Carel Industries

Earnings Release • Nov 6, 2020

CAREL INDUSTRIES S.p.A. 2020 – 9M Results

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6 th November 2020

9M 2020 – Highlights

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The positive trends already reported at the end of Q2 2020 accelerated in Q3 2020, further mitigating the impact on revenues of the temporary lockdowns in several countries and confirming Group's ability in coping with disrupting scenarios.

• Revenues were in line with 9M 2019 (+0.1%; +1.2% constant FX) with a very positive performance in Q3 2020 (+7.7%)
• A recovery in several geographic areas and applications and company's ability to seize the opportunities offered by the market in these unprecedented times were key elements in achieving stable results compared to the same period in 2019. This, in spite of the temporary shutdown in the first part of the year of a significant part of CAREL's production facilities accounting for more than 60% of its total production capacity.

• EBITDA margin equal to 19.6%, up 40bps on H1 2020.
  • The positive effect of the operating leverage in Q3 2020 along with a quick and effective implementation of a number of initiatives to contain opex helped limiting the effect of higher logistic expenses due to COVID-19.

• Robust FCFE leading to a ~13m€ reduction in NFP compared to FY 2019.

9M 2020 – Significant recovery in Q3 2020

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m€	9M 2019	9M 2020	Δ%
Revenue	247.7	248.0	+0.1%
Revenue FX Adj.	247.7	250.7	+1.2%
EBITDA	49.6	48.5	-2.2%
EBITDA/Revenue	20.0%	19.6%
Net Profit	28.2	26.2	-7.2%
Capex	16.3	7.8	n.r.

KPIs Revenues Bridge (m€) 247.7 0.3 248.0 2.7 0.5 251.2 Revenues 9M 2019 Δ Revenues Revenues 9M 2020 FX No core Org. Revenues 9M 2020 +1.4%

• Revenue +0.1%: Significant recovery in revenues from -3.6% (in H1 2020) to +0.1% (+1.4% organic), with an improvement in all the macro-sectors (HVAC and Refrigeration) and geographical areas. The backlog accumulated in the first part of the year has been completely recovered.
• EBITDA -2.2%: The slight decline in EBITDA was mainly related to the increase in logistic costs due to COVID-19 pandemic and to the absence of the positive effect coming from operating leverage. In any case, the EBITDA margin improved compared both to H1 2020 and to FY 2019
• Net Profit -7.2%: Operating results and higher D&A resulted in lower net-profit.
• Capex: Capex reduction in line with expectation, as the expansion of the production footprint was completed at the end of 2019. 3

9M 2020 – Revenue breakdowns

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• EMEA The positive trends already indicated at the end of H1 2020 continued: constant growth in Eastern Europe and in heat pumps in Northern Europe more than offset a slow-down in specific applications.
• APAC Positive performance in China substantially counterbalanced negative performance in South APAC linked to COVID-19.
• Americas (North) Slight improvement compared to H1 2020.
• Americas (South) Significant impact of FX Strong performance in Brazil offset the negative results in other countries in the area.

• Strong recovery in HVAC compared to H1 2020 (from -4.9% to +0.5% net of FX) thanks mainly to the positive trend in heat-pumps, data-centers and hospitals.
• Positive performance in Refrigeration in spite of a cautious market. Market share gain in particular in Eastern Europe and China in food-retail more than offset poor performance in the HO.RE.CA applications.

From EBITDA to Net Profit

K€	9M '19	9M '20	Δ%
EBITDA	49,593	48,523	-2.2%
D&A	-12,332	-13,768
EBIT	37,261	34,755	-6.7%
Financial (charges)/income	-990	-1,095
FX gains/losses	-62	125
Companies cons.with E.M.	135	252
EBT	36,344	34,035	-6.4%
Taxes	-8,088	-7,832
Minorities	-26	-14
Group net profit	28,231	26,190	-7.2%

• Higher D&A mainly linked to higher Capex in 2019.

• Slightly higher financial charges due to increased amount of loans.
• Positive contribution from FX and company consolidated with E.M.
• 23.0% tax rate (9M 2019 = 22.2%), due to a different mix in terms of contribution from different geographic areas and the expiration of the tax subsidy in Croatia

9M 2020 – NFP Bridge

• 20% reduction in NFP compared to 2019 FY level thanks to 40m€ FFO, which easily covered capex, a slight increase in NWC and dividends.

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• ΔNWC +3.2m€: A slight increase in inventory partially offset by an improvement in DSO.
• At the end of October 2020 the Group had Cash & Cash Equivalent and available credit lines >100m€.

Closing Remarks

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• The backlog accumulated during the lock-down in February and April was completely cleared in June and July.

Operations

• No major issue have been reported in relations to the operating capacity of CAREL's plants; on the contrary in China and Croatia production capacity has been increased in order to better cope with possible future lockdowns.

• The same trends reported at the end of H1 2020 continued and even improved: in HVAC, "high-efficiency heat pumps", "data centers" and "hospitals" performed well, while a number of the most cyclical applications continued to still suffer. In refrigeration performance was positive in "food retail" and negative in HO.RE.CA.

Initiatives

• The initiatives put in place to reduce discretionary opex enabled CAREL to improve its EBITDA margin compared both to FY 2019 and to H1 2020.

The actual order intake is sending positive signals for the end of the year. Net of a possible sharp deterioration of the scenario due to the current resurgence of the COVID-19, in particular in Europe, the Group expects to achieve FY 2020 revenues close to FY 2019 level.

Annexes

Shareholding structure (>3% voting rights)

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Income statement and Balance Sheet

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Income statement Balance sheet

K€	9M 2019	9M 2020	Delta %
Revenues	247,694	247,955	0.1%
Other revenues	1,963	2,157	9.9%
Operative costs	(200,064)	(201,589)	0.8%
EBITDA	49,593	48,523	(2.2%)
Depreciation and impairments	(12,332)	(13,768)	11.6%
EBIT	37,261	34,755	(6.7%)
EBT	36,344	34,035	(6.4%)
Taxes	(8,088)	(7,832)	(3.2%)
Net result of the period	28,257	26,204	(7.3%)
Non controlling interest	(26)	(14)	(46.5%)
Group net result	28,231	26,190	(7.2%)

K€	FY 2019	9M 2020	Delta %
Fixed Capital	167,957	162,630	(3.2%)
Working Capital	45,232	46,097	1.9%
Employees defined benefit plans	(7,844)	(8,083)	3.0%
Net invested capital	205,345	200,643	(2.3%)
Equity	143,220	151,210	5.6%
Net financial position (asset)	62,124	49,433	(20.4%)
Total	205,345	200,643	(2.3%)

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. 2015-2019 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…

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Source: Company information as of Mar-20

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

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Source: Company information as of Mar-20 Note: 1) developed with partners

Long track record of profitable organic growth

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
• Invest in 2018/19 in capacity globally and in Industry 4.0, with labor efficiency benefits in future years
• 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 2018-20 will be oriented to the research for new innovative technological solutions with a major focus on energy saving, widening high-efficiency solutions offer and geographical expansion

Source: Company information as of Mar-18

Leading provider of advanced energy efficient control solutions

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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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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.

Food Service segments

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

Geo expansion Expansion to adjacent niches Secular trends Cross-selling Up-selling Energy savings Digitalisation Focus on environment Expansion of market of reference CAREL share of applications market Market of reference for applications CAREL can address

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Increase in share of wallet

products driven by break-through innovations, such as energy saving features, digitalisation and environmental focus

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

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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

Source: Company info; Management elaborations

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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.19;

Note: 1) as% of 2018 Revenues 2) as of 2018 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

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

Source: Company information as of Mar-20

Note: 2015-2019 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

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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.