Welcome to e ink's 2nd quarter 2020 earnings conference call. Today's speaker is Chairman, Mr. Johnston Lee. CFO, Mr. Lloyd Chen, and Finance Director, Mr.
Patrick Zhang. All participants are currently in a listen only mode. After the presentation, there will be a Q And A session. A webcast replay will be available after today's conference. Please visit TW.einc.com under the Investor Relations section.
We now proceed with the conference.
Good day, everyone. Let's take a quick look at the Safe Harbor statement before our second quarter investor conference. Okay. Okay. Next page Alright.
So firstly, let's let's, take a look at the, first half results. There was a lot of positive momentum happened in the first half in terms of sales revenue, gross profit, operating profit as well as the net income. For the 2nd quarter revenue, basically the highest amount of the past 8 years. In terms of the, operating profit and the, net profit for Q2 and first half, both also achieved record high among the past 9 years. For the first half, operating profit.
We've already achieved, around, 76% what we had in 2019. So as you can see, the year over year improvement basically, or or possibly improved. However, in terms of the, non income was slightly decreased in first half. But, by better utilizing our cash generated, from operation and royalty income. We basically convert the cash to, the financial investment.
Some products, basically generating higher investment income, in order to, offset on the growth income shortfall. Basically, that, will be our long term non op income strategy. We will talk more, in the third quarter, investor conference. So next stage. We, we have done a lot of efforts to improve our own business and even financial, performance.
However, we we definitely, you know, know the importance the, on CSR. So, Ian's efforts on the CSR, has been recognized in the second quarter. We were, in the top 10, HighPay exchange, CSR index. E ink is publicly traded in the tiberium exchange. And we also prepare, a short video click, to let you know, the efforts we have done for, CSL in the past few years.
Wednesday. Okay. So that that's, the efforts, and the chief when we have done for, the CSR. And we apologize, for the content in the video clip. It is in in Chinese.
The English one is under preparation. We apologize for that. Once again, Next page. As I explained, the second quarter, operating profit and net income achieved a record high, in the past 9 years. So, basically, this slide, I'm showing a trend chart how it, it has been improved in terms of the net income and, operating profit.
Basically, the the the better, profitability, came from, the more, e ink material sales, growth in, that that's why it's supported a better profit. At this stage? For the, financial position movements. Basically, it's a balance sheet items. For the cash and financial assets, in the past 3 years, So you can, see, our, cash and financial assets position has been, increased from, 2,400,000,000 NT to, 6,800,000,000 NT.
Even, the debt ratio for operation has been slightly increased, from 28% in, 2018. To, 36% in 2020. However, the total assets and also, proportionately, increased by, 4%, for example, from 2019 to, 2020. And, in the long run, basically, our, strategy to utilize the cash is, to basically, use the cash, being generated from operation and royalty income to invest. So once again, convert cash into financial assets, to get, higher interest investment income, in order to offset on road income, shortfall.
Also, for the, cash needed from the operation seems being inc has been, growing positively. We we also, obtain more bank facility. So we would better, utilize the bank facility at the lower interest rate to meet the operation, cash needs. So that's how we are, going to utilize our cash, strategically in the long run. So, once again, as I explained, in the previous slide, our cash utilization strategy So, basically, as you can tell from the slides, from, second quarter 2019, to second quarter 2020, net $1,900,000,000 cash being increased.
Of course, it came from the operation activities. Positively. And we utilize the cash, to reinvest to the financial products to get the, you know, higher, interest and and and dividend income to offset the royalty income shortfall. And we utilize our bank facility and the lower interest rate, to meet, the requirement from the CapEx and and the annual cash dividends. So, once again, our financial investment, for, offsetting, lower income, I'm sure for.
And also, continuing CapEx investment, for expanding, digging collider. That's our, 20, color, technology and also, to the extent, material capacity. That's how we unmute the types of cash in second quarter. And for the technology innovation. I think we we spent a lot of efforts on, capacity expansion and and the strategy about, how we utilize the cash.
We also, continue our, technology innovation for, business growth. For the, color, part, basically, we will, move from the smaller size to the larger size and from the, free color spectrum, being used on the, on the SL electronic chef label and and to the multi color, Clidal products. Out with our printing color technologies and to, up to the full color, gallery. Display. And also from from Label, yes, they'll to, or diversify the applications.
And that's for the color part. And for the black and white, basically, we we we have been, standing in a lot of efforts on the black and white. So we definitely were enhanced, our black and white e paper, advantages. Such as, faster, page turns and make the the the the display are thinner and make the spot size bigger. And in terms of the temperature range, we will make, the temper temperature range wider, to move, even move, you know, more valued functions such as, you know, battery free solution.
And, flexible, affordable, technology for, future business growth. And we also prepare, 2 video clips to help you better understand what what what I just talked about. So next page. This is this is, the the affordable ebook I just, talked about. Apart from a more, smooth page turns, the video clip, you can you can see that, a front live function, is added.
So we prepare a video clip for you to understand better, sir. Please. So, the next example, we that I talk about, that I will talk about next stage. Is, our Evink, gallery, for 100, is our, 2nd generation, ASAT, technology. And, in comparison with the 1st generation, a COC from the video, it shows, a flash list on page turn on black and white.
And the faster page turn on colors. And just for your reference, this this video create on this from our, online SID, on the show.
Okay. So,
a path from the financial and, the efforts on the technologies, we we continuously, you know, expand our, ecosystem. So, we actively, developing the eco system around the paper. E painter, of course, as as a core, collaborate with, upstream partners. Such as, TFDOCD makers, icemakers, and also to the downstream, partners such as, software, suppliers, system integrators, service providers, even all the way up to the vendors. We gradually are built up and expand our, ecosystems.
In the 2nd 2nd quarter, 3 new strategic partners, join our ecosystem. The the first one is Inox. The the cooperation with, Inox, basically, is that, e ink, supplies our, advanced colored e paper. To them. And, they are the, of course, the ecosystem partner for the large size module, for our advanced color, you pay for technologies.
And, now and then it would take opportunity to introduce the potential customers, to be no luck. So, through, the the strong cooperation between percent, you know, ups. We, will expand our application of, colored paper, show the excellence, and the value to the epaper and attract more market attention and adoption of our color displays. And the second, strategic partner is, TCL, CSOT. Basically, this cooperation, CSOT will manufacture a 42 inch e paper.
TFP, backplate, using, an 8.5 generation production line. This will be the first time large size e paperbacktran have been manufactured. In an 8.5 generation facilities. With this collaboration, it will not, you know, only help optimize, our cost effectiveness of the production but also definitely will help to increase our efficiency. And last but not least, the cooperation with, Visionox in particular, I mean, subsidiary, you, change it up to electronics, the the addition of, Visionox, definitely will to, to our module manufacturing partner, it will enable us to expand, our presence in the ESL industry, particularly in the China market.
So that's out after it's only ecosystem buildup. And 3 strategic partners join our ecosystem in the second quarter. Has been, established, for 30 years already and apart from, earning the profit. Of course, a company need to make the profit. We are striving to be a sustainable company for the world changing environment.
We definitely need, a healthier earth for us to grow, you know, sustain sustainably. We believe, we are a green company with, green technology. I think, as of today, we have, shipped a 400,000,000 tronic, shelf labels and 130,000,000, e reader in the past 5 years. And in other words, with those, shipments, 20,000,000 trees being saved. Because, with our green technology and and and also in other words, I'm more than, 5 £25,000,000,000, CO2 emission being saved with our e paper technology.
And if we convert it to kilogram, that is 2,400,000,000 kilograms. We definitely know, the importance of our, of the ESG. And we just want to share with you, for you to understand that, that It is a company you are evaluating for investment or you're already invested. So that's our contribution, in terms of the, CO2 emission saving. And, having said that, can you move to the next page?
So once again, we definitely understand the importance of the the the ESG. I want to emphasize again, apart from earning the profit, we're definitely, you know, striving to be a sustainable company. So with the DSL, e reader on print effects on the c a CO2 saving I just mentioned. Through our ecosystem partners, support. We believe our, e paper technology application can be further expanded to, the field.
For example, smart packaging. Printing and even writing. So by I'm using a very conservative estimation. Let's just assume, I'm 2% of the paper consumption on those area I just mentioned. That would be, 166,000,000 trees, can be saved per year.
In other words, but around £8,000,000,000 CO2 can be, absorbed in 1 years. Recently, in Taiwan locally. The Taiwanese government, emphasized the e s ESG 3 point 0, with the big policy. We believe e inc, not just only followed, but we already move ahead. So once again, we do understand the importance of the ESG.
So, last but not least, we would like to share the future of, e ink with you. Internally, we have a slogan. We want to make all the smart stuff. We want we want to make services smarter. So we, endeavor to make or the services smarter, this slide basically outlines the future of the ink, with full potential and massive on business opportunities.
So, as you can see from the smart factory, logistics, education, medical retail to architecture. So, we really want to, you know, make all this services smarter. The most important will be, we continuously, endeavor to the society and to the environment. So that's a key point. We want to, deliver in the 2nd quarter investor conference.
So 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. In the question box 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 take your question, please remember to unmute yourself.
You can also ask questions through text in the question box on the sidebar. Yeah.
We would we sell a question from, Michael Lee, and he took from, and he told us. I think my Michael, brought up a question about the outlook of, July in in August. I think Johnson can can answer in general.
Hi, Michael. So so, basically, we believe that our second half will be better than the first half. Even though first half, we hit 9 year record high. I think we released our July sales revenue. It's it's either the highest or the 2nd highest for this year.
We're relatively bullish about the second half. I think it's because of, COVID 19 and and we were we were we were hit with the impact on the e reader side during the first half, but, because I guess people have been staying at home for too long and the pickup of reading, which indirectly helps the sales volume for for e readers also start picking up. So we believe that the second half will be better than the first half. And and ESL also has remained quite strong so far. Okay.
I saw another question by weather shoe. Is that shoe? Yeah. What I should? So in terms of royalty income, we believe that this year will still continue to fall from last year.
But the good thing is that we're kinda trying to offset that with our investment. So we do actually make investment, in 2 categories. 1 is strategic investment that we think is important as well as the growth. Either through acquisitions or purchase of IPs or purchase of teams or or just purely an investment as a as a shareholder, to bring that relationship closer at the same time because we have roughly one point No. 16,000,000,000 or 1.6.
16,000,000,000. Yeah. $16,000,000,000 of cash Oh, $16,000,000,000
NT dollars. Yeah. Cash of cash. Financial for that.
Cash and COVID. So so we do have we we we continue to look for, low risk investment opportunities. In terms of the technology that so basically, LCD technology that uses. That basically has a touch on top of it because FFS technology are the ones that have you pressed on it. You don't see any ripple effect.
And so any LCD displays that you see comes with either capacitive touch or cover lens, are using our our technology. So But OLED technology, the AM will let they don't have to pay as royalty. But the ones that's using LCD base, a lot of marketing name is called IPS, but it's it's a very similar technology, but it's really about fringe field switching. Which has an RTO on the top. So which is why we use an LCD today.
Okay? So either in mobile phone tablet car display. That needs to have a interactive touch touch on top of it.
Thank you for joining us today. You may now leave the conference today and goodbye.
Thank you.