12. 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:

 

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

 

i. Transferred trade receivables

NORMA Group subsidiaries in the EMEA and Americas segments transfer trade receivables to external buyers as part of factoring and ABS transactions. The details and effects of the respective programs are presented below.

 

a) Factoring transactions

In the factoring agreement concluded in the 2017 fiscal year with a maximum receivables volume of currently EUR 10 million, NORMA Group subsidiaries in Germany, Poland and France sell trade receivables directly to the external buyers. Under this agreement, receivables amounting to EUR 4.8 million were sold as of June 30, 2024 (December 31, 2023: EUR 7.1 million), of which EUR 0.5 million (December 31, 2023: EUR 0.0 million) were not paid out as purchase price retentions held as security reserves and were recognized as other financial assets.

The continuing involvement in the amount of EUR 50 thousand (December 31, 2023: EUR 74 thousand) was recorded as other financial liabilities and includes the maximum loss for NORMA Group resulting from the late payment risk from the receivables sold as of the balance sheet date. The fair value of the guarantee or the interest payments to be assumed was recorded at EUR 4 thousand (December 31, 2023: EUR 6 thousand).

In 2018, NORMA Group established another factoring program with a maximum receivables volume of currently USD 27.5 million. As part of this factoring program, a subsidiary of NORMA Group in the US sells trade receivables directly to external buyers. Under this agreement, receivables amounting to EUR 18.2 million were sold as of June 30, 2024 (December 31, 2023: EUR 12.3 million), of which EUR 3.6 million (December 31, 2023: EUR 0.0 million) were not paid out as purchase price retentions, which are held as security reserves. These were recognized as other financial assets.

 

b) ABS program

In the 2014 fiscal year, NORMA Group entered into a revolving receivables purchase agreement with Weinberg Capital Ltd. (program special purpose vehicle). The agreed structure provides for the sale of NORMA Group’s trade receivables as part of an ABS transaction and was successfully initiated in December 2014. The receivables will be sold by NORMA Group to a program special purpose vehicle.

As part of this asset-backed securities (ABS) program with a volume of up to EUR 20 million, domestic Group companies of NORMA Group sold receivables amounting to EUR 8.4 million as of June 30, 2024 (December 31, 2023: EUR 9.5 million), of which EUR 0.5 million (December 31, 2023: EUR 0.5 million) were not paid out as purchase price retentions, which are held as security reserves. These were recognized as other financial assets.

A continuing involvement in the amount of EUR 166 thousand (December 31, 2023: EUR 188 thousand) was recognized as other financial liabilities and includes, on the one hand, the maximum amount that NORMA Group might have to repay from the default guarantee assumed and, on the other hand, the expected interest payments until receipt of payment in relation to the carrying amount of the transferred receivables. The fair value of the guarantee or the interest payments to be assumed was also recognized and recognized in profit or loss as other liabilities in the amount of EUR 134 thousand (December 31, 2023: EUR 152 thousand).

In the 2018 fiscal year, NORMA Group entered into another revolving receivables purchase agreement with Weinberg Capital Ltd. (program special purpose vehicle) for the sale of trade receivables. The agreed structure

provides for the sale of NORMA Group's trade receivables as part of an ABS transaction and was successfully initiated in December 2018. The receivables are sold by NORMA Group to a program special purpose vehicle.

As part of 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 11.6 million as of June 30, 2024 (December 31, 2023: EUR 11.4 million), of which EUR 0.7 million were not paid out as purchase price retentions (December 31, 2023: EUR 0.7 million), which are held as security reserves. These were recognized as other financial assets.

A continuing involvement in the amount of EUR 768 thousand (December 31, 2023: EUR 750 thousand) was recognized as other financial liabilities and includes, on the one hand, the maximum amount that NORMA Group might have to repay from the default guarantee assumed and, on the other hand, the expected interest payments until receipt of payment in relation to the carrying amount of the transferred receivables. The fair value of the guarantee or the interest payments to be assumed was also recognized and recognized in profit or loss as other liabilities in the amount of EUR 195 thousand (December 31, 2023: EUR 190 thousand).

 

ii. Trade receivables earmarked for transfer

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

 

12. (b) Financial Liabilities and Net Debt

 

i. Loans

The maturity of the long-term syndicated loans, as well as the promissory notes and the commercial paper, was as follows as of June 30, 2024:

The maturities of the syndicated loans and the promissory note loans as of December 31, 2023, were 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, 2024, were as follows:

 

iii. Other financial liabilities

Other financial liabilities are as follows:

 

a) Liabilities from ABS and factoring

Liabilities from ABS and factoring include liabilities from the remaining continuing involvement recorded under the ABS and factoring programs in the amount of EUR 984 thousand (December 31, 2023: EUR 1,012 thousand), liabilities from recognized fair values of default and interest guarantees in the amount of EUR 333 thousand (December 31, 2023: EUR 348 thousand) and liabilities from deposits from customers for receivables already sold within the ABS and factoring programs as part of the accounts receivable management carried out by NORMA Group in the amount of EUR 8,987 thousand (December 31, 2023: EUR 7,272 thousand).

 

iv. Net debt

Net financial debt as of June 30, 2024, was as follows:

NORMA Group’s financial liabilities were 1.7% above the level as of December 31, 2023.

Loan liabilities increased as of June 30, 2024, compared to December 31, 2023, due to cash-neutral currency effects on foreign currency loans and an increase in liabilities for accrued interest. In addition, the acquisition of Teco in the first quarter of 2024 resulted in the assumption of loan liabilities amounting to EUR 1,483 thousand.

The increase in other financial liabilities is mainly due to the increase in liabilities from ABS and factoring.

Net debt increased by EUR 22,131 thousand, or 6.4%, compared to December 31, 2023.

A reconciliation of the change is shown below:

NOTE 17: DISCLOSURE ON THE CONSOLIDATED STATEMENT OF CASH FLOWS

 

12. (c) Derivative Financial Instruments

Derivative financial instruments held as part of hedging transactions are accounted for at their respective fair values. They are fully classified in Level 2 of the fair value hierarchy.

The derivative financial instruments are as follows:

 

Foreign currency derivatives

As of June 30, 2024, foreign currency derivatives with a positive market value of EUR 0 thousand and foreign currency derivatives with a negative market value of EUR 48 thousand were held to hedge cash flows. In addition, foreign currency derivatives with a positive market value of EUR 484 thousand and foreign currency derivatives with a negative market value of EUR 31 thousand were held to hedge changes in fair value.

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

 

Interest rate hedging instruments

Parts of NORMA Group’s external financing were hedged against interest rate fluctuations using interest rate swaps. As of June 30, 2024, interest rate hedges with a positive market value of EUR 4,843 thousand were held. The interest rate hedges had a nominal value of EUR 60,586 thousand (December 31, 2023: EUR 58,910 thousand). As of June 30, 2024, the fixed interest obligation resulting from the hedges was 1.41%; the variable interest rate was the three-month LIBOR. The maximum default risk as of the reporting date is the fair value of the derivative assets reported in the consolidated statement of financial position.

In the first six months of 2024 and 2023, no expense was recognized for ineffective portions of the cash flow hedges.

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

The gains and losses from interest rate swaps recorded in the hedge reserve in equity as of the reporting date are continuously recorded in profit or loss until the loan liabilities are repaid. The gains and losses from foreign currency derivatives recorded in the hedge reserve in equity are short-term and are recorded effectively in profit or loss within one year.

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

 

12. (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, 2024, and December 31, 2023, 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 as part of hedging transactions are accounted for at their respective fair values. They are fully classified 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 foreign exchange contracts is calculated using the forward exchange rate at the balance sheet date and the result is then presented at the discounted present value.

As of June 30, 2024 and December 31, 2023, no financial liabilities were assigned to Level 3 of the fair value hierarchy.

Financial instruments that are carried at amortized cost in the consolidated statement of financial position 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 accounted for at amortised cost but for which the fair value is stated in the notes, are determined on the basis of the market interest rate curve using the zero-coupon method, taking credit spreads (Level 2) into account. The interest accrued as of the reporting date is included in the values.

Trade accounts receivable and other receivables, like cash and cash equivalents, have short-term maturities. Their carrying amounts correspond to their respective fair values as of the balance sheet date, as the effects of discounting are not material.

Since trade payables and other financial liabilities have short maturities, their carrying amounts approximate their fair values.