Carel Industries

Quarterly Report • May 15, 2019

CAREL INDUSTRIES S.p.A. 2019 - Q1 Results

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15th May 2019

Q1 2019 – Highlights

• In Q1 2019 the implementation of the strategic guidelines continued, leading to a growth in revenues equal to 19.5%, benefitting mainly from:
• Organic Growth (+3.7m€) All the geographic areas reported a growth
• Hygromatik and Recuperator (+8.7m€) In line with business plan and expectations. Integration process on track.
• EBITDA margin in line with FY 2018
• Tax-rate equal to 19%

• Growth in NFP (+18.4m€) mainly linked to the adoption of the IFRS 16 (14.7m€) and to the seasonal increase in NWC.

• Production footprint expansion plan on track: the plants should come on stream by the end of 1H 2019.
• Geographic expansion: opening of CAREL Ukraine branch in January 2019
• Services: the "Go-to-market" phase is in line with expectation and the commercial phase should start by the end of 2019.

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Q1 2019 – Growth in all the economic KPIs

m€	Q1 2018	Q1 2019	Δ%
Revenue	67.0	80.1	19.5%
Revenue FX Adj.	67.0	79.4	18.4%
Revenue (no M&A)	67.0	71.4	6.4%
EBITDA	13.2	15.7*	18.9%
EBITDA/Revenue	19.7%	19.6%
Net Profit	8.2	8.9	8.4%
Capex	1.7	4.9	n.r.

*Including the contribution from Hygromatik and Recuperator equal to +1.8m€ and

the impact of the adoption of IFRS 16 equal to 1.1m€

KPIs Revenues Bridge (m€) 67.0 3.7 8.7 0.7 80.1 Revenues Q1 2018 Organic Growth M&A FX Revenues Q1 2019

• • Revenue +19.5%: The significant growth in revenues is attributable both to organic growth (+3.7m€) and to the excellent results of Hygromatik and Recuperator (+8.7m€), not included in the consolidation perimeter in Q1 2018.
• EBITDA +18.9%: the growth in the top-line is substantially reflected at the EBITDA level, which includes 1.8m€ from Hygromatik and Recuperator and benefitted also from the IFRS 16 adoption (+1.1m€). EBITDA includes as well. approx. 0.5m€ of recurring costs from IPO not present in Q1 2018.
• Net Profit +8.4%: The bottom-line is positively impacted by the operating results together with a lower tax-rate compared to 2018.
• Capex: International footprint expansion plan on track, resulting in a significant Capex growth. ³

Q1 2019 – Revenue breakdowns

• Sector Q1 2018 Q1 2019 Δ% Δ% fx HVAC 41.8 53.0 26,8% 25,3% Refrig. 23.6 25.8 9,6% 9,1% Core Revenue 65.4 78.9 20,6% 19,5% No core 1.6 1.2 -25,0% -25.1% Total Revenue 67.0 80.1 19,5% 18,4% Breakdown by region Breakdown by sector HVAC 66% Refrig. 32% Other 2% 80.1 M€ m€ m€
• Positive growth in all the geographic areas, both at current and constant exchange rate.
• EMEA positively impacted by Hygromatik and Recuperator consolidation.
• Americas (North) performance limited by the saturation of the US plant.
• Americas (South) improving in spite of an unfavorable economic scenario

• Strong growth in HVAC sector driven also by the change in scope of consolidation (Hygromatik and Recuperator), net of which, Refrigeration would still be the fastest growing sector.

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• Expected decline in no core revenues.

From EBITDA to Net Profit

K€	Q1 '18	Q1 '19	Δ%
EBITDA	13,222	15,718	18.9%
D&A	-1,961	-4,052
Impairment				adoption of IFRS 16 (0.9m€)
EBIT	11,260	11,666	3.6%
Financial (charges)/income	97	-266
FX gains/losses	-550	-435
Companies cons with e.m.
EBT	10,807	10,965	1.5%
Taxes	-2,627	-2,095
Minorities	-10	-17
Group net profit	8,171	8,854	8.4%	Patent Box mechanism

• Higher D&A mainly linked to: the change in scope of consolidation, to higher Capex in 2018 and to the adoption of IFRS 16 (0.9m€)
• Financial charges/income affected by higher interests expenses due to the loans for the M&A transactions.

• Lower tax-rate (approx. 19% against 24% in Q1 2018) due mainly to the

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Q1 2019 – NFP Bridge

• The 18.4m€ increase in NFP is mainly linked to the adoption of the IFRS 16 (+14.7m€).
• FFO 13.3m€: which covered higher capex (due to the deployment of the production plants expansion plan) and partly the seasonal increase in NWC.
• NWC +11.1m€ due mainly to seasonal effect in receivables and higher use of stocks (due to the stocks reduction plan) with less purchases and consequently less payables.

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Closing Remarks

The constant deployment of our strategic guidelines, together with a growing orders intake make us confident in relations to a further improvement in performance in the coming quarters.

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Annexes

Shareholding structure

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Income statement and Balance Sheet

Income statement Balance sheet

K€	Q1_2018	Q1_2019	Delta %
Revenues	67,031	80,097	19.5%
Other revenues	359	609	69.6%
Operative costs	(54,169)	(64,988)	20.0%
EBITDA	13,222	15,718	18.9%
Depreciation and impairments	(1,961)	(4,052)	106.6%
EBIT (Risultato Operativo)	11,260	11,666	3.6%
EBT (earn before taxes)	10,807	10,965	1.5%
Taxes	(2,627)	(2,095)	-20.3%
Net result of the period	8,181	8,871	8.4%
Non controlling interest	10	17	73.0%
Group net result	8,171	8,854	8.4%

K€	FY 2018	Q1_2019	Delta %
Fixed Capital	131,364	148,749	13.2%
Working Capital	53,383	65,024	21.8%
Empl. defined benefit plans	(7,333)	(7,383)	0.7%
Net invested capital	177,414	206,390	16.3%
Equity	118,288	128,909	9.0%
Net financial position (asset)	59,125	77,481	31.0%
Total	177,414	206,390	16.3%

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Company profile

Leading provider of advanced control solutions for HVAC/R

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Note: 1) avg. 2015A-18A; 2) Value Added Resellers

Note: financial data refer to consolidated accounts of CAREL Industries S.p.a. 2015-2018 IFRS. Comparability might be affected by change in consolidation perimeter

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We operate in attractive niches across a wide range of end-markets…

Source: Company information as of Mar-19

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

Source: Company information as of Mar-19 Note: 1) developed with partners

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Long track record of profitable organic growth

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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

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

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² Attractive market growth supported by secular trends

Note: 1) Based on management elaboration on BSRIA data on Rooftop, Chillers, AHU and Datacenters applications, based on report dated Mar-2018; 2) Based on management elaboration on PlanetRetail data on Food Retail and Food Service segments

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

wallet

digitalisation and environmental focus

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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

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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…

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4 …diversified blue-chip customers

Well-established relationships oriented to preserve and enhance the CUSTOMER LIFE-TIME VALUE

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Source: Company information as of Mar-18; audited IFRS consolidated financials as of Dec-17

Note: 1) as % of 2017 revenue; 2) as % of 2017 revenue for each market; 3) Top 60 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-19 Note: 2015-2018 IFRS

Note: 1) 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 A

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

• 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

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HygroMatik NFP substantially neutral.

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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