NORMA Group SE (NOEJ) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. The conference is now being recorded. Welcome to the NORMA Group SE Full Year 2022 Results. [Operator Instructions]. It's my pleasure, I would now like to turn the conference over to Mr. Miguel Lopez, CEO. Please go ahead, sir.

Welcome to everyone. This is Miguel Lopez speaking from Maintal. Very happy to have you here. Let's start the results presentation -- the company generated group sales of EUR 1.243 million (sic) [ EUR 1,243 million ] in 2022, corresponding to 13.8% increase over the previous year. Organic sales growth amounted to 7.1%. And here with a pricing policy implemented by NORMA Group, very strongly in the year 2022, we will come later to more details in order to cushion the impact of inflation. Positive currency effects from the strong U.S. dollar also made a significant contribution to growth. And all the 3 business regions, also which we will see later in more detail, made a contribution -- a positive contribution to growth. Adjusted earnings before interest and taxes, so what we call the adjusted EBIT achieved a level of EUR 99 million. The adjusted EBIT margin was 8%. And as we have been indicating before, the earnings and the margins were impacted by higher cost for energy intensive raw materials, including steel and plastics, resins, higher logistics cost and special costs incurred in connection with the introduction of a globalized standardized ERP system. And we did need also temporary -- additional temporary workers to support production relocations and to eliminate backlog of customer orders. The net operating cash flow amounted to EUR 65.3 million. The proposed dividend per share will be EUR 0.55 per share. Management Board and Supervisory Board of NORMA Group will propose to the AGM on May 11, the distribution of the dividend exactly of EUR 0.55 per share to the shareholders for the financial year 2022. This corresponds to a distribution volume of about EUR 17.5 million. The planned payout ratio is thus almost 31.3% of the adjusted net profit in financial year 2022 of EUR 56 million. Additionally, I would like to mention and highlight that we achieved the 2022 environmental targets and we could reduce CO2 emissions by 88%. As you know, we are committed to reducing greenhouse gas emissions at our production sites as part of the environmental strategy that we developed back in 2018. We focus on emissions resulting from gas consumption and the purchase of electricity and [indiscernible] heating at our production sites. Since January 2022, we have been purchasing electricity from renewable sources at all of the 27 production sites. Moving on to the segment reporting and P&L statements. Top line increased in total, as I mentioned before, by 13.8% compared to the 1.9 -- that's EUR 0919 million (sic) [ EUR 1,091.9 million ] in 2021, achieving the EUR 1,243 billion (sic) [ EUR 1,243 million ], resulting in 7.1% organic growth, thereof plus 9.3% price and minus 2.1% in volume. This organic growth of 7.1% was specifically achieved due to a good development in the Americas region and good recovery in Q4 in EMEA. EJT sales showed an organic growth of 7.5%, strong in the Americas and EMEA. SJT sales showed good organic growth of 6.4%, mainly due to the Americas region. The currency effect was about a positive translation of EUR 73.1 million, meaning that this represents and reflects 6.7% of group sales growth. The currency effects mostly was related to the U.S. dollar. Specifically because of this last effect, we have seen now a move or shift in the regional split, Americas jumping to 46% compared to the 42% in the previous year. APAC was 14% and EMEA was 40%. In regard to the segment reporting by regions, I would like to highlight. First, in the Americas region, sales growth was very strong with 25.7% and we reached EUR 574.2 million. That makes it the fastest-growing business region with a total contribution, as I mentioned before, of 46% to group sales. In addition to the substantial organic growth of 11.9%, the positive currency effects, I mentioned before, a major contribution, business with standardized joining products developed very positively overall, posting an increase of 25.8% of which organically 12% compared to the prior year period. Important to understand that this includes the U.S. business with irrigation and drainage products, an area that, as you know, has been growing for years. Water management business increased significantly once again with 12.4% organic growth in 2022. Here, a number of price increases helped offset the inflation related increase in the cost base. Coming to the EMEA region, sales increased by 5.8% to EUR 489.2 million. Organic growth at 6.1% was diminished by 0.3% due to the negative currency effects. Automotive recovered in the second half of the year following what the times were, really considerable disruptions to the European automotive industry as a result of the Russian invasion of Ukraine. NORMA Group grew by 9.5% in the full year. And also here, it was higher selling prices where we managed to compensate for inflation-related price hikes for raw materials and intermediate products. In the area of standardized joining technology for distributors and wholesalers, sales were overall down in financial year '22, falling slightly minus 4.3%. That was in part due to capacity bottlenecks at some production sites. We will counter these bottlenecks going forward with efficiency measures and an increased level of cooperation. In APAC, we have been growing by 3.9% to EUR 179.6 million. Here, as well, currency effects accounted for a positive impact of 6.5%. Organically, the region developed negatively of 2.6%, of course, primarily due to weak automotive business in China as a consequence of the prolonged COVID lockdowns in that country. At Page 9, I would like to highlight the balanced sales mix. You see here the distribution between EJT and SJT and the different areas, 3 of them within mobility and new energy and water management and industry applications. This, for us, is extremely important that it is balanced in a way, as you can see here it in this chart. At Page 10, I would like to highlight that the year '22 has been a very challenging year. We have been closing the quarter 4 with 6.4% margin -- EBIT margin. And this is the starting point for our business development now in the fiscal year 2023. With this, I would like to hand over to you, Annette.

Perfect. Thank you very much. So let's have a look together to the profit and loss development. I'll start at Page 11, as you can see. Our material cost, our material cost ratio increased, while our gross profit ratio decreased in 2022, this is due to higher material costs in steel, plastic, resin, energy. And it is for sure also caused by shortages, inflation and this is all around the Ukraine war as an impact. So our total expenses, there we see a strong improvement in personnel cost ratios due to -- we could see that the number of employees, while our sales increased but always having in mind that the volume also decreased. So therefore, that it's a plus but it's something what is supported by this as well. If I look to our OpEx ratio that increased majorly due to freight costs -- higher freight costs, going for higher numbers of temp workers. But thereafter, this is affected on the one hand by our plant relocations, but we always have to keep in mind that the more we move via Mexico and India, our temps are anyhow -- our [indiscernible] there due to a specific structure in contracts. So adjusted EBIT, our margin decreased from 12.6% (sic) [ 10.4% ] in the prior year to 8% in '22. Let's come to our operational adjustments. So the message is, like always in the recent years, on EBITDA level, we don't adjust anything. Our adjustments are only referring to PPAs. So out of past acquisitions, when I look then to the earnings per share, we have reported an earnings per share of EUR 1.23. Our adjustments are 52% -- EUR 0.52 and the adjusted share EPS is then EUR 1.75. The outlook for '23 and '24 is then always [ EUR 0.01 ] less. Referring to earnings per share, we already spoke about. So Miguel already spoke about the dividend. You can see that our payout ratio is approximately -- normally, our policy is that we have a dividend payout between 30% and 35%. We proposed this year 31.3% to the AGM, which amounts to EUR 0.55 in this case. Profit and loss statement on Page 14. So I think that's the detail -- of the detail that you can read. We have said before, so I would skip over that. Let's come together to the balance sheet and the maturity profile of our loans and our cash. So Page 16, our working capital developments, where we see that our working capital ratio increased due to higher inventories related majorly to safety stocks because of our plant relocations in '22, higher -- certain material shortages and inflation. We are impacted by our factoring program. We increased our factoring programs to EUR 77 million in order to optimize our financial flexibility there. When we see then on Page 17, we can see that our net debt increased by 9.8%. This is majorly due to the higher working capital needs and our leverage amounts increased to 2.2x. Our equity ratio increased from 44.6% to -- from 45.2% to 44.6%. Coming then to our financing structure for our maturity profile, Page 18, you can see that we are looking on a very solid maturity profile which is based on long-term financing, on that strategy what we still follow up. We have in '23, EUR 113 million to refinance. This is very well underway and our next larger refinancing is due in '26. So when I look then to our cash flow on Page 21, we see there that our working capital outflow increased. So we have a working capital outflow of EUR 38.8 million due to higher inventory, safety stocks due to plant relocation, material shortages and inflation. Our CapEx has majorly increased but in line with the higher sales. Our net operating cash flow is -- by this EUR 65.3 million, always emphasizing it's the operational cash flow and not the total cash flow. When I look then to Page 22 and the NORMA value added, we see there that our NORMA value added for our long-term strategic target dropped down from EUR 16 million to minus EUR 27.1 million, which is on the one hand due to the loss in EBIT. And on the other hand, we had to consider an increase in WACC, which is now for us [ 9.25 ]. By this, I give again over to Miguel in order to guide us through the guidance.

Thank you, Annette. What do we see for the year 2023? I would like to highlight 4 areas. The first one being organic sales growth. Here, we do see a medium single-digit organic sales growth. And we, of course, differentiate between regions and also the 2 product segments, as you can read. We see an adjusted EBIT margin around 8% and net operating cash flow around EUR 70 million. And of course, we will stay with the dividend policy, around 30% to 35% of adjusted group earnings. We are still communicating already in summer last year that we started a performance improvement program. The performance improvement program was -- are differentiated between stabilization measures. In short term, what we have seen in the last 2 quarters of the year 2022 and still ongoing in the first 2 quarters of 2023 and then additionally to add efficiency and structural measures in the midterm, which we are currently working on. Specifically for this Phase II, we will announce details with the Q1 2023 results presentation on May 9, 2023. Here, we will take care specifically about growth but also efficiency and structural cost improvements in operations. With this, we can start the Q&A session.

[Operator Instructions] We have the first question from Ingo Schachel from BNP.

The first one would be on the margin outlook for '23. I think on a group level, it's understood that you're only expecting flat margins, but can you maybe give us a bit more color on the margin development you expect on the, let's say, automotive side or mobility side of the business, especially in EMEA, the 2.6% margin was, of course, pretty low in '22. So I think with all the issues that you flagged, the plant closure, ERP rollout, it's fair to assume that mobility margins in EMEA should be substantially higher than in '22, and that might be offset margin weakness, for example, in water? Or what is your thinking by end market on the margin outlook?

Thank you very much, Ingo. As I mentioned before, we do see still the actions of stabilization around EMEA in quarter 1 and quarter 2 of this year. So we will see the output and specifically the productivity kicking in or being output at the level that we expect and productivity kicking in, in early Q3. So that's what we expect now. For EMEA specifically, if we take a look on the water, you have seen as well the development overall in housing construction and housing sales in the Americas. That's the reason why we were slightly cautious on this field. And that's how we come to the overall 8% -- around 8%, which certainly can be classified as a conservative guidance.

Okay. Understood. And maybe 1 question around, I think, 1 point which came up in the media coverage a month ago, where there was, I think, a media article suggesting that -- I'm not sure exactly the Supervisory Board or someone has sort of tried to explore the possibility of a sale of NORMA Group and some private equity investors being interested. Of course, you were probably not be privy to every detail of eventual attempt to solicit the purchase of the company. But just from your perspective, is there anything you can comment on this. For example, I think that you're still searching for a new CEO and so on, would it be fair to say that whatever happened at the end of last year, you want -- you need to sort of come to a final conclusion and something people have looked at, but it's not over or it needs to be over quite soon so that you have a clear path forward? Or could it be an ongoing strategic consideration to explore whether there's interest in the company?

Thank you for this question, Ingo. The -- of course, we cannot comment on this. But in case -- in the theoretical case, that this would occur in the future, what we certainly would do is to take a look to all the valuation methods that are existing in the market and come to a conclusion and as a Managing Board and also Supervisory Board that if the offer in the future in this theoretical case would be in the fair range, then of course, we would need to inform the shareholders. If not, we would not.

Yes. Understood. And of course, I think we can also have a view on the right. So the Asian margin for the business, I think what's for us always the interesting question how you would look at it in terms of the long-term margins. I think your predecessors have made certain comments on those long-term margins, I guess, that would be the key swing factor which kind of offer you might regard as fair or not is your view on long-term margins for the business? I mean do you have a strong final view on that or already? Is it the same as the previous teams? Or it's something that you also are still forming an opinion on?

Of course, we do see our task now to come from the current margin level to margins levels where our shareholders would be more satisfied. In the long-term development, we have seen where we have been in the past. So the work that we are about to do in the company program in the midterm program is how to increase the margins back to double digit. But from today's perspective, we need to first stabilize and get to the 8% and this is what we are working on.

The next question comes from Nicolai Kempf from Deutsche Bank.

It's Nicolai Kempf from Deutsche Bank. The first would be on your regional outlook, especially in China. You're guiding for low double-digit growth. Just wondering because January and February have been rather weak. Do you expect a sharp ramp-up in the second half of the year?

Nicolai, thank you very much for that. I have been in China last week, and I could make myself aware of the current development in the country. I can't really confirm that after the opening up early this calendar year, we will see their growth that it's absolutely in this range that we described in this low double-digit range. Of course, the visibility overall might not be now complete, and there might be some thoughts around a more optimistic view, but this we will see in the next months. So at least the opening up was a very good sign for the whole industry. And yes, we need to see now in 3 to 4 months from now, whether we can take this more optimistic view or we stay with this rather more cautious view.

Okay. Understood. And my second one would be also on the margin guidance of the around 8%. Is there any seasonality in this? So is Q1 trading within this guidance? Or it's more like back-end loaded?

Given the fact, Nicolai, that the EMEA output, but also productivity will be about to kick in, in quarter 3. We look right now the complete year 2023 as more back-end loaded. So we will see the kind of bit different seasonality as in normal years. We will start a little bit below, and then we will be a little bit above in the second half of the year, so that we achieved this around 8% over the complete fiscal year 2023.

The next question comes from Johannes Ries from Apus Capital.

Maybe also some follow-on questions to the colleagues before. Maybe first to the year 2022, you don't gave some breakdown of the profitability of the different regions. Can you give us an indication to my knowledge or that what I thought or heard from you is, EMEA was by far the lowest profitability there. But maybe you can give us some more insight on this topic.

Yes. Just let me have a look. So at the end -- so in terms of -- so when I look to EMEA, we achieved there in '22, an EBIT margin of [ 2.6% ]; in Americas, we achieved an EBIT margin of 12.7%; in Asia Pacific of 10.6%. So this is what we already said before. I would say the business or in the other [indiscernible] the business in Americas and Asia Pacific develop for us reasonably fine, always considering all these headwinds we had to face this long COVID breakages and so on. At the end, our pain point and our of [ pain of ] improvement is EMEA -- the EMEA region.

Yes. And percentage-wise, maybe of the margin or maybe absolute, how high has been the extraordinary cost you had in EMEA through -- problems with this [ ERP ] transformation and all this additional costs you have to be extraordinary transport costs, consultant costs and so on. Can you give a feeling how high this amount has been?

So this is, at the end, what we assumed, you cannot take that really on the last digit, but at the end is something around EUR 10 million what brought us by -- what came by inefficiency also by this longer course of relocation of plants and also then the increased consultancy cost for our ERP system, which was due to the case that we were forced to implement ERP systems to 1 location where the transformation has been postponed. So roughly EUR 10 million, I would say, I would amount to that.

But that's not including the lower sales you had to compare what you've normally have done if you make -- could have delivered normally, especially the industrial business, which was cut because you had to deliver to the automobile customers.

For sure, for sure. So this is not included there. As we faced trouble in relocation, what we already discussed, we were not able to fully fulfill the demand of our industrial customers, but this is not included what I just told you.

Super. And -- for your outlook for this mid digital growth, what are your assumption on volume and price? To my feeling, there's nearly no growth at the volume. Is it right or nearly very low? Do you expect only a low digit price increase in this inflationary environment?

Sure. I think the -- so what we expect in the market is that the price -- so this inflation covering of pricing is most of that has been done last year. So we achieved more than 9% out of pricing which is a [ relative ] amount. This year, we can see that standardized anyhow came already down still something different, in particular in Europe. And however, we see -- well, let's see what comes up in APAC and so on in terms of shortages. So there, we are a bit cautious. But this big inflation, what we need to countermeasure, we don't see for the time being. We look to LMC or IHS figures, which are, for us, a little bit too optimistic because normally they came down with this expectation from time to time, but we are cautious there because the market environment is very volatile for the time being.

Clear. But there is some price increase because you have this overrun effect because you don't increase surprises at the 1st January last year, it was during the year. So for there's some impact, but you have this accounting effect to the metal price, that's clear.

Yes. So we -- what we are still doing is that we are catching in this huge increase of alloy surcharges what started last year in March after the Ukraine invasion. This is really coming through the P&L, that's clear. Things like this are still coming in. So it's like this. And for sure, what you mentioned with industrial, as we said, we -- our homework was stabilized in '22, our production facilities. And as this job is on a very good way, we see an increase in industrial products in the sake of industrial products, we see what should help us in the margin.

And any negative impacts today at the end of March from this transformation? Or is it nearly not done...

Well, end of March, I cannot comment too much now, but for sure, our restructurings -- so we consider these high extra cost of last year more or less as onetime cost because it was a high amount, but the story is over. So we shut down our plant in [indiscernible] that's done, that's already filled. So there is nothing out of that time anymore. So these were high cost, but onetime cost.

Okay. Last question, too. You always mentioned in the past you want even to build up the water business in Europe. We also hear a little bit more about it if I [ remind ] of May with your midterm program. Is it a part of this? Or is it maybe driven by opportunities?

Well, I mean the water is very -- of course, very relevant question. The water business overall has been, as you know, extremely successful in the U.S., but we were lacking implementation in Europe so far. So the company program overall is about growth programs, specifically on water and on industry and of course, improvement of profitability in the automotive arena. So yes, we will certainly give some light on what we intend to do in water specifically.

The next question comes from Jürgen Pieper from Metzler.

I have 2 quick questions. The first one is for the full understanding of Q4. I mean you have, at the same time, the -- I think the highest organic growth in the year. You mentioned that EMEA, the auto business recovered. You had the inclusion on some surcharges, raw material costs went, prices began to come down. So why was then the fourth quarter, the weakest quarter in terms of profitability in the year. So what is the 1 key factor here which I missed? And the second one, if you look at 2023, would you say, I mean, labor is certainly certain threat this year. Would you say that your labor for revenues are more or the same or at least very similar in your regions? Or is Europe still clearly, the region with the highest labor cost year.

So at the end, 4Q, that's '22. So for Q4, when I look there, for sure, we were negative in terms of margin in EMEA. We had a minus 1.5 Q4 margin in EMEA, while Americas was a 10-ish and Asia Pacific even at 12. So that's the pain point out of that. All in all, in terms of volume, I would say there, we could see that we grew over proportional.

So it was Europe. This was the one...

No, that's Europe, clearly.

Failure. And is it, to a certain extent, extraordinary because of plant closure? Or is it just because it was so weak at the end?

So on the 1 hand, we had to absorb last year a plant closure. So by the end of the year, we closed [indiscernible] was part of our restructuring program in the recent years. That story went over about 2 years, and the relocation of these products was done on the 1 hand to check, and on the other hand, to [indiscernible] cost. And that was one of the reasons where we suffered in particular in mid last year that we saw that we had a certain delay there.

On the personnel cost ratio for 2023, we see a stable ratio compared to the previous year, compared to 2022.

The next question comes from Christian Glowa from Hauck Aufhäuser Investment Banking.

Just coming back to what you just have said quantifying the extraordinary costs in EMEA. As I've understood on the right, I think you said EUR 10 million extraordinary costs, which you don't expect to reoccur next year. At the same time, you are guiding basically for stable input cost ratios. So that makes it difficult to understand why you're not guiding basically for a margin improvement if these costs will not reoccur. Can you please quantify a bit specifically -- a bit more specifically on these cost items and on the stabilization measures which you are planning to install this year and the associated cost piece.

So at the end -- well, as Miguel already said, we are on a good track, but there is still a way to go in this year also, in particular, in EMEA. We cannot be satisfied with the margins we are seeing in EMEA. There, we are on a clear improvement track and this where we just -- we really need to do our homework and we need to increase our productivity. Our margin guidance is also a dedicated price that we expect somehow stronger headwinds in the macro environment in '23. So at the end, we are still cautious in terms of APAC, but it's clear because we don't know how this will develop. I think we see that for the time being positive -- more positive, even maybe than expected. But however, any kind of shortages, whatever might come out of it and nobody knows for the time being. That's fully cleared. So in terms of the Americas, we are cautious in water business. We see for the time being that for sure, there's still a long rainy season. There is still a lot of snow in Americas. So it was clearly due to inflation and due to the high interest that this consumer-oriented and consumer-oriented business, we stood cautious there. These are majorly the impacts which are baked also in our guidance.

Okay. That's clear. And maybe 2 follow-ups, if I may. First of all, can you please provide a bit of color on the stock levels of your wholesalers. I assume they have quite substantially destocked at the year-end, and now you should basically have some tailwind in water management this year from restocking effect. And secondly, on working capital, you said you had EUR 38 million cash outflow in working capital, and that was largely because of safety stocks inventories as we see basically supply chains normalizing, I would assume basically that you have some positive cash inflows from working capital improvements this year. But still you are guiding basically for a flattish operating cash flow. Is that related to the factoring program? Or how should I look at your working capital assumption for this year?

Christian, I'll start with the first question of wholesalers, retailers and especially in the U.S. Yes, we have seen in Q4, destocking. We expected in the first months of the 2023, this effect to be slightly continued. What we have seen has been very close to that, but a bit better than expected. So our expectation is that destocking is done, and that we will have a cautious development in the next months to come exactly because of what Annette just explained before. Around the working capital question, I hand over to Annette.

Well, at the end, you answered your question already a bit by yourself. So that's indeed what we see. So we increased our factoring program from -- normally, we -- our intention is to have that around the 53, something like that. we increased it to EUR 77 million. This we want to change. That's clearly the target that we say, okay, we want to have a healthy proportion to that, but not in this extent. So that is one of the major [indiscernible]. For sure, I think everybody is hit a bit by inflation. This is baked not only currently in pieces what we have in working capital is also prices. Therefore, we are working on dedicated inventory improvement programs. We always have to consider anyhow that our inventory, the more we go into water, the more we gain sales in water and in industry business, the more stock we need because we need to be in the shelves of our wholesalers and so on in order to be able to deliver. So that needs a certain variety in system business as well where we need a certain stock.

The next question comes from Peter Rothenaicher from Baader Bank.

I have a question on your automotive business and the margins. So if I look on EMEA automotive, the margin has obviously been negative in 2022. So I follow NORMA since more or less the IPO. And we came from also the automotive business from margins, I would say, definitely 13% to 16%, so not too much different from the nonautomotive business. Now you are loss-making. We know that the market in automotive has become more difficult. You have some restructuring. Nevertheless, this does not explain in my point of view, a loss in the margin if I compare former margins to the current level of 15 percentage points. What has happened? And I have still the impression and the feeling NORMA is the clear market leader for these connected components in the automotive business. Therefore, the market and negotiation position should still be quite good. But how can this be then that the NORMA has such a negative margin performance in here?

So maybe I'll start it, Miguel can at the end -- at the end. So just to get the things clear, we are -- we have -- did not make a loss in EMEA or in EJT in our automotive business in '22. So we are around 2%, 3% margin in EMEA. So that's the point. The last quarter was loss-making, but for the quarter 4, but not that one. But you are fully right, normally, and this is the intention of our performance improvement plan, what we will announced in a few weeks. You are right, we need to go in EMEA again, back to double-digit automotive margins. We need to be picking there, and that's clear and all our planning is going towards there.

But to understand it right, in my point of view, EJT in EMEA was much more profitable than the automotive. Isn't this true?

EJT is mostly the automotive business. But you are right, it was in the past also a good reasonable double-digit margin, and now we are at a low single-digit margin. And this is clearly to be improved. Therefore, we did all these restructuring, transferred our plan to best cost countries, working on productivity and that's clearly the target what we need to focus. You can see that in Americas and in Asia, we do much reasonable better margins, and this margin, there is no reason why this should be larger in Europe because these are often the same customer, not always, but often.

Yes. But it's, for me, still difficult to understand because I cannot imagine that your competitors in this area have a much better cost position. And I think sales, I cannot afford being here at 0 margin or even negative or something like that.

No. This is something that we also cannot afford. We are on a small in EMEA on a smaller single-digit margin, and this is something that is clearly not what we want to have and what we can accept. So therefore, the clear message is to improve this margin, and we are in our programs, we have captured that for the time being. We put this on the Street, but at the end, it has to be deployed until we see then the full range out of it.

And what can we expect for a time horizon to see here double-digit automotive margins again?

Well, let me jump in here. I think this question is as well extremely valid. That's the content of our -- that's the content of our program. And the midterm expectations, of course, overall, as I mentioned before, is to come back to the double-digit arena. And we will certainly give more light on this one during the May 9th presentation, also around what we expect for some -- for the 3 product areas overall. But this that we need to ask for a bit of patience until May the 9th.

Then with regard to the forecast for 2023, I don't know if you have in your annual report already any guidance for about the financial result, is significant deterioration to expect due to the higher interest rates and what is here your guidance is?

That's not significant. We are lucky there at the end, for sure, also -- so first of all, we are lucky that our syn loan, we are financed until '26. For sure, interest increased, we are slightly impacted there, but we have a very good interest swap on our exposure on U.S. dollars. So when we had last year to absorb a financing cost of roughly at 2% -- 2-point-something, we count now with maybe a 3-something. But we are lucky enough that in terms of all of our U.S. financing, we are pretty well hedged. So therefore, the impact is really not big.

Okay. And then your water business, you mentioned there are some uncertainties in terms of demand. But overall, in terms of margin, there is a similar situation to be expected as in 2022? Or do you see here also some risks?

No, no. We don't see a margin dilution in water business at all, and we would never accept that. So then we would not sell it for the price because we see that really as a kind of -- that's the kind of -- want to be a bit more cautious. But at the end, these products are top of the pot and [ repeated ] demand these products. So there's no to make and no discount to make on that.

Ladies and gentlemen, in the interest of time, we have to end the Q&A session now, and I hand back to Mr. Lopez for closing comments. .

Yes. Thank you very much for your attendance, for the interest in NORMA. We are very glad to speak to you and to see you and to discuss with you again on May 9 during earnings result presentations of Q1, including as already announced a couple of times today, including the -- some more details on the company improvement program. To all of you, again, thank you, and have a wonderful rest of the day. Bye-bye.

Bye-bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you very much for joining.