E Ink Holdings Inc’s (元太科技) revenue would take a hard hit this month, as the firm was forced to halt the production of e-paper display modules at its facility in China amid COVID-19 containment measures, the firm said yesterday.
The world’s sole supplier of e-paper displays said that it temporarily shut down a plant in China’s Yangshou earlier this month amid an outbreak of COVID-19 in the city.
With new infections receding, the outbreak is increasingly under control, it said.
Despite the interruption, E Ink said that it is confident that its net profit for the whole of this year would increase from last year, thanks to robust customer demand for e-paper displays used in e-readers and e-notes following the introduction of color e-paper displays.
US retail giant Walmart and other international retailers are increasingly replacing traditional paper shelf labels with electronic labels equipped with E Ink technology.
“We expect that the factory shutdown would, to a certain degree, effect revenue in August,” E Ink chairman Johnson Lee (李政昊) told investors during a teleconference.
“However, one thing is positive: Customers’ orders are quite stable,” Lee said. “We need to push back shipments. Hopefully, we can catch up with all shipments later after the city reopens.”
E Ink said that demand has improved in the second half of this year, compared with the first half.
E Ink is expanding capacity to cope with rising customer demand, with three new production lines set to start operation by the end of this year and another one next year.
The firm posted quarterly net profit of NT$1.39 billion (US$49.7 million), up about 43 percent year-on-year from NT$976 million in the second quarter of last year.
Earnings per share jumped to NT$1.23 last quarter from NT$0.86 a year earlier, it said.
On a quarterly basis, net profits expanded 18.8 percent from NT$1.17 billion, or NT$1.03 per share.
During the first two quarters, net profits jumped 45.45 percent annually to NT$2.66 billion, the biggest half-year profit in 10 years.
However, investors voiced concern over a drastic decline in gross margin, which was down to about 41 percent last quarter, compared with 50 percent in the first quarter and 42.36 percent in the second quarter last year.
E Ink said that high key component costs caused the decline, adding that costs of flat panels and chips soared last quarter.
The company decided not to pass the costs to customers last quarter, but it would not rule out the possibility of raising prices to ensure profitability, E Ink said.
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