry challenges but also the company’s proactive steps to secure future growth and recurring revenues.

Conclusion & Recommendation

Overall Assessment: Sarine Technologies’ H1 2025 performance reflects a company under considerable pressure from structural shifts in the diamond industry. The 30% YoY revenue decline and swing to a net loss highlight the tough operating environment. However, Sarine remains cash-rich, is actively cutting costs, and is pivoting its business to focus on recurring revenue streams and diversification. The absence of a dividend this half signals caution, but the continued share buyback and strong cash position provide some support for the stock.

Investor Recommendations

• For Current Holders: Hold. The company’s strong cash position, commitment to cost containment, and ongoing strategic shift toward recurring revenues and diversification mitigate the near-term sector headwinds. Investors should monitor progress on the Kitov.ai investment and further signs of stabilization or growth in the diamond and LGD markets.
• For Potential Investors: Wait. While Sarine’s strategic initiatives are promising, the current industry headwinds and lack of earnings growth warrant caution. Consider entering if/when there are clearer signs of recovery in core markets or successful execution of its diversification strategy.

Disclaimer: This analysis is based solely on information contained in the company’s H1 2025 interim financial report and does not constitute investment advice. Please consult with a qualified financial advisor before making investment decisions.

View Sarine Tech Historical chart here