Quarterly report at 31.03.2015

Emak S.p.A. • Via Fermi, 4 • 42011 Bagnolo in Piano (Reggio Emilia) ITALY Tel. +39 0522 956611 • Fax +39 0522 951555 - [email protected] • www.emak.it Capitale Sociale Euro 42.623.057,10 Interamente versato • Registro delle Imprese N. 00130010358 • R.E.A. 107563 Registro A.E.E. IT08020000000632 • Registro Pile/Accumulatori IT09060P00000161 Meccanografico RE 005145 • C/C Postale 11178423 • Partita IVA 00130010358 • Codice Fiscale 00130010358

Emak Group Financial Highlights

Income statement (€/000)

Year 2014			1Q 2015	1Q 2014
354,757	Net sales		109,843	105,829
31,456	EBITDA	(1)	14,253	13,346
19,983	EBIT		11,389	10,577
10,185	Net profit		6,849	5,878

Investment and free cash flow (€/000)

Year 2014		1Q 2015	1Q 2014
9,464	Investment in property, plant and equipment	2,379	2,267
2,086	Investment in intangible assets	379	349
21,658	Free cash flow from operations (2)	9,713	8,647

Balance sheet (€/000)

31.12.2014		31.03.15	31.03.14
239,142	Net capital employed	280,045	260,670
(79,043)	Net debt	(107,749)	(104,464)
160,099	Total equity	172,296	156,206

Other statistics

Year 2014		1Q 2015	1Q 2014
8.9%	EBITDA / Net sales (%)	13.0%	12.6%
5.6%	EBIT/ Net sales (%)	10.4%	10.0%
2.9%	Net profit / Net sales (%)	6.2%	5.6%
8.4%	EBIT / Net capital employed (%)	4.1%	4.1%
0.49	Debt / Equity	0.63	0.67
1,574	Number of employees at period end	1,588	1,576

Share information

Year 2014		3 Months 2015	3 Months 2014
0.064	Earnings per share (€)	0.042	0.037
163,934,835	Number of shares comprising share capital	163,934,835	163,934,835
163,537,602	Average number of oustanding shares	163,537,602	163,537,602

(1) "Ebit" plus "Amortization, depreciation and impairment losses"

(2) "Net Profit" plus "Amortization, depreciation and impairment losses"

Consolidated financial statements

Consolidated income statement

FY 2014	€/000	1 Q 2015	1 Q 2014
354,757	Sales	109,843	105,829
3,045	Other operating incomes	434	513
6,144	Change in inventories	11,739	7,144
(198,608)	Raw and consumable materials and goods	(68,987)	(64,266)
(65,035)	Salaries and employee benefits	(18,237)	(17,418)
(68,847)	Other operating costs	(20,539)	(18,456)
(11,473)	Amortization, depreciation and impairment losses	(2,864)	(2,769)
19,983	Ebit	11,389	10,577
683	Financial income	95	129
(3,860)	Financial expenses	(838)	(942)
357	Exchange gains and losses	296	(545)
17,163	EBT	10,942	9,219
(6,978)	Income taxes	(4,093)	(3,341)
10,185	Net profit	6,849	5,878
282	(Profit)/loss attributable to minority interests	94	223
10,467	Net profit attributable to the group	6,943	6,101
0.064	Basic earnings per share	0.042	0.037
0.064	Diluted earnings per share	0.042	0.037

Comprehensive income statement

FY 2014	€/000	1 Q 2015	1 Q 2014
10,185	Net profit (A)	6,849	5,878
2,537	Profits/(losses) deriving from the conversion of foreign	5,270	(1,079)
	company accounts
	Profits/(losses) deriving from the transfer of treasury	0	0
(46)	shares in portfolio (*)
52	Tax effect relating to other components (*)	0	0
	Total other components to be included in the		(1,079)
2,543	comprehensive income statement (B):	5,270

12,728	Comprehensive net profit (A)+(B)	12,119	4,799
	Comprehensive net profit attributable to minority
656	interests	167	450
13,384	Comprehensive net profit attributable to the group	12,286	5,249

(*) Items will not be classified in the income statement

Schedule showing consolidated assets-liabilities-financial situation

ASSETS

31.12.2014	€/000	31.03.2015	31.03.2014
	Non-current assets
	56,836 Property, plant and equipment	58,453	55,620
	6,170 Intangible assets other than goodwill	6,272	5,748
	34,773 Goodwill	36,770	33,153
	230 Equity investments in other companies	230	230
	8,576 Deferred tax assets	8,317	7,822
	158 Other non current financial assets	144	176
	62 Other receivables	306	2,463
106,805 Total		110,492	105,212
	Current assets
	127,665 Inventories	141,720	125,766
	95,615 Trade and other receivables	137,906	135,657
	5,037 Current tax assets	5,763	4,715
	7 Other financial assets	7	2
	241 Derivative financial instruments	265	65
	13,238 Cash and cash equivalents	25,553	9,774
241,803 Total		311,214	275,979
	348,608 TOTAL ASSETS	421,706	381,191

EQUITY AND LIABILITIES

31.12.2014 €/000		31.03.2015	31.03.2014
	Capital and reserves
	158,411 Total Group	170,775	154,299
	1,688 Minorities interest	1,521	1,907
	160,099 Total equity	172,296	156,206
	Non-current liabilities
	51,005 Loans and borrowings	61,205	49,139
	4,365 Deferred tax liabilities	5,397	3,763
	9,112 Provisions for employee benefits	8,962	9,433
	1,666 Provisions	1,661	1,765
	937 Other non-current liabilities	912	1,009
67,085 Total		78,137	65,109
	Current liabilities
	75,049 Trade and other payables	91,308	86,744
	2,879 Current tax liabilities	5,339	6,208
	40,823 Loans and borrowings	71,405	64,592
	859 Derivative financial instruments	1,108	750
	1,814 Provisions	2,113	1,582
121,424 Total		171,273	159,876

	348,608 TOTAL EQUITY AND LIABILITIES	421,706	381,191

Consolidated net financial position

( €/000)	31.03.2015	31.12.2014	31.03.2014	31.12.2013
Cash and banks	25,553	13,238	9,774	15,122
Securities and derivative financial instruments	265	241	65	101
Other financial assets	7	7	2	1,503
Financial liabilities	(71,405)	(40,823)	(64,592)	(41,197)
Derivative financial instruments	(1,108)	(859)	(750)	(848)
Short-term net debt	(46,688)	(28,196)	(55,501)	(25,319)
Other financial assets	144	158	176	178
Financial liabilities	(61,205)	(51,005)	(49,139)	(51,240)
Long-term net debt	(61,061)	(50,847)	(48,963)	(51,062)
Cash and banks	25,553	13,238	9,774	15,122
Securities and derivative financial instruments	265	241	65	101
Other financial assets	151	165	178	1,681
Financial liabilities	(132,610)	(91,828)	(113,731)	(92,437)
Derivative financial instruments	(1,108)	(859)	(750)	(848)
Total net debt	(107,749)	(79,043)	(104,464)	(76,381)

Financial liabilities at 31 March 2015 include debts for the purchase of equity investments for an amount of € 2,375 thousand.

Banks and financial liabilities include the amount, equal to € 17,000 thousand, of the bank loan obtained March 30, 2015, for the acquisition of the company Lemasa, and still available as of March 31, 2015 as the transaction was finalized in the following quarter.

Long-term financial payables include not only the non-current portion of loan principal repayments but also the portion of finance leases falling due after more than 12 months.

Short-term debt mainly includes:

Bank overdrafts;
Mortgage repayments due by March 31, 2016;
Debts to other financial institutions due by March 31, 2016.

Change in consolidated net equity

The following table reports changes in consolidated equity between 31st December 2013 and 31st March 2015.

					OTHER RESERVES			RETAINED EARNINGS
Eur/000	Share Share capital premium Legal Revaluation reserve reserve	Cumulative translation adjustment	Reserve Ias 19	Other reserves	Retained earnings	Net profit of the period	TOTAL GROUP	EQUITY ATTRIBUTABLE TO MINORITY INTERESTS	TOTAL

Balance at 31.12.2013	40,594	42,454	1,924	1,138	1,176	(782)	27,733	24,478	10,326	149,041	1,753	150,794

Change in treasury shares										0		0
Profit reclassification			136					6,101	(10,326)	(4,089)	(119)	(4,208)
Other changes								75		75	710	785
Net profit for the period					2,911	6			10,467	13,384	(656)	12,728

Balance at 31.12.2014	40,594	42,454	2,060	1,138	4,087	(776)	27,733	30,654	10,467	158,411	1,688	160,099

Change in treasury shares										0		0
Profit reclassification								10,467	(10,467)	0		0
Other changes								78		78		78
Net profit for the period					5,343				6,943	12,286	(167)	12,119

Balance at 31.03.2015	40,594	42,454	2,060	1,138	9,430	(776)	27,733	41,199	6,943	170,775	1,521	172,296

*the share capital is show n net of treasury shares of a value of € 2,029 thousand

Organizational chart of Emak Group as at 31/03/2015

The company Comet Do Brasil Investimentos Ltda is 99% owned by Comet SpA and the remaining 1% by PTC Sr.l. The participation in Valley Industries LLP is equal to 100% as a result of the "Put and Call Option Agreement" that governs the acquisition of the remaining 10% ownership of the company's General Manager.

Comments on the financial statements

This quarterly consolidated report has been prepared in accordance with International Financial Reporting Standards (IFRS) and in compliance with article 154-ter ("Financial Reports") of the Consolidated Finance Act, introduced by legislative decree 195/2007.

The accounting standards and policies adopted by the group for preparing the quarterly consolidated financial statements are the same as those used for the consolidated financial statements at 31 December 2014.

In this interim report IAS 19 is not applied as far as the quantification of changes in actuarial gains accrued in the period is concerned.

It should be noted that:

when it has not been possible to obtain invoices from suppliers for the provision of consulting and other services, a reasonable estimate of these costs has been made on the basis of the stage of completion of the work;
current and deferred taxes have been calculated using the tax rates applied in the current year in the individual countries of operation;
the quarterly report is not subject to audit;
all amounts are expressed in thousands of euros, unless otherwise specified.

Scope of consolidation

Compared to December 31, 2014 the company Comet do Brasil Investimentos LTDA has been included in the scope of consolidation. Its assets and liabilities and its financial effects have therefore been included in this interim financial report. The details of the operations are described in the next paragraph.

Compared to March 31, 2014, consolidated financial statements include:

the economic and financial figures of the company Master Fluid Srl, acquired by PTC S.r.l. on 5 June 2014 and merged into the same with effect from 1 September 2014. Master Fluid Srl has been included in the consolidated financial statements as of July 1, 2014;
The economic and financial figures of the company Speed South America SpA, incorporated during the month of October 2014 by the company Speed France Sas and became operational from the first quarter of 2015.

Significant, non-recurring transactions or atypical, unusual transactions

Incorporation of Comet do Brasil Investimentos LTDA

On March 2, 2015 was subscribed and fully paid the share capital of 10 million Brazilian reais for the incorporation of Comet do Brasil Investimentos LTDA based in Induiatuba (Brazil) whose capital is held 99% by the subsidiary Comet SpA and 1% by the subsidiary PTC Srl.

On March 31, 2015, with no change in the shareholding structure, it has been subscribed and fully paid a share capital increase amounting to 18,990 thousand reais, for an equivalent of € 5,445 thousand, bringing the share capital of 19,000 million Brazilian reais. It was also granted on 30 March 2015 a loan from Comet SpA of € 9,240 thousand, equal to about 32,000 thousand Reais to provide the Company with the necessary financial resources to the completion of the acquisition of 70% of Lemasa LTDA.

Share capital increase Speed South America

During the first months of 2015 the company Speed France has fully subscribed and paid a capital increase of the subsidiary Speed South America for € 120 thousand

DIRECTORS' REPORT

Comments on economic figures

Summery of economic results

Summary figures from the consolidated income statement for the first quarter 2015 are shown below:

FY 2014	%	€/000	1Q 2015	%	1Q 2014	%	Change %
354,757	100	Net sales	109,843	100	105,829	100	3.8
31,456	8.9	Ebitda	14,253	13.0	13,346	12.6	6.8
19,983	5.6	Ebit	11,389	10.4	10,577	10.0	7.7
17,163	4.8	Profit before taxes	10,942	10.0	9,219	8.7	18.7
10,185	2.9	Net profit	6,849	6.2	5,878	5.6	16.5

Sales

The consolidated turnover for the first quarter 2015 amounted to € 109,843 thousand compared to € 105,829 thousand for the same period of the previous year, an increase of 3.8%. At constant scope of consolidation the increase would have been of 2.9%.

Starting from the interim report at September 30, 2104, the Group has adopted a new breakdown of revenues by business area, more consistent with the internal reporting used by management to evaluate performance and manage the Group. The amounts relating to the comparative periods have been suitably reclassified.

The purpose is to represent the individual activities of the Group in terms of uniform distribution channels, and of customer and market dynamics.

The following table shows an analysis of sales reported for the first quarter 2015, broken down by business sector and geographic area, compared with the sales of the same period of the previous year:

€/000		OUTDOOR POWER EQUIPMENT			PUMPS AND HIGH PRESSURE WATER			COMPONENTS AND ACCESSORIES			TOTAL
	1Q2015	1Q2014	Var. %	1Q2015 1Q2014		Var. %	1Q2015 1Q2014		Var. %	1Q2015	1Q2014	Var. %

Europe	43,261	48,412	-10.6%	12,835	11,592	10.7%	21,567	20,577	4.8%	77,663	80,581	-3.6%
Americas	3,481	2,451	42.0%	11,236	8,171	37.5%	6,608	5,944	11.2%	21,325	16,566	28.7%
Asia, Africa and Oceania	5,202	2,930	77.5%	2,722	3,054	-10.9%	2,931	2,698	8.6%	10,855	8,682	25.0%

Total	51,944	53,793	-3.4%	26,793	22,817	17.4%	31,106	29,219	6.5%	109,843	105,829	3.8%

Sales in the business "Outdoor Power Equipment" were overall higher than last year, net of the decrease in the markets of Russia and Ukraine due to the political and economic difficulties of the area. The impact of these two markets was still relevant in the first quarter of 2015, and will decrease significantly in subsequent quarters. In Europe, good performances were registered on the markets directly managed, among which Italy, UK and Poland. The increase in sales in the Americas was mainly driven by the good results obtained on the Latin American market. The good performance in the markets of the Middle East and India, as well as the recovery of the Turkish market, have driven sales in Asia, Africa and Oceania.

Sales of the "Pumps and High Pressure Water Jetting" in Europe sales were higher than the previous year thanks to the increase on the Italian market. In other markets, sales were broadly in line. Sales growth in the Americas was driven by the North American market and the good results obtained in some Latin American countries, including Mexico and Chile. The markets of Asia, Africa and Oceania have seen a slight decrease compared to last year mainly due to lower sales of industrial pumps in the Far East.

The enlarged scope of consolidation contributed positively for a total of about € 900 thousand.

Emak Group

Quarterly report at 31 March 2015

The sales growth of the business "Components and Accessories" on the European market was driven mostly by the increase on the Italian market. The good results obtained in the United States have contributed to the good performance of the Americas. In Asia, Africa and Oceania the good results achieved in China have to be emphasized.

EBITDA

EBITDA for the first quarter 2015 amounts to € 14,253 thousand, compared to € 13,346 thousand for the corresponding quarter of the previous year, increasing by 6.8%.

Ebitda as a percentage of revenues was 13%, compared to 12.6% in the same period last year.

The increase, both in absolute and percentage terms, was due to higher sales volumes and a mix of revenues with higher margins. These factors more than offset the negative effects of the increase in product costs due to the unfavorable trend of some foreign currencies.

Some extraordinary provisions for future liabilities in the amount of about 400 thousand and expenses related to M & A in the amount of 432 thousand negatively affected EBITDA for the first quarter of 2015.

Excluding these effects, EBITDA would amount to € 15,085 thousand, an increase of 13% over the previous year and with a margin of 13.7%.

The average number of employees in the workforce, including temporary workers, decreased amounting to 1,756 against the 1,839 in the same period of the previous year.

The increase in personnel costs is due to increased production volumes and a different distribution of staff among the various countries in which the Group operates.

During the quarter, some companies of the Group made use of social welfare.

EBIT

EBIT for the first quarter 2015 is € 11,389 thousand, compared to € 10,577 thousand for the same quarter of last year.

Depreciation and amortization are € 2,864 thousand, compared to € 2,769 thousand in the same period of the previous year.

EBIT as a percentage of sales stands at 10.4% compared to 10% of the first quarter 2014.

Non-annualized EBIT as a percentage of net invested capital is 4.1%, unchanged compared to the same period of the previous year.

Net profit

Net profit for the first quarter 2015 is € 6,849 thousand, against € 5,878 thousand for the same quarter of the previous year.

The financial management improves thanks to the decrease in average cost of funding.

The management of currencies is positive for € 296 thousand, while it was negative for € 545 thousand in the same period of last year.

The tax rate of 37.4% increased compared to 36.2% in the same period of the previous year, due mainly to the different distribution of taxable income between the countries in which it operates and the non-registration, for prudential purposes, of deferred tax assets on losses.

Balance sheet and financial position

31.12.2014	€/000	31.03.2015	31.03.2014
87,970	Net non-current assets	93,416	89,066
148,575	Net working capital	186,629	171,604
236,545	Total net capital employed	280,045	260,670
158,411	Equity attributable to the Group	170,775	154,299
1,753	Equity attributable to the minority interests	1,521	1,907
(76,381)	Net debt	(107,749)	(104,464)

Net non-current assets

During the first quarter 2015 Emak Group invested € 2,758 thousand in property, plant and equipment and intangible assets, as follows:

€ 951 thousand for product innovation;
€ 928 thousand for adjustment of production capacity and for process innovation;
€ 344 thousand for upgrading the computer network;
€ 388 thousand for adjustment of industrial buildings;
€ 147 thousand for other managerial working investments.

Investments broken down by geographical area are as follows:

€ 1,723 thousand in Italy;
€ 219 thousand in Europe;
€ 446 thousand in Americas
€ 370 thousand in the Rest of the World.

Net working capital

The net working capital, compared to December 31, 2014, increased of € 38,054 thousand, going from € 148,575 thousand to € 186,629 thousand, mainly due to sales seasonality.

The following table shows the change in net working capital in the first quarter 2015 compared with the same period of the previous year:

€/000	1Q 2015	1Q 2014
Net working capital at 01 January 2014	148,575	142,212
increase/(decrease) in inventories	14,055	6,539
increase/(decrease) in trade receivables	40,081	36,078
(increase)/decrease in trade payables	(15,610)	(9,170)
change in scope of consolidation	0	(6)
other changes	(472)	(4,049)
Net working capital at 31 March 2014	186,629	171,604

The increase in inventories is mainly due to the late start of the season. The increase in trade receivables is due to the higher sales volumes and the difficult financial situation experienced in some markets. The increase in accounts payable is related to higher purchases during the quarter. It is expected that these effects should normalize over the next few months due to the seasonality of the business and for the initiatives undertaken by the Group.

Compared to the same period of last year the increase in net working capital is affected by the translation of financial statements of consolidated companies with national currencies not euro.

Net equity

Consolidated net equity stands at € 172,296 million, compared to € 160,099 million as of December 31, 2014. Earnings per share as of March 31, 2015 are € 0.042 compared to € 0.037 for the same period of the previous year.

At 31.12.2014 Emak S.p.A. held 397,233 treasury shares, worth € 2,029 thousand. From 01.01.2015 to 31.03.2015 no treasury shares were purchased or sold by Emak S.p.A., and therefore its total holding and the relative value are unchanged compared to 31 December 2014.

Net financial position

The following table shows the movements in the net financial position of the quarter:

€/000	1Q 2015	1Q 2014
Opening NFP	(79,043)	(76,381)
Cash flow from operations, excl. changes in operating assets and
liabilities	9,710	8,647
Changes in operating assets and liabilities	(37,183)	(30,068)
Cash flow from operations	(27,473)	(21,421)
Changes in tangible and intangible assets	(6,582)	(2,031)
Other equity changes	5,349	(900)
Change in consolidation area	0	(3,731)
Closing NFP	(107,749)	(104,464)

Changes in tangible and intangible assets and in equity are largely justified by the foreign exchange differences arising from translation of financial statements of consolidated companies with foreign currencies. Free cash flow from operations after tax is € 9,713 thousand, compared with € 8,647 thousand in the same period of last year.

The net financial position increased from € 79,043 thousand at December 31, 2014 to € 107,749 thousand at March 31, 2015. The increase is mainly due to the increase in net working capital.

Compared to the same period prior to the increase in net debt reflects the effect of translating the financial statements of the consolidated companies with foreign currencies.

Business outlook

The positive trend of the first quarter of the year is related both to the recovery of some markets where the Group operates, and to the consolidation of development strategies and cost rationalization implemented by the management. Consistently with the stabilization of the situation in Eastern Europe and the confirmation of the signs of recovery, the Group is confident to confirm in the coming months the growth rates obtained so far. The management also expects a significant contribution to growth in the second quarter, by the entry in the scope of consolidation of Lemasa.

Subsequent events

Acqusition of Lemasa LTDA

On April 1, 2015, was finalized the closing of the acquisition of 70% of share capital of the Brazilian company Lemasa LTDA, one of the leading manufacturers in South America of pumps and systems for high and very high pressure,

The acquisition took place through the newly-formed Comet do Brasil Investimentos LTDA based in Indaiatuba (Brazil), whose share capital will be owned as to 99% by Comet S.p.A. and 1% by Ptc Srl..

In accordance with agreements, Comet do Brasil has paid the first installment (42.3 million Reais) of the total price of 75.6 million Reais. The amounts related to the other two installments were filed in an escrow account as security for all contractual commitments and for price adjustments quantified on the basis of economic and financial parameters provided in the contract.

The financial resources used by the Comet do Brasil for the acquisition of 70% of Lemasa LTDA were obtained by the same as follows:

19 million Reais through the subscription of capital by the parent company Comet S.p.A. and P.t.c. S.r.l .;
32 million Reais through the granting of a loan by the parent company Comet S.p.A.;
25 million Reais through a bank loan signed in local currency on 1 April 2015.

Lemasa's business and technology are highly complementary Comet's, one of the worldwide leaders in the field of pumps for agriculture and high pressure water jetting. With this acquisition, Comet will strengthen its competitive position by exploiting industrial and distribution synergies resulting from the transaction.

Bagnolo in Piano (RE), May 15, 2015

On behalf of the Board of Directors

Chairman

Fausto Bellamico

STATEMENT

Subject: Quarterly report at March 31, 2015.

I, the undersigned, Aimone Burani, the executive in charge of preparing the accounting statements of EMAK S.p.A. hereby

CERTIFY,

in accordance with the second paragraph of Art. 154-bis, of Italian Legislative Decree No. 58 of 24 February 1998

that, to the best of my knowledge, the Quarterly Report at March 31, 2015, examined and approved today by the Board of Directors of the company, corresponds with the accounting documents, ledgers and records,

Yours faithfully,