Rakon lifts guidance after AKM fire, share price rallies

Components maker Rakon has lifted its earnings guidance. Photo / Supplied

Shares in NZX-listed electronic components maker Rakon rallied sharply after it upgraded its earnings guidance for the current year, driven by a big lift in orders and a consumer device boom.

By early afternoon, the stock was up 15c or 13.4 per cent, at $1.27.

The company said it now expects to achieve underlying ebitda in the range of $39 million-$44m in the full year 2022, up from an earlier guidance of $27m-$32m.

Chair Bruce Irvine said that a key factor in Rakon's 2022 expected revenue and earnings is the significant orders for its TCXO2 circuits secured as a result of an extensive chip shortage caused by a fire at a factory of Japan's AKM, the world's largest TCXO integrated circuits maker, in October last year.

He said there had been also been a concurrent consumer device boom.

"While customer orders were in hand at the time of the April 1 guidance, we also needed to factor in a number of risks and uncertainties around our ability to deliver and at what cost," he said.

"These included having to add the necessary manufacturing capacity; procurement of raw materials and parts; adapting design specifications and other production uncertainties.

"However, over the last five months these risks and uncertainties have not materially eventuated," he said in a statement.

Irvine said for the remainder of 2022, Rakon's core business was expected to perform well, particularly in 5G where demand for its products going into 5G network equipment had been stronger than anticipated.

However, the company was still experiencing supply chain volatility and was mindful of the risk of future disruption at manufacturing sites due to Covid-19.

Looking to 2023, Rakon expected TCXO demand to return to normal levels, and its core business to continue on its growth trajectory on the back of 5G rollouts and the demand for Rakon applications in data centres, industrial positioning and new space.

Rakon has also appointed Steven Tucker to the board as an independent director.

Irvine said Tucker is a professional director with extensive governance and senior executive experience across privately owned, public sector and listed companies in the technology sector.

"He brings more than 20 years' experience as a senior executive at Gallagher, a leading New Zealand export company with global operations focused on research and development, design, manufacturing and marketing," he said.

Irvine, who was re-elected to the board at the last annual meeting, said Tucker's appointment was part of the board's current succession planning which includes his own intention to step down.