Welcome to the E Ink Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. The webcast replay will be available after today's conference.
Joining me today are Chairman, Jonathan Li CFO, Lloyd Chen and Finance Center Senior Director, Pei Chiang. Now let me turn the call over to Lloyd.
Good day, everyone. Before we start, let's take a quick look at the Safe Harbor statement. All right, next page. All right, firstly, let me talk about the I've been lost statements for the Q2 and first half first. For the Q2, sales revenue was around RMB 4,000,000,000 for the operating profit was RMB 318 1,000,000.
Net income was $1,400,000,000 EPS was $1.23 And talking about the first half, the first half on sales revenue, operating profit And even the net income was the best first half in the past 10 years. And also, it's worthwhile to mention that The operating income has been higher than royalty income since last year. So that's for the profit and loss statement next page. For the operating profit, The first half operating profit was 3x Growth over year over year from 338000000 to 1,300,000,000 due to the strong demand from market through e reader, e note, retail and signage. Next page.
Talking about the profitability, especially on ROE and ROA, first half ROE and ROA have been rising since 2017. First half this year, 20 21 ROE was around 8% and first half ROA was 5.3%, respectively, Which already more than 60% of 2020 whole year ROE and ROA It shows the growing profitability and how we efficiently utilize shareholder equity and assets to generate the profit at E Ink. Next page. So now let's look at the asset side. Basically, positive on increasing trend On cash assets, total assets, even the net asset value per share as you can see from the screen.
Right. Next page. For cash flow, Cash was decreased from $13,000,000,000 to $9,700,000,000 because we converted on cash to financial investment and also to CapEx on the paper production line to meet on strong Market demand. The total financial assets plus cash was increased to around CNY 30,700,000,000 By Q2 of this year. And that's for the cash flow.
All right. Apart from those financials, I also would like to talk about Some achievements that we had in second quarter. I think in April, we had remarkably successful exhibition at Touch Taiwan on 2021. And it attracted lots of attention from supplier customers and even competitor and investors And also in April, And ePaper Industry Alliance was established. At the beginning, we invited more than 60 companies To construct and refine ePaper ecosystem to broaden ePaper application and also to explore more on Diversified on e paper business opportunities.
And at end of this year, We are aiming to have more than 100 participants. And Our goal in 2021 is to invite more than 200 members. And also, as you already know that E Ink became the largest strategic shareholder in nuclear Through the steam out of digital microfluidic steam from E Ink, our American subsidiary procedures. And apart from those accomplishments, we So some recognition from some medias. The first one is EdTech Digest.
Basically, it's a digital media to offer insights, updates, interview into the rapid evolving world of education technology. That's why they named themselves as EdTech Education Technology. And their EdTech award It's a program in all of education technology recognizing the biggest name in EdTech and newer talent who are shaping the future of EdTech. E Ink was named as one of the 21 top 10 are final lists in the Emergent Technology Solutions category. This is an award for companies and people in and around Education for outstanding contribution in transforming education.
And that's for the media in the States. And we also got the recognition from 2 Taiwan low code magazines. The first one is a magazine called Business Next, basically published 2020 Taiwan High Value Enterprise Top 100 and Yi Ing was ranked us the 67th place out of more than 1,100 public listed companies. And we are also in the 4th place from the optoelectronics industry. It's not only recognized our achievement of financial performance, but also recognized our innovation, upgrade, Capability and rapid growth even under COVID pandemic.
And And last one is a very credible magazine locally in Taiwan. It's called Commonwealth. We also published their comprehensive annual top 2000 survey. Basically, this survey is published every year. And we were on the 206th Place out of Taiwan's top manufacturing companies and also recognized as 62nd place under the category of profitability.
So that's updates For our accomplishments in the Q2. Next page. And For ESG and corporate sustainability, once again, we What very fit us at top 20,000 corporate governance evaluation among Taipei Exchange listed company for the 4th consecutive year. And apart from that, We also accomplished One achievement in 2nd quarter, we were the 1st company contracted and will accomplish 10% installed Renewable Energy in Taiwan. So under recent COVID-nineteen outbreak situation in Taiwan, We donated COVID-nineteen testing facilities to the local government showing our social responsibility.
And also for the 3 ESG indexes in Taiwan, We are selected as the top 10 constituents on 3 ESG indexes in Taiwan, including Taipei Exchange ESG IT Elite Total Return Index. And another one is on Taipei Exchange ESG Growth Total Return Index. And the last one is on Taipei Exchange ESG Index. Those indexes recognize our performance on both profitability and also the ESG. So that's for the ESG and sustainability.
And I think recently, the COVID-nineteen outbreak at Yangzhou under Jiangsu And our actually is facing a complex COVID-nineteen Containment measures, activities from local government such as movement restriction, lockdown And even temporary suspension of the production all will impact our shipment and revenue, especially on the August Sales revenue. We have been working very hard how to mitigate those Shipment and revenue impact and endeavor to accelerate the shipment in order to meet stronger customer demand when the situation gets better. So that's a quick update about our Yangzhou factory. Next page. So I'm going to talk about our innovation for the Smart Life.
So our technology and product innovation Basically linked to the smart lifestyle. It means more product diversification And more on business growth along the way. You can see from the screen Quite a lot of ePaper products and applications are there. Better color performance, I mentioned earlier, in larger sizes and notating function, we expect that We will trigger the wave of new device purchases on e reader and eNotes. Basically, it enables not only paperless office but also digital learning.
There's also a trend to integrate larger size e paper display for laptops And even large sized paper like secondary monitors. Recently, as you can see from the screen, And the Japanese company Fujitsu launched a new generation eNote, Qozinil, with a better performance. And another Japanese company, Ricoh, As reviewed, works on thinnest and lightest 42 inches portable on digital whiteboard With applications across the medical, construction and office settings, that's about the eNote and eReader. And as for the IoT applications, our technology and product can be used From once again paperless office and also factory, transportation and even to aviation. And one of our growth engines on ESL and Retail, the growing momentum has been carrying forward from 2020 to 2021.
And one of our system integrated partner Recently announced that it would expand its DSL technology with Walmart Canada. And I'm going to talk more on ESL next page. So in conclusion, Inc. Is continuing to engage With supplier and customers try to lead to the Smart Life stuff. So next page is our retail expertise.
So as the leading innovator of ePaper Technology, In this Spectra, 3100 all in one driver IC, Basically, 1, COMPUTEX Taipei 2021 Best Choice Award. And this is the full color next generation e paper platform on ESL and signage. With this newly announced all in one driver IC, it enables Smart Retail 2.0, which makes few Features as you can see from the screen. The first one is, it makes text edge sharper, Brings better power efficiency and integrates, encrypted Algorithm for data security and also enables sparkling flashing mode With more interactive images to offer more flexibility to retailers during the promotion campaign. As you can see from the screen, there's a tech With the sparkling of flashing mode is the example I'm referring to.
So Furthermore, the key feature I just mentioned, low power consumption, it aligns with the United Nations ESG that Helps company meet their ESG considerations for sustainable development and environmental friendliness. So that's all our retail expertise. So last but not least, We're talking about our continuous growth. So E Ink is aiming to replace paper. So our vision is to make services smarter.
That's one of our slogan internally. We even try to go beyond that With this longer term vision, we endeavor on the continuous growth Not only focuses on business growth by engaging with more suppliers and customers to build a more Robust ecosystem but also asks for integrated supply chain to Meet stronger customer demands along with the growth, of course, innovation, Efficiency and effectiveness are the key elements on being involved. And once again, ESG with the long term Thank you very much. And we can move to the Q and A session.
We are now in the Q and A session. Please press raise your hand icon on the sidebar if you would like to ask a question when we have your question please remember to unmute yourself You can also ask questions through text in the question box on the sidebar. The first question comes from Harvey Cho. You may ask the question.
Hi, can you hear me? Yes, we hear you, Harvey.
Hi. Thank you so much for taking my question. I just have some quick ones. In your opening remarks, you You mentioned that the overall impact from the COVID-nineteen. So I'm just wondering, could you please give us some, like, A quantitative impact on your maybe orders revenue and I also see that In your July sales, the overall momentum actually seemed quite fine and grew like 20% Ma'am, Ma'am, and I know that in a subfolder is normally the model of EPCs and for your e reader and e mail.
I'm just wondering If we see a much softer top line momentum focus, can we still expect Maybe Q3 to see some growth on the top line level. And how can we imagine
Okay. Thank you, Harvey. So I think the question is about the Yangzhou situation of impact by the COVID. At this moment, the Yangzhou City is still at lockdown. It started, I think, in early August, And it's been almost 3 weeks now.
So it does impact our revenue in August because of the shutdown. And mostly, we made all our module in Yanzhou. And in Ink's business, a big portion of our revenue comes from Of the e paper module. So it does get affected. But since it's been 3 weeks now, roughly 3 weeks or so, So believe the situation should improve because they took drastic measure in locking down the city.
It's going to it's really going to impact our August revenue, but it doesn't mean that the orders are Canceled. It just means that it's going to be delayed in terms of shipment. If everything goes back to normal, Hopefully soon and we believe it should be because yesterday there was I think 6 people that was infected and the day before it was 3 And the day before that is also sick. So it's already in the single digit in terms of people affected With COVID in Yangzhou, so we believe that it should be back in production hopefully by September. And if that is possible, then we believe that we need to catch up in September and maybe all the way through December to catch up The loss of shipment during that period of August, right now.
So overall, in terms of revenue, I do believe that it's In August it's going to be impact but for the whole year there might be impact it really depends on When the shutdown is over or when the shutdown of Citi is over. But overall, second half It's always better than the first half in general for Yig. And we believe that this year, this should continue on as well.
Okay, great. So I can actually say that maybe as we mentioned, if we really do catch up On the production, pent up demand push all into the September month. And also you mentioned that second half is Normally better than the first half. So can I assume that if we do catch up on the production into the September month, our Q3 sale could come Even with the impact in the August month because of the COVID-nineteen restriction?
Right. So the plan is, Once the shutdown is over, we're going to start shipping the module. That was some of them were actually prebuilt in the early days of August. So I don't think we don't believe that we can catch everything up And September to cover the August time frame. But it may take until October or even go all the way down to December, depending On how quickly this pandemic is over in Yangzhou.
But at this moment, we believe that it's going to take us roughly 3 at least 3 months to catch up the lots of shipment in August.
Okay. Okay. That's very good. Thank you so much. I'll go
back to the queue. All right. Thank you.
Next question comes from John Xu. You may ask your question.
Hi. Can you hear me?
Yes. Hi, John.
Yes. Hi. Good afternoon, everyone and gentlemen. So the wise question because I just I also attend Chinese version an hour ago And you mentioned that the capacity actually will be still be pretty tight next year, I mean, particularly in your material business. So can I assume that the next year the material business will outgrow the module business and therefore actually Your gross margin fluctuation will be stabilized or we will see that we won't see the Pretty big significant margin fluctuation in next year?
That's my question. Thanks.
John, thank you. Thank you for this question. So in a general sense, yes. As we sell more E Ink materials, Hopefully, there's going to be less fluctuation in terms of margin. But I think this year is actually a very special year.
Everything was in shortage, either ICs and TFTs. But as we look today and looking forward, we believe the situation Will not be over, but it will be better than the first half of this year. So looking forward, as we expand Or FPL, that's what we call internally FPL. Our e ink materials, we're expanding that capacity as it gets ramped up. Yes, we should be selling more e ink materials down the road.
I think the key question I think the key What we're mostly concerned about is how quickly we can ramp up our new facility up and running Because at this moment, when we're looking at the demand side, the demand is quite strong. And it needs us to ramp up our facility a lot quicker than we expected to. So, yeah, that's a bit of pressure on the team. But of those e ink materials are made into module by e ink. It needs to be determined because we're still in that phase of negotiation with our customer for next year.
So yes, that's the situation. And on the earlier call, there was actually A question about our expansion of a new facility in Xianzu factory in our Xianzu office. We're building a new building in Xianzu that can We can put in more production equipment into it, but it will take until 2023 before The facility is ready. So we have next year. So we still need to get over with.
Okay, I see. So I mean regarding your module business, so actually in the next year, the module assembly business is still in China. So Maybe next year, you still cannot diversify your production base? I mean, in terms of your module base?
Yes. So I mean, in terms of the module side, we're also seeing strong demand on that side as well. So yes, we really have to see how that's going to That's our revenue down the road. If we continue to sell more module, of course, our revenue will be a lot higher than selling just e ink material. So because there's also a transition that's happening at E Ink, we're it's moving from black and white to color.
So we're still waiting and seeing that sense how that will pick up in terms of volume For next year.
Okay. Thank you. So the one more question is that can you remind me that in terms of the gross margin, The material business is better than the module business? Thank you.
That's actually quite a tough question. So we usually don't comment too much about the margins. But you can probably tell from Q2 this year that, there's an increase in price from TFTs, an increase in price from ICs, which Our suppliers are doing super well. I mean, I look at their financial report, from Fiti Power So, AstroTurf, to Himax, to AUL and Alexia, they are doing really well and I'm happy for them. But We didn't really transfer that increase of cost to our customer.
And we kind of just absorbed those costs. But down the road, if the situation doesn't really improve and it's really going to hurt our bottom line big time, then We will consider raising our prices. But at this moment, we think it's still okay. Whether older products will have better margins, It's really hard to say because when we do Our pricing strategy, there's a lot of things involved. It's not just how much money we can make out of each module, but it's really about applications, about When we think about that application, whether it's a higher volume, which usually goes with the lower margin, or it is Small volume, but a smaller volume, but then it will have a reflect with a higher gross margin.
So it really depends on the application.
Okay. Thank you very much. I will back to the queue. Thank you.
Thank you. All right. We noticed a question online. It's about the reason of lower gross profit margin In second quarter, I think Johnson already answered that question.
Okay. We don't have any questions on line now. So thank you for joining us today. Good day and goodbye.
Thank you. Have a good weekend. Thank you.