Radica Games (RADA) on rising costs, a Chinese gov't-imposed wage increase, and prospects for currency revaluation (1Q05 conf call quotes)

May. 9.05 | About: Rada Electronics (RADA)

Radica Games (ticker: RADA), a manufacturer of electronic entertainment products, reported Q1 2005 results today. Here are key quotes from CFO David Howell and CEO Patrick Feely from the company's earnings results conference call:

On Increased Costs

....Going forward, we'll still feel pressure on our margins from the continued impact of higher fuel cost on plastic, freight and electricity.

....material prices, while stabilizing have also continued to rise, as have shipping costs.

On a Government-Imposed Wage Increase

....on March 1, the minimum wage level for our China factory was raised by the government there. This is expected to impact gross margins for the full year by about 1%. Offsetting this is the previously-announced annual increase in our product prices, which will take effect from May 1, 2005. On average, our prices will increase by 3%.

On Currency Revaluation

....we continue to monitor the status of the Chinese Remnant B and expect it to be revalued by 3% at some point during 2005, which would have an effect on Remnant B expenditures, such as wages and those raw materials purchased directly in China. As a result, we've placed on deposit with HSBC in China, the Remnant B equivalent of $9 million U.S. dollars. This should offset a loss if not all of the impact of any exchange rate movement during the remainder of 2005.

(Quotes are from the CCBN StreetEvents transcript.)