Emak — Investor Presentation 2019

Mar 19, 2019

Star Conference, Milan March 20-21, 2019

Emak at a glance

Global presence

Direct presence in 14 countries Distribution network in five continents Efficient production footprint 2,000 employees

Outdoor Power Equipment

Main brands	Product range	End-users	Distribution channel	Strategic priorities
	• Hand held products: trimmers, chainsaws, blowers. • Wheeled products: lawnmowers, garden tractors, tillers, transporters. • Accessories and spare parts	• Professional users • High demanding private users (prosumer)	• Specialised dealers	• Product innovation • Distribution network • Efficiency

Pumps & High Pressure Water Jetting

Main brands	Product range	Application / End user	Clients / distribution channel	Strategic priorities
	• Agriculture products: diaphragm, centrifugal and piston pumps	• Agriculture: spraying and weeding	• Manufacturers of spraying and weeding machines	• Product innovation • Cost and efficiency improvements • Maximize synergies
	• Industrial products: piston pumps, hydrodynamic units and urban cleaning equipment.	• Several industries:  Oil & gas  Sugar cane  Shipyard  Cleaning	• Manufacturers of hydrodynamic units and high pressure washers, contractors, independent distributors	from acquisitions • Focus on key attractive segments
	• Cleaning products: complete range of high pressure washers, floor care equipment	• Professional • Hobby	• Specialised dealers and DIY

Components & Accessories

DIY

Our strategy

Emak strengths

Profit & Loss

€m	FY 2018	%	FY 2017	%	Δ %
Net sales	452.8	100	422.2	100	7.3
EBITDA adj.	50.8	11.2	45.6	10.8	11.3
EBITDA	49.4	10.9	43.9	10.4	12.6
D&A	-15.5		-14.0
EBIT	34.0	7.5	30.0	7.1	13.3
Financial income	5.3		1.8
Financial charges	-4.8	-4.8
FX gains/(losses)	0.1		-4.2
Gains from equity investments	0.3		0.4
Profit before taxes	34.9	7.7	23.1	5.5	50.7
Taxes	-9.2		-6.7
Net Profit	25.6	5.7	16.4	3.9	56.1

Net sales: increase of 7.3%:

• contribution of the change in the scope of consolidation for 7.1%
• negative exchange rate effect for 1.4%
• organic growth of 1.6%

Financial income: in 2018 capital gains and contingent financial assets recorded for a total of € 4.5 million.

Dividend proposal: distribution of a dividend of € 0.045 per share

Balance Sheet

€m	FY 2018	FY 2017
Net non current assets	154.9	151.0
Net working capital	168.3	161.8

Net capital employed	323.2	312.8
----------------------	-------	-------

Total Equity	205.8	187.5
Net debt	117.4	125.3

Capex: 18.2 €m, of which 11.2 €m product and process innovation; 1.9 €m for ongoing works for the construction of the new R&D center; 2.9 €m for ongoing activities for implementation of the new ERP management system.

Net debt: Figure includes commitments of 17.2 €m to acquire minority interests in subsidiaries

Outdoor Power Equipment

Sales to third parties €m

Sales:

• Europe: decrease because of a negative season for gardening products due to unfavourable weather conditions.
• Americas: decline in some Latin American countries.
• Asia, Africa and Oceania: stable compared to last year, benefiting from the good results achieved in the Middle East markets in the first part of the year.

EBITDA

• favourable product / market mix
• results from operating and personnel costs reduction initiatives
• Figure adjusted for non-ordinary costs amounting to 1.7€m, of which 1.3€m for reorganization costs.
• Figure doesn't include holding costs

Pumps and High Pressure Water Jetting

EBITDA Adjusted €m

Sales

• Organic growth of 3.7%.
• Lavorwash contribution of 39.3 €m
• Europe: positive trend on a like-for-like basis, especially in Italian and Western European markets.
• Americas: slight organic growth, especially in Latin America.
• Asia, Africa and Oceania: good organic performance, mainly in the Far East and Oceania.

EBITDA

• Organic decrease due to lower sales and unfavourable product mix in the last quarter.
• Lavorwash contribution of 7.4 €m
• Figure adjusted of non-ordinary charges amounting to 1,4 €m and non-ordinary revenues for 0.9 €m

Components and Accessories

Sales to third parties €m

EBITDA Adjusted €m

Sales

• Negative impact from Raico deconsolidation from 2Q
• Europe: growth in Italy and Eastern European countries. Slowdown in Western Europe, due to the negative season for gardening products
• Americas: significant increase in Latin American markets thanks to the growth of the Chilean subsidiary and Spraycom acquisition
• Asia, Africa and Oceania: positive performance in Far East, also because of new distribution model
• Positive 4Q like-for-like performance

EBITDA

• Lower sales volumes,
• An unfavorable product mix
• Higher raw material costs
• Figure adjusted for non-ordinary revenues amounting to 0.3 €m and non-ordinary costs for 0.5 €m

Sale of 100% of Raico S.r.l.

• On March 6, 2018 the parent company Emak S.p.A. has signed a binding agreement for the sale of 100% of the share capital of Raico S.r.l. for a consideration of 5.5 €m. The closing of the transaction took place on March 30, 2018.
• Raico is specialised in the distribution of spare parts and accessories for agricultural tractors, industrial and construction machines, with a turnover of around 12.8 €m, EBITDA of 0.5 €m and a net negative financial position of 0.7 €m at 31 December 2017.

Shareholding of 51% in the Brazilian company Spraycom

• On 20 July 2018, the subsidiary Tecomec S.r.l. paid € 377 thousand for a capital increase representing 51% of the shares of the company.
• Spraycom is a Brazilian company active in the distribution in Brazil of components and accessories for agriculture such as nozzles, valves, pumps, electronic components, achieved in 2017 a turnover of about one million Reais.

Subsequent events

Acquisition of 30% of Agres

• Headquarter in Pinais (Paranà), Brasil
• Activity: development and supply, mainly on the local market, of electronic systems (software, hardware and related services) for agricultural machines (spraying and weeding machines and seeders)
• Value of the transaction: 11.7 million Reais (approximately 2.8 €m)
• Further agreements: Put & Call Option on a further 55% stake to be exercised in 2023.
• 2017 company results: sales of 26.6 million Reais and EBITDA of 6.2 million Reais.

Consolidated income statement

€m	Year 2018	of which to related parties	Year 2017	of which to related parties
Revenues from sales	452.8	0.8	422.2	1.3
Other operating incomes	5.5		3.7
Change in inventories	4.6		14.2
Raw materials, consumable and goods	-243.2	-4.5	-234.6	-6.6
Personnel expenses	-83.3		-80.1
Other operating costs and provisions	-87.0	-2.4	-81.5	-2.5
Amortization, depreciation and impairment losses	-15.5		-14.0
Operating result	34.0		30.0
Financial income	5.3	0.0	1.8	0.0
Financial expenses	-4.8		-4.8
Exchange gains and losses	0.1		-4.2
Income from/(expenses on) equity investment	0.3		0.4
Profit befor taxes	34.9		23.1
Income taxes	-9.2		-6.7
Net profit (A)	25.6		16.4
(Profit)/loss attributable to non controlling interests	-0.3		-0.3
Net profit attributable to the Group	25.4		16.2
Basic earnings per share	0.155		0.099
Diluted earnings per share	0.155		0.099

€m	31.12.2018	of which to related parties	31.12.2017	of which to related parties
Non-current assets
Property, plant and equipment	75.4		73.3
Intangible assets	20.2		20.3
Goodwill	65.8	14.6	67.1	14.7
Equity investments in other companies	0.2		0.2
Equity investments in associates	4.6		4.3
Deferred tax assets	8.5		9.1
Other financial assets	2.5	0.3	0.8	0.3
Other assets	0.1		0.1
Total non-current assets	177.2	14.9	175.1	15.0
Current assets
Inventories	156.7		155.7
Trade and other receivables	108.3	0.9	109.4	1.2
Current tax receivables	6.0		5.4
Other financial assets	0.6	0.0	7.3	0.4
Derivative financial instruments	0.3		0.2
Cash and cash equivalents	62.6		40.8
Total current assets	334.5	1.0	318.9	1.7
TOTAL ASSETS	511.7	15.9	494.0	16.6

Consolidated balance sheet - Liabilities

€m	31.12.2018	of which to related parties	31.12.2017	of which to related parties
Shareholders' Equity
Shareholders' Equity of the Group	203.7		184.8
Non-controlling interest	2.1		2.7
Total Shareholders' Equity	205.8		187.5
Non-current liabilities
Loans and borrowings due to banks and other lenders	113.3		95.7
Deferred tax liabilities	8.4		9.6
Employee benefits	8.8		10.9
Provisions for risks and charges	2.2		2.3
Other non-current liabilities	0.5		0.6
Total non-current liabilities	133.1		119.1
Current liabilities
Trade and other payables	95.9	3.6	101.5	3.4
Current tax liabilities	4.9		4.7
Loans and borrowings due to banks and other lenders	69.4		78.5
Derivative financial instruments	0.6		0.2
Provisions for risks and charges	1.9		2.5
Total current liabilities	172.7	3.6	187.4	3.4
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	511.7	3.6	494.0	3.4

Appendix

Emak Group – Our History

Star Conference, Milan 2019 19

Shareholders' structure

Synthesis of results

€m	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011	2011 PF	2012	2013	2014	2015	2016	2017	2017 PF	2018
Sales	84.4	89.5	133.0	146.7	147.0	152.7	163.2	183.4	208.4	217.8	243.4	194.9	206.8	204.4	357.0	354.8	355.0	354.8	381.6	391.9	422.2	461.8	452.8
EBITDA adj	12.9	12.8	16.0	20.6	22.9	23.9	22.6	22.3	25.1	30.0	31.7	21.7	21.3	19.6	37.8	31.7	34.2	33.1	37.5	40.5	45.6	52.5	50.8
margin	15.3%	14.3%	12.0%	14.1%	15.6%	15.7%	13.9%	12.1%	12.1%	13.8%	13.0%	11.1%	10.3%	9.6%	10.6%	8.9%	9.6%	9.3%	9.8%	10.3%	10.8%	11.4%	11.2%
EBIT adj	9.3	8.1	10.6	14.8	16.8	17.5	16.3	17.0	19.8	24.5	24.9	14.9	13.9	12.5	25.8	19.6	22.4	21.7	25.0	22.9	31.7	38.1	36.3
margin	11.1%	9.0%	8.0%	10.1%	11.4%	11.5%	10.0%	9.3%	9.5%	11.2%	10.2%	7.6%	6.7%	6.1%	7.2%	5.5%	6.3%	6.1%	6.5%	5.8%	7.5%	8.2%	8.0%
Net profit	5.5	3.9	6.2	7.9	9.0	9.6	9.0	9.6	11.3	15.2	14.9	9.4	11.6	5.8	13.0	8.6	10.5	10.2	9.0	17.7	16.4	20.6	25.6
margin	6.5%	4.4%	4.7%	5.4%	6.1%	6.3%	5.5%	5.2%	5.4%	7.0%	6.1%	4.8%	5.6%	2.8%	3.6%	2.4%	3.0%	2.9%	2.4%	4.5%	3.9%	4.5%	5.7%
FCF from operations	9.1	8.6	11.6	13.7	15.1	16.0	15.3	14.8	16.7	20.8	21.6	16.2	19.0	12.9	25.0	20.8	22.4	21.7	21.5	35.3	30.4	35.0	40.1
Net Equity	42.1	44.8	48.8	53.8	59.3	65.1	69.8	75.4	81.9	91.4	99.4	104.6	114.0	140.1	140.1	145.0	150.8	160.1	168.5	181.7	187.5	187.5	205.8
Net fin. debt	3.2	5.5	14.3	26.4	19.1	21.1	16.4	25.8	37.9	31.0	61.8	38.0	27.4	97.3	97.3	99.9	76.4	79.0	99.4	80.1	125.3	125.3	117.4
Net capital employed	45.3	50.3	63.1	80.3	78.5	86.2	86.3	101.2	119.7	122.5	161.2	142.6	141.4	237.4	237.4	244.9	227.2	239.1	267.9	261.8	312.8	312.8	323.2
NWC	27.5	32.1	43.7	55.6	54.2	60.2	59.3	66.4	81.8	81.1	103.2	82.9	83.7	157.5	157.5	155.9	142.2	148.6	154.6	145.6	161.8	161.8	168.3
Debt/Equity	0.1	0.1	0.3	0.5	0.3	0.3	0.2	0.3	0.5	0.3	0.6	0.4	0.2	0.7	0.7	0.7	0.5	0.5	0.6	0.4	0.7	0.7	0.6
Debt/EBITDA adj	0.2	0.4	0.9	1.3	0.8	0.9	0.7	1.2	1.5	1.0	2.0	1.8	1.3	5.0	2.6	3.1	2.2	2.4	2.7	2.0	2.7	2.4	2.3

* Calculated by adding the items "Net profit" plus "Amortization, depreciation and impairment losses"

1998-1999: Creation of 5 commercial branches in Western Europe. 2004: Establishment of Emak Jiangmen, production plant in China. 2005: Creation of Victus, commercial branch in Poland. 2006: Creation of Emak U.S.A. commercial branch in USA. 2008: Aacquisition of Bertolini and Tailong (cylinder manufacturer) 2011: Acquisition of Epicenter (Ukraine), Tecomet, Comet, Sabart and Raico 2012: Start-up of Emak do Brazil, acquisition of Valley in USA 2014: Acquisition of Speed Industrie Sarl (Marocco), S.I.Agro Mexico, Geoline Electronic, Master Fluid, Speed South America (Chile) 2015: Acquisition of Lemasa (Brazil) 2016: Acquisition of 30% of Cifarelli S.p.A. 2017: Acquisition of Lavorwash Group 2018: Sale of Raico; acquisition of Spraycom

Aimone Burani, the executive responsible for the preparation of the corporate accounting documents, declares and certifies in accordance with article 154 bis, paragraph 2, of the Consolidated Finance Act, that the financial statements contained in this presentation correspond to the underlying accounting documents, records and accounting entries.

Emak S.p.A 42011 Bagnolo in Piano (RE) Italy www.emakgroup.com www.linkedin.com/company/emap-s-p-a-