Future development of NORMA Group
NORMA Group places a strategic focus on sustainable value creation. Key objectives are sustainable sales growth, profitability above the industry average and the most efficient use of capital possible. In addition, NORMA Group orients itself towards sustainability targets in order to live up to its own claim of a responsible approach to people and the environment. STRATEGY AND GOALS
General statement by the Management Board on probable development
Development of sales growth in 2023
Based on the current assessments of relevant economic research institutes and industry associations, the Management Board expects the macroeconomic situation to be burdened by geopolitical tension and the disruptions in the markets for energy and raw materials. In particular, the potential aftermath of the corona pandemic in China and the further development of the Russia-Ukraine war on global supply and transport chains continue to be seen as major factors of uncertainty. The currently high level of inflation worldwide, the interest rate turnaround initiated by the central banks and a possibly resulting further decline in demand on selected global markets are also seen as significant negative factors. The management therefore looks to the fiscal year 2023 with caution and respect, but nevertheless with good confidence in the future, supported by the forecast development in the key customer industries for NORMA Group.
According to the latest forecasts by renowned industry experts and automotive associations, in the automotive industry a significant recovery in the commercial vehicle market and an increase in global passenger car production volumes can be expected in 2023 - despite the difficult economic situation and high interest rates. In addition, the technology shift is expected to gain even greater momentum, driven by the current developments. With reference to this and additionally supported by NORMA Group's solid order situation, the Management Board anticipates medium single-digit organic sales growth for the EJT (Mobility and New Energies) division.
For the SJT business and the associated strategic business units Water Management and Industrial Applications, management also expects organic sales growth in the medium single-digit range in the fiscal year 2023. In particular, good development in the industrial applications area and continued stable US water business are expected to be the growth drivers here.
The trend forecasts are expected to be reflected in the development of the regional segments in fiscal 2023 as follows:
For the development in the EMEA region, the Management Board forecasts medium single-digit organic sales growth. The forecast is based on the assumption that the recovery trend from the second half of 2022 will continue to be reflected in a positive demand development from the European automotive industry in fiscal 2023. Additional growth impetus is also expected to result from business with general industrial applications in the SJT area.
In the Americas region, the Management Board expects low single-digit organic sales growth. The forecast is based on the assumption of continued good growth in the US water business. However, following previous periods showing disproportionately strong increase, the development is expected to be somewhat more moderate in 2023. In addition, the Management Board expects good development in the automotive sector (light and heavy vehicles) in the Americas region.
For the Asia-Pacific region, the Management Board forecasts an increasing demand in fiscal year 2023, which is based on the presented trend forecasts and supported in particular by the further localization of production in the EJT area in China, implemented in 2022. In addition, the SJT business is also expected to generate additional revenue. Based on this, the Management Board expects organic sales growth in the Asia-Pacific region to be in the low double-digit range. It should be noted, however, that this forecast does not take a further - or renewed - worsening of the pandemic situation into account.
Against this background, the Management Board of NORMA Group expects a medium single-digit organic growth in Group sales for the fiscal year 2023. However, this forecast is made under the assumption that in the course of 2023 there will neither be further significant negative effects in connection with the Corona pandemic - especially in China - and the Ukraine war nor will other influencing factors worldwide occur, which could lead to significant pressure on NORMA Group’s business development.
Development of the cost of materials ratio
NORMA Group was confronted with numerous challenging environmental developments in fiscal year 2022. In addition to disrupted supply chains within Europe as a result of the war of assault against Ukraine, the pandemic-related restrictions in China that continued throughout the entire year also had a negative impact. Overall, there were global distortions on the international energy and raw material markets. The continuing shortage of raw materials and the resulting sharp rise in prices for energy, raw materials and intermediate products, coupled with the sharp rise in inflation had a significant negative impact. In addition, supply bottlenecks drove up logistics costs on the input side.
The Management Board expects the situation on the international raw material markets to remain tight in fiscal year 2023, as in 2022, and that energy price levels and therefore cost pressure on the industry side will remain high. By contrast, the market for standard plastics, components and merchandise is expected to stabilize in 2023, albeit for the time being at a high level. By applying the multisourcing strategy of its purchasing organization, which aims to constantly minimize negative effects, and by continuously passing on the higher cost prices to customers, NORMA Group should be able to partially compensate for the negative factors. For this reason, the Management Board expects the materials usage ratio to remain stable in 2023 compared to the previous year. However, this assumes that there are no further major disruptions to the global economy.
Development of the personnel cost ratio
Assuming a good sales development in all major customer industries and regions of NORMA Group, the Management Board expects a stable personnel cost ratio in the financial year 2023 compared to the previous year.
Research and development expenses
To maintain its innovation and competitiveness in the long term, NORMA Group invests a fixed percentage of its Group sales in research and development activities every year. In the fiscal year 2023, the targeted investment ratio in R&D activities is expected to reach a value of around 3% of Group sales.
Adjusted EBIT margin
An important focus of NORMA Group is on maintaining profitability. Accordingly, all business activities are strategically aligned to this. In this context, the profitability of the Group is to be sustainably increased, among other things, through appropriate efficiency measures. In addition to optimizing operating processes and site capacities in all regions, these also include the systematically revising structures and focusing as well as aligning the product portfolio. The measures implemented are intended to contribute to further improving NORMA Group's competitiveness and maintaining it in the long term.
Provided that there are no market disruptions as in the past years, which could lead to significant additional costs or restrictions in the implementation of the efficiency measures, the Management Board expects an EBIT margin adjusted for acquisition effects of around 8% for the fiscal year 2023.
Financial result of up to EUR – 12 million expected
The Management Board expects a financial result of up to EUR –12 million for fiscal year 2023. This includes interest charges on the Group’s gross debt, which bears interest at an average rate of approximately 3.1%, as well as further expenses for currency hedges and transaction costs.
Adjusted tax rate between 28% and 30%
The Management Board expects an adjusted tax rate of between 28% and 30% for fiscal year 2023.
Moderate increase in adjusted earnings per share
Based on the assumptions described above, the Management Board expects a moderate increase in adjusted earnings per share in fiscal year 2023, compared to the previous year.
Adjustments to the result
As in previous years, the Management Board expects adjustments from the allocation of purchase prices to depreciable tangible and intangible assets related to acquisitions from previous years. These will amount to up to EUR 22 million in total, depending on the development of exchange rates. In the event that new acquisitions are made in fiscal year 2023, however, the Management Board reserves the right to make further adjustments in this regard.
NORMA Value Added (NOVA)
For fiscal year 2023, the Management Board expects NOVA of between EUR -10 million and EUR 10 million.
Investment ratio of between 5% and 6% targeted
The Management Board expects the investment activity (excluding M&A activities) in fiscal year 2023 to be at around 5% to 6% of Group sales.
Net operating cash flow
Assuming that sales continue to develop well and at the same time constant optimization measures are implemented in the area of working capital management, the Management Board of NORMA Group expects net operating cash flow of around EUR 70 million in fiscal year 2023.
Sustainable dividend policy
NORMA Group pursues a sustainable dividend policy. This is based on a payout ratio of approximately 30% to a maximum of 35% of the adjusted consolidated net income, provided the future economic situation permits this.
Market penetration and innovation capability
The degree of market penetration is reflected in organic growth in the medium term. Therefore, securing its innovative capability is essential for the future and competitiveness of NORMA Group. NORMA Group records the number of annual invention disclosures as a key figure for measuring and managing the company’s innovative strength. The current target for the Group is more than 20 new invention disclosures per fiscal year.
Carbon dioxide emissions
One key area of NORMA Group’s environmental strategy is aimed at sustainably reducing greenhouse gas emissions at its production sites worldwide. Taking the steady implementation of further CO2 reduction measures into account, the Management Board expects CO2 emissions to reach a level of below 9,800 tons of CO2 equivalents in fiscal year 2023.
Problem-solving behavior of employees
To ensure quality and maximize customer satisfaction, NORMA Group measures and controls the problem-solving behavior of its workforce based on the number of defective parts per million (PPM) rejected by customers. A value below 5.5 is targeted for the PPM performance indicator in fiscal year 2023.
Forecast for fiscal year 2023
These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.