* Annual output surges more than five times to 1.1mln carats
* Revenue dips to $69.1 mln on lower rough diamond prices
* Trading conditions remain challenging
* Rand strength absorbing much of increase in rough prices
(Recasts, adds interview with CEO, share price, details)
By Julie Crust
LONDON, July 7 (Reuters) - Petra Diamonds Ltd expects to return to profit in the current financial year, Chief Executive Johan Dippenaar told Reuters in an interview, after the company posted a five-fold rise in annual production.
"We would expect our earnings to come back into positive in the not too distant future," Dippenaar on Tuesday. "We would expect to see them become positive in the current financial year."
Petra shares were up 6.4 percent at 46 pence at 0902 GMT, having bounced from a six-year low of 22.44p set in April.
The company in February posted a first-half loss of $88.1 million on lower diamond prices and a $75.2 million impairment charge. It plans to announce its full-year results to the end of June in September.
"The first half was a large negative because of the very high level of impairments," said Dippenaar. "You are not going to see that in the second half, you are going to see ordinary trading results."
Earlier on Tuesday the company said its annual output jumped above 1 million carats, but the African diamond producer added that revenue dipped and trading conditions remained challenging.
Annual production surged to 1.1 million carats in the year to end June, up more than five times from the year earlier, but revenue fell to $69.1 million from $76.9 million on lower rough diamond prices.
OUTLOOK
"Trading conditions remain challenging and our cash flow remains tight, with the recent strengthening of the rand absorbing much of the benefit of the increase in rough prices," said Dippenaar in a statement.
The company anticipates further production growth for the current financial year.
Average rough diamond prices fell as much as 65 percent between last September and early 2009. Petra said it has since experienced a general price recovery of around 25 percent.
"We have seen some improvement in the prices over the last two or three months and we believe it is feasible that the market can sustain these prices and even deliver slight growth towards the end of the year," it said.
A tentative recovery in diamond prices could be knocked back by supplies from Russia or top producer De Beers, an analyst said on Tuesday.
Dippenaar said the market has been underpinned by new consumers in Asian markets. Demand from the United States has declined to about 40 to 50 percent of the world total from around 60 to 70 percent.
However, the strong rand, which touched a 10 month high against the dollar earlier in July, has outweighed the rise in rough diamond prices.
Petra is also facing higher power and fuel prices. Power typically accounts for 9 to 14 percent of its total costs and labour around 50 to 62 percent.
Petra, which had about $10.5 million in cash at the end of last year and has a $20 million convertible bond repayment due in September, said it had no plans to come to the market for financing.
The company said it is in talks to renegotiate the payment date and strike price of the convertible bond. (Editing by Matt Scuffham; Editing by David Holmes)