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Rakon first-half profit slumps 66%

By Paul McBeth

Friday 14th November 2008

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Rakon, a navigation technology company, posted a 66% decline in first-half profit on operating losses in France and weaker world demand as the global economy slows. Its share price plummeted 24% on the NZX.

Net profit was $1.97 million compared to $5.74 million a year earlier, the company said in a statement. Rakon’s stock extended its slide this year to more than 65%, trading at $1.29 today.

“If current indications of demand from our customers continue then we would expect the second-half result to be equal to or just below that achieved in the first half of this year,” the company said.

Rakon has been hit by weakening world demand for its products as its customers attempt to reduce costs in preparation for a global recession. Still, the company said it is well-placed to take advantage of the predicted growth in global positioning systems for mobile phones as handset makers pack in more functions.

It is confident its joint venture with Timemaker in China will report strong growth in the GPS market, though economic volatility is prompting Rakon to scale back construction of its new manufacturing facility in that country. Construction probably won’t now begin until next financial year, when there may be greater certainty in the global environment.

Rakon reported its biggest fall in revenue from Asia, down 14.6%, while its European revenue dropped 7.1%.

The company’s chief financial officer Graham Leaming will take on the additional duties of chief operating officer, with responsibility for Rakon’s global manufacturing operations.

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