NORMA Group SE Annual Report 2016

FY2016 Annual Report · NORMA Group SE

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A N N U A L R E P O R T 2 0 1 6

NORMA GROUP

NORMA Group is an international market and technology leader in engineered
joining technology. The Company manufactures a wide range of innovative
joining technology solutions in three product categories – CL A MP, CONNECT
and FLUID – and offers more than 35,000 high-quality products and solutions
to around 10,000 customers in 100 countries. NORMA Group’s joining products
are used in various industries and can be found in vehicles, ships, trains, air-
crafts, domestic appliances, engines and plumbing systems as well as in
applications for the pharmaceutical and biotechnology industry. From its head-
quarters in Maintal near Frankfurt, Germany, the Company coordinates a
global network consisting of 27 production facilities as well as numerous sales
and distribution sites across Europe, the Americas, and Asia-Pacific.

Overview of Key Figures 2016

Order situation

Order book (Dec 31)

Income statement

Revenue

Adjusted gross profit 1

Adjusted EBITA 1

Adjusted EBITA margin 1

EBITA

Adjusted profit for the period 1

Adjusted EPS 1

Profit for the period

EPS

Cash flow

Operating cash flow

Net operating cash flow

Cash flow from investing activities

Cash flow from financing activities

Balance sheet

Total assets

Total equity

Equity ratio

Net debt

Employees

Core workforce

Share data

IPO

Stock exchange

Market segment

ISIN

T 0 0 1

2016

2015

change in %

EUR millions

302.4

295.8

EUR millions

EUR

EUR millions

EUR

EUR millions

894.9

545.6

157.5

17.6

150.4

94.6

2.96

75.9

2.38

149.2

148.5

− 133.8

49.6

889.6

533.1

156.3

17.6

150.5

88.7

2.78

73.8

2.31

128.2

134.7

− 44.5

− 70.4

0.6

2.3

0.8

n/a

0.0

6.6

6.7

2.7

3.0

16.4

10.3

201.0

n/a

Dec 31, 2016

Dec 31, 2015

change in %

EUR millions

1,337.7

483.6

36.2

394.2

1,167.9

429.8

36.8

360.9

14.5

12.5

n/a

9.2

5,450

5,121

6.4

April 2011

Frankfurt Stock Exchange, Xetra

Regulated Market (Prime Standard), MDA X

Security identification number

Ticker symbol

Highest price 2016 2

Lowest price 2016 2

Year-end share price on Dec 31, 2016 2

EUR

Market capitalization as of Dec 31, 2016 2

EUR millions

Number of shares

DE000A1H8BV3

A1H8BV

NOEJ

51.54

35.20

40.55

1,292

31,862,400

1 Adjustments are described in the Notes to the Consolidated Financial Statements.  Notes, p. 138.
2 Xetra price.

Date of publication: March 22, 2017

Two Strong Distribution Channels

Engineered Joining Technology

Tailored, high-tech products devel-
oped to meet specific requirements
of individual OEM customers

Distribution Services

High-quality standardized brand
products for a variety of applications

p
u
o
r

G
A
M
R
O
N

E N G I N E E R E D J O I N I N G T E C H N O LO GY ( E J T )
The business area of EJT focuses on customized, engineered solutions which meet the specific requirements of
original equipment manufacturers (OEM). For these customers NORMA Group develops innovative, value-adding
solutions for a wide range of application areas and various industries. No matter whether it is a single component,
a multi-component unit or a complex system, all products are individually tailored to the exact requirements of
the industrial customers while simultaneously guaranteeing highest quality standards, efficiency and assembly
safety. NORM A Group’s EJT products are built on the extensive engineering expertise and proven leadership in
this field.

D I S T R I B U T I O N S E R V I C E S ( D S )
In the area of DS, N OR M A Group sells a wide range of high-quality, standardized joining technology products
for various applications through different distribution channels. Among the customers are distributors, O EM
aftermarket customers, technical wholesalers and hardware stores. In the DS business area N O R M A Group
benefits not only from its extensive geographic presence and global manufacturing, distribution and sales capa-
cities, but also from its well-known brands, the customized packaging and the high availability of its products at
the point of sale. NORM A Group markets its joining technology products under its well-known brand names:

Innovative joining technology and the
highest quality standards have secured
NORMA Group’s market position for
over 60 years now. The Com pany of fers
solutions for many different indus-
tries with its advanced products. In fact,
NORMA Group ranks as one of the
world’s market and technology leaders in
the area of joining technology thanks
to the personal dedication of more than
6,000 employees and an intellectual
property rights portfolio that consists of
more than 700 patents.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSCONTENTSE M E A

A N E N O R M O U S E C O N O M I C S PA C E W I T H G R E AT P O T E N T I A L

Europe, Middle East & Africa. This economic zone includes some of the richest and poorest
countries in the world. The living and development standards within these regions are incredi-
bly diverse, and their ethnic and cultural diversity is immense. However, some basic industrial
requirements are the same no matter where you are – reliable joining technology for instance,
whether for applications in the motor vehicle industry, in mechanical engineering, in the
infrastructure sector, in the water industry or in agriculture.

2.3

B I L L I O N

people live in the EMEA region.

¹/³

of the world’s gross domestic product

is generated in EMEA.

6.5

P E R C E N T

more passenger cars were registered in 2016 than last year

according to the European industry association ACEA –

total number: 15.1 million (EU28 + EFTA).

2.7

P E R C E N T

growth of EMEA’s recent economic output in a year

(averaged over the last ten years).

M I L L I O N

motor vehicles are manufactured in EMEA every year –

a quarter of the world’s total production.

E M E A

A N E N O R M O U S E C O N O M I C S PA C E W I T H G R E AT P O T E N T I A L

Europe, Middle East & Africa. This economic zone includes some of the richest and poorest

countries in the world. The living and development standards within these regions are incredi-

bly diverse, and their ethnic and cultural diversity is immense. However, some basic industrial

requirements are the same no matter where you are – reliable joining technology for instance,

whether for applications in the motor vehicle industry, in mechanical engineering, in the

infrastructure sector, in the water industry or in agriculture.

2.3

B I L L I O N

people live in the EMEA region.

¹/³

of the world’s gross domestic product
is generated in EMEA.

6.5

P E R C E N T

more passenger cars were registered in 2016 than last year
according to the European industry association ACEA –
total number: 15.1 million (EU28 + EFTA).

2.7

P E R C E N T

growth of EMEA’s recent economic output in a year
(averaged over the last ten years).

M I L L I O N

motor vehicles are manufactured in EMEA every year –
a quarter of the world’s total production.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSCONTENTSE F F I C I E N C Y

A M E G AT R E N D F O R T H E C L I M AT E ’ S S A K E

Droughts, extreme storms, rising sea levels: The threats of climate change are
obvious and their effects are global. Climate protection is the order of the day.
Reducing carbon dioxide emissions plays an important role in this. The motor
vehicle industry is an important starting point here. Reducing emissions by
increasing efﬁ ciency is the motto. To meet the high demands of manufacturers,
suppliers must also offer innovative solutions.

130

G R A M S O F C O 2 P E R K M
may be emitted on average since the year 2015
by new cars in the EU.

E F F I C I E N C Y

A M E G AT R E N D F O R T H E C L I M AT E ’ S S A K E

Droughts, extreme storms, rising sea levels: The threats of climate change are

obvious and their effects are global. Climate protection is the order of the day.

Reducing carbon dioxide emissions plays an important role in this. The motor

vehicle industry is an important starting point here. Reducing emissions by

increasing efﬁ ciency is the motto. To meet the high demands of manufacturers,

suppliers must also offer innovative solutions.

G R A M S O F C O 2 P E R K M
is the legal limit for average emissions
of newly registered passenger cars
in the EU from the year 2021.

5.1

P E R C E N T

annual reduction in car ﬂ eet consumption
since 2015 needed to reach the 95-gram target.

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSCONTENTST E C H N O L O G Y

H O W I N C R E A S E D E F F I C I E N C Y I S B E C O M I N G P O S S I B L E

Smaller, lighter, more reﬁ ned – many measures are being combined to meet the
stringent emissions requirements in the motor vehicle industry. Downsizing and turbo-
charging are two starting points to make combustion engines more powerful. The challenge
is that many individual components have to be adapted in order to withstand thermal
and mechanical stress. As a result, the complexity and technical requirements of the
components are increasing.

T E C H N O L O G Y

H O W I N C R E A S E D E F F I C I E N C Y I S B E C O M I N G P O S S I B L E

Smaller, lighter, more reﬁ ned – many measures are being combined to meet the

stringent emissions requirements in the motor vehicle industry. Downsizing and turbo-

charging are two starting points to make combustion engines more powerful. The challenge

is that many individual components have to be adapted in order to withstand thermal

and mechanical stress. As a result, the complexity and technical requirements of the

components are increasing.

61.4

K I L O W A T T

performance per liter of displacement for the
average registered car in Germany today.
Ten years ago, that number was only 48.9.

260

P E R C E N T

increase in hybrid vehicle registrations
between 2010 and 2015 in the EU.

2.5

P E R C E N T

decrease in total mass of newly registered passenger
cars in Europe from 2010 to 2015 (empty weight divided
by product of vehicle length, width and height).

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSCONTENTSEM E A IN
F IG U R ES

THE YEAR 20 1 6

3.8%

sales growth

432

EUR million in sales

production sites in
the EME A region

3,202

employees in the
EME A region

48%

of total sales in
the EME A region

EM E A IN

F IG U R ES

FOU R
Q U EST ION S TO…

THE YEAR 20 16

3.8%

sales growth

432

EUR million in sales

production sites in

the EME A region

3,202

employees in the

EME A region

48%

of total sales in

the EME A region

J O A C H I M G E I M E R President EMEA

Mr. Geimer, the Swedish company A BA and the German
company Rasmussen merged to form NORM A Group in
2006. So, in a way EME A , or even better said Europe, is
the Group’s home market. But how important is the region
today? After all, NORM A Group now has over 6,000 em-
ployees at 27 sites around the world.

That’s right. N O R M A Group has grown steadily in the ten
years of its existence, both organically and through numer-
ous acquisitions. Today, we are globally active. The Americas
and Asia-Paciﬁ c regions account for more than 50% of sales
and earnings.

But this also means that we still generate almost half of all
sales in the EME A region. The EU as the largest economic
area in the region is and remains an important sales market
for us. Our largest customers and some of the most impor-
tant players in the automotive industry are based here.

Does that mean diversiﬁ cation is in EME A’s future?

Diversiﬁ cation is part of our corporate strategy, in the EME A
region as well as worldwide. We have made eleven acquisi-
tions in the past ten years, including four in the water sector
and one in the pharma/biotech sector. Liﬁ al, the Portuguese
company which we acquired in January 2017, is a producer
of metal clamps for use in industry and agriculture for exam-
ple. We are constantly looking for new companies, but are
buying companies from the automotive industry as well, as
in the case of Autoline. Of course, seeing potential synergies
is prerequisite. Our demands are high: the companies we
acquire must match us. They must be consistent with our
acquisition strategy and contribute to our growth. In addition,
their business must be as proﬁ table as N OR M A Group’s in
order to be considered an acquisition target. There are al-
ready many companies that do not meet these criteria.

Does that mean the focus in the EMEA region is on the
automotive industry?

So where do you see the key drivers for future growth in
the E M E A region: in the automotive sector or rather in
other areas?

We certainly have a focus on business with the automotive
industry in E M E A , but without neglecting our projects in
the construction industry, mechanical engineering and the
infrastructure sector. It is simply grown like this and also
intended. However, that does not mean we exclude acqui-
sitions of companies from other industries in E M E A . On
the contrary, we are seeing exciting applications in mega-
trends for our joining technology in Europe, in the water
sector, for example.

Yes and yes. Emissions regulations alongside general devel-
opments in mobility signiﬁ cantly determine our business in
the automotive industry. Our products are tailored precisely
to the needs of every industry and are therefore in great
demand. This promises potential for further growth in all in-
dustries. Our product applications are endless – we are far
from exhausting their possibilities.

Sources: E M E A : World Bank, http://databank.worldbank.org | European Automobile Manufacturers’ Association, http://www.acea.be/statistics/ | OICA, http://www.oica.net/
category/production-statistics/ | E F F I C I E N C Y : EU regulation no. 443 / 2009 | T E C H N O L O G Y : Federal Motor Transport Authority | ICCT EU Pocketbook 2016, http://eupocketbook.
theicct.org

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSCONTENTSS
T
N
E
T
N
O
C

14
Letter from the Management Board

C
Consolidated Financial Statements

A
To Our Shareholders

26 NORMA Group on the Capital Market
30 Supervisory Board Report
33 Corporate Governance Report

B
Consolidated Management Report

48 Principles of the Group
59 Economic Report
78 Events after the End of the Fiscal Year
78 Forecast Report
83 Risk and Opportunity Report
94 Remuneration Report
98 Other Legally Required Disclosures
101 Report on Transactions with Related Parties

110 Consolidated Statement of Financial Position
112 Consolidated Statement of
Comprehensive Income

113 Consolidated Statement of Cash Flows
114 Consolidated Statement of Changes in Equity
116 Segment Reporting
118 Notes to the Consolidated Financial

Statements

176 Appendix to the Notes to the Consolidated

Financial Statements
178 Responsibility Statement
179 Auditor’s Report

180
Further Information

180 Glossary
185 List of Graphics
186 List of Tables
189 Overview by Quarter 2016
190 Multi-Year Overview

Financial Calendar 2017
Contact
Imprint

E X P L A N AT I O N O F S Y M B O L S

@ Internet

 Cross reference

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS12

The Management Board

W E R N E R D E G G I M
C H I E F E X E C U T I V E O F F I C E R ( C E O )

• Vice President and General Manager, TRW Automotive, USA
• Managing Director / Chairman of the Management Board, Peguform GmbH
• Various executive management positions,
thereof seven years in the USA and Canada

D R . M I C H A E L S C H N E I D E R
C H I E F F I N A N C I A L O F F I C E R ( C F O )

• Managing Director, F TE automotive Group
• Member of the Management Board, Veritas AG
• Director of Finance and IT, Aesculap AG (B. Braun Melsungen Group)
• Various international management positions,

thereof three years in Brazil

B E R N D K L E I N H E N S
B O A R D M E M B E R B U S I N E S S D E V E L O P M E N T

With NORMA Group since the beginning of his professional career:
• Global Sales Director for Commercial & Passenger Vehicles
• Business Area Sales Manager for NORMACL AMP
• Marketing Manager Automotive
• Development Engineer

J O H N S T E P H E N S O N
C H I E F O P E R A T I N G O F F I C E R ( C O O )

• Vice President Operations, Hayes Lemmerz International
• Director of Operations for Northern Europe, Textron Fastening Systems
• Plant Manager and Managing Director, APW Electronics
• Various positions, among others in the area of
project and production management at Valeo

Further information regarding the professional careers of the Management
and the Supervisory Board can be found in the Investor Relations section
on the NORMA Group website @ http://investors.normagroup.com.

NORMA Group SE Annual Report 2016The Management Board

J O H N S T E P H E N S O N

W E R N E R D E G G I M

B E R N D K L E I N H E N S

D R . M I C H A E L S C H N E I D E R

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS14

Letter from the Management Board

Dear shareholders, customers
and business partners,

2016 was a year that posed many challenges. Political events such as Great
Britain’s decision to leave the EU and the outcome of the US presidential elec-
tion shaped the mood on the international markets. The global economic de-
velopment was moderate and important growth markets lacked momentum.

For NORMA Group, 2016 was a mixed year in this challenging economic envi-
ronment in which we were unable to achieve all of our original goals. Although
the business segments of importance to us in the automotive and water indus-
tries were driven by increased production numbers and strong demand and
developed well, we had to adjust our sales forecast in November 2016 due to
the persistently weak development of the US markets for commercial vehicles
and agricultural machinery. This came as a surprise not only to us, but also for
many investors and analysts and led to clear reactions on the capital market
with a negative impact on our share.

At the end of the year, however, we proved that our business rests on a solid
foundation that ensures stability, even in an economically difficult environment.
We succeeded in increasing our sales slightly by 0.6% – by 0.9% organically
– to EUR 894.9 million and maintained our adjusted EBITA margin at the usual
high level of 17.6%. We are satisfied with the year-on-year increase of 6.6%
higher adjusted profit for the period of EUR 94.6 million and adjusted earnings
per share of EUR 2.96.

NORMA Group SE Annual Report 201615

We also managed to achieve further successes in the area of M& A in fiscal year
2016. Autoline has been part of our Group since the end of November. With
production facilities in France, Mexico and China, Autoline operates globally and
enhances our existing portfolio with its products in the area of quick connectors
for applications in the automotive industry. With the acquisition of Autoline, we
have once again come one step closer to our goal of offering our customers in
the vehicle industry holistic joining solutions.

In January 2017, we also acquired the Portuguese clamp manufacturer Lifial.
Lifial produces metal clamps for use in industry and agriculture and employs
around 100 people. The company markets its products to customers in Europe
and North Africa. By acquiring Lifial, we have strengthened our product line
in the Distribution Services business and our market position on the Iberian
Peninsula and in Europe.

Autoline already made a contribution of EUR 3.5 million to Group sales in fiscal
year 2016, and these two highly profitable companies will continue to contribute
to sales growth in the future.

Acquisitions are and will remain an important part of our Company strategy of
strengthening its growth and contributing to the diversification of our business
activities. Organic growth, in other words growth through our own strength, is

Letter from the Management BoardCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS16

another even more important pillar of our success. And this is primarily based
on our innovative strength and the quality of our products and processes. We
leave nothing to chance here. As a result, our Research & Development de-
partment has developed a long-term roadmap to meet the challenges of the
future with targeted, innovative solutions. Global megatrends, such as climate
change and resource scarcity, and addressing the resulting requirements for
our products and our customers’ end products are at the forefront.

The sustainability of our activities is always the focus and forms the basis of
all decision-making. For this reason, we once again issued an invitation to a
stakeholder roundtable on corporate responsibility in fiscal year 2016. This
year, the focus of the dialogue event was on sustainability in purchasing and
the holistic integration of sustainability aspects in the value chain. The results of
the discussion round gave us important impulses for the further development
of our Corporate Responsibility (CR) strategy, which we have anchored in our
CR roadmap 2018 and published on our website.

With this clear focus on innovation and sustainability, we are looking confidently
to the current year 2017. The broad diversification of our business activities,
our high cost-awareness and the emerging slight recovery of global markets
will have a positive effect on business development and growth. We see op-
portunities for our Company to continue its growth, especially in the increasing
regulatory density in environmental law, both in the area of emissions reduction
and in the water sector.

NORMA Group SE Annual Report 201617

Dear shareholders, our anniversary year 2016 has now come to an end and
we look back on 10 years of NORMA Group, in which we have achieved a
lot. We have continuously grown, developed from a predominantly Europe-
an company into a global Group, professionalized our processes and struc-
tures and multiplied our number of employees. We would like to thank you
for the fact that you have accompanied us on this path and placed your trust
in us. Be assured that our goals are no less ambitious for the coming years.

Of course, we would like you to participate again in the success of the Company
in the past year and will therefore propose a dividend of EUR 0.95 per share at
the Annual General Meeting on May 23, 2017, in Frankfurt for fiscal year 2016.

We would also like to thank our more than 6,000 employees worldwide for their
commitment in 2016. Furthermore, we would like to thank our customers and
business partners. We look forward to continuing our good relationships. Let
us work together to make 2017 a successful year.

Sincerely,

Werner Deggim

Dr. Michael Schneider

Bernd Kleinhens

John Stephenson

Letter from the Management BoardCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS

NORMA Group SE Annual Report 201619

Whether it is in Germany, Europe or the
rest of the world, the signs for freight
transport are characterized by growth in
the long term. One important means
of transport still is by road.

Letter from the Management BoardCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS20

“The increasingly urgent demand for more ENVIRONMENTALLY FRIENDLY
TECHNOLOGIES presents major challenges for commercial vehicle manufacturers and
suppliers alike. Through our LONG-STANDING COOPERATION with OEMs, we
know the specific requirements of the industry in terms of the quality, performance and longevity

of the components and work with customers every day to make our products even better,

lighter and more powerful.”

P E T E R V O L K E R T

T E A M L E A D E R H E A V Y E Q U I P M E N T
N O R M A G R O U P H O L D I N G G M B H

NORMA Group SE Annual Report 201621

“The increasingly urgent demand for more ENVIRONMENTALLY FRIENDLY

TECHNOLOGIES presents major challenges for commercial vehicle manufacturers and

suppliers alike. Through our LONG-STANDING COOPERATION with OEMs, we

know the specific requirements of the industry in terms of the quality, performance and longevity

of the components and work with customers every day to make our products even better,

lighter and more powerful.”

P E T E R V O L K E R T

T E A M L E A D E R H E A V Y E Q U I P M E N T

N O R M A G R O U P H O L D I N G G M B H

C O N N E C T I N G P R O D U C T S

I N E N G I N E A N D C O O L I N G S Y S T E M S

C O N N E C T I N G P R O D U C T S

I N O T H E R A P P L I C A T I O N S

C O N N E C T I N G P R O D U C T S

I N E X H A U S T S Y S T E M

Letter from the Management BoardCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS22

NORMA Group SE Annual Report 201623

Letter from the Management BoardCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTTO OUR SHAREHOLDERSINHALTSVERZEICHNIS26
NORMA Group on the Capital Market

30
Supervisory Board Report

33
Corporate Governance Report

S
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D
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H
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R
A
H
S

R
U
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CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

NORMA Group on the Capital Market

Dividend of EUR 0.90 resolved at the Annual General Meeting

Research coverage at a high level

2015 Annual Report and Investor Relations work won several awards

POSITIVE BAL A NCE ON THE CAPITAL M AR KE TS

DESPITE ROUGH START TO THE YE AR
The stock market year 2016 got off to a very weak start and the
global stock markets suffered severe price losses in the first two
months of the year. The growing economic difficulties that China
is experiencing, which also pose a threat to profits for European
companies and investors around the world, were one reason for
this. The DA X fell by approximately 17% by the middle of Febru-
ary to its low for the year of 8,699 points and was shaken again
in June by the unexpected outcome of the Brexit referendum.
The stock exchanges recovered in the second half of the year,
however. The continuing expansionary monetary policy of the
central banks, improving economic indicators and the strong
US dollar gave the markets a boost. The surprising result of the
presidential election in the US in November caused a damper,
but only temporarily. Most of the markets ended the year in
positive territory. The DA X ended the year up 6.9% at 11,481
points, while the MDA X closed at 22,188 points, 6.8% higher
than at the end of 2015. The US stock exchanges painted an

even brighter picture. There, the S&P 500 rose by 9.5%, while
the Dow Jones Index even recorded a plus of 13.4%.

PER FOR M A NCE OF THE NOR M A GROUP SH AR E
The NORMA Group share was unable to continue its upward
trend in 2016 and developed weaker than the overall mar-
ket during the year. Whereas the benchmark indices MDA X
and DA X slowly recovered in the second half of the year, the
NORMA Group share continued its negative trend. Weaker than
expected sales due to the declining business in the areas of
commercial vehicles and agricultural machinery in the US and
the resulting correction of the annual sales forecast in Novem-
ber disappointed many investors and analysts. The NORMA
Group SE share lost significantly in value and closed the year
at EUR 40.55 in 2016, 20.7% lower than in the previous year
(2015: EUR 51.15). The market capitalization amounted to EUR
1.29 billion as of December 31, 2016 (2015: EUR 1.63 billion).
This is based on an unchanged number of 31,862,400 shares
compared to last year.

I N D E X- B A S E D C O M PA R I S O N O F N O R M A G R O U P ’ S S H A R E P R I C E P E R F O R M A N C E I N 2 0 16 W I T H T H E M D A X A N D D A X

G 0 0 2

in %

−5

− 10

− 15

− 20

−25

−30

−35

NORMA Group SE

MDA X

DA X

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

NORMA Group SE Annual Report 201627

In terms of free float market capitalization that is of relevance in
determining index membership, the NORMA Group share came
in 46th place out of 50 in the MDA X in December 2016 (Dec.
2015: 33rd).

TR ADING VOLUME INCR E ASED
The average Xetra trading volume of the NORMA Group share
was 73,571 shares per day (2015: 88,888 shares) in the period
from January to December 2016. The NORMA Group share
thus ranked 48th out of 50 (2015: 46th) in the MDA X in Decem-
ber 2016 based on trading volume. This represents an average
trading volume per day of EUR 3.2 million and thus a decline
compared to last year.

The total average number of shares traded per day in 2016
was 223,983 (2015: 273,943). Trading on the various trading
platforms can be broken down as follows:

D I S T R I B U T I O N O F T R A D I N G A C T I V I T Y I N 2 0 16

G 0 0 3

in %

37
Block trades

33 Official

trading

30 Alternative

trading platforms

The percentage of shares traded on the official market remained
constant at 33% compared to last year. By contrast, the per-
centage of trading on alternative platforms increased from 25%
to 30%. The percentage of shares traded via block trades de-
clined to 37% compared to last year (2015: 42%).

BROADLY DIVERSIFIED SH AR EHOLDER STRUCTUR E
The N O R M A Group share has gained greater international
recognition in recent years due to active investor relations work.
As a result, foreign investors have become increasingly import-
ant. In the meantime, NORMA Group now has a regionally highly
diversified shareholder base with a high share of international
investors mainly from the US, the UK, France, Germany and
Scandinavia.  G 004: Free Float by Region.

At the end of the reporting year, 94.7% of NORMA Group shares
were held by institutional investors, 2.3% (2015: 2.3%) by man-
agement, and 3.0% (2015: 2.1%) by private investors. The num-
ber of private investors (excluding management) increased from
2,833 to 4,231 over the course of fiscal year 2016.

F R E E F L O AT B Y R E G I O N

G 0 0 4

in %

as of December 31, 2016

Rest of World 14

18 USA

21
France

6
Scandinavia

17 Germany

24 United Kingdom

VOTING RIGHTS NOTIFICATIONS IN 2016
Based on the voting rights notifications received by the end of
2016, shares of NORMA Group designated as free floating and
amounting to over 3% are held by the following institutional
investors:

O V E R V I E W O F V O T I N G R I G H T S N O T I F I C AT I O N S

T 0 0 2

in %

Ameriprise Financial Inc., Wilmington, DE, USA

Allianz Global Investors Europe GmbH, Frankfurt / Main, Germany

A X A S.A., Paris, France

BNP Paribas Investment Partners S.A., Paris, France

Mondrian Investment Partners, Ltd., London, UK

T. Rowe Price Group, Inc. Baltimore, MD, USA

The Capital Group Companies, Inc., Los Angeles, CA, USA

5.57

5.02

4.91

4.85

3.11

3.05

As of December 31, 2016. Please refer to the Notes on page 176 for further information

on the voting right notifications received. All voting rights notifications are published on

the Company’s website @ http://investors.normagroup.com.

2016 A NNUAL GENER AL MEE TING
The Ordinary Annual General Meeting of NORMA Group SE was
held on the premises of the Jahrhunderthalle in Frankfurt / Main
on June 2, 2016. 23,694,807 of the 31,862,400 shares with vot-
ing rights, i.e. 74.37% of the share capital, were represented at
the meeting. The participating shareholders resolved a dividend
of EUR 0.90 per share. This corresponds to a distribution rate
of 32.3% based on NORMA Group’s adjusted net profit for the
fiscal year of EUR 88.7 million. All items on the agenda were
approved by clear majorities. The voting results are available on
the website @ http://investors.normagroup.com/hv.

To Our ShareholdersNORMA Group on the Capital MarketCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
28

DIR ECTORS’ DE ALINGS
In fiscal year 2016, two transactions were reported as Directors’
Dealings. These can be found in the Corporate Governance
Report.  Corporate Governance Report, p. 37.

R ESE ARCH COVER AGE AT HIGH LE VEL
18 analysts from various banks and research firms currently
follow NORMA Group. As of December 31, 2016, there were 14
recommendations to buy the share. Four analysts advised to
hold the share. The average price target was EUR 45.72 at the
end of December 2016 (2015: EUR 52.86).

A N A LY S T S C O V E R I N G N O R M A G R O U P

T 0 0 3

SUSTAIN ABLE IN VESTOR R EL ATIONS ACTIVITIES
NORMA Group’s investor relations activities seek to further
increase awareness of the Company on the capital market,
strengthen long-term confidence in its share and achieve a re-
alistic and fair valuation. Therefore, the management and those
responsible for investor relations hold many meetings with in-
stitutional investors, financial analysts and private shareholders
over the course of the year.

The Management Board and the Investor Relations team of
NORMA Group conducted 35 roadshows in Europe and North
America’s most important financial centers in 2016. Further-
more, NORMA Group attended the following conferences:

Baader Bank

Bankhaus Lampe

Bankhaus Metzler

Peter Rothenaicher

Christian Ludwig

Jürgen Pieper

• Oddo Forum, Lyon
• Commerzbank German Investment Seminar, New York
• Kepler Cheuvreux German Corporate Conference,

Bank of America Merrill Lynch

Kai Müller

Frankfurt / Main

Berenberg Bank

Commerzbank AG

Deutsche Bank AG

DZ Bank AG

equinet Bank

Hauck & Aufhäuser

HSBC

Jeffries

Kepler Cheuvreux

Macquarie

MainFirst Bank AG

NordLB

Oddo Seydler Bank AG

Warburg Research GmbH

Philippe Lorrain

• Goldman Sachs European Small & Mid Cap Symposium,

Ingo-Martin Schachel

London

Tim Rokossa

Thorsten Reigber

Tim Schuldt

Christian Glowa

• Kepler Cheuvreux Mid Cap Days, Paris
• Société Générale Nice Conference, Nice
• Berenberg European Conference, Tarrytown
• Berenberg Energy Efficiency & Construction Conference,

Jörg-André Finke

Zurich

Peter Reilly

Hans-Joachim Heimbürger

Christian Breitsprecher

Tobias Fahrenholz

Frank Schwope

• db Access German, Swiss & Austrian Conference, Berlin
• Equinet Europakonferenz, Frankfurt / Main
• Commerzbank Sector Conference, Frankfurt / Main
• UBS Best of Germany Conference, New York
• Berenberg & Goldman Sachs German Corporate

Daniel Kukalj

Conference, Munich

Alexander Wahl

• Baader Investment Conference, Munich
• DZ Bank Equity Conference 2016, Frankfurt / Main
• Berenberg European Conference 2016, Surrey

A N A LY S T R E C O M M E N D AT I O N S

G 0 0 5

as of December 31, 2016

Hold 4

14 Buy

SERVICE FOR SH AR EHOLDERS
Shareholders and those interested can register in the investor
relations section of the Company website @ http://investors.
normagroup.com to receive the circular letter for investors from
NORMA Group. They will be informed promptly by e-mail of any
developments within the Group and automatically receive the
regular publications.

Furthermore, comprehensive information on the NORMA Group
share is published on the website. Besides financial reports and
presentations that can be downloaded, all important financial mar-
ket dates and details on how to reach the contact partners can
be found there. The teleconferences on the quarterly and annual
financial statements are recorded and offered in audio format.

NORMA Group SE Annual Report 2016
29

NOR M A GROUP 2015 A NNUAL R EPORT R ECEIVES

• The Best Annual Report 2015: 3rd place in the MDA X seg-

NUMEROUS AWAR DS
NORMA Group’s 2015 Annual Report excelled in several na-
tional and international competitions and received the following
awards:

ment, 6th place in the overall ranking

• Investors’ Darling: 2nd place in the MDA X segment, 10th

place in the overall ranking

• ICMA Award: Award of Excellence
• 2016 L ACP Vision Award: Silver
• 2016 ARC Awards: Bronze

K E Y F I G U R E S F O R T H E N O R M A G R O U P S H A R E S I N C E T H E I P O

T 0 0 4

2016

2015

2014

2013

2012

2011 Apr 8, 20111

Closing price on Dec 31 (in EUR)

Highest price (in EUR)

Lowest price (in EUR)

MDA X level on Dec 31

40.55

51.54

35.20

51.15

53.30

38.32

39.64

43.59

30.76

36.09

39.95

21.00

23.10

15.85

16.00

21.58

11.41

21.00 2

n / a

22,188.94

20,774.62

16,934.85

16,574.45

11,914.37

8,897.81

10,539.6

Number of unweighted shares as of Dec 31

31,862,400

Market capitalization (in EUR millions)

1,292

1,630

1,263

1,150

669

510

669

Average daily Xetra volume

EUR millions

Earnings per share (in EUR)

Adjusted earnings per share (in EUR)

Dividend per share (in EUR)

Dividend yield (in %)

Distribution rate (in %)

Price-earnings ratio

Selected indices

73,571

88,888

73,932

86,570

54,432

46,393

3.20

2.38

2.96

0.95 3

2.3

32.0 3

17.0

4.10

2.31

2.78

0.90

1.8

32.3

22.1

2.80

1.72

2.24

0.75

1.9

33.4

23.05

2.53

1.74

1.95

0.70

1.9

35.9

20.7

1.04

1.78

1.94

0.65

3.1

33.5

11.8

1.45

1.19

1.92

0.60

3.8

33.2

13.4

n / a

MDA X, CDA X, Classic All Share, Prime All Share, DA X International 100, DA Xsector Industrial,
DA Xsubsector Products & Services, HDA X, MIDCAP MK T PR, ST XE TM Automobiles & Parts Index,
ST XE TM Small Index, ST XE Total Market Index

1 IPO and first trading day of the NORMA Group share.
2 Issuing price.
3 In accordance with the Management Board’s proposal for the appropriation of net profit, subject to approval by the Annual General Meeting on May 23, 2017.

S H A R E P R I C E D E V E L O P M E N T O F T H E N O R M A G R O U P S H A R E S I N C E T H E I P O I N 2 0 11 C O M PA R E D T O T H E M D A X

G 0 0 6

MDA X in points

NORMA Group SE in EUR

25,000

20,000

15,000

10,000

5,000

2011

2012

2013

2014

2015

2016

To Our ShareholdersNORMA Group on the Capital MarketCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
30

Supervisory Board Report

COLL ABOR ATION BE T WEEN THE SUPERVISORY

BOAR D A ND THE M A N AGEMENT BOAR D
The Supervisory Board of NORMA Group SE has monitored
and advised on the activities of the Management Board in fis-
cal year 2016 in accordance with the rules of the Aktiengesetz
(AktG, German Stock Corporation Act), the German Corporate
Governance Code and NORMA Group’s Articles of Association.

The Management Board reports to the Supervisory Board
regularly in written form on a monthly basis on the business
development of NORMA Group SE and the Group and pro-
vides a forecast for the current fiscal year. The development
of sales and earnings, incoming orders and order backlog are
described in detail compared to the previous year and current
targets. In addition to this monthly reporting and the Super-
visory Board meetings, the Chairman of the Management Board
and the Chairman of the Supervisory Board engaged in regular
exchanges on important topics in fiscal year 2016.

The Management Board began each Supervisory Board meet-
ing by reporting on the overall economic situation and sec-
tor-specific conditions. The weakening of the US economy and
the consequent impact on NORMA Group were key topics in
2016. The Management Board then reported on the respective
business performance of NORMA Group and explained the
earnings situation based on key indicators and their devel-
opment compared to the previous year and the budget. The
Management Board discussed sales and the order situation
for both the regions and the distribution channels. Accidents at
work and countermeasures that have been introduced to im-
prove work safety as well as quality and delivery were also dis-
cussed at each meeting. Furthermore, the Supervisory Board
and Management Board discussed NORMA Group’s long-term
strategic orientation and current M&A projects, particularly the
acquisition of Autoline from Parker Hannifin and the acquisi-
tion of the Portuguese clamp manufacturer Lifial – Indústria
Metalúrgica de Águeda, Lda. The Management Board and the
Supervisory Board also dealt with amendments to the EU Mar-
ket Misuse Directive, particularly with regard to notifications
of director’s trading transactions (Directors’ Dealings) and the
instructions that need to be given to persons closely related

to executives. The Management Board regularly presented
the planning and the current state of the implementation of
the Microsoft A X software to both the Supervisory Board and
the Audit Committee. Furthermore, the Supervisory Board has
decided to raise some thresholds for transactions for which the
Management Board requires the approval of the Supervisory
Board and to adjust the rules of procedure of the Management
Board accordingly.

The Chairman of the Audit Committee reported to the other
Supervisory Board members after the meetings of the Audit
Committee.

At each regular meeting of the Supervisory Board, the Manage-
ment Board also presents a risk report in which the probability
of occurrence and potential effects of all relevant risks, including
any countermeasures, are assessed. This regular risk reporting
provides the Supervisory Board with a clear picture of which
possible risks could have a negative impact on the Company’s
assets, financial and earnings position. Moreover, compliance
topics are also discussed at every Supervisory Board meeting
(including possible fraud).

The Supervisory Board convened internally before or after each
meeting with the Management Board.

For transactions requiring approval, the Management Board
sought the decisions of the Supervisory Board well in advance
and presented the Supervisory Board with sufficiently detailed
information in written form.

Besides the regularly recurring topics, the Supervisory Board
also dealt with the following issues in fiscal year 2016:

Supervisory Board meeting held
on March 21, 2016, in Maintal
The 2015 annual financial statements and management report of
NORMA Group SE as well as the corresponding consolidated fi-
nancial statements and group management report presented by
the Management Board were discussed in detail by the Super-
visory Board with the auditors in attendance from the engaged

NORMA Group SE Annual Report 2016Supervisory Board Report

auditing firm, PricewaterhouseCoopers GmbH Wirtschaftsprü-
fungsgesellschaft (PwC). The risk report and compliance status
were discussed in detail. PwC confirmed, among other topics,
that no cases of fraud can be reported at NORMA Group. As
part of the presentation of the economic development and the
current business situation, the Management Board and the
Supervisory Board discussed various technologies, including
selective catalytic reduction (SCR) and the hybrid drive, as well
as their possible uses in various engine types. The Supervisory
Board also approved an agreement with Deutsche Bank on
advisory services.

Supervisory Board meeting held
on June 2, 2016, in Frankfurt / Main
The Supervisory Board meeting was held after the Annual Gen-
eral Meeting of NORMA Group SE and started with a follow-up
assessment of the Annual General Meeting. The participants
discussed in detail the consequences of the diesel scandal and
the resulting decline in sales of vehicles with diesel engines and
the impact of this decline on NORMA Group’s business. The
Supervisory Board approved the Management Board’s proposal
to optimize the promissory note and agreed to extend the line
of credit.

Supervisory Board meeting held
on September 15, 2016, in Maintal
The Management Board presented in detail current M& A
projects and informed the Supervisory Board about compli-
ance with the European Market Infrastructure Regulation (EMIR),
which had not led to any objections. The auditors’ report was
handed over to the Supervisory Board. Subsequently, the Man-
agement Board and the Supervisory Board discussed the con-
sequences and / or planned measures for the implementation of
the CSR (Corporate Social Responsibility) Directive.

Supervisory Board meeting held
on November 30, 2016, in Maintal
The Management Board explained in detail the reduction in cus-
tomer orders in the US, which led to the adjustment of the sales
forecast for the full year 2016 on November 10, 2016, which
was unexpected at the time of publication of the third quarter
figures. The Supervisory Board and the Management Board
discussed in detail the current political situations, especially in
Europe and China, on electric vehicles and the resulting conse-
quences for the sales figures for vehicles with pure combustion
engines and hybrid drives. The Supervisory Board approved the
revised budget for 2017 proposed by the Management Board
and the medium-term planning until 2021.

In addition, the Supervisory Board met for closed meetings
in Frankfurt/Main on January 20, 2016, and in Wiesbaden on
October 21, 2016. These meetings focused on fundamental
topics, including global and regional corporate and manage-
ment structures, the growth strategy, remuneration of the
Management Board, changes to the Corporate Governance
Code, necessary business process harmonization, future IT
structures, Deutsche Bank’s advisory mandate proposed by

Dr. Stefan Wolf

Chairman of the Supervisory Board

the Management Board, a regulation concerning audit-inde-
pendent services to be rendered by the auditor and require-
ments for the agendas of the Supervisory Board and the Audit
Committee for the year 2017.

TOPICS OF THE AUDIT COMMIT TEE IN 2016
The Audit Committee of NORMA Group convened three times in
2016. In addition, it also held four telephone conferences. CFO
Dr. Michael Schneider took part in every meeting and telephone
conference. Other participants were departmental managers of
the second management level to advise on technical issues in
their areas of responsibility, in particular Accounting & Report-
ing, Treasury, Compliance and Internal Revision.

The Audit Committee discussed the main focuses, procedure
and results of the audit of the individual and consolidated finan-
cial statements of NORMA Group SE with the auditors. One fo-
cus of the work of the Audit Committee in 2016 was on NORMA
Group Good Practice Controls. These are rules that are part
of the internal control system that were bindingly introduced
at all NORMA Group sites in 2015. The Audit Committee dis-
cussed the quarterly reporting with the CFO. Other topics for
the Audit Committee were the adoption and details of budget
planning and medium-term planning, as well as the compliance
management system (including fraud protection) and current
compliance issues, the risk management process and what
was learned from Internal Revision for the revision plan for 2017.
The Audit Committee also discussed topics that pertained to
the Treasury with the CFO, in particular promissory notes, for-
eign currency hedging instruments, asset backed securities
and reversed factoring, but also improvements to the financing
agreements, and gave an overview of the current pension plans
at NORMA Group.

In addition to the Audit Committee meetings, the Chairman of
the Audit Committee was in regular personal and telephone
contact with the CFO and the auditors to discuss possible areas
of emphasis for the audit of the 2016 annual financial statements

To Our ShareholdersCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS32

as well as the focus of the work of the Audit Committee in
the coming year 2017. Furthermore, personal discussions took
place involving an Audit Committee member, the CFO and the
CIO Group ICT on the status of standard process implementa-
tion with Microsoft A X.

AT TENDA NCE OF MEE TINGS A ND

CONFER ENCE CALLS, NO CONFLICTS OF INTER EST
All Supervisory Board members, Dr. Stefan Wolf (Chairman),
Lars Berg (Vice-Chairman), Günter Hauptmann, Knut Michel-
berger, Dr. Christoph Schug and Erika Schulte, participated in
all of the Supervisory Board meetings held in 2016. All members
of the Supervisory Board attended the first closed meeting. Dr.
Wolf was prevented from attending the second closed meeting
due to personal reasons; all other members of the Supervisory
Board attended this meeting.

All members of the Audit Committee, Lars Berg, Knut Michel-
berger, Dr. Christoph Schug (until September 2016) and Erika
Schulte (from October 2016), participated in all meetings and
telephone conferences of the Audit Committee.

The General and Nomination Committee did not convene in
2016. Personnel matters were prepared by the Chairman of
the Supervisory Board and discussed with all of its members.

There were no conflicts of interest between the members of
the Supervisory Board and the Company in fiscal year 2016. In
order to reduce the risk of potential conflicts of interest before
they even arise, the Chairman of the Supervisory Board, Mr.
Hauptmann and the Management Board discussed the extent
to which Mr. Hauptmann’s membership in an advisory council
of a company that competes with NORMA Group in some areas
could have an effect. No conflicts of interest have yet arisen
from this activity.

INFOR M ATION ON THE AUDITOR
The 2016 annual financial statements for NORMA Group SE
presented by the Management Board were audited by the au-
diting firm PricewaterhouseCoopers GmbH Wirtschaftsprü-
fungsgesellschaft along with the management report and the
corresponding consolidated financial statements and group
management report. The audit mandate was issued on Sep-
tember 28, 2016.

The auditors Dr. Ulrich Störk and Benjamin Hessel as well as
Thomas Tilgner and Richard Gudd took part in the Supervisory
Board meeting held to formally adopt the financial statements
as well as in Audit Committee meetings and conference calls
with the Audit Committee.

APPROVAL OF THE 2016 A NNUAL

FIN A NCIAL STATEMENTS
The consolidated financial statements of NORMA Group SE
were prepared in accordance with section 315a of the German
Commercial Code (Handelsgesetzbuch, HGB) on the basis of
International Financial Reporting Standards (IFRS) as adopted

in the EU. The auditor issued an unqualified opinion for the 2016
annual financial statements and management report of NORMA
Group SE as well as for the consolidated financial statements
and group management report. The documents pertaining to
the financial statements, the Management Board’s proposal for
the appropriation of net profit and both auditors’ reports were
submitted to the Supervisory Board. The Audit Committee and
the Supervisory Board in its entirety thoroughly examined the
reports and discussed and scrutinized them in detail together
with the auditor. The Supervisory Board accepted the auditor’s
findings and had no objections.

The Supervisory Board then approved the annual financial state-
ments of NORMA Group SE and the 2016 consolidated financial
statements together with their respective management reports
at its meeting on March 20, 2017. The Supervisory Board ap-
proved the proposal on the appropriation of profits by the Man-
agement Board. NORMA Group SE’s annual financial statements
are thereby adopted in accordance with section 172 AktG.

DECL AR ATION OF CONFOR MIT Y WITH

THE GER M A N COR POR ATE GOVER N A NCE CODE
The Supervisory Board and Management Board dealt with the
requirements of the German Corporate Governance Code and
ratified the following Declaration on January 31, 2017: NORMA
Group SE has complied with the recommendations of the Ger-
man Corporate Governance Code as amended on May 5, 2015,
(published on June 12, 2015) by the Federal Ministry of Justice
in the official section of the Federal Gazette (‘Bundesanzeiger’)
since its last Declaration was submitted and will continue to
comply with the recommendations. The Corporate Governance
Declarations made by NORMA Group SE are available on the
Company’s website @ http://investors.normagroup.com.

The Supervisory Board would like to thank all employees of
NORMA Group all around the world and the Management Board
for their personal efforts and successful work once again in fis-
cal year 2016. The Supervisory Board is confident that NORMA
Group will continue to grow successfully in fiscal year 2017.

Dettingen / Erms, March 20, 2017

Dr. Stefan Wolf
Chairman of the Supervisory Board

NORMA Group SE Annual Report 2016Corporate Governance Report

Corporate Governance Report

The following is the Management Board’s Declaration of Confor-
mity in accordance with article 289a of the German Commercial
Code (Handelsgesetzbuch, HGB) and section 3.10 of the Ger-
man Corporate Governance Code. The Declaration is part of
the Consolidated Group Management Report.

The management of NORMA Group is dedicated to achieving
sustained economic success while complying with the Com-
pany’s social responsibility. Transparency, responsibility and
sustainability are the principles that determine its actions.

DECL AR ATION OF CONFOR MIT Y WITH THE

GER M A N COR POR ATE GOVER N A NCE CODE
The Supervisory Board and Management Board of NORMA
Group SE thoroughly examined which of the German Corpo-
rate Governance Code’s recommendations and suggestions
NORMA Group SE should follow and explains deviations from
the recommendations and the reasons for deviating from the
Code. The current Declaration dated January 31, 2017, as well
as all the other Declarations are published on NORMA Group’s
website. @ http://investors.normagroup.com.

The Declaration dated January 31, 2017, is presented below:

With the following exceptions, NORMA Group SE has complied
since its last declaration was submitted, and will continue to
comply, with the recommendations of the German Corporate
Governance Code as amended on May 05, 2015 (published on
June 12, 2015 by the Federal Ministry of Justice in the official
section of the Federal Gazette) (‘Bundesanzeiger’):

1. With respect to the compensation of the members of
the Management Board, the Supervisory Board does not
take into account the compensation of the upper man-
agement or the workforce as a whole (section 4.2.2 para.
2 of the German Corporate Governance Code).
When determining the compensation of the Management
Board, the Supervisory Board, advised by an external re-
muneration expert, also took into account the compensa-
tion structure of the Company as well as the entire NORMA
Group. Due to NORMA Group’s dynamic development, the

Supervisory Board has so far not explicitly defined the upper
management or the workforce as a whole and, therefore,
does not take these groups or their development over time
into account.

2. The remuneration of the Management Board is not
capped, either in total or in terms of its variable com-
pensation elements (section 4.2.3 para. 2 of the German
Corporate Governance Code).
The maximum gross option profit from the matching stock
program for the Management Board is limited in total to a
percentage of the average annual EBITA during the vesting
period; therefore, a relative maximum limit that is dependent
on the Company’s success is applied rather than a maxi-
mum monetary amount.

The maximum amount of the long-term variable remuner-
ation under the Long-Term Incentive program is limited to
250% of the amount that results based on the three-year
average value of the annual EBITA or the free cash flow that
the Company has budgeted multiplied by the respective bo-
nus percentages set in the employment contract.

In addition, the Supervisory Board may grant in its sole
discretion a special bonus for extraordinary achievements
which is not limited by a maximum amount. The Super-
visory Board does not believe such a maximum amount to
be required because the Supervisory Board can ensure by
specifically exercising its discretion that the requirement of
adequacy under section 87 para. 1 of the German law on
stock corporations is complied with.

3. The remuneration of the Management Board has not
yet been disclosed on an individual basis (section 4.2.5
para. 3 of the German Corporate Governance Code).
T h e A n n u a l G e n e r a l M e e t i n g w h i c h wa s h e l d o n
April 6, 2011 resolved not to disclose the remuneration for
individual Management Board members between 2011 and
2015. The Board was committed to upholding this resolution.
For this reason, the reference tables attached to the German
Corporate Governance Code could not be used unchanged,

To Our ShareholdersCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

but rather only the individual components of remuneration
each as a total sum for the entire Management Board. From
publication for the fiscal year 2016, the remuneration of the
Management Board will be disclosed individually in accor-
dance with the German Corporate Governance Code.

4. Concrete objectives regarding the composition of the
Supervisory Board have not been set and, therefore,
are not published in the Corporate Governance Report.
There is no regular limit of length of membership of the
Super visory Board (section 5.4.1 para. 2 of the German
Corporate Governance Code).
All members of the Supervisory Board will continue to com-
ply with all pertinent legislation related to Supervisory Board
proposals for new Supervisory Board members. In doing
so, the Supervisory Board takes into account the individual
professional and personal qualifications of the relevant can-
didates independently of their gender. According to section
2 para. 2 of the rules of procedure of the Supervisory Board
each member of the Supervisory Board shall have the re-
quired knowledge, abilities and functional experience to fulfil
the duties properly and shall be sufficiently independent.
The tenure of a Supervisory Board member shall not be
extended beyond his or her 70th birthday; a regular limit of
length of membership of the Supervisory Board does not
exist. Section 2 para. 3 of the rules of procedure of the Su-
pervisory Board provides for further principles which shall
be taken into account in the Supervisory Board’s proposals
for the election of the Supervisory Board by the general
shareholders’ meeting. These principles comprise, amongst
others, a maximum number of positions in other listed com-
panies and of former members of the Management Board
within the Supervisory Board as well as the requirements
of independence. In addition, attention shall be paid to the
international activities of the company and diversity.

Taking into account the size of the Supervisory Board with
only six members, the Supervisory Board does not believe
the definition of additional concrete objectives for its com-
position to be appropriate.

5. During the transformation of NORMA Group AG into an
SE, the members of the Supervisory Board were not cho-
sen in a separate election (section 5.4.3 of the German
Corporate Governance Code).
All members of the first Supervisory Board of NORMA Group
SE were elected as part of the transformation pursuant to
Article 40 para. 2 sentence 2 SE VO in accordance with the
Articles of Association to ensure that the resolution on the
election of the members of the Supervisory Board could
not be challenged separately. Otherwise, the risk could not
be ruled out that the Company would have no Supervisory
Board or that the Board would have an insufficient number
of members after the transformation was entered in the com-
mercial register.

ALLOCATION OF COMPE TENCES BE T WEEN THE

M A N AGEMENT A ND THE SUPERVISORY BOAR D
NORMA Group SE uses the same type of dual management
system that German stock corporations use. Here, the Super-
visory and Management Boards are separate bodies that have
different functions and powers. The Management Board man-
ages the Company under its own responsibility. The Supervisory
Board appoints, advises, monitors and dismisses members of
the Management Board.

The Management Board provides the Supervisory Board with
regular updates about its business policies, how the business is
developing, the position of the Company and any transactions
that could have a significant impact on profitability or liquidity.
The Management Board reports the key figures of the Group
and the current course of business to the Supervisory Board on
a monthly basis, in particular with regard to the published guid-
ance on the expected development of the Company. Based on
the written documents that were submitted to the Super visory
Board in advance, the members of the Management Board re-
port in great detail on business developments and provide an
outlook on the expected future development of NORMA Group
at the Supervisory Board meetings. Other recurring topics at
all meetings include the monthly and quarterly figures, risk
analysis and measures aimed at minimizing any risks that had
been detected, reports by the respective Committee Chairmen
on the previous meetings held and strategic projects. All Man-
agement Board members participate in the Supervisory Board
meetings. The Supervisory Board convenes separately before
or after meeting with the Management Board.

The Chairman of the Supervisory Board and the Chairman of
the Management Board coordinate the collaboration of the two
Boards. They also stay in regular contact between Super visory
Board meetings and discuss current corporate governance is-
sues.

In accordance with the legal requirements, the by-laws of the
Management Board and NORMA Group’s Articles of Associ-
ation, the Supervisory Board must approve certain important
transactions before they can be executed by the Management
Board and the Company’s employees. This applies not only for
measures at NORMA Group SE, but also for measures at its
subsidiaries. In order to ensure that the Management Board
is promptly informed of corresponding matters involving sub-
sidiaries so that it can request the approval of the Supervisory
Board, a hierarchical system of approval requirements organized
by functional areas, levels of responsibility and countries applies
worldwide at NORMA Group.

M A N AGEMENT BOAR D A ND R EGION AL M A N AGEMENT
The Management Board of NORMA Group SE is composed
of four members: Werner Deggim (Chief Executive Officer), Dr.
Michael Schneider (CFO), Bernd Kleinhens (Managing Director
for Business Development), and John Stephenson (Chief Oper-

NORMA Group SE Annual Report 2016

Corporate Governance Report

ating Officer). The allocation of responsibilities and internal order
of the Management Board are based on relevant legislation,
NORMA Group SE’s Articles of Association and the Manage-
ment Board by-laws enacted by the Supervisory Board as well
as the internal guidelines, including the compliance documents
and the business allocation plan.

a specific issue will be dealt with by the entire Management
Board. The Management Board did not form any committees.
Board meetings are usually held once a month. In addition, the
Board meets regularly at least once a month along with other
executives of the Group.

R E S P O N S I B I L I T I E S O F
T H E M A N A G E M E N T B O A R D

T 0 0 5

Every Board member is obliged to inform the Supervisory Board
immediately, but also the other members of the Management
Board, of any conflicts of interest. No such conflicts of interest
arose for a Board member in 2016.

Werner Deggim
Chief Executive Officer (CEO)

Compliance
Personnel
Legal and M&A
Group Development
Group Communications
Internal Revision
Corporate Responsibility / Sustainability
Risk Management

Dr. Michael Schneider
Chief Financial Officer (CFO)

Bernd Kleinhens
Managing Director
Business Development

John Stephenson
Chief Operating Officer (COO)

Finances
Controlling
Investor Relations
Treasury
IT
Insurances

Sales
Product Development
Marketing

Production
Purchasing
Supply Chain Management
Global Excellence Program
Quality Assurance

The Chief Executive Officer heads the Corporate Responsibil-
ity initiative of NORMA Group and is responsible for the topics
Environmental, Social and Governance (ESG), insofar as this
does not concern individual issues, especially on the environ-
ment. Chief Operating Officer, Mr. Stephenson, is responsible
for these matters.

In general, Management Board resolutions are passed by simple
majority. The Chairman has the deciding vote if the vote is tied.
However, the members of the Management Board are obliged
to make an effort to reach unanimous decisions. If a member
of the Management Board cannot participate in a vote, his vote
will be obtained at a later date. The entire Management Board
is responsible with matters of particular importance. In accor-
dance with the Management Board by-laws, these include the
following matters: producing the Management Board reports
for the purpose of informing the Supervisory Board and the
quarterly and half-yearly reports, fundamental organizational
measures, including the acquisition or disposal of significant
parts of companies and strategic and business planning is-
sues, measures related to the implementation and supervision
of a monitoring system pursuant to section 91 (2) AktG, issuing
the Declaration of Conformity pursuant to section 161 (1) AktG,
preparing the consolidated and annual financial statements and
similar reports, convening the Annual General Meeting and in-
quiries and recommendations by the Management Board that
are to be handled and resolved by the Annual General Meeting.
In addition, every Management Board member may request that

The Supervisory Board must approve of any transactions be-
tween NORMA Group companies on the one hand and a mem-
ber of the Management Board, related parties or businesses
on the other hand. No such transactions took place in 2016.

The Supervisory Board must also approve any secondary
activities by a member of the Management Board. In 2016,
it agreed to Mr. Stephenson as a shareholder of a family-run
English company and had already agreed in 2015 that the CFO
Dr. Schneider would continue to be a member of the Supervi-
sory Boards of two German companies. The other members of
the Board of Management do not have any secondary activities
that are subject to approval.

The rules of procedure of the Supervisory Board provide that
the term of office of a member of the Management Board should
not be extended beyond his or her 65th birthday.

Local Presidents in the three regions EMEA, Americas and APAC
are responsible for carrying out business on a daily basis. These
three Presidents report directly to the CEO. The entire Man-
agement Board of NORMA Group SE meets at least once a
year with the Presidents and their managers at the local head-
quarters – Singapore for the Asia-Pacific region, Auburn Hills,
Michigan, for the Americas, and Maintal for the EMEA region. In
addition, individual members of the Management Board meet
regularly with the local teams. The managers at NORMA Group
work in a matrix structure in which they have both a disciplinary
as well as a technical supervisor.

SUPERVISORY BOAR D
The Supervisory Board of NORMA Group SE is comprised of
the following six members:

• Dr. Stefan Wolf (Chairman of the Supervisory Board)
• Lars M. Berg (Vice-Chairman of the Supervisory Board)
• Dr. Christoph Schug
• Günter Hauptmann
• Knut J. Michelberger
• Erika Schulte

They are all representatives of the shareholders, in other words
elected by the Annual General Meeting. NORMA Group SE is
not a codetermined Company; therefore, worker representatives
are not represented on its Supervisory Board.

To Our ShareholdersCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS36

All members of the Supervisory Board are independent as
defined in section 5.4.2 of the German Corporate Governance
Code. No Supervisory Board member has ever served as a
member of the Management Board of NORMA Group SE or
been a member of management of any of its predecessor
companies.

Five of the six members of the Supervisory Board, Dr. Wolf,
Mr. Berg, Mr. Hauptmann, Mr. Michelberger and Dr. Schug,
have been members of the Supervisory Board since 2011. Mrs.
Schulte has been a member of the Supervisory Board since
2012. The term of all members of the Supervisory Board began
in 2013 and lasts until the Annual General Meeting that resolves
on discharging the Supervisory Board for the fourth fiscal year
after commencement of the term (the 2013 fiscal year in which
the term began is not counted) at the very longest and no later
than six years after officially taking office. This is expected to
be until the 2018 Annual General Meeting, 2019 at the latest.

The rules of procedure of the Supervisory Board provide that
the term of office of a member of the Supervisory Board should
not be extended beyond his or her 70th birthday.

There are no consultancy, other service or work contracts be-
tween NORMA Group companies and a member of the Super-
visory Board.

All members of the Supervisory Board are obligated to report
any conflicts of interest. No such conflicts of interest arose in
2016. After Mr. Hauptmann became a member of the advisory
council of a company that competes in some areas with NORMA
Group in September 2016, the Chairman of the Supervisory
Board, Mr. Hauptmann and the Management Board discussed
whether this activity could lead to conflicts of interest in the
future and how this could be avoided. So far, there have been
no conflicts of interest.

The Supervisory Board of NORMA Group convened for four
regular meetings in fiscal year 2016. All members of the Su-
pervisory Board and the Management Board took part in these
meetings. In addition, two closed meetings of the Supervisory
Board were held without the Management Board. All members
of the Supervisory Board attended the first closed meeting. Dr.
Wolf was prevented from attending the second closed meeting
for personal reasons, while all other members of the Supervisory
Board attended this meeting.

The Chairman of the Supervisory Board represents the Supervi-
sory Board externally. He organizes the work of the Supervisory
Board and chairs its meetings. The Supervisory Board can pass
resolutions by simple majority, whereby the Chairman has the
deciding vote if a vote is tied.

The Supervisory Board formed two committees: the Audit Com-
mittee and the General and Nomination Committee.

The Audit Committee deals in particular with monitoring the
accounting process and the effectiveness of the internal control
and risk management systems as well as the audit of the annual
financial statements, in particular through the independence
of the auditor, the additional services rendered by the auditor,
engaging the auditor, determining areas of audit emphasis and
agreeing to the auditor’s fees. The Audit Committee accom-
panies the collaboration between NORMA Group SE and the
auditors and ensures that opportunities for improvement identi-
fied during the audit are promptly implemented. It is responsible
for preparing the accounting documents and adopting the Su-
pervisory Board’s resolution on the consolidated and separate
financial statements. Moreover, it is responsible for compliance
and reviews the compliance with statutory provisions and the
internal guidelines.

Mr. Michelberger took on the role of Chairman of the Audit Com-
mittee on October 1, 2016. Other members are Lars M. Berg
and, since October 1, 2016, Erika Schulte. At the end of Sep-
tember 2016, Dr. Christoph Schug stepped down from the Audit
Committee, until which time he was Chairman. Mr. Michelberger
is an independent financial expert within the meaning of section
100 (5) AktG. Due in large part to his many years as CFO and
Managing Director, he has particular knowledge and experi-
ence in the application of accounting principles and internal
guidelines.

The Audit Committee of NORMA Group convened three times in
fiscal year 2016 and held four telephone conferences. All Audit
Committee members took part in each.

The General and Nomination Committee prepares personnel-re-
lated decisions for the Supervisory Board. This committee has
the following specific responsibilities: preparing Supervisory
Board resolutions regarding the formation, amendment and
termination of employment contracts with members of the Man-
agement Board in accordance with the remuneration system ap-
proved by the Supervisory Board, preparing Supervisory Board
resolutions regarding legal applications to reduce the remuner-
ation of a Management Board member pursuant to section 87
(2) AktG, preparing Supervisory Board resolutions regarding
the structure of the remuneration system for the Management
Board, acting as representatives of the Company to Manage-
ment Board members who have left the Company pursuant
to section 112 AktG, approving secondary employment and
external activities for Management Board members pursuant
to section 88 AktG, granting loans to the persons specified in
section 89 AktG (loans to members of the Management Board)
and section 115 AktG (loans to members of the Supervisory
Board), approving contracts with members of the Supervisory
Board pursuant to section 114 AktG and proposing suitable
candidates to the Annual General Meeting when there is a vote
on Supervisory Board members. In 2016, the Chairman of the
Supervisory Board, Dr. Stefan Wolf, served as the Chairman of
the General and Nomination Committee and its other members

NORMA Group SE Annual Report 2016Corporate Governance Report

were Dr. Christoph Schug and Lars M. Berg. No formal meeting
of the General and Nomination Committee was held in 2016.

SH AR EHOLDERS A ND A NNUAL GENER AL MEE TING
The shareholders of a Societas Europaea decide on the Com-
pany’s important and fundamental matters. The shareholders
exercise their voting rights at the Annual General Meeting, which
takes place at least once every year. The Annual General Meet-
ing resolves among other topics on how earnings are to be
distributed, the formal approval of the Management Board and
the Supervisory Board, the selection of the auditor, but also on
amendments to the Articles of Association.

Shareholders are entitled to vote if they are registered in the
shareholders’ register of NORMA Group SE and provide NORMA
Group SE or another location specified in the invitation with
written notice, in German or English, at least six days before the
Annual General Meeting that they will be attending. Each share
entitles the bearer to one vote.

NORMA Group SE publishes the invitation and all documents
that are to be made available at the Annual General Meeting
promptly on its website. Information regarding the number of at-
tendees and the voting results are published there following the
Annual General Meeting. @ http://investors.normagroup.com/hv.

SH AREHOLDINGS OF THE M A N AGEMENT BOARD

A ND SUPERVISORY BOAR D
On December 31, 2016, the Management Board and the Super-
visory Board jointly held 728,858 (2.3%) of the total 31,862,400
shares of NORMA Group SE. Members of the Supervisory Board
held 87,083 (0.3%), and members of the Management Board
641,775 (2.0%), whereby no member of the Management Board
held more than 1% of the shares in NORMA Group SE.

DIR ECTORS’ DE ALINGS
Members of the Management Board and the Supervisory Board
and related parties are obliged to disclose Directors’ Dealings
in NORMA Group SE shares if the value of these transactions
reaches or exceeds EUR 5,000 within a calendar year.

The following transactions were reported in connection with
Directors’ Dealings in 2016:

D I R E C T O R S ’ D E A L I N G S

T 0 0 6

Buyer / Seller

Dr. Michael Schneider John-Leonard Stephenson

Type of financial
instrument

NORMA Group SE share
(ISIN: DE000A1H8BV3)

Type of transaction

Date of transaction

Place of transaction

Average price per
share in EUR

Total value in EUR

Purchase

Sale

June 28, 2016

August 11, 2016

Xetra

44.49

Xetra

50.40

104,996.40

223,119.84

STOCK OP TION PL A NS A ND

EQUIT Y- BASED INCENTIVE PROGR A MS
The principles of management remuneration are described in
the remuneration report which is also part of the management
report.  Remuneration Report, p. 94.

In fiscal year 2013, a Long-Term Incentive Program (LTI) was
launched for the second management level, which involves the
employees participating in NORMA Group’s success over the
medium term.

OTHER M A NDATES IN M A N AGEMENT BOAR DS OF

LISTED COMPA NIES OR SUPERVISORY BODIES
Exercised professions and other mandates on Supervisory
Boards or comparable Supervisory Bodies of the members
of NORMA Group’s Supervisory Board in fiscal year 2016 are
shown in  Table 007 on p. 38.

TARGE TS FOR THE SH AR E OF WOMEN
According to the statutory requirements introduced in 2015,
the Supervisory Board of NORMA Group SE has set targets
for the proportion of women for the Supervisory Board and
the Management Board for the management level of NORMA
Group SE below the Management Board as well as a time
limit for implementing them. These targets have not been ad-
justed since then. They are expected to be valid until the end
of June 2017.

The Supervisory Board of NORMA Group SE is not subject to
the statutory provisions binding women quotas. The legal pro-
visions for mandatory women quotas apply only to companies
that are listed and codetermined. NORMA Group SE is listed,
but not codetermined. The members of the Supervisory Board
of NORMA Group SE are elected solely by the shareholders;
employee representatives are not represented on the Super-
visory Board.

In setting the target values for the Supervisory Board and the
Management Board, the Supervisory Board bases its decisions
on the remaining term of office of the Supervisory Board and the
terms of the Management Board member’s contracts of employ-
ment. The latest deadline for implementation of the targets that
are to be set for the first time is June 30, 2017. The term of office
of all Supervisory Board members and the terms of Manage-
ment Board members end only after this date. For this reason,
the proportion of women cannot be expected to change be-
fore this date. Accordingly, the current status quo has been set
as the target for the Supervisory Board and the Management
Board until June 30, 2017. The Supervisory Board currently
has a female member; therefore the target for the proportion of
women is one female member out of the six members in total.
The Management Board is currently composed exclusively of
men. Therefore, the target for the proportion of women on the
Management Board remains zero. These unchanged targets
were achieved in 2016.

To Our ShareholdersCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS38

O T H E R M A N D AT E S O F T H E S U P E R V I S O R Y B O A R D M E M B E R S

T 0 0 7

Supervisory Board member, exercised office

Other mandates on Supervisory Boards and comparable committees

Dr. Stefan Wolf,
Chairman of the Management Board (CEO) of ElringKlinger AG

Member of the Supervisory Board of Allgaier Werke GmbH,
Uhingen, Germany

Lars Berg,
Consultant to various companies in the fields of
telecommunications, media and finances

Günter Hauptmann,
Consultant

Knut J. Michelberger,
Consultant

Dr. Christoph Schug,
Entrepreneur

Erika Schulte,
Managing Director of Hanau Wirtschaftsförderung GmbH and
Liquidator of Techno logie- und Gründerzentrum Hanau GmbH
(until February 3, 2017)

NORMA Group SE has only one layer of management below the
Management Board. It includes all persons who report directly
to the Management Board and have management responsibili-
ties towards employees. Given the female representation of 50%
at the time of the adoption of the resolution in 2015, the Man-
agement Board has set the target for the proportion of women
in the first management level below the Management Board that
is to be met by June 30, 2017 at at least 25% or one woman.
No reduction in the proportion of women is intended, nor is it
to be ruled out that the percentage of women will increase from
50%. The Management Board has in its opinion proven with the
current filling of management positions that it has succeeded
and should be able to continue to recruit qualified women for
leadership positions at NORMA Group SE in the future. There
is no second management level for which the Management
Board would have also had to set targets. At the balance sheet
date 2016, 11 out of 18 employees were women. Of the total
of four people, who form the first management level below the
Management Board, two are women. This means that the level
was maintained since the resolution was passed in 2015 and
exceeded the target of 25%.

At NORMA Group, targets for the Management, Supervisory
Board and the top two levels of management were also set for
another company, NORMA Germany GmbH. This company is
not listed, but codetermined.

Chairman of the Supervisory Board of Net Insight AB, Stockholm, Sweden

Member of the Supervisory Board of Greater Than AB,
Stockholm, Sweden (since February 5, 2016)

Member of the Supervisory Board of BioElectric Solutions AB,
Stockholm, Sweden

Chairman of the Advisory Board of Atesteo GmbH (formerly GIF GmbH),
Alsdorf, Germany

Member of the Supervisory Board of Geka GmbH,
Bechhofen, Germany (until August 31, 2016)

Member of the Advisory Board of Moon TopCo GmbH,
formerly mertus 268. GmbH (Schlemmer Group), Poing, Germany
(since September 1, 2016)

Member of the Advisory Board of Rena Technologies GmbH,
Gütenbach, Germany

Member of the Supervisory Board (raad van commissarissen)
of Weener Plastics Group, Ede, The Netherlands (since January 1, 2016)

Member of the Advisory Board of Kaffee Partner Holding GmbH,
Osnabrück, Germany (since June 1, 2016)

Member of the Advisory Board of Bomedus GmbH, Bonn, Germany

Member of the Advisory Board of MoebelFirst GmbH, Cologne, Germany

Member of the Administrative Board of AMEOS Gruppe AG,
Zurich, Switzerland (until December 31, 2016)

No seats on other boards or comparable committees

COMPLIA NCE
NORMA Group’s compliance organization seeks to prevent vio-
lations of laws and other rules, in particular through preventive
measures. Nevertheless, if there is evidence of violations, these
matters will be investigated promptly and thoroughly and the
necessary consequences will be taken. Findings will be used
to take steps to reduce the risk of future violations.

The Group-wide compliance activities are headed by the Chief
Compliance Officer of NORMA Group, who reports directly to
the CEO. Besides the existing compliance department at Group
level, there are Compliance Officers at the level of the regions
and the individual companies. For instance, the three regional
Compliance Officers of the EMEA, Americas and Asia-Pacific re-
gions report to the Chief Compliance Officer. Furthermore, each
operational Group company has its own Compliance Officer,
who reports to the respective Regional Compliance Officer. The
Supervisory Board monitors compliance with the compliance
rules defined by the Management Board.

The compliance organization performs risk analysis together
with the relevant functions and departments in order to deter-
mine and monitor the risk profile of countries, subsidiaries and
functions. On the basis of this, it identifies the respective need
to take action and initiates corresponding measures. Special
training courses are held regularly on specific risk areas and
important current topics or developments. In 2016, for example,

NORMA Group SE Annual Report 2016Corporate Governance Report

worldwide online training was held on approval procedures. Be-
sides these training courses on specific focus topics, all employ-
ees worldwide (on-site in personal training or online training) are
trained on the basic compliance rules and important contents
of the compliance guidelines. Furthermore, employees receive
important, up-to-date compliance information on a regular basis
on the intranet page, through the employee newsletter and in
the form of e-mails and notices.

The compliance guidelines of NORMA Group are an important
means of demonstrating to employees their ethical and legal obli-
gations. All compliance documents are reviewed regularly and, if
necessary, adapted to new legal or social requirements and thus
always kept up-to-date. The current versions of the main compli-
ance documents, the ‘Code of Conduct,’ and the two principle
directives ‘Conflicts of Interest’ and ‘Anti-Corruption’ were revised
and published in March 2016 with the approval of the Supervisory
Board. They are binding for all employees of NORMA Group. A
separate ‘Supplier Code of Conduct’ applies for suppliers. It is
intended to help ensure that laws and ethical rules are observed
within the NORMA Group supply chain. In addition, a compliance
manual was compiled in 2016, which defines responsibilities and
regulatory areas, describes basic compliance processes, and
provides a summary of key compliance issues.

NORMA Group encourages its employees to report breaches
of regulations and internal policies for all hierarchies. Besides
directly approaching superiors, the personnel department or
Compliance Officers, an Internet-based ‘whistleblower system’
is available for this purpose. With this whistleblower system,
company-internal and external parties can report suspicious
cases to the compliance organization of NORMA Group and, if
necessary, preserve their anonymity.

The members of the compliance organization always follow up
on references to compliance violations. If violations of compli-
ance rules are discovered or weaknesses in the organization are
identified, management takes the necessary action promptly in
cooperation with the compliance organization. Depending on
the actual case, these measures range from targeted additional
training and changes in organizational processes to disciplinary
means, including termination of employment.

INFOR M ATION ON THE AUDITOR A ND

INTER N AL ROTATION
PricewaterhouseCoopers GmbH Wir tschaf ts prüfungs-
gesellschaft (PwC), Frankfurt / Main, audited the financial state-
ments of NORMA Group SE / NORMA Group AG as well as the
consolidated financial statements for the fiscal years 2011 to
2016. Furthermore, PwC retroactively audited the years 2009
and 2010 for the prospectus as part of the IPO in 2011.

After an internal rotation at PwC, Mr. Thomas Tilgner exercised
the position of the left undersigned auditor and Mr. Richard
Gudd the right undersigned auditor for fiscal year 2016 for the
first time.

To Our ShareholdersCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS40

NORMA Group SE Annual Report 201641

The automotive industry is the largest
industrial sector in Germany in terms
of sales volume and is also one of the
most important industries worldwide.
With its many years of experience and
extensive expertise in joining technology,
NORMA Group is an important player
in this market.

To Our ShareholdersNORMA Group on the Capital MarketCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS42

“With the acquisition of the FRENCH AUTOLINE BUSINESS, we significantly
strengthened our market position in the area of quick connectors. Autoline’s products

perfectly complement our existing product portfolio in the plastic area and allow access to new
customers and NEW APPLICATIONS IN THE AUTOMOTIVE INDUSTRY –
not only in Europe, but also on a global scale.”

E D O U A R D G E N H O

K E Y A C C O U N T M A N A G E R F O R E J T
N O R M A D I S T R I B U T I O N F R A N C E S . A . S .

NORMA Group SE Annual Report 201643

“With the acquisition of the FRENCH AUTOLINE BUSINESS, we significantly

strengthened our market position in the area of quick connectors. Autoline’s products

perfectly complement our existing product portfolio in the plastic area and allow access to new

customers and NEW APPLICATIONS IN THE AUTOMOTIVE INDUSTRY –

not only in Europe, but also on a global scale.”

E D O U A R D G E N H O

K E Y A C C O U N T M A N A G E R F O R E J T

N O R M A D I S T R I B U T I O N F R A N C E S . A . S .

C O N N E C T I N G P R O D U C T S

I N E N G I N E A N D C O O L I N G S Y S T E M S

C O N N E C T I N G P R O D U C T S

I N E X H A U S T S Y S T E M

C O N N E C T I N G P R O D U C T S

I N F U E L S Y S T E M

To Our ShareholdersNORMA Group on the Capital MarketCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS44

NORMA Group SE Annual Report 201645

To Our ShareholdersNORMA Group on the Capital MarketCONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED MANAGEMENT REPORTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS48
Principles of the Group

78
Forecast Report

48 Business Model
48 Organizational Structure
50 Products and End Markets
51 Unique Selling Propositions and Competitive Situation
51 Economic and Legal Factors of Influence
52 Goals and Strategy
54 Control System and Control Parameters
57 Research and Development

59
Economic Report

59 General Economic and

Industry-Specific Conditions
61 Significant Developments in 2016
61 Comparison of Target and Actual Values
61 General Statement by the Management Board on
the Course of Business and Economic Situation

62 Earnings, Assets and Financial Position
69 Sustainable Value Creation
70 Production and Logistics
71 Quality Management
71 Purchasing and Supplier Management
73 Employees
76 Environmental Protection and

Ecological Management

77 Marketing

78 General Economic and Industry-Specific Conditions
80 Future Development of NORMA Group
82 General Statement by the Management Board

on the Probable Development

83
Risk and Opportunity Report

83 Risk and Opportunity Management System
84 Internal Control and Risk Management System

with Regard to the Group Accounting Process
85 Risk and Opportunity Profile of NORMA Group
91 Assessment of the Overall Profile of Risks and
Opportunities by the Management Board

94
Remuneration Report

94 Remuneration of the Management Board
98 Remuneration of the Supervisory Board

98
Other Legally Required Disclosures

78
Events after the End of the Fiscal Year

101
Report on Transactions with Related Parties

T
R
O
P
E
R

T
N
E
M
E
G
A
N
A
M

D
E
T
A
D

L
O
S
N
O
C

CONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

Consolidated Management Report 2016

Principles of the Group

BUSINES S MODEL
NORMA Group is an international market and technology leader
in the area of advanced and standardized engineered joining
and mounting technology. With its 27 production sites and nu-
merous sales offices, the Group has a global network with which
it supplies more than 10,000 customers in over 100 countries.
NORMA Group’s product portfolio includes more than 35,000
high-quality joining products and solutions in the three product
categories clamps (CL AMP), joining elements (CONNECT) and
fluid systems / connectors (FLUID). The products NORMA Group
offers are used across industries in a wide range of applications,
whereby the product specifications differ depending on the ap-
plication and customer requirements.

High customer satisfaction forms the foundation of NORMA
Group’s continued success. The main factors here are the cus-
tomized system solutions, the global availability of products in
consistently high quality and delivery reliability.

By opening new plants and competence centers and making
strategic acquisitions, NORMA Group has succeeded in ex-
panding its international presence quite significantly in recent
years while optimizing its distribution channels and intensifying
its cooperation with local customers.

ORG A NIZ ATION AL STRUCTUR E

Corporate legal structure
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. It is responsible for the strategic management of busi-
ness activities. In addition, it is also responsible for communi-
cating with the Company’s most important target audiences
as well as for Legal and M& A, Compliance and the Internal
Revision.

Group-wide central management responsibilities such as IT,
Treasury, Group Accounting and Group Controlling, are all
based at the subsidiary NORMA Group Holding GmbH. Three re-
gional management teams located in Auburn Hills, USA, Maintal,
Germany, and Singapore steer the specific holding activities for
the three regions Americas (North, Central and South America),
EMEA (Europa, Middle East and Africa) and Asia-Pacific (APAC).

As of December 31, 2016, NORMA Group SE holds shares in
46 companies that belong to NORMA Group either directly or
indirectly and are fully consolidated.  Notes, p. 134.

Acquisitions
Economically effective as of November 30, 2016, N O R M A
Group acquired all of Autoline’s assets from Parker Hannifin.
The company was included in the scope of consolidation as of
December 1, 2016. Autoline’s main production site is located in
Guichen, France. Furthermore, it has production sites in Mexico
and China.  Significant Developments in 2016, p. 61.

Changes of legal structure
In fiscal year 2016, NORMA Türkei Verwaltungs GmbH, head-
quartered in Maintal, was renamed NORMA Verwaltungs GmbH.
NORMA Verwaltungs GmbH as a controlled company and its
sole shareholder NORMA Group Holding GmbH as the con-
trolling company concluded a domination and profit transfer
agreement, which was entered into the commercial register
on December 21, 2016. NORMA Verwaltungs GmbH holds the
shares in the Turkish Group company NORMA Turkey Bağlantı
ve Birleştirme Teknolojileri Sanayi ve Ticaret Limited Şirketi
as well as minority interests in the Russian Group company
NORMA Group CIS and, since January 2017, a minority interest
in the newly acquired Portuguese company Lifial – Indústria
Metalúrgica de Águeda, Lda.  Events after the End of the Fiscal
Year, p. 78.

NORMA Group SE Annual Report 201649

N O R M A G R O U P ( S I M P L I F I E D S T R U C T U R E ) 1

G 0 0 7

NORMA Group SE

NORMA Group Holding
(Germany)

NORMA Pennsylvania
(USA)

NORMA Group APAC Holding
(Singapore)

Craig Assembly
(USA)

NORMA
Michigan (USA)

NORMA EJT
(Wuxi)

NORMA
Thailand

R.G.R AY
(USA)

NORMA Group
Mexico

NORMA DS
Mexico

National
Diversified Sales
(USA)

NORMA
Brazil

NORMA
Australia

Guyco
(Australia)

NORMA Products
Malaysia

NORMA
China 2

NORMA EJT
(China)

NORMA
Korea

NORMA
Japan

NORMA
India

NORMA
Germany

NORMA
Distribution
Germany

NORMA
Serbia

NORMA
Polska

NORMA Group
DS Polska

Groen BV
(The Netherlands)

NORMA
Czech

NORMA
Turkey

NORMA
Distribution
France

NORMA
Sweden

CONNECTORS
Verbindungstechnik
AG (Switzerland)

NORMA
China 2

NORMA
Italy

NORMA
France

NORMA
Spain

NORMA
UK

NORMA
Russia

NORMA
Autoline
France

1 The graph gives an overview of the operating companies of NORMA Group. A complete list of the Group companies and NORMA Group’s shareholdings as of December 31,

2016, can be found in the  Notes, p. 134.

2 NORMA China is organizationally assigned to the Asia-Pacific segment. In terms of company law, it belongs to NORMA Group Holding GmbH.

These corporate changes will have no impact on the operational
business.

In connection with the acquisition of Autoline, NORMA Group
has set up a new subsidiary in France (NORMA Autoline France
SAS) and in China (NORMA EJT (Wuxi) Co., Ltd.). These new
companies have been running the Autoline business in France
and China since December 1, 2016. The American-Mexican
part of the Autoline business has been integrated into NORMA
Group’s existing American Group companies.

Group management
NORMA Group SE has a dual management system that consists
of a Management Board and a Supervisory Board. The Manage-
ment Board comprised of four members, manages the Com-
pany under its own responsibility, while the Supervisory Board

advises and monitors the Management Board. The Supervisory
Board consists of six members who have been elected by the
shareholders at the Annual General Meeting. Detailed informa-
tion on the composition of the Management Board and the Su-
pervisory Board, as well as the distribution of responsibilities
among themselves, can be found in the Corporate Governance
Report, which forms part of the Management Report. The State-
ment of Corporate Governance pursuant to section 289a HGB,
including the Declaration of Conformity pursuant to section
161 AktG, a description of the procedures of the Management
Board and the Supervisory Board, and relevant information on
corporate governance practices, is also part of the Corporate
Governance Report.  Corporate Governance Report, p. 33.
The curriculum vitae of the Supervisory and Management Board
members are published on NORMA Group’s website. @ http://
investors.normagroup.com.

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS50

O R G A N I Z AT I O N A L S T R U C T U R E O F N O R M A G R O U P

G 0 0 8

NORMA Group SE

PARENT COMPANY

UNDER COMPANY L AW

EME A

Americas

Asia-Pacific

SEGMENTS

Engineered Joining Technology (EJT)

Distribution Services (DS)

DISTRIBUTION CHANNELS

Operative segmentation by regions
NORMA Group’s strategy is based, among other considerations,
on regional growth targets. In order to achieve these, the op-
erative business is managed by the three regional segments
EM E A (Europe, Middle East and Africa), the Americas and
Asia-Pacific (APAC). All three regions have networked regional
and cross-company organizations with different functions. The
internal Group reporting and control system that Management
uses is also therefore quite regional in nature. The distribution
service is based on regional and local priorities.

PRODUCTS A ND END M AR KE TS

Product portfolio
The products that NORMA Group offers can for the most part be
divided into the three product categories clamps (CL AMP), join-
ing elements (CONNECT) and fluid systems / connectors (FLUID).

The clamp products (CL AMP) are manufactured from unalloyed
steels or stainless steel and are generally used to join or seal
elastomer hoses.

The connection products (CONNECT) include connectors made
of unalloyed steels or stainless steel that are partly equipped
with elastomer or metal seals and are used as the joining and
sealing elements of metal and thermoplastic pipes.

FLUID products are either single or multiple layer thermoplastic
plug-in connectors for liquid systems that reduce installation
times, ensure reliable flow of liquids or gases and occasional-
ly replace conventional products such as elastomer hoses. In
addition, the FLUID division’s product range includes solutions
for applications in the sectors of storm water management and
landscape irrigation, but also joining components for infrastruc-
ture solutions in the area of water.

NORMA Group’s advanced engineered joining technology is
used in all applications in which pipelines, tubes and other sys-
tems need to be connected together. Because joining technol-
ogy plays a role in nearly all industries, NORMA Group serves
many different end markets. Besides the automotive, commer-
cial vehicle, and aviation industry, NORMA Group is also active
in the construction and mechanical engineering industry, the

S A L E S B Y D I S T R I B U T I O N C H A N N E L S

G 0 0 9

in %

DS 40

60 EJT

pharmaceutical and biotechnology fields, agriculture and the
drinking water supply and irrigation industry. NORMA Group
products are also used in consumer products such as home
appliances.

Two complementary distribution channels
NORMA Group supplies its customers via two different sales
channels:

• Engineered Joining Technology – EJT and
• Distribution Services – DS.

The two distribution channels differ in terms of the degree of
specification of the products, while having intersections in pro-
duction and development that enable cost benefits and ensure
quality assurance.

The area of EJT includes sophisticated, individually customized
joining technology and is particularly characterized by close
development partnerships with OEMs (original equipment man-
ufacturers). NORMA Group’s central development departments
and resident engineers work together with the customer on
developing solutions for specific industrial challenges. Due to
the constant proximity to customers in the area of EJT, NORMA
Group’s engineers gain comprehensive knowledge and a deep
understanding of the various challenges their end markets
and customers face. Such development partnerships result in

NORMA Group SE Annual Report 201651

O V E R V I E W O F E N D M A R K E T S A N D B R A N D S B Y S E G M E N T

T 0 0 8

Segment

Product categories

Distribution channels End markets

Brands

EME A

Americas

Asia-Pacific

CL AMP
CONNECT
FLUID

EJT
DS

Industrial suppliers, Passenger vehicle OEMs,
Distributors, Commercial vehicle OEMs,
Pharma / Biotechnology, Water management

ABA ®, CONNECTORS ®, Gemi®,
NORMA ®, Serflex ®, TERRY®

Industrial suppliers, Passenger vehicle OEMs,
Distributors, Commercial vehicle OEMs,
Pharma / Biotechnology, Water management

ABA ®, Breeze®, Clamp-All®,
CONNECTORS ®, Five Star®, Gemi®,
NDS ®, NORMA ®, R.G.R AY ®, TORCA ®

Industrial suppliers, Passenger vehicle OEMs,
Distributors, Commercial vehicle OEMs,
Pharma / Biotechnology, Water management

ABA ®, Breeze®, CONNECTORS ®,
FISH ®, Gemi®, NORMA ®

high-technology products that are designed not only to meet
the needs of customers with respect to efficiency and perfor-
mance, but that also take aspects such as weight reduction and
quick installation into consideration. As a result, they generate
substantial added value for the customers and contribute to
their economic success.

Via its Distribution Services (DS), NORMA Group markets a
broad range of high-quality, standardized brand products. In
addition to its own global distribution network, the Company
also relies on multipliers such as sales representatives, retailers
and importers. Its customers include, among others, distribu-
tors, specialized wholesalers, OEM customers in the aftermarket
segment, do-it-yourself stores and small application industries.
The brands ABA ®, Breeze®, Clamp-All®, CONNECTORS ®, FISH ®,
Five Star®, Gemi®, NDS ®, NORMA ®, R.G.RAY®, Serflex®, TERRY®
and TORCA ® exemplify technological know-how, high quality
and reliability and meet the technical standards of the countries
in which they are sold.

UNIQUE SELLING PROPOSITIONS A ND

COMPE TITIVE SITUATION

Economies of scale and synergies
By combining know-how in developing customized solutions
for industrial customers (EJT) and providing high-quality stan-
dard brand products through global distribution (DS), NORMA
Group is not only able to realize cross-selling effects, but also
many synergies in the areas of production, logistics and sales.
In addition, the Company benefits from significant economies of
scale and scope due to the broad variety of its product offerings
and high quantities and therefore differentiates itself clearly from
smaller, usually more specialized competitors.

Competitive environment
With its products, NORMA Group provides solutions for numer-
ous industrial applications. Its expertise covers metal-based
connection solutions and products (CL AMP and CONNECT) as
well as thermoplastic materials (FLUID). Thanks to the unique
combination of expertise in both metal and plastics processing
and the broad diversification of its product portfolio, NORMA
Group can offer its customers a wide range of solutions to dif-
ferent problems from a single source and thus distinguishes

itself from its competitors who mainly specialize in individual
product segments.

In the area of Engineered Joining Technology, especially in the
area of CL AMP and CONNECT, NORMA Group operates in a
highly fragmented market, which is characterized by a very
heterogeneous structure due to the abundance of specialized
industrial companies. In this environment, NORMA Group sees
itself as a provider of tailor-made, value-creating solutions that
are geared to the specific needs of the customer and are devel-
oped in long-term partnerships. With its international business
alignment and its cross-industry customer base, NORMA Group
distinguishes itself from its mostly regional competitors.

In the area of FLUID, NORMA Group finds itself facing mainly
competitors that are globally active and mainly offer solutions
that are based on rubber and elastomer products. NORMA
Group, however, has focused more on innovative plastic-based
solutions that generate significantly higher value for its custom-
ers due to their lower weight and price, as well as the environ-
mental compatibility of the materials used.

In the much more standardized sales channel Distribution Ser-
vices, NORMA Group is active in mass markets and competes
primarily with providers of similar standardized products. It dif-
ferentiates itself from them particularly through its strong brands
that are the result of a deliberate brand policy that focuses
on the regional needs of its customers. In addition, customers
appreciate the high quality of service. NORMA Group offers
its trade customers a complete range of products that meets
all of their end users needs’. These products are available on
short notice, therefore the dealer is always in a position to meet
his delivery obligations even with uncommon applications or if
demand fluctuates.

ECONOMIC A ND LEG AL FACTORS OF INFLUENCE

Economic factors
NORMA Group is active in many different industries and regions.
Seasonal and economic fluctuations in individual countries or
industries can have varying effects on customer demand and
the order situation at NORMA Group. For example, the downturn
in demand for commercial vehicles and agricultural machinery

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
52

in the US last year had a marked negative impact on NORMA
Group’s US business in this segment and led to a decline in
organic growth in the Americas segment.  Sales and Earnings
Performance, p. 63.

The ongoing productivity improvements defined as part of the
Global Excellence Program contribute to continuous optimiza-
tion of the cost structure and help to compensate for negative
developments with regard to costs.  Production and Logistics,
p. 70.

Thanks to its diversified product portfolio and broad customer
base, NORMA Group is, however, perfectly equipped to com-
pensate for temporary drops in demand. Temporary produc-
tion peaks can be intercepted quite flexibly due to its efficient
production structures and use of temporary workers. Further-
more, the high proportion of long-term development partner-
ships makes NORMA Group more independent of short-term
fluctuations in demand.

Exchange rate fluctuations
Due to NORMA Group’s international activities, exchange rate
fluctuations also influence its business. While fluctuations be-
tween two non-euro currencies have only little impact on the
operating result of NORMA Group as a result of regional produc-
tion, exchange rate fluctuations against the euro as the reporting
currency may have a greater impact on its results. Due to the
high US dollar exposure, fluctuations in the EUR / USD exchange
rate in particular affect earnings.  Risk and Opportunity Re-
port, p. 86 and Notes, p. 135. In fiscal year 2016, NORMA Group
generated more than 40% of its sales in US dollars. The devel-
opment of the US dollar against the euro resulted in a slightly
positive sales effect in fiscal year 2016. In contrast, changes in
the exchange rates of the following currencies had a negative
effect on the development of sales: British pound, Swedish kro-
na, Serbian dinar, Turkish lira, Chinese renminbi and Malaysian
ringgit.

Changes in personnel and material costs
With respect to costs, the development of wages and salaries
in particular has an effect on NORMA Group, as do changes in
material costs.

Because the majority of the companies that make up NORMA
Group are not bound by a collective agreement, personnel costs
are based mainly on the country-specific development of the
cost of living. For companies that have collective agreements,
for example in Germany and Sweden, personnel costs are in-
fluenced by the cost levels in the collective agreements or by
the outcomes of local collective pay negotiations. Changes in
collective wage agreements can lead to an increase in person-
nel costs at the respective sites.

NORMA Group is a manufacturing Company that requires a wide
variety of different raw materials to manufacture its products.
Price fluctuations for important materials can therefore have an
effect on earnings. NORMA Group hedges against short-term
price changes during the purchasing process by contractually
fixing the prices for important material groups for a longer peri-
od of time – usually one year. This applies to both procurement
and sales. Long-term price changes are largely passed on to
the customer, which reduces the impact on earnings.

Legal and regulatory aspects
Due to the international focus of the business and against the
background of its acquisition strategy, various legal and tax-re-
lated regulations are of relevance to NORMA Group. Among
others, these include product safety and product liability laws,
construction, environmental and employment-related regula-
tions as well as foreign trade and patent laws.  Risk and Op-
portunity Report, p. 91.

The growing density of regulation in environmental law, in par-
ticular, has an impact on NORMA Group’s product strategy.
For example, new emission regulations, especially in the auto-
motive and commercial vehicle industry, increase the demand
for innovative joining technology and thus benefit N OR M A
Group’s business. In this context, NORMA Group also expects
country-specific regulations for car fleets to have a positive
effect on sales in the medium term. In this case, lower aver-
age emission ceilings per vehicle fleet will be mandatory in the
years to come.  T 009, p. 53. Vehicle manufacturers will have
to invest in low-emission technologies in order to achieve the
required emission targets. NORMA Group’s products are of
great benefit to OEM customers as they strive to comply with
these requirements.

By acquiring National Diversified Sales (NDS) at the end of 2014,
the various regulatory initiatives due to increasing environmental
problems, water shortages and water pollution are of greater
relevance for NORMA Group. As a result of increasing water
scarcity and water pollution, households and companies in var-
ious regions of the US, California, for example, are urged to limit
their water consumption. Since existing infrastructure is often
obsolete, in most cases technical conversion is inevitable. NDS
offers a wide variety of solutions with its efficient products for
water supply and infrastructure. NORMA Group therefore as-
sumes that stricter regulations regarding the consumption and
use of water will have a positive effect on its business.

GOALS A ND STR ATEGY
N O R M A G roup’s strate gic goal is the sustaina ble in-
crease of the company value. In each regional segment
and both distribution channels (EJT and DS) the focus lies
on the continuous ex tension of business activities and
the increase in market shares. In addition, N O R M A Group
also seeks to make targeted acquisitions that will con-
tribute to the diversification of the business and strengthen
growth. In doing so, the Group always focuses on maintaining
its high profitability and stable cash flows. By focusing on inno-
vations, sustainability and high service quality, NORMA Group
creates added value for its customers and thus ensures its com-
petitiveness and future viability.

NORMA Group SE Annual Report 201653

R E G U L AT I O N O F AV E R A G E E M I S S I O N S ( C O 2) F O R V E H I C L E F L E E T S 1

T 0 0 9

Fleet goal year 1

Fleet goal year 2

Region

USA

China

Japan

India

Target
year 1

Target
year 2

Duration
in years

under
national
laws

converted
into
g / km 2

under
national
laws

converted
into
g / km 2

Change
in %

CAGR
in %

2015

2016

2015

2016

2021

2025

2020

2021

130 g / km

37.8 mpg

6.9 l / 100 km

16.8 km / l

130 g / km

130

139

161

139

130

95 g / km

56.2 mpg

5.0 l / 100 km

20.3 km / l

113 g / km

117

115

113

−27

−37

−27

−17

−13

−5.1

−5.0

−6.2

−3.7

−2.8

1 Emission regulation schedule for cars adapted to the consumption of gasoline engines (source: European Union, ICCT, NORMA Group).
2 Fuel consumption data is normalized as g CO 2 / km in accordance with the NEDC.

Robust business model through broad diversification
Broad diversification with respect to the products, regions and
end markets that the Company operates in represents the core
of NORMA Group’s growth strategy. The Company is able to
expand and strengthen its business activities and international
presence by constantly adding application solutions for existing
EJT customers, identifying and signing up new EJT custom-
ers, extending and deepening its customer base in the area of
Distribution Services and entering new markets with attractive
growth potential. NORMA Group sees immense growth potential
especially in the emerging markets where demand for advanced
engineered joining technology is on the rise in all industries
due to the ongoing industrialization and increasing quality re-
quirements. To benefit from this growth trend, NORMA Group
has positioned itself in the major Asian growth markets of India
and China as well as in the emerging economies of South and
Central America in recent years. In order to meet the increasing
long-term demand in these regions, the sites in Asia and South
America will be expanded even further in the mid-term.

In identifying new end markets, NORMA Group places a strate-
gic focus on niche markets with attractive margins, sophisticat-
ed products, fast-growing sales opportunities and a fragmented
competition environment. By engaging in strategic knowledge
transfer to new, fast-growing industries, the Company seeks to
achieve broad diversification with respect to the end markets.
This also strengthens the sustainable earnings profile, indepen-
dence from economic trends and contributes to the stability of
the business. The large number of relevant growth trends in
the end markets that NORMA Group serves offer the Company
attractive growth potential.  Products and End Markets, p. 50.

Furthermore, NORMA Group focuses on expanding in new applica-
tion areas of existing customers in which no NORMA Group com-
ponents are being used yet. The goal here is to achieve high mar-
ket penetration within the various individual technical applications.

Focus on high-quality joining technology and
sustainable product solutions
The technological requirements that end products for NORMA
Group’s customers must meet constantly change. Increasing
environmental consciousness, rising fuel costs and growing
cost pressure also play key roles for virtually every industry. Oth-
er factors include binding targets by lawmakers that place spe-
cial requirements on the materials used, particularly in the auto-
motive and commercial vehicle industry, due to more stringent
emission regulations or special requirements.  Economic and
Legal Factors of Influence, p. 51. This marks the starting point
for the development of new products. NORMA Group therefore
focuses on value-added solutions that assist its customers in
reducing emissions, leakages, weight, space and installation
time. Innovations play an important role in meeting customer
requirements, which increase with each new production cycle.
Therefore, NORMA Group employs more than 300 R&D employ-
ees who constantly work on developing new solutions and opti-
mizing existing systems. NORMA Group plans around 5% of its
EJT sales for investments in research and development activities
to sustainably strengthen its power of innovation.  Research
and Development, p. 57.

Highest quality standards and strong brands
Although the joining products that NORMA Group sells make
up a relatively small value proportion of the final product, they
are often mission-critical. Quality management therefore plays
a crucial role for NORMA Group.  Quality Management, p. 71.

The area Distribution Services which offers and sells more stan-
dardized brand products is based on a specific, regionally-driv-
en brand strategy that is based on the respective performance
parameters of the well-known brands.  Marketing, p. 77. In this
business unit, the focus is on ensuring high-quality service and
the availability of products at all times. NORMA Group ensures
this through its worldwide distribution network.

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

Selective value-added acquisitions
to supplement organic growth
By making select acquisitions, NORMA Group intends to contrib-
ute to the diversification of its business and strengthen its growth.
Acquisitions are therefore an integral part of the Company’s
long-term growth strategy. NORMA Group observes the market
for engineered joining technology very closely and contributes to
its consolidation through targeted acquisitions. NORMA Group
has acquired eleven companies (including Lifial which was ac-
quired in January 2017  Events after the End of the Fiscal Year,
p. 78) since the IPO in 2011 and integrated them into the Group.

The main focus of M& A activities is always on companies that
help to realize the diversification objectives of NORMA Group,
to strengthen its competitive position and / or to generate syn-
ergies. The preservation of growth and high profitability also
play an important role. For example, NORMA Group expanded
its activities in the lucrative water business quite significantly
by acquiring National Diversified Sales in 2014 and is thus driv-
ing its growth and increasing the diversification of its business.
Through the acquisition of the Autoline business in November
2016, NORMA Group has strengthened its market position in
the area of quick connectors for the automotive industry and
thus contributed to market consolidation.

Ongoing efficiency improvements
In order to increase NORMA Group’s profitability, the focus is
on continuously improving processes in all functional areas and
regions. The Global Excellence Program launched back in 2009
serves as an important tool for achieving this. As part of this
program, all internal operative processes are continuously op-
timized. Projects on increasing efficiency are systematically re-
corded and monitored using a web-based program. This makes
it possible to quantify the monetary savings that result from a
specific measure fairly accurately at the end of the 12-month
project cycles. Senior management reviews the current status
of all projects once a month and a steering committee does so

once a quarter. The aim of the program is to be able to absorb
and minimize both the unexpected negative cost developments
and inflationary cost increases.

CONTROL SYSTEM A ND CONTROL PAR A ME TERS
The consistent focus on the Group objectives mentioned is also
reflected in the internal control system at NORMA Group, which
relies on both financial and non-financial control parameters.

Important financial control parameters
The most important financial control parameters for NORMA
Group include the following value-oriented indicators that are
directly related to value creation at NORMA Group: Group sales,
profitability (adjusted EBITA margin) and net operating cash flow.

As a growth-oriented Company, NORMA Group attaches partic-
ular importance to profitable growth in sales. The Group seeks
to achieve short- and medium-term growth above the market
average. Due to the heterogeneous market structure in the area
of joining technology, the Management Board is guided by in-
ternal analyses as well as studies by leading economic research
institutes on the development of the gross domestic product of
the respective regions and on the production and sales figures
of the relevant customer industries in developing the forecast
on the expected development of sales. In addition, the manage-
ment observes certain early indicators, such as customer order
patterns in the retail business (Distribution Services) and the
order book in the area of Engineered Joining Technology (EJT).

The adjusted EBITA (EBITA before special influences) is the
most important internal and external valuation figure for ongo-
ing operations. In order to be able to make a long-term com-
parison and for a better understanding of how the business
is developing, NORMA Group adjusts the operating result by
certain expenses, such as those that are related to acquisi-
tions.  Adjustments, p. 138. The adjusted EB I TA margin
(EBITA as a percentage of sales) as another key indicator for

S T R AT E G I C G O A L S O F N O R M A G R O U P

G 0 10

NORMA Group strategic goals

Increase company value

Increase market share

High level of customer satisfaction

Diversification

Innovation

Quality

Efficiency

Acquisitions

Strategic focus

NORMA Group SE Annual Report 2016F I N A N C I A L C O N T R O L PA R A M E T E R S

Group sales (in EUR millions)

Adjusted EBITA margin (in %)

Net operating cash flow (in EUR millions)

N O N - F I N A N C I A L C O N T R O L PA R A M E T E R S

2016

894.9

17.6

148.5

2015

889.6

17.6

134.7

2014

694.7

17.5

109.2

2013

635.5

17.7

103.9

T 0 10

2012

604.6

17.4

81.0

T 0 11

Number of new patent applications

Defective parts per million (PMP)

Quality-related customer complaints per month

2016

2015

2014

2013

2012

NORMA Group provides information on the profitability of its
business activities. In order to maintain the adjusted EBITA
margin and thus the Group’s profitability at its usual high lev-
el, NORMA Group continuously works on optimizing its pur-
chasing and production processes with the aim of limiting the
increase in expenses in relation to sales to a large extent. To
determine the EBITA target margin, both past performance and
the planning of individual business units are taken into con-
sideration. The target margin for the Group is determined as
the weighted average of the divisions. The price development
of the raw materials of greatest importance to NORMA Group
serves as an early indicator of changes in major cost items,
such as material costs. For this reason, the respective mar-
kets and raw material prices are constantly monitored and the
prices of key materials are contractually fixed when necessary.

In order to maintain the Group’s financial independence and
solvency at all times, NORMA Group is guided by operating net
cash flow in addition to the aforementioned key figures. The net
operating cash flow includes the most important cash-effective
items that can be influenced by the individual business units and
provides information on whether NORMA Group can finance its
operating business out of its cash flow. It is calculated on the
basis of the adjusted EBITDA plus changes in working capital
minus capital expenditures. The key approaches to improving
net operating cash flow are therefore to increase sales, engage
in sustained value-enhancing investment activity and to improve
the operating result adjusted for special effects (EBITDA). In
addition, consistent management of working capital also has a
positive effect on net operating cash flow.

All financial control variables are planned and monitored on an
ongoing basis at Group, regional and Group company levels.
Deviations between forecasted and actually achieved targets
are measured on a monthly basis in all local companies and
aggregated at the level of regional segments within the monthly
reporting for the Management Board. Detailed business plans
are regularly projected on the basis of current monthly and
quarterly results and may include various scenarios.

Important non-financial control parameters
The most important non-financial control parameters for NORMA
Group include the extent of market penetration, the Group’s
power of innovation, problem-solving behavior and the sustain-
able overall development of NORMA Group as a whole.

NORMA Group always pursues the objective to sustainably ex-
pand its business and achieve sales growth and profitability that
are higher than average by industry comparison. Particularly by
offering innovative solutions, NORMA Group is able to create
value creation potential in various areas of application and nu-
merous industries. The Group’s organic growth is thus a sign
of NORMA Group’s market penetration.

Sustainably securing its innovation capability is a key driver for
the future growth of NORMA Group. The Group uses patents as
a way of protecting its innovations. Up until 2016, the number
of patent applications per year is therefore part of the internal
control system and an important indicator of NORMA Group’s
innovative capacity.

For the reporting year 2016, NORMA Group decided to file
mainly cross-national patent applications (European and glob-
al (PCT)) rather than new individual patent applications. This
reduces costs, lowers the application efforts and increases
the quality of the patent portfolio. Since a single cross-nation-
al patent application can lead to patent protection in several
countries, inventions are no longer required to be registered in-
dividually in each individual country. This leads to a reduction in
the absolute number of new patent applications. Nevertheless,
this strategy does not necessarily have to lead to a reduction
in the number of patents granted in the long term, since new
cross-national patent applications are followed by validations
in various countries. NORMA Group does not include these
new registrations as new applications but rather as part of the
patents held after the respective national patents have been
granted. In fiscal year 2016, this optimization of the patent filing
strategy resulted in a reduction in the number of new patent
applications to 52 (2015: 74).

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

From reporting year 2017 onwards, NORMA Group will introduce
the number of invention applications as a new indicator for mea-
suring and managing the Company’s innovative strength. Details
can be found in the Forecast Report  Forecast Report, p. 78.

NORMA Group stands for the highest possible reliability and
quality of service. The reputation of its brands and reliability
of its products are key factors in the Company’s success. In
developing and manufacturing products, the Group therefore
relies on the highest quality standards. In order to minimize
production losses and maximize customer satisfaction, NORMA
Group measures and manages the problem solving behavior of
its employees by using two performance indicators: the average
number of customer complaints per month and defective parts
per million of manufactured parts (parts per million / PPM). The
two metrics are collected and aggregated at Group level on a
monthly basis.  Quality Management, p. 71.

NORMA Group considers it to be its main responsibility to bring
the effects of its business activity into balance with the ex-
pectations and needs of society. For this reason, operational
decisions are based on the principles of responsible company
management and sustainable actions. NORMA Group’s strategy
and goals are influenced by its Corporate Responsibility (CR)
policies and described in detail on the Corporate Responsibility
website of NORMA Group. @ http://normagroup.com/cr.

Other non-financial performance indicators include employee
and environmental indicators and indicators on occupational
safety and healthcare within the Group. They are discussed in
the respective chapters of this management report.

The target figures for the financial and non-financial control pa-
rameters for 2017 and the assumptions underlying the forecast
are presented in the Forecast Report.  Forecast Report, p. 78.

Goals regarding finance and liquidity management
NORMA Group’s objectives with respect to central finance and
liquidity management have not changed since the previous year
and are as follows:

I. Ensuring solvency at all times
The main financial objectives are maintaining the necessary
liquidity for the Group’s operating business at all times, main-
taining sufficient strategic liquidity reserves and thus ensuring
NORMA Group’s long-term solvency. This also includes main-
taining sufficient liquid funds for short- to medium-term acqui-
sitions.

Rolling, regular, currency-differentiated liquidity planning for all
major Group companies, which is analyzed and aggregated by
the centrally organized Group Treasury, forms the main stra-
tegic cornerstone of NORMA Group’s finance management.
Financing flexibility is ensured by maintaining the appropriate
credit lines. These are negotiated loan commitments, which
can be utilized within a very short period of time and thus can
compensate for liquidity peaks. NORMA Group has a so-called

‘Sunshine Line’ and a revolving credit line within its syndicated
bank loan. These credit lines can be taken advantage of in dif-
ferent currencies and terms. NORMA Group uses Asset Backed
Security (ABS), factoring and reverse factoring programs to
manage liquidity, optimize working capital and make its cash
flows more predictable.

The financing measures implemented in fiscal year 2016 are de-
scribed in detail in the Notes to the Financial Position. Notes,
p. 141.

II. Limiting financial risks
The Group Treasury division constantly identifies and assesses
interest rate and currency risks and selects suitable hedging
instruments to reduce these risks. Here, not only derivatives,
but also the appropriate foreign currency financing, are used to
reduce currency risks. In the reporting year 2016, a significant
share of financing (the equivalent of around EUR 50 million) was
issued in US dollars as part of the new promissory note that was
issued. More detailed information can be found in the chapter
 Financial Management, p. 66. The overall goal is to optimize
the assets and liabilities side of the balance sheet with regard to
currency risks. In addition, operating currency risks are reduced
by using derivative financial instruments in the Group companies
as of a defined threshold. Here, Group-wide, currency-differen-
tiated liquidity planning is crucial to identifying and managing
such risks.

To limit interest rate risks, NORMA Group’s objective is to devise
a relatively high proportion of financing measures in such a way
that they are subject to interest rates on a fixed-interest basis or
use interest rate swaps. On December 31, 2016, around 12%
of all debt instruments had variable interest rates and were not
hedged by interest rate swaps. In addition, existing risk posi-
tions are monitored regularly by Group Treasury and assessed
for their risk-bearing capacity. The Group Treasury initiates ap-
propriate countermeasures if the defined risk parameters are
exceeded.

Key elements of the policy on limiting financial risks are the
clear definition of process responsibilities, multi-stage approv-
al processes and regular risk assessments. These have been
fixed in a Treasury Directive and are also subject to external
auditing. Compliance with the EMIR (European Market Infra-
structure Regulation) requirements, which was audited in 2016
for the year 2015 with no objections raised, is equally important
to the audit. NORMA Group thus meets all of the prerequisites
for process mapping and control with regard to the handling of
financial risks.

III. Optimizing the Group’s internal liquidity
NORMA Group Holding GmbH assumes central liquidity man-
agement and is responsible in particular for investing surplus
liquidity as well as for intra-Group financing. The Group Treasury
of NORMA Group constantly works on improving internal financ-
ing opportunities and bundling the Group’s liquidity in order to
make it available for a wide variety of funding purposes. This is

NORMA Group SE Annual Report 201657

achieved by optimizing the allocation of cash and cash equiva-
lents in NORMA Group Holding and at the same time ensuring
that the respective individual companies are solvent at all times.
This is done by using a professional treasury management sys-
tem which provides a daily overview of the cash holdings of the
most important subsidiaries. Regional cash pools have been
installed to enable the technical implementation of liquidity cen-
tralization. Further cash concentrations are performed at regular
intervals. Manually pooling funds makes it possible to guarantee
an optimized cash balance for all Group companies, whereby
in particular the local terms for international payments must be
taken into account here.

R ESE ARCH A ND DE VELOPMENT
Research and development activities at NORMA Group are
aimed at further expanding the Group’s innovation power in
the area of engineered joining technology and detecting and
addressing technological trends as early as possible. The fo-
cus is on opening up new markets, tapping into new groups of
customers and developing new products and system solutions.

As part of the restructuring of the R&D department in 2015, its
responsibilities were also redefined. Since then, the focus has
increasingly been on evaluating new technologies, in particular
with respect to their ability to optimize existing processes, min-
imize the materials used, and improve the functionalities of the
end products. The research focus is on solutions to the global
industrial challenges of the respective end markets. By con-
centrating on the megatrends of importance to its customers,
NORMA Group is able to initiate technology developments at
an early stage and serve the market by offering the appropriate
products.

Focus on innovations
A clear focus of NORMA Group’s R&D department is on strength-
ening the Company’s innovative strength. In order to identify
technological trends at an early stage and systematically plan
and carry out product development, new methods and inno-
vation management processes have been implemented in the
past two years by introducing ‘Innovation Roadmapping’ and
so-called ‘Innovation Scouts.’

As part of ‘Innovation Roadmapping,’ long-term technology de-
velopment schedules are drawn up that take into account the
industrial megatrends that have been identified as well as their
impact on the relevant markets and resulting requirements for
potential new products. So-called ‘Innovation Councils’ are driv-
ing the implementation of the projects identified. For example,
the Innovation Council ‘E-Mobility’ is responsible for coordinat-
ing all information and global activities on electromobility, as well
as developing and implementing a strategy geared to all regions
and business sectors.

The Innovation Scouts also started with their work in fiscal year
2016. These NORMA Group employees collect ideas on future
trends throughout the Group and examine them in terms of their
feasibility during their regular meetings.

Thanks to these new measures, NORMA Group expects to not
only be able to focus on innovations better in the years to come,
but also to increase its efficiency in the areas of product and
customer development.

Strategic collaboration with customers
and research institutes
NORMA Group’s EJT unit works closely with its end customers,
but also with research and development institutes, suppliers
and other external partners. This allows for the global trends
to be identified immediately and be seamlessly turned into new
technologies and ideas for products. This, in turn, allows for
fast marketing of product innovations. For competitive reasons,
however, the Company does not disclose the specific nature of
these research partnerships.

As the Distribution Services division is purely a commercial unit,
the market does not demand the same level of technological
research from it. Moreover, customers of NORMA Group in this
business division expect a strong brand image and the most
complete product range. Therefore, the focus in the DS area lies
on making useful additions to the product range and targeted
marketing activities  Marketing, p. 77.

Development focuses in 2016
The main focus of R&D activities in 2016 was still on driving
implementation of the SCR (Selective Catalytic Reduction)
systems with major automotive customers. These customers
have to continuously optimize their systems in order to achieve
the EU targets, which will make a further reduction of nitrogen
oxide emissions for diesel vehicles mandatory by 2020. NORMA
Group supports several automotive manufacturers in the con-
ceptual development of these improved systems.

Another focus during the reporting year was on improving the
Company’s profile clamps. The goal here was to further optimize
the performance of its profile clamps by using appropriate sim-
ulations and calculations in order to increase the durability and
reliability of the connections, especially under high pressure.

Assessment of plastic materials was yet another R&D focus.
Here, special test methods have been developed with which the
materials used can be optimally evaluated for their technical and
commercial usability for specific customer solutions.

Know-how protected by patents
The Company’s specific know-how in the area of joining tech-
nology represents a key success factor for NORMA Group.
Therefore, the Group protects its innovations with patents. As of
December 31, 2016, 843 patents and utility models (2015: 727)
were held in 196 patent families (2015: 179). In 2016, 52 new
patent rights (2015: 74) were filed in 18 patent families (2015: 23).
The lower number of new patent applications compared to the
previous year is due to the changeover in the patent strategy in
fiscal year 2016 that now calls for cross-national, regional and
international patents to be applied for (European and / or global)
instead of filing individual national applications.  Control Sys-

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS58

R & D K E Y F I G U R E S

T 0 12

Number of R&D employees

R&D employee ratio in relation to permanent staff (in %)

R&D expenses in the area of EJT (in EUR millions)

R&D ratio in relation to EJT sales (in %)

R&D subsidies received (in EUR thousands)

2016

2015

2014

2013

2012

2011

305

5.6

28.8

5.4

271

5.3

25.4

4.7

250

5.2

25.7

5.3

231

205

5.0

21.9

4.9

190

5.1

22.1

5.1

174

5.1

16.8

4.1

tem and Control Parameters, p. 54. These secure a protection
position in several countries at the same time, which results in
lower registration expenses, reduced costs and a higher quality
of the patent portfolio.

R&D expenses
Research and development expenses in the area of EJT totaled
EUR 28.8 million in 2016 (2015: EUR 25.4 million). This rep-
resents approximately 5.4% (2015: 4.7%) of sales in this area.
The capitalization ratio, which is the proportion of own work
capitalized in relation to R&D expenses, during the reporting
year amounted to 12% (EUR 3.3 million).

R&D employees
As of December 31, 2016, 305 employees (2015: 271) worldwide
worked for NORMA Group in the R&D department, which rep-
resents approximately 5.6% of all permanent employees of the
Group (2015: 5.3%). Most of the employees who work in R&D
are engineers, technicians and technical draftsmen.

Important product launches
NORMA Group develops new and innovative products for vari-
ous types of applications each year. Newly introduced products
accounted for EUR 48.2 million in sales in 2016 (2015: EUR 42.2
million). This corresponds to 5.3% of total sales (2015: 4.6%).

NORMA Group SE Annual Report 2016
59

Economic Report

GENER AL ECONOMIC A ND

INDUSTRY- SPECIFIC CONDITIONS

Global economy in 2016 still predominantly weak
The global economy continued to develop moderately without
reviving in fiscal year 2016. According to the International Mon-
etary Fund (IMF), growth in 2016 was even slightly lower than in
the previous year at 3.1%. The pace of expansion in China pla-
teaued as expected. Impetus was also weak in other emerging
and developing countries as well as in the US. Low oil prices
and high uncertainties were burdens. The latter resulted from
conflicts in Syria and Turkey as well as the Brexit vote in the UK
and the government and banking crisis in Italy. On the other
hand, expansive monetary policy supported economic activity
in industrialized countries. The ECB continued its extremely re-
laxed monetary policy. The US Central Bank (FED) raised inter-
est rates only slightly towards the end of the year.

The Chinese Gross Domestic Product grew by 6.7% in 2016.
The state-controlled economic transformation toward stronger
domestic demand and the economic transformation process
from basic and heavy industry toward a technology-oriented
industry were further advanced. In addition, governmental sup-
port measures were again taken up. Industrial production grew
robustly by 6.0% (2015: 6.1%), with significantly higher automo-
tive production, but losses in the iron and steel industry. The
emerging markets of Southeast Asia (ASEAN-5) grew moderate-
ly by only 4.8% as a result of moderate global demand. Growth
in India slowed from 7.6% to 6.6%. Restrained investment and
a slump in private consumption after the currency reform in No-
vember slowed down the local economy. Brazil remained deep
in recession, while the Russian economy stabilized at a low level
after shrinking throughout the entire year. Emerging and devel-
oping countries grew overall by 4.1%, as in the previous year.

According to the IMF, advanced economies grew by only 1.6%,
weaker than in the previous year (2015: 2.1%). Based on the
first official figures, the US economy grew by only 1.6%. After a
weak start to the year, an upswing strengthened in the second
half. This was driven particularly by private consumption and
construction investment. On the other hand, equipment invest-
ments declined. According to FED data, US industrial production

G D P G R O W T H R AT E S ( R E A L )

T 0 13

in %

World

USA

China

Euro zone

Germany 1

2016

2015

2014

+3.1

+1.6

+6.7

+1.7

+1.9

+3.2

+2.6

+6.9

+2.0

+1.7

+3.4

+2.4

+7.3

+1.1

+1.6

Sources: IMF, 1 Federal Statistical Office (Destatis)

stagnated in 2016 (−0.3%, excluding energy: −0.1%). Oil and gas
production fell massively. The automotive industry and com-
puter and communications equipment manufacturers grew. US
capacity utilization in December, at 75.5% (2015: 75.4%), was
still well below the long-term average of 80.0% (1972-2015). The
Japanese economy showed only weak growth at 0.9% (2015: re-
vised 1.2%). The UK, on the other hand, grew by a robust 2.0%.

Euro zone robust, but with restrained industrial activity
The economy in the euro zone developed solidly thanks to low
interest rates and low inflation. The Gross Domestic Product
(GDP) grew by 1.7% in 2016 (2015: revised 2.0%). The Brexit
vote led to high uncertainty, but the real economy has not yet
been visibly impaired. Private consumption remained the prima-
ry support of the economy. Higher government spending and a
buoyant construction industry were also stimulants. In view of
weak exports and political crises, company investment activity
remained subdued. In the final quarter, the euro lost value pri-
marily to the US dollar. All EU member states have continued
to recover economically. Spain and Ireland again showed very
strong growth. The upswing in the Netherlands was particularly
vigorous. Portugal and France recorded moderate growth. In
contrast, the recoveries in Greece and Italy were weak and
remained well below the average of the currency union.

Accelerated upswing in Germany,
but industry remains sluggish
According to Destatis (Federal Statistical Office), Germany
achieved solid and steady economic growth of 1.9% in 2016.
The dynamics of the upswing continued to increase compared
with previous years as the long-term job market trend contin-
ued. On average, 43.5 million people were employed (+1.0%).
With growth of 2.0%, private consumption was the main eco-
nomic driver (2015: 2.0%). In addition, government spending
at 4.2% (2015: 2.7%) supported by immigration-related costs,
among others, and a boom in housing construction contributed
to strong gains in construction investments at a total of 3.1%
(2015: 0.3%). Export growth, however, flattened out and did not
again reach the increase of imports.

Gross value creation remained moderate in the manufacturing
sector, excluding construction. On the other hand, most ser-
vice areas generated significant growth. The industrial economy
lagged behind the generally positive development since a back-
wind from foreign markets was noticeably lacking. In the course
of the year, industrial production developed predominantly ro-
bustly, but ineffectually. Coupled with high uncertainties, invest-
ment in equipment grew by only 1.7% (2015: 3.7%), more slowly
than in previous years. According to Eurostat data, capacity utili-
zation rose steadily to 85.8% in the final quarter (Q4 2015: 84.4%).

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
60

Mechanical engineering in stalemate,
German manufacturers again in stagnation
Due to the world’s restrained industrial activity, mechanical
engineering lacked demand stimulus. According to prelimi-
nary estimates by the industry association VDMA, the global
industry turnover stagnated in fiscal year 2016. Among the ma-
jor markets, only China recorded growth (real +3%) thanks to
government measures. Sales in the US and Japan declined by
2% in real terms. Revenues in South Korea and Latin America
declined by 5% in real terms. The development was positive in
some Gulf countries, especially in India and the ASEAN-5 coun-
tries. However, the important market of Europe (−1%) remained
problematic and heterogeneous. In Russia, the market volume
fell further (−6%), while Switzerland stagnated. The UK (−4%),
the Netherlands (−6%), Scandinavia and eastern EU countries
declined. Stagnating sales were recorded in Germany, France
and Italy. In sum, the EU and the euro zone maintained only
zero growth.

Once again, production of export-oriented German mechani-
cal engineering remained in this environment at the previous
year’s level. According to the VDMA, capacity utilization was
just below the long-term industry average. In the first eleven
months, exports from Germany fell by a real 0.8% (imports:
+3.2%). Imports to the US, China, Russia and Latin America
were not completely offset by higher exports to the ASE AN re-
gion, the euro zone and other EU countries. During this period,
sales amounted to EUR 197.1 billion (nominal +1.4%, real +0.5%).
After rising orders in the first half of the year, demand weakened
again due to growing uncertainties on the customer side. In
2016, the industry even recorded a loss of 2% (domestic: −1%,
foreign currency: −3%) in real order intake.

Automotive industry grows globally,
upswing in China and Western Europe
The automotive industry grew strongly in 2016, although region-
al trends diverged widely. According to LMC Automotive (LMCA),
sales of light vehicles (LV, up to 6 metric tons) in 2016 grew by
4.1% to 92.8 million units worldwide. Global production grew by
4.8% to 93.0 million vehicles. In the more narrowly defined pas-
senger car world market, the VDA branch office is forecasting
an increase in sales of 4% to 81.6 million passenger cars. The
Chinese automotive industry has grown strongly, supported by
tax incentives for passenger cars with smaller cubic capacity.
According to the LMCA, sales of LV were up 12.3% to 28.0 mil-
lion, while the sales figures for passenger cars rose by 17.8%
(VDA). Following a decline from the previous year, the Chinese
commercial vehicle market also saw a single-digit increase in
sales and production, with a drop in buses and growth in trucks
(CA AM, China Association of Automobile Manufacturers). With
growth of only 0.5%, the US market achieved a new record vol-
ume of LV at 17.5 million. The passenger car subsegment shrunk
(−9%), while sales in the light truck division rose by 7%. The US
heavy truck market fell significantly by posting an 11% decline in
sales. Due to recession, the markets in Brazil and Russia again
recorded double-digit losses. Japanese car sales fell by 1.6%,
while the Indian car market grew by 7.0%.

The European automotive market grew strongly again in 2016.
According to data from the European industry association
ACE A, new car registrations increased by 6.5% to 15.1 million
units (EU28 + EF TA). In Eastern Europe, sales grew by 15.9%,
while in Western Europe by 5%. Car production rose by 3.8%
here (LMCA). The development was positive in all volume mar-
kets. According to ACE A, car sales in Italy (+15.8%) and Spain
(+10.9%) even rose by double digits. The demand also remained
strong in France (+5.1%) and the UK (+2.3%), while sales in Ger-
many rose strongly by 4.5% to almost 3.4 million passenger
cars. Data from the VDA reveals that domestic production rose
by 1% in Germany to more than 5.7 million passenger cars. As
in the previous year, 4.4 million passenger cars were exported.
German manufacturers increased their production abroad by
6% to over 10 million passenger cars.

The dynamic recovery also continued in the European market
for commercial vehicles. According to ACE A figures, sales of
trucks and buses rose by 11.4% in 2016 to 2.4 million com-
mercial vehicles. In Western Europe, sales rose by 11.0% and
in Eastern Europe by 14.8%. Growth in Italy was outstanding
(+49.9%). Commercial vehicle sales in Spain (+11.3%), France
(+8.3%) and Germany (+7.0%) increased significantly as well.
Among the major sub-markets, only the UK (+1.2%) experienced
moderate growth. Market growth in Europe was driven by in-
creases in sales of between 11% and 12% for trucks in all weight
classes. The bus segment grew by 3.5%.

Construction industry in Western Europe in upswing,
housing construction boom in Germany
The European construction industry developed with region-
al differences, but grew overall. According to a joint analysis
from the industry network Euroconstruct and the Ifo Institute,
construction output in the 19 largest single European markets
rose by 2.0% in real terms (2015: 1.8%). In Western Europe,
the upturn accelerated to 2.4% (2015: 1.6%) thanks to strong
expansion in housing construction. Eastern Europe suffered a
setback of 3.3% (2015: +5.5%) following the expiry of major
EU projects. This exerted pressure on civil engineering across
Europe (−1%). Scandinavia and Ireland achieved the greatest
growth. France and Spain also posted robust growth. Swiss
construction stagnated for the most part. In the UK, construc-
tion productivity fell slightly.

According to Destatis, investment in construction in Germa-
ny increased by 3.1% in real terms (2015: 0.3%). The reasons
for this were the boom in housing construction and vigorous
public construction activity. According to the IfW (Institute for
the World Economy), investment in both sectors rose by more
than 4% in real terms. Weighed down by subdued corporate in-
vestments, commercial construction enjoyed very little stimulus
(real: −0.5%). According to the DIW (German Institute for Eco-
nomic Research), construction volume in housing construction
expanded by a nominal 5.6% to almost EUR 200 billion, with
11.2% for new construction alone. The construction output of
existing buildings (modernization, maintenance), which accounts
for two-thirds of the total housing construction volume, rose by

NORMA Group SE Annual Report 2016Economic Report

3.1%. In building construction excluding apartments, nominal
construction output rose by 2.3% and civil engineering by 3.0%.

SIG NIFICA NT DE VELOPMENTS IN FISCAL YE AR 2016

Issuance of a new promissory note
In August 2016, NORMA Group issued a new promissory note
with euro and US dollar tranches totaling approximately EUR
150 million. The promissory note has maturities of 5, 7 and
10 years and again offers more favorable conditions than the
previous promissory notes. The financial resources from the
promissory note were used to finance the acquisition of Autoline
and to repay the variable euro tranches of the promissory note
from 2013 (EUR 49.0 million).  Financial Management, p. 66.

half of 2016, which is why NORMA Group adjusted its sales fore-
cast for the Americas region in November when the Company
published its figures for the third quarter of 2016. Instead of solid
organic growth, NORMA Group now only expected sales below
the previous year in fiscal year 2016 for the Americas.

After the order backlog in the commercial vehicle, agricul-
tural machinery and construction machinery sectors, includ-
ing aftermarket parts, decelerated even further in the US, the
Management Board was forced on November 10, 2016, to re-
duce the forecast for Group sales growth in 2016. Instead of
organic Group sales growth of around 2% to 5%, the Manage-
ment Board has since then projected organically stable sales
for fiscal year 2016.

Acquisition of the global Autoline business
for quick connectors from Parker
NORMA Group SE acquired all assets of the Autoline business
(Autoline) from Parker Hannifin with effect from November 30,
2016. It was included in the scope of consolidation on Decem-
ber 1.

The forecast for the other target values, including the adjusted
EBITA margin of more than 17%, remained unchanged in 2016.
 Table 014, p. 62 provides an overview of the target and actual
values as well as the adjustments made to the forecasts over
the course of the year.

Autoline has been developing, manufacturing and marketing
quick connectors for the connection of fluid lines in motor ve-
hicles for over 20 years. These plastic components are used
in line systems for fuel, tank ventilation, cooling, brake vacuum
and SCR (Selective Catalytic Reduction) in all types of vehicles.
Autoline has its headquarters in Guichen, France, and produc-
tion sites in Mexico and China. The company sells its joining
products to customers worldwide. The acquisition of Autoline
strengthens NORM A Group’s market position through new
quick connector products but also by bringing new customers,
in Asia, for example. The Autoline business was part of the Fluid
System Connectors division of Parker Hannifin Corporation and
before that a division of Legris.

COMPARISON OF TARGE T A ND ACTUAL VALUES
In its 2015 annual report, NORMA Group issued a forecast for
the Group and the segments for 2016 for its most important
internal control figures. Due to unforeseen developments, the
Management Board was forced to adjust the forecast for growth
in sales of individual segments and ultimately for Group turnover
growth as well during the year. The following report provides an
overview of the forecast adjustments and a comparison of the
projected values with the actual results of the Group.

Adjustments to the forecast during the year
In August 2016, NORM A Group adjusted its sales forecast
at segment level and lowered its sales expectations for the
Asia-Pacific region. Instead of growth of more than 10%, the
Management Board has since then assumed stable organic
sales for the region. The reason for this was the temporal shift of
localization projects in the Asia-Pacific region in favor of slightly
stronger growth in the EME A region.

The situation in the area of commercial vehicles and agricultural
machinery in the US deteriorated over the course of the second

Deviations from the target values
NORMA Group achieved the growth in sales adjusted on No-
vember 10, 2016, for fiscal year 2016. In terms of costs, NORMA
Group achieved a slightly better-than-forecast material cost ratio
due to optimized purchasing and supplier management as well
as favorable price developments for some key materials.  Pur-
chasing and Supplier Management, p. 71. On the other hand,
the personnel cost ratio was slightly higher than the projected
figure. This was due to the higher increase in the number of
employees in relation to the increase in sales as well as to the
disproportionate development of sales in the US. In combina-
tion with tax credits and a reduced average tax rate in the US,
the latter also led to a lower adjusted tax rate of 28.9% for the
Group. Net operating cash flow was higher than expected at
EUR 148.5 million.

GENER AL STATEMENT BY THE M A N AGEMENT BOAR D

ON COURSE OF BUSINESS A ND ECONOMIC SITUATION
NORMA Group ended fiscal year 2016 with organic growth of
0.9%, which is lower than originally forecast. Due to the continu-
ing weakness in the commercial vehicle and agricultural machin-
ery markets in the US, which intensified again towards the end
of the year, the Management Board was forced to correct the
annual sales forecast for fiscal year 2016 on November 10. This
was due to the decline in the order backlog in the areas men-
tioned, including the aftermarket business in the US. Despite
the lower than expected sales volume, the cost ratios were kept
stable overall so that NORMA Group achieved its profitability
target and an adjusted EBITA margin of 17.6%.

The region’s sales performance was very heterogeneous due
to the above-mentioned causes: while the Americas suffered
significantly from the downturn in the US commercial vehicle
and agricultural machinery business, the EMEA and Asia-Pacific
regions showed solid to strong growth which was driven by
good EJT business in particular.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS62

A C T U A L B U S I N E S S D E V E L O P M E N T C O M PA R E D T O T H E F O R E C A S T

T 0 14

Results in
2015 1

March
2016

May
2016 (Q1
Interim
Statement)

August
2016 (Q2
Interim
Report)

November
2016 (Q3
Interim
Statement)

November
10, 2016

Results
2016 1

Group sales
(in EUR millions)

Growth of
Group sales

Sales growth
EME A

889.6

n /a

894.9

3.7% organic
growth, additionally
EUR 115.4 million
from acquisitions

solid organic growth
of around 2% to 5%

no
adjustment

Adjustment
of guidance:
stable or-
ganic sales

0.9% organic
growth, addition-
ally EUR 3.5 million
from acquisitions

5.1%
organic

solid
organic growth

no
adjustment

4.3% organic

Sales growth
Americas

−1.2%
organic

solid
organic growth

Sales growth
Asia-Pacific

Adjusted cost of
materials ratio

13.7%
organic

40.8%

Adjusted personnel
expense ratio

26.3%

more than
10%

roughly at the same level
as in previous years

no
adjustment

Adjustment
of guidance:
stable or-
ganic sales

no
adjustment

Adjustment
of guidance:
sales lower
than last
year

no
adjustment

−3.8% organic

no
adjustment

5.8% organic

no
adjustment

39.4%

27.3%

17.6%

Adjusted
EBITA margin

Financial result
(in EUR million)

Adjusted
tax ratio

17.6%

−17.2
(unadjusted)

sustainable at the same level as in
previous years of more than 17.0%

no
adjustment

up to
EUR −15.0 million

no
adjustment

−14.6%

32.1%

around 32% to 34%

no
adjustment

28.9%

Earnings per share
(in EUR)

2.78 (adjusted)
2.31 (reported)

solid increase

no
adjustment

2.96 (adjusted)
2.38 (reported)

Net operating cash
flow (in EUR million)

134.7

Investments in R&D
(related to EJT sales) 4.7%

Investment rate
(without acquisitions) 4.7%

Dividend (in EUR)
Payout ratio

0.90 2
32.3%

slightly higher than the level
of the previous year
(2015: EUR 134.7 million)

operationally around 5.0%

operationally around 4.5%

no
adjustment

approx. 30% to 35% of adjusted
annual Group earnings

no
adjustment

148.5

5.4%

0.95 2
32.0%

1 The adjustments refer to one-off effects from acquisitions.  Notes, adjustments, p. 138.
2 In accordance with the Management Board’s proposal for the appropriation of net profit, subject to the approval by the Annual General Meeting on May 23, 2017.

The Management Board is par ticularly pleased with the
acquisition of the Autoline business, which was completed on
November 30, 2016. Autoline’s products complement the ex-
isting portfolio in the area of quick connectors and strengthen
the EJT business.

As of December 31, 2016, the order book stood at EUR 302.4
million (2015: EUR 295.8 million), which suggests a good start
to fiscal year 2017. The Management Board therefore assumes
that NORMA Group’s growth will accelerate again in the current
fiscal year.

Overall, fiscal year 2016 was a mixed year for NORMA Group, in
a partially challenging economic environment. The Management
Board assumes that the commercial vehicle market in the US
will recover in the medium term. However, it is difficult to predict
from today’s point of view whether this will already be the case
in 2017 due to the volatile economic environment.

E AR NINGS, AS SE TS A ND FIN A NCIAL POSITION

Adjustments
NORMA Group adjusts certain expenses for the operational
management of the Company, in particular those related to ac-
quisitions made.

NORMA Group SE Annual Report 2016

Economic Report

In fiscal year 2016, expenditures totaling EUR 4.8 million (2015:
EUR 3.6 million) were adjusted within EBITDA (earnings before
interest, taxes, depreciation of tangible, amortization and amor-
tization of intangible assets).

The adjustments within EBITDA refer to material expenses (EUR
0.6 million) resulting from the valuation of the inventories taken
on as part of the purchase price allocation of the acquisition of
the Autoline business. In addition, acquisition-related costs (EUR
2.1 million) and transaction costs (EUR 1.7 million) related to
the acquisition were adjusted within other operating expenses.
Furthermore, expenses for the integration of the acquired Auto-
line business (EUR 0.2 million) were adjusted in other operating
expenses and expenses for employee benefits (EUR 0.2 million).

In addition to the adjustments described, as in prior years, de-
preciation on tangible assets in the amount of EUR 2.3 million
(2015: EUR 2.2 million) as well as amortization of intangible as-
sets in the amount of EUR 20.6 million (2015: EUR 17.3 million),
in each case from purchase price allocations were adjusted.
This also includes an unscheduled amortization of capitalized
customer relationships in the amount of EUR 3.9 million relating
to CONNECTORS Verbindungstechnik AG. This was triggered
by the start-up of a competing company with a similar product
portfolio. In addition, a major supplier recalled the trading rights
for major products with CONNECTORS. These events led to a
loss of customers and ultimately resulted in a partial deprecia-
tion of customer relationships.  Notes, p. 147.

Fictitious income taxes resulting from the adjustments are cal-
culated using the tax rates of the respective local companies
affected and taken into account in the adjusted result after tax.
The following overview simplifies the adjustments.

A D J U S T M E N T S *

T 0 15

in EUR millions

2016 adjusted

adjustments

2016 reported

Group sales

EBITDA

EBITDA margin (in %)

EBITA

EBITA margin (in %)

EBIT

Financial income

Profit for the period

EPS (in EUR)

894.9

179.4

20.0

157.5

17.6

147.7

−14.6

94.6

2.96

* Deviations may occur due to commercial rounding.

4.8

7.1

27.7

18.7

0.58

894.9

174.6

19.5

150.4

16.8

120.0

−14.6

75.9

2.38

Sales and earnings performance
The development described below describes the changes in the
main items of the income statement in the year under review,
adjusted for the above-mentioned special effects. In some cas-
es, the adjustments are discussed separately for comparative
purposes. The adjustments made in 2015 are explained in the
Notes.  Notes, p. 138.

Sales development

Group sales growth strengthened by acquisitions
In fiscal year 2016, Group sales of NORMA Group increased to
EUR 894.9 million, or 0.6%, compared to the prior-year period
(2015: EUR 889.6 million). This figure includes organic sales
growth of 0.9% (2015: 3.7%) and acquisition-related growth of
0.4%. Changes in exchange rates, particularly in connection
with the British pound, the Chinese renminbi and the Malaysian
ringgit, had a negative effect of a total of 0.7%.

The increase in the Group’s sales was primarily the result of the
increase in the global vehicle production of passenger cars and
the resulting good growth of the EJT business in the EMEA and
Asia-Pacific regions. In addition, the positive development of the
DS water business in the Americas region had a positive impact
on Group sales growth. On the other hand, the weak demand
in the commercial vehicle and agricultural machinery sectors in
the US had a negative impact on sales growth.

D E V E L O P M E N T O F S A L E S I N 2 0 16

G 0 11

in EUR millions

H1: 454.3

H2: 435.3

2015

2016

H1: 462.8

H2: 432.1

889.6

894.9

500

1,000

E F F E C T S O N G R O U P S A L E S

T 0 16

Sales 2015

Organic growth

Acquisitions

Currency effects

Sales 2016

in EUR millions

Share in %

889.6

7.6

3.5

−5.8

894.9

0.9

0.4

−0.7

0.6

Heterogeneous developments in the various regions
The sales performance of NORMA Group in the various regions
was very heterogeneous in fiscal year 2016. In Europe, NORMA
Group benefited from the positive overall development of the
vehicle industry, with rising production and sales figures.  Gen-
eral Economic and Industry-Specific Conditions, p. 59. This had
a positive effect on the EJT business in the region and led to
solid organic growth in sales in the EME A region.

In the Americas region, NORMA Group’s business was influ-
enced by the declining trend and the negative production figures
for commercial vehicles and agricultural machinery in the US in

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

particular. This led to order cancellations and a significant drop
in sales in the EJT segment in the Americas, which could not
be offset by the positive development of the DS water business.

C O S T O F M AT E R I A L S A N D C O S T O F
M AT E R I A L S R AT I O ( A D J U S T E D )

G 0 12

Cost of materials (in EUR millions)

– Cost of materials ratio (in %)

The Asia-Pacific region recorded strong growth over the year,
driven in particular by the good EJT business.

EJT area characterized by weak US business,
DS area grew solidly
Sales in the EJT segment amounted to EUR 535.9 million in
fiscal year 2016, a decrease of 0.8% compared to the previous
year (EUR 540.3 million). This was mainly due to the previously
mentioned weak development of the US market for commercial
vehicles and agricultural machinery. The EME A and Asia-Pa-
cific regions each showed strong growth in the EJT business,
which is mainly attributable to a positive development of the
production figures in the automotive industry and new product
developments. In addition, revenues of EUR 3.5 million from the
Autoline business acquired in November contributed to sales
in the EJT sector.

Sales revenues in the Distribution Services division amounted
to EUR 354.5 million in 2016, an increase of 3.0% compared to
the previous year (2015: EUR 344.1 million). This growth was due
in particular to the strong US water business.

D E V E L O P M E N T O F S A L E S C H A N N E L S

T 0 17

EJT

2016

2015

2016

2015

Group sales (in EUR millions)

535.9

540.3

354.5

344.1

Growth (in %)

Share of sales (in %)

−0.8

12.3

3.0

62.7

Development of earnings

Adjusted material cost ratio improved again –
gross margin increased
Targeted purchasing management and the favorable price
development of some important production materials once
again led to an improved adjusted material cost ratio in fiscal
year 2016. With adjusted material expenses of EUR 352.9 mil-
lion (2015: EUR 362.9 million), the adjusted material cost ratio
amounted to 39.4% in 2016 (2015: 40.8%).

After taking into account changes in inventories (EUR 0.2 million)
and other own work capitalized (EUR 3.3 million), this results in
adjusted gross profit of EUR 545.6 million. This represents an
increase of 2.3% compared to the previous year (EUR 533.1 mil-
lion). In relation to sales, this resulted in an adjusted gross mar-
gin of 61.0% compared to the previous year (2015: 59.9%).

362.9

352.9

40.8

39.4

400

300

200

100

2015

2016

Higher adjusted operating income
Adjusted personnel expenses amounted to EUR 243.9 million in
fiscal year 2016, an increase of 4.2% compared to the previous
year (2015: EUR 234.1 million). The adjusted personnel cost
ratio resulting from the ratio of adjusted personnel expenses
and sales amounted to 27.3%, which is a year-on-year increase
(2015: 26.3%). This was due in particular to the increase in the
number of employees as well as to an increase in the wage level
and the relatively lower sales volume in the US in fiscal year 2016.

Adjusted other operating income and expenses increased by 0.6%
to EUR 122.3 million in the reporting year (2015: EUR 121.5 mil-
lion). In relation to sales, this resulted in a constant ratio of 13.7%.

Adjusted operating earnings before interest, taxes, depreciation
and amortization (adjusted EBITDA) for fiscal year 2016 amounted
to EUR 179.4 million, an increase of 1.1% compared to the pre-
vious year (EUR 177.5 million). NORMA Group’s main control pa-
rameter, adjusted EBITA, amounted to EUR 157.5 million in 2016,
0.8% above the adjusted EBITA of the previous year (EUR 156.3
million). The resulting adjusted EBITA margin remained unchanged
at 17.6% compared to the previous year. NORMA Group’s busi-
ness thus again proved to be sustainably profitable in 2016.

A D J U S T E D E B I TA A N D A D J U S T E D E B I TA M A R G I N

G 0 13

Adjusted EBITA (in EUR millions)

– Adjusted EBITA margin (in %)

160

120

156.3

157.5

17.6

2015

2016

NORMA Group SE Annual Report 2016

Economic Report

Financial result
The financial result amounted to EUR −14.6 million in fiscal year
2016 (2015: EUR −17.2 million). It was mainly affected by interest
expenses and expenses from derivative valuation. In addition,
the financial result included positive currency effects, which are
largely the result of the development of the British pound, the
Polish zloty and the Swedish krona.  Notes, p. 141.

Adjusted income taxes
Adjusted income taxes amounted to EUR 38.5 million, resulting
in a tax rate of 28.9% (2015: 32.1%). The unadjusted tax rate
was 28.0% (2015: 31.4%). The lower tax rate compared to the
previous year is due to lower sales growth in the US and to tax
credits as well as a lower average tax rate in the US.

Adjusted profit for the period rose
Adjusted profit for the period after tax amounted to EUR 94.6
million in 2016, an increase of 6.6% compared to the previous
year (EUR 88.7 million). The unadjusted profit for fiscal year 2016
amounted to EUR 75.9 million, 2.7% higher than the previous
year’s result (EUR 73.8 million). Overall, the after-tax adjustment
effect amounted to EUR 18.7 million  T 015: Adjustments, p. 63.

With an unchanged number of shares of 31,862,400 compared
to the previous year, this resulted in adjusted earnings per share
of EUR 2.96 (2015: EUR 2.78). Unadjusted earnings per share
amounted to EUR 2.38 (2015: EUR 2.31).

Asset position

Total assets
Total assets as of December 31, 2016, amounted to EU R
1,337.7 million, which was 14.5% higher than in the previous
year (EUR 1,167.9 million). The increase in the balance sheet
total is mainly due to the acquisition of Autoline’s business in
December 2016 and the associated increase in loan liabilities
as well as currency effects.

Non-current and current assets affected by
the acquisition of Autoline
The acquisition of Autoline and investments were reflected in an
increase in assets. Non-current assets rose by 10.3% year-on-
year to EUR 875.0 million (2015: EUR 793.6 million). Property,
plant and equipment increased by EUR 31.2 million, goodwill by
EUR 25.0 million and other intangible assets by EUR 24.4 mil-
lion. Intangible assets were also impacted by currency effects,
in particular in connection with the US dollar.  Notes, p. 145.

Similarly, current assets increased by 23.6% to EUR 462.7 mil-
lion as of December 31, 2016. The increase is mainly due to the
increase in cash and cash equivalents of EUR 65.6 million and
the increase in inventories of EUR 10.0 million.

The share of non-current assets to total assets at the end
of 2016 amounted to 65.4%. Consequently, current assets
accounted for a share of 34.6%.

Working capital
(Trade) working capital (inventories plus receivables minus liabil-
ities, both primarily from trade payables and trade receivables)
amounted to EUR 144.5 million as of December 31, 2016, which
was 4.9% lower than in the previous year (2015: EUR 151.9
million). In relation to sales, working capital was 16.1% on the
balance sheet date (2015: 17.1%). It was influenced by active
working capital management. As in previous years, NORMA
Group participates in reverse factoring and an Asset Backed
Securities (ABS) program. In addition, in the fourth quarter of
2016, it entered into a factoring agreement on monthly revolving
sales of trade receivables, which resulted in a significant reduc-
tion in operating receivables at the end of the year.

Equity ratio fell slightly
As of December 31, 2016, consolidated equity amounted to EUR
483.6 million, an increase of 12.5% compared to the previous
year (2015: EUR 429.8 million). This increase resulted mainly
from the net profit for the period of EUR 75.9 million and posi-
tive currency translation differences in the amount of EUR 4.0
million. In contrast, the dividend payment in the amount of EUR
28.7 million in the second quarter reduced equity. At the end
of fiscal year 2016, the equity ratio of 36.2% (2015: 36.8%) was
only slightly lower than in the previous year, despite the increase
in the degree of indebtedness resulting from the acquisition of
the Autoline business.

Net debt increased
Net debt at the end of the reporting period was EUR 394.2
million (included herein are derivative financial instruments in
the amount of EUR 2.2 million) and thus rose by EUR 33.3
million or 9.2% respectively compared with the previous year
(2015: EUR 360.9 million). The reason for this was the debt
financing of the acquisition of the Autoline business by issuing
another promissory note in August 2016 amounting to around
EUR 150 million and the payment of the dividend. Gearing (net
debt in relation to equity) was 0.8 and thus at the same level
as at the end of 2015, despite higher net debt. Leverage (net
debt without hedging derivatives in relation to adjusted EBITDA
LTM) was 2.1 (2015: 2.0).

Non-current and current liabilities
Non-current liabilities increased by 11.3% in total to EU R
640.3 million (2015: EUR 575.4 million) and thus amounted to
47.9% of total assets. The increase in long-term debt of EUR
69.4 million or 15.6% which was attributable to the issuance of
the new promissory note had a major impact.

Current liabilities amounted to EUR 213.8 million (2015: EUR
162.6 million) as of the balance sheet date in 2016 and thus rose
by 31.5% compared to the previous year. This is mainly due to
an increase of EUR 35.1 million in current loan liabilities. These
include, among other factors, tranches of the promissory note
issued in 2014 as well as the syndicated credit line with maturity
in 2017. In addition, trade payables rose by EUR 18.7 million to
EUR 119.6 million.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
66

A S S E T A N D C A P I TA L S T R U C T U R E

in EUR millions

Assets

2016

2015

875

794

297

166

274

100

Non-current assets

Current assets

Liquid assets

Equity and liabilities

2016

2015

484

430

Equity

640

214

575

163

Non-current liabilities

Current liabilities

G 0 14

1,338

1,168

1,338

1,168

Unrecognized intangible assets
NORMA Group’s rights to its brands and patents on the brands
it owns, but also customer relationships, if acquired externally,
are recognized in the balance sheet as intangible assets. How-
ever, the reputation of these brands and how well known they
are among its customers also play important roles in its suc-
cess, as does consumer confidence in NORMA Group’s prod-
ucts. Well-established customer relationships that are based on
NORMA Group’s distribution network that has continually grown
over the course of many years are equally important. The know-
how and experience of NORMA Group employees also play
important roles in the Company’s success. The many years of
research and development expertise and project management
know-how are also seen as competitive advantages for NORMA
Group. These values are not recognized in the balance sheet.

Financial management

Financial measures and capital costs
NORMA Group monitors risks from changes in exchange and
interest rates on a regular base and aims at limiting them by
using derivative structures among others. Furthermore, NORMA
Group generally strives to achieve a diversification of its financ-
ing instruments in order to reduce risks. These also include
prolongation of repayment obligations and an even distribution
of the maturity profile. Most of the supply and service relation-
ships between individual currencies are simultaneously hedged
over the course of the year.

NORMA Group took further steps toward improving its financial
structure in fiscal year 2016. For this purpose, a new promissory
note that consisted of euro and US dollar tranches with a total
volume of approx. EUR 150 million was issued at the beginning
of August 2016. The promissory note has maturities of 5, 7 and
10 years and again more favorable interest rates. The funds from
the promissory note were partly used to repay the variable euro
tranches of the promissory note issued in 2013 (EUR 49.0 mil-
lion) and to cover payment of the purchase price of the Autoline
business (EUR 81.0 million).

As of the reporting date December 31, 2016, the revolving line
of credit in the amount of EUR 50 million in the syndicated
loan had not been used. Furthermore, a so-called accordion
facility was also negotiated in the loan agreement. This en-
ables NORMA Group to take out loans from other banks up
to a maximum volume of EUR 250 million and thus extend its
overall credit line. This results in a high degree of flexibility when
it comes to financing. In order to reduce interest rate risks that
could result from the external financing components, US dollar
interest rate hedges of EUR 75.3 million were concluded in the
fiscal year.

As of December 31, 2016, the average interest rate on total
gross debt was 2.3%. N O R M A Group’s maturity profile for
all promissory notes I (2013), II (2014) and III (2016) and the
syndicated credit line (2015) was as follows on December 31,
2016:

NORMA Group SE Annual Report 2016Economic Report

M AT U R I T Y P R O F I L E B Y C U R R E N C Y

G 0 15

in EUR millions

EUR

USD

117

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

100

200

M AT U R I T Y P R O F I L E B Y F I N A N C I A L I N S T R U M E N T

G 0 16

in EUR millions

Syndicated credit line

Promissory note I

Promissory note II

Promissory note III

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

113

100

200

As of the balance sheet date in 2016, NORMA Group complied
with all of the conditions contained in the loan contracts (finan-
cial covenants: debt in relation to adjusted Group EBITA and
change of control).

Future concrete financing steps will depend on the current
changes in the financing markets and acquisition potentials.

Development of cash flow

Net operating cash flow increased significantly
In 2016, NORMA Group achieved a net operating cash flow of
EUR 148.5 million, an increase of 10.3% compared to 2015 (EUR
134.7 million). This was mainly due to slightly higher adjusted
EBITDA compared to the previous year and optimized working
capital management. Investments increased to EUR 47.9 million
compared to the previous year (2015: EUR 42.2 million) and
pertained mainly to plants in Germany, Poland, Serbia, the US
and China.

Cash flow from operating activities increased
Cash flow from operating activities in fiscal year 2016 amounted
to EUR 149.2 million (2015: EUR 128.2 million). It was mainly
influenced by the cash-effective reduction in working capital. In
this context, the effects of the factoring agreement, which was
newly concluded in fiscal year 2016, had a positive effect on
cash flow. The total amount of trade receivables sold within the
factoring program and Asset Backed Securities (ABS) program
amounted to EUR 24.4 million in fiscal year 2016 (2015: EUR 13.9
million). The amount of trade payables in the reverse factoring
program amounted to EUR 23.4 million (2015: EUR 21.1 million).
 Notes, p. 155 and p. 168.

Cash flow from operating activities is corrected by interest ex-
penses in the amount of EUR 12.7 million as well as expenses
from the valuation of hedging derivatives in the amount of EUR
2.4 million which relate to the change in the fair value of foreign
currency derivatives recognized in the income statement and
are allocated to financing activities.

The payments for share-based payments amounting to EUR 2.5
million reported in cash flow from operating activities result from
the cash remuneration of the 2012 tranche of the Management
Board’s Matching Stock Program.

The correction of the other payments allocated to the acquisition
activity (EUR 1.7 million) relates to transaction taxes in connec-
tion with the acquisition of Autoline in December.

Other interest-related expenses and income, which resulted in
an outflow in the amount of EUR 0.8 million (2015: EUR −9.8 mil-
lion) in the reporting year, include non-cash interest expenses
from the application of the effective interest method and ex-
penses from stock option programs.

Cash flow from investing activities
Cash outflow from investing activities amounted to EUR 133.8
million in fiscal year 2016 (2015: EUR 44.5 million). This includes
net payments for acquisitions amounting to EUR 87.6 million
(2015: EUR 0.1 million). These mainly relate to payments in
connection with the acquisition of the Autoline business (EUR

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
68

82.7 million). In addition, payments for the conditional purchase
price liability in connection with the acquisition of the business
activities of Five Star (EUR 3.3 million) as well as payments for
the settlement of all purchase price liabilities from the acquisi-
tion of NDS (EUR 1.6 million) are included.

In addition, cash flow from investing activities was influenced in
particular by the cash outflow for the acquisition of intangible
assets and property, plant and equipment in the amount of
EUR 47.0 million (2015: EUR 44.8 million). This figure includes
expenditure on expansion (EUR 29.1 million) and expenditure on
the maintenance and improvement of operational capacity (EUR
18.5 million). Furthermore, the cash flow from investing activities
includes the change in liabilities for the acquisition of intangible
assets and tangible assets in the amount of EUR 0.6 million.

NORMA Group’s investing activities in fiscal year 2016 (tangible
and intangible assets) in the amount of EUR 47.9 million (2015:
EUR 42.2 million) represents an investment ratio of 5.4% (2015:
4.7%) of sales.

Investment analysis
NORMA Group invests the funds from its operating cash flow in
its continued growth. Investments made in the reporting year
2016 pertained to investments in production facilities and ex-
pansion of capacities mainly in the US, Poland, Serbia, Germany
and China.  Production and Logistics, p. 70.

Cash flow from financing activities
Cash flow from financing activities amounted to EUR 49.6 million
in 2016 (2015: EUR −70.4 million). This included, among other
items, receipts from loans (EUR 188.4 million) relating to the
newly issued promissory note in August and interim financing
of EUR 40.0 million which was already repaid by the end of
September. The repayment of financial debts (EUR −94.2 mil-
lion) essentially comprises the amortization of the floating-rate
tranches of the promissory note issued in fiscal year 2013 as
well as the aforementioned repayment of interim financing in
the amount of EUR 40.0 million. In addition, the payment of the

dividend (EUR −28.7 million) as well as cash flows from interest
paid (EUR −12.0 million) and disbursements from derivatives
(EUR −3.5 million) affected cash flow from financing activities.

Segment reporting
By developing new markets in line with its continuing strategy of
internationalization of NORMA Group, the share of sales realized
internationally increased slightly from 78.3% to 78.8%.

The distribution of sales across the three segments EME A (Eu-
rope, Middle East, and Africa), the Americas (North, Central and
South America) and Asia-Pacific (APAC) changed slightly due
to the continuing weakness in the US commercial vehicle and
agricultural machinery markets, the acquisition of the Autoline
business in the fiscal year and the growth in the EME A and
Asia-Pacific regions and is now as follows:

B R E A K D O W N O F S A L E S B Y S E G M E N T

G 0 17

in %

2015 in brackets

Asia-Pacific 9 (9)

Americas 43 (44)

48 (47) EME A

Due to the fact that financing as a whole is controlled centrally
and financing is exclusively available through approved exter-
nal credit facilities by the central functions of NORMA Group,
the Company forgoes publishing a separate list of financing by
segments. In every segment, the aim is to achieve an investment

D E V E L O P M E N T O F S E G M E N T S

T 0 18

EME A

Americas

Asia-Pacific

in EUR millions

2016

2015

∆

2016

2015

∆

2016

2015

∆

Total segment sales

External sales

Contribution to consolidated sales (in %)

Adjusted EBITDA 1

Adjusted EBITDA margin (in %) 2

Adjusted EBITA 1

Adjusted EBITA margin (in %) 2

459.0

432.0

93.7

20.4

83.5

18.2

445.2

416.0

88.0

19.8

78.1

17.5

3.1%

3.8%

6.4%

6.9%

390.3

381.6

83.1

21.3

75.2

19.3

403.4

395.3

87.6

21.7

79.7

19.8

−3.3%

−3.5%

−5.2%

−5.7%

84.1

81.3

11.7

13.9

9.0

10.7

3.8%

3.9%

15.3%

17.3%

81.0

78.2

10.1

12.5

7.7

9.5

1 The adjustments are described in the Notes.  Notes, p. 138.
2 In relation to segment sales.

NORMA Group SE Annual Report 2016

Economic Report

ratio and cash generation that is in line with the Group average
in the medium-term.  Goals Regarding Finance and Liquidity
Management, p. 56.

Investments amounted to EUR 16.9 million and were below the
previous year’s level (2015: EUR 17.8 million). The investment
focus was on the US plants, in particular NDS and NORMA
Michigan.  Production and Logistics, p. 70.

EMEA
External sales in the EME A region amounted to EUR 432.0 mil-
lion in 2016, and thus increased by 3.8% over the previous
year (2015: EUR 416.0 million). The region experienced solid
organic growth of 4.3%. The main reason for this was the posi-
tive development of the EJT business as a result of the positive
development of the European automotive industry. In addition,
the Group generated sales revenues of EUR 1.3 million from the
acquisition of the Autoline business.

The EME A region’s share of total sales increased slightly from
47% to 48% compared to the previous year due to the relatively
weak US business and the acquisition effects in fiscal year 2016.

Asia-Pacific
External sales in the Asia-Pacific region amounted to EU R
81.3 million in 2016 and were thus 3.9% higher compared to the
previous year (2015: EUR 78.2 million). The region once again
experienced a very dynamic development with solid organic
growth of 5.8%.

Adjusted EBITDA in the Asia-Pacific region rose by 15.3% to
EUR 11.7 million (2015: EUR 10.1 million). The adjusted EBITDA
margin increased to 13.9% (2015: 12.5%). At the same time,
adjusted EBITA rose to EUR 9.0 million (2015: EUR 7.7 million),
resulting in an adjusted EBITA margin of 10.7% (2015: 9.5%).

Adjusted EBITDA in the EME A region improved by 6.4% to EUR
93.7 million (2015: EUR 88.0 million). The adjusted EBITDA mar-
gin of 20.4% was higher than in the previous year (2015: 19.8%).
In addition, adjusted EBITA rose by 6.9% from EUR 78.1 million
to EUR 83.5 million. The adjusted EBITA margin correspondingly
amounted to 18.2% (2015: 17.5%).

Assets increased by 41.3% from EU R 84.4 million to EU R
119.3 million in the reporting period. This is mainly due to the
continuing growth of the operating business in the region as
well as the acquisition of the Chinese business activities of
Autoline.

Assets rose by 13.9% to EUR 556.9 million compared to the
previous year (EUR 489.2 million) as a result of the acquisition
of the Autoline business.

Investments amounted to EUR 20.0 million, and were thus
38.6% higher than last year (EUR 14.4 million). The funds were
invested primarily in Germany, Poland and Serbia.  Production
and Logistics, p. 70.

Americas
In the Americas segment, external sales fell by 3.5% to EUR
381.6 million in 2016 (2015: EUR: 395.3 million). This was due
to the slump in US business in the areas of commercial vehicles
and agricultural machinery, which could not be compensated
for by the good performance of the water business and slightly
positive currency effects. This led to a negative organic sales
development of 3.8%. At 0.1%, acquisition effects related to
Autoline’s Mexican business had a slightly positive effect on
sales growth.

Adjusted EBITDA for the Americas region was EUR 83.1 million
in 2016, and thus 5.2% lower than the previous year’s level
(2015: EUR 87.6 million). The adjusted EBITDA margin amounted
to 21.3% (2015: 21.7%) despite weak sales growth in the report-
ing year. Adjusted EBITA decreased by 5.7% to EUR 75.2 million
(2015: EUR 79.7 million). This results in an adjusted EBITA mar-
gin of 19.3% (2015: 19.8%).

Investments, which amounted to EUR 5.5 million in 2016 (2015:
EUR 5.6 million), were mainly used to expand the two sites in
China.  Production and Logistics, p. 70.

SUSTAIN ABLE VALUE CRE ATION
NORMA Group considers reconciling the effects of its business
activities with the needs of society as part of its corporate re-
sponsibility. The management therefore takes the principles of
responsible management and sustainable conduct into consid-
eration in making company decisions.

Corporate Responsibility (CR), NORMA Group’s responsibility to
society and the environment, is therefore an integral component
of the corporate strategy. The CR steering committee under the
leadership of CEO Werner Deggim is responsible for setting
and formulating long-term goals for CR and coordinates the
respective cross-divisional activities and the dialogue with the
stakeholder representatives.

Five key areas of Corporate Responsibility
NORMA Group pursues a comprehensive CR strategy and fo-
cuses its CR goals and measures on the following five areas
of activity:

• Responsible Management
• Business Solutions
• Employees
• Environment
• Community

Assets increased by 5.8% to EUR 673.2 million (2015: EUR
636.3 million) mainly as a result of currency effects and the
acquisition of Autoline.

NORMA Group published its second CR report in July 2016.
This describes the long-term objectives and strategic measures

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS70

for all fields of action. These are based on the CR Roadmap
2018, published at the beginning of 2016, which is intended to
serve as a cross-departmental framework for the coming years.
@ http://normagroup.com/cr.

PRODUCTION A ND LOGISTICS
N O R M A Group manufactures and markets approximately
35,000 different products and has 27 production sites all over
the world. Furthermore, the Company has a network consist-
ing of numerous distribution, sales and competence centers
that supply to its customers in the respective regions.  G 001,
Back cover.

In fiscal year 2016, NORMA Group acquired the Autoline busi-
ness for quick connectors from Parker Hannifin, including pro-
duction facilities in France, China and Mexico.

Production and capacity utilization
The capacity utilization of NORMA Group’s manufacturing and
storage facilities varies from site to site. In markets such as the
emerging countries of Asia and South America, where NORMA
Group’s business is still being developed, the area-related utili-
zation of production plants is currently relatively low. This can be
attributed to the fact that investment decisions are planned in ad-
vance to ensure that sufficient production space is available to be
able to expand production capacity in a flexible manner. In indus-
trial nations and the markets in which NORMA Group already has
an established market position and the plants are largely working
to capacity, an attempt is made to avoid investing in additional
manufacturing space whenever possible. Instead, the goal is to
optimize the current manufacturing processes by improving effi-
ciency in order to be able to use the existing space to create addi-
tional capacity. This was also the focus in the reporting year 2016.

I N V E S T M E N T H I G H L I G H T S I N 2 0 16

T 0 19

Region

Country

City

Investments

EME A

Germany

Maintal

• Investment in new assembly line for quick connectors to support large customer order starting in 2017
• Overhauling of cold forming presses to improve productivity and reduce scrap

Gerbershausen

transport costs

• Investment in three new assembly machines to enable insourcing activity and reduce external and

France

Briey

• Installation of multi-layer extrusion processes to support future technology requirements
• Investment in new assembly line for air suspension system project
• Investment in corrugated extrusion capacity expansion

• Installation of injection molding machines to enable localized production and

improve productivity and transport costs

Serbia

Subotica

• Establishment of corrugated extrusion capacity to support new customer projects

• Establishment of test laboratory for fluid systems including pressure, vibration and

temperature test equipment

• Installation of injection molding machines to enable localized production, improving productivity

Poland

Pilica

and lowering transport costs

Sweden

Czech
Republic

Anderstorp

Hustopeče

• Investment in tube cutting equipment to drive productivity and reduce costs
• Investment in new press technology to support the ramp up of a new range of clamps

• Investment in 30 ton press to support new customer projects
• Robot implementation on two cells to improve productivity

Americas

USA

Auburn Hills,
Michigan

• Final installation of Super Seal equipment
• Tooling upgrades to expand capacity and to improve quality
• Investment in corrosion chamber for test laboratory

St. Clair,
Michigan

Saltsburg,
Pennsylvania

Lake Orion,
Michigan

• New assembly machines to support growth
• Investment in new molding tools to support new customer projects
• Upgrade of assembly machine to improve productivity and quality

• Investment in power seal production line
• Investment in three-piece-clamp assembly equipment
• Investment in T-bolt production equipment to improve productivity and quality

• Investment in packaging equipment for new customer acquisitions

Lindsay,
California

• Investment in six new fully electric molding machines to support growth, productivity and cost reductions
• Injection molding tool upgrades and refurbishment

Mexico

Monterrey

• Investment in additional molding machine to support new projects
• ‘Aging’ test cell, to improve test capabilities
• Investment in additional SCR assembly lines for new customer projects

Juárez

• Investment in automation of profile clamp production
• Transfer of quick latch production into Juárez

Asia-Pacific

China

Qingdao

• Investment in extrusion line to produce heating wires for SCR-systems in order to support

EURO 6 implementation in China

• Investment in additional conveyor oven to support new customer projects
• Expansion of testing capabilities by installing additional burst test equipment

Changzhou

• Investment in automatization of production of worm drive hose clips

NORMA Group SE Annual Report 2016Economic Report

The capacity utilization of manufacturing plants can be ramped
up flexibly to suit customer demand and the order situation.
Within each product category, a wide variety of different prod-
ucts with different specifications can be manufactured at the
existing plants by performing only minor conversion measures.
Thus, production can be optimally adapted to suit customer
demand.

Investment in capacity expansion
NORMA Group has again invested in expanding its capacity
during the reporting year. The main investments are shown in
the  Table 019, p. 70.

Continuous optimization of the entire value chain
At NORMA Group, all internal processing steps in the value
chain are constantly analyzed for optimization potential. The
Global Excellence Management System represents an essen-
tial tool here that helps to analyze existing processes, identify
potential for improvements, introduce the appropriate measures
for implementation and realize cost saving projects. As a result,
many processes have already been automated and standard-
ized in recent years, so that significant economies of scale have
been achieved.

NORMA Group introduced the NORMA Group Production Sys-
tem (NPS) in 2014, which has been rolled out throughout the
Group. The objective of the NPS is to increase productivity
and enable further cost savings. NORMA Group also uses lean
methods of process optimization. These include, for example,
the 5S methodology for optimizing workplaces, the introduc-
tion of standardized work, the visualization of various KPIs and
the daily Gemba Walk. Furthermore, methods for optimizing
the material flow (K ANBAN) and set-up time (SMED) are used.
In each NORMA Group production facility – except for the lo-
cations of the newly acquired companies Autoline and Lifial
– there are also one or more Operational Excellence Leaders
who are familiar with lean management and are driving the local
implementation of the NPS forward and transferring it to the
distribution centers. This is intended to promote the continuous
improvement culture at NORMA Group.

Software-based support for important business transactions is
provided by a uniform ERP system. The use of a standardized
system enables NORMA Group to harmonize and integrate all
processes, which is of particular importance in the context of
rapid Group growth and the many acquisitions in recent years.

Customer focus and secure supply chain
In order to optimize its logistics costs, NORMA Group always
strives to keep the geographical distances in the value chain
as short as possible and avoid non value-adding intermediate
steps via other NORMA Group sites. The goal is therefore to
always manufacture in the regions that its customers are based
in. This not only optimizes working capital and lowers logistics
costs, but also minimizes delivery risks and reduces negative
impacts on the environment.

Despite these efforts, cross-border deliveries are still indispens-
able for NORMA Group in many places, therefore optimized and
secure customs processes are extremely important in order to
flexibly react to customer requirements. For this reason, NORMA
Group participates in various customs and trade partnership
programs, e. g. in the US, China and the EU. By participating in
an export control programme that is part of the global compli-
ance programme, NORMA Group ensures that its supply chain
meets all of the legal requirements. By reviewing all of its busi-
ness partners at least once a year, NORMA Group is able to
rule out deliveries to legally sanctioned third parties. In addition,
compliance with the relevant legal regulations on export con-
trol is ensured through internal organizational procedures and
regular checks.

QUALIT Y M A N AGEMENT
The products that NORMA Group supplies are often critical to
the ability of its customers’ end products to function properly.
It is therefore extremely important for NORMA Group to ensure
that it delivers outstanding quality. In order to be able to offer
the same high quality all over the world, the quality standards
ISO 9001, TS 16949 are observed throughout the entire Group,
with the exception of NDS and the recently acquired company
Autoline. Two sites that supply to the aviation industry have also
been certified in accordance with EN 9100, and various product
categories have been approved especially for the shipping and
construction industries.

Because customer needs vary in the many different regions
and markets, regional standards and customer requirements
are also taken into consideration in production. This know-how
is shared inside the Group through close collaboration between
the various sites and gradual implementation of quality manage-
ment (CAQ) software.

NORMA Group uses the key metrics number of returned parts
per million (PPM) and number of quality-related complaints to
measure customer satisfaction. The number of returned parts
per million (PPM) was 32 in the reporting year and thus higher
compared to the previous year (2015: 21) due to two one-off
effects. The average number of quality-related customer com-
plaints per month amounted to 8, the same figure as last year.

PURCH ASING A ND SUPPLIER M A N AGEMENT
Material costs represent the highest cost position for NORMA
Group next to personnel costs. Because they significantly af-
fect the Group’s profits, purchasing and supplier management
both play a decisive role in the success of the Group. The most
important goal for the purchasing department is to reduce price
risks and leverage economies of scale within the Group through
proactive management of the direct and indirect costs of mate-
rials and services purchased.

Purchasing and supplier management at NORMA Group is or-
ganized primarily on the basis of the following three higher level
commodity groups:

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS72

• Steel and metal components (various grades / materials)
• Granules, plastic and rubber products
• Capital goods, non-production materials and services.

The commodity organization is integrated into the NORM A
Group plants worldwide in the form of a matrix structure. Ad-
ditional commodity responsibilities emerged in recent years in
purchasing and supplier management, particularly in the areas
of water infrastructure and pharmaceutical biotechnology, due
to the Company’s continued growth, acquisitions and the relat-
ed expansion into new markets.

M AT E R I A L P U R C H A S I N G T U R N O V E R I N 2 0 16
A C C O R D I N G T O M AT E R I A L G R O U P S

G 0 18

in %

Indirect 28
material

Others 4

2 Electronic components

13 Granules

6 Rubber moulded

parts

9 Plastic parts

Alloy 6

surcharges

Steel, Wire 15

18 Metal components

Global Group structure and regional expertise
NORMA Group has further expanded its high-performance
Group purchasing structure in recent years. Besides purchasing
of production materials, procurement of non-production materi-
als and services, including IT, has been expanded even further.

Purchasing at NORMA Group is controlled centrally for all do-
mestic and foreign Group companies, while regional or lo-
cal teams contribute their specific knowledge of local market
conditions and typical regional cost drivers. Due to the high
degree of professionalism and the combination of global, re-
gional and local purchasing management, resources and ser-
vices can be purchased much more competitively; therefore
the costs can be reduced. Furthermore, the recent introduc-
tion of the new e-procurement solutions have made report-
ing easier and now even allow for more efficient purchasing
management. This is also reflected in an improved adjusted
material usage ratio of 39.4% in fiscal year 2016 (2015: 40.8%).
 Economic Report, p. 64.

Development of material prices and prices of
non-production materials
In fiscal year 2016, the prices of the raw materials nickel, chrome
and ferrochrome, which are mainly responsible for setting the
prices of alloy surcharges, continued to rise starting in May. This
resulted in higher alloy surcharges and thus significant price
increases at the end of the year.

With respect to ferritic materials, NORMA Group’s total expen-
ditures for the alloy surcharges were on average roughly on par
with the previous year, as the attractive prices in the first half of
the year were offset by price increases at the end of the year.
In the case of austenitic materials, the total expenditures for
alloy surcharges were slightly below the previous year’s level
despite the significant increases in the third and fourth quarters.
The base prices for the stainless steels purchased in Europe
remained relatively constant in 2016. In North America, the high-
er price conditions in fiscal year 2015 could be neutralized by
negotiating new agreements with suppliers. Price reductions
were also negotiated on non-stainless steel commodities and
thus contributed to the improvement of the cost of material
ratio.  G 019.

D E V E L O P M E N T O F N I C K E L P R I C E S A N D T H E A L L OY S U R C H A R G E 1. 4 3 0 1 I N 2 0 16

Alloy surcharge of flat products 1.4301 X39Cr13 Europe (Outokumpu) in EUR

G 0 19

Nickel LME in EUR

600

550

500

450

400

350

300

12,000

11,000

10,000

9,000

8,000

7,000

6,000

Jan 2016

Apr 2016

Jul 2016

Oct 2016

Jan 2017

NORMA Group SE Annual Report 2016
Economic Report

With respect to plastics, the development of oil prices effect
the cost of procurement of polypropylenes, in particular. These
are mainly used to produce plastic components in the field of
water infrastructure.

of NORMA Group, help to ensure a fair procurement process
and encourage sustainable relationships with suppliers. Fur-
thermore, all major suppliers were also invited to register on
the e-procurement platform, confirming their agreement with
NORMA Group’s compliance rules.

In the case of technical plastics such as butadiene, for example,
the prices are the main factors for their use by NORMA Group.
These prices fell sharply again starting in the second half of
2016 despite significant increases in the first half of the year
and thus enabled a competitive price level to be maintained
throughout the year. Prices experienced significant increases
again at the end of 2016, however. This could have a negative
impact on purchasing conditions in the future.

Furthermore, improved commodity management led to more
competitive conditions with respect to certain polyamide ma-
terial groups.

By establishing regional and local structures, it was also possi-
ble to improve the supply and service conditions in the area of
non-production materials, which also had a positive impact on
the lower material usage ratio in the reporting year.

Supplier management
Constantly optimizing the selection of suppliers is yet another
key task of NORMA Group’s purchasing department. This is
done not only solely on the basis of traditional criteria such
as quality, price, delivery times and loyalty, but also takes
important aspects of risk management and sustainable devel-
opment into consideration. A centrally defined, detailed supplier
evaluation system is used by all of the production plants each
year. This evaluation system was revised in the previous fiscal
year and expanded to include an assessment of suppliers based
on sustainability criteria. The new assessment criteria are based
on the results of the annual stakeholder survey on sustainability
and will be applied as of reporting year 2017. This means that
new business will be awarded based on an even more sound
decision-making foundation in the future that also takes sus-
tainable aspects into consideration.

The topic of sustainability is of great importance to NORMA
Group.  Sustainable Value Creation, p. 69. The aim is to en-
sure responsible conduct across the entire value chain within
the framework of the contractual agreements with suppliers.
The main focus will be on topics such as respect for human
and workers’ rights, assurance of workplace safety and the
consideration of environmental and ethical aspects, which
have been manifested in a Supplier Code of Conduct. @ http://
normagroup.com/cr.

Based on the supplier evaluation system, two suppliers were
recognized with the Supplier Recognition Award for their out-
standing achievements at the regional level in the reporting year.
This award for outstanding performance and results was pre-
sented to Norderband-Stahl in the EME A region and Aperam
in the Americas region. Both suppliers were honored for their
long-term reliable delivery to NORMA Group.

Supplier structure
Total production materials turnover amounted to approximately
EUR 233.0 million in 2016. The top 10 suppliers accounted for
roughly 26%, while the Company’s top 50 suppliers accounted
for nearly 59% of the total volume. Thus there are no excessive
dependencies on individual suppliers.

EMPLOYEES

Personnel development
NORMA Group employed a staff (core workforce including tem-
porary staff) of 6,664 in total at the end of December 2016 and
thus 6% more people than in the previous year (2015: 6,306).
There were 1,214 temporary workers on this date (2015: 1,185).
This equates to around 18% of the total workforce.

NORMA Group recorded the highest increase in employees in
the EME A region in 2016. The permanent workforce here grew
by 10% to 3,202 employees. This was due to the purchase of
the Autoline business and the expansion of the workforce at
the site in Serbia.

In the Asia-Pacific region, the number of employees rose by 9%
to 830 permanent employees. This can be attributed for the
most part to the increase in the number of employees at the
sites in Ipoh, Malaysia, and Changzhou, China, as a result of
growth. In addition, the acquisition of the Autoline plant in Wuxi,
China, contributed to the increase in the number of employees
in this region.

In the Americas region, the number of employees fell slightly by
3% to 1,418 permanent employees.

C O R E W O R K F O R C E B Y S E G M E N T

T 0 2 0

The Group-wide introduction and establishment of e-procure-
ment solutions for more efficient procurement processes was
also given further attention in 2016. Standardized purchase pro-
cesses and transparent and clearly structured supplier interac-
tion processes, which are subject to the compliance principles

EME A

Americas

Asia-Pacific

Total

2016

in %

2015

in %

3,202

1,418

830

5,450

2,899

1,462

760

5,121

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
74

P E R S O N N E L D E V E L O P M E N T AT N O R M A G R O U P

5,450

5,121

4,828

4,134

3,759

3,415

2016

2015

2014

2013

2012

2011

1,214

1,185

1,147

813

726

837

G 0 2 0

6,664

6,306

5,975

4,947

4,485

4,252

Core workforce

Temporary staff

A G E S T R U C T U R E O F N O R M A G R O U P E M P L OY E E S *

T 0 2 1

B R E A K D O W N O F E M P L OY E E S B Y G R O U P

G 0 2 1

< 30 years

30 to 50 years

> 50 years

average age

23.7%

54.6%

21.7%

39.3

* 5,244 employees in total (96.2% of permanent staff). For legal reasons, reporting on

employees’ ages is not possible for all Group companies.

L E N G T H O F S E R V I C E O F N O R M A G R O U P E M P L OY E E S * T 0 2 2

up to 5 years

> 5 years

> 10 years

average

in %

Salaried employees
28

54%

20%

26%

7.4 years

* The Autoline business that was acquired in early December 2016 is not yet included

in this calculation.

20
Indirect employees

52
Direct
employees

Stable share of employee groups
The total number of employees (core workforce and permanent
staff) in the reporting year consisted of 3,453 direct employ-
ees (2015: 3,307), 1,352 indirect employees (2015: 1,374) and
1,859 salaried employees (2015: 1,625). The proportion of the
various groups of employees in relation to the total number of
employees remained virtually unchanged compared to the previ-
ous year. While direct employees are individuals who are involved
in the manufacturing process, indirect employees are employ-
ees who work in production-related areas such as the quali-
ty department, for example. The group of salaried employees
refers mainly to employees who hold administrative positions.

Qualified permanent workforce
The employees of NORMA Group are well trained and obtain
their qualifications by earning school and university degrees and
by participating in professional and supplementary training. In
order to maintain the high degree of innovative capacity and
ensure the successful development of the Group in the future,
NORMA Group invests in the training and further education of
its employees. The goal is to recruit as many specialized em-
ployees as possible from one’s own junior staff, thereby becom-
ing more independent of the external labor market. Therefore,
NORMA Group also cooperates closely with universities.

Uniform global talent promotion
The ‘Learning & Development’ competence center was set up in
2016 with the aim of identifying, retaining and developing talents
within the Group. The competence center acts as an internal
consultant to the local HR departments, executives and employ-
ees, and is part of the HR Invent initiative, a project on optimizing

NORMA Group SE Annual Report 2016Economic Report

human resources work. The focus of the initiative is on the con-
ception and supply of development processes and programs
that can be used worldwide, which are aligned with NORMA
Group’s Company values and growth targets. In order to pro-
mote learning at the workplace and the individual development
of its employees, direct supervisors as well as internal mentors
and coaches are made available. As part of the project, vari-
ous local and regional human resources development methods
have been integrated into a global portfolio. This ensures uni-
form global talent promotion for all NORMA Group employees.

The process of agreeing on goals and evaluating performance
that was redesigned worldwide and implemented as part of this
effort in 2016 is also an important part of the Learning & De-
velopment program. By introducing a HRIS (Human Resources
Information System) software, the process has been simplified,
made more transparent and more professional. For example,
potential successors for key positions have been made glob-
ally more visible and individual development requirements can
now be met more quickly in a tailor-made manner. This helps
to develop as many professional and managerial employees
from within the Company as possible, thus ensuring the Group’s
ability to innovate in the future.

Numerous training opportunities for career entrants
Besides accompanying courses of studies in the areas of busi-
ness engineering, mechanical engineering, mechatronics and
business administration, NORMA Group also offers internships
for students in all departments and regions. Furthermore, young
people are trained in various technical and commercial areas.
NORMA Germany’s training was again recognized for its ex-
emplary commitment by the IHK Hessen in the reporting year.

Exchanges of personnel:
More communication, better understanding
NORMA Group will continue to grow internationally in the future,
both organically and through acquisitions. In order to be able
to integrate new parts of the Group, the individual sites need
to work together efficiently. Thus communication that functions
well is essential at all levels. To encourage this, NORMA Group
offers several exchange programs for its employees, from one
to three-month so-called ‘Bubble-Assignments’ to ‘Long-Term
Assignments.’ Expert personnel and managers who participate
in this initiative bring special skills and experience to the new
sites and, at the same time, benefit from the know-how that
their new colleagues have. Through these projects, NORMA
Group promotes the internal transfer of knowledge, intercultur-
al awareness, the establishment of networks and the individual
development of the participants.

Rewarding performance
NORMA Group strives to attract and retain qualified and com-
mitted employees. By holding regular benchmarks, NORMA
Group ensures that its employees are paid market-oriented
salaries and wages based on their responsibilities. The remu-
neration system also contains variable remuneration elements
to encourage employees to take an interest in the further de-

velopment of the Company and share in its economic success.
For tariff and non-tariff employees in Germany, this is based on
important financial performance indicators, for example. More-
over, the personal achievements of employees also play a role
in remuneration.

Supporting diversity and internationality
NORMA Group’s employees come from several different nations
and have various ethnic and cultural backgrounds. In order to
systematically encourage diversity and the exchange of ideas at
work, NORMA Group’s aim is to create a working environment
free from prejudice and discrimination. The Group therefore has
three regional diversity officers who help maintain a culture of
mutual appreciation, respect and equal opportunities. Further-
more, the global Diversity Day, which takes place once a year
and invites everyone to experience diversity, is a fixed date in
NORMA Group’s calendar.

Encouragement of female potential
One objective of NORMA Group’s diversity strategy is to in-
crease the share of female employees in management posi-
tions in the medium-term. On December 31, 2016, the Group
employed 1,916 female employees, which equates to roughly
35% of its core workforce.

Social inclusion
At NORMA Group, people who have handicaps are also given the
chance to take part in normal work life. The Group employed 59
men and women with disabilities in Germany in fiscal year 2016.

Employer branding – living company values
The ‘Living our Values’ initiative was launched in fiscal year
2016 to help the Company to grow together even more as a
unit. The objective is to bring NORMA Group’s values closer to
each employee across cultures. NORMA Group’s core values
are made directly accessible to employees in inter-department
group meetings by taking an experience-oriented approach.

Feedback culture – employees express their opinions
In the interest of a continuous analysis and improvement pro-
cess, NORMA Group has been conducting regular employee
surveys since 2008. The focus of this central feedback tool
is on the Company’s strengths and weaknesses from an
employee perspective, employee satisfaction, as well as the
quality of leadership and cooperation. The next employee sur-
vey will be conducted in 2017 and then every three years in the
future.

Care guides to assist employees
In 2016, NORMA Group joined the Hessian initiative ‘Balancing
Career and Care’ and signed the corresponding charter. As part
of this program, several NORMA Group employees have been
trained to be company care guides and are available to their
fellow employees who care for family members. Care guides
give an overview of the most important steps in providing care
and share the addresses of the relevant contact points both
within and outside the Company. The consultations are confi-

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS76

dential, fast and unbureaucratic. Through this measure, NORMA
Group supports its employees in difficult life situations and thus
responds to the demands that are increasingly being placed on
employees as a result of demographic change.

Healthy team – healthy company
A productive Company like NORMA Group depends on hav-
ing healthy and satisfied employees. For this reason, NORMA
Group contributes to its employees’ health. At its headquarters
in Maintal, for example, measures such as skin screening, blood
fat measurements, inoculation advice, tests on lung function,
cardiovascular disease prevention, back training and flu vacci-
nations are offered.

Occupational health and safety is of the highest priority
In order to prevent any potential hazards to its employees at
work, NORMA Group invests heavily and systematically in the
area of occupational health and safety. Thus the Company com-
plies with the applicable laws and regulations that pertain to en-
vironmental health and occupational safety. In addition, NORMA
Group also sees to it that all workplaces ensure maximum safe-
ty and avoid accidents where possible through complementary
measures and programs.

NORMA Group has been certifying the safety management sys-
tems at its sites in accordance with OHSAS 18001 (Occupation-
al Health and Safety Assessment Series), and thus guarantees
a high standard of safety within the Group. Currently 23 sites
were already rated accordingly (2015: 22). Certification of the
remaining sites will take place in a timely manner.

NORMA Group also continued to implement the Value-Based
Safety Program in fiscal year 2016. In the context of this pro-
gram, the employees’ activities at work are analyzed and po-
tentially dangerous behaviors are determined as part of regular
security checks. The deficits found are corrected using stan-
dardized and team-oriented problem solving methods.

Accident rate at a sustainable low level
NORMA Group constantly monitors and analyzes its accident
statistics. The number of occupational accidents as well as the
total number of reportable accidents are collected on a Group-
wide basis each month and the trend is monitored using various
key performance indicators (KPIs). The accident rate, which re-
flects the number of accidents per 1,000 employees, represents
the most important indicator in this regard. The figure was 8
for the 2016 reporting year, which means that it rose slightly
compared to the previous year (2015: 5). NORMA Group’s goal
with respect to the current initiatives is to have an accident-free
working environment in the long term.

I N C I D E N T R AT E

Incidents per 1,000 employees

G 0 2 2

2016

2015

2013

2012

2011

2010

2009

EN VIRONMENTAL PROTECTION

A ND ECOLOGICAL M A N AGEMENT
As a manufacturing Company, NORMA Group is well aware of its
environmental, economic, and social responsibility. Environmen-
tally compatible and sustainable economic activity is therefore
a central element of its corporate strategy. For this reason, the
Company considers it important to systematically include envi-
ronmental aspects in its business decisions. NORMA Group’s
goal is to increase the efficiency of its production processes,
lower its energy consumption over the long term, and reduce
waste. The long-term cost savings associated with this contrib-
ute to the economic efficiency of the Group. The core elements
of NORMA Group’s environmental strategy and measures per-
taining to their implementation were published in January in the
2018 CR Roadmap. @ http://normagroup.com/cr.

Group-wide environmental management system
In 2016, NORMA Group continued with the implementation of
the Group-wide Environmental Management System that the
Company had first introduced in 2013. At the end of the report-
ing period, 22 production sites had been certified according to
ISO 14001. The certifications of NDS and the newly acquired
companies Autoline and Lifial are planned for the coming years.

NORMA Group has been using a Group-wide reporting tool to
record and track resource consumption, emissions and waste
since 2013. NORMA Group’s objectives are to reduce CO 2 emis-
sions by 9% and water consumption by 6% (in relation to the
production activity in fiscal year 2015).

NORMA Group SE Annual Report 2016Economic Report

M ARKE TING
In order to further increase awareness of NORMA Group’s prod-
ucts all over the world, boost product sales, strengthen its cus-
tomer relationships and thus contribute to the Group’s growth,
NORMA Group’s long-term marketing strategy is based on the
following objectives:

• Building a strong NORMA Group image
• Decentralization of marketing activities
• Optimization of the brand portfolio
• Optimization of marketing tools

In order to be able to focus on its end markets and customers
as much as possible, NORMA Group aligns all its marketing
activities to address the local market conditions and consum-
er habits in the respective regions and markets. The regional
marketing units are then responsible for executing the various
activities and synchronizing them with the operative objectives
of NORMA Group.

Marketing focus in 2016
Key marketing activities in 2016 included the following:

• Development of a strong digital presence
• Subtilize the brand strategy in all three regions
• Continue to build a strong corporate identity that reflects

the value proposition

• Put in place a future-ready Lean Marketing
• Expedite deep market insights to nurture NORMA Group’s

its employees, including trainings, employer branding and inter-
nal communication activities.

Attention was also given to creating a Lean Marketing by
streamlining all marketing and sales processes. Therefore,
N O R M A continued to automatize and interlink the various
marketing tools and bring them up to the highest standards
of digitalization. The Print-on-Demand system which is tech-
nically connected with the existing Digital Asset Manage-
ment System and easily accessible via the Intranet is being
rolled out Company wide. With this, lead times and costs can
be significantly reduced, the quality of marketing materials
can be improved and an optimal base for further increasing
NORMA Group’s online and offline presence can be provided.

To ensure a deep understanding of customer expectations and
needs, marketing strongly increased its efforts in market research.
Among other activities, a Customer Radar was installed and is
now being rolled out worldwide. This online-based research
tool according to neuro-scientific standards allows the Compa-
ny an almost just-in-time insight into customers’ behavior and
expectations. The Customer Radar complements the bi-annual
Customer Satisfaction Survey that was also conducted in 2016.

Marketing expenditures
Marketing expenditures amounted to EUR 4.7 million in total in
2016 and thus were at the same level as in the previous year
(2015: EUR 4.7 million).

agility in product, sales and marketing activities

M A R K E T I N G E X P E N D I T U R E S 2 0 16 B Y S E G M E N T

G 0 2 3

in %

excluding personnel expenses

In order to increase NORMA Group’s Internet presence, in 2016
a strong digital campaign was established. This was supported
by regional teams of strategic brand and product management
and focused on the roll out of several micro websites with a
unique look and feel and specific information for each brand.
Regional micro sites have also been successfully launched for
NORMA Group’s EJT business unit in order to emphasize the
Company’s innovative product solutions and their added values
for customers. Furthermore, the Company intensified its activ-
ities in social media.

Other key marketing activities in 2016 included the fine-tuning
of NORMA Group’s global brand strategy and the strengthening
of the Company’s corporate identity based on its value proposi-
tion. These activities were underlined by advertising campaigns,
the participation in several fairs and innovation days worldwide,
as well as specific online marketing campaigns. It was compli-
mented by internal programs to strengthen knowledge about
NORMA Group’s corporate identity and value proposition among

Americas 48

48 EME A

Asia-Pacific 4

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS
78

Events after the End of the Fiscal Year

Forecast Report

NORMA Group acquired the Portuguese clamp manufacturer
Lifial in January 2017. Based in Águeda, Portugal, Lifial pro-
duces metal clamps for use in industry and agriculture. The
company employs around 100 people and distributes its trade-
mark products to customers in Europe and North Africa. With
the acquisition of Lifial, NORMA Group has strengthened its
product offering in the Distribution Services business as well as
its market position on the Iberian Peninsula and across Europe.
Lifial generated sales of around EUR 8 million in fiscal year 2015.
The company was included in the scope of consolidation with
effect from January 1, 2017.

GENER AL ECONOMIC A ND

INDUSTRY- SPECIFIC CONDITIONS

Global economy nearing slight growth recovery
despite rising uncertainties
The International Monetary Fund (IMF) reaffirmed its latest fore-
cast with the new outlook for January 2017. It projects that the
global economy will gradually begin to pick up. For 2017, the
Fund expects growth of 3.4%, and even a gain of 3.6% for 2018.
It projects that industrial production will rise and, especially in
industrialized countries, a revival of investment activity will oc-
cur. The recovery of oil and commodity prices, for example, is
expected to have a positive effect, particularly on the situation
of key emerging markets. Another growth driver is predicted to
be the upswing in the US, despite the political risks posed by
the policies of the new US government. Uncertainties are also
resulting from the divergence of monetary policy in industrialized
countries and growing nationalism and protectionism.

China should continue its economic transformation into the
coming years. The IMF expects a decrease in growth rates to
6.5% (2017) and 6.0% (2018). The high debt of municipalities
and companies, among other things, are considered problems.
For the ASEAN-5 countries, growth of 4.9% is forecast for 2017
and a gain of 5.2% for 2018. These countries will thus continue
to grow strongly in the coming years. The principal drivers here
are high infrastructure investments and growing exports. The
Indian economy is on a strong expansion course. Although the
effects of the currency reform process are likely to be felt for
some time, the growth rate should pick up again following the
initial setback. Brazil is expected to overcome its recession in
2017 despite structural deficits, and should recover moderately.
Russia is expected to revive its economy. Although the sanc-
tions the country is faced with are burdensome, higher oil and
gas revenues will stimulate the national budget as well as the
economy. For all emerging and developing countries, the IMF
is forecasting an acceleration of the economic power to 4.5%
(2017) and 4.8% (2018).

Buoyant forces are also strengthening in industrialized coun-
tries. In addition to private consumption, more and more stimuli
are likely to emerge from a revival of investment in the coming
years, provided the risks remain limited. The IMF expects growth
of 1.9% for industrialized countries in 2017. For the following
year, the IMF is even forecasting an increase in economic output
by 2.0%. For the US, the IMF is now expecting a strong upswing,
which should also be fueled by the new government’s growth
measures. In addition, a recovery of the energy sector is expect-
ed, which would result in higher US industrial production. The
IMF expects GDP growth of 2.3% (2017) and 2.5% (2018) respec-
tively for the US. For the Japanese economy, on the other hand,
it projects only minimal growth potential with a tendency to even
decrease. For the UK, the IMF is forecasting declines due to
the Brexit decision and growth of 1.5% for 2017 (2018: 1.4%).

NORMA Group SE Annual Report 2016Forecast Report

The euro zone is in tension between an improved international
environment and extremely high risks. Besides the Brexit pro-
cess, elections in important EU countries and future relations
with the US could trigger new uncertainties. Moreover, the state
budgets of some countries are strained and the banking crisis
in Italy has not yet been overcome. This means that there is no
further economic recovery projected for the euro zone. The IMF
expects moderate growth of 1.6% for both 2017 and 2018. The
Kiel Institute for the World Economy (IfW) forecasts rates of 1.7%
for the same years. In France, growth is expected to remain
modest in 2017; the upswing is expected to slow in Italy and es-
pecially in Spain. The economy in the euro zone will continue to
be borne by domestic economies, although private consumption
will lose momentum despite rising job market growth and rising
inflation. Investment activity should therefore gradually be revived
as a result of the build-up of demand. In 2017, the IfW expects an
increase in gross capital investments of 3.1%. Due to the robust
condition that the German economy is in, it should also remain
on a growth course in 2017. After the expansion of the previous
year, the IfW expects a GDP increase of 1.7% (adjusted for work-
ing hours: 2.0%) for 2017 and growth of 2.0% for 2018. Private
and public consumption should remain strong, albeit at a slower
rate than last year. Exports should continue to pick up, but not
as dynamically as imports. Investments are increasingly contrib-
uting to growth in both the construction and equipment sectors.

F O R E C A S T S F O R G D P G R O W T H ( R E A L )

T 0 2 3

in %

World

USA

China

Euro zone

Germany 1

2016

+3.1

+1.6

+6.7

+1.7

+1.9 2

2017e

2018e

+3.4

+2.3

+6.5

+1.6

+1.7

+3.6

+2.5

+6.0

+1.6

+2.0

Sources: IMF, 1 Institute for the World Economy (IfW),
2 Federal Statistical Office (Destatis)

Prevailingly positive framework conditions
for NORMA Group’s key customer industries
With the expected moderate revival of the international econ-
omy in 2017 and 2018, the climate and prospects for NORMA
Group’s key customer industries are also improving.

Engineering industry
With the revival of the global economy and the investment cli-
mate, the prospects for mechanical engineering should also
brighten. Opportunities are also at hand worldwide due to con-
tinued automation and digitization. The VDMA industry associ-
ation is forecasting worldwide machine turnover of around 2%
(real) for 2017. For the two largest markets by volume, China and
the US, real growth of 3% is forecast. Only a small loss is ex-
pected for Russia and Brazil. The VDMA forecasts above-aver-
age growth rates for Asia, particularly in India, South Korea and
the ASEAN-5 countries. According to the VDMA, Japan (+1%) is
also expected to grow slightly. In the euro zone and Europe as
a whole, revenues in 2017 should only rise by 1% in real terms,

slower than in other major machine building markets. Even for
the German market, the increase in sales is only expected to be
1%, due especially to the restrained order situation at the end
of 2016. Although the weak euro is supporting exports outside
the monetary union, the VDMA sees obstacles to growth in the
global crises, changes in US politics and the political situation
in Europe.

E N G I N E E R I N G :
R E A L C H A N G E I N I N D U S T R Y S A L E S

T 0 24

in %

China

USA

Euro zone

World

Source: VDMA

2015

2016

2017e

−2

Automotive industry
The automotive industry is currently undergoing a major up-
heaval, but should continue to grow in the future. Besides the
development of fuel-efficient and low-emission combustion
engines, electromobility, autonomous driving and car sharing
are future trends in the automotive industry. LMC Automotive
expects the global market for Light Vehicles (LV, up to 6 tons)
to grow by 2.3% to 95.1 million units in 2017. Sales are thus
expected to rise by around 1%. IHS Automotive even anticipates
an increase in sales of 1.8%. For the narrowly defined passen-
ger car market, the German association VDA expects a global
sales gain of 2% to 83.6 million units. With regard to the three
largest markets, the VDA only projects growth for China (+5%).
It expects stagnating sales for the US and Western Europe. For
the UK, the VDA even expects a slump of 8% in passenger car
sales as a result of the Brexit vote. Risks for the industry are
seen in the future US trade policy. For the heavy commercial
vehicle market (> 6 tons), the VDA predicts that sales will decline
by 1% in Western Europe in 2017.

A U T O M O T I V E I N D U S T R Y: G L O B A L P R O D U C T I O N
A N D D E V E L O P M E N T O F S A L E S ( L I G H T V E H I C L E S )

T 0 2 5

in %

2015

2016

2017e

2018e

Production

Sales

1.7

2.1

4.8

4.1

2.3

1.3

2.5

2.8

Source: LMC Automotive

Construction industry
The Euroconstruct industry network and the Ifo Institute are
projecting to see a continuation of the upswing for the Euro-
pean construction industry in 2019. Growth in real construction
output is estimated to be 2.1% in the largest 19 individual mar-
kets together. The residential, commercial and civil engineering
sectors are expected to continue to grow. Construction of new
buildings and renovation activities are enjoying tailwind. For
2017, the forecast assumes strong growth in Eastern Europe

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

(+3.5%) as a result of new EU projects. Western European con-
struction output is expected to grow by 2.1% in 2017. A strong
gain (+8.5%) is expected for Ireland. In Portugal, Spain and Italy,
construction output is expected to revive, while a slight decline
is expected for the UK. In Germany, the construction boom
should continue dynamically. The IfW expects an increase in
real construction investment of 3.1% (2017) and 3.9% (2018).
The largest segment, housing construction, is expected to grow
by 4.4% (2017) and 5.1% (2018) and public construction should
also be stimulated, but with lower rates of growth than in recent
years. Commercial construction is expected to be positive, but
not until 2018. With regard to the nominal building volume in
2017, the DIW (German Institute for Economic Research) ex-
pects an increase of 4.9% to nearly EUR 210 billion in housing
construction, with growth of 9.0% in new building and 3.0% in
construction projects involving existing buildings. In other build-
ing construction (excluding housing), the construction volume in
2017 is expected to rise by 2.2% and civil engineering by 3.9%.

C O N S T R U C T I O N I N D U S T R Y: D E V E L O P M E N T O F
E U R O P E A N C O N S T R U C T I O N O U T P U T

T 0 2 6

in %

2015

2016

2017e

2018e

Western Europe

Eastern Europe

Europe

1.6

5.5

1.8

2.4

−3.3

2.0

2.1

3.5

2.1

1.9

6.9

2.2

Source: Euroconstruct / Ifo Institute (19 core markets in total)

This macroeconomic perspective is the basis for N O R M A
Group’s forecast and outlook for 2017.

FUTUR E DE VELOPMENT OF NOR M A GROUP
NORMA Group will continue with its successful international
growth strategy, continuing to pursue its long-term defined
goals. The diversification of the business with regard to end
markets, regions and customers will continue to be a priority in
the future. Business activities are also being further expanded
through additional acquisitions. The focus of M& A activities will
continue to be on companies that either contribute to market
consolidation or enable entry into new high margin markets.

In addition, internationalization and in particular the expansion
of activities in the Asia-Pacific region will continue to be the fo-
cus. This is to exploit the opportunities in this important growth
market and to transfer the added value to the respective region
or country.

In the area of research and development, the long-term pres-
ervation of the Company’s ability to innovate continues to play
an important role. The focus of development activities remains
therefore on the strengthening of is innovative power and the
development of innovative products that help to solve its cus-
tomers’ industrial challenges.

Sales growth in 2017
For the year 2017, the NORMA Group Management Board from
today’s perspective (March 2017) expects a moderate revival of
the international economy and growth of the global economy
at slightly above last year’s level, driven mainly by industrialized
and Asian emerging countries. In the high uncertainties resulting
in particular from the divergence of the monetary policy of in-
dustrialized countries, growing nationalism and protectionism as
well as the future policy of new governments in various industrial
countries, the NORMA Group Management Board sees potential
risks that will continue to make the global economy vulnerable.

The Management Board sees the Group in a good position
thanks to its global business activities and broad diversification
in order to continue to benefit from the relevant growth trends
in the various end markets and regions.

NORMA Group expects moderate growth in the economy in the
EMEA region that will be slightly below the previous year’s level,
given the Brexit decision, the ongoing banking crisis in Italy
and the forthcoming elections in major European countries. The
European domestic economy is still seen as a cyclical driver,
with private consumption likely to lose momentum despite the
stabilization on the labor market as a result of rising inflation.

The end markets in which NORMA Group is active are also
affected by these developments. The automotive sector is cur-
rently undergoing a major upheaval due to advances in the de-
velopment of new drive technologies as well as in the area of
autonomous driving but should continue to grow in the future.

NORMA Group therefore expects a moderate increase in its
production in the EME A region for the current year. In addition,
it expects positive effects from new product launches, also as
a result of the country-specific fleet regulations for passenger
cars.  Legal and Regulatory Factors, p. 52. Overall, NORMA
Group expects moderate organic growth in the EME A region in
fiscal year 2017 compared to the previous year.

NORMA Group expects a revival of the economy in the Americas
region, especially in the US, and higher growth compared to
the previous year. With regard to the end market for commer-
cial vehicles and agricultural machinery, which is important to
the Group, NORMA Group expects a further drop in sales that
should be less severe than in the previous year. In the area of
water management, on the other hand, NORMA Group expects
solid growth. Overall, the Management Board therefore forecasts
moderate organic growth for the Americas in the current year.

The dynamism of NORMA Group’s business in the Asia-Pacific re-
gion will continue in 2017 despite the slightly slower growth pros-
pects for China. Due to the increasing business activities in this
region and driven by stricter emissions regulations for passenger
cars and trucks, NORMA Group expects organic growth in the high
single-digit range for the Asia-Pacific region in fiscal year 2017.

In addition, with the adoption of the CR Roadmap 2018, NORMA
Group has laid a further important foundation for the Company’s
future focus on sustainability.

Overall, NORMA Group expects moderate growth both for the
DS and for the EJT business in 2017.

NORMA Group SE Annual Report 2016
Forecast Report

Against the backdrop of the described assumptions and the
current economic and political uncertainties, NORMA Group
expects the Group’s organic sales growth to be at around
1% to 3% over 2016 for fiscal year 2017. In addition, sales of
the acquisitions of Autoline and Lifial will amount to a total of
around EUR 45 million. Currency effects may have a positive or
negative impact on growth, depending on the exchange rates
with the euro.

Adjustments to the result
NORMA Group expects adjustments in the allocation of the
purchase prices to depreciable tangible and intangible assets
from the acquisitions of the past years in the amount of EUR
25 million in fiscal year 2017. In addition, integration costs and
expenses incurred in connection with the valuation of the ac-
quired inventories as part of the purchase price allocation for
the acquisition of Autoline in the amount of approximately EUR
4 million are expected and will be adjusted.

Development of key cost items
NORMA Group assumes that the main relative cost items (ma-
terial and personnel expenses) will develop stably compared to
the previous year.

Tax rate of between 31% and 33%
A tax rate of between 31% and 33% is expected for fiscal year
2017.

The continuous increase in the degree of professionalization
in purchasing, the conclusion of long-term contracts and the
creation of economies of scale have led to a continuous im-
provement in the material cost ratio in recent years. NORMA
Group expects to be able to maintain the current good level
also in the current year 2017 and expects a material cost ratio
roughly at the level of previous years.

As a result of the Group’s continuous growth and the strength-
ening of activities in the Asia-Pacific region, NORMA Group ex-
pects a constant increase in personnel costs as a proportion
of sales, and therefore expects a stable personnel cost ratio at
the level of previous years.

Investment in research and development
To sustain its innovation and competitiveness in the long term,
NORMA Group aims to achieve an annual investment rate of
5% of EJT turnover. R&D activities will continue to focus on
strengthening the Company’s innovative strength and develop-
ing innovative products to solve the industrial challenges faced
by customers.

Adjusted EBITA margin
An important focus of NORMA Group is on maintaining its high
profitability. Therefore, all business activities are strategically
aligned. The acquisition of new companies also plays a key
role in maintaining margins. Due to numerous internal Group
measures and ongoing optimization processes in all areas,
NORMA Group is also in a position to maintain its high mar-
gin level in 2017 and therefore aims to achieve a sustained
adjusted EBITA margin at the previous year’s level of more
than 17.0%.

Financial result of up to EUR −13 million
In sum, NORMA Group expects a financial result of up to EUR
−13 million. This includes interest charges on the Group’s gross
debt with an average interest rate of approx. 2.0% to 2.5% as
well as other expenses for currency hedges and transaction
costs.

Rising adjusted earnings per share
Adjusted earnings per share will rise moderately in fiscal year
2017. The growth in sales and a sustained margin will contribute
to this as well as a slightly improved financial result.

Investment rate of around 5% sought
For fiscal year 2017, NORMA Group expects investments of
around 5% of Group sales. This covers both maintenance in-
vestments and investments in expanding the business. A par-
ticular focus will be on the expansion of activities for future
growth, projects for the integration of processes and functions
(insourcing) as well as the expansion of capacities for the local-
ization of production.

Net operating cash flow
NORMA Group expects the usual high net operating cash flow
as a result of increasing sales with a sustained margin as well as
strict working capital management and a constant investment
rate. As a result of additional factoring agreements which had a
positive impact on net operating cash flow in fiscal year 2016,
net operating cash flow is expected to be lower than the pre-
vious year’s level at EUR 130 million (2016: EUR 148.5 million).

Sustainable dividend policy
If the future economic situation permits, NORMA Group will pur-
sue a sustainable dividend policy, which is based on a dividend
ratio of approx. 30% to a maximum of 35% of the adjusted
Group annual earnings.

Market penetration and innovation
The degree of market penetration is reflected in medium-term
organic growth.  Sales Forecast 2017, p. 80. Ensuring the
ability to innovate is essential for the future competitiveness of
NORMA Group.

From reporting year 2017 onwards, NORMA Group will intro-
duce the number of invention applications as a new indicator for
measuring and managing the Company’s innovative strength.
An invention application is made within the framework of an
internal, formalized process, which is preceded by the external
process of a new patent application. Since inventions are specif-
ically promoted by internal incentive systems and their number
is not dependent on the registration strategy, this figure is even
better suited for the future measurement of innovative power
than the number of new patent applications. The Group-wide
annual number of invention applications will therefore replace
the number of new patent applications as a non-financial control
parameter as of the 2017 reporting year. The Group will seek to
file 20 new invention applications each year.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS82

Employee problem-solving behavior
NORMA Group measures and manages problem-solving behav-
ior, among other things, in the number of customer complaints,
through the following two performance indicators: defective
parts (parts per million, PPM) rejected by the customer and the
number of quality-related complaints. For the PPM indicator, a
value of less than 20 is aimed at each year depending on the
product group. Customer complaints are also to be further re-
duced in 2017 despite their already very low level.

Sustainable company development
(Corporate Responsibility)
NORMA Group published its CR Roadmap 2018 in January
2016. The objective is to continue to achieve the goals stated
therein in a consistent manner and lay even more important
milestones for managing the Company more sustainably in 2017.

GENER AL STATEMENT BY THE M A N AGEMENT BOAR D

ON THE PROBABLE DE VELOPMENT
At the time that the Management Report 2016 was prepared,
the Management Board expected NORMA Group to grow or-
ganically by around 1% to 3% in 2017. It also expects revenues
of around EUR 45 million from the acquisitions of Auto line and
Lifial.

In the EMEA region, management is assuming a slight decline in
growth compared to 2016, given the political and economic un-

certainties stated above. The Management Board sees growth
potential in the EME A region as a result of a slight increase in
production compared to the previous year, as well as positive
effects from new product launches.

In the Americas, the Management Board expects a year-on-
year increase in economic momentum, and consequently higher
revenue growth in 2017. This is based on the assumption that
the markets for commercial vehicles and agricultural machinery
in the US will decline again in the current year, but less strongly
than in the previous year. Water management is also expected
to continue its solid growth in 2017.

Due to its dynamic development, the Asia-Pacific region will
once again make an important contribution to Group growth
in fiscal year 2017.

Due to the continual optimization of processes in all areas of
the Group, the Management Board expects to see a stable
development of the key cost positions in relation to sales and
consequently a high adjusted EBITA margin of over 17.0% again
in fiscal year 2017.

Continuous market observation and a targeted search for new
acquisitions are still an important part of the Company strategy.
For this reason, the Management Board is not excluding further
acquisitions in fiscal year 2017.

F O R E C A S T F O R F I S C A L Y E A R 2 0 17

T 0 2 7

Consolidated sales

moderate organic growth of around 1% to 3%, additionally around EUR 45 million from acquisitions

EME A:

moderate organic growth

Americas: moderate organic growth

APAC:

organic growth in the high single-digit range

DS:

EJT:

moderate growth

Adjusted cost of materials ratio

roughly at the same level as in previous years

Adjusted personnel cost ratio

roughly at the same level as in previous years

Adjusted EBITA margin

sustainable at the same level as in previous years of more than 17.0%

Financial result

Adjusted tax rate

Adjusted earnings per share

up to EUR −13 million

around 31% to 33%

moderate increase

Investment rate (excluding acquisitions)

operative investments of around 5% of Group sales

Net operating cash flow

around EUR 130 million

Dividend

approx. 30% to 35% of adjusted annual Group earnings

NORMA Group SE Annual Report 2016Risk and Opportunity Report

Risk and Opportunity Report

NORMA Group is exposed to a wide variety of risks and oppor-
tunities, which can have a positive or negative short-term or
long-term impact on its financial position and its performance.
For this reason, opportunity and risk management represents
an integral component of corporate management for NORMA
Group SE, at both the Group management level and at the level
of the individual companies and individual functional areas. Due
to the fact that all corporate activities are associated with risks
and opportunities, NORMA Group considers identifying, assess-
ing, and managing opportunities and risks to be a fundamental
component of executing its strategy, securing the short and
long-term success of the Company and sustainably increasing
shareholder value. In order to achieve this over the long-term,
NORMA Group encourages its employees in all areas of the
Company to remain conscious of risks and opportunities.

RISK A ND OPPORTUNIT Y M A N AGEMENT SYSTEM
NORMA Group defines risks and opportunities as possible
future developments, changes, or events that could have a
positive or negative impact on the Group’s ability to meet its
targets and achieve its business objectives. Analogous to the
medium-term planning, the management’s focus with respect
to possible deviations in specific risks and opportunities cov-
ers a period of five years. Opportunities and risks that affect
the Company’s success beyond this period of time are re-
corded and managed at the Group management level and
taken into consideration in the Company’s strategy. Analogous
to the medium-term planning, the focus with respect to the
valuation of specific risks and opportunities covers a period
of five years, provided that no other period is specified in the
individual categories.

The Management Board of NORMA Group SE is responsible
for maintaining an effective risk and opportunity management
system. The Supervisory Board is responsible for monitoring the
effectiveness of the Group’s risk management system. Compli-
ance with the Group’s risk management policy in the individual
companies and functional areas is subject to the internal audit
department’s periodic reviews.

Risk management process
The risk management process at NORMA Group includes the
core elements of risk identification, risk assessment and risk
treatment and monitoring.

Risk identification is carried out bottom-up by the individual
companies as well as top-down by the individuals responsible
for functions at the regional and Group level. Various methods
that correspond to the structure of the organization are used
to identify risks. Such methods include interdisciplinary work-
shops, interviews and checklists, but also market and com-
petition analyses. In certain cases, analyses of the process
workflows as well as results from internal and external audit
reports are used. NORMA Group’s risk managers are respon-
sible for verifying on a regular basis whether all material risks
have been reported.

NORMA Group uses a systematic assessment procedure to
evaluate the risks that were identified, both in terms of their
financial impact and probability of occurrence. All risks that can
be adequately assessed and specified are reported regardless
of their expected financial impact. The measurement of the
gross expectation value of the risk, i. e. the expected value of

R I S K M A N A G E M E N T S Y S T E M O F N O R M A G R O U P

G 0 24

Monitoring

Identification

Risk management

Risk identification

Risk reporting

Risk culture
Risk strategy
Methods
Technologies

Risk assessment

Supervisory Board &
Management Board

Risk analysis

Risk aggregation

Countermeasures

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS84

the risk before considering countermeasures, must be based on
the assumption of the most unfavorable outcome of the financial
impact for the Company.

As part of the risk treatment strategy, the appropriate risk miti-
gating measures are developed, implemented and their imple-
mentation is monitored. These include, in particular, strategies
to terminate, treat or transfer risks, i. e. measures that minimize
the financial impact of the risks as well as their probability of
occurrence. Risks are managed in accordance with the princi-
ples of the risk management system as described in the Group
risk management policy.

The process of identifying, evaluating and controlling risks is
accompanied by continuous monitoring and communication of
the reported risks by the risk managers. Monitoring the devel-
opment of the risk situation and the reassessment of the various
individual risks during the year, is followed by a multi-stage risk
approval process that is conducted by the individual companies,
the functional managers of the segments and the Group, which
is supported by an integrated risk management software.

In addition, the Group risk management policy, which defines
the processes and responsibilities in the area of risk manage-
ment, was revised and rolled out in the organization in 2016. For
this purpose, training was provided to all organizational units
and those responsible for risk management in NORMA Group’s
three regions.

Opportunity management process
Operational opportunities are identified during monthly meetings
held at the local and regional level, but also by the Management
Board, and then documented and analyzed. Measures aimed at
capitalizing on strategic and operational opportunities through
local and regional projects are approved during these meetings.
Regular forecasts are developed as part of periodic reporting to
record how successfully potential opportunities are taken ad-
vantage of. Strategic opportunities are recorded and evaluated
as part of annual planning. NORMA Group uses a systematic
assessment procedure to evaluate the opportunities and risks
that were identified, both in terms of their financial impact, i. e.
gross and net impact on planned financial indicators, and their
probability of occurrence.

Risk reporting
Group-wide recording and assessment of risks as well as
their structured reporting by functional areas and individual
companies to the functional managers, the management of
the segments, the Management Board and the Supervisory
Board takes place on a quarterly basis. In addition, risks that
are identified within a quarter and whose expected value have
a significant impact on the results of subdivisions of the Group
are reported ad hoc to the Management Board and, if neces-
sary, to the Supervisory Board.

In order to analyze NORMA Group’s overall risk situation and ini-
tiate suitable countermeasures, individual risks of local business
units, segments and Group-wide risks are aggregated in a risk
portfolio. All entities, which are included in NORMA Group’s con-
solidated financial statements, are part of the Company’s risk
reporting and risk management process. In addition, NORMA
Group categorizes risks according to type and the functional
area they affect. This makes it possible to aggregate individual
risks into risk groups in a structured manner. This aggregation
enables NORMA Group to identify and manage not only indi-
vidual risks, but also trends and Company-specific types of
risks and thus sustainably influence and reduce the risk factors
with certain types of risks. If not indicated otherwise, the risk
assessment applies for all regional segments.

Further development of the risk management system
An integrated risk management software was implemented in
2016 in order to further develop NORMA Group’s risk man-
agement system. The respective organizational units report the
risks they have identified and assessed in this software solution.
Risks are reviewed and approved by those responsible at the
regional level and, depending on the risk category, by the func-
tional managers at Group level.

INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM

WITH REG ARD TO THE GROUP ACCOUNTING PROCESS
NORMA Group’s internal control and risk management system
with regard to the Group accounting process can be described
using the following main characteristics: The purpose of this
system is to identify, analyze, evaluate and manage risks as well
as monitor these activities. The Management Board is responsi-
ble for ensuring that this system meets the Company’s specific
requirements. Based on the allocation of responsibilities within
the Company, the CFO is responsible for the Finance and Ac-
counting divisions. These functional areas define and review the
Group-wide accounting standards within the Group and compile
the information used to produce the consolidated financial state-
ments. The need to provide accurate and complete information
within predefined timeframes represents a significant risk for
the accounting process. Because of this, requirements must
be clearly communicated and the affected units must be put in
a position to meet these requirements.

Posting transactions too early or too late or failing to comply
with accounting regulations are some situations that can result
in risks that could potentially impact the accounting process. In
order to avoid errors, the accounting process is based on the
segregation of duties and functions and plausibility checks for
reporting. The preparation of the financial statements of those
entities to be included in the consolidated financial statements
as well as the consolidation measures based on this consoli-
dated group are characterized by consistent observance of the
‘four eyes-principle.’ Comprehensive and detailed checklists
must be completed before the respective reporting deadlines.
The accounting process is fully integrated into NORMA Group’s
risk management system. This ensures that accounting risks are
identified early, allowing the Company to implement measures
for risk prevention and risk mitigation without delay.

NORMA Group SE Annual Report 2016
Risk and Opportunity Report

The internal control system ensures the accuracy of NORMA
Group’s financial reporting with respect to its accounting pro-
cesses. The Internal Audit department reviews the accounting
processes on a regular basis to ensure that the internal control
and risk management system is effective. External specialists
also support these efforts. Furthermore, the financial statement
auditor conducts audit procedures during the audit of the annu-
al financial statements based on the risk-based audit approach,
whereby material errors and violations are to be uncovered with
reasonable assurance.

The IFRS accounting standards as they are to be applied in the
European Union are summarized in an accounting manual. All
companies in the Group must base their accounting processes
on the standards described in the accounting manual. The
accounting manual contains binding definitions of important
measurement methods, such as those used in the measure-
ment of inventories, tools and receivables. The Group also
has system-supported reporting mechanisms to ensure that
identical situations are handled in a standardized way across
the Group.

The consolidated financial statements and the group manage-
ment report are prepared according to a uniform time schedule
for all companies. Each company in the Group prepares its
separate financial statements in accordance with the applicable
local accounting guidelines and IFRS. Intra-Group deliveries and
services are recorded in separately designated accounts by the
Group companies. The net balances of Intra-Group offsetting
accounts are reconciled on the basis of defined guidelines and
schedules by means of balance confirmations. The companies
in the Group use the COGNOS reporting system for financial re-
porting. In accordance with NORMA Group’s regional segmen-
tation, technical responsibility for the financial area is shared
by both the financial officers in the Group companies as well
as by the regional CFO for the respective segment. They are
responsible for the quality assurance of the financial statements
of the respective Group companies. The comprehensive quality
assurance of the financial statements of the Group companies
included in the consolidated financial statements is carried out
by Group Accounting, Finance & Reporting, which is responsi-
ble for preparing the consolidated financial statements. In addi-
tion, the data and disclosures of the Group companies as well
as the consolidation measures necessary for the preparation of
the consolidated financial statements are verified through audit
procedures conducted by external auditors under consideration
of the associated risks.

The various IT systems that individual NORMA Group companies
use to perform financial accounting are gradually standardized.
Tiered user access rights are defined for all systems. The type
and design of these access authorizations and authorization
policies are decided on by local management in coordination
with NORMA Group’s Head of IT.

RISK A ND OPPORTUNIT Y PROFILE OF NOR M A GROUP
As part of the preparation and monitoring of its risk and op-
portunities profile, NORMA Group assesses risks and oppor-
tunities based on their financial impact and their probability of
occurrence. The financial impact of risks and opportunities are
assessed based on their relation to EBITA. The following five
categories are used here:

• Insignificant: up to 1% of current EBITA
• Minor: more than 1% and up to 5% of current EBITA
• Moderate: more than 5% and up to 10% of current EBITA
• Significant: more than 10% and up to 25% of current EBITA
• High: more than 25% of current EBITA

The interval of the risk’s or the opportunity’s impact generally
relates to the EBITA of the Group. Provided that an individual
assessment relates solely to a specific segment, the EBITA of
the respective segment is used instead. The assessment of
opportunities and risks whose financial impact has an effect
on line items in the statement of comprehensive income below
EBITA is also performed in relation to EBITA. The presented
impact always reflects the effects of countermeasures initiated.

The probability of individual risks and opportunities occurring is
quantified based on the following five categories:

• Very unlikely: up to 3% probability of occurrence
• Unlikely: more than 3% and up to 10% probability

of occurrence

• Possible: more than 10% and up to 40% probability

of occurrence

• Likely: more than 40% and up to 80% probability

of occurrence

• Very likely: more than 80% probability of occurrence

Financial risks and opportunities
NORMA Group is exposed to several financial risks, including
default, liquidity and market risks. The Group’s financial risk
management strategy concentrates on the identification, evalua-
tion and mitigation of risks, focusing on minimizing the potential
negative impact on the Company’s financial performance. De-
rivative financial instruments are used to hedge particular risk
items. The financial risk management strategy is implemented
by Group Treasury. Group management defines the areas of
responsibility and necessary controls related to the risk man-
agement strategy. Group Treasury is responsible for defining,
evaluating and hedging financial risks in close consultation with
the Group’s operating units. In this context, various processes
and organizational structures work together to measure and
evaluate opportunities and risks on a regular basis, and to initi-
ate appropriate measures if necessary. Group Treasury regularly
conducts analyses of default risks, interest rate risks, currency
risks and liquidity risks. The results are then discussed internally
and actions are defined. Group Treasury also advises the man-

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS86

agement of relevant departments in monthly committee meet-
ings and discusses how to handle these risks and the potential
impact on NORMA Group.  Notes, p. 136.

Capital risk management
NORMA Group’s objective when it comes to managing its capital
is primarily the long-term servicing of its debts and remaining
financially stable. In connection with its financing agreements,
the Company is obliged to maintain the financial covenant total
net debt cover (debt divided by adjusted consolidated EBITDA).
This key figure and its maintenance, but also net debt and the
maturity structure of financial debt, are continually monitored.
Changes in the value of the amounts included in this financial
indicator are limited by employing long-term hedging strategies.

Default risks
Default risks are risks of contractual partners not meeting their
obligations arising from business and financial transactions. Due
to the nature of the respective assets and business relationships,
as well as the soundness of its current banking partners, default
risks with respect to deposits and other transactions concluded
with credit and financial institutions currently do not represent
a major risk category for NORMA Group. Nevertheless, the
creditworthiness of contract partners is continuously moni-
tored and discussed at regular senior management meetings.

Relevant default risks can arise, however, with respect to busi-
ness relationships with customers and relate to outstanding
receivables and committed transactions. NORMA Group reviews
the creditworthiness of new customers to minimize the risk of
default on trade receivables. Customers whose credit ratings
are below Group standards or who have defaulted on payment,
are only supplied if they pay in advance. A diversified customer
portfolio reduces the financial repercussions of default risks. De-
fault risks are considered to be possible despite the measures
referred to above. The potential financial effects of default risks
are judged to be insignificant considering the relevant factors,
such as bad debt losses experienced in the past, and due to
the countermeasures taken.

Liquidity risks and opportunities
Prudent liquidity risk management requires NORMA Group
to hold sufficient cash funds and marketable securities, have
sufficient financing from committed lines of credit and be able
to close out market positions. Due to the dynamic nature of
the underlying business, Group Treasury aims to maintain flex-
ibility in financing by keeping committed credit lines available.
Therefore, NORMA Group’s primary objective is to ensure the
uninterrupted solvency of all Group companies. Group Trea-
sury is responsible for liquidity management and therefore for
minimizing liquidity risks. As of December 31, 2016, NORMA
Group’s liquid assets (cash and cash equivalents) amounted
to EUR 165.6 million (2015: EUR 100.0 million). Furthermore,
NORMA Group has a high level of financial flexibility thanks to a
total of EUR 50 million in committed revolving credit lines with
national and international credit institutions. These lines were

not drawn down at all as of December 31, 2016. In addition,
NORMA Group has a so-called accordion facility in the amount
of up to EUR 250 million that offers additional financial flexibility
as well as a non-promised but negotiated credit line of EUR
15 million, which offer additional financial scope.

Financial opportunities are seen, among other areas, in NORMA
Group’s high creditworthiness as well as its solid financial po-
sition, financial performance and cash flows, which enable the
Company to gradually reduce its capital costs. Against this
backdrop, NORMA Group placed a promissory note amounting
to EUR 150 million in euro and US dollar tranches in 2016 in or-
der to increase the scope for the strategic further development
of the Group. In addition, partial amounts of the promissory note
issued in euro in 2013 were repaid. As a result of this optimized
conversion, significant interest savings have been achieved, re-
flecting the improved creditworthiness of NORMA Group. The
liquidity-related opportunities are therefore considered to be
possible, especially due to the Company’s good reputation on
the capital market. In light of the refinancing measures carried
out in the recent past, by which the borrowing costs have al-
ready been reduced quite considerably, the potential financial
effects of liquidity-related opportunities on NORMA Group’s
earnings are considered to be only minor.  Financial Manage-
ment, p. 66.

Most of the Group’s financing agreements contain typical terms
for credit lines (financial covenants). If NORMA Group does not
adhere to these terms, the banks would be entitled to re-eval-
uate the agreements and demand early repayment. Failure to
comply with these loan covenants would have high potential
financial repercussions. For this reason, NORMA Group contin-
uously monitors its compliance with the financial covenants in
order to implement suitable measures in advance and prevent
the terms from being violated. In order to hedge balance posi-
tions in foreign currencies whose valuation leads to fluctuations
in the profit and loss account, NORMA Group partly uses rolling
hedging transactions. Group Treasury ensures that sufficient
liquidity or granted credit lines are available at all times to cov-
er possible cash outflows related to these hedging measures.
This is continuously monitored by means of risk simulation
and discussed in senior management meetings. By increasing
NORMA Group’s financial flexibility compared to the previous
year, the likelihood of liquidity risks negatively impacting the
Company’s operations has been reduced further. The risk of
non-compliance with financial covenants is still considered to
be very unlikely due to NORMA Group’s high profitability and
strong operating cash flow.

Foreign currency trends
As an internationally operating Company, NORMA Group is ac-
tive in more than 100 countries and is thus exposed to foreign
currency risks. The US dollar, British pound, Chinese renminbi,
Indian rupee, Polish złoty, Swedish krona, Swiss franc, Serbian
dinar and Singapore dollar are regarded to be the main risky
currency positions.

NORMA Group SE Annual Report 2016Risk and Opportunity Report

Foreign currency risks that cannot be offset against each oth-
er are hedged using futures and options whenever reasonable
(including the US dollar, Swedish krona, Japanese yen, Swiss
franc and British pound). The high volatility of many major
currencies and the particular influence of the US dollar on the
Group’s financial position and performance represent a con-
siderable risk that can only be partially hedged for a short-term
period. In the medium term, NORMA Group will reduce foreign
currency risks by taking an increasingly regional approach to
production.  Production and Logistics, p. 70.

Because the Group’s subsidiaries operate in the most import-
ant countries with currencies other than the euro, it has suffi-
cient cash-in and cash-out capabilities to absorb short-term
exchange rate fluctuations via targeted income and expenditure
management. The optimization of the bank loans renegotiated
in 2015, which now also offers the possibility of utilizing credit
lines in US dollars, but also the promissory note tranches issued
in US dollars in 2016, results in more congruent payment pro-
files in US dollars. In addition, currency risk is monitored in the
Group and transferred to the euro over time on a rolling basis
by means of derivative hedging instruments if the risk becomes
too excessive. Translation risks are continuously monitored by
Group Treasury. Translation effects from items in the statement
of financial position and income statement of subsidiaries in for-
eign currency areas on the consolidated statement of financial
position prepared in euros are unavoidable, however.

The potential financial effects of opportunities and risks relat-
ed to exchange rate changes are considered to be moderate
based on the sensitivity analyses that have been performed.
The probability of the incidence of these risks and opportu-
nities is assessed to be possible in light of recent exchange
rate fluctuations and the uncertainties with regard to the further
development of relevant exchange rates.

Changes in interest rates
Changes in global market interest rates affect future interest
payments for variable interest liabilities and can therefore have
an adverse effect on the Group’s financial position, financial
performance and cash flows. NORMA Group’s interest change
risk arises in particular from long-term loans.

Many of the current loans have fixed interest rates and are there-
fore not subject to interest rate risk. Loans that initially had vari-
able interest rates were synthetically converted into fixed interest
rate positions with derivative instruments. NORMA Group cur-
rently has an interest rate risk for the amount of EUR 40 million
from the bank loan renegotiated in 2015 in the amount of EUR
100 million and for the revolving credit facility (EUR 50 million)
that has not yet been drawn on. The same applies for the prom-
issory note issued in 2014 (EUR 13 million) and the promissory
note issued in 2016 (EUR 65 million). NORMA Group will seek
to hedge approximately 80% of the interest change risk arising
from future medium-term utilization of the committed revolving
credit facility.

Due to the fact that there are currently no signs of a more re-
strictive monetary policy in the euro zone, NORMA Group re-
gards the risk of interest rate hikes in the short term to be rather
unlikely; however, the risk of higher interest rates is considered
to be possible in the medium term. This would only have a mi-
nor financial impact due to NORMA Group’s financing structure,
however. Due to the currently low interest rate level, the potential
for opportunities that can arise from a falling interest rate level is
considered to be unlikely. In light of the measures already imple-
mented on optimizing financing, the financial effects associated
with these opportunities are considered to be insignificant.

Economic and cyclical opportunities and risks
The success of NORMA Group depends significantly on macro-
economic trends on its sales markets and its customers’ sales
markets. Therefore, indicators for economic development world-
wide are taken into account both in planning as well as in risk
and opportunities management. In order to gauge the macro-
economic trend, NORMA Group mainly uses the forecasts of
widely regarded institutions such as the IMF, the Bundesbank
and reputable economic research institutes. Accordingly, global
growth of 3.4% can be expected in 2017.

In the previous year, not only geopolitical crises, but also the
economic development in China and Latin America and the
possible effects of an increase in key interest rates in the US on
the economic development in emerging markets were identified
as risks. The still subdued economic expectations in China and
the ongoing recession in Brazil, which could well be overcome in
2017 despite structural deficits, are still of relevance to NORMA
Group’s business activities in these countries. Furthermore, key
interest rates in the US have already gradually started to rise. In
2016, these developments, which represent relevant risk factors
for NORMA Group, were joined by Great Britain’s decision to
leave the European Union, with consequences not yet foresee-
able for trade, as well as increasing protectionist tendencies in
certain countries.

In light of the possible overall economic impact of these de-
velopments, NORMA Group is of the opinion that a negative
development of the global economy compared to the planning
assumptions is currently classified as possible taking these
risks into account. Should these factors lead to a deteriora-
tion in global demand, the financial deviations from planning
are considered to be moderate. A positive development of the
global economy that goes beyond the planning assumptions
represents an opportunity for NORMA Group. Thanks to its
flexible production structures, NORMA Group is able to expand
capacities in the short term and thus respond to a generally
increased demand. The Company believes it is possible that the
global economic situation and thus NORMA Group’s earnings
will improve beyond the planning assumptions. In the overall
view of the current macroeconomic climate and the prospects
based thereon, the potential financial impact of these opportu-
nities compared to the previous year is no longer considered
moderate but rather only minor.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS88

Industry-specific and technological risks and opportunities
Industry-specific and technological opportunities and risks for
NORMA Group are closely linked to the conditions and devel-
opments in the respective customer industries  Products and
End-Markets, p. 50. It should be borne in mind that the custom-
er industries in the regions relevant to NORMA Group, EME A,
the Americas and Asia-Pacific, have partly specific character-
istics and challenges.

Business activities with OEMs for passenger cars and commer-
cial vehicles as well as customers in the Automotive Aftermar-
ket segment still represent the most important end markets for
NORMA Group. In this area, the ever-stricter emission standards
as well as the increasing use of more environmentally friend-
ly drive technologies represent a development that is associ-
ated with various opportunities and risks for NORMA Group.
NORMA Group’s current product portfolio includes a variety
of solutions that help reduce emissions in passenger cars and
commercial vehicles equipped with an internal combustion en-
gine, including hybrid vehicles, and thus help customers meet
ever-stricter emission requirements. Regulatory measures such
as stricter exhaust gas standards and the resulting increased
demand for environmentally friendly technologies and products
are thus an opportunity for NORMA Group. On the other hand,
NORMA Group’s present product portfolio currently offers fewer
product solutions for purely battery-powered electric vehicles.
If the share of purely battery-powered electric vehicles were to
increase substantially, it will be important for NORMA Group
to offer customers new product solutions and technologies.
Correspondingly, the ongoing discussion about compliance
with emission standards in vehicles with an internal combus-
tion engine can lead to both opportunities and risks for NORMA
Group. NORMA Group counteracts these risks through consis-
tent initiatives aiming to secure and expand its leadership in
technology and innovation as well as by focusing on customers
and markets.  Research and Development, p. 57.

The water management segment, which has been consistent-
ly strengthened by the acquisitions carried out in past years,
represents another strategically important customer industry
for NORMA Group. The increasing scarcity of water and the
responsible handling of this important resource in this context
are leading to entrepreneurial opportunities.

NORMA Group’s strong diversification in terms of customers in
different industries is another element of the Company’s risk and
opportunity management. NORMA Group counters long-term,
industry-specific risks and opportunities through a consistent
innovation policy and regular market analyses.

In summary, the industry-specific and technological opportu-
nities and risks are assessed to be possible with a moderate
financial impact.

Risks and opportunities associated with corporate strategy
The strategic goal of NORMA Group is to achieve a sustained
increase in the Company’s value. In view of this goal, NORMA
Group is pursuing the strategy of profitably expanding its busi-
ness activities through organic growth as well as selective val-
ue-enhancing acquisitions and achieving broad diversification
with respect to its products, regions and end markets, thus
becoming less dependent on individual products, regions and
end markets. NORMA Group’s aim is to grow with innovations,
superior product quality and strong brands in existing end mar-
kets, to open up new end markets and to continuously improve
the efficiency of its business processes in all functional areas
and regions.  Goals and Strategy, p. 52.

Besides the company’s strategic activities aimed at continuing to
develop the business organically, NORMA Group sees consider-
able opportunities to increase the Group’s financial result beyond
planning, particularly in its strategy of profitably expanding its
business activities through selective, value-adding acquisitions.
NORMA Group has been able to demonstrate the success of this
strategy several times in the past by completing its acquisitions.
If, however, in individual cases, the development of the acquired
companies falls behind the expectations at the time of acquisi-
tion or if integration progresses more difficultly than assumed,
risks could also arise from acquisitions for N OR M A Group.
However, NORMA Group believes that the Company’s goals for
the profitability of potential acquisitions, careful due diligence
measures in the run-up to the acquisition, and agreed integra-
tion plans form the basis for mitigating these risks accordingly.

In addition, opportunities to achieve its financial targets arise
for NORMA Group from the broad diversification with respect to
its products, regions and end markets. Should the demand in
individual regions and end markets or the demand for individual
products temporarily lag behind planning, NORMA Group will
have the chance to compensate for this via other regions, end
markets or products. Nevertheless, the broad diversification
with respect to products, regions and end markets also implies
a certain complexity, which can be associated with risks for
NORMA Group. Because NORMA Group’s diversification efforts
are being carried out step by step with regard to the regions
and end markets as well as its products, these risks can be
adequately limited by means of an appropriate adaptation of
the organization to the changed circumstances.

With respect to the efficiency of its business processes, NORMA
Group is able to settle production processes that require a high-
er degree of manual assembly effort in countries with lower
labor costs, thus securing and further increasing its profitability.
However, there are inevitably risks associated with the appro-
priate location decisions and related investments if significant
assumptions made in the investment decision are not fulfilled.
NORMA Group addresses these risks by conducting careful
analyses in the run-up to investment decisions and uses graded
approval procedures.

NORMA Group SE Annual Report 2016Risk and Opportunity Report

When the corporate strategy initiatives of NORMA Group are
combined, the financial impact of the opportunities associ-
ated with NORMA Group’s company strategy is assessed as
moderate and a positive deviation from planning as possible.
Based on the measures taken to limit the risks associated
with NORMA Group’s corporate strategy, the probability of the
occurrence of strategic risks is considered unlikely, while the
potential financial impact of corporate strategy risks is con-
sidered moderate.

The company strategy is adapted to the individual market con-
ditions in the individual segments. For instance, acquisitions are
made particularly in those countries and regions that offer at-
tractive growth opportunities for NORMA Group. Nevertheless,
the general assessment of corporate strategy opportunities and
risks in the regions is identical.

Operational risks and opportunities

Commodity prices
The materials that NORMA Group uses, in particular the raw
materials steel and plastics, are subject to the risk of price
fluctuations. The price trend is also influenced indirectly by the
further development of the world economic situation as well as
by institutional investors. NORMA Group limits the risk of rising
purchase prices through systematic material and supplier risk
management. Thanks to a powerful global Group purchasing
structure, economies of scale are being used to purchase the
most important product materials steel, metal components,
polyamides and rubber as competitively as possible. This Group
purchasing structure also enables NORMA Group to balance
out the risks of individual segments with each other. NORMA
Group also constantly strives to secure permanently competi-
tive procurement prices by continuously optimizing its selection
of suppliers and applying the best-landed-cost-approach. The
Company also tries to reduce dependency on individual materi-
als through constant technological advances and tests of alter-
native materials. Protection against commodity price volatility is
done by forming procurement contracts with a term of up to 12
months, whereby material supply risks are minimized and price
fluctuations can be better calculated.

Due to the currently rising price of steel, including the alloy
surcharges applicable to stainless steel, NORMA Group esti-
mates the probability of rising prices compared to the previous
year as likely rather than possible. Nevertheless, this is likely to
have only a minor financial impact due to the countermeasures
that have already been initiated. Due to the fact that a share
of material price developments can be passed on to the cus-
tomer by designing the customer contracts accordingly, falling
commodity prices are generally not a major success factor. The
chances of a falling commodity price development are therefore
regarded as minor. In contrast to the previous year, the falling
development of global commodity prices compared to the plan
is no longer considered possible but rather unlikely.

Suppliers and dependencies on key suppliers
The loss of suppliers and dependencies on single suppliers can
lead to material shortages and thus to negative impacts on the
Group’s activities. In order to minimize this risk, NORMA Group
only works with reliable and innovative suppliers who meet its
high quality requirements. The ten most important suppliers are
responsible for approximately 30% of the purchasing volume.
 Purchasing and Supplier Management, p. 71. These and other
key suppliers are regularly observed and assessed as part of
quality management. If the loss of a supplier appears imminent,
NORMA Group evaluates alternatives immediately. As a result,
the loss of suppliers is considered possible, but the potential
financial impact is regarded as minor. However, NORMA Group
also sees opportunities in this area as a result of its proactive
approach both in terms of existing supplier relationships as well
as identification of new suppliers and raw materials. But since
an optimization in the area of Purchasing is anticipated in the
medium term, NORMA Group estimates the potential of the im-
plemented measures for a positive deviation from planning to
be possible with a minor impact.

Quality and processes
NORMA Group’s products are often mission-critical with re-
spect to the quality, performance and reliability of the final
product. Quality defects can lead to legal disputes, liability
for damages or the loss of a customer. Therefore, the reliable
guarantee of product quality is a key factor to ensuring NORMA
Group’s long-term success, so that its products provide crucial
added value for its customers.  Quality Management, p. 71.
Maintaining the right balance between cost leadership and
quality assurance is a constant challenge. To reduce this risk,
far-reaching quality assurance measures and Group-wide qual-
ity standards are used. Furthermore, NORMA Group focuses
on innovative and value added joining solutions tailored to meet
customer requirements. For this reason, the Company believes
that it is possible for quality risks to occur, while the potential
financial repercussions would be minor due to the existing in-
surance coverage.

NORMA Group takes every opportunity to realize cost advan-
tages to improve its competitive position. Thus the Company
develops and implements initiatives focused on cost discipline,
the continuous improvement of processes in all functions and re-
gions and optimization of supply chain management and produc-
tion processes. These initiatives are expected to have a positive
impact on NORMA Group’s business.  Production and Logis-
tics, p. 70. Since NORMA Group pursues a continuous process
of improvement, there are opportunities over and above planning
for positive deviations in the area of these processes. This ap-
plies for all regions in which NORMA Group is active. The Compa-
ny estimates the likelihood of cost savings to be possible. Since
planning already allows for continuous optimization of production
processes and NORMA Group’s processes are already extreme-
ly efficient, the short-term financial impact of a deviation from
the plan as a result of improved production processes is minor.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS90

Customers
Customer risks result from a company being dependent on
important buyers for a significant proportion of its sales. They
could take advantage of their bargaining power, which can lead
to increased pressure on the Company’s margins. Decreases in
demand from these customers or the loss of these customers
can have a negative impact on the Company’s earnings. For this
reason, NORMA Group continuously monitors incoming orders
and customer behavior so as to identify customer risks early.
Due to its diversified customer portfolio, financial repercussions
of customer risks are reduced. Accordingly, no single customer
generated more than 5% of sales in 2016. Therefore, it is possi-
ble that customer risks could have a negative impact on NORMA
Group’s business, but the financial effects would be minor due
to the diversified customer structure.

Based on NORMA Group’s strategy and the goal of further ex-
panding its markets, the Company managed to expand its cus-
tomer portfolio compared to the previous year. As a result of
its innovative solutions, new customers in all regions could be
convinced of its products. Therefore, NORMA Group estimates
the opportunities for positive deviations from planning to be
possible with a minor impact on earnings based on a growing
number of customers.

Risks and opportunities of personnel management
NORMA Group’s success is largely dependent on its employees’
enthusiasm, commitment to innovation, expertise and integri-
ty. The Group’s personnel management serves to retain and
expand this core expertise. The resignation of employees with
crucial skills as well as a shortage of suitable workers can have
a negative impact on operations. The competition for the most
talented employees as a result of demographic developments
and the shortage of skilled labor in Western industrial nations
is becoming more and more intense.

personal expertise through educational and training opportu-
nities as well as the targeted search for talent within the Group.
Furthermore, NORMA Group offers its employees flexible and
family-friendly working time models.

Through the above-mentioned measures, NORMA Group ac-
tively supports the preservation and collection of knowledge
within the Company, which will thus offer opportunities for the
future development of NORMA Group. The occurrence of these
opportunities is considered likely and the financial contribution
of these opportunities to be minor.

IT-related risks and opportunities
The use of functional and high-performance IT systems is of
central importance for an innovative and global Company such
as NORMA Group with regard to the efficiency of its business
processes. In this context, it is critical for the Company’s suc-
cess to support the business processes of NORMA Group,
which are partly organized across corporate and national
boundaries along the value chain with stable and powerful IT
systems that provide the management at all levels with the nec-
essary information in a timely manner and allow for efficient
organization of workflows. For the exchange of information with
customers and suppliers of NORMA Group, tailor-made IT solu-
tions connected to the respective ERP systems are of great im-
portance. With regard to this business-critical IT infrastructure,
there is a risk that an extensive computer system failure, e. g.
due to technical-related malfunctions of the systems or attacks
by hackers, could seriously disrupt the Company’s operations.

In addition, NORMA Group sees the risk that external users
could gain unauthorized access to sensitive Company informa-
tion and misuse it. In this context, unauthorized access to in-
formation about production processes, financial, customer and
employee data could have a negative impact on the Company.

NORMA Group counters these risks with far-reaching basic and
advanced training as well as employee development programs.
NORMA Group also encourages its employees to focus on the
Company’s success through variable remuneration systems.
In return, the employees contribute to the continuous further
development of the Company in connection with employee sur-
veys and improvement initiatives. Comprehensive representation
rules and a division of responsibilities that promote mutual ex-
change secure the Group from risks that can arise due to the de-
parture of employees. When identifying potential new employees
who can make a crucial contribution to performance, NORMA
Group seeks the advice of external human relations advisors.

Therefore, NORMA Group has implemented appropriate mea-
sures to avoid and reduce this type of risk. These measures are
collectively embedded in the IT risk management process and
are adjusted in this context to changing conditions. NORMA
Group manages the IT risks it identifies by mirroring the data-
base, using decentralized data storage and outsourced data ar-
chiving to a certified external provider, by encrypting e-mails as
well as using up-to-date firewalls and e-mail filters, for instance.
The access of employees to sensitive information is ensured by
means of authorization systems customized for the respective
positions, taking into account the principle of segregation of
duties. Finally, employees are trained on data security.

Thus, the Company regards the probability of personnel risks
occurring as possible, whereas the potential financial impact is
insignificant due to the sustainable personnel policy.

NORMA Group estimates the probability of IT-related risks oc-
curring in all regions despite the implemented countermeasures
to be possible and the potential financial impact to be minor.

In addition, there are opportunities from the consistent fur-
ther development of the employees. NORMA Group fosters its
employees and offers them incentives to further develop their

Opportunities in the area of IT arise in particular from the po-
tential of process standardization and optimization across all
companies of NORMA Group. For example, the gradual transi-

NORMA Group SE Annual Report 2016Risk and Opportunity Report

tion from old ERP systems to new and uniform systems for the
entire Group continued in 2016. The opportunities that arise
from this streamlining measure are considered to be likely. The
related financial effects are expected to be minor.

Legal risks and opportunities

Risks related to standards and contracts
Future changes to legislation and requirements, especially com-
mercial law, liability law, environmental law, tax law, customs
law and labor law, as well as changes in related standards,
could have a negative impact on NORMA Group’s develop-
ment. Violations of laws and regulations, but also of contractu-
al agreements, can lead to penalties, regulatory requirements
or claims from injured parties. Conversely, NORMA Group can
be adversely affected by contractual breaches by third parties.
Furthermore, defective products can lead to legal disputes and
claims for damages. Likewise, the results of tax audits can lead
to tax payments.

In 2016, litigations against NORMA Group (passive) mainly in-
volved labor disputes such as prosecution charges as well as
product deficiencies claimed by customers or their insurances.
Active proceedings mainly pertained to claims against suppliers.
In addition, NORMA Group identified several possible violations
of its own IP rights or IP rights of third parties. The national
focuses of the legal disputes were Germany and the US.

NORMA Group uses its current compliance and risk manage-
ment systems to ensure that it complies with constantly chang-
ing laws and regulations and meets its contractual obligations.
NORMA Group counters the risk of product defects through its
Group-wide quality assurance program. In addition, NORMA
Group is also insured against claims arising from certain de-
fective products.

Due to the current significant changes in international tax law
(e. g. the OECD BEPS Initiative), in particular, that can lead to
unanswered legal questions, as well as due to the increased
auditing intensity of tax audits that can be seen in many coun-
tries, the likelihood of risks related to standards and contracts
compared to the previous year is no longer considered un-
likely but rather possible. However, due to the existing risk
management measures, the potential financial impact of risks
in connection with standards and contracts is still considered
to be moderate.

All legal risks that NORMA Group is aware of are taken into
account through provisions recognized in the consolidated fi-
nancial statements.

Social and environmental standards
Violating social and environmental standards could damage the
reputation of NORMA Group and result in restrictions, claims for
damages or disposal obligations. NORMA Group has therefore
implemented Corporate Responsibility as an integral part of

the Group strategy. In this context, a systematic environmental
management system was introduced at NORMA Group so that
corporate decisions can always be evaluated also considering
the goal of avoiding emissions and conserving resources. The
Company also invests in the area of occupational health and
safety for its continuous improvement.  Employees, p. 73.
Consequently, NORMA Group believes that the probabilities of
occurrence of negative developments remain unlikely as a result
of social and environmental risks and that the potential financial
effects would be moderate.

However, the investments in the area of Corporate Responsibil-
ity serve not only to ward off risks. The measures and initiatives
are also seen as having the potential to positively impact both
the business environment as well as NORMA Group and its
stakeholders. Therefore, NORMA Group estimates the opportu-
nities in this area to be possible and assumes that the measures
and initiatives will have a minor impact on its planning.

Intellectual property
N O R M A Group’s position as a technology and innovation
leader means that violations of its intellectual property rights
could lead to lost sales and reputation. For this reason, the
Company ensures that its technologies and innovations are
legally protected. NORMA Group also minimizes the potential
impact by developing customer-specific solutions and through
its speed of innovation. At the same time, it is also possible
for NORMA Group to violate the intellectual property of third
parties. For this reason, developments for potential patent
violations are reviewed at an early stage. Therefore, it is con-
sidered possible for the intellectual property to be violated.
Due to the measures that NORMA Group has implemented,
the potential impact of an intellectual property violation is re-
garded to be minor. In addition, N O R M A Group also sees
opportunities as possible that can lead to a minor deviation
from the medium term plan as a result of the consistent de-
fense of the intellectual property and the expansion of legal
unique selling points.

AS SES SMENT OF THE OVER ALL PROFILE OF RISKS

A ND OPPORTUNITIES BY THE M A N AGEMENT BOAR D
The Group’s overall situation results from the aggregation of
individual risks and opportunities from all categories of the busi-
ness units and functions. After assessing the likelihood of risks
occurring and their potential financial impact as well as in light
of the current business outlook, NORMA Group’s Management
Board does not believe that there is any individual risk or group
of risks with the potential to jeopardize the continued existence
of the Group or individual Group companies as a going con-
cern. Taking the aggregated opportunities into account, NORMA
Group is in a very good position with respect to both the me-
dium and long terms to further expand its market position and
grow globally. This assessment is reinforced by the good oppor-
tunities to cover the financing requirements. Therefore, NORMA
Group has not made any effort to obtain an official rating from
a leading rating agency.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS92

General economic risks remain for NORMA Group in all areas,
which is why setbacks on the way towards long-term realization
of the growth and profitability targets cannot be ruled out. In
contrast, there are clear opportunities that NORMA Group is
taking advantage of through its strategy and consistent oppor-
tunity management, so that it is possible to even exceed the
profitability targets.

The changes in the individual opportunities and risks shown
in the overview have no significant impact on NORMA Group’s
overall risk profile. NORMA Group has therefore concluded that
the Group’s overall profile has not changed significantly com-
pared to the previous year.

R I S K A N D O P P O R T U N I T Y P O R T F O L I O O F N O R M A G R O U P *

Financial risks and opportunities

Default risk

Liquidity

Currency

Change in interest rates

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Economic and cyclical risks and opportunities

Risks

Opportunities

Industry-specific and technological risks and opportunities

Risks

Opportunities

Risks and opportunities associated with corporate strategy

Risks

Opportunities

Operational risks and opportunities

Commodity pricing

Suppliers

Quality and processes

Customers

Risks and opportunities of personnel management

Risks

Opportunities

IT-related risks and opportunities

Risks

Opportunities

Legal risks and opportunities

Risks related to standards and contracts

Social and environmental standards

Property rights

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Probability of occurence

Financial impact

unlikely

possible

likely

insignificant

minor

moderate

significant

high

very

likely

Change

in 2016

very

unlikely

•

T 0 2 8

Change

in 2016

•

* If not indicated otherwise, the risk assessment applies for all regional segments.

unchanged

higher

lower

NORMA Group SE Annual Report 2016

R I S K A N D O P P O R T U N I T Y P O R T F O L I O O F N O R M A G R O U P *

Financial risks and opportunities

Default risk

Liquidity

Currency

Change in interest rates

Economic and cyclical risks and opportunities

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

Industry-specific and technological risks and opportunities

Risks and opportunities associated with corporate strategy

Risks and opportunities of personnel management

Operational risks and opportunities

Commodity pricing

Suppliers

Quality and processes

Customers

Risks

Opportunities

Risks

Opportunities

IT-related risks and opportunities

Legal risks and opportunities

Risks related to standards and contracts

Social and environmental standards

Property rights

Risks

Opportunities

Risks

Opportunities

Risks

Opportunities

T 0 2 8

Change
in 2016

Risk and Opportunity Report

very
unlikely

•

Probability of occurence

Financial impact

unlikely

possible

likely

very
likely

Change
in 2016

insignificant

minor

moderate

significant

high

•

* If not indicated otherwise, the risk assessment applies for all regional segments.

unchanged

higher

lower

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

Remuneration Report for the
Management and Supervisory Boards

R EMUNER ATION OF THE M A N AGEMENT BOAR D

Basic principles of the remuneration system
The purpose of NORMA Group’s remuneration system is to pro-
vide the members of the Management Board with adequate
remuneration for their activities and areas of responsibility as
well as their personal performance in accordance with applica-
ble legislation and to provide them with a long-term incentive to
commit themselves to the success of the Company. In addition
to the criteria of the Company’s performance and future pros-
pects, the decision as to what level of remuneration is appro-
priate is also based on the general levels of remuneration paid
by comparable companies and NORMA Group’s remuneration
structure.

In accordance with the recommendations of the German Cor-
porate Governance Code in the version dated May 5, 2015, the
remuneration comprises a fixed element and variable elements.

The basic remuneration is a fixed cash payment for the entire
year based on the respective Management Board member’s
area of responsibility. This basic remuneration is paid in the
form of a monthly salary.

The variable compensation is designed differently depending
on when a Board member took office. With the Board mem-
bers who took office before 2015, it consists of the following
components:

1. The annual bonus is a variable cash payment calculated
on the basis of the quantifiable performance of the Com-
pany in the previous fiscal year. The parameters taken into
consideration are whether or not the Company reaches its
target for an earnings component (adjusted EBITA) and a
liquidity component (operating free cash flow before external
use). Each of the two indicators is calculated for a fiscal year
based on figures taken from the Company’s consolidated
financial statements and compared to the target set in ad-
vance by the Supervisory Board. The annual salary of the
Management Board member is multiplied by a percentage
between 0% and 200%, depending on the extent to which
the targets for the components were met. The range limits
the annual bonus to 50% of the member’s annual salary. In
case of negative performance, it can be reduced to EUR 0.

2. The Company’s long-term incentive (LTI) plan is a component
of a variable remuneration element designed to maximize
the Company’s long-term performance. The LTI plan also
comprises an EBITA component and an operating free cash
flow before external use (FCF) component, each of which are
observed over a period of three years (performance period).

A new three-year performance period begins for every year.
Both components are calculated by multiplying the average
annual (adjusted) EBITA and FCF values actually achieved
in the performance period by the (adjusted) EBITA and FCF
bonus percentages specified in the employment contract. In
a second step, the actual value of a component is compared
to the medium-term plan approved by the Supervisory Board
to evaluate the Company’s performance and adjustments
are made to the LTI plan. The LTI plan is limited to two and a
half times the amount that would be arrived at on the basis
of the figures in the Company’s medium-term plan. If the
actual value is lower than the planned value, the LTI plan is
reduced on a straight-line basis down to a minimum of EUR 0
if the three-year targets are missed by a significant amount.

3. The Matching Stock Program (MSP) provides a share price-
based long-term incentive to commit to the success of the
Company. The MSP is a stock option program.

To this end, the Supervisory Board specifies a number of
stock options to be allotted each fiscal year with the proviso
that the Management Board member makes a correspond-
ing personal investment in the Company.

The MSP is split into different tranches. The first tranche
was allotted on the day of the initial public offering (April 8,
2011). The other tranches were allotted on March 31 each
following year. The stock options relate to those shares al-
lotted or acquired and qualified under the MSP as specified
in the Management Board contract. The number of stock
options is calculated by multiplying the qualified shares (for
2013 and 2014: 108,452 shares per year, for 2015 and 2016:
85,952 shares) held at the allotment date by the option fac-
tor specified by the Supervisory Board. The option factor is
re-determined for each tranche and amounts to 1.5 for each
of the tranches in 2013, 2014, 2015 and 2016. Therefore,
162,679 share options are to be considered in fiscal years
2013 and 2014 and 128,927 in fiscal years 2015 and 2016.
Every tranche will be recalculated taking changes in the in-
fluencing factors into consideration and balanced pro rata
temporis over the vesting period.

The vesting period is four years and ends on March 31 in
2017, 2018, 2019 and 2020 respectively for the 2013, 2014,
2015 and 2016 tranches. The options in a tranche can only
be exercised within a period of two years after the vesting
period expires. As a precondition for exercising the options,
the share price must exceed the exercise threshold when the
options are exercised (basis: weighted average of the last
ten exchange trading days before exercising the option). The
exercise threshold is set by the Supervisory Board when the
respective tranche is allocated and equals at least 120% of
the strike price. The exercise threshold was set at 120% of
the strike price for the 2013, 2014, 2015 and 2016 tranches.
In determining the exercise price of the tranches, the weight-
ed average of the closing prices of the Company’s share on

NORMA Group SE Annual Report 2016

Remuneration Report for the Management and Supervisory Boards

the last 60 trading days that immediately preceded allocation
of each tranche is to be applied. Dividend payments by the
Company during the vesting period are to be deducted from
the exercise price of each tranche.

The value of the stock options is calculated by an external
assessor based on generally accepted business valuation
models.

The Company is free to decide at the time of exercise wheth-
er compensation for the option is to be offered in the form
of shares or a cash settlement. NORMA Group has originally
opted for a settlement in equity instruments. In April 2015,
the MSP was changed to a cash settlement by resolution of
the Supervisory Board for the 2011 tranche. Due to this de-
cision and the history it forms, the remaining tranches were
changed in terms of their classification from a settlement in
equity instruments to compensation in the form of a cash
payment.  Notes, p. 141.

O V E R V I E W O F T H E M AT C H I N G S T O C K
P R O G R A M ( M S P ) AT T H E T I M E O F A L L O T M E N T

T 0 2 9

Tranches

Option factor

Number of
options

Exercise
price in EUR

End of the
vesting period

2016

2015

2014

2013

1.5

128,928

162,679

46.62

44.09

40.16

23.71

2020

2019

2018

2017

Upon entering into service in fiscal year 2015, the variable com-
pensation consisted of the following components:

1. The annual bonus is a variable compensation component,
which refers to the average Group EBT (earnings before
income taxes) of the last three fiscal years. The Manage-
ment Board receives a percentage of the amount of the
three-year average. The annual bonus is capped at twice
the fixed annual salary. The annual bonus for the previous
fiscal year is to be paid after approval of the consolidated
financial statements by the Supervisory Board the following
year. If the Management Board member has not worked for
the Company for a full twelve months in a fiscal year, the
annual bonus will be reduced accordingly.

2. The Long-Term Incentive program is designed to be a so-
called NORMA Value Added Bonus and represents a part of
the variable remuneration of the Management Board aligned
toward sustained positive business development. This LTI
provides a long-term incentive for the Management Board
to work hard to make the Company successful. The LTI is
an appreciation bonus that is based on the Group’s perfor-
mance. The Board member receives a percentage of the
calculated increase in value. The NORMA Value Added Bo-
nus corresponds to the percentage of the average increase
in value from the current and the two previous fiscal years.

The annual increase in value is calculated using the following
formula:

NORMA Value Added =

(EBIT × (1 − s))

− (WACC × invested capital).

The calculation of the first component is based on the con-
solidated earnings before interest and taxes (Group EBIT)
for the fiscal year and the average corporate tax rate. The
second component is calculated from the Group WACC mul-
tiplied by the capital invested. The NORMA Value Added
Bonus is limited to a fixed annual salary. 75% of the amount
attributable to the LTI is paid to each Management Board
member the following year. The Company then uses the
remaining 25% attributable to the LTI to purchase shares of
NORMA Group SE in the name and on behalf of the individual
Board members. Alternatively, the Company may pay out
this balance to the Board member. In this case, the Manage-
ment Board member obligates himself to purchase shares
of NORMA Group SE with the balance of this amount within
120 days after the annual financial statements are approved
at the Supervisory Board meeting. The Management Board
member may not dispose of the shares for four years. Div-
idends and subscription rights are to be made freely avail-
able to the Management Board member. If a Board member
takes office in the current fiscal year or does not work for
the Company for a full twelve months in a fiscal year, the LTI
is to be reduced proportionally (pro rata). Upon termination
of the employment contract, a Management Board member
may dispose of his shares only after 12 months of leaving the
Company. Upon termination of his appointment to a body
at the request of the Management Board or for another im-
portant reason, no future rights to variable components of
the LTI shall be granted.

Furthermore, when taking office in 2015, a Management
Board member is entitled to a pension, which is measured as
a percentage of the pensionable income. The pension enti-
tlement arises when the contract has expired, but not before
reaching the age of 65, or if that individual is unable to work.
The percentage depends on the number of years of service
as a Management Board member. The percentage amounts
to 4% of the last yearly fixed salary prior to leaving for each
completed year of service. The percentage can increase to a
maximum of 55%. Furthermore, a survivor’s pension is to be
provided as well.

In the event of premature termination of the employment con-
tract without an important reason, any payments to the Manage-
ment Board are not to exceed the value of two annual remuner-
ations and correspond at most to the value of the remuneration
for the remaining term of the employment contract (see section
4.2.3 of the GCGC). If a special right of termination is exercised
in the event of a change of control, the Management Board re-
ceives compensation of three years’ remuneration, but no more
than the value of the remuneration for the remaining term of

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

the employment contract (see section 4.2.3 of the GCGC). The
annual remuneration includes the current annual fixed salary as
well as short- and long-term variable remuneration components
from the past fiscal year.

The members of the Management Board are additionally com-
pensated with a company car, which they can also use for per-
sonal purposes. Furthermore, Management Board members
are reimbursed for any expenses and travel costs incurred
while performing their duties for the Company in accordance
with the Company’s respectively applicable guidelines. Inven-
tor’s bonuses are also granted. The members of the Man-
agement Board arrange private insurance or are personally
responsible for the statutory deductible of 10% of the loss for
the D&O insurance policy carried for the Managing Directors
of NORMA Group.

Remuneration of the Management Board
in fiscal year 2016
The Management Board’s remuneration for fiscal year 2016 is
reported in accordance with the applicable accounting princi-
ples (DRS 17) and the recommendations of the German Corpo-
rate Governance Code. Pursuant to the resolution of the Annual
General Meeting on April 6, 2011, no individualized disclosure
of the Management Board’s remuneration pursuant to section
314 (1) no. 6 lit. A) Sentence 5 to 9 HGB is to be made for the
years 2011 to 2015.

Management Board remuneration in 2016 according to the
accounting standard DRS 17
The total remuneration of the Management Board pursuant to
section 315a in connection with section 315 (2) no. 4 and sec-
tion 314 (1) no. 6 of the German Commercial Code (HGB) is
distributed among the individual members of the Management
Board as shown in  Table 031 on p. 97.

The performance-related components include only the short-
term annual bonuses. All other bonuses, including the MSP are
listed under long-term incentives.

A provision was recognized for the variable compensation ele-
ments. The stock options associated with the MSP are assessed
on an ongoing basis and included in other provisions in the in-
come statement. Prior to the changeover to cash remuneration,
they were recognized in the capital reserve on a prorated basis
over the course of the holding period.

Remuneration of the Management Board in 2016 in
accordance with the German Corporate Governance Code
In accordance with the German Corporate Governance Code
in its version dated May 5, 2015, which draws a distinction
between remuneration that is being granted for the year under
review and inflow in or for the year under review, the remunera-
tion of the Management Board is shown in  Table 030 on p. 97
(models recommended in the Code are being used):

R E M U N E R AT I O N G R A N T E D T O T H E M A N A G E M E N T B O A R D

in EUR thousands

Basic remuneration

Benefits

Sum

One-year variable remuneration

Multi-year variable remuneration

LTI tranche 2016–2018

LTI tranche 2015–2017

Other perennial remuneration

MSP 2016–2020

MSP 2015–2019

Sum

Pension expenses

Total remuneration

Werner Deggim

Dr. Michael Schneider

Bernd Kleinhens

John Stephenson

Complete Management Board

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2015

2016

2016 (Min)

2016 (Max)

450

471

113

481

232

826

450

471

1,297

471

450

471

225

1,093

1,616

2,934

3,405

300

327

517

300

817

135

1,279

300

327

135

462

300

327

600

300

900

135

1,362

300

306

318

154

547

853

300

306

300

306

150

723

1,074

1,947

280

294

300

144

514

808

280

294

280

294

140

682

1,002

1,824

1,248

1,299

461

960

150

906

2,478

137

3,914

1,330

1,398

775

1,099

300

530

2,704

135

4,237

1,330

1,398

135

1,533

306

2,253

294

2,118

T 0 3 0

1,330

1,398

1,115

2,498

300

3,692

7,605

135

9,138

NORMA Group SE Annual Report 2016

Remuneration Report for the Management and Supervisory Boards

M A N A G E M E N T B O A R D R E M U N E R AT I O N I N 2 0 16

in EUR thousands

Werner
Deggim

Dr. Michael
Schneider

Bernd
Kleinhens

John
Stephenson

Total

Fixed components

Performance-related components

Long-term incentive effect

Total remuneration

2016

471

158

556

1,185

2016

327

817

1,144

2016

306

105

369

780

2016

294

347

739

2016

1,398

361

2,089

3,848

I N F L O W F R O M M A N A G E M E N T B O A R D M E M B E R R E M U N E R AT I O N

in EUR thousands

Fixed remuneration

Benefits

Sum

One-year variable remuneration

Multi-year variable remuneration

LTI tranche 2013–2015

LTI tranche 2012–2014

MSP 2012–2016

MSP 2011–2015

Other perennial remuneration

Sum

Pension expenses

Total remuneration

Werner
Deggim

Dr. Michael
Schneider

Bernd
Kleinhens

John
Stephenson

Complete
Management Board

2016

450

471

158

299

879

1,336

1,807

2016

300

327

517

150

667

135

1,129

2016

300

306

105

198

584

887

1,193

2016

280

294

186

545

829

1,123

2016

1,330

1,398

878

683

2,008

150

3,719

135

5,252

T 0 31

2015

4,557

T 0 3 2

2015

1,248

1,299

461

682

2,265

3,409

137

4,845

Expenses in the amount of EUR 134 thousand for the LTI tranche 2013–2015 and EUR 526 thousand for the MSP are recognized for former members of the Management Board in

the fiscal year.

R E M U N E R AT I O N G R A N T E D T O T H E M A N A G E M E N T B O A R D

T 0 3 0

in EUR thousands

Basic remuneration

Benefits

Sum

One-year variable remuneration

Multi-year variable remuneration

LTI tranche 2016–2018

LTI tranche 2015–2017

Other perennial remuneration

MSP 2016–2020

MSP 2015–2019

Sum

Pension expenses

Total remuneration

Werner Deggim

Dr. Michael Schneider

Bernd Kleinhens

John Stephenson

Complete Management Board

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2016

2016 (Min)

2016 (Max)

2015

2016

2016 (Min)

2016 (Max)

450

471

113

481

232

826

450

471

450

471

225

1,093

1,616

2,934

300

327

517

300

817

135

1,297

471

3,405

1,279

300

327

135

462

300

327

600

300

900

135

1,362

300

306

318

154

547

853

300

306

300

306

150

723

1,074

1,947

2,253

280

294

300

144

514

808

280

294

280

294

140

682

1,002

1,824

2,118

1,248

1,299

461

960

150

906

2,478

137

3,914

1,330

1,398

775

1,099

300

530

2,704

135

4,237

1,330

1,398

135

1,533

1,330

1,398

1,115

2,498

300

3,692

7,605

135

9,138

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

R EMUNER ATION OF THE SUPERVISORY BOAR D
The remuneration for the Chairman and the Deputy Chairman of
the Supervisory Board was calculated separately in accordance
with the recommendations of the German Corporate Gover-
nance Code in the version dated May 5, 2015. The Chairman
is paid double the remuneration of the other members of the
Supervisory Board, and the Deputy Chairman is paid one and
a half times this amount. In addition, the Chairman and mem-
bers of the Supervisory Board’s committees are remunerated
separately.

The Supervisory Board members will be remunerated for their
activities on the day after the 2017 Annual General Meeting as
follows:

R E M U N E R AT I O N O F T H E S U P E R V I S O R Y B O A R D

T 0 3 3

Supervisory Board
member

Membership /
Chairmanship of a committee

Remunera-
tion in EUR

Dr. Stefan Wolf

Chairman of the Supervisory Board

110,000.00

Lars M. Berg

Chairman of the General
and Nomination Committees

Deputy Chairman of the
Supervisory Board

Member of the Audit Committee

Member of the General
and Nomination Committees

95,000.00

Günter Hauptmann Not a member of a committee

50,000.00

Knut J.
Michelberger

Chairman of the Audit Committee
(since October 1, 2016)

66,284.15

Member of the Audit Committee
(until September 30, 2016)

Dr. Christoph
Schug

Chairman of the Audit Committee
(until September 30, 2016)

86,202.19

Member of the General
and Nomination Committees

Erika Schulte

Member of the Audit Committee
(since October 1, 2016)

Total

52,513.66

460,000.00

No remuneration was paid to Supervisory Board members in
fiscal year 2016 for services personally rendered (in particular
advisory and brokerage services).

Furthermore, the Supervisory Board members are reimbursed
for any expenses and travel costs incurred while performing
their duties for the Company in accordance with the Compa-
ny’s respectively applicable guidelines. The members of the
Supervisory Board arrange private insurance or are personally
responsible for the statutory deductible of 10% of the loss for
the D&O insurance policy carried for the Management Board
and the Supervisory Board of NORMA Group.

Other Legally Required Disclosures

An overview of the information required under section 315 (4)
of the German Commercial Code (Handelsgesetzbuch, HGB)
is presented below:

Section 315 (4) no. 1 HGB
NORMA Group SE’s share capital totalled EUR 31,862,400.00 on
December 31, 2016. This is divided into 31,862,400 registered
shares with no par value. Each share entitles the bearer to one
vote. There are no other classes of shares. NORMA Group SE
holds no treasury shares.

Section 315 (4) no. 2 HGB
The Management Board of NORMA Group SE is not aware of
any restrictions affecting voting rights or the transfer of shares
or any agreements between shareholders which could result in
such restrictions.

Section 315 (4) no. 3 HGB
There are no direct or indirect capital holdings exceeding one
tenth of the voting rights other than those voting rights listed in
the notes to the consolidated financial statements.

Section 315 (4) no. 4 HGB
There are no shares in NORMA Group SE that confer special
control rights to the holder.

Section 315 (4) no. 5 HGB
There are no employee share schemes through which employ-
ees can acquire shares of NORMA Group SE. Employees with
shareholdings in NORMA Group SE exercise control rights in the
same way as other shareholders in accordance with applicable
legislation and the Articles of Association.

Section 315 (4) no. 6 HGB
Management Board members are appointed and dismissed in
accordance with section 84 et seq. AktG. The Articles of As-
sociation of NORMA Group SE do not contain any provisions
related to this issue that contradict the applicable legislation.
The Supervisory Board is responsible for determining the actual
number of members on the Management Board. It can nom-
inate a Chairman and Deputy Chairman of the Management
Board or a Management Board spokesperson and a deputy
spokesperson.

Changes to the Articles of Association are made by the Annual
General Meeting in accordance with section 179 (1) AktG. In
accordance with section 179 (1) sentence 2 AktG, the Annual
General Meeting can authorize the Supervisory Board to make
changes which affect only the wording of the Articles of As-
sociation. The Annual General Meeting of NORMA Group SE
has chosen to do so: According to Article 14 (2) of the Articles
of Association, the Supervisory Board is authorized to make
changes to the Articles of Association which only affect their
wording. In accordance with article 20 sentence 3 of the Articles

NORMA Group SE Annual Report 2016Other Legally Required Disclosures

of Association, a simple majority of votes submitted is sufficient
for a resolution on changing the Articles of Association if at least
half of the share capital is represented when the resolution is
adopted and a different majority is not required under the law.

The Supervisory Board is authorized to amend the wording of
article 6 of the Articles of Association to reflect the issue of the
new shares from the Conditional Capital 2015. The same will
apply insofar as the authorization to issue convertible bonds,
bonds with warrants, and / or participation rights with or without
conversion or option rights or conversion or option obligations
in accordance with the Annual General Meeting’s resolution of
May 20, 2015 is not exercised during the term of the authoriza-
tion or the corresponding option or conversion rights or option
or conversion obligations have lapsed because the exercise
periods have expired or for another reason.

The Supervisory Board is authorized to amend the wording of
article 5 of the Articles of Association in accordance with the
issuance of new shares from the Authorized Capital 2015 and,
provided that the Authorized Capital 2015 has not been utilized
or not been fully utilized by May 19, 2020, adjust the authoriza-
tion after that deadline has expired.

The Management Board may determine that the share capi-
tal is to remain unchanged in the event that shares are to be
withdrawn and, instead, be increased by withdrawing a per-
centage of the remaining shares in the share capital pursuant
to section 8 (3) AktG. In this case, the Management Board is
authorized to adjust the number of shares in the Articles of
Association.

Section 315 (4) no. 7 HGB

Authorized capital
In accordance with the resolution passed at the Annual General
Meeting on May 20, 2015, the Management Board is autho-
rized, with the Supervisory Board’s consent, to increase the
Company’s share capital once or repeatedly by up to a total
of EUR 12,744,960 on or before May 19, 2020 by issuing up to
12,744,960 new registered shares against cash and / or non-
cash contributions (Authorized Capital 2015).

The Management Board is authorized, with the Supervisory
Board’s consent, to exclude the shareholders’ subscription
rights wholly or in part, once or repeatedly, in accordance with
the following provisions:

• to exclude the shareholders’ subscription rights for fractional

amounts;

• if and to the extent that it is necessary to grant the bearers
or creditors of conversion or option rights and / or the bearers
or creditors of financing instruments carrying conversion or
option obligations which were or are issued by the NORMA
Group SE, or by a domestic or foreign company in which
NORMA Group SE holds directly or indirectly the majority of
the votes and capital;

• in the case of a capital increase against cash contributions
pursuant or according to section 186 (3), sentence 4 AktG
if the par value of the new shares is not substantially lower
than the stock exchange price of the already listed shares
in the Company and if the new shares which were issued
under exclusion of the subscription right do not exceed
a proportional amount of 10% of the share capital in total;
• in case of capital increases against non-cash contributions,
in particular for the purpose of acquiring enterprises, parts of
enterprises or interests in enterprises.

The Authorized Capital 2011/II which was resolved by the An-
nual General Meeting on April 6, 2011 has thus been cancelled
by resolution of the Annual General Meeting on May 20, 2015.
Article 5 of the Articles of Association of NORMA Group SE has
been changed accordingly.

Conditional Capital
The Management Board is authorized to issue, with the Super-
visory Board’s consent, once or repeatedly on or before May
19, 2020, bearer or registered convertible bonds and / or bonds
with warrants and / or participation rights carrying a conversion
or option right and / or conversion or option obligation (or a
combination of these instruments) in a total nominal amount of
up to EUR 200,000,000 with or without a limited maturity term
(hereinafter referred to collectively as ‘bonds’) and to grant the
creditors of bonds conversion / option rights and / or lay down
for the creditors of bonds conversion / option obligations to sub-
scribe to a total of up to 3,186,240 new registered shares of
the Company with a pro rata amount of the share capital of a
total of up to EUR 3,186,240 in accordance with the terms and
conditions of the bonds.

The share capital of the Company is conditionally increased by
up to EUR 3,186,240 through an issuance of up to 3,186,240
new registered shares (Conditional Capital 2015).

The purpose of the Conditional Capital 2015 is to issue shares
to the creditors of convertible bonds and / or bonds with war-
rants and / or participation rights carrying an option / conversion
right and / or a conversion / option obligation (or a combination of
such instruments), which will be issued based on the authoriza-
tions granted by the Annual General Meeting of NORMA Group
SE on May 20, 2015 or domestic or foreign companies in which
NORMA Group SE directly or indirectly holds the majority of the
votes and the capital.

New shares are issued at the conversion or option price to be
determined in each case in accordance with the respective au-
thorization. The conditional increase in capital will be performed
only insofar as the bearers of conversion or option rights based
on the aforementioned bonds or participation rights exercise
their conversion or option rights or conversion or option obli-
gations that are based on such bonds are fulfilled, and insofar
as the conversion or option rights and / or conversion or option
obligations are not satisfied through own shares, shares from
authorized capital or other consideration.

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS100

The new shares will participate in the profit as of the beginning
of the fiscal year in which they are issued; notwithstanding the
above, the Management Board may, if permitted by law, resolve
with the consent of the Supervisory Board that the new shares
be able to participate in the profit as of the beginning of an ear-
lier fiscal year for which, at the time of their issue, the Annual
General Meeting has not yet resolved on the appropriation of
the net retained profit.

The authorization of the Management Board to issue warrants
and convertible bonds and participation rights with warrants
and convertible rights and the Conditional Capital 2011 resolved
by the Annual General Meeting on April 6, 2011 were cancelled
by shareholder resolution on May 20, 2015. Article 6 of the Ar-
ticles of Association of NORMA Group SE has been amended
accordingly.

Authorization to acquire own shares
Pursuant to the resolution of the Annual General Meeting on
May 20, 2015, NORMA Group SE is authorized to acquire up to
a total of 10% of its own share capital at the time at which the
resolution was adopted or – in the event that this value is lower
– at the time that the authorization is exercised via the stock
exchange or via a public purchase offer on or before May 19,
2020 for any permissible purpose. This authorization may be
exercised by NORMA Group SE in whole or in partial amounts,
once or repeatedly, in pursuit of one or more purposes, but also
be carried out by companies that are dependent on NORMA
Group SE or in which NORMA Group SE holds a majority of the
shares, or on its or their account. If the shares are acquired on
the stock exchange, the equivalent value per share that is paid
(without ancillary acquisition costs) may not exceed the price of
the share in NORMA Group SE in the Xetra trading system (or a
comparable successor system), as determined on the trading
day in Frankfurt / Main by the opening auction, by more than
10% and not fall below it by more than 20%. If the acquisition is
effected by way of a public purchase offer, the purchase price
offered or the threshold values of the purchase price margin
(without ancillary acquisition costs) may not exceed the closing
price of the NORMA Group SE share in the Xetra trading system
(or a comparable successor system) on the third trading day in
Frankfurt / Main prior to the day of the public announcement of
the offer by more than 10% and not fall below it by more than
20%. Should the relevant price vary by a not inconsiderable
extent following the publication of the public purchase offer, the
offer may be adjusted. In this case, the closing price on the third
trading day in Frankfurt / Main prior to the public announcement
will be based on any adjustment that has been made.

The Management Board is authorized to use shares of the Com-
pany for any legal purpose, once or repeatedly, in whole or in
part, and also through dependent or majority-owned NORMA

Group SE related companies or through third parties acting on
their behalf or on behalf of NORMA Group SE. In particular, the
shares acquired may be redeemed without such redemption
or its implementation requiring a shareholder resolution. The
cancellation leads in principle to a capital reduction. The Man-
agement Board may alternatively determine that the share cap-
ital is to remain unchanged upon redemption. In addition, the
Management Board is expressly authorized to use the shares
acquired under this authorization on one or more occasions, in
whole or in part, individually or jointly, and also by dependent
or majority-owned NORMA Group SE related companies or, on
their account or third parties acting on the account of NORMA
Group SE as follows:

• for sale against cash, provided that the price is not significantly
below the stock market price of shares of the Company at the
time of sale (simplified exclusion of subscription rights in ac-
cordance with section 186 para. 3 sentence 4, 71 para. 1 no.
8 sentence 5 half-sentence 2, AktG, is limited to a maximum
of 10% of the share capital),

• for sale against payment in kind, particularly for the acqui-
sition of companies, parts of companies or participations in
companies,

• to meet obligations under conversion or option rights or obli-

gations to act or option,

• to issue in connection with share-based payments and em-

ployee share participation programs.

The purchase right of shareholders to these own shares is ex-
cluded in the event of an appropriate use.

NORMA Group SE is authorized to acquire its own shares with-
in the framework of the aforementioned, related to the share
capital limits, and by using derivatives such as put options, call
options, forward purchases or a combination of these instru-
ments and to take out derivative transactions. The acquisition of
shares by using derivatives is limited to a number of shares that
does not exceed a proportionate amount of 5% of the existing
share capital at the time.

Section 315 (4) no. 8 HGB
NORMA Group’s financing agreements including the contracts
for the promissory notes include the typical Change of Control
Clause. In the event of a takeover by a third party, the possi-
bility that NORMA Group would not be able to finance itself at
similarly favorable terms and conditions cannot be ruled out.

Section 315 (4) no. 9 HGB
NORMA Group SE has no agreements in place that provide
compensation for members of the Management Board or em-
ployees in the event of a takeover bid. Please see the remuner-
ation report for further details.  Remuneration Report, p. 94.

NORMA Group SE Annual Report 2016101

Report on Transactions with Related Parties

Report on Transactions
with Related Parties

In fiscal year 2016, there were no significant transactions with
related companies or persons besides the minority activities of
members of the Management Board described in the Corporate
Governance Report.

Maintal, March 9, 2017

NORMA Group SE

The Management Board

Werner Deggim

Dr. Michael Schneider

Bernd Kleinhens

John Stephenson

Consolidated Management ReportCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS

102

NORMA Group SE Annual Report 2016103

The world population is growing
steadily and with it the challenges for
many industries. The construction
industry and agriculture are two of them
when it comes to creating new housing
and safeguarding the food supply to
the population.

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS104

“NORMA Group supplies manufacturers of construction and agricultural vehicles in the
heavy equipment sector. These place HIGH DEMANDS ON THE PERFORMANCE of
the machines. Due to the complexity and numerous interfaces, with the motor and cooling
system for example, RELIABLE JOINING TECHNOLOGY plays an important role. In
order to meet the high mechanical requirements, we developed the new NORMA Quick V2 XC

in close cooperation with an agricultural machinery manufacturer last year.”

D I R K H A G E N K O R D

A C C O U N T M A N A G E R O F N O N R O A D & I N D U S T R Y
N O R M A G R O U P H O L D I N G G M B H

NORMA Group SE Annual Report 2016105

C O N N E C T I N G P R O D U C T S

I N E N G I N E A N D C O O L I N G S Y S T E M S

C O N N E C T I N G P R O D U C T S

I N F U E L S Y S T E M

148

C O N N E C T I N G P R O D U C T S

I N O T H E R A P P L I C A T I O N S

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS106

NORMA Group SE Annual Report 2016107

Consolidated Management ReportPrinciples of the GroupCONSOLIDATED FINANCIAL STATEMENTSKONZERNLAGEBERICHTAN UNSERE AKTIONÄREINHALTSVERZEICHNIS110
Consolidated Financial Statements

178
Responsibility Statement

110 Consolidated Statement of Financial Position
112 Consolidated Statement of Comprehensive Income
113 Consolidated Statement of Cash Flows
114 Consolidated Statement of Changes in Equity
116 Segment Reporting

179
Auditor’s Report

180
Further Information

180 Glossary
185 List of Graphics
186 List of Tables
189 Overview by Quarter 2016
190 Multi-Year Overview

118
Notes to the
Consolidated Financial Statements

140 Notes to the Consolidated Statement of

Comprehensive Income

143 Notes to the Consolidated Statement

of Financial Position

169 Other Notes

176
Appendix to the Notes to the
Consolidated Financial Statements

176 Voting Rights Notifications
177 Corporate Bodies

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110

Consolidated Statement of Financial Position

A S S E T S

in EUR thousands

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Other non-financial assets

Derivative financial assets

Income tax assets

Deferred income tax assets

Current assets

Inventories

Other non-financial assets

Other financial assets

Derivative financial assets

Income tax assets

Trade and other receivables

Cash and cash equivalents

T 0 3 4

Note

Dec 31, 2016

Dec 31, 2015

(19)

(20)

(25)

(22)

(17)

(18)

(24)

(25)

(26)

(22)

(17)

(23)

(36)

368,859

295,427

201,177

261

1,576

106

7,563

874,969

139,885

15,701

5,685

1,157

10,479

124,208

165,596

462,711

343,829

271,009

169,939

234

458

8,105

793,574

129,902

13,711

3,856

248

3,772

122,865

99,951

374,305

Total assets

1,337,680

1,167,879

NORMA Group SE Annual Report 2016
Consolidated Statement of Financial Position

111

E Q U I T Y A N D L I A B I L I T I E S

T 0 3 4

in EUR thousands

Note

Dec 31, 2016

Dec 31, 2015

Equity attributable to equity holders of the parent

Subscribed capital

Capital reserve

Other reserves

Retained earnings

Equity attributable to shareholders

Non-controlling interests

Total equity

Liabilities

Non-current liabilities

Retirement benefit obligations

Provisions

Borrowings

Other non-financial liabilities

Other financial liabilities

Derivative financial liabilities

Deferred income tax liabilities

Current liabilities

Provisions

Borrowings

Other non-financial liabilities

Other financial liabilities

Derivative financial liabilities

Income tax liabilities

Trade and other payables

Total liabilities

Total equity and liabilities

31,862

210,323

27,077

213,504

482,766

819

(27)

483,585

(29)

(30)

(31)

(32)

(33)

(22)

(18)

(30)

(31)

(32)

(33)

(22)

(17)

(34)

11,786

9,668

513,105

610

1,240

2,014

101,845

640,268

9,489

42,176

31,212

1,119

167

10,087

119,577

213,827

854,095

31,862

210,323

21,128

165,600

428,913

898

429,811

11,951

10,842

443,711

1,368

681

2,510

104,380

575,443

9,972

7,056

28,653

6,019

876

9,172

100,877

162,625

738,068

1,337,680

1,167,879

Consolidated Financial Statements
112

Consolidated Statement of Comprehensive Income

Note

Q4 2016

Q4 2015

2016

2015

T 0 3 5

in EUR thousands

Revenue

Changes in inventories of finished goods and work in progress

Other own work capitalized

Raw materials and consumables used

Gross profit

Other operating income

Other operating expenses

Employee benefits expense

Depreciation and amortization

Operating profit

Financial income

Financial costs

Financial costs – net

Profit before income tax

Income taxes

PROFIT FOR THE PERIOD

Other comprehensive income for the period, net of tax

Other comprehensive income that can be reclassified
to profit or loss, net of tax

Exchange differences on translation of foreign operations

Cash flow hedges

Other comprehensive income that cannot be reclassified
to profit or loss, net of tax

(8)

(9)

(10)

(11)

(12)

(19, 20)

(13)

(16)

(27)

(22,27)

Remeasurements of post employment benefit obligations, net of tax

(27, 29)

Other comprehensive income for the period, net of tax

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

Profit attributable to

Shareholders of the parent

Non-controlling interests

Total comprehensive income attributable to

Shareholders of the parent

Non-controlling interests

215,454

217,025

894,887

889,613

456

890

−87,561

129,239

5,033

−37,935

−58,926

−17,623

19,788

120

− 2,930

− 2,810

16,978

−1,516

15,462

15,963

12,861

3,102

833

16,796

32,258

15,449

15,462

32,281

−23

32,258

781

914

−88,354

130,366

2,488

−34,864

−57,543

−12,909

27,538

280

−3,830

−3,550

23,988

−5,503

18,485

7,169

6,607

562

−401

6,768

25,253

18,510

−25

18,485

25,327

−74

25,253

244

3,318

−353,527

544,922

15,210

−141,446

−244,061

−54,624

120,001

227

−14,872

−14,645

105,356

−29,490

75,866

5,955

3,926

2,029

833

6,788

82,654

75,747

119

75,866

82,529

125

82,654

3,622

2,748

−365,373

530,610

11,408

−133,514

−234,616

−49,094

124,794

500

−17,709

−17,209

107,585

−33,738

73,847

18,599

18,017

582

−401

18,198

92,045

73,680

167

73,847

91,911

134

92,045

(Un)diluted earnings per share (in EUR)

(15)

0.48

0.58

2.38

2.31

NORMA Group SE Annual Report 2016

Consolidated Statement of Comprehensive Income | Consolidated Statement of Cash Flows

Consolidated Statement of Cash Flows

113

T 0 3 6

in EUR thousands

Note

Q4 2016

Q4 2015

2016

2015

Operating activities

Profit for the period

Depreciation and amortization

Gain (−) / loss (+) on disposal of property, plant and equipment

Change in provisions

Change in deferred taxes

Change in inventories, trade account receivables and
other receivables, which are not attributable to investing
or financing activities

(19, 20)

(30)

(18)

(23, 24,
25, 26)

Change in trade and other payables, which are not attributable
to investing or financing activities

(32, 33, 34)

Change in reverse factoring liabilities

Payments for share-based payments

Interest expenses in the period

Income (−) / expenses (+) due to measurement of derivatives

Other payments classified as investing activities

Other non-cash expenses (+) / income (−)

(36)

Cash flow from operating activities

thereof interest received

thereof income taxes

Investing activities

15,462

17,623

−150

−2,396

−4,150

18,485

12,909

150

2,000

−6,237

75,866

54,624

870

−5,202

73,847

49,094

1,374

−7,158

12,157

12,338

−11,348

−19,474

11,719

−788

3,722

2,392

1,650

−3,885

53,356

105

−6,953

−3,946

2,740

2,732

−1,993

32,225

18,580

2,279

−2,534

12,652

2,435

1,650

−754

149,198

221

10,559

5,690

−2,265

13,599

12,610

−9,789

128,159

−12,682

−21,788

−40,079

−44,228

Payments for acquisitions of subsidiaries, net

(36, 40)

−82,681

−87,623

−52

Investments in property, plant and equipment
and intangible assets

Proceeds from the sale of property, plant and equipment

Cash flow from investing activities

(19, 20)

−15,571

−15,975

−46,974

448

−97,804

−75

748

−16,050

−133,849

Financing activities

Interest paid

Dividends paid to shareholders

Dividends paid to non-controlling interests

Proceeds from borrowings

Repayment of borrowings

Repayment of derivatives

Repayment of lease liabilities

−4,890

−4,536

(27)

(31)

−38

−2,598

−3,056

−77

−55

99,247

−83,658

−22,619

−72

−11,693

4,482

94,965

504

99,951

−12,026

−28,676

−204

188,434

−94,163

−3,485

−294

49,586

64,935

99,951

710

165,596

Cash flow from financing activities

(36)

−10,659

Net change in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Effect of foreign exchange rates on cash and cash equivalents

Cash and cash equivalents at the end of the period

−55,107

217,556

3,147

165,596

−44,793

378

−44,467

−13,926

−23,897

−205

99,703

−94,076

−37,751

−294

−70,446

13,246

84,271

2,434

99,951

Consolidated Financial Statements

114

Consolidated Statement of Changes in Equity

in EUR thousands

Note

Subscribed capital

Capital reserve

Other reserves

Retained earnings

Total

Non-controlling interests

Total equity

Attributable to equity holders of the parent

Balance as of December 31, 2014

Changes in equity for the period

Result for the period

Exchange differences on translation of foreign operations

Cash flow hedges, net of tax

Remeasurements of post employment benefit obligations, net of tax

Total comprehensive income for the period

Stock options

Dividends paid

Dividends paid to non-controlling interests

Total transactions with owners for the period

Balance as of December 31, 2015

Changes in equity for the period

Result for the period

Exchange differences on translation of foreign operations

Cash flow hedges, net of tax

Remeasurements of post employment benefit obligations, net of tax

Total comprehensive income for the period

Stock options

Dividends paid

Dividends paid to non-controlling interests

Total transactions with owners for the period

(22)

(27, 29)

(28)

(27)

(22)

(27, 29)

(28)

(27)

31,862

216,468

31,862

−6,145

210,323

Balance as of December 31, 2016

31,862

210,323

2,496

18,050

582

18,632

21,128

3,920

2,029

5,949

27,077

116,218

73,680

−401

73,279

−23,897

165,600

75,747

833

76,580

−28,676

213,504

367,044

73,680

18,050

582

−401

91,911

−6,145

−23,897

−30,042

428,913

75,747

3,920

2,029

833

82,529

−28,676

482,766

969

167

−33

134

−205

898

119

125

−204

819

T 0 3 7

368,013

73,847

18,017

582

−401

92,045

−6,145

−23,897

−205

−30,247

429,811

75,866

3,926

2,029

833

82,654

−28,676

−204

−28,880

483,585

NORMA Group SE Annual Report 2016

Consolidated Statement of Changes in Equity

115

T 0 3 7

in EUR thousands

Note

Subscribed capital

Capital reserve

Other reserves

Retained earnings

Total

Non-controlling interests

Total equity

Attributable to equity holders of the parent

Balance as of December 31, 2014

Changes in equity for the period

Result for the period

Exchange differences on translation of foreign operations

Cash flow hedges, net of tax

Remeasurements of post employment benefit obligations, net of tax

Total comprehensive income for the period

Stock options

Dividends paid

Dividends paid to non-controlling interests

Total transactions with owners for the period

Balance as of December 31, 2015

Changes in equity for the period

Result for the period

Exchange differences on translation of foreign operations

Cash flow hedges, net of tax

Remeasurements of post employment benefit obligations, net of tax

Total comprehensive income for the period

Stock options

Dividends paid

Dividends paid to non-controlling interests

Total transactions with owners for the period

(22)

(27, 29)

(28)

(27)

(22)

(27, 29)

(28)

(27)

31,862

216,468

31,862

−6,145

210,323

Balance as of December 31, 2016

31,862

210,323

2,496

18,050

582

18,632

21,128

3,920

2,029

5,949

27,077

116,218

73,680

−401

73,279

−23,897

165,600

75,747

833

76,580

−28,676

213,504

367,044

73,680

18,050

582

−401

91,911

−6,145

−23,897

−30,042

428,913

75,747

3,920

2,029

833

82,529

−28,676

482,766

969

167

−33

134

−205

898

119

125

−204

819

368,013

73,847

18,017

582

−401

92,045

−6,145

−23,897

−205

−30,247

429,811

75,866

3,926

2,029

833

82,654

−28,676

−204

−28,880

483,585

Consolidated Financial Statements

116

Segment Reporting

EME A

Americas

Asia-Pacific

Total segments

Central functions

Consolidation

Consolidated Group

in EUR thousands

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

Total revenue

thereof inter-segment revenue

459,049

27,043

445,188

29,171

390,303

8,686

403,418

8,071

84,126

2,862

81,047

2,798

933,478

38,591

929,653

40,040

35,802

31,620

−74,393

−71,660

894,887

889,613

Revenue from external customers

432,006

416,017

381,617

395,347

81,264

78,249

894,887

889,613

894,887

889,613

T 0 3 8

Contribution to consolidated Group
sales

Adjusted gross profit 1

Adjusted EBITDA 1

Adjusted EBITDA margin 1, 2

Depreciation without
PPA depreciation 3

Adjusted EBITA 1

Adjusted EBITA margin 1, 2

Assets 4

Liabilities 5

CAPE X

Number of employees 6

48%

271,116

93,677

20.4%

−10,225

83,452

18.2%

556,935

184,247

19,988

2,950

47%

261,322

88,025

19.8%

−9,964

78,061

17.5%

489,161

136,903

14,425

2,756

43%

235,941

83,055

21.3%

−7,871

75,184

19.3%

673,203

354,953

16,921

1,439

44%

237,376

87,571

21.7%

−7,872

79,699

19.8%

636,294

358,563

17,752

1,399

41,000

11,681

13.9%

−2,683

8,998

10.7%

119,283

34,804

5,526

780

36,762

10,133

12.5%

−2,463

7,670

9.5%

84,422

30,805

5,597

767

1 For details regarding the adjustments, please refer to  Note 7.
2 Based on segment sales.
3 Depreciation from purchase price allocations.
4 Including allocated goodwill, taxes are shown within the column “consolidation.”
5 Taxes are shown within the column “consolidation.”
6 Number of employees (average headcount).

100%

548,057

188,413

−20,779

167,634

1,349,421

574,004

42,435

5,169

100%

535,460

185,729

−20,299

165,430

1,209,877

526,271

37,774

4,922

n /a

−8,568

−1,113

−9,681

474,932

672,332

5,452

n /a

−8,017

−884

−8,901

404,821

556,760

4,392

−2,500

−468

−486,673

−392,241

n /a

−2,378

−233

−446,819

−344,963

n /a

545,557

179,377

20.0%

−21,892

157,485

17.6%

1,337,680

854,095

47,887

5,266

533,082

177,479

20.0%

−21,183

156,296

17.6%

1,167,879

738,068

42,166

5,006

NORMA Group SE Annual Report 2016

Segment Reporting

117

T 0 3 8

EME A

Americas

Asia-Pacific

Total segments

Central functions

Consolidation

Consolidated Group

in EUR thousands

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

2016

2015

Total revenue

thereof inter-segment revenue

459,049

27,043

445,188

29,171

390,303

8,686

403,418

8,071

84,126

2,862

81,047

2,798

933,478

38,591

929,653

40,040

35,802

31,620

−74,393

−71,660

894,887

889,613

Revenue from external customers

432,006

416,017

381,617

395,347

81,264

78,249

894,887

889,613

894,887

889,613

Contribution to consolidated Group

sales

Adjusted gross profit 1

Adjusted EBITDA 1

Adjusted EBITDA margin 1, 2

Depreciation without

PPA depreciation 3

Adjusted EBITA 1

Adjusted EBITA margin 1, 2

Assets 4

Liabilities 5

CAPE X

Number of employees 6

48%

271,116

93,677

20.4%

−10,225

83,452

18.2%

556,935

184,247

19,988

2,950

47%

261,322

88,025

19.8%

−9,964

78,061

17.5%

489,161

136,903

14,425

2,756

43%

235,941

83,055

21.3%

−7,871

75,184

19.3%

673,203

354,953

16,921

1,439

44%

237,376

87,571

21.7%

−7,872

79,699

19.8%

636,294

358,563

17,752

1,399

41,000

11,681

13.9%

−2,683

8,998

10.7%

119,283

34,804

5,526

780

36,762

10,133

12.5%

−2,463

7,670

9.5%

84,422

30,805

5,597

767

100%

548,057

188,413

−20,779

167,634

1,349,421

574,004

42,435

5,169

100%

535,460

185,729

−20,299

165,430

1,209,877

526,271

37,774

4,922

n /a

−8,568

−1,113

−9,681

474,932

672,332

5,452

n /a

−8,017

−884

−8,901

404,821

556,760

4,392

−2,500

−468

−486,673

−392,241

n /a

−2,378

−233

−446,819

−344,963

n /a

545,557

179,377

20.0%

−21,892

157,485

17.6%

1,337,680

854,095

47,887

5,266

533,082

177,479

20.0%

−21,183

156,296

17.6%

1,167,879

738,068

42,166

5,006

Consolidated Financial Statements

118

Notes to the Consolidated Financial Statements

1. GENER AL INFOR M ATION
NORMA Group SE is the ultimate parent Company of NORMA
Group. Its headquarters are located at 63477 Maintal, Edison-
strasse 4 in the vicinity of Frankfurt, Germany, and the Compa-
ny is registered in the commercial register of Hanau under the
number HRB 94473. NORMA Group SE and its affiliated Group
subsidiaries operate in the market as ‘NORMA Group.’

NORMA Group has been listed in the Prime Standard of Frank-
furt Stock Exchange’s Regulated Market since April 8, 2011. For
a detailed overview of NORMA Group’s shareholdings, please
refer to the  Appendix to the Notes: ‘Voting Rights.’

NORMA Group SE was established in 2006 as a result of the
merger of Rasmussen GmbH and the ABA Group. Rasmussen
was founded in 1949 as Rasmussen GmbH in Germany. It man-
ufactured connecting and retaining elements as well as fluid
conveying conduits such as monolayer and multilayer tubes and
corrugated tubes. All products were marketed globally under the
NORMA brand. ABA Group was founded in 1896 in Sweden. The
Group has since developed into a leading multi-national compa-
ny specializing in the design and production of hose and pipe
clamps, as well as connectors for many world-wide applications.

In past decades, NORMA Group has, driven by its successful
acquisitions and continuous technological innovation with prod-
ucts and operations, developed into a group of companies of
global importance.

On November 30, 2016, NORMA Group acquired the Autoline
business (Autoline) with locations in France, Mexico and Chi-
na from Parker Hannifin. This acquisition strengthens NORMA
Group’s market position with new products in the area of quick
connectors and by gaining new customers.

For Engineered Joining Technology (EJT) customers, NORMA
Group offers tailor-made solutions and special engineered
joining systems. To effectively fulfill special requirements,
N O R M A Group builds on extensive industr y and applica-
tion knowledge, a successful track record of innovation and
long-standing relationships with all its key customers. As a
result, many joining systems and fluid conveying conduits
have been developed in close cooperation with global OEMs
and NORMA Group.

For Distribution Services (DS) customers, NORMA Group of-
fers a wide range of standard fastening and fixing products.
Furthermore, NORMA Group offers a broad technological and
innovative product portfolio which includes brands like ABA ®,
Breeze®, Clamp-All®, CONNECTORS ®, FISH ®, Five Star®, Gemi®,
NDS ®, NORMA ®, R.G.RAY®, Serflex®, TERRY® and TORCA ®.

2 . BASIS OF PR EPAR ATION
The principal accounting policies applied in the preparation of
these Consolidated Financial Statements are set out below.
These policies have been consistently applied to all the years
presented, unless otherwise stated.

The Consolidated Financial Statements of NORMA Group have
been prepared in accordance with International Financial Re-
porting Standards and the relevant interpretations as adopted
by the EU (IFRS) as well as with the regulations under commer-
cial law as set forth in section 315a of the German Commercial
Code (HGB) for the year ended December 31, 2016.

The Consolidated Statement of Comprehensive Income has
been prepared in accordance with the total cost method.

NORMA Group markets its products to its customers via two
different market channels: Engineered Joining Technology (EJT)
and Distribution Services (DS).

The Consolidated Financial Statements of NORMA Group SE
were prepared by the Management Board on March 9, 2017,
and released for publication after they were approved by the
Supervisory Board on March 20, 2017.

NORMA Group SE Annual Report 2016119

The Consolidated Financial Statements of NORMA Group are
being filed with and published in the German Federal Gazette
(Bundesanzeiger).

Financial Statements are disclosed in  Note 6 ‘Critical Ac-
counting Estimates and Judgments.’

The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process
of applying the Group’s accounting policies. The areas involv-
ing a higher degree of judgment or complexity or areas where
assumptions and estimates are significant to the Consolidated

New and amended standards adopted by
the Group for the first time in 2016
The following new standards or amendments to standards
which were applied for the first time for the fiscal year be-
ginning January 1, 2016, did not have a material impact on
NORMA Group’s financial position, cash flows and financial
performance.

N E W A N D A M E N D E D S TA N D A R D S A D O P T E D B Y T H E G R O U P F O R T H E F I R S T T I M E

T 0 3 9

New or revised
standard

Amendments

Amendments to IAS 19:
Defined Benefit Plans:
Employee Contributions

IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit
plans. The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an
entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is
rendered, instead of allocating the contributions to the periods of service.

Amendments to
IAS 16 and IAS 38:
Clarification of Acceptable
Methods of Depreciation and
Amortization

Amendments to IAS 1:
Presentation of Financial
Statements

This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appro-
priate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the
consumption of the economic benefits embodied in the asset. This has also clarified that revenue is generally presumed to
be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The
amendments further clarify that the depreciation of property, plant and equipment based on the sales revenue of the goods
produced by them does not necessarily correspond to this approach and is therefore not appropriate since the revenue
not only depends on the consumption of the asset, but also on other factors such as sales volume, price or inflation. In
principle, this clarification is also included in IAS 38 for the amortization of intangible assets having limited useful lives. The
presumption may only be rebutted in certain limited circumstances. These are where the intangible asset is expressed as
a measure of revenue; or where it can be demonstrated that revenue and the consumption of the economic benefits of the
intangible asset are highly correlated.

On December 18, 2014, the IASB issued Amendments to IAS 1: Presentation of financial statements. The amendments
emphasize the concept of materiality to avoid several application issues. The amendments clarify that an entity must not
reduce the understandability of its financial statements by obscuring material information with immaterial information or
by aggregating material items that have different natures or functions. The aim of these clarifications is to relieve IFRS
financial statements of non-essential information while promoting the exchange of relevant information. Furthermore, the
understandability of financial statement information shall not be limited by summarizing relevant and irrelevant information
or by aggregating main items with different characteristics or functions. The amendments result in the deletion of a model
structure of the notes towards consideration of company-specific relevance, whereby it is explicitly clarified that companies
should take the impact on the readability and comparability of their IFRS financial statements into account in determining
the structure of their notes. Furthermore, companies are expected to take the nature of their business and the methods by
which the addressees most likely expect to receive information into consideration in determining the accounting policies
to be listed. The amended standard also contains explanations on aggregation and disaggregation of items in the balance
sheet and the income statement, and clarification as to how shares of other comprehensive income of companies to be
accounted for using the equity method are to be presented in the statement of comprehensive income.

Annual Improvements to IFRS:
2010–2012 Cycle
and 2012–2014 Cycle

In December 2014, as part of its annual improvements project, the International Accounting Standards Board (IASB) issued
Annual Improvements to IFRSs: 2010–2012 Cycle and also in September 2014, 2012–2014 Cycle, both of which propose
amendments to several International Financial Reporting Standards (IFRSs). The amendments are intended to clarify the
requirements and not to change the accounting practice.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements120

Standards, amendments and interpretations of existing
standards that are not yet effective and have not been
adopted early by the Group
The following standards and amendments to existing standards
have been published and application is mandatory for all ac-

counting periods beginning on or after January 1, 2017. The
Group has decided against an early adoption.

1) Standards, amendments and interpretations to existing
standards that have already been endorsed by the EU
(with reference to each respective EU effective date):

S TA N D A R D S , A M E N D M E N T S A N D I N T E R P R E TAT I O N S T O E X I S T I N G S TA N D A R D S
T H AT H AV E A L R E A D Y B E E N E N D O R S E D B Y T H E E U

T 0 4 0

New or revised
standards

EU endorse-
ment date

Amendments

IFRS 9:
Financial
Instruments

Nov 22, 2016 In July 2014, the IASB finalized the reform of financial instruments accounting and issued IFRS 9, which will supersede
IAS 39 Financial Instruments: Recognition and Measurement. The completed IFRS 9 contains the requirements for the
classification and measurement of financial assets and liabilities, the impairment methodology, and the general hedge
accounting.

Classification and measurement of financial assets and financial liabilities
IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for
financial assets: amortized cost, fair value through OCI and fair value through P&L. The basis of classification depends
on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to pres-
ent changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39. For financial liabilities, there were no changes to classification and measurement
except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair
value through profit or loss.

Impairment methodology
The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39.

IAS 39’s ‘incurred loss’ model delayed the recognition of impairment until objective evidence of a credit loss event had
been identified. Under the impairment approach in IFRS 9, it is no longer necessary for a credit event to have occurred
before credit losses are recognized. Instead, an entity always accounts for expected credit losses and changes in those
expected credit losses.

Hedge accounting
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires
an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as
the one management actually uses for risk management purposes. Contemporaneous documentation is still required but
is different to that currently prepared under IAS 39. The new standard is effective for accounting periods beginning on or
after January 1, 2018. Early adoption is permitted.

IFRS 15:
Revenue from
Contracts with
Customers

The Group is currently assessing the impact of adopting IFRS 9 on the Group’s Consolidated Financial Statements.

Sep 22, 2016 In May 2014, IFRS 15 was issued which established a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance. The core
principle of IFRS 15 is that an entity should recognize revenue to depict the transfer of promised goods or services to a cus-
tomer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. Specifically, the Standard introduces a 5-step approach to revenue recognition: 1. Identify the contract(s) with
a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the
transaction price to the performance obligations in the contract; 5. Recognize revenue when (or as) the entity satisfies a
performance obligation. Under IFRS 15, an entity recognizes revenue when (or as) a performance obligation is satisfied,
i. e. when control of the goods or services underlying the particular performance obligation is transferred to the customer.

Key changes to current practice are:
• Any bundled goods or services that are distinct must be recognized separately, and any discounts or rebates on the

contract price must generally be allocated to the separate elements.

• Revenue may be recognized earlier than under current standards if the consideration varies for any reasons (such as for

incentives, rebates, performance fees, royalties, success of an outcome etc).

• The point at which revenue is able to be recognized may shift: some revenue which is currently recognized at a point in

time at the end of a contract may have to be recognized over the contract term and vice versa.

• There are new specific rules e. g. on licenses, warranties, non-refundable upfront fees and consignment arrangements.

Furthermore, extensive disclosures are required by IFRS 15. In September 2015, the IASB issued amendments to this
standard, which move the effective date to accounting periods beginning on or after January 1, 2018. Early adoption is
permitted.

The impacts of IFRS 15 are currently being analyzed within a Group-wide implementation project. Changes within the cur-
rent timing of revenue recognition could occur for long-term delivery contracts within the Engineered Joining Technology
(EJT) business with integrated graduated discounts, staggered rebates or price scales. A reliable quantitative estimate of
the potential effects is not possible before the completion of this project. Besides, changes to the Statement of Financial
Position are expected, e. g. separate line items for contract liabilities resulting from granted customer bonuses. However,
from the Group’s present point of view, the application of IFRS 15 will not have a material impact on NORMA Group’s
financial position, cash flows and financial performance.

NORMA Group SE Annual Report 2016121

2) Standards, amendments and interpretations to existing

standards that have not been endorsed by the EU:

S TA N D A R D S , A M E N D M E N T S A N D I N T E R P R E TAT I O N S T O E X I S T I N G S TA N D A R D S
T H AT H AV E N O T B E E N E N D O R S E D B Y T H E E U

T 0 41

New or revised
standards

IFRS: 16 Leases

Amendments to IAS 12:
Recognition of Deferred Tax
Assets on Unrealized Losses

Amendments to IAS 7:
Disclosure Initiative

Amendments

The IASB issued the new leasing standard IFRS 16, Leases, on January 13, 2016, which replaces the previous leases stan-
dard IAS 17 and related interpretations. IFRS 16 sets out the principles for the recognition, measurement, presentation and
disclosure of leases for both parties to a contract, i. e. the customer (‘lessee’) and the supplier (‘lessor’). The new standard
affects particularly lessees, as almost all leases will be recognized on the lessee’s balance sheet. The lessor accounting
requirements in IAS 17 will be substantially carried forward by IFRS 16. IFRS 16 eliminates, with only few exceptions, the dis-
tinction between finance and operating leases for lessees. Instead, the standard adopts a single lessee accounting model.

Applying that model, a lessee is required to recognize a right-of-use asset and a lease liability and depreciation of lease
assets separately from interest on lease liabilities in the income statement. The lease liability includes the present value of
the outstanding future lease payments plus residual value guarantees. Exceptions exist for leases with a term of less than
12 months and leases with an underlying asset of low value (primarily “small IT equipment”). Those leases are recognized
according to the existing operating leases. A lessor continues to classify its leases as operating or finance leases, and to
account for those two types of leases differently.

The new standard is effective for accounting periods beginning on or after January 1, 2019. Early adoption is permitted.

The Group is currently assessing the impact of adopting IFRS 16 on the Group’s Consolidated Financial Statements.

On January 19, 2016, the IASB published amendments to IAS 12, Income Taxes, which contain clarifications on the ap-
proach of deferred tax assets on temporary differences from unrealized losses. The amendment to IAS 12 makes it clear
once again that the determination of a temporary difference within the meaning of IAS 12 is based on the fact that the book
value is realized at the time of the determination of the economic benefit that flows to the company in future periods. The
existence of a temporary difference could be determined solely by comparing the IFRS carrying value at the respective
balance sheet date with the tax base at that time. Future foreseeable changes in the book value are not to be considered.

In addition, the amendment clarifies that the IFRS book value is only relevant for the determination of temporary differences,
but not for the estimation of the future taxable profit. When determining the taxable profit, the realization of a value greater
than the current IFRS carrying value is also conceivable, provided this is probable.

In this context, it is also clarified that, insofar as the tax deduction limits the use of deductible temporary differences to a
certain type of result, when assessing whether and to what extent deferred tax assets are to be applied, only these types
of deferred taxes can be applied to these differences.

In addition, the IASB makes clear that the reversal of any deductible differences is not to be taken into account when deter-
mining the future taxable profit, which is used to determine the recoverability of deferred tax assets.

Entities are required to apply the amendments for annual periods beginning on or after January 1, 2017. Earlier application
is permitted.

The Group is currently assessing the impact of an application of the amendments to IAS 12 to the Consolidated Financial
Statements of the company.

On January 29, 2016, the IASB published amendments to IAS 7, Cash Flow Statement, which are intended to improve
information on financing and liquidity of companies. In particular, the financial statements should enable users of financial
statements to evaluate changes in liabilities arising from financing activities. To achieve this objective, the IASB requires
that the following changes in liabilities arising from financing activities are disclosed (to the extent necessary): changes
from financing cash flows, changes arising from obtaining or losing control of subsidiaries or other businesses; the effect
of changes in foreign exchange rates, changes in fair values; and other changes.

The amendments are effective for annual periods beginning on or after January 1, 2017. Earlier application is permitted.

The Group does not expect any material effects on the Consolidated Financial Statements from the amendments.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements122

New or revised
standards

Amendments

Amendments to IFRS 15:
Clarifications to IFRS 15

On April 12, 2016, the International Accounting Standards Board (IASB) published final clarifications to IFRS 15 Revenue
from contracts with customers. The amendments contain clarifications on various provisions of IFRS 15 and simplifications
regarding the transition to the new standard.

Amendments to IFRS 2:
Clarification on:
Valuation, Classification
and Modification

The clarifications concern the identification of the performance obligations from a contract, the assessment of whether
a company is the principal or agent of a business transaction, and the assessment of whether revenues from a granted
license are to be taken on a time or period basis.

In addition to the clarifications, the amendment standard provides two further simplifications to reduce the complexity and
cost of switching to the new standard. These relate to options for the presentation of contracts which are concluded either
at the beginning of the earliest period shown or which have been changed before the start of the earliest period.

The amendments are effective for annual reporting periods beginning on or after January 1, 2018, which is the same effec-
tive date as that of IFRS 15. Earlier application is permitted.

On June 20, 2016, the IASB issued amendments to IFRS 2, Share-based Payment, clarifying how to account for certain
types of share-based payment transactions.

The amendments provide requirements on the accounting for the following areas:

Consideration of conditions of performance (terms of service, market conditions and other performance condi-
tions) within the framework of the valuation of cash settled share-based payments.
Under the new regulations, market conditions and non-exercisable conditions must be taken into account when estimating
the fair value. Service conditions and other performance conditions must be considered when estimating the number of
awards expected to vest.

Classification of share-based payment transactions with a net settlement feature for withholding tax obligations.
If a company reduces the number of equity instruments to be delivered otherwise because it is obliged to withhold the
number of equity instruments equal to the monetary value of the employee’s tax obligation, and if this net compensation is
provided for in the contract, the remuneration is – in spite of this partial payment – classified in its entirety as an equity-set-
tled share-based payment transaction.

Accounting for a modification in the terms and conditions of a share-based payment that changes the transaction
from cash-settled to equity-settled.
The equity-settled share-based payment is recognized at the modification date fair value of the equity instrument granted
to the extent that services have been rendered up to the modification date. The cash-settled award is remeasured, with any
difference recognized in the income statement before the remeasured liability is reclassified into equity.

Entities are required to apply the amendments for annual periods beginning on or after January 1, 2018. Early application
is permitted.

The Group is currently examining the effects of applying IFRS 2 to its consolidated financial statements.

In December 2016, the IASB conducted the cycle as part of the
Annual Improvement Project 2014–2016, which provides vari-
ous amendments to existing standards. The cycle: 2014–2016
contains clarifications for three standards, IFRS 1, IFRS 12 and
IAS 28. The amendments to IFRS 1 and IAS 28 are effective
for annual periods beginning on or after January 1, 2018, the
amendment to IFRS 12 for annual periods beginning on or after
January 1, 2017.

The amendments are intended for clarification purposes and
not for any fundamental changes in accounting practice. As a
result, the Group does not expect any material effects on the
Consolidated Financial Statements.

3 . SUMM ARY OF SIG NIFICA NT ACCOUNTING

PRINCIPLES

1. Consolidation

(a) Subsidiaries
Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Consolidation
of an investee begins from the date the Group obtains control
of the investee and ceases when the Group loses control of
the investee.

The IASB has published a number of other pronouncements.
These recently translated accounting pronouncements as well
as the pronouncements which have not yet been implemented
have no material effect on the consolidated financial statements
of NORMA Group.

The Group uses the acquisition method of accounting to ac-
count for business combinations. The initial value for the ac-
quisition of a subsidiary is recognized at fair value of the assets
transferred, the liabilities incurred and the equity interests issued

NORMA Group SE Annual Report 2016
123

by the Group. The initial value recognized includes the fair value
of any asset or liability resulting from a contingent consideration
arrangement. On the acquisition date, the fair value of the con-
tingent consideration is recognized as part of the consideration
transferred in exchange for the acquiree. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value on the ac-
quisition date. According to IFRS 3, for each business combi-
nation the acquirer shall measure any non-controlling interest in
the acquiree either at fair value (full goodwill method) or at the
non-controlling interest’s proportionate share of the acquiree’s
net assets. The Group measures the non-controlling interest
in the acquiree at the non-controlling interest’s proportionate
share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any
non-controlling interest in the acquiree and the acquisition date
fair value of any previous equity interest in the acquiree over
the fair value of the Group’s share of the identifiable net assets
acquired, is recorded as goodwill. If this is less than the fair
value of the net assets of the subsidiary acquired in the case of
a bargain purchase, the difference is recognized immediately in
the statement of comprehensive income.

In a business combination achieved in stages, the Group remea-
sures its previously held equity interest in the acquiree at its
acquisition date fair value and recognizes the resulting gain or
loss, if any, in profit or loss.

Intercompany transactions, balances and unrealized gains or
losses on transactions between Group companies are elimi-
nated. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies ad-
opted by the Group.

(b) Non-controlling interests
Non-controlling interests have a share in the earnings of the re-
porting period. Their interests in the shareholders’ equity of sub-
sidiaries are reported separately from the equity of the Group.

The Group treats transactions with non-controlling interests that
do not result in a loss of control as transactions with equity
owners of the Group. For purchases from non-controlling in-
terests, the difference between any consideration paid and the
relevant share acquired of the carrying value of net assets of
the subsidiary is recorded in equity.

(c) Disposal of subsidiaries
When the Group ceases to have control, any retained interest in
the subsidiary is remeasured at its fair value, with the change in
the carrying amount recognized in profit or loss. The initial carry-
ing amount is the fair value for the purposes of subsequently ac-
counting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognized in
other comprehensive income in respect of that entity are account-
ed for as if the Group had directly disposed of the related assets
or liabilities. This may mean that amounts previously recognized
in other comprehensive income are reclassified to profit or loss.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements124

2. Valuation methods
The following table shows the most important valuation methods:

VA L U AT I O N M E T H O D S

T 0 4 2

Position

Assets

Goodwill

Valuation method

Impairment-only approach

Other intangible assets (except goodwill) – finite useful lives

Amortized costs

Other intangible assets (except goodwill) – indefinite useful lives

Impairment-only approach

Property, plant and equipment

Derivative financial assets:

Classified as cash flow hedge

Classified as fair value hedge

Without hedge accounting

Inventories

Other non-financial assets

Other financial assets

Trade and other receivables

Cash and cash equivalents

Liabilities

Pensions

Other provisions

Borrowings

Other non-financial liabilities

Other financial liabilities (categories IAS 39):

Financial liabilities at cost (FL AC)

Derivative financial liabilities:

Classified as cash flow hedge

Classified as fair value hedge

Without hedge accounting

Contingent consideration

Trade and other payables

Amortized costs

At fair value in other comprehensive income

At fair value through profit or loss

Lower of cost or net realizable value

Amortized costs

Nominal amount

Projected unit credit method

Present value of future settlement amount

Amortized costs

At fair value in other comprehensive income

At fair value through profit or loss

Amortized costs

3. Fair value estimation
The amendment to IFRS 7 for financial instruments that are
measured in the statement of financial position at fair value in
accordance with IFRS 13 requires disclosure of fair value mea-
surements by level using the following fair value measurement
hierarchy:

The level in the fair value hierarchy within which the fair value
measurement is categorized in total is determined on the basis
of the lowest level input that is significant to the fair value mea-
surement in total. The different hierarchy levels demand different
amounts of disclosure.

Level 1: Quoted prices (unadjusted) in active markets for iden-

tical assets or liabilities,

Level 2:

Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either di-
rectly (that is as prices) or indirectly (that is derived
from prices), and

On December 31, 2016, and 2015, the Group’s derivative finan-
cial instruments carried in the statement of financial position
at fair value (e. g. derivatives used for hedging) are categorized
in total within Level 2 of the fair value hierarchy. The fair value
of interest rate swaps is calculated as the present value of the
estimated future cash flows. The fair value of forward foreign
exchange contracts is determined using a present value model
based on forward exchange rates.

Level 3: Inputs for the asset or liability that are not based on
observable market data (that is unobservable inputs).

Contingent considerations recognized in the balance sheet as
of December 31, 2015, measured at fair value, are within Level
3 of the fair value hierarchy.  Note 21 ‘Financial Instruments.’

NORMA Group SE Annual Report 20164. Foreign currency translation

E X C H A N G E R AT E S

T 0 4 3

125

(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary eco-
nomic environment in which the entity operates (‘the functional
currency’). The Consolidated Financial Statements are prepared
in ‘euros’ (EUR), which is NORMA Group SE’s functional and the
Group’s presentation currency.

(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the actual exchange rates on the dates of the
transactions or valuation where items are remeasured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange
rates of monetary assets and liabilities denominated in foreign
currencies are recognized in profit or loss.

Foreign exchange gains and losses that relate to borrowings
and cash and cash equivalents are presented in profit or loss
within ‘financial income / costs.’ All other foreign exchange gains
and losses are presented in profit or loss within ‘other operating
income / expenses.’

(c) Group companies
The results and financial position of all the Group entities (none
of which has the currency of a hyper-inflationary economy) that
have a functional currency different from the presentation cur-
rency are translated into the presentation currency as follows:

• Assets and liabilities for each Consolidated Statement of
Financial Position presented are translated at the closing
rate on the date of that Consolidated Statement of Financial
Position;

• income and expenses are translated at average exchange
rates (unless this average is not a reasonable approxima-
tion of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are
translated at the actual rate on the dates of the transac-
tions); and all resulting exchange differences are recognized
as a separate component of equity.

• Goodwill and fair value adjustments arising through the

acquisition of a foreign entity are treated as assets and liabil-
ities of the foreign entity and translated at the closing rate.

The exchange rates of the currencies affecting foreign currency
translation are as follows:

Spot rate

Average rate

per EUR

Australian dollar

Brazilian real

Chinese renminbi
yuan

Swiss franc

Czech koruna

Dec 31,
2016

Dec 31,
2015

2016

2015

1.4596

3.4305

7.3202

1.0739

1.4897

4.3117

7.0608

1.0835

1.4885

3.8611

7.3501

1.0900

1.4773

3.6935

6.9747

1.0679

27.0210

27.0230

27.0344

27.2832

British pound sterling

0.8562

0.7340

0.8189

0.7262

Indian rupee

71.5935

72.0215

74.3474

71.1975

Japanese yen

123.4000

131.0700

120.3107

134.3315

South Korean won

1,269.3600

1,280.7800 1,284.3540

1,256.0469

Malaysian ringgit

4.7287

4.6959

4.5843

4.3318

Mexican peso

Polish złoty

Serbian dinar

Russian ruble

Swedish krona

Singapore dollar

Thai baht

Turkish lira

US dollar

21.7719

18.9145

20.6641

17.6063

4.4103

4.2639

4.3628

4.1827

123.3860

121.5970

123.0988

120.6521

64.3000

80.6736

74.1911

67.9736

9.5525

1.5234

9.1895

1.5417

9.4676

1.5275

9.3539

1.5251

37.7260

39.2480

39.0434

38.0130

3.7072

1.0541

3.1765

1.0887

3.3426

1.1067

3.0231

1.1100

5. Intangible assets

(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary on the date of acquisition. Goodwill
on acquisitions of subsidiaries is included in ‘intangible assets.’
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill
are not reversed. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of
impairment testing. The allocation is made to those cash-generat-
ing units or groups of cash-generating units that are expected to
benefit from the business combination in which the goodwill arose.

(b) Development costs
Costs of research activities undertaken with the prospect of
gaining new scientific or technical knowledge and understand-
ing are expensed as incurred. Costs for development activities,
whereby research findings are applied to a plan or design for the
production of new or substantially improved products and pro-
cesses, are capitalized if development costs can be measured
reliably, the product or process is technically and commercially
feasible, future economic benefits are probable.

Furthermore, NORMA Group intends, and has sufficient resourc-
es, to complete development and use or sell the asset. The
costs capitalized include the cost of materials, direct labor and

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

126

other directly attributable expenditure that serves to prepare
the asset for use. Such capitalized costs are included in profit
or loss in line ‘own work capitalized.’ Capitalized development
costs are stated at cost less accumulated amortization and
impairment losses with an amortization period of generally three
to five years. Development costs which did not meet the require-
ments are expensed as incurred.

(c) Other intangible assets
Separately acquired other intangible assets are shown at his-
torical cost less accumulated amortization. Intangible assets
acquired in a business combination are recognized at fair value
on the acquisition date. Other intangible assets which have a
finite useful life will be amortized over their estimated useful
life. Amortization is calculated using the straight-line method
to allocate their cost. Other intangible assets which are deter-
mined to have indefinite useful lives as well as intangible assets
not yet available for use are not amortized, but instead tested
for impairment at least annually. Furthermore, other intangible
assets which are determined to have indefinite useful life and
therefore are not amortized, will be reviewed each period to de-
termine whether events and circumstances continue to support
an indefinite useful life assessment for these assets.

In general, the Group’s other intangibles are not qualifying as-
sets in accordance with IAS 23 and borrowing costs eligible for
capitalization therefore do not exist.

The useful lives of other intangible assets acquired in a business
combination are estimates based on the economics of each
specific asset which were determined in the process of the
purchase price allocation. The major part of these assets are
brand names and customer lists.

The estimated useful lives for other intangible assets are as follows:

• Patents: 5 to 10 years
• Customer lists: 4 to 20 years
• Technology: 10 to 20 years
• Licenses, rights: 3 to 5 years
• Trademarks: indefinite or 20 years
• Software: 3 to 5 years
• Development costs: 3 to 5 years

Other intangible assets with indefinite useful lives are essentially
brand names, for which the end of usability is not foreseeable
and therefore indeterminable. These brand names result from
acquisitions. For these brand names an indefinite useful life is
assumed. Based on a market perspective, there are no clear
indications for a definite useful life of these brand names as
they have been well-established in the market for many years.

6. Property, plant and equipment
All property, plant and equipment are stated at historical cost
less depreciation and impairment loss, if substantial. Historical

cost includes expenditure that is directly attributable to the ac-
quisition of the items and, if any, the present value of estimated
costs for dismantling and removing the assets, restoring the site
on which it is allocated. Borrowing costs eligible for capitaliza-
tion in the sense of IAS 23 were not available.

Subsequent costs are included in the asset’s carrying amount
or recognized as a separate asset, as appropriate, only when
it is foreseeable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is
derecognized. All other repairs and maintenance expenses are
charged to profit or loss during the financial period in which
they are incurred.

Land is not depreciated. Depreciation on other assets is calcu-
lated using the straight-line method to allocate their cost to their
residual values over their estimated useful lives.

The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, on each balance sheet date.

An asset’s carrying amount is written down to its recoverable
amount if the asset’s carrying amount is greater than its esti-
mated recoverable amount.

Gains and losses on disposals are determined by comparing the
proceeds with the carrying amount and are recognized within
‘other operating income / expenses.’

The estimated useful lives for property, plant and equipment
are as follows:

• Buildings: 8 to 40 years
• Machinery and technical equipment: 3 to 18 years
• Tools: 3 to 10 years
• Other equipment: 2 to 20 years
• Land is not depreciated

7. Impairment of non-financial assets

Assets with a finite useful life
For assets with a finite useful life, an impairment test is needed
if there are indications that those assets may be impaired. If
such indications exist, the amortized carrying value of the asset
is compared to the recoverable amount, which is the higher of
an asset’s fair value less costs to sell and its value in use. The
value in use is the discounted present value of future cash flows
expected to arise from the continuing use of the asset. In the
case of an impairment, the difference between the amortized
carrying amount and the lower recoverable amount is recog-
nized as an expense in profit or loss. If evidence exists that the
reasons for the impairment no longer exist, the impairment loss
is reversed. The reversal cannot result in an amount exceeding
amortized cost.

NORMA Group SE Annual Report 2016127

Goodwill and other assets with an indefinite useful life
Moreover, other intangible assets with an indefinite useful life,
other intangible assets not yet ready for use or advance pay-
ments on such assets as well as goodwill must be tested for
impairment annually. A test is also performed whenever there
is any indication that an asset might be impaired. Where the
reasons for an impairment no longer exist, the impairment loss
is reversed, except in the case of goodwill.

The recoverable amount is determined for each individual asset,
unless an asset generates cash inflows that are not largely in-
dependent of those from other assets or other groups of assets
or cash-generating units. In these cases, the impairment test is
performed at the relevant level of cash-generating units to which
the asset is attributable.

Goodwill acquired in a business combination is allocated at
the acquisition date to the cash-generating unit or group of
cash-generating units that are expected to profit from the
synergies deriving from the business combination. This also
represents the lowest level at which goodwill is monitored for
internal management purposes. These are the operating and
reportable segments EME A, Americas and Asia-Pacific.

There is currently no goodwill in the Group that can be directly
allocated to an individual entity because this reflects the enter-
prise value of the acquired entity regardless of the transaction.

The Company normally determines the recoverable amount
using measurement methods based on discounted cash flows.

Brand names with indefinite useful lives acquired in business
combinations are tested for impairment at the level at which
a recoverable amount, which is based on the fair-value-less-
costs-to-sell, can be determined.

For cash-generating units, NORMA Group first determines the
relevant recoverable amount as fair-value-less-costs-to-sell,
which it compares with the respective carrying amounts, in-
cluding allocated goodwill in the case of impairment tests on
goodwill. For further details regarding the determination of the
fair-value-less-costs-to-sell and the underlying assumptions,
we refer to  Note 19 ‘Goodwill and Other Intangible Assets.’

8. Inventories
Inventories are stated at the lower of cost or net realizable value.
Net realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and
the estimated variable selling costs. Cost is determined using
the weighted average method. The cost of finished goods and
work in progress comprises design costs, raw materials, di-
rect labor, other direct costs and related production overheads
(based on normal operating capacity). Inventories of the Group
are not qualifying assets in accordance with IAS 23, so that
the acquisition or production costs do not include capitalized
borrowing costs.

9. Financial instruments

Financial assets

Classification
The Group classifies its financial assets in the following catego-
ries: at fair value through profit or loss, loans and receivables,
available-for-sale and held to maturity. The classification de-
pends on the purpose for which the financial assets were ac-
quired. Management determines the classification of its financial
assets at initial recognition.

In the current and in the previous fiscal year, all financial assets,
except for derivative financial instruments, are classified to the
category loans and receivables.

Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for matur-
ities greater than 12 months after the balance sheet date. These
are classified as non-current assets. The Group’s loans and
receivables comprise ‘trade and other receivables’ ( paragraph
12) and ‘cash and cash equivalents’ ( paragraph 13) in the
statement of financial position.

Recognition and measurement
Regular purchases and sales of financial assets are recognized
on the trade date – the date on which the Group commits to pur-
chase or sell the asset. Financial assets are initially recognized
at fair value plus transaction costs for all financial assets not
carried at fair value through profit or loss. Financial assets are
derecognized when the rights to receive cash flows have expired
or have been transferred and the Group has transferred substan-
tially all risks and rewards of ownership. Loans and receivables
are carried at amortized cost using the effective interest method.

Impairment of financial assets carried at amortized cost
The Group assesses at the end of each reporting period wheth-
er there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of finan-
cial assets is impaired and impairment losses are incurred only
if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the
asset (a ‘loss event’) and that loss event (or events) has (have)
an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated.

The criteria that the Group uses to determine if there is objective
evidence of an impairment loss include:

• Financial difficulty of the issuer or obligor;
• A breach of contract, such as a default or delinquency in

interest or principal payments;

• The Group, for economic or legal reasons relating to the
borrower’s financial difficulty, granting to the borrower a
concession that the lender would not otherwise consider;

Consolidated Financial StatementsNotes to the Consolidated Financial Statements128

• It becomes probable that the borrower will enter bankruptcy

or other financial reorganization;

• Observable data indicating that there is a measurable de-

crease in the estimated future cash flows from a portfolio of
financial assets since the initial recognition of those assets,
although the decrease cannot yet be identified with the indi-
vidual financial assets in the portfolio, including:

i. Adverse changes in the payment status of borrowers in the

portfolio; and

ii. National or local economic conditions that correlate with

defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of im-
pairment exists.

The amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not
been incurred) discounted at the financial asset’s original effec-
tive interest rate. The asset’s carrying amount is reduced and
the amount of the loss is recognized in profit or loss. If a loan
has a variable interest rate, the discount rate for measuring any
impairment loss is the current effective interest rate determined
under the contract.

If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an
event occurring after the impairment was recognized (such
as an improvement in the debtor’s credit rating), the reversal
of the previously recognized impairment loss is recognized in
profit or loss.

Impairment testing of trade receivables is described in  para-
graph 12.

Financial liabilities
Financial liabilities primarily include trade payables, liabilities to
banks, derivative financial liabilities ( paragraph 11) and other
liabilities.

a) Financial liabilities that are measured at amortized cost
After initial recognition, financial liabilities are carried at amor-
tized cost using the effective interest method. In this category, in
particular, trade payables, liabilities to banks and other financial
liabilities are classified.

b) Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include
derivative financial instruments unless they are designated as
hedges and contingent purchase price liabilities. Gains or losses
on financial liabilities that are measured at fair value through
profit or loss are included in profit or loss.

10. Offsetting financial instruments
Financial assets and liabilities are offset and the net amount is
reported in the Consolidated Statement of Financial Position
when there is a legally enforceable right to offset the recognized
amounts and an intention to settle on a net basis, or realize the
asset and settle the liability simultaneously. At NORMA Group,
arrangements exist which do not meet the criteria for netting
in the Consolidated Statement of Financial Position according
to IAS 32.42, as they allow netting only in the case of future
events such as default or insolvency on the part of the Group
or the counterparty.

The following table presents the recognized financial instru-
ments that are offset, or subject to enforceable master netting
arrangements and other similar agreements but not offset, as
of December 31, 2016 and 2015.

NORMA Group SE Annual Report 2016

O F F S E T T I N G O F F I N A N C I A L I N S T R U M E N T S

T 0 4 4

129

December 31, 2016
in EUR thousands

Financial assets

Derivative financial instruments (b)

Trade and other receivables (a)

Other financial assets

Cash and cash equivalents

Total

Financial liabilities

Borrowings

Derivative financial instruments (b)

Trade and other payables (a)

Other financial liabilities

Total

December 31, 2015
in EUR thousands

Financial assets

Derivative financial instruments (b)

Trade and other receivables (a)

Other financial assets

Cash and cash equivalents

Total

Financial liabilities

Borrowings

Derivative financial instruments (b)

Trade and other payables (a)

Other financial liabilities

Total

Gross amounts
of financial
assets / financial
liabilities

Gross amounts
of financial
assets / financial
liabilities offset in
the statement of
financial position

Net amounts
recognized in
the statement
of financial
position

Amounts that
are not offset in
the statement of
financial position

Financial
instruments

Net amount

2,733

124,565

5,685

165,596

298,579

555,281

2,181

119,934

2,359

679,755

357

2,733

124,208

5,685

165,596

298,222

555,281

2,181

119,577

2,359

679,398

635

2,098

124,208

5,685

165,596

297,587

555,281

1,546

119,577

2,359

678,763

Gross amounts
of financial
assets / financial
liabilities

Gross amounts
of financial
assets / financial
liabilities offset in
the statement of
financial position

Net amounts
recognized in
the statement
of financial
position

Amounts that
are not offset in
the statement of
financial position

Financial
instruments

Net amount

248

123,195

3,856

99,951

227,250

450,767

3,386

101,207

6,700

562,060

330

248

122,865

3,856

99,951

226,920

450,767

3,386

100,877

6,700

561,730

248

122,865

3,856

99,951

226,672

450,767

3,138

100,877

6,700

561,482

(a) Offsetting arrangements
NORMA Group gives volume-based rebates to selected cus-
tomers. Under the terms of the supply agreements, the amounts
payable by NORMA Group are offset against receivables from the
customers and only the net amounts are settled. The relevant
amounts have therefore been presented net in the balance sheet.

(b) Master netting arrangements – not currently enforceable
Agreements with derivative counterparties are based on an ISDA
Master Agreement and other corresponding national master
agreements, such as the corresponding German Framework
Agreement. These arrangements do not meet the offsetting

criteria, because they allow netting only in the case of future
events such as default or insolvency on the part of the Group
or the counterparty. The table above shows the impact on the
Group’s balance sheet if all set-off rights were exercised.

11. Derivative financial instruments and hedging activities
Derivatives are initially recognized at fair value on the date
a derivative contract is entered into and are subsequently
remeasured at their fair value. The method of recognizing the
resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of
the item being hedged.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

130

(a) Derivative financial instruments

not designated as hedges

Gains and losses from derivatives that are not designated as
hedges (trading derivatives) are recognized in profit or loss.
Trading derivatives are classified as non-current assets or lia-
bilities in accordance with IAS 1.68 and 1.71 if they are due after
more than one year; otherwise they are classified as current.

(b) Derivative financial instruments designated as hedges
Derivatives included in hedge accounting are generally desig-
nated as either:

• Hedges of the fair value of recognized assets or liabilities or

firm commitments (fair value hedge);

• Hedges of a particular risk associated with a recognized
asset or liability or a highly probable forecast transaction
(cash flow hedge); or

• Hedges of a net investment in a foreign operation (net in-

vestment hedge).

The entities of NORMA Group use derivative financial instruments
for the hedging of future cash flows and for intragroup monetary
items, which are between two Group entities that have different
functional currencies. Derivatives such as swaps and forwards
are used as hedging instruments. The accounting treatment of a
change in the fair value of hedging instruments depends on the
nature of the hedging relationship. In the case of hedges of fu-
ture cash flows (cash flow hedges), the hedging instruments are
measured at fair value. Gains and losses from remeasurement
of the effective portion of the derivatives are initially recognized
in the other reserves within equity, and are only recognized in
the income statement when the hedged item is recognized in
profit or loss; the ineffective portion of a cash flow hedge is
recognized immediately in profit or loss. Amounts accumulat-
ed in other comprehensive income are reclassified to profit or
loss in the periods when the hedged item affects profit or loss.

In the case of a hedge against foreign exchange rate gains and
losses on intragroup monetary items, which are not fully elim-
inated on consolidation (fair value hedges), gains and losses
from the remeasurement of the hedging instruments as well as
foreign exchange rate gains and losses of the hedged item are
recognized in profit or loss.

At the inception of the transaction, the relationship between the
hedging instrument and hedged item is documented, as well as
the risk management objectives and strategy for undertaking the
hedging transaction. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether
the derivatives that are used in hedging transactions are highly
effective in offsetting changes in the cash flows of hedged items.

The fair values of derivative financial instruments used for hedg-
ing purposes and of those held for trading are disclosed in
 Note 22 ‘Derivative Financial Instruments.’ Movements on the
hedging reserve in equity are shown in  Note 22 and 27 ‘Equity.’

12. Trade receivables
Trade receivables are amounts due from customers for mer-
chandise sold or services performed in the ordinary course of
business. If collection is expected within one year or less, they
are classified as current assets. If not, they are presented as
non-current assets. Trade receivables are classified as loans
and receivables in accordance with IAS 39 and recognized ini-
tially at fair value and subsequently measured at amortized cost
using the effective interest method, less provision for impair-
ment. An allowance for doubtful accounts of trade receivables
is established when there is objective evidence that the Group
will not be able to collect all amounts due according to the orig-
inal terms of the receivables. Significant financial difficulties of
the debtor, the probability that the debtor will enter bankruptcy
or financial reorganization, and default or delinquency in pay-
ments are considered indicators that the trade receivable is im-
paired. The amount of the allowance is the difference between
the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest
rate. In addition to the required individual bad debt allowances,
the Group will determine a portfolio-based bad debt allowance
considering the aging structure for trade receivables to cover
general credit risk if this is applicable.

13. Cash and cash equivalents
Cash and cash equivalents are measured at their nominal value
and include cash in hand, deposits held at call with banks, and
other short-term highly liquid investments with original maturities
of three months or less and which are subject only to insignifi-
cant risk of change in value. Bank overdrafts are shown within
borrowings in current liabilities in the Consolidated Statement
of Financial Position.

14. Trade and other payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if
payment is due within one year or less. If not, they are presented
as non-current liabilities.

Trade payables are recognized initially at fair value and subsequent-
ly measured at amortized cost using the effective interest method.

The Group participates in a reverse factoring program as well
as in an ABS program. The payments to the factor and from the
ABS program are included in trade and other payables, as this
represents the economic substance of the transactions.

The full fair value of a hedging derivative is classified as a
non-current asset or liability when the remaining maturity of
the hedged item is more than 12 months and as a current asset
or liability when the remaining maturity of the hedged item is
less than 12 months.

15. Borrowings
Borrowings are recognized initially at fair value, net of directly
attributable transaction costs incurred. Borrowings are subse-
quently stated at amortized cost; any difference between the

NORMA Group SE Annual Report 2016131

proceeds (net of transaction costs) and the redemption value
is recognized in profit or loss over the period of the borrowings
using the effective interest method.

Fees paid on the establishment of loan facilities are recognized
as transaction costs of the loan to the extent that it is probable
that some or all of the facility will be drawn down. In this case,
the fee is deferred until the draw-down occurs. To the extent
that there is no evidence that it is probable that some or all
of the facility will be drawn down, the fee is capitalized as a
pre-payment for liquidity services and amortized over the period
of the facility to which it relates.

Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the balance sheet date.

16. Current and deferred income tax
The tax expenses for the period are comprised of current and
deferred tax. Tax is recognized in profit or loss, except to the ex-
tent that it relates to items recognized in other comprehensive in-
come or directly in equity. In this case, the tax is also recognized
in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the
tax laws enacted on the balance sheet date in the countries
where the Group’s subsidiaries operate. Management period-
ically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to inter-
pretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized using the liability method on
temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the Consolidated
Financial Statements and on tax losses carried forward and not
yet used tax credits. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially
enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realized or the
deferred income tax liability is settled.

Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable entities
where there is an intention to settle the balances on a net basis.

A surplus of deferred income tax assets is recognized only to the
extent that it is probable that future taxable profit will be avail-
able against which the temporary differences can be utilized.

For taxable temporary differences arising on investments in
subsidiaries and associates, deferred tax liabilities are recog-
nized, except where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.

17. Employee benefits

(a) Pension obligations
Group companies operate different pension schemes. NORMA
Group has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which the
Group pays fixed contributions to a separate entity. The Group
has no legal or constructive obligations to pay further contribu-
tions if the fund does not hold sufficient assets to pay all em-
ployees the benefits relating to employee service in the current
and prior periods. A defined benefit plan is a pension plan that
is not a defined contribution plan. The major defined benefit plan
is the German benefit plan which defines the amount of pension
benefit that an employee will receive on retirement to depend
on years of service and compensation.

The liability recognized in the Consolidated Statement of Finan-
cial Position with respect to defined benefit pension plans is the
present value of the defined benefit obligation on the balance
sheet date less the fair value of plan assets. The defined ben-
efit obligation is calculated annually by independent actuaries
using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the es-
timated future cash outflows using interest rates of high-quality
corporate bonds that are denominated in the currency in which
the benefits will be paid and that have terms to maturity approx-
imating the terms of the related pension liability.

Remeasurement gains and losses arising from experience ad-
justments and changes in actuarial assumptions, as well as
returns on plan assets, which are not included within the net
interest on the defined benefit liability, are recognized within
retained earnings in the other comprehensive income (OCI).

Past service costs are recognized fully in the period of the re-
lated plan amendment.

For defined contribution plans, the Group pays contributions to
publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The Group has no
further payment obligations once the contributions have been
paid. The contributions are recognized as employee benefits ex-
pense when they are due. Prepaid contributions are recognized
as an asset to the extent that a cash refund or a reduction in the
future payments is available.

(b) Termination benefits
Termination benefits are payable when employment is ter-
minated by the Group before the normal retirement date, or
whenever an employee accepts voluntary redundancy in ex-
change for these benefits. The Group recognizes termination
benefits as a liability and expense on the earlier date of: (a)
when the entity can no longer withdraw the offer of those
benefits; or (b) when the entity recognizes costs for a re-
structuring that is within the scope of IAS 37 and involves the
payment of termination benefits. Benefits falling due more
than 12 months after the balance sheet date are discounted
to their present value.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements132

(c) Short-term employee benefits
Employee benefits with short-term payment dates include wag-
es and salaries, social security contributions, vacation pay and
sickness benefits and are recognized as liabilities at the repay-
ment amount as soon as the associated job has been performed.

If the refund is in a close economic relationship with the rec-
ognized provision, the expenses from the provision are netted
with the income from the corresponding refund in profit or loss.

Income from the release of non-utilized provisions from prior
years are recorded within other operating income.

(d) Provisions for other long-term employee benefits
Provisions for obligations similar to pensions (such as anniversa-
ry allowances and death benefits) are comprised of the present
value of future payment obligations to the employee less any
associated assets measured at fair value. The amount of pro-
visions is determined on the basis of actuarial opinions in line
with IAS 19. Gains and losses from the remeasurement are rec-
ognized in profit or loss in the period in which they are incurred.

18. Share-based payment
Share-based payment plans issued in NORMA Group are ac-
counted for in accordance with IFRS 2 “Share-based payment.”
In accordance with IFRS 2, NORMA Group in principle distin-
guishes between equity-settled and cash-settled plans. The
financial interest from equity-settled plans granted on grant date
is generally allocated over the expected vesting period against
equity until the exit event occurs. Expenses from cash-settled
plans are generally also allocated over the expected vesting pe-
riod until the exit event occurs, but against accruals. A descrip-
tion of the plans existing within NORMA Group can be found in
 Note 28 ‘Share-based Payments.’

19. Provisions
Provisions are recognized when the Group has a present legal or
constructive obligation to third parties as a result of past events;
it is probable that an outflow of resources will be required to set-
tle the obligation; and the amount has been reliably estimated.

Where there is a number of similar obligations, the likelihood that
an outflow will be required in settlement is determined by con-
sidering the class of obligations as a whole. A provision is rec-
ognized even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expendi-
tures expected to be required to settle the obligation taking into
account all identifiable risks. Provisions are discounted using
a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognized
as interest expense.

In addition to the expected amount of cash outflows, uncertain-
ties also exist regarding the time of outflows. If it is expected
that the outflows will take place within one year, the relevant
amounts are reported in the short-term provisions.

When the Group expects a refund for a provision, this refund is
recognized in accordance with IAS 37.53 as a separate asset.

20. Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and services in the ordi-
nary course of the Group’s activities. Revenue is shown net
of value-added tax, returns, rebates and discounts and after
eliminating sales within the Group.

Sale of goods
The Group recognizes revenue when the amount of revenue
can be reliably measured, it is probable that future economic
benefits will flow to the entity and when the significant risks
and rewards associated with ownership of the goods sold have
been transferred to the buyer. The above criteria are regular-
ly fulfilled if the beneficial ownership has been transferred to
the customer in accordance with the agreed Incoterms. The
amount of revenue is not considered to be reliably measurable
until all contingencies relating to the sale have been resolved.
The Group bases its estimates on historical results, taking into
consideration the type of customers, the type of transaction and
the specifics of each arrangement.

Development contracts
Revenues from customer-specific fixed price development con-
tracts are recognized with the percentage of completion method
(PoC method) in accordance with IAS 11 if the outcome can be
reliably measured. The stage of completion is calculated on the
basis of the proportion of contract costs incurred to the esti-
mated total contract costs. An expected loss on a construction
contract is expensed immediately.

The percentage of completion method places considerable
importance on accurate estimates of the extent of progress
towards completion and may involve estimates on the scope
of deliveries and services required for fulfilling the contractu-
ally defined obligations. These estimates include total contract
costs, total contract revenues, contract risks, including technical
risks and other judgments. Under the percentage of comple-
tion method, changes in estimates may lead to an increase or
decrease in revenue. The creditworthiness of our customers is
taken into account in estimating the probability that economic
benefits associated with a contract will flow to the Company.

21. Leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any in-
centives received from the lessor) are charged to profit or loss
on a straight-line basis over the period of the lease.

NORMA Group SE Annual Report 2016133

Leases where the Group has substantially all the risks and re-
wards of ownership are classified as finance leases. Finance
leases are capitalized at the lease’s commencement at the less-
er of the fair value of the leased property and the present value
of the minimum lease payments.

on a systematic basis over the periods in which the related costs
are expensed that the grants are intended to compensate for.

Grants related to non-depreciable assets are recognized in profit
or loss as part of the other operating income over the periods
that bear the cost of meeting the obligations.

Each lease payment is allocated between the liability and finance
charges so as to achieve a constant periodic rate of interest on
the finance balance outstanding. The corresponding rental ob-
ligations, net of finance charges, are included in other financial
liabilities. The interest element of the finance cost is charged
to profit or loss over the lease period. The property, plant and
equipment acquired under finance leases is depreciated over
the shorter of the useful life of the asset and the lease term.

The Group’s leases include both operating leases and finance
leases, which relate mainly to property and equipment.

22. Government grants
Government grants are not recognized until there is reasonable
assurance that the conditions attached to them are complied
with and that the grants will be received.

Grants related to depreciable assets are recognized in profit
or loss over the periods that bear the expense related to the
depreciation of the underlying assets and are recognized as
deferred income in the statement of financial position. The de-
ferred income is recognized in profit or loss on a straight-line
basis over the expected useful life of the underlying asset and
reported as part of other operating income.

4. SCOPE OF CONSOLIDATION
With N OR M A Group SE, the Consolidated Financial State-
ments contain all domestic and foreign companies which
NORMA Group SE controls directly or indirectly.

The Consolidated Financial Statements of 2016 include 7 do-
mestic (Dec 31, 2015: 7) and 40 foreign (Dec 31, 2015: 38)
companies.

Government grants for the compensation of expenses incurred are
recognized in profit or loss as part of the other operating income

The composition of the Group changed as follows:

C H A N G E I N S C O P E O F C O N S O L I D AT I O N

T 0 4 5

As of January 1

Additions

of which newly founded

Disposals

of which no longer consolidated

As of December 31

2016

2015

Total Domestic

Foreign

Total

Domestic

Foreign

In 2016, NORMA Autoline France SAS, based in France and NORMA
EJT (Wuxi) Co., Ltd., based in China, were founded in the context
of the acquisition of the Autoline business from Parker Hannifin. For
further details, please refer to  Note 40 ‘Business Combinations.’

In 2015, Nordic Metalblok S.r.l. was liquidated and deconsolidated.

For a detailed overview of NORM A Group’s shareholdings,
please refer to the following chart:

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

134

L I S T O F G R O U P C O M PA N I E S O F N O R M A G R O U P A S O F D E C E M B E R 3 1, 2 0 16

T 0 4 6

No. Company

Central Functions

NORMA Group SE

NORMA Group APAC Holding GmbH

NORMA Group Holding GmbH

Segment EME A

NORMA Distribution Center GmbH

DNL GmbH & Co KG

NORMA Germany GmbH

NORMA Verwaltungs GmbH
(formerly NORMA Türkei Verwaltungs GmbH)

DNL France SAS

NORMA Autoline France SAS

Registered address

Maintal, Germany

Marsberg, Germany

Maintal, Germany

Briey, France

Guichen, France

NORMA Distribution France SAS

La Queue En Brie, France

NORMA France SAS

DNL UK Ltd.

NORMA UK Ltd.

NORMA Italia SpA

Briey, France

Newbury, Great Britain

Gavardo, Italy

Groen Bevestigingsmaterialen B.V.

Purmerend, Netherlands

NORMA Netherlands B.V.

NORMA Polska Sp. z o.o.

Delft, Netherlands

Slawniów, Poland

NORMA Group Distribution Polska Sp. z.o.o.

Krakow, Poland

NORMA Group CIS LLC

DNL Sweden AB

NORMA Sweden AB

Togliatti, Russian Federation

Stockholm, Sweden

Connectors Verbindungstechnik AG

Tagelswangen, Switzerland

NORMA Grupa Jugoistocna Evropa d.o.o.

Fijaciones NORMA S.A.

NORMA Czech, s.r.o.

Subotica, Serbia

Barcelona, Spain

Hustopece, Czech Republic

NORMA Turkey Bağlantı ve Birleştirme Teknolojileri
Sanayi ve Ticaret Limited Şirketi

Kartal, Istanbul, Turkey

Segment Americas

NORMA do Brasil Sistemas De Conexão Ltda.

São Paulo, Brazil

NORMA Group México S. de R.L. de C.V.

Monterrey, Mexico

NORMA Distribution and Services S. de R.L. de C.V. Juarez, Mexico

Craig Assembly Inc.

National Diversified Sales, Inc.

NORMA Michigan Inc.

NORMA Pennsylvania Inc.

NORMA US Holding LLC

R.G.R AY Corporation

Segment Asia-Pacific

NORMA Pacific Pty. Ltd.

Guyco Pty. Ltd.

NORMA China Co., Ltd.

NORMA EJT (Changzhou) Co., Ltd.

NORMA EJT (Wuxi) Co., Ltd.

NORMA Group Products India Pvt. Ltd.

NORMA Japan Inc.

NORMA Products Malaysia Sdn. Bhd.
(formerly Chien Jin Plastic Sdn. Bhd.)

NORMA Korea Inc.

St. Clair, USA

Woodland Hills, USA

Auburn Hills, USA

Saltsburg, USA

Auburn Hills, USA

Melbourne, Australia

Adelaide, Australia

Qingdao, China

Changzhou, China

Wuxi, China

Pune, India

Osaka, Japan

Ipoh, Malysia

Seoul, Republic of Korea

NORMA Group Asia Pacific Holding Pte. Ltd.

Singapore, Singapore

NORMA Pacific Asia Pte. Ltd.

NORMA Pacific (Thailand) Ltd.

Singapore, Singapore

Chonburi, Thailand

Share in %

held
by

direct
parent
company

of
NORMA
Group SE

Cur
rency

Equity 1

Result 1

−2

0 2

−1

0 2

2,490

−1,328 3

684

−1,151

7,560

8,797

1,450

1,265

441

645

20,867

49,009

46,390

−105

100.00

kEUR

106,814

94.80

100.00

94.90

100.00

60.00

90.00

100.00

kEUR

kGBP

kEUR

kPLN

2,175

6,542

56,306

47,953

25,173

3,016

1,938

2,944

32,877

6,002

1,400

2,085

5,745

126,673

32,148

99.96

100.00

kRUR

131,370

100.00

kSEK

kCHF

79,160

201,362

7,532

100.00

kRSD 3,725,684

402,761

100.00

kEUR

kCZK

5,813

365,575

1,978

56,979

100.00

kTRL

5,136

2,402

97.80

99.40

99.00

100.00

kBRL

kUSD

100.00

kMXN

100.00

99.99

60.00

100.00

60.00

kUSD

kAUD

kCNY

kINR

kJPY

31,864

−7,933

8,812

1,138

40,325

226,994

76,591

112,618

23,374

98,663

13,183

8,085

157,846

40,292

179,620

358,612

129,342

2,447

318

5,966

27,962

4,868

−3,657

−765

7,231

−819

1,535

26,216

−804

−3,375

19,587

6,747

100.00

kMYR

31,609

6,622

100.00

kKRW

463,280

278,499

100.00

kSGD

kTHB

101,926

−129

737

−657

106,560

10,957

1 Reported values according to IFRS as of December 31, 2016; except for NORMA Group Holding GmbH, NORMA Germany GmbH and NORMA Distribution Center GmbH; these
values are prepared according to German GA AP as of December 31, 2016, but not yet finally audited. The values are translated with the exchange rates according to Note 3.4.

2 A profitpoolingcontract exists.
3 Including transaction tax amounting to EUR 1,650 thousand relating to the acquisition on November 30, 2016.

NORMA Group SE Annual Report 2016135

5. FIN A NCIAL RISK M A N AGEMENT

1. Financial risk factors
The Group’s activities expose it to a variety of financial risks,
including market risk, credit risk and liquidity risk. The Group’s
financial risk management focuses on the unpredictability of
financial markets and seeks to minimize its potential adverse
effects on the Group’s financial performance. The Group uses
derivative financial instruments to hedge certain risk exposures.

Financial risk management is carried out by a central treasury
department (Group Treasury). The necessary responsibilities
and controls associated with risk management are determined
by Group management. Group Treasury identifies, evaluates
and hedges financial risks in close cooperation with the Group’s
operating units.

Market risk

(i) Foreign exchange risk
NORMA Group operates internationally in around 100 different
countries and is exposed to foreign exchange risk arising from
the exposure to various currencies – primarily with respect to
the US dollar, the British pound sterling, the Chinese renminbi
yuan, the Indian rupee, the Polish złoty, the Swedish krona, the
Swiss franc, the Serbian dinar and the Singapore dollar.

The effects of changes in foreign exchange rates are analyzed
below for financial assets and liabilities denominated in foreign
currencies.

F O R E I G N E X C H A N G E R I S K

T 0 47

Dec 31, 2016

Dec 31, 2015

in EUR thousands

+10% −10%

+10%

−10%

Currency relation

EUR / USD – Profit before tax

−481

588

−1,293

1,580

EUR / GBP – Profit before tax

1,504

−1,838

1,101

−1,346

EUR / CNY – Profit before tax

−532

EUR / INR – Profit before tax

EUR / PLN – Profit before tax

EUR / SEK – Profit before tax

EUR / CHF – Profit before tax

EUR / RSD – Profit before tax

−99

244

285

729

EUR / SGD – Profit before tax

−303

650

121

−299

−348

−52

−891

371

−406

−95

545

279

−161

−132

497

116

−667

−341

−86

197

161

The Group Treasury’s risk management policy is to hedge about
50%–90% or more of anticipated operational cash of the signif
icant foreign currency exposures.

NORMA Group has certain investments in foreign operations
whose net assets are exposed to foreign currency translation
risks. This translation risk is primarily managed through borrow
ings in the relevant foreign currency.

(ii) Interest rate risk
NORMA Group’s interest rate risk arises from longterm borrow
ings with variable interest rates. Borrowings issued at variable
interest rates expose the Group to cash flow interest rate risk
which is partially offset by hedges (interest rate swaps). The
Group’s policy is to maintain approximately 75% of its medi
umterm borrowings in fixed rate instruments. NORMA Group
uses the flexibility of floating instruments for extraordinary re
payments without any additional cost.

Below, the effects of changes in interest rates are analyzed
for bank borrowings which bear variable interest rates, and for
interest rate swaps included in hedge accounting. Borrowings
that bear fixed interest rates are excluded from this analysis.

Due to the current low level of interest rates in those markets
that are relevant for NORMA Group’s funding, the likelihood of
rising interest rates is higher than that of declining interest rates
– this has been addressed in the sensitivity analysis.

In fiscal year 2016, if interest rates on euro and US dollar de
nominated borrowings had been 100 basis points (BPS) (2015:
100 BPS) higher with all other variables held constant, profit
before tax for the year would have been EUR 746 thousand
lower (2015: EUR 133 thousand lower) and other comprehensive
income would have been EUR 5,375 thousand higher (2015: EUR
2,074 thousand higher with 100 BPS shift).

In fiscal year 2016, if interest rates on euro and US dollar de
nominated borrowings had been 50 basis points (2015: 50 BPS)
lower with all other variables held constant, profit before tax
for the year would have been EUR 245 thousand higher (2015:
EUR 518 thousand lower). The prior year effect of higher interest
payments with lower rates can be explained as the behavior of
hedges and hedged items is not fully identical with interests
below zero. Other comprehensive income would have been EUR
2,786 thousand lower (2015: EUR 4,016 thousand lower).

(iii) Other price risks
As NORMA Group is not exposed to any other material eco
nomic price risks, such as stock exchange prices or commodity
prices, an increase or decrease in the relevant market prices
within reasonable margins would not have an impact on the
Group’s profit or equity. Hence, the Group’s exposure to other
price risks is regarded as not material.

Credit risk
The credit risk incurred by the Group is the risk that counterpar
ties fail to meet their obligations arising from operating activities
and from financial transactions. Credit risk arises from cash
and cash equivalents and deposits with banks and financial
institutions, as well as credit exposures to customers, including
outstanding receivables and committed transactions.

Credit risk is monitored on a Group basis. To minimize credit
risk from operating activities and financial transactions, each

Consolidated Financial StatementsNotes to the Consolidated Financial Statements
136

counterparty is assigned a credit limit, the use of which is mon
itored regularly. Default risks are continuously monitored in the
operating business.

The aggregate carrying amounts of financial assets represent
the maximum default risk. For an overview of pastdue receiv
ables, please refer to  Note 23 ‘Trade and Other Receivables.’
Given the Group’s heterogeneous customer structure, there is
no risk concentration.

Liquidity risk
Prudent liquidity risk management implies maintaining suffi
cient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and
the ability to close out market positions. Due to the dynamic
nature of the underlying businesses, Group Treasury maintains
flexibility in funding by maintaining availability under committed
credit lines.

With NORMA Group’s IPO in April 2011, all bank borrowings
were refinanced with syndicated bank facilities in the amount
of EUR 250 million, of which EUR 178 million had been repaid
before December 31, 2014. In September 2014, the existing
syndicated bank facilities were renegotiated with the result of
an updated loan amount of EUR 100 million. In December 2015,
another renegotiation of the syndicated bank facilities to in total
EUR 100 million in euro and US dollar led to a further improved
interest profile and now better reflects the currency of NORMA
Group’s cash flows (mainly US dollar and euro). After scheduled
repayment in 2016, the credit volume as of December 31, 2016
is EUR 19 million and USD 83.5 million (Dec 31, 2016: EUR
79.2 million). On top of this, the term loan includes an option of
an additional accordion facility in the amount of EUR 250 million
and a maturity of up to seven years. In addition, a borrowing
facility in the amount of EUR 50 million is available for future
operating activities and to settle capital commitments, which
was not yet drawn on December 31, 2016.

For refinancing of the borrowing line and for M&A purposes,
an additional promissory note was issued in August 2016 with
enhanced conditions. It includes euro tranches in the amount
of EUR 102 million with 5, 7 and 10year terms and US dollar
tranches in the amount of USD 52.5 million with 5 and 7year
terms.

In the fourth quarter of 2014, an additional promissory note was
issued with euro tranches in the amount of EUR 106 million with
3, 5, 7 and 10year terms and US dollar tranches in the amount
of USD 128.5 million with 3, 5 and 7year terms.

Liquidity is monitored on an ongoing basis with regard to the
Group’s business performance, planned investment and re
demption of capital.

The amounts disclosed in the table below are the contractual,
undiscounted cash flows. Financial liabilities denominated in
foreign currencies are translated at the closing rate on the bal
ance sheet date. Interest payments on financial instruments with
variable interest rates are calculated on the basis of the interest
rates applicable as of the reporting date.

M AT U R I T Y S T R U C T U R E O F N O N - D E R I VAT I V E
F I N A N C I A L L I A B I L I T I E S

T 0 4 8

December 31, 2016

in EUR thousands

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Borrowings

51,475

42,404

357,303

160,656

Trade and other payables

119,577

Finance lease liabilities

Other financial liabilities

139

981

138

862

245

172,172

43,404

357,548

160,656

December 31, 2015

Furthermore, in July 2013, NORMA Group issued a promissory
note valued at EUR 125 million with 5, 7 and 10year terms.

in EUR thousands

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

The variable tranches with 5 and 7year terms of the promis
sory note dated 2013 valued at EUR 49 million were repaid in
advance in July 2016. For this purpose, NORMA Group made
use of the borrowing facility as part of the syndicated loan fa
cility in the amount of EUR 40 million on a shortterm basis.

Borrowings

15,656

48,957

327,888

108,878

Trade and other payables

100,877

Finance lease liabilities

Other financial liabilities

147

5,880

138

511

122,560

49,606

327,921

108,878

NORMA Group SE Annual Report 2016137

The maturity structure of the derivative financial instruments
based on cash flows is as follows:

or shareholder actions. If a covenant breach occurs and is not
remedied, the syndicated loans may be, but are not required
to be, withdrawn.

M AT U R I T Y S T R U C T U R E O F
D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

T 0 4 9

6. CRITICAL ACCOUNTING ESTIM ATES

A ND JUDGMENTS

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Estimates and judgments are continually evaluated and are
based on historical experience, and expectations regarding
future events that are believed to be reasonable under the cir
cumstances.

As of December 31, 2016

in EUR thousands

Derivative receivables
– gross settlement

Cash outflows

Cash inflows

Derivative liabilities
– gross settlement

Cash outflows

Cash inflows

Derivative receivables
– net settlement

Cash inflows

Derivative liabilities
– net settlement

Cash outflows

As of December 31, 2015

in EUR thousands

Derivative receivables
– gross settlement

Cash outflows

Cash inflows

Derivative liabilities
– gross settlement

Cash outflows

Cash inflows

Derivative liabilities
– net settlement

Cash outflows

−73,840

74,997

−16,914

16,747

282

1,253

−530

742

−983

−942

−501

752

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

−41,919

42,167

−104,582

103,706

−626

−1,254

−932

−992

2. Capital risk management
The Group’s objectives when managing capital are to ensure
that it will continue to be able to repay its debt and remain
financially sound.

The Group is subject to the financial covenant total net debt
cover (net debt in relation to adj. Group EBITDA), which is mon
itored on an ongoing basis. This financial covenant is based on
the Group’s Consolidated Financial Statements as well as on
special definitions of the bank facility agreements. There were
no covenant breaches in 2016 and 2015.

In the case of a covenant breach, the facility agreement includes
several ways to remedy a potential breach by rules of exemption

The Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the respective actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities with
in the next fiscal year are addressed below.

Estimated impairment of goodwill
NORMA Group tests annually whether goodwill has suffered any
impairment in accordance with the accounting policy stated in
 Note 3.7. The recoverable amounts of cashgenerating units
have been determined based on fairvaluelesscoststosell cal
culations. These calculations are based on discounted cash flow
models, which require the use of estimates.  Note 19 ‘Goodwill
and Other Intangible Assets.’

In 2016 and 2015, no impairment of goodwill, which amounted
to EUR 368,859 thousand on December 31, 2016 (Dec 31, 2015:
EUR 343,829 thousand), was necessary. Even if the discount
rate would increase by +2% and the terminal value growth rate
would be 0%, the change of these key assumptions would not
cause the carrying amount to exceed its recoverable amount
in any CGU.

Income taxes
The Group is subject to income taxes in numerous jurisdictions.
Significant judgments are required in determining the worldwide
provision for income taxes. There are transactions and calcu
lations for which the ultimate tax determination is uncertain.
The Group recognizes liabilities for anticipated tax audit issues
based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters differs from the
amounts that were initially recorded, such differences will impact
the current and deferred income tax assets and liabilities in the
period in which such determination is made. On December 31,
2016, income tax liabilities were EUR 10,087 thousand (Dec 31,
2015: EUR 9,172 thousand) and deferred tax liabilities were EUR
101,845 thousand (Dec 31, 2015: EUR 104,380 thousand).

Pension benefits
The present value of the pension obligations depends on a
number of factors determined on an actuarial basis using a
number of assumptions. The assumptions used in determining
the net cost (income) for pensions include the discount rate. Any
changes in these assumptions will impact the carrying amount
of pension obligations.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements138

The present value of the defined benefit obligation is calculated
by discounting the estimated future cash outflows using the
interest rates of highquality corporate bonds.

The Group determines the appropriate discount rate on the bal
ance sheet date. In determining the appropriate discount rate,
the Group considers the interest rates of highquality corporate
bonds that are denominated in the currency in which the bene
fits will be paid, and that have terms to maturity approximating
the terms of the related pension liability.

Other key assumptions for pension obligations are based in part
on current market conditions. Additional information is disclosed
in  Note 3.17.

Pension liabilities amounted to EUR 11,786 thousand on Decem
ber 31, 2016 (Dec 31, 2015: EUR 11,951 thousand).

Useful lives of property, plant and equipment
and intangible assets
The Group’s management determines the estimated useful
lives and related depreciation / amortization charges for its
property, plant and equipment and intangible assets. This es
timate is based on projected lifecycles. These could change
as a result of technical innovations or competitor actions in
response to severe industry cycles. Management will increase
the depreciation charge where useful lives are less than pre
viously estimated lives, or it will writeoff or writedown tech
nically obsolete or nonstrategic assets that have been aban
doned or sold.

7. AD JUSTMENTS
Certain expenses are adjusted for operational management pur
poses. Hence, the following results which are adjusted by these
expenses, reflect the management perspective.

In fiscal year 2016, expenses amounting to EUR 4,752 thou
sand (2015: EUR 3,591 thousand) were adjusted within EBITDA
(Earnings before interest, taxes, depreciation and amortization).

These adjustments within EBITDA are related in the amount
of EUR 635 thousand to expenses for raw materials and con
sumables used, which are a result of the remeasurement of
acquired inventories within the purchase price allocation for
the acquisition of the Autoline business. Furthermore, acquisi
tionrelated expenses in the amount of EUR 2,076 thousand and
a transaction tax amounting to EUR 1,650 thousand related to
the acquisition were adjusted within other operating expenses.
Expenses associated with the integration of the acquired entity
in the amount of EUR 223 thousand were adjusted within other
operating expenses and in the amount of EUR 168 thousand
within employee benefits expense.

In fiscal year 2015, these adjustments within EBITDA are related
in the amount of EUR 2,472 thousand to expenses for raw ma
terials and consumables used, which are a result of the remea
surement of acquired inventories within the purchase price
allocation for the acquisition of National Diversified Sales, Inc.
(NDS). Furthermore, expenses associated with the integration
of the acquired entity in the amount of EUR 578 thousand were
adjusted within other operating expenses and in the amount of
EUR 541 thousand within employee benefits expense.

Besides the adjustments described, depreciation in the amount
of EUR 2,317 thousand (2015: EUR 2,237 thousand) and amorti
zation in the amount of EUR 16,685 thousand (2015: EUR 17,257
thousand) from purchase price allocations were adjusted as in
previous years.

Additionally, in 2016 an impairment of capitalized customer lists
in the amount of EUR 3,921 thousand was adjusted within the
amortization of intangible assets.  Note 19 ‘Goodwill and Other
Intangible Assets.’

The theoretical taxes resulting from the adjustments are calcu
lated using the respective tax rate of each Group entity and are
considered within the adjusted earnings after taxes.

The following table shows profit or loss net of these expenses:

NORMA Group SE Annual Report 2016139

P R O F I T A N D L O S S N E T O F A D J U S T M E N T S

T 0 5 0

in EUR thousands

2016
unadjusted

Notes

Transfer
taxes paid

M&A
related costs

Integration
costs

Stepup
effects from
purchase price
allocations

Total
adjustments

2016
adjusted

Revenue

(8)

894,887

Changes in inventories of finished goods
and work in progress

Other own work capitalized

244

3,318

Raw materials and consumables used

(9)

−353,527

Gross profit

544,922

Other operating income and expenses

(10, 11)

−126,236

Employee benefits expense

(12)

−244,061

EBITDA

Depreciation

EBITA

Amortization

Operating profit (EBIT)

Financial costs – net

Profit before income tax

Income taxes

Profit for the period

Noncontrolling interests

Profit attributable to shareholders of
the parent

Earnings per share (in EUR)

(13)

174,625

−24,209

150,416

−30,415

120,001

−14,645

105,356

−29,490

75,866

119

75,747

2.38

in EUR thousands

Notes

2015
unadjusted

Revenue

(8)

889,613

Changes in inventories of finished goods
and work in progress

Other own work capitalized

3,622

2,748

Raw materials and consumables used

(9)

−365,373

Gross profit

530,610

Other operating income and expenses

(10, 11)

−122,106

Employee benefits expense

(12)

−234,616

EBITDA

Depreciation

EBITA

Amortization

Operating profit (EBIT)

Financial costs – net

Profit before income tax

Income taxes

Profit for the period

Noncontrolling interests

Profit attributable to shareholders of
the parent

Earnings per share (in EUR)

(13)

173,888

−23,420

150,468

−25,674

124,794

−17,209

107,585

−33,738

73,847

167

73,680

2.31

1,650

2,076

1,650

2,076

1,650

2,076

1,650

2,076

1,650

−535

1,115

2,076

−672

1,404

223

168

391

−127

264

635

2,317

2,952

20,606

23,558

−7,631

15,927

894,887

244

3,318

635

−352,892

545,557

3,949

−122,287

168

−243,893

4,752

2,317

7,069

20,606

27,675

179,377

−21,892

157,485

−9,809

147,676

−14,645

27,675

−8,965

18,710

133,031

−38,455

94,576

119

1,115

1,404

264

15,927

18,710

94,457

2.96

Stepup
effects from
purchase price
allocations

Integration
costs

Total
adjustments

2015
adjusted

2,472

578

541

3,591

2,237

5,828

17,257

23,085

889,613

3,622

2,748

−362,901

533,082

−121,528

−234,075

177,479

−21,183

156,296

−8,417

147,879

−17,209

23,085

−8,210

14,875

130,670

−41,948

88,722

167

578

541

1,119

−397

722

2,472

2,237

4,709

17,257

21,966

−7,813

14,153

722

14,153

14,875

88,555

2.78

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

140

Notes to the Consolidated Statement
of Comprehensive Income

10. OTHER OPER ATING INCOME
Other operating income comprised the following:

8 . R E VENUE
Revenue recognized during the period related to the following:

in EUR thousands

2016

2015

O T H E R O P E R AT I N G I N C O M E

T 0 5 3

R E V E N U E B Y C AT E G O R Y

T 0 51

Currency gains operational

in EUR thousands

2016

2015

Reversal of accruals

Reversal of provisions

Engineered Joining Technology (EJT)

Distribution Services (DS)

Other revenue

535,857

354,542

4,488

894,887

540,336

344,108

5,169

889,613

Grants related to
employee benefits expense

Reimbursement of vehicle costs

Other income from disposal of fixed assets

Foreign exchange derivatives

Government grants

Refund other taxes

Others

Revenue for 2016 (EUR 894,887 thousand) was 0.6% above
revenue for 2015 (EUR 889,613 thousand). The increase in rev
enue results from organic growth and from the inclusion of the
Autoline business. Negative currency effects have an opposite
effect. The Autoline business, which was acquired in the fourth
quarter of 2016, contributed EUR 3,479 thousand to revenue.
Revenues from the Autoline business are fully allocated to En
gineered Joining Technology.

11. OTHER OPER ATING E XPENSES
Other operating expenses comprised the following:

O T H E R O P E R AT I N G E X P E N S E S

T 0 5 4

In 2016, EUR 599 thousand in revenues from construction con
tracts are included (2015: EUR 1,298 thousand).

in EUR thousands

2016

2015

Consulting and marketing

−19,004

−16,232

For the analysis of sales by region, please refer to  Note 37
‘Segment Reporting.’

Expenses for temporary workforce
and other personnelrelated costs

6,703

1,245

3,801

802

386

450

389

1,267

15,210

6,741

1,169

1,525

177

624

449

574

11,408

9. R AW M ATERIALS A ND CONSUM ABLES USED
Raw materials and consumables used comprised the following:

R A W M AT E R I A L S A N D C O N S U M A B L E S U S E D

T 0 5 2

in EUR thousands

2016

2015

Cost of raw materials,
consumables and supplies

Cost of purchased services

−326,133

−333,548

−27,394

−31,825

−353,527

−365,373

The raw materials and consumables used lead to a ratio of
39.5% (2015: 41.1%). Also in relation to the total value, raw ma
terials and consumables used are, with a ratio of 39.3%, below
last year’s level (2015: 40.8%).

The Autoline business, which was acquired in the fourth quarter
of 2016, contributed EUR 3,208 thousand to the material costs.

Freights

IT and telecommunication

Rentals and other building costs

Travel and entertaining

Currency losses operational

Research & development

Vehicle costs

Maintenance

Commission payable

Nonincomerelated taxes

Insurances

Other administrative expenses

Others

−25,917

−22,288

−12,228

−10,851

−9,841

−6,648

−4,883

−4,054

−2,903

−6,111

−4,043

−2,589

−4,626

−5,460

−24,602

−22,431

−11,499

−10,159

−9,566

−6,955

−2,567

−3,875

−3,928

−6,307

−2,382

−2,527

−4,896

−5,588

−141,446

−133,514

Other operating expenses for 2016 (EUR 141,446 thousand)
were 5.9% higher than other operating expenses for 2015 (EUR
133,514 thousand). In relation to the total value, other operating
expenses increased disproportionately higher with a ratio of
15.7% (2015: 14.9%). The increase in comparison to the prior
year is partly due to the costs in the amount of EUR 3,726 thou
sand incurred in connection with the Autoline business acquired
in the fourth quarter of 2016.  Notes 7 ‘Adjustments.’

The Autoline business acquired in 2016 contributed EUR 2,115
thousand to other operating expenses.

NORMA Group SE Annual Report 2016

141

12 . EMPLOYEE BENEFITS E XPENSE
Employee benefits expense comprised the following:

E M P L OY E E B E N E F I T S E X P E N S E

T 0 5 5

in EUR thousands

2016

2015

Wages and salaries and
other termination benefits

Social security costs

Pension costs – defined contribution plans

Pension costs – defined benefit plans

−200,304

−193,174

−31,139

−11,873

−745

−29,456

−11,645

−341

−244,061

−234,616

In 2016, employee benefits expense amounted to EUR 244,061
thousand compared to EUR 234,616 thousand in 2015. The
increase of 4.0% is mainly due to an increase in the average
headcount in 2016 compared to 2015. Currency effects had
a positive effect on employee benefits expense. In relation
to the total value, employee benefits expense increased dis
proportionately higher with a ratio of 27.2% (2015: 26.2%).

Average headcount was 5,266 in 2016 (2015: 5,006).

The Autoline business acquired in 2016 contributed EUR 748
thousand to employee benefits expenses.

13 . FIN A NCIAL INCOME A ND COSTS
Financial income and costs comprised the following:

F I N A N C I A L I N C O M E A N D C O S T S

T 0 5 6

in EUR thousands

2016

2015

Due to a largely stable US dollar spot rate compared to the prior
year, the foreign exchange result on financing activities shows
in fiscal year 2016 income in the amount of EUR 1,617 thousand
compared to EUR 11,683 thousand in fiscal year 2015.

Losses from the valuation of derivatives amount to EUR 2,436
thousand and decreased by EUR 10,562 thousand compared
to fiscal year 2015 (EUR 12,998 thousand).

The development of losses on valuation of derivatives as well
as of foreign exchange result on financing activities results
from the hedging of the US dollar financial liabilities and from
the development of the US dollar compared to the prior year.
The hedging relationship is classified as a fair value hedge,
hence the valuation effects of the derivatives and of the fi
nancial liabilities are both reflected in the financial result. The
net effect is disclosed in  Note 14 ‘Net Foreign Exchange
Gains / Losses.’

Transaction costs in connection with financing are netted with
the bank borrowings in accordance with IAS 39.43. They are
amortized over the financing period of the respective debt using
the effective interest method. The value of transaction costs
recognized in the balance sheet and amortized over the matur
ities of the bank borrowings amounted to EUR 1,467 thousand
(2015: EUR 1,293 thousand).

14. NE T FOR EIG N E XCH A NGE G AINS / LOS SES
The exchange differences recognized in profit or loss are as
follows:

N E T F O R E I G N E X C H A N G E G A I N S / L O S S E S

T 0 5 7

in EUR thousands

Note

2016

2015

Financial costs

Interest expenses

Currency gains operational

Bank borrowings incl. hedging instruments

−12,831

−15,144

Currency losses operational

Finance lease

Expenses for interest accrued on provisions

Expenses for interest accrued on pensions

Foreign exchange result on financing activities

Losses on valuation of derivatives

Other financial cost

Financial income

Interest income on shortterm bank deposits

Gains on valuation of derivatives

Other financial income

−21

−59

−162

1,617

−2,436

−980

−25

−22

−165

11,683

−12,998

−1,038

−14,872

−17,709

221

227

389

500

Foreign exchange result
on financing activities

Result from foreign
exchange rate derivatives

(10)

(11)

(13)

6,703

−6,648

6,741

−6,955

1,617

11,683

(13, 22)

−2,301

−629

−13,008

−1,539

15. E AR NINGS PER SH AR E
Earnings per share are calculated by dividing net income for
the period attributable to NORMA Group’s shareholders by the
weighted average number of shares issued during the period
under review. NORMA Group has only issued common shares.
In 2016, as in the previous year, the average weighted number
of shares was 31,862,400.

Net financial cost

−14,645

−17,209

The interest expenses from bank borrowings, including hedging
instruments, include in 2016 EUR 11,203 thousand from bor
rowings (2015: EUR 11,944 thousand) and EUR 1,628 thousand
are related to interest expenses from hedging derivatives (2015:
EUR 3,200 thousand).

The MSP tranche from 2011 was settled in cash in June 2015.
Due to this payment, the classification of the outstanding
tranches changes from equity settlement to cash settlement.
For this reason, no dilutive stock options resulted from the re
maining MSP tranches as of December 31, 2016, and 2015, and
therefore also no dilutive effects on earnings per share.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

142

Earnings per share in 2016 and 2015 were as follows:

E A R N I N G S P E R S H A R E

T 0 5 8

Profit attributable to shareholders of the parent (in EUR thousands)

15,449

18,510

75,747

73,680

Number of weighted shares

Earnings per share (un)diluted (in EUR)

31,862,400

0.48

0.58

2.38

2.31

Q4 2016

Q4 2015

2016

2015

16. INCOME TA XES
The breakdown of income taxes is as follows:

I N C O M E TA X E S

T 0 5 9

in EUR thousands

2016

2015

The income tax expense of the Group actually reported differs
from the theoretical income tax expense based on the German
combined income tax rate of 30.1% for 2016 as follows:

TA X R E C O N C I L I AT I O N

T 0 6 0

in EUR thousands

2016

2015

Current tax expenses

Deferred tax income

Total income taxes

−34,635

5,145

−29,490

−41,482

7,744

Profit before tax

−33,738

Group tax rate

The combined income tax rate for the German companies for
2016 amounted to 30.1% (2015: 30.1%), comprising corporate
income tax at a rate of 15%, the solidarity surcharge of 5.5% on
corporate income tax, and trade income tax at an average rate
of 14.3%. The taxation of the foreign subsidiaries is calculated
on the basis of the tax rate applicable in the respective coun
try of domicile. Deferred taxes, calculated using the tax rates
which apply respectively, are expected to apply in the various
countries at the time of realization.

Expected income taxes

Tax effects of:

Tax losses and tax credits from the actual
year for which no deferred income tax
is recognized

Effects from deviation of Group tax rate
resulting mainly from different foreign
tax rates

Nondeductible expenses for
tax purposes

Tax expenses recognized in equity

Utilization of tax losses and tax credits
from prior year for which no deferred
income tax asset was recognized

Other taxfree income

Tax effect of changes in tax rates
regarding deferred taxes

Income taxes related to prior years

Other

Income taxes

105,356

30.1%

−31,712

107,585

30.1%

−32,383

−758

−1,333

1,110

−799

149

503

1,430

587

−516

−830

1,336

1,164

276

−268

−676

−508

−29,490

−33,738

The positive effect within the position ‘Effects from deviation of
Group tax rate resulting mainly from different foreign tax rates’
results from the shift in the amounts contributing to earnings
from the Americas region to the EME A region. The tax rate of
some countries within the EMEA region is lower than the Group
tax rate whereas the tax rate of the Americas region is higher
than the Group tax rate. This leads to positive effects regarding
the income tax expenses. Furthermore, the average tax rate of
the Americas region decreased.

In 2015, the item ‘Tax expenses recognized in equity’ relates
to the switch over of the MSP for the Management Board of
NORMA Group and the corresponding recognition of the pro
rata fair value of the options in equity  Note 28 ‘Sharebased
Payments.’

NORMA Group SE Annual Report 2016

The item ‘Income taxes related to prior years’ consists regarding
2015 of the capitalization of provisions for tax risk related to
prior years. In 2016 provisions for tax risk regarding future tax
audits were recognized in this item. The income tax expenses
regarding the capitalization of these provisions were overcom
pensated for by tax credits concerning the Americas region.

The item ‘Other’ consists in 2016 and 2015 mainly of other
incomebased taxes (e. g., withholding tax) and the incomerel
evant taxrelated recognition of valuation units due to a new tax
assessment of the facts.

The income tax charged / credited directly to other comprehen
sive income during the year is as follows:

I N C O M E TA X C H A R G E D / C R E D I T E D
T O O T H E R C O M P R E H E N S I V E I N C O M E

T 0 6 1

143

Notes to the Consolidated Statement
of Financial Position

17. INCOME TA X AS SE TS A ND LIABILITIES
Due to changes in German corporate tax laws (“SESteuerge
setz” or “SEStEG,” which came into effect on December 31,
2006) an imputation credit asset (“Körperschaftsteuerguthaben
gem. § 37 KStG”) has been set up. As a result, an uncondi
tional claim for payment of the credit in ten annual installments
from 2008 through 2017 has been established. The resulting
receivable arising from corporation and trade taxes is included
in income tax assets and amounted to EUR 459 thousand on
December 31, 2016 (Dec 31, 2015: EUR 901 thousand).

18 . DEFER R ED INCOME TA X
The analysis of deferred tax assets and deferred tax liabilities
due to maturity is as follows:

2016

in EUR thousands

Before tax
amount

Tax
charge /
credit

Netoftax
amount

D E F E R R E D TA X A S S E T S A N D
D E F E R R E D TA X L I A B I L I T I E S

T 0 6 2

Cash flow hedges gains / losses

2,759

−730

2,029

Remeasurements of post
employment benefit obligations

Other comprehensive income

1,119

3,878

−286

−1,016

833

2,862

2015

in EUR thousands

Before tax
amount

Tax
charge /
credit

Netoftax
amount

Cash flow hedges gains / losses

895

−313

582

Remeasurements of post
employment benefit obligations

Other comprehensive income

−491

404

−223

− 401

181

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Deferred tax assets

Deferred tax assets to be recovered
after more than 12 months

Deferred tax assets to be recovered
within 12 months

Deferred tax assets

Deferred tax liabilities

Deferred tax liabilities to be recovered
after more than 12 months

Deferred tax liabilities to be recovered
within 12 months

Deferred tax liabilities

Deferred tax liabilities (net)

1,663

5,900

7,563

1,383

6,722

8,105

101,709

104,276

136

101,845

94,282

104

104,380

96,275

The movement in deferred income tax assets and liabilities
during the year is as follows:

M O V E M E N T I N D E F E R R E D TA X
A S S E T S A N D L I A B I L I T I E S

T 0 6 3

in EUR thousands

2016

2015

Deferred tax liabilities (net)
– as of January 1

Deferred tax income

Tax charged to other comprehensive income

Foreign exchange rate differences

Acquisition of subsidiaries

Deferred tax liabilities (net)
– as of December 31

96,275

−5,145

1,016

2,686

−550

93,510

−7,744

223

10,286

94,282

96,275

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

144

The analysis of deferred income tax assets and deferred income
tax liabilities without taking into consideration the offsetting of
balances within the same tax jurisdiction is as follows:

D E F E R R E D I N C O M E TA X A S S E T S

T 0 6 4

ible temporary difference can be utilized. As of December 31,
2016, and also in the previous year, deferred tax assets were
recognized for all deductible temporary differences because
sufficient taxable income will most likely be available to utilize
these deductible temporary differences.

in EUR thousands

Dec 31, 2016

Dec 31, 2015

In 2016 and prior years, the Group had tax losses at several
subsidiaries in several countries.

Intangible assets

Property, plant and equipment

Other assets

Inventories

Trade receivables

Retirement benefit obligations /
pension liabilities

Provisions

Borrowings

Other liabilities, incl. derivatives

Trade and other payables

Tax loss carry forward and tax credits

Deferred tax assets
(before valuation allowances)

Valuation allowance

Deferred tax assets (before offsetting)

Offsetting effects

Deferred tax assets

4,577

214

293

2,590

909

1,474

1,059

5,481

3,131

508

3,361

23,597

−157

23,440

−15,877

7,563

4,168

430

1,810

2,733

941

1,694

1,326

3,551

3,729

329

3,514

24,225

−2,017

22,208

−14,103

8,105

D E F E R R E D I N C O M E TA X L I A B I L I T I E S

T 0 6 5

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Deferred income tax assets are recognized for tax loss carry
forwards as far as it is expected that the deferred tax assets
would be utilized in the foreseeable future.

The Group did recognize the following tax losses:

E X P I R Y O F R E C O G N I Z E D TA X L O S S E S

T 0 6 6

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Up to 1 year

> 1 year up to 5 years

> 5 years

Unlimited carry forward

Total

140

3,177

3,537

6,887

326

3,157

2,813

6,296

The Group did not recognize deferred income tax assets
in respect of loss carry forwards amounting to EUR 12,503
thousand on December 31, 2016 (Dec 31, 2015: EUR 11,031
thousand).

The expiration of loss carry forwards not recognized for tax
purposes is as follows:

95,855

15,800

4,070

E X P I R Y O F N O T R E C O G N I Z E D TA X L O S S E S

T 0 6 7

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Intangible assets

Property, plant and equipment

Other assets

Inventories

Trade receivables

Borrowings

Provisions

Other liabilities, incl. derivatives

Trade and other payables

Untaxed reserves

Deferred tax liabilities
(before offsetting)

Offsetting effects

Deferred tax liabilities

Deferred tax liabilities (net)

92,293

15,919

6,717

110

207

387

446

177

532

577

161

111

Up to 1 year

> 1 year up to 5 years

> 5 years

1,506

1,200

Unlimited carry forward

Total

117,722

−15,877

101,845

94,282

118,483

−14,103

104,380

96,275

Deferred income tax assets are recognized for all deductible
temporary differences to the extent that it is probable that fu
ture taxable profits will be available against which the deduct

2,013

1,001

9,489

12,503

270

932

3,781

6,048

11,031

Regarding taxable temporary differences amounting to EUR
265,156 thousand on December 31, 2016 (Dec 31, 2015: EUR
218,660 thousand), associated with investments in subsidiaries,
no deferred tax liabilities are recognized since the respective
parent is able to control the timing of the reversal of the tempo
rary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.

NORMA Group SE Annual Report 2016

145

19. GOODWILL A ND OTHER INTA NGIBLE AS SE TS
The acquisition costs as well as accumulated amortization and
impairment of intangible assets consist of the following:

D E V E L O P M E N T G O O D W I L L A N D O T H E R I N TA N G I B L E A S S E T S

T 0 6 8

in EUR thousands

Acquisition costs

Goodwill

Customer lists

Licenses, rights

Software acquired externally

Trademarks

Patents & technology

Internally generated intangible assets

Intangible assets, other

Total

Amortization and Impairment

Goodwill

Customer lists

Licenses, rights

Software acquired externally

Trademarks

Patents & technology

Internally generated intangible assets

Intangible assets, other

Total

in EUR thousands

Acquisition costs

Goodwill

Customer lists

Licenses, rights

Software acquired externally

Trademarks

Patents & technology

Internally generated intangible assets

Intangible assets, other

Total

Amortization and Impairment

Goodwill

Customer lists

Licenses, rights

Software acquired externally

Trademarks

Patents & technology

Internally generated intangible assets

Intangible assets, other

Total

As of
Jan 1, 2016

Additions

Deductions

Transfers

Changes in
consolidation

Currency
effects

As of
Dec 31, 2016

379,576

228,921

2,091

26,735

54,837

40,404

9,925

15,295

757,784

35,747

38,172

1,374

16,351

9,251

27,201

3,666

11,184

2,513

550

2,899

3,350

9,327

17,995

286

5,372

1,245

2,431

2,199

887

142,946

30,415

−202

−73

−658

−156

−1,089

−202

−73

−630

−905

3,585

−3,585

−64

18,922

26,901

1,410

10,606

6,998

5,930

375

1,766

1,336

−118

405,496

261,752

1,908

33,135

58,013

52,896

12,242

14,786

57,839

16,367

840,228

890

1,227

224

341

880

−118

3,486

36,637

57,394

1,462

21,938

10,837

30,512

5,273

11,889

175,942

As of
Jan 1, 2015

Additions

Deductions

Transfers

Changes in
consolidation

Currency
effects

As of
Dec 31, 2015

357,441

206,967

2,059

23,496

49,249

36,322

8,017

12,482

696,033

32,945

22,749

1,072

11,859

7,221

21,519

1,827

9,885

2,611

716

2,213

2,858

8,402

13,398

371

4,279

1,229

3,466

1,747

1,184

109,077

25,674

−39

−20

−61

−120

−39

−20

−1

−52

−112

129

105

−272

−35

−256

22,391

21,951

519

5,588

3,366

−410

288

379,576

228,921

2,091

26,735

54,837

40,404

9,925

15,295

−256

53,725

757,784

2,802

2,025

233

801

2,217

167

35,747

38,172

1,374

16,351

9,251

27,201

3,666

11,184

8,307

142,946

Consolidated Financial StatementsNotes to the Consolidated Financial Statements146

G O O D W I L L A N D O T H E R I N TA N G I B L E A S S E T S –
C A R R Y I N G A M O U N T S

T 0 6 9

Carrying amounts

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Goodwill

Customer lists

Licenses, rights

Software acquired externally

Trademarks

Patents & technology

Internally generated intangible assets

Intangible assets, other

Total

368,859

204,358

446

11,197

47,176

22,384

6,969

2,897

343,829

190,749

717

10,384

45,586

13,203

6,259

4,111

664,286

614,838

The item ‘Patents & technology’ on December 31, 2016, con
sists of patents worth EUR 12,245 thousand (Dec 31, 2015: EUR
1,903 thousand) and technology worth EUR 10,139 thousand
(Dec 31, 2015: EUR 11,300 thousand).

Internally generated intangible assets mainly include technolo
gies as well as internally generated software in the amount of
EUR 283 thousand.

The item ‘Intangible assets, other’ consists mainly of prepayments.

The change in goodwill, customer lists and patents & technol
ogy results from positive foreign exchange differences, mainly
from the US dollar area and from the acquisition of the Autoline
business  Note 40 ‘Business Combinations.’

The change in goodwill is summarized as follows:

C H A N G E I N G O O D W I L L

T 0 7 0

in EUR thousands

Balance as of December 31, 2015

Changes in consolidation

Autoline France

Autoline China

Autoline Mexico

Currency effect

Balance as of December 31, 2016

343,829

18,922

16,991

499

1,432

6,108

368,859

Besides the goodwill, there are intangible assets within trade
marks with an indefinite useful life in the amount of EUR 30,263
thousand (2015: EUR 29,301 thousand) resulting from the ac
quisition of NDS in 2014. From a market perspective, NORMA
Group assumed an indefinite useful life for these acquired
trademarks, which mainly include the corporate brand NDS ®,
because these brands have been established in the market for

a number of years and there is no foreseeable end to their
useful life, therefore useful lives are indefinite. Trademarks with
indefinite useful lives are fully allocated to the cashgenerating
unit (CGU) Americas.

Trademarks with an unknown term of use are subjected to an
annual impairment test pursuant to IAS 36 on the basis of the
recoverable amount pursuant to the procedure described in
 Note 3.7 ‘Summary of Significant Accounting Policies: Impair
ment of NonFinancial Assets.’

On December 31, 2016, and 2015, the intangible assets are
unsecured.

Impairment tests for goodwill
Goodwill is allocated to the Group’s cashgenerating units
(CGUs) identified according to geographical areas. A summary
of the goodwill allocation is presented below.

G O O D W I L L A L L O C AT I O N P E R S E G M E N T

T 0 71

in EUR thousands

Dec 31, 2016

Dec 31, 2015

CGU EME A

CGU Americas

CGU AsiaPacific

172,087

190,756

6,016

368,859

155,035

183,294

5,500

343,829

Goodwill for the CGU EMEA increased in 2016 due to the acquisi
tion of the Autoline business in France amounting to EUR 16,991
thousand and due to currency effects. Goodwill for the CGU
Americas increased in 2016 due to currency effects and due
to the acquisition of the Autoline business in Mexico amount
ing to EUR 1,432 thousand. Goodwill for the CGU AsiaPacific
was increased by currency effects and by the acquisition of the
Autoline business in China amounting to EUR 499 thousand.

The recoverable amount of a CGU is determined based on fair
valuelesscoststosell, which is calculated by discounting pro
jected cash flows. Based on the inputs used for this valuation
technique, fair values are classified as level 3 fair values ( Note
3.3 ‘Fair Value Estimation’). These calculations use cash flow
projections based on financial budgets approved by the man
agement covering a fiveyear period. Cash flows beyond the
fiveyear period are extrapolated using the estimated growth
rates stated below. The growth rate does not exceed our ex
pectations for the longterm average growth rate for the geo
graphical area of the respective CGU.

The discount rates used are aftertaxrates and reflect the
specific risk of each CGU. The respective beforetaxrates
are 9.86% (2015: 10.38%) for the CGU EME A, 10.30% (2015:
10.79%) for the CGU Americas and 10.01% (2015: 10.49%) for
the CGU AsiaPacific.

NORMA Group SE Annual Report 2016

147

The key assumptions used for fairvaluelesscoststosell cal
culations are as follows:

G O O D W I L L P E R S E G M E N T – K E Y A S S U M P T I O N S

T 0 7 2

December 31, 2016

CGU
EME A

CGU
Americas

CGU
AsiaPacific

Terminal value growth rate

Discount rate

Costs to sell

1.50%

7.80%

1.00%

1.50%

6.92%

1.00%

1.50%

7.90%

1.00%

December 31, 2015

CGU
EME A

CGU
Americas

CGU
AsiaPacific

the customer list was prepared which resulted in the recoverable
amount being lower than the carrying amount. Consequently, an
impairment charge amounting to EUR 3.9 million was recognized
within the amortization, reducing the carrying amount to the re
coverable amount.

The fair value of the customer lists was determined using the
residual value method based on level 3 inputs. The residual
value method estimates the fair value by determining the present
value of the future economic returns expected from the cus
tomers over their useful lives. The earnings were taken from the
midterm planning (own data) as there was no other available
information that indicated that market participants would use
different assumptions / data.

Terminal value growth rate

Discount rate

Costs to sell

1.50%

8.11%

1.00%

1.50%

7.25%

1.00%

1.50%

8.32%

1.00%

Key assumptions used in determining the fair value of the cus
tomer lists are:

The assumptions are based on management’s expectations
regarding future developments.

The Group has performed a sensitivity analysis wherein the
EBITA was decreased by 10%. This change would not cause the
carrying amount to exceed its recoverable amount in any CGU.
Even if the discount rate would increase by +2% and the ter
minal value growth rate would be 0%, the change of these key
assumptions would not cause the carrying amount to exceed
its recoverable amount in any CGU.

Impairment losses – acquired customer lists
An impairment test on customer lists was conducted in the sec
ond half of the year after observing a significant decrease in the
related forecasted sales revenue. The reason for this reduction
was attributed to the loss of several main customers (triggering
event) which the management considered to be an indicator of po
tential impairment resulting in a downward revision of the project
ed cash flows. A new estimate of expected cash flow attributed to

A S S U M P T I O N S I M PA I R M E N T

Proportion of total
revenue driven
from acquired
customers

Pretax
risk adjusted
discount rate

Tax rate

EBITDA margin

Attrition factor

This figure was determined after an analysis
of the current circumstances while taking
into account historical and forecasted data.

The WACC was calculated specifically for
the subsidiary by considering its specific
business risk and financial risk.

The last available standalone marginal
corporate tax rate of the subsidiary was
used (F Y 2016).

The EBITDA margin has been set in line with
the expectations of the management of the
subsidiary after an analysis of the market
conditions.

Since the useful life of the asset is 8 years,
the factor is expected to reduce every year
by 12.5%.

T 0 7 3

98%

6.98%

21.2%

10%

12.5%

Besides the afore mentioned impairment, no material impair
ments for intangible assets or write ups were recognized in
2016 and 2015.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

148

20. PROPERT Y, PL A NT A ND EQUIPMENT
The acquisition and manufacturing costs as well as accumu
lated depreciation of property, plant and equipment consist of
the following:

D E V E L O P M E N T O F P R O P E R T Y, P L A N T A N D E Q U I P M E N T

T 0 74

As of
Jan 1, 2016

Additions

Deductions

Transfers

Changes in
consolidation

Currency
effects

As of
Dec 31, 2016

in EUR thousands

Acquisition costs

Land and buildings

Machinery & tools

Other equipment

Assets under construction

Total

Depreciation and Impairment

Land and buildings

Machinery & tools

Other equipment

Assets under construction

Total

in EUR thousands

Acquisition costs

Land and buildings

Machinery & tools

Other equipment

Assets under construction

Total

Depreciation and Impairment

Land and buildings

Machinery & tools

Other equipment

Assets under construction

Total

105,133

245,297

54,900

22,057

427,387

45,875

169,979

41,580

1,392

11,490

5,346

20,332

38,560

2,877

16,738

4,579

−31

−2,757

−1,455

1,122

12,094

1,747

−50

−14,963

1,963

11,484

136

2,332

−26

1,329

100

549

109,553

278,937

60,774

30,257

−4,293

15,915

1,952

479,521

−2

−2,517

−1,229

−6

−31

−90

457

435

48,654

184,694

44,967

278,344

257,448

24,209

−3,748

As of
Jan 1, 2015

Additions

Deductions

Transfers

Changes in
consolidation

Currency
effects

As of
Dec 31, 2015

100,925

224,425

52,875

14,816

393,041

43,016

155,801

39,535

199

1,663

13,993

3,665

14,443

33,764

2,843

16,481

4,082

−163

−5,998

−2,773

−101

−9,035

−271

−5,779

−2,534

238,551

23,420

−8,584

889

6,136

610

−7,635

−98

215

−215

1,819

6,741

523

534

105,133

245,297

54,900

22,057

9,617

427,387

385

3,261

399

45,875

169,979

41,580

4,061

257,448

P R O P E R T Y, P L A N T A N D E Q U I P M E N T –
C A R R Y I N G A M O U N T S

T 0 75

On December 31, 2016, the item ‘Machinery & tools’ includes
tools valued at EUR 26,222 thousand (Dec 31, 2015: EUR 17,820
thousand).

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Land and buildings

Machinery & tools

Other equipment

Assets under construction

Total

60,899

94,243

15,807

30,228

201,177

59,258

75,318

13,320

22,043

169,939

No material impairment and no material writeups were re
cognized on property, plant and equipment in 2016 and 2015.

On December 31, 2016, and 2015, property, plant and equip
ment, except for finance lease assets, are unsecured.

NORMA Group SE Annual Report 2016
149

Land and buildings includes the following amounts where the
Group is a lessee under a finance lease:

Other equipment includes the following amounts where the
Group is a lessee under a finance lease:

F I N A N C E L E A S E S – L A N D A N D B U I L D I N G S

T 0 7 6

F I N A N C E L E A S E S – O T H E R E Q U I P M E N T

T 0 7 8

in EUR thousands

Dec 31, 2016

Dec 31, 2015

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Cost – capitalized finance leases

Accumulated depreciation

Net carrying amount

885

−49

836

630

−25

605

Cost – capitalized finance leases

Accumulated depreciation

Net carrying amount

−53

−21

Machinery includes the following amounts where the Group is
a lessee under a finance lease:

F I N A N C E L E A S E S – M A C H I N E R Y

T 0 7 7

in EUR thousands

Dec 31, 2016

Dec 31, 2015

The Group leases various property, machinery, technical and
IT equipment under noncancellable finance lease agreements.
The lease terms for machinery and other equipment are be
tween three and ten years, the lease terms for land and building
are up to 50 years.

Cost – capitalized finance leases

Accumulated depreciation

Net carrying amount

−29

265

−179

21. FIN A NCIAL INSTRUMENTS
Financial instruments according to classes and categories were
as follows:

F I N A N C I A L I N S T R U M E N T S – C L A S S E S A N D C AT E G O R I E S

T 0 7 9

in EUR thousands

Financial assets

Derivative financial instruments –
hedge accounting

Interest rate swaps –

cash flow hedges

Foreign exchange derivatives –
cash flow hedges

Foreign exchange derivatives –
fair value hedges

Trade and other receivables

Other financial assets

Cash and cash equivalents

Financial liabilities

Borrowings

Derivative financial instruments –
hedge accounting

Interest rate swaps –
cash flow hedges

Foreign exchange derivatives –
cash flow hedges

Foreign exchange derivatives –
fair value hedges

Trade and other payables

Other financial liabilities

Other liabilities

Finance lease liabilities

Totals per category

Loans and receivables (LaR)

Financial liabilities at amortized cost (FL AC)

Measurement basis IAS 39

Category
IAS 39

Carrying
amount
Dec 31, 2016

Amortized
Cost

Fair value
through profit
or loss

Derivatives
used for
hedging

Measure
ment basis
IAS 17

Fair value
Dec 31, 2016

n / a

LaR

1,576

685

472

124,208

5,685

165,596

124,208

5,685

165,596

FL AC

555,281

n / a

FL AC

n / a

2,014

115

119,577

2,088

271

2,088

295,489

676,946

295,489

676,946

1,576

685

472

2,014

115

1,576

685

472

124,208

5,685

165,596

567,028

2,014

115

119,577

2,088

266

295,489

688,693

271

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

150

in EUR thousands

Financial assets

Derivative financial instruments –
held for trading

Measurement basis IAS 39

Category
IAS 39

Carrying
amount
Dec 31, 2015

Amortized
Cost

Fair value
through profit
or loss

Derivatives
used for
hedging

Measure-
ment basis
IAS 17

Fair value
Dec 31, 2015

Foreign exchange derivatives

FAHf T

Derivative financial instruments –
hedge accounting

Foreign exchange derivatives –
cash flow hedges

Foreign exchange derivatives –
fair value hedges

Trade and other receivables

Other financial assets

Cash and cash equivalents

Financial liabilities

Borrowings

Derivative financial instruments –
held for trading

n / a

LaR

143

122,865

3,856

99,951

3,856

99,951

FL AC

450,767

Foreign exchange derivatives

FLHf T

Derivative financial instruments –
hedge accounting

Interest rate swaps –

cash flow hedges

Foreign exchange derivatives –
cash flow hedges

Foreign exchange derivatives –
fair value hedges

Trade and other payables

Other financial liabilities

Contingent considerations

Other liabilities

Finance lease liabilities

Totals per category

Financial assets held for trading (FAHf T)

n / a

FL AC

n / a

FL AC

n / a

2,510

761

100,877

3,472

2,939

289

Loans and receivables (LaR)

226,672

Financial liabilities held for trading (FLHf T)

Financial liabilities at amortized cost (FL AC)

554,583

143

2,510

761

3,472

2,939

289

143

122,865

3,856

99,951

461,867

2,510

761

100,877

3,472

2,939

292

226,672

565,683

Financial instruments, which are recognized in the balance
sheet at amortized cost and for which the fair value is stated
in the notes, are also allocated within a three-step fair value
hierarchy.

The fair value calculation of the fixed-interest promissory note,
which is recognized at amortized cost and for which the fair
value is stated in the notes, was based on the market yield curve
according to the zero coupon method considering credit spreads
(level 2). Interests accrued on the reporting date are included.

Trade and other receivables and cash and cash equivalents
have short-term maturities. Their carrying amounts on the re-

porting date equal their fair values, as the impact of discounting
is not significant.

Trade and other payables and other financial liabilities have
short times to maturity; therefore the carrying amounts report-
ed approximate the fair values.

On December 31, 2015, contingent considerations measured at
fair value in the amount of EUR 3,472 thousand resulting from
the acquisition of the business activities of Five Star Clamps,
Inc. in the second quarter of 2014 are included in the position
other financial liabilities. Furthermore, this position includes lia-
bilities from the acquisition of NDS in the fourth quarter of 2014

NORMA Group SE Annual Report 2016

151

in the amount of EUR 1,622 thousand. Both liabilities are fully
paid as of December 31, 2016.

have been categorized entirely within level 2 in the fair value
hierarchy.

The fair values of finance lease liabilities are calculated as the
present values of the payments associated with the debts based
on the applicable yield curve and NORMA Group’s credit spread
curve (level 2).

Derivative financial instruments held for trading and those used
for hedging are carried at their respective fair values. They

None of the financial assets that are fully performing were re-
negotiated last year.

The tables below provide an overview of the classification of
financial assets and liabilities measured at fair value in the fair
value hierarchy under IFRS 13 as of December 31, 2016, as well
as December 31, 2015:

F I N A N C I A L I N S T R U M E N T S – FA I R VA L U E H I E R A R C H Y

in EUR thousands

Level 1 1

Level 2 2

Level 3 3

T 0 8 0

Total as of
Dec 31, 2016

Recurring fair value measurements

Assets

Interest rate swaps – cash flow hedges

Foreign exchange derivatives – cash flow hedges

Foreign exchange derivatives – fair value hedges

Total

Liabilities

Interest rate swaps – cash flow hedges

Foreign exchange derivatives – cash flow hedges

Foreign exchange derivatives – fair value hedges

Total

1,576

685

472

2,733

2,014

115

2,181

1,576

685

472

2,733

2,014

115

2,181

1 Fair value measurement based on quoted prices (unadjusted) in active markets for these or identical assets or liabilities.
2 Fair value measurement for the asset or liability based on inputs that are observable on active markets either directly (i. e. as priced) or indirectly (i. e. derived from prices).
3 Fair value measurement for the asset or liability based on inputs that are not observable market data.

in EUR thousands

Recurring fair value measurements

Assets

Foreign exchange derivatives – held for trading

Foreign exchange derivatives – cash flow hedges

Foreign exchange derivatives – fair value hedges

Total

Liabilities

Interest rate swaps – cash flow hedges

Foreign exchange derivatives – held for trading

Foreign exchange derivatives – cash flow hedges

Foreign exchange derivatives – fair value hedges

Other financial liabilities

Total

Level 1 1

Level 2 2

Level 3 3

Total as of
Dec 31, 2015

143

248

2,510

761

3,386

3,472

143

248

2,510

761

3,472

6,858

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

152

No transfers between the different levels occurred in 2016 and
2015.

In 2016, currency effects on this liability amounting to EUR 152
thousand (2015: EUR -334 thousand) were recognized in other
comprehensive income.

The fair value of interest swaps is calculated as the pres-
ent value of estimated future cash flows. The fair value of
forward foreign exchange contracts is determined using
a present value model based on forward exchange rates.

The contingent consideration related to the acquisition of the
business activities of Five Star Clamps, Inc. existing on Decem-
ber 31, 2015, in the amount of EUR 3,472 thousand was settled
with a payment of EUR 3,320 thousand in the second quarter
of 2016. The payment was equal to the outstanding fair value of
the liability in euros calculated on June 30, 2016.

The development of the financial assets that are recognized at
fair value and assigned to level 3 of the fair value hierarchy is
stated below:

In accordance with IFRS 7.20 (a), net gains and losses from
financial instruments by measurement category are as follows:

F I N A N C I A L I N S T R U M E N T S –
N E T G A I N S A N D L O S S E S

T 0 8 2

in EUR thousands

2016

2015

Loans and receivables (LaR)

−345

−2,023

Financial instruments held for trading
(FAHf T and FLHf T)

Financial liabilities at cost (FL AC)

−1,538

−11,454

−13,337

−1,799

−11,959

−15,781

F I N A N C I A L I N S T R U M E N T S –
C H A N G E S I N L E V E L 3 I N S T R U M E N T S

T 0 8 1

Net gains and losses of loans and receivables comprise impair-
ment of trade receivables and interest income on short-term
bank deposits. Net gains and losses of financial liabilities at cost
comprise interest expenses and fees from borrowings.

in EUR thousands

Contingent consideration
in business combinations

Total

Balance as of January 1, 2016

3,472

Gains and losses recognized in
profit (−) or loss (+)

Payments

Currency effects

Balance as of December 31, 2016

Total gains or losses for the period
included in profit (−) or loss (+),
under ‘Financial result’

−3,320

−152

Net gains and losses of financial instruments held for trad-
ing result from the dynamic protection concept described in
 Note 22 ‘Derivative Financial Instruments.’

Currency effects from the translation of financial assets and
liabilities according to IAS 21 are shown within  Note 14 ‘Net
Foreign Exchange Gains / Losses.’

22 . DERIVATIVE FIN A NCIAL INSTRUMENTS
The derivative financial instruments were as follows:

D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S

T 0 8 3

in EUR thousands

Assets

Liabilities

Assets

Liabilities

Dec 31, 2016

Dec 31, 2015

Interest rate swaps – cash flow hedges

Foreign exchange derivatives – held for trading

Foreign exchange derivatives – cash flow hedges

Foreign exchange derivatives – fair value hedges

Total

Less non-current portion

Interest rate swaps – cash flow hedges

Non-current portion

Current portion

1,576

2,014

685

472

2,733

1,576

1,157

115

2,181

2,014

167

143

248

2,510

761

3,386

2,510

876

NORMA Group SE Annual Report 2016

153

Foreign exchange derivatives
On December 31, 2016, foreign exchange derivatives with a
positive market value of EUR 685 thousand and with a negative
market value of EUR 115 thousand were classified as cash flow
hedges. The notional principal amounts were EUR 21,584 thou-
sand (Dec 31, 2015: EUR 5,957 thousand) and EUR 15,534 thou-
sand (Dec 31, 2015: EUR 3,017 thousand). Furthermore, foreign
exchange derivatives with a positive market value of EUR 472
thousand and a negative value of EUR 52 thousand and a no-
tional principal amount of EUR 52,257 thousand (Dec 31, 2015:
EUR 24,565 thousand) and EUR 1,212 thousand (Dec 31, 2015:
EUR 77,772 thousand) were classified as fair value hedges.

Foreign exchange derivatives classified as cash flow hedges are
used to hedge foreign currency risk within the operative busi-
ness. The foreign exchange derivatives classified as fair value
hedges are used to hedge foreign currency risk of external debt
and intragroup monetary items.

As part of its financial risk management, NORMA Group not
only employs traditional approaches, such as using so-called
natural hedges to reduce US dollar exposure and rolling hedg-
ing with foreign currency derivatives, but has also delegated
certain parts of its exposure to banking partners. The purpose
of this instrument is to protect NORM A Group against any
unfavorable exchange rate developments while at the same
time letting the Company take advantage of positive devel-
opments in foreign exchange markets. A dynamic protection
concept with variable rate hedging is used here that analyzes
market trends on the basis of quantitative models and imple-
ments these findings in a technical security model. All activi-

ties must always follow the strict requirements of internal risk
management. Foreign exchange derivatives resulting from the
described dynamic protection concept are classified as held
for trading. No such foreign exchange derivatives were held
on December 31, 2016.

Interest rate swaps
In order to avoid interest rate fluctuations, NORMA Group has
hedged parts of the loans against changes in interest rates.

On December 31, 2016, interest rate swaps with a positive
market value of EUR 1,576 thousand and a negative market
value of EU R 2,014 thousand are recognized. The notion-
al principal amount of the interest rate swaps amounts to
EUR 95,210 thousand (Dec 31, 2015: EUR 0 thousand) and
EUR 99,754 thousand (Dec 31, 2015: EUR 117,430 thousand).

On December 31, 2016, the hedged fixed interest rate was be-
tween 1.178% and 2.0025%; the variable interest rate was the
3-month LIBOR and the 6-month EURIBOR.

The maximum exposure to credit risk on the reporting date is
the fair value of the derivative assets in the Consolidated State-
ment of Financial Position.

In 2016 and 2015, no ineffective portion of cash flow hedges
relating to foreign exchange derivatives and interest rate swaps
was recognized in profit or loss.

The effective part recognized in other comprehensive income
excluding taxes developed as follows:

C H A N G E I N H E D G I N G R E S E R V E B E F O R E TA X

in EUR thousands

Balance as of January 1, 2015

Foreign currency translation effects

Reclassification in profit or loss

Net fair value changes

Balance as of December 31, 2015

Foreign currency translation effects

Reclassification in profit or loss

Net fair value changes

Balance as of December 31, 2016

Foreign exchange
derivatives

Interest rate
swaps

Cross-currency
swaps

−109

−3

110

−21

−45

754

712

−2,554

1,544

−1,498

−2,508

1,628

443

−437

−716

−67

783

T 0 8 4

Total

−3,379

−70

2,437

−1,472

−2,484

−21

1,583

1,197

275

Consolidated Financial StatementsNotes to the Consolidated Financial Statements154

Amounts due to interest rate swaps recognized in the hedging
reserve in equity will be released in profit or loss before the
repayment of the loans. Amounts due to foreign exchange de-
rivatives recognized in the hedging reserve in equity are current
and will therefore be released in profit or loss within one year.

An overview of the gains and losses arising from the hedging of
fair value changes that were recognized in the financial result
is shown below:

G A I N S A N D L O S S E S FA I R - VA L U E H E D G E S

T 0 8 5

23 . TR ADE A ND OTHER R ECEIVABLES
Trade and other receivables were as follows:

T R A D E R E C E I VA B L E S A N D O T H E R R E C E I VA B L E S

T 0 8 6

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Trade receivables

thereof receivables from POC

Other receivables

123,901

122,781

1,525

307

1,460

124,208

122,865

in EUR thousands

2016

2015

On the balance sheet date, trade receivables were as follows:

Losses (−) / Gains (+) on hedged items

Loss (−) on hedging instruments

−69

−892

−961

11,124

T R A D E R E C E I VA B L E S

T 0 8 7

−11,220

−96

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Trade receivables

Less: allowances for doubtful accounts

127,011

−3,110

123,901

126,100

−3,319

122,781

All trade receivables are due within one year. The following table
shows the maturity analysis for overdue trade receivables and
other current receivables that are not impaired:

T R A D E R E C E I VA B L E S – M AT U R I T Y A N A LY S I S

T 0 8 8

As of December 31, 2016
in EUR thousands

Not past due

< 30 days

30–90
days

91–180
days

181 days–
1 year

> 1 year

Total

Trade receivables

Other receivables

102,902

12,210

307

103,209

12,210

3,854

1,680

1,128

275

122,049

307

122,356

As of December 31, 2015
in EUR thousands

Not past due

< 30 days

30–90
days

91–180
days

181 days–
1 year

> 1 year

Total

Trade receivables

Other receivables

99,408

12,888

99,475

12,889

5,959

5,975

2,034

1,831

632

122,752

122,836

On December 31, 2016, and 2015, there was no indication that
trade receivables that were not impaired could be irrecoverable.

The amount of receivables that were impaired was as follows:

T R A D E R E C E I VA B L E S – I M PA I R M E N T S

T 0 8 9

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Trade receivables impaired
and provided for

Allowances for doubtful accounts

4,962

−3,110

3,348

−3,319

NORMA Group SE Annual Report 2016

155

The carrying amounts of the Group’s trade and other receiv-
ables are denominated in the following currencies:

T R A D E A N D O T H E R R E C E I VA B L E S –
C A R R Y I N G A M O U N T P E R C U R R E N C Y

T 0 9 0

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Euro

US dollar

Chinese renminbi

British pound

Australian dollar

Swedish krona

Swiss franc

Indien rupee

Malaysian ringgit

Thai baht

Russian ruble

Other currencies

32,280

63,049

15,947

2,712

2,949

773

622

1,374

1,124

793

307

39,428

59,465

10,137

3,656

3,009

918

584

1,330

1,264

493

332

2,278

124,208

2,249

122,865

All trade receivables were impaired by specific valuation allow-
ances. There have been no general allowances. Movements
on the Group provision for impairment of trade receivables are
as follows:

T R A D E R E C E I VA B L E S –
D E V E L O P M E N T I M PA I R M E N T S

T 0 9 1

in EUR thousands

2016

2015

As of January 1

Additions

Amounts used

Reversals

Currency effects

As of December 31

3,319

518

−610

−126

3,110

1,921

1,359

−202

−54

295

3,319

The creation and release of allowances for doubtful accounts
have been included in ‘other operating income / expenses’
in the Consolidated Statement of Comprehensive Income.
Amounts charged to the allowance account are generally
written off when there is no expectation of recovering addi-
tional cash.

The other classes within trade and other receivables do not
contain impaired assets.

The maximum exposure to credit risk on the reporting date is
the carrying amount of each class of receivables mentioned
above. The Group does not hold any collateral as security.

On December 31, 2016, and 2015, the trade and other receiv-
ables are unsecured.

Factoring transactions
In the factoring agreement concluded in 2016, with a maximum
volume of receivables of EUR 20 million, NORMA Group sub-
sidiaries in Germany and Poland sell trade receivables directly
to external purchasers.

As part of this factoring program, receivables of EUR 10.9 million
were sold as of December 31, 2016, (Dec 31, 2015: EUR 0 mil-
lion), of which EUR 1.09 million (Dec 31, 2015: EUR 0 million) were
retained as a reserve and recognized as other financial assets.

The requirements for a receivables transfer were met in accor-
dance with IAS 39.15 since the receivables were transferred in
accordance with IAS 39.18 a). Verification in accordance with IAS
39.20 shows that nearly all opportunities and risks were neither
transferred nor retained. It follows in accordance with IAS 39.30
that NORMA Group recognizes remaining continuing involvement.

NORMA Group is continuing to perform receivables manage-
ment (servicing) for the receivables sold.

Although NORMA Group is only entitled to act as a servicer,
NORMA Group retains the right to dispose of the sold receiv-
ables, as purchasers do not have the right to resell the receiv-
ables acquired.

NORMA Group is continuing to recognize the sold trade re-
ceivable to the extent of its continuing involvement, i. e., at the
maximum amount to which it continues to be liable for the credit
and late payment risk inherent in the receivables sold. Hence,
NORMA Group is recognizing a corresponding financial liability.

The remaining continuing involvement in the amount of EUR
74 thousand (Dec 31, 2015: EUR 0 thousand) was recognized
as a financial liability and considers the maximum potential loss
for NORMA Group resulting from the late payment risk of receiv-
ables sold as of the reporting date. The fair value of the guar-
antee / interest payments to be assumed has been estimated at
EUR 5 thousand, taken through profit or loss and recognized
under other liabilities.

ABS program
In 2014, NORMA Group entered into a revolving asset purchase
agreement (Receivables Purchase Agreement) with Weinberg
Capital Ltd. (special purpose entity). Within the agreed structure,
NORMA Group sold trade receivables in the context of an ABS
transaction which was successfully initiated in December 2014.
Receivables are sold by NORMA Group to a special purpose entity.

As of December 31, 2016, domestic NORMA Group entities had
sold receivables in an amount of EUR 13.5 million (Dec 31, 2015:
EUR 13.9 million) under this asset-backed securities (ABS) pro-
gram with a maximum volume of EUR 25 million. From the receiv-
ables sold, EUR 3.8 million (Dec 31, 2015: EUR 3.6 million) were
retained as loss reserves and not paid out. These assets were

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

156

recognized as other financial assets. The basis for this transaction
is the transfer of trade receivables of individual NORMA Group
subsidiaries to a special purpose entity with a framework of un-
disclosed assignment. This special purpose entity (SPE) is not
consolidated under IFRS 10 because neither the power over the
SPE is attributable to NORMA Group nor does NORMA Group
have an essential self-interest and no connection between power
and variability of the returns of the special purpose entity exists.

The requirements for a receivables transfer according to IAS
39.15 are met, since the receivables are transferred according
to IAS 39.18 a). Verification in accordance with IAS 39.20 shows
that a substantial share of all risks and rewards were neither
transferred nor retained. Therefore, according to IAS 39.30,
NORMA Group’s continuing involvement must be recognized.
This continuing involvement in the amount of EUR 245 thou-
sand (Dec 31, 2015: EUR 251 thousand) includes the maximum
amount that NORMA Group could conceivably have to pay back
under the default guarantee and the expected interest payments
until the payment is received for the carrying amount of the
receivables transferred. The fair value of the guarantee / inter-
est payments to be assumed has been estimated at EUR 171
thousand (Dec 31, 2015: EUR 1 thousand), taken through profit
or loss and recognized under other liabilities.

Receivables from construction contracts
Trade receivables include the following receivables from cus-
tomer-specific contract production recognized using the per-
centage of completion method:

24. IN VENTORIES
Inventories were as follows:

I N V E N T O R I E S

T 0 9 4

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Raw materials

Work in progress

Finished goods and goods for resale

32,471

20,997

86,417

31,484

20,266

78,152

139,885

129,902

On December 31, 2016, impairments were made on inventories
amounting to EUR 4,224 thousand (Dec 31, 2015: EUR 3,957
thousand).

Inventories include inventories amounting to EUR 6,356 thou-
sand from the Autoline business acquired in 2016. Thereof, EUR
3,867 thousand were measured at fair value less costs to sale
as part of the purchase price allocation.

On December 31, 2016, and 2015, the inventories were not
collateralized with the exception of the customary business res-
ervations of title.

25. OTHER NON - FIN A NCIAL AS SE TS
Other non-financial assets were as follows:

O T H E R N O N - F I N A N C I A L A S S E T S

T 0 9 5

R E C E I VA B L E S F R O M C O N S T R U C T I O N C O N T R A C T S

T 0 9 2

in EUR thousands

Dec 31, 2016

Dec 31, 2015

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Deferred costs

Production costs, including result
from construction contracts

Payments received on account

VAT assets

Prepayments

2,270

−745

1,525

1,460

Reimbursement insurance contracts

Other assets

3,120

7,948

3,255

1,639

15,962

3,575

5,836

2,635

170

1,729

13,945

Receivables from construction contracts include customer-spe-
cific contract production with an asset-side balance, whose
production costs, taking account of profit shares and loss-free
valuation, exceed the payments received on account.

The following table shows the gross amounts of the construc-
tion contracts as of December 31, 2016, and 2015:

26. OTHER FIN A NCIAL AS SE TS
Other financial assets were as follows:

O T H E R F I N A N C I A L A S S E T S

T 0 9 6

in EUR thousands

Dec 31, 2016

Dec 31, 2015

G R O S S A M O U N T C U S T O M E R C O N T R A C T S

T 0 9 3

Receivables from ABS program

Receivables from factoring

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Payment claims from acquisitions

Other assets

3,830

1,095

407

353

5,685

3,593

263

3,856

Amounts due from customers
for contract work

Amounts due to customers
for contract work

1,525

1,460

Receivables from the ABS program and from factoring include
reserves for the trade receivables sold  Note 23 ‘Trade and
Other Receivables.’

NORMA Group SE Annual Report 2016

157

Payment claims from acquisitions include outstanding receiv-
ables from a purchase price adjustment in connection with the
acquisition of the Autoline business in 2016.  Note 40 ‘Busi-
ness Combinations.’

by issuing up to 3,186,240 new no-par value registered shares
to grant convertible bonds and / or bonds with warrants (con-
ditional capital 2015).

27. EQUIT Y

Subscribed capital
The subscribed capital of the Company on December 31, 2016,
and 2015 amounted to EUR 31,862 thousand and was fully paid
in. It is divided into 31,862,400 shares with no par value and
a notional value of EUR 1. The liability of the shareholders for
the obligations of the Company to its creditors is limited to this
capital. The amount of the subscribed capital is not permitted
to be distributed by the Company to its shareholders.

Authorized and conditional capital
The Management Board is entitled to increase the share capital
by up to EUR 12,744,960.00 until May 19, 2020, by issuing up to
12,744,960 new no-par value registered shares in exchange for
cash and / or contributions in kind either once or several times
by resolution of the Annual General Meeting held on May 20,
2015, with the approval of the Supervisory Board, whereby the
subscription rights of shareholders may be restricted (authorized
capital 2015).

The resolutions of the Annual General Meeting of April 6, 2011,
Authorized Capital 2011 and Conditional Capital 2011, were re-
pealed.

Capital reserve
The capital reserve contains:

• amounts (premiums) received for the

issuance of shares,

• premiums paid by shareholders in exchange for

the granting of a preference for their shares,

• amounts resulting from other capital contributions

of the owners.

Management incentive schemes
In the second quarter of 2015, the Matching Stock Program
(M S P) for the Management Board of N O R M A Group was
switched over to cash settlement by resolution of the Super-
visory Board. Due to the change in classification, EUR 6,278
thousand were recognized directly in equity as a reduction of
the capital reserve against a corresponding provision.

The share capital is being increased by up to EUR 3,186,240.00
by resolution of the Annual General Meeting on May 20, 2015,

Retained earnings
Retained earnings consisted of the following:

D E V E L O P M E N T R E TA I N E D E A R N I N G S

in EUR thousands

Balance as of December 31, 2014

Profit for the year

Dividends paid

Effect before taxes

Tax effect

Balance as of December 31, 2015

Profit for the year

Dividends paid

Effect before taxes

Tax effect

Remeasure-
ments of post
employment
benefit
obligations

IPO costs
directly netted
with equity

Reimburse-
ment of
IPO costs by
shareholders

Acquisition
of non-
controlling
interest

Effects
from the
application
of IAS 19R

T 0 9 7

Total

−2,607

−4,640

4,681

−2,429

839

116,218

−491

73,680

−23,897

−491

−3,008

−4,640

4,681

−2,429

839

165,600

1,119

−286

75,747

−28,676

1,119

−286

Retained
earnings

120,374

73,680

−23,897

170,157

75,747

−28,676

Balance as of December 31, 2016

217,228

−2,175

−4,640

4,681

−2,429

839

213,504

A dividend of EUR 28,676 thousand (EUR 0.90 per share) was
paid to the shareholders of NORMA Group after the Annual Gen-
eral Meeting in June 2016, which reduced the retained earnings.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

158

Other reserves
Other reserves consisted of the following:

D E V E L O P M E N T O T H E R R E S E R V E S

T 0 9 8

the 2015 tranche, on March 31, 2018, for the 2014 tranche, and
on March 31, 2017, for the 2013 tranche). Non-forfeitable claims
out of the options are earned pro rata over the respective perfor-
mance period. The exercise price for the outstanding tranches
will be the weighted average of the respective closing price of
the Group’s share on the 60 trading days directly preceding the
allocation of each tranche. Dividend payments by the Group
during the vesting period are deducted from the exercise price
of each tranche.

Foreign
exchange rate
differences on
translating for-
eign operations

Cash flow
hedges

Total

−2,343

895

−313

−1,761

2,759

−730

4,839

2,496

18,050

18,945

−313

22,889

21,128

3,920

6,679

−730

268

26,809

27,077

The options of a tranche can only be exercised within a period
of two years following the expiration of the holding period. In
order for an option to be exercised, the weighted average of
the last ten trading days must be at least 1.2 times that of the
exercise price. The pay-out is limited to 2% of the average (ad-
justed) EBITA (tranches 2014, 2015 and 2016) respectively of
the average (adjusted) EBITDA (tranche 2013) during the holding
period. When the option is exercised, the Group can decide
whether to settle the option in shares or cash.

in EUR thousands

Balance as of
January 1, 2015

Effect before taxes

Tax effect

Balance as of
December 31, 2015

Effect before taxes

Tax effect

Balance as of
December 31, 2016

28 . SH AR E- BASED PAYMENTS

Management incentive schemes

The Matching Stock Program
The Matching Stock Program (MSP) for the Management Board
provides a long-term incentive to commit to the success of the
Group. The MSP is a share-based option. To this end, the Supervi-
sory Board specifies a number of share options to be granted each
fiscal year with the proviso that the Management Board mem-
ber makes a corresponding personal investment in the Group.

The shares involved in the share options are those shares allo-
cated or acquired and qualified as part of the MSP defined in
the Management Board contract. The number of share options
is calculated by multiplying the qualified shares (2016: 85,953;
2015: 85,953) held at the time of allotment by the option factor
specified by the Supervisory Board. A new option factor is set
for every tranche (the option factor for 2016 is 1.5; 2015: 1.5).
The first tranche was allocated on the day of the IPO. The oth-
er tranches will be allocated on March 31 each following year.
There are therefore 128,929 share options in the 2016 fiscal year
(2015: 128,929 share options). The holding period is four years
(on March 31, 2020, for the 2016 tranche, on March 31, 2019, for

In the second quarter of 2015, the MSP for the Management
Board of NORMA Group was switched over to cash settlement
by resolution of the Supervisory Board. Due to the change in
classification of the stock options from being a settlement in
equity instruments to a cash settlement, the proportional fair
value of the options was recalculated at the time of the change
in estimates. The proportional expenses for the year 2015 up
to the date of change in the amount of EUR 135 thousand were
recognized within the capital reserve through profit or loss. The
pro rata fair value on the date of the change in the assessment
in the amount of EUR 6,278 thousand was recognized directly
in equity as a reduction of the capital reserve against a corre-
sponding provision.

The determination of fair value, which is the basis for determining
the pro rata provision on the balance sheet date, was carried out
using a Monte Carlo method. The expected volatilities are set to
be the historical volatility of the three-year period before the val-
uation date. Due to the cash settlement, the options are valued
at each balance sheet date and the resulting changes in fair val-
ue are recognized through profit or loss, whereby the prorated
expenses were ratably recognized over the performance period.

The option rights granted under the MSP changed as follows in
the 2016 and 2015 fiscal years:

NORMA Group SE Annual Report 2016

159

D E V E L O P M E N T O F T H E M S P O P T I O N R I G H T S

T 0 9 9

Tranche
MSP 2012

Tranche
MSP 2013

Tranche
MSP 2014

Tranche
MSP 2015

Tranche
MSP 2016

Expected duration until exercise in years

n /a

0.42

1.42

2.42

3.42

Proportional fair value per outstanding “share units” in EUR
as of December 31, 2016

Fair value per “share unit” in EUR as of December 31, 2016

Exercise price in EUR

n /a 2,363,785.00

548,816.00

383,241.00

207,190.00

n /a

15.17

16.43

20.71

4.40

37.81

4.10

43.19

4.11

45.72

Balance as of December 31, 2014

Tentatively granted “share units”

Exercised

Lapsed

162,679

128,929

8,438

16,875

25,313

Balance as of December 31, 2015

154,241

145,804

137,366

128,929

Balance as of December 31, 2015

Tentatively granted “share units”

Exercised

Lapsed

154,241

145,804

137,366

128,929

154,241

128,929

Balance as of December 31, 2016

145,804

137,366

128,929

In fiscal year 2016, expenses in the amount of EUR 396 thou-
sand (2015: EUR 1,762 thousand) resulting from the MSP were
recognized in employee benefits expense against a correspond-
ing addition within the provisions. Furthermore, a payment
amounting to EUR 2,534 (2015: EUR 2,265 thousand) was made
for the exercised options of the 2012 tranche.

The total provision for the MSP amounts to EUR 3,650 thousand
as of December 31, 2016 (Dec 31, 2015: EUR 5,640 thousand).

Long-Term Incentive Plan
In fiscal year 2013, NORMA Group installed a share-based, long-
term, variable compensation component for executives and cer-
tain other groups of employees (Long-Term Incentive Plan). The
Long-Term Incentive Plan (LTI) is a share-based payment, cash
settled plan that takes into account both the performance of the
Company and the share price development.

The participants receive a preliminary number of share units (vir-
tual shares) at the start of the performance period based on a
percentage of the respective base salary multiplied by a conver-
sion rate. The conversion rate is determined based on the aver-
age share price of the previous 60 trading days of the calendar
year prior to the grant date. Once four years have elapsed, the
number of share units granted at the start of the performance
period is adjusted based on the performance the Company
has achieved, incorporating both the targets defined during the
performance period and the Company / regional factor.

The goal achievement factor, measured by adjusted EBITA,
as well as the Company / regional factor are applied as per-
formance targets. The goal achievement factor is based on
the adjusted EBITA of NORMA Group. The absolute adjusted

EBITA target is determined for every year of the performance
period based on the budgeted value. After conclusion of the
four-year-period, the yearly recorded adjusted EBITA values are
defined as a percentage in relation to the target values and
averaged out over the four years. Allocation occurs above a
goal achievement ratio of 90%. Between 90% and 100% goal
achievement, every percentage point amounts to 10 percentage
points of goal achievement factor. Between 100% and 200%
goal achievement, the goal achievement factor grows by 1.5
percentage points per percentage point of goal achievement.

The Company factor is determined by the Group Senior Man-
agement based on the Company’s development, as well as the
development in relation to comparable companies. In addition
to this, the development of free cash flows is taken into account
when determining the factor. At the discretion of the Group
Senior Management, unanticipated developments can also be
taken into account and the Company factor corrected either
downward or upward accordingly. The factor can assume values
between 0.5 and 1.5.

The regional factor is defined by the Group Senior Management
prior to pay-out and can assume a value between 0.5 and 1.5.
The factor takes into account the results of the region, as well
as any region-specific aspects.

The value of the share units is then determined at the end of the
fourth calendar year based on the average share price of the
last 60 days of trading in this fourth year. In case the calculated
Long-term Incentive pay-out exceeds 250% of the initial grant
value, the maximum pay-out is capped at 250%. The value de-
termined is paid out to the participants in cash in May of the
fifth year.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements160

The LTI is a Group-wide and global compensation instrument
with a long-term orientation. Due to the coupling to the devel-
opment not only of the stock price, but also the Company’s
performance, the LTI provides an additional incentive to cre-
ate value through value-based action, aligned with the goals of
NORMA Group.

performed using a Monte Carlo simulation. Due to the cash
settlement of the virtual share units, the fair value is measured
on each balance sheet date and the resulting changes in the
fair value are recognized in income or loss. The allocation of
the expenses is made on a pro rate basis over the performance
period.

The determination of fair value, which is the basis for deter-
mining the pro rata provision on the balance sheet date, was

The share units granted under the LTI changed as follows in the
2016 and 2015 fiscal years:

D E V E L O P M E N T LT I

T 10 0

Expected duration until exercise in years

Fair value per “share unit” in EUR as of December 31, 2016

Share price when granted in EUR

Balance as of December 31, 2015

Tentatively granted “share units”

Exercised

Lapsed

Balance as of December 31, 2016

Expected duration until exercise in years

Fair value per “share unit” in EUR as of December 31, 2015

Share price when granted in EUR

Balance as of December 31, 2014

Tentatively granted “share units”

Exercised

Lapsed

Balance as of December 31, 2015

1st Tranche
LTI 2013

2nd Tranche
LTI 2014

3rd Tranche
LTI 2015

4th Tranche
LTI 2016

n /a

39.77

20.68

1.00

39.89

36.40

2.00

38.94

36.89

31,158

22,144

38,056

–

1,391

29,767

–

3,768

18,376

–

5,061

32,995

3.00

38.19

48.57

31,210

–

31,210

1st Tranche
LTI 2013

2nd Tranche
LTI 2014

3rd Tranche
LTI 2015

1.00

45.29

20.68

2.00

48.43

36.40

31,884

23,385

–

726

–

31,158

–

1,241

22,144

3.00

46.60

36.89

39,726

–

1,670

38,056

In fiscal year 2016, expenses resulting from the LTI in the amount
of EUR 1,706 thousand (2015: EUR 1,178 thousand) were record-
ed under personnel expense and within a corresponding pro-
vision. In total, the provision for the LTI amounts to EUR 3,661
thousand as of December 31, 2016 (2015: EUR 1,955 thousand).

NORMA Group SE Annual Report 2016161

2 9. R E TIR EMENT BENEFIT OBLIG ATIONS
Retirement benefit obligations result mainly from two German
pension plans and a Swiss post-employment benefit plan.

according to decisions of the relevant foundation board. Strate-
gies of the foundation boards to make up for potential shortfalls
are subject to approval by the regulator.

The German defined benefit pension plan for NORMA Group
employees was closed for new entrants in 1990 and provides
benefits in case of retirement, disability, and death as life-long
pension payments. The benefit entitlements depend on years
of service and salary. The portion of salary that is above the
income threshold for social security contribution leads to high-
er benefit entitlements compared to the portion of the salary
up to that threshold. Although the plan was closed in 1990,
NORMA Group is still exposed to certain actuarial risks associ-
ated with defined benefit plans, such as longevity and compen-
sation increases. Due to the amount of the obligation and the
composition of the plan participants, approximately 95% being
pensioners, a significant change in the actuarial assumptions
would have no significant effects on NORMA Group.

Employees hired after 1990 are eligible under a defined con-
tribution scheme. The contributions are paid into an insurance
contract providing lump sum payments in case of retirements
and deaths.

Furthermore, in fiscal year 2015, a plan for members of the
Management Board was established. This second German de-
fined benefit plan is based on a direct commitment to an annual
retirement payment for members of the Management Board of
NORMA Group. The annual retirement payment is measured
as a percentage of the pensionable income. The pension en-
titlement arises when the contract has expired, but not before
reaching the age of 65, or if that individual is unable to work.
The percentage depends on the number of years of service as
a Management Board member. The percentage amounts to 4%
of the last fixed annual salary prior to leaving for each completed
year of service. The percentage can increase to a maximum of
55%. Furthermore, a survivor’s pension is to be provided as
well. The obligations arising from the plan are subject to certain
actuarial risks associated with defined benefit plans, such as
longevity and compensation increases.

Besides the German plans, there is a further benefit plan in
Switzerland resulting from the Swiss “Berufliches Vorsorgege-
setz” law (BVG). According to the BVG, each employer has to
grant post-employment benefits for qualifying employees. The
plan is a capital-based plan under which the Company has to
make contributions equivalent to at least the limits specified in
the plan conditions for employee contributions. These plans are
administered by foundations that are legally separated from the
entity and are subject to the BVG. The Group has outsourced
the investment process to a foundation, which sets the strategic
asset allocation in its group life portfolio. All regulatory grant-
ed obligations out of the plan are reinsured by an insurance
company. This covers risks of disability, death and longevity.
Furthermore, there is for the retirement assets invested a 100%
capital and interest guarantee. In the case of a shortfall, the
employer and plan participants’ contribution might be increased

Besides the plans described in Germany and Switzerland,
NORMA Group also participates in a multi-employer pension
plan in the US for the benefit of employees of one of its US
based plants. NORMA Group’s obligation to participate in the
fund arises from the agreement with the employees’ labor or-
ganization. The multi-employer pension plan is governed by US
federal law under which the plan funds are held in trust and the
plan administration and procedures substantially governed by
federal regulation. The multi-employer pension plan is a defined
benefit plan, and would normally be treated as such based on
its associated actuarial estimates; however, the plan trustees
do not provide the participating employers with sufficient infor-
mation to individually account for the plan (or their portioned
participation therein) as a defined benefit plan. For this reason,
the plan is being treated in accordance with the rules for de-
fined contribution pension plans (IAS 19.34). The share of con-
tributions that NORMA Group paid to the pension schemes in
the previous fiscal year amounts to EUR 1.1 million (2015: EUR
1.2 million). Contributions to the plan are recognized directly in
personnel expenses for the period. Future changes to the con-
tributions, if any, would be determined through negotiations with
the workers’ organization, as they may be slightly modified from
time to time by regulation, and except for which NORMA Group
has no other fixed commitment to the plan. Conditionally, in the
unlikely event that NORMA Group withdraws from the fund or a
significant employer in the fund experiences a major solvency
event, additional future contribution payment obligations could
arise. The funded status of the multi-employer plan is report-
ed annually by the US Department of Labor, and is influenced
by various factors, including investment performance, inflation,
changes in demographics and changes in the participants’
levels of performance. Based on the information provided by
the plan administrator, the plan is undercapitalized. The value
of the undercapitalization amounts to USD 836.4 million for all
plan participants (approximately 155 companies). The portion
of NORMA Group to this shortfall is 3.0% (based on information
provided for 2015). The expected employer contributions to the
pension schemes for the following year 2017 amount to EUR
1,276 thousand.

Reconciliation of defined benefit obligations (DBO)
and plan assets
The amounts included in the Group’s Consolidated Financial
Statements arising from its post-employment defined benefit
plans are as follows:

C O M P O N E N T S P E N S I O N L I A B I L I T Y

T 10 1

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Present value of obligations

Fair value of plan assets

Liability in the balance sheet

14,805

3,019

11,786

15,785

3,834

11,951

Consolidated Financial StatementsNotes to the Consolidated Financial Statements
162

The reconciliation of the net defined benefit liability (liability in
the balance sheet) is as follows:

R E C O N C I L I AT I O N O F T H E N E T
D E F I N E D B E N E F I T L I A B I L I T Y

T 10 2

in EUR thousands

2016

2015

As of January 1

Current service cost

Past service cost

Administration costs

Interest expenses

Remeasurements:

Return on plan assets excluding amounts
included in net interest expenses

Actuarial (gains) losses from changes
in demographic assumptions

Actuarial (gains) losses from changes
in financial assumptions

Experience (gains) losses

Employer contributions

Benefits paid

Settlement payments

Business combinations,
disposals and other

Foreign currency translation effects

11,951

12,271

745

162

−155

275

−1,269

−221

−638

883

536

−195

165

−240

−181

902

−228

−628

−591

121

As of December 31

11,786

11,951

A detailed reconciliation for the changes in the DBO is provided
in the following table:

R E C O N C I L I AT I O N O F T H E C H A N G E S I N T H E D B O

T 10 3

in EUR thousands

2016

2015

As of January 1

Current service cost

Past service cost

Administration costs

Interest expenses

Remeasurements:

Actuarial (gains) losses from changes
in demographic assumptions

Actuarial (gains) losses from changes
in financial assumptions

Experience (gains) losses

Plan participants contribution

Benefits paid

Transfers

Settlement payments

Business combinations,
disposals and other

Foreign currency translation effects

15,785

15,130

745

192

536

−195

217

275

−1,269

1,068

−638

−2,110

883

902

536

−1,012

−591

424

As of December 31

14,805

15,785

The total defined benefit obligation at the end of fiscal year 2016
includes EUR 7,054 thousand for active employees, EUR 92
thousand for former employees with vested benefits and EUR
7,659 thousand for retirees and surviving dependents.

The transfer in the amount of EUR 2,110 thousand relates to the
benefit plan in Switzerland and is a result of the legally required
transfer of net defined benefit obligation to the new employer
upon the departure of an employee.

Experience gains and losses recognized in fiscal year 2016 are a
result of the described transfers within the benefit plan in Swit-
zerland and a result of changes in the number of participants
within the plan in Germany.

Settlement payments in fiscal year 2015 in the amount of EUR
591 thousand relate to the liquidation of Nordic Metalblok, Italy,
in fiscal year 2015.

A detailed reconciliation of the changes in the fair value of plan
assets is provided in the following table:

R E C O N C I L I AT I O N O F C H A N G E S
I N T H E FA I R VA L U E O F P L A N A S S E T S

T 10 4

in EUR thousands

2016

2015

As of January 1

Interest income

Remeasurements:

Return on plan assets excluding amounts
included in net interest expenses

Employer contributions

Plan participants contributions

Benefits paid

Transfers

Foreign currency translation effects

Fair value of plan assets at end of year

3,834

−30

221

1,068

−2,110

3,019

2,859

240

228

536

−384

303

3,834

Disaggregation of plan assets
The allocation of the plan assets of the benefit plans is as follows:

in EUR thousands

2016

2015

Asset class

Insurance contracts

Cash deposit

Equity securities

Total

2,948

3,787

3,019

3,834

Cash deposits and equity securities have quoted prices in ac-
tive markets. The values for insurance contracts represent the
redemption value. No quoted prices in an active market are
available for these.

−155

−181

D I S A G G R E G AT I O N O F P L A N A S S E T S

T 10 5

NORMA Group SE Annual Report 2016

163

Actuarial assumptions
The principal actuarial assumptions are as follows:

A C T U A R I A L A S S U M P T I O N S

T 10 6

in %

Discount rate

Inflation rate

Future salary increases

Future pension increases

2016

2015

1.24

1.59

2.32

1.66

1.40

1.62

2.30

1.61

The biometric assumptions are based on the 2005 G Heubeck
life-expectancy tables for the German plan and on the life-ex-
pectancy tables of the BVG 2015 G for the Swiss plan. The
tables are generation tables and hence differ according to sex,
status and year of birth.

Sensitivity analysis
If the discount rate were to differ by +0.25% / −0.25% from the
interest rate used on the balance sheet date, the defined ben-
efit obligation for pension benefits would be an estimated EUR
386 thousand lower or EUR 423 thousand higher. If the fu-
ture pension increase used were to differ by +0.25% / −0.25%
from Management’s estimates, the defined benefit obligation
for pension benefits would be an estimated EUR 210 thousand
higher or EUR 203 thousand lower. The reduction / increase of
the mortality rates by 10% results in an increase / deduction of
life expectancy depending on the individual age of each ben-
eficiary. That means, for example, that the life expectancy of a
male NORMA Group employee age 55 years as of December
31, 2016, increases / decreases by approximately one year. In
order to determine the longevity sensitivity, the mortality rates
were reduced / increased by 10% for all beneficiaries. The effect
on DBO as of December 31, 2016, due to a 10% reduction / in-
crease in mortality rates would result in an increase of EUR 774
thousand or a decrease of EUR 767 thousand.

When calculating the sensitivity of the defined benefit obligation
to significant actuarial assumptions, the same method (present
value of the defined benefit obligation calculated with the pro-
jected unit credit method) has been applied as when calculat-
ing the post-employment benefit obligation recognized in the
Consolidated Statement of Financial Position. Increases and

decreases in the discount rate or rate of pension progression
which are used in determining the DBO do not have a symmet-
rical effect on the DBO due to the compound interest effect
created when determining the net present value of the future
benefit. If more than one of the assumptions are changed si-
multaneously, the combined impact due to the changes would
not necessarily be the same as the sum of the individual effects
due to the changes. If the assumptions change at a different
level, the effect on the DBO is not necessarily in a linear relation.

Future cash flows
Employer contributions expected to be paid to the post-em-
ployment defined benefit plans in fiscal year 2017 are EUR 199
thousand (2015: EUR 274 thousand).

Expected payments from post-employment benefit plans are
as follows:

E X P E C T E D PAY M E N T S F R O M
P O S T- E M P L OY M E N T B E N E F I T P L A N S

in EUR thousands

Expected benefit payments

2017

2018

2019

2020

2021

2022–2026

in EUR thousands

Expected benefit payments

2016

2017

2018

2019

2020

2021–2025

T 10 7

2016

731

715

702

916

677

3,152

2015

819

802

787

771

753

3,702

The weighted average duration of the defined benefit obligation
is 11.3 years (2015: 11.8 years).

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

164

3 0. PROVISIONS
The development of provisions is as follows:

D E V E L O P M E N T O F P R O V I S I O N S

T 10 8

As of
Jan 1, 2016

Additions

Amounts
used

Unused
amounts
reversed

Interest
accrued

Changes in
consoli-
dation

Foreign
currency
translation

As of
Dec 31,
2016

Transfers

in EUR thousands

Guarantees

Severance

Early retirement

Other personnel-related obligations

11,481

Outstanding credit notes

Outstanding invoices

Others

Total provisions

1,072

798

1,928

20,814

1,226

899

3,410

325

257

1,139

4,585

811

1,364

8,481

−187

−338

−1,266

−4,166

−878

−1,370

−8,205

−154

−334

−6

−307

−1

−443

−1,245

140

−757

−267

−966

−3

−2

−8

−2

1,207

622

3,339

11,999

780

1,210

19,157

As of
Jan 1, 2015

Additions

Amounts
used

Unused
amounts
reversed

Interest
accrued

Changes in
consoli-
dation

Foreign
currency
translation

As of
Dec 31,
2015

Transfers

in EUR thousands

Guarantees

Severance

Early retirement

Other personnel-related obligations

Outstanding credit notes

Outstanding invoices

Others

Total provisions

1,391

1,004

3,321

4,206

1,285

1,049

2,093

14,349

340

618

1,986

10,693

842

773

1,261

16,513

−147

−723

−1,919

−3,447

−434

−1,049

−1,274

−8,993

−380

−5

−627

−24

−133

−1,169

−7

−19

1,226

899

3,410

11,481

1,072

798

1,928

20,814

T 10 9

P R O V I S I O N S – S P L I T C U R R E N T / N O N - C U R R E N T

in EUR thousands

Guarantees

Severance

Early retirement

Other personnel-related obligations

Outstanding credit notes

Outstanding invoices

Others

Total provisions

December 31, 2016

December 31, 2015

Total

1,207

622

3,339

11,999

780

1,210

19,157

thereof
current

thereof
non-current

1,010

622

6,127

780

950

9,489

197

3,339

5,872

260

9,668

Total

1,226

899

3,410

11,481

1,072

798

1,928

20,814

thereof
current

thereof
non-current

940

899

4,588

1,072

798

1,675

9,972

286

3,410

6,893

253

10,842

Early retirement contracts
Employees at NORMA Group in Germany can in general en-
gage in an early retirement contract (“Altersteilzeit”). In the first
phase, the employee works 100% (“Arbeitsphase”). In the sec-
ond phase, he / she is exempt from work (“Freistellungsphase”).
The employees receive half of their pay for the total early re-
tirement-phase as well as top-up payments (including social
security costs paid by the employer). The duration of the early
retirement has a maximum of six years.

NORMA Group SE Annual Report 2016

165

The accounting for early retirement (“Altersteilzeit”) is based on
actuarial valuations taking into account assumptions such as a
discount rate of 0.2% p.a. (2015: 0.61% p.a.) as well as the 2005
G Heubeck life-expectancy tables. For signed early retirement
contracts, a liability has been recognized. The liability includes
top-up payments (“Aufstockungsbeträge”) as well as deferred
salary payments (“Erfüllungsrückstände”).

Guarantees
Provisions for guarantees include provisions due to circum-
stances where a final agreement has not yet been achieved
and provisions based on experience (customer claim quota,

amount of damage, etc.). Future price increases are considered
if material.

Severance payments
Provisions for severance payments include expected severance
payments for NORMA Group employees due to circumstances
where a final agreement has not yet been reached. The provi-
sions will be paid out in the following fiscal year and are there-
fore reported under the current provisions.

Other personnel-related provisions
Other personnel-related provisions are as follows:

P R O V I S I O N S – O T H E R P E R S O N N E L- R E L AT E D

T 110

December 31, 2016

December 31, 2015

in EUR thousands

Notes

Total

thereof
current

thereof
non-current

LTI – Board Members

LTI – Management

STI – Board Members

Matching Stock Program (MSP)

NORMA VA Bonus

Anniversary provisions

Other personnel-related

(28)

1,800

3,661

880

3,650

300

788

920

796

996

880

2,400

300

755

1,004

2,665

1,250

788

165

Total

1,608

1,955

460

5,640

150

770

898

thereof
current

thereof
non-current

808

460

2,396

150

774

800

1,955

3,244

770

124

11,999

6,127

5,872

11,481

4,588

6,893

The Company’s Long-Term Incentive (LTI) of the Management
Board consists of two different long-term compensation ele-
ments. The variable compensation is designed differently de-
pending on the time when a Board member took office. With
the Board members present before 2015, it consists of an EBITA
component and an operating free cash flow before external
use (FCF) component, each of which is observed over a period
of three years (performance period). A new three-year perfor-
mance period begins every year. Both components are cal-
culated by multiplying the average annual adjusted EBITA and
FCF values actually achieved in the performance period by the
adjusted EBITA and FCF bonus percentages specified in the
employment contract. In the second step, the actual value of a
component is compared to the medium-term plan approved by
the Supervisory Board to evaluate the Company’s performance
and adjustments are made to the LTI plan. The LTI plan is limited
to two and a half times the amount that would be arrived at on
the basis of the figures in the Company’s medium-term plan. If
the actual value is lower than the planned value, the LTI plan is
reduced on a straight-line basis down to a minimum of EUR 0 if
the three-year targets are missed by a significant amount. Due
to the calculation of the variable remuneration based on future
results of the Group, uncertainties exist regarding the amount
of the future outflows. Parts of the long-term compensation
component will be paid out in the first half of the following fiscal
year and are therefore reported under the current provisions.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements
166

When entering service as from reporting year 2015, the vari-
able compensation of the Management Board consists of the
NORMA VA Bonus. This variable remuneration for the members
of the Management Board who are not part of the MSP provides
a long-term incentive for the Management Board to work hard
to make the Company successful. The LTI is an appreciation
bonus that is based on the Group’s performance. The Board
member receives a percentage of the calculated increase in
value. The NORMA Value Added Bonus corresponds to the per-
centage of the average increase in value from the current and
the two previous fiscal years. The annual increase in value is
calculated using the following formula:

NORMA Value Added =

(EBIT × (1 − s))

− (WACC × invested capital)

The calculation of the first component is based on the con-
solidated earnings before interest and taxes (Group EBIT) for
the fiscal year and the average corporate tax rate (s). The sec-
ond component is calculated from the Group cost of capital
(WACC) multiplied by the capital invested. The NORMA Value
Added Bonus is limited to a fixed annual salary. 75% of the
amount attributable to the LTI is paid to each Management
Board member the following year. The Company then uses the
remaining 25% attributable to the LTI to purchase shares of
NORMA Group SE in the name and on behalf of the individual
Board members. Alternatively, the Company may pay out this
balance to the Board member. In this case, the Management
Board obligates itself to purchase shares of NORMA Group SE
with the balance of this amount within 120 days after the annual
financial statements are approved at the Supervisory Board
meeting. The Management Board member may not dispose of
the shares for four years. Dividends and subscription rights are
to be made freely available to the Management Board mem-
ber. If a Board member takes office in the current fiscal year
or does not work for the Company for a full twelve months in
a fiscal year, the LTI is to be reduced proportionally (pro rata).
Upon termination of the employment contract, a Management
Board member may dispose of his shares only after 12 months
of leaving the Company.

The LTI for Management (Long-Term Incentive Plan) is a vari-
able compensation component based on the share price of the
NORMA Group. A detailed description can be found in  Note
28 ‘Share-based Payments.’

The STI of the Management Board (Short-Term Incentive Plan)
results from short term variable cash payment. A description
can be found in the  Remuneration Report for the Management
and Supervisory Boards.

Anniversary provisions are based on actuarial valuations taking
into account assumptions such as a discount rate of 1.39% p. a.
as well as the 2005 G Heubeck life-expectancy tables.

Furthermore, other personnel-related provisions mainly include
payable income tax and social security contributions in foreign
countries.

Other non-personnel related provisions
Provisions for outstanding invoices in the amount of EUR 780
thousand (2015: EUR 798 thousand) include expected obliga-
tions for the audit and advisory services. There are uncertainties
regarding the amount and timing of the outflows. However, it is
expected that this results within a year in payments.

Other provisions mainly include obligations for long-term cus-
tomer bonus agreements as well as for other taxes. The amount
of the long-term customer bonus agreements depends on fu-
ture sales volumes. Therefore, uncertainties exist regarding the
amount of the final obligation.

31. BOR ROWINGS
The borrowings were as follows:

B O R R O W I N G S

T 111

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Non-current

Bank borrowings

Current

Bank borrowings

Other borrowings

Total borrowings

513,105

42,176

555,281

443,711

6,994

7,056

450,767

Bank borrowings
As of December 31, 2016, NORMA Group’s financing consists
in the amount of EUR 19.0 million (2015: EUR 20.0 million) and
USD 83.5 million of syndicated bank facilities (value in EUR on
December 31, 2016: 79.2 million, 2015: USD 87.9 million or EUR
80.8 million). The adjusted syndicated bank facilities in fiscal
year 2015 led to a further improved interest profile and now
much better reflect the currency of NORMA Group’s US dollar
cash flows. Both tranches are due in 2021 but include an option
to prolongate until 2022. In fiscal year 2016, the repayment of
the syndicated bank facilities amounts to EUR 5.1 million (2015:
EUR 92.8 million with a contrary issuing in connection with the
renegotiation in the amount of EUR 100.0 million).

As of December 31, 2016, provisions for the Matching Stock
Program (MSP) for NORMA Group’s Management Board amount
to EUR 3,650 thousand (2015: EUR 5,640 thousand). In fiscal
year 2016, EUR 2,534 thousand were paid for exercised options
from the 2012 tranche.  Note 28 ‘Share-based Payments.’

Furthermore, NORMA Group issued a promissory note valued
at EUR 125.0 million with 5, 7 and 10-year terms in 2013, of
which EUR 49.0 million were paid back in 2016. In the fourth
quarter of 2014, NORMA Group issued a second promisso-

NORMA Group SE Annual Report 2016

167

32 . OTHER NON - FIN A NCIAL LIABILITIES
Other non-financial liabilities are as follows:

O T H E R N O N - F I N A N C I A L L I A B I L I T I E S

T 114

in EUR thousands

Dec 31, 2016

Dec 31, 2015

ry note valued at EUR 106.0 million with 3, 5, 7 and 10-year
terms and at USD 128.5 million (value in euro on December
31, 2016: EUR 121.9 million, 2015: EUR 118.0 million) with 3,
5, and 7-year terms. In the third quarter of 2016, a third prom-
issory note was issued with euro tranches in the amount
of EU R 102.0 million 5, 7 and 10-year terms and U S dol-
lar tranches in the amount of USD 52.5 million (value in euro
on Dec 31, 2016: EUR 49.8 million) with 5 and 7-year terms.

The maturity of the syndicated bank facilities and the promissory
note on December 31, 2016, is as follows:

Non-current

Government grants

Other liabilities

Current

M AT U R I T Y B A N K B O R R O W I N G S 2 0 16

T 112

Government grants

2016
in EUR thousands

up to 1
year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Syndicated bank facilities, net

5,170

87,897

Promissory note, net

34,422

26,000

244,955

150,333

Non-income tax liabilities

Social liabilities

Personnel-related liabilities
(e. g. vacation, bonus, premiums)

Other liabilities

Deferred income

Total

39,592

31,170

332,852

150,333

Total other non-financial liabilities

521

610

341

2,892

4,438

22,421

398

722

31,212

31,822

1,316

1,368

1,559

3,547

21,544

890

1,113

28,653

30,021

The maturity of the syndicated bank facilities and the promissory
note on December 31, 2015, is as follows:

M AT U R I T Y B A N K B O R R O W I N G S 2 0 15

T 113

2015
in EUR thousands

up to 1
year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Syndicated bank facilities, net

5,038

90,681

Promissory note, net

33,789

214,168

101,074

Total

5,038

38,827

304,849

101,074

Costs directly attributable to financing were netted with the bank
borrowings in accordance with IAS 39.43. They are amortized
over the financing period using the effective interest method.
The total amount, which was amortized over the remaining fi-
nancing period, amounts to EUR 1,467 thousand as of Decem-
ber 31, 2016 (2015: EUR 1,293 thousand).

Furthermore, parts of the syndicated bank facilities and the ma-
turity of tranches of the promissory note with variable interest
rates are hedged against interest rate changes. The derivative
liability was decreased from EUR 2,510 thousand on December
31, 2015, to EUR 2,014 thousand on December 31, 2016.

NORMA Group received government grants, of which EUR 862
thousand were not recognized in profit or loss. They consist of
grants in cash as well as land. The grants are bound to capital
expenditures and employees. NORMA Group recognizes the
government grants as income over the period in which related
expenses occur. In 2016, EUR 450 thousand were recognized
as income (2015: EUR 449 thousand).

3 3 . OTHER FIN A NCIAL LIABILITIES
Other financial liabilities were as follows:

O T H E R F I N A N C I A L L I A B I L I T I E S

T 115

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Non-current

Lease liabilities

Other liabilities

Current

Lease liabilities

Outstanding credit notes

Acquisition liability

Liabilities from ABS and Factoring

Other liabilities

133

1,107

1,240

138

496

485

1,119

2,359

150

531

681

139

225

5,094

253

308

6,019

6,700

The bank borrowings were unsecured on December 31, 2016,
and 2015.

Total other financial liabilities

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

168

The future aggregate minimum lease payments under non-can-
cellable finance leases and their respective present values are
as follows:

3 5. FIN A NCIAL LIABILITIES A ND NE T DEBT
The financial liabilities of NORMA Group have the following ma-
turity:

F U T U R E M I N I M U M L E A S E PAY M E N T S
N O N - C A N C E L L A B L E F I N A N C E L E A S E S

T 116

M AT U R I T Y F I N A N C I A L L I A B I L I T I E S

T 118

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Gross finance lease liabilities –
minimum lease payments

Up to 1 year

Later than 1 year and up to 5 years

Later than 5 years

Future finance charges on finance lease

Present value of finance lease liabilities

Up to 1 year

Later than 1 year and up to 5 years

Later than 5 years

139

138

277

138

133

271

147

151

298

139

150

289

Lease liabilities are effectively secured because the rights to
the leased assets will revert to the lessor in the event of default.

December 31, 2016
in EUR thousands

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Borrowings

42,176

30,563

332,383

150,159

Trade and other payables

119,577

Finance lease liabilities

Other financial liabilities

138

981

133

862

245

162,872

31,558

332,628

150,159

December 31, 2015
in EUR thousands

up to
1 year

> 1 year
up to
2 years

> 2 years
up to

5 years > 5 years

Borrowings

7,056

38,276

304,426

101,009

Trade and other payables

100,877

Finance lease liabilities

Other financial liabilities

139

5,880

137

511

113,952

38,924

304,459

101,009

3 4. TR ADE A ND OTHER PAYABLES
Trade and other payables were as follows:

Net debt of NORMA Group is as follows:

T R A D E A N D O T H E R PAYA B L E S

T 117

N E T D E B T

T 119

in EUR thousands

Dec 31, 2016

Dec 31, 2015

in EUR thousands

Dec 31, 2016

Dec 31, 2015

79,768

Bank borrowings, net

555,281

450,705

Trade payables and other payables

Reverse factoring liabilities

96,189

23,388

119,577

21,109

100,877

All trade and other payables are due to third parties within one
year. For information regarding trade and other payables, please
refer to  Note 3.14.

Derivative financial liabilities –
hedge accounting

Derivative financial liabilities –
held for trading

Other borrowings

Finance lease liabilities

Other financial liabilities

Financial debt

Cash and cash equivalents

Net debt

2,181

3,312

271

2,088

559,821

165,596

394,225

289

6,411

460,853

99,951

360,902

NORMA Group’s financial debt increased by 21.5% from EUR
460,853 thousand as of December 31, 2015, to EUR 559,821
thousand as of December 31, 2016. The increase within the
bank borrowings is due to the placement of a third promis-
sory note (SSD III) in the amount of EUR 149,030 thousand. It
was used to finance future acquisitions and was partially used
for the repayment of a share of the promissory note, issued
in 2013 in the amount of EUR 49,000 thousand to further im-
prove the structure of NORMA Group’s debt. The issue volume
is divided into four euro tranches and four US dollar tranches.
The SSD III is equipped with both fixed interest rates and float-
ing rate tranches. The terms include five, seven and ten years.

NORMA Group SE Annual Report 2016

The bank borrowings are additionally influenced by the sched-
uled repayment of the syndicated bank facilities in the amount
of EUR 5,065 thousand as well as effects from changes in the
exchange rates on the US dollar portion of parts of the syndi-
cated bank facilities and of the promissory notes.

Within the derivatives, the negative market value of the hedging
derivatives decreased. The decrease in other financial liabilities
is mainly due to the repayment of liabilities resulting from the
acquisition of NDS in 2014 as well as the repayment of the con-
tingent consideration resulting from the acquisition of Five Star
in 2014 in the total amount of EUR 4,942 thousand.

Compared to December 31, 2015 (EUR 360,902 thousand), net
debt increased to EUR 394,225 due to the financing of the ac-
quisition of the Autoline business in the fourth quarter of 2016.

The increase in cash and cash equivalents results from the
increase of net cash provided by operating activities which
overcompensated for total cash outflows from investing and
financing activities.

169

Other Notes

3 6. INFOR M ATION ON THE CONSOLIDATED

STATEMENT OF CASH FLOWS

In the statement of cash flows, a distinction is made between
cash flows from operating activities, investing activities and fi-
nancing activities.

Net cash provided by operating activities is derived indirectly
from profit for the period. The profit for the period is adjusted to
eliminate non-cash expenses from depreciation and amortiza-
tion as well as expenses for which the cash effects are investing
or financing cash flows and to eliminate other non-cash expens-
es and income. Net cash provided by operating activities of EUR
149,198 thousand (2015: EUR 128,159 thousand) represents
changes in current assets, provisions and liabilities (excluding
liabilities in connection with financing activities).

As in the prior year, the Group participates in a reverse factoring
program as well as in an ABS program. The payments to the
factor and from the ABS program are included in cash flows
from operating activities, as this represents the economic sub-
stance of the transactions.

In 2016, NORMA Group entered into a factoring agreement in
which trade receivables will be sold on a monthly revolving ba-
sis. This factoring agreement resulted in positive effects of EUR
9,854 thousand on net cash provided by operating activities in
fiscal year 2016.

The total amount of trade receivables sold within the factoring
and ABS program, as well as the amount of trade payables
which are part of the reverse factoring program can be found
in  Note 23 ‘Trade and Other Receivables’ or  Note 34 ‘Trade
and Other Payables.’

Net cash provided by operating activities includes in 2016 cash
outflows from the payments of the cash-settled share-based
payments of the MSP tranche 2012 (2015: tranche 2011) for the
Management Board of NORMA Group in the amount of EUR
2,534 thousand (2015: EUR 2,265 thousand).

The correction of expenses due to measurement of derivatives
within a hedge in the amount of EUR 2,435 thousand (2015:
EUR 12,610 thousand) relates to fair value gains and losses
recognized within the income statement assigned to the cash
flows from financing activities.

Other payments classified as investing activities result from the
transfer tax amounting to EUR 1,650 thousand paid in connec-
tion with the acquisition of the Autoline business which were
classified as cash flows from investing activities.

Non-cash income (−) / expenses (+) in net cash provided by
operating activities in fiscal year 2016 mainly include foreign

Consolidated Financial StatementsNotes to the Consolidated Financial Statements170

exchange rate gains and losses on external debt and intragroup
monetary items in the amount of EUR −1,616 thousand (2015:
EUR −11,683 thousand).

Furthermore, other non-cash income (−) / expenses (+) included
non-cash interest expenses from the amortization of accrued
costs directly attributable to the refinancing amounting to EUR
421 thousand (2015: EUR 1,570 thousand). In 2015, this includes
in addition non-cash expenses from the stock option program
amounting to EUR 135 thousand (2016: EUR 0 thousand).

Cash flows resulting from interest paid are disclosed as cash
flows from financing activities.

Cash flows from investing activities include transactions relat-
ing to the acquisition and disposal of non-current assets in the
amount of EUR 46,226 thousand (2015: EUR 44,415 thousand),
including the repayment of liabilities from prior year investments
in property, plant and equipment and intangible assets amount-
ing to EUR −636 thousand (2015: EUR 2,627 thousand). From
the investments in non-current assets of EUR 47,611 thousand
(2015: EUR 42,166 thousand), expenditures in the amount of
EUR 29,097 thousand (2015: EUR 23,893 thousand) relate to
growth and expenditures amounting to EUR 18,514 thousand
(2015: EUR 18,273 thousand) to maintenance and continuous
improvements.

In 2016, also net payments for acquisitions of subsidiaries in
the amount of EUR 87,623 thousand (2015: EUR 52 thousand)
are included in the cash flows from investing activities, which
result from the payments due to the acquisition of the Autoline
business in fiscal year 2016 amounting to EUR 81,031 thousand
and the transfer tax amounting to EUR 1,650 thousand paid in
connection with this acquisition. Furthermore, payments for the
contingent liability resulting from the acquisition of the business
of Five Star Clamps, Inc. in the amount of EUR 3,320 thousand
and the payment of the outstanding purchase liability from the
acquisition of NDS amounting to EUR 1,622 thousand are in-
cluded in the cash flows from investing activities.

The net payments for acquisitions of subsidiaries in 2016 and
2015 were as follows:

N E T PAY M E N T S F O R
A C Q U I S I T I O N S O F S U B S I D I A R I E S

T 12 0

in EUR thousands

2016

2015

Acquisition liability at the
beginning of the period

Payment for acquisitions

Payment for transfer taxes

Other changes

Less acquisition liability at the
end of the period

Net payments for acquisitions
of subsidiaries

5,094

81,031

1,650

−152

4,284

862

5,094

87,623

Cash flows from financing activities mainly comprise net pro-
ceeds from borrowings in the amount of EUR 94,271 thousand
(2015: net proceeds in the amount of EUR 5,627 thousand). The
proceeds from borrowings in the amount of EUR 188,434 thou-
sand are a result of the issuance of a new promissory note as
of August 1, 2016, in the amount of EUR 148,434 thousand (in-
cluding transaction costs in the amount of EUR −596 thousand)
and of bridge financing in the amount of EUR 40,000 thousand
which was settled as of September 30, 2016. The repayment
of borrowings in the amount of EUR 94,163 thousand (2015:
EUR 94,076 thousand) mainly includes the repayment of a share
of the promissory note, issued in 2013 in the amount of EUR
49,000 thousand made in July 2016 as well as the repayment
of the bridge financing in the amount of EUR 40,000 thousand
made in August 2016.  Note 31 ‘Borrowings.’

Furthermore, outflows from the scheduled repayment of borrow-
ings in the amount of EUR 5,065 thousand, the payment of the
dividend amounting to EUR 28,676 thousand (2015: EUR 23,897
thousand), cash outflows resulting from interest paid (2016: EUR
12,026 thousand, 2015: EUR 13,926 thousand) as well as re-
payments for derivatives in the amount of EUR 3,485 thousand
(2015: repayment of EUR 37,751 thousand) are included.

Additionally, dividend payments to non-controlling interests in
the amount of EUR 204 thousand (2015: EUR 205 thousand)
and repayments from finance lease liabilities in the amount of
EUR 294 thousand (2015: EUR 294 thousand) are disclosed as
cash flows from financing activities.

The changes in balance sheet items that are presented in the
Consolidated Statement of Cash Flows cannot be derived di-
rectly from the balance sheet, as the effects of currency transla-
tion are non-cash transactions and changes in the consolidated
Group are shown directly in net cash used in investing activities.

Cash is comprised of cash on hand and demand deposits of
EUR 165,470 thousand on December 31, 2016 (Dec 31, 2015:
EUR 99,828 thousand), as well as cash equivalents with a value
of EUR 125 thousand (Dec 31, 2015: EUR 123 thousand).

Cash from China, India, Russia, Brazil and Malaysia (Dec 31,
2016: EUR 10,668 thousand, Dec 31, 2015: EUR 5,816 thou-
sand) cannot currently be distributed due to restrictions on
capital movements.

37. SEGMENT R EPORTING
NORMA Group segments the Group at a regional level. The
reportable segments of NORMA Group are EME A, the Ameri-
cas and Asia-Pacific. NORMA Group’s vision includes regional
growth targets. Distribution Services are focused regionally and
locally. EMEA, the Americas and Asia-Pacific have linked region-
al intercompany organizations of different functions. As a result,
the Group’s management reporting and controlling system has a
regional focus. The product portfolio does not vary significantly
between these segments.

NORMA Group SE Annual Report 2016

171

Revenues of each segment are generated from the three prod-
uct categories clamps (CL AMP), joining elements (CONNECT)
and fluid systems / connectors (FLUID).

External sales per country, measured according to the place
of domicile of the company which manufactures the products,
are as follows:

NORMA Group measures the performance of its segments
through profit or loss indicators which are referred to as “ad-
justed EBITDA” and “adjusted EBITA.”

“Adjusted EBITDA” comprises revenue, changes in inventories
of finished goods and work in progress, other own work capital-
ized, raw materials and consumables used, other operating in-
come and expenses, and employee benefits expense, adjusted
for material one-time effects. EBITDA is measured in a manner
consistent with that used in the statement of comprehensive
income.

“Adjusted EBITA” includes, in addition to the EBITDA, the de-
preciation adjusted for depreciation from purchase price allo-
cations.

E X T E R N A L S A L E S P E R C O U N T R Y

T 12 1

in EUR thousands

2016

2015

Germany

USA, Mexico, Brazil

Other countries

189,911

381,617

323,359

193,150

395,347

301,116

894,887

889,613

The non-current assets per country include non-current assets
less deferred tax assets, derivative financial instruments, and
shares in consolidated related parties and are as follows:

N O N - C U R R E N T A S S E T S P E R C O U N T R Y

T 12 2

in EUR thousands

Dec 31, 2016

Dec 31, 2015

In 2016, acquisition related expenses in connection with the
acquisition of the Autoline business in the amount of EUR 4,752
thousand were adjusted within EBITDA and EBITA  Note 7 ‘Ad-
justments.’

Inter-segment revenue is recorded at values that approximate
third-party selling prices.

Germany

USA, Mexico, Brazil

Sweden

Other countries

Consolidation

119,414

506,566

49,996

204,676

−14,822

115,695

490,440

50,779

144,269

−15,714

865,830

785,469

Segment assets comprise all assets less (current and deferred)
income tax assets. Taxes are shown in the reconciliation. Seg-
ment assets and liabilities are measured in a manner consistent
with that used in the Statement of Financial Position. Assets of
the “Central Functions” include mainly cash and intercompany
receivables.

Segment liabilities comprise all liabilities less (current and de-
ferred) income tax liabilities. Taxes are shown in the consolida-
tion. Segment assets and liabilities are measured in a manner
consistent with that used in the Statement of Financial Position.
Liabilities of the “Central Functions” include mainly borrowings.

Capex equals additions to non-current assets (property, plant
and equipment and other intangible assets).

Current and deferred tax assets and liabilities are shown in the
consolidation. On December 31, 2016, EUR 24,997 thousand
(Dec 31, 2015: EUR 18,562 thousand) in tax assets and EUR
108,499 thousand (Dec 31, 2015: EUR 111,002 thousand) in tax
liabilities were shown in the consolidation.

3 8 . CONTINGENCIES
The Group has contingent liabilities in respect of legal claims
arising in the ordinary course of business (e.g. warranty obli-
gations).

NORMA Group does not believe that any of these contingent
liabilities will have a material adverse effect on its business or
any material liabilities will arise from contingent liabilities.

3 9. COMMITMENTS

Capital commitments
Capital expenditure (nominal value) contracted for on the bal-
ance sheet date but not yet incurred is as follows:

C O M M I T M E N T S

T 12 3

in EUR thousands

Dec 31, 2016

Dec 31, 2015

Property, plant and equipment

Inventory

Service contracts

5,698

1,383

3,183

817

7,171

4,085

There are no material commitments concerning intangible assets.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

172

Operating lease commitments
The Group leases various vehicles, property and technical
equipment under non-cancellable operating lease agreements.
The lease terms are between 1 and 15 years. The Group also
leases various technical equipment under cancellable operating
lease agreements.

NORMA Group has significant operating lease arrangements with
annual lease payments of more than EUR 200 thousand con-
cerning the leasing of land and buildings. Except for usual renew-
able options, the lease contracts do not comprise other options.
The lease arrangements are held by the following companies:

• NORMA UK Ltd. (Great Britain): lease term from 2006 to
2016, prolonged to 2028, soonest termination in 2021,

• NORMA Pacific Pty Ltd. (Australia): lease term from 2016 to

2021, soonest termination in 2021,

• NORMA Michigan Inc. (USA): lease term from 2013 to 2019,

soonest termination in 2019,

• Connectors Verbindungstechnik AG (Switzerland): lease

term from 2012 to 2017, soonest termination in 2017,

• National Diversified Sales, Inc. (USA): lease terms from 2013
to 2020, soonest termination in 2020; 2015 to 2018, soonest
termination in 2018; 2016 to 2019, soonest termination in
2019 and 2016 to 2021, soonest termination in 2021,

• R.G.RAY Corporation (USA): lease term from 2014 to 2019,

soonest termination in 2019.

Lease expenditure (including non-cancellable and cancellable
operating leases) amounting to EUR 10,101 thousand in 2016
(2015: EUR 9,449 thousand) is included in profit or loss in ‘other
operating expenses.’

The following table shows the future aggregate minimum lease
payments (nominal value) under non-cancellable operating
leases:

F U T U R E M I N I M U M L E A S E PAY M E N T S O F
N O N - C A N C E L L A B L E O P E R AT I N G L E A S E S

T 124

in EUR thousands

Dec 31, 2016

Dec 31, 2015

No later than 1 year

Later than 1 year and no later than 5 years

Later than 5 years

6,936

12,163

1,180

20,279

6,694

10,540

1,824

19,058

40. BUSINES S COMBIN ATIONS
On November 30, 2016, NORMA Group acquired the Autoline
business (Autoline) from Parker Hannifin.

Autoline produces quick connectors for the connection of fluid
lines in motor vehicles and has more than 200 employees at lo-
cations in France, Mexico and China. The acquisition of Autoline
strengthens NORMA Group’s market position with new products
in the area of quick connectors and by gaining new customers,
including in Asia. Autoline has developed, manufactured and
marketed plastic quick connectors for more than 20 years. The
products connect, among other things, fuel-line systems, tank
ventilation, cooling, brake vacuums and SCR (Selective Catalytic
Reduction) in all vehicle types. Autoline’s main production site
is located in Guichen, France.

The following intangible assets were identified and measured
as part of the purchase price allocation. Customer relationships
amounting to EUR 26,901 thousand were valued using the ‘Multi
Period Excess Earnings Method.’ Trademarks in the amount of
EUR 1,410 thousand were valued using the ‘Relief from Royalty
Method.’ Technology in the amount of EUR 10,606 thousand
was valued using the ‘Relief from Royalty Method.’

The summarized assets and liabilities below were allocated
to the following cash-generating units (CGUs): France to CGU
‘EMEA,’ Mexico to CGU ‘Americas’ and China to CGU ‘Asia-Pa-
cific’ because it is expected that they will benefit from the ac-
quisition respectively.

Goodwill of EUR 18,922 thousand derives from the acquisition,
which mainly relates to the strengthening of NORMA Group’s mar-
ket position, the extended product range mainly in the area of quick
connectors and expected customer and distribution synergies.

Of the consideration of EUR 80,624 thousand, EUR 81,031
thousand were paid in cash and EUR 407 thousand consist of
receivables from the previous owners due to a purchase price
adjustment. The consideration is subject to future purchase
price adjustments, which result from the final determination of
the acquired inventories and other personnel-related liabilities
on the acquisition date.

The following table summarizes the consideration paid for the
Autoline business and the amounts acquired and liabilities as-
sumed recognized on the acquisition date:

NORMA Group SE Annual Report 2016
173

P U R C H A S E P R I C E A L L O C AT I O N A U T O L I N E

T 12 5

in EUR thousands

Total

France

China

Mexico

Consideration on November 30, 2016

80,624

49,655

20,610

10,359

Acquisition-related costs (included in other operating expenses in
the consolidated financial statement of comprehensive income)

Recognized amounts of identifiable assets acquired
and liabilities assumed

Property, plant and equipment

Trademarks

Customer lists

Patented technology

Inventory

Personnel-related liabilities

Deferred tax assets

Total identifiable net assets

Goodwill

Due to the acquisition of the Autoline business on November 30,
2016, the determination of the fair values of the acquired assets
and liabilities on the balance sheet date could not be completed.
The consolidation is therefore based on a preliminary purchase
price allocation. This concerns in particular the fair value of the
acquired identifiable intangible assets in the amount of EUR
38,917 thousand; this position mainly includes customer rela-
tionships and patented technology.

Other personnel-related liabilities mainly relate to pension liabil-
ities in France and to outstanding bonus and salary payments
as well as to outstanding vacation claims from the periods prior
to the acquisition.

The revenue included in the consolidated statement of compre-
hensive income contributed by the Autoline business was EUR
3,479 thousand since December 1, 2016. NORMA Group acquired
individual assets and processes. Therefore, no profit or revenue
can be shown for the period from January 1 to November 30, 2016.

41. R EL ATED - PART Y TR A NSACTIONS

Sales and purchases of goods and services
In 2016 and 2015, no management services were bought from
related parties.

2,076

n /a

15,915

1,410

26,901

10,606

8,520

−2,200

550

61,702

18,922

80,624

14,039

1,410

5,633

10,606

2,255

−1,829

550

32,664

16,991

49,655

316

15,496

4,647

−348

20,111

499

20,610

C O M P E N S AT I O N O F M E M B E R S O F
T H E M A N A G E M E N T B O A R D ( I F R S )

1,560

5,772

1,618

−23

8,927

1,432

10,359

T 12 6

in EUR thousands

2016

2015

Short-term benefits

Other long-term benefits

Termination benefits

Share-based payment

Total compensation according to IFRS

2,276

1,288

199

284

4,047

1,969

729

1,763

4,557

In fiscal year 2015, in addition to the compensation above, EUR
6,278 thousand were recognized directly in equity as a reduc-
tion of the capital reserve against a corresponding provision in
the context of the change in classification of the Matching Stock
Program (MSP) for the Management Board of NORMA Group
 Note 28 ‘Share-based Payments.’

Provisions for the compensation of the members of the Man-
agement Board are as follows:

P R O V I S I O N S F O R C O M P E N S AT I O N O F
T H E M A N A G E M E N T B O A R D M E M B E R S

T 12 7

in EUR thousands

Notes

Dec 31, 2016

Dec 31, 2015

There are no material sales or purchases of goods and services
from non-consolidated companies, from the shareholders of
NORMA Group, from key management or from other related
parties in 2016 and 2015.

LTI – Management Board

STI – Management Board

Matching Stock Program (MSP)

NORMA VA Bonus

Total

(30)

(28)

(30)

1,800

880

3,650

300

6,630

1,608

460

5,640

150

7,858

Compensation of members of the Management Board
Compensation of the members of the Management Board ac-
cording to IFRS is as follows:

Details regarding the individual provisions can be found in the
respective notes.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

174

Beside the provisions above, a defined benefit obligation exists
for the Management Board. The present value of the obligation
amounts to EUR 362 thousand as of December 31, 2016 (Dec
31, 2015: EUR 96 thousand)  Note 29 ‘Retirement Benefit Ob-
ligations.’

Details regarding the compensation of the Management Board
can be found on  pages 94 to 98.

42 . ADDITION AL DISCLOSURES PURSUA NT TO

SECTION 315A (1) OF THE GER M A N COMMERCIAL

CODE (HGB)

Compensation of Board members
The remuneration of the Management Board and Supervisory
Board of NORMA Group GmbH was as follows:

C O M P E N S AT I O N O F B O A R D M E M B E R S

T 12 8

in EUR thousands

2016

2015

Total Management Board

Total Supervisory Board

3,848

460

4,308

4,557

460

5,017

The remuneration of the members of the Management Board
was as follows:

C O M P E N S AT I O N O F M E M B E R S O F T H E M A N A G E M E N T B O A R D ( § 3 15 A H G B )

in EUR thousands

Fixed compensation

Variable compensation

Long-term incentives

Total compensation

Werner
Deggim

Dr. Michael
Schneider

Bernd
Kleinhens

John
Stephenson

Total

2016

471

158

556

1,185

2016

327

817

1,144

2016

306

105

369

780

2016

294

347

739

2016

1,398

361

2,089

3,848

T 12 9

2015

4,557

NORMA Group SE Annual Report 2016

175

Besides these expenses, expenses for defined benefit obli-
gation for Dr. Michael Schneider in the amount of EUR 199
thousand (2015: EUR 96 thousand) are also recognized with-
in employee benefits expense.  Note 29 ‘Retirement Benefit
Obligation.’

Fees for the auditor
Fees for the auditor, PricewaterhouseCoopers GmbH Wirt-
schafts prüfungsgesellschaft, Frankfurt / Main were expensed
as follows:

F E E S F O R T H E A U D I T O R

T 13 0

in EUR thousands

2016

2015

Audit fees

Audit-related fees

Other fees

485

565

562

664

Headcount
The average headcount breaks down as follows:

AV E R A G E H E A D C O U N T

T 131

but rather supports production. Salaried employees are employ-
ees in administrative / sales / central functions.

Consolidation
Name, place of domicile and share in capital pursuant to section
313 (2) No. 1 HGB of the consolidated group of companies is
presented in  Note 4 ‘Scope of Consolidation.’

Proposal for the distribution of earnings
The Management Board proposes that a dividend of EUR 0.95
be paid as a dividend per bearer of shares, leading to a total
dividend payment of EUR 30,269,280.

Corporate governance (section 161 AktG)
The Management Board and Supervisory Board have issued a
corporate governance declaration pursuant to section 161 of
the German Stock Corporation Act (Aktiengesetz) and made
it available to shareholders on the website of NORMA Group.
@ http://investors.normagroup.com

43. E XEMPTIONS UNDER SECTION 264, PAR AGR APH 3

OF THE GER M A N COMMERCIAL CODE (HGB)

In 2016, the following German subsidiaries made use of disclo-
sure exemptions pursuant to section 264, Paragraph 3 of the
German Commercial Code (HGB):

Number

Direct labor

Indirect labor

Salaried

2016

2015

2,416

1,169

1,681

5,266

2,319

1,123

1,564

5,006

• NORMA Group Holding GmbH, Maintal
• NORMA Distribution Center GmbH, Marsberg
• NORMA Germany GmbH, Maintal
• NORMA Verwaltungs GmbH, Maintal

The category ‘direct labor’ consists of employees who are di-
rectly engaged in the production process. The numbers fluctu-
ate according to the level of output. The category ‘indirect labor’
consists of personnel that does not directly produce products,

4 4. E VENTS AF TER THE

BAL A NCE SHEE T DATE

As of March 9, 2017, no events were known that would have led
to a material change in the disclosure or valuation of the assets
and liabilities as of December 31, 2016.

Consolidated Financial StatementsNotes to the Consolidated Financial Statements

176

Appendix to the Notes to the
Consolidated Financial Statements

VOTING RIGHTS NOTIFICATIONS
According to section 160 (1) No. 8 AktG, information regarding
voting rights that have been notified to the Company pursuant
to section 21 (1) or (1a) of the German Securities Trading Act
(Wertpapierhandelsgesetz – WpHG) have to be disclosed.

tains the information of the last notification of each share-
holder and the percentage and shares may have changed in
the meantime.

The following sheet gives an overview of all voting rights that
have been sent to the Company as of March 9, 2017. It con-

All notifications of voting rights by the company in the reporting
period and up until March 9, 2017, are available on the website
of NORMA Group @ http://investors.normagroup.com.

V O T I N G R I G H T S N O T I F I C AT I O N S

T 13 2

Notifying party

Achievement of
voting rights

Share
in %

Shares Pursuant to WpHG

Allianz Global Investors Europe GmbH,
Frankfurt am Main, Germany

January 21, 2014

Ameriprise Financial Inc., Minneapolis, USA 1

December 21, 2016

1,601,001

thereof 0.50% (157,764 voting rights)
according to § 22 (1) sent. 1 no. 6 WpHG

1,773,418 § 21, 22 WpHG

5.02

5.57

November 6, 2015

4.85

1,543,895

§ 22 (1) sent. 1 no. 6 in connection
with sent. 2 WpHG

November 6, 2015

February 18, 2016

1,543,895

§ 22 (1) sent. 1 no. 6 in connection
with sent. 2 WpHG

1,599,240 § 21, 22 WpHG

960,377 § 21, 22 WpHG

1,564,752 § 21, 22 WpHG

4.85

5.02

2.98

4.91

March 7, 2014

3.05

973,100 § 22 (1) sent. 1 no. 6 WpHG

Atlantic Value General Partner Limited,
London, United Kingdom

Atlantic Value Investment Partnership LP,
Wilmington, Delaware, USA

A X A S.A., Paris, France

BNP Paribas Asset Management SAS, Paris, France

August 9, 2016

BNP Paribas Investment Partners S.A., Paris, France

July 14, 2016

Capital Research and Management Company,
Los Angeles, CA, USA

Impax Asset Management Group Plc,
London, United Kingdom

MIPL Group Limited, London, United Kingdom

February 20, 2017

November 6, 2015

MIPL Holdings Limited, London, United Kingdom

November 6, 2015

Mondrian Investment Partners Limited,
London, United Kingdom

November 6, 2015

SMALLCAP World Fund, Inc., Los Angeles, CA, USA

October 30, 2014

T. Rowe Price Group, Inc., Baltimore, Maryland, USA

February 24, 2016

3.08

4.85

3.05

3.11

982,407 § 21, 22 WpHG

1,543,895 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG

1,543,895 § 22 (1) sent. 1 no. 6 WpHG

970,940

990,078 § 21, 22 WpHG

The Capital Group Companies, Inc.,
Los Angeles, CA, USA

March 7, 2014

3.05

973,100

§ 22 (1) sent. 1 no. 6 in connection
with sent. 2 and 3 WpHG

1 The voting rights attributed to the notifying party are held by the following shareholder whose share in the voting rights in NORMA Group SE amounts to 3% or more: Threadneedle

Investment Funds ICVC

NORMA Group SE Annual Report 2016

177

Corporate Bodies

MEMBERS OF THE M A N AGEMENT BOAR D

MEMBERS OF THE SUPERVISORY BOAR D

Werner Deggim
Master’s degree in Mechanical Engineering,
Chief Executive Officer (CEO)

Dr. Michael Schneider
PhD in Economics, Chief Financial Officer (CFO)

Bernd Kleinhens
Master’s degree in Mechanical Engineering,
Managing Director Business Development

John Stephenson
Master of Science, Chief Operating Officer (COO)

Dr. Stefan Wolf (Chairman)
• Chairman of the Management Board (CEO) of

ElringKlinger AG, Dettingen, Germany

• Member of the Supervisory Board of Allgaier Werke GmbH,

Uhingen, Germany

Lars M. Berg (Vice-Chairman)
• Consultant to various companies in the fields of

telecommunications, media and finances

• Chairman of the Supervisory Board of Net Insight AB,

Stockholm, Sweden

• Member of the Supervisory Board of Greater Than AB,

Stockholm, Sweden (since February 5, 2016)

• Member of the Supervisory Board of

BioElectric Solutions AB, Stockholm, Sweden

Günter Hauptmann
• Consultant
• Chairman of the Advisory Board of Atesteo GmbH

(formerly GIF GmbH), Alsdorf, Germany

• Member of the Supervisory Board of Geka GmbH,

Bechhofen, Germany (until August 31, 2016)

• Member of the Advisory Board of Moon TopCo GmbH,
formerly mertus 268. GmbH (Schlemmer Group), Poing,
Germany (since September 1, 2016)

Knut Michelberger
• Consultant
• Member of the Advisory Board of Rena Technologies GmbH,

Gütenbach, Germany

• Member of the Supervisory Board (raad van commissar-

issen) of Weener Plastics Group, Ede, Netherlands (since
January 1, 2016)

• Member of the Advisory Board of Kaffee Partner Holding

GmbH, Osnabrück, Germany (since June 1, 2016)

Dr. Christoph Schug
• Entrepreneur
• Member of the Advisory Board of Bomedus GmbH,

Bonn, Germany

• Member of the Advisory Board of MoebelFirst GmbH,

Cologne, Germany

• Member of the Administrative Board of AMEOS Gruppe AG,

Zurich, Switzerland (until December 31, 2016)

Erika Schulte
• Managing Director of Hanau Wirtschaftsförderung GmbH

and Liquidator of Techno logie- und Gründerzentrum Hanau
GmbH (until February 3, 2017)

• No seats on other boards or comparable committees

Consolidated Financial StatementsNotes to the Consolidated Financial Statements178

Responsibility Statement

To the best of our knowledge, and in accordance with the applicable reporting principles, the consoli-
dated financial statements give a true and fair view of the assets, liabilities, financial position and profit
or loss of the Group, and the Group Management Report includes a fair review of the development
and performance of the business and the position of the Group, together with a description of the
principal opportunities and risks associated with the expected development of the Group.

Maintal, March 9, 2017

NORMA Group SE
The Management Board

Werner Deggim

Dr. Michael Schneider

Bernd Kleinhens

John Stephenson

NORMA Group SE Annual Report 2016
179

Auditor’s Report

We have audited the consolidated financial statements prepared by the NORMA Group SE, comprising
the statement of financial position, the statement of comprehensive income, statement of changes in
equity, cash flow statement and the notes to the consolidated financial statements, together with the
group management report for the business year from January 1, 2016 to December 31, 2016. The
preparation of the consolidated financial statements and the group management report in accordance
with the IFRSs, as adopted by the EU, and the additional requirements of German commercial law
pursuant to § (Article) 315a Abs. (paragraph) 1 HGB (“Handelsgesetzbuch”: German Commercial
Code) is the responsibility of the parent Company’s Board of Managing Directors. Our responsibility
is to express an opinion on the consolidated financial statements and on the group management
report based on our audit.

We conducted our audit of the consolidated financial statements in accordance with § 317 HGB
and German generally accepted standards for the audit of financial statements promulgated by the
Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require
that we plan and perform the audit such that misstatements materially affecting the presentation of
the net assets, financial position and results of operations in the consolidated financial statements in
accordance with the applicable financial reporting framework and in the group management report
are detected with reasonable assurance. Knowledge of the business activities and the economic
and legal environment of the Group and expectations as to possible misstatements are taken into
account in the determination of audit procedures. The effectiveness of the accounting-related internal
control system and the evidence supporting the disclosures in the consolidated financial statements
and the group management report are examined primarily on a test basis within the framework of
the audit. The audit includes assessing the annual financial statements of those entities included in
consolidation, the determination of the entities to be included in consolidation, the accounting and
consolidation principles used and significant estimates made by the Company’s Board of Managing
Directors, as well as evaluating the overall presentation of the consolidated financial statements and
the group management report. We believe that our audit provides a reasonable basis for our opinion.

Our audit has not led to any reservations.

In our opinion based on the findings of our audit the consolidated financial statements comply with
the IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant
to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of
operations of the Group in accordance with these requirements. The group management report is
consistent with the consolidated financial statements, complies with legal requirements, as a whole
provides a suitable view of the Group’s position and suitably presents the opportunities and risks of
future development.

Frankfurt am Main, March 9, 2017

PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft

Thomas Tilgner
Wirtschaftsprüfer
(German Public Auditor)

ppa. Richard Gudd
Wirtschaftsprüfer
(German Public Auditor)

Consolidated Financial StatementsNotes to the Consolidated Financial Statements180

Glossary

5S ME THOD OLOGY
5S is a method for organizing a work space for efficiency and
effectiveness in order to reduce industrial accidents.

CASH POOLING
Consolidating liquidity within the Group through central finan-
cial management with the purpose of compensating for excess
liquidity or liquidity shortfalls.

A F TER M ARKE T SEGMENT
The market concerned with the maintenance / repair of invest-
ment goods or long-life final goods (e. g. vehicles) or the sale
of replacement parts or complementary parts for the goods.
This involves the sale of services and / or parts that are directly
related to the previous sale of the goods.

APAC
Abbreviation for the Asia-Pacific region.

CODE OF CONDUCT
A set of policies which can and should be applied in a wide
range of contexts and environments depending on the situa-
tion. In contrast to a rule, the target audience is not obliged to
always comply with the Code of Conduct. A Code of Conduct
is more of a personal commitment to follow or abstain from cer-
tain patterns of behavior, ensuring that nobody gains an unfair
advantage by circumventing these patterns.

AS SE T BACKED SECURITIES (ABS) PROGR A M
A specific way of converting payment claims into negotiable
securities with a financing company.

COMMODIT Y
A term used in procurement for any kind of material good used
by traders.

AUSTENITIC STEEL
Austenitic steel is a stainless steel that normally contains an
alloy of 15–20% chromium and 5–15% nickel.

COMPLIA NCE
Conforming to rules: companies adhering to Codes of Conduct,
laws and guidelines.

BEST L A NDED COST APPROACH
Assessment of the total costs of a product including the price
of the product as well as the charges for the shipping, taxes
and / or duties.

COR POR ATE GOVER N A NCE
A set of all international and national rules, regulations, values
and principles which apply to companies and determine how
these companies are to be managed and monitored.

BUBBLE AS SIG NMENT
Short-term exchange program for employees to promote internal
knowledge transfer, intercultural awareness, the development of
networks and the individual development of participants.

COR POR ATE R ESPONSIBILIT Y
A form of corporate self-regulation integrated into a business
model by taking societal and environmental aspects into ac-
count.

BR E XIT
In a referendum on June 23, 2016, the citizens of the United
Kingdom voted against the country remaining in the European
Union (EU). The collective consequence of the EU exit has taken
on the popular, unofficial term of Brexit.

CAQ SOF T WAR E
Software for quality assurance.

COVER AGE
The regular assessment of the economic and financial situation
of a listed company by banks or financial research institutions.

CROS S CURRENCY SWAP
A financial derivative in which two parties exchange interest and
principal payments in different currencies.

NORMA Group SE Annual Report 2016Further Information

Glossary

181

CROS S - SELLING EFFECTS
The action or practice of selling an additional product or service
to an existing customer.

DISTRIBUTION SERVICES (DS)
One of NORMA Group’s two ways to market, providing a wide
range of high-quality, standardized joining products for a broad
range of applications and customers.

E- PROCUR EMENT SYSTEM
Electronic procurement system.

EBITA (E AR NINGS BEFOR E INTER EST, TA XES A ND

A MORTIZ ATION)
EBITA describes earnings before interest, taxes and amortiza-
tion of intangible assets. For long-term comparison and a better
understanding of business development, NORMA Group adjusts
the EBITA for certain one-time expenses. These are described
in the Management Report as well as in the Notes to the Con-
solidated Financial Statements.

EBITA M ARGIN (AD JUSTED)
The adjusted EBITA margin is calculated from the ratio of ad-
justed EBITA to sales and is an indicator of the profitability of
NORMA Group’s business activities.

EBITDA (E AR NINGS BEFOR E INTER EST, TA XES,

DEPR ECIATION A ND A MORTIZ ATION)
Earnings before interest, taxes, depreciation (of property, plant
and equipment) and amortization (of intangible assets). It is a
measure of a company’s operating performance before invest-
ment expenses. For long-term comparison and a better under-
standing of its business development, NORMA Group adjusts
the EBITA for certain one-time expenses. These are described
in the Management Report as well as in the Notes to the Con-
solidated Financial Statements.

EL ASTOMERS
Stable but elastic plastics which are used at a temperature
above their glass transition temperature. The plastics can de-
form under tensile or compressive load, but then return to their
original shape.

EME A
Abbreviation for the economic area of Europe (comprising West-
ern and Eastern Europe), the Middle East and Africa.

EMPLOYER BR A NDING
Corporate strategic measure to represent the company as an
attractive employer and for positioning in the labor market.

ENGINEER ED JOINING TECHNOLOGY (E JT )
One of NORMA Group’s two ways to market. It provides custom-
ized, highly engineered joining technology products primarily,
but not exclusively, for industrial OEM customers.

EURIBOR
Reference rate for time deposits in the interbank business (cur-
rency: EUR).

EUROPE A N M AR KE T INFR ASTRUCTUR E R EGUL ATION

(EMIR)
An EU regulation that regulates the over-the-counter market
with derivative products. The main stipulation of this regulation
obligates market participants to clear their over-the-counter
standard derivative transactions through a central counterpart
and report these transactions to a trade repository.

FACTORING
Factoring is a type of debtor finance in which a business sells
its accounts receivable to a third party (called a factor) at a
discount.

EBITDA M ARGIN (AD JUSTED)
The adjusted EBITDA margin is calculated from the ratio of ad-
justed EBITA to sales.

FER RITIC STEEL
Ferritic chromium steel is a stainless steel that normally cannot
be hardened. It is magnetizable and used in environments con-
taining little or no chloride.

182

FR EE CASH FLOW
Indicates the amount of money that is available to pay dividends
to shareholders and / or repay loans.

ISO 9 0 01
International standard that defines the minimum requirements
that quality management systems must meet.

GE ARING
Gearing is a measure of a company’s debt level. Gearing is
calculated from the ratio of net debt to equity.

ISO / TS 16 9 49
An international standard that combines the existing general
demands on quality management systems of the (mostly North
American and European) automotive industry.

GEMBA WALK
Daily walk through the production halls, inspecting individual
processes in the opposite order of workflow and analyzing po-
tential opportunities for improvements.

GLOBAL E XCELLENCE PROGR A M
A cost optimization program started in 2009. It coordinates
and manages all of NORMA Group’s sites and business units.

INITIAL PUBLIC OFFERING (IPO)
First offering of shares of a company on the organized capital
market.

INNOVATION ROADM APPING
Systematic approach to adapt company-specific product in-
novations to future market and technological developments.

INNOVATION SCOUTING
Structured observation of changes, potentials and relevant
knowledge of technological developments and processes.

INTER N ATION AL SECURITIES

IDENTIFICATION NUMBER (ISIN)
12-digit alphanumerical code used to identify a security traded
on the stock market.

K AIZEN
A methodical concept the aim of which is continuous and in-
finite improvement. The improvement takes place as a gradual,
punctual perfection or optimization of a product or process.

K A NBA N
Method of production process control for the reduction of local
stocks of precursors.

LE A N M A NUFACTURING
A systematic method for the elimination of waste within a manu-
facturing process. An integrated socio-technical system reduces
or minimizes supply-side, customer-side and internal fluctuations.

LE VER AGE
Leverage is a measure of a company’s debt and is calculated as
the ratio of net debt (without hedging instruments) to adjusted
EBITDA over the last 12 months (LTM). For the purpose of a bet-
ter comparison, adjusted EBITDA LTM includes the companies
acquired during the year.

LONG -TER M AS SIG NMENT
Long-term exchange program for employees to promote internal
knowledge transfer, intercultural awareness, the development of
networks and the individual development of participants.

ISO 140 01
An international environmental management standard that spec-
ifies the internationally accepted requirements for an environ-
mental management system.

M ATERIAL USAGE R ATIO
The material usage ratio of NORM A Group results from the
ratio of material expenses to sales. Furthermore, N O R M A

NORMA Group SE Annual Report 2016Further Information

Glossary

183

Group presents material expenses in relation to total output.
The latter is the result of sales plus changes in inventories of
finished goods and work in progress and other capitalized
own work.

N ATION AL BUR E AU OF STATISTICS (NBS)
Chinese Bureau of Statistics.

NE T DEBT
Net debt is the sum of financial liabilities less cash and cash
equivalents. Financial liabilities also include liabilities from de-
rivative financial instruments that are held for trading purposes
or as hedging instruments.

OHSAS 18 0 01
Occupational Health and Safety Assessment Series; certification
of occupational health and safety management systems.

ORIGIN AL EQUIPMENT M A NUFACTUR ER (OEM)
A company that retails products under its own name.

PRIME STA NDARD
A segment of the regulated stock market with higher inclusion
requirements than the General Standard. It is the private law
segment of the Frankfurt Stock Exchange with the highest
transparency standards. All companies listed in the DA X, MDA X,
TecDA X and SDA X must be included in the Prime Standard.

PRINT ON DEM A ND SYSTEMS
Publication process by which print templates are not created
until the first order has been received.

R E- ENGINEERING CENTER
Engineering redesign of existing products to adapt to changing
market conditions.

R E VERSE FACTORING
A financing solution initiated by the ordering party in order to
help its suppliers finance their receivables more easily and at a
lower interest rate than they would normally be offered.

NE T OPER ATING CASH FLOW
Net operating cash flow Is calculated on the basis of EBITDA
plus changes in working capital, less investments from oper-
ating activities. Net cash flow is a key financial control figure
for NORMA Group and serves as a measure for the Group’s
liquidity.

ROADSHOW
Series of corporate presentations made to investors by an issuer
at various financial locations to attract investment in the company.

SELECTIVE CATALY TIC R EDUCTION (SCR)
Selective catalytic reduction is a method used to reduce particle
and nitric oxide emissions.

PATENT COOPER ATION TR E AT Y (PCT )
The Patent Cooperation Treaty (PCT) is an international treaty.
Under the terms of this treaty, its Contracting States shall form
a special association in accordance with the Paris Conven-
tion on the Protection of Industrial Property. The PCT allows
either nationals of a Contracting State or those domiciled in a
Contracting State to submit a single patent application to the
International Bureau of WIPO or another approved office (e. g.
Deutsches Patentamt or European Patent Office) for all Con-
tracting States Of the PCT.

SENIOR FACILIT Y AGR EEMENT (SFA )
Loan agreement.

SIX SIGM A
Management system for process improvement using analytical
and statistical tools.

ECONOMIES OF SCALE
Indicates the ratio of the production volume to the production fac-
tors used. In the case of positive scale effects, the production out-
put is also increased with the intensification of production factors.

184

SMED (SINGLE MINUTE E XCH A NGE OF DIE )
Optimization of set up times of processes through both organi-
zational and technical measures.

SOCIE TAS EUROPAE A (SE )
Legal form for stock companies in the European Union and the
European Economic Area. With the SE, the EU started allowing
for companies to be founded in accordance with a largely uni-
form legal framework at the end of 2004.

SUNSHINE LINE
A short-term bilateral framework credit line for general company
purposes, which can be used as current bank overdrafts as well
as in the form of debts or money market loans.

WEIGHTED AVER AGE COST OF CAPITAL ( WACC)
The WACC is calculated at NORMA Group as a weighted aver-
age cost of equity and borrowing costs at the end of the year.
The cost of equity is derived from capital market information as
the expectation of a shareholder’s return. NORMA Group’s risk
profile is based on market parameters.

SECURITIES ID NUMBER ( WK N)
A six-character combination of numbers and letters used in
Germany to identify securities.

WORKING CAPITAL
Trade working capital describes the Group’s current net operat-
ing assets and is calculated as the sum of inventories and trade
receivables minus trade payables.

THER MOPL ASTS

(ALSO K NOWN AS PL ASTOMERS)
Plastics which become elastic (thermoplastic) in a particular
temperature range, whereby this process is reversible.

XE TR A
An electronic trading system operated by Deutsche Börse AG
for the spot market.

NORMA Group SE Annual Report 2016Further Information

List of Graphics

185

List of Graphics

COVER

CONSOLIDATED M A N AGEMENT R EPORT (CONT.)

G R A P H I C
G 001 NORMA Group Production and

Distribution Sites

P A G E

Back cover

TO OUR SH AR EHOLDERS

G R A P H I C
G 009 Sales by Distribution Channels
G 010 Strategic Goals of NORMA Group
G 011 Development of Sales in 2016
G 012

Cost of Materials and Cost of Materials Ratio
(Adjusted)

G R A P H I C
G 002

Index-Based Comparison of NORMA Group’s Share
Price Performance 2016 with the MDAX and DAX 26
27
27
28

G 003 Distribution of Trading Activity in 2016
G 004 Free Float by Region
G 005 Analyst Recommendations
G 006

Share Price Development Since the IPO in
April 2011 Compared to the MDAX

CONSOLIDATED M A N AGEMENT R EPORT

G R A P H I C
G 007 NORMA Group (Simplified Structure)
G 008 Organization Structure of NORMA Group

P A G E

P A G E
49
50

G 013 Adjusted EBITA and Adjusted EBITA Margin
G 014 Asset and Capital Structure
G 015 Maturity Profile by Currency
G 016 Maturity Profile by Financial Instrument
G 017 Breakdown of Sales by Segment
G 018

Material Purchasing Turnover in 2016
According to Material Groups
Development of Nickel Prices and the
Alloy Surcharge 1.4301 in 2016
G 020 Personnel Development at NORMA Group
G 021 Breakdown of Employees by Group
G 022
G 023 Marketing Expenditures 2016 by Segment
G 024 Risk Management System of NORMA Group

Incident Rate

G 019

P A G E
50
54
63

64
64
66
67
67
68

72
74
74
76
77
83

186

List of Tables

COVER

CONSOLIDATED M A N AGEMENT R EPORT (CONT.)

TA B L E
T 001 Overview of Key Figures 2016

P A G E
Front cover

TA B L E
T 025

TO OUR SH AR EHOLDERS

T 026

Automotive Industry: Global Production and
Development of Sales (Passenger Vehicles)
Construction Industry: Development of
European Construction Output

TA B L E
T 002 Overview of Voting Rights Notifications
T 003 Analysts Covering NORMA Group
T 004

Key Figures of the NORMA Group Share
Since the IPO

29
35
T 005 Responsibilities of the Management Board
T 006 Directors’ Dealings 2016
37
T 007 Other Mandates of the Supervisory Board Members 38

P A G E
27
28

T 027 Forecast for the Fiscal Year 2017
T 028
T 029

Risk and Opportunity Portfolio of NORMA Group
Overview of the Matching Stock Programme (MSP)
at the Time of Allotment
95
Remuneration Granted to the Management Board 96
97

T 030
T 031 Management Board Remuneration in 2016
T 032

Inflow from Management Board Member
Remuneration

CONSOLIDATED M A N AGEMENT R EPORT

T 033 Remuneration of the Supervisory Board

CONSOLIDATED FIN A NCIAL STATEMENTS

TA B L E
T 008
T 009

P A G E
Overview of End Markets and Brands by Segment 51
Regulation of Average Emissions (CO2)
for Vehicle Fleets

T 010 Financial Control Parameters
T 011 Non-Financial Control Parameters
T 012 R&D Key Figures
T 013 GDP Growth Rate (Real)
T 014

Actual Business Development Compared
to the Forecast

Investment Highlights in 2016

T 015 Adjustments
T 016 Effects on Group Sales
T 017 Development of Sales Channels
T 018 Development of Segments
T 019
T 020 Core Workforce by Segment
T 021 Age Structure of NORMA Group Employees
T 022
T 023 Forecasts For GDP Growth (Real)
T 024

Engineering: Real Change in Industry Sales

Length of Service of NORMA Group Employees

TA B L E
P A G E
110
T 034 Consolidated Statement of Financial Position
T 035 Consolidated Statement of Comprehensive Income 112
113
T 036 Consolidated Statement of Cash Flows
114
T 037 Consolidated Statement of Changes in Equity
116
T 038 Segment Reporting
T 039

New and Amended Standards Adopted
for the First Time
Standards, Amendments and Interpretations That
Have Already Been Endorsed by the EU
Standards, Amendments and Interpretations That
Have Not Been Endorsed by the EU

T 040

T 041

T 042 Valuation Methods
T 043 Exchange Rates
T 044 Offsetting of Financial Instruments
T 045 Change in Scope of Consolidation
T 046

List of Group Companies of NORMA Group
as of December 31, 2016

T 047 Foreign Exchange Risk

53
55
55
58
59

62
63
63
64
68
70
73
74
74
79
79

P A G E

80
82
92

97
98

119

120

121
124
125
129
133

134
135

NORMA Group SE Annual Report 2016Further Information

List of Tables

187

CONSOLIDATED FIN A NCIAL STATEMENTS (CONT.)

TA B L E
T 048

T 049

Maturity Structure of Non-Derivative
Financial Liabilities
Maturity Structure of Derivative
Financial Instruments

T 050 Profit and Loss Net of Adjustments
T 051 Revenue by Category
T 052 Raw Materials and Consumables Used
T 053 Other Operating Income
T 054 Other Operating Expenses
T 055 Employee Benefits Expense
T 056 Financial Income and Costs
T 057 Net Foreign Exchange Gains / Losses
T 058 Earnings Per Share
T 059
T 060 Tax Reconciliation
T 061

Income Tax Charged / Credited to
Other Comprehensive Income

Income Taxes

T 062 Deferred Tax Assets and Deferred Tax Liabilities
T 063 Movement in Deferred Tax Assets and Liabilities
T 064 Deferred Income Tax Assets
T 065 Deferred Income Tax Liabilities
T 066 Expiry of Recognized Tax Losses
T 067 Expiry of Not Recognized Tax Losses
Development Goodwill and
T 068
Other Intangible Assets
Goodwill and Other Intangible Assets –
Carrying Amounts

T 069

T 070 Change in Goodwill
T 071 Goodwill Allocation Per Segment
T 072 Goodwill Per Segment – Key Assumptions
T 073 Assumptions Impairment
T 074 Development of Property, Plant and Equipment
T 075

Property, Plant and Equipment –
Carrying Amounts

T 076 Finance Leases – Land and Buildings

P A G E

136

137
139
140
140
140
140
141
141
141
142
142
142

143
143
143
144
144
144
144

145

146
146
146
147
147
148

148
149

TA B L E
T 077 Finance Leases – Machinery
T 078 Finance Leases – Other Equipment
T 079 Financial Instruments – Classes and Categories
T 080 Financial Instruments – Fair Value Hierarchy
Financial Instruments – Changes in
T 081
Level 3 Instruments

T 082 Financial Instruments – Net Gains and Losses
T 083
Derivative Financial Instruments
T 084 Change in Hedging Reserve Before Tax
T 085 Gains and Losses Fair-Value Hedges
T 086 Trade and Other Receivables
T 087 Trade Receivables
T 088 Trade Receivables – Maturity Analysis
T 089 Trade Receivables – Impairments
T 090

Trade and Other Receivables –
Carrying Amount Per Currency

P A G E
149
149
149
151

152
152
152
153
154
154
154
154
154

Inventories

155
155
T 091 Trade Receivables – Development Impairments
156
T 092 Receivables from Construction Contracts
156
T 093 Gross Amount Customer Contracts
156
T 094
156
T 095 Other Non-Financial Assets
156
T 096 Other Financial Assets
157
T 097 Development Retained Earnings
158
T 098 Development Other Reserves
159
T 099 Development of the MSP Option Rights
160
T 100 Development LTI
T 101 Components Pension Liability
161
T 102 Reconciliation of the Net Defined Benefit Liability 162
T 103 Reconciliation of the Changes in the DBO
162
Reconciliation of Changes in the
T 104
Fair Value of Plan Assets

T 105 Disaggregation of Plan Assets
T 106 Actuarial Assumptions
T 107

Expected Payments from Post-Employment
Benefit Plans

162
162
163

163

188

CONSOLIDATED FIN A NCIAL STATEMENTS (CONT.)

TA B L E
T 108 Development of Provisions
T 109 Provisions – Split Current / Non-Current
T 110 Provisions – Other Personnel-Related
T 111 Borrowings
T 112 Maturity Bank Borrowings 2016
T 113 Maturity Bank Borrowings 2015
T 114 Other Non-Financial Liabilities
T 115 Other Financial Liabilities
T 116

Future Minimum Lease Payments
Non-Cancellable Finance Leases

T 117 Trade and Other Payables
T 118 Maturity Financial Liabilities
T 119 Net Debt
T 120 Net Payments for Acquisitions of Subsidiaries
T 121 External Sales Per Country
T 122 Non-Current Assets Per Country
T 123 Commitments
T 124

Future Minimum Lease Payments of
Non-Cancellable Operating Leases

P A G E
164
164
165
166
167
167
167
167

168
168
168
168
170
171
171
171

172

TA B L E
T 125 Purchase Price Allocation Autoline
Compensation of Members of the
T 126
Management Board (IFRS)
Provisions for Compensation of the
Management Board Members

T 127

T 128 Compensation of Board Members
Compensation of Members of the
T 129
Management Board (§ 315a HGB)

T 130 Fees for the Auditor
T 131 Average Headcount
T 132 Voting Rights Notifications

FURTHER INFOR M ATION

TA B L E
T 133 Overview by Quarter 2016
T 134 Multi-Year Overview

P A G E
173

173

173
174

174
175
175
176

P A G E
189
190

NORMA Group SE Annual Report 2016Further Information

Overview by Quarter 2016

189

Overview by Quarter 2016 1

Income statement

Revenue

Adjusted gross profit

Adjusted EBITA

Adjusted EBITA margin

EBITA

Adjusted profit for the period

Adjusted EPS

Profit for the period

EPS

Cash flow

Cash flow from operating activities

Net operating cash flow

Cash flow from investing activities

Cash flow from financing activities

Balance sheet

Total assets

Equity

Equity ratio

Net debt

Q1 2016 2

Q2 2016 2

Q3 2016 2

Q4 2016 2

T 13 3

EUR millions

EUR

EUR millions

EUR

EUR millions

226.6

137.7

40.1

17.7

39.6

22.6

0.71

19.4

0.61

19.4

11.8

−11.1

−1.6

236.2

144.3

43.8

18.5

42.1

25.3

0.79

21.7

0.68

41.6

42.1

−12.6

−32.8

216.6

133.7

38.7

17.9

37.8

22.5

0.71

19.3

0.61

35.4

32.2

−12.3

94.6

215.5

129.9

34.9

16.2

31.0

24.2

0.76

15.5

0.48

53.4

62.4

−97.8

−10.7

Mar 31, 2016

Jun 30, 2016

Sep 30, 2016

Dec 31, 2016

1,164.1

1,174.1

1,282.1

1,337.7

437.1

37.6

347.8

433.4

36.9

354.1

451.4

35.2

335.1

483.6

36.2

394.2

1 Minor deviations may occur due to commercial rounding for the full year 2016 compared with the summation of the corresponding quarterly amounts.
2 The adjustments are described in the Notes.  Notes, p. 138.

190

Multi-Year Overview 1

2016 2

2015 2

2014 2

2013

2012 3

2011

2010

T 13 4

EUR millions

302.4

295.8

279.6

236.7

215.4

218.6

188.0

EUR millions

% of sales

EUR millions

EUR

894.9

432.0

381.6

81.3

535.9

354.5

545.6

157.5

17.6

150.4

94.6

75.9

2.96

2.38

889.6

416.0

395.3

78.2

540.3

344.1

533.1

156.3

17.6

150.5

88.7

73.8

2.78

2.31

694.7

394.5

237.8

62.5

481.0

211.5

405.6

121.5

17.5

113.3

71.5

54.9

2.24

1.72

635.5

388

191.5

56.0

443.9

193.6

371.4

112.6

17.7

112.1

62.1

55.6

1.95

1.74

604.6

367.5

193.3

43.8

427.6

174.5

344.4

105.4

17.4

105.1

61.8

56.6

1.94

1.78

EUR millions

−14.6

−17.2

−14.5

−15.6

−13.2

581.4

372.7

173

35.7

411.5

170.3

322.6

102.7

17.7

84.7

57.6

35.7

1.92

1.19

−29.6

30.0 4

16.8

4.1

490.4

336.6

123.8

30.0

323.6

168.3

274.7

85.4

17.4

64.9

48.2

30.3

1.93

1.21

−14.9

16.6

5.1

32.1

25.4

4.7

33.3

25.7

5.3

32.6

21.9

4.9

30.3

22.1

5.1

362.9

289.9

269.4

263.5

262.3

220.5

EUR millions

% of EJT sales

EUR millions

% of sales

EUR millions

28.9

28.8

5.4

352.9

39.4

243.9

149.2

148.5

EUR millions

−133.8

EUR millions

49.6

40.8

234.1

128.2

134.7

−44.5

−70.4

41.7

188.3

96.4

109.2

−265.1

57.7

EUR millions

1,337.7

1,167.9

1,078.4

EUR millions

% of sales

483.6

36.2

394.2

144.5

16.1

5,450

6,664

429.8

36.8

360.9

151.9

17.1

5,121

6,306

368.0

34.1

373.1

141.8

20.4

4,828

5,975

42.4

169.7

115.4

103.9

−43.4

51.7

823.7

319.9

38.8

153.5

110.8

17.4

4,134

4,947

43.6

156.5

96.1

−58.1

−34.1

691.8

289.2

41.8

199

115.9

19.2

3,759

4,485

45.1

143.7

71.7

66.8

−33.7

−0.5

648.6

256.0

39.5

198.5

106.2

18.3

3,415

4,252

124.4

62.1

51.7

−56.6

−3.1

578.8

78.4

13.5

344.1

86.7

17.7

3,028

3,830

Order situation

Order book (Dec 31)

Income statement

Revenue

thereof EME A

thereof Americas

thereof Asia-Pacific

EJT

Adjusted gross profit

Adjusted EBITA 2

Adjusted EBITA margin 2

EBITA

Adjusted profit for the period 2

Profit for the period

Adjusted EPS 2

EPS

Financial result

Tax rate

R&D expenses

R&D ratio (in relation to EJT sales)

Cost of materials 2

Cost of materials ratio 2

Personnel expenses 5

Cash flow

Cash flow from operating activities

Net operating cash flow

Cash flow from investing activities

Cash flow from financing activities

Balance sheet

Total assets

Equity

Equity ratio

Net debt

Working capital

Working capital ratio

Employees

Core workforce

Total workforce incl. temporary workers

Number of shares (weighted)

Number of shares (year-end)

31,862,400 31,862,400 31,862,400 31,862,400 31,862,400 30,002,126 24,862,400

31,862,400 31,862,400 31,862,400 31,862,400 31,862,400 31,862,400 24,862,400

1 Key figures prior to the IPO in 2011 are not shown due to lack of comparability be-

3 2012: The accounting rules changed in 2013 due to the first-time use of IAS 19R. In

tween HGB and IFRS. For this reason, the multi-year-overview includes only the years

order to better compare the earnings, assets and financial positions, the 2012 figures

from 2010 onwards.

have been adjusted to suit the new accounting rules and may therefore deviate from

2 In 2016 adjustments were made which especially relate to the acquisition of the Autoline
business. The adjustments are described in the Notes.  Notes, p. 138. Adjustments

of prior years are shown in the respective Annual Reports from prior years.

the figures published in the 2012 Annual Report.

4 Adjusted for deferred tax liabilities of EUR 2.8 million resulting from 2007.
5 From 2010 to 2011 and 2014 to 2016, adjusted by one-off effects.

NORMA Group SE Annual Report 2016

Annual Review

J A N U A R Y – M A R C H 2 0 1 6

A P R I L – J U N E 2 0 1 6

N OR M A Group publishes Corporate Respon-
sibility Roadmap 2018

N OR M A Group issued Gold Status by EcoVadis
for its achievements in the area of sustainability

General Motors recognizes N OR M A Group in China
and the Czech Republic with its Supplier Quality
Excellence Award

N OR M A Group has launched the new Breeze
Super-Seal clamp for fluid connections in high-pres-
sure applications using rubber or silicone hoses

N OR M A Group has received Platinum Supplier
Status 2015 from General Motors Company for its
site in Poland

w
e

v
e
R

a
u
n
n
A

p
u
o
r

G
A
M
R
O
N

J U LY – S E P T E M B E R 2 0 1 6

O C T O B E R – D E C E M B E R 2 0 1 6

N OR M A Group SE issues third promissory note
valued at EUR 150 million

N OR M A Group is supplying Fuel Transport Tube
Systems for a new model of an Italian motorcycle
manufacturer on a serial basis

N OR M A Group successfully completes acqui-
sition of Parker’s global Autoline business for
quick connectors

N OR M A Group wins major contract from French
motor vehicle manufacturer

Annual Review

NORMA Group Worldwide

N O R M A G R O U P P R O D U C T I O N A N D

D I S T R I B U T I O N S I T E S

G 0 0 1

A M E R I C A S

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

A S I A - P A C I F I C

Australia (D)
China (P, D)
India (P, D)
Indonesia (D)
Japan (D)
Malaysia (P, D)
Singapore (D)
South Korea (D)
Thailand (P, D)

E M E A

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

P = Production sites
D = Sales, distribution and competence center

Financial Calendar 2017

Mar 22, 2017
May 10, 2017
May 23, 2017
Aug 9, 2017
Nov 8, 2017

Publication of Full Year Results 2016
Publication of Q1 Interim Statement 2017
Annual General Meeting 2017 in Frankfurt/Main
Publication of Q2 Interim Report 2017
Publication of Q3 Interim Statement 2017

The financial calendar is constantly updated. Please visit the Investor Relations
section on the Company website @ www.normagroup.com for up-to-date information.

Contact and Imprint

If you have any questions regarding NORM A Group or would like to be included in
the distribution list, please contact the Investor Relations team:

E-Mail: ir@normagroup.com

Andreas Trösch
Vice President Investor Relations
Phone: + 49 6181 6102 741 | Fax: + 49 6181 6102 7641
E-mail: andreas.troesch@normagroup.com

E D I TO R
NORMA Group SE
Edisonstraße 4
63477 Maintal, Germany

Vanessa Wiese
Senior Manager Investor Relations
Phone: + 49 6181 6102 742 | Fax: + 49 6181 6102 7642
E-mail: vanessa.wiese@normagroup.com

Phone: + 49 6181 6102 740
E-mail: info@normagroup.com
www.normagroup.com

Dana Feuerberg
Manager Investor Relations
Phone: + 49 6181 6102 748 | Fax: + 49 6181 6102 7648
E-mail: dana.feuerberg@normagroup.com

C O N C E P T A N D L AYO U T
3st kommunikation, Mainz

P R I N T
Woeste Druck, Essen

compensated

Id-No. 1763438
www.bvdm-online.de

Note on the Annual Report
This Annual Report is also available in German. If there are differences between the two, the German version takes priority.

Note on rounding
Please note that slight differences may arise as a result of the use of rounded amounts and percentages.

Forward-looking statements
This Annual Report 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 ‘chould’ 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 the actual events including the financial position and profitability of 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 in these statements. Even if
the actual assets for 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 Annual Report, no guarantee can be given that this will continue to be the case in the future.

NORMA Group SE
Edisonstraße 4
63477 Maintal, Germany

Phone: +49 6181 6102 740
E-mail:
info@normagroup.com
Internet: www.normagroup.com