“Vaisala’s second quarter 2023 was two-folded. Although our quarterly net sales grew by 9% and operating result increased compared to previous year, due to an uncertain market environment, we needed to adjust our full-year 2023 net sales estimate and decrease our operating result estimate earlier in July.
The uncertainty in the business environment originating from weak economic outlook, high inflation, and increasing interest rates has slowed down industrial activity around the world. Consequently, the demand for products and services as well as net sales for Industrial Measurements business area were lower than expected during the second quarter due to customers postponing their investment decisions. Even though we believe we maintained our market position, market softness resulted in a 6% decrease Y/Y in orders received in Industrial Measurements business area. This quarter orders in power and energy as well as liquid measurements market segments grew Y/Y, while orders for industrial instruments and life science market segments decreased. Following the decrease in orders received, net sales of Industrial Measurements business area fell short from previous year by 3%. Business area’s gross margin was impacted negatively by more intense than expected price competition especially in China and unfavorable product mix.
On the other hand, demand for products and solutions for Weather and Environment business area continued strong, especially in roads and automotive as well as in renewable energy market segments. Net sales growth was very strong in product and subscription sales, contributing to business area’s gross margin improvement.
Our gross margin remained at previous year’s level thanks to Weather and Environment business area’s net sales growth and decrease of additional costs related to component spot purchases. In both business areas, we continued our investments in sales and marketing as well as in R&D and IT system renewal according to plan, yet more moderately than during previous quarters. Following net sales growth, our operating result increased and was 9.1% of net sales.
We continued executing our strategy as planned. In Weather and Environment business area, the growth businesses and subscription sales continued to improve sales mix, contributing to the business area’s profitability improvement. In Industrial Measurements business area, we continued to invest in new technologies and products to drive future growth. Although the economic uncertainty impacted our profitability during the second quarter in Industrial Measurements business area, our view of long-term market outlook is supported by several megatrends.
The uncertainty in the business environment is expected to remain high without significant improvements in industrial activity during the second half of 2023. The additional costs related to component spot purchases are expected to be insignificant by the end of 2023. We now estimate that our full-year 2023 net sales will be in the range of EUR 530–560 million and operating result (EBIT) to be in the range of EUR 65–75 million.”Half Year Financial Report January-June 2023, July 28, 2023.