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NORMA Group SE Management Reports 2014

Mar 27, 2014

311_ip_2014-03-27_33910f15-2355-4859-afc6-b115a77f7e77.pdf

Management Reports

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Highlights 2013 - Strategy

EMEA Successful introduction of new products for EURO 6 emission standard leads to outperformance of
volume trend
Americas New production facility in Brazil founded
APAC Further expansion of regional business into new markets and customers
APAC Open second plant in China to serve domestic and regional customers
Acquisitions 3 acquisitions in DS to strengthen our presence in Poland and Australia
Listing MDAX listing in March 2013 – 100% Free Float

Highlights 2013 – Financials (I)

Adjusted EBITA
Record adjusted EBITA of EUR 112.6 million (2012: EUR 105.4 million)
Margin
Sustainable record-level EBITA margin of 17.7% (2012: 17.4%)
Financial Result
Successful refinancing leads to improved interest rate structure and healthy maturity profile
Taxes
One-off taxes due to implementation of legal regional segments
Stable adjusted EPS of EUR 1.95 (2012: EUR 1.94)
EPS
Reported EPS almost on same level as prior year (2013: EUR 1.74; 2012: EUR 1.78)
Sales Record sales of EUR 635.5 million (2012: EUR 604.6 million) lead to growth of 5.1%
Highlights 2013 – Financials (II)
Equity Strong balance sheet with an equity ratio of 38.8% (2012: 41.8%)
despite dividend payment and increased balance sheet total due to temporarily higher cash
Net Debt Net debt* lowered to EUR 138.2 million from EUR 174.2 million in 2012 despite payments
for dividend and acquisitions
Leverage Net debt / EBITDA leverage* down to 1.1 x (2012: 1.4 x)
Cash Flow Record adjusted net operating cash flow of EUR 103.9 million (2012: EUR 81.0 million)
Dividend Dividend proposal to the AGM of EUR 0.70 per share – increase of 7.7% compared to 2012
36% or EUR 22.3 million of adjusted net income of EUR 62.1 million
Guidance Solid organic sales growth of around 4% to 7% plus approx. EUR 5 million from recent acquisitions
Sustainable EBITA margin on the level of the last years of above 17%


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Tighter Emission Regulations Drive Increased Joining Technology Content

Today
Europe EURO 3 EURO 4 EURO 5 EURO 6
NAFTA EPA '00 EPA '04 EPA '07 EPA '10 EPA '15
Japan JPN '98 JPN '02 JPN '05 JPN '09 JPN '14 J. '19
Brazil EURO1 EURO 2 EURO 3 EURO 4 EURO 5 EURO 6
Russia EURO1 EURO 2 $E\psi$ RO 3 EURO 4 EURO 5
India EURO 1 EURO 2 EURO 3 EURO 4 EURO 4+
China EURO 1 EURO 2 EURO 3 EURO 4 EURO 5 (big cities) EURO 6 (big cities)
2000 2002
2004
2006
2008
2010
2012
2014 2016 2018
2019

Environmental awareness continues to drive tightening emission regulations globally

Increasingly tighter emission regulations, including in emerging markets

Low-emission alternatives require significantly higher joining technology content at a substantially increased
complexity compared to existing/past technologies

Note: Chart shows emission regulation roadmap for passenger vehicles Source: Integer Research DieselNet, ACEA, NORMA Group

Sales by regional reporting segments

  • Weaker European environment is outperformed by higher content due to EURO 6 introduction which leads to +5.6% growth
  • Americas reported favourable organic growth of +2.4% which translated into slight negative EUR amounts due to weaker $\blacksquare$ USD
  • Asia-Pacific recorded strongly increased direct sales (+28.1% mainly driven by acquisitions) which represents 9% of total ٠ sales in 2013 or $\sim$ 13% including all NORMA Group exports into the region (sales by destination)

Record sales of EUR 635.5 million including Acquisitions

  • -Sequential improvement through the year as expected
  • -Strong Q4 2013 with 10.6% organic growth

Sales Development in EUR million

Sales 2012 2013 Change Change in % thereof
organic
thereof
currency
thereof
acquisitions
Q1 159.7 159.3 -0.4 -0.3% -6.1% -0.2% +6.0%
Q2 158.0 163.5 +5.5 +3.5% +0.5% -0.6% +3.6%
Q3 149.6 159.9 +10.3 +6.9% +6.3% -3.3% +3.9%
Q4 137.3 152.8 +15.5 +11.2% +10.6% -3.3% +4.0%
FY 604.6 635.5 30.9 5.1% +2.5% -1.8% +4.4%
  • Acquisitive growth of 4.4% related to Connectors Verbindungstechnik AG, Nordic Metalblok S.r.l., Chien Jin Plastic Sdn. Bhd., Groen Bevestigingsmaterialen B.V., Davydick & Co. Pty. Ltd., Variant S.A. and Guyco Pty. Ltd.

Strong improvement of Material consumption

  • Investments into regions, products and plants lead to slightly higher personnel costs and OPEX ò,
  • Improved material costs overcompensates higher personnel expenses and OPEX: Margin improved $\blacksquare$

No Operational Adjustments in 2013

  • -No operational adjustments despite recent acquisitions in Poland / Australia and change into SE
  • -Ongoing PPA adjustments at EUR 0.21 on EPS level
in EUR million Reported PPA adjustments adjusted
Sales 635.5 0 635.5
EBITDA 129.3 No operational adjustments 129.3
EBITDA margin 20.3% 20.3%
EBITA 112.1 0.5 112.6
EBITA margin 17.6% 17.7%
EBIT 99.5 8.2 107.7
EBIT margin 15.7% 16.9%
Net Profit 55.6 6.5 62.1
Net Profit margin 8.8% 9.8%
EPS (in EUR) 1.74 0.21 1.95

-Full Year PPA adjustments on EBIT level for 2014 approx. EUR 10 million

No Operational Adjustments 2013

-Only minor PPA adjustments in following years on EBITA level

in EUR million 2010 2011 2012 2013
Reported EBITA 64.9 84.7 105.2 112.1
+ Restructuring Costs 1.3 1.8 0 0
+ Non-recurring/non-period-related
items*
15.5 14.8 0 0
+ Other group and normalized items 0.7 0.2 0 0
+ PPA depreciation 3.0 1.2 0.2 0.5
Adjusted EBITA 85.4 102.7 105.4 112.6

*: 3 6 -

Profit & Loss (adjusted & reported)

in EUR million 2012 2013
reported adjusted reported adjusted
Sales 604.6 604.6 635.5 635.5
Gross Profit 344.4 344.4 371.4 371.4
EBITDA 120.8 120.8 129.3 129.3
EBITA 105.1 105.4 112.1 112.6
in % 17.4 17.4 17.6 17.7
EBIT 94.4 101.9 99.5 107.7
in % 15.6 16.8 15.7 16.9
Financial Result -13.2 -13.2 -15.6 -15.6
Profit before Tax 81.2 88.7 83.9 92.1
Taxes -24.6 -26.9 -28.3 -30.0
Net Profit 56.6 61.8 55.6 62.1

EPS – Dividend Proposal EUR 0.70 per share

  • -Dividend proposal to the shareholders at the AGM on 21 May 2014: EUR 0.70 per share (2013: EUR 0.65)
  • -Pay-out of EUR 22.3 million for 31,862,400 shares equals 36.0% of adjusted net income of EUR 62.1 million

Working Capital - Historical Low Level of 17.4% of Sales

    • Successful implementation of reverse factoring and optimizing TWC processes boosts trade accounts payables
  • -Trade receivables on a slightly higher level due to excellent sales in Q4 2013

Equity increased by EUR 31 million due to High Profit even including Dividend Payment

Successful Issuance of Promissory Note (Schuldschein) in July 2013

Targets achieved

  • Maturity: Mid-term oriented well balanced repayment schedule
  • More diversified mix of financing instruments
  • Balanced fixed and floating tranches

Schuldschein

  • Volume EUR 125 million
  • Interest terms improved by ~2%
  • Financial result improves starting 2014
  • Tenor 5, 7 and 10 years (40%/40%/20%)
  • 3fold oversubscribed
  • BBB+ / A- internal Bank rating achieved

Lenders

-Small European banks (e.g. German Sparkassen and Insurance institutions)

Successful Repayment of SFA leads to Substantial Interest Cost Savings

  • Repayment of ~ EUR 100 million SFA funded by low interest rate promissory note
  • January 2014 chosen to optimize one-off costs (derivatives)
  • Therefore financial result 2014 approx. EUR 18 million compared to EUR 15.6 million in 2013
  • Includes one-off of EUR 6.8 million and immediate interest cost saving starting January 2014

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Equity Debt Ratios and Maturity Profile

Solid Balance Sheet

  • -Liquid assets and current liabilities temporarily inflated due to refinancing of SFA
  • -Repayment of EUR 101.4 million in January 2014 already done

Another Record Operating Net Cash Flow in 2013

Operating net cash flow
in EUR million
2011
2012
2013
EBITDA
117.0
120.8
129.3
+7.0%
∆ ± Working capital
-19.5
-9.8
5.1
n.a.
Operating net cash flow before investments
97.5
111.0
134.4
21.0%
from operating business
Variance
∆ ± Investments from operating business -30.7 -30.0 -30.5 +1.6%
Operating net cash flow
66.8
81.0
103.9
28.2%
    • Operating net cash flow before investments significantly increased by EUR 23.3 million to a total of EUR 134.4 million in 2013 due to higher EBITDA and working capital in flow
    • 2013 CAPEX spending on the same level as in 2012 leads in total to a record cash flow of EUR 103.9 million

Cash Flow Statement

  • -Adjusted operating net cash flow strongly improved by 290 BP to 16.3% of sales (2012: 13.4%)

Outlook 2014 - Strategy

Outlook 2014 - Macroeconomic Forecast - GDP Growth

$\ln \frac{9}{6}$ 2013 2014e 2015e
USA* $+1.9$ $+2.8$ $+3.0$
China* $+7.7$ $+7.5$ $+7.3$
Euro zone* $-0.4$ $+1.0$ $+1.4$
Germany* $+0.4$ $+1.7$ $+2.0$
World* $+3.0$ $+3.7$ $+3.9$
  • VDMA (German Engineering Federation) expects production increase of 5% in 2014
  • Euroconstruct expects trend reversal to +0.9 % for the European construction industry п
  • VDA expects 3.0 % growth in passenger cars in 2014

Source: International Monetary Fund, Eurostat February 2014

Outlook 2014 – Company Guidance

Sales Solid organic growth of approx. 4% to 7%, plus approx. EUR 5 million from recent acquisitions
EBITA margin Sustainable margin level as in previous years of more than 17%
Investments in
R&D
Approx. 4% of EJT sales
Material ratio Approx. on the level of the two previous years
Financial result Approx. EUR -18 million including one-offs due to repayment of SFA in January 2014
Tax rate Approx. 32%
CAPEX
rate
Approx. 4.5% of sales
Dividend Approx. 30% to 35% of Group adjusted net profit

NORMA Group Full Year Results 2013

Investors' & Analysts' Conference


Thank you for your attention

Customer Value through Innovation

NORMA Group – Key Investment Highlights

1 Market leader in attractive engineering niche markets with strong growth prospects
2 Premium pricing through technology and innovation leadership in mission-critical components
3 Enhanced stability through broad diversification across products, end-markets and regions
4 Two distinct ways-to-market providing unique customer access and market intelligence
5 Significant growth and value creation opportunity through synergistic acquisitions
6 Proven track record of operational excellence

Proven Business Model Addressing Key Megatrends

Strong Content Growth based on EURO 6

  • EURO 6 introduction for trucks and passenger vehicles in 2014 triggers new engine generations and ramp-up in 2013
  • Market for joining technology is expected to outgrow the respective end-markets, driven by megatrends including
  • Additional components in new engines
  • Higher value of joining technology content $\mathbf{r}$
  • -> Lead to increased number of units and higher prices per customer end product

Convincing Growth Prospects

Clear global market leader in clamp/connect Excellent growth outlook across EJT market

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(2013-18 CAGR) Additional growth for
Joining technology market
above market growth
Passenger vehicles add. 2-4%
Commercial vehicles add. 2-4%
Agricultural equipment add. 2-4%
Construction equipment add. 2-4%
Engines add. 2-4%
White goods Same level
Drainage systems Same level

NORMA Group expects to grow even faster than its end-markets

3-* -: - -

Premium Pricing through Technology and Innovation Leadership in Mission-Critical Components

Mission-criticality: Small relative cost – high impact to achieve premium pricing
Ability
Example:
Harvester
Approx. value of
joining technology
content

Basis for premium pricing:

Market leadership
Cooling water c. € 21-26
Technology
Charged air c. € 20-25
Quality

Innovation
Fuel and oil system
Exhaust system
c. € 49-60
c. € 62-101
Tailor-made solutions

High switching costs for customers

Savings potential for customer
Standard clamps
and connectors
c. € 36-44 mismatches risk of switching
supplier
Total
c. € 188-256
(< 0.1%)
Price of
harvester:
€ 350,000
  • Basis for premium pricing:
  • Market leadership
  • Technology
  • Quality
  • Innovation
  • Tailor-made solutions
  • High switching costs for customers
  • Savings potential for customer mismatches risk of switching supplier

Enhanced Stability through Broad Diversification Across Products, End-Markets and Regions

More than 30,000 products, manufactured in 21 locations and sold to more than 10,000 customers in 100 countries Top 5 customers account for only $~18\%$ of 2013 sales

Good Balance in the Two Distinct Ways-to-Market

  • -Significant economies of scale in production
  • -Close contact to international EJT customers
  • -Knowledge transfer from EJT to DS

Engineered Joining Technology (EJT) ~70% of 2013 sales

Innovation and product solution partner for customers, focused on engineering expertise with high value-add

Distribution Services (DS) ~30% of 2013 sales

High quality, branded and standardised joining products provided at competitive prices to broad range of

Customised, engineered solutions Patents in nearly 200 patent families

B2B

High quality, standardised joining technology products B2C

Successful Acquisition Track Record Continues Plus 4.4% of Sales

Sales consolidation effects in
EUR million
Date of
Acquisition
Country 2012 2013 2014** Total
Connectors Verbindungstechnik AG 04/12 Switzerland 11.5 5.1 - 16.6
Nordic Metalblok S.r.l. 07/12 Italy 2.3 2.9 - 5.2
Chien Jin Plastic Sdn. Bhd. 11/12 Malaysia 0.5 7.2 - 7.7
Groen Bevestigingsmaterialen B.V.* 12/12 Netherlands - 3.4 - 3.4
Davydick & Co. Pty. Limited 01/13 Australia - 3.3 - 3.3
Variant SA * 06/13 Poland - 1.2 ~1 ~2.2
Guyco Pty. Limited 07/13 Australia - 3.6 ~4 ~7.6
Total 14.3 26.7 ~5 ~46

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Acquisition of Connectors Verbindungstechnik AG

M&A Acquisiton of Connectors Verbindungstechnik AG, Switzerland, in April 2012
Business
Model
Connectors specialises in connecting systems for the pharmaceutical and biotechnology industry.
History For more than 25 years the company has been manufacturing and distributing connecting elements
that meet the highest purity standards for medical sterile technology.
Sales Approx. EUR 15 million sales in financial year 2012
Consoli
dation
First time consolidation into NORMA Group starting Q2 2012
Adjustments No operational adjustments planned from acquisition
Excellent margin of Connectors in the range of NORMA Group's margin;
Margin Earnings accretive in 2012 already

Acquisition of Nordic Metalblok S.r.l.

M&A Acquisiton of Nordic Metalblok S.r.l., Italy in July 2012
Business
Model
Company specialises in manufacturing clamps for various applications particularly for the heating,
ventilation and air conditioning industry and the agricultural and construction sectors.
History For more than 40 years the company distributes its products to retailers and wholesalers as well as to
manufacturing companies globally.
Sales Approx. EUR 6 million sales in financial year 2012
Consoli
dation
First time consolidation into NORMA Group starting Q3 2012
Adjustments No operational adjustments planned from acquisition
Margin Margin of the company including synergies in the range of NORMA Group's margin

Acquisition of Chien Jin Plastic Sdn. Bhd.

M&A Acquisiton of Chien Jin Plastic, Malaysia, in October 2012
Closing expected toward year end 2012
Business
Model
Specialised in joining elements for plastic and iron pipe systems for different application areas, esp.
drinking and domestic water distribution. Also produces components for sanitary appliances under its
brand name Fish. More than 200 customers in 30 countries.
History In the market for 20 years, the company is based in Ipoh, Malaysia.
Sales Approx. EUR 7 million sales in financial year 2012
Consoli
dation
First time consolidation into NORMA Group after closing.
Adjustments No operational adjustments planned from acquisition
Margin Margin of the company including synergies in the range of NORMA Group's margin

Increase in Ownership in Groen Bevestigingsmaterialen BV

M&A 60% increase in ownership to 90% in Groen Bevestigingsmaterialen B.V. in December 2012
Business
Model
Wholesale supplier of hose and pipe clamps and coupling to the industrial, construction, agriculture,
plumbing, hardware and automotive sector in Belgium, the Netherlands and Luxembourg. Moreover,
extensive supply programme for traffic sign brackets and necessary mounting tools.
History Partnership between Groen and NORMA started in 1993 with ABA hose claps. The company is based
in Purmerend, Netherlands.
Sales Approx. EUR 5 million sales in financial year 2012 (thereof EUR 2 million additional external sales)
Consoli
dation
First time consolidation into NORMA Group after closing on 31
December 2012
Adjustments No operational adjustments planned from acquisition
Margin Margin of the company including synergies in the range of NORMA Group's margin

Acquisition of Davydick & Co. Pty Ltd.

M&A Acquisition of Davydick & Co. in January 2013
Business
Model
Distribution for various elements in the transportation of water in irrigation systems. Specialised in
supplying a comprehensive range of rural irrigation fittings, valves, and pumps under the brand
PUMPMASTER. More than 700 customers throughout Australia.
History In the market for more than 20 years. Based in Goulburn, Australia
Sales Approx. EUR 4 million sales in financial year 2012
Consoli
dation
First time consolidation into NORMA Group after closing in early 2013
Adjustments No operational adjustments planned from acquisition
Margin Margin of the company including synergies in the range of NORMA Group's margin

Acquisition of Variant S.A.

M&A Acquisition of Variant S.A. in May 2013
Business
Model
Sells joining products and cable ties to over 1,000 retailers and wholesalers across Poland. End
clients include home improvement stores, garages and specialist retailers for automotive supplies.
History Distribution partner of NORMA Group for more than 20 years. Based in Krakow, Poland
Sales Approx. EUR 5 million sales in financial year 2012 (thereof ~EUR 1 million external products)
Consoli
dation
First time consolidation into NORMA Group after closing in June 2013
Adjustments No operational adjustments planned from acquisition
Margin Margin of the company including synergies within 12 months in the range of NORMA Group's margin

Acquisition of Guyco Pty. Limited

NORMA Group Worldwide

EMEA

Czech Republic (P) France (P, D) Germany (P, D) Italy (P, D) Netherlands (D) Poland (P) Russia (P, D) Serbia (P, D) Spain (D) Sweden (P, D) Switzerland (D) Turkey (D) United Kingdom (P, D)

Americas

Brazil (P, D) Mexico (P) $USA(P, D)$

Asia-Pacific

Australia (D) China (P, D) India $(P, D)$ Indonesia (D) Japan (D) Korea (D) Malaysia (P, D) Philippines (D) Singapore (D) Thailand (P) Vietnam (D) $P =$ production

D = distribution, sales, competence center

  • 21 Productions sites
  • 23 Countries with Distribution, Sales & Competence Centres $\mathbf{u}$
  • Sales into 100 countries ×,

Historic Growth Track Record

Historic revenue development in EUR million

$\begin{array}{cccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccccc$

1997 to 2013: 17 years of a successful growth story

Sales by Way-to-Market and by Industries

  • -Stable breakdown by way-to-market: Acquisitions included in Distribution Services
  • -Majority of sales goes to non-automotive industrials, distributors as well as general tiers
    • Sales to industrial suppliers include various industries , e.g. airplanes, trains, buses, water, plumbing, irrigation, agricultural & construction equipment

Continuation of Growth Track and Sustainable Margin into 2012

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9

Pro-active FCF Management to be Continued

Trade working capital (in EUR million)

Capex (in EUR million)

* excluding payments related to IPO costs (EUR 2 million) ** at sales run rate of EUR 625 million

Solid development of Balance Sheet

(all amounts in EUR million) 31 Dec 2012 31 Dec 2013 (all amounts in EUR million) 31 Dec 2012 31 Dec 2013
Assets Equity and liabilities
Non-current assets Equity
Goodwill / Other intangible
assets
/ Property, plant & equipment
436.8 441.5 Total equity 289.2 319.9
Other and derivative financial Non-current and current
Liabilities
assets / Income tax assets /
Deferred income tax assets
8.3 9.1 Retirement benefit obligations /
Provisions
21.6 24.5
Total non-current assets 445.1 450.6
Current assets Borrowings and other financial 246.6 332.4
Inventories 74.3 79.8 liabilities
Other non-financial assets /
Income tax assets
20.7 9.0 Other non-financial liabilities 21.2 23.8
Trade and other receivables 79.3 90.1 Tax liabilities and derivative
financial liabilities
75.5 64.1
Cash and cash equivalents 72.4 194.2 Trade payables 37.7 59.0
Total current assets 246.7 373.1 Total liabilities 402.6 503.8
Total assets 691.8 823.7 Total equity and liabilities 691.8 823.7
Event Date
Publication Interim Results Q1 2014 07 May 2014
Annual General Meeting in Frankfurt / Main 21 May 2014
Publication Interim Results Q2 2014 06 August 2014
Publication Interim Results Q3 2014 05 November 2014
Contact
Andreas Troesch
Vice President Investor Relations
Phone:
+49 6181 6102-741
Fax:
+49 6181 6102-7641
Email:
[email protected]

Disclaimer

This presentation contains certain future-oriented statements. Future-oriented statements include all statements which do not relate to historical facts and events and contain future-oriented expressions such as "believe", "estimate", "assume", "expect", "forecast", "intend", "could" or "should" or expressions of a similar kind. Such future-oriented statements are subject to risks and uncertainties since they relate to future events and are based on the Company's current assumptions, which may not in the future take place or be fulfilled as expected.

The Company points out that such future-oriented statements provide no guarantee for the future and that actual events including the financial position and profitability of the NORMA Group SE and developments in the economic and regulatory fundamentals may vary substantially (particularly on the down side) from those explicitly or implicitly assumed or described in these statements.

Even if the actual results for the NORMA Group SE, including its financial position and profitability and the economic and regulatory fundamentals, are in accordance with such future-oriented statements in this presentation, no guarantee can be given that this will continue to be the case in the future.

Non audited data is based on management information systems and/or publicly available information. Both sources of data are for illustrative purposes only.