Great. The music disappeared and I am appearing. A very big welcome to all of you. We are so glad you all made it and you all found a parking spot somewhere around this venue here. It is not so easy to do that on a Monday lunchtime and Monday morning. We are so excited having you here and explaining to you what New NORMA is all about, and we really welcome you here in Frankfurt and also a big welcome to all our participants and guests who dialed in remotely. Before we start, I have to read this to you, but I am not. You can all read it to yourself. The presentations are all online on our web pages, so I am not going to read it to you now.
Instead, let me just briefly walk you through the agenda so you know what to expect the remainder of the day. My name is Christian Filipcic. I am heading Corporate Marketing and Corporate Communications, and I have the pleasure of moderating this day for you. We are going to start as soon as I have disappeared from the stage.
We are welcoming Birgit Seeger, who is our CEO, who is going to tell you about the why we are changing, what New NORMA is all about. Basically, we are going to talk about the three execution levels, which is the Sales Push. We are going to talk about Industry Applications as well as the Mobility & New Energy business unit and also technology and innovation, followed by information about the footprint and also information about how we are going to accomplish transformation topics. We are going to have a coffee break.
Sorry for the ones who dialed in. You have to take care for the coffee yourself. Afterwards, we will be looking at the financial framework, which is financial targets and capital allocations. The last 45 minutes, if we can stick to the agenda, is a very useful question and answer time where we take your questions as well as the questions that reach us from our guests that are dialed in. What is New NORMA? Let me take you on a journey. You start your morning, you are in your bathroom, you operate the tap, water flows. That is the first time you might get in touch with it. You enjoy breakfast in your kitchen, you load the dishwasher, you might even then get in contact with us and our products again.
You drive to work, and it does not matter whether it is a combustion engine car or a hybrid car or electrical car, we are all there, too. While you drive, you see the solar plants and the windmills generating power that needs to be stored somewhere in Battery Energy Storage Systems. We are there as well, taking care that batteries feel good. Then you arrive at your factory and you use your corporate preferred AI service to do some prompting, goes to the data center, and we are also there to help it cool down and to supply enough power to it in a secure way. Then you walk by in your lunch break in the production facility, and we are there as well. If you go home, we make sure everything is following according to plan. Basically, NORMA and our products are everywhere. We do our job.
Most of the times you do not see our products, but they have truly become trusted parts of everyday life. Let us visualize that journey together.
[Presentation]
Dear ladies and gentlemen, a very warm welcome also from my side to today's CMD and Strategy update for New NORMA. Very happy to welcome everybody here in person in Frankfurt and everybody who joined online. This day is a very special day for us and also for me. There are three reasons which I am going to explain why it is really special.
The first one, this is the first CMD since NORMA Group did the IPO in 2011. Second reason, I am basically one year now in this position as the CEO of NORMA Group, and I think I can say it was a very exciting year. It was a year full of learning, a year full of changes, and we will share with you in this meeting today. Number three, it is very important for you as our stakeholders, and in addition, it is super important for us internally.
We did a lot of work, a lot of preparation to come to this event today, and we made a lot of progress on aligning. We had difficult discussions, we had controversial discussions, and in my view, this makes it that we can say we are aligned as a team NORMA to make New NORMA happen. Before we dive in the content, I would like to start with a quote from Albert Einstein, and I think most of you know it. "The definition of insanity is doing the same thing again and again and expecting different results." We as NORMA, we expect very different results, but we are doing very different things, and that is what we are discussing today and looking forward afterwards also to the questions. I will start. What is it, the different results, what we expect?
We see here we have a CAGR of 1%-3% between the financial year now and 2031. We commit to an adjusted EBIT which is double digits, so more than 10%, and we see a cash conversion higher than 70%. Basically we see a profitable growth in both strategic business units. What we are going to talk about in the Sales Push, how we are going to do it. The adjusted EBIT margin, we have basically three initiatives which we are going to explain to you. The Wave 1, you are fully aware this was announced in 2025. We have a Wave 2 already lined up and we talked the EMEA footprint. With this we are very confident that we can meet this EBIT target by 2031 and the cash conversion because we are very disciplined working on our capital and the capital expenditure.
Basically this works because we are well invested in our plant. Let us look where we come from. In NORMA, and that is the nice thing and that is what I learned, we have a very strong engineering foundation. We have the knowledge, not only here in Germany, we have it in China, we have it in the U.S. We have a very nice global engineering team from the product engineering, from the industrial engineering, and I found a lot of capabilities here. The second thing is that we have longstanding customer relationships, and I met more than 20 customers around the world, basically in person. What I heard from all of them, we like the NORMA products. All of them told me we will need more of this and we are happy if you share innovations.
We actually had a customer event in Maintal and Gerrit showed some of the innovations and he will share some with you later on today. The customers, they basically said, "When can we have them?" Basically, rather yesterday than tomorrow. We got a little bit of feedback that they said now finally NORMA comes up with some innovations. This gave us also the confidence we are doing now the right things. The other thing is that we say we have this global footprint and we are all aware of the geopolitical situation, which will probably not become easier in the next years. We need to be globally positioned, and we are globally positioned. I met some time ago with one customer and they were giving us some insights how they are changing their production locations and what they expect from us.
And at the end the feedback was, "Oh, you are exactly where we need you." This is good. It is not all fantastic. We also learned, and you see this here in the middle, that we need to change something. First of all, the accountability. We got a little bit fragmented in NORMA and this came from all the M&As. Basically every plant, every site is their own P&L owner and what happens then is that we are not working for NORMA Group but for individual islands. This is what we need to change and we have prepared this. We are ready to change. Somehow we have changed and from January 2027, the whole controlling system, also the segment reporting, and Okan will give you a lot of insights how this will look like. We will update this to have a global accountability.
The second thing is this customer-centric steering. We got a little bit inward perspective, what is growing a little bit too strong. Therefore, we have now again the external perspective to the customers on all hierarchy levels. I really love speaking to customers because there you get the truth, and everybody else also following. The third point is, and therefore we can commit to the targets that we have, we have an underutilized asset base. We have basically a 50%-60% utilization, which is far too low. We need to go to an 80%+ utilization, which of course adds nicely to our margins. The good thing is we are invested, therefore with the CapEx, we can be quite moderate. There will be no new plans. Of course, sometimes tools replacement and things like this. However, that is a reasonable, in my view, reasonable CapEx range.
What is New NORMA? We have this focused portfolio. You all know water divestment has been finished. We have done the share buyback as promised. We have given to our shareholders the EUR 260 million in the two steps. We put a lot of effort in, and I got at least a lot of positive feedback that it went very well. We have this focused portfolio with the two business units, and the business units will lead and will be the P&L owner, will make sure we have the innovations in a very customer-centric way. The third thing, we have a performance orientation, and we will learn a little bit more about this in Annette's speech because we will have basically the NORMA team incentivized for performance. This is the translation, and you will hear a lot of details from our team today.
For me, it is very important that we have colleagues, which one is Annette. She is four months with the company, so she will bring a lot of also external view in. We have Selman with us, who is 25 years in NORMA and everything in between. Our team is really a wide variety on experience within NORMA and also bringing experience from other companies. How will we now run the sustainable value creation? First it is a growth case, an industrial application. We will hear later from Dominik. There are fantastic markets where we have products and we are bringing more products in the market, and there are some markets which help us to have a lot of growth potential. In Mobility & New Energy, we have also nice growth opportunities.
I want to emphasize, of course, you all know our metal product for the internal combustion engine. I hope you all may know that we also have battery cooling. This is, of course, for the battery electric vehicles. The content per vehicle in a battery electric vehicle is about the same as in an internal combustion engine. And of course, if you drive a hybrid, we are super happy because there we have the highest content per vehicle. So we really like this, especially. We are basically independent of the powertrain, and we will follow where the industry goes. The second thing is to improve, and we will come to this. We are now working and thinking in the cost of goods sold method, where we have super transparency on our SG&A. And this was shocking for me.
We will later see, because we have translated from our current costing model in the cost of goods sold model, which is new one, that we are currently running with 30% SG&A, three, zero . I think needless to say that there is a lot of potential. So we have set out projects where we reduce the SG&A by 10 percentage points. And to reduce SG&A by 10 percentage points is a lot, and now you are all thinking, "And then you are not good enough," and you are right, of course. However, we go first this 10%, and we have very concrete plans how we take our organization with us, because of course, operation needs to run during all these projects. Then we generate quite significant cash. Again, CapEx, we are well invested, so we have really nice possibilities here.
We create the value with, of course, a very good capital management of the capital allocation, and we will also come to this capital allocation strategy. Now let me give you some insights on our two SBUs, strategic business units. One is the M&E, Mobility & New Energy, and they are very important for me. About 50% of the revenue in NORMA is what we call automotive. 20% is commercial vehicles. And this is basically the cash generation opportunity for us. Then we have the Industry Applications business unit, which is 30% of our revenue. And of course, this is growing for us. So here then we see our four strategic pillars, which we addressed before, and this is guiding now our presentation. This is the Sales Push, will be the next agenda item.
We talk about the footprint and then about the transformation to make our organization leaner, to reduce the SG&A, the growth element, which includes an inorganic growth. It is more the midterm and not in the focus for the next two years because we have so much potential and also so much to do that we focus on these first three strategic pillars for our value creation for the value drive. Now I want to announce really a customer testimonial what we have brought with us. Not the only one, but one of them. This is from a customer, GE Haier. Haier is a Chinese company. They acquired some years ago GE in the U.S., and together with some of my colleagues, I have also visited this customer in the U.S.
We have been together on the shop floor, and we looked at the process, how we could improve and support the customer here. With this, I would say, let's listen to what our customer is telling us.
My name is Arturo Aguirre. I am a supplier quality manager for metal parts, and my team handles hardware and painted steel and stainless steel. We are on 83. We have five buildings. This is building number three, and here is where we make just dishwasher. We make 60,000 dishwasher a week. Wow, okay. Every dishwasher has one clamp, all of them NORMA clamps. Excellent. We had a supplier, and we have a lot of variation, especially with the diameter, and that was making the operation very difficult. Later on, we can go to the assembly line, and I can show you how the operator puts the clamp into the drain hose and then into the pump. That variation in diameter was making the operation a little bit tricky. We tried with supplier A, and it did not work very good.
Then we tried supplier B, it did not work. This clamp is the one that secures the pump, the hose, and this connection needs to be super tight so we do not have water. I can imagine taking one off-the-shelf clamp and putting it across five different applications could be a challenge. Exactly. For example, we have five different assembly lines, and not every line has the application the same, right, Wonderful. I really appreciate it. Thank you. Thanks so much. Great to see you.
Hi, everybody. My name is Dominik. I am globally responsible for the Industry Applications business unit. I am very excited to be here today to talk about our Sales Push. I will be supported in talking about this by my colleagues, Jeff, on the one hand, who is responsible for sales in the Industry Applications business unit in Americas. Sergio, who is the Global Segment Leader for Commercial Vehicles in the M&E business unit. Last but not least, Gerrit, who is our Global R&D Responsible. They all will support on telling you more about what we call Sales Push. As Birgit previously mentioned, the Sales Push is basically one of the four value creation levers that supports a stronger cash generation and sustainable returns, and mainly through volume, top line growth, and higher utilization. To be honest, previously, we have not been realizing the full potential of IA.
That was mainly due to four constraints. First, we had limited direct customer access. This is mainly due to the fact that we had grown the Industry Applications business through the distribution channel. There we did not have enough visibility on end customers on attractive end markets. Second, our focus on attractive end markets was insufficient. Our commercial resources were not systematically directed towards those growth markets. Third, our cost and price positioning was simply not there, mainly due to our footprint and due to our utilization. Fourth, we had limited R&D focus into IA-specific applications. Not NORMA as a total, but for the IA-specific applications. Existing technologies basically were not systematically transferred into IA-relevant end market solutions. The IA Sales Push is basically addressing all these constraints and turns them into a focused growth agenda.
As you have seen with our customer testimonial, I think we are already starting to do a good job there in removing those constraints. Let us have a look at how we do that. By customer-centric execution, developing an end-to-end business unit ownership that drives the business wins and operating leverage. First, it is own, ownership. We are basically creating a business unit structure that owns everything that is needed in order to serve the customer's needs. Sales, sales enablement, marketing, product development, engineering, manufacturing. This will all be part of the business unit. Second, focus. As mentioned before, we did not have enough focus on the attractive growth markets. Now, our channel development will exactly do that. We will clearly focus on selected markets, and that means we will also change our mix from distribution channel to focus industries.
We will also have dedicated resources for those focus industries in order to grow them. Third, scale. All these actions basically are paying into a profitable growth with higher volumes and strengthening, therefore, our cost position. A stronger customer focus, combined with efficient channel development, competitive positioning, and innovative solutions, is fueling this self-reinforcing cycle of profitable growth. Now you are probably interested in which industries are we focusing on, and I think Birgit already mentioned a few. Let us have a look at that. Basically, the industries that we are focusing on are going to significantly increase IA's growth exposure. We have identified seven growth industries, seven focus industries, as we call them, which are attractive for different reasons. On the one hand, the market attractiveness. They provide strong growth opportunities, strong market potential. On the other hand, it is also our right to win as NORMA.
What is the technological fit in our engineering capabilities in these markets? By combining a structural demand driver with a strong fit to our existing engineering capabilities, we will succeed in these industries. Now, the total addressable market of these industries we estimate to be about 12% per year until 2031, 12% growth. This is by far much stronger than what we see in our base business, which is mainly the distribution channel. That means also that the mix of the addressable market will change from currently about 50% to roughly 60% in 2031 due to that strong growth. Those focus industries are basically combining attractive markets with a strong fit to NORMA. Let us make it a bit more tangible for you. Let us look at some of these focus industries in detail and how we are already succeeding in them.
As previously mentioned by Birgit, data centers. It is a very attractive industry. It is providing strong growth rates. It is mainly driven by the infrastructure investments that we see coming from AI development and cloud computing. Our potential in this industry lies around fastening cable management, fluid management solutions that are aimed at cooling and power systems in those data centers. We have been successfully tapping into that market with a product called Cable Cleats, which you actually see on the left side on the picture, where it is fixation for the cables, which run kilometers of cables in these data centers. And we have been successfully winning business in Malaysia, Thailand, Vietnam, but also Australia. Let us have a look at BESS. So Battery Energy Storage Systems. Here, we also see a strong growth in this industry, mainly driven by the renewable energy integration into the grid.
You need to storage that energy when it is produced in order to have it when you need it. Here, our potential is within the fluid handling and quick connectors, as we call them, for the battery thermal management solutions. And actually, we know those quite well because we have the experience from the automotive industry. It is similar systems. You need to cool a battery. We are working already with large European BESS manufacturer. I visited actually a few weeks ago, and we are providing a full thermal cooling solution integrated into their system to them. And they are very happy working with us. They basically gave me the feedback. They like the agility, the responsiveness, and of course, also our engineering capabilities, because it is a project-driven business where you need to react fast. When we look at the heat pumps, again, another growth market.
We see a lot of growth in that market, mainly driven by decarbonization targets, but also the electrification of heating. So here, again, our products, our potential lies in fluid handling and connecting solutions for thermal management solutions. And also here, we are working with the major heat pump manufacturers everywhere, basically providing or developing together a solution that moves away from the currently used mainly copper and brass piping that are being used in heat pumps today. So we are developing together with them a solution in plastics. This is basically providing a cost-efficient and sustainable solution with leak-proof assembly. And last but not least, the white goods industry. It is also a very attractive industry to us, mainly because it has a largely installed base and a consistent aftermarket demand. So also here, our potential and our products are within fluid handling solutions.
Basically we are working here, as you have seen with big white goods manufacturers from the testimonial before. And also here, there is a development ongoing in changing current metal clamping solutions within dishwashers and washing machines to a plastic solution. But right now, we are providing the metal clamps to them. So maybe some more interesting insights with regards to these industries. Obviously, they provide a very different type of potential. Some of these industries have a very foreseeable unit volume. There are only so many data centers being built each year. However, when we look at the white goods industries, there is about a quarter of a billion dishwashers and washing machines manufactured each year. So very different unit volume potential within the industry. But also our content per unit differs significantly.
Whereas in the white goods, we approximate a EUR 1-EUR 3 per unit potential for us as NORMA. This can go up to a couple millions in a data center. Leveraging fastening, connecting, and fluid handling competencies across attractive growth applications. We are seeing first evidence of that. Here we go. Focus industries are gaining relevance in our opportunity pipeline. We do see that our focused industry approach is materializing. I have been talking about business wins in the focus industries that we've gained so far. This is a structural change that we can see in our opportunity pipeline. It shows basically that the previously mentioned own focus and scale approach is working.
By assigning or empowering and enabling the business unit to basically serve the customer and direct all the customer needs, and assigning also dedicated resources to those focus industries, we are seeing a stronger opportunity pipeline. Currently, basically our share in focus industries is around 25% today of the total IA potential, total sales, and we expect this to grow to roughly 34% in 2031. The commercial activity is increasingly aligned with our strategic focus, supporting a higher contribution from those focus industries. Our ambition in IA is to grow at least in line with the market. Focus industries are essential to IA's Sales Push. However, our base business is also still fundamental to us, as you can see from the numbers.
Before Jeff will now take you through on how we develop the base business and continue to develop the base business, we would like you to listen to another one of our customers, and this customer is in our base business, and he has been working with NORMA for more than 30 years.
My name's Don Gritzmacher. I'm President of Enders & Associates, Inc., based in Portland, Oregon. Proud to say we've been associated with the NORMA Group of companies for the better part of three decades now. It's been a fantastic partnership, whether it be Breeze hose clamps, Torca exhaust clamps, NORMA quick connects, really anything that has to move air or fluids of any type, NORMA's really our go-to product line for those things. We've come to rely on them to be excellent in terms of quality and in terms of engineering. We've come to also rely on their engineering prowess. We can bring them literally any kind of a challenge, and they have been game and up for those challenges, and being able to work with their test group has also proven to allow us to develop products jointly with them that we know will survive the test of time.
The reason NORMA has become a trusted partner for us is because they back up their products with real ingenuity, with real engineering, with real testing, with real validation. As our industry continues to go through a renaissance right now in terms of propulsion systems, we really need companies like NORMA who have a good open mind about reinventing themselves along the way. One of the advantages NORMA brings to the table, in addition to a fantastic footprint, in addition to a regional-based business when needed, or a global-based business when needed, their level of execution has been very-very good. In short, NORMA is reliable, professional, they represent quality, and they represent innovation. All attributes in a company we truly like to align ourselves with. That's NORMA.
Well, I couldn't say it any better. Hello, my name is Jeff Lombardi, and I have the pleasure of serving NORMA as the Business Development Leader in America. I'm very excited to be here. I've been with NORMA for about six years. Let me tell you, the transformation we've made in the last 12 to 18 months is incredible. As Dominik mentioned previously, our focus industry is our future, but our foundation is our base business, and that's what I'm here to talk to you about today. Don said it very well. He's been a customer of NORMA for over 30 years. He supports the M&E business, but he's also a distributor in our IA business, in the base business, and it's truly a trusted partnership.
In the base business, that's truly important because in our business in America, it's fragmented, it's large, and it's very competitive, and we have to differentiate ourselves through our performance and support. What we do in America is we offer that, and we do that also in APAC and EMEA. But I'm here to give you some examples on how we're doing that and how we're executing the base business strategy. Why is the base business, why does it matter? Well, number one, the velocity that it supports our plants improves our manufacturing absorption and utilization. Number two, it provides us quick access to the market, which is really important. Our M&E colleagues have a long gestation period in terms of development and then revenue, but ours is quick, from 1 day to 30 days to 60 days. It's quick and it's repeatable. Third, resilient cash generation.
It generates cash immediately. We ship, we invoice, and we collect. Lastly, it has proven growth potential, and it's repeatable. Our market is large. It represents about 55%-60% of our business in the Americas, and it's profitable. Now, it's important for those very reasons, but we have to execute, and where we execute are these six fundamentals. Not necessarily in this order or in this hierarchy, but we have to be competitive. We're not the cheapest, we're not the most expensive, but we offer a value proposition, which is really important. Number two, we have the most complete line card of any manufacturer of fasten and clamps. From our Torca brands to our ABA brands, Breeze, NORMA, we're a one-stop solution. So a customer doesn't have to go to different places for different applications. They call me, and my team executes flawlessly.
We have targeted conversion programs as well because we have competitors out there, and they are very good at what they do. However, we are constantly looking at opportunities, both with our current customers, taking more of their share of wallet. Also, new customers that are with our competitors and offering them a value proposition. One-stop shopping, easy solution, and tremendous support. Availability and service, another critical component. Working collaboratively with our manufacturing team, our supply chain, we have to deliver on our promise. We have to deliver on time at the lead times they expect, and Americas are doing that. Application engineering, critical. Not only in product development, but this is solution engineering, where customers bring us problems. They say, "Hey, we have X problem." Like the GE Haier. That is an industrial application.
They came to us and said, "Hey, we are having a leakage problem with our dishwasher." I do not know about all of you, but in America, Americans like to eat, and we use kitchens quite a bit. Can you imagine a dishwasher leaking, and what the catastrophic? Americans like to invest in kitchens, $100,000 kitchens, and this is what they told us. One clamp could cause devastation and an insurance claim that they have to pay. They came to us after multiple suppliers. They reached out to us and said, "Hey, you seem to be a full service." They did not even know about it. We offered them application engineering onsite, product development for upstream, sales support, and constant communication. That is another success story. Lastly, the team I have in America. Outstanding.
I always say, "We may be small, but we are mighty." A Shakespearean quote, meaning what they do is they take it as pride. We have over 475 accounts in America that have about 1,000 different locations. We actually prioritize based upon market potential, current spend, and opportunity. We use our skill set and our resources strategically. The winning formula in America, and also at APAC, and also in EMEA, is availability, market pricing, a full expansive portfolio of products, engineering support, targeted conversion, and coverage. Coverage is absolutely important as we talk to customers. Now let us turn this into real-life examples. In the Americas, and I am just giving you a few examples here. I have put a little index there for each one of these customers.
The base business, as I mentioned, represents about 55% of our mix, and you can see here what attributes are important for each one of these customers. I will use Dixon. Dixon is a global both manufacturer and distributor. They are in America, they are in APAC, they are in EMEA, and also in Australia. What they come to us with their problems, they come to us and say, "This is the problem we are trying to solve," and this is when we offer them a solution. Another important part of this growth opportunity was they offered a competitor's product, the FGR coupling. It is a high-pressure conversion coupling. They were using a competitor, a third party, and they said, "Well, do you have something similar?" We offered them our complete product line card. We offer their sales team training. We offer their distribution partners training as well.
We were offered not only their training but their end customer training. We were able to convert about $150,000 line of product to NORMA. Another one is a large, privately held B2C distributor in America. It is our largest distributor in America, over $6 million in revenue, and they have increased their sales incredibly year-over-year. They offer about 550 different SKUs and constantly adding to that through innovation of our products and also training. These are just a few examples of how America has grown the base business 5% volume, not price, volume, year-over-year in a flat market. Again, we are using these different sales attributes, skill sets, and resources to grow the base business. I would like to now just close out the base business with a customer testimonial from our largest customer in Japan, Kuriyama.
Well, it has been already almost 50 years since we started dealing with hose clamp business in Japan. Originally, we had a contract with ABA, Brage, in Sweden. After that, 2008, NORMA Group was established. Since then, we have been taking care of NORMA product. Because NORMA Group is the number one company to producing hose clamps and automotive products and industrial products. That is why NORMA Group is very, very trusted company. NORMA has a good capability to make a solution to develop products. We really need more information for new market and also new product. NORMA Group is a very well-known company. I think that NORMA is the biggest hose clamp company and of course, NORMA is a supplier for all automotive companies. Should be excited.
Okay. Good afternoon. I am Sergio Bonfá. I will give you some color on our M&E business, which is the largest part of our company. Some of you may be having some question in your mind. Is the M&E business the group back? My answer to you is no. It is stable, it is profitable, and it is helping to pay the company growth. The market, and I will give you this in three steps, the market, our position to the market, and the proof. The first thing is that the market is not disappearing. The market is reshaping. We can see that by last year, we had like a 6 in 10 vehicles or passenger vehicles being combustion engine vehicles. By 2031, it is going to be like a one in three. Most of the vehicles will be hybrids. The market is just reshaping.
But for us, what is important is the addressable market. That is growing by 1% in passenger vehicle and 2% in commercial vehicle, or I see a similar trend, but kind of as lower. So it is a kind of a stable to slight growth. Why it is for NORMA? Because first of all, the regulations tightens everywhere, and as the regulation tightens, it adds content that we already have. Also, this content shifts across the platforms. We are pretty much prepared for supplying products independent of the powertrain. Our business is resilient to that. Of course, with our innovation, we can add content to this. We have autonomous vehicles getting placed, that adds content that normal products can supply. Also solid-state battery packs.
All the stuff that will be presented later by Gerrit, you can see that we can also add on our content per unit. This is more or less how it looks today or how it looks moving forward as well. When I have a combustion engine, of course, they will have exhaust systems in the engine. In the battery electric, we do not have that. We have the thermal management systems that have kind of a similar content, comparable content. When it goes to the hybrid vehicles, we see that we have a higher content potential. This is proving that our diversified portfolio can be resilient across the powertrains. As I said, wherever the powertrains goes, we are there. These are the products we are supplying by type of powertrain.
We supply kind of exhaust clamps and quick connectors for the combustion engines, and then we go to the thermal management system for the battery electric, and we have a mix of both in the hybrid. We also have a product portfolio that applies for this, fuel cells and alternative fuels. This is something that keeps our content per vehicle resilient over the time. Why? We have this differentiation. This differentiation comes because, number one, we do have the portfolio. Our portfolio is the broadest in the market. We can really play in every single type of a powertrain we may have. We are local. We are producing close to our customers. This is an important differentiation in this world of these geopolitical tensions and so on. We have a long-standing relationship with our customers, as you just saw in the Japanese customer testimonial.
We are positioning for that together with our automotive-grade engineering. We have a highly experienced engineering people in our company that are really developing products to really solve the problems of our customers. We do not need to guess where the powertrain go. We are ready for all of them. Here, my last slide is the proof. This is New NORMA executing with discipline, and it is already showing. Number one, we are leveraging the base we have. The build-out space is behind us. We have the capacity in place. We do not need new plants, we just need new tools. This is enough for us for really growing our business. We have this market-led execution.
We have the market-based pricing, we have the target costing in place, and we are also managing our business through these business units that manage the customer and the P&L. It is a complete different approach. We are also leveraging the business across the business units. Some of the products that sometimes we develop for the commercial vehicle, we can apply this to the power generation markets. The battery electric vehicle, thermal management systems that we mentioned before, we can apply to data centers or charging stations. This is leveraging somehow the investment that we have already done. That is what will support this profitable growth, through pricing, customer penetration and engineering leverage. What is the real proof that things are really moving on and changing? Number one, we have just been awarded the largest passenger vehicle program we ever won.
It's a EUR 157 million in lifetime revenue. 80% of this is renewing, but 20% is growth. It was won based on good profit with the capacity we already have. It's really leveraging our business. The second proof is that in the first nine months of this year, we won 45% more revenue in lifetime programs than the nine months of the previous years. We can see that the direction is changing, and we have this ambition to at least grow on pace with the market. So capture the market opportunities that we are working on. We are not waiting for the market to help us. We are taking our future in our own hands. Just to summarize, the market is stable. We are ready for every powertrain and we are delivering.
Now I'd like to present you also another video where we can showcase our tech knowledge and our product development.
[Presentation]
Dear ladies and gentlemen, in this video we've seen what is possible if, and this was shown by one of my engineering directors out of my global engineering organization, if we use this China speed and combine it with NORMA's global product knowledge and competencies. It's really fantastic to see. My name is Gerrit von Breitenbach. I'm heading the Engineering Teams, the global product development at NORMA, and I'm happy today to take you through a short journey, which is not financial, but a little bit more focused on the products we are dealing with. Stone just showed us what a Dry Break Valve is at the end, and I want to give you just a little bit more details behind it. A Dry Break Valve is one of the quick connectors we have at NORMA.
A Dry Break Valve is used if you want to separate a fluid line, separate it to do maintenance, to be able to maintain it, and then to bring it together again. The key thing about this, and this is, you can hear it, there are valves in it. The left picture, this mustard color shows the fluid, and it shows in the top state if a line is connected, the fluid can flow very efficiently through it. If you open it, there's a little bit of spill coming out, but then it seals. This means if you do maintenance, you don't have to refill things afterwards. You don't have to de-aerate. You can just disconnect it, do some maintenance, bring it together, and then it's safely connected and you can continue to proceed. This is a highly engineered product. How did we do it?
We developed it two years ago for an automotive customer according to automotive standards. In the middle, you can see in the top one of the initial design concepts. We did numerical analysis, so-called computational fluid dynamics, to understand how the system behaves, what are the losses. We optimized the product, and in the lower section, you can see when we optimized design with much less turbulences, very smooth operation, absolutely free of turbulences, a very laminar flow, how we as engineers said. This is creating a new asset for NORMA. So it's flow optimized. It's a modular product design. You can scale it easily to different sizes and applications. It's a NORMA patented design. It's a USP. Nobody else has such a design, and it is fully validated in our global laboratory.
The nice thing, this was fully for an automotive customer. But on the next slide, I will give you a success example out of the field of Battery Energy Storage Systems, as Dominik already showed it to us. That's about these battery packs, and these battery packs are used to store high energy amounts to make them quickly available, for example, for recharging stations. These are typically built in blocks and you can see it on the left-hand picture in containers. These containers have these battery packs in, and because it's high-power battery packs, they need thermal management. They also need maintenance. So if a battery pack fails, you want to easily take it out, assemble a new one, and here comes our Dry Break Valve into play. Let's have a look at it. A typical line for one single rack looks like this.
You have a feeding line, which feeds the battery with fresh cooling water, and you have a second line with the warm water, which takes it away. Each of these is then connected with one single battery pack. The Dry Break Valve now allows us, if you want to exchange such a battery pack, disconnect it, take it out, insert a new one, job done, and you can directly smoothly continue operation of your data or of your battery installation. We have seven racks for such a standard industry container, like shown in the left upper picture. Here we have four total containers, seven racks per container. Plus here in this example, 16 Dry Break Valves makes for the left upper installation roughly 1,000 Dry Break Valves. Bigger size one feature 48 containers in such BESS solutions, which makes 10,000 Dry Break Valves plus our fluid lines. Super interesting.
We have a customer win, one of the market leaders in here. We received first serial orders this year. Because the customer was so enthusiastic, my engineering teams managed to speed up the timeline of delivery of the first serial parts by almost half a year. Even more nice for us was the compliment. The customer used competitor parts before. He was not satisfied with their part performance. They were leaky. They were of bad quality. The customer decided to switch to our solution. Now we are very much looking forward to provide even much more of such systems and Dry Break Valves to our customers. The next development step of a Dry Break Valve is the UQD, a universal quick disconnect. This is what we've seen in the video from Stone. What is it about?
In some applications, you don't want to have any drip of water coming out if you disconnect and connect it again. If a drip of water comes on an electric installation, you might have a short circuit, which is creating damage. This is exactly what it's about with a UQD. It's a connection which allows connection and disconnection without a single drip of water. We have two innovation projects running in the moment at NORMA in my teams. One is a metal UQD out of a video of Stone. This is nothing new. This technology in the full metal connections, they exist since years. There are many players on the market. However, these metal things, as established from hydraulics, oil, and so on, these are the standard in the market. We are the experts with quick connectors.
That's the reason why Stone is driving this, what we call a speed lane project, to get into the data center market and to supply our customers with a current accepted solution. In parallel, we are also doing an innovation project, which is about what I call the all plastic UQD, a fully plastic version, which is perfectly in line with the technologies. We are perfectly in at NORMA, which is production of injection molded plastic components. We are convinced this is fully sufficient. The temperatures, the pressures allow to use plastics. This is giving us, in this project, doing freedom to operate analysis, market screening, the chance to establish a unique solution which is to date not known at the market. A patented solution which underlines our superior product expertise and performance. We develop it absolutely cost optimized.
Such connections cost two digit or even three digit, the metal ones, these connections. Here to have a cost alternative, a best cost option, perfectly providing optimized fluid flow with a patented design. Both obviously to support NORMA and NORMA's customers with our quick connector knowledge and to serve our growth, especially in the field of data centers, but also our similar related industries. The second example I want to show you today is an example about applying existing and well-developed products to a new field. In the left upper picture, you see a failure message which one or the other for sure driving your own car has noticed. But where it's due to a dirtied sensor, a certain system is disabled. This, of course, is nothing too bad as long as it's about a comfort function.
What we see legally, there are more and more sensors and systems packed in our cars like Emergency brake assistance systems and so on, which are legally required to be permanently and safely available. Here comes our solutions into place. Since decades, we developed fuel lines. We know fuel can burn if you have leakages, it must be a super safe line. This is what we offer our customers who need to ensure that their sensors have to be properly maintained, worked, and cleaned. These lines, as said, NORMA Group has a long experience about such lines, which are safety regulated parts, which ensure under each extreme conditions any fluid, fuel, but also cleaning detergent, will be delivered and allow that these systems save lives daily in operations, in mobility to make or to avoid dangerous situations.
The last example I took with me is a very nice development which very freshly started, and I am super enthusiastic about it. There might be one or the other who is driving a fully battery electrical vehicle, I assume. If we are, everybody knows if you do fast charging, there is a phenomenon that the end of a fast charging of an electrical battery, the speed is decreasing. Reason purely is temperature, the temperature of a battery. High-speed chargers today have a power of 50-350 kW, which is incredible high power. Everybody who uses a stove or a cooker at home in your kitchen, this typically has 3-5 kW, and you do not put your hand on it. It is really, really hot. Imagine what happens if you take 100 times this energy and put it in a short term into a place. It is just getting warm.
If you now combine this knowledge with knowing that with lithium battery technology today, a battery has a temperature range of ± 5 degrees Celsius, where it can deliver optimum performance, charging and discharging. This is for lithium, roughly 25-35 degrees Celsius. Solid-state batteries even have an optimum temperature range of ± 2 degrees Celsius. The next battery generation is even tighter. This underlines this thermal management is getting even more and more important. This is where our new innovation project comes into play, which is a full plastic cooling system. Today, NORMA Group has in series such lines here. These are standard lines we are having, and these are the ones we see outside here, these black lines. These are the feeding and the return lines of coolant for batteries.
What this innovation project now is targeting is to create value for our customers inside the battery pack. The focus is these blue lines, which we see in this example picture of one single battery pack. We are targeting here to achieve the temperature control and the required tolerances to allow super fast charging, so that everybody can charge his car in 10 to maximum 15 minutes without that it is getting slower at the end. At 50% less weight, because today these systems are made of metal, not of plastic. NORMA Group does not produce metal, but we are the experts in plastic, at 20% better cost. Thereby providing the today's technology, the lithium battery technology, but also be ready to provide solutions for future technology, which will be the solid-state battery technology. With this, my presentation comes to an end.
Thank you very much for your attention, and if you are interested in our products, I am available for complete day.
Thank you, Gerrit. In a manufacturing company, what is really important is the footprint. Are we in an optimal setup? We discussed already, not really. This helps us with the utilization, with the productivity, but also the cost discipline, also the cash is really relying on our footprint. If we look at it, currently NORMA comes from a regional operation from a lot of M&A. NORMA Group was growing with these M&As and basically each acquisition brought one or more manufacturing plants, sometimes with their own trending, with a little bit products. This is how the group was nicely growing. Where do we need to go? We need to go to a best fit production allocation around the globe. Again, ensuring that in this geopolitical situation, we can always serve our customer to the best possible fit and have really nice results for our company.
What does this mean now? We look what NORMA has done already. Starting at the right at the top, we see in China, NORMA had actually six plants in some point in time, then four, and now we have two, so recently closed two plants. We are now set up in China with really two plants with a high performance from each of them. Then moving further in the next step, we see Singapore. Singapore was our head office for Asia-Pacific. You know that we have been managing our segments via regions, so we needed regional headquarters. This is changing. From 1st of January, we are managing the company with business units as our segments. This means we do not need regional headquarters anymore. In addition, it gives us also speed when doing our month-end and so on.
This means we have announced internally already that we will be closing our Singapore office early next year. The third point here is Australia. We had several distribution centers. We have closed Adelaide, and we serve our customers with the same quality, with the same speed. This is also a step which has been done. Moving to the left side, you see Novi Sad, our shared service center, and we are going to expand this. I visited Novi Sad. There is a very nice team. They have good competencies, what we need. However, we still have, in most of our plants, the full administration functions isolated. We will move much more to Novi Sad. There is a nice talent pipeline, university city, so we will grow this, and with this, we will increase the efficiency and the standardization of the processes. Maybe a little detour here.
When I joined NORMA, I was a bit surprised, to say the least, that artificial intelligence was basically blocked. We looked at this, and as we all know, with artificial intelligence, there is risk behind, and we need to manage the risk for sure. We have first generated an updated artificial intelligence policy which has a nice balance between the risk management and enablement to ensure our team are using artificial intelligence in a good way. We started the AI council. Then I was again surprised because many of our team came up with fantastic ideas, started to generate models, how they can make processes more efficient. However, we need to say we are really at the starting point. This gives us opportunity, again, in shared service center, to increase the efficiency in our processes.
If you remember the 30% SG&A, we know how we are going to reduce this. Last but not least, in Mexico, we are in the consolidation to reduce the number of plants there, also to increase productivity. Now you may think there is an important part missing of the world, and this is EMEA. Let us look to EMEA. We have currently nine plants. We have about 50%-60% utilization, as discussed. This is also true for EMEA, and we need to go to the 80%. Basically, we work through this, and we need to have the best cost manufacturing hub where we need to bring the efficiency, where we need to bring the volume and the knowledge basically in one significant plant.
This will give us a EUR 20 million- EUR 30 million EBIT contribution by 2031, which we have, of course, planned in detail. For me, personally, it is very important that we work very nicely with our people there, with our social partners, with our works council, with our unions, and we will give you an update in time how we are progressing in this one. Regarding footprint, when I joined, you all know we have Maintal plant. I saw the numbers, which were a bit challenging. Many of you challenged me and said, "What is going on in Maintal? Have you fixed the issues?" We are fixing them. Here, I would want to invite two colleagues who are day-to-day working with a lot of passion on Maintal. Please, Bronislava and Selman, join me on stage. Thank you.
Bronislava is our European Director of Supply Chain Management and is spending a lot of time in Maintal to really fix the situation there and has fixed a lot. We have Selman Boran with us, who was the Chairman of the Works Council in Maintal and decided to take on, again, a very operational role, which is a really outstanding move. First of all, I would like to start with Selman. This was a big step. Why did you decide to take now an operational role again?
I had seen the site performance get worse for years. The backlog increased, delivery performance declined, and losses grow. I wanted to move from talking about the problems to taking responsibility for solving them, especially where I could have the biggest operational impact.
Excellent. What have you changed so far?
We have set clear priorities and clear responsibilities. We focus on the most important problems and on what the customer need. The goal is simple, stable production, stable delivery. We identified bottlenecks, and we tackle them systematically.
Do you see progress you can share with everybody here?
Yes. The production is more stable. We reduced backlog, we improved delivery performance, but this is not enough. We still have a lot of work to do. This is the right direction, but we must get better.
Thanks for this. I really like it. Whenever I am there in the plant, I can see a lot of things have changed. Again, I agree with you, Selman. We are not yet there, but we are on a good way to make this improvement sustainable. What are you really proud of?
Yes, but it is a story I have to tell in German.
Okay, I try to translate.
Okay, thank you. [Non-English content]
Maybe to try to translate. Selman took the decision to go back to the Segmentleiter role for TORRO, what he had before he was Chairman of the Works Council. There were a few people, including myself, who convinced Selman that this is the right step and he only understood how severe the issues are when he joined this position. For me, I can say a big thank you. I was very happy that Selman was taking up the role. I think this is a great commitment to NORMA.
[Non-English content]
Basically, Selman is saying we do not need to say it too positive. We have too much backlog and many of the colleagues, Selman is in charge of a team with 200 people, they ask themselves: How is our future? What is going on with us?
[Non-English content]
You took the work hands on. You asked for discipline, you give orientation and I know Selman Boran is working very closely with the people and very direct. There is now a very strong team spirit.
[Non-English content]
For the last four weeks, right, was 6 million?
[Non-English content]
Nine weeks even.
[Non-English content]
7 million TORROs per week with the same team. We are really on a good projection here.
[Non-English content]
To summarize, we wanted to try what happens if you really add on some more energy.
[Non-English content]
10 million TORROs per week. This was a new record in Maintal.
[Non-English content]
The team is very proud and we are all very proud of this and this needs to be celebrated.
[Non-English content]
The T-Shirt design was done by the team from today and they will get it. I heard the week 44 was also the Golden Week, I hear internally, and this is the backlog recovery weeks what I am really looking forward because our customers will be super happy.
[Non-English content]
In week 44, Selman will have 100 days in his new role and therefore the performance is going up again and then stay like this. That is my interpretation, by the way.
[Non-English content]
Selman is proud for the team and we are all proud of the whole team, including Selman, including the T-Shirt and looking forward for the great performance. It was a little bit of free translation, but I hope this is okay. Thank you, Selman. Bronislava, to you. I mean, supply chain is also a really key element and I remember when I joined, we were quite stuck with it. Why did you personally get involved in Maintal and spend a lot of time away from your family staying in Maintal?
In 2025, we implemented a new ERP system, and all of the logistic activities became unstable. Finally, we fell to significant delays with the shipments. This was the point when I made a decision to step into Maintal and step by step with the local team, start to set up the stabilization in the logistic activities.
How did the local team react when you joined Maintal, and you were personally present more and more and more?
They took it as the help, and we started as well with Selman and with the team, step by step, act as the team. When he is saying that we have an output 7 million, 8 million, 9 million, it is amazing, but we need to have an output which is needed. The split of the items has to be exactly what we have to ship.
Thank you. When you stabilized logistics, what did you discover?
That is a nice question, and thanks for that, because finally at that moment came the point that the biggest bottleneck, it is not about the logistic. Logistic was only symptoms. We got the goods to the stock, but not in time when it was needed and not in quantity which was needed. Finally, we found out that the bottleneck, it is capacity and the execution of the output at the time. This allowed us to start to focus on the root cause and not to solve the symptoms.
Thank you. That is really nice to share. What did you change in terms of teamwork, maybe also cross-functional work?
I would like to say that today we are one team. As I said, we have jointly planning, where we manage it together. We focus where there are the bottlenecks, and we are looking to the same objectives. We want to ship, and we want to execute the shipments without the delay, in quantity, in time. All of the teams, operations, supply chain quality, we are aligned finally with the new set up of the team.
Thank you. Now, we talk New NORMA today and also months before. What is your personal view on New NORMA? Maybe also, I do not know if we can make it. What do we need in addition?
New NORMA, it is for me, finally, about the team set up. It is about the people. It is visible that we, as one team, when we have the same objective and when we understand what is a bottleneck, that is actually what has happened to us within last one and a half year, that we found what the bottlenecks are and what we have to focus on. We start to act, and we are solving it actively. That is the biggest change which happened. What is well visible that we move from individual functional way of the thinking to the shared accountability for the business outcomes.
Thanks, Bronislava.
For me, the most important thing is our people. We need to explain why change is necessary. We need to listen to our teams and bring them in. We can have success when the people understand the goal and when they work together. That is what I have learned here in Maintal.
Thank you. A question to both of you, or a challenge. We talked about EMEA footprint before. Any lessons learned from Maintal, from your experience for this quite significant project?
Maybe I have to say again the same sentence. We have to act as the team, because if we will do it individually, we will never achieve what is expected.
Have to do it together, and we have a strong team in Maintal, and I believe we will achieve all goals what we will achieve.
Thanks. Thanks so much to both of you for sharing what you do day to day and sometimes day and night. I know sometimes you are really spending 24 hours in the plant with your full commitment, spending time away from your family. This is really, really helping us and bringing us forward what we need. With this, I would like to hand over to Ulrik and Annette to give us more insights in their transformation.
Thank you, Birgit. My name is Ulrik Thelin. I am leading our business transformation and our transformation office. Now we are bolting on the final piece of what is making up New NORMA. I really must admit to you, I am happy to see the interesting faces, and also, as a transformation officer, it is nice to come out of my project scope to be able to talk and address more stakeholders than the small internal secret population. Here we are finally coming out and telling you what is about our internal dealings of making New NORMA happen. On the left-hand side here, you see Wave 1, what is already communicated as was in full swing and what we are already reaping full benefits of in our P&L. I think this is really interesting. It was communicated August last year.
The more interesting thing is the blueprint for New NORMA, what we have heard my colleagues putting and giving you teasing and pieces about, and also the contribution and the benefits about that at the bottom. Wave 2, as we call it, is more to build on the simplification as we did in Wave 1, where we laid out an organizational structure, we started our transformation office, we set up our shared service center. This was Wave 1. This is now what is continuing in, and we are reaping the full benefits. I will tell you in the coming moments on how the individual waves are being built and what we are doing. But if you see what we are adding on to Wave 2, we are simplifying the organization.
We are really now addressing also our AI implementation, digital processes, and the full end-to-end focus on our business, really to drive the right benefits and to remind ourselves the commitment there still stands, and we are slightly ahead of schedule that you heard before in our reports of EUR 38 million to EUR 42 million. This is running.
We will see soon a time schedule how this is really running. Then what we are adding on is on top, another EUR 28 million to EUR 32 million as a Wave 2 administrative simplification. Three different transformation levers that we are working with. First and foremost, simplification. What does it mean to us? In terms of the SBU implementation, it means less organizational layers, more clarity of responsibility, and also team sizes that are appropriate, meaning span of controls from a technical language saying that one leader has more team sizes so that it is more efficient leadership.
This is then driving clarity of our processes and accountability. A simplified organization, which is then headed by the SBU. You have heard the SBUs throughout the day, and this is really the key leading dimension. We are removing the regional consolidation layer, and we are driving straight from the P&L in the SBU. What does it mean for that? That is then the structure. Then we need to address our processes a little bit of what is happening under the hood and how we conduct our business. Full end-to-end focus. Since we are objectively less people, we also have less hands on deck. We are moving more on automation where it is possible, but also elimination, meaning what we have to decide not to do. We need to prioritize and stop doing things, setting the customer first.
I am also leading the AI council that Birgit proudly announced and working on. This is really an interesting knowledge base that we are building now on how we can AI-enable the New NORMA. This means that we are now not just automating or simplifying, but we are also then bolting on where we actually can get our agents on board and getting really end-to-end full automation supported by AI, and it is working. The passion that we see in these team meetings is just absolutely amazing. But we are on an early stage, but it is happening. These two levers are still then driving performance. The performance is not a reporting topic, it is genuinely changing. I mean, genuinely changing. You will hear us in the future about how we report, but we are starting to get really good traction. Super proud of the team.
Let's get in to see what we have done and what is on the horizon. On the left-hand side in green, you see our Wave 1. We announced, we prepared ourselves. We announced and launched August last year. Since then, we have been in very diligent execution. The American program on voluntary leavers are delivered and done. In Germany, which was one big addressable market for us on this, was also a voluntary leavers program, which is now also done. Then we continue throughout majority of 2027, and then we will fully complete the rest of EMEA, but it is minor locations and smaller topics that are now coming in towards this. But we see Wave 1 being fully executed by the end of 2028. With the SBU introduction, January 1st, we introduce Wave 2. Really focusing on administrative simplification and cost reduction.
Additional EUR 28 million to EUR 32 million worth of reduction. These are incremental reductions, so there are no overlaps. Both programs are continuing and being fully delivered to the end of 2028. Wave 1 actions are phasing out, and Wave 2 is now stepping up. From a transformation office and a business transformation perspective, of course, we are managing this together with the business. How does this then come together? We are looking at six different areas of transformation impact. I will take them in pairs from left to right, because that is how they really impact and translate in our business. On the first, on the left-hand side, you see simplification linked to the SBU-led business model. It is what I said before. With less layers, with cleaner, more crisp processes, we are then taking ourselves a more agile and easy to lead business.
Taking a step to the side, to the center picture, we see the structural cost reduction. This means less SG&A, less also operational expenses. We are really addressing how to operate our business in a sustainable way without that much resources at our hands. We really use AI, and even if I am proud of what we are doing, I cannot say that we are there. There is so much productivity to be tapped into here, and I am really, really interested to see how far we can go. We see that it is really happening, and this gives us strong beliefs that with the right KPI stats that we are now defining and launching links with the SBU, we are also seeing sustained business transformation and performance.
I see it already coming, and the teams feel it. With that, I will hand over to Annette to give us a little bit more insight on transformation from a different perspective.
Thank you, Ulrik, for handover. Let me turn to the people side of our transformation now. My name is Annette, responsible for HR and so-called a new joiner. 25 years for Selman, almost five months for me. Before I walk you through the slides here, what is around HR, I would like to share with you my first impressions of the company. What struck me really first was the strong commitment of the people here. Colleagues identify deeply with NORMA and its brand. At the same time, years of uncertainty, people are concerned about the future and tired of constant change. I also saw highly capable and dedicated teams. Sometimes organizational barriers and inefficient interfaces get in the way. Teams work very good within their own areas, but not very well across the boundaries.
I recognize something which is not very specific for NORMA, it is appearing in other companies as well. Processes are more complex than they need to, a need for greater ownership, and the importance of building confidence in a shared strategic direction. My overall picture is clear. NORMA has the people and the capabilities. This is a very huge potential. What we need to create is an environment in which they are more effective. HR plays a critical role in this. We worked a lot in the last months to really find the right priorities. My priorities or three priorities we are working from an HR standpoint is more effective organization, retaining and developing our key talents, and establishing a performance driven leadership. Ulrik has already outlined how we are reshaping our organization.
Let me now focus on key talent retention and development, and most importantly, the new leadership culture in NORMA. First, talent. Our starting point is quite solid. Voluntary attrition is around 8%, even better than benchmark. Retention means for NORMA not to keep everyone at any cost. We are more looking on knowing which capabilities and roles are really needed for the future and making sure how to protect them. We have therefore identified the critical roles and the key talents across the group, and we are systemically strengthening succession coverage for these positions. Most important is the so-called ready now quota. Ready now quota in NORMA is around 30%. This means how many positions we can replace more or less overnight. 30% is, from my perspective, slightly too low. I think we have to improve here roughly up to 50%.
At the same time, we know that transformation requires new capabilities. What we are combining in NORMA is internal talent development with external hiring, upskilling and reskilling. While retaining key talent is the most important task from a risk perspective, I would now guide you through how we build up the new leadership culture in NORMA. Let's face it, the world around us is moving faster and faster. This transformation in NORMA takes place against this background, and this does not make it easier. A few years ago, and I think most of you have that already in mind or still in mind, it was called the word was VUCA. VUCA is meant volatile, uncertain, complex, and ambiguous. Leaders had to manage it, and corporate strategies work to mitigate these factors. Now VUCA is no longer strong enough to describe the world around us.
Uncertainty has become more systemic, more disruptive, and harder to make sense of. We live in a BANI world. What means BANI? BANI means brittle, anxious, nonlinear, and incomprehensible. The question is now how we can consider this world model into our new leadership culture. Let's start with the I in BANI, incomprehensible. When people cannot fully understand or predict what is happening around them, NORMA leaders have to provide clarity, not by having all the answers but by explaining decisions, setting clear direction, and being transparent about uncertainty. In a brittle and nonlinear environment, organizations need resilience. NORMA leaders are accountable and will adapt quickly. In an anxious and very anxious environment, NORMA leaders create trust and psychological safety. For NORMA, we translate this into three leadership principles: clarity, performance, and role modeling. These expectations are not just words on a fancy slide.
We will execute against these principles, and we will make leadership performance measurable, and we will reward leadership performance. Therefore, we will align with financial outcomes that matter for NORMA. Revenue, EBIT, free cash flow. Most likely exactly those that you are looking at as our investors as well. Second, we want to strengthen shared accountability because transformation delivery is a collective responsibility and not just an individual exercise. Third, individual performance and remuneration will be linked more closely to company results. In short, clear targets, shared accountability, and a stronger pay for performance. These principles ensure that NORMA's leadership is aligned with the NORMA vision. How can HR support in this transition? HR has always worked as a role model. What we have to do is to simplify our operating model as well.
Our model combines four elements, strong HR business partners, very close to the business, global centers of excellence for specialist targets, efficient regional shared service centers at regional costs, and standardized digital processes supported by artificial intelligence. The objective is quite simple. Less complexity and manual work, better service to the business, and more time for the topics that really matter, lean organization, talent, and leadership. Thank you.
Thank you very much. That was already a lot of content up to now. You all deserved a little break right now. We face that as the next item on our agenda. We've got a break for coffee now, which is served outside and some little light snacks, and we're going to reunite now at 4:15 P.M. A quarter past 4:00 P.M. Enjoy your coffee all in the room and also our guest speakers. DIY coffee. Thank you very much. 4:15 P.M.
We're going to get started any second. Time to take the last coffee. Welcome back, everyone, here in the room and also everyone that's dialed in remotely. Hope you all had a good coffee break, relaxed a bit because now we're approaching more the number cruncher sessions now, and that's how we're going to continue with the financial targets. I'd like to hand over to Okan.
Thank you very much, Christian, and thanks for that. Hello, everyone. Good afternoon. I hope you enjoyed the coffee break as I did. We had very good conversations already and received very interesting questions in our coffee break. But maybe let's start with the financial targets first before we then deep dive into, let's say, a further exchange later. My name is Okan Celiker, and I'm working for NORMA since more than nine years. Since April 2026, I'm the acting Group CFO of NORMA. For this part of the Capital Markets Day, I would like to connect our operating model with our financial ambition 2031. I would like to start on how we intend to manage financial performance because the way we steer our business matters for the results that we can deliver.
I will also explain our operational measures behind our ambition before I bring back our discussion to cash generation and returns. Now, let me begin with accountability. From January 2027, we will move from a regional steering to a steering through strategic business units. Our SBU model brings responsibility of price, cost, capacity, and margin under one business owner who can consider the full economic picture. The SBU will own the consolidated P&L, while plants will be managed as cost centers rather than standalone profit centers. That creates a clearer distinction of responsibility between the economics of the business and the responsibility of the manufacturing performance. A global SBU cockpit with harmonized performance indicators will support this approach. The principle is simple. People taking decisions need a consistent understanding of the consequences. We also introduced a market-based pricing target concept that helps to address an essential commercial question.
What are the cost structures for us and the right cost structures to serve our customers competitively and earn an appropriate margin. With our structure that we basically set up, we can answer those questions. The next slide shows how our financial structure supports that. As you can see here, we are basically changing our steering model. Our SBU model will be supported by the introduction of a new P&L steering structure, which is based on the cost of sales method and will replace the total cost method, which is currently being used. This will strengthen the margin transparency, increase the accountability, and will also allow targeted pricing, productivity, and cost reduction measures. We want management discussions to move beyond the observation that the margin has changed. Useful questions in that context are: why did the margin change and what caused the change?
What makes economic sense? Let us connect that management view here with the financial performance today and going forward. On this slide, we are comparing the total cost method and the cost of sales presentation for fiscal year 2025. The structure you see in the table on the right-hand side shows the structure we will present our financials going forward. As you can see, was mentioned already before, we have a rather high SG&A rate. With the background on the foundation we are about to establish, let us now turn to the actions intended to improve the business itself. We have organized the execution of our strategy around the aforementioned strategic levers, which are the Sales Push, footprint, transformation, and growth. The interaction between the strategic pillars is extremely important. Additional sales can create more value when the business has capacity to serve them efficiently.
A better utilization can improve the economics of the assets that are already in place. Structural cost discipline can help more of the gross profit reach the bottom line. Also a very important one. The financial outcomes we are targeting with this are sales growth, margin expansion, cash generation, and ultimately, this will support a stronger return on capital employed. Now let's have a look at the commercial opportunity that have been also presented earlier by my colleagues. Our Sales Push approach brings together market opportunities and specific commercial actions and support our growth ambition of approximately 1%-3% CAGR from 2026 to 2031. The main drivers of the Sales Push are opportunities in the thermal management, electrification, and industrial infrastructure. Another lever is the customer penetration. Increasing the share of wallet with existing and new customers.
Next one is channel expansion through a broader market access through distribution and account coverage. Last but not least, the commercial execution, which includes competitive pricing, improved product mix, and a portfolio expansion. Growth is one part of the earnings equation. The cost basis is another one. We have structured our transformation in two waves. Wave 1 consists of the already communicated measures and comprises a higher organizational efficiency, an SG&A reduction, and initial footprint activities. This should bring us EUR 38 million-EUR 42 million of annualized savings by fiscal year 2028. Wave 2 adds further simplification, structural cost reduction, and a more efficient operating model and will contribute another EUR 28 million-EUR 32 million by fiscal year 2028. Together, the two waves are representing a targeted annualized EBIT saving of EUR 66 million-EUR 74 million by fiscal year 2028.
Now, let's have a look at our EMEA manufacturing footprint and related measures, which is the third pillar of our transformation. The financial logic is straightforward. Concentration of manufacturing volumes in fewer sites raises the utilization and improves the absorption of manufacturing overhead. At the same time, it lowers site-related costs and streamlines operations. We expect an annualized EBIT contribution of approximately EUR 20 million-EUR 30 million by fiscal year 2031 out of the EMEA footprint activities we are planning to conduct. The next slide brings all the economics of the programs together. For Wave 1, which is ongoing, we expect, as mentioned earlier, EUR 38 million-EUR 42 million of savings by fiscal year 2028, of which EUR 15 million are expected to be realized already at the end of 2026.
That means Wave 1 will contribute another EUR 23 million-EUR 27 million of incremental savings compared to the fiscal year 2026. This will be complemented by additional savings out of Wave 2, the EUR 28 million to EUR 32 million, again by fiscal year 2028, as well as the EMEA footprint, which will come in with annual run rate EBIT savings of EUR 20 million to EUR 30 million by fiscal year 2031. If we combine all of it, that gets us to incremental annualized EBIT savings of EUR 70 million to EUR 90 million by fiscal year 2031. What are the required implementation costs for these programs? Wave 1, we communicated a P&L effective cost by fiscal year 2028 of EUR 54 million to EUR 61 million, of which EUR 56 million are expected to be incurred by year-end fiscal year 2026.
For Wave 2 and EMEA footprint, we expect another combined average annual P&L effective cost of EUR 15 million to EUR 20 million for the years 2027 to 2031. Let's have a look how the stronger earnings translate into cash generation. Our ambition is clear. It has been communicated already. We aim to achieve a cash conversion above 70% by fiscal year 2031, measured as free cash flow divided by adjusted EBIT. The bridge on this page illustrates how we get from our adjusted EBIT to the free cash flow. Let me explain the main assumptions. We expect a D&A of approximately 5%, while we are planning to keep our CapEx below 5%, as we are already well invested today. It was also mentioned by Birgit earlier. This will help us to achieve our cash conversion ambition of more than 70%.
On trade working capital, we see improvement potentials. At the same time, the assumption includes a reduction of our supply chain financing programs for the planning period. We considered the same or equivalent capital structure as we are having today, and that's why we haven't considered any interest payments here in this bridge. For the cash taxes, we assume 25% of our earnings before taxes. Taken together, these assumptions support our ambition of more than 70% cash conversion by 2031. Disciplined working capital and CapEx management are central for that ambition. Let me bring our financial ambition together. We are targeting a net sales growth of approximately 1% to 3% on average for the years 2026 to 2031. We aim to reach an adjusted. This is, by the way, with profitable growth in both SBUs.
We also aim to reach an adjusted EBIT margin above 10%, which is supported by the transformation measures Wave 1, Wave 2, and our EMEA footprint activities. We also aim a cash conversion above 70%, which is, of course, also a result of the disciplined working capital and CapEx management that I've mentioned before. These assumptions are basically the key assumptions you can see on the lower end of this slide for our financial planning are a standalone organic development as well as a stable geopolitical situation. We also considered comparable FX rates, and on top of that, we assumed stable energy and raw material prices, as well as continued personnel cost inflation. These are the main assumptions that should give you the context to assess our targets. They also help to distinguish the effects of our own execution from changes in the external environment.
I would like to conclude my presentation. I would like to thank you for your attention, and I am looking forward for interesting conversations and open conversations after this event. But before that, I will hand over to you, Birgit. Thank you very much.
Thanks, Okan.
Welcome.
To put all the measures together in this financial model. Now we come to the question: what is the capital allocation strategy for NORMA? First of all, of course, we want to maintain and to keep a healthy balance sheet. We have set ourself a target in this midterm cycle until 2031 of a leverage of 1.5. Does not mean we need to go there, especially not now, but the cycle runs until 2031. Second point is that we say we invest in organic growth. As we have shown, there is lots of potential there. We are well invested, and we will go there.
Thirdly, the selective inorganic growth, and we have not discussed much about M&A today, which is really much on purpose because we say let's work on our in-house organic growth and margin improvement topic first, and when we have achieved a certain stability, and we are convinced it takes us about two years, then we work closer on the M&A on the inorganic growth topic. Number four is the shareholder distribution. We have an update there because we say we see two areas. Basically, we have updated our dividend policy where we say we have a minimum of 10% of the adjusted net income based on the situation on liquidity and our situation in the company. Secondly, and this is very important, we do opportunistic share buybacks.
We know about the last two share buybacks we have done around the water divestment, and we received a lot of positive feedback. This was taken very positive up by our shareholders. This is the reason we really thought through, and we are convinced this is a good, balanced, and flexible way of distribution to our shareholders. What is now our investment criteria? First of all, growth opportunities as discussed, organic and inorganic for the next two years, basically absolute focus on the organic growth. We have this criteria, these four investment criteria for sure. The strategic fit is number one. We will not go too far outside where NORMA comes from. In the connecting solutions, there is lots of space for us. We have the knowledge, the value creation, a key point. Of course, the returns very important and the risk and financial capacity.
This is basically our criteria, which we will use for each investment decision, and this comes then as an outcome that we say we go, we do, or we do not invest. Now to really conclude with these five areas for our value creation. We have the focused portfolio in our two business units. We have the profitable growth opportunities, as shown by our colleagues, the margin improvement, Wave 1, Wave 2, the EMEA footprint, cash and returns, and last but not least, the capital allocation. I want to really summarize with where we have started. This is the quote by Albert Einstein. You all remember now the definition of insanity. We say we do expect different results, as we have shared with you, and you have seen from many of our colleagues that we do very different things, and we do them in a different way.
With this way, we are committed, we will meet the targets, and we will deliver to our promise. Thanks a lot. With this, we are opening the Q&A session.
Right. Thank you, Birgit. I would like to invite all the speakers up to the stage, please. We are going to have to move a table here. Thank you very much for that. Everyone that joins us remotely, please use the text box that is a part of the transmission to enter your questions. We will be exchanging with questions that come up here locally from the audience, as well as questions that come in from our remote viewers. Right. Ready. We start with a question that we got from our remote submission. Basically two questions. Question number one, if the substitution of metal with plastic-based connectors is the correct strategic decision in higher value applications, why can you not be aiming with higher growth rates? Brilliant question.
Yes, it is a very brilliant question. For sure, it is important for us that we promise and we deliver. It is also allowed to over-deliver. This is what we put together, a quite balanced plan where we are convinced we can deliver and we can regain the trust from you and from our shareholders and from our stakeholders completely. We will work alongside this plan, and we will give you updates alongside this plan. If we are faster than with the progress, we will update you on time.
Okay. Thank you very much. Any questions from the room? Yes. One second. Got to give you the microphone, otherwise the remote viewers would not hear the question.
Okay. Thank you very much. Thanks for taking my questions. I would start with two. The first one is on the Wave 2 and the EMEA footprint. Really appreciate that you are going forward to even cut more costs. You said 2028, 2031. When will we see first impacts? Already next year, or is it really just by 2028? Maybe the second question on your dividend payout ratio. You lowered this and also included share buybacks. I appreciate this, but is this really to give you more flexibility on cash? Are you planning a larger M&A transaction by 2028 or potential transaction, or are you committed to share buybacks, and hence, why not including this more higher commitment in this policy, than just saying opportunistic programs?
Let me maybe take question one first and give you an answer, and thanks for the question, Nikita. With regards to the transformation waves, yes, we will see first impacts, especially out of Wave 2 already next year. This block of our transformation basically is planned to end or fully deployed in fiscal year 2028. We will start with it immediately, and we will see first impacts next year. There will basically be an overlap, especially with one-wave savings out of the Wave 1. With regard to the EMEA footprint, we just recently announced this project and third pillar of the transformation, if you will. The plans I think are very solid. We will, of course, communicate once we start to, of course, initiate and kick off the first project.
I would also say there is definitely the opportunity that we will see positive impacts out of these programs rather sooner than later, looking at our timeline and financial ambition until fiscal year 2031.
On the dividend policy, thanks for feedback on this one. Yes, there's an element of flexibility built in. We have the dividend plus the share buyback, also based on the very positive feedback to the share buybacks. As said, the M&A is not in the next two years, but at the end of this cycle, that's a good opportunity. We want to have the possibility also with the shareholder distribution. Therefore, we updated the dividend policy as we did.
Okay. Other questions from the room here? Yes.
Thank you for taking my questions, and thank you for the interesting presentation to all of you. My first question is going more to the cash conversion. You've shown that you, or shared that you plan to have a more or less stable CapEx. Can you update us on your tax ideas, tax payments, tax ratios going forward? Let's talk about a bit more about your key assumptions for your guidance. How can we prove them? Do you have some examples for us? Thank you.
Should I? Yes. Thanks for the question, or the questions. Let me start with the CapEx. I mentioned that we are planning to have a rather lower compared to the depreciation CapEx rate for the next years, just because we are, as mentioned a few times in our presentation, well invested. Throughout the last couple of years, we paid a decent amount, I would say, year- over- year, for maintenance. We really want to make sure that we invest our money in areas where we can really generate value and growth going forward. This is why we are confident that the CapEx ratio in the short to midterm can be lower than the depreciation on the one hand side. Then related to the tax, yes, I mentioned the tax ratio or the cash tax of 25% of our earnings before tax.
This is what we expect, to be honest. As I said, we also assumed no change in our capital structure. We are basically debt free right now, and that's why we left, let's say, potential interest payments, which are already very low in this year in our approach. Now, with regard to the proof points of our guidance, I think it also has been mentioned already. Or do you want to say something? No?
You start and then I can.
Okay.
Maybe add.
It has been mentioned already a few times that we promised many things in the past, or things have been promised in the past, so we really want to make sure that we achieve and deliver what we are promising. A proof point from our point of view is really this year already, 2026. This morning, we also announced our preliminary Q3 figures. We see a decent top line for the third quarter in this year, and we see, again, an improvement of our adjusted EBIT now at 3.7%. This is basically a result of our efforts in Wave 1 and also the disciplined way we are, let's say, handling our cost management so far. Going forward, of course, it is really about to make sure that we do more, increase the margin, and execute according to our plans.
In the proof points for the future, you heard in Sergio's presentation about our business wins in the mobility sector. First, the biggest project in the company's history, and secondly, compared to last year, what projects we win, it was a really more than 40% improvement. Also in Jeff's presentation, we heard clearly in the Americas that in the distribution, in the base business, we were really growing in all over in Industry Applications, we were growing. This is based on a very different sales approach. I would say we restarted the sales machine, and that's for me a clear proof point. As Okan said, in Wave 1, we are a little bit faster, so we are bringing in the savings, which is basically what we see in the adjusted EBIT.
Thank you very much. We got one question from the remote viewers that ties perfectly into that. The question is, can you tell us more about the EUR 157 million order received in automotive? Can we know the customer? If not, maybe you can give some detail about the reasons for the 20% increment in value over and above the framework it replaces. This must be a move from an ICE to hybrid EV.
Well, I can give you for sure some more insights, especially why we did win this business, because this is also what we ask ourselves internally. I can also share, if I joined the company, this business was also already in the quotation process. The colleagues from sales came to me and said, "We have this really nice opportunity, but we are going to lose it." Of course, I said, "Why? We need to win it. This is really nice because we have the CapEx and it's really nice opportunity." So we did really dig down what are the assumptions for our calculations. It was a lot of work with quite some number of colleagues involved, and why are we going to lose it? So what's missing? We really found that we need to bring people together and we need to work on the assumptions.
It is not only to get the quotes out and to sell it, but it is also how to manage this project until SOP. This is what we put in place, and there was a lot of negotiation rounds. Of course, I shortcut this now, but this is why we did win it. We are well invested. We have a very nice plant. By the way, we allocated it to one plant in Serbia. This is also much better than to split it, of course, much more efficient. Then we really motivated the team and we said, "We need to win this, but we need to win it profitable." With a lot of work and with a lot of change in the process and with a lot of change in the attitude, we could win it.
As it was explained, it is 80% renewal business, which is super important to win such a business, and 20% what we basically got from a competitor, and this was also because our products are really nice, and this is what the customer is really telling me, "We like your products." Again, efficiency in manufacturing the whole range.
Okay, thank you very much. I am happy to take the next question from the audience here. Any question?
Here on the left side, Christian.
Oh, sorry.
Yes, hello. Thank you for taking my question. Sebastian here from MPCM. Looking into your slides and the end markets targeted, I cannot see that many news compared to what we have learned about some 10 years ago, some six years, five years ago. What is really new? If you look at the sales growth rates, you will hardly outperform the market. How does that come together? You talk about a Sales Push, but you hardly will outgrow your markets with a 1%-3% CAGR, which is, I think, pretty disappointing.
Well, what I've seen is that we are delivering lower than the market. The ambition is now to be at least grow with the market, and that's what I said, let us deliver this first and then we will give you an update.
Okay, point taken. The other question is on the margin development, targeting a 10 percentage points reduction in SG&A while ramping up sales force and restarting the sales engine. That would bring me from today 3.7% or 3% in the half year results to above 12%, 13%. What is your assumption then that brings down the margin to the 10%?
Well, I would say that, first of all, we try to build everything that we described today into our midterm plan, and we intentionally communicated that we are aiming for an adjusted EBIT margin above 10%. Now with all the initiatives, transformation activities, and the potential higher top-line growth, of course, there is a potential to end up at 2031, maybe even earlier, who knows, above 10%. We definitely do not say that there is no potential to reach a margin, an adjusted EBIT margin above 10%. But at the same time, again, going back to our comment, we want to make sure that we deliver what we promise.
Okay. Thank you.
You are welcome.
Thank you very much. Another question from the audience here in the room maybe? Yeah, one second.
Yeah, thank you very much for the presentation and taking my questions. Victor Beyer from Bankhaus Metzler. Again, one question on your revenue growth guidance. You showed some incredible growth rates in the focus industries. But on the group level, in the midpoint, you rather grow below inflation. What will be the balancing part in the portfolio? And maybe what will be the mix effect, is it part of your margin guidance as well, that you will fade out some low margin projects. And maybe second question, which is a bit unintuitive for me, while you cut your dividend guidance, at the same time also want to be restrictive about the CapEx, increase the free cash flow conversion. Would it be right to anticipate that you are planning for something bigger here with the cash, or what is the intuition behind it?
Do you want to take the sales or should I? Well, on your sales growth question, that was the first one, I think it is, of course, also related to the fact that the mobility business is already accounting for two-thirds of basically of our group sales today. That means, of course, the smaller numbers in Industry Applications need to really get bigger first in order to, let's say, also increase the growth. We are definitely expecting, as we heard earlier and saw on the slides, a stronger growth potential in the focus industries, meaning in the IA business. And I think this is really the lever of the top line growth and can help us to end up rather on the higher end of the communicated range for the top line growth.
With regard to the cash conversion and the maybe slightly lower CapEx ratio that we mentioned going forward, we do not plan for something bigger except than executing our transformation, which for us is already a big thing. We are talking about three big initiatives and three big programs, basically, that will consume a lot of effort from our organization over the next couple of years. Of course, we want to make sure that we have enough cash on our balance in order to also execute these programs so that we can adjust our cost structures. Other than that, not really a big plan. Not sure if you were pointing out for something specific, but that would be my answer.
Okay. Thank you very much. Next question from somebody dialed in three parts. Part number one: What is your underlying assumption for automotive and commercial vehicle market developments?
Well, we have shown it's about more than 1% market growth. We see that we can gain the market share, basically, in both in passenger vehicles and in commercial vehicles because we have very nice offering. So far, we were really prominent in a niche position, and this is the feedback from the customers. We want to grow the market share.
Okay, second part to that question, what is your ROCE target? So return on capital employed.
We mentioned in the presentation that our target, our midterm target, is to achieve a ROCE higher than our WACC, ultimately. Of course, obviously, with our 2025 adjusted EBIT in the New NORMA structure and all, let's say, the things we are doing today in order to improve our adjusted EBIT, it might still take some time to increase also our ROCE ultimately. But again, the target is to achieve a ROCE which is higher than the weighted average capital cost. This is basically what we also think is realistic in our midterm plan until full year or fiscal year 2031.
Okay. Part three of three, what would be your management response to a significant second wave of inflation?
The standard response would be inflation needs to be compensated. That is clear, and that is what we will work on depending on how the inflation goes. This is true for the plants, this is true for the result, and this is the ambition.
Okay. Thank you very much. Question from the audience, maybe. Okay.
I have another question with regards to the content per vehicle or content per unit. You have shared some nice insights with us again, like we have seen over the past couple of years. There were some big movements for passenger cars coming from 80 to 90, then down again, and now at 115. We saw almost a tripling of the content per commercial vehicle coming from about 100 in the past. Now it is about 300, while at the same time, agriculture is cutting by half. How do you explain those big changes, especially in the commercial and agriculture sector?
Well, it depends also on the engineering development, what products we offer. But maybe we can get some insights, maybe Sergio on the commercial vehicles, you could get some insights why we have this high offering, and this is your segment.
Microphone, or can we hear you?
I have a mic.
Okay.
Yeah.
That I just have to turn it on.
Yeah.
Well, for all the markets, passenger vehicle, commercial vehicle, we have been adjusting our product offering, and it have been impacting what we report as a content per vehicle over the time. It is an ongoing job that we are evaluating what the market potentials, what we had offered before and what we are offering now. That is why we will see the swing in the numbers compared to what we presented a couple of years ago.
Well, it was March last year. It is not that long ago, though, that the content per truck has tripled. What is then the additional offering?
Because now we have the Battery Energy Storage Systems embedded into that. We have also the alternative fuels and so on. All of these increase the content in some cases. In some other cases, some of the product offers you used to have in the past are not anymore in our focus. That is why you have this adjustment.
Okay, then allow me one follow-up. We see a lot of Chinese truck makers coming into Europe, as lastly seen at the IAA Transportation in Hanover. How big is your content then with the Chinese OEMs? How do you gain business with those guys?
Yeah. We see this increasing because the regulations are tightening into their markets as well. This is demanding more of our product and technology, so that's why we see that. And we have been winning business with them, and we see this increasing moving forward because of these additional regulatory changes.
Perfect. Next question from somebody dialed in. With Industry Applications increasingly positioned as NORMA's key growth driver, does that mean that Mobility & New Energy will become strategically less important over time?
No, it doesn't mean it will become less important. As we have shown, currently we have the 50%, what I would call automotive passenger vehicles, 20% commercial vehicles, and 30% Industry Applications. This can shift because we see in the Industry Applications a higher growth. This does not mean that Mobility is less important. It's very important to utilize our assets, what we have, to really be a cash generation business unit. It's very important foundation for NORMA going forward.
Okay, thank you very much. Another question from the audience, maybe.
Thank you. Can you confirm that both SBUs are profitable on adjusted EBIT level already?
Adjusted EBIT level, yes, already.
Do you have a target split of revenues between both SBUs?
Yes, we have a target split, and it is set today, one third is Industry Applications, two thirds are Mobility & New Energy. We plan to slightly change for that, which means that the Industry Applications business will account for 36%, 38%, maybe even more percent of the sales. It is also not a significant dramatic change, as again, they are coming from a smaller position, actually.
Thank you very much. Another question from the audience here in the room. Then one more that got sent to us remotely. If New NORMA targets EUR 70 million-EUR 90 million in annualized EBIT savings by 2031, how will we ensure these savings translate into sustainable financial value rather than being offset by increased operational risks, outsourcing costs, or the loss of critical capabilities?
Well, I can say Okan showed also the implementation costs, what we have carefully considered, what we need, and there is a commitment behind. I mean, the savings are also very carefully calculated what we will achieve. You see from Wave 1 that we have a rigorous implementation. Yes, it's not easy projects. These are complex projects, so we have project organization with a project management office. We, as the senior leadership team, are very close to these projects, and we will manage in the same way, basically Wave 2. EMEA footprint requires also special competencies, what we either have in-house or we bring in as addition. Annette explained also that we need to bring in some competencies what we have not in-house. This has started already, so we are very confident that we can execute all three projects or initiative in a good way.
Okay. Next question. We've seen you talking about the use of artificial intelligence in driving operational efficiency. Can you give us some example or examples of the use of AI for that reason?
You can do that one.
Well, I have seen examples of when we have supplier contracts, there is the terms of business that in NORMA, people have been reading through very manually. All this can be done with AI, writing reports, all these kind of things, was very manual, was very time-consuming. I see now that our whole team is using artificial intelligence, and again, we are at the beginning. We are not at the high end. We have a lot of potential, but I see this, I would say, simple examples that we start now using artificial intelligence, saving time, basically. Again, it is beginning, and I have seen like in the finance areas, some nice models. Again, they are built in an early stage. So efficiency, basically pure efficiency gains that our colleagues can spend time for something more valuable. But again, at the beginning with a lot of potential.
Okan, do you want to add?
No, exactly. I can only second that. If you just think about, as you just mentioned, simple things like Copilot. My part of the organization was extremely excited to be able to use it, and we are now teaching ourselves, if you will, to really exploit the Copilot and make sure that we are more efficient, more automated, and yeah, I think this is a step into the right direction and comes of course, with a lot of potentials.
Okay, thank you very much. Next question from the remote audience is: Are there differences in your market growth expectations depending on the region we are looking at? And that was done.
Yeah. Basically, yes. There are some regions where we have strong growth because also we are a bit lower. For example, in Asia-Pacific, you know that we are not that strong, but we have lots of potential. We also upgraded our sales force there with experienced people. We will do a few more steps in Asia-Pacific. In EMEA, it is normally more difficult to grow, to be honest.
Okay. Another question from the audience here in the room. Yes, one second.
Thank you. You just mentioned artificial intelligence, and I remember that the AI council policy was being implemented, and I remember you have said you are working with Microsoft Copilot. Please correct me when I am wrong.
Yes.
MS Copilot was criticized by not being, let us say, very sophisticated in keeping secure information. How do you deal with that?
Yep. Yes, you are absolutely right. We use the Microsoft Copilot, but it depends on the contract and depends therefore on the policy, what is allowed. Where we can use the Copilot, we are not using it for everything. There is a very clear policy that the results are checked, basically, by our colleague. This is how we do it. We have, of course, a cybersecurity policy and this all in place. This was all checked before we allowed the use.
Thank you. Next question is about incentivization. How do you do it? Thank you.
On incentivization, our current policy is basically a significant portion is on individual targets, so it depends on the supervisor what individual targets are given. This is what we are updating, as Annette explained, to more a bonus policy, which is the same KPIs as the shareholders are seeing it, so that we have everybody working in the same direction.
Okay. Thank you very much. Another question from the audience here in the room. Not? Then I have one from our remote viewers. That is a pro question. Maybe you can give us an update idea of EPS progression at the third quarter 2026, given the calculation will happen nearly 40% less shares.
Well, as said.
Pro question.
It's a pro question. You are right, and thanks for that question. As I mentioned earlier, we today published our prelims, only the top line development and also the adjusted EBIT. We will, of course, share more information once we publish our Q3 figures, which will take place on the 3rd of November, so in basically two weeks. Until then, I would like to kindly ask, let's say, for a little bit patient, so that we can really make sure that we do the math right and share all the relevant information on that date.
Yep. Thank you very much. Next question from our remote viewers to automotive again. In the automotive sector, I guess there have been calls below the framed contract volume. How successful have you been with your claims, and how long did the negotiations take for that?
That is very individual. Of course, it is an important topic, and not all contracts are below volume. It depends also what the contract says, what flexibility we have. Yes, it is very important to negotiate a low volume payment. What we are doing for each contract where this is the case. Result is very different and also timing is very different depending on customer, depending on the situation.
Okay. Thank you very much. There is a question specifically on the U.S. market. Can you elaborate how different the market environment you are operating in in the United States is from the rest of the world?
I think I will pass this on to one or both of our colleagues from the U.S. Maybe you give us an insight about the U.S. market, Jeff and/or Sergio.
Thank you. In the IA business, Industry Applications, we are seeing growth, but it is relatively flat in the base business, as I discussed today. We are growing a little faster than the market. We are seeing some headwinds with tariffs, of course. Tariffs are definitely a point of topic and discussion in our business. We are really determined to really onshore, as you all know, in America, and that helps us in America gain some share. There are headwinds with inflation, there are headwinds with tariffs, but we are seeing through the third quarter, growth above the market. I cannot speak to how we compare against EMEA or against APAC, but I can just say that our base business is growing against the market and our focus industries are at market right now.
Yeah. It's a similar situation with Mobility & New Energy. We have the tariffs. That's bringing some headwinds to the market. On the other hand, we are being pushed more for local production and so on because of the tariffs. So we're seeing this reshoring into the market, and we are in a good position because we have the footprint there to support the customers and localize the product. This is helping us as well.
Thank you.
Thanks a lot. Next advanced question: what prevented you from implementing measures such as the Sales Push years ago?
Well, that's a really difficult question, I agree, because I don't know the history. The only thing I can say, what I see is NORMA has been extremely successful, and I think most of you know these times. After the water divestment or during the water divestment, it became very clear where NORMA stands minus the water divestment, and now we're taking immediate actions on this.
Okay. Thank you very much. A question from the audience, maybe.
Thank you. Maybe to you. You were talking about the base markets versus focus markets. Is there any different in margins? Will there be a mix improvement when you have more business in the focus than base markets?
There is a difference, and thank you for the question. In the base business, we are seeing some margin improvement, but we are seeing also margin improvement in the focus industry. When we deal with the base business, we are dealing with automotive aftermarket, just to clarify what the base business is. Automotive aftermarket, wholesale distribution, and industrial applications that are standard products. The focus industries, we are dealing with higher margin parts, more proprietariness of the part. So we are seeing a little differentiation of the products and also the offerings in the market. Hope that answered your question.
Thank you very much, Jeff. We have another question here.
Yes. Thanks for opening that area, staying on the margins. You said that both BUs are profitable, I guess, slightly, but we have not yet seen your thoughts on the margin potential of the two. I think, during some road shows, you mentioned double digits also or the Industry Applications. Maybe you can share your thoughts. What is the target margin for both BUs, and by when will you officially make those targets public?
Yeah. I can take that, sure. Thanks for the question. We expect, of course, for both business units, not just the industry business, but also for the mobility business, once, of course, we fix our cost structures and margin improvement. That is for sure. When will we share the first time, the segment reporting, if you will? Of course, then with our Q1 announcement, in May, I think, next year. We will basically share figures for the first quarter based on the segments. What are target margins going forward? I think in the Industry Applications area, it is fair to say that realistic margins are between, in the midterm, let us say short to midterm, somewhere around 12%-15%, I would say. In the mobility area, I would say somewhere around 6%-8%.
Again, once, of course, we fix our cost structures and increase the utilization and everything that we presented today, basically.
Very helpful. Thank you.
Sure. You are welcome.
Okay. Another question from the audience, maybe, while we are together. No? Okay, let's take this next one from here. It is about buybacks. Buybacks, they only value creative if done below fair value. You therefore must have an idea of what this fair value is. Is it closer to the first or second price point of your recent buybacks?
It is also a pro question.
It is a very pro question, yes, and I completely agree with this statement. For each of the buybacks, we took quite significant effort and thinking. What is the fair value? Based on this, you all know there was different price offer. Based on this evaluation, we made both share buybacks. For a potential next one, we will do a very similar process.
Okay. Thank you very much. Next question is concerning the transformation. Can you detail a bit more of what your methodology or your approach is in increasing efficiency throughout the organization? What methodologies and what areas of improvement are you focusing on?
Well, I can start with the SG&A portion. If you look at SG&A, I shared early on, NORMA Group has grown with a lot of M&A, so you have individual sites which are a full business with all functions. Every function is thinking, how do we do it? It is normally not very efficient. If you bring this together, for example, in shared service centers, you apply more digitalization, artificial intelligence, and you can have a very streamlined process. They are sharing ideas, you support each other. With this, there is, for an example, a higher efficiency. Altogether, if we look at the processes, the processes in NORMA Group have grown to where they are, everybody trying to do the best. What we need to do is to think like, can we maybe stop a process or a report or something like this at all?
It is like a lean in indirect areas. Or can we really streamline the processes? There is lots of potential if the need is there, and the need is there.
It is okay? Good. Okay, next question. Looking at Maintal again, we have seen the stories and the news about improving the efficiency and the throughput for quite some time now. Why did you start to show improvements just recently?
Why did we show them just recently? I can say from my time, from the last year, I have also seen the issues as it was explained by Selman and by Bronislava. We brought in these two colleagues, but even more people to support this, and we really track very regularly and very transparent what is the progress which needs to become sustainable. It was very clear that there are some issues. Selman very openly shared the issues, and also that he was a bit surprised when he stepped into it. Also, Selman is here 25 years with the company in Maintal. We know it is fundamental, but I am convinced we are now on the right track to fix them sustainably.
Okay. Thank you very much. Another question from the front row.
Yes. Sorry to come back. I just did this back of the envelope calculation and came to the conclusion only at the upper end of the margin ranges you just provided I can come to 10.2%. Coming back to the March 2025 deck, you said 15%-20% for IA and Mobility and about 10% for Autos. So what has changed this view now?
There is no significant change in this view. We are just trying to, let's say, be not too aggressive, let's say, in our plan. I think it's, as you just did it, I also did the math this morning exactly on that question. I think it all depends then on the mix, it all depends on our cost structures, it all depends on the customers that we can win, especially in the focus industries. If you apply the share that we've just communicated for Mobility versus IA or even change it a little bit, there is a significant potential. I think ultimately, if we fix the cost structures and execute our plans as they have been drafted, then in both areas, there is a significant upside potential. There's no significant change.
It is rather a question of, let's say, quality of sales, customer structure, and then also the mix ultimately between the two business units. Hope that answers your question.
Well, to some extent.
It's a prudent approach, if you will.
Okay. Thank you very much. Another question from the audience. Yes.
Thank you. On the share buyback, do you plan to, typically, there is approval of 10% of outstanding shares at the AGM. Is this enough for you, or are you planning to get approval for a higher share just to have more flexibility?
Well, at the moment it is okay, and we will then assess, well before the next AGM, what we ask for. But at the moment, we feel comfortable with the approval we have.
Thank you very much.
Hi. Thank you very much for the good presentation. Nils Herzing from Shareholder Value. Just one question regarding the overall picture. Whatever you presented comes across a little bit conservative. If you add up the different target growth rates in automotive, for example, you have 1%-2%, and the content per vehicle should actually grow because you have more hybrids or at least stay stable with the switch to BEV. Then in the margins and the cost takeout measurements, if you add them up, you actually always come out at the lower end. Then with the cash conversion, you stand at 70%, even though you say you have a tax rate of 25%, sorry. This at least would be 75%.
You also say, actually, your CapEx should be lower than the D&A, because at one end, NORMA has done a lot of M&A, and due to this, the PPA portion of the D&A is larger, and so you need less.
Given those three points, and the fact that you have around EUR 70 million or EUR 80 million in cash at hand, and you are not planning any M&A in the next two years, and you just changed your dividend policy to at least 10% and opportunistic share buybacks, what would trigger a third buyback, and when would you think something like this would happen? Would it be this year or next year? What are the levers? Thank you very much.
Well, thanks for this, and I understand fully why you say it sounds conservative. We heard also today, and we are all fully aware that in NORMA in the last years, there was quite high numbers promised, and the delivery was sometimes an issue. That's also, for me, a really key point that we promise and we deliver every quarter. That's absolutely what we want to do. We feel very comfortable or committed and convinced that we can do this, and we will run, and of course, we will always be in a good communication. In case we would see there is a higher opportunity, we will for sure inform you about this. At the moment, we feel like we need to run with this. We are committed and deliver and show that we can deliver to what we have promised.
The share buyback, well, at the moment, we have done what we have done. We have from the AGM the resolution for 10%, and we are assessing what makes sense. In a point of time, we will, of course, come back and inform you about any decision.
Just for clarification, and that I understand it correctly. What you are basically saying is what you said before in one of the questions, there is the evaluation method, how you think about the shares, and if the share price is reasonably priced. This was EUR 22.35 in the past. You have a resolution in place for a share buyback of up to 10%, which holds until the next AGM, actually. Given the fact that the share price is where it is today, and then you could basically look how the next quarters develop, you could basically do a share buyback early next year, Q1 or Q2. Just from my understanding, that I didn't misunderstand what you were saying.
Potential is there, we could do, and of course, we always assess what is the right decision from our point of view. There is no decision taken yet.
Thank you very much.
Thank you very much. We got time for one question from the audience, and I still got one that is very strategic from the remote viewers. Here you go.
I do not know if it is strategic, but maybe just a technical question on the provisions for these additional measures you were talking about today. Are you going to book them this year still, or is it then for other temporaries or next year? Thank you.
That is our aim. We are working against that target, yes. But of course, there are certain conditions that need to be in place in order to do that. We did that last year for Wave 1 transformation costs. We are planning to do that, and in case it all works out, we will book an accrual for Wave 2 already this year.
Hopefully Q4 then.
Potentially.
So really final question from the audience. If not, then we take one from our remote viewer. With Mobility & New Energy focused on profitability and cash generation, while Industry Applications is positioned as a growth engine, how does the Management Board evaluate the long-term strategic value of keeping both businesses together?
Well, for NORMA, we benefit really from the synergies. It was in some presentations also shared. We have quite some machines where we produce for both business units. Of course, most of our plants are shared for both business units. Also the footprint, we bring this together, we have even better synergies if we have the shared services. So we basically benefit. Also what Gerrit has shared in the engineering and the innovation part, we have innovations which we basically develop for one business unit, but we utilize it also for the other business unit. So we see a very good synergies from the metal and plastics. We have seen the move there. Therefore, we are convinced that this is the right way forward.
Okay. Thank you very much. That concludes the Q&A. Can I ask all our presenters to come on stage? That actually brings us to the end of the strategy update event for today. We say a big thank you to everyone that came to see us here in Frankfurt, and also a big thank you to everyone that joined us over our remote session. We hope you found that day informative and you got answers that you wanted. We say thank you very much for your time and for the ones that are with us here physically, we are enjoying some light snacks. Sorry for the ones that dialed in remotely. Thank you very much. Until next time, thank you and goodbye from Frankfurt.