Rakon navigates through currency volatility

Tech high-flyer Rakon has reported a 5 per cent rise in first half net profit after tax to $5.74 million, with the company hit by the strength of the New Zealand dollar against its US counterpart.

In the six months to the end of September revenue from ordinary activities rose 78 per cent from the corresponding period last year to $89.91 million, Rakon said today.

The result took account of all global business acquired at the end of the previous financial year and the impacts of the globally weakening US dollar, the company said.

In particular the high NZ dollar to US dollar had an adverse effect.

Auckland-based Rakon develops and produces high performance quartz crystal components used for timing reference and frequency control in applications such as global positioning systems and wireless communications.

Forecasting the full year had been made more difficult by the dramatic weakening of the US dollar and the increased volatility of the cross rate between the NZ and US currencies, Rakon said.

While its foreign exchange cover was well within its policy limits, conditions may compound to make it difficult to achieve the forecast range of $27m to $32m for full year earnings before interest, tax, depreciation and amortisation (ebitda).

Business demand remained strong and plans for manufacturing in China were in action. It was anticipated that the company would be able to report progress on that and other initiatives during the second half of this fiscal year, Rakon said.

For the six months to the end of September, ebitda rose 22 per cent to $12.44m, while earnings before interest and tax were up 1 per cent to $8.5m.

New Zealand revenue grew 32 per cent on a US dollar basis over the same period last year, but when converted to NZ dollars that growth was reduced to 12 per cent, the company said.

Revenue and ebitda would have been $7.7m and $4.6m higher than reported if the NZ dollar to US dollar cross rate had remained the same as it was for the same period last year.

Growth in New Zealand sales revenue and ebitda was underpinned by sales volume growth of 53 per cent, Rakon said.

Sales growth plus cost and productivity gains equated to a $9.4m increase at the ebitda level compared to the same period last year.

That was partially offset by volume related price reductions of $4m, to produce a net benefit of $5.4m of ebitda.

The company also had higher indirect costs as a result of its expanded global operation, for which it had invested considerably in building a worldwide infrastructure to develop and capture future growth.

Rakon's shares dropped 35c in early trading today to $4.80.


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