Rakon's fall from grace took another turn for the worse yesterday when the specialised electronic components maker revised down its 2012-13 earnings forecast for the second time since December.
The company's shares, at one point one of the market's most sought-after, closed at a record low of 26c - 12c or 31.6 per cent down from its close on Tuesday.
Rakon shares listed on the NZX at $1.60 in 2007, hitting $5.80 just one year later. Rakon said it had revised down its earnings guidance for the year to March because of "sudden, aggressive" price reductions demanded of all key component suppliers.
The company also said it would be looking at restructuring its balance sheet, but chief executive Brett Robinson said Rakon, which remained within its banking covenants, was not looking at raising capital from the market.
Robinson said the escalating value of the New Zealand dollar against the US dollar was affecting earnings at a time when Rakon's major Japanese competitors were benefiting from a decline in the value of the yen against the greenback.
For the year to March, Rakon now expects to report earnings before interest, tax depreciation and amortisation (ebitda) of $5 million to $7 million.
That compares with a previous forecast - issued on December 20 - of $8 million to $12 million, which compared with its August guidance of $14 million to $16 million.
Rakon said its planned cost reductions of $10 million a year, $7 million of which take effect from April 1, were still intact. Rakon was once a big supplier to locational device makers such as Navman, and had significant pricing power, but now the manufacturers of mobile phone devices make up about 30 per cent of its revenue.
"As they have grown, and have sought to become a supplier to the larger global telcos, it would seem that they have lost pricing power over their product and it is a dog-eat-dog game of the best price wins, once you reach a certain ... capability," Matt Goodson, a portfolio manager at BT Funds Management, said. APNZ