Rakon to sign US$56m Huawei contract

The Rakon factory in Mt Wellington, Auckland. Photo / Natalie Slade
The Rakon factory in Mt Wellington, Auckland. Photo / Natalie Slade

Rakon, the communications components maker which dropped out of the NZX 50 Index in June, will today sign a letter of intent with Huawei Technologies, quadrupling its sales to the Chinese-based company to US$56 million (NZ$69.4 million) over the next five years.

Huawei will use Rakon's frequent control products in its handsets, smart devices and infrastructure programmes. A signing ceremony will be held at Wellington's New Zealand Trade and Enterprise office.

"The letter of intent recognises the greater scale and breadth of our product range, validates our commitment to a strategy of globalisation and our investment in operations in China," managing director, Brent Robinson said in a statement.

The high New Zealand dollar and weaker demand from the telecommunications industry has weighed on Rakon's earnings. In May, the Auckland-based company's full-year earnings before interest, tax, depreciation and amortisation fell 47 per cent to $13 million including a share of ebitda from associates and joint ventures.

Robinson credited the assistance of Trade Minister, Tim Groser and NZ Trade and Enterprise in helping facilitate the deal and the 2011 trade mission to China that was a catalyst for the enhanced relationship with Huawei.

"This is a significant partnership for Huawei, with Rakon providing crucial electronic components," a Huawei spokesman said.

"Huawei's supply chain is truly global, with only the most impressive and competitive suppliers selected. Rakon's success is testament to New Zealand's ability to produce world-leading products and innovations."

Shares in the company last traded at 50 cents, after opening at 42 cents. Shares have shed about 51 per cent in value over the past year. They traded as high as $5.50 in November 2007.

- with HERALD ONLINE

- BusinessDesk

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