NOVA = (adjusted EBIT x (1 – s)) – (WACC x capital employed)

 

The cost of capital rate is calculated on the basis of the following assumptions and calculations:

The base interest rate is derived from the interest rate structure data of Deutsche Bundesbank (three-month average: October 1 to December 31, 2022). The market risk premium represents the difference between the expected return of a risky market portfolio and the risk-free interest rate. NORMA Group uses the recommendation of the Institut der Wirtschaftsprüfer in Germany (Institute of Public Auditors in Germany (IDW)) to determine this risk premium. The beta factor represents the individual risk of a share compared to a market index. It is first determined as the average value of the unindebted beta factors of the peer group and subsequently adjusted to NORMA Group’s individual capital structure. The cost of equity is calculated by adding the risk-free interest rate and the weighted country risk of NORMA Group with the product of the market risk premium and the indebted beta factor of the peer group. The credit spread used to calculate the cost of debt was determined on the basis of the terms of NORMA Group’s current external financing. Invested capital is calculated from consolidated equity plus net financial debt as of January 1 of the respective fiscal year.

The financial control parameters are planned and continuously monitored in the Group, but also for the most part at the segment and Group company levels. Deviations between planned and actual figures are tracked in the local companies and aggregated at the regional segment level as part of the monthly analysis. Business development is regularly forecast on the basis of the available monthly and quarterly results and assuming various scenarios.

 

Important non-financial control parameters

NORMA Group’s most important non-financial control parameters include CO2 emissions, the Group’s power of innovation, the problem-solving behavior of its employees and the sustainable overall development of NORMA Group.

CO2 emissions

Compliance with applicable environmental protection requirements and the avoidance of environmental risks are top priorities for NORMA Group. The company is guided by international standards and guidelines in this regard. Climate-relevant CO2 emissions are a significant non-financial performance indicator in the area of the environment that has also been part of the Management Board’s remuneration system since January 2020. NORMA Group records the greenhouse gas emissions of all production sites resulting from gas consumption (Scope 1) and the purchase of electricity and district heating (Scope 2) and strives to continuously reduce these CO2 emissions. For its own production processes, NORMA Group has set itself the target of reducing CO2 emissions by around 19.5% by 2024 (reference year 2017). This target is based, among other criteria, on calculations of the Science-based Targets Initiative.  CLIMATE PROTECTION

 

Invention applications

The sustainable safeguarding of its innovative capability is a key driver for the future growth of the Group. NORMA Group therefore measures the number of annual invention disclosures. NORMA Group employees submit invention applications as part of an internal formalized process upstream of the external process of new patent applications. By establishing targeted internal incentive systems, NORMA Group promotes its employees’ innovative thinking.

 

Quality figure

NORMA Group strives for high reliability and service quality. The reputation of its brands and the reliability of its products are key factors in the company’s success. The Group therefore adheres to high quality standards in developing and manufacturing its products. In order to minimize production losses and maximize customer satisfaction, NORMA Group measures and manages the problem-solving behavior of its employees by tracking the number of defective parts per million of manufactured parts (parts per million/PPM). This metric is collected and aggregated at the Group level on a monthly basis.  QUALITY MANAGEMENT

 

Other non-financial performance indicators

Other non-financial performance indicators include employee and environmental indicators on occupational safety and healthcare within the Group. More information can be found in the  CR REPORT.

The target figures for the financial and non-financial control parameters for 2023 and the assumptions underlying the forecast are presented in the  FORECAST REPORT.