Earnings, asset and financial position

 

General statement by the Management Board on the course of business and the economic situation

Fiscal year 2022 was again characterized by massive uncertainties and major imponderables resulting from the overall geopolitical situation and the continuing impact of the corona pandemic in 2022, in particular with concerns over further lockdowns in China. The cost of gas and electricity and, as a result, the prices for the energy-intensive raw materials and input materials required by NORMA Group rose to unprecedented levels following the outbreak of the war in Ukraine. In addition, this resulted in renewed disruptions to the supply chains in Europe. Demand in the Asia-Pacific region was also rather subdued for large parts of the year. However, NORMA Group’s business continued to develop well in the Americas region. At the same time, sales were supported throughout 2022 by positive currency effects from the strong US dollar.

In this turbulent environment characterized by diverse and complex challenges, NORMA Group nevertheless managed to grow further. Organic sales growth amounted to 7.1% and was mainly due to an inflation-driven increase in sales prices. Overall, Group sales in fiscal year 2022 reached EUR 1,243.0 million (2021: EUR 1,091.9 million), an increase of 13.8%.

At EUR 99.0 million, the adjusted operating result – adjusted EBIT – was significantly lower than in the previous year (2021: EUR 113.8 million). The adjusted EBIT margin was 8.0% after 10.4% in the previous year. This is in line with the adjusted expectations of the Management Board. The decline in profitability compared to the previous year is primarily attributable to the significant increase in raw material and energy costs in connection with supply chain issues and additional burdens from logistics expenses in 2022. Costs for the implementation of a new Group-wide ERP solution and additional costs in connection with the closure of an East German site and the related relocation of production capacities within Europe also had a negative impact.

The Management Board of NORMA Group looks forward to the year 2023 with caution and respect. The current fiscal year will also bring challenges. Taking the overall economic situation into account and based on the analyses and evaluations of renowned economic institutes currently available, the Management Board expects organic Group sales growth in a medium sized single-digit percentage range in fiscal year 2023 compared to the previous year. With regard to the development of the EBIT margin adjusted for acquisition effects, the Management Board assumes that this will develop similarly to how it did in fiscal year 2022 and therefore forecasts a target value of around 8% for the full year 2023.  FORECAST REPORT

 

Adjustments

The management of NORMA Group adjusts certain expenses and income for the purpose of managing the Group’s operations. The adjusted results presented below reflect the management’s view.

In fiscal year 2022, as in 2021, no adjustments were made for expenses within EBITDA (earnings before interest, taxes, depreciation of property, plant and equipment and amortization of intangible assets). Within EBITA, depreciation of property, plant and equipment from purchase price allocations amounted to EUR 1.3 million in fiscal year 2022 (2021: EUR 1.5 million). In addition, amortization of intangible assets from purchase price allocations in the amount of EUR 21.2 million (2021: EUR 20.2 million) was adjusted within EBIT.

Notional income taxes resulting from the adjustments are calculated using the tax rates of the respective local companies concerned and included in adjusted earnings after taxes.

Table T028 shows the adjusted figures in fiscal year 2022. More detailed information on the unadjusted figures can be found in the  NOTES.

 

 

Earnings position

 

Development of sales

 

Group sales

In fiscal year 2022, NORMA Group generated Group sales of EUR 1,243.0 million, which represents a 13.8% increase compared to the previous year (2021: EUR 1,091.9 million). This includes organic sales growth of 7.1%. The largest share of the positive development in the past fiscal year was attributable to price increases implemented vis-à-vis customers due to the higher costs of raw materials and energy. In addition, positive currency effects of 6.7% boosted sales. These are mainly attributable to the strength of the US dollar throughout 2022.

Overall, NORMA Group’s business in the reporting year 2022 was strongly indirectly influenced by Russia’s war in Ukraine, which started in February 2022. The resulting inflation as well as ongoing restrictions in connection with the corona pandemic and fears of further lockdowns in China also created numerous challenges in the market environment. The first few months of 2022 also saw highly volatile customer ordering behavior. Last but not least, the massive increase in the costs of energy, materials and logistics and the overall prevailing economic uncertainties also burdened NORMA Group’s business.

 

Positive development in EJT business despite partly weak automotive demand in first half of the year

Sales in the EJT business totaled EUR 698.8 million in fiscal year 2022. Compared to the previous year (2021: EUR 620.7 million), this represents a 12.6% increase in sales (organic: 7.5%). Currency effects contributed 5,1% to this growth. In the first half of 2022, the Americas region was still the main driver of sales in the Engineered Joining Technology segment, benefiting from positive price effects. By contrast, the second half of the year saw an increase in sales in the automotive business in the EMEA and Asia-Pacific regions. In addition, higher input costs were increasingly passed on to customers in these regions.

 

With its Standardized Joining Technology (SJT) segment, NORMA Group generated sales of EUR 535.3 million in fiscal year 2022, thus also significantly exceeding the previous year’s figure by 15.3% (2021: EUR 464.3 million). Organic sales growth amounted to 6.4%. Currency effects pushed up sales by an additional 8.9%. Significant additional sales were generated in the Americas region in particular in fiscal year 2022. This was attributable to organic growth (+12.4%) in the US water business and positive price effects. In the Asia-Pacific region as well, SJT business developed positively despite difficult conditions thanks to an increase in selling prices, whereas sales in the EMEA region in 2022 were down on the previous year. 

 

Development of earnings

 

(Adjusted) EBIT, (adjusted) EBITA and adjusted ROCE

The operating result (earnings before interest and taxes, EBIT) amounting to EUR 76.5 million in fiscal year 2022  was below the previous year’s figure (2021: EUR 92.1 million). The EBIT margin was 6.2% (2021: 8.4%). The decline in EBIT is mainly due to significantly higher purchase costs of materials and raw materials of importance to NORMA Group as well as higher production and logistics expenses for inbound and outbound freight. Besides the worldwide increase in freight costs, these higher logistics expenses are also attributable to interim delivery backlogs and the need for more expensive special freight. Furthermore, additional expenses for temporary workers, increased costs in connection with the introduction of a globally standardized ERP system, higher costs for warranty expenses and contractual penalties, and higher travel costs contributed to the decline in EBIT.

EBIT adjusted exclusively for depreciation and amortization from purchase price allocations totaled EUR 99.0 million. This compares to EUR 113.8 million in the previous year and represents a 13.0% decrease. The adjusted EBIT margin reached 8.0% in the current reporting period (2021: 10.4%).

Earnings before interest, taxes and amortization of intangible assets (EBITA) were also below the previous year’s level at EUR 105.6 million (2021: EUR 121.0 million). The EBITA margin was 8.5% (2021: 11.1%). Adjusted EBITA of EUR 106.9 million in fiscal year 2022 was 12.8% lower than in the previous year (2021: EUR 122.5  million). The adjusted EBITA margin reached 8.6% (2021:  11.2%).

Return on capital employed (ROCE) as a ratio of adjusted EBIT to average capital employed was 9.7% in fiscal year 2022 (2021: 11.9%). The year-on-year decline in ROCE was mainly due to lower adjusted EBIT. The slight increase in average capital employed also had a negative impact on ROCE.

 

Key factors influencing the development of earnings

 

Cost of materials ratio and gross margin

The global general conditions deteriorated significantly in 2022, mainly due to disrupted supply chains in Europe as a result of the war against Ukraine and the pandemic-related restrictions in China which lasted throughout the year. In Europe, the cessation of gas supplies from Russia caused a significant increase in energy costs and consequently massive disruptions on the international energy and raw material markets. The continued shortage of raw materials and the resulting significant increase in prices for energy, raw materials and intermediate products put pressure on NORMA Group’s margins. Moreover, the supply bottlenecks drove up the logistics costs on the input side. This development was partially offset in the second half of 2022 by passing on the higher initial costs to customers.

In total, cost of materials amounted to EUR 597.0 million in the current reporting year, which corresponds to an increase of 19.4% compared to the previous year (2021: EUR 500.0 million). Due to the disproportionately higher cost of materials compared to sales growth in combination with likewise increased expenses for inbound transport

and logistics services, the cost of materials ratio (cost of materials as a percentage of sales) amounted to 48.0% in fiscal year 2022 (2021: 45.8%). The cost of materials ratio in relation to the total operating performance (sales plus changes in inventories and other own work capitalized) also rose considerably to 47.3% (2021: 44.9%).

Gross profit in fiscal year 2022 amounted to EUR 664.4 million, an increase of 8.5% compared to the previous year (2021: EUR 612.4 million), due to higher sales. The significant increase in cost of materials had a negative impact on gross profit. By contrast, the build-up of inventories had an increasing effect on gross profit in fiscal year 2022, although this was EUR 1.8 million lower than in the previous year (2022: EUR 15.6 million; 2021: EUR 17.5 million). At 53.5%, the gross margin was 2.6 basis points lower than in the previous year (2021: 56.1%).

 

Personnel cost ratio

At EUR 309.4 million, personnel expenses in fiscal year 2022 exceeded the level of the previous year (2021: EUR 284.9 million) by 8.6%. This was mainly due to the currency-related increase in personnel expenses for employees in the Americas. In addition, the increase in personnel costs in the Asia-Pacific region as a result of a year-on-year increase in the workforce also had an increasing effect on expenses. Due to the significantly higher volume of sales compared to the previous year, which was also driven by inflation-related price increases in particular, the personnel cost ratio improved to 24.9% (2021: 26.1%).

 

Other operating income and expenses

The balance of other operating income and expenses in fiscal year 2022 amounted to EUR -197.8 million (2021: EUR -159.9 million). Compared to the previous year, this represents an increase of 23.7%. As a percentage of sales, the balance of other operating income and expenses was 15.9% (2021: 14.6%).

The year-on-year increase in other operating expenses was mainly due to additional costs. These included expenses for temporary staff and other personnel-related expenses. They were caused by the strong fluctuation in customer demand and the resulting need for flexibility in personnel planning. In addition, the situation on the job market in the US was difficult and made it necessary to resort to hiring temporary workers. Higher logistics costs were also incurred, particularly for cost-intensive special freight. In addition, other operating expenses in 2022 included further costs in connection with the implementation of a new Group-wide ERP system, which increased expenses for IT and telecommunications. Warranty expenses and contractual penalties also increased compared to the previous year due to delays in deliveries and as a result of production relocations.

Other operating income in fiscal year 2022 mainly related to foreign exchange gains from operating activities resulting from currency fluctuations in the European region. It also included income from the reversal of liabilities – primarily in connection with the reversal of personnel-related obligations – and of unused provisions, as well as income from the disposal of non-current assets. The latter resulted mainly from the sale of a plot of land in the US.  NOTES

 

NORMA Value Added (NOVA)

NORMA Value Added (NOVA), which also serves as the relevant benchmark for the long-term remuneration of the Management Board, amounted to EUR -27.1 million in fiscal year 2022 and thus decreased quite significantly compared to the previous year (2021: EUR 16.0 million). The reason for this significant decline was significantly lower adjusted EBIT coupled with increased costs of capital.

 

Financial result

The financial result amounted to EUR -12.6 million in fiscal year 2022 and thus deviated only slightly from the financial result of the previous year (2021: EUR -12.4 million). The financial result was mainly burdened by the increase in interest expenses compared to the previous year. This resulted primarily from the effects of interest rate increases in the US dollar and euro zone and a negative result from the valuation of derivatives. By contrast, the clearly positive foreign exchange result from financing activities had an increasing effect on the financial result.  NOTES.

 

Income taxes

The tax expense at Group level amounted to EUR 24.7 million (2021: tax expense EUR 23.6 million) in fiscal year 2022. Based on a pre-tax result of EUR 63.9 million (2021: EUR 79.7 million), this resulted in a tax rate of 38.7% (2021: 29.6%). The adjusted tax rate in fiscal year 2022 was 35.2% (2021: 28.6%). The reasons for the increase include non-creditable withholding taxes and non-deductible expenses as well as unrecognized deferred tax assets on losses in fiscal year 2022.

 

Profit for the period and appropriation of profit

Net profit for the period amounted to EUR 39.2 million in fiscal year 2022 and thus fell below the figure for the prior-year period (2021: EUR 56.1 million). Based on an unchanged number of shares compared to the previous year of 31,862,400, this results in earnings per share of EUR 1.23 (2021: EUR 1.76) after deduction of the profit for the period attributable to non-controlling interests.

Adjusted profit for the period amounted to EUR 56.0 million in fiscal year 2022 (2021: EUR 72.3 million). This results in adjusted earnings per share of EUR 1.75 after deduction of the profit for the period attributable to non-controlling interests (2021: EUR 2.27).

The Management Board and Supervisory Board will propose to the Annual General Meeting on May 11, 2023, that a dividend totaling EUR 17.5 million be distributed from the commercial net profit of NORMA Group SE of EUR 36.8 million. This is equivalent to a dividend of EUR 0.55 per no-par value share entitled to a dividend. The proposed payout ratio amounts to 31.3% of the adjusted net profit and is thus in the corridor between 30% and 35% according to NORMA Group’s sustainable dividend strategy.

 

Development of sales and earnings in the segments

 

EMEA

External sales in the EMEA region increased by 5.8% to EUR 489.2 million in fiscal year 2022 (2021: EUR 462.4 million). Organic sales growth amounted to 6.1%. This development is mainly attributable to the renewed increase in demand for automotive joining technology in the second half of 2022. The resulting increase in sales more than compensated for the downward trend from the first half of 2022. As a result, the EJT segment in the EMEA region showed a significant year-on-year recovery in 2022 as a whole, posting growth of 9,5% (organic: 9,7%) to EUR 363.5 million (2021: EUR 332.0 million). In addition to the slight recovery of the automotive industry in the second half of 2022, price increases successfully passed on to customers were also a key driver of the positive development in the EJT business. By contrast, sales in the Standardized Joining Technology (SJT) business in the EMEA region declined by 4,3% (organic: -3,7%)  to EUR 121.2 million (2021: EUR  126.6 million) due to continued subdued business. The decline in sales could not be fully compensated for by inflation-related price increases vis-à-vis customers.

Overall, the EMEA region accounted for around 40% of total sales in fiscal year 2022, down on last year’s figure (2021: 42%).

Adjusted EBIT in the EMEA region declined significantly in fiscal year 2022 to EUR 13.8 million (2021: EUR 43.9 million). The adjusted EBIT margin was 2.6% (2021: 8.8%). This significant decline in profitability was primarily due to high expenses for energy and materials, but also to additional transfer costs incurred in connection with the relocation of an East German production site to the Czech Republic and to NORMA Group’s main site in Maintal, Germany. In order to process customer orders as promptly as possible despite these conditions, additional temporary workers were deployed at the European sites. As part of the additional costs, special trips were also necessary to reduce delays in shipments. In addition, IT costs incurred in connection with the introduction of a new ERP system had a negative impact on the margin.  

 

Americas

In the Americas region, external sales in the reporting year 2022 amounted to EUR 574.2 million, thus exceeding the previous year’s figure (2021: EUR 456.8 million) by 25.7%. This significant increase is divided into an increase in organic sales of 11,9% and positive currency translation effects due to the strong US dollar (+13,9%). The sales growth in the region was based on a very good business performance in the SJT segment: at EUR 355.2 million (2021: EUR 282.4 million), a 25,8% (organic: 12,0%) higher sales level was achieved there compared to the same period of the previous year. The US water business alone was able to realize organic growth of 12.4% over the year as a whole (2021: 20.9%). The positive development was driven by a general economic recovery as well as effects from passing on higher cost prices to customers.

The EJT business also contributed to the positive development of sales in the Americas region as a result of the significant recovery in production figures for light and heavy vehicles and higher selling prices. Overall, sales of the automotive business in the Americas region reached EUR 215.4 million in 2022 (2021: EUR 171.7 million), which equates to a 25,4% increase in sales (organic: 11,4%). The Americas region’s share of Group sales accordingly increased significantly to 46% (2021: 42%) in fiscal year 2022.

At EUR 74.4 million, adjusted EBIT in the Americas region significantly exceeded the previous year’s figure (2021: EUR 52.7 million). The adjusted EBIT margin for the Americas region was thus 12.7% (2021: 11.3%). The main factor behind its positive development was the increase in sales caused by higher selling prices. In addition, the sale of a property in the US had an increasing effect on adjusted EBIT, whereas the higher price level for raw materials, an increase in freight costs, and higher personnel costs due to fluctuating customer demand weighed on adjusted EBIT in the Americas region.

 

Asia-Pacific

External sales in the Asia-Pacific region rose by by 3.9% to EUR 179.6 million in fiscal year 2022 and thus exceeded the previous year’s figure (2021: EUR 172.8 million). In organic terms, business in the region developed negatively, declining by -2,6%, while currency effects had a positive impact of 6,5%. The subdued development in the Asia-Pacific region was mainly due to an organically weak EJT business (-4,4%) as a result of the ongoing restrictions related to corona, in China in particular, and the resulting lower industrial production. Overall, EJT sales for the full year 2022 amounted to EUR 119.9 million (2021: EUR 116.9 million).

By comparison, SJT sales amounted to EUR 58.9 million (2021: EUR 55.3 million), resulting in a 6,6% increase, or 1,2% organically, compared to 2021. The positive sales trend in the first half of the year weakened significantly again in the further course of the year, resulting in a strong downward development. The Asia-Pacific region accounted for 14% of Group sales (2021: 16%) in fiscal year 2022.

Adjusted EBIT in the Asia-Pacific region of EUR 20.0 million was below the comparative figure for the previous year (2021: EUR 25.0 million). The adjusted EBIT margin amounted to 10.6% (2021: 14.0%). This development is attributable, among other factors, to higher costs of materials and logistics and additional expenses in connection with the restrictions related to corona.

 

Asset position

 

Assets

 

Total Assets

Total assets amounted to EUR 1,560.7 million as of December 31, 2022, an increase of 4.2% compared to the previous year (Dec 31, 2021: EUR 1,498.2 million).

 

Non-current assets

Non-current assets amounted to EUR 924.5 million as of December 31, 2022, an increase of 2.1% compared to the previous year’s reporting date (Dec 31, 2021: EUR 905.6 million). While the goodwill included in this figure increased by 2.4% to EUR 402.3 million (Dec 31, 2021: EUR 392.7 million) due to currency effects, other intangible assets declined by 7.9% to EUR 195.9 million (Dec 31, 2021: EUR 212.8 million) whereby currency effects had an offsetting increasing effect on other intangible assets. Property, plant and equipment increased by 6.5% to EUR 295.8 million (Dec 31, 2021: EUR 277.7 million). A total of EUR 53.2 million was invested in fixed assets (property, plant and equipment and intangible assets, excluding leasing) in fiscal year 2022 (2021: EUR 47.4 million). Thus, NORMA Group’s investment activities in fiscal year 2022 resulted in a constant investment ratio of 4.3% compared to the previous year (2021: 4.3%).  PRODUCTION AND LOGISTICS The investments mainly related to the expansion of the sites in Changzhou and Qingdao, China, the construction of a new water management plant in the US and the expansion and further development of production sites in Europe, in particular in the UK, Eastern Europe and Germany.

Non-current assets accounted for 59.2% of total assets as of the reporting date in 2022 (Dec 31, 2021: 60.4%).  NOTES

 

Current assets

Current assets amounted to EUR 636.2 million as of the balance sheet date in 2022 and were thus 7.4% above the level of the previous year’s reporting date (Dec 31, 2021: EUR 592.6 million). This was primarily due to the significant 20.6% increase in inventories to a value of EUR 250.8 million (2021: EUR 208.0 million). The increase

also resulted from rapid price increases on the procurement market; in addition, inventories of raw materials and intermediate products were built up in anticipation of the price increases to be announced.

Trade and other receivables increased by 15.0% to EUR 186.3 million as of December 31, 2022 (Dec 31, 2021: EUR 162.0 million). This is mainly due to higher selling prices and higher receivables as of the reporting date.

At EUR 168.7 million, cash and cash equivalents on the reporting date December 31, 2022, were below the level of the previous year (Dec 31, 2021: EUR 185.7 million).

At 40.8%, current assets as a percentage of total assets increased slightly compared to the previous year’s reporting date (Dec 31, 2021: 39,6).

 

(Trade) working capital

(Trade) working capital (inventories plus receivables less payables, in each case mainly trade payables) amounted to EUR 230.4 million as of December 31, 2022, and thus increased by 21.6% compared to the previous year’s reporting date (Dec 31, 2021: EUR 189.5 million). The increase can be attributed in particular to the disproportionate increase in inventories already mentioned. Inventories of work in progress and finished goods were also increased in fiscal year 2022 to ensure the best possible delivery capability. By contrast, the balance of trade payables and receivables remained virtually unchanged compared to the previous year’s reporting date. The value of trade working capital also increased, driven by currency effects. The working capital ratio (trade working capital in relation to sales) was 18.5% as of December 31, 2022 (Dec 31, 2021: 17.4%).

 

Liabilities

 

Equity ratio

Group equity amounted to EUR 705.4 million as of December 31, 2022, an increase of 5.5% compared to the previous year (Dec 31, 2021: EUR 668.6 million). The consolidated equity ratio rose to a level of 45.2% as of the reporting date of fiscal year 2022 (Dec 31, 2021: 44.6%). The increase in equity mainly resulted from the net profit for the period of EUR 39.2 million. This was offset by the dividend payment made in 2022 (dividend of EUR 0.75 per share) totaling EUR 23.9 million (2021: EUR 22.3 million). In addition, positive currency effects from the translation of foreign operations, positive effects from the remeasurement of the net defined benefit liability and positive effects on cash flow hedge reserves had an increasing effect on equity.

 

Net debt

Net debt (financial liabilities, including derivative hedging instruments of EUR 1.6 million, less cash and cash equivalents) amounted to EUR 349.8 million at the end of December 2022. The increase of 9.8% or EUR 31.3 million compared to the previous year (Dec 31, 2021: EUR 318.5 million) was mainly due to current interest expenses for loans in fiscal year 2022, the increase in lease liabilities due to additions in the area of rights of use, and the valuation-related increase in liabilities from derivatives. This was offset by net cash outflows from total cash inflows from operating activities, net cash outflows from the procurement and disposal of non-current assets, and from the dividend payment. In addition, cash-neutral negative net currency effects on foreign currency loans, cash and cash equivalents had an increasing impact on net debt.

 

Financial liabilities

NORMA Group’s financial liabilities increased by 2.8% to EUR 518.4 million as of the reporting date in 2022 (Dec 31, 2021: EUR 504.2 million). The main reason for this was the increase in loans payable due to currency effects in connection with the US dollar. This was offset by the net repayment of loans in fiscal year 2022. In addition to the

repayment of the promissory note loans in the amount of EUR 8.5 million, there was also a repayment of liabilities from the commercial paper program in the amount of EUR 40.0 million.

There was a year-on-year increase in lease liabilities due to a net increase resulting from repayments (payment of lease installments), additions in the area of rights of use, reassessments of renewal options and amendments to contracts, and interest effects. There was also an increasing effect from exchange rate effects, resulting in particular from liabilities denominated in US dollars of subsidiaries based in the US.

The increase in other financial liabilities resulted mainly from higher liabilities from ABS and factoring.  NOTES

Gearing (net debt in relation to equity) was unchanged at 0.5 as of the reporting date in 2022 (2021: 0.5).

Leverage (net debt excluding hedging derivatives in relation to adjusted EBITDA for the past twelve months) increased to 2.2 compared to the previous year (Dec 31, 2021: 1.9). The increase in the ratio is based on the increase in net debt with a simultaneous decrease in EBITDA in the current reporting year. The leverage relevant for the financing agreements was also 2.2 as of the reporting date December 31, 2022 (December 31, 2021: 1.9).

 

Assets not recognized in the balance sheet

NORMA Group’s trademark rights and patents to the brands it holds as well as customer relationships, if acquired externally, are recognized in the balance sheet under intangible assets. However, important influencing factors for a successful business are also the awareness and reputation of these brands among customers and their trust in NORMA Group products. The trustful customer relationships based on NORMA Group’s long-established distribution network are equally important. In addition, NORMA Group’s workforce makes an important contribution to the company’s success with its extensive experience and specific expertise, so that the knowledge gained over many years in the areas of research and development and project management is also seen as a competitive advantage. The values listed are not recognized individually in the balance sheet, but are partly reflected in goodwill.

 

Financial position

 

Financing measures

NORMA Group constantly monitors risks from changes in exchange and interest rate changes and limits them, among other ways, by using derivative hedging instruments. Furthermore, NORMA Group generally strives to achieve a diversification of its financing instruments in order to reduce risks. This also includes the prolongation of repayment obligations and an even distribution of the maturity profile. Most of the supply and service relationships between individual currencies are hedged at matching maturities over the course of the year.

NORMA Group had successfully refinanced its bank credit lines in fiscal year 2019, thus creating further financial security and even greater flexibility for the future. The credit agreement has a total volume of initially EUR 300 million, including a revolving facility of EUR 50 million and a flexible accordion facility. An additional EUR 50 million revolving facility was agreed under the existing credit agreement in October 2021. The refinancing was concluded with a banking syndicate consisting of ten international banks. In addition, a sustainability component links the financing conditions to NORMA Group’s commitment in the area of corporate responsibility. In 2022, as in the previous year, NORMA Group was able to achieve an improvement in its sustainability scoring, which enabled further savings with regard to the credit margin. After exercising the two extension options from the syndicated loan agreement in fiscal years 2020 and 2021, all components of the loan agreement will be available to NORMA Group through at least 2026. This ensures maximum financing flexibility.

The commercial paper program that has been in place since 2019 and is used for short-term liquidity management, had been utilized in the amount of EUR 25 million as of December 31, 2022 (Dec 31, 2021: EUR 65 million). EUR 43 million (Dec 31, 2021: EUR 0) had been drawn from the revolving credit facilities as of December 31, 2022. Likewise, a promissory note loan tranche in the amount of EUR 3.5 million was repaid as scheduled and another one in the amount of EUR 5 million was repaid unscheduled. NORMA Group’s gross debt (liabilities to banks) increased slightly from EUR 463 million as of December 31, 2021, to EUR 465 million as of the end of 2022. 

NORMA Group uses interest rate hedges to hedge interest rate risks that could arise from the external financing components. As of December 31, 2022, the average interest rate of the gross debt (excluding derivatives) was 3.49%. NORMA Group’s maturity profile, based on the utilization of the short-term CP program, the revolving credit facilities, the promissory note loans I (2013), II (2014) and III (2016) as well as the syndicated bank loan (2019), as of December 31, 2022, was as shown in  GRAPHICS G029: “MATURITY PROFILE BY FINANCIAL INSTRUMENT” and  G030: “MATURITY PROFILE BY CURRENCY”.

As of the balance sheet date in 2022, NORMA Group complied with all key figures contained in the credit agreements (financial covenants: net debt in relation to adjusted Group EBITDA).

Concrete future financing steps depend on the current changes in the financing markets and acquisition potentials.

 

Cash flow

 

Net operating cash flow

In fiscal year 2022, NORMA Group generated net operating cash flow (adjusted EBITDA less changes in working capital and investments from operations) of EUR 65.3 million (2021: EUR 99.8 million). The change resulted from the weaker EBITDA compared to the previous year, the change in working capital and the increased investments from the operating business.

 

Cash flow from operating activities

Cash flow from operating activities decreased significantly to EUR 76.6 million in fiscal year 2022 (2021: EUR 108.4 million). This was mainly due to the lower net profit for the period in combination with the changes in trade working capital.  NOTES

 

Cash flow from investing activities

At EUR 44.5 million, the cash outflow from investing activities in fiscal year 2022 remained at a similar level as in the previous year (2021: EUR 45.2 million). It includes inflows mainly from the sale of a plot of land in the US and outflows for the acquisition of intangible assets and property, plant and equipment, including the expansion and modernization of production sites.

Investments in the EMEA region included the expansion of production capacities for electromobility applications in Poland, capacity expansions in the area of fluid systems in Serbia, and investments in a new mold concept in the UK. Investments were also made in the modernization of a fully automated production line at the Maintal site in Germany.

Investments in the Americas region included the construction and expansion of a new site for water management products on the East Coast of the US, as well as further capacity expansions in the areas of water management and e-mobility and plant modernizations.

In the Asia-Pacific region, intensive investments were made in the strategic expansion and extension of the Changzhou site for local production of clamps. Localization projects were also implemented in other regions in China and India and investments were made in preparing individual sites for the implementation of customer-specific projects.

 

Cash flow from financing activities

Net cash used in financing activities decreased by 23.3% to EUR 54.5 million in fiscal year 2022 (2021: EUR 71.1 million). This was primarily due to the significantly lower net payments for loans compared to the previous year. In contrast, the cash outflow from financing activities in fiscal year 2022 includes increased payments for lease liabilities and repayments of hedging derivatives. Dividends amounting to EUR 23.9 million (2021: EUR 22.3 million) were also paid to the shareholders of NORMA Group SE.