Hello, and welcome to the Vaisala Q2 2022 interim report. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I'm pleased to present President and CEO, Kai Öistämö. Please go ahead with your meeting.
Thank you. Thanks for everybody for joining the call from my side as well. I'm joined here by our chair of the board, Ville Voipio, our CFO, Kaarina Muurinen, and our head of IR, Paula Liimatta. Vaisala had a strong second quarter despite the fact that the market environment remained challenging. Both the COVID-19 situation, especially in Asia, as well as then the Ukraine war, the economic uncertainties throughout the world, as well as the challenging component situation was the environment we operated in. Despite all of that, both the demand side remained strong, as well as our delivery capability remained on a very high level.
The order intake grew by 10%, and net sales likewise by 10%, on the back of very strong industrial measurement business area, whereas the weather environment business area was on a previous level during second quarter, albeit as a comparison to a very strong second quarter last year. From the market area perspective, the net sales increased strongly in industrial instruments, life sciences and aviation market segment, which was very pleasing to see as well, gradually growing towards the pre-COVID-19 levels.
What was also very pleasing to see was the fact that we were able to keep our gross margin on the same level, about 55% as last year, despite the fact that there was about 3% negative impact through the component spot purchases that we continued to do actively during the third quarter. We were able to offset this 3 percentage point negative impact by our pricing actions as well as then the more profitable sales mix and increased relative share, obviously on industrial measurements as well. The EBIT fell somewhat short of previous year and this was on the back of increased operating expenses. Two things to mention here.
As we've indicated before, we are renewing our IT systems, especially the ERP system this year, which is a significant investment, a planned investment, and we continue to do that, and it progresses well so far. The second thing is that we continued, as we indicated before, to invest on our future growth into R&D and into sales and marketing. The order book also, on the back of very strong order intake, ended up on a record high level on Vaisala. Well, then I'll move on to the non-financial highlights for the second quarter. We continued the work to expand our product offering as well as our operational excellence.
On new product launches, it's worth mentioning the new C-band Weather Radar, which is completing our weather radar offering, which is strategically also very important. This radar family really excels in delivering high resolution weather forecasting information. Just as an example, it's able to differentiate between snow, hail, sleet, and rain through its capabilities. We have been investing very heavily into ESG and into sustainability. Sustainability, as you know, is at the heart of our strategy. It was pleasing to again, during the quarter, get a couple of notices in the marketplace. First to mention is the Carnegie Sustainability Award for this year, where we were selected, in the category of small cap companies, the leading company.
A second thing I would like to mention on this is the sustainability Sustainalytics report came out on a huge number of companies, and again, we performed extremely well. If you look at our ESG rating, we were in the top 2% 2nd percentile in the electronics equipment industry assessed by Sustainalytics. Extremely good results. The third highlight I would like to raise is the acknowledgement in the Finnish design competition or Fennia Prize on the handheld in the Indigo family. I think this is actually a larger part of a larger investment that we have done over the past few years. Investing in the usability and the capabilities throughout our portfolio.
It was very pleasing also here to get the external acknowledgement on the hard work and very good work that the organization has been doing over the past years. Moving on to the financials. If I look first at the second quarter orders received, they grew, as I said, by 10%. The increase came on the back of very strong industrial measurements business area. As I said earlier, the weather environment was on the same level as second quarter last year. I'll just repeat myself, the second quarter last year was very strong in weather environment.
When looking at the business areas or market segments, industrial instruments, life sciences, ground transportation, and aviation were among the strongest market segments contributing to the growth in the orders received. With a strong orders received, we reached a new record level on the order book at the end of second quarter. Here, it's also worth noting, it's both business areas contributed to this. Industrial instruments, life sciences and industrial measurements, and then ground transportation, aviation, renewable energy on the weather environment side were the strongest contributors. When we look at the net sales in the second quarter, net sales grew by 10%.
If we look at the constant currencies, it would be 5%, compared to second quarter last year. This is again on a very strong growth on the industrial measurement business area. I'll come back to that a little bit later in the presentation. Weather environment, as said, was on the previous year's level, and same market segments as on the order book contributed to the strong growth on the net sales side. Gross margin, as I mentioned earlier, remained on over 55%.
This, like said, was very pleasing to see, especially in the environment where we need to operate, given the shortage of components, the 3% negative impact on the spot purchases during the quarter, and the ability to offset this by pricing actions as well as more favorable, profitable business mix. I think it is a very good performance by the organization. From the OpEx side, as I said, operating expenses increased according to our plan. The IT system renewal and the long-term investments into both sales and marketing as well as in R&D contributed to this. That led into operating result decreasing somewhat year-on-year.
Now, diving deeper into the business areas, I think this is the same headline for industrial measurements now a third time in a row. Maybe it's lack of my imagination or running out of superlatives, but it really was again an excellent performance continuing. The orders received increased strongly on most market segments, especially industrial instruments, life sciences, and power industry. The order book increased when we compare to previous year by 43%, and orders received by 24%. Really an excellent performance on orders received and the result in order book. Similarly, when we look at the net sales on industrial measurement side, really a very good quarter. Net sales growth of 24%.
Even when we would look at it in constant currency, 17% increase year-on-year in constant currency. Very good. Very good quarter. The strongest contributors in terms of market segment, industrial instruments, life sciences, and power industry again. The gross margin, slight decrease. We were almost able to compensate the additional costs related to components spot purchase. The headwinds were about 3 percentage points on the gross margin. We were almost able to compensate that by increasing the prices as well as a kind of ability to sell more profitable parts of the product portfolio.
The operating result was EUR 11.5 million when comparable number previous year was EUR 10.5 million. That translates into 21 percentage points of net sales. When we look at the weather environment, even if the percentage growth in terms of orders received was a little bit over a percentage point over the same time last year. We have to just remind you again that the second quarter last year, we had a record high quarter in terms of orders received in weather environment. Even if the growth was only 1 percentage point, I would consider the actual order intake as very good.
This actually can be translated also in terms of order book, ending order book that we had at the end of the quarter, which was on an all-time high level as well. On net sales, slight growth of 1 percentage point, constant currency-wise, decrease of 3 percentage points. The market segment I would like to highlight is aviation market segment, which as said, is very pleasing to see the continued improvement on the market segment towards the pre-COVID-19 levels. The gross margin decreased somewhat again due to the component spot purchases, which had the same 3 percentage points negative impact on the gross margin.
That being said, we were able to compensate most of it again through pricing actions and more profitable mix also in the weather environment side. The operating result, due to increased operating expenses and the planned investments, ended up being EUR -1.1 million during the quarter. As we are in the middle of the year, it's good to look at the first half financials. When we look at how we fared so far in the year, net sales have been growing by 19%, and in constant currencies that translates into 14%. We have been able to improve our gross margin from previous year up to 55.7 percentage point.
This is very much also on the back of also a very good first quarter, as you may remember. This all in a situation where we had a component spot purchases had a on a half-yearly basis, 3 percentage points negative impact on the gross margin, whereas in the previous year, we had no component spot purchases during the same period. The operating result margin increased to 11.7% compared to 9.5% at the same time previous year. In cash flow terms, slight change in the negative cash flow side. Two contributors to this.
We have increased our component inventories to mitigate the difficult component availability situation in the marketplace, as well as a change in the deferred liability, or decrease in liabilities during first half of this year. The biggest contributor to this is on the back of very strong last year. We had also a strong incentive payment during first half of this year compared to the previous year. On a financial position, again, the same headline as I had on the same slide after first quarter. Strong financial position continues.
Maybe the one number I would like to draw your attention to here, as we have been indicating for some time, our capital expenditure now has decreased to the level prior to the building investments, both here in with the R&D building here in Vantaa, in Finland, as well as our facility in Boulder, Colorado. Now we are on the level that we have been indicating before. When we look at the market development and the business outlook for the rest of the year, when we look at the market segments, the high-end we expect the market to continue to grow on high-end industrial instruments, life science, power industry, liquid measurements, and renewable energy. The aviation continues to recover towards the pre-COVID-19 levels.
Meteorology and ground transportation, we expect to remain stable. This then translates into keeping our business outlook for 2022 unchanged. We anticipate our net sales to be in the range between EUR 465 million and EUR 495 million, and our operating result to be in the range between EUR 55 million and EUR 70 million. If I would just finish up by summarizing, the second quarter really characterized by strong demand, strong delivery performance continuing throughout the quarter. Especially pleasing was to see our capability to keep our gross margin on the same level than year before, despite the component negative impact through the component purchases. I was very happy to note that.
With that, I would like to conclude and open up for any questions you may have.
Thank you. If you have an audio question for the speakers, please press zero one on your telephone keypad to register. Once again, it's zero one on your telephone keypad to register for a question. Our first question comes from the line of Pauli Lohi from Inderes. Please go ahead. Your line is open.
Thank you. I have a couple of questions. First, I would like to ask about how do you guys see the development of sales volumes in the industrial measurements business area? Do you think that the volume growth, despite being at good level in Q2, is however slowing down a bit in the second half of 2022?
Like we said, just on the second last slide, we kept our guidance, which is actually very much of a growth guidance compared to the year before. Obviously, if you look at the comparables, we experienced, if you look at the industrial measurement sales volumes throughout last year, percentage-wise, obviously they grew through the year quite a bit. The comparables get to be harder to achieve going forward, if you look at the percentages.
We see so far with the limited visibility that we have, and I have to remind you that the market situation it remains difficult to predict with a war going on in Ukraine, the energy crisis in Europe, inflation, all the kind of economic woes throughout the world, the continued impact of COVID-19 in China. The visibility is kinda exceptionally poor, I would say, on overall economy. With all that we can see, we are confident to keep our guidance.
Thank you. My second question is actually related to the European energy crisis. Have you already seen any kind of boost in the demand for renewable energy solutions due to this difficult energy situation in Europe? Do you expect that to happen in the near future?
Yeah. A very good question. Thank you. Our part on the renewable energy, we really need to see the most of the demand when the investment really start to happen. I think now, right now, it's more in a planning phase and the investments I would expect to come in the coming months and years. Many of these investments are big CapEx investments which don't happen overnight. I would expect that these investments are going to come not only short- term, but very much on the long- term as well. This is a big change in Europe.
Okay. Thank you.
Thank you. Once again, it's zero one on your telephone keypad to register. Now, our next question comes from the line of Matti Riikonen from Carnegie. Please go ahead. Your line is open.
Hi, and good afternoon. It's Matti Riikonen, Carnegie. Couple of questions. You flagged the increased fixed costs, and I was thinking that, what kind of increases are we talking about? Are they kind of permanent personnel-related increases that will probably remain fixed? Or are you kind of using external acquired services that are lifting costs temporarily? What is the kind of rough split, and how would you characterize, is the cost base going to be permanently higher?
Thank you, Matti, very good question. I kind of split my answer into two parts. As I said, there are two main components that are driving the increased operating expenses. One is the planned continued investments into fueling the future growth of the company, which are into R&D, according to our strategy, into R&D and into our sales and marketing. Obviously, those are areas where we are mainly looking at internal resources. You know, we are in a very competitive environment where the competitiveness of the company is about the knowledge base and the competitiveness of the employee base. That's the core competitive advantage that we have.
For example, our R&D investments, very much of that, we continue to see very important that it's our own personnel. That all being said, obviously we are, for example, in R&D, we continue to look at what are the kind of the more representative things where we can use outsourcing. Main part clearly is investing into our own knowledge base. On the IT investments, which is the second part of the answer, obviously that's a project. In this kind of a IT renewal, ERP system renewal, that's a big part of the costs are external. It's both kind of external partners, external consultants, external purchases and so on. That's a.
As it's a project, it's a finite timeframe as well when it's completed.
All right. Thank you. Are the IT projects? I mean, when you mention ERP, it used to mean that there's gonna be a lot, of course, and very long project. Nowadays, of course, we are perhaps hopefully living a different life. Are these ERP costs? You will certainly have some fixed ERP costs in terms of licenses or maintenance costs in any case. What is the kind of relationship here between the project cost and then the remaining cost?
Yeah. With the remaining cost, obviously you have to compare with the running cost of the existing ERP as well. I don't see a major increase on the running cost per se. Every company needs to have an ERP, and you always have a running cost on it. I'm not seeing our ERP upgrade, and it's kind of when we have other IT kind of platform investments here as well. The running costs, I'm not overly concerned. That's. There's no kind of big cost pressure on that so far anyway. It's more of a kind of project that we need to, you know. You know, every company, every now and then, you need to just upgrade the ERP, and that's how the life cycle goes.
Of course. Technical question related to the rental income. Could you remind us what was that coming? Where was that coming from? What is the reason that you don't record it in the other operating income, but it's in EBIT?
Where that is coming from is our wind LiDAR business, and especially the wind park assessment type of a business, where very expensive wind LiDARs are used to assess, especially offshore, optimal positioning on offshore wind parks. That's what that rental revenue is. I'll let Kaarina answer the accounting part of your question.
Matti, we are following IFRS 16 for the lease accounting. Leases we make to our customers, they are booked as lease income, and they are part of our wind net sales. The expenses are part of operating expenses.
Good. Yes. Kai actually already answered the real kind of reason. If it's wind LiDARs that you lease to your customers, then of course it's part of your kind of operating business. I just thought that you might have some kind of facilities that you just rent out, then it would be totally different.
No.
Now I understand. Okay, that was a good clarification, and sorry for not knowing that before.
No, no. Very good question.
Finally, I don't think we discussed the thing about the Aerius.
Yes.
Acquisition. Did you book any kind of additional costs related to that purchase? You probably used some lawyers, but they were booked in Q1, right? They did not increase the costs in Q2.
They would be in the Q1. There were some extraordinary like deal related costs in the Q1 numbers. I mean, it's the size of those costs were related to the actual size of the business, so not excessive costs. Thank you for, Matti, asking the question. I should have actually, you know, in my prepared remarks, I could actually say also something about the Speedwell Climate and how that acquisition is going. I'm quite happy on both. It's fully integrated, it's fully part of the operational structure, and we are off to a very good start.
It's so far, given that it's early days now being part of Vaisala, five months, but very happy and very much on the ambitious plan that we had when we bought the company and when we did the.
All right. Thank you. That was all from me.
Yeah. Matti, actually it was EUR 500,000 was the extraordinary costs during the first quarter.
Okay, good. Excellent.
Thank you. As we have no more questions registered, I hand back to our speakers.
All right. Thank you for very good questions. As before, we are very much here for you. Any further questions you may have, please, don't hesitate to contact us, and we'll set up other occasions also for you to speak with us. With that, I would like to wish you a very happy continuation, good continuation of the summer. Hope you have a chance of getting a little bit of a break from your busy day, working days as well. Thank you.
Yes.