13. Financial Instruments:

The following disclosures provide an overview of the financial instruments held by the Group.

The financial instruments by class and category were as follows:

 

13. (a) Trade Receivables Held for Transfer and Transferred

 

i. Transferred trade receivables

Subsidiaries of NORMA Group in the segments EMEA and Americas transfer trade receivables to non-Group buyers under factoring and ABS transactions. The details and effects of the respective programs are presented below.

 

a) Factoring transactions

A factoring agreement was concluded in fiscal year 2017. The maximum volume of receivables under this agreement was increased from EUR 10 million as of December 31, 2022 to EUR 18 million during the first half of 2023.  Under this agreement NORMA Group subsidiaries in Germany, Poland and France sell trade receivables directly to the external buyers. As of June 30, 2023, receivables in the amount of EUR 7.5 million were sold (Dec 31, 2022: EUR 7.6 million), of which EUR 0.7 million (Dec 31, 2022: EUR 0.0 million) were not paid out as purchase price retentions held as security reserves and recognized as other financial assets.

The continuing involvement in the amount of EUR 68 thousand (Dec 31, 2022: EUR 70 thousand) was recognized as other financial liability and comprises the maximum loss for NORMA Group resulting from the late payment risk on the receivables sold as of the reporting date. The fair value of the guarantee or the interest payments to be assumed was recognized at EUR 5 thousand (Dec 31, 2022: EUR 6 thousand).

NORMA Group established another factoring program in 2018. As of December 31, 2022, the agreed maximum receivables volume was USD 24 million. In the first half of 2023, the volume was reduced to USD 16 million. In the course of this factoring program, a subsidiary of NORMA Group in the United States sells trade receivables directly to buyers outside the Group. Receivables in the amount of EUR 13.9 million were sold under this factoring program as of June 30, 2023 (Dec 31, 2022: EUR 21.9 million), of which EUR 2.8 million (Dec 31, 2022: EUR 0.0 million) were not paid out as purchase price retentions held as security reserves and recognized as other financial assets.

 

b) ABS program

NORMA Group entered into a revolving receivables purchase agreement with Weinberg Capital Ltd. (special purpose entity) in fiscal year 2014. The agreed structure provides for the sale of trade receivables of NORMA Group via an ABS transaction and was successfully initiated in December 2014. NORMA Group sells the receivables to the special purpose entity.

Under this asset-backed securities (ABS) program with a volume of up to EUR 20 million, domestic Group companies of NORMA Group sold receivables in the amount of EUR 12.5 million as of June 30, 2023 (Dec 31, 2022: EUR 12.6 million), EUR 0.7 million (Dec 31, 2022: EUR 0.6 million) of which were not paid out as purchase price retentions held as security reserves and recognized as other financial assets.

A continuing involvement in the amount of EUR 233 thousand (Dec 31, 2022: EUR 234 thousand) was recognized as other financial liability and comprises the maximum amount that NORMA Group could have to repay under the assumed default guarantee and the expected interest payments until receipt of payment with regard to the carrying amount of the transferred receivables. The fair value of the guarantee or the interest payments to be assumed was recognized and recognized in profit or loss as other liability in the amount of EUR 171 thousand (Dec 31, 2022: EUR 171 thousand).

NORMA Group entered into yet another revolving receivables purchase agreement with Weinberg Capital Ltd. (program special purpose entity) in fiscal year 2018 on the sale of trade receivables. The agreed structure provides for the sale of trade receivables of NORMA Group via an ABS transaction and was successfully initiated in December 2018. The receivables are sold by NORMA Group to the special purpose entity.

Under this ABS program with a volume of up to USD 20 million, US group companies of NORMA Group sold receivables in the amount of EUR 11.9 million as of June 30, 2023 (Dec 31, 2022: EUR 13.9 million), EUR 0.7 million of which were not paid out as purchase price retentions (Dec 31, 2022: EUR 0.7 million) held as security reserves and recognized as other financial assets.

A continuing involvement in the amount of EUR 644 thousand (Dec 31, 2022: EUR 753 thousand) was recognized as other financial liability and comprises the maximum amount that NORMA Group could have to repay under the assumed default guarantee and the expected interest payments until receipt of payment with regard to the carrying amount of the transferred receivables. The fair value of the guarantee or the interest payments to be assumed was recognized and included in profit or loss as other liability in the amount of EUR 183 thousand (Dec 31, 2022: EUR 214 thousand).

 

ii. Trade receivables earmarked for transfer

In the Group’s view, trade receivables included in these programs but not yet disposed of beyond the closing date cannot be allocated to either the “hold” or the “hold and sell” business model. Accordingly, they are recognized in the category “fair value through profit and loss” (FVTPL).

 

13. (b) Financial Liabilities and Net Debt

 

i. Loans

The maturities of the long-term syndicated loans as well as the promissory note loans and commercial paper as of June 30, 2023, are as follows:

The maturities of the syndicated loans and the promissory note loans as of December 31, 2022, are as follows:

Parts of the syndicated loans were hedged against interest rate changes by way of derivatives.

 

ii. Leases

The maturities of the nominal values and the carrying amounts of the lease liabilities as of June 30, 2023, are as follows:

 

iii. Other financial liabilities

Other financial liabilities are as follows:

 

a) Liabilities from ABS and factoring

The liabilities from ABS and factoring include liabilities from the remaining continuing involvement recognized within the ABS and factoring programs in the amount of EUR 945 thousand (Dec 31, 2022: EUR 1,057 thousand), liabilities from recognized fair values of default and interest rate guarantees in the amount of EUR 359 thousand (Dec 31, 2022: EUR 390 thousand) and liabilities from payments from customers for receivables already sold within the ABS and factoring programs as part of the accounts receivable / receivables management carried out by NORMA Group in the amount of EUR 5,179 thousand (Dec 31, 2022: EUR 8,960 thousand).

 

iv. Net debt

Net financial debt as of June 30, 2023, was as follows:

NORMA Group’s financial liabilities were 1.5% above the level as of December 31, 2022.

Loans amounting to EUR 5,251 thousand were repaid and loans amounting to EUR 13,250 thousand were taken out in the first six months of the fiscal year. Accrued interest expenses increased loan liabilities, and cash-neutral currency effects on foreign currency loans had a reducing effect on the USD tranches of loan liabilities.

The increase in liabilities from leases resulted from additions in the area of rights of use due to newly concluded leases, which more than offset the changes due to repayments (payment of lease installments).

The decrease in other financial liabilities mainly resulted from the repayment of liabilities from ABS and factoring.

Net debt increased by EUR 77,202 thousand, or 22.1%, compared to December 31, 2022.

The main reason for this was a decrease in cash and cash equivalents due to net cash outflows from total cash outflows from operating activities in the amount of EUR 7,059 thousand, net cash outflows from the acquisition and sale of non-current assets of EUR 31,323 thousand, and from the payment of the dividend in the amount of EUR 17,524 thousand.

Furthermore, current interest expenses in the first six months of 2023 and the increase in lease liabilities in the first six months had an increasing effect on net debt. NOTE 18 “DISCLOSURES RELATING TO THE CONSOLIDATED STATEMENT OF CASH FLOWS”.

 

13. (c) Derivative Financial Instruments

Derivative financial instruments held for hedging purposes are recognized at their respective fair values. They are classified entirely within Level 2 of the fair value hierarchy.

The derivative financial instruments are as follows:

 

Foreign currency derivatives

As of June 30, 2023, foreign currency derivatives with a positive fair value of EUR 61 thousand and foreign currency derivatives with a negative fair value of EUR 0 thousand were held to hedge cash flows. In addition, foreign currency derivatives with a positive market value of EUR 107 thousand and foreign currency derivatives with a negative market value of EUR 1,426 thousand were held to hedge changes in fair value.

Foreign currency derivatives used to hedge cash flows are used to hedge against fluctuations in the exchange rate arising from operating activities. Foreign currency derivatives used to hedge changes in fair value are used to hedge external financing liabilities and intercompany monetary items against fluctuations in the exchange rate.

 

Interest rate hedging instruments

Parts of NORMA Group’s external financing were hedged against interest rate fluctuations by using interest rate swaps. As of June 30, 2023, interest rate hedges with a positive fair value of EUR 6,112 thousand were held. The interest rate hedges had a notional amount of EUR 58,310 thousand (Dec 31, 2022: EUR 65,629 thousand). As of June 30, 2023, the fixed interest obligation resulting from the hedges was 1.41%, the variable interest rate was the 3-month LIBOR. The maximum default risk as of the reporting date is the fair value of the derivative assets recognized in the Consolidated Statement of Financial Position.

No expense was recognized from ineffective portions of cash flow hedges in the first six months of 2023 and 2022.

The effective portion from cash flow hedges recognized in other comprehensive income and the reserve for hedging costs developed as follows, excluding deferred taxes:

Gains and losses on interest rate swaps recognized in equity in the hedge reserve on the reporting date are recognized in profit or loss on an ongoing basis until the loan liabilities are repaid. The gains and losses on foreign currency derivatives recognized in equity in the hedge reserve are short-term and are recognized effectively in profit or loss within one year.

An overview of the gains and losses arising from fair value hedges recognized within the financial result is as follows:

 

13. (d) Fair Values of Financial Instruments

The following tables present the valuation hierarchy according to IFRS 13 of NORMA Group’s assets and liabilities measured at fair value as of June 30, 2023, and December 31, 2022, respectively:

As in the previous year, there were no transfers between the individual levels of the valuation hierarchies in the current period.

No terms of a financial asset that would otherwise be past due or impaired were renegotiated during the fiscal year.

Financial instruments held for hedging purposes are recognized at their respective fair values. They are classified in full in Level 2 of the fair value hierarchy.

The fair value of interest rate swaps is calculated as the present value of expected future cash flows. The fair value of forward exchange contracts is calculated using the forward exchange rate on the balance sheet date and the result is then presented at its discounted present value.

As of June 30, 2023, and December 31, 2022, no financial liabilities were assigned to Level 3 of the measurement hierarchy.

Financial instruments that are recognized in the Consolidated Statement of Financial Position at amortized cost but for which the fair value is disclosed in the notes are also classified in a three-level fair value hierarchy.

The fair values of the fixed-interest tranches of the promissory note loans, which are carried at amortized cost but for which the fair value is disclosed in the notes, are determined on the basis of the market yield curve using the zero coupon method, taking credit spreads (Level 2) into account. Interest accrued as of the reporting date is included in the amounts.

Trade and other receivables, as well as cash and cash equivalents, have short-term maturities. Their carrying amounts as of the reporting date correspond to their respective fair values, as the effects of discounting are immaterial.

As trade accounts payable and other financial liabilities have short maturities, their carrying amounts approximate their fair values.