Rakon says 2013 earnings to rise as margins remain tight

Rakon wants to quadruple  its 
sales to Huawei, to US$56 
million over the next five years, 
through the partnership. Photo / Natalie Slade
Rakon wants to quadruple its sales to Huawei, to US$56 million over the next five years, through the partnership. Photo / Natalie Slade

Rakon, which makes crystal oscillators used in smart phones and navigation systems, said 2013 earnings will be an improvement on last year's results, when a high kiwi dollar compounded the impact of lukewarm demand from the telecommunications sector.

Earnings before interest, tax, depreciation and amortisation are expected to be $14 million to $16 million in the year ending March 31, 2013, managing director Brent Robinson said in a statement. That would compare with $13.1 million last year, which was about half the 2011 result.

Robinson said the company is seeing "slowly strengthening demand across its market sectors." Sales growth for smartphones and tablets has been reflected in "corresponding growth in those sales by Rakon" though competition "means margins remain tight."

"The telecommunications infrastructure market remains below expectation and that of the prior year," he said. "Rakon experienced the beginnings of a recovery in this market at the end of the last financial year, but it has not continued to grow at the expected pace, as the global economic environment causes operators to delay spending despite the growth in data."

Shares of Rakon last traded at 47 cents, having rallied last week when the company signed a letter of intent with Huawei Technologies, quadrupling its sales to the Chinese company to US$56 million over the next five years.

Rakon's market value is $91.7 million and it dropped out of the NZX 50 Index in June to reflect its shrinking size.

- BusinessDesk

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