Russia's Alrosa, the world's second largest diamond producer, said late on Thursday it will not pay out dividends for 2008 due to its sharp fall in profit.

Due to the sharp fall in net profit, the supervisory board has advised that a decision be taken at the annual shareholders' meeting to not pay dividends for 2008, state-controlled Alrosa said in a statement published after the supervisory board met.

Shareholders will convene on June 20.

Alrosa said its net profit for 2008 stood at 1.57 billion roubles ($49.09 million), and it expects 2.2 billion roubles this year.

Diamond producers across the globe have been hit as the world economy weathers its worst financial crisis since the Great Depression and consumers tighten their belts.

Russia's luxury market has come down with a bump as oligarchs' fortunes shrink, jobs and salaries are slashed and banks become reluctant to dish out cheap loans.

Alrosa, which had previously expected to keep production levels unchanged this year, said last month it counts on producing $1.87 billion worth of diamonds, down from $2.36 billion in 2008. ($1=31.98 Rouble) (Reporting by Amie Ferris-Rotman; editing by Jim Marshall)

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