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Rakon shares sink 5.8% on prospect softer 2012 earnings

Rakon shares sink 5.8% on prospect of 44% fall in 2012 operating profit

Aug. 31 (BusinessDesk) – Crystal timing devices manufacturer Rakon Ltd.’s shares sank 5.8% after it said annual operating profit could fall as much as 44% for the year ending March 2012 if the New Zealand dollar remains are current levels.

“Our underlying global business is performing well” and continuing to record strong sales growth, managing director Brent Robinson told NZX. But the strength of the New Zealand dollar against the US dollar and the British pound is significantly impacting profitability. The shares dropped 5.8% to 81 cents and have tumbled 30% this year.

“In the past 18 months the New Zealand dollar has strengthened more than 20% against the British pound and over 25% against the US dollar,” Robinson said.

“To put this impact into context, this equates to a reduction in cash earnings in the current year of around $20 million, purely from the impact of currency,” he said.

If the New Zealand dollar stays at current levels, he expects earnings before interest, tax, depreciation and amortisation (EBITDA) will be between $14 million and $18 million for the year ending March 2012.

EBITDA in the year ended March 2011 was $24.8 million, suggesting it could fall between 27.4% and 43.5% for the current year.

Rakon has a history of disappointing investors – EBITDA for the year ended March 2011 was below the company's own forecast of between $25 million and $30 million. The shares had been trading at $1.27 before the results were announced in May.


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