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Norma Group AG (ETR:NOEJ) reported a challenging first quarter of 2025, with sales declining 7.9% year-over-year amid persistent market volatility. The company has unveiled an ambitious transformation plan aimed at becoming an "Industrial Powerhouse" by 2028, despite current headwinds.
Quarterly Performance Highlights
Norma Group’s Q1 2025 results showed significant pressure on both top and bottom lines. Net sales fell to €284.2 million, down from €308.5 million in Q1 2024, representing a 7.9% decline. The adjusted EBIT dropped sharply to €10.3 million (Q1 2024:€25.7 million), resulting in an adjusted EBIT margin of just 3.6%, compared to 8.3% in the prior-year period.
As shown in the following key figures summary, the company posted a negative adjusted earnings per share of -€0.01, a dramatic decline from €0.39 in Q1 2024:
The sales decline was primarily driven by volume decreases of 9.0%, partially offset by positive currency effects of 1.3%. Regionally, EMEA (Europe, Middle East, and Africa) was hardest hit with a 12.2% sales decline, while Americas fell 3.5% and APAC (Asia-Pacific) decreased by 8.0%.
The following chart illustrates the components of the sales decline from Q1 2024 to Q1 2025:
Among Norma’s strategic business units (SBUs), Mobility & New Energy experienced the steepest decline at 14.5% below the prior year, while Water Management decreased by 2.3%. Only Industry Applications showed growth, increasing by 6.4% year-over-year.
Detailed Financial Analysis
Despite the challenging sales environment, Norma Group managed to improve its material cost ratio to 42.5% (Q1 2024:44.3%) and maintained a stable gross profit ratio of 57.4%. However, personnel expenses as a percentage of sales increased to 29.3% (Q1 2024:27.9%), reflecting the difficulty in adjusting fixed costs amid declining revenues.
The following profit and loss development chart shows the pressure on margins across the business:
Regional profitability varied significantly, with Americas maintaining a relatively strong adjusted EBIT margin of 9.6% (down from 11.1% in Q1 2024), while EMEA turned negative at -1.0% (down from 7.4%). APAC’s margin declined to 5.5% from 6.9% in the prior-year period.
One bright spot was the improvement in net operating cash flow, which reached €3.1 million compared to -€2.3 million in Q1 2024, representing a 234.8% increase. This improvement was primarily driven by better trade working capital management as part of the company’s Step Up program.
Strategic Initiatives
In response to the challenging market environment, Norma Group has launched a comprehensive transformation program aimed at adapting to what it calls the "New Normal." The company plans to evolve from what it describes as a "Conglomerate" structure to an "Industrial Powerhouse" by 2028.
The following slide illustrates Norma Group’s target vision for this transformation:
The transformation focuses on three key areas: footprint optimization, administrative efficiency, and operational expense reduction. As an example of the footprint changes, Norma plans to consolidate production in southern Jiangsu, China, by closing its Wuxi plant by August 2025 and transferring production to sites in Changzhou and Qingdao. This move is expected to generate annual savings of approximately €0.7 million from 2028 onward.
As shown in the following chart, Norma Group has established ambitious target margin ranges for each of its strategic business units:
The company’s Step Up program includes various efficiency initiatives, such as automating molding processes at its St. Clair facility in the USA, which has eliminated the need for six operators who have been retrained for other tasks.
Forward-Looking Statements
Despite the weak Q1 performance, Norma Group has maintained its full-year 2025 guidance:
The company expects group sales to range between €1.1 billion and €1.2 billion, with an adjusted EBIT margin between 6% and 8%. Net operating cash flow is projected to be between €75 million and €95 million. These targets suggest management expects significant improvement in the coming quarters.
For the longer term, Norma Group aims to achieve double-digit EBIT margins by 2028, with its Industry Applications and Water Management segments targeting 15-20% margins, while Mobility & New Energy aims for double-digit performance.
Market Reaction and Analyst Perspectives
Following the earnings announcement, Norma Group’s stock price declined by 7.24% in pre-market trading, reflecting investor concerns about the company’s ability to navigate current market challenges. As of May 16, 2025, the stock was trading at €11.64, down 1.69% for the day and significantly below its 52-week high of €19.80.
During the earnings call, analysts questioned the company’s outlook for Q2, which management indicated would show improvement over Q1. Questions also focused on the impact of tariffs and the ongoing CEO search. Executives provided insights into their negotiations with customers and confirmed that the water management disposal process is expected to conclude by the end of the year.
Despite current challenges, Norma Group maintains strong fundamentals with a robust equity ratio of 49.3% and appears undervalued according to some metrics, trading at just 0.53 times book value. The company has maintained dividend payments for 14 consecutive years, proposing a dividend of €0.40 per share for fiscal year 2024, representing a payout ratio of 31.2% of adjusted group net profit.
Martin Wilhelm, a key executive, acknowledged the challenges, stating, "Q1 numbers have shown that we need to get our act together," while emphasizing the company’s commitment to transformation into "a focused supplier of connection technology."
Full presentation:
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