Carel Industries

Earnings Release • Mar 7, 2019

CAREL INDUSTRIES S.p.A. FY Results 2018

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2018 - Main achievements

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2018 – Implementation of the strategic guide-lines

2018 results highlights: +9.7% in Revenue; 19.7% EBITDA Margin adj.; +18.9% Net profit adj. Thanks to the implementation of CAREL's strategic guidelines.

CAREL reported a significant growth in revenues (+8.9%) net of Hygromatik/Recuperator contribution thanks to its ability to:

• take advantage from cross-selling and up-selling activity, offering the most advanced solutions in its niches.
• leverage its direct and skilled sales-force in order to increase its market share.

Completion of two important transactions, 100% share capital of Hygromatik and Recuperator:

• Hygromatik will help to increase the Group's market share in humidification sector in German-speaking countries
• Recuperator will enable the Group to improve its positioning in AHUs sector

The Company is extremely focused on the development of digital services linked to CAREL's hardware and expertise in thermodynamics. A number of pilot projects have already been launched and their "Go-to-market" phase is expected to be implemented in 2019.

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FY 2018 – Growth expectations confirmed

m€	FY 2017	FY 2018	Δ%
Revenue	255.4	280.2	9.7%
Revenue FX Adj.(1) (3)	255.4	284.6	11.4%
EBITDA	50.3	47.0	-6.7%
EBITDA Adj.(2)	50.9	55.2	8.5%
EBITDA adj./Revenue	19.9%	19.7%
Net Profit	31.2	30.8	-1.3%
Net Profit Adj.(2)	31.5	37.5	18.9%
Capex	10.0	18.4	>80%

• Revenue +9.7% (+11.4% Adj): The steady growth in revenue thoughout 2018 (which would have been +11.4% net of FX impact) is linked to the deployment of CAREL's strategy and includes 2.1m€ from Recuperator/Hygromatik consolidation.
• EBITDA adj. +8.5%: the growth achieved in the first half of the year is also substantially confirmed in the second halfyear with a profitability in line with 2017 in spite of higher recurring costs (IPO; production footprint expansion, FX, etc).
• Net Profit adj. +18.9%: The bottom line is positively impacted by the operating results together with a lower tax-rate compared to 2017, the latter benefitting from a number of non-recurring elements (patent-box contribution for ~2.1m€)
• Capex >80%: International footprint expansion plan on track, resulting in a Capex growth higher than 80%
• Dividend: Dividend proposal equal to 0.1€ per share, with a pay-out ratio of approx. 30%

(1)Net of FX impact

(2)Net of IPO/M&A and other non-recurring costs (3) Including 2.1m€ contribution from Hygromatik/Recuperator and 3.0m€ from Alfaco

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.

FY 2018 – Revenue breakdowns

• Net of FX impact, revenue grew in all the geographical areas with a double-digit growth in Europe thanks also to high-efficiency components, which drove the cross-selling and up-selling activities.

• In the second part of the year, recovery in the sales trend in US, South America and South APAC

• Net of the expected sales reduction in the lowprofitability no-core sector, the growth would have been 10.9% (+12.7% excl. FX impact).

• Significant growth in the refrigeration sector both in absolute (+13.8m€) and in percentage terms (+17.6%)* 5

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(*)Net of FX impact

From EBITDA to Net Profit

K€	FY '17	FY '18	Δ%
EBITDA	50,337	46,986	-6.7%
D&A	-8,076	-9,119
Impairment
EBIT	42,261	37,867	-10.4%
Financial (charges)/income	451	-136
FX gains/losses	-814	-352
Companies cons with e.m.	-20	15
EBT	41,878	37,394	-10.7%
Taxes	-10,714	-6,643
Minorities	-47	-74
Group net profit	31,117	30,678	-1.4%

• Higher D&A mainly linked to the Carel's footprint expansion project (Croatia, Italy, US)
• Financial charges/income affected by:
• the disinvestment in life insurance for approximately 46m€.
• Higher interests expenses due to M&A transactions

• Lower tax-rate (approx. 18% against 26% in FY 2017) due to the effects of the "patent-box" mechanism.

FY 2018 – (NFP)/Cash Bridge

• Positive FCF generation (+9.6m€): FFO equal to ~41.5m€ thanks to very positive operating results.
• NWC +13.8m€ due to higher inventory level, caused by global electronic shortage/lead time extension. An improvement (approx. 2m€, net of M&A effects) compared to 9M 2018 already in place and further normalization is expected in 2019.

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• Strong increase in Capex (>80%) compared to last year, devoted to footprint expansion project.
• 30m€ extraordinary dividend.
• Net of M&A activity (-78.3m€) the company would have been net-cash positive (+19.1m€)

Sustainability as a strategic pillar

Sustainability has always been an essential element driving CAREL strategy

Closing Remarks

As of today we don't see any signs of trend inversion, in our niches, compared to what with we experienced in last years.

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Annexes

Shareholding structure

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Income statement and Balance Sheet

Income statement Balance sheet

K€	FY 2017	FY 2018	Var. %
Revenues	255,449	280,220	9,7%
Other revenues	2,131	3,147	47,7%
Operative costs	(207,242)	(236,381)	14,1%
Operative costs adj	(206,721)	(228,158)	10,4%
EBITDA	50,337	46,986	-6,7%
EBITDA ADJ	50,858	55,209	8,6%
Depreciation and impairments	(8,076)	(9,119)	12,9%
EBIT (Risultato Operativo)	42,261	37,867	-10,4%
EBT (earn before taxes)	41,878	37,394	-10,7%
Taxes	(10,714)	(6,643)	-38,0%
Net result of the period	31,164	30,752	-1.3%
Non controlling interest	-47	-74	56,8%
Group net result	31,117	30,678	-1,4%

K€	FY 2017	FY 2018	var %
FIXED ASSETS	37,411	131,364	251.1%
WORKING CAPITAL	46,353	53,383	15.2%
EMPL. DEF. BENEFIT PLAN	(5,687)	(7,333)	28.9%
NET CAPITAL INVESTED	78,077	177,414	127.2%
EQUITY	118,316	118,288	0.0%
NET FINANCIAL POSITION	(40,239)	59,125	-246.9%
TOTAL	78,077	177,414	127.2%

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