Welcome to this second quarter earning call for Boule Diagnostics. Thank you for joining us here in the middle of the summer. Today, we're a bit spread out, so I hope technology will be with us today. Myself, I am in Los Angeles, together with a number of colleagues. I will attend one of the bigger IVD conferences, AACC, this week, and we'll meet a number of customers, particularly OEM customers and also distributors from South America. Let's start with the highlights of this quarter.
We released a new 5-part veterinary instrument, so we now have a broader veterinary portfolio for the European market, and that we're really, really happy to see, and we are now shipping these units to customers in Europe. In the U.S., on our system side, we had a hospital chain, which had been using Boule instruments for many years, that decided to upgrade their entire installed base. That's not so common for us in the U.S., so that was a very strategic and a complement both to our solutions, but also to our organization. Overall, it's been a tough quarter that we have seen a lot of sales headwinds, you know, due to the geopolitical situation.
Of course, our sales in East Europe declined. We've also seen some challenges to, not to get the orders, but to deliver, due to payment restrictions in foreign currencies in some of the markets. For us, like we had some bigger orders to Egypt, Iraq and Pakistan that was moved out to the quarter very late since they could not pay in US dollars. We're very happy to see that our gross margins improved versus last year, despite that we really had an unfavorable product mix in this quarter. That pressured our gross margin a little bit, you know, compared to the first quarter. It was a significant improvement versus last year. When it comes to our new platform development, we're in a very interesting and intense phase.
We have done extensive clinical testing, and we also have done many design reviews, also using external resources to make sure we get, you know, the best performance. We have identified a number of improvements, which we're now implementing. Given that, we have also delayed the start of our validation, which will mean that we actually delay the regulatory submission to the summer of 2024 instead of end of this year. Let's look at the financials. Our gross was 0%, so we're [right in] million SEK. We ended up at the same level as last year. However, if you consider the currency effect, it's actually a decline of 10% organically.
Our gross margins improved by almost 5 percentage points. Also, we increased our EBIT by 2.6 percentage points. We have invested SEK 18 million in the new product platform. We've also done some investments in our facilities and infrastructure, particularly in increasing our capacity and some business continuity investments for our U.S. facility. I think it's worth mentioning here also that I'm not really satisfied with our operating cash flow. It's a significant improvement from last year. We still continue to run with some high inventory levels. Despite that, we have seen now that this component supplies is much more stable. We are now having actions so that we can trim down our inventory, since we don't see the same need to be carry so much inventory internally.
Also, in the quarter, we increased our receivables. We did the investments, you know, beyond, you know, product platform, and we also amortized the loan. We now have ongoing activities to reduce our working capital, so I expect that we will release capital during the second half of this year. If you look now, how, where did we grow? We had growth in U.S. and Asia, particularly. In U.S., this was driven by a continued growth of our OEM consumable sales. Asia was the biggest growth this quarter, and that was a large portion of 5-part instruments in a market where the market prices is lower, so that pressured our gross margin.
As expected, we continue to see a decline of our sales in Eastern Europe due to the war in Ukraine. In South America, it's been a soft quarter, in particular, it's our three-part instruments that has declined. We start to see some improvements in Western Europe, and I expect that West Europe will grow going forward, thanks to our extended veterinary portfolio. Africa, Middle East, we saw decline, but it was not really what we planned for. We really expected that we would get some prepayments and we would ship orders in the third quarter, in the second quarter, that would have actually eliminated this decline in sales that we saw now.
It was just a few bigger orders that was pushed out that caused the decline in Africa and Middle East. If you look at our how gross profit and EBIT developed, the gross margin improvements were really thanks to the price increases we implemented last year, but also that we not buying components on the spot market, so we have reduced our purchase cost. I would also like to point out that we also made significant improvements in when it comes to efficiency in the instrument production. I would really like to thank our production team for the progress being made here during the spring. Others, which sticks out here is actually the currency effects.
EBIT margin is at 6.2%, which is better than last year, but of course, not where we should be. I think we have a number of improvements that will help us improve this significantly the coming year. If we zoom out and look at the bigger picture and see how things have developed over the last two years, here you can see the blue bars here are number of instruments delivered per quarter. This quarter we delivered 999 instruments. It is less than a year ago, but it's up from compared to the second half of last year.
What we see here is that we hear from both our OEM consumable customers, but also from distributors, that with increased interest rates and financial costs, many of our partners are trimming their inventories now to lower their need for capital. Our roll, the red line here is our rolling 12 months consumable sales, and as you can see, there is a it's almost flat, a little decline. Would have the orders we planned for in the end of June kicked in, we would have seen a small increase instead, but that did not happen. Let's see how things develop in the market. Our OEM consumable sales continue to show a solid growth, even if it has slowed down in the last few quarters compared to earlier.
Part of that is that our customers are trimming their inventories. They want to reduce their need for working capital. So we're very happy with the development of our current customer relations, but we're also growing a pipeline of smaller projects, which will, you know, create new potential OEM deals in the future. This is a very nice business because very often we are involved in the development of their products during a few years, and once those products are launched, we deliver consumables, you know, through the lifetime of those instruments. Typically, these business relationships, you know, last for 10-20 years. The last few contracts we have signed, they are 10-year supply agreements.
A business that we're very happy to have and that we are investing to continue to grow going forward. Looking at the market, and there is an underlying growth and need for diagnostics in general, but we really have some headwind when it comes to sales, very much due to the geopolitical and economical situation around the world, particularly than in Eastern Europe and, but also in the Middle East and Africa and Asia. There are some weak local currencies that reduce the opportunity to invest short term, but we see there is a growing need in those countries as well. Same time, we see that our bigger customers are trimming their inventories.
What we've seen here lately is that there are delay in payments when it comes to foreign currencies, and that has impacted our deliveries in the second quarter. In the U.S., we have a positive view of the business. We expect that the OEM business will continue to grow. In Asia, we have a number of initiatives to grow in India, where local manufacturing of reagents is extremely important. We signed an agreement with our partner, Q-Line Biotech, last year, and we're now in the final phases of setting up manufacturing in India local. We expect that the first customer deliveries will happen in end of September. This is very important since many of the future public tenders require Make in India to be to win those tenders.
Very happy about the development in that respect for India. In Western Europe, we're really looking forward to see how this new extended VET portfolio can grow our business. As I've also pointed out, the last few quarters, is that we have also are developing a relationship with FUJIFILM, and they are our distributor for these VET products in Europe. I see that that will help us, you know, create a greater footprint than we have today in Europe. I expect that veterinary medicine in Europe will grow going forward. In Eastern Europe, I mean, there's no end of the war in Ukraine in sight, and we expect that, you know, we further declines and that business will wind down.
In Middle East and Africa, I mean, those are interesting markets with a lot of new opportunities. However, our biggest market currently is Egypt, that market has slowed down due to those payment restrictions, let's see how the political situation in that part of the world, also our relationship with Sweden will develop now. It's clear that there are markets where we have opportunities, even though that our main focus will be to drive sales in North America and West Europe. One of the biggest highlight of this quarter was that we launched this new 5-part hematology solution called H50V. It's now launched in Europe. It's equipped with 13 predefined animal profiles, we analyze over 30 parameters within 1 minute.
What is unique is that we have the built-in mixer that is very much liked by our customers of our present, four-part instruments. That is now available also to this instrument, and that's a, you know, very smart and very liked feature as it saves bench space. It feels really good that we now have a very attractive and broader veterinary portfolio going forward. Of course, the big development for Boule and what's, you know, important long term, and particularly since the market is shifting from three-part to five-part, is to have a fully connected, advanced, five-part system with the autoloader, and also ability to measure retics, so immature blood cells. We're developing this new product platform and implementing a number of new technologies, where we digitize the measurements system.
We have now been in the phase where we've been able to test it clinically, with several instruments, we discovered some improvements were both needed and possible. We are now implementing these improvements, the instruments will be ready in August, after that, we'll start the clinical validation. At the same time, we're also preparing pre-series production, it's a lot of activities and very exciting. It means that our regulatory submission will be delayed until next summer. In summary, a tough quarter, but also a lot of progress. Our business in the U.S. is growing, we have extended our veterinary product portfolio, this is an area where I think there's a lot of potential.
We continue to make progress with our new product platform, and we also, the efficiency savings program that we launched six months ago, is giving results and really helping us to combat both improving our profits, but also mastering some of these market dynamics, which is very volatile, where we have to be both quick and adapt to new market conditions. With that, I would like to thank you for your attention and open up for questions.
Hi. Hello, should I start with questions?
Please.
Hello, hello, thank you for taking my questions. I'll start with one on the issues we're having now with delayed payments from certain countries, from Middle East and Africa. You have now seen a SEK 10 million impact, but in practical terms, do you think that these sales will happen in Q3, or do you actually know when these sales will be, let's say, received, and how this is moving forward also? Thank you.
No, I don't know when these payments will occur, and what will happen with these SEK 10 million, and of course, there's a risk, always a risk that there's another, some other business we planned for in this third quarter that is moved out. It was a bit special situation here now in this end of second quarter, because we really were expecting the payments and had planned shipments, you know, the second half of June. Basically, the central banks did not allow this, our distributors to pay, despite they had the need for the product and despite that they had the money. It was a bit of a special situation, but it's very difficult for us to kind of comment on how that will develop going forward.
Okay, great. One question also in the, in your 5-part instrument, that, the one that you are delaying to sales for 2025. I mean, now you are investing, you have invested in this quarter SEK 18 million .
Can you comment how these costs will be moving forward for the next quarters until, let's say, that you launch the product?
What we have guided for is that we have, do investments of SEK 15 million- SEK 20 million during the development and as we are setting up production. It will decline in 2024.
All right. Great. Thank you very much.
Christian, you want to go next? I see you raised your hand.
Good morning. Thank you for taking my questions. I have a follow-up question on the change of policy to take payment in advance from customers with weaker local currencies.
Mm-hmm.
If this may have a hampering impact on sales, in near term, but perhaps have a net positive impact on cash flow?
I think it's on the, on the margin, I would say. I mean, it's not... I mean, we talked about, you know, let's say SEK 10 million-SEK 20 million here in this, in this quarter. Principally, yes, you could say so, but I mean, we have prepayments, and we are also using EKN, so we, you know, already, so I don't think, expect a big effect from this. It's more that we want to make sure that we... I think Boule has been extremely good at not having any bad debts, and we're very diligent with that.
That, you know, so we see now that when there are financial, you know, issues in some of the countries, we are very just conservative and just making sure that we don't set us up to lose any money.
Yeah, sure.
Even if it has any, you know, short-term effect on our sales, we feel it's better to be conservative in this respect.
Of course. Next question. If my math is correct, the ASP for the instruments amounted to almost SEK 47,000 in Q2. I think this is the highest number ever. Is it possible to split between how much was due to price adjustments, currency tailwinds, and if increasing sales of the new veterinary instrument played a part?
It could maybe it is probably possible, but it's not something that we do on a regular basis, and it's actually quite difficult to disentangle the currency effects when we break it down to the different product lines. You're correct that it's, I think there are two major things which drive this higher ASP. Well, three things. It's that we increased the prices last year, we have the currency effects, and we have a higher portion of 5-part instruments.
Okay, thank you.
Mm-hmm.
I was also wondering if you could help us to understand why sales of consumables to own instruments decreased by 5% year-over-year, given that your installed base is 8% higher, and you have also made positive price adjustments, and you also have currency tailwinds?
There's a trend in the market that there are more and more tests done on 5-part instruments. There are fewer tests on the 3-part instruments. That's why it is important now that we sell the 5-part instrument that we have, and that we're also now investing in to have a 5-part instrument. There's a general trend where customers shift from doing 3-part testing to instead doing on 5-part instruments. That's importantly. Some of those countries which have been done high usage of consumables and high volume of testing, are also those countries where they've had high, weak local currencies and have decreased their purchases from us during the last year.
Okay, thank you very much. That's all from me.
Mm-hmm. Any more questions? If not, I would like to thank you for your, for your interest in Boule. I'd also like to, you know, thank all of you that are owners for your support. Also, I see that there is a number from our staff here. I would like to thank also our staff for contributing to a good quarter, despite some relatively tough market environments around us. I wish you a nice day. Actually, I'm here in the middle of the night in Los Angeles, I will go to bed before I head up for the first customer meetings in the morning. Have a great day and enjoy the summer, and see you soon.