Vaisala Oyj

So, this is Kai Östömö. I'm the president and the CEO of Vaisala. And as the operator said, I'm joined here with our chairman of the board, Ville Voipio, our CFO, Karina Murinen, and head of IR, Paula Liimaa. So, as usual, I'll make some prepared comments, and then we'll open up the line for Q&A. Before I go into the numbers, maybe worth to note that one market environment during the first quarter, which proved to be very, I would say, surprising and somewhat disappointing in terms of the war breaking out in the middle of Europe. So the Ukraine war and other events around the world, like the COVID in China, where obviously not foreseen and surprising events, especially the war in Ukraine, very disappointing and shocking event. And we here at Paitala, we very much immediately, once the news broke out, we assessed the situation and decided that we were not comfortable to continue the business in Russia nor in Belarus, and we suspended that part of the business immediately and it's uh worth to to reiterate that that that side of the business uh traditionally has not been uh that sizable for for vice a la the it might take past five years the net sales from that region uh all in all has been between one to two percentage points on an annual level So not very meaningful in terms of the size to overall at Vaisala. So despite all that, we did have an excellent start of the year. Excellent in terms of a net sales growth, very strong in both business areas. Excellent in terms of operating results, which doubled, more than doubled compared to the year before. order book ended up at 169 million euros which is all-time high for us and the orders received also grew very nicely on both business areas. Now before diving into the numbers I would like to highlight few points that happened here on strategy execution and advice. Two points on renewing our offer according to our plans. First I'd like to highlight the automotive weather service deal that we made with Volkswagen. Volkswagen as you know is the second largest automotive company in the world and what we provide for Volkswagen just as much as many of the other car partnerships that we have is a hyperlocal weather service and forecasts, precipitation information and weather warnings shown on the infotainment screen on the car. and this deal just strengthens our very strong leading position in the automotive weather service and we do see this great opportunity in the years to come. On the other side of the business we renewed and expanded our product offering intended for the data center customers. Data centers as you know is a big increasing business and we have been having a very solid business and offering in that segment. We have enjoyed a good market growth in that side. Now we completed our offering so that we can serve as a a one-stop shop, so to say, with our offering to these very, very important customers. Sustainability is at the heart of our strategy and two important events during the quarter I would like to highlight. First thing is that we announced that we commit to the science-based target initiative to reduce our emissions. So we will do the assessment on science based on our all our emissions direct and indirect during this year and make a concrete plan and then work to reduce those according to the science-based target initiative by 2030. We also got a very nice recognition from Financial Times. Financial Times creates this climate leaders list annually. And in this year's list, we ranked as number five on that list, on all the companies in terms of how much they have been able to reduce greenhouse gas emissions between 2016 and the present day. So very, very proud of what we have been able to do. And I think it's a great highlight also on our strategy execution on this part. Then moving on into the actual numbers during the first quarter. So if I look at the quarter's receipt, increased by 18%. Very happy with that. The orders received came from both, strongly from both business areas. And if I look at the market segments, which I would like to highlight, would be renewable energy, aviation, industrial instruments, and life science market segments. Those were the strongest contributors, but there was a growth in many other market segments as well. Then going into the order book, it increased by 8% when compared to the first quarter of 2021. The increase came from largely the same market segments in industrial instruments and life sciences market segment in industrial measurement side and aviation and renewable energy in the weather and environment side. And worth to reiterate that we ended with the order book, we ended up with the all-time high size of order book at the end of the first quarter. When we move on to net sales, net sales grew 29% year on year, very strong growth on both business areas. Again, if I look at the market segment side, renewable energy, meteorology, industrial instruments and life sciences market segments were the strongest contributors to the growth. It's worth noting also that this time around the strengthening dollar helped a bit or the comparables. So if I look at in constant currencies, the growth would have been 25%, very strong number. that as well. Diving into the two business areas, starting with industrial measurements, excellent performance in all aspects. Orders received increased very strongly and and when we look at the order book compared to last year we ended up in the ended for 45 41 percent higher in terms of the orders received during the quarter 90 percent increase here looking at net sales net sales growth of 34 percent which then then increased the the operating result to excellent 27.5% of net sales. Also, gross margin improved to 64.3%. During the quarter, there was additional material costs, from purchases from the spot market, So the component challenges continued during the first quarter as we anticipated. Although in this quarter the impact on gross margin was less than the quarter before. And this is really caused by the fluctuation between the specific components the market changes and the component in shortage changes as well as the suppliers who have a shortage changes kind of a dynamically from quarter to quarter. It's also worth noting when we look at the gross margin that year before there were no spot purchases in the comparable number in first quarter of 2021. in weather environment side orders received were at the excellent level it was driven by especially by we know renewable energy and aviation market segments and we ended with the order book of 133.5 million euros which is good growth from last year and in terms of an orders received increase of 17% when we compare to the first quarter of 2021. And in terms of operating result in weather and environment, it increased to 4.4% of net sales. You may recall that due to seasonality and other things, typically the first quarter is difficult for weather environment. In many past years, we have been at breakeven or even below breakeven in terms of operating results. So having an operating result of 4.4% of net sales, it makes me very happy. And I think it's a very good performance buy. by the business area. The net sales growth was driven by renewable energy, meteorology market segments, as well as ground transportation. Gross margin was on a very healthy level, and here also there were additional material costs related to components purchases, but on a lower level. fourth quarter as they materialized. And when I look at the entire company, on how we fared as a company during the first quarter, the operating result, again, an excellent level, 14.8% of net sales, net sales growth of 29%, and if I make the comparison on constant currencies, it would have been 25%. Gross margin was at, on the previous year's level, slight increase there. And here I want to maybe emphasize Again, the spot purchases, we actually did make a significant commitment into spot purchases also during this quarter, even if then the actual impact on the numbers during the quarter was clearly less than what the commitments in this quarter were. And this is really due to the fact, as I said earlier, that the the components in question, the vendors in question, they fluctuate from quarter to quarter and even the shortages which come and go at a relatively rapid motion kind of change from quarter to quarter, even month to month. And then If we turn the result into EPS during the quarter, it translates into 38 euro cents compared to 17 euro cents the year before. In terms of cash flow from operating activities, it decreased somewhat due to the negative impact on net working capital. This really was The biggest impact on this was the change in the accounts receivable. This was due to the fact that the business grew significantly compared to last year. When we compare to the comparable period last year, actually, we just emerged out of the COVID-19 slump, I would call it, during 2020. So... The way I would read the changes in the cash flow is related really to the strong growth in terms of a business. If we look at our financial position, I would characterize it as continues to be very strong. And maybe I'll go into maybe more interesting, which is then the market development and the business outlook for the year. Here, I'll go back to maybe how I opened the session in terms of what happened. The war broke out in Ukraine, the COVID-19 lockdowns in China, many things happening in the world, which makes the unpredictability and in the world to be on a very high level and transparency on the markets overall to be quite challenging. So uncertainty for the rest of the year in terms of I would say second order and third order impacts in terms of What does the impact on inflation to real economy mean? What does the increase in energy prices, especially in Europe mean? What is the impact on the lockdowns in China? For both the real economy in China as well as the consequential potential impacts into logistics, which are already strained and so on. or the uncertainties significantly grew during the quarter. That all being said, we did not change our outlook and our view on market development. We continue to see that high-end instruments, life sciences, power industry, liquid measurements and renewable energy clearly are growth segments. The aviation very much supported by the numbers also during the first quarter, is in a recovery mode towards pre-COVID-19 levels. It's still kind of a way to go there, but clearly a recovery is seen in the marketplace. And on the other hand, meteorology and ground transpilation we see to be stable market segments. And in terms of a number, this translates into no changes in our business outlook. We see that our net sales for the full year are in the range between 465 to 495 million euros and the operating result between 55 to 70 million euros. So just to summarize and conclude my prepared remarks, excellent start of the year in a dynamic market situation. Strong net sales throughout the company, very good operating result and very strong order book. So good start of the year despite the fact that the world around us is experiencing all kinds of uncertainties and That concludes my prepared remarks, and operator, if you would open up the line for any questions.

Yeah, thank you. If you have questions for the speakers, please press 01 on your telephone keypad. Please hold until we have the first question. So we have the first question from Pauli Loche from Interim. Please go ahead.

Thank you, Hanna. Thank you Kai for your presentation. I have two questions. First, I would like to ask about the strong sales development in the weather and environmental business area. Do you see any particular reason why it was so strong in Q1? Do you believe it could continue also in the following part?