Carel Industries

Investor Presentation • Nov 10, 2022

CAREL INDUSTRIES S.p.A. 2022 – 9M Results

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10th November 2022

9M 2022 – Highlights

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In the first 9M 2022 the company managed to keep an excellent organic revenue growth rate (Q3 2022 is the seventh consecutive quarter in which CAREL reported a double digit organic revenue growth). Adding to this the strong effort in M&A activity (4 deals completed) and a continuous commitment in ESG.

• Excluding the positive impact of the exchange rates, and the contribution coming from the M&A activity (~22m€) the organic revenue growth rate reported is +19.0%.
• CAREL managed to take advantage of very positive trends experienced in a certain number of applications in HVAC (Heat pumps; Indoor Air Quality; Data centres) and in Refrigeration, in spite of a supply chain scenario still very challenging to which is added a difficult geo-political and macro-economic context.

• EBITDA margin equal to 21.4%: higher on FY 2021 and in line with H1 2022 level. Net of ~1.8m€ non-recurring M&A activity costs, the EBITDA margin would have been 21.9%
• The partial deployment of the effects deriving from previous price-list increases and the positive operating leverage effects partly offset higher raw materials cost due to the shortage.

• M&A pipeline remains active. During 9M 2022 CAREL completed 4 bolt-on transactions:
  • Acquisition of 70% of the share capital of Sauber
  • Acquisition of a further 30% stake in Arion
  • Acquisition of 100% of Klingenburg
  • Acquisition of 100% of Senva

M&A – 2022 – Senva

• Company profile: SENVA is a US company located in Oregon specialising in the design and manufacture of a wide range of sensors, mainly in the air-conditioning and ventilation sectors, and with a significant presence in indoor air quality.
• Rationale: the acquisition of SENVA is a further step towards the process of external growth through complementary products in reference applications that began in 2018. As in the case of Arion's acquisition (April 2022), the focus in the sensors segment is key to making products more efficient and more connected to their ecosystem, while also facilitating the activation of digital services. Furthermore, Numerous synergies can be achieved through the integration of CAREL and SENVA
• Transaction structure: Carel Industries S.p.A acquires all SENVA Inc.'s business through a SPV held by Carel USA Inc., Carel Industries S.p.A.'s US subsidiary. That acquisition is valued at USD 34 million. CAREL will also make an additional payment of up to USD 4 million tied to certain EBITDA results, for a total potential acquisition value of USD 38 million.

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• Key Data:

• Enterprise value (100%) = 34-38m€
• 2021 Revenues = ~13m USD
• EBITDA (TTM) = 3.1m USD
• Employees = ~65

• Industrial fitting:

• Bolt-on acquisition
• Strong complementarity with CAREL's product line-up
• Strong cross-selling and channel/geographical expansion opportunities
• Financial fitting:
• ~12x EV/EBITDA
• Low impact on Carel's NFP

M&A – 2022 – Klingenburg

• Company profile: Klingenburg GmbH and Klingenburg International Sp. Z.o.o. are leading producers of a wide range of products used mainly for heat recovery in ventilation and humidification systems, adiabatic cooling and air purification.
• Rationale: The transaction rationale is mainly attributable to the high degree of complementarity between Recuperator and Klingenburg in relation to the respective technologies of specialisation (plate exchangers for Recuperator and rotary for Klingenburg) and to the application areas. Furthermore it will strengthen CAREL's profile as a supplier of complete control solutions with high added value in the conditioning and refrigeration industry, with energy efficiency as one of their main characteristics.
• Transaction structure: The transaction, through which CAREL Industries S.p.A. takes over control of Klingenburg GmbH and Klingenburg International Sp. Z.o.o. via the acquisition of 100% of the share capital of the German and Polish companies, took place in response to an Enterprise Value of Euro 12.0 million (adjusted for approximately 2 million deferred capex).

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• Key Data:

• Enterprise value (100%) = 12m€
• 2021 Revenues = ~30m€
• EBITDA = 2.4m€
• Employees = ~200

• Industrial fitting:

• Bolt-on acquisition
• Strong complementarity with Recuperator's product line-up
• Strong cross-selling and geographical expansion opportunities
• Financial fitting:
• ~5x EV/EBITDA
• Low impact on Carel's NFP

9M 2022 – Results

m€	9M 2021	9M 2022	Δ%
Revenue	310.3	401.1(1)	29.3%
Revenue FX Adj.	310.3	390.8	25.9%
Revenue (no M&A)	310.3	379.6	22.4%
EBITDA	66.0	85.9(2)	30.1%
EBITDA adj.	68.0	87.7(3)	29.0%
EBITDA adj. Revenue	21.9%	21.9%
Net Profit	38.8	52.6	35.7%
Capex	13.8	15.4	11.6%

(1) Incl. ~21.4m€ (change in the consolidation perimeter); (2) Incl. ~4.7m€ (change in the consolidation perimeter); (3) Incl. ~1.8m€ (M&A expenses)

• Revenue +29.3%: Q3 2022 substantially confirmed the same growth trends and the magnitude already reported in the first part of the year in spite of a persistent challenging scenario (supply chain tensions, cost inflation, slow-down in global economy). Excluding the positive contribution coming from M&A and FX the reported organic growth is equal to 19%. It is worth noting that the growth rate reported in 9M 2021 was already very high (+25%).
• EBITDA +30.1%: The very positive results reported in revenues were reflected in the EBITDA growth rate. Q3 2022 EBITDA margin equal to 21.3% (22.4% on an adjusted base) thanks to the full deployment of previous price-list increases, along with operating leverage which helped in recovering part of the raw material cost inflation.
• Net Profit +35.7%: benefitting from the operating results. 20.8% Tax-rate in line with as reported in 9M 2021
• Capex: higher capex including the new plant in Croatia.

9M 2022 – Revenue breakdowns

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• EMEA Robust growth rate confirmed also in Q3 2022. 9M 2022 LFL growth rate equal to 19%
• APAC Acceleration in Q3 in the whole area, in spite of prolonged and strict numerous lock-downs in China. South APAC still over performing (9M 2022 growth rate at constant FX >25%)
• Americas (North) Even excluding M&A contribution and the positive FX impact, the growth rate reported would have been approximately 20%.
• Americas (South) Growth rate acceleration continued in Q3 thanks to very positive performance also outside Brazil and to seasonality in the Refrigeration sector.

• HVAC: Excellent growth confirmed (>20% excluding M&A and FX), driven by a strong demand across the board also in Q3 (particularly strong in heat pumps, Indoor air quality and data centers).
• Refrigeration: Excluding M&A and FX the growth rate would have been ~17%. In the first 9M of the year demand remained robust also thanks to the transition towards low GWP refrigerants. 6

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From EBITDA to Net Profit

K€	9M '21	9M '22	Δ%
EBITDA	66,042	85,918	30.1%
D&A	-15,147	-17,033
EBIT	50,894	68,885	35.3%
Financial (charges)/income	-1,719	-2,189
FX gains/losses	-310	-549
Companies consolid. with Eq. . Methods	509	2,361
EBT	49,375	68,508	38.8%
Taxes	-10,283	-14,236
Minorities	-291	-1,635
Group net profit	38,801	52,636	35.7%

• Higher D&A mainly due to the purchase price allocation amortisation
• Financial charges slightly higher compared to 9M '21 impacted mainly by the financial effects of the put/call option on CFM
• The growth in Companies consolidated with equity method is due to the application of the fair-value principle on Arion stake, following the related M&A transaction.

• tax-rate stable (20.8%), compared to 9M 2021 and down on H1 2022 level.

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9M 2022 – NFP Bridge

• Robust cash generation was offset by a strategic increase in NWC along with the payment of 2021 dividends. Approximately 14m€ impact deriving from M&A
• ΔNWC +39.9m€: The significant increase in NWC is mainly due to higher revenues (DSO are substantially the same compared to 9M 2021) and a strategic consolidation of the safety stock (~21m€) in order to be more resilient in such challenging raw material shortage scenario. It is worth nothing that the level of NWC and inventory stock remained substantially stable compared to H1 2022.
• Approximately 40% of the total 9M 2022 NFP is related to IFRS 16 accounting effect.

ESG rating - Update

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• In October 2022 CAREL was upgraded to "AA" in the MSCI ESG Ratings assessment.
• This upgrade is part of a continuous improvement path which brought CAREL from "B" in 2019 to "AA" in 2022.

• CAREL is now in the "ESG Leaders" category according to MSCI ESG rating assessment: "A company leading its industry in managing the most significant ESG risks and opportunities".

• Between April and June 2022 CAREL took part for the first time in the ECOVADIS rating process. Ecovadis is the most important Global ESG rating provider, with more than 90K companies rated.

• ECOVADIS Rating is particularly valuable for the supply chain, often representing a pre-requisite to be chosen as a supplier.
• The Group received a Silver Medal and its ranking is in the top 23% (in its industry/sector).

Closing Remarks

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• Solid growth trend across the board and in all the regions confirmed also in Q3 2022 (seventh consecutive quarter reporting a double-digit organic growth). Some applications continue to stand out such as heat pumps, data centers, Indoor Air Quality in HVAC and Food Retail in Refrigeration thanks also to secular trends, such as electrification, and regulation.
• Strong effort of the company in increasing flexibility, efficiency, time-to-market, sustainability: new plant in Croatia completed; digitalization process' milestone achieved; ESG ratings improvement.

• In 9M 2022 CAREL completed four bolt-on acquisitions with a significant strategic potential:
  • Sauber Strengthening Group's positioning in the services area.
  • Arion Securing the supply chain and opening new opportunities in the sensors field
  • Klingenburg Completing CAREL's offering in Heat exchangers for AHUs.
  • SENVA Widening opportunities in smart and high value added sensors sector.

• Challenges: The persistence of the electronic material shortage, the relentless rise in inflation rate, the geopolitical tensions and the restrictive monetary policy adopted by the Fed and ECB are all elements that could hamper global growth in the next quarters.
• Opportunities: Transition to low GWP refrigerants is already gaining traction also outside Europe (Kigali Amendment ratification by China and India and authorized by the US Senate). Booming Heat pumps market, in particular in Europe due to he REPowerEU regulation.

Guidance

Net of possible further worsening in the supply chain, the Company expects to report, in 2022, a revenue growth close to 20% (LFL, current exchange rate), improving its previous guidance. FY 2022 total EBITDA Margin is expected to be close to 20%.

Annexes

Shareholding structure (>5% voting rights)

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Income statement and Balance Sheet

Income statement Balance sheet

K€	9M 2022	9M 2021	Delta %
Revenues	401,076	310,309	29.3%
Other revenues	3,179	3,409	(6.7%)
Operating costs	318,337	247,677	28.5%
EBITDA	85,918	66,042	30.1%
Depreciation and impairments	(17,033)	(15,147)	12.4%
EBIT	68,885	50,894	35.3%
EBT	68,508	49,375	38.8%
Taxes	(14,236)	(10,283)	38.5%
Net result of the period	54,271	39,092	38.8%
Non controlling interest	1,635	291	>100%
Group net result	52,636	38,801	35.7%

K€	9M 2022	FY 2021	Delta %
Fixed Capital	248,928	230,338	8.1%
Working Capital	101,642	55,591	82.8%
Employees defined benefit plans	(8,495)	(8,612)	(1.4%)
Net invested capital	342,074	277,317	23.4%
Equity	215,473	169,875	26.8%
Non currrent liabilities	53,040	49,602	6.9%
Net financial position (asset)	73,560	57,841	27.2%
Total	342,074	277,317	23.4%

Company Profile

Leading provider of advanced control solutions for HVAC/R

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Note: financial data refer to consolidated accounts of CAREL Industries S.p.a. 2015-2021 IFRS. Comparability might be affected by change in consolidation perimeter

This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.

We operate in attractive niches across a wide range of end-markets…

Source: Company information as of Mar-22

…through a one-stop-shop portfolio of components and platforms

Source: Company information as of Mar-22 Note: 1) developed with partners

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This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.

Well-articulated strategies to continue the growth track record

• Consolidation of HVAC market leadership
• Growth in Refrigeration driven by technology leadership
• Upselling and cross-selling
• Global penetration
• Connectivity, IoT and AI capabilities already developed
• Advanced monitoring and optimization services to end customers to represent one of CAREL's organic growth drivers
• Maintain innovation leadership
• Deliver strong profitability
• Leveraging the current production capacity, further enhancing flexibility
• Develop talent
• Disciplined bolt-on M&A activity focused on complementing corebusiness in Europe, on expanding in US and APAC and on adjacent capabilities, leveraging on solid balance sheet

CAREL general strategy for 2020-2023 will be oriented to the research for new innovative technological solutions with a major focus on energy saving, transition to natural refrigerants, widening high-efficiency solutions offer and geographical expansion

Source: Company information as of Mar-22

A

B

C

Leading provider of advanced energy efficient control solutions

¹ High-tech leader in attractive niches of the HVAC/R industry

Source: Company information as of Mar-18, BSRIA (Mar-17)

Note: 1) 2016 market shares calculated on # of units based on BSRIA market data and management elaborations; 2) close control units for data centers in US, UK and Italy; 3) tested by third-party laboratory compared to Topten EU benchmarks; 4) compared to average semi-hermetic

² Attractive market growth supported by secular trends

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Source: Company information

Growth is driven by market trends and focused strategic actions… 2

digitalisation and environmental focus

wallet

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…and favoured by up-selling and cross-selling 2

FROM PRODUCT PLATFORMS TO INTEGRATED ELECTRONIC SOLUTIONS…

…IN THE HVAC AND REFRIGERATION MARKETS

Positioning and innovation capability hard to replicate 3

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Leadership position in HVAC OEM premium niches… 3

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Source: Management elaborations based on BSRIA data for the year 2016 (based on report dated Mar-17) Note: 1) Total other minor proprietary c.13%; 2) Total other minor proprietary c.8%

…and leading in innovation in the refrigeration market 3

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Source: Company info; Management elaborations

4 Highly efficient global operations serving locally…

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4 …diversified blue-chip customers

Well-established relationships oriented to preserve and enhance the CUSTOMER LIFE-TIME VALUE

Source: Company information as of Dec.21;

GLOBAL BLUE-CHIP

DIVERSIFIED

LONG-TERM BUSINESS

Note: 1) as% of 2021 Revenues 2) as of 2021 revenues for each market 3) Top 40 customers accounting for approx. 50% of total revenue for each market

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⁵ Track record of profitable organic growth

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Resulting in a solid balance sheet and strong value creation to shareholders

Source: Company information as of Mar-22 Note: 2015-2020 IFRS

Note: 1) Including the contribution from M&A and the impact of the non recurring IPO Costs (~8m€ in 2018) 2) Operating cash calculated as cash flow from operations - Capex;

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Global expansion, innovation and services 6 A

Pursuing additional opportunities improving services offer with IoT and advanced monitoring solutions

Cross-selling and upselling exploiting high-efficiency trends

Consolidation of leadership positions in HVAC Growth in Refrigeration

Geographical expansion through the introduction of innovative solutions in new geographies

Pursuing external growth through disciplined bolt-on M&A 6 C

CAREL has performed detailed analyses and scouting of potential targets, thus promoting an opportunistic approach with a focus on 3 MAIN EXPANSION AREAS:

COMPLEMENTING CORE-BUSINESS

A

through the acquisition of complementary products / services, competences and niche markets, and increasing its presence in European markets

GEOGRAPHICAL EXPANSION ABROAD, mainly US and APAC B

Potential selected acquisitions in NEW APPLICATIONS (e.g. industrial refrigeration, building automation, etc.)

C

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M&A

M&A – 2022 – Sauber

• Company profile: Sauber is based in Porto Mantovano (Mantua) and is active mainly in the sector of on-field installation and maintenance services for HVAC/humidification systems in commercial and residential buildings, with a strong focus on energy saving and optimization.
• Rationale: the transaction can be traced back to the implementation of one of the main pillars of CAREL's strategy of strengthening its services area (digital, onfield and consulting) both by internal activities and through acquisitions.
• Transaction structure: Carel takes over control of Sauber through the acquisition of 70% of its share capital. The acquisition of the remaining 30%, the valuation of which is tied to Sauber future results, is governed by a cross-option mechanism between the parties, exercisable in 2025.

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• Key Data:

• Equity value (70%) = 3.6m€
• 2021 Revenues = 7.6m€
• EBITDA = 0.8m€
• Employees = ~55

• Industrial fitting:

• Bolt-on acquisition
• Strong know-how in on-field services and energy savings
• Strong possible synergies with Iot/Digital services provided by CAREL
• Financial fitting:
• ~7x EV/EBITDA
• Low impact on Carel's NFP

M&A – 2022 – Arion

• Company profile: Arion is the joint venture based in Bolgare (Bergamo Province - Italy), established in 2015 between CAREL and Bridgeport S.p.A. with the aim of developing sensor technology expressly dedicated to the air conditioning and refrigeration sectors.
• Rationale: The transaction is consistent with the Group's long-term strategy since the use of increasingly advanced sensors will make the equipment more efficient, more reliable and more connected with the eco-system in which they are inserted, also facilitating the activation of digital services.
• Transaction structure: Carel acquired a further 30% of the share capital of Arion reaching a 70% stake.

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• Key Data:

• Equity value (30%) = 1.2m€
• 2021 Revenues = 2.7m€
• 2020 EBITDA = 0.5m€
• Employees = 6
• Industrial fitting:
• Bolt-on acquisition
• Enabler of digital services
• Focus on those applications presenting higher growth trends
• Secure supply-chain in critical technology
• Financial fitting:
• ~7x EV/EBITDA Low impact on Carel's NFP

M&A – 2021 – CFM

• Company profile: a long-standing distributor and partner in Turkey as well as a provider of digital and on-field services and complete high added value solutions dedicated to OEMs, contractors and end users in the Turkish HVAC (Heating, Ventilation and Air conditioning) and Refrigeration market.
• Transaction structure: Carel takes control of CFM through the acquisition of 51% of the share capital of the company The acquisition of the remaining 49% of CFM, the valuation of which is tied to CFM future results, is governed by a crossoption mechanism between the parties, exercisable between 2024 and 2027.

• Key Data:

• Enterprise value (51%) = 23.1m€
• 2020 Revenues = 14.5m€
• EBITDA = 5.0m€
• Employees = ~34

• Industrial fitting:

• Bolt-on acquisition
• Footprint expansion outside Western Europe
• Strong know-how in digital and onfield services
• Financial fitting:
• ~9x EV/EBITDA
• Low impact on Carel's NFP

M&A – 2021 – Enginia

• Company profile: Enginia has been operating in the AHU sector since 1997 and has grown year after year to become a recognized leader, particularly as regards the manufacture production of dampers for air handling units.
• Rationale: expansion of the product portfolio in the HVAC market, consolidating CAREL's role as a supplier of complete solutions to manufacturers of air handling units through advanced solutions in terms of performance and energy efficiency.
• Transaction structure: Carel, through its subsidiary Recuperator, acquired 100% of the share capital of Enginia.

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• Key Data:

• Enterprise value* = 12.4m€
• 2020 Revenues = 12.3m€
• 2020 EBITDA = 1.5m€
• Employees = 46

• Industrial fitting:

• Bolt-on acquisition
• Completing CAREL's product range for AHU
• Significant synergies with CAREL/Recuperator
• Financial fitting:
• ~8x EV/EBITDA* Low impact on Carel's NFP

*The transaction included the real estate complex that houses the company's headquarters, which was valued separately.

M&A – 2018 – Recuperator

• Key Data:

• Cash-out for equity = 25.7m€
• Company positive net-cash = 6.9m€
• 2017 Revenues = 16.4m€
• EBITDA = 1.7m€
• Employees = ~60

• Industrial fitting:

• Small-size Company
• Complementary products
• Carel's commercial strength
• Cross-selling

• Financial fitting:

• ~11x EV/EBITDA vs. CAREL's ~15x
• Net-Cash in the BS
• Low impact on Carel's NFP

M&A – 2018 – HygroMatik

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• Key Data:

• Cash-out for equity = 56.1m€
• Enterprise Value = 59.0m€
• 2017 Revenues = 15.0m€
• EBITDA = 4.7m€
• Employees = ~60

• Industrial fitting:

• Small-size Company
• Interesting geographic positioning
• Strong in after-sale services
• Cross-selling

• Financial fitting:

• ~12.5x EV/EBITDA vs. CAREL's ~15x
• HygroMatik NFP substantially neutral.

Disclaimer

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This document has been prepared by CAREL Industries S.p.A for use during meetings with investors and financial analysts and is solely for information purposes. The information set out here in has not been verified by an independent audit company.

Neither the Company nor any of its subsidiaries, affiliates, branches, representative offices (the "Group"), as well as any of their directors, officers, employees, advisers or agents (the "Group Representatives") accepts any responsibility for/or makes any representation or warranty, express or implied, as to the accuracy, timeliness or completeness of the information set out herein or any other related information regarding the Group, whether written, oral or in visual or electronic form, transmitted or made available.

This document may contain forward-looking statements about the Company and/or the Group based on current expectations and opinions developed by the Company, as well as based on current plans, estimates, projections and projects of the Group. These forward-looking statements are subject to significant risks and uncertainties (many of which are outside the control of the Company and/or the Group) which could cause a material difference between forward-looking information and actual future results.

The information set out in this document is provided as of the date indicated herein. Except as required by applicable laws and regulations, the Company assumes no obligation to provide updates of any of the aforesaid forward-looking statements.

Under no circumstances shall the Group and/or any of the Group Representatives beheld liable (for negligence or otherwise) for any loss or damage howsoever arising from any use of this document or its contents or otherwise in connection with the document or the aforesaid forward looking statements. This document does not constitute an offer to sell or a solicitation to buy or subscribe to Company shares and neither this entire document or a portion of it may constitute a recommendation to effect any transaction or to conclude any legal act of any kind whatsoever.

This document may not be reproduced or distributed, in whole or in part, by any person other than the Company. By viewing and/or accepting a copy of this document, you agree to be bound by the foregoing limitations

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This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.