Rakon profit down 59pc but says demand returning

Quartz wafers are prepared for sanding at Rakon's manufacturing plant in Mt Wellington, Auckland. Photo/ Paul Estcourt.

Rakon reported a 59 per cent fall in full year net profit to $4.5 million as global economic troubles hit sales.

The quartz crystal components company today said the result for the year to the end of March took into account higher depreciation and a higher effective tax rate.

Revenue was down 20 per cent from a year earlier to $139.5m, while earnings before interest, tax, depreciation and amortisation (ebitda) fell 27 per cent to $18.5m. No dividend will be paid.

A strong focus on working capital delivered an operating cash flow of $16.6m, up from $1.4m in the prior year, Rakon said.

That had enabled the company to maintain its investment in product development for future revenue growth and maintain a healthy balance sheet with substantial unused debt facilities.

Managing director Brent Robinson said the company was pleased with its achievements in "a very challenging" economic environment.

"Our decision to diversify into non-consumer markets has helped insulate us from the slowdown in certain retail sectors and puts us in a strong position as consumer confidence returns."

Revenue from the New Zealand business, which is largely focused on sales into consumer GPS products, was significantly affected by the global economic climate in the second half of the year.

As a result New Zealand revenue for the full year was down 27 per cent to $80m, Rakon said.

Selling prices for high volume products fell 20 per cent over the year with half of that concentrated in the final quarter. Total sales volume was down 25 per cent.

Rakon was seeing some demand returning in consumer markets, but the company remained cautious in the current economic climate, said Robinson.

"Sales of consumer GPS were soft in the second half of the financial year, but we are now seeing some demand returning. We also continue to grow our presence strongly in the GPS-enabled phone handset market.

"This is a highly competitive market and we expect prices and margins to continue to be under pressure. However, with over half of all cell phones expected to have GPS functionality by 2014, increased volumes will more than offset this," he said.

Rakon was continuing to investigate further investment in China, to build on its 40 per cent stake in Timemaker, which it bought last June.

"We consider offshore manufacturing in China and India as being one of the keys to Rakon's success in the coming years," Robinson said.

Rakon's business now comprised wholly owned manufacturing operations and engineering design centres in this country, Britain and France, as well as joint venture manufacturing operations and engineering design centres in India and China.

In the latest year demand from communications infrastructure customers was strong. Rakon continued to improve market share, as new technologies and networks were deployed which the company's innovative products were specifically targeted towards and well suited to, he said. Rakon shares were down 4c to $1.46 at mid-afternoon.

- NZPA