Welcome to the Norma Group Q3 2026 results webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised.
To ensure that the session runs as smoothly as possible and is easy for all participants to follow, we kindly ask that you raise your questions one at a time. In other words, if you have more than one question, please wait for the answer to the current question before moving on to your next one. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Birgit Seeger, Chief Executive Officer of Norma Group. Please go ahead.
Good morning and good afternoon to all of you. We are very happy that you join our Q3 call today. With me, I have our Group CFO, Okan Celiker, very warm welcome, who will give you some more insights on our financial performance. Today, we will review the key development in our third quarter, especially focusing on our NewNORMA strategic initiatives and our profitability recovery. With this, we move to the next page where we see, as usual, our disclaimer. Please familiarize yourself with the disclaimer regarding forward-looking statements. Unless it is shown otherwise, we report today NewNORMA numbers, which is our continued operations. For some of the metrics, we have still our former Norma basis, which includes our former Water Management business, and this is highlighted on the page itself.
Let me start with some highlights from our third quarter, and here also, before I dive into this, let me briefly comment on the CFO transition as we have announced this morning in our press release. We are very pleased that our Supervisory Board has appointed Tobias Bichler to be our new CFO for Norma Group starting latest at 1st of April 2027. Tobias brings a lot of international experience in finance and transformation and will be a really strong addition to Norma's Management Board. There will be a continuation in the NewNORMA strategy also with Tobias' joining of Norma Group, and he will, together with us, with the whole Norma team, focus on profitability, on cash generation, and again, a disciplined capital allocation as we have updated on the strategy update on our CMD in October.
At the same time, I would say a very big thank you to Okan Celiker as our Group CFO, but it's not a farewell because Okan will for sure continue in his role until Tobias is joining, and Okan will also ensure a very smooth handover and transition and continuation in the finance area. A big thank you, Okan, for this collaboration so far and the continued work together.
Of course. You are welcome.
This means our strategic direction will continue also with the update in the management board. Now let us turn to our performance in the third quarter. Let us start with the Sales Push. I mean, we see a double-digit organic growth in Industry Applications, and we are quite pleased to see this, and we see also a slight growth in Mobility & New Energy. As we all know, the environment is quite tough in this area. We see our structural cost measures in our transformation programs, as you are aware, are showing results, and we see this basically in our profitability results. We have really interesting business wins, and later on, I will share with you some examples to give you an insight what we are working on and what we are achieving as NewNORMA. What is our result?
In Q3, we really have achieved 3.7% adjusted EBIT margin, and we have EUR 5.3 million savings, which we see in the EBIT in Q3 from our Wave 1 transformation. Just to mention again, we have finalized the EUR 260 million return to the shareholders with the two-step share buyback. With this, we confirm our financial year 2026 outlook as we have given already. Let us now turn our attention to some of the business highlights. You see to the left, this is from our Industry Applications business. There are two examples, and it is really just examples. From our U.S., from America's business, we got a very nice nomination for components for the diesel particulate filters, and this is for construction equipment. Also in Europe, we could gain a project from a company who is producing engines for off-road and agricultural machinery.
We also deliver some lines here. It is also very nice business. Moving on to the right side, this is Mobility & New Energy. We have got a nomination from a Chinese OEM, really. It is a local Chinese platform, very important for us. It is a cooling system connector, and we gained this in Q3, and the start of production is next quarter, of course, starting in smaller volumes, as is always the case. However, we show that we can really meet China's speed because this was very important for our customer that we can meet this timeline. A big thanks to the whole team who achieved this. With this, I would like to turn our attention to the dry-break valve technology. This is something we basically developed from our automotive business, and now we transferred it to BESS. This is the battery energy storage systems.
You may have seen these huge containers with the big batteries, and you may also know that batteries need to have the right temperature. This is where we come into play. We ensure that the batteries have always the right temperature. We developed this technology further, and we deliver projects already, and we have won projects. This is really interesting because the customer asked us to bring forward the go-live, and we managed to bring it forward six months. This means we have also the revenue six months earlier. Also, a big thank you to the whole Norma Group who made this possible. Let's now have a look to our Q3 results. We see really a net sales of EUR 207.8 million, which is up from last year 4.2% on a comparable FX basis.
We see the adjusted EBIT with EUR 7.8 million, and this is up 105% towards last year, so I think it's fair to say a big improvement. Big thank you also here to the whole Norma Group team to make this possible, which translates into an adjusted EBIT margin of 3.7%, which is up 1.8 percentage points towards last year. The net operating cash flow results to EUR 10.2 million positive cash generation here. Please remember, in Q3 2025, there is still the Water Management business in, so the comparison is a bit a challenge because we are comparing here new and former Norma. Our current number, just to mention, includes for sure our supply chain financing, which we are using in NewNORMA.
Here, please understand that we are looking at the whole Norma business, the operational performance, but also at our financing structure in the instruments we are currently using. We are really reviewing these instruments, including, of course, the supply chain financing. With this, let's have a look at the year-to-date. Let's have a look at the first three quarters of 2026. We see a net sales of EUR 628.3 million. This means a slight improvement compared to last year's, which is 0.9% on comparable FX basis and - 0.6% on a reported basis. Adjusted EBIT, EUR 21.7 million. This is significantly improved, like by 269% towards last year, and an adjusted EBIT margin of 3.5%. Again, a very strong improvement by 2.5 percentage points. The net operating cash flow is negative with EUR 2.9 million.
Of course, again, this is different if we look at the water divestment, and we have very strong effects, special effects, one-off effects regarding our water divestment, and Okan will say later on a little bit more on these effects. Overall, I think we can say that we have now delivered three quarters improved results. Of course, we will go ahead, and we are working every day to go ahead like this, and a big thank you to the whole team who made this happen in the first three quarters of 2026. With this, I will hand over to Okan to more insight into our financial performance.
Thank you very much, Birgit. Hello, and warm welcome also from my side. Let me start with our top-line development in Q3. On a comparable FX basis, net sales increased by 4.2% on a year-over-year basis, reflecting a positive volume and pricing contribution of, in total, EUR 8.3 million. Q3 2026 sales include EUR 5 million of TSA-specific sales to ADS, compared with EUR 3.3 million of comparable intercompany sales to Water Management in Q3 2025, which are reflected in the rebased prior-year figures. These transitional sales are expected to phase out during quarter four of this year, 2026. Positive currency effects contributed an additional EUR 2 million, resulting in a reported net sales growth of 5.2%, leading to EUR 207.8 million. Let me now continue with our strategic business units.
Looking at our two strategic business units, we can conclude that both delivered positive sales growth in Q3, with IA continuing to outperform. On a comparable FX basis, Industry Applications grew by 11.3%, driven by a positive volume and price contribution amounting to EUR 7 million. Including positive currency effects of EUR 0.7 million, reported sales increased by 12.4% to EUR 70.2 million in our Industry Applications business. As explained on the previous slide, TSA-specific sales are included in Industry Applications, with the prior-year comparison rebased accordingly. Now let's turn to Mobility & New Energy. Also here, the business returned to a slight growth, with a positive volume and price contribution of EUR 1.2 million. On a comparable FX basis, sales increased by 0.9%, while reported sales grew by 1.9% to EUR 137.6 million in quarter three.
Positive developments in the Americas and EMEA were partially offset by declining sales in the APAC region, reflecting a continued challenging automotive demand, particularly in China. Let's look at the regional development on the next slide. Our regional performance stayed still, mixed, I would say, while profitability improved significantly in the Americas and EMEA region. Americas delivered the strongest growth with net sales increasing by 13% on a comparable FX basis and 14.8% reported to EUR 76.1 million. The adjusted EBIT margin, however, improved by 3.9 percentage points to 8.4%, supported by higher volumes and improvements in the cost structure. As mentioned, the region includes the TSA-specific sales to ADS, which contributed EUR 0.7 million to adjusted EBIT compared to EUR 0.2 million from comparable businesses in Q3 2025. Now let's look at EMEA. In EMEA, net sales increased by 2.4% on a comparable FX basis and 2.1% reported.
The adjusted EBIT margin, however, improved by 3.6 percentage points from -0.9%- 2.7%, supported by improved cost structures and the absence of temporary additional expenses incurred in the prior year quarter. In APAC, net sales declined by 9% on a comparable FX basis, primarily reflecting a continued weak automotive demand in China, as mentioned before. The adjusted EBIT margin decreased by 1.2% - 9.1% in Q3 2026. Let me now take you through the main drivers behind the improvement in adjusted EBIT that Birgit also mentioned earlier. Our adjusted EBIT more than doubled to EUR 7.8 million in quarter three, with the margin improving from 1.9% - 3.7% in the same quarter. The improvement was supported by higher business volumes and the continued cost discipline, primarily also supported by our transformation program. Volume and price effects contributed EUR 3.8 million, reflecting the positive sales development in quarter three.
This was partly offset by EUR 2.9 million in negative material cost effects that we saw in Q3, which remained a headwind to profitability. Personnel costs and other OPEX contributed a combined EUR 2.3 million, reflecting positive effects from cost management and the ongoing transformation. D&A and FX provided further positive contributions supporting the overall margin improvement. Important to mention, the NewNORMA transformation delivered a positive net earnings contribution of EUR 5.3 million in quarter three, bringing a total cumulative contribution out of the Wave 1 transformation for the first nine months of EUR 11.4 million. Let me now reconcile the reported and adjusted results for the first nine months and provide an update on the expected adjustments for the full-year. On this slide is the bridge from the reported to the adjusted earnings, which you are all familiar with.
Since there have been no changes here, I will skip discussing further details, but mention what is most important, which is our expectation for the adjustments in full-year 2026 that have not changed. We continue to expect special costs related to the transformation of EUR 24 million and around EUR 5 million of adjustments for PPA amortization, leading to a combined EUR 29 million adjustments on EBIT level. Let me turn to the cash flow development of Q3. Norma Group generated a positive net operating cash flow of EUR 10.2 million in Q3. Our starting point is our adjusted EBITDA of EUR 18.8 million, which you can see on the left side of the bridge, which is reduced by the supply chain financing program reduction that was earlier mentioned by Birgit Seeger in the amount of EUR 3 million.
The change in other trade working capital items, excluding supply chain financing, contributed another minus EUR 0.8 million. Our CapEx in Q3 amounted to EUR 4.8 million, resulting in a net operating cash flow of EUR 10.2 million for quarter three. With that, I would like to hand over back to you, Birgit Seeger, to walk us through the full-year 2026 outlook and our communicated midterm ambition for the fiscal year 2031.
Thanks, Okan. Thanks to give us all this insight in the finance area. Just to remind you, this is our outlook financial year 2026. We talk about a net sales growth of the area of between 0% and 2% on comparable FX rates. We have given the guidance for the adjusted EBIT margin in the range of 2%-4%. You see we are in a good position so far, and we are working heavily to go ahead like this for the next quarter to close the year like this. The net operating cash flow, we discussed the situation there. Of course, there's the comparability topic with the divestment of Water Management, so our guidance is a range of EUR 10 million-EUR 20 million. Again, we confirm this guidance for 2026.
With this, let's quickly recap the financial ambition for financial year 2031, as we shared in detail at the Strategy Update in October. We see by a CAGR of 1%-3% of net sales until 2031, we have given the target of an adjusted EBIT margin of more than 10% by the financial year 2031. This includes our transformation initiatives, mainly the Wave 1, which you are aware, which is fully up and running, Wave 2, which we have introduced in the Strategy Update, and the EMEA footprint, which we also announced during the Strategy Update. The cash conversion, which is to be set at more than 70% by financial year 2031. With this, I would say thanks for your great attention, and we are looking forward for questions which Okan and myself are happy to answer.
Thank you. To ask a question, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To ensure that the session runs as smoothly as possible and is easy for all participants to follow, we kindly ask you to raise your questions one at a time. In other words, if you have more than one question, please wait for the answer to the current question before moving on to your next question. Thank you. We will now take the first question. One moment, please. Your first question today comes from the line of Nikita Papaccio from Deutsche Bank. Please go ahead.
Good afternoon. Hi, Birgit and Okan. Thank you for taking my questions. I would have three. The first one is on the Chinese auto market and your weakening APAC margin. Are there any measures you are taking to offset this and stabilize the APAC margin, or are you just reducing your exposure to the region?
Thanks, Nikita, for this question. This is the case, yes, thanks for noting this. What do we do to measure, to stabilize this? We have really increased the team and sent experienced colleagues to China, so we have a fully-fledged team in China now who are working on this. This is also the reason why I shared with you our project nomination. This is, I hope, good evidence for you that we are working on the China market, on the APAC market, to come back to increase and improve performance.
Thank you. The second question is on your implied Q4 margin. You fully confirmed your full-year guidance. This would mean for Q4 margin that this could be even below your full-year range. Any comment you want to make here? Also, maybe just remind us of your cost savings you expect to see in the last quarter.
Yeah. Thank you for the question, and also hello from my side, Nikita. First of all, for the quarter four, as always, we expect, of course, a slower business development as this is a normal seasonality, let's say, our quarter four compared to the first three quarters. There is nothing specific that we expect, but of course, we are still considering the current market situation, which remains challenging, as mentioned before. With regard to savings out of our transformation Wave 1, we expect still to reach the communicated incremental EUR 15 million with the EUR 11.4 million that I've just mentioned. For the first nine months, we are still expecting roughly EUR 4 million out of the program for Q4.
Thank you very much. My last question is more towards 2027. I mean, for sure you're not giving any guidance with Q3, but a lot of suppliers and also OEMs were talking about cost inflationary pressure. Are you seeing anything picking up here, and do you expect this going forward also for 2027?
Yeah. Thanks, Nikita, for this question. I mean, we see the cost inflation pressure, of course, also on our side. We are working heavily to put countermeasures. As we have shown, and this is still the case for us, we have a lot of measures and initiatives in-house, in our own hands, in the Norma Group, to really have a really good 2027, which confirms our financial year 2031 journey as presented.
Thank you very much.
Thank you.
Thank you.
Thank you. As a reminder, if you wish to ask a question, please press star one and one on your telephone. That is star one and one to ask a question. We will now take the next question. Your next question today comes from the line of Sebastian Ubert from MPCM. Please go ahead.
Yes. Hello, Birgit, and hello, Okan. Thanks for taking my questions. I would also have three and a follow-up question, if I may. Wave 2 and the EMEA footprint. At the Strategy Update, you have indicated that you would try to book at least a part of the Wave 2 charges already in the fourth quarter. Today, you have just confirmed your total adjustments of EUR 29 million, of which EUR 24 million comes from Wave 1 and another EUR 5 million from PPA. Can you give us any kind of indication about the timing then for the charges related to Wave 2? Is there any chance to book something in the, well, remaining two months of the fourth quarter, or will that just simply start in 2027 and then followed by 2028?
Yeah, I am going to take that. Hello, Sebastian, and thanks for the question. As communicated during the Capital Markets Day, this is still our goal, and we are targeting to book an accrual for Wave 2 and potentially also EMEA footprint measures in the fourth quarter of this year. We are working together with the team in order to, yeah, make sure that we have everything at hand in order to book this accrual. So yeah, yes, we are targeting to do this in this year still.
Okay, that is clear. My second question would be on the material cost ratio. In the nine month period, you were able to bring that down, but we have seen that in the third quarter in particular, your measure seems to be insufficient given that the material cost ratio has increased to 46.1%, which is almost 2.5% higher than it was in the second quarter. Can you shed some light what is going on there?
Should I take this one? Again, thanks for the question and also for the observation. Yes, the material cost ratio was a clear headwind in the fourth quarter, but it is not really different, let us say, than the situation we saw throughout the year. We still have the situation in the Americas region related to tariffs, which are putting pressure on material prices. Of course, we still have also the situation with the Iran and Ukraine war, which affects also the EMEA region with regard to gasoline prices primarily. This is the current situation, which is unchanged. We are defining and working on countermeasures. We will do the same thing also in quarter four, and as earlier mentioned by Birgit, also in 2027.
Okay, thank you. I have this follow-up question to Nikita's one on the implied fourth quarter margin development. If I take the lower end, that would bring me even to a loss of EUR 5 million at the adjusted EBIT. Is there something that you can give us on hand to make sure that at least you would not explicitly see a loss in the fourth quarter EBIT?
Yes, I mean, we can say that currently, as of today, we do not see a loss for the fourth quarter. As Okan explained, the fourth quarter is always a bit weaker due to seasonality in our business, and this is already what we have booked in our forecast, in our numbers, and we are heavily working on this, so we do not see currently a special effect in Q4.
We can conclude that the lower end of the guidance is extremely conservative.
I think I could not oppose to your conclusion.
Okay, I am back in the queue then. Thank you.
Thank you.
Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone. That is star one and one to ask a question. There are currently no further questions. I will now hand the call back to Birgit Seeger, CEO of Norma Group, for closing remarks.
Thanks a lot to all of you who joined this call today. It was really nice from us to talk to you again, and we will work hard to go ahead with NewNORMA and try to deliver consistently also for the next quarter and for the following years. With this, a big thank you and have a great day. Bye-bye.
Bye-bye.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.