Norma Group Ag Name Akt

Ladies and gentlemen, welcome to our Q2 2020 call. Together with me today is Andreas Dresch. Hello. Q2 and even the whole first half year of 2020 is a very exceptional half year. It's characterized by a crisis, by an infection, by corona. with a lot of negative implications on social life and also on economy. But we also see from the business side some positive signals, and I'm sure we will touch it later on. If I start with an overview on page two of our presentation that we send out and put on our homepage, we see that in Q2 2020, we have 191.5 million in sales versus 289 million last year, which means we are 33.8% down versus last year. And out of these 191 million of sales, we have an adjusted EBITDA of negative um minus 22.5 million versus last year 40.9 million we have to see that these 22.9 million miners also include the costs for our get on track program so that these costs of the change program of 21.5 million are included in that negative eva day so without that we would have been nearly flat in the second quarter 2020. Adjusted EBIT of minus 24.6 million also impacted by the get on track and by the COVID implications. Net operating cash flow was positive at 1.9 million. Last year we had 28.8 million. And we also have to see here in that definition of operating cash flow, it also includes the 21.5 million costs related to the change program get on track. If we would exclude that, we would have been at 23.4 million in terms of net operating cash flow. Balance sheet, we have an equity ratio of 40.9%. A slight decline versus last year, December, which was at 41.6%. Net debt went down versus December, $414 million versus $421 million. We had our annual general meeting this year in June. We changed the date based on corona implications as well. all agenda items were approved by the AGM, including the dividend reduction to 4 cent minimum dividend that we paid. The guidance for 2020 is based on the impact and the coming developments of the COVID-19 pandemic. From today's perspective, still not possible. It cannot be reliably estimated by the time of our publication. And so far, guidance for fiscal year 2020 due to that current market volatilities, insecurities, what is going on with COVID wave X is not yet possible. If we move on to page three, our top line development, You see that the 191.5 million of Q2 sales in 2020 show a organic reduction of 33.9%. And for the full half year, with the sales of 445 million, we see an organic decline of 21.7 million based on the based on the COVID-19 related shutdowns. We have a weak EJT NDS business in all regions. But we also have to keep in mind a good topic, a good signal that we have a nice growth, a nice organic growth in the US water business with our subsidiary NDS. Euro 0.4 million. 0.1% positive currency effect in Q2. You see the regional split in increase in Asia Pacific to 15% of our sales in Asia Pacific. America's at 43% in EMEA, 42% as an overview on the sales development. And we go in a couple of details on the next page, page four. We see the organic development of our sales in the different regions for Q2 and even for the first half year. And there we see that the second quarter organic growth in EMEA is at 45.5% negative. The EJT business was heavily impacted by the production reductions in the consequence of the COVID-19 shutdowns, which led to that organic decline. And in the first half here, an organic decline of 29.4% versus last quarter 2020, 52.6%. We had in Americas an organic decline of 30% in the quarter, 20.6%. What we see in Americas is what I mentioned regarding the water management business growing at 4.4% in the first half year 2020, which is a very good development. The water management in US was defined as critical infrastructure. as important business for the global infrastructure. So we see a very good development in our water management business, Americas. APEC region, we have an organic decline of 7.2%, already showing some growth in Q2 2020 for the EJT business, where we see that after the COVID-19 shutdowns, a nice recovery meanwhile. So that we have overall for H1, 0.7% decline for the EJT business. But in Q2, an EJT related growth of 5.4%. So that's the With the view on water management business in the U.S. and already starting automotive business in APEC, especially in China, we see some positive impacts. EMEA and America's automotive are still extremely weak. If you have a look on the margin development on page 5, we see that EBITDA margin was, of course, highly influenced by the costs related to the change program get on track, which we do not adjust. So these costs of 22 million are included in the second quarter and in the first half here. EBITDA margin excluding these costs related to the change program, 22 million, is at 5.9% in the first half here. And EBITDA, if we exclude the get on track, one-off cost is at nearly 11% for the first half of 2020. So this gives an overall overview in the first glance. And if you go into some details of the margin on page six, we see that Cross-profit margin decreased in the second quarter if you compare it to the second quarter 2019. We have some destocking and a quite stable material cost ratio. Personal costs in Q2 are at 44.6%. We have to keep in mind that the far most portion of our get on track restructuring measures and also costs are related to personal aspect and so far a quite high personal cost ratio in relation to sales. As mentioned, mainly related to our change program get on track. OPEX operating income and expenses ratio only decreased to 15.4% in Q2 2020 mainly based also or mainly due to the reduction of temp workers which reduced the increase of OPEX in that area. We had a significant reduction of employees mainly also temp workers in Q2 so that Other operating income and expenses only increased to 15.4%. Adjusted EBITDA margin in H1 then decreased 1%. Adjusted EBITDA margin by 0.1% in H1. And once again, this includes 22 million costs related to our change program, Get on Tracks. On page seven, where we show the operational adjustments, you see what we mentioned meanwhile, a couple of times, we do not adjust these costs for get on track. So in the EBITDA line, you see no adjustments, zero. So reported EBITDA and adjusted EBITDA is the same. You see in the EBIT A area, depreciation from PPA, 1.5 million. And you also see in the EBIT area amortization PPA of 11.3 million. So overall EBIT impact at 12.8 million. So we only adjust for M&A related costs, no other costs anymore in 2020. The net profit impact out of these Purely PPA-driven adjustments is 9.6 million. So earnings per share adjustments, 0.31 euros. So that adjusted earnings per share is minus 0.22 euros per share. This is also reflected on page 8 when we are showing the earnings per share. Adjusted and reported EPS are as also the profit lines negatively impacted by the COVID-19 pandemic and costs related to the change program get on track. And we paid, you see it on the right-hand side, 4 cents per share as dividend, which is the minimum dividend we have to pay. which was approved by the annual general meeting, which was held virtually. On a debt and liquidity side, which starts on page nine, we see that the cash increased versus December last year to now $193 million cash. And the net debt overall was reduced to $414 million, coming from $421. So that we have a reduced net debt and an improved cash position, which is an important basis for these volatile and unsecure months and weeks. So from a liquidity perspective, we believe we are well positioned. we have to see that leverage is at 3.7. And we also have to regard that regarding the contract definition of the leverage, we can exclude for the leverage calculation based on the financing contracts, the costs related to the change program get on track. So that the relevant leverage for the financing contracts amount to 3.1 end of June 2020. The covenant for the financing contracts, and this is what we see on page 10, which we included to see the solid liquidity profile. The covenant is at 3.75. Once again, 3.1. is our leverage in comparison to these contracts currently. We showed on page 10 the maturity profile of our financial instruments, which shows a very solid development and solid situation so that we have a solid financial position currently based on 193 million of cash and a credit line that we have of around 130 million. So we also are prepared if there are some volatilities, whatever COVID wave X, we feel that from a liquidity perspective, we are very well positioned. A solid long-term maturity profile, no covenant breach possible at least until March 2021. Repayments scheduled for 2020 are already repaid or prolonged. This is what we showed in our graph. And once again, overall available committed credit lines, 130 million, besides our cash of 193 million. The cash flow development on page 11 shows that we have a Solid cash flow development in the course of 2020. We start in the definition of that net operating cash flow with the EBITDA. And we have to keep in mind that this EBITDA degrees due to COVID-19 related shutdowns and costs that are related to the change program get on track. In the first half year, 22 million. We performed a strict working capital management, which led to an inflow of 20 million in Q2. We further reduced our factoring program from an overall perspective to 51 million on June 30, coming from 70 million in 2019 December. So we reduced that supply chain financing by 19 million. CapEx, of course, were monitored very strictly. We have CapEx spending that decreased to $7 million in the second quarter and $14 million in the first half year. So we have significantly reduced these CapEx spending also in H1. And so far, we have a positive net operating cash flow despite significant decrease in EBITDA. And once again, this EBITDA includes the 22 million for measures for the Get on Track program. As you all know, page 12, we have a strategic performance indicator, which is normal value added with the decreasing EBIT Also, the normal value added is impacted negatively, so that it goes to minus 40 million in the first half here, 2020. On page 13, we showed the actual information on our Get on Track program, costs and benefits in the timeline. We accelerated the Get on Track program also in the course of the COVID-19 pandemic. We did some activities earlier. We have additional activities. So overall, we accelerated this program. We had 21.5 million costs in Q2 and 22 million in H1 related to location projects. led to increased costs in 2020, full year of around 30 million. We mentioned in the former presentation an amount of 10 million. So we have accelerated and speed up in this program. First benefits include improvements in purchasing and product portfolios so that we Already in 2020, we'll see first benefits out of that program, so that we expect the net impact for the full year 2020 out of that program costs minus first benefits of around $25 million. And we see that the positive impact of that program will amount to roughly $50 million. We see the positive impact starting in 2021-22 and going up to 50 million in 2023, so that we, on the long-term perspective, will see a positive impact per year of around 50 million from that get-on-track program, which is shown here as costs and benefits and timeline in the net impact. As I mentioned earlier, the current situation driven by the corona pandemic is extremely volatile as an exceptional half year. And so far, the impact of the COVID-19 pandemic from today's perspective cannot be reliably estimated, which leads us to not guiding currently for the full year 2020. Guidance for fiscal year 2020 is due to that conditions, market, pandemic, not yet possible from today's perspective. Overall, we see a lot of negative impacts in H1, but also positive, very positive signals. If you look into our business, once again, water management business in the US, automotive business, China, very well prepared from a liquidity perspective. And if you would not have had $22 million or $21.5 million of get-on-track costs, our EBITDA margin would have been at 5.9%. So that's the current situation, tough situation, but we expect for the second half here more positive development for the next coming months. Thanks for listening, and of course, we are happy to get your questions and discuss with you.

We've received the first question. It is from Ingo Schachel of Commerzbank. Please go ahead. Your line is now open.

Thank you. My first question would be on your free cash flow performance. benefited from a very strong network and capital release and on top of that you've been able to reduce factoring quite notably in the second quarter on both aspects, network and capital and factoring. Just wanted to get a sense of what you expect for the rest of the year. Is it just a short-term effect relating to lower activity levels and we should expect a complete reversal in the second half or do you think some of those effects should be sustainable in the mid-term?