Carel Industries

Investor Presentation • Mar 4, 2021

CAREL INDUSTRIES S.p.A. 2020 – FY Results

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FY 2020 – Financial highlights

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Thanks to its resilience and the ability to seize significant opportunities even in a challenging scenario, CAREL continued to grow across all the economic KPIs and generated an outstanding cash flow.

+1.3% Revenues growth rate

• Excluding the adverse impact of the exchange rates, revenues growth would move from 1.3% to 2.8%.
• The continuous recovery reported in H2 2020 (+7.7% Q3 2020; +5.0% Q4 2020) in all the geographic areas and the very positive performance in a number of applications/segments (Data-Centers – Hospitals – Heat pumps - Food retail) were crucial in achieving revenues growth in 2020 in spite of the temporary shutdown of a significant part of CAREL's production facilities accounting for more than 60% of its total production capacity.

• EBITDA margin equal to 19.7%, up 40bps on FY2019.
• Despite the absence of the usual effect coming from operating leverage, the Group managed to increase the EBITDA Margin compared to last year through effectively implementing a number of initiatives to contain opex, which also helped limiting the effect of higher logistic expenses due to COVID-19.

• Thanks to the significant cash generation, the NFP went down from 46.9m€ to 21.4m€, excluding the IFRS16 effect. NFP/EBITDA far below 1x.

FY 2020 – Non-financial highlights

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ESG topics are one of the most important elements in CAREL's strategy development. Significant results were achieved in 2020, with more to come in 2021.

CAREL has already started working on a new 3-year sustainability plan, taking all the indications and stimuli come from ratings and stakeholders into consideration, with the objective to further improve its sustainability profile.

THE USE BY CAREL INDUSTRIES S.p.A. OF ANY MSCI ESG RESEARCH LLC OR ITS AFFILIATES ("MSCI") DATA, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT, RECOMMENDATION, OR PROMOTION OF CAREL INDUSTRIES S.p.A. BY MSCI. MSCI SERVICES AND DATA ARE THE PROPERTY OF MSCI OR ITS INFORMATION PROVIDERS, AND ARE PROVIDED 'AS-IS' AND WITHOUT WARRANTY. MSCI NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI.

FY 2020 – All the KPIs are positive

m€	FY 2019	FY 2020	Δ%
Revenue	327.4	331.6	1.3%
Revenue FX Adj.	327.4	336.7	2.8%
EBITDA	63.1	65.2	3.3%
EBITDA/Revenue	19.3%	19.7%
Net Profit	35.0	35.1	0.3%
Capex	23.6	13.3	n.r.

• Revenue +1.3%: Significant recovery in revenues in H2 2020 from -3.6% (in H1 2020) to +1.3% with improvements in all the macro-sectors (HVAC and Refrigeration) and geographical areas. Without FX and no-core impacts, revenues growth rate would have reached +3.1%.
• EBITDA +3.3%: EBITDA growth rate went from negative to positive in Q4 2020 thanks to the effect of the full deployment of the opex containment initiatives launched in Q2 2020. The negative impact of FX on revenues were partly offset by the Group's natural hedging strategy. FY 2020 EBITDA margin up by 40 bps compared to 2019 despite the absence of operating leverage.
• Net Profit +0.3%: Stable net profit benefitting from operating results and a slightly lower tax rate (21.1% in 2020 vs. 22.0% in 2019).
• Capex: Capex reduction in line with expectation, as the expansion of the production footprint was completed at the end of 2019.
• Dividend: Dividend proposal equal to 0.12€/share (in line with 2019 dividend), with a pay-out ratio of approx. 34% 4

FY 2020 – Revenue breakdowns

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• EMEA A constant recovery over several applications and very positive results in Eastern Europe led to a mid-single digit growth rate in the area (-0.5% in H1 2020)
• APAC Excluding FX impact, APAC area reported positive results (+1.0%): Strong economic upturn in China offset slightly negative performance in the rest of the continent
• Americas (North) The negative trend reported in 2020 showed a deceleration in the last two quarters
• Americas (South) Significant FX impact Strong performance in Brazil offset the negative results in other countries in the area.

• HVAC recovery trend already visible in Q3 2020 continued also in Q4 2020 (from -4.9% in H1 2020 to +2.1% FY 2020 net of FX) thanks mainly to the positive performance in heat-pumps, datacenters and hospitals.
• Positive results in Refrigeration in spite of a cautious market. Market share gain in food-retail particularly in Eastern Europe and China more than offset poor performance in the HO.RE.CA applications.

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From EBITDA to Net Profit

• K€ FY '19 FY '20 Δ% EBITDA 63,132 65,194 3.3% D&A -16,769 -18,482 EBIT 46,363 46,713 0.8% • Higher D&A mainly linked to higher Capex in 2019. • Higher FX losses mainly related to US \$ devaluation vs Euro in the second half of 2020 (opposite trend in 2019).
  • 21.1% tax rate, due to a different mix in terms of contribution from different geographic areas.

Financial (charges)/income		-1,431	-1,489
	FX gains/losses	-152	-921
Companies cons.with E.M.		177	208
EBT		44,957	44,511	-1.0%
	Taxes	-9,910	-9,393
	Minorities	-28	-5
Group net profit		35,019	35,112	0.3%

• Excluding the IFRS 16 accounting impact, the NFP fell by approx. 25m€ with a FCF of approx. 38m€
• ΔNWC -3.9m€. Compared to the first 9M 2020, the significant reduction (-7m€) was linked to a decrease in receivables (due both to seasonality and stronger control).
• IFRS 16 increase (+12.8m€) is related to the renewal of the existing leasing contract for the rent of the buildings in the HQ.

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*Excluding IFRS16

Closing Remarks

• During 2020, a significant share (approximately 60%) of CAREL's production capacity were hit by a number of temporary lockdowns in Italy and China.

Operations

• The Group responded promptly leveraging its "mirroring production strategy" thanks also the additional flexibility granted by completing the production footprint expansion plan in 2019.
• This limited the backlog accumulated during the lockdown, which was cleared by June/July.

• Starting from the end of Q2, favorable trends in demand started to gain traction in a number of Geographic areas (especially in China and partly in Europe) and in a number of HVAC applications such as "high-efficiency heat pumps", "data centers" etc. (whereas some of the most cyclical applications continued suffering.)
• In refrigeration performance was positive in "food retail" and negative in HO.RE.CA.

• The combination of its resilience and flexibility, the ability to seize major opportunities even during challenging scenario circumstances and the strength and depth of its salesforce were key to marking growth in all the economic KPIs even in such a difficult year as 2020.

It is still too early to give a precise guidance for the end of the year since elements of uncertainty remain, linked to the end of the pandemic and the current global shortage of raw materials. In any case, the Group maintains an optimistic stance, considering that the positive trends seen in H2 2020 accelerated in the first months of 2021.

Annexes

Shareholding structure (>3% voting rights)

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Income statement and Balance Sheet

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Income statement Balance sheet

K€	FY 2019	FY 2020	Delta %
Revenues	327,358	331,610	1.3%
Other revenues	3,611	3,704	2.6%
Operative costs	(267,837)	(270,120)	0.9%
EBITDA	63,132	65,194	3.3%
Depreciation and impairments	(16,769)	(18,482)	10.2%
EBIT	46,363	46,713	0.8%
EBT	44,957	44,511	(1.0%)
Taxes	(9,910)	(9,393)	(5.2%)
Net result of the period	35,047	35,118	0.2%
Non controlling interest	(28)	(5)	n.r.
Group net result	35,019	35,112	0.3%

K€	FY 2019	FY 2020	Delta %
Fixed Capital	167,957	176,413	5.0%
Working Capital	45,232	41,007	(9.3%)
Employees defined benefit plans	(7,844)	(8,189)	4.4%
Net invested capital	205,345	209,231	1.9%
Equity	143,220	159,621	11.5%
Net financial position (asset)	62,124	49,610	(20.1%)
Total	205,345	209,231	1.9%

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

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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.

Branches

Plants

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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

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

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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…

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

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

• 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.