Carel Industries

Investor Presentation • Aug 4, 2021

CAREL INDUSTRIES S.p.A. 2021 – H1 Results

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H1 2021 - Main events

New Croatian plant construction kick-off

Appointment of CAREL's new Board of Auditors and Board of Directors. One specific Director, Carlotta Rossi Luciani, was specifically assigned tasks and powers concerning ESG.

Completion of the acquisition of 51% of the share capital of CFM, a system integrator and longstanding distributor and partner in Turkey.

Completion of the acquisition of 100% of the share capital of Enginia, a leading company operating in the ventilation/AHU sector.

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Signing of CAREL's first Sustainability Linked Loan for an amount of 20m€

H1 2021 – Financial highlights

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Q2 2021 confirms the already excellent revenues growth rate reported in Q1 2021.

• Excluding the adverse impact of the exchange rates, and the contribution coming from the acquisition of CFM (~1.6m€) the organic revenues growth rate is even higher, rising from 25.9% to 27.0%.

• All the regions and markets contributed to this achievement: on top of a strong recovery of global demand, the Group managed to seize significant opportunities in several applications (Indoor Air Quality, Data Centres, Heat pumps), as well as benefitting from a new cycle of investments in Food retail/Food service and from the recovery of the most cyclical industrial sectors, heavily impacted by the pandemic.

• Adj. EBITDA margin equal to 22.4%, up 320bps on H1 2020 and 270bps on FY 2020.

• Excellent performance driven by operating leverage along with the continuous influence of the effects linked to the initiatives to contain opex taken in 2020. These elements partly mitigated the increase in raw material costs caused by the current shortages.

• Net of the M&A activity, NFP decreased by 13%: ~37m€ FFO easily covered ~13m€ increase in NWC (driven by an expected increase in inventory and higher revenues), ~7m€ capex and ~ 12m€ dividends.

H1 2021 – Outstanding KPIs growth confirmed

KPIs
m€	H1 2020	H1 2021	Δ%
Revenue	161.0	202.6*	25.9%
Revenue FX Adj.	161.0	206.0*	28.0%
EBITDA	30.9	44.1	42.9%
EBITDA Adj.	30.9	45.3**	46.3%
EBITDA Adj./Revenue	19.2%	22.4%
Net Profit	16.3	26.8	64.4%
Capex	5.0	6.9	37.1%

*Including ~1.6m€ from the inclusion of CFM in the consolidation perimeter

** Excluding approx. 1m€ related to M&A advisory costs.

• Revenue +25.9%: The same outstanding growth rate reported in Q1 2021 was experienced also in Q2 2021 resulting in an increase in revenues in H1 2021 of more than 25% compared to the same period in 2020. A growth rate higher than 20% is also found when comparing H1 2021 and H1 2019 results (the latter were not impacted by the COVID pandemic).
• EBITDA ADJ +46.3%: The very positive results reported in revenues were reflected in the EBITDA ADJ growth rate thanks to operating leverage and the opex containment initiatives already implemented during the pandemic which partly offset higher raw material costs related to the ongoing tensions in the supply chain.
• Net Profit +64.4%: benefitting from the operating results. Stable tax-rate compared to Q1 2021 and a significant improvement on H1 2020 thanks mainly to a favourable geographic profit mix.
• Capex: higher capex including the new plant in Croatia.

H1 2021 – Revenue breakdowns

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• EMEA Both HVAC and Refrigeration contributed to the growth in the area, whose positive performance reported in Q1 2021 was confirmed in Q2 2021*.
• APAC China's exceptional growth drove the performance, together with a >20% recovery in South APAC, which had been severely struck by the pandemic in 2020.
• Americas (North) H1 2020 performance was impacted by an unfavourable US/EURO exchange rate. Net of this effect, revenue growth rate would have been close to 20%.

• Americas (South) Strong performance in the entire region. Including ~1.6m€ from the inclusion of CFM in the consolidation perimeter

• HVAC: a very positive performancethat benefitted from a significant recovery trend in key industrial applications (e.g. Automotive sector >50%) and an improvement in Data Centres, Indoor Air Quality, Hospitals and Heat pumps.

• Strong rebound in Refrigeration. The investment cycle in the food retail sector, picked-up again in Q1 2021 and improved further in Q2 2021. An acceleration has also been seen in the Food service segment.

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From EBITDA to Net Profit

E-MARKET SDIR
CERTIFIED

K€	H1 '20	H1 '21
EBITDA	30,872	44,123
D&A	-9,183	-9,669
EBIT	21,690	34,454
Financial (charges)/income	-716	-1,130
FX gains/losses	33	-255
Results from companies cons. with E.M.	252	618
EBT	21,259	33,687
Taxes	-4,920	-6,701
Minorities	-10	-145
Group net profit	16,329	26,843

• D&A substantially in line with H1 2020.
• Higher financial charges due to IFRS 16 interest and accounting impact from put and call option on CFM acquisition.
• FX losses mainly related to the operations in Brazil, Croatia and China.
• Tax-rate 19.9%, in line with 19.4% reported in Q1 2021 but much lower compared to 23.1% in H1 2020. It benefits from a favorable geographic profit mix.

H1 2021 – NFP Bridge

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• Excluding the impact of the M&A activity, NFP would have decreased by around 13% thanks to a robust cash generation.
• ΔNWC +13.4m€: Substantially stable compared to Q1 2021 level. The increase compared to FY 2021 is due to : 1) a significant growth in revenues; 2) an expected increase in inventory to better cope with the global raw material shortage. H1 2021 DSO improved compared to H1 2020.
• More than one third of the total H1 2021 NFP is related to IFRS 16 accounting effect.

Closing Remarks

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• A significant GDP improvement also continued in Q2 2021: China +7.9%; US +6.3% supporting a generalized increased in demand and a further acceleration in the most cyclical industrial sectors, heavily hit during 2020 by the pandemic.
• Strong focus of end clients on energy saving (high efficiency solutions) and environmental sustainability (transition towards natural refrigerants).
• Positive trend confirmed in heat pumps, data centres and indoor air quality segments. Strong investment cycle in Food Retail and recovery in Food Service.

Demand

• The impact on CAREL activities of the global raw material shortage was partly mitigated thanks to a number of countermeasures taken in the last 12 months: increased flexibility through the deployment of new production lines; homologation of alternative components; inventory increase.

• Tensions in the supply chain are expected to continue also in H2 2021: Q3 2021 representing the most impacted quarter of the year.

• The 10-year record growth rate in revenues reported at the end of Q1 2021 also continued in Q2 2021 in combination with an EBITDA margin significantly higher than 20%.

• Improved M&A activity along with a strong balance sheet opened up important opportunities that the company managed to seize in H1 2021, completing two bolt-on acquisitions (CFM and Enginia), in line with CAREL's strategic guidelines

Guidance

Taking into account the very positive trend experienced in Q1 and Q2 2021 and the indications from the current order intake, without any worsening in the current scenario (COVID-19 and raw material shortage), CAREL expects to achieve a revenue growth rate between 15%-20% in FY 2021 (excluding any contribution from M&A), improving its previous guidance.

M&A

M&A - 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.

Annexes

Shareholding structure (>5% voting rights)

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Income statement and Balance Sheet

Income statement Balance sheet

K€	H1 2021	H1 2020	Delta %
Revenues	202,601	160,968	25.9%
Other revenues	2,761	1,421	94.3%
Operative costs	(161,239)	(131,517)	22.6%
Operative costs adj.	(160,053)	(131,430)	21.8%
EBITDA	44,123	30,872	42.9%
EBITDA Adj.	45,309	30,959	46.3%
Depreciation and impairments	(9,669)	(9,183)	5.3%
EBIT	34,454	21,690	58.8%
EBT	33,688	21,259	58.5%
Taxes	(6,701)	(4,920)	36.2%
Net result of the period	26,987	16,339	65.2%
Non controlling interest	145	10	n.r.
Group net result	26,843	16,329	64.4%

K€	H1 2021	FY 2020	Delta %
Fixed Capital	227,581	176,413	29.0%
Working Capital	53,479	41,007	30.4%
Employees defined benefit plans	(8,802)	(8,189)	7.5%
Net invested capital	272,258	209,231	30.1%
Equity	144,173	159,621	(9.7%)
Non currrent liabilities	49,146	-	n.r.
Net financial position (asset)	78,939	49,610	59.1%
Total	272,258	209,231	30.1%

M&A - 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

Company profile

Leading provider of advanced control solutions for HVAC/R

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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.

Note: financial data refer to consolidated accounts of CAREL Industries S.p.a. 2015-2020 IFRS. Comparability might be affected by change in consolidation perimeter

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

Source: Company information as of Mar-21

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

Distinctive ability to meet customers' demand for tailored integrated solutions using standard platforms

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Source: Company information as of Mar-21 Note: 1) developed with partners

Long track record of profitable organic growth

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.

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of local distributors

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

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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-21

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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

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4 Highly efficient global operations serving locally…

4 …diversified blue-chip customers

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

Source: Company information as of Dec.20;

Note: 1) as% of 2020 Revenues 2) as of 2020 revenues for each market 3) Top 40 customers accounting for approx. 50% of total revenue for each market

⁵ Track record of profitable organic growth

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

Source: Company information as of Mar-21

Note: 2015-2020 IFRS

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

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

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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 - 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 - 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