E Ink Holdings Co (元太科技), which holds a dominant position in the world’s electronic paper display market, yesterday posted its first operating loss in about eight quarters as e-reader sales slowed due to product transition and operating expenses rose.
The results were largely in line with the company’s expectations, as e-reader clients revamp their models and shift to screen sizes larger than 6 inches.
However, E Ink expects growth momentum to pick up later this quarter from last quarter’s NT$2.99 billion (US$99.69 million), bringing it back on track with its full-year revenue forecast.
Nearly 70 percent of the company’s total revenue last year came from e-paper displays used in e-readers.
“Revenue in the second quarter will be better than the first quarter,” said Patrick Chang (張元培), a financial director at E Ink. “We still believe that revenue for the full year will grow from last year’s level.”
E Ink posted an operating loss of NT$263.89 million for the quarter ending March 31, compared with an operating profit of NT$45 million in the same period last year, according to the company’s financial statement.
Operating expenses climbed 14.3 percent year-on-year to NT$1.37 billion last quarter from NT$1.2 billion.
They included a 26 million euro (US$30.54 million) equity investment in SES-imagotag as E Ink aims to accelerate electronic shelf label (ESL) growth.
“We are seeing high-speed growth in the ESL market as South America is joining Europe, China and the US adopting the solution,” E Ink president Johnson Lee (李政昊) told an investor teleconference yesterday.
“We cannot satisfy the strong growth just with our own module capacities. We want to create an ecosystem to address that growth together with our partners,” Lee said.
SES-imagotag is the world’s No. 1 player in the e-tag market, Lee said.
The investment should help E Ink develop electronic shelf labels that better cater to market demand, he added.
Aside from e-readers and ESL, eNote is gradually becoming its third revenue driver, he said.
E Ink’s flexible e-paper displays are used in electronic notebooks for students, hospitals and government agencies.
The company is expanding its reach to equip flexible e-paper displays for new areas such as car license plates.
Last quarter, E Ink eked out a net profit of NT$49 million, aided by an 8.52 percent annual increase in royalty income to NT$446 million and less the financial burden from its bankrupt South Korean subsidiary Hydis Technologies Co.
Last quarter’s figure represented a decline of 64.2 percent from a net profit of NT$137 million the previous year.
On a quarterly basis, net profit sank 89.2 percent from NT$456 million.
Gross margin fell to 38.3 percent last quarter, compared with 38.7 percent a year earlier and 42.1 percent a quarter earlier.
E Ink attributed the contraction to higher shipments of lower-margin flexible e-paper displays and increased key components costs, such as multilayer ceramic capacitors.
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