Carel Industries

Earnings Release • Sep 9, 2019

CAREL INDUSTRIES S.p.A. 2019 - H1 Results

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9 th September 2019

H1 2019 – Highlights

H1 2019 overall results in line with expectations and guidelines: improvement in revenues, profitability and NWC compared to Q1 2019.

• The continuous implementation of the strategic guidelines has led to an increase in revenues equal to 20.3%, benefitting mainly from:

• Organic Growth (+7.3%) All the geographic areas reported a growth.
• Hygromatik and Recuperator (+18.1m€) In line with business plan.
• EBITDA adj. margin 20.5% (EBITDA reported margin 20.2%) vs. 20.0% in Q1 2019.

• Growth in NFP (+16.9m€) mainly linked to the adoption of the IFRS 16.
• Cash absorbed by NWC halved compared to Q1 2019.

• Production footprint expansion plan on track: the new plant in China and the expansion of the US plant are completed.

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• Geographic expansion: opening of CAREL Ukraine branch in January 2019.
• Services: the "Go-to-market" phase is in line with expectations.

H1 2019 – Improvement compared to Q1 2019

KPIs				Revenues Bridge (m€)
m€	H1 2018	H1 2019	Δ%
Revenue	138.8	166.9	20.3%			+7.3%
Revenue FX Adj.	138.8	165.6	19.3%			1.4
Revenue (no M&A)	138.8	148.9	7.3%	138.8	9.7
EBITDA	24.2	33.7*	39.4%				(1.0)
EBITDA Adj.**	29.2	34.2*	17.1%
EBITDA Adj/Revenue	21.0%	20.5%
Net Profit	15.6	19.0	21.7%
Capex	7.2	11.2	54.9%	Revenues	Organic	FX	No core	Organic

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*Including the contribution from Hygromatik and Recuperator equal to +3.9m€ and the impact of the adoption of IFRS 16 equal to 2.0m€

** 2018 EBITDA adj. for non recurring costs (5m€) related to IPO; 2019 EBITDA adj. for non-recurring costs (0.5m€) related to IPO/M&A

• Revenue +20.3%: The significant growth in revenues (accelerating compared to Q1 2019=19.5%) is attributable both to organic growth (+9.7m€) and to the excellent results of Hygromatik and Recuperator (+18.1m€), not included in the consolidation perimeter in H1 2018.
• EBITDA adj. +17.1%: the growth in the top-line is substantially reflected at the EBITDA level, which includes 3.9m€ from Hygromatik and Recuperator and benefitted also from the IFRS 16 adoption (+2.0m€). EBITDA includes as well. approx. 0.8m€ of recurring costs from IPO not present in H1 2018 and 0.4m€ costs related to US/China duties.
• Net Profit 21.7%: Net of the '18-'19 non-recurring costs, the bottom-line would have been substantially stable in spite of higher financial charges and tax rate (23% vs. 20.5% in 1H 2018).
• Capex: International footprint expansion plan on track, resulting in a significant Capex growth. ³

H1 2019 – Revenue breakdowns

• Positive growth in all the geographic areas maintained, with a significant improvement in North America thanks to the overcoming of the logistic issues experienced in Q1 2019.
• EMEA positively impacted by Hygromatik and Recuperator consolidation.
• APAC Significant growth in spite of higher volatility in the area.
• Americas (South) stable results impacted by the negative geopolitical scenario.
• Strong growth in HVAC sector driven also by the change in scope of consolidation (Hygromatik and Recuperator).
• 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€	H1 '18	H1 '19	Δ%
EBITDA	24,165	33,687	39.4%
D&A	-4,175	-8,143
Impairment
EBIT	19,990	25,544	27.8%
Financial (charges)/income	66	-682
FX gains/losses	-418	-326
Companies cons with e.m.	15	136
EBT	19,653	24,673	25.5%
Taxes	-4,030	-5,660
Minorities	-27	-23
Group net profit	15,596	18,990	21.7%

• Higher D&A mainly linked to: the change in scope of consolidation, to higher Capex in 2019 and to the adoption of IFRS 16 (2.0m€)
• 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 1H 2018.
• Higher tax rate (approx. 23% against 20.5% in H1 2018) due mainly to a number of elements linked to China (dividend distribution and a less favorable tax-rate) and to Parent Company tax-rate.

H1 2019 – NFP Bridge

• Net of the effects derived from the adoption of IFRS 16, the NFP would have been substantially stable (including the dividend payment and the buy-back plan).
• FFO 26.1m€: which easily covered higher capex (due to the deployment of the production plants expansion plan) and the increase in NWC.
• NWC +5.9m€ due mainly to the increase in revenues (and subsequently in receivables). The increase has halved compared to Q1 2019 thanks to an improvement in inventory (as expected) and to a decrease in tax credits.

Closing Remarks

Increased volatility in Europe and China and the difficult political situation in South America suggest a prudential stance in elaborating medium-term forecast.

Without significant further deterioration in the global macro-economic scenario, we expect for 2019 YE to keep a top-line growth pace and profitability close to what we achieved in 1H 2019.

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Annexes

Shareholding structure

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Income statement and Balance Sheet

Income statement Balance sheet

K€	H1_2018	H1_2019	Delta %
Revenues	138,793	166,904	20.3%
Other revenues	766	1,156	50.8%
Operative costs	(115,395)	(134,373)	16.4%
EBITDA	24,165	33,687	39.4%
Depreciation and impairments	(4,175)	(8,143)	95.0%
EBIT (Risultato Operativo)	19,990	25,544	27.8%
EBT (earn before taxes)	19,653	24,673	25.5%
Taxes	(4,030)	(5,660)	40.5%
Net result of the period	15,623	19,012	21.7%
Non controlling interest	27	23	-17.5%
Group net result	15,596	18,990	21.8%

K€	FY 2018	H1 2019	Delta %
Fixed Capital	131,364	151,208	15.1%
Working Capital	53,383	59,313	11.1%
Employees defined benefit plans	(7,333)	(7,919)	8.0%
Net invested capital	177,414	202,601	14.2%
Equity	118,288	126,530	7.0%
Net financial position (asset)	59,125	76,071	28.7%
Total	177,414	202,601	14.2%

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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.