Letter from the Management Board
Dear shareholders, customers and business partners,
We look back on six eventful months in 2022, which have shaped our development in various ways.
Our Group sales rose markedly by 9.5% to EUR 622.3 million in a market environment characterized by numerous challenges. The Americas region was the main sales driver. There, we recorded noticeable year-on-year sales growth in both the Water Management and the Mobility and New Energy segments, due to positive effects from higher selling prices. Sales in the Asia-Pacific region also developed positively, mainly due to good business in Standardized Joining Technology.
By contrast, the operating earnings figures in the first half of 2022 partly did not meet our expectations. Adjusted EBIT reached EUR 52.7 million and the adjusted EBIT margin of 8.5% was significantly below that of the previous year. Net operating cash flow also decreased to EUR 9.8 million and was thus below the level of the prior-year period. We are not and cannot be satisfied with these results, although there were many reasons for the decline in operating earnings. These include unexpected further increases in the cost of materials due to sharply higher gas and energy prices, which we were unable to fully offset by the increases in our selling prices. In addition, increasingly high inflation, the continuing impact of the Ukraine crisis and the risk of further lockdowns in China had a noticeable negative impact. Higher logistics costs and other operating costs, including IT implementation costs, also had a negative impact on operating earnings in the first six months of 2022.
We will have to deal with the aforementioned factors in a targeted manner in these volatile times. In addition, it is becoming increasingly clear that the globally challenging situation will not ease significantly in the second half of 2022. For this reason, we adjusted our forecast for the adjusted EBIT margin from previously around 11% to now around 8%, taking expectations for the remaining fiscal year 2022 into account. For net operating cash flow, we have corrected our assumption in this context from previously around EUR 100 million to a figure of now around EUR 60 million. As the Management Board of NORMA Group, we are aware that these corrections represent severe cuts. Nevertheless, they were necessary due to the general conditions.
With regard to Group sales, we continue to expect to generate mid to high single-digit organic growth in fiscal year 2022. Looking ahead, we are confident that we will develop well. We have a clear strategy and are continuously building on our strengths. Our customers and product innovations for the relevant future markets of water management and electromobility are the focus of our business activities. In the first half of 2022, we have already seen significant successes in this regard. For instance, we launched the NORMA Marlin together with our partner SAB. We have thus strengthened our water business in Europe and expanded our position in the field of drinking water applications. In the Asia-Pacific region, our cooperation with Kanok was a significant step. We have been jointly offering compression fittings for agricultural applications to customers in Thailand since March 2022. Such partnerships are essential as our customers’ demand for efficient water management solutions is increasing worldwide. At the same time, they underscore that NORMA Group has a product portfolio that is in demand, innovative and helps solve the most pressing issues of our time.
Ladies and gentlemen, in addition to the strategically important successes, it is also important not to lose sight of the challenges. The second half of 2022 will continue to hold some of these in store for us: The war in Europe, the coronavirus and supply chain issues, but also inflation, price increases and the availability of materials will continue to accompany us. We will do everything we can to protect our workforce and limit the impact of environmental conditions on our business as best we can. And we will do this as one team. We are determined to strengthen NORMA Group’s competitiveness and remain committed to our long-term goal: to be the market leader for joining and fluid handling technology in current and future markets worldwide.
Please accompany us on our way!
These contents are part of the Non-financial Group Report and were subject to a separate limited assurance examination.