Key figures

The macroeconomic perspective presented here, which takes into account the diverse industrial segments and regional sales markets served by NORMA Group, forms the basis of NORMA Group’s forecast and outlook for the fiscal year 2025.

Global economy 2025: still subdued and risky, USA pushes protectionism

The global economy is likely to remain under pressure from trouble spots and major uncertainties in 2025. Although the chances of an easing of tensions in the Middle East improved at the beginning of the year, setbacks cannot be ruled out. In addition, the war in Ukraine continues. New sources of conflict could also emerge, including in Asia (North Korea, China/Taiwan). The greatest economic risk lies in the looming trade war. The newly formed US government has announced the introduction of punitive tariffs against Mexico, Canada and China. Counter-reactions from the countries affected are to be expected and an expansion or escalation of the conflict cannot be ruled out. Such a trade war would currently have unforeseeable negative consequences for the global economy. In addition, the potential for fiscal policy stimulus is low due to the high level of debt in many countries. An easing of consumer prices and a continued easing of monetary policy, particularly in Europe, should have a positive effect. According to the ifo Institute, this would boost consumer demand and investment in industrialized countries. In its January 2025 Update, the International Monetary Fund (IMF) assumes that the global economy will grow by 3.3% in 2025, i.e. at a similarly moderate rate as in 2023 and 2024. Compared to the fall forecast (+3.2%), this outlook is, therefore, somewhat more confident. While the industrialized countries are expected to increase their economic output by 1.9% in 2025, the developing and emerging countries are set to expand by 4.2%, according to the IMF.

China’s expansive fiscal and monetary policy measures should have a positive impact on growth in 2025. However, domestic demand is likely to remain subdued due to the unresolved crisis in the real estate sector, while the Chinese economy should continue to be supported by lively exports in 2025, according to the ifo Institute. Exports are expected to be redirected to other markets in response to US protectionism. The economy in Southeast Asia is closely linked to value creation in China. The ASEAN-5 countries in particular could benefit from production relocations in response to a trade war between the USA and China. The IMF is therefore forecasting brisk growth of +4.6% in these countries in 2025. India’s economic expansion also remains very dynamic (+6.5%).

According to the ifo Institute, the USA has not yet reached the turning point of the economic boom. Meanwhile, the economic policy announced by the Trump administration is causing great uncertainty. On the one hand, fiscal policy is likely to remain expansionary in 2025. However, the introduction of massive punitive tariffs on imports from key trading partners and stricter measures to curb migration are expected to slow growth, according to the Kiel Institute. As a result, inflation is likely to approach the Fed’s target only slowly in 2025, reducing the scope for further interest rate cuts by the Fed. Taken together, development in the US is likely to remain on the upswing in 2025. Growth is expected to remain robust (+2.7%).

In Europe, with the current economic weakness and in view of a further easing of consumer prices, central banks are expected to loosen their monetary policy in 2025. Although this should gradually improve financing conditions, it can be assumed that the industrial economy will only pick up speed again at a slower pace. This is due to the subdued level of investment, which is forecast to gradually pick up again. It can also be assumed that the economy will be burdened by numerous uncertainties – including the threat of trade conflicts with the USA and China as well as structural problems in the industry. Economic momentum in Europe is therefore likely to remain moderate in 2025 despite a slight upturn. The IMF is currently forecasting growth of 1.0% in the eurozone. It is to be expected that the German economy will continue to lack noticeable impetus from abroad in 2025. Although the domestic economy is expected to pick up on the back of slightly higher private consumer demand, investment is expected to remain sluggish – albeit not as much as in 2024. In addition to structural problems and the threat of trade disputes, international crises are also a negative factor preventing a noticeable economic recovery in Germany.

This macroeconomic outlook forms the basis of NORMA Group’s forecast and outlook for the fiscal year 2025.

Forecast for GDP growth (real)1

T057

2024

2025e

2026e

3.2

3.3

3.3

2.8

2.7

2.1

5.0

4.6

4.5

0.7

1.0

1.4

-0.2

0.3

1.1

The environment for NORMA Group’s key customer industries remains challenging

Assuming that there is no further escalation in the trouble spots or an outbreak of further geopolitical conflicts, that supply chains are not disrupted again and that the central banks continue to loosen their monetary policy, it can be assumed that the prospects for NORMA Group’s key customer industries should gradually improve over the course of 2025. However, the environment remains very challenging and characterized by unusually high volatility in light of the looming trade conflicts.

Mechanical engineering

Long-term investment requirements in industrialized countries are determined by three major structural factors. These are protectionism, decarbonization and digitalization. The global economy is already changing as a result of decoupling. To put it simply, established global partnerships are being broken up in favor of regional, small-scale solutions. This creates new alliances. The threat of trade disputes with the USA could significantly reinforce the trend towards establishing new value chains in individual economic areas or countries in 2025. This in turn requires strategic investments independent of the cycle. Furthermore, the goal of an emission-free economy can only be achieved through a far-reaching transformation. This requires substantial investment in new production processes and technologies. After all, the field of artificial intelligence (AI) is driving the digitalization of industry with rapidly growing application possibilities and thus investments in modern machines and smart technologies. The long-term prospects for mechanical engineering are therefore promising from a structural perspective.

In the short term, with the global economy set to remain sluggish in 2025 and the high geopolitical risks, there is little cyclical impetus for the industrial economy and a noticeable upturn in willingness to invest. In addition, capacities are often very underutilized. Nevertheless, the prospects for mechanical engineering are gradually brightening again. With the expectation of further moderate interest rate cuts, the financing environment should tend to improve in 2025. The industry association VDMA therefore expects the sector to recover slightly. Global machine sales are expected to increase by 1% in real terms in 2025. The emerging markets of China (+2%) and India (+5%) are expected to continue to grow. The industry environment is also improving in the USA (+1%). In Europe, an upturn is expected above all in the UK (+1%) and Switzerland (+3%). In contrast, France (+0%), Italy (-1%) and Germany (-2%) are not yet showing any signs of growth in 2025. Against this backdrop, the eurozone is not yet back on track for expansion with a real decline in sales of 1%.

Engineering: real change in industry sales

T058

2023

2024

2025e

-1.0

-6.0

-1.0

-3.0

-3.0

1.0

2.0

2.0

2.0

0.0

-2.0

1.0

Automotive industry

In the short term, the outlook for the automotive industry is twofold. Further falls in interest rates are likely to have a positive impact over the course of 2025. In contrast, the introduction of high tariffs on imports of cars and car parts from Europe and China announced by the USA represents an immense burden that could lead to turbulence and a high level of uncertainty. The industry experts at S&P Global Mobility (S&P GM) have based their forecast on the assumption that the new tariffs will take effect from mid-2025 and are designed to be permanent. On this basis, S&P GM forecasts that global car sales will only increase moderately by 1.7% to 89.6 million light vehicles (up to 6 tons) in 2025. The analysts at Global Data (GD) are somewhat more optimistic (+3.2% to 91.4 million LV). The forecasts for production are mixed, but the tenor is predominantly cautious. While GD expects a slight increase of 1.8% for 2025, S&G GM forecasts that the production level will decrease slightly (-0.4%) to 88.7 million LV. Output in China, Japan, South Korea and Mexico is expected to stagnate. Higher production in India (+3.8%) and Brazil (+3.4%) is to be offset by further declines in the USA (-3.0%), Canada (-8.1%) and Western Europe (-5.7%). S&P GM also expects to see significant cuts in car production in the UK (-13.6%), Spain (-13.7%) and Italy (-8.2%). A countermovement is being priced in for France (+8.2%) after the recent slump. In contrast, car production in Germany is expected to remain under pressure with a forecast 4.11 million units (-2.3%). In contrast to passenger vehicles, the short-term outlook for the global commercial vehicle market (commercial vehicles, trucks + buses) is positive. There are signs of a recovery in 2025. According to the S&P GM forecast, global production will increase by 9.5% to more than 3.7 million commercial vehicles.

The massive technological upheaval that the automotive industry is undergoing is irreversible. On the road to a zero-emission automotive sector, battery electric vehicles (BEV) and plug-in hybrids (PHEV) are currently gaining ground at the expense of combustion engines (petrol, diesel). Other alternative drive systems based on hydrogen or fuel cells are currently insignificant in the volume market. The necessary transformation of the automotive market is accompanied by a high level of complexity and massive investment requirements. On the one hand, these relate to drive technology and, in particular, the improvement of range and charging cycles. On the other hand, investments are required in a secure supply of raw materials, battery cell production, the expansion of the charging infrastructure and the upgrading of the electricity grids. The time horizon for this is correspondingly long, so that classic combustion engines should initially remain highly relevant on the global market. S&P GM expects 14.8 million BEVs (+30%) and 6.8 million PHEVs (+24%) to roll off the production line worldwide in 2025. Accordingly, the combined global market share of these New Energy Vehicles (NEV) will rise to 24.2% in 2025. In 2030, their share of the global production volume of passenger vehicles is expected to reach 45.8%, meaning that combustion engines will still account for a good half of all vehicles produced.

Automotive industry: development of global production

T059

2024

2025e

2026e

-1.7

-0.4

2.6

6.2

7.6

8.8

12.9

16.6

20.3

-5.0

9.5

5.9

Construction industry

Asia’s construction industry will be driven in the long term by rapid population growth, urbanization and government investment in infrastructure. The focus is also shifting to projects to combat climate-related damage. In China, however, the outlook for residential construction remains gloomy. The real estate crisis continues to smolder. Weak key data at the turn of the year does not yet signal a turnaround in building construction for 2025. In terms of floor space, new construction starts for all building types are 23% below the low level of the previous year, and this also applies to the residential sector (-23%). Office and other commercial buildings are also down by a similar amount. For the construction industry in Malaysia and Singapore, the planned joint special economic zone in Johor should provide impetus for construction and India should continue its steady upturn in construction at 6% to 7% in 2025 in view of the continuing good economic prospects.

The Euroconstruct industry network is seeing the first signs of recovery in the European construction industry. This is due to the stabilization of the real estate market in several European countries and an increase in mortgage lending. Europe’s construction output is expected to pick up in 2025 with real growth of 0.6% (Western Europe: +0.4%; Eastern Europe: +3.5%) and continue to recover in 2026. However, construction output is also expected to fall in France and Italy, among other countries, in 2025. The forecast for Germany is also negative at -1.0%. Based on the very poor order situation and a low number of building permits, which shrank again by almost a fifth between January and November 2024, a low level of new residential construction is also expected for 2025. The German Institute for Economic Research (DIW) expects the volume of residential construction to fall by 1.2% in real terms (new construction -1.8%; existing buildings -0.9%). A decline is also expected for non-residential buildings in 2025. The total German construction volume is expected to fall by a further 0.8%. Although a recovery in

commercial and residential construction is likely to begin in 2026, construction activity is expected to remain at a very low level. The DIW anticipates a quarter lower construction volume in residential construction in 2026 compared to the last boom year 2020.

Construction industry: development of European construction output

T060

2024

2025e

2026e

-2.4

0,4

1,6

-2.7

3,0

4,7

-2.4

0,6

1,8

In the USA, key data, including declining building permits and new construction starts at the end of 2024, suggest a slight slowdown in private US residential construction in 2025. According to FMI Insights, the high demand of around 1.5 million apartments and the expected further fall in interest rates will stimulate the construction of new single-family homes (+4%) as well as conversion and extension activities (+5%). In contrast, there are signs of a massive slump in the construction of apartment buildings (-13%). The commercial sector, which includes office, retail and accommodation buildings, is also expected to fall by 9%. In contrast, the US is substantially promoting investment in semiconductors, electric vehicles, green energy and sustainable production processes, meaning that construction investment in factories and production facilities should benefit greatly. In addition, construction activities in the water supply sector (+9%) are expected to remain on the upswing in 2025. Spending on repairs and renovations, which is a key driver of the NDS-business, is expected to return to moderate growth in 2025. The Harvard JCHS Lira Index anticipates an increase of 1.2%. The experts at John Burns Real Estate Consulting (JBREC) are somewhat more optimistic and expect the market for repairs and renovations to grow by around 4% in 2025.

Legal and regulatory influencing factors

As part of the international orientation of its business and against the background of its acquisition strategy, NORMA Group is obliged to comply with various legal and tax regulations. Product safety and product liability laws, construction, environmental and employment law requirements as well as foreign trade and patent law all play a role here. RISK AND OPPORTUNITY REPORT

NORMA Group’s product strategy is influenced by the growing density of regulation in environmental law in key industries. NORMA Group sees many opportunities to benefit from current global megatrends on the one hand and regulatory developments on the other. This includes the area of climate change mitigation and decarbonization. Related to this are developments in the area of the energy transition and the application field of alternative energy generation and storage. Since 2024, the latter have been increasingly addressed by the strategic business unit Industry Applications, among others. In addition to applying new, customer-specific approaches, the division also draws on years of engineering development experience from Mobility & New Energy’s direct OEM business. In terms of synergies, the Group is focusing in particular on identifying adapted product applications for relevant market segments based on products already established on the market, as well as starting points for direct business.

Various regulatory initiatives and government measures aimed at improving the supply of water to the population – not least due to advancing climate change – have also gained influence for NORMA Group in the area of Water Management as a result of the business that has grown over the years. NORMA Group continues to see further opportunities for the global Water Management business due to the need for responsible use of the important resource of water and the associated increase in demand for corresponding product solutions. These are intended to support customers in meeting the constantly tightening regulatory requirements.

In addition, the structural change in the automotive industry, which is bringing lower-emission drive technologies into focus, continues to be an important driver for NORMA Group’s sales – and especially for the Mobility & New Energy business unit. NORMA Group’s business is benefiting from new emission regulations and fleet regulations as well as the strong trend towards alternative drive models. The increasing electrification of the automotive industry in particular is presenting original equipment manufacturers (OEMs) with new challenges. This opens up new opportunities and business areas for NORMA Group, particularly in the field of thermal management. RESEARCH AND DEVELOPMENT 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.

Legend

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