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Rakon 2009 earnings may rise

Thursday 11th September 2008

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Rakon, the New Zealand supplier of crystal oscillators for global positioning systems, said earnings may rise this year, reflecting a weaker currency and increased sales to major customers.

Earnings before interest, tax, depreciation and amortization (EBITDA) are likely to be in the middle of analysts' estimate range of NZ$23.5 million to NZ$34.4 million, managing director Brent Robinson told shareholders at their annual meeting. That suggests an increase from last year's NZ$24.5 million.

New Zealand's dollar traded recently at 65.20 US cents and has declined from 81 cents at the start of the year. Each one cent movement in the currency against the US dollar is worth NZ$1 million and NZ$1.5 million to Rakon's EBITDA, the company said today.

Still, weakening consumer and commercial markets worldwide "have impacted our business in the year to date and we do not see this abating in the near term," Robinson said today.

Sales from New Zealand are expected to rise 20% this year, led by demand from major customers, with sales growth from smaller GPD customers "less robust."

Sales volumes in the UK are slightly up on the previous year but with an improved product mix, the company said. The company is in the process of moving plant from France to India and also has plans to develop plants in China.

Earlier this year, the company bought a 40% stake in Timemaker Crystal Technology Ltd. as part of a plan to ramp up production in China. Shenzhen-based Timemaker is the world's largest supplier of high-spec quartz crystal blanks, a key component of crystal oscillators and resonators. The two companies formed a joint venture to make components for consumer products including GPS cellular phones starting next year.

The shares were unchanged at NZ$2.80 and have declined 29% this year.

By Jonathan Underhill

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