Rakon sells Chinese stake to cut debt

Rakon cut up to 60 local jobs to shift manufacturing to China in the past financial year. Photo / Natalie Slade

Rakon, one of the worst-performing stocks on the New Zealand sharemarket in the past year, will sell 80 per cent of its Chinese joint-venture factory for US$18.8 million ($24 million) to reduce debt.

Auckland-based Rakon, which will keep a 5 per cent holding in the venture, says it is selling the stake to Shenzhen Stock Exchange-listed ZheJiang East Crystal Electronic, a specialised electronic components manufacturer.

It expects to take a $32 million impairment on the investment.

In May, Rakon said it planned to cut debt to $13.5 million in the current financial year ending March 31, from the $36.1 million.

The sale meant debt could be reduced earlier and below its target, the company said yesterday.

Rakon and ZheJiang would share resources and capabilities, with ZheJiang funding expansion of the factory to enable the venture to gain greater scale while Rakon supplied research and development, technology and marketing to the partnership.

Competition was strong and more consolidation in the industry was likely in the next three years, it said.

Shares in Rakon, which makes crystal oscillators used in smart phones and navigation systems, closed up 4c yesterday at 27c.

Rakon posted a loss of $32.8 million last financial year as it cut up to 60 local jobs to shift manufacturing to China. The sale is expected to settle on September 30, pending a final agreement and regulatory approvals.