Purchasing and supplier management

The procurement costs of materials, goods and services have a significant impact on NORMA Group’s earnings position. By managing all procurement activities efficiently and selecting the proper suppliers, Purchasing can make a significant contribution to the success of the Group. The main task here is to optimize the services purchased and minimize costs by taking Group-wide economies of scale into account.

Global purchasing organization

NORMA Group's purchasing activities are divided into four superordinate product groups:

•Steel and metal components

•Technical granulates, plastic and rubber products

•Standard plastics, components and commodities

•Capital goods, non-production materials and services

With its existing expertise in the product groups, the purchasing organization supports the strategic business units Industry Applications, Mobility & New Energy and the Water Management business. In addition to this operational structure, there is a division into segments, i.e. the EMEA, Asia-Pacific and Americas regions. This matrix organization enables a centralized control by the respective experts of the product groups and the simultaneous integration of the knowledge of the regional or local purchasing teams concerning specific local market conditions. NORMA Group thus ensures professional purchasing management and the achievement of competitive prices for goods and services. Digital procurement solutions support the global organization in its work and thereby enable efficient reporting.

Development of material prices

In fiscal year 2024, the cost of materials amounted to EUR 500.0 (2023: EUR 549.6 million), which corresponds to a share of 43.3% (2023: 45.0%) of sales. The cost of materials ratio thus improved noticeably compared to the previous year. EARNINGS POSITION Among other things, lower costs for some of the raw materials relevant to NORMA Group had a positive effect. The positive effects are the result of ongoing optimizations and renegotiations by the global purchasing organization. These represent a key strand of measures within the “Step Up” program. On the other hand, the generally high level of transportation costs due to the tense geopolitical situation and higher energy costs at the end of the year had an increasing effect on the cost of materials in the current reporting period. Detailed information on this can be found in the following sections.

The purchasing volume used for internal management purposes and adjusted for currency effects amounted to EUR 479.4 million. (2023: EUR 537.1million). EUR 330.0 million of this amount (2023: EUR 377.9 million) and thus 69% (2023: 71%) was attributable to the purchase of production materials.

NORMA Group’s continuous focus on strategic sourcing, procurement efficiency and market adaptability has been instrumental in minimizing risks and taking advantage of opportunities in the volatile environment.

Steel and metal components

In fiscal year 2024, the supply of raw materials (steel and wire) and metal components to the global production sites was very good, bar a few, limited exceptions. Lower capacity utilization at supply plants in many areas, coupled with a decline in demand in key industry segments, led to falling prices and very good material availability, particularly in the EMEA region and to a certain extent also in China. Geopolitical crises – in particular, the war in Ukraine – had no significant impact on the availability of materials in the metals sector in the 2024 fiscal year. A normalization of energy prices in Europe meant that no inflation surcharges were levied, with the exception of the established alloy surcharges for stainless steels.

In the annual price negotiations for fiscal year 2024 in the EMEA region, significant reductions in contract prices (basic purchase price for stainless steel without alloy surcharges) could be achieved for the first time in years in the stainless steel segment, which is an important material group for NORMA Group.

By contrast, price negotiations in the Americas region were once again much more difficult. The USA’s protectionist trade policy continued to have an impact, meaning that only minor positive price changes were achieved despite intensive efforts.

In the Asia-Pacific region – and particularly in China – lower purchase prices for stainless steel products were achieved in negotiations. However, it should be noted that price reductions in the negotiations there were less significant than in EMEA. It should also be noted that the alloy surcharges are included in the price agreements there.

In the EMEA and Americas region, prices of the newly agreed monthly alloy surcharges (price components include nickel, scrap and ferrochrome prices) developed inconsistently on closer inspection. Austenitic materials (the main cost driver is the alloying element nickel) rose in the first half of the year. This was initially followed by a predominantly falling price trend for nickel from the second half of 2024 onwards – as illustrated by the example of the material 1.4301 in Germany in chart G017. Ferritic materials (figure G018) were almost stable with little variation in 2024. Here, prices followed the main cost drivers ferrochrome and scrap.

Overall, it should be noted that alloy surcharges remained at a relatively high level in the current reporting year.

NORMA Group was only able to reduce the purchase prices for metal components used in the Americas region in a few cases for fiscal year 2024. In contrast, purchase prices in the EMEA region were reduced slightly in line with commodity prices. However, it should be noted that increased energy and labor costs as well as packaging and transport costs continued to counteract substantial price reductions.

In the product group of surface-finished non-stainless steels and cold-rolled strip, purchase prices were reduced slightly over the course of the year, in line with a decline in demand in many industrial segments.

Technical granulates, plastic and rubber products

After the Ukraine war had a lasting impact on 2023, particularly in the first and second quarters – and the EMEA region, in particular, was confronted with volume shortages and high energy prices – the availability and price situation improved significantly in the second half of 2023.

This trend continued in the first quarter of 2024. Depending on the material, the prices were updated with slight increases or decreases. Thanks to long-term base price agreements with strategic suppliers, NORMA Group was able to maintain the price level of the first quarter of 2024 for the most part throughout 2024. Minor adjustments resulted from the change in some input raw materials and gas prices.

The improved price and supply situation for granules also led to falling prices for plastic components in some cases, although these were still influenced by higher energy and gas prices in the 2024 fiscal year compared to the period before the war in Ukraine.

In contrast to the improved volume availability of technical granules, the rubber products product group continued to be negatively impacted by the war in Ukraine throughout the 2024 fiscal year. Since the outbreak of the war, it has led to a massive shortage of key raw materials for rubber components and the associated high price pressure, which continued throughout 2024.

Standard plastics, components and commodities in the Water Management area

After the Ukraine war had a lasting impact on 2023, particularly in the first and second quarters – and the EMEA region, in particular, was confronted with volume shortages and high energy prices – the availability and price situation improved significantly in the second half of 2023.

This trend continued in the first quarter of 2024. Depending on the material, the prices were updated with slight increases or decreases. Thanks to long-term base price agreements with strategic suppliers, NORMA Group was able to maintain the price level of the first quarter of 2024 for the most part throughout 2024. Minor adjustments resulted from the change in some input raw materials and gas prices.

The improved price and supply situation for granules also led to falling prices for plastic components in some cases, although these were still influenced by higher energy and gas prices in the 2024 fiscal year compared to the period before the war in Ukraine.

In contrast to the improved volume availability of technical granules, the rubber products product group continued to be negatively impacted by Despite economic pressure and geopolitical tensions – in particular the war in Ukraine and the conflict in the Middle East – the raw material price environment for standard plastics, components and merchandise in the Water Management business remained relatively stable. This was particularly the case in NORMA Group’s key markets, including the USA and Asia-Pacific.

The stability of raw material costs paired with effective cost management enabled NORMA Group to maintain competitive procurement spending in Water Management in the 2024 reporting year and to provide decisive support to the business despite difficult market conditions in 2024 and amid continued cost pressure from customers.

the war in Ukraine throughout the 2024 fiscal year. Since the outbreak of the war, it has led to a massive shortage of key raw materials for rubber components and the associated high price pressure, which continued throughout 2024.

Energy market 2024

Energy prices remained susceptible to market signals and geopolitical developments. Although prices declined overall in 2024, the effects of the US presidential elections and the aforementioned geopolitical factors in the Middle East and Ukraine caused prices to rise again at the end of the year to levels comparable with the third quarter of 2023.

However, macroeconomic and geopolitical factors were not the only drivers of this volatility. The switch to renewable energies, whose generation is naturally volatile, was met with existing, less flexible industrial structures and a demand that could only be adapted to a limited extent. The volatility in the interplay between generation and consumption increased, particularly in times of low availability of renewable energies.

NORMA Group met these challenges with a long-term strategy that focuses on the opportunities presented by the energy transition while minimizing the risks of strong price fluctuations. Flexible contract models that combine the security of long-term agreements with the advantages of spot electricity trading played a central role here. In addition, in-house electricity generation and green electricity contracts (PPAs) were evaluated and implemented.

With this focus, NORMA Group will remain well positioned to meet the requirements of a changing energy market in the future.

Supplier management and structure

The purchasing organization of the NORMA Group continuously monitors the performance of suppliers. The annual supplier screening is a key instrument in this respect. This involves the use of globally uniform criteria from the areas of quality, logistics, sustainability and commercial aspects. The relevant departments are involved in the assessments at the local level. The evaluation process is mapped using e-procurement software. Besides the annual supplier performance evaluation, supplier risks were monitored continuously using automated risk management software. This helps the purchasing organization to maintain a constant overview of resilience in the supply chain and to initiate the necessary measures early on.

The focus of NORMA Group’s supplier selection is a balance of supplier consolidation to reduce complexity and avoiding strong dependencies. This balance is continuously optimized by the purchasing department. The current supplier base is as follows: In fiscal year 2024, 31.4% (2023: 34.6%)of the purchasing volume was attributable to NORMA Group's top 10 suppliers. The top 50 suppliers accounted for around 63.0% (2023: 65.2%) of production material sales in the amount of EUR 330.0 million. (2023: EUR 377.9 million), which corresponds to EUR 208.0 million. (2023: EUR 247.2 million).