E Ink Holdings Inc (元太科技), which supplies e-paper displays for amazon.com’s and Rakuten Kobo Inc’s e-reader series, yesterday reported its first operating profit in five years as a major product revamp started bearing fruit.
During the five-year span, E Ink had been reliant on royalty fees to make a profit as it took a beating from falling panel prices amid an industrywide overcapacity.
Last year, the company booked NT$2.25 billion (US$74.29 million) in royalty income, which helped lift its bottom line to NT$1.91 billion, more than tripling from NT$539 million in 2015.
Earnings per share surged to NT$1.69 last year from NT$0.47.
Operating income stood at NT$61 million last year, compared with an operating loss of NT$449 million in 2015, the company’s financial statement showed.
“That was mainly due to an improved product mix and enhanced productivity, as well as the company’s asset light policy and divestment [from unprofitable businesses],” E Ink chairman Frank Ko (柯富仁) told his first investors’ conference since assuming the post in 2014.
E Ink, a pioneer among local LCD panel makers, quit the market in the final quarter of last year and focused on becoming a dedicated e-paper display supplier after shuttering its South Korean LCD manufacturing subsidiary Hydis Technology Inc early last year.
Gross margin climbed to 36.56 percent last year, compared with 31.18 percent in 2015 and 22.59 percent in 2014, thanks to greater contributions from higher-margin e-paper displays mostly for e-readers.
The figure is likely to climb further this year, aided by falling manufacturing costs and an improved product portfolio, Ko said.
Ko is also optimistic about revenue growth this year, saying that new sales drivers, such as e-paper display applications, electronic shelf labels and electronic signages, should make up for the loss of the LCD panel business.
LCD panels accounted for about 10 percent of E Ink’s total revenue of NT$14.01 billion last year.
Electronic shelf labels accounted for 17 percent, the firm said.
Ko has already seen growth momentum for the company’s e-paper displays accelerate in the first half of the year.
“Demand for e-readers remained robust in the first half, bolstered by orders from our major clients. We expect annual growth from this segment,” Ko said.
An improving global macroeconomy has helped drive demand from Asia, China primarily, and emerging markets, such as India, Ko said.
Shipments of electronic shelf labels are forecast to expand by at least 20 percent year-on-year in the first half, Ko said.
Asian and US retailers are joining their European peers in substituting paper shelf labels with electronic labels, as they can recover their costs in less than two years, Ko said.
“Electronic shelf labels is a very promising business,” Ko said.
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