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Rakon writes off $32 million on investment
Fri, 5th Jul 2013
FYI, this story is more than a year old

Rakon, the second-worst performing stock on the New Zealand sharemarket in the past year, will sell 80 percent of its Chinese joint venture factory to a Chinese electronics manufacturer for US$18.8 million to reduce debt.

Rakon, which will retain a 5 percent holding in the venture, is selling the stake to Shenzhen Stock Exchange listed ZheJiang East Crystal Electronic Co, a specialised electronic components manufacturer, the Auckland-based company said in a statement. It expects to take a $32 million impairment on the investment.

In May, Rakon said it planned to cut debt to $13.5 million in the current financial year ending March 31, from the $36.1 million outstanding when it made the announcement in May.

The sale means debt can be reduced both earlier and below its target, the company said today.

Rakon and ZheJiang will share resources and capabilities, with ZheJiang funding expansion of the factory to enable the venture to achieve greater scale while Rakon provides research and development, technology and marketing to the partnership.

Competition is strong and further consolidation in the industry is likely in the next three years, Rakon said.

Shares in the company, which makes crystal oscillators used in smart phones and navigation systems, had jumped today before the stock was halted for the announcement and edged up to 28 cents from 25 cents when they resumed trading, taking their gain so far today to 22 percent. The shares have tumbled 50 percent in the past 12 months.

The company posted a loss of $32.8 million last financial year as it cut up to 60 local jobs to shift manufacturing to China.

The sale is expected to settle on Sept. 30, pending a final agreement and any required regulatory approvals. A further update will be given at the interim results in mid-November, the company said.

By Tina Morrison - BusinessDesk