NOVA = (adjusted EBIT x (1 – s)) – (WACC x capital employed)11

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

¹¹ The variable “s” represents the taxes.

The base interest rate (risk-free interest rate) is calculated from the interest rate structure data of the Deutsche Bundesbank (three-month average: October 1 to December 31, 2024). The market risk premium represents the difference between the expected return on 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 the current external financing of NORMA Group. 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.

Carbon dioxide emissions

Important non-financial control parameter

Compliance with applicable environmental protection requirements and the avoidance of environmental risks are key priorities for NORMA Group. The company adheres to international standards and guidelines in this regard.

Since fiscal year 2023, only CO₂ emissions which have also been a target figure within Management Board remuneration for determining part of the long-term Management Board remuneration (ESG LTI) since 2020, have been considered a key non-financial performance indicator.

The CO₂ emissions for the target value were reported in the control system in accordance with the GHG Protocol (market-based, Scope 1 and Scope 2) until the end of fiscal year 2024. Scope 1 includes only emissions from natural gas and liquefied petroleum gas, and Scope 2 includes emissions from purchased electricity and district heating. Only emissions related to the production sites were taken into account when recording emissions. Since January 2022, NORMA Group has sourced electricity from renewable energies at all production sites. For this purpose, NORMA Group purchases "Energy Attribute Certificates." These are also included in the target.²

The Group strives to continuously reduce these emissions. NORMA Group’s target of reducing CO₂ emissions from its production processes by 19.5% by 2024, compared to the reference year 2017, was already overachieved considerably in 2022. In the 2024 fiscal year, CO₂ emissions amounted to 4,171 t CO₂eq (2023: 5.064 t CO₂eq).¹²

Other non-financial performance indicators

Other important non-financial indicators include the Group’s innovative capacity, measured by the number of invention applications, the problem-solving behavior of employees, expressed in defective parts per million parts produced (parts per million/PPM), and the rate of reportable accidents at work. The detailed set of personnel and environmental key figures as well as key figures on occupational health and safety in the Group can be found in the CONSOLIDATED NON-FINANCIAL STATEMENT.

The target figures for the financial and the non-financial control parameters for 2025 and the assumptions underlying the forecast are presented in the FORECAST REPORT.

¹²     The methodology presented was used in the management system until the end of 2024 based on the forecast issued in the 2024 financial year for CO₂ emissions of “below 9,600 tons of CO₂ equivalents”. The change in the calculation basis in connection with the first-time application of the European Sustainability Reporting Standards (ESRS) will be included in the 2025 Annual Report. This means that in future annual reports, the emissions from the greenhouse gas balance in accordance with the Greenhouse Gas (GHG) Protocol initiative will be reported in the Scope 1 to Scope 3 categories for all locations worldwide in the management system.