Online Annual Report 2019

Times are Changing

The market environment in which NORMA Group operates is undergoing radical change. We recognized this early on and subsequently began to adapt to the changed conditions. Every change is driven by a multitude of different factors, which in turn have a profound impact on patterns of action and decision-making.

On the following pages, you will learn what significance the changed framework conditions have for NORMA Group. We present an overview of the main drivers and factors behind the developments in fiscal year 2019 in a significantly changing environment. “Times are changing” – we have the answers to the questions of our time.

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Management Board Statement

Dear shareholders, customers and business partners,

“Times are changing” is the title of this year’s Annual Report, and this title describes the current situation for NORMA Group quite well in many ways. We live in a constantly changing world and only those who are able to adapt to the changing conditions will be successful in the long run.

Change is currently omnipresent for NORMA Group: Some of the markets we are active in are affected by extensive technological changes.…

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Our
answers to

8


current questions

Business activities
and Group structure
of NORMA Group SE

Objectives and strategy
of NORMA Group SE

Employees of
NORMA Group SE

Macroeconomic situation
and sectoral development

Facts & Figures FY 2019

Management Board's
assessment to the future
development of
NORMA Group SE

NORMA Group’s Risk
and Opportunity Report

Key Figures

Key financial and non-financial
figures and their development
in the past fiscal year.

Consolidated
Management
Report

Detailed information about NORMA Group and the fiscal year 2018

Consolidated
Financial
Statements

Consolidated financial statements including the notes

Supervisory Board Report

March 20, 2020

Corporate
Governance Report

March 25, 2020

IR Presentation

May 6, 2020

NORMA Group
Business Model

Online Annual Report 2019

Business activities and Group structure of NORMA Group SE

  • NORMA Group is an international market and technology leader in the area of advanced and standardized connecting technology.
  • NORMA Group’s product portfolio includes more than 40,000 high-quality joining products and solutions in the following three product categories: water management (WATER), fluid systems and connectors (FLUID) and clamps and joining elements (FASTEN).
  • With its 29 production sites and numerous sales offices, the Group has a global network with which it supplies more than 10,000 customers in more than 100 countries.
  • Two different sales channels: Engineered Joining Technology (EJT) und Distribution Services (DS).
  • NORMA Group SE is the parent company of NORMA Group. It has its headquarters in Maintal near Frankfurt/Main, Germany. NORMA Group SE serves as the formal legal holding of the Group.
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Objectives and strategy of NORMA Group SE

Increase in value The long-term strategy of NORMA Group is based on the ‘Vision 2025’, which was launched by the Management Board in 2018. The Vision 2025 includes increasing the value creation of NORMA Group as its central objective, building on NORMA Group’s successful entrepreneurial development and focusing on sustained sales growth, profitability above the industry average and the efficient deployment of capital.

NORMA Groups’ strategy for the long-term increase in value is based on the following key objectives and strategic measures:

  • Profitable growth
  • Selective product portfolio
  • Selective value-adding acquisitions to supplement organic growth
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Employees of NORMA Group SE

  • NORMA Group employs more than 8,500 people worldwide.
  • Decentralized organization, common corporate culture that is lived.
  • Focus on uniform global talent promotion.
  • Good performance is rewarded.
  • Feedback culture, employee opinions are always welcome.
  • Occupational health and safety is of the highest priorit.y
  • Incident rate improved significantly in financial year 2019.
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Macroeconomic situation and sectoral development

  • Trade conflicts put global economy under considerable pressure in 2019.
  • Noticeable economic slowdown in the euro zone, domestic demand remained strong in 2019.
  • German economy showed a mixed picture in 2019: lively domestic demand combined with weak industry.
  • Mechanical engineering in a recession almost worldwide, China also clearly in a downturn.
  • Automotive industry 2019 with partly massive production losses for cars and trucks.
  • Construction industry in Asia and Europe experiences strong tailwind in 2019, Germany booming.
  • US construction industry and water management experience tailwind in 2019 for infrastructure and renovation.
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Facts and figures FY 2019

Programs for optimization and personnel changes in the Management Board

  • Rightsizing program: Long-term optimization of group structures almost complete.
  • Change program “Get on Track” publicly announced in November 2019; Goals: optimize site capacities in all regions and streamline the product portfolio, in particular through active portfolio management and improvement of the purchasing processes.
  • Personnel changes in the Management Board: Dr. Michael Schneider, formerly CFO, took over the duties of Chairman of the Management Board in November 2019.
Development of key financial figures in the 2019 financial year
  • Slight increase in Sales of 1,5 % to EUR 1,100.1 million (2018: EUR 1,084.1 million).
  • Decline in organic sales by 2,0 % in FY 2019 (2018: +7.7%).
  • EJT business affected by weakness in the automotive sector, DS business grows significantly.
  • Heterogeneous growth in the three regional segments:
    • Asia-Pacific: strongest growth in fiscal year 2019, primarily due to the strong growth in the second half of the year.
    • Americas: good development of the NDS water business in the US, decline in EJT business.
    • EMEA: Decline in sales due to the weak development in both the European automotive business and stagnation in the DS segment.
  • Adjusted EBITA decreases by 16.4% to EUR 144.8 million (2018: EUR 173.2 million), adjusted EBITA margin at 13.2% (2018: 16.0%).
  • Adjusted Earnings per share weaker at EUR 2.76 (2018: EUR 3.61).
  • NORMA Value Added (NOVA) at EUR 17.3 million and significantly lower compared to the previous year (2018: EUR 60.8 million).
  • Strong balance sheet with an equity ratio of 41.6% (2018: 40.9%) despite dividend payments and higher balance sheet total.
  • Net debt increases to EUR 420.8 million mainly due to the first-time application of IFRS 16.
  • Leverage (Net debt / adj. EBITDA leverage increased to 2.2x (2018: 1.9x) due to IFRS 16 effects.
  • Stable net operating cash flow of EUR 122.9 million (2018: EUR 124.4 million).
  • Dividend proposal to the AGM of EUR 1.10 per share, 39.9% or EUR 35.0 million of adjusted net income of EUR 87.8 million.
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Forecast report

  • Global Econony
    Mixed picture in 2020: stabilization of the global economy and slight recovery possible but with high risks.

    Forecast for GDP growth (real)
    in %20192020e2021e
    World1+2.9+3.2+3.4
    USA2+2.3+2.0+1.7
    China3+6.1+5.6+5.8
    Euro zone4+1.2+1.3+1.4
    Germany5+0.6+1.1+1.4
    Sources: 1. IMF; 2. US Trade Ministry; 3. National Bureau of Statistics (NBS); 4. Eurostat; 5. German Federal Statistical Office (Destatis)
  • Mechanical engineering
    Downturn in the global mechanical and plant engineering industry should at least be slowed down, but without generating any new momentum; Important industry drivers that are independent of cycles include automation, digitalization and, in many countries, environmental protection, but also the restructuring of the energy industry.

    Real change in industry sales
    in %201820192020e
    China8142
    USA5-1-1
    Euro zone4-1-2
    World (excluding China)51-2-1
    1Revised data according to NBS (VDMA)
    Source: Mechanical Engineering Industry Association (VDMA)
  • Automotive industry
    No real trend reversal is expected for the global automotive market in 2020, especially as there is still a lack of demand impetus in the volume markets; Global sales and production of trucks and buses are expected to shrink by 7.7% each. A recovery in the truck sector is then expected for 2021.

    Global production and development of sales (light and commercial vehicles)
    in %201820192020e2021e
    Production of light vehicles-1.0-5.01.12.6
    Sales of light vehicles-0.8-4.50.12.4
    Sales of commercial vehicles4.7-2.3-7.73.8
    Source: LMC Automotive
  • Construction Industry
    Euroconstruct (i.e. ifo Institute) forecasts a steady upswing for the construction industry in Europe, which will be favored by the continuing low interest rate level and the high construction demand in the housing and infrastructure sectors.

    Development of european construction output
    in %201820192020e2021e
    Western Europe2.62.01.00.8
    Eastern Europe12.87.33.71.3
    Europe3.22.31.10.9
    Source: Euroconstruct/ifo Institute (19 core markets in total)
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Risk and Opportunity Report

  • The risk and opportunity management represents an integral component of corporate management for NORMA Group
  • Identifying, assessing, and managing opportunities and risks is a fundamental component of executing the corporate strategy, securing the short- and long-term success of the Company and sustainably increasing shareholder value.
Risk and Opportuinty Report


Climate change: an eye on opportunities and risks

Dealing with the consequences of climate change and the increasing scarcity of resources properly is becoming increasingly important. NORMA Group’s main objective is to identify risks and opportunities arising from the changing environment and to recognize potential.

The growing electromobility market is a consequence of the ongoing demand for a reduction in greenhouse gas emissions. Opportunities have arisen for NORMA Group in this area, in the development of innovative systems in the fields of thermal management for batteries and water, for example, when it comes to landscape irrigation, rainwater management and infrastructure solutions.

Nevertheless, NORMA Group also keeps a close eye on the risks that could arise, an increase in the cost of production processes that could result if greenhouse gas emissions were to be priced, for example. Potential losses of business in the automotive sector in connection with conventional drives are also monitored closely on an ongoing basis and appropriate steps are taken in good time as required.

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