Economic factors

NORMA Group is active in many different industries and regions. Seasonal and economic fluctuations in individual countries or industries can have an impact on customer demand and the order situation of NORMA Group. At the same time, NORMA Group is less vulnerable to temporary declines in demand in individual industries or countries thanks to its diversified product portfolio and broad customer base. Temporary production peaks can be absorbed due to the flexible production structures and the use of temporary workers.


Global economy heavily burdened in 2022 as a result of Ukraine war, inflation, the interest rate turnaround and problems in China

The economic environment deteriorated significantly in 2022. The main reasons for this were Russia’s war against Ukraine, which violated international law and had far-reaching consequences, and the lockdowns of entire economic centers in China as a result of the country’s strict zero-COVID policy. Both events triggered additional turbulence in supply chains that were already disrupted. In particular, the war in Ukraine led to profound effects: Important sources of supply were no longer accessible. In addition, the cessation of Russian gas supplies threatened to cause an energy crisis in Western Europe. Not only did the prices of important raw materials and intermediate products rise as a result, but the costs of energy supply also experienced a significant increase. Food prices likewise rose significantly worldwide. In addition to the Ukraine war, this was due to intense heat waves and droughts in Europe and Asia in the summer of 2022. This environment also saw a sharp rise in inflation, which reached new highs. In response and as a countermeasure to this development, many of the world’s central banks resolutely raised key interest rates. Many countries also responded by introducing extensive fiscal packages to cushion the impact of the explosion in energy costs and thus stabilize the economy. The economy was also supported by corona catch-up effects in many countries. Nevertheless, the global economy was noticeably depressed at the end of 2022, and industrial production had lost momentum. According to the International Monetary Fund (IMF), global economic growth weakened in the past fiscal year and stood at 3.4%.

Economic development in China was burdened by the government’s strict zero-COVID policy. The restrictions were only gradually eased towards the end of 2022. In addition, the real estate sector there remained under pressure as a result of the still unresolved financing problems. Furthermore, Chinese exports were impacted by faltering supply chains and weaker external demand. In this environment, Chinese industrial production rose by a slight 3.6% in 2022, compared to a 9.6% increase in the previous year. In particular, producers in construction-related sectors, such as steel, cement and flat glass, suffered significant losses. In order to stabilize the economy, the Chinese Central Bank eased its interest rate policy, bucking the global trend. Nevertheless, according to the National Bureau of Statistics, China’s economic growth in 2022 was only 3.0%. In Southeast Asia (ASEAN-5), on the other hand, economic growth recovered strongly (+5.2%) after overcoming the pandemic-related burdens. Although momentum in India flattened out, GDP growth nevertheless remained strong at 6.8%. Brazil’s economy also grew at a much more moderate rate of 3.1% than recently. By contrast, Russia’s economy slumped as a result of the war and sanctions. Overall, according to the IMF, the economic recovery in the developing and emerging countries in 2022 at +3.9% was somewhat weaker than originally expected at the beginning of the year.

In the US, the economic recovery did not continue in 2022. Economic momentum weakened as early as the first months of 2022, reaching an annual growth rate of 2.1%. On the one hand, this was due in particular to high inflation, which peaked at 9.1% in June 2022. On the other hand, the rapid and significant interest rate hike by the US Federal Reserve, which took a total of seven interest rate steps, also had an impact on growth. Nevertheless, industrial production increased by 3.9% and capacity utilization improved slightly by 23 basis points to 79.7% on average for the year. As a result of geopolitical developments, investment in machinery and equipment also increased slightly, which in turn helped stabilize the economy. Additional positive impetus came from consumption and exports. However, the very low GDP growth of 1.0% in the fourth quarter of 2022 compared to the final quarter of the previous year reflects the negative effects of the restrictive monetary policy on economic development, although this limited inflation to +6.5% at the end of the year. According to the IMF, growth in other industrialized countries such as Japan (+1.4%), Canada (+3.5%) and the UK (+4.1%) was also moderate in 2022.


GDP growth rates (real) in %























Europe’s economy under pressure due to the consequences of the war in Ukraine, high order backlog has stabilizing effect

After the euro zone economy got off to a strong start in 2022, the environment changed following the start of Russia’s war at the end of February 2022, and the growth rates determined by the European Central Bank (ECB) fell continuously year-on-year over the course of the year. To counter the immense inflationary pressure that had arisen, the ECB and the central banks of the UK and Switzerland decided to raise interest rates significantly. This placed a heavy burden on the construction sector in particular. As a result, the first signs of a recession in the euro zone became visible at the end of 2022. In this environment, the euro zone economy grew only very modestly at 3.5% according to the Eurostat statistics office. All countries were affected by the economic slowdown, but there were differences. While the economies in Switzerland and the United Kingdom, for example, suffered relatively moderate setbacks, the impact in France and Germany was more pronounced.

Industrial production in the euro zone proved to be resilient in 2022 despite the many challenges. The hurdles included supply bottlenecks and high prices for raw materials and energy, for example. By contrast, high order backlogs in particular had a stabilizing effect. In addition, demand for capital goods was not yet impacted by high interest rates. Overall, industrial capacity utilization in the euro zone was 81.4% in the fourth quarter of 2022 (2021: 82.7%).


Germany: Economy held up well despite the strain, industrial activity remains robust

According to the Federal Statistical Office (Destatis), the German economy was also affected by the consequences of the Ukraine war and extreme energy price increases in 2022. Material bottlenecks as well as considerable supply problems, massive price increases – for food, among other items – and the shortage of skilled workers were other notable factors that had a burdening effect. Despite this, the German economy held up comparatively well over the course of the year, contrary to very pessimistic expectations. Private consumption in particular proved to be one of the main pillars of the economy, with growth of 4.6% year-on-year, partly due to the corona catch-up effects following the lifting of nearly all corona protection measures in the spring of 2022. Moreover, investment in plant and equipment, including machinery, equipment and vehicles, increased by 2.5% despite the turnaround in interest rates and cost increases. By contrast, shrinking construction investment and the deterioration in net exports weighed heavily on GDP growth. According to Destatis, the German economy grew by a total of 1.8% in 2022.

As in the previous year, German industry suffered from disrupted supply chains, particularly in the first half of 2022. The massive increase in energy prices and input costs also had a negative impact, whereas the high order backlogs had a supporting effect. As a result, the significant decline in new orders at the end of the year and the cancellations were not yet reflected in production utilization. By contrast, industrial production remained at the level of the previous year despite the high volatility. Nevertheless, energy-intensive companies in particular cut their production levels against the backdrop of significantly higher energy costs. Overall, average capacity utilization in German industry deteriorated only slightly in 2022 according to Eurostat data. In the fourth quarter, it was 84.7% compared to 85.2% in the same period of the previous year, which means that it remained at a high level.


Exchange rate fluctuations

Due to its international activities, exchange rate fluctuations have an impact on NORMA Group’s business.   RISK AND OPPORTUNITY REPORT

In fiscal year 2022, NORMA Group generated around 48% of its sales in US dollars. The development of the US dollar against the euro led to a positive effect on sales in fiscal year 2022. In addition, there were positive effects from the Chinese renminbi.


Industry-specific influencing factors


Significant slowdown in global mechanical engineering in 2022, high order backlog has stabilizing effect

Due to the increasingly weak global economy and the drastic rise in energy costs, the initially positive development of global industrial production (excluding construction) weakened slightly in 2022. The cumulative increase was 3.3% for the first eleven months. Here, however, China’s industrial production actually slumped in April 2022 due to the strict lockdowns, and investment propensity in 2022 was low overall. In the US, equipment investment actually shrank. By comparison, investment in the UK and the euro zone again grew robustly. In this heterogeneous environment, global machinery sales rose in 2022 according to estimates by the German Engineering Federation (VDMA), although growth of 3% was lower than previously forecast. The original growth forecast of 5% was thus clearly missed. Strong growth was recorded in the mechanical engineering sector in Japan and Canada in 2022, at +9% in both countries. In the US and Mexico, the sector grew robustly at +3% each, while the market in South Korea (-2%) showed a negative trend. Among the most important emerging countries for the sector outside China, real machinery sales grew in Turkey (+11%), the Middle East (+5%) and India (+3%). Industry sales were down 2% in Brazil, however.

By comparison, the export-oriented European mechanical engineering sector performed robustly, although the factors of material shortages, skills shortages, the explosion in energy costs and the gradual capping of Russian natural gas supplies weighed noticeably on the European industrial economy. Although the industry benefited from a continuing very good order situation, it should be noted that backlogs of orders had built up due to supply bottlenecks and pandemic-related catch-up effects took place in consumer-related end markets. At the same time, many manufacturers of energy-intensive goods, such as basic chemicals, were forced to cut their production volumes significantly as a result of high energy prices. In light of this development, mechanical engineering sales in 2022 increased by 6% in Switzerland, but slumped significantly in the UK (-10%). According to the VDMA, industry sales in the euro zone rose by 3% following double-digit growth the previous year. Very strong growth was again generated in the Netherlands (+26%), Poland (+13%) and Belgium (+10%). Spain grew by 5% and Italy achieved a moderate increase of 2%. In Germany, the sector recorded stagnating sales, although production increased slightly by 1% after adjustment for prices. In France, by contrast, the mechanical engineering sector contracted by 4% in 2022.


Engineering: Real change in industry sales








– 15.0



– 13.0



– 8.0






– 6.0


Automotive production up despite weak demand, catch-up effects had a compensating effect

In 2022, the global automotive industry showed opposing dynamics in the respective regions. While demand in the established industrialized countries was subdued, passenger car sales in China recovered strongly thanks to stimulating tax breaks. The market in India also grew, while Brazil recorded negative growth. However, in global terms, sales of light vehicles (LV, up to 6 t) declined by 1.0% compared to the previous year to 80.6 million units in 2022, according to LMC Automotive. Despite this, however, global production increased by 6.4% to 81.8 million units. In terms of drive types, pure combustion engines continued to dominate by a wide margin, although their production volumes tended to decline. In contrast, electric drives in the form of plug-in hybrids (PHEV) or pure battery electric vehicles (BEV) continued to gain market share. Their production volume increased by 62.3% worldwide in 2022 to 10.5 million units (PHEV + BEV). The global market for commercial vehicles (commercial vehicles, trucks + buses) showed a different trend by comparison. Commercial vehicle production in China dropped by nearly half, while manufacturers in other Asian countries (Japan, South Korea and India) achieved growth. Commercial vehicle production also increased in North America (+8.5%).

According to the ACEA (Association des Constructeurs Européens d’Automobiles), demand for passenger cars in Europe (EU + EFTA + UK) fell by 4.1% to 11.3 million units in 2022, following an already weak prior year. The decline in Western Europe was also 4.1%. Among the volume markets, only Germany (+1.1%) recorded a slight increase thanks to a strong performance at the end of the year. By contrast, demand slumped sharply in France (-7.8%) and Italy (-9.7%). Sales in Spain (-5.4%) and the United Kingdom (-2.0%) also fell below the level of the previous year. In addition, demand declined in Poland, Belgium, the Netherlands, Switzerland and Scandinavia. Overall, developments were characterized by shortages of starting products and raw materials, massive increases

in energy prices, and the uncertainties triggered by the war in Ukraine. In this environment, Europe’s automotive industry produced 15.8 million passenger cars, down 1.4% year-on-year according to LMC Automotive. By contrast, passenger car production in Germany increased by 11%. However, it should be noted that the previous year’s base was very low due to the lack of microchips and temporary production stoppages. At this point, it should be mentioned that, despite the recovery, the production volume in 2022 was still about a quarter lower than before the pandemic in 2019. In the European commercial vehicle market, on the other hand, sales in 2022 slumped significantly (-15.1%), according to ACEA. LMC Automotive nevertheless estimates that European commercial vehicle production increased by 4.6%, contrary to this development. In particular, commercial vehicle manufacturers in Germany achieved a strong increase of 14.5%.


Automotive Industry: Global production and development of sales








– 15.9



– 19.5









– 13.7



– 5.3



– 3.6


International construction industry increasingly under pressure in key markets in 2022

In 2022, construction activity and the construction sector in Asia were given a structural boost by population growth, advancing urbanization and infrastructure expansion. Now that the burdens resulting from the corona pandemic have been overcome, the construction industry has increasingly recovered. Accordingly, India’s construction industry grew, whereas China’s construction industry was exposed to a few stress factors due to the government’s zero-COVID policy and unresolved financing problems in the real estate sector. Nevertheless, national construction investment in China increased by 5.2%, according to the National Bureau of Statistics (NBS). Investments in the water industry rose by 13.6%. By contrast, investment in building construction, which is important for the economy, slumped by 10.0% in nominal terms, with a 9.5% decline in housing. By comparison, following the outbreak of the war in Ukraine, the European construction industry performed relatively robustly, caught between a high order backlog on the one hand and growing uncertainties – due to material bottlenecks, cost explosions and rising interest rates – on the other. While an optimistic outlook prevailed at the beginning of the year, the adverse effects emerged in the course of the year. According to estimates by the Euroconstruct industry network (including the ifo Institute), construction output in Europe increased by 3.0%, whereas it had grown twice as fast the previous year. A look at the regions reveals a strong development of construction activity in Italy and Ireland, while growth in France and the UK flattened out noticeably. In Portugal and Switzerland, construction output actually declined.

In Germany, construction activity also deteriorated noticeably over the year as a whole, bringing the multi-year boom in the sector to a standstill. In economic terms, real construction investment contracted by 1.6%. The main reasons for this were high inflation and the related loss of purchasing power, shortages of materials and skilled labor, the energy crisis and the weak economy. According to the DIW (German Institute for Economic Research),

these factors led to skyrocketing construction prices and a slump in new orders. While construction volume increased significantly in nominal terms, it declined by 2.1% when adjusted for the double-digit increase in construction prices (+15.8%). Declines were recorded in both residential construction (-2.2%) and commercial construction (-2.3%), as well as in public sector construction (-1.0%). In residential construction, which is one of the most important pillars of the construction industry, the volume of new construction fell particularly sharply by 4.5%. However, the volumes of additions and conversions, modernization and maintenance, which accounted for the dominant structural measures on existing buildings with a share of 69% of the total volume, also fell by 1.6% in 2022.


Construction Industry: Development of European construction output
















US construction industry impacted by interest rate turnaround and a weak US economy, construction spending in water management remains high

The US construction industry experienced an ambivalent development in 2022. While a positive trend with high growth rates was still recorded at the beginning of the year, a significant change set in during the further course of the year, which made the view from a full-year perspective more restrained. In addition to the high level of inflation, this was mainly due to the significant turnaround in interest rates by the US Federal Reserve, which significantly restricted financing options in the construction sector. As a result, following two strong previous years (2020: +7.2%, 2021: +10.7%) and a good start to the year, real housing investment lost considerable momentum and even declined by a double-digit percentage in the second half. According to official figures, the losses in residential investment totaled -10.7% in 2022. Likewise, investment in the commercial sector (IfW estimate for 2022: -8.1% in real terms) fell sharply due to the economic situation and the sharp rise in interest rates. A similar trend was seen in building permits, which fell by 13% year-on-year, as well as in housing starts for single-family homes, which fell by 11%. Sales of existing homes in 2022 were down by as much as 17% year-on-year. Notwithstanding this, however, construction spending rose significantly by a nominal 10.2% in 2022, due to massive price increases in the construction and real estate sectors. While spending in private residential construction increased by 13.3%, spending in the US water sector increased by 18% to USD 23 billion in 2022. Spending on repair and renovation work, which is another key driver of NDS product sales, increased by 3% in 2022, according to industry experts at JBREC (John Burns Real Estate Consulting). By contrast, construction activity in the commercial sector, which includes office, retail and lodging buildings, increased by 10%. This positive development was mainly supported by steady infrastructure investment. Although the commercial sector accounts for a smaller share of NDS revenues, it is an important growth market which still lags behind the residential market in terms of its current size, however.


Legal and regulatory influencing factors

Due to the international focus of its business and against the backdrop of its acquisition strategy, NORMA Group is obliged to observe various legal and tax-related regulations, which include product safety and product liability

laws as well as construction, environmental and employment-related regulations as well as foreign trade and patent laws.  RISK AND OPPORTUNITY REPORT

In addition, NORMA Group’s product strategy is influenced by the increasing density of regulations in environmental law and ongoing discussion on emission-reducing drive technologies and the resulting structural change in the automotive industry. New regulations on emissions and fleet management provisions, as well as the strong trend toward hybrid and fully electric drive models, have a positive impact on NORMA Group’s business. After all, the increasing complexity of systems in vehicles – due to downsizing or hybrid vehicles, for example – also increases the number of interfaces and thus the demand for reliable joining technology. In addition, the increasing electrification of the automotive industry presents OEMs with new challenges and opens up new opportunities and business fields for NORMA Group, especially in the area of thermal management.  RESEARCH AND DEVELOPMENT

Due to NORMA Group’s growing water business and its increasing strategic importance, the various regulatory initiatives in the area of Water Management, as well as public measures to improve the supply of water to the population, have also gained considerable influence for NORMA Group.


These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.