It updated today that it was “on track with the accelerated schedule for the transfer of key product lines to Rakon’s manufacturing centre of excellence in India”.
The Auckland-based firm, which turns quartz crystals into radio frequency control systems that help telecommunications gear, satellites, missile guidance systems and emergency beacons maintain the same “heartbeat” as other electronics, swung to a $10.4 million net loss for the six months to September 30 from its year-ago net profit of $0.5m.
Revenue crashed 32% to $41.7m, which the firm pinned primarily on an ongoing slump in telecommunications – its largest market.
No dividend was declared. In August last year, the firm paid its first-ever dividend following sustained pressure from minority investor Mike Daniel.
Rakon incurred $1.7m in consulting and legal costs in the period associated with repelling a $1.70 per share takeover offer initially made in December from an un-named “credible bidder” – reported by some as an industry player – that saw the stock jump to $1.33 before it was abandoned in June. That came on top of $2.2m in costs associated with the offer in the year to March 31.
The board considered it a lowball offer in the context of Rakon’s historic share price and its sector being at what it saw as the bottom of its cycle. A $1.5m hit from unfavourable exchange rate movements and $1.5m from inventory adjustments also contributed to the loss.
Warning on operating earnings
The firm warned its full-year earnings before interest, taxation, depreciation and amortisation (ebitda) for the 2025 financial year was “tracking in the lower half” of its $5m to $15m guidance.
Rakon had $15.8m in net cash at September 30, $2.1m lower than a year ago.
Shares were down 4.4% to 65c in midday trading. The stock is down 10.2% for the year.
On a conference call with analysts, Rakon’s Auckland-based chief executive, Sinan Altug said conversations with major telecommunications infrastructure partners indicated that demand should stabilise in the second half of the 2025 financial year.
Altug said the rise of AI, which is powering data centres, could lead to a significant increase in Rakon’s business but did not put numbers or a timeline around his prediction, or name the potential customers involved.
The rapid increase in low-Earth orbit satellite constellations also had the potential to drive potential growth, he said.
Foils stay below the waterline
On the conference call, Forsyth Barr analyst Will Twiss asked why margins were weaker.
Interim chief financial officer Mark Dunwoodie replied that production was less efficient at lower volumes.
“It’s like America’s Cup sailing. You need wind to get up on your foils,” he said.
“The first half really tested us,” Altug told the analysts.
However, he said the final month of the period – September – had seen the highest volume of orders from the telco sector.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
