Norma Group Ag Name Akt

Good morning and good afternoon, everyone. Welcome to our Q3 2025 conference call for NOMA Group. I'm Birgit Seger, and it is my pleasure to speak to you today, stepping into the role of CEO for NOMA Group, which I've just started 1st of November. Together with our CFO, Annette Stieve, I will guide you through the presentation. We will answer your questions after the presentation as is our use of practice. Please allow me to give you some background about myself. Over the past two decades, I've had the privilege of working across the global automotive industry as well as other industrial sectors, most recently leading Bosch's worldwide Compact Actuator business. These experiences taught me how innovation, operational excellence, and strong customer partnerships can drive long-term success. My assignments have been about leading transformation in complex and global environments. Whether in manufacturing, consulting, or serving on the board of international industrial companies, I've learned the importance of combining technical expertise with financial discipline and clear execution. That mindset will guide how we advance Norma Group towards becoming the industrial powerhouse for connecting solutions by 2028. On the next page, I will give you an impression of what we have planned for new Norma. There are six points. Point number one, as Team Norma, we will transform our company into an industrial powerhouse for connecting solutions. This means we will sharpen the strategic portfolio focus to create new Norma. Secondly, we increase operational excellence and thereby increase margins. To achieve this, we are focusing on cost efficiency, lean processes, a resilient supply chain, and improved productivity. Point number three, we strengthen the collaboration with customers. We accelerate growth in segments with high potential. This primarily means growth in segments that are geared towards a strong and broad customer base. Point number four, we are further boosting our innovation strength and sustainable product leadership. We want to focus even more on quality, research and development, digitalization, and sustainability, which are an integral part of the company's product range. Point number five is guided by the approach, think global and act local, we optimize NORMA's global presence and local relevance, ensuring that regional strategies are tailored to local requirements and that global optimization is achieved. Last point, the most important, is our focus on financial discipline and the creation of shareholder value, connected as Team NORMA. I want to give you an overview of our divestment of water management which has been communicated already alongside the divestment process. So, one billion valuation for water management business has been achieved. Value a critical multiple of about 19.3 adjusted EBIT has been achieved. Regarding net proceeds. As it has been published on the day of signing, we aim for the three pillar model. We will pay off a large portion of the company's debts. Secondly, distribute about 250 to 270 million euros to our shareholders. This translates into approximately eight euro per share. The transaction is subject to approval by the antitrust authorities. Number three, We invest a reasonable amount in our growth in industrial applications to accelerate Norma's establishment as the industrial powerhouse for connected solution. Our true north is to reach double digit EBIT once the industrial powerhouse is successful. With the next page, I will summarize where we stand and what are the next steps in the divestment process. Signing took place on September 23rd this year. The buyer is ADS, Advanced Drainage System. The accounting impact is assessed to be displayed at discontinued from September 30th this year, and we will see this later on in our numbers. The net proceeds are around 620 to 640 million expected. And the precondition is the customary closing conditions, including the regulatory approvals. So the closing is estimated for the first quarter of 2026, subject to approval by the antitrust authorities, which will determine the date of closing. The estimated net proceeds of between 620 and 640 million euros. This amount will then be available for us for further use. Annette Stiepe, our CFO, will explain on the next page how the value of 1 billion US dollar translates into net proceeds of 620 to 640 million Euro. And with this, I hand over to Annette. Thank you Birgit, and a warm welcome also from my side. To provide more detail on the estimated net proceeds calculation, we have prepared this slide as a part of our updated transaction presentation from September 30th, which is also available to our industrial relations website. Today, I would like to highlight the tax tax a bit more in detail. As communicated already end of last year with our announcement of the intended sale, The sole US daughter MDS is held under the Pennsylvania holdings since our acquisition in 2014. This structure brought significant tax benefits to normal group over the last 11 years. As also the other operating legal entities in the US are held under this asset, the same holding as a tax fiscal unity. Within our early communication on the intended sale, it was clearly communicated that we are expecting a tax rate of around 22 to 23% on the capital gain. This assumption was based on a sale via a share deal. During the negotiation with the potential buyers, it turned out that the best bidder, in this case ADS, prefers to have the transaction in the U.S. structured as the so-called deemed asset sale. This allows ADS to treat the transaction as an asset deal for U.S. tax purposes. As a result, they receive a step-up of the tax base of the acquired assets, which increases their future depreciation capacity. The tax benefit for ADS was estimated with an amount around 125 million US dollar by ADS. On the other hand, the deemed asset sale results in additional taxes for normal group, which are estimated with around 50 million US dollar versus a share deal and an evaluation of 1 billion US dollar. It was agreed between the parties that the tax advantages for ADS is to be compensated by an additional portion of the purchase price. As the benefit for ADS is about 125 million euro, and our additional tax payment is about 50 million US dollar, both. $125 million and our additional tax payment is about $50 million. This structure is financially very beneficial for normal group and its shareholders. As the additional purchase price portion brings significant higher net proceeds. So we achieved a win-win situation for buyer and seller. With this negotiated success, we have enabled estimated net proceeds to normal group of around 620 to 640 million euro. And thus, about 20 euro per share, what equals roughly eight euro per share for distribution to shareholders. And with this explanation, I hand again back to Birgit, coming to our Q3 results now. Thank you, Annette. Let us turn our attention now to the financial results of the third quarter. Upfront, a note regarding the water management business. This has been classified as the discontinued operation with effect from September 30th this year. This means figures related to water management are no longer included in the revenue and earnings development for the third quarter of 2025. as well as retroactively to January 1st this year. Reclassification of some APEC business into industrial applications business unit is already included in the Q3 numbers. Where these adjustments have not been made, which means water management is included, we have indicated this on the slide. So, the net sales in Q3 totaled to 197 million compared to 206.5 million in the previous year. The adjusted EBIT was at 3.8 million versus 7.5 in the previous year third quarter. The adjusted EBIT margin was at 1.9% versus 3.6 in the last year Q3. Now coming to the next three numbers, and they are continued and discontinued operations. This is the net operating cash flow was at 24.5 million versus 28.2 million euros in Q3 last year. Equity ratio of 40.5% at September 30, 2025. versus 50.2% on December 31st of last year. CO2 emissions, NOMA successfully avoided 1,193 tons of CO2 emissions, scope one and two, as of September 30th, 2025. So this means our CO2 emission target we have already met for the full year. Let us now move to the next page where we talk about our top line development in some more detail. Compared to the same period of the previous year, sales in the third quarter of 2025 decreased by 4.3%. This development is mainly coming from negative currencies. While volume remained relatively stable, lower prices in our mobility business contributed 0.9% to the decline in sales. As we can see in the pie chart, the right top of the chart, the regional distribution has shifted significantly towards Europe due to the divestment of water management. Let's move on to the next page and discuss the sales development by strategic business unit. For industrial applications, Sales increased by 12.2% in Q3 of this year. This increase was partially due to reallocation of business from our business unit M&E to industrial applications, in particular sales from construction and agricultural machinery, as well as stationary energy storage. Positive volume development led to a growth for industrial applications. Unfavorable exchange rate effects had a counter effect. In mobility and new energy, the sales were 10.4% below previous year. This was driven by reallocation effects and due to the impact of a cyber attack at one of our major European customers. For APEC, we recorded growth in Q3. Unfavorable currency effects contribute to the decline of the top line. Let us move to the next page to discuss sales developments in the regions. In the Americas, sales declined by 4.9% to 66.3 million compared to previous year. The main reason for the decline were negative currency effects. Adjusted for exchange rate effects, the third quarter shows growth of 1.2%. Sales in EMEA were 100.9 million euros in the third quarter of this year, 5% lower compared to previous year. This resulted from a difficult market environment probability, including a cyber attack on a major customer. In APEX, sales were 30.3 million euros in the third quarter of this year, down 0.7% compared to same quarter of previous year. The positive development of the business was offset by negative currency effects. On the next page, we will look deeper in those developments. In the Americas, the sales in the business unit industrial applications recorded an increase of 15.1% compared to previous year. Top line growth was supported by reallocation effects. Negative currency effects counteracted this development. In mobility, sales decreased by 13.6% as a result of low volume as well as reallocation and currency effects. In EMEA, industrial application sales increased by 10.3% due to the reclassification of revenues in the current year. In M&E, sales decreased by 10.3% due to weak market demand and the cyber attack at a major customer. In APEC, industrial application sales increased by 10.3% supported by reallocations of sales. M&E sales growth has compensated negative effects of reallocations. Unfavorable currency effects led to a sale reduction by 4.3%. And with this, I hand over to Annette. Thank you, Birgit. Let's have a look now at the key P&L figures of our Q3 continued business. Our material cost ratios keep improving. In Q3 2025, we were 10 bps better than in Q3 of last year. On a year-to-date comparison, our material cost ratio even improved by 60 bps. This is mainly due to further optimizations in the area of material and energy costs as well price increases accepted by our customers. As a result of lower material costs, the gross profit margin rose by 60 bps year-to-date 25. Personnel costs in total fell in the third quarter while the personnel cost ratio rose by 70 bps due to lower sales volumes and inefficiencies. With our global transformation, we are targeting to sustainably reduce the personnel cost ratio to a normalized level. We will give you an update on our measures at the end of this presentation. The other expenses were up in total, and also the ratio went up from 14.9% to 16.9% in Q3. The main reason for this development are the continued elevated cost for special frames and extra shifts in our mine-type plants. This topic is clearly addressed with specific measures in order to resume to a normalized cost base in due course. The sales decline and still elevated cost in the mine-type plant are reflected in the subcute adjusted EBITDA and adjusted EBIT in Q3 and also our year-to-date figures. Nonetheless, with an adjusted EBIT margin of 0.9%, year to date, we are thoroughly within our guided margin corridor for the continued business of around 0 to 1%. Let's move on and take a look to our EBIT margin by region on the next slide. This, ladies and gentlemen, is for me, Personally, a key slide in our Q3 presentation. For the first time, we are disclosing our adjusted EBIT margin by region for our continued business. As we were frequently asked if we can really generate decent margins without water management, here's the answer. In the APEC region, we are at 10.3% in Q3. In the American region, Even with all hiccups around tariffs and consumer sentiment, we are generating solid 4.5% in Q3. What remains clearly a pain point is EMEA with an adjusted EBIT margin of minus 0.9%. This is to a large extent caused by sluggish sales in the region, but also by continued operational issues in our mine tar factory. These issues and their causes are identified and clearly addressed. The expected financial improvements are duly calculated and we will revert to that later. To sum it up and make it very clear, there is no reason at all why the EMEA region, also with even its hiccups in geopolitical challenges, should not be able to be as profitable as the other regions. This year's adjustments are, of course, extraordinary in many aspects. As already mentioned before, we assume up to 20 million transaction costs for the sale of the water management business. On top, adjustments for one or four transformation costs up to 30 million euro are to be expected. The PPA effects for the continued business are expected to be around 6 million euro. Based on our ad hoc statement from last week, a non-cash effective goodwill impairment depreciation of around 50 million euro was identified for the EMEA region as a result of a mandatory impairment test. The impairment requirement is mainly caused by subdued revenue assumptions in the EMEA region for the coming financial years. It will have a corresponding impact on our consolidated earnings after taxes, but it will not lead to a cash outflow. Accordingly, the total adjustments in the current fiscal year are expected around 106 million Euro. With these explanations, let's have a look to our net debt and equity. Before going into these figures, Please be aware that the illustrated figures refer to the continued and discontinued business combined according to IFRS 5. Our net debt slightly decreased by 0.9% against the end of 24. Due to the lower EBITDA, leverage was up to 2.4 times adjusted EBITDA from 2.1 times at the end of previous year. Total equity levels at 585 million. The equity ratio decreased by 500 bps. Main reasons are the negative profit in the reporting period, which was predominantly impacted by the goodwill impairment in the EMEA region of about 50 million euro, and negative foreign exchange rate differences amounting to minus 63.7 million. Nonetheless, the equity ratio still stands at a very solid 45%. On the next slide, we briefly discuss our cash flow development. Likewise, the previous slide, please be aware the illustrated cash flow figures also refer to the continued and discontinued business combined according to IOS science. The net operating cash flow in Q3 decreased by 4.6% compared to the same period last year. This is primarily due to lower adjusted EVGA. Year-to-date, the net operating cash flow levels at solid 59.1 million, including a decrease in our supply chain financing programs of 3.4 million compared to end of 24. At this point, please let me underline that the cash flows from the continued but also the discontinued operations in the current year belong 100% to normal group and its shareholders. And with that, I hand back to Birgit. Thanks, Annette. Let's now turn our attention to our guidance. The guidance for the year 2025 has already been published with the announcement of the water management divestment September 23rd. We confirm our guidance for 2025. For the continued business, we expect sales in a range of approximately 810 million euro up to approximately 830 million euro. The adjusted EBIT margin in the continued business is expected to be in the range of approximately 0% and approximately 1%. The net operating cash flow, here we see the continued and discontinued business combined, is expected in the range of approximately 70.5 million Euro to approximately 95 million Euro. For our scope 1 and 2 CO2 emissions, we are targeting the avoidance of 1,000 ton CO2 equivalent emissions at all normal group sites in the continued and discontinued business combined. On the next page, we see details for the adjusted EBIT margin guidance 2025. Within our guidance for the adjusted EBIT of approximately zero up to 1%, we have included one-off effects for the current year. These one-off effects are mainly change of the CEO, the D365 ERP implementation in Mindtal, including related costs, and the cyber attack at one of our largest customers in Europe. Some explanation for the ERP implementation in Mindtal. This project costs extraordinary implementation costs of about 3.5 million Euro and higher than expected follow-up costs, such as special freight and additional staff allocation. We expect these one-off costs to reach about 12.5 million Euro for this year. The root causes of the issues are identified. Corresponding action plans have been set up and are in implementation. In September this year, cyber attacks took place at one of our largest customers in Europe. European plans at our customers were shut down until the beginning of October. We estimate a loss of adjusted EBIT of approximately 2 million euros. The one-off costs in the current year will sum up to about 16 million euros. Without these one-off effects, our guidance for the adjusted EBIT margin would have been more in a corridor of about 2 to 3 percent. These numbers are unsatisfying, do not meet our expectations, and I'm fully aware of the challenges ahead. Let us now come to some examples from our SPEFA program. The first example comes from our business unit industrial applications in Europe. We've recently received an order in a market segment which is new for our fluid products, battery cooling as part of battery energy storage systems. Our customer is a pioneer in advanced battery energy storage systems and already built a more than 1.1 gigawatt wind and solar plant in Europe. The company required a top-notch solution for the cooling system and compassing types and connections. Loma Group is providing a flexible type solution for the customer and also improving their assembly efficiency. The next example comes from our M&E team. In order to bring our quick connector technology to a wider market, we have developed a comprehensive sales strategy. This comprises the quick connector content store, extensive customer engagement, and operational competitiveness. The quick connector content store is showcasing the full range of innovations in quick connectors. The Qlik Connect provider displays the entire range and also products in development, prototypes, and customized solutions for our customers. We ensure competitiveness in production and pricing with optimizing production capabilities and maintaining competitive pricing to meet customer demands using, for example, advanced data analytics and further tools. Let us now look at progress of our transformation. Until the end of 2028, we are targeting annual savings of up to 42 million euros versus the baseline of 2024. We will reduce our global headcount by approximately 400, 70 of those in Germany. One key element of transformation is the optimization of our global production footprint. Starting in China, The site transfer from Wuxi to Changzhou and Qingdao has been completed by end of September. The Wuxi facilities have been closed. We have also initiated a site transfer from Guangzhou to Changzhou. The Guangzhou site will be closed by end of this year. With these two measures, we optimize our footprint in China to run our business with two sides. This enables more efficient production and logistics, lower rental costs and reduces administration costs. Looking at Australia, we have closed our Adelaide distribution center in order to optimize the local cost structure. These methods in China and Australia will contribute its annual savings of about 1.8 million Euro from 2026 to our overall saving targets. headcount will be reduced by a total of 51 heads. In India, we have optimized our production layout and thus generated additional 700 square meters of production space to allow for the growing industrial market in India. At the next page, I will give you a preview on the next steps that are planned in the Americas region. Norma currently operates three manufacturing sites in Mexico, in Juarez, Tijuana, and Monterrey. The production for our metal-based products is currently based in Juarez as well as in Tijuana. In Juarez, we have recently rented a new production location, a modern site, which enables an optimized production infrastructure with streamlined logistics and production layouts. In the first step, we will transfer the metal production from Tijuana to our new Juarez facility. In the second step, we will transfer the production equipment from the current Juarez location to the new production site in Juarez. We are forming a single and modern metal production plant in Juarez, Mexico. These measures will contribute this annual savings of approximately 1.2 million euros from 2027 onwards. Let us move on to share our true north for NOMA. Our target vision for 2028, our true north, would show double-digit margins. In 2025, our adjusted EBIT without one-off costs would level at about 2 to 3%. Until 2028, we are targeting annual savings of about 38 to 42 million euros with our transformation. Additional 10 million euros in savings are targeted to come from the Mayanthal operational recovery plan. Further on, we reach for M&A opportunities to strengthen the industrial application business. So, to summarize for Norma, I'm aware of the challenges ahead and the current situation of Norma, which is not satisfactory. Our focus and power is to build new Norma as an industrial powerhouse characterized as follows. You generate a strong market position in the industrial applications market, which offers high growth potential and really good margins. Our competitiveness in the area of mobility will be significantly enhanced by product innovation and cost effectiveness. Our lean and cost-adjusted organization will be focused on key tasks and fast decision-making. Our global production and distribution network will be streamlined to support our lean and cost-efficient approach, whilst offering delivery, reliability, and quality in all regions. So with this, I say thank you very much for joining our call today. And we are looking forward to answering your questions now.

Ladies and gentlemen, if you would like to ask a question, please press nine and star on your telephone keypad. In case you wish to withdraw your question, press three and star on your telephone keypad. And the first question is from Nikita Palaccio, Deutsche Bank. Please go ahead with your question.

Hi, good afternoon. This is Nikita from Deutsche Bank. First, welcome, Birgit, to the company. Looking really forward to work with you. Three questions from me, please. So, first of all, congrats on your strong APAC margin. Could you explain what was the key driver here, and can we expect to be this the run rate going forward? Second, I mean, we talked a bit about building blocks for 2025. Could you maybe elaborate what will drive Q4 here? And then the third question, I mean, we are seeing ongoing weakness in the EMEA mobility business. How would you tackle this weakness to see improvements here and to increase your margin? Thank you.