Rakon profit slumps

Shares in Rakon are being slammed, losing nearly a quarter of their value, after the technology exporter put out an interim profit that was well below market expectations.

Rakon blamed the weakening global economy for a 66 percent slump in after-tax earnings to $1.98 million for the half-year to September.

The result was achieved on revenues of $79.37 million - down 12 percent.

Earnings before interest, tax, depreciation and amortisation (ebitda) were down 16 percent at $10.4 million.

The company told shareholders at the annual meeting in just September that ebitda for the full year was likely to "near the middle" of brokers' estimates of $23.5 million to $34.4 million.

However, today the company was indicating that second half earnings would be similar to those in the first - meaning that overall earnings will be much lower than it indicated just two months ago.

Current volatility in customer orders and forecasts, and the short lead times we operate within, made it difficult to forecast a result for the second half of FY 2009," the company said.

"However if current indications of demand from our customers continue then we would expect the second half result to be equal to or just below that achieved in the first half of this year."

The company also indicated it had largely covered its foreign exchange earnings for this year at a rate of US70 cents to the New Zealand dollar. The actual rate today was about US57c - meaning that the company is missing out on the benefits of the massive drop in value of the Kiwi against the greenback recently.

The company said it had low rates of forward cover against the US dollar next year, meaning that it would benefit from the falling Kiwi in 2010.

Directors said the current business environment had continued to deteriorate in the past month and would impact particularly upon its consumer focused businesses.

However, Rakon’s leadership position as a supplier to the personal navigation device market was being maintained.

"Competition has intensified but the quality of our product, service and track record of innovating significant performance improvements leave us in a strong position. New product developments and enhancements should see our growth back on track when the market recovers.

"In the short term our leading customers are focusing on reducing inventories and consequently we anticipate softer demand for a period of time but confidently expect this market to return strongly in the years ahead," directors said.

- © Fairfax NZ News