Carel Industries

Investor Presentation • Nov 12, 2019

CAREL INDUSTRIES S.p.A. 2019 – 9M Results

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.

12th November 2019

Main events

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9M 2019 – Highlights

In spite of a deterioration in macro-economic scenario in particular in Western Europe and China, Revenues growth rate and Profitability for the first 9M 2019 stayed close to 1H 2019

• Overall Revenues grew by 18.9%, with a positive contribution from all the geographic areas.

• Excluding the contribution coming from Hygromatik and Recuperator, the growth rate would have been 6.0% (against 7.3% in 1H 2019). The difference is explained by a normalization in US growth-rate and a temporary slow-down in refrigeration sector in Europe.

+6.0%

Org. revenues growth rate

• Overall EBITDA Margin equal to 20.0%, basically in line with 1H 2019 (20.2%).
• Excluding the IFRS contribution (2.9m€), and some minor non-recurring elements, the EBITDA margin would have been equal to 19.1% (against 19.3% in 1H 2019).

• Robust cash generation, benefitting from positive operating results and from a further reduction in NWC (cash absorbed by NWC halved compared to 1H 2019).

9M 2019 – Growth in economic KPIs confirmed

m€	9M 2018	9M 2019	Δ%
Revenue	208.4	247.7	18.9%
Revenue FX Adj.	208.4	245.7	17.9%
Revenue (no M&A)	208.4	220.9	6.0%
EBITDA	38.3	49.6*	29.6%
EBITDA Adj.**	43.6	50.2*	15.0%
EBITDA Adj/Revenue	20.9%	20.3%
Net Profit	24.8	28.3	14.1%
Capex	11.8	16.3	38.1%

^*Including the contribution from Hygromatik and Recuperator equal to +5.7m€ and the impact of the adoption of IFRS 16 equal to 2.9m€

** 2018 EBITDA adj. for non recurring costs (5.4m€) mainly related to IPO; 2019 EBITDA adj. for non-recurring costs (0.6m€) related to IPO/M&A

• Revenue +18.9%: The positive results in revenues are attributable both to organic growth (+11.8m€) and to the excellent results of Hygromatik and Recuperator (+26.8m€), not included in the consolidation perimeter in 9M 2018.
• EBITDA adj. +15.0%: the growth in the top-line is substantially reflected at the EBITDA level, which includes 5.7m€ from Hygromatik and Recuperator and benefitted also from the IFRS 16 adoption (+2.9m€). EBITDA includes as well. approx. 0.8m€ of recurring costs from IPO not present in 9M 2018 and additional 0.4m€ costs related to US/China duties.
• Net Profit 14.1%: Net of the '18-'19 non-recurring costs, the bottom-line would have been substantially stable.
• Capex: International footprint expansion plan on track, resulting in a significant Capex growth. ⁴

9M 2019 – Revenue breakdowns

• Positive growth in all the geographic areas maintained with very significant results in North America.
• EMEA 1H 2019 growth rate substantially maintained in 9M 2019 in spite of a deterioration in the macro-economic scenario.
• APAC Significant growth despite higher volatility in the area.
• Americas (South) mid-single-digit growth stemming mainly from Brazil.
• Strong growth in HVAC sector driven also by the change in scope of consolidation (Hygromatik and Recuperator).
• Temporary deceleration in refrigeration growth rate mainly linked to the unfavorable economic scenario in Europe.

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• Expected decline in no core revenues, net of which the growth in the top line would have been ~1% higher.

From EBITDA to Net Profit

K€	9M '18	9M '19	Δ%
EBITDA	38,275	49,593	29.6%
D&A	-6,409	-12,332
Impairment
EBIT	31,867	37,261	16.9%
Financial (charges)/income	107	-990
FX gains/losses	-227	-62
Companies cons with e.m.	15	135
EBT	31,762	36,344	14.4%
Taxes	-6,964	-8,088
Minorities	-45	-26
Group net profit	24,753	28,231	14.1%

• Higher D&A mainly linked to: the change in scope of consolidation (~3m€), to higher Capex in 2019 and to the adoption of IFRS 16 (2.9m€).
• Financial charges/income affected by higher interests expenses due to the loans for the M&A transactions and the absence of the positive contribution coming from life insurances present in 2018.

• 22.3% tax rate, substantially in line with 1H 2019 and with guidance.

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9M 2019 – NFP Bridge

• Net of the effects derived from the adoption of IFRS 16 and the so-called tax step-up mechanism*, the NFP would have decreased by ~9m€.
• FFO 42.6m€: which easily covered higher capex (due to the deployment of the production plants expansion plan), the slight increase in NWC and dividends.
• ΔNWC +2.8m€: cash absorbed by NWC had been in constant reduction in the last 2Qs thanks to a number of phenoma including an improvement in inventory (as expected) along with a decrease in tax credits.

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*see next slide for further details on "Tax Step-up"

Focus on «Tax step-up»

CAREL paid 11.1m€ as "Tax step-up" on the excess cost related to the M&A transactions completed at the end of 2018 (Hygromatic and Recuperator). The tax burden is calculated at a favourable tax rate of 16.0%.

The advantage for the parent company consists in deducting from its taxable income the excess costs in 5 installments (starting from the second year after the tax payment). The tax benefit of the deductable costs is at 27,9%.

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From an accounting point of view the amount of 11.1m€ paid rapresents a tax asset that will be debited to the P&L in 5 years starting from 2021.

The estimated gross tax benefit is ~19m€ in 5 years.

Closing Remarks

Even in presence of a difficult macro-economic scenario in several geographic areas (Europe, China, South America) Carel managed to maintain a significant growth rate in revenues and a stable profitability, proving the resilience of its business portfolio/business model.

Temporary deceleration in Refrigeration growth rate mainly linked to the European economic slow-down.

Strong execution delivering results:

• Hygromatik and Recuperator integration process continues smoothly: high single-digit top-line growth of the two combined companies confirmed.
• The improvement in inventory trend is also confirmed.
• The footprint expansion plan launched in 2018 is substantially completed.

Taking into consideration a possible further worsening in European economic landscape and according to the current order intake level, for the FY 2019 we expect the revenues growth-rate to reach a mid-single digit and a slight reduction in profitability due to lower impact of the operating leverage.

9 From a mid-term/mid-cycle standpoint we don't see any change in the secular trends underlying our reference markets/applications. ⁹

Annexes

Shareholding structure

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Income statement and Balance Sheet

Income statement Balance sheet

K€	9M 2018	9M 2019	Delta %
Revenues	208,401	247,694	18.9%
Other revenues	1,125	1,963	74.5%
Operative costs	(171,251)	(200,064)	16.8%
EBITDA	38,275	49,593	29.6%
Depreciation and impairments	(6,409)	(12,332)	92.4%
EBIT (Risultato Operativo)	31,867	37,261	16.9%
EBT (earn before taxes)	31,762	36,344	14.4%
Taxes	(6,964)	(8,088)	16.1%
Net result of the period	24,798	28,257	13.9%
Non controlling interest	(45)	(26)	-42.3%
Group net result	24,753	28,231	14.1%

K€	FY 2018	9M 2019	Delta %
Fixed Capital	131,364	164,217	25.0%
Working Capital	53,383	55,483	3.9%
Employees defined benefit plans	(7,333)	(7,877)	7.4%
Net invested capital	177,414	211,823	19.4%
Equity	118,288	136,415	15.3%
Net financial position (asset)	59,125	75,408	27.5%
Total	177,414	211,823	19.4%

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Disclaimer

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.

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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.