Norma Group Ag Name Akt

Yes, thank you very much for the introduction. Ladies and gentlemen, welcome to our analyst call Q2 2022. You all saw our Q2 reporting and you all saw two weeks ago our profit warning for 2022 that we had to reduce our margin expectation for the running year. We will come back to that topic later. And of course, to point that out at the beginning, we are not happy about that development, but we will come back to that later. Let us first come to the Q2 figures 2022. And I flipped to page two of our presentation that was distributed. In terms of sales, we increased our net sales to $318 million, which is an increase of 12.9%, and an organic increase of 5.3%. Our adjusted EBIT of $22.3 million. It is a decrease versus last year by 38%, and we show for the second quarter an adjusted EBIT margin with that of 7%. The referring net operating cash flow is at the level of 26.4 million, while the equity ratio is at the end of Q2, 44.7%, and net debt at 382.8 million. We had our annual general meeting on May 17th, And all agenda items were approved by the AGM. And we also decided, the AGM decided to have a dividend of 0.75 euro per share. As mentioned, we have an updated guidance. We keep our sales guidance unchanged, which is medium to high single digit organic growth in sales. Our EBIT margin of around 8% with a previous expectation of around 11%. And a net operating cash flow of around $60 million, which was previously around $100 million. If you go to the next page, page 3, you see the top line development in Q2 and H1. We had a sales development in the first half year 2022 that shows an increase of 9.5%. The top line increase in net sales by 12.9% to 318 million in Q2 22 compared to 282 million in Q2 last year. Mainly, it's referring to Americas. We had a very good development in sales in Americas and a positive currency effect. In terms of organic growth, as mentioned, 5.3% in Q2. The performance in Americas was very strong. EJT sales increased to Euro 168 nearly. with an organic growth of 0.7% due to a strong Americas business, but almost being offset by a weak development in China business in APEC. Our standardized joining technology sales increased to 147 million, showing a strong organic growth of more than 10%, 10.5%, mainly based on the US water business and even the APEC region, while currency effects in terms of translation effects is at 21 million or 7.5% in Q2 2022. With that development, and this is shown on page 4, we have a regional split that shows now 46% of our sales in Americas, 40% in EMEA, and you see the reduction of the share in sales in EMEA, coming from 45% last year to 40% now, and a ratio in APIC of 14% of sales. And we see also for the regions, the sales development for the first half here, meaning in America, sales in the first half here, 290 million, which is an increase of nearly 27%. The EMEA sales in H1 2022 decreased slightly by 3.7% to 246 million. And in APEC, sales increased slightly in the first half 2022 to 87 million, meaning an increase of 2.9%. If we take a deeper dive into the regional sales, which is shown on page five, we see for EMEA an organic decline of 1.1% in our engineered joining technology business in the second quarter, which is mainly due to a weak automotive business, which is also related to the Russia-Ukraine crisis and partly compensated by positive pricing effects. The standardized joining technology in EMEA declined by 3.3% in Q2 due to lower volumes and partly also compensated by a higher pricing. In Americas, we saw a organic growth in engineered and even standardized joining technology. In engineered joining technology, we had an organic growth of 13.4% in the second quarter. which is mainly driven by a very positive pricing. And in the standardized joining technology, which also includes the water management business, we have a strong double-digit organic growth of 14.9% in the second quarter, which is mainly related to the US water business, growing more than 20%, 20.7% in the first half of 2022. In APEC, we have a different picture in EJT and SJT. We had an organic decline of 13.4% in the engineer joining technology business, mainly due to the difficult China business, which is mostly based on the COVID-19 impacts and the lockdowns in China, which were hurting the second quarter significantly. And we had a strong organic growth of 20% also in the SJT business, also due to positive for the business in India, Malaysia, and even Australia. Based on these sales developments, we see the margin development on page six on an overview. And we see that we have for the first half here, 2022, an adjusted EBIT margin of 8.5% and 7% in the second quarter. We saw that weakening adjusted EBIT margin based on external and even internal effects. External effects were high increase in gas and energy prices, as we all know and read in the newspapers. with a further increase of inflation and ongoing effects of the war in Ukraine. And of course, we also still have the corona impacts and we saw that especially in the second quarter in China with the risk of further lockdowns in China. And what we saw higher costs in our operations business and our supply chain, which means logistics costs and operations costs are higher than what we budgeted and expected, as well as higher IT implementation costs based on these developments in operations and logistics. So the margin for the first half here at 8.5% EBIT margin, meaning for the second quarter, it's 7%. With that, I hand over to Annette, our CFO, for a couple of more details on the financials.

ANNETTE SCHMIDT- Well, thank you, Michael. So then let's have a deeper look to the P&L development, and in particular to the corresponding margins. The material cost ratio increased by 430 basic points, and the gross profit ratio decreased by also 430 basic points in Q2 22. This is mainly due, already mentioned, Higher costs, in particular, related to the global supply shortages, to higher inflation, and to effects on the Ukraine war. Here, in particular, the additional pressure on our main raw materials, steel and resin, driven here by higher energy costs. Looking to the personnel costs, we see an improvement in personnel costs and in the personnel cost ratio by 70 bps. to 25% in Q2 and by 50 bps in H1 respectively. This is majorly due to our downsizing of plants, in particular here Serbia and Germany. Our OPEX increased by 11.9 million euro to 50.2 million euro This leads to a ratio of 15.8%, mainly due to a higher number of leased workers and IT implementation costs. Consequently, our adjusted EBITDA margin decreased by 590 BIPs to 11.6, and our adjusted EBIT margin decreased by 580 bps to 7% in Q1 and to 8.5% in H1. Coming now to our operational adjustments on the next slide, the message of the slide is that we operation-wise adjust nothing, so our adjustments refer only to PPA-related adjustment which brings us to a reported net profit of 26.7, an adjustment of 8.3, and by this an adjusted net profit of 35.0. Our EPS referred then reported earning per share is 84 cents. The adjustment corresponding is 26 cents. And our adjusted earning per share is €1.10. If we look to the next slide, we can see here again on the one hand our dividend paid. Michael already referred to that. We paid a dividend of 75 cents. per share, which corresponds to around 33% of our adjusted group net profit of the fiscal year 21, and this has been paid in May. So, adjusted earnings per share are mounting to $0.44, and we see a corresponding adjusted net income of $14.1 million. In Q2, this shows in H1 an adjusted earning per share of one euro ten and a corresponding net income of 35 million. Reported EPS is in this case 31 cents corresponding to 10 million net income and for H1 84 cents corresponding to 26.7 million. Referring then to our equity ratio and our net debt, so our net debt increased by 20.2%, mainly due to the dividend payment of 24 million paid in May and business seasonality, which increases with the higher portion of water business. Our leverage is showing an increase to 2.5 due to higher net debt and due to the lower EBITDA. Our equity ratio slightly improved from 44.6 to 44.7. We are based on a very solid maturity profile. I think this we want to mention as well. So our next larger refinancing is due in 26 and we have no potential cross default risk anymore. So solid basis for that. Coming to the net operating cash flow development, our net operating cash flow is impacted on the one hand by the decreasing of our factoring programs by 6 million to 56 million euro by the end of H1. A lower adjusted EBITDA with a higher working capital outflow leads us to a decreased net operating cash flow before CAPEX of 27.7 million compared to 59.1 million in H1-21. CAPEX spendings have slightly been decreased. We spent 17.9 million euro in H1 compared to 19.8 million euro in H1-21. This is resulting to a net operating cash flow of 9.8 million euro compared to 39.3 million euro in H1. Coming now to the NORMA value added, which is NORMA's long-term strategic target. You can see there that the NOVA is amounting to 4.2 million euro, which is 17.4 million euro lower than comparable figure of H1 last year, which was 21.6. By this, I hand over again to Michael.

Yes, thank you very much, Annette. As I mentioned earlier, we adjusted our guidance for 2022, and of course, we put quickly a task force together regarding our performance improvement program. And so far, this task force defines the basic structure of that improvement program, which is focus number one for the next week, month, and also for the next year. And this performance improvement program has three focus areas. It's stabilizing measures. especially short-term for 2022. We have additional efficiency measures on a mid-term perspective to sustainably improve the profit situation. And on a mid- and long-term perspective, we have structural measures to further increase overall efficiencies with the clear target to pursue our profitable growth strategy for the future. in our three strategic business units, mobility, new energy, industry applications, and water management business. So that these are part of our performance improvement program where we integrate all of the different measures and programs so that we have one program that will be managed if it's global excellence, get on track, pricing, operations improvements in one integrated program. with a focus on operational improvements internally. This is the basis to further stabilize and bring us to a significantly better margin level, because if you take the outlook of 2022 as updated company guidance, which we show on page 14, we have external and internal reasons for these adjustments. um you know all the external aspects in terms of ongoing material price increases inflation even in the second half of 2022 and from our point of view probably also 2023 regarding gas energy and the subsequent consequences we still have the war in ukraine ongoing and not seeing an end and we have further lockdown risks in Asia Pacific, especially in China. You must say that we have internal challenges as well in increased cost in business operations and supply chain, partly related also to COVID and the consequences. We see that the relocation of the plant Gerber's Housen, which we are closing in the course of 2022 to Maintal, Czech, and Sweden, It's not as efficient as we would like to have it, and we have, in consequence, out of that, some higher IT costs, IT implementation costs. So all that in total. Let's do the adjusted company guidance. Unchanged on the sales perspective, EBIT margin around 8%. Net operating cash flow around 60 million, and the NOVA normal value added between minus 20 and 10 million. Out of that, adjusted guidance for 2022. This gives an overview on the current situation. And of course, as the moderator pointed out earlier, we like to have it open for your questions.