Carel Industries

Investor Presentation • Sep 11, 2020

CAREL INDUSTRIES S.p.A. 2020 – H1 Results

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11th September 2020

H1 2020 – Highlights

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In spite of the temporary lockdown in China (February) and the shutdown of the Italian plant (March/April), the Company managed to achieve operating results not far from what reported in H1 2019, thanks to its resiliency and the ability to promptly react to adverse scenarios.

• Revenues were down slightly on H1 2019 (-3.6%; -3.1% constant FX) but in the higher end of the guidance range given in Q1 2020.
• This performance is particularly positive taking into account 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 19.2%, substantially in line with FY 2019, and 100 bps higher than Q1 2020.
• The quick and effective implementation of a number of initiatives to contain opex, offset the absence of the positive effect of operating leverage and higher logistic expenses due to COVID-19.

• Positive FCFE, proving that the Group is able to generate cash in also in a challenging scenario

H1 2020 – COVID-19 impact has been mitigated

KPIs
m€	H1 2019	H1 2020	Δ%
Revenue	166.9	161.0	-3.6%
Revenue FX Adj.	166.9	161.7	-3.1%
EBITDA	33.7	30.9	-8.4%
EBITDA/Revenue	20.2%	19.2%
Net Profit	19.0	16.3	-14.0%
Capex	11.2	5.0	n.r.

• Revenue -3.6%: Revenues hit the high end of the guidance range given in May. The recovery of the backlog and the ability of the Group in coping with the lock-down in Italy and China helped to keep performance not far from the H1 2019 level.
• EBITDA -8.4%: The effects of lower revenues were partially offset by several initiatives to contain discretionary opex such as marketing, consulting and travel expenses. This led to a recovery in profitability, standing at 19.2%, substantially in line with what reported in FY 2019 (19.3%).
• Net Profit -14.0%: the decline in net profit was due to operating results (lower revenues/higher D&A).
• Capex: Capex reduction in line with expectation, as the expansion of the production footprint was completed at the end of 2019.

H1 2020 – Revenue breakdowns

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• EMEA Substantially stable results driven mainly by a constant growth in Eastern Europe and in heat pumps in Northern Europe, offsetting a slowdown in specific applications.
• APAC Important recovery on Q1 2020 results thanks to good performance in China.
• Americas North In line with Q1 2020 and impacted by COVID-19
• Americas (South) Strong impact of FX Positive performance in Brazil did not completely offset the performance in other countries in the area.

• The trend in HVAC, in line with Q1 2020, was impacted by the shutdown of the Italian plant and a mixed trend in demand by applications (positive: heat-pumps and data-centers; negative: automotive)
• Net of the impact of FX, Refrigeration reported positive results linked to a slight recovery in investments (Supermarkets), partially counterbalanced by poor performance in the HO.RE.CA applications.

From EBITDA to Net Profit

K€	H1 '19	H1 '20	Δ%
EBITDA	33,687	30,872	-8.4%
D&A	-8,143	-9,183
EBIT	25,544	21,690	-15.1%
Financial (charges)/income	-682	-716
FX gains/losses	-326	33
Companies cons.with E.M.	136	252
EBT	24,673	21,259	-13.8%
Taxes	-5,660	-4,920
Minorities	-23	-10
Group net profit	18,990	16,329	-14.0%

• 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.
• 23.1% tax rate, due to a different mix in terms of contribution from different geographic areas and the expiration of the tax subsidy in Croatia.

H1 2020 – NFP Bridge

• NFP substantially stable compared to 2019 FY level. The FFO equal to 25.5m€ covered capex, the expected increase in NWC and the majority of dividends.
• ΔNWC +8.3m€: the NWC trend was mainly due to the prudential increase in inventory in order to better cope with possible resurgence of the COVID pandemic and to a normalization of receivables level.
• At the end of August 2020 the Group had Cash & Cash Equivalent and available credit lines for about 100m€.

Closing Remarks

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• Although the most significant impact of the lockdown of the Italian production HUB were reported in Q2, the Group managed to mitigate it, thanks mainly to its "technological mirroring" strategy in production.
• The backlog accumulated during the lock-down were absorbed for the most part in June, and a residual part in July.

• Mixed trends depending on the segment/application: in HVAC, good performance in "highefficiency heat pumps" and "data centers" applications and poor performance in automotive and wellness sectors. In refrigeration positive performance in "food retail" and negative in HO.RE.CA.
• The fact the CAREL has a widespread presence in several markets/segments/geographic areas helped in mitigating the negative impacts of COVID-19.

• The initiatives put in place to reduce discretionary opex fully unfolded their effects, enabling CAREL to maintain an EBITDA margin in line with FY 2019.

Net of a possible deterioration of the current scenario due to a resurgence of the COVID-19, the Group expects to achieve Q3 2020 results at least in line with Q3 2019 and has a favorable view on the FY 2020 trend.

Annexes

Shareholding structure (>3%)

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Income statement and Balance Sheet

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Income statement Balance sheet

K€	H1 2019	H1 2020	Delta %
Revenues	166,904	160,968	(3.6%)
Other revenues	1,156	1,421	23.0%
Operative costs	(134,373)	(131,517)	(2.1%)
EBITDA	33,687	30,872	(8.4%)
Depreciation and impairments	(8,143)	(9,183)	12.8%
EBIT	25,544	21,690	(15.1%)
EBT	24,673	21,259	(13.8%)
Taxes	(5,660)	(4,920)	(13.1%)
Net result of the period	19,012	16,339	(14.1%)
Non controlling interest	23	10	(55.8%)
Group net result	18,990	16,329	(14.0%)

K€	FY 2019	H1 2020	Delta %
Fixed Capital	167,957	164,557	(2.0%)
Working Capital	45,232	51,912	14.8%
Employees defined benefit plans	(7,844)	(7,964)	1.5%
Net invested capital	205,345	208,505	1.5%
Equity	143,220	143,242	0.0%
Net financial position (asset)	62,124	65,263	5.1%
Total	205,345	208,505	1.5%

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.