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Rakon turns to annual loss as telcos pull back infrastructure spending

Thursday 19th May 2016

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Rakon, the high-tech components manufacturer, turned to an annual loss after telecommunications companies pulled back infrastructure spending, hurting sales at its largest unit. 

The Auckland-based company posted a loss of $1.7 million, or 0.9 cents a share, in the 12 months ended March 31, from a profit of $3.2 million, or 1.6 cents, a year earlier, it said in a statement. Underlying earnings before interest, tax, depreciation and amortisation fell to $9 million, within its forecast $9 million-to-$10 million forecast range, from $15.4 million a year earlier. Revenue fell 14 percent to $112.7 million.

Shares in Rakon dropped 9.1 percent to 25 cents and have slid 9.8 percent this year.

Rakon said earnings have been hurt as major network operators around the world favoured investment in 5G bandwidth and merger and acquisition activities over spending on base stations and other infrastructure. That's seen revenue from telecommunications, the company's largest unit, slump by a quarter to $53.4 million, outweighing gains in sales of its global positioning and space and defence units.

The move to 5G would create a need for increased infrastructure investment to cope with growing demand for an ever-expanding range of applications and faster network speeds, said managing director Brent Robinson. 

Rakon has strong relationships with both network equipment and original design manufacturers, meaning it was well-placed to benefit from an upturn in infrastructure investment, but remained cautious about forecasting exactly when demand would rebound, he said.

The company's global positioning unit boosted revenue 3.7 percent to $31.5 million.

Robinson said the increasing usage of GPS technology in a range of industries was generating significant opportunities for Rakon. Changing technologies, including the decline of the personal navigation device in favour of other solutions, was helping to drive increased margins in Rakon’s global positioning business while the company’s automotive customers were looking beyond GPS to address advanced connectivity applications for smart cars, he said.

Revenue at is space and defence unit increased 9.6 percent to $25.3 million. The unit expected increased sales in the coming year, with the introduction of new products following the completion of several key long-term development projects during the 2016 financial year, Robinson said.

A breakdown of revenue by region shows the biggest decline came from Asian customers, with sales dropping by a quarter to $48.7 million. Sales to North American customers increased 35 percent to $23.9 million while European revenue slid 18 percent to $37.2 million.

The company didn't declare a dividend.

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