Earnings call transcript: Vaisala Q2 2025 sees flat sales, stock dips 5.5%

Published 25/07/2025, 18:40
Earnings call transcript: Vaisala Q2 2025 sees flat sales, stock dips 5.5%

Vaisala Oyj A (NASDAQ:VSAL), a company with a market capitalization of nearly $2 billion and a solid financial health score according to InvestingPro, reported its second-quarter 2025 earnings, revealing flat net sales year-over-year and a 16% decline in order intake. Despite these challenges, the company posted strong growth in its Industrial Measurements segment and subscription sales, which increased by 53%. Following the earnings announcement, Vaisala’s stock experienced a 5.5% decline, with shares closing at $49.75, down $2.75 from the previous day. The company maintains a relatively low volatility profile with a beta of 0.69.

Key Takeaways

  • Vaisala’s Q2 net sales remained flat compared to the previous year.
  • Order intake declined by 16% year-over-year.
  • Industrial Measurements and subscription sales showed significant growth.
  • The company’s stock price fell by 5.5% following the earnings report.
  • Vaisala updated its full-year guidance, expecting net sales between €590-650 million.

Company Performance

Vaisala’s performance in the second quarter of 2025 highlighted a stable yet challenging environment. While the company’s overall net sales did not grow, its Industrial Measurements business and subscription sales demonstrated resilience. The company also reported an improvement in gross margin and EBITA compared to the previous year, indicating operational efficiency amidst market uncertainties.

Financial Highlights

  • Revenue: Essentially flat year-over-year.
  • Order intake: Declined by 16% compared to the same quarter last year.
  • Subscription sales: Increased by 53% year-over-year.
  • Gross margin and EBITA: Both improved compared to the previous year.

Outlook & Guidance

Vaisala updated its full-year guidance, projecting net sales between €590-650 million and an operating result (EBITDA) of €90-100 million. The company expects continued growth in Industrial Measurements but anticipates challenges in the Renewable Energy market.

Executive Commentary

CEO Kai Oistema emphasized the company’s strategic focus on long-term growth, stating, "We are basing our decisions on a very solid strategy, looking at business in the long term." He also acknowledged the challenges posed by tariff changes, noting, "The biggest risk is tariff changes and their impact on our customers."

Risks and Challenges

  • Renewable Energy market slowdown: Significant challenges expected to persist.
  • Tariff changes: Potential impacts on customer demand and pricing strategies.
  • Currency fluctuations: Additional complexity in financial performance.
  • Public sector spending cuts: Potential impacts on project timelines, especially in the U.S. and Europe.
  • Cyclicality in Chinese market investments: Continued uncertainty in growth prospects.

Q&A

During the earnings call, analysts inquired about the impact of U.S. public spending cuts and the cyclicality in the Chinese market. Executives addressed concerns about tariff mitigation strategies and clarified the slowdown in the renewable energy sector across various geographies.

Full transcript - Vaisala Oyj A (VAIAS) Q2 2025:

Nina Alalopo, Investor Relations, Vaisala: Hello, everyone, and welcome to Vaisala’s second quarter and half year results call. I am Nina Alalopo from Vaisala’s Investor Relations. And today, here in this call with me are President and CEO, Kai Oistema CFO, Heli Lindfors and Chair of the Board, Ville Voipio. First, Kai will present the results. And after that, we have time for questions.

Let’s start with the presentation.

Kai Oistema, President and CEO, Vaisala: Thank you, Nina, and welcome also from my side. Looking at the second quarter, as the headline says, mixed second quarter. And while there was a kind of there was a strong growth in many parts of the business and good performance, At the same time, there was a decline in especially in the renewable energy business. So let’s dig a little bit deeper into the quarter. Net sales wise, we were roughly on a previous year’s level.

The slight decline is largely explained by changes in the exchange rates. In when we look at the net sales, strong growth continued in Industrial Measurement across the board. I’ll go a little bit deeper into that a little bit later in the presentation, while weather environment side suffered from slowdown, especially in the renewable energy markets. The subscription sales continued on a very strong growth as it was also in the first quarter, both from inorganic side, I. E, the acquisitions that we did late last year as well as the organic side, underlying organic In terms of order intake, decline, and this came from two places.

It’s order decline, obviously, in Renewable Energy. That was visible there And I’m hopeful but also in Meteorology and Aviation. Here, I’ll talk about this a little bit more in detail later. This, I would say, is more in kind of explained by the cyclicality of the underlying business, and I’ll give you a little bit color later in the presentation. From an EBITA perspective, lower compared to a very strong quarter last year.

And it’s good to remember when we compare to the second quarter last year, and remember the abnormality in terms of the different quarters in last year, where first quarter was weaker than much weaker than a normal year. And then second quarter was kind of a compensating part of that. First quarter last year had the ERP change and the strikes at the same time is kind of impacting both net sales and order intake. And then that was partly compensated in the second quarter. So that’s good to keep in mind.

And I’ll show you also the year to date numbers in comparison to the last year. It’s very visible there as well. And then I’ll conclude the presentation with the remarks on the market and the business outlook. Before going into the numbers, it’s good to remember that we have a very, very clear strategy. And while the market public side and myself in this call will talk much more about the short term impacts on the marketplace, whether it is the import duties, whether it’s the trade war, whether it’s the real war in Europe, whether it’s the kind turbulence in the marketplace, it’s good to remember that climate change has not gone anywhere.

It’s progressing. We see just looking outside of the window how that the impacts are more and more prevalent. And it’s important to remember that we are basing our decisions on the very, very solid strategy, looking at business in the long term and the real importance of fighting climate change and its importance on many business trends as well, where we really strongly feel that we are on the right side of the history. And it’s good to have this kind of a solid basis for making business decisions guiding us in the long term. Now going into the financials, first looking at it on a Faisaler level, the order as said, order intake decreased despite the strong demand in the Industrial Measurement side.

Year on year comparison, it’s a 16% decline. And consequently, also the order ending order book declined compared to the same time or the starting order book for this year, I. E, at the level of end of last year, 7% decline. And net sales declined slightly here, essentially flat if we look at constant currencies. So more than half of this decrease is explained by changes in the currency exchange rates.

Strong growth, but more interestingly, the kind of what’s happening underlying on the top level numbers is the strong growth in Industrial Measurements and in subscription sales and at the same time, weak demand in renewable energy, which then impacted the net sales significantly on that side of the business as well. The gross margin on a good level, albeit a slight decline compared to kind of second quarter last year. And the cash conversion continued strong, and I’ll show you a slide on that as well. Industrial measurements, a very good quarter. Growth continued in all geographic areas and all market segments.

This is it’s great to see. Has not been the case for quite some time in Industrial Measurements, but I can actually say that the growth really comes from all geographic areas and all market segments. In terms of orders received, increased compared to a very strong comparable year on year by 10%. And net sales correspondingly increased by the same 10%. The growth Americas continued strong, but it’s the clear growth also in Europe and in Asia as well as in all market segments that we serve.

Slight decline in gross margin compared to exceptionally high level kind of same time last year, but in well in the range that I can say that it was I can be very happy about the gross margin as well as on the EBITA level on Industrial Measurement side. Mixed inside of weather environment. Weak market demand in renewable energy. So orders received decreased, said, significantly when compared to strong comparison point, albeit the strong comparison point last year, 32%. And the order book, consequently, 7% down compared to the end of last year.

And then net sales decreased by 10% compared to the same time last year, which, again, was a strong not only in orders received but also in net sales, as you can see from the graph on the right on the slide. And where did it come from? It came from slowdown in the renewable energy market. Maybe you can, worthwhile, a little bit opening up. What this means is the investments into especially wind, as we’ve said before in previous calls, have slowed down around the world.

There are kind of specific markets also that where we operate in. This has now kind of gone into the early phases also in terms of a new potential wind park explorations, which is really where we have our biggest exposure in renewable energy business. And many of the markets that or some of the markets where we are kind of specifically strong, like Central Europe or Japan, have kind of slowed down significantly. So the impact on the market kind of comes through kind of fully in our numbers. But also, the complete slowdown in U.

S. As the administration changed and the regulations are in flux in The U. S. This has caused a complete kind of slowdown in The U. S, which obviously is seen also in our demand and in our numbers.

In subscription sales, I said this earlier as well, a very strong growth, 53% growth in subscription sales. And this is obviously coming from the acquired businesses and also very happy on the organic growth of 11% year on year on underlying business on subscription sales. Continue to progress very, very well on sales business driven by the ex weather business that we have. In weather environment, it’s worthwhile also in the order intake side, maybe a few words on the traditional side of the business. And I referred back to the cyclicality of nature of that business, kind of a couple of maybe opening up a couple of pointers to that.

Like if we compare to the last year or last the second quarter last year or last year and some kind of partly the year before, the cycle was driven up in a couple of things. One thing being in as an example, the use of COVID-nineteen recovery fund for renewing meteorology infrastructure, especially in Southern Europe. We benefited quite a bit from that during the past two years. Kind of a prime example of that was the investment in a completely new radar network in Spain, but also in Greece and many other kind of smaller deals in other countries in Southern Europe. The use of that fund, obviously, now finally is over.

And at the same time, many of those investments now are on the way. Second thing I’ll kind of make of small albeit much smaller impact, but kind of a typicality of this business is China, where we are now in the fifth year of the five And as we anticipated, the investments in meteorology are lower in the last year. As it’s typical in this five year plan, executions that China has done, let’s say, the investment got up quite a bit of it, boosted the investments in China last year, and the orders came in last year and this year, clearly in a low level in China. But that did like I said, these are the nature of the traditional side of the business, meteorology and aviation side of the business.

And that’s seen in all, especially in the order intake in that business inside of weather environment. And gross margin kind of decline, kind of two things impacting that. It’s lower net sales, scalability working the other way. And then on the other hand, unfavorable sales mix, meaning that there’s a little bit more project revenue in the mix compared to some other quarters, leading also lower profitability compared to the previous year same time. I mentioned the cash flow continuing on a good level.

Here you can see kind of changes in the cash flow. Nothing really kind of a major here. Cash conversion continuing on a very good level, one point zero and free cash flow consequently being €22,000,000 in the quarter. And I spoke about the seasonality and kind of comparisons to last year. And here, I promised to kind of talk about bit kind of the year on year comparisons also from a kind of a first half perspective, which kind of give you a slightly different picture compared to just looking at the second quarter, given the cyclical nature of our business.

So cyclical in terms of between the quarters. And now when we look at first half compared to previous year, orders received decline was somewhat milder. But at the same time, the company’s net sales, strong growth. And the same drivers, Industrial Measurements, subscription sales as well as the then to some extent also the traditional Materials business. Gross margin actually ahead of last year and EBITA ahead of last year, EBIT being ahead of last year.

And the operating expense is well in control, kind of some increase, but that really was driven by the acquisitions that we did in the second half of last year, which we are very happy and actually contribute to the net sales and profitability as well already and then earnings per share being on the same level as last year. Financial position continued to be on a strong level comparing to kind of our first half last year, obviously, gearing a bit higher since we did the acquisitions last year. Kind of we stay low levered stay very low levered and we continue to have the asset light business model. And here, it’s good to remind also that, that end report that with the investment in the automated logistics center here in Vanta continue as planned. So we actually have completed the building.

I’m watching out of the window and seeing corner of it. We received the building and inspected, and it’s already completely done. And as we speak, we are installing the automation machinery into the building, and we expect that to be taken into full use during the second half of this year as we have planned. Now maybe kind of changing the focus into future and a few words on the market and business outlook. So business outlook for this year, we continue to see growth, We expect growth in the market’s underlying industrial measurements, I.

Heli Lindfors, CFO, Vaisala: E,

Kai Oistema, President and CEO, Vaisala: industrial measurements, industrial life sciences and power. Roads continue to be stable. I talked about the Meteorology and Aviation in terms of the traditional business having a bit of a cyclicality and the cyclicality compared to last year in lower cycle. And then the challenges in the renewable energy, spoke about as well. And thus, those markets we see declining this year.

When I look if I were to look at long term, then I would say kind of no changes in the outlooks on meteorology and aviation roads. The traditional markets continue to be stable long term. And long term, we continue to believe, obviously, the energy transitions and so on, as I spoke about in the strategy of the company. Now consequently, we are now in the middle of the year, and it’s time to look at the business outlook as well. And when we specify the range, it’s a little bit narrower than what we started the year with.

And we see the net sales being now between $590,000,000 to $6.00 €5,000,000 and then operating result in terms of EBITDA being between 90,000,000 and €100,000,000 So this concludes my prepared remarks. And now we would be very happy to answer any calls any questions you may have.

Moderator: The next question comes from Nico Ruikangas from SEB. Please go ahead.

Nico Ruikangas, Analyst, SEB: This is Nico Ruikangas from SEB. Thank you for the presentation. I have a couple of questions, and I’ll go one by one. Starting with weather and environment. So you mentioned that the cuts in public spending affected demand in weather and environments.

And also, there have been made proposals for weather services, budget cuts in The U. S. Both from presidential office and then from Senate and Congress. So could you discuss what do you think about this? And then as you discussed about the impact of public spending costs, do you think that the biggest risks of that relates to 25% or then 26

Kai Oistema, President and CEO, Vaisala: So when I on my prepared remarks, I actually spoke about really, yes, it’s a public spending, but it was more a stimulus fund post COVID, that was I was mentioning. So really, like, we can argue whether that’s a cut or not. It’s just like a kind of on a back of previous stimulus funds. Similarly, in China, it really not a cut in public spending. It’s just the cyclicality of the public spending.

But you’re quite right. Back to The U. S. And National Weather Service NOAH. NOAH in there has been cuts in both in the personnel as well as in the budget in terms of the NOAA and underlying National Weather Service, at least for this year.

This has consequently postponed some of the projects that we were anticipated that would be coming to a closure during this year. So far, we have not seen a dismissal or stopping of any of the projects that have been ongoing. They have everything has just moved forward in time rather than being canceled entirely or even rescoped. It really has been moving forward in time. And that’s the visibility that we have today.

So we have no reason to say that this would be like a permanent level in longer term. We’ll see. And still relatively early days, I mean, we are talking about It’s about four months since this the kind of a dodging started in kind of regarding National Weather Service and NOAA. And we’ll see kind of ongoing negotiations, I think, within administration on how to spend the money and where do you where the cuts too deep and where not and so on and how will the kind of future years look like.

So I would say too early to really speculate the longer term. And on the other hand, I think it’s a positive sign that no project has been cut so far.

Nico Ruikangas, Analyst, SEB: All right. I understand. So the biggest impact from a less public spending in Q2, you mentioned, so it is not U. S, but other countries, Europe.

Kai Oistema, President and CEO, Vaisala: Yes, yes, yes, yes. And this was we anticipated this. So look, we all knew that the COVID-nineteen recovery fund in Europe, when we are living in year 2025, and that’s like three years ago when, in my books, COVID ended. So it’s about time to stop using my tax money on recovery, on COVID.

Nico Ruikangas, Analyst, SEB: Yes, I understand. But then you still kind of cut the outlook in traditional weather and environment side to decline from stable. Which part of this was kind of surprise for you compared to expectation in Q1?

Kai Oistema, President and CEO, Vaisala: A bit like the or the only kind of a really a new thing is this compared to Q1 is what you actually were asking in terms of U. S. And it comes on top of the other cyclicality that I was talking about, whether it’s the Europe or whether it’s the China or just the normal cyclicality between the quarters in the business in that market. Being relatively small market, all in all and single kind of decisions kind of move it one way or the other kind of between the kind of like quarters and a half a year. So the only real kind of material change is the impact on in The U.

S. For rest of this year.

Nico Ruikangas, Analyst, SEB: All right. And then gross margin development, if we continue with weather and environment. So gross margin there declined year on year quite a much. So was this kind of a Q2 specific? Or were there kind of specific explanations for this?

And what is affected by tariffs there? And were you able to kind of transfer the tariffs to prices also in weather and environment?

Kai Oistema, President and CEO, Vaisala: So good question. So there was nothing kind of really specific kind of to any meaningful extent in the second quarter numbers. Really, the biggest weakness is in Renewable Energy and really a significant decline in the marketplace itself. And remember, the Renewable Energy business is has been a higher gross margin business and higher profitability business than the kind of the average weather environment in the reported segment. So that has an impact kind of directly into the reported segment numbers.

So that really is where it is coming from. In the first half, regarding the tariffs and everything else, kind of in all practical purposes, we were able to mitigate that a little bit from price increases, but mainly actually preshipments into U. S. We like, again, it’s a longer cycle business. So we will actually be able to actually ship much what we shipped as kind of a and closed sales in U.

S. So this moved from our like into our warehouse in a factory in U. S. And then kind of turned into sales during the second quarter. So that was part of the mitigation in weather environment on the traditional business side regarding the tariffs.

Nico Ruikangas, Analyst, SEB: Okay. And then if you think about H2, so will you then also be benefiting from pre shipments? Will

Kai Oistema, President and CEO, Vaisala: We you try we to so yes, yes, when we did this, we not only looked at the quarter, we looked at, obviously, kind of whatever. We kind of could kind of anticipate for the kind of quarter year. And remember pricing changes in public when we talk about the public business and longer term commitments, it happens much slower than in a fast moving business like Industrial Measurements.

Nico Ruikangas, Analyst, SEB: Yes, I understand. Then I have still many questions, but I think that I’ll ask one and then let others ask. About fixed cost development, you also mentioned that you are doing actions to kind of improve cost efficiency in renewable energy. So so, basically, your fixed costs did not increase much even though you had made the acquisitions in in weather and environment side. And then on the other hand, you showed increase in fixed costs in industrial measurement side.

So can you kind of explain a bit background for that development? And was it already impacted by the cost actions you are taking?

Kai Oistema, President and CEO, Vaisala: Part of this is like we’ve been saying that the many other people are agreeing with me that the visibility into the year has been very challenging. Trade war, like what kind of tariffs, when will the tariffs hit, what categories will the tariff hit, how will that what is the currency exchange, how will it impact the market demand and so on, which has kind of led that we have been prudent in deploying our investments in kind of since the start of the year. And that’s mainly what you see in the numbers. And the specific cost actions into renewable energy, some of it is visible now in the second quarter, but most of it, as you can imagine, this takes some time to actually kind of reduce when you kind of change the focus of investments and so on and reduce investments and reduce costs. It takes some time before they become visible in the numbers.

And that’s not yet really in the second quarter numbers at all.

Nico Ruikangas, Analyst, SEB: Yes, I understand. Thomas, do you think that there is kind of a room to fight in the belt?

Kai Oistema, President and CEO, Vaisala: It’s a bit too early to say. I would like would not to comment yet on the number. I’m happy to report in a third quarter, it’s a bit early since much of this still is under planning.

Moderator: The next question comes from Pauli Lohi from Indiers. Please go ahead.

Pauli Lohi, Analyst, Inderes: Good afternoon. It’s Paoli Lohi from Inderes. First, I would like to ask, have you seen any changes in the competitive landscape or your market share in that renewable energy business?

Kai Oistema, President and CEO, Vaisala: No, no, no. So the decline is entirely coming from the changes in the marketplace. We actually many of our competition is privately held, so kind of getting quarterly numbers is impossible. But having seen now kind of one of the biggest competition that we have, their annual numbers from last year, they actually saw kind of a significant decline already last year. Them having an even bigger kind of exposure to U.

S, maybe even exaggerated like compared to or exaggerated, but made it even stronger than what kind of a like and faster why we did not see it last year yet the same way in our net sales.

Pauli Lohi, Analyst, Inderes: And then I have understood that China the competitive landscape in China is a bit different from Western markets, but is that a significant share of your revenue

Kai Oistema, President and CEO, Vaisala: No, really nothing at all in Renewable Energy. Okay.

Pauli Lohi, Analyst, Inderes: Then my second question is regarding currencies. So do you think that the current weakening of U. S. Dollar to euro would affect your EBITDA margin, I mean, the relative profitability materially, if we consider that most of your expenses are paid in euro and many of your suppliers are European?

Kai Oistema, President and CEO, Vaisala: That’s correct. And now that remains to be seen. It’s all speculative what the currency exchange rates will be kind of going forward. I think the part of this kind of obviously we can mitigate depending on what exchange rates are. I think the impact on top line would be probably more challenging.

I’ll give you just an example. If I talk about our BIM business in U. S, and not only in U. S, but also in China, it’s a good example. So if you look at renminbi, it’s actually followed exactly the rate maintained its rate to USD and thus weakening the same way vis a vis euro, now being 10% lower level compared to, say, beginning of this year or even February this year.

That means in like just mathematically means that if we compare to last year and it would stay, say, in this 10% depreciation. That would mean that we would effectively need to sell 10% more in terms of USD and renminbi, just to say, stay in the same place industrial measurements in, say, in The U. S. Or in China. I’m just not saying that that’s the case, but I’m just visualizing you what is really the kind of impact on the currency exchange rates on the top line.

Pauli Lohi, Analyst, Inderes: But you don’t see a squeeze if you produce in Europe and then you have costs in euro and sell to other currencies. So you don’t see the squeeze in profitability?

Kai Oistema, President and CEO, Vaisala: Of course, like any squeeze on top line kind of has an impact on profitability, but that’s all reflected in our guidance already.

Nico Ruikangas, Analyst, SEB: Okay.

Pauli Lohi, Analyst, Inderes: Then finally, you already gave some explanation for the about the impact from tariffs, and you have mostly mitigated them through predelivered products. But how about looking forward, if we assume that there will be some 10% or 15% tariffs permanently, can you offset them in both? Or can I mean, can you give some color for both divisions?

Heli Lindfors, CFO, Vaisala: Yes. You can offset

Kai Oistema, President and CEO, Vaisala: measurements, we have been able to offset them completely by pricing actions. So and I feel confident that we have now enough evidence that we can do that. All obviously depends on what now we speculate. If it stays on the current level, we have no evidence that we can offset them without really impacting the demand picture or the competitive picture. And then on and there, as I said earlier, it’s obviously much easier to pass on the prices to customers when it’s more of a transactional nature and book to bill turnaround is three weeks.

You don’t have the same way long term commitments and long term deals as you have in the weather environment, where it does have some shorter term business also, but kind of it takes a longer time to pass the costs to our customers. We certainly are going to be doing pricing actions on it, but then we need to do other actions And we will like we will see how kind of what will be the levels of tariffs and what will be the levels of the currency exchange rates, kind of a longer term. But I think we have, on one hand, different levers between the different units, but we have levers in both units.

Moderator: The next question comes from Atjortika from Evli. Please go ahead.

Atjortika, Analyst, Evli Research: Good afternoon. This is Atjortika from Evli Research. Thank you for taking my questions. Firstly, more of a general commentquestion. Looking at the specified outlook range, at least for my eyes, it looks rather narrow in terms of top line, especially given that we’re only halfway through the rather uncertain here.

What are your thoughts on this overall, this kind of narrowness on the guidance? And then how you take into account, for example, currency movements here? I think you already commented

Kai Oistema, President and CEO, Vaisala: that We don’t. We don’t. So it’s I don’t think it’s for us to speculate what the USD versus euro rate is going to be at the end of the year. So it’s impossible for businesses like us to take a view on and the stance on that. And similarly, taking a view on what will be the kind of the tariff regimes kind of towards the end of the year.

It’s anybody’s guess. We are not taking really a per case stance on either one of those.

Atjortika, Analyst, Evli Research: Okay. Thank you. Then couple on the renewable energy. If I remember correctly, I think you started seeing some kind of weakening there during second half of last year. If we compare it to that market situation, how is it?

Is it substantially weaker now than

Nico Ruikangas, Analyst, SEB: late Yes, last it

Kai Oistema, President and CEO, Vaisala: is. Yes, it is. So it continued. So like you said, early signs were in the second half of last year and clearly kind of much more prevalent during the first quarter and now in kind of going into the second quarter. I’m not expecting any kind of material improvement on that market, not this year, and we’ll see a little bit then how it behaves longer term.

Atjortika, Analyst, Evli Research: Okay. Then lastly, from my side, you commented on that you expect the Renewable Energy business sales to be down €15,000,000 this year. You already gave us some color, but could you comment on how this spreads across the operating regions for that business?

Kai Oistema, President and CEO, Vaisala: Can you repeat the question? I’m not sure if really got

Atjortika, Analyst, Evli Research: Yes. So just asking of you expect the energy business to be down this year, how you expect that to spread across your operating regions?

Kai Oistema, President and CEO, Vaisala: Yes, yes. It’s across the kind of all geographies. I don’t think there’s really a material difference in terms of whether the market is down, whether we talk about North America, Europe or Asia, and which those are the geographies like where we are selling.

Atjortika, Analyst, Evli Research: Okay. Thank you. That was all for me.

Moderator: The next question comes from Matti Rikonen from DNB Carnegie Investment Bank. Go ahead.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: Good afternoon. It’s Matti at D and B Carnegie. Couple of questions. Firstly, you mentioned the Chinese public sector investments being softer. I was just thinking that when you explain that the five year plan in China is now having the last year, does that mean that or could you discuss that what is your experience from those five year plans that when we go to the next one, do you think that it will kind of start strongly if you say that the last year of the five year plan is slower than normal years?

Or what kind of pattern do you see Yes,

Kai Oistema, President and CEO, Vaisala: the pattern has yes, been Pattern has been such that the last year, for some reason, I don’t have details on kind of what’s the logic behind, but it has been kind of a for previous five year plans as well that the last year seems to be a kind of a softer public spending, especially on kind of industries that are related to us. And then kind of it starts again, kind of the cycle starts again when the next five year plan starts. So there seems to be a pattern.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: All right. In your view, does it seem like China would be buying more from local manufacturers? Do you see that kind of trend?

Kai Oistema, President and CEO, Vaisala: Yes. So if like this is kind of a general question, obviously, that if I take kind of put it in pieces a bit on the weather environment side, that change already have happened, and we’ve changed the business model in terms of a we are partnering with kind of local partners and kind of it’s not remember that serves kind of like maybe sectors that have national interest, and that change already happened many, many years ago. So we’ve adapted into that, and I don’t really see kind of a change happening. We have not seen anything that would mark that change in that. So it’s already is where it is.

And then on whether in Industrial Measurement side, there is local competition. But again, I’m not seeing any changes like the competitive environment really hasn’t really materially changed at all kind of compared to last year or the year before.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: Okay. Then The U. S. Situation with the public spending, do you think that you now have a slightly better visibility that you already kind of took your market estimates down for The U. S.

So in Q1, I think you discussed that you had not seen yet any major changes in the so called inventory orders so that they would be they had come a bit softer, but you expected that they would kind of return to normal towards the end of the year, but you had seen slowness in the new business. So is this still the picture that you are looking at?

Kai Oistema, President and CEO, Vaisala: That is still the picture that we are looking at the running business and honoring the old contracts. That has continued. So the softening in the market is less visible in net sales, much less visible in net sales. It really is on new orders and new orders moving kind of moving right, I yield, kind of, into the future.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: Right. And roughly, what kind of net sales exposure we are talking about with The U. S. Public sector? So is it more than €10,000,000 of your sales annually?

Or what kind of numbers are we talking about?

Kai Oistema, President and CEO, Vaisala: Yes. It’s more than that. I would say this way that and this is no scientific number. This this is my my my own back of the envelope calculation and estimation and all disclaimers to it. The the the impact on the the by the dodging into the related markets to us, the market probably order of magnitude would be down in terms of new orders this year, maybe EUR 20,000,000, the entire market.

Like I said, this is based on no scientific. This is just my kind of expectation on the market.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: So and were you talking about kind of the Total total buying of

Kai Oistema, President and CEO, Vaisala: yes, yes, total buying, total buying, to And the then

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: the share of that?

Kai Oistema, President and CEO, Vaisala: Would be whatever our market share would be.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: Okay. Fair enough. And then moving to kind of nitty gritty things in financials. The Industrial Measurement Q2 was very good. Was there any particularly good trends or some relief rally, maybe kind of companies returning to normal after I mean, the situation is not very clear yet on U.

S. Tariff policies, but at least most people have to or most businesses have to go forward. And then was there some kind of relief after the April events?

Kai Oistema, President and CEO, Vaisala: It’s widespread. So nothing that I could kind of point out to. As I said in my remarks, the kind of all geographies performed well. All our underlying market segments performed well. So it was widespread, like nothing I could point out to.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: All right. Then one technicality that with that kind of top line growth, one would have expected slightly better gross margin, but that didn’t scale much higher. Does it mean that you have increased your resources in the delivery organization? Or was that just weaker sales mix?

Kai Oistema, President and CEO, Vaisala: It’s about the sales mix. And so in terms of if you look at the profitability, so EBITDA, even the tariffs have no impact. And like if you think about how the tariffs, when you compensate it by increasing prices, then actually the tariffs go into the bill of materials. So that actually technically lowers the percentage a little bit, but I can’t go behind that. That’s just a kind of a small piece of the decline.

It really was a mix.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: All right. Now now it seems that you have pretty much taken into account the U. S. Administration’s decision regarding these Doge cuts on your customers. But is the biggest risk now going forward still that the tariff policies in general would be changed and there would be some additional tariffs and maybe some additional disturbances towards the rest of the year affecting your business, not only in The U.

S, but also then having repercussions outside The U. S, meaning global?

Kai Oistema, President and CEO, Vaisala: Yes. Thank you for the question. And I think it’s a great question. And I maybe should have emphasized this, that that’s absolutely the biggest risk that the tariffs are tariff changes compared to whatever it is today, obviously, and they have a direct impact to us. Would be even more worried about the impact to our customers and therefore, the entire market and the demand across like the and the longer the uncertainty continues, it’s not good for our customers.

And similarly, the currency exchange rates, That’s another kind of a big uncertainty, only directly to us but also to our customers. And again, kind of like the compounding impact of all of these uncertainties and how do you plan investments, how do you plan your spending in this kind of environment when I’m talking about our customers. That’s, I think, is by far the biggest risk.

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: All right. Thank you for this clarity. That’s all from me.

Kai Oistema, President and CEO, Vaisala: Thank you.

Moderator: The next question comes from Nico Ruukangas from SEB.

Nico Ruikangas, Analyst, SEB: Hello. This is Nikolonis from SEB again. I have one additional question. Going back to The U. S.

Public spending topic, but from a bit different angle. So do you think that possible additional spending cuts in The U. S. Could affect your subscription business in North America. So how dependent are you on the public data there?

Kai Oistema, President and CEO, Vaisala: No, no. I don’t see any of that.

Nico Ruikangas, Analyst, SEB: All right. That’s clear answer. That’s all for me. Thanks.

Kai Oistema, President and CEO, Vaisala: Yes. Thank you for the question.

Moderator: The next question comes from Walter Terry Rossi from Danske Bank. Please go ahead.

Heli Lindfors, CFO, Vaisala: Hi. Walter Rossi from Danske Bank. Firstly, on the renewable energy, have you disclosed the geographical footprint in there? How much is The U. S.

Sales from renewable energies?

Kai Oistema, President and CEO, Vaisala: It’s small compared to Europe and Asia. We have not really disclosed it, but that will be the answer.

Heli Lindfors, CFO, Vaisala: All right. Fair enough. Then about the public sector exposure in ex weather. Have you said anything on that?

Kai Oistema, President and CEO, Vaisala: There’s a bit. But remember, all public sector spending that XX weather has exist, kind of like, for example, would be the lightning data. That will be an ongoing spending. That’s not an investment. That requires no new gear.

That requires no new projects. That’s an ongoing spending, and we don’t see any like I said, also in the traditional business, we don’t see any kind of really an impact on the ongoing business itself.

Heli Lindfors, CFO, Vaisala: Okay. Okay, clear. Then about the weather and environment profitability, you said that you will lower costs because of the lower sales volumes. How efficiently do you think you can mitigate the negative profitability impact through these actions this year?

Kai Oistema, President and CEO, Vaisala: I think we have first of all, we have multiple levers to pull from, and we are kind of definitely doing that, quantifying exactly all of this. As I said earlier, I answered to somebody else earlier that I would rather talk about it in a third quarter call. It’s still under planning, and it would be premature to really comment too much about it yet.

Heli Lindfors, CFO, Vaisala: Okay. All right, all right. Then two small questions still. About the budget reductions in China, could you open up what is actually driving those there?

Kai Oistema, President and CEO, Vaisala: Like clarifying comment, it’s not a budget. Don’t think about it as a budget cut. It’s a cyclicality of the kind of a public spending. It’s a cyclicality of how the public spending is done in China. There’s no cut per se.

It’s kind of where they allocate the public spending in given year, and it’s just a cyclicality thing, nothing else.

Heli Lindfors, CFO, Vaisala: Okay. Okay. Fair enough. And lastly, about the competition in the public sector in The U. S.

Would you say that the U. S. Government has any meaningful local options?

Kai Oistema, President and CEO, Vaisala: I don’t think that’s the question here at all. It’s like they have multiple vendors and everything else, but this is not about U. S. Or not U. S.

We are very close to the kind of the governmental actors and the customers and everything else. We are not seeing like this being at all a question on what U. S. Or not U. S.

Heli Lindfors, CFO, Vaisala: Okay. So no kind of

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: buying No, their

Kai Oistema, President and CEO, Vaisala: no, no. You were asking about the tariff impact?

Heli Lindfors, CFO, Vaisala: Yes. I mean, because of the tariff don’t impact the local players, then they would have

Matti Rikonen, Analyst, DNB Carnegie Investment Bank: a competitive Well,

Kai Oistema, President and CEO, Vaisala: depends on well, my comment only would be depends on their supply chain. If the local people, maybe the manufacturing, it doesn’t impact because but the manufacturing itself is a small piece. Depending on where the supply chain is, if you use Chinese components, if you have Mexican subassemblies, the tariff impacts may be higher than what it is for us.

Heli Lindfors, CFO, Vaisala: All right. Fair enough. Yes. That’s a good answer. That’s it.

That’s all from me.

Moderator: There are no more questions at this time. So I hand the conference back to the speakers.

Nina Alalopo, Investor Relations, Vaisala: Okay. Thank you very much for joining the call today. We will publish our interim report January, September on October 23, and we will have our next quarterly audiocast and conference call then. But now, thank you very much, and have a nice weekend.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.