NORMA Group SE (NOEJ) Earnings Call Transcript & Summary

Yes. Hello from my side, Mark Wilhelms speaking. I welcome you to our call. I'm accompanied by Annette Stieve, the CFO of NORMA Group; and Sebastian Lehmann, our VP, Investor Relations and CSR. Annette and myself will take you through the slides during the course of the presentation. Financial year '24 has been a year of change for NORMA Group in many aspects. We've implemented a number of measures and initiatives that will have a positive impact on the future of the company. I would like to present the successes the team has achieved in this process before Annette Stieve takes you through the financial performance of the group. Following our presentation, we'll be happy to answer any questions with the normal process that the operator will take you through later on. Let's now turn to the next slide. NORMA Group has undoubtedly reached a turning point in its development. The past financial year was characterized by becoming aware of this change in every aspect, and we had to actively shape it. Our employee engagement survey, we received clear feedback from our team that action is required. And that is what you see on this slide here, our new mission statement. Let's now move to a slide that talks more about the operational highlights. While the market is interested in what comes out of the bottom line, we are, of course, working and analyzing how do we get there. Our mission statement we've just discussed was one of the necessary steps for us to move in the direction of how to get there. Equally important was the further implementation of our step-up profit improvement program, which was set up back in 2023. This was not least responsible for the further recovery and operational improvements at our production facilities and at the staff functions. Later on, Annette will give you some more insights to how those improvements resulted in better numbers for NORMA. As a result, we can now present you with a solid performance in a very difficult market environment, constant 8% margin constant versus 2023 despite a 5.5% revenue decline is quite special. We are thus embarking on an exciting path towards a new NORMA. Let's take a deeper dive with the next slide. We increased our competitiveness and continue to work with the aim of being best-in-class for our products to our customers and to the financials, and we need to work hard to get there. We increased the transparency of the company's values by sharpening its core competitors to become focused rather than being a group of company. And last but not least, we've sharpened the corporate strategy with a major decision to sell the Water Management business. It's our clear commitment to bring NORMA Group profitability back to double-digit adjusted EBIT margins in the medium term and increase the momentum of our growth by investing in our core business. The business NORMA has years of experience in. What this means for the future of NORMA Group can be seen on the next slide. The future NORMA Group. NORMA Group aims to be the market leader in the field of connection technology to bring liquids and gases from A to B at the highest level. We want NORMA Group to be the preferred partner of our stakeholders around the world because of our expertise, solutions and products that offer the best value in the marketplace. After all, NORMA's business model in combination with the targeted market leadership will transfer in healthy profits, solid growth and corresponding good key financial figures. This, ladies and gentlemen, will be our compass for the upcoming years. Let's now get back to the development in the past year. On the next slide, I will share with you a few top figure numbers for the year '24. First and most obvious one is the top level. Looking at our sales for the full year '24, we see a decline of 5.5%, which is mainly due to a rather weak second half of the year. This development reflects the unstable and sometimes highly volatile market situation in all regions. Europe and Asia proved to be particularly challenging. In terms of volume, the growth in Water Management continued. Mobility & New Energy as well as Industry Applications, on the other hand, saw restrained customer demand, particularly in Europe and Asia. Pricing remained stable with a tendency to slight decreases in the second half of the year. Slightly negative currency effect resulted primarily from the Americas and APAC region. The TECO acquisition made a positive revenue contribution, albeit small, if not to say, very small of 0.2% in '24. On the next slide, we talk about the development, the sales development by region. In the Americas region, the sales remained about stable. The decline in sales in Europe was primarily due to the continued weakness in the automotive and truck industry. Asia Pacific saw a reduction in sales, which was mainly due to weak demand from automotive industry and infrastructure business. On the following slide, we break down the sales development by our strategic business unit. The slide starts on the left-hand side with Industry Applications. Sales were down by 6.4% on the previous year. Slight price increases were unable to compensate for the decline in the volume. All regions contributed to this negative development, particularly out in Asia Pacific. Water Management in the middle of the slide and up to now in the middle of our company, we saw sales being up by 3.5% compared to the previous year. This actually underpins the continued growth perspective of this business. The acquisition of TECO and slight price increases also had a positive effect on the revenue development in Water Management. The right-hand side of the slide takes us to Mobility & New Energy, where sales were down by 8.9%, i.e., the strongest year-over-year reduction of all 3 segments. Against previous year, subdued global demand, particularly in EMEA and Asia Pacific led to declining volumes in passenger cars as well as trucks. Now that I've taken you through the challenging revenue situation, I leave it to Annette Stieve to share with you the financial highlights below the top line.

Thank you very much, Mark, and a warm welcome from me as well. Looking at the line items below the top line in our '24 financial year is indeed showing decent steps in the right direction. Let's start with the gross profit margin, which significantly increased by 320 bps, mainly due to an overproportionate reduction in the cost of materials compared to sales. Total operating costs decreased as we were able to reduce freight costs by EUR 3.8 million or 25%. Special freight costs were reduced even by EUR 6.2 million or 80%. This is another clear proof of our success of our step-up measures. Consequently, our adjusted EBITDA and the adjusted EBIT margin developed solidly in '24 despite lower sales. In line of -- or in the light of this very challenging market environment, especially in the second half of the year, this is truly an outstanding result. Let's get over to the next slide where we show the adjusted EBIT margin development by region. The adjusted EBIT margin in the Americas region developed remarkably well. On the one hand, this is due to the positive development of the Water Management business. In addition to favorable material costs, our sales teams were able to achieve slight price increases. At the operational level, lower freight costs also contributed to this positive development. The adjusted EBIT margin in EMEA was negatively impacted by lower sales volumes. The continued implementation of further operational efficiency measures, especially reduced freight costs did not compensate for the top line development. In addition, rising personnel costs dampened the margin development there. In APAC, the decline in sales was also the main reason for the lower margin compared to previous year. However, successfully implemented cost reduction and efficiency measures contributed to the fact that the fall in sales could be partially offset by cost savings. On the next slide, we will dive a little bit deeper in our adjustments. For '24, the overall adjustment in our EBIT amounted to about EUR 35 million, resulting primarily from PPA amortizations of prior acquisitions. In addition to the regular PPAs, we had an extraordinary PPA write-off amounting to about EUR 13.5 million coming from a subsidiary in India. Just as a reminder, this write-off was noncash effective. Together with the corresponding tax impact, we had a higher adjustment in our net profit compared to the previous year. For '25, adjustments include lower PPA effects of about EUR 15 million. In addition, we are expecting about EUR 20 million associated transaction costs in connection with the sale of the Water Management business. As already announced with our guidance on the 7th of March, we expect additional adjustments from one-offs for transformation costs. The exact amount cannot be estimated yet. Let's move over to the development of our EPS. Based on the decline in sales and also a lower financial result compared to the previous year, adjusted earnings per share are lower than in '23 and level at EUR 1.28. As a reminder, our dividend policy is a payout ratio of 30% to 35% of the adjusted group earnings. Based on this, the management will propose a dividend of EUR 12.7 million to the Annual General Meeting in May. This corresponds to a dividend of EUR 0.40 per share and thus a payout ratio of 31.2%, which is fully in line with our guidance. Let's move over to the working capital. Trade working capital, including supply chain financing programs totaled EUR 236 million, thus slightly above the previous year's level of EUR 231 million. Trade working capital ratio increased predominantly due to lower sales in combination with inventories being at the same level as of '23. The inventories were intentionally built up at the end of '24 as safety stock in preparation for the introduction of a new ERP system at the production facility in Maintal from January onwards this year. Looking at our supply chain financing programs on the right side, we delivered what we have promised and reduced the programs by about EUR 5 million. The trade working capital ratio increase, excluding supply chain financing programs is thus significantly better by 30 bps. Let's have a closer look to our most important balance sheet figures. Our net financial debt visibly decreased compared to the end of '23 by 4.7%. This is also reflected in the improvement of our leverage by 10 bps against the prior year. Finally, I'm pleased to inform you that the equity ratio has further improved and reached its highest level since the IPO with 50.2% at the end of '24. Let's move over to our maturity profile. As said at the previous slide, we have lowered our net debt significantly. One of the main reasons is the repayment of debt as follows: Promissory note loan 1 and 2 tranches amounting to EUR 2 million and EUR 16 million were repaid as planned. An early repayment of EUR 48.1 million was made in connection with our syndicated loan. The repayment of debt amounting to about EUR 66 million is a clear signal for our strength in cash generation. It will help us to significantly improve our net financial result in the current year. This is currently expected with roughly EUR 18 million less interest. Our next larger refinancing is due in '26. The proceeds of the Water business divestment will allow us to revisit this debt position. Finally, let's take a look to our cash flow. Our net operating cash flow increased significantly by more than 20%. We thus achieved the upper end of our guidance. In addition, we have lowered our supply chain financing programs by EUR 5 million. So on a like-for-like comparison, the net increase in net operating cash flow was even higher. Our external cash flow increased by even more than 50% compared to '23 and amounted to EUR 57 million. Ladies and gentlemen, let me close my part of the presentation with a brief summary of our success in the corporate responsibility. '24 marked a shift in the ESG reporting. We have successfully introduced our new ESG reporting with reference to the ESRS. This will give investors a comprehensive overview of our sustainability strategy and a larger number of additional KPIs. You will find the new report integrated in our financial year '24 report. Moreover, we have achieved all our ESG targets in '24. This relates to CO2 reduction, defective path and the number of customer complaints. This success is also reflected in the retention of very good ESG ratings as shown on the right side of this slide. With these encouraging achievements, I would like to give back to Mark Wilhelms.

Yes. Thank you, Annette. Dear audience, let's not change from looking at yesterday to looking at tomorrow. We have already published our outlook for '25 on March 7 with the following key data. Sales level, we expect to be at around EUR 1.1 billion to EUR 1.2 billion. Adjusted EBIT margin, we expect a range from 6% to 8% and the net operating cash flow between EUR 75 million and EUR 95 million. We are and not we, I guess, we all are experiencing a continued volatile and challenging market environment. Additional uncertainties arise from partly implemented partly against suspended tariffs, new tariffs all over the world. It's basically every country seems to want to implement tariffs. This additional uncertainty will influence spending in all affected countries. We are thus expecting a rather muted demand in the first half of the year. And as the comparable database is getting easier and government stimulus will kick in, in Europe, but also China, the second half of the year '25 is expected to pick up a bit in the year-over-year comp. Before answering your questions, let me provide you with some more recent achievements of the step-up program on the remaining slides. As a reminder, step-up is not just another short-term profit improvement program. With step-up, we are targeting a cultural change at NORMA, a change of our mindset as a continuous improvement process which should become part of the NORMA DNA. We are addressing both growth and efficiency measures. Let me provide you with some achievements in this step-up process. As far as the highlights from growth area are concerned, we published a number of outstanding projects over the course of 2024. What you may only realize at a second glance is that these projects correspond to our step-up goals. We were able to show that we can win new business at Industry Applications by focusing on resilient business opportunities and reentering new markets. We have expanded Water Management through globalization by means of the TECO acquisition in Mobility & New Energy, we successfully developed products for alternative drive technologies and expanding the new offering to existing customers. And finally, we've won new customers in Industry Applications with existing products from Mobility & New Energy through modification. You may remember the talk about the heat pumps here. Now let's move to the efficiency section of the step-up program. Efficiently mainly concerns our processes and the way we manufacture our products. We have presented examples of other occasions from our plant in the Czech Republic or the plant in India. In the Czech Republic, we made further progress with automation. In India, we've automated our quality assurance. In Maintal, the historic plant of the NORMA Group, we've installed the next generation of TORRO automated assembly lines to improve the manufacturing process, including a new system to control the production flow. As a result, we achieved greater product stability and faster changeover times. This means faster cycle times and an increase in productivity. Finally, let me once again point you towards our mid-margin targets. The focus is on continuous profitable expansion. The adjusted EBIT margin is our key performance indicator. We've shown a resilient margin development despite a challenging market in '24. Although the market environment is currently difficult, we are aiming for a double-digit EBIT margin at group level, again, in medium term. To achieve these targets, we will need an accelerated transformation towards a new NORMA target operating model. We are currently in the final phases of our analysis and we will provide you in due course with more details. Ladies and gentlemen, thank you for listening to today's presentation. Thank you for your participation. We now look forward to your questions.

[Operator Instructions] And coming to the first questioner, it is Marc-René Tonn from Warburg Research.

I would probably suggest that we take them one by one. First question would be on EMEA, please. And of course, it is, let's say, basically the market which led to final full year results well below, I think, the expectation or ambition you had at the beginning of the year. So my first question would be regarding that region. Is it that you can just wait for, let's say, volumes to recover? Or are you also, let's say, considering there some more comprehensive restructuring in that area, additional plant locations, closures, anything which you may have on your mind for that region? That would be the first question.

Well, Marc-René, well, for sure, we suffer in EMEA, in particular, about volume decreases because of the volatility of all these years and back and forth. So the second half of the year was clearly cooled down compared to the first half of the year. As we are in EMEA missing Water business and on the other hand, our IA business was also at the end, not that high as expected because of interest, which didn't face so much and so on, we are missing volume there. That's a major part. And so we are looking to this outside environment, what is giving us more business in terms of volume, yes.

If volumes would not recover or stay where they are, and I think volumes most of the time now, and this is not NORMA specific, but I think the industry as a whole was pretty disappointing in the past year. So restructuring is something which could come on the agenda if volumes would not recover, right?

So we are continuously investigating our footprint. For sure, we are in the preparation phases of a transformation. As you know, we are divesting our Water business. So therefore, we are looking for the future and will culture our ideal business model there, sharpening the strategy on Industrial business and for sure, also having a look to our EMEA facilities and how the volumes will come back.

Second question would be on the pricing initiatives. I think we -- let's say, I have all learned last year that the transformation to e-mobility may take a bit longer than had been projected a few years ago. And that ultimately means that some of your, let's say, combustion engine-related business will run for longer. A question would be, could you, let's say, use that to improve prices with respect to products? Or did you experience major pushbacks here by customers indicating that if you want to earn business with new products for the e-mobility that let's say, may not necessarily get the higher prices for the old products. Some of that would be helpful.

Well, that is finally paying in our pocket because these contracts initially expired. We were prepared for that. That's clear. As you know, we had in the past contracts also in our portfolio in order to get volume with not so satisfying margins. We changed that already now since more than 2 years. And the customers cannot do it without us to extend their current products. But at the end, we are expecting higher prices for that. And well, you have not heard anything else with the market. So therefore, you can trust on that we can achieve our pricing, what we expect. We will not take contracts in automotive below 10%. And this has to be discussed with the customer, and that is pretty successful.

And then lastly, you mentioned the ambition to bring NORMA back to double-digit margins. I assume that this target medium term still, let's say, applies to the group as it is right now, but certainly also, let's say, applies to the group, excluding the Water Management business in the future. But if you could give us some time frame, particularly when excluding the Water Management, what would be, let's say, the time frame you would expect it takes to bring NORMA back to double-digit margins?

So as I said, we are working on our new business model. One is for sure, we want to divest the Water Management in order to invest and to sharpen our strategy towards Industrial Application. And there, we are able to achieve as sufficient margins in the direction of Water Management. So therefore, for us, it's clear we want to shift over the business and sharpen our strategy, and we will concentrate on Industrial business, what is providing pretty good margins. For this, we already started in the recent year, different things and different approaches. We could acquire very, very good contracts for high-volume direct deliveries with Industrial customers, and that looks promising.

Would you share with us some communication on the current profitability of the Mobility & New Energy business on a stand-alone basis? Is it, let's say, mid-single digit, below mid-single digit or even above some communication?

We are not publishing that in detail, but well, look to the Water Management and for sure, suffering for the time being, everybody is suffering volume. We ourselves increased our profitability because I think we could prove that our EBIT margin is pretty stable and could compensate the volume and there you can see that we are on a very good track in terms of these margins.

And the next question comes from Nikita Lal from Deutsche Bank.

I would have also 3, and I would also go through them one by one. The first question is on your Q4 margin in APAC. If I do the calculations, it seems that you had a quite significant step-up in margin in Q4 sequentially. What was the reason? And how should we think about the region over the course of 2025?

Well, the step-up in the Q4, Q4 is always a little bit different. So we cleaned up the certain things in personal liabilities and so on. So this is, I would say, extraordinary or special things, which are not directly related to the business. All in all, for sure, APAC and volumes in APAC is, for the time being, not that easy. We hope as everybody and as it is promised for us, this is playing in China that this is coming back, and we clean our things. So what you saw there is not directly related to the business, but we could with our cost reductions and with our offsets there, we could cut our margin deterioration there by savings.

Okay. The second question would be on the U.S. tariffs. We are currently seeing that the administration announced tariffs of imported cars, but as well as on some auto components from wherever, so not only the EU. Could you give us a rough indication of the impact of NORMA earnings in 2025? And how do you plan to mitigate impacts from U.S. tariffs?

I guess the first step here in that answer is it's a complicated, very fluid situation. We should not just look at the U.S. tariffs, but also what other countries are doing in this situation. NORMA, specifically in Americas is set up with lots of plants in the U.S., in Mexico as well, 3 in Mexico. The Water business has plants in the U.S. Automotive has 2 plants in the U.S. So we can actually offer the customer a lot of local manufacturing. Having said that, there are also imported components that we need for the plant. So it's a multifaceted situation. We've written to every U.S. customer stating that we expect the customer to take over the customs and duty charges that come along because these were not part of our original decision to participate in the programs. Besides the talk about the tariffs, we must see that specifically with tariffs for cars, for vehicles that may change end consumer demand, changing from buying imported vehicles to locally manufactured vehicles, and it's manufactured vehicles, which is not per vehicle brand. There are many special tweaks like BMW's biggest plant is, in fact, in the U.S. where they manufacture the X5, X6, X3. So there's a lot of German branded production, which, in fact, comes out of the U.S. plant. Same holds true for Mercedes. On the other hand, we are not only with the European companies. Our biggest revenue share last year with almost 50% was in the U.S. besides the Water business. We are essentially a supplier to all and every U.S. car and truck manufacturer. So as long as the people, the consumers end up buying a car, they most likely will buy a car with a NORMA product in there. Therefore, we've got a complex multifaceted situation at this point, very tricky to spell it out in dollars, euros, cents, pesos, renminbi, how the outcome will be.

So maybe I can add to that, Nikita. At the end, as Mark said, it's a complex situation, and we need to be flexible. We, at the end, separate 3 different root causes. There are things about steel, tariffs on steel. We have China tariffs, and we are looking to the situation of Mexico. So these things have to be recharged to the customers. We are already, as Mark said, in contact with them, and we will do that by a kind of surcharge. We agree with the customers that we don't want to get rich with it, but also not to us. So whatever comes out and how volatile that might change because for the time being, the U.S. authorities have, I would say, daily different expectations or different ideas. So we will handle that with a surcharge. In terms of the threat that European cars are touched by this tariff, that is for us pretty indirect because we have a localized production. And I think Mark also explained midterm when then the demand from a customer in the U.S. is shifting from a European to an American car, we are also invested in these American cars. So that might be a shift from one brand to another.

Okay. Just to be clear, these impacts are not included in your guidance yet, right?

Yes, we expect that we will recharge that. So that has to be reimbursed by the customer. That's the clear target, and we see already the first successes there. So we are quick in this.

Okay. Yes. Perfect. And then my last question is on the Water business. Could you give us an update on the divestment process so far?

Yes. Thanks for that question. The process is moving along. We've not shared any very specific dates, but you've clearly heard that we've appointed an M&A adviser. The process is developing according to our internal plan. And we ought to leave it there at this point not to jeopardize the details of the process.

And next up is Felix Kruse from Hauck Aufhäuser Investment Banking.

So the first one would also be on the guidance range and what exactly is baked in at both the upper end and the low end. As one of my colleagues earlier tried to inquire, does the lower end reflect any volume impact by tariffs, partially offset by price increases, I assume? Also, what Asia development is reflected in the lower and the upper end? I know last year, you had a bit of a headwind from a specific customer that seems to be improving sequentially. And then the second question would be on the Water Management divestiture and just a question around whether you can give us a broad impression of when you expect to have kind of the first indications on valuation of the assets and when you would be willing to share those rough indications? I think in the past, you've talked about an EBIT ratio of about 20% in the market. And obviously, that might be a little high for the current market environment. But yes, if you just could comment on the time frame when you expect to have a clearer picture of the valuation.

I probably start with the last question of yours, Felix, since it also ties to [indiscernible]. As said, we are not yet sharing details on what will happen when in the sales process. However, we kind of stick to our view that this is a very special once-in-a-lifetime chance for strategic investors to get an asset that is strong in the U.S. water market, that is very experienced in the U.S. water market with a sizable revenue opportunity for the acquiring partner. That should help us to get a very good sales price to get a very good EV for our Water business, which is not just NDS in the U.S., but also some business in Europe and in Asia. Time will come as the sales process moves forward that you will get to know through the [indiscernible] what people think the value is. It will be final when the negotiations are ended and we've signed a contract with a party. Then guidance, our revenue guidance on the upper side is essentially very close to what we had last year of '24 and at the lower end with EUR 1.1 million. Certain factors of softening are included. This essentially builds on the low sales, the low revenue from the fourth quarter of '24 and assumes this continues. There's no overall recession priced in. In terms of margins, and tariffs. Keep in mind what Annette said, we propose to charge through the tariff, which is not a price increase, which is like a charge over. Typical pricing results in a drop-through in the bottom line. The tariff forward billing on billing of those will be accompanied by a charge in the same euro or U.S. dollar amount. Technically, when we include costs in the revenue that are also in the cost line, it mathematically results in a somewhat smaller EBIT margin simply by the math of it. And the outlook assumes we will charge all tariffs that we are hit with on to the customers. Here and there, that may be a bit on the aggressive side. On the other hand, in our -- specifically in New Energy & Mobility, the margins are not strong enough to allow us or our competitors to suffer sort of extra charges of 25% tariff. It's simply not possible. It would mean the end of the business model. And since the customers are tied to our engineering, to our products, et cetera, and that tariffs have not been included in any risk scenario, it's very obvious that the customer plants ought to be paying for those tariffs as Annette Stieve indicated.

[Operator Instructions] And now we have the next questioner in the line. It is Peter Rothenaicher from Baader Bank.

One question regarding the Water Management business. Why hasn't it been treated as discontinued operations? So you -- what you tell means that you are very confident to come successful to the sale and you are absolutely in line with your expectations regarding the process. But why hasn't it been taken as discontinued operations?

Well, this I can answer. That is pretty clear. So it is not certain when finally the closing will be. And there are legal obligations. And when we announced that, it was very, very early in the stage. And I would say we are well ongoing. But if the closing -- if this might come or really the closing is already under signature by the end of the year is fully unclear. So therefore, it is clear. We checked that with our auditors, and there was no variation chance. So we were obliged to show it like this. We will start with the second half of the year that we have to show and discontinued.

Okay. So it means it's only a timing issue, but you have no doubt that it will go on...

I have no doubt at all. We could sit somebody at the telephone. No, there is a demand, and we give that over to our investment bankers, but there is a clear queuing of people who are interested, and I have no doubt about that. And let's have a look to the timing when we start with discontinued operation as soon as we have to, we will do it. We are prepared.

Then second question to Kimplas in India and the necessary amortization. Can you a bit comment on it? What is going on there? Why do you have these problems? And what are your expectations for the upcoming year?

Well, we are preparing all in all for our Water Management divestment. Kimplas is a part of that. So we are accompanying that by these preparations. And for sure, it will also, in this case, optimize the future. So therefore, we took this decision. It's a one-off.

Then regarding your medium-term margin. So these margin expectations are now out since, I think, 2, 3 years. The only aspect that is moving forward is midterm. So could you put a number on it? When do you expect now being able to reach this? Is this now 2028? Is this 2030? Can you give us some information?

Well, Peter, for the time being, we are in a big transformation. Things changed a little bit towards our first declaration of that. Anyhow, we don't correct it. We expect the company to be double digit. We now go for divestment in Water. We want to strengthen our Industrial business, which has as promising margins. And we are doing good progress in acquiring on the one hand, different products. We have inside ourselves in order to change the business. And on top, we have the hope that we can take a part of our proceeds in order to acquire something what is supporting and is increasing this business as well.

Okay. And the last question is on the current performance. So I think you made some indications that you have not seen any improvement versus already very weak fourth quarter. Is it then fair to assume that the sales in the first quarter will be more towards that what we have seen in Q3 and Q4?

Well, the overall economic climate has not improved on a global scale. So you are probably right in assuming it will not be a strong sales quarter, the quarter 1. It will more likely be on the softer side, as you indicated. One should not be surprised if Q1 ends up being a difficult quarter for the whole industry and for NORMA as well.

At the end, we are all struggling like everybody with the different announcements day by day and in order to organize us with this. So with this we are doing, but this is for the time being, not the attraction for people neither to buy industrial products nor to over enthusiastic buying a car. We expect the business in the second half of the year that it becomes a bit more friendly. And on the one hand, maybe with the lowering in interest for Industrial business. On the other hand, the stimuli from China and EMEA in the politics should maybe help there a little bit, but we are looking for the second half and the start in the year is due to that a little bit impacted by all these things.

And regarding the 3 regions, did you see here differentiation in the first quarter everywhere going still relatively smooth, bad...

I think that is very early to say. This is not a Q1 call. This is a '24 call with the outlook for the full year. Q1 call happens early May.

Let us do today our last day in sales and then we prepare on the figures.

And the next question comes from David Diranko from Diranko Capital.

I have only one regarding the, let's call it, EBIT margin bridge from your current outlook to the double-digit range. Could you maybe break it down a little bit on how much do you rely on volumes picking up again? And to what degree you can maybe continue your step-up program and rationalize the operating cost basis? And if you rely on volume growth, how much does that depend on the general climate picking up? And to what degree you can maybe take market share in a second market in your Industrial business?

Well, David, that's a little bit too early to really go in depth there. We are working with high pressure on that. On the one hand, we [ catch ] our target operating model because we are modeling our divestment in water and then our picking up and increasing in industry and what we expect from that. So therefore, it's a little bit too early. On the other hand, there might be incentives in the future, what is coming in Europe, but also in the other regions. A little bit too early, but I hope that in Q1, we can stay there a little bit more.

At the moment, there seem to be no further questions. [Operator Instructions] And there is a question coming from Raphaël Moreau from Amiral Gestion.

Just a quick one. You mentioned the ERP change at Maintal. How did it go?

Well, we are over the mountain, I would say. So I'm not saying that it was fully easy because we came there really from a very old local legacy system. For sure, we had our hiccups in the very first 1, 2 months, if you can see that in our special freight. But I would say backups are on the way to be reduced. And I would say we know the root causes and that should be over -- yes, by the end of March, April, we should face that out. So therefore, our first Q will be a little bit burdened by that, but not at all compared to what we saw in recent years.

[Operator Instructions] There are no further questions. And with this, I hand the floor back to Mark Wilhelms for some final remarks.

Yes. Thanks a lot for the active participation in the Q&A session. I hope that gave you some more insight to NORMA Group and how we are moving forward over the next quarters. With this, I say goodbye. Talk to you soon as we will present the Q1 numbers in early May and have our AGM on the 13th of May.

Goodbye. Thank you.