Landi Renzo

Earnings Release • Nov 12, 2021

Informazione Regolamentata n. 0915-29-2021		Data/Ora Ricezione 12 Novembre 2021 17:59:20	Euronext Star Milan
Societa'	:	LANDI RENZO
Identificativo Informazione Regolamentata	:	154169
Nome utilizzatore	:	LANDIN03 - Cilloni
Tipologia	:	REGEM
Data/Ora Ricezione	:	12 Novembre 2021 17:59:20
Data/Ora Inizio Diffusione presunta	:	12 Novembre 2021 17:59:21
Oggetto	:	PR Q3 2021 Financial Results
Testo del comunicato

Vedi allegato.

Landi Renzo: Board of Directors approves results at September 30, 2021

• Green Transportation sector impacted by tensions due to increases in raw material prices and supply chain headwinds, particularly with regard to electronic components
• Metatron S.p.A., leader of gas and hydrogen solutions for the Mid&Heavy Duty segment, consolidated line-by-line as of August 2021
• SAFE&CEC subsidiary continued to perform well, driving Landi Renzo Group's performance
• Indian joint venture Krishna Landi Renzo continued to grow, with new significant opportunities in a high-growth market
  • Consolidated revenues amounted to €162.6 million, increasing (+64.2%) compared to €99 million at September 30, 2020
  • Adjusted EBITDA was €7.6 million, accounting for 4.6% of revenues, compared to €4.4 million at September 30, 2020
  • EBITDA rose by €2.5 million to €6 million, accounting for 3.7% of revenues (€3.5 million at September 30, 2020)
  • Net result negative for €1 million, compared to a loss of €7.9 million at September 30, 2020
  • Net Financial Debt at €138.8 million (€72.9 million at December 31, 2020), including a €25.4 million residual debt associated with the acquisition of the Metatron Group. Adjusted Net Financial Position at September 30, 2021 amounted to €99.3 million, of which €7 million attributable to the Clean Tech Solutions sector and €92.3 million to the Green Transportation sector, of which €9.6 million referring to Metatron Group's net financial position

Cavriago (RE), November 12, 2021

The Board of Directors of Landi Renzo, chaired by Stefano Landi, met today and approved the Interim Report at September 30, 2021. After a first half of the year marked by a significant increase in global car production compared to the same period of the previous year (+29.2%), the automotive sector suffered from increasing supply chain headwinds in the logistics sectors and on the market of raw materials, particularly semi-conductors. This generated negative effects on the industry's supply chains, slowing down production and also leading to temporary plant closures by major carmakers, with subsequent delivery delays, production losses and increased costs. This situation jeopardized the recovery of the sector, which is expected to return to normal levels in 2022.

SAFE&CEC reported positive performance, constantly growing in terms of sales and order backlog.

"It was a challenging quarter for the overall automotive sector, as it was weighed down by supply chain headwinds and increases in raw material prices, which impacted our Group's performance. At the same

Press release November 12, 2021

time, we began the Metatron integration, which we are certain will generate positive results in the coming years. Recent international climate change conferences have pointed out that hydrogen will be an increasingly crucial technology to decarbonize energy, and at Landi Renzo Group, we are ready to play a leading role in both the mobility and infrastructures segments," stated Stefano Landi, Chairman of Landi Renzo S.p.A.

Cristiano Musi, Chief Executive Officer of Landi Renzo S.p.A., commented: "The automotive sector, which was unfortunately impacted by extremely difficult market conditions both in the OEM and After Market segments. We are working to further focus on cost reduction, defining agreements with our OEM clients to reflect the increase in raw material prices, while also accelerating the Metatron integration process. All these measures will enable us to recover our margins as soon as the fourth quarter of the year. It bears also noting that we are observing a significant recovery of the After Market segment in the fourth quarter, with clear benefits as regards margins and cash generation. Worth of mention is also the performance of our Indian joint venture, which is growing both in terms of revenues and margins, with significant growth projections in the near term. We are also continuing to strategically develop the hydrogen segment, in which, also thanks to the acquisition of Metatron, our product range is ready and will generate significant revenues as soon as 2021. SAFE&CEC as well continues to perform well, growing in terms of revenues and margins and with an all-time high order backlog that is reporting an ongoing uptrend, thanks to the new important opportunities offered by the compression of hydrogen and CO2 and by the methane emission recovery — segments in which we forecast significant revenues as soon as 2022."

Consolidated Financial Highlights at September 30, 2021

The consolidated financial results at September 30, 2021 are not directly comparable with those for the same period of the previous year due to the following factors:

• line-by-line consolidation of the SAFE&CEC Group's results as of May 2021 (Clean Tech Solutions sector) following amendments to the shareholders' agreement that conferred greater decisionmaking autonomy on Landi Renzo S.p.A., enabling it to exercise control pursuant to IFRS 10;
• acquisition of the Metatron Group in August 2021 (Green Transportation sector) which, in light of the absence of conditions precedent for the acquisition of the remaining 51% equity interest and the governance system contractually agreed upon by the parties, meets the requirements set forth in IFRS 10 for acquiring control.

In the first nine months of the year, Landi Renzo Group's revenues amounted to €162,558 thousand (€99,008 thousand at September 30, 2020). On a like-for-like consolidation basis, i.e., considering the Green Transportation sector alone, consolidated revenues at September 30, 2021 would have been €120,020 thousand (of which €2,391 thousand attributable to the Metatron Group for the period August-September 2021), up €21,012 thousand (+21.2%) compared to September 30, 2020 (€99,008 thousand).

The Group's adjusted EBITDA for the first nine months of 2021 was positive at €7,555 thousand, accounting for 4.6% of revenues, compared to €4,382 thousand (4.4% of revenues) for the same period of the previous year.

EBITDA was positive at €5,952 thousand (positive at €3,488 thousand at September 30, 2020), including non-recurring costs amounting to €1,603 thousand (€894 thousand at September 30, 2020).

EBIT for the reporting period was negative at €5,413 thousand (negative at €5,604 thousand at September 30, 2020), after amortization, depreciation and impairment losses totaling €11,365 thousand (€9,092 thousand at September 30, 2020), of which €2,123 thousand due to the application of IFRS 16 – Leases (€1,543 thousand at September 30, 2020).

Following the acquisition of control over the SAFE&CEC Group, which operates in the Clean Tech Solutions sector, Landi Renzo Group's interest in the latter was measured at fair value pursuant to IFRS 3; as a result, a €8,783 thousand income from consolidation was recognized in the income statement. At the consolidation date, the fair value of the group acquired was measured by a major independent expert.

The Indian joint venture Krishna Landi Renzo, consolidated using the equity method, continued to report positive results: in the first nine months of 2021, it significantly increased its sales to a major Indian OEM customer, recording €14.1 million revenues and €2.5 million EBITDA. Accordingly, the equity interest was written up for €885 thousand (compared to a write-down of €97 thousand at September 30, 2020).

EBT was negative at €47 thousand (negative at €9,489 thousand at September 30, 2020).

Net Result for the Group and minority interests at September 30, 2021 was negative at €1,050 thousand compared to a loss for the Group and minority interests amounting to €7,877 thousand at September 30, 2020.

Net Financial Debt totaled €138,818 thousand at September 30, 2021 (€72,917 thousand at December 31, 2020), of which €13,788 thousand due to the application of IFRS 16 — Leases, €263 thousand due to the fair value of financial derivative contracts and €25,436 thousand due to the residual debt for the acquisition of the Metatron group. Adjusted Net Financial Position at September 30, 2021, i.e., excluding the effects arising from the application of this standard, the fair value of financial derivative contracts and the residual debt for the acquisition of equity interests, would have been €99,331 thousand, of which €7,035 thousand attributable to the Clean Tech Solutions sector and €92,296 thousand to the Green Transportation sector. Adjusted Net Financial Position of the Green Transportation sector, net of the Metatron Group's contribution (€9,599 thousand), was virtually stable compared to the previous quarter but rose by €15,377 thousand compared to December 31, 2020, mainly as a result of the increase in net working capital and investments for the period.

Performance of the Green Transportation (automotive) operating business

Revenues from sales on the Green Transportation sector at September 30, 2021 amounted to €120,020 thousand, up €21,012 thousand (+21.2%) compared to the same period of the previous year and including €2,391 thousand revenues generated by the Metatron Group, consolidated by Landi Renzo Group as of August 2021.

Sales within the OEM channel amounted to €50,359 thousand and accounted for 42% of total (€47,765 thousand at September 30, 2020), sharply increasing thanks to the greater order backlog of a major European OEM client that has focused on LPG bifuel engines to broaden its range of 'green' products. In the first nine months of 2021, the ratio of these sales to total revenues generated effects on the Group's margins, as sales on the OEM channel provide lower profitability than those on the After Market channel. This was in addition to the effects of the increase in raw material prices, which were not yet reflected in sales prices.

Sales within the After Market channel amounted to €69,661 thousand (€51,243 thousand at September 30, 2020) and mainly referred to orders from both national and foreign distributors and authorized installers. This item grew chiefly as a result of the recovery of some LATAM, North African and Asian markets. Despite the positive market scenario, the shortage of electronic components caused problems in the completion of production lots and in their delivery.

In detail, with regard to the geographical breakdown of sales on the Green Transportation sector:

• Italy accounted for 12.7% of total revenues (16.2% in the first nine months of 2020), down compared to the same period of the previous year (-5%). After a first half of the year marked by encouraging signs of a recovery and growing demand for conversions, the third quarter of 2021 reported a decline (-24.9% compared to the same period of the previous year) following carmakers' delay in delivering their vehicles. According to data of the association of foreign carmakers operating in Italy (UNRAE), registrations of gas-fueled (methane and LNG) vehicles in the Italian market continued nonetheless to account for approximately 9% of total. It should be noted that the recent price instability, recorded as of September, brought the price of methane to a current level of €2/Kg and that of LNG to €0.8/Liter, thereby leading to postpone conversion decisions.
• The rest of Europe accounted for 53% of total revenues (53.4% in the first nine months of 2020), up 20.3% mainly thanks to the greater order backlog of a major European OEM client that has focused on LPG bifuel engines to broaden its range of 'green' products. The current shortage of semiconductors on the market led to temporary halts of production, with the consequent postponement of portions of orders planned to be delivered during the third quarter.
• Sales in America for the first nine months of 2021 amounted to €15,127 thousand (€11,295 thousand at September 30, 2020), up 33.9% thanks to the LATAM area's positive performance that, despite delays in the vaccine campaigns, showed significant signs of a recovery.
• The markets in Asia and the Rest of the World accounted for 21.7% of total revenues (19% in the first nine months of 2020), increasing by 38.5% thanks to the positive trend of the North African and Asian markets.

In the first nine months of 2021, adjusted EBITDA of the Green Transportation sector, net of €1,333 thousand non-recurring costs, was positive at €2,801 thousand, accounting for 2.3% of revenues, down compared to the same period of the previous year (€4,382 thousand, or 4.4% of revenues, net of nonrecurring costs of €894 thousand). Adjusted EBITDA of the Green Transportation sector included the

contribution of the Metatron Group, consolidated as of August 2021, whose adjusted EBITDA amounted to €225 thousand.

EBITDA of the Green Transportation sector was positive at €1,468 thousand and accounted for 1.2% of revenues (€3,488 thousand; or 3.5% of revenues at September 30, 2020).

EBIT was negative at €8,851 thousand (negative at €5,604 thousand at September 30, 2020).

Group's margins at September 30, 2021 were impacted both by the significant ratio of sales on the OEM channel to total revenues, as the former provide lower margins than those on the After Market channel, and by the effects of the increase in raw material prices, which to date have impacted sales on the After Market channel only partially. Negotiations are currently underway with a major OEM client to redefine sales prices in order to partly reflect the extraordinary increases in raw material prices reported in 2021.

The After Market channel showed positive signs and, despite the increasing price competition, recovered markedly on the LATAM, North African and Asian markets.

Performance of the Clean Tech Solutions operating business

With regard to the five months (May-September) consolidated by Landi Renzo Group, the Clean Tech Solutions sector reported revenues amounting to €42,727 thousand, adjusted EBITDA positive at €4,754 thousand and EBITDA positive at €4,484 thousand. EBIT was positive at €3,438 thousand.

At a pro-forma level, i.e., considering the SAFE&CEC Group's results for the first nine months of 2021, the Clean Tech Solutions sector's revenues rose significantly from €53,929 thousand at September 30, 2020 to €66,295 thousand at September 30, 2021 (+22.9%). Despite the negative impacts on global economy due to the persistence of the Covid-19 pandemic and the difficulty in procuring raw materials on the market, the SAFE&CEC Group continued to report increasingly positive results and an order backlog able to cover the whole fourth quarter of 2021 and first half of the next year.

The Clean Tech Solutions sector's pro-forma adjusted EBITDA at September 30, 2021 was €5,370 thousand, accounting for 8.1% of revenues, up compared to the same period of the previous year (€3,124 thousand, or 5.8% of revenues).

The Clean Tech Solutions sector's pro-forma EBIT at September 30, 2021 was €2,724 thousand, up sharply (€1,815 thousand) compared to the same period of the previous year.

The gradual improvement of margins within the Clean Tech Solutions sector continued in the third quarter as well, thanks to the positive effects arising from the product standardization process, which led to a significant reduction in production costs as soon as the second quarter of 2021, and the increase in revenues, which allowed to better absorb fixed costs.

Significant events after the first nine months of 2021

After the end of the first nine months of 2021 and up to today's date, it should be noted that on November 12, 2021 the Board of Directors of Landi Renzo S.p.A., in light of the overall period of time required for the acquisition of Metatron S.p.A., acknowledged that an agreement, still to be formalized, has been entered into with the Metatron Group's main shareholder aimed at extending to January 31, 2022 the period within which the acquisition of the Metatron Group by Landi Renzo S.p.A. shall be finalized, and approved the contents thereof.

Business outlook

Following the current shortage of raw materials on the market, and semi-conductors in particular, that led to significant price increases, in addition to supply chain headwinds and production halts by main carmakers, the Green Transportation sector reported lower-than-expected results, with a reduced visibility on the coming months. Accordingly, the management revised its projections for 2021 forecasting revenues from sales on the Green Transportation sector (net of the Metatron Groups' contribution) amounting to €160-165 million and adjusted EBITDA in the range of €7 million to €8 million, including positive effects expected to arise from the price negotiations currently underway with a major OEM client.

With regard to the Clean Tech Solutions sector, the Group confirms the revenues and margins forecasts announced upon publishing the results at June 30, 2021, i.e., an annual value of production in the range of €85 million to €90 million, with adjusted EBITDA between €8 million and €9 million (of which approximately €7 million and €8 million referring to the period May-December 2021).

With reference to the Metatron Group, forecasts call for revenues from sales amounting to €20 million on an annual basis (€7 million in the period August-December 2021).

This press release is a translation. The Italian version prevails

Pursuant to Article 154-bis, paragraph 2, of Italian Legislative Decree No. 58 of February 24, 1998, the Officer in charge of preparing the Company's financial statements, Paolo Cilloni, declares that the accounting information contained in this press release corresponds to the documented results, books and accounting records. This press release is also available on the corporate website www.landirenzogroup.com.

Landi Renzo is the global leader in the Methane gas, LNG, hydrogen and LPG components and systems for the motor vehicles sector. The Company is based in Cavriago (Reggio Emilia) and has over 60 years' experience in the sector, and is renowned for the extent of its international activities in over 50 countries, with export sales of about 80%. Landi Renzo S.p.A. has been listed on the STAR segment of the MTA Market of Borsa Italiana since June 2007.

LANDI RENZO

Paolo Cilloni CFO and Investor Relator ir@landi.it

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Cristina Fossati, Angela Fumis Phone: +39 02 89011300 e-mail: landirenzo@imagebuilding.it

Press release

November 12, 2021

(thousands of Euro)
	30/09/2021	30/09/2020
CONSOLIDATED INCOME STATEMENT
Revenues from sales and services	162,558	99,008
Other revenues and income	1,568	89
Cost of raw materials, consumables and goods and change in inventories	-101,648	-57,995
Costs for services and use of third-party assets	-29,879	-19,972
Personnel costs	-24,473	-16,224
Allocations, write downs and other operating expenses	-2,714	-1,418
Gross Operating Profit	5,952	3,488
Amortization, depreciation and impairment	-11,365	-9,092
Net Operating Profit	-5,413	-5,604
Financial income	150	221
Financial expenses	-3,081	-2,367
Exchange gains (losses)	-690	-1,718
Income (expenses) from equity investments	8,768	0
Income (expenses) from joint venture measured using the equity method	219	-21
Profit (Loss) before tax	-47	-9,489
Taxes	-1,003	1,612
Net profit (loss) for the Group and minority interests, including:	-1,050	-7,877
Minority interests	829	-163
Net profit (loss) for the Group	-1,879	-7,714
Basic earnings (loss) per share (calculated on 112,500,000 shares)	-0.0167	-0.0686
Diluted earnings (loss) per share	-0.0167	-0.0686

Press release

November 12, 2021

(thousands of Euro)
ASSETS	30/09/2021	31/12/2020
Non-current assets
Land, property, plant, machinery and other equipment	15,330	13,212
Development expenditure	11,909	9,506
Goodwill	75,133	30,094
Other intangible assets with finite useful lives	17,384	10,860
Right-of-use assets	13,028	4,975
Equity investments measured using the equity method	1,627	22,509
Other non-current financial assets	1,049	921
Other non-current assets	2,556	2,850
Deferred tax assets	13,332	12,201
Total non-current assets	151,348	107,128
Current assets
Trade receivables	66,540	39,353
Inventories	71,634	42,009
Contract work in progress	16,076	0
Other receivables and current assets	13,598	6,712
Other current financial assets	0	2,801
Cash and cash equivalents	19,504	21,914
Total current assets	187,352	112,789
TOTAL ASSETS	338,700	219,917
(thousands of Euro)
SHAREHOLDERS' EQUITY AND LIABILITIES	30/09/2021	31/12/2020
Shareholders' Equity
Share capital	11,250	11,250
Other reserves	44,518	53,199
Profit (loss) for the period	-1,879	-7,662
Total Shareholders' Equity of the Group	53,889	56,787
Minority interests	5,071	-473
TOTAL SHAREHOLDERS' EQUITY	58,960	56,314
Non-current liabilities

TOTAL SHAREHOLDERS' EQUITY	58,960	56,314
Non-current liabilities
Non-current bank loans	67,555	68,181
Other non-current financial liabilities	3,695	408
Non-current liabilities for right-of-use	10,872	2,871
Provisions for risks and charges	4,231	2,897
Defined benefit plans for employees	3,581	1,556
Deferred tax liabilities	1,485	297
Liabilities for derivative financial instruments	263	458
Total non-current liabilities	91,682	76,668
Current liabilities
Bank financing and short-term loans	47,075	23,108
Other current financial liabilities	510	378
Current liabilities for right-of-use	2,916	2,228
Trade payables	83,486	53,509
Tax liabilities	3,205	2,677
Other current liabilities	50,866	5,035
Total current liabilities	188,058	86,935
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	338,700	219,917

Press release

November 12, 2021

(thousands of Euro)
CONSOLIDATED CASH FLOWS STATEMENT	30/09/2021	30/09/2020
Financial flows deriving from operating activities
Pre-tax profit (loss) for the period	-47	-9,489
Adjustments for:
Depreciation of property, plant and machinery	3,226	2,920
Amortisation of intangible assets	6,016	4,629
Depreciation of right-of-use assets	2,123	1,543
Loss (profit) from disposal of tangible and intangible assets	247	-44
Share-based incentive plans	132	132
Impairment loss on receivables	560	152
Net financial charges	3,621	3,864
Net expenses (income) form equity investments measured using the equity method	-219	21
Net expenses (income) form equity investments	-8,768	0
	6,891	3,728
Changes in:
Inventories and work in progress	-8,281	-1,751
Trade receivables and other receivables	-650	1,539
Trade payables and other payables	3,938	-12,332
Provisions and employee benefits	-58	-859
Cash generated from operation	1,840	-9,675
Interest paid	-1,434	-1,301
Interest received	161	51
Taxes paid	-653	-598
Net cash generated (absorbed) from operating activities	-86	-11,523
Financial flows from investment
Proceeds from sale of property, plant and machinery	446	187
Purchase of property, plant and machinery	-2,386	-4,589
Purchase of intangible assets	-194	-257
Development expenditure	-3,612	-3,941
Variation in consolidation area	3,575	0
Net cash absorbed by investment activities	-2,171	-8,600
Free Cash Flow	-2,257	-20,123
Financial flows from financing activities
Disbursements (reimbursement) of loans to associates	0	-600
Disbursements (reimbursement) of medium/long-term loans	-3,915	23,644
Change in short-term bank debts	8,652	-1,168
Repayment of leases IFRS 16	-2,302	-1,648
Net cash generated (absorbed) by financing activities	2,435	20,228
Net increase (decrease) in cash and cash equivalents	178	105
Cash and cash equivalents as at 1 January	21,914	22,650
Effect of exchange rate fluctuations on cash and cash equivalents	-2,588	-2,934
Cash and cash equivalents at the end of the period	19,504	19,821