Notes to the Development of Sales and Earnings

 

Order backlog at the end of the quarter

As of March 31, 2025, NORMA Group’s order backlog amounted to EUR 474.0 million. (March 31, 2024: EUR 544.8 million).

 

Group sales fall by 7.9% in the first quarter of 2025

In the first quarter of 2025, NORMA Group’s total sales amounted to EUR 284.2 million, a decrease of 7.9% compared to the same period of the previous year (Q1 2024: EUR 308.5 million). This includes positive exchange rate effects of 1.3% related to the US dollar and the Chinese renminbi. In addition, acquisition effects had a slightly upward impact (+0.2%). Adjusted for the factors mentioned above, NORMA Group recorded a 9.4% decline in the first three months of 2025.

This development was reflected in all regional segments. The decline in sales was most pronounced in the EMEA region in the first quarter of 2025 due to continued weak demand from the European automotive industry. In the Americas region, the water business was particularly affected by weather-related one-time effects, which was reflected in lower sales volumes compared with the previous year. Positive currency effects counteracted this decline. The Asia-Pacific region also saw lower volumes due to demand. This mainly affected the Mobility & New Energy division, but also business in Industry Applications.

 

Industry Applications: First quarter of 2025 with sales growth of 6.4%

Sales in the Industry Applications area totaled EUR 58.5 million in the period from January to March 2025, representing an overall increase of 6.4% compared with the same quarter of the previous year (Q1 2024: EUR 55.0 million). This was partly due to the reclassification of customer business previously assigned to the Mobility & New Energy strategic unit. This included, in particular, sales from the customer application areas of construction and agricultural machinery as well as stationary energy storage. Translation effects (+1.4%) also had an upward impact on sales development in the first quarter of 2025. Adjusted for the aforementioned effects, however, there was a decline of 12.8%. This was primarily due to significantly lower volumes as a result of weak global demand, which was particularly evident in the EMEA and Asia-Pacific regions. Furthermore, temporary sales losses due to temporary logistics delays in connection with the introduction of an ERP system at a site in Germany dampened sales development.

 

 

Water Management: Development in the first three months of 2025 largely withstands harsh conditions

In the Water Management area, sales in the first quarter of 2025 reached EUR 71.2 million, representing only a slight decrease of 2.3% compared to the same quarter of the previous year (Q1 2024: EUR 72.9 million). Positive currency effects (+2.6%) and acquisition effects (+1.0%) counteracted a stronger decline, as did the reclassification in the current fiscal year of the gas joining technology business, which was previously part of Mobility & New Energy. Excluding the factors described above, sales declined by 8.1%, primarily due to a decline in the Americas region. There, business development in the first quarter of 2025 was impacted primarily in January and February by weather-related one-time effects. In March, however, there were signs of a recovery in sales.

 

Mobility & New Energy: Development in the current reporting period below previous year’s level

The Mobility & New Energy division generated sales of EUR 154.5 million in the first quarter of 2025. This represents a decline of 14.5% compared with the same quarter of the previous year (Q1 2024: EUR 180.6 million). It should be noted that the development in the first quarter of 2025 is only comparable to the previous year to a limited extent due to the intra-group reclassification of revenue. The adjustment was related to customer businesses that were still allocated to Mobility & New Energy at the end of 2024 and were assigned to Industry Applications (including the construction machinery, agricultural machinery and stationary energy storage businesses) and, to a lesser extent, to Water Management (gas business) in the current fiscal year. This further reduced the revenue ratio of Mobility & New Energy in the first quarter of 2025. The business development of Mobility & New Energy was also significantly impacted by prevailing uncertainties in connection with the global effects of potential US trade tariffs. In contrast, currency effects had a slightly positive impact of 0.7%. Excluding the impacts of the factors mentioned here, the decline was 8.9%, which was primarily due to lower business volume.

 

Material cost ratio

The cost of materials totaled EUR 120.9 million in the first three months of 2025. This represents a significant decrease of 11.6% compared with the same period of the previous year (Q1 2024: EUR 136.8 million). This is attributable to the following factors: On the one hand, costs for some of the raw materials relevant to NORMA Group fell. On the other hand, slight energy savings were achieved. At the same time, the decrease in material expenses was influenced by the lower sales volume. Overall, the cost of materials as a percentage of revenue improved to 42.5 in the first three months of the current fiscal year (Q1 2024: 44.3%). The ratio of materials used to total operating performance (sales plus changes in inventories and other capitalized in-house work) was 42.6% in the first quarter of 2025 (Q1 2024: 43.7%). The reduction in inventories in the first quarter of 2025 amounting to EUR 1.5 million (Q1 2024: increase in inventories of finished and unfinished goods amounting to EUR 3.2 million) had an upward effect on the cost of materials ratio in the first three months of 2025.

 

 

Gross margin

Gross profit (sales revenue minus cost of materials plus changes in inventories and other capitalized own work) amounted to EUR 163.2 million in the first quarter of 2025. This corresponds to a decrease of 7.4% compared to the same quarter of the previous year (Q1 2024: EUR 176.2 million) and is primarily attributable to the disproportionate decline in sales revenues in the first three months of 2025. In addition, the reduction in inventories of finished goods and work in progress of EUR 1.5 million (Q1 2024: increase in inventories of EUR 3.2 million) reduced gross profit.The gross margin in the first three months of 2025 was 57.4% (Q1 2024: 57.1%).

 

Personnel cost ratio

Expenses for employee benefits totaled EUR 91.3 million in the first quarter of 2025, up 6.2% on the same quarter of the previous year (Q1 2024: EUR 86.0 million) despite a lower core workforce figure. Personnel cost ratio, which is calculated as a percentage of revenue, was therefore significantly higher in the first quarter of 2025 at 32.1% than in the same quarter of the previous year (Q1 2024: 27.9%).

The increase in personnel expenses was due to global wage inflation, which had a negative impact on the personnel cost ratio in relation to declining sales. Personnel expenses in the current reporting quarter were also increased by expenses related to the early departure of former Chairman of the Management Board Guido Grandi, which was announced on February 17, 2025.

 

 

Other operating income and expenses

The balance of other operating income and expenses amounted to EUR -46.0 million in the first quarter of 2025 (Q1 2024: EUR -49.7 million). Other operating income and expenses as a percentage of sales amounted to 16.2% in the period from January to March 2025 (Q1 2024: 16.1%).

Other operating income includes in particular currency gains from operating activities in the amount of EUR 1.0 million (Q1 2024: EUR 2.7 million) and income from the reversal of liabilities and unused provisions in the amount of EUR 0.7 million (Q1 2024: EUR 0.6 million).

Other operating expenses amounted to EUR 48.9 million, down 9.1% on the same quarter of the previous year (Q1 2024: EUR 53.8 million). The decline is primarily attributable to lower expenses for temporary staff and other personnel-related expenses (Q1 2025: EUR 10.5 million; Q1 2024: EUR 13.5 million). In addition, the need for write-downs and value adjustments on trade receivables decreased in the current reporting quarter (Q1 2025: EUR -0.4 million; Q1 2024: EUR -2.0 million), which also had a reducing effect. In contrast, IT and telecommunications expenses rose in the current reporting quarter (Q1 2025: EUR 7.7 million; Q1 2024: EUR 6.7 million). This was due to the implementation of a new ERP system at the Maintal site, which began at the start of the year and required higher expenses at times due to technical delays in logistics processing. In this context, additional expenses for special freight (increase by EUR 1.1 million to EUR 1.8 million) were also incurred in the current reporting period. In contrast, regular freight costs fell in the first three months (decrease by EUR 1.0 million to EUR 6.3 million) due to the focus on transparent and cost-efficient planning and the avoidance of unnecessary freight movements, so that total freight expenses remained almost at the previous year’s level (Q1 2025: EUR 8.1 million; Q1 2024: EUR 8.0 million).

 

Adjusted EBIT and adjusted EBIT margin

EBIT adjusted for depreciation and amortization of tangible and intangible assets from purchase price allocations as well as expenses for the preparation of the planned sale of the Water Management business costs for initiating the transformation of the organization planned from 2025 onwards amounted to EUR 10.3 million in the current reporting period. Compared to the same quarter of the previous year (Q1 2024: EUR 25.7 million), this represents a decline of 59.9%. Against this backdrop, the adjusted EBIT margin declined to 3.6% in the first three months of 2025 (Q1 2024: 8.3%). Adjusted EBIT in the first quarter of 2025 was primarily impacted by the decline in sales in the period from January to March 2025. In addition, higher personnel expenses due to global wage inflation, among other factors, had a negative impact on the adjusted EBIT margin in the first three months of the current fiscal year. In contrast, a reduction in material expenses and other operating expenses had an increasing effect on margin development in the first quarter of 2025. The latter was mainly due to a significant decrease in expenses for temporary staff and other personnel-related expenses compared with the same quarter of the previous year, as well as lower write-downs on receivables. 

 

 

NORMA Value Added (NOVA)

NORMA Value Added (NOVA) amounted to EUR -23.4 million in the first three months of 2025 (Q1 2024: EUR -7.6 million). This was mainly due to the decline in adjusted EBIT and a disproportionate increase in the tax rate.

 

Financial result

The financial result amounted to EUR -4.7 million in the first quarter of 2025, and therefore improved compared to the same period of the previous year (Q1 2024: EUR -6.2 million). This development was mainly driven by lower net interest expense (Q1 2025: EUR -4.1 million; Q1 2024: EUR -5.6 million), which resulted from a decrease in interest expense for liabilities to banks. This positive development is attributable, among other things, to the unscheduled repayment of syndicated loans in the fiscal year 2024 and the scheduled repayment of promissory note loans, which also took place last year. Against this backdrop, interest expense was correspondingly higher  in the first quarter of the previous year. In the first three months of 2025, net currency losses of EUR 0.3 million (Q1 2024: EUR -0.1 million) were included in the financial result.

 

 

Adjusted net profit for the period and adjusted earnings per share

The adjusted net income (after taxes) for the current reporting period was negative and amounted to EUR -0.3 million (Q1 2024: EUR 12.4 million). This development is attributable to the following factors: on the one hand, the significantly lower adjusted EBIT weighed on performance in the first three months of 2025. On the other hand, this resulted in a high tax rate in the current reporting quarter due to the relation between significantly lower adjusted earnings before taxes and the actual tax expense, which was relatively higher. The latter was attributable to the non-recognition of deferred taxes on losses at a German company. Based on an unchanged number of 31,862,400 shares, this resulted in negative adjusted earnings per share of EUR -0.01 (Q1 2024: EUR 0.39).