Norma Group Ag Name Akt

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our Analysts and Investors Conference 2021. I'm here together with our CEO, Dr. Michael Schneider. and also with our CFO Annette Stieve. This year, as you are all aware, things are different due to the pandemic. We are still not able to meet in person. So for this reason and in addition to the telephone conference that we usually offer, we also offer today a Zoom link where you can see us in addition to hearing us. Speaking about the pandemic, just to let you know, we all have been tested prior to this event and the doctors gave us the green light. Just some housekeeping facts. First, Michael and Anette will lead you through the presentation. This will take roughly 45 minutes. After this, there will be plenty of time to answer all your questions. If you want to ask a question, please dial in by phone. There is technically no possibility to ask questions via Zoom, so please dial in by phone as usual, and then after the presentation, the operator will take your questions. We are planning to end the conference no later than 3.30 German time. With having said this and without further ado, I will hand over now to Michael. Please go ahead.

Thanks Andreas. Ladies and gentlemen, a warm welcome to our conference 2021 from my side as well. We have an exceptional crisis here behind us. And the question now is, how did Norma Group develop in that crisis here? If you look in our sales, we saw a decrease of 13.4% versus last year. We had generated 952 million in 2020. Due to the COVID-19 pandemic, we had this decline in sales. 12.1% organic decline in sales for the full year 2020. We had an adjusted EBITDA, which also decreased versus last year. It decreased to 54.6 million. And our adjusted EBIT amounted to 45.3 million, also a decline versus last year. If you look on the margin side, adjusted EBITDA margin 5.7% in 2020 versus 13.2% last year, and an adjusted EBITDA margin of 4.8%, please keep in mind that this also includes the cost for GetOnTrack. If we would look at our pro forma EBIT A and EBIT, we would see margins at 8.8% and 7.8% respectively. In consequence of that, our adjusted earnings per share went down to 0.77 euro per share, reported earnings per share at 18 cent. And in that crisis year 2020, our normal value added went to minus 46 million, so we could not generate additional value in 2020 with that normal value added. Looking on the equity side, strong balance sheet was a slightly improved equity ratio at 41.7%. We decreased our net debt to 338 million euros due to a very strict cash collection, cash management in 2020. And the leverage in course of that cash management leverage was at 3.4 versus 2.2 at December 2019. We have to keep in mind that the leverage excluding costs related to get on track, which is the relevant basis for the financial contracts and for the covenants, is at 2.6. So we are far better than any covenant level. We had a good year in terms of cash flow. We saw net operating cash flow at 78 million, 78.3 million. Despite the challenging year 2020, we had that strong cash flow, even also keeping in mind that we had reduced our factoring program from 17 million 2019 to 52 million in 2020, which is also a negative cash impact. So overall, a good cash development. We will present a dividend proposal of 70 cents per share for the fiscal year 2020 to the annual general meeting on May 20. And also looking into our corporate responsibility targets and into our corporate responsibility development, which is integral part of our strategy. We saw that we reduced the CO2 emissions by 8.6% in 2020. We have a long-term goal for that. We want to reduce our greenhouse gas emissions by around 19.5% until end of 2024. We had a challenging year behind and now all eyes are on 2021 and beyond. If you have a short view on 2020, we saw that COVID-19 pandemic affected Norma Cruz business significantly. The P&L was impacted by costs due to faster implementation of our Get on Track change program. And as mentioned, we have a strong net operating cash flow and decreased net debt. What were main Norma Group actions in 2020? The strong focus on pandemic with health and safety measures, of course. We had a strict cash collection and cash management in 2020. Consistent realization of our Get on Track program, which went very well. We will come back to that later. We expanded our water management business, which grew in 2020. And we increased our e-commerce activities. That means looking forward to 2021, what do we expect? And of course, at the end of our presentation, we will focus more detailed on the guidance for 2021. We expect a strong sales growth, including rebound in automotive business in 2021. We will focus on water management in industry applications and of course we want to improve our margin to result in adjusted EBIT A margin of higher than 13%. We have a positive net effect of the Get on Track program which is expected to be at 25 million so that we are in line and on track with our change program. Looking on to the top line, the sales development 2020, a short view on the quarterly development. We see that we have generated sales of 952 million in 2020, which is a decline of 13.4%. Organically, we reduced our sales by 12.1%. And you see in the quarterly development that we started in the first quarter with minus 8.9% versus And the critical quarter last year was the second quarter in the, let's say, middle of the corona crisis, where we had a decline of nearly 34% organically in sales in Q2 2020. And that improved consistently in Q3 and Q4 last year, so that we already in Q4 last year saw an organic growth versus 2020. We see in this quarterly development very clearly the COVID-19 lockdown effect in the second quarter and that strong year-end performance, which gives us a good basis for 2021. If you look on a regional perspective, which is page 6 of the presentation, we look in the EMEA region. In EMEA, we generated sales of 410 million in 2020, which is a decline of 15.7%, 15.5% organic decline. which is related to the sharp drop of 52.6% in Q2 2020 in EJT sales due to the COVID-19 pandemic, related to the weak European automotive sector. EJT sales then very well recovered, 10.9% plus in Q4 2020. So that we overall in 2020 saw 15.5% negative organic growth. Also in our standardized products, standardized joining technology, distribution services business, we saw a drop of 15.5% mainly due to destocking in that crisis year. No impacts from M&A activities, currency effects slightly negative, mainly driven in EMEA by that organic decline. Moving to Americas, looking on page 7 of our presentation, in Americas region we had sales of 386 million and we had an organic decline in Americas of 12.4%. We saw that significant drop in sales of nearly 27% in the EJT business for 2020, also due to the COVID development, COVID pandemic-related weak automotive sector. Sales drop of 0.5% in the overall standardized products, standardized joining technology, where we have a different development between the water area and the industry applications. Water management products had a strong growth in 2020, where we saw an organic growth of 6.7% versus 2019. while we also saw a significant decline in the industry business, mainly also in America, due to the destocking in the course of the COVID-19 pandemic. No ammonia activities. We had a currency effect in the America sales of minus 2.1%. But the main impact, organic sales decline in 2020, driven by the COVID development, with a nice development of our water management business, which was defined as critical infrastructure in America, which helped us a lot. In the Asia-Pacific area, page 8, we generated sales of 157 million. Overall, for the full year, a slight decline of minus 1.2%. We saw a very good recovery of the EJT business starting already in Q2 2020. And except for Q1 2020, all quarters showed a year-on-year growth which is a very strong position in Asia-Pacific, driven mainly by the automotive market in China. Significant drop of our standardized products, standardized joining technology, mainly due to destocking and lockdowns also in Malaysia and India. No acquisition effects, currency effects at 2.6%, but also mainly impacted by the pandemic-driven sales decline, but with a different cycle as we saw in EMEA and Americas. On page 9 we see the revenue track record over the last 10 years and of course we do not like that chart going down in 2020. Overall we have a 10 years development of plus 7% CAGR in sales. And an organic development thereof, CAGR over the last 10 years of 2.7% for the whole group, normal group worldwide. What we saw in 2020 and which gives us a very good basis and what we see on page 10 is the balanced industry mix with two strong ways to the market which gives us a stable basis also in critical years as we saw it in 2020 where the water management business had a quite nice development. Looking into our balanced industry mix, we see that EJT, which is the inner circle, Engine Joining Technology, was around 58% of our sales, while standardized products, 42%, distribution, services, business, where we sell to wholesalers and retailers, 42% of our sales. Nice development in the water management area, where we increased our stake of sales to 23%, 19% industry application, so overall 42% standardized products sales, and EJT 58%. In percentage of sales, 19% sales in light vehicles, 7% in truck business, and industrial supplier business being quite stable at 32% abroad, and market business. With that balanced industry mix, we developed our business, and you see on page 11, over the long-term period since fiscal year 2011, the development of our margin, EBITDA and EBIT, And of course, we do not like that picture, seeing the margin going down in Q2 2020 in a negative area and going down. And so far, of course, this is not what we want to have for the future. We will significantly improve that. We will come to that a little bit later when we are talking about the guidance for 2020. But first I will hand over to Annette Stiewe who will give a little bit more detailed information on the financial figures of 2020 and so far Annette's views.

If you look a little closer, look to the P&L margins, starting with the material costs, we can see that the material costs all in all decreased by 12.6%. This is mainly due to declined volumes. Due to a significant drop in sales as well, the material cost ratio increased by 40 BPs. This is also impacted by, on the one hand, a very much higher portion of retail sales in the US from our water business and also by higher inbound freights in Americas, which are COVID impacted. Having a look to the gross profit, we can see that the gross profit decreased by 14.9%, including in particular a very good favourable destocking. We did a very good work in capital management and we had some inventory write-offs there. Looking to the personal expenses, we can see that the pro forma personal expenses ratio is at 28.7. Sorry, I think there... So looking to this, we increased slightly our personal cost expenses from 27.5 to 31.3. Taking in consideration that we didn't adjust our get on track costs of 25.2 here in particular, our pro forma personal cost would be 28.7. Having a closer look to the net expenses, we can see here that pro forma OPEX ratio went up to 14.6. This is impacted also by get-on-track costs, in particular consultancy costs in this case. Having looked to our adjusted EBITDA, we could reach an EBITDA percentage, a margin of 5.7%. Also having in mind that we didn't deduct and didn't adjust the get-on-track cost of in total 29.1%, we could have reached or would have reached normally a performer margin of 8.8%. Adjusted EBIT wise, our adjusted EBIT margin is at 4.8%. So, when we look then to our operational adjustments, the major message is that on EBITDA level, we didn't adjust anything. So, in particular, not the get-on-track activities. Our adjustments are mostly driven by the classical M&A things referring to depreciation, amortization, and the taxes. Out of that, so no adjustment on EBITDA level. That brings us from reported earning per share of 18 cents to adjusted earning per shares of 77 cents. Well, as we didn't adjust on EBITDA level and we didn't do any M&A activity in the year 2020, it is clear that our earnings per shares will decline in the upcoming years in terms of adjustments. So we declined from 59 cents to 48 cents up to 22 cents. Having a look then from the earnings per share, in particular to the dividend per share, we can see that in 2019 we had a minimum dividend of 4 cents due to the COVID pandemic, which is roughly something about 1.5% of our group net profit. This year we will propose or it will be proposed a dividend of 70 cent to the AGM and if we mix that up or have somewhere an average we are over both years something around 45%. Let's have a look to our working capital. In this moment you can see that our working capital decreased in 2020. We could drop that by 60 basic points. The most important things here are very strict cash collection, destocking and also keeping in mind that we reduced our supply chain financing programs by 18 million and dropped that down to a level of 52 million euro. At the end, having a look then to the equity ratio, we could see that our equity ratio for the time being is mostly determined or the equity decreased by €39 million. It's mostly determined by FX differences. I would say we contributed €6 million in terms of... Profit to the EBIT, when we see here the balance sheet also shrinking the balance sheet amount, we could increase our equity ratio slightly from 40.6% to 41.7%. In terms of net debt development, I think we could provide a very strong and solid development here. We could reduce our net debt by 19.6% from 421 million euro to 338 million euro. This is majorly due to strict cash collection and a strict cash management. We have a very strong cash position of 185 million euro, which finally leads us to a financial covenant, I would call it like this, because the covenant for our financial contracts is by 2.6, which is far better than any covenant level all in all. This prepares us very well for the future. It gives us the headroom for future operational business. And, well, the motto can be in this, all eyes on 21 and beyond. Concentrating now on the maturity profile, when we have a look here to our financial instruments in 2021, we are well underway already in the negotiations for the repayment of our promissory notes. These are 69 million, which are due in the second half of 2021. Our bank borrowing of 239 million, we face in 2025 and we have there the opportunity of a prolongation to 2026. Looking to the currencies, we have a pretty well mix between US dollar in particular and Euro, which brings us the position of repayments in local currency as well. So all in all, I would point out we have a solid long-term maturity profile here. We are not faced anymore by any covenant breach because we prepaid our last promissory notes by December last year. So we are comfortably positioned in terms of cash position and in terms of debts. Looking to the cash flow, we could provide a very good cash flow with a strong inflow in working capital by 32.8%, despite even a lower EBITDA of 40.7%. We spent 41.2 million Euro for CAPEX, so we lowered our spending there by 24.8 and the major spending in terms of investments we did in Serbia, in UK, in Poland, US, China and Malaysia. So all in all, the conclusion is, despite a challenging year, we have a very strong net operating cash flow of 78.3 million, even though we dropped down our supply chain financing programs and we didn't adjust our get-on-track cost of 29 million in total. Having a look in this moment to our normal value added and to the ROSI, the normal value added is the group's long-term strategic target. It determines the annual value creation and facing this really different year, we went down in our NOVA to minus 46.4 and our ROSI went down to 4.6%. And our ROSI reported on EBIT went down to 2.2%. So by this, I would give over to Michael again to have a look to the get-on-track.

Annette, thanks a lot. To improve our situation, we defined a change program already in 2019, which we published in October 2019. And this Get on Track program will lead to 50 million savings per year overall. And the main drivers for that are changes in our location structure, in our product portfolio and in our organizational setup and in the purchasing structures. That means that in the locations areas, and we showed some examples on that chart, we expect in these 50 million savings per annum, 20 million savings coming from the optimization in the locations. We communicated that we unfortunately have to close a plant in Germany in Gerbershausen, which we communicated. We unfortunately have to optimize, have to reduce positions in our headquarter in Maintal as well. We are streamlining our product portfolio through active portfolio management. We bundle and transfer low volume parts. and businesses to wholesalers. Maybe then also we'll save in the area of product portfolio around 5 million euros. And in terms of strengthening our commodities strategy, and please be aware these commodities here mean purchased material groups, focus on best-cost country purchasing, improvement of structures and processes overall, which will lead to around 25 million of savings. The implementation costs are in total over the few years at 55 million euros and please be aware it is not adjusted. So it is part of the adjusted EBITDA and will reduce the adjusted EBITDA in all transparency. When we are looking on the development of the savings over the years on page 23, we see that in 2020 we were slightly better than what we expected. We expected one-time costs that we communicated of 30 million. We had one-time costs of 29.1 million. Most costs already booked in 2020. with only additional 5 million to come in 2021. We saw that we have net effects in the year 2020 coming from that program, where we have positive impacts of 5.5 million. of minus 23.6 million. We expect it to have minus 25 million. So the program overall in 2020 ran successfully. And we also see that successful development for the next years, which means in 2021 we are expecting a net impact of 25 million positively out of that program. Get on track is an important part to follow in our strategy, page 24. And looking into that strategic development and in that strategic update, we have three, let's say, focus areas. We want to exceed customer expectations. We want to be employer of choice. And, of course, we want to increase our value. So, of course, one focus is value creation. So our focus is on our stakeholders by being market leader in joining and fluid handling technology. In existing and future markets, focusing on profitable and sustainable growth. In water management and industry applications, especially in stormwater and irrigation business via e-commerce. In mobility and new energy, focusing on the rollout of global best practices as well as selected high profitable projects. with selected acquisitions, which we did not have in 2019-2020 because of the crisis here, but which is clearly in our focus to also grow via selective acquisitions, especially in water management, supporting Norma Group's value creation. And we mentioned meanwhile a couple of times that corporate responsibility is an integral part of our strategy. And so far, our strategy 2025 also includes our corporate responsibility roadmap, which you see on the right-hand side. So we strongly focus on sustainable economic activities. We maintain, of course, high quality standards. Our target is also to reduce CO2 emissions. As I mentioned, our 2024 target CO2 reduction of 19.7%. We have as a target continuous reduction of water consumption and waste volume. We help our customers to reduce water consumption and of course we also want to reduce our water consumption in production and in our business processes and reduce our waste volume. We have a target for our training hours per employee that we clearly follow. And of course, and this is what we especially saw in 2020 in that crisis year, we constantly want to improve health and safety conditions. This strategy update also should include a view on the regions with a strategic focus In Americas, we have our strategic activities for our three strategic business areas, water management, industry applications, mobility and energy. We want to grow. We grow in water management by expanding the stormwater and irrigation business. We strengthen our industry applications, especially via online and e-commerce solutions. And in the mobility and new energy area, we focus on selected and profitable businesses in the U.S. and Mexico. In EMEA, also looking into the strategic focus areas, we also will increase the organic expansion enhanced via M&A activities, where we are constantly looking into potential M&A targets. In the area of industry applications, we have an active management of our product portfolio, including online and e-commerce channels. And of course mobility and new energy focus on growth opportunities both inside and outside the car so that we can cover the whole energy cycle from energy generation, storage, usage in a car. Asia-Pacific, we will expand our existing water management business, which is currently in Australia, Malaysia, and India. In India, where we bought Kimplus a few years ago. We also will increase the product availability and further localization for our industry application products and in the area of mobility and new energy. We have the expansion of alternative mobility solutions, especially in China, especially in the passenger vehicles where we have meanwhile a strong position. With that view on the regions, let me have a look on page 26 of that presentation that we also published. We see that we have a proven business model which addresses global megatrends. The most important global megatrends for us are climate change and resource scarcity. And with the focus on the impacts and on the consequences of these megatrends, we see our value creation by normal products addressing these global megatrends. We help our customers to reduce emissions, to reduce assembly time, to focus on additional activities in e-mobility, to reduce weight in a car, which helps our customers to save CO2 emissions and also for us to save CO2 emissions in our production. So climate change is one of the two long-term megatrends that drive our business and where we help our customers to handle scarce resources efficiently. The same are we doing if you look on the second megatrend, resource scarcity. Resource scarcity, mainly water scarcity, is a long-term and a global trend, and we have with our portfolio the solutions for our customers for landscape protection, for water conservation, safe water, avoid leakages, and in the next steps also besides pure focus on water. quantity, also to use and increase water quality, and the level of reused volumes of water. So, in a nutshell, we create value, our customers create value, by normal products that address these two global megatrends and the impacts out of these megatrends, climate change and resource scarcity. If you look on the water management business, which we show you on the next page, we are focusing currently on the water management areas, stormwater management, efficient landscape irrigation, flow management and other products for optimizing the water quantity. Besides that, in the future we have the next business opportunities in addressing water quality and the reuse of water. So the water management business generates over the next couple of years and globally long term are a very good potential for us for our joining and fluid handling technology in the water management area to help our customers to handle water efficiently. In the area of e-mobility, I mentioned earlier that we have not only applications in the car, the pure automotive business, but we cover the whole, let's say, value chain of electricity generation, usage, storage and transfer of energy. And you can see the areas where we are on that chart, where we have significant growth opportunities for e-mobility developments within the car, in the area of battery thermal management, coolant systems, power electronics and motors cooling, HVAC systems, heat pump systems, etc. So these are additional applications for our products in the e-mobility area. And on the right-hand side of that chart, you see a couple of pictures where we see further growth opportunities outside the car, maybe in wall boxes, in high-charging stations, joining technology in windmills, etc., in home storage areas, so that there is, over the next decades, a huge potential for our joining and fluid handling technology in that area of e-mobility, new energy in general, inside and outside the car. A nice example for products and for our integral part of corporate responsibility in our strategy are two examples where we address climate aspects. environmental impacts of products where we see a key selling point for them for example on the left hand side Our new EM Twist quick connector designed for e-mobility applications. Space saving and lightweight. It saves more than 25% of weight. It has a reduced CO2 footprint. We estimate to be 32% below the CO2 emission that we typically have in a quick connector. So we save 30-32% in the production process in CO2 emission. A nice example for innovative products serving the customer needs and reducing CO2 emissions from a corporate responsibility perspective. Water management, right-hand side, a nice example. Dip irrigation system versus sprinklers. You save up to 60% of water consumption. water usage, comparing the drip irrigation system versus a sprinkler. And on top of that, more than 50% of the resins are from recycled plastics at Norma Group's water management subsidiary at NDS. So two very nice examples. Reduce water consumption by 60% and use re-granulate, reused resins for these products. You see that ESG corporate responsibility is an integral part of our strategy, and we showed you on that chart 30 normal group corporate responsibility focus areas. E, like environment, climate, sustainable products, green financing is also part of our ESG and corporate responsibility agenda. So we have climate, scope one, electricity, scope two, gas consumption, climate, scope one and two target in line with recommendations of the science-based targets initiative. We have the integration of environmental aspects into product design processes, as I showed you earlier, for example, with the EM Twist Quick Connector. And we also have sustainable aspects that we regard in other areas, like, for example, financing. We have a sustainability-linked loan that connects financing conditions to achievements of sustainability rating that we included in our last financing round. So clear focus on environmental issues. Health and safety and learning as a social area in ESG. We decrease the reportable accidents by more than 50% since 2014. And in the learning area, we have a high number of training hours per employee that we have as a target per year and that we follow over a long-term perspective. clause in the area of governance compliance we have a system-based compliance management that covers all regions and entities and we have also this governance compliance topic in purchasing where we have a integration of sustainability aspects into our standard purchasing processes So we have clear targets within our strategy 2025, within our corporate responsibility agenda that we show on page 31. In the environmental area, clear target to reduce CO2 emissions. I mentioned a long-term target until 2024. And we have a target for 2021, CO2 emissions of 50,470 tons. CO2 emission. We of course also want to reduce the water consumption so that we want to have a 2% improvement. Baseline is 2019 cubic meters per thousand euro of sales. And also the waste, which is mainly metals and plastics waste that we want to improve by 1% in 2021. Baseline is also 2019 indicator is kilogram also per thousand euro of sales. The social area, you see it, we have targets for incident rate, training hours, voluntary attrition rate, where we have local targets per entity. And of course, also in the area of governance, we defined an indicator for maximum of defective parts of 10 and the number of customer complaints being lower than 5.6 average per month per entity. So a clear integration of our ESG targets in our strategic development. And it did not start only in 2020. We have the ESG and corporate responsibility integration in our strategy since years. Since years, we have a clear focus in our strategy also on CR aspects and ESG components, which you see also on page 32. where others rating companies mainly confirm Norma Group's approach to corporate responsibility, to ESG, where we have some ratings and just a few examples. We have an MSCI ESG rating where we are top 25% within the industrials benchmark in 2020. We are under the top 1% of rating universe platinum standard for EcoVadis. ISS ESG top 10 of rating universe qualification social and environmental investment. We are in the CDP, we are at the awareness level and in this analytics, which measures the risk situation, we are in the top 1% in industry benchmark in terms of risk score. This is just an example of ratings that we got in 2020. Once again, it's since a couple of years part of our strategy and in the focus of our activities. There are a few awards. For example, in 2017, we got the award Building Public Trust Award for the best non-financial report in the MDAX companies by PwC. In 2020, we got the Fox Finance Award for CR reporting. So that's just a signal how others are assessing our work. ESG and corporate responsibility position. And this overview confirms Norma Group's approach to corporate responsibility. With that, I would like to give an outlook on the 2021 strategy. which is more or less a short summary of what we pointed out earlier. We, of course, continue to develop our water management and industry applications in 2021. We want to grow, we will grow, and we will profitably grow. We, of course, expand our mobility and new energy area, which contains parts in the car and outside the car, which covers the whole value chain of electricity. Both, number one and number two, water management and industry applications, mobility and new energy, long-term strategic growth areas for us with a very good perspective driven by the two megatrends that we pointed out earlier. The way how we sell products might change over the next long-term period. We will have more e-commerce applications, we will have more online business, so expanding the e-commerce channels is one important target for us for the future and of course also in 2021. started successfully with our get on track change program and this as I mentioned went very well in 2020 and we also will execute it strictly with the projects that we defined in 2021 as a foundation foundation for further profitable growth in that in that extent a Monday is integral part of our strategy, even if we did not have any M&A targets 2019-20 because of that crisis situation. Nevertheless, we continue steadily the dialogue with potential M&A targets in water management and new energy in all regions. And unfortunately, we did not and the corona crisis. That also means, that's point six on that outlook 2021, we have to have a close monitoring of market dynamics regarding this coronavirus, COVID-19 situation. And we see a strong technical rebound in that extent. Once again, unfortunately, this crisis is not yet over. We are quite optimistic, but we have to be a little bit more cautious also in the next weeks and months. Coming from that outlook and strategy 2021 to our guidance in more detail, which we show you on page 34. We have a clear organic sales growth that we expect in the low double digit area. We have, and these are the two main important topics on that list, we have a margin improvement so that we see an EBITDA margin, adjusted EBITDA margin of more than 13% and we clearly want to be better than 2019, already in 2021. And focusing more on the EBIT, adjusted EBIT margin in line with the improved EBITDA margin of more than 12%. Financial result being at 13 million, normal value added positive being 10 to 25 million, higher than 10 million. And we also expect for 2021 a good net operating cash flow being at 100 million plus, 110 million plus in 2021. Dividend. Of course, we want to pay a good dividend in the future as well. The dividend for 2020 is an exception where we went to the minimum. We, of course, want to pay a dividend around 30 to 35 percent of our adjusted group earnings. CO2 emissions, as mentioned, integral part of our strategy. We want to reduce the CO2 emissions until 2024 by 19.5%. which is a reduction per year at around three percent and of course we also have uh targets that we guide for the number of applications invention applications more than 20 and the number of defective parts being below 10. well that's a our guidance um 2021 with the two focus parts double digit growth and the low double digit area organically in 2021 and a margin level of 13 plus percent EBIT A adjusted respectively 12 percent EBIT margin adjusted. With that I would like to come to the Norma Group key investment highlights. Norma Group is focusing on joining and fluid handling technology. with profitable and sustainable growth on a long-term perspective in existing and future markets. And we are driven by the global megatrends, climate change and resource scarcity, as I pointed out earlier. These are long-term trends and global trends that drive the need for our products, which gives us a very good basis. We are with our focus on joining and fluid handling technology, active in different end markets, which gives us a good level of stability, active in water management, industry applications, and mobility and new energy. Overall, we have an enhanced stability. Through broad diversification across products, regions and markets, customers, we have a strong global distribution network with one-stop shopping service to specialized dealers for our standardized joining technology products. Wholesalers, distributors, specialized dealers as well with a one-stop shopping service as well as increased focus on e-commerce channels because that channel will be used in the future more and more. We see significant growth opportunities by acquisitions, synergistic acquisitions, and we focus clearly on value creation and shareholder return and strong commitment to sustainable and development goals. With that, we summarized our key investment highlights. We summarized the development in 2020 with the perspective on 2021. And as mentioned earlier, all eyes are on 2021. We are very confident and very optimistic that we will have a huge step in the right direction in 2021. And so far, we are happy to present to you today that we have a stable basis for that growth. And with that, we are happy to take your questions and thanks for your participation.

Thank you very much. We are now opening the Q&A session. For that, I will hand over to the operator. As mentioned in the beginning, please dial in for the questions via Zoom. There is no possibility. Please dial in by phone, and then you can ask your questions. I will hand over to the operator now.

Thank you. Ladies and gentlemen, we will now begin the Q&A session. If you have a question for our speakers, please dial 0 and 1 on your telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question is answered before it is your turn to speak, you can dial 0 and 2 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. And the first question is from Ingo Schakel, Commerzbank. Your line is now open. Please go ahead.

Yes, thanks very much. I have two questions, and I hope that they have not yet been answered because I think we missed a certain part of your presentation because of the technical problem. The first one would be on the raw material price volatility that we've seen. Wondering whether you could give us a bit more of a sense how comfortable you feel with having visibility on the impact for this year. Is the 13% margin still contingent on you pushing through a round of price increases, or do you think the 30% should be achievable even if steel and oil prices remain as high as they are and you don't implement additional price increases?

Yeah. Thanks, Ingo, for the question. We see these volatilities in the raw material price developments and in the raw material area. We are, let's say, covered on a mid- and long-term basis by long-term contracts with our suppliers. And so far, we covered these long-term developments, long-term quantities and prices. which is covered in our profitability for 2021. So these 13 plus percent EBITDA margin include material prices in our budget that we, let's say, covered on a yearly basis. So we are covered with the price situation and baked in that we have a good growth in 2021.

Okay, and the second question would be on the short-term growth to be expected for the water management business. I think you've given an outlook that implies weaker growth for water management than in the previous years. Just wondering, I think top-down, of course, makes sense, because last year was already quite strong. Are you seeing any information, bottom-up indications from your business or current trading in January, February? which might suggest, let's say, weaker growth rates, because otherwise we're still seeing, of course, quite high consumer spending on medium-sized discretionary items. So it feels like your guide for water might even turn out to be a bit conservative. So just wondering if they've already seen any specific indications that could lead you to this conservative assumption.

Yeah. Well, you're right, these 2.7% or 2 to 3% that we expect for the water management business is quite cautious. We typically had in the last years higher growth rates. We were cautious in that extent because we saw also in 2020 very good growth rates for the water management business at 6.7%. There's no structural change. There's a very good development of the markets. So we also saw in January, February and also in the first indications for March that it develops very nicely. And maybe these two to three percent are a little bit cautious, but maybe it's better in that crisis situation where we did not yet finalize the COVID part to be a little bit cautious. But there's no structural change in the water management business so far. And maybe two to three percent are a little bit cautious.

Okay, understood. And maybe just to finish a very quick housekeeping question regarding, I think, the other operating expenses, you had a pretty steep increase of guarantee expenses, citing, I think, penalties for delivery performance and mentioning corona as well as the production relocations. Can you give us a bit more feeling for, I mean, should we think of it mostly corona and those penalties will be gone next year, or should some of those higher penalty levels be let's say sticky now that I think Norma is maybe turning leaner for a production setup and maybe that's a bit of the price to pay for a more efficient production setup.

Well, we have a more efficient production setup and a leaner cost structure for Norma Group, which is a result of the activities and which will improve further in the next years by our measures that we addressed. And so far, of course, we still have the Corona situation, unfortunately, but we are working steadily on the further improvement of our cost structure so that also next year we expect a further improvement.

All in all, if I can add that, for sure, we still are suffering a bit on cost basis on that. For sure, we have higher hygiene costs. We have still some more freight in it, things like this. But these are all priced in our assumptions on any kind of margin assumption.

Okay, understood. Thanks very much. And also congratulations on returning to double-digit growth and margins so quickly after the corona crisis.

Thanks very much.

The next question is from Harald Egerling, AutoBHF. Your line is now open. Please go ahead.

Yes, thank you. I might have missed it due to the technical issues. Could you elaborate on CapEx and working capital guides for 2021? And could you give some color, please, on polyamide supply and the hedge policy with a path to close your sourcing policy or sourcing price? they might be stable or if you're also subject to substantial price increases here. Thank you.

Well, I hope I understood you correctly because the line was not very so stable. CapEx and working capital 2021, we have given a CapEx guidance 5% to 6% of our sales in 2021, which is a ratio that we more or less also kept in the last couple of years. We see in the CAPEX development no structural change. Of course, we focus on our strategic growth areas also with our CAPEX areas, but overall 5-6% also in 2021. Working capital development, we are constantly working on the improvement of the working capital development as we showed, but we have to keep in mind that in 2020, even in 2019, we reduced the level of accounts receivables or we reduce the supply chain financing issues from the past. So this is also impacting our working capital. We are working on additional efficiencies in that area, if it's inventories or receivables, even payables. also getting better in 2021 and the following years. We of course have to see that in a growth period we probably will have additional accounts receivables, but that's part of the growth story. It will not avoid us from having a good, very good cash flow development. Polyamide supply, we do not have critical issues regarding polyamide supply so far. There are a couple of developments in the US especially. We do not face currently, and we do not see it for the next month, polyamide shortages in that area.

Okay, thank you.

You're welcome.

Are there more questions, operator?

Hello, operator.

Can you hear us? Yeah, the phone line was cut off earlier for a couple of minutes, and maybe that's happening again.

All right, sorry. Technical issue on my end. The next question is from Nikolai Kempf. Your line is now open. Please go ahead.

Yeah, Nikolai Kempf here, speaking for Deutsche Bank. My first question would be on the semiconductor shortage and that some ORMs, both the autos as well as the truck side, have been informed rather late, just the example of Volvo this week. So my question is, how long is your visibility on this topic? And my second question would be on your powertrain forecast. And it seems like that OEMs are just a new target for their shift to electric vehicles. Would a faster shift to electric mobility affect your business negatively?

Maybe I take your second question first. Powertrain development to e-mobility, would it impact our business negatively? No, not at all. We see a very positive development in the e-mobility area. We cover the whole, let's say, electricity value chain, and if the move into e-mobility comes earlier and quicker, that's fine for us. We cover all areas. and are prepared also for quicker e-mobility developments. For example, if we take our current share in e-mobility, if we take battery electric vehicles and plug-in hybrids, we are at roughly 10% 2021, expected roughly 10% of our sales, of our EJT sales, being in the e-mobility area, battery electric vehicles plus plug-in hybrids. The market is around 7-8% overall. It depends a little bit on the regional weighting. So we have very good development, and if immobility comes earlier, that's fine for us. Your first question, Nikolai, was semiconductor shortage. We see that topic. It's very intensively discussed in the public area. We do not see significant impacts for Norma Group from that semiconductor shortage in the whole 2021. There might be a shift from the first half year into the second half year. So overall, in 2021, we do not see a critical topic for us. If you look into the semiconductor shortage, Depends a little bit on which customer, which OEM you discuss. If we take the last fire in the ship production area in Japan, of course, some Japanese customers are impacted heavily by that. And it was in the public press, so we can talk about it. It's totally different if you take other customers that do not want to To mention any names, it depends a little bit on their value chain, on their, let's say, stocking of semiconductors. So we do not see a significant impact of that semiconductor shortage in 2021 for Norma Group. There might be a shift between H1 and H2, but not an overall significant negative impact. Okay, thanks. You're welcome.

And there are currently no further questions. So as a reminder, if you would like to ask a question, please press 0 and 1 on your telephone keypad now. And the next question is from Ingo Schachl, Commerzbank. Your line is now open again. Please go ahead.

Thanks. Just a quick follow-up on the standardized joining technology business. In North America, I think you also spoke about destocking that you saw at the end of the year. Can you explain that a bit more and tell us whether you think that's more structural because you're, I think, partly rather small customers, they have to keep a close eye on inventories because of the corona crisis, or do you think it's rather just a cyclical year-end destocking where you would expect probably inventory levels to be replenished in the year 21?

Well, the Stellnet joining technology, there is no structural change. It is driven by COVID implications and the typical, let's say, cycle. COVID plus typical cycle, that's the reason for that in 2020. We will see a growth in 2021, but there is no structural change.

Okay, very clear. Thank you.

You're welcome.

And we haven't received any further questions at this point, so I hand back to the speakers for closing remarks.

Well, if there are no further questions, I would like to thank you all once again for participating in our Investors and Analyst Conference 2021. Happy to have you on the line. Unfortunately, we cannot meet in person. We all hope that we next year will be able to meet personally. For the time being, please keep in mind, Norma is very well prepared for the walk into 2021 and the next decades with our program, with our strategic development. We have a strong financial basis. Our strategy is clearly defined and we are well on track. The most important topic now is stay healthy. And I hope we can see you soon again. And so far, once again, thanks a lot. Stay healthy. See you next time.

Thank you. Bye-bye.