Rakon shares plunge 24pc on guidance cut

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

Rakon's share price dropped by nearly 24 per cent to an all-time low today after the high-tech components maker cut its earnings guidance for the second time since December.

By late morning, Rakon was trading at $0.29, down 9 cents (23.7 per cent) from Tuesday's close.

Rakon said it had revised down its earnings guidance for the year to March because of "sudden and 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 was not looking at a capital raising.

"We are not looking to raise capital but we are certainly looking at our assets and making sure that they align with our plans," Robinson told APNZ. "We can't say what the outcome will be at this point," he said.

For the year to March, Rakon now expects to report earnings before interest, depreciation and amortisation of $5 million to $7m, down from a previous forecast - issued on December 20 - of $8m to $12m.

The new forecast brings the company in line with analysts surveyed by Reuters, who expect ebitda of $6.3 million.

The downward adjustment comes as a result of the smart wireless device markets sudden and aggressive price reductions demanded of all key component suppliers, the company said.

Rakon said its planned cost reductions of $10m a year, $7m which take effect from April 1, were still intact and that it remained compliant with its banking covenants.

The company said its balance sheet had been reviewed over past months.

While the balance sheet remained strong, it would be the subject of "actions to ensure it is properly aligned to a future for Rakon that allows the company to profit from its strengths".

The new forecast brings the company in line with analysts surveyed by Reuters, who expect ebitda of $6.3 million.

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.

Manufacturers of mobile phone devices make up about 30 per cent of Rakon's revenue.