Rakon shares plunge on profit warning

Last updated 10:32 13/02/2013
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Hi-tech NZX-listed manufacturer Rakon has again taken the knife to its annual earnings forecast, after aggressive price reductions in one of its key markets.

The company now says its earnings before interest, tax, depreciation and amortisation for the year ending March 31 will be between $5 million and $7m - instead of the $8m-$12m forecast in December.

That December forecast was itself another significant earnings downgrade. The company had previously put earnings for the year at between $14m-$16m.

The company makes crystal oscillators for improving the precision of wireless signals, including in devices such as smartphones.

In a statement released to the NZX, Rakon said the latest earnings downgrade was a result of "sudden and aggressive price reductions demanded of all key component suppliers" in the smart wireless device market.

The company said its directors were "very disappointed", but wished to emphasise that it was on track to make cost reductions of $10m per annum, $7m of which would take effect by April.

Part of those cost reductions involved cutting about 60 New Zealand jobs and moving more manufacturing offshore.

Rakon said it was compliant with its bank covenants, and would take action to ensure its already-strong balance sheet "is properly aligned to a future for Rakon that allows the company to profit from its strengths".

As of the end of September, Rakon had net assets of $189m, and net tangible assets of 80 cents per share.

Rakon shares fell to 29c, a drop of 24 per cent - or 9 cents - today.

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- BusinessDay.co.nz


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