Financial and liquidity management objectives and strategies

NORMA Group’s objectives and strategies with regard to central finance and liquidity management are unchanged compared to the previous year and are as follows:

 

I.    Ensuring solvency at all times

NORMA Group’s most important financial objective is to secure its ongoing solvency in the long term. This is ensured through sufficient operating liquidity and the maintenance of corresponding strategic liquidity reserves. These reserves also include readily available credit lines to take advantage of short to medium-term acquisition opportunities.

Regular rolling liquidity planning for all major Group companies, which is analyzed and aggregated by the centrally organized Group Treasury forms the main strategic cornerstone of NORMA Group’s financial management. This is also a valuable tool for measuring and managing liquidity risk, particularly with regard to current geopolitical and economic conditions.

Financing flexibility is ensured by maintaining the appropriate credit lines. These are negotiated loan commitments that can be drawn down within a very short period of time and can subsequently compensate peaks in required liquidity. NORMA Group has a revolving credit line as part of the syndicated bank loan. This credit line can be drawn in various currencies and maturities up to an amount of EUR 50 million. In order to increase flexibility, NORMA Group agreed on a further revolving credit line within the existing syndicated bank loan of EUR 50 million in October 2021, so that a credit line of EUR 100 million in total can be drawn from. NORMA Group uses asset-backed security (ABS), factoring and reverse factoring programs to manage liquidity, optimize working capital and improve the predictability of cash flows.

The financing measures undertaken in fiscal year 2023 are described in detail in the explanatory notes to the financial position. FINANCIAL POSITION

 

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 derivative hedging instruments, but also the appropriate foreign currency financing, are used to reduce currency risks. 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 also reduced in the Group companies above a defined threshold by using derivative financial instruments. Here, Group-wide liquidity planning is crucial to identifying and managing such risks.

In order to limit interest rate risks, NORMA Group aims to hold a balanced ratio of fixed and variable interest rate instruments, either originally or with the aid of interest rate swaps. As at December 31, 2023 , around 58% (2022: 46%) of all debt instruments have variable interest rates and are not hedged by interest rate swaps. In addition, current risk positions are monitored regularly by Group Treasury and assessed for their risk-bearing capacity. Group Treasury initiates appropriate countermeasures if the defined risk parameters are exceeded.

Key elements of the policy on limiting financial risks are the clear definition of process responsibilities, multistage approval processes and regular risk assessments.

 

III.    Optimizing the Group’s internal liquidity

NORMA Group Holding manages its liquidity centrally and is responsible in particular for investing surplus liquidity as well as for internal Group financing. The Group Treasury of NORMA constantly works on improving internal financing opportunities and bundling the Group’s liquidity in order to make it available for a wide variety of funding purposes. This is achieved by optimizing the allocation of cash and cash equivalents in NORMA Group Holding and at the same time ensuring the solvency of the respective individual companies at all times. A professional treasury management system is used for this purpose that provides a daily overview of the cash holdings of almost all subsidiaries. Regional cash pools have been installed to enable the technical implementation of liquidity centralization. Further cash concentrations are carried out at regular intervals. Manual pooling makes it possible to ensure an optimized cash position for all Group companies. Particular attention must be paid to local conditions in international payment transactions.