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No savings this year for Rakon manufacturing shift to China

No savings this year for Rakon’s manufacturing shift to China, grand plan coming in July

By Paul McBeth

May 23 (BusinessDesk) - Rakon, which makes crystal oscillators used in smart phones and navigation systems, doesn’t expect dividends from its decision to shift its local manufacturing to China this year, but is promising investors will get a better steer on its fortunes in a July update.

Last year’s decision to cut up to 60 local jobs and shift manufacturing to China won’t provide any boost to the company’s profit margins this year, with the $10 million improvement flagged in November likely to be further out, managing director Brent Robinson told a conference call. Rakon’s gross margin shrank to 23 percent from 29 percent a year earlier.

The Auckland-based company reported a loss of $32.8 million in the year ended March 31, wearing a $17.3 million impairment charge on its China-Timemaker and New Zealand units, with earnings before interest, tax, depreciation and amortisation of $5.1 million, near the bottom end of a twice-downgraded forecast.

Rakon’s board plans to slash its debt to $13.5 million by the end of March next year from the $36.1 million it has currently drawn on, as part of a rejigged balance sheet “properly aligned to market opportunities and solid profit growth,” it said.

That will be revealed to investors in July, though because of confidentiality agreements Robinson said he couldn’t go into further detail does.

A rights issue “hasn’t been discussed at this point” and isn’t being considered “at this stage,” Robinson said.

Rakon’s shares plunged 16 percent to 21 cents, having already shed 32 percent this year. That values the company at $40.1 million, a 70 percent discount to its net tangible assets. The stock is rated an average ‘hold’ based on four analyst recommendations compiled by Reuters, with a median target price of 25 cents.

(BusinessDesk)

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