General Economic and Industry-Specific Conditions

Negative surrounding factors place burden on the global economy, growth momentum slows down

The combination of rising interest rates, high inflation, bottlenecks in intermediate products and significantly rising energy and transport costs, coupled with high geopolitical risks, are increasingly placing a burden on the global economy. However, the greatest factor of uncertainty relates to the further course and duration of the war in Ukraine. In particular, the consequences of a possible energy and global hunger crisis emerging as a result of the war represent a strong potential burden for the global economy. In addition, there is a high probability that renewed waves of infection could occur starting in the fall of 2022 as part of the corona pandemic and place an additional burden on the global economy. Experts largely agree that raw material costs in particular will remain high for an extended period and inflation will continue to rise. In response, the world’s central banks are likely to continue their restrictive course. Considering these pressures, the International Monetary Fund (IMF) lowered its forecast for global economic growth in 2022 in July 2022 to 3.2% (last forecast: 3.6%). For emerging and developing countries, growth of 3.6% is expected in total - but in China a noticeable slowdown in the pace of growth in connection with the effects of the corona lockdowns. According to the IMF, the industrialized countries are set for weak expansion of 2.5%. The US economy is expected to grow by 2.3%, while the euro zone is estimated to expand by 2.6%. However, a recession cannot be ruled out in the event of an energy crisis in the euro zone.

Development of the German economy strongly dependent on surrounding factors

According to estimates by the German Bundesbank and leading economic research institutes (ifo, IfW Kiel), the German economy is likely to gain momentum in the second half of 2022. This assumption is based on the premise that the pace of inflation, primarily in energy costs, will level off, supply bottlenecks will ease and, as a result, exports will pick up again. While private investment is likely to pick up in the second half of 2022, particularly in construction and equipment, government investment is assumed to rise sharply in defense, among other areas. However, this scenario assumes that there is no further aggravation in connection with the continuation and impact of the Ukraine war. If, on the other hand, energy supplies from Russia are discontinued or further sharply reduced in a negative scenario, economic output is likely to slump significantly. Accordingly, there is currently an increased economic risk. In light of this situation, the German Bundesbank expects Germany’s gross domestic product to grow moderately by 1.9% (ifo: 2.5%, IfW: 2.1%). According to current estimates, the IMF also expects growth in Germany of 2.1%.


in %
















Euro zone5








1_Revised data; 2_IMF; 3_US Department of Commerce; 4_National Bureau of Statistics (NBS), 5_Eurostat/ECB; 6_German Bundesbank; Data as of July 29, 2022.

Mechanical and plant engineering with positive trend thanks to high order backlog and investment programs

The mechanical engineering sector is currently operating in a perceptible field of tension. On the one hand, the prospects have deteriorated due to the turnaround in interest rates and flatter production trends in important customer industries; in addition, the war in Ukraine and its negative consequences and the resulting geopolitical instability are dampening European demand for capital goods. On the other hand, the industry continues to benefit from government investment programs launched in the wake of the corona crisis. Furthermore, not only is investment in digitalization, climate protection and the energy turnaround likely to be driven forward, but demand for machinery and equipment in the industrialized countries in favor of regionally closed value chains should also increase. Nevertheless, the previous production target of the German Engineering Federation (VDMA) for German machinery and plant production of 4% in real terms in 2022 is no longer achievable. This is due to the strain caused by supply chain problems and the consequences of the war in Ukraine. Instead, machinery and equipment production is now expected to increase by 1% in real terms in the second half of 2022, supported by the high order backlog - provided there is no abrupt interruption to energy supplies.


in %


Q1 2022

Q2 2022



– 0.8

April: – 5.8May: – 2.2

According to VDMA2


– 0.43

Order inflow2



5M: 5.0




5M: 4.0




5M: 6.0

1_German Central Bank / Destatis. (adjusted for working days).

2_VDMA. 3_VDMA-Forecast for production from May 30, 2022.

Automotive remains a growth industry, but with lower volume potential

According to current estimates by LMC Automotive (LMCA), the outlook for the automotive industry has deteriorated most recently. Although sales and production volumes are expected to pick up in the second half of 2022, the automotive industry is likely to remain under considerable pressure for the time being. The war in Ukraine and supply chain problems in particular will remain negative drivers. According to the LMCA, other influencing factors, especially for the long-term outlook, result not only from the poor economic situation, but also from potential new material bottlenecks. These include in particular the availability of lithium for electric drive batteries. On the customer side, demand is also forecast to cloud over due to high inflation combined with rising interest rates. On this basis, LMCA expects low growth coupled with low annual volumes, which in the light vehicles (LV) segment are expected to decline by around 5 million per year by 2034. In total, the experts forecast global production of 81.5 million LVs in 2022, an increase of 6.0% compared to the previous year. While a decline of 1.0% is expected for vehicles with conventional combustion engines, a double-digit increase is expected in the area of electric vehicles (EVs). This estimate thus also implies that the global production share of vehicles with classic powertrains is likely to drop to 76.9% in 2022 (2021: 83.1%). By comparison, production in the commercial vehicles (CV) sector is expected to decline by 11.1% in 2022 as a result of the economic situation.



in %




Production of light vehicles




Traditional combustion engines

– 5.0

– 1.0










Sales of light vehicles


– 0.2


Truck production

– 0.1

– 11.1


Truck sales


– 13.6


1_ Revised data according to LMC; source: LMC Automotive.

Construction industry in China under pressure, significant slowdown expected in Europe

The situation in China’s construction industry remains very tense due to liquidity problems and high debt. Even though the volume of all building investments currently under construction has only fallen slightly so far despite the lockdowns, new construction starts in the first half of 2022 have slumped massively. The decline was 35.4% in the area of residential construction. Commercial construction also showed a similar trend. This signals trends of a sharp decline in Chinese construction output in the upcoming months of 2022. For Europe, the Euroconstruct industry network (including ifo) forecasts a cooling of industry growth in 2022 after the strong prior year, due to both the war in Ukraine and the multiple burdens from higher interest rates and material costs. Above-average growth is expected primarily in the UK, Ireland, Spain and France. By comparison, Germany’s construction output is estimated to stagnate at a high level according to the latest analyses. In Germany, it is also expected that growth in western Germany will be more positive than in eastern Germany.

End of the boom in US residential construction foreseeable due to rising interest rates, water industry continues growth course

In the US, the construction boom continues to be driven by private residential construction. Accordingly, building permits (896 thousand units, +2.2%) and housing starts (840 thousand units, +5,9%) significantly exceeded the volume of completions (646 thousand units, -0.6%) in the first six months of 2022. Additional impetus is coming from commercial construction and the healthcare sector. Accordingly, the current key data signals an intact upswing. Notwithstanding this, a noticeable cooling of the construction boom is to be expected. One reason for this is the year-on-year increase in construction costs and mortgage interest rates.

The experts at JBREC (John Burns Real Estate Consulting) recently revised their growth forecast for the housing market for the full year 2022 to 3% (prior forecast: 5%). A key driver of the more moderate growth forecast is also relaxed corona restrictions, which contribute to a greater proportion of disposable income being spent on other or non-construction activities.

According to estimates by FMI Corporation, a leading provider of consulting and investment banking services for the construction industry, the strong growth in residential construction investment will slow to 5% in 2022 (2021: +8%). This will particularly affect the single-family housing and renovation sectors. In this context, water supply is one of the few segments in the non-residential construction segment that is expected to grow at 5% in 2022. This is due in particular to spending under the so-called “US Infrastructure Investment & Jobs Act.”

The recently published Nonresidential Construction Index (NRCI) indicates continued optimism at 53.8 points, although this had stood at 54.8 points in the previous quarter. The positive sentiment is supported by continued strong demand as well as the expansion of the order backlog, whereas the challenges lie mainly in ongoing economic uncertainty as well as high material and labor costs.



in %




Western Europe3




Eastern Europe3








1_Revised values; 2_Euroconstruct / ifo Institute (forecast as of June 2022); 3_Euroconstruct / ifo Institute

Future development of NORMA Group SE

NORMA Group does not plan any material changes to its company objectives and strategy. A detailed description of the strategic objectives is provided in the 2021 ANNUAL REPORT.

The development of NORMA Group’s key operating earnings figures was negatively impacted by a number of factors in the first half of 2022. The main reasons for this are unexpected further increases in the cost of materials due to the sharp rise in gas and energy prices, which could not be fully compensated for by increases in selling prices, a continued rise in high inflation, the ongoing effects of the war in Ukraine, the risk of further lockdowns in China as well as higher logistics and other operating costs, including IT implementation costs.

The Management Board does not expect the challenging situation to ease significantly in the second half of 2022 either and therefore adjusted its forecast for the adjusted EBIT margin and net operating cash flow on July 21, 2022, taking the above-mentioned factors into account and based on current figures for the second quarter of 2022 and the expected sales performance for the remainder of fiscal year 2022.

Accordingly, the management now expects an adjusted EBIT margin of around 8% for fiscal year 2022 (previous forecast: “around 11%”). For net operating cash flow, the management expects a figure of around EUR 60 million in fiscal year 2022 (previous forecast: “around EUR 100 million”).

With regard to the development of organic Group sales, the Management Board is sticking to the forecast published in the 2021 Annual Report and confirmed in the interim announcement for the first quarter of 2022 (“mid to high single-digit organic Group sales growth”). In the EJT business, the Management Board now expects mid-single-digit organic sales growth for the full year 2022 (previously: "mid to high single-digit organic sales growth"), while the Management Board now forecasts high single-digit organic sales growth (previously: "Mid to high single-digit organic sales growth") for the SJT business.

Taking into account the reasons and factors outlined above, a higher cost of materials ratio (previously: "Stable cost of materials ratio") is anticipated for the financial year 2022. By contrast, the personnel cost ratio is expected to improve compared with the previous year (previously: "Stable personnel cost ratio"), assuming that sales continue to develop well.

With regard to NOVA (NORMA Value Added) the Management Board assumes, based on current knowledge, that it will reach a value in the corridor between EUR – 20 million and EUR 10 million in the full year 2022 (previously: "Between EUR 20 million and EUR 40 million").

With regard to adjusted earnings per share, management now expects a significant decrease in fiscal 2022 (previously: "Significant increase in adjusted earnings per share").

The other key financial figures do not deviate from the values forecast in the 2021 Annual Report. The Management Board’s assumptions on the development of the key performance indicators in fiscal year 2022 are shown in the table below.


Organic Group sales growth

Mid to high single-digit organic Group sales growth

EJT: Mid single-digit organic sales growth

SJT: High single-digit organic sales growth

EMEA: Mid single-digit organic sales growth

Americas: Mid to high single-digit organic sales growth

APAC: Mid to high single-digit organic sales growth

Cost of materials ratio

Higher cost of materials ratio compared to previous year

Personnel cost ratio

Improvement of personnel cost ratio compared to previous year

R&D investment ratio

Around 3% of sales

Adjusted EBIT margin

Around 8%

NORMA Value Added (NOVA)

Between EUR – 20 million and EUR 10 million

Financial result

Up to EUR – 10 million

Tax rate

Between 27% and 29%

Adjusted earnings per share

Significant decrease in adjusted earnings per share

Investment ratio (excluding acquisitions)

Investment ratio between 5% and 6% of Group sales

Net operating cash flow

Around EUR 60 million

Dividend / payout ratio

Approx. 30% to 35% of adjusted Group earnings

CO2 emissions

Less than 10,000 metric tons of CO2 equivalents

Number of invention applications

More than 20

Number of defective parts rejected by the customer (parts per million/PPM)



1_Due to the increasing strategic relevance of the area of water management, NORMA Group has included R&D expenses in this area in the calculation since the reporting year 2020 and uses total sales as a reference value to determine the R&D ratio (previously 5% of EJT sales).

However, the updated forecast is made under the assumption that in the further course of the year 2022 no significant negative additional effects related to the corona pandemic, such as pandemic-related lockdowns in China, for example, or other influencing factors occur that could lead to a strong weakening of the global economy and to significant pressure on how the business develops for NORMA Group.

Potential influencing factors include, for example, the military activities as well as economic sanction measures in connection with the Russia-Ukraine crisis. NORMA Group does not operate any production or sales sites in Ukraine or Russia and the share of business with customers in Russia and Ukraine in NORMA Group’s total sales is less than 1%. Nevertheless, how the Russia-Ukraine crisis will affect the global economy and thus NORMA Group in the long term cannot be fully assessed at present.


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