21. (e) Financial liabilities and net debt

 

i. Trade and other liabilities

Trade and other payables are as follows:

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. NORMA Group participates in a reverse factoring program. The liabilities included in this program are reported under trade payables and similar liabilities, as this corresponds to the economic content of the transactions. All trade payables and liabilities from reverse factoring programs are due to third parties within one year. As a result, these have short-term maturities, therefore the carrying amounts on the balance sheet date correspond to their fair values, as the effects of discounting are not material.

 

Refund liabilities

Reimbursement liabilities are recognized for volume discounts and similar bonus agreements payable to customers. These arise from retrospective volume rebates or similar agreements that are based on total sales or on a specific product sale of a twelve-month or shorter period. Refund liabilities are recognized for discounts expected to be payable to the customer for sales completed by the end of the reporting period. For further details, please refer to  NOTE 3 ‘SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES’. All reimbursement liabilities are due to third parties within one year. The carrying amounts on the balance sheet date therefore correspond to their fair values, as the effects of discounting are not material.

 

 

ii. Bank borrowings

The borrowings were as follows:

Borrowings are recognized initially at fair value, net of directly attributable transaction costs incurred. Borrowings are subsequently stated at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in profit or loss over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a pre-payment for liquidity services and amortized over the period of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the balance sheet date.

The maturity of the syndicated bank facilities and the promissory note was as follows:

 

a) Fair value of bank borrowings

The fair value calculation of the fixed-interest promissory note, which is recognized at amortized cost and for which the fair value is stated in the notes, was based on the market yield curve according to the zero coupon method considering credit spreads (Level 2). Interest accrued on the reporting date is included.

 

b) Financial covenant

The Group is subject to the financial covenant total net debt cover (net debt in relation to adjusted Group EBITDA), which is monitored on an ongoing basis. This financial covenant is based on the Group’s Consolidated Financial Statements as well as on special definitions of the bank facility agreements.

In the event of non-compliance with a financial ratio, the credit agreement provides for several possibilities of cure in the form of exemption provisions of the shareholder measures. If there is a breach of a condition which is not remedied, the syndicated loan may possibly be called in.

NORMA Group complied with the specified financial covenants in fiscal years 2022 and 2021.

 

 

iii. Other financial liabilities

Other financial liabilities were as follows:

 

a) Liabilities from the ABS and factoring

The liabilities from ABS and factoring include liabilities from continuing involvement in the amount of EUR 1,057 thousand (Dec 31, 2021: EUR 447 thousand), liabilities from fair values of default and interest guarantees in the amount of EUR 390 thousand (Dec 31, 2021: EUR 314 thousand) recorded under the ABS and factoring programs and liabilities from customer payments for receivables already sold under the ABS and factoring programs in the amount of EUR 8,960 thousand (Dec 31, 2021: EUR 6,976 thousand) as part of the debtor / receivables management performed by NORMA Group.

 

 

iv. Maturity of financial liabilities

The financial liabilities of NORMA Group have the following maturities:

 

v. Net debt

Net debt of NORMA Group is as follows:

NORMA Group’s financial liabilities are 2.8% higher than on December 31, 2021.The increase in loan liabilities is due to currency effects in connection with the US dollar; the net repayment in fiscal year 2022 had an opposite effect. In addition to the repayment of promissory note loans in the amount of EUR 8,500 thousand, liabilities from the Commercial Paper program were repaid in the amount of EUR 40,000 thousand. EUR 43,000 thousand was drawn from the revolving credit facility in the total amount of now EUR 100 million as of December 31, 2022.

Lease liabilities increased compared to the end of 2021, the changes due to repayments (payment of lease installments), the additions from rights of use, reassessments of extension options and contract amendments, and interest effects led to a net increase; exchange rate effects mainly on liabilities in US dollars – of subsidiaries in the United States – had an increasing effect.

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

Net debt increased by EUR 31,287 thousand, or 9.8%, as of December 31, 2022. This was mainly due to current interest expenses in the fiscal year, the increase in lease liabilities, and the valuation-related increase in liabilities from derivatives during the year, which had already been repaid as of the reporting date.

This development was offset by net cash inflows from the sum of cash inflows from operating activities of EUR 76,615 thousand, net cash outflows from the procurement and disposal of non-current assets of EUR 44,485 thousand, and from the payment of the dividend of EUR 23,897 thousand.

Cash-neutral negative net currency effects from foreign currency loans, cash and cash equivalents, and lease liabilities and other financial liabilities had an increasing impact on net debt.