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Rakon half year results, Nov 2012

Rakon half year results

Auckland, 15 November 2012:

Rakon (RAK) has posted a half year revenue of NZ$89 million, down $5 million on the previous year but up $6 million on the preceding 6 months, reflecting the company's re-invigorated strategy in the Asian market.

Rakon Managing Director, Brent Robinson, said the company had been building its position in several markets and investing in its manufacturing platforms to meet anticipated growth. This has required the business to continue to carry additional costs over that period. The results in the current half year also reflected a softer Telecommunications infrastructure market.

The economic situation in Europe and North America has impacted the Telecommunications market for longer than had been expected. Operator spend has been down but recent announcements, such as those from AT&T, show this is turning as operators begin building their 4G networks.

Mr Robinson said Rakon is strongly positioned in this market and beginning to see an increase in demand. "Although recent announcements by several operators to roll out 4G networks have been later coming than the market expected, we remain in a very strong position as a preferred supplier to the leading vendors of equipment for these networks."

"These new 4G networks will incorporate both traditional macro base station equipment and small cells. This equipment and associated backhaul investment will provide significant growth for Rakon in the coming years."

Mr Robinson said SWD (smart wireless device) growth has continued strongly, which meshed well with Rakon's strategy.

During 2012, China surpassed the US as the largest market for smartphone sales and Chinese brand names are taking an increasing share of this market.

"Rakon is a leading supplier not only to the well-recognised names but also to the leading Chinese brands. Rakon's RCC (Rakon Crystal Chengdu) facility is operating well. Capacity will increase with the planned movement of two high volume lines from NZ and additional new capacity in the new year," he said.

EBITDA on a look through basis including JVs and Associates for the first half was NZ$4.7 million compared with $6.2 million in the same period in the prior year and $6.9 million in the last 6 months of the prior year. A bottom line Net Loss after tax of NZ$4.0 million was recorded.

"Our manufacturing facilities in China and India are now well established which will enable us to reduce costs we have been carrying through the transition and allow us to improve earnings and continue to invest in growth."

Recently Rakon announced a realignment of its global business, taking advantage of its scale manufacturing plants in India and China that form a vital part in the company's long term growth strategy. This realignment will reduce global costs by NZ$10 million per annum, with 70% of the planned changes expected to be in place by April 2013. It would also enable the NZ business to concentrate more heavily on growing its R&D activities and new product development.

Commenting upon full year guidance given to the market in August, Mr Robinson said that with the current prospects and orders being received Rakon should achieve a result within the range predicted.


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