Ladies and gentlemen, welcome to our analyst call, Q3 2022. Overall, we grew in Q3 amid a turbulent market environment. We had sales that increased net sales by 19.9% to EUR 318.6 million, which reflects an organic growth of 10.3%. We generated an Adjusted EBIT in Q3 2022 of EUR 27 million, which increased by 18.3% at a margin of EBIT margin of 8.5% versus Q3 2021 of 8.6%. We had a net operating cash flow in Q3 of -EUR 3.8 million and an equity ratio of 45.7%, which improved slightly versus end of last year, as we have net debt of nearly EUR 400 million, EUR 396.6 million.
The leverage at end of September 2022 at 2.5, based on a solid maturity profile, with next larger refinancing in 2026, which we will see later on. Going to page three of our presentation regarding the top-line development. We see that the increase in net sales by 19.9% to EUR 380.6 million in top line. The organic growth of 10.3% in Q3 shows a strong performance, especially in Americas and EMEA. The EJT sales increased to EUR 181.8 million, and this reflects an organic growth of 16.5% due to a strong performance in all regions and mainly driven by price increases, while our price activities run very well in 2022.
In our Standardized Joining Technology, we saw sales increase to EUR 134.6 million. This reflects an organic growth of 2.5% with a high single digit organic growth in Americas and a decreased business in EMEA and APAC also due to some restocking effects in previous years. The currency effect also impacts our sales development, and we saw a positive translation effect of EUR 25.5 million, or in terms of percentage, 9.6% in the third quarter. Looking into the segment reporting on page four, we see that the regional splits for the first three quarters of 2022 increased the Americas stake to 47% of our sales in the first nine months, while we have the stake of EMEA sales at 39% and 14% in APAC.
We also see on that chart the increase of America sales overall, 27.7%, EMEA sales plus 0.9%, and sales in APAC region plus 6.5%. If you have a deeper look on the sales development on page five. For EMEA, we see for the EJT business, Engineered Joining Technology, a very strong double-digit organic growth of 20% in Q3, which is mainly due to the positive pricing effect and also higher volumes. In the SJT business, Standardized Joining Technology, we had a 7.9% organic decline in EMEA in Q3 2022 due to lower volumes, partly compensated by good pricing developments in the third quarter.
Moving into Americas, we saw a strong double-digit organic growth of 14.6% in the EJT business, where we also see the good pricing effects in that area. Also in the SJT business, 8.9% organic growth in the third quarter, which is primarily a result of a very positive pricing effect. Coming to APAC, organic growth of 9.4% for EJT in Q3. There's higher volumes while pricing have a slightly positive contribution. Standardized Joining Technology, an organic decline of 7.7% in Q3 due to lower volumes, but overall compensated by some positive pricing effects.
Looking into the margin development on page six, we see that in the third quarter of 2023, we are showing an EBIT margin of 8.5% and an EBITDA margin of 13.1%, so we caught up versus Q2 to the figures. Regarding some details on the margins, I hand over to Annette Stieve, our CFO.
Yes. Thank you, Michael. Let's have a look, a closer look to the profit and loss development. We can see that our gross profit ratio decreased in Q3 2022 by 210 basis points. This is mainly due to higher material costs related to global supply chain shortages and high inflation, and it is in particular in EMEA already also still caused by the Ukrainian war. We see an improvement in our personnel cost ratio by 230 basis points to 24.1% in Q3. We could reduce there our average headcount by roughly 260 headcount. Looking to our net expenses, we see that our OPEX increased by EUR 10.2 million to EUR 51.6 million.
This leads to 16.2%, mainly due to, on the one hand, operational inefficiencies in EMEA on higher lease staff, in particular in Querétaro and Tijuana, so it's Mexico and India, and higher IT implementation costs. Consequently, our Adjusted EBITDA margin decreased by 50 basis points to 13.1%, and our adjusted EBIT margin amounts to 8.5%. The next slide, there we come to our operational adjustments. Nothing happened there since the last quarter. The message is that on our EBITDA level, we don't adjust anything. Our adjustments mainly refer to PPAs and these are our only adjustments.
Focusing on net profit, we can see a reported net profit of EUR 36.1 million, adjustment of EUR 12.5 million, that results then in an adjusted net profit of EUR 48.6 million. I go already to the next slide because the EPS we can see there much better. Our EPS development is visible there. When we look to year to date, our adjusted earnings per share amount to EUR 1.52, and this corresponds to a net income of EUR 48.6 million. Our reported earnings per share amounts to EUR 1.13, and this corresponds to net income of EUR 36.1 million.
Referring to our balance sheet development, you can see on the next page that our net debt increased by 24.5%, mainly due to the dividend payment of roughly EUR 24 million in May and our business seasonality. Our leverage increased to 2.5 due to higher net debt and to a lower EBITDA. Our equity ratio increased by 110 basis points to 45.7. Michael already pronounced that or emphasized that on the very first page. We look to a very solid maturity profile, and we have in the next years no significant refinancing to do before 2026. That brings us in the situation that the currently increasing interest rates are not touching the general business of the company.
Coming to the next page, to our net operating cash flow development, we decreased our factoring programs by EUR 57 million compared to the year-end of last year of EUR 62 million. Our trade working capital outflow is at EUR 81.6 million, mainly due to higher inventory levels increase and increased receivables. That is majorly in EMEA. Our lower Adjusted EBITDA with higher working capital also leads to a decreased net operating cash flow before CapEx of EUR 41.3 million. Our CapEx spending of EUR 35.3 million is a little bit higher compared to last year of EUR 30.6 million. This results all in a net operating cash flow of EUR 6 million compared to last year of EUR 70.5 million.
I would like to emphasize that, I described here the operating cash flow. For sure, we have also financial cash flow. The last two conferences I've been asked about that. Therefore, we have financial cash flow. They are also minus 37 million, and this you can follow up in our detailed interim statement where all this is well published on our IR site. Having said that, we come to our NOVA, which amounts currently to EUR -4.7 million, which is a delta to last year of EUR -26.3. By this, I would like to give back to Michael Schneider.
Annette, thank you very much. Following our short presentation regarding the performance improvement plan. Of course, we have additional measures to further improve. Just to mention here that we have three phases of that, and the phase for 2022 is the stabilization measures, short-term for making sure that we get to our profit guidance. In the next years we have additional efficiency measures, structural measures to further improve. From a guidance perspective, you all know that we exhausted our guidance.
We have organic sales growth that we expect to be in the medium- to high-single-digit% organic Group sales at an adjusted EBIT margin of around 8%, generating a net operating cash flow of around EUR 60 million and a NORMA Value Added that we expect in the range of EUR -20 million to +10 million for 2022. With that's our short overview on Q3 and the year-to-date figures and, of course, happy to take your questions.
Ladies and gentlemen, at this time we'll begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one. If you wish to remove yourself from the question queue, you may press star followed by two. In the interest of time, please limit yourself to two questions only. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from Philippe Laurin from Berenberg. Please go ahead.
Yes, good afternoon, and thanks for taking my question. A couple ones, on just like housekeeping. Would you mind sharing with us the pricing contribution to the organic growth for both Q3 and nine months at group level and perhaps as well by region?
Yes. If you look in the pricing section, Philippe, and thanks for your question. If we take the first three months of 2022, we have overall a pricing effect of 9% for the first nine months. It is 5.8% in EMEA, 14.8% in Americas, 2% in APAC. That's for the first nine months year to date. You also asked for the Q3 figures. From a total perspective in terms of pricing, we had 11% in group perspective, which is 8% at EMEA, 17% in Americas and 3% in APAC.
We see also what we mentioned, that we catch up also with the pricing with a nice effect in Q3 2022, which shows that we are on a very good way in terms of pricing negotiations with our customers.
Yes. Would you mind just repeating because for EMEA for nine months, actually, I did not really get you on your answer.
Repeat for the first nine months?
First nine months, EMEA, yes.
Yeah. First nine months for total group, it's 9%.
Yeah.
You got the regions or so it's.
No, exactly. I was just missing EMEA.
Philippe, I recommend we will send it to you, so no problem about that. You can get the slide that much clearer.
Yeah. Okay.
Okay.
Per-perfect.
5.8% for EMEA.
Yeah, I'll send it to you right away after.
Yeah.
Okay. Thank you. Just the second question from my side, to understand versus your guidance for the Net Operating Cash Flow of EUR 60 million. It's a step up of about EUR 54 million, if I calculated that correctly for Q4 that you anticipate. What are going to be the main drivers for reaching your target here?
At the end, the fourth quarter is always a high quarter of cash generation, and we are pretty optimistic to get that. No problem about that. I'm not worried, in this case. That's coming out of Q4.
I understand that in seasonal terms, but I was just meaning like, can you be like really confident that, I don't know, inventory levels perhaps will go down meaningfully in Q4 or that as well you've got like a bit less CapEx coming through because, I think CapEx was a notch higher in Q3 this year versus Q3 last year. I was just asking about the moving path.
Sure. We expect that the realization of CapEx will be a bit lower because we have there also supply chain disruptions. We already know that a few significant customers' investment will not be ended by the end of the year, so that is part of that. We for sure optimize our inventories. However, as I said, we will not come back to years ten years ago or something like that because our seasonal part of increasing water business is there. That's clear. Anyhow, we will collect more receivables. We have there a high amount which is a kind of carryover. It's unusually high in a year, but that's really due to the quarter. I expect there also a drop-down.
Oh, okay. Perfect. A final follow-up on that topic. Should we expect as well increase in factoring volumes? Because so far this year it's down a little bit versus last year. There's no-
Yeah, you're perfectly right. We will level that out by the end of the year in order to reach our target. As late as possible, but anyhow, for sure we can level that out by the end.
Okay. Perfect. Thank you.
There is headroom. There is headroom to do.
Mm-hmm.
The next question comes from Ingo Schachel from BNP Paribas Exane. Please go ahead.
Yeah, thanks very much for taking my question, and the first one would be a follow-up on pricing, and if you could give us a bit more background on, let's say, what share of this price increase would be permanent versus price escalation clauses and steel surcharges that will fall away. Of course, you don't have to give us too much detail, but maybe, for example, you can indicate whether if raw material prices remain at the currently lower level, whether you would expect average prices in 2023 to be higher than this year, or whether you would see incremental price impacts in Q4 as well, or whether a big part of the 9% will phase out as those raw material costs and then possibly energy costs decrease.
Yeah. Ingo, thank you very much for that question. We have in our contracts with our EJT customers pass-through clauses for the alloy surcharges. The alloy surcharges are fluctuating depending on the London Metal Exchange rate. In so far, these are going up and down, currently going up. Even if it's going down, of course, it works in both directions. In so far, that part of the alloy surcharge that we have here too clauses also will fluctuate if the alloy surcharges are going down. This reflects the EJT business, and maybe half of, roughly half of that is then related to the alloy surcharge.
Right. When it comes to steel, for example, the way you've negotiated your price increases now, in the Q2, Q3, those would in principle be sticky or would be up to the OEM to then renegotiate the next year's contract negotiation, but there's no automatic price de-escalation if the steel prices remain low.
At the end, that is always the case with automotive. If you are a single source supplier, you will never get a kind of direct path through. However, we are very close to that. In terms of what we keep, that's always. If we see what we achieved this year, this is at least more than double of what we budgeted for. That's tremendous. That is a typical volatile year, and our assumption is that in the future we will fully countermeasure our inflation by pricing. That is at the end what we are doing. What do we keep out of that? That's a crystal ball. At the end, in water and industry, in the past, we never gave back any kind of price increase.
However, we increased our prices in the recent two years so over proportional that we need to see what happens there, but that will be marginal. That will be not a lot. In terms of of the car industry, that's the vice versa. As soon as prices stabilize on a certain level, for sure our car makers will come again and will ask for repricing, and then we need to extend as long as possible. It's the other way around. The one who sits in the driver's seat tries to keep the door closed as long as possible, and this time we need to sit in the bus and need to keep the doors closed as long as possible. That's the typical story.
It's always a matter of negotiation with the customers where we have, in principle, a very good position.
As you can see.
Okay. Very clear.
Now this pricing comes in. As Michael said, alloy surcharges, that's always a time delay. Therefore, we are much stronger in pricing in the second half of the year because the alloy surcharges are dropping in now out of that time shift.
Okay. Understood. Maybe one question on the volume growth in at NDS. I think first half has been very strong. I was wondering how you think about the, I think, negative volume growth rate that you seem to have had in the third quarter for NDS. Is that a function of restocking in the channels in the first half, or do you see any pockets of weakness, new construction related or certain channels that are weaker? Should we not read too much into one quarterly data point which might have been a bit softer from a volume perspective?
That is first of all cautiousness. At the end, we don't see that we are missing real projects. What we see is that the wholesalers, the big customers, that they are cautious in order to take stock over the winter. That is for sure fully combined with the increases of interest in the States. Our customers are typical residential home water, residential customers. These customers are cautious there. We are for the time being not missing real projects that's talking over the winter of these wholesalers and distributors.
Okay, thank you. Thanks very much.
Welcome.
The next question is from Nicolai Kempf from Deutsche Bank. Please go ahead.
Yes, good afternoon. It's Nicolai Kempf here from Deutsche Bank. My first question would be on input prices. Do you see material prices coming down, both for steel or for plastics?
Well, currently, we are still on a high level that we see. In principle, if you're all discussing potential recession scenarios for the next year, if it's Americas or whatever, in principle, there should then be a certain lowering of prices, but this is what we cannot see currently. It's still on a very high price level.
It's also, I would say there are specific levels currently. For sure, the commodity steel already went down, so there is a certain relaxation. We are using high-quality stainless steels with a lot of surcharges, with a lot of alloys in it. So they are very high specialty steels. These are still on a high pricing level. That's the same for technical resins. The technical resin is still on a very high price level. There's a certain relaxation in China, in APAC, but not at all in Europe and not at all in here because that is a high consumer of any kind of energy. Where we see a certain relaxation is on commodity resins, what we for example use for NDS, that gets better.
Okay, understood. My second one would be on energy costs. What kind of headwinds do you see next year that could creep because of higher just energy costs in terms of electricity or natural gas?
Well, we are mainly dependent on energy. Natural gas, we have some production areas in Maintal in Germany that gas is from our, let's say, source of energy, the lower part. We more or less are facing energy, and gas is a low part of what we need in Maintal.
At the end, our main cost driver of energy is already baked in our raw materials because you cannot produce any metal or any resins like we need without gas. The major part of that is already the price increase in our raw materials.
You have to see that steel production is quite energy-intensive. The high level that we still see in these steel categories that we need is also driven by the energy prices.
All right. Understood. Thank you.
Welcome.
The next question is from Jürgen Pieper from Metzler. Please go ahead.
Yes, hi, good afternoon. I've principally one question. I mean, if you look at the auto production in most regions, especially in Europe, this has strangely gone up since August, September. I think this, to a certain degree, has supported your third quarter. What is your best guess? I mean, is it just a very short-term phenomenon? I think it's mainly driven by this fading of the chip crisis. Is it more a short-term thing until year-end, let's say? Or is it, if you look at the delivery times for new cars, it could well last until spring, summer of next year, so it could bring you through this tough winter. What is your best guess? Is this a very short-term thing, or is it a medium-term thing?
Secondly, so to say, question is on your guidance. I think we all had the understanding that, after the second quarter, it was a pretty tough target, still the 8%. Now, I think it looks more comfortable and to a certain degree because of this auto production, I guess. Is it a view you share that you're quite comfortable now with the 8% on the growth target? Maybe a little less with the free cash flow target. Is it a view you share, or is it an exaggerated view of an analyst?
Maybe taking your first question, moving into the automotive market development, we would expect for the full year no volume increase. What we see for 2022 is purely price driven. We also would be cautious in the principal market development for the first half of 2023. It's a short-term and mid-term impact. Although we have some sort of reactions next year, the overall market, we would be quite cautious based on the aspects that you mentioned.
At the end, we still observe that with a high degree of respect because it's not at all stable. It became better, yes. Is it on the level one has been promised to us by LMC or by IHS? Not at all. We see at each and every automotive plant that, and really every customer here and there, is not picking up the last day of production. We are facing still certain shortages all around the world. Might it be in America, might it be here. It's often the topic still, special chips and so on. It is. It became better, but not at all stable. This volatility will last, and we expect a carryover to the first quarter and first half of the year of 2023.
Okay. On the guidance, has it changed in any way?
These marketing companies, they are not that reliable anymore than in the recent years.
Okay.
You need to make sure there are certain.
That's clear.
Certain calculations downwards, otherwise you don't survive.
Okay. Okay, thank you.
Ladies and gentlemen, as a reminder, if you wish to ask a question, you may press star followed by one. The next question is from Richard Schramm from HSBC. Please go ahead.
Yes, good afternoon. My first question would refer to the supply side. Also, I think we have talked about the prices where you said there is only some cautious signs of a relief, but not turn around, so still inflated levels. What about the real supply? Do you get the volumes you need, or are there still delays and constraints which do also cause extra cost here? What's the situation there?
Well, we get the volumes that we need. This is good. We also see the overall volatility in the supply chain. In so far, it's going into the company and out of the company. What Annette mentioned earlier, that the volatility is there when, for example, customers pick up. Also the volatility on the incoming supply chain is there, but we get our quantities. That's okay. Of course, we are on a very high level of prices.
At the end, in the pure automotive factories, there is still a lack of volume. This is visible. We are not fully on the volume what normally is outlined there and would be planned there. We can countermeasure much better than others, in particular in our plants, where we also produce FGT on the same machinery, so we can maybe better countermeasure than others. In pure automotive plants, what we have, for example, in Serbia and so on, there we see month by month here and there still missing volume. The order books are there, but at the end there is a closing here, a closing there. Look to the U.K. We had a two-week shutdown around the ceremony of the death of the Queen.
Things like that, as a producer is utilizing.
Okay. The volumes caused by the OEMs are still lower than initially expected. That's the message, right?
Mm-hmm.
It's still a very volatile development. The order book stability from the past is gone since, I don't know, two years or so.
Okay. Second question refers to the extra costs you also mentioned in connection with the depressed margin level you have at the moment, from the IT side, where you said you have here additional investments to cope with and also with the transfer of production, which was obviously more costly than expected. Could you shed a bit light on the size of these effects in the first nine months, what extra cost you had to bear here, and when we should expect that these burdens fade out? Thanks.
Just to make it complete, you're referring to which cost? The line is quite bad, so we didn't get it acoustically. The operating cost in the first nine months we are referring to?
At the end, I think he referred to we that was one of the major reasons out of our profit warning in July that we stated out that we had certain extended topics on our restructuring to close our last plant and to transfer the products either to Maintal or to Czech. That caused, in particular in Czech, also higher IT costs. That was the major problem of Q3, I would say in July, September, and so on. We are there on a very good way. I would say in particular, Czech is pretty well stabilized already. We faced the higher IT cost not because we had our IT systems not under control.
At the end, we had a delay in our restructuring, in our transferring products and machinery over the border that started already with COVID, that we had a certain time delay that brought us to a delay in integrating an early and necessary update in our IT systems there. For sure, if you have then not frozen processes and need to implement a standard system on that's more costly. The good news is I think it's becoming better and better. That is, I would say, well off. We still face a few topics here in Maintal. That's clear. That we meant with operational costs. That is at the end, the status where we are. Should be done by the end of the year.
Could you please, give a figure to these extra costs? That was my question.
Well, we already had that. That's not easy to say.
Rough estimate would do.
We estimated something around EUR 10 million-EUR 15 million, I would say, that could be. That's really because it's in each and every position. The good news is it's over. We closed Gerbershausen by the end of the year. Our last employees are just leaving us, and the last product is or has already arrived last week in Maintal. These are the last things, but roughly EUR 10 million-EUR 15 million is, I would say, the gut feeling around that. That was the figure by September. Maybe it's a little bit different now, but roughly.
Okay, thank you.
The next question is from Peter Rothenaicher, from Baader Bank AG. Please go ahead.
Yes, hello, Annette Stieve and Michael Schneider. I think my question refers also to the last question. If I look at the segment reporting, the profitability in EMEA is, I would say, disastrous, within the third quarter around 3% adjusted EBIT margin. If I look back some years ago, we had here profitability levels 16%, 18%, 19% even. I think this has to do also with the restructuring, but what would be your best guess then in 2023? Is there a chance to come back to margins of 10% or something like that?
Well, if you look into the EMEA region, Peter, we must say that we have these operating issues purely in EMEA region. This margin development of EMEA is linked to these operating, let's say challenges/problems. As we mentioned, the transfer from Gerbershausen to Maintal will be resolved end of 2022. When we resolve these operating issues, also the margin will be significantly better in EMEA as it is today.
How fast can there be a recovery? I mentioned the 10% for the regional margin. Would this be possible in 2023 already?
Peter, step by step. I'm really a fan of step by step, increasing margin step by step and sustainably. What we are missing the most in terms of margin is in the EMEA region, that we needed then to focus much more on automotive business in order to satisfy our automotive customers. Therefore, we are missing, to be honest, SJT volume. SJT volume is our high volume, our high volume business. As Michael said, I'm convinced that the bulk of that is done. Czech is already pretty fine. Maintal has still because we have the last product here what has been transferred. By the end of the year, the major bulk should be still done, and then step by step. However, our own problems will continue like that.
We expect somehow a bumpy year 2023 in terms of recession. Everybody is thinking of a recession in Europe and in America. We are cautious on that. In particular, this Ukraine war is taking place already quite a long time and has high impacts here. This topic of inflation and how this develops has certain clouds for everybody. Therefore, I'm cautious. Our own things we will bring under control, and then we should float with the market development, and mostly NORMA can do that then much better than others.
For these operations challenges, the measures are defined to get better step by step, and with these improvement measures, also the margin will develop.
Okay. My second question is on the income tax expenses. You had in the third quarter very high tax rate of almost 48%. I think you also increased your guidance for the tax ratio for the full year to more than 30%. Can you comment on this? Was this a one-time effect in the third quarter, and what is your expectation for the tax rate going forward?
That is at the end a timing effect. We have a tax audit in the house, and it's pretty clear that in terms of transfer prices, we need to see here a certain impact, what will be then leveled out by the other countries. Therefore, that's a timing issue. We will get that back in other countries, but not in the same year. We need to at the end to balance for that and expect the money back from the other states, well, in the next year, let's say.
This means, overall, nothing has changed regarding the overall.
Nothing has changed.
expectation of 28% or something like that?
Exactly. It's a typical transfer pricing, topic which carries over the year, the fiscal year.
Okay, thank you.
you cannot double tax, so therefore we will get it back. I'm pretty sure about that.
Mm-hmm.
The next question is from Klaus Wingerte from Oddo BHF. Please go ahead.
Yeah, good afternoon. Thanks for taking my question. Want to get back on this, pricing versus, raw materials cost topic, and maybe a qualitative statement on looking at Q4. When we look here, we have this 11% pricing in Q3 at group level. What's the indication here? Have we seen the peak already in terms of the pricing effect? Or will we, let's say, with some time delay, see maybe a higher figure for Q4? Would be great to get your color here. Thank you.
Yes. The pricing issues with the most important impact started middle of the year. We saw already a good Q3, and we also will see a very good Q4 in terms of pricing effects for the full year.
Can you say if it will be higher sequentially or same level, or?
It's getting sequentially higher in the second half here in Q3 and Q4. As Annette mentioned earlier, we budgeted a certain amount of pricing for the budget, and we will end up nearly doubling that price, in fact, which is an impact in Q3 and especially also in Q4.
Okay.
That's the impact of these alloy surcharges. In alloy surcharges, you have a delay between three and six or nine months. As the peak of the alloys in terms of nickel was by the end of April, these peaks will flow in now. That's a rhythm which we fully see now, and that's clear. On top, in automotive business, you're always lagging a bit behind because you need to justify against a running contract that something changed. Therefore, you need to have something in your hand. This is all flowing in now, what we already see in Q3, where we really over proportionally realized.
Okay, that's very helpful. Thank you.
Mm-hmm.
The next question is from Andres Buyan from Canaccord Genuity. Please go ahead.
Hello, thank you for taking my question. Could you please explain the headcount a bit more in detail? I see a 2% increase in personnel, although volume has decreased. I see that the increase comes mainly from the temporary workers. The second question regarding personnel costs. They have increased by 10%. I have noticed that FX effects play in here, but still, that's a significant increase. Why so high? What can we expect for next year when the salary increases come into effect? Will we see a personnel decrease once those employees have left the site? Can you describe this development a bit, please?
Yes. Andres, thanks a lot for your question. When you're looking to the efficiency aspect and operations aspect that we especially saw last month, we also must say that we have additional temp workers where we have inefficient processes, to be very frank. With the improvement of our operations processes, we are gonna see also a higher efficiency of headcount and temp workers again.
We need to be a bit cautious, Andres. At the end, our headcount decreased compared to last year, and our personnel cost ratio improved. For sure, our leased staff increased, and that has a typical fully independent story. We are working with leased staff, in particular in the so-called tax-driven, I would say, maquiladora structure in Mexico. In Mexico, which is at the end best cost country for America, each and every of our employees is leased staff. As our volumes are increasing there, that's healthy and normal that this is increasing because we shift the work there. It's India. It's that has to do with certain structures where you have extended work benches with low-cost country or best cost countries, and there you have these typical structures. That's something normal.
Yes, thank you. Maybe look into 2023. Can you give an indication what the headcount will do? Will we see any significant changes or is that it, what we see in this third quarter report?
In 2023, we closed our major restructurings. However, we already decreased in headcount, and we are not shrinking. We are transforming or transferring work from mostly high cost to best cost countries. We are a growing company, which means our proportion of people in best cost countries is increasing. It's much better to look to ratios and to look to personnel cost than only to headcount.
Yes, of course. In the cost ratio, you have the very significant material cost increase, and that's why I did refer the development to the volume development. The volume development was negative, right, in the third quarter?
Exactly. Therefore, I think we are for 2023, we will get there on a good range. At these restructuring measures, what we realized, the recent two years show then their success, I would say, in terms of numbers, without giving you a detailed plan for 2023.
All right. That's fine. Thank you.
There are no further questions at this time, and I hand back to Dr. Michael Schneider for closing comments.
Yes, thank you very much and thanks to everybody who participated in that call. Before we leave, please let me make a personal remark. As you are aware, and what we communicated, my consultancy contract will expire June 2023. As we communicated, I will not extend my contract, and I will leave the management board end of this year. This also means that this is my last investor call at NORMA Group , and I would like to thank you all for your external perspective, the professional and always positive relationship over the years, which I enjoyed very much. This started with my time as CFO and then later as CEO. So far, I wish you all the best. Stay healthy, and again, thank you all very much.