Rakon looks to smartphones for revival

Brent Robinson. Photo / Glenn Jeffrey

Growth in sales of technology for mobile networks and GPS in smart phones is balancing a slowdown in consumer sales, says Rakon.

The technology company, which specialises in quartz crystal components for GPS, yesterday reported a 59 per cent fall in full-year net profit to $4.5 million. Revenue was down 20 per cent from the previous year to $139.5 million and ebitda fell 27 per cent to $18.5 million.

Managing director Brent Robinson described the results for the full year to March 31 as "solid".

He said growth in Rakon's telecommunications infrastructure and industrial markets - particularly in China - had offset a contraction in the consumer market.

Robinson said the company was looking to increase its market share of GPS technology in smartphones and netbooks - 115 million smart phones are expected to be sold this year.

He said Rakon aimed to have at least 30 to 40 per cent of the smart phone GPS market, adding: "We are seeing a demand for improved performance in the smart phone."

This month Rakon announced it would invest $9 million in a two-year project to develop products for GPS-enabled cellphones and the wireless network infrastructure market. The company garnered $4.4 million of support from the Government Foundation for Research, Science and Technology.

First NZ Capital analyst Jason Familton said the result was slightly ahead of his expectation of $4.1 million.

"The story remains the same. The exposure to the GPS into the cellphone market looks to be quite attractive."

Shares in Rakon closed down 4c at $1.46 yesterday.

Familton said Rakon's joint venture with Timemaker Crystal Technology to build a manufacturing plant in China would be key to meeting that demand.

Last year Rakon entered a deal with the Chinese company to produce components for high-end and high-volume consumer applications, including the rapidly emerging GPS cellular phone market.

It was originally scheduled to begin production late this year but the company will decide shortly how it will proceed with its Chinese investment.

Sales volumes from its New Zealand business, which supplies the consumer GPS market, plummeted more than 50 per cent from 28 million units in the first half of the year to only 13 million.

Robinson blamed the global financial crisis but said the consumer market was recovering strongly and he expected volumes for the first quarter of the current year to be up 60 per cent on the quarter before.

Robinson expected demand to become consistent from August.

He said Rakon had successfully shifted the high-labour part of manufacturing to India under a joint-venture agreement with Centum Electronics.

Chief financial officer Graham Leaming said the joint venture and associated investments in China had contributed $1.1 million in ebitda and $300,000 in profit after tax. No outlook was given for 2010 earnings.

CHANGING COURSE

Year to March 31

Rakon:

Revenue
2009: $139.5m
2008: $174.3
change: -20 per cent

Ebitda
2009: $18.5m
2008: $25.4
change: -27 per cent


Net profit
2009: $4.5m
2008: $10.85
change: -59 per cent