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Strong growth but high NZ Dollar erodes profits

Strong growth but high NZ Dollar erodes profits

31 August 2011: Rakon is continuing to record strong sales growth but the highly volatile and very strong New Zealand dollar is undermining profitability.

Brent Robinson, Rakon Managing Director, said, "Our underlying global business is performing well, however, currently our business is significantly impacted by the NZD/USD and NZD/GBP exchange rates. The NZD has been trading at an all time highs against both these currencies. In the past 18 months the NZD has strengthened more than 20% against the GBP and over 25% against the USD. To put this impact into context this equates to a reduction in cash earnings in the current year of around NZ$20 million purely from the impact of currency."

"If the NZD stays at these current levels we expect EBITDA for the March 2012 year to be in the range of NZ$14 - 18 million."

Robinson said that Rakon had foreign exchange protection in place to mitigate any further negative impact on the current year's results should the NZD continue to strengthen. He also noted that Rakon's strategy of expanding globally and particularly into China would, in time, help hedge the impact of currency movements. He further added that a number of cost savings initiatives were being implemented across the business.

"Our underlying demand in the year to date has been very good with all our business units experiencing volume growth compared to the same period last year. In particular demand for our OCXOs manufactured in India has been a standout and our French results for the year to date are significantly improved on the prior year."

Rakon's Annual Shareholders Meeting will be held in Auckland on 9 September and Robinson said he looked forward to providing a more detailed update on Rakon's business and markets at the meeting.

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