Hello, and welcome to the Vaisala Q3 2021 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 am pleased to present President and CEO, Kai Öistämö, CFO, Kaarina Muurinen, Head of IR, Paula Liimatta, and Chair of the Board of Directors, Ville Voipio. Please go ahead with your meeting.
The President and CEO of the company and welcome also from my part. Good afternoon, everybody. Vaisala had a strong third quarter. It was characterized by strong demand and excellent performance.
Excuse me, Operator. We can hear everything twice. There's an echo.
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Okay, this is President and CEO Kai Öistämö. I am very sorry with the technical troubles that we are having. Here we go. Now the music paused. Here we go. Let's restart. Excellent. This is President and CEO Kai Öistämö. Start.
One more try. This is President and CEO Kai Öistämö. I am extremely sorry about the technical problems that we are experiencing or we have been experiencing. Now it seems like it's okay. Yeah. For some reason.
Okay. President Kai Öistämö, one more time. I think we came to the bottom of our technical problems. Extremely sorry about all of this. Nevertheless, let's go dive into the third quarter of Vaisala. We had an excellent performance during the third quarter. The order intake was continued extremely strong, and the profitability continued strong as well. The EBIT margin was on an excellent level at 17.3%. The recovery that we started to experience during the first quarter of the year that continued, and we even saw signs now of a starting recovery on the aviation market, which was depressed during the COVID times. Very pleased to see that.
Our order intake on aviation market segment more than doubled during the third quarter compared to the same time in previous year. The order book itself remained at the all-time high, EUR 165 million. Shortage of components characterized much of the business environment for us as other people, but it did not impact our capability to deliver our products and solutions to our customers during the third quarter, which was very pleasing to see. It did create some additional material costs during the quarter, and the visibility to the component market and component availability has continued to deteriorate. The availability on and access to the components via spot market also is getting more and more difficult.
That all being said, we did have a set of strong profitability and the operating result decreased to EUR 19.2 million, you know, compared to the EUR 19.5 million at the comparable time previous year due to the exceptional costs and during the quarter, which I'll go through a little bit later in the presentation. Now, if I go a little bit deeper on what happened during the third quarter at Vaisala, obviously, as I said, the strong performance across different segments, highlighted especially on the industrial instruments, life sciences, aviation, and renewable energy was, of course, the backdrop for the quarter.
As I said, the component situation was difficult, but we managed to manage the situation extremely well, I would say, and I am extremely proud of how our organization has been able to cope with it. We found solutions to most availability issues together with our suppliers, together with our purchasing organization, as well as our R&D, as well as in being active on the spot market as said. We expect that the global shortage of components is going to continue during the fourth quarter and then into first half of next year. Finding solutions, as I said, through the spot market is getting increasingly difficult, as the component availability is getting more scarce also through that.
We do estimate that the component shortages continue to generate additional material costs during the fourth quarter of this year. As a very positive note, as you know, sustainability is at the heart of our strategy and heart of everything that we do, and it was very pleasing to see that in two external assessments, evaluations, we performed extremely well on this front. First, we were found as most responsible company among Finnish public companies by Finnish private investors in a survey by T-Media.
Second, in an international study by Sustainalytics, our ESG scoring, we actually were among 63 Finnish stock-listed companies, our scores were among the very top, we were actually selected as number one on the list. According to Sustainalytics study, our ESG risk score is categorized as negligible, which is very pleasing to note. Also during the third quarter, we did present our new strategy and update our long-term targets in our Capital Markets Day. I'll give you just a brief update and reminder on our strategy. We are extremely well-positioned as a company, and we are at the core of multiple different mega trends, such as climate change, renewable energy, resource efficiency, and so on.
The heart of our strategy is that we provide world's most reliable measurements where it really truly matters. We have three distinct goals and means how to do this. We actively seek sustainable growth by solving customers' business-critical challenges. In any market we act on, we always seek to be number one on that market. We have identified four success drivers which are helping us to implement the strategy. At the heart, again, is the product and technology leadership, which also is then coupled with a very deep customer understanding and application know-how, so we know to whom and to which environment we are developing our products intimately. Then we seek to be the masters in scalability in the high mix, low volume business that we are.
The talented and engaged people are really what makes Vaisala special. We presented the renewed sharpened strategy at the Capital Markets Day, as I said, and those who have not yet watched, I encourage you to go to our website under the Investors tab, and you can find the webcast or the recordings of the webcast there, and you can take a look more deeply into our strategy. Going into the numbers during the third quarter. As I said, orders received increased by 29% year-on-year. The increase came from both business areas, in industrial measurements, industrial instruments, and life sciences were big drivers on the increase in orders received.
As I already mentioned, very pleasing to see the aviation starting to recover on the weather and environment side and the renewable energy continued very strong performance during the third quarter. The strong order intake led into a strong order book, which increased if we compare to the same time previous year by 22%. It remained on an all-time high level of EUR 165 million. The increase again came from the order intake from both business areas and from the same market segments as I already mentioned. If we look at how that turned into net sales, net sales grew by 19% year-on-year, again, growth coming from both business areas.
The biggest drivers of the increased net sales were in Industrial Measurements side, Industrial Instruments, and Life Science, and then in Weather and Environment, the Renewable Energy and Aviation. If we dive deeper into Industrial Measurements, the quarter really was characterized by excellent performance, which we already had during the first and second quarters of this year. The orders received increased in all market segments, not only the Industrial Instruments and Life Science, even though those were the strongest ones. It really was pleasing to see that here our capability to deliver against orders from our customers, despite the component shortage, really made a difference in this in the Industrial Measurements side.
The net sales grew by 35% to EUR 14.2 million, which is 30.2% over 30% of net sales. If we look at the operating result, it actually did include additional material costs from spot purchases that happened during the third quarter, about two percentage points negative impact through the increased component costs from these spot purchases. At the same time, this was compensated by improvement of gross margin by the same two percentage points due to the economies of scale with the higher sales and higher deliveries that we had in industrial measurement.
You can think about it even though they are two different causes. They kind of compensate for each other, which meant that the gross margin then was on the previous year level on 64.4%. We continued to invest as our strategy has been into our operations and into R&D during the quarter as well. Similarly, when we look at Weather and Environment, the strong order intake characterized the quarter, and as I said, led by Aviation and Renewable Energy market segments. Maybe the other thing I would like to highlight is the strong increase in large project orders.
An example of a project order that we have talked in public was our project in Poland, where we helped to improve the meteorological observations and mitigate impacts of potential flooding throughout Poland, where we, in consortium with our local partner, are delivering over 1,600 automatic weather measurement stations throughout Poland. We are delivering this system during this and next year. When we look at the Weather and Environment operating result, the exceptional costs are something that I would highlight. Here, it did include 2.3%.
EUR 2.3 million worth of exceptional costs, which were then related to the contingent considerations on the M&A that we did during the earlier years. Okay, here is Kai Öistämö again, and we have again experienced technical troubles and now a few minutes ago, so I'll continue from just recapping the financials for the first three quarters of the year. When we look at the figures for the first three quarters, they are excellent, and we have had an excellent year in all key figures, and thus we did increase our business outlook on October 19th .
It's worth noting maybe on the numbers is that the operating result included EUR 0.9 million expenses arising from valuation increase on contingent considerations of acquired businesses based on the updated financial plans for 2021, as well as a settlement payment to a business partner and legal fees in the U.S. The other highlight on this slide I would take is the effective tax rate, which was low 14%, and this comes from our ability or expectation to be able to utilize the tax loss carryforwards from previously acquired companies. From a cash flow perspective, the first three quarters of the year also were very good. The cash flow was very strong, EUR 48.9 million compared to EUR 16 million.
16.9 million euros same time last year. Mainly, the biggest contributor here is that the improved financial performance on our operations. Our financial position remained strong in all aspects. Here maybe worth noting the CapEx number, which is down from last year as the two building projects that we had are now finished, but it still is somewhat higher than the normal year where we expect it to come down to over the course of time, still elevated to the fact that we are continuing some of the installments and investments into some of the laboratories in our R&D building here in Vantaa. Going into market development and business outlook.
On market side, we are expecting the growth to continue on high-end in industrial instruments, on life sciences, on power industry and in renewable energy. The recovery we expect to continue on liquid measurements and meteorology in developing countries, and as I said earlier in my presentation, in the aviation side as well. Whereas the meteorology in developing countries and transportation we expect to remain stable.
Recapping our business outlook that we gave out October 19th, we expect our net sales for the full year 2021 to be in the range of EUR 425 million-EUR 440 million, and our operating results to be for the same period to be in the range between EUR 48 million - EUR 58 million. If I summarize, the third quarter of this year it was characterized by strong demand, and we have experienced very strong performance throughout the company. Orders received, massive strong growth on orders received and excellent performance also on unit sales. I'll stop my prepared remarks here, and I'll open up the floor for questions. Operator, please.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a brief pause while questions are being registered. Our first question comes from the line of Joni Grönqvist of Inderes Oyj. Please go ahead. Your line is now open.
Hello, and congratulations again for a good quarter, and maybe we can already say for a strong year as well. I actually don't have any questions on this quarter or the end of the year. If I may, I would like to change focus already to next year. I have two questions that are related to each other. If I could ask, what kind of plans and/or focus areas do you have for next year? Secondly, what kind of drivers and risks do you see there for next year? Thank you.
We have not given any guidance obviously for next year. We have a long-term strategy and the investments into much of the where we have seen the strong performance actually throughout our portfolio. We feel that we are well-positioned obviously going into next year. We will give you an update on an updated guidance together then with our fourth quarter results in February. I'm not gonna go into any more detail into that. Maybe the one thing I can say, as I said in my prepared remarks, obviously the component situation will require quite a bit of attention from us, like with everybody else I believe in the industry.
This is something which will be obviously from an operational perspective, one of the themes for next year.
Yes. Thank you. I was not asking or referring to any guidance or expecting any guidance. Just like, drivers like the component market and if the aviation industry is, if you expect it more like you commented here that it's picked up in orders, like these kind of drivers that give you a tailwind. If you see any other possible risks, or if we look at components that is there only some components, now that you where there is problems to get and do you see risk for further other components as well, getting like hard to get?
Yeah. Let me give you a little bit more color on the component situation. The visibility into the market. If I look at just what has happened over the end of the third quarter and the visibility into the market has deteriorated, which kind of, if I try to put it in plain English, it means that the visibility into the supply for any or just about any electronic component is extremely short and very hazy as well. We have experienced during the third quarter decommitments from multiple big well-known suppliers and just like I would say the entire industry. Then when you ask from these certain big name electronic suppliers, they depending on the company, they give you a slightly different answers.
If I just, you know, recap what has been said and some of the well-known publicly stated numbers or outlooks on the component situation. Some of the companies like, if I recall right, Intel said that they would expect difficulties to meet the complete demand during the entire next year. Some of the other ones may see a little bit different outlook, but it gives you a maybe an idea that this is the situation in the marketplace which requires quick fixes, quick reactions and a lot of activities to mitigate rapidly changing supply situation or supply picture.
Okay. Thank you.
Thank you. Ladies and gentlemen, once again, I remind you if you do wish to ask a question, please press zero one on your telephone keypad now. We currently have no further registered questions. I'll hand back to the speakers for any final remarks.
Thank you. Thank you for your patience. I do apologize for all the technical difficulties we experienced during the call, and I wish to engage all of you in further discussions, and you can book them through our IR. Thank you.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.