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.