Rakon upbeat despite net loss

Rakon hopes to take advantage of the growth in smart wireless devices. Photo / Natalie Slade

Shares in components maker Rakon dropped sharply yesterday after the company failed to meet earnings guidance in its full-year result.

Earnings before interest, tax, depreciation and amortisation (ebitda), including a share from joint ventures and associates, fell 47 per cent on the prior year to $13.1 million, which the firm said reflected the impact of a strong New Zealand dollar.

The company gave guidance last year for ebitda in the range of $14 million to $18 million. Revenue fell 5.8 per cent on the prior year to $178.3 million, the company said. However, in US dollar terms revenue gained 4 per cent. Rakon reported a net loss of $400,000, compared with an $8.5 million net profit a year earlier.

Chief financial officer Graham Leaming said the bottom-line loss reflected the impact of increased depreciation costs related to the firm's manufacturing facility in China, which was commissioned last year. Shares initially fell by almost 13 per cent yesterday following the result's announcement, but regained ground to close down 5c at 49c.

Mark Lister, at Craigs Investment Partners, said it was unsurprising that Rakon shares had been sold off so heavily.

"You can't miss guidance and then expect markets to give you the benefit of the doubt."

Rakon chief executive Brent Robinson said the company had "never felt better" about its overall position. Global manufacturing volumes of smart wireless devices were expected to grow to 800 million in 2013. He said Rakon was well positioned to take advantage of that growth and capture market share.

However, Craigs has warned that the market is rapidly "commoditising", with new players offering cheaper components.