Prima Industrie — Investor Presentation 2019

Sep 4, 2019

• ‣ 40+ YEARS
• ‣ 20 YEARS LISTED
• ‣ 466.9 €M SALES
• ‣ 1800+ PEOPLE
• ‣ 8 PLANTS
• ‣ R&D COMMITMENT (5%-6% on sales)
• ‣ 13,000+ INSTALLATIONS
• ‣ 80+ COUNTRIES

+4% Increase in revenues

+14% Increase in adjusted EBIT

+29% Increase in Net Profit

2018 RESULTS

SHEET METAL PROCESSING MACHINES & SYSTEMS

ELECTRONICS & LASER SOURCES SERVICES ADDITIVE MANUFACTURING

MFG PLANT – Seinajoki (FINLAND)

MFG PLANT – Suzhou (CHINA)

OFFICES AND TECHNOLOGY CENTER – Chicago (USA)

3	2014	2015	2016	2017	2018	2019	2019
							May Jun
								$49.8$ $49.4$
							49.2 48.9
							50.4 49.9
							50.5	50.6
							49.1	۰
							49.8	49.3
							49.4	48.0
							47.7	47.6
							44.3	45.0
							50.6	51.9
							49.7	48.4
							50.1	47.9
							54.2	52.4
							50.2	49.4
							51.6	50.6
							48.4	47.5
							48.4	45.5
							52.7	52.1
							50.2	51.0
							50.0	49.2
							49.8	48.6

GLOBAL MFG. PMI TO 49,8 - LOWEST SINCE 2012

Source: Markit, JP Morgan Asset Management

IN 2017 ALMOST ALL WORLD MARKET ECONOMIES WERE EXPANDING (GREEN)

IN 2019 ALMOST ALL WORLD MARKET ECONOMIES ARE CONTRACTING (RED)

GLOBAL PMI INDEX CHANGE YoY

(M 1 )	Global M. PMI Y/Y HeatMap					@MacroTechnicals May surveys ASYPCTL A prev
MT VORLD	2012	2013	2014	2015	2016	2017	20*	2019		50.0 growing	36ML	P Z $-1.7$		MT VOI
MT DM MT EM										49.9 contracting 50.3 growing	78ML 4ML	$-2.2$ $-0.1$		MT DM MT EM
MT Fragile 5										50.8 growing	7ML	0.4 60		MT Fragil
USA . US CA Canada									$-5.5$ $-7.1$	50.5 growing 49.1 contracting	118ML 4IML	$-2.0$ $-1.4$	$\blacktriangle \Leftrightarrow$ ▲△	USA Canada
돕 BB Brazil MX Mexico EA									$-0.5$ $-1.0$ $-7.8$	50.2 growing 47.7 contracting	IML 2ML 2ML	0.5 58 $-1.4$ $-1.9$		Brazil Mesico EA
$\frac{d}{d}$ $\approx$ DE Germany 인 FR. France									$-12.6$ $-3.8$	44.3 contracting 50.6 growing	2ML 3MH	$-2.3$ $-0.3$		German France
Italy Spain ES									$-3.0$ $-3.3$	49.7 contracting growing	5MH 3ML	$-1.1$ $-2.2$		Italy Spain
Netherlands NL AT Austria									$-8.$ $-9.0$	52.2 growing 48.3 contracting	2MH 50ML	$-1.1$ $-1.3$		Netherlar Austria
GR Greece Denmark DK									0.3 0.1	54.5 growing 47.6 contracting	3ML 12ML			Greece Denmark
Sweden SE Norway NO. Switzerland CH									$-2.7$ $-1.4$ $-13.8$	53.1 growing growing 54.4 48.6 contracting	6MH 2MH 2MH	$-0.8$ 0.6 $-1.3$		Sweden Norway Switzerlar
GB UK RU. Russia									$-4.9$ 0.0	49.4 contracting 49.8 contracting	34ML SML	$-2.0$ $-0.4$ 35	- 23 -	UK Russia
TR Turkey PL Poland									$-1.1$	45.3 contracting 48.8 contracting	4ML 2ML	$-1.4$ $-1.6$		Turkey Poland
HU Hungary CZ Czech Rep									2.7 $-9.9$	57.9 growing 46.6 contracting	em r 77ML	11 $-2.6$	the control	Hungary Czech Re
South Africa ZA NG Nigeria $\frac{1}{2}$ $\frac{1}{2}$ $\frac{1}{2}$ Japan									$-4.4$ 1.3 $-3.0$	45.4 contracting 57.8 growing 49.8 contracting	2ML 4MH 2ML	$-1.0$ 12 $-1.2$		South Af Nigeria Japan
₽ AU Australia NZ New Zealand									$-4.8$ $-1.3$	52.7 growing 53.0 growing	2ML APR	$-0.1$ 55 $-0.9$		Australia New Zeal
Singapore SG 高 DN. China									$-2.8$ $-0.9$	19.9 contracting 2 growing	33ML 2ML	$-0.7$ 0.1 47		Singapor China
HK HongKong ΙN India									0.6 1.5	8.4 contracting growing	APR 3MH	$-0.2$ 0.6		HongKor India
ID Indonesia South Korea KR MY Malaysia									$-0.1$ $-0.5$ 1.2	growing contracting contracting	9MH 3ML 2ML	1.2 $-0.8$ $-0.1$ 53	73	Indonesia South Ko Malaysia
TW Taiwan PH Philippines									$-5.0$ $-2.5$	contracting $\mathbf{H}$ growing	2MH 2MH	$-1.1$ $-1.3$		Taiwan Philippine
TH. Thailand VN Vietnam									$-0.1$ $-1.9$	growing growing	APR 2ML	15 1 $-0.3$		Thailand Vietnam
	source: ThomsonReuters Markit MacroTechnicals		$Z = 5Y$ 2-score	P = 5Y PCTL

Source: Thompson Reuters Markit

CAPITAL GOODS DERIVATIVE WITH RESPECT TO GDP TREND

World

CECIMO Economic and Statistical toolbox

CECIMO ORDERS 1Q2019 DOWN 19% YoY UCIMU ORDERS 2Q2019 DOWN 31,4% YoY VDW ORDERS 2Q19 DOWN 22% YOY

CECIMO MEMBERS ARE MACHINE TOOLS ASSOCIATIONS FROM ITALY (UCIMU), SWITZERLAND, GERMANY, (VDW) FRANCE, SPAIN, PORTUGAL, UK, BELGIUM, THE NETHERLANDS, DENMARK, SWEDEN, FINLAND, AUSTRIA, CZECHIA, TURKEY

Recent years: 2007 to 2018

The	capital	goods		sector	has
always	experienced			a	secular
growth		with			relevant
	cyclicality,	with	:
	"up -period	"	of	7 - 8	years
	and
	"down	-period"		of	2 - 3
	years

Last cycle showed an "up period" starting from mid 2010 which lasted until mid 2018 .

PRIMA INDUSTRIE GROUP ORDER INTAKE

The chart shows, as from mid 2018, the beginning of a downturn of our market which is not currently as hard and sharp as the global crisis of 2008-09

SALES EXPECTED IN THE RANGE OF € 420-440 million (≈ 5% to 10% down from 2018, thanks to

• significant backlog of Jan.1st 2019)
• EBITDA MARGIN OF ≈ 9% (thanks to important structural reorganization and costs reduction actions that will bring structural benefits to the future profitability of the Group).
• NET FINANCIAL POSITION: IMPROVEMENT (compared to June 30, 2019). The strategy to downsize NWC is based on:
• Fiber laser components stock consumption
• Demo machines rationalization
• Credit collection improved
• Inventory excess absorption

"At the expiration of the current three-year plan and after the international exhibitions scheduled in the autumn, the 2020-2022 three-year plan will be prepared and the main guidelines of it will be disclosed to the market. We remain strongly positive on the medium-term prospects thanks to the technological content of the products, the strengthened international presence and the quality and expertise of the human resources characterizing our Group".

TREND JAN 2018 THROUGH AUG 2019 vs ITALIAN PEERS

LOWER TP, CONSERVATIVE RECOMMENDATIONS BUT SIGNIFICANT UPSIDE

		2019				2020
	B. IMI Mediobanca			B. Akros Consensus	B. IMI	Mediobanca		B. Akros Consensus
	16,5	18,0	16,0		16,5	18,0	16,0
	ADD	NEUTRAL	NEUTRAL		ADD	NEUTRAL	NEUTRAL
REVENUES	430	433,6	434	432,5	438,6	440,6	436	438,4
EBITDA	37,5	40,1	3 9	38,9	41,84	43,2	4 2	42,3
EBIT	13,5	17,3	1 9	16,6	17,84	20,4	2 1	19,7
NET RESULT	5,65	8,1	1 0	7,9	10,25	11,5	1 2	11,3
NFP	-103,6	-93,1	-97	-97,9	-98,5	-87,4	-85	-90,3

PRIMA POWER SALES TO AUTOMOTIVE SECTOR HAVE DROPPED FROM 25% IN 2017 TO 14% IN 2018 and 12.5% IN 1H2019

• The automotive industry is facing major challenges around the world.
• For the first time in twenty years, sales in the automotive industry in China are declining
• Automakers are facing a shift in core competencies, as a changing business environment is requiring new skills and capabilities while making others less important. This requires a significant investment in new business models and new solutions.
• Four reasons the car industry is struggling (source BBC UK):

Falling demand: after years of strong growth, global car sales were broadly flat in 2018, largely because of a slump in demand in the

Emissions woes: in Europe, emissions issues are also causing headaches

• world's biggest market, China.
• for car firms.
• isn't quite ready for electric cars.
• A shift away from ownership? Renting can be an option

The electric challenge: A lot of carmakers are not ready to deliver electric vehicles at the right quantities (they need to change their operations but that requires investment. On the other side the market

AUTOMOTIVE MARKET: HSS STILL AN OPPORTUNITY

HSS is the main application for 3D laser machines

AUTOMOTIVE MARKET: HSS STILL AN OPPORTUNITY ELECTRIFICATION WILL INCREASE THE NEED FOR LIGHT AND RESISTANT MATERIALS

FIBER LASER TECHNOLOGY

• A quick change of the global scenario took place in the last few months: the entry of new Chinese fiber laser manufacturers caused an aggressive and unexpected fiber laser price decrease both
• in Europe (≈ -20-30%, depending on purchased quantities) and
• mostly in China (≈ -30-40% depending on purchased quantities)

Strategy: the introduction of the new pumping units and higher power modules by mid 2020 shall allow Prima a significant cost reduction and an important gain of competitiveness.

ADDITIVE MANUFACTURING

• Since several years Prima Industrie is investing in Additive Manufacturing (AM) technologies, leveraging on internal know-how on fiber laser.
• Among Prima Industrie competitors only Trumpf is investing in this technology which is expected to further boom in the next years.
• All dedicated R&D investments (partially funded with EU projects) have been charged to P&L; no capitalizations have been made so far.
• In 2019 AM contribution to Prima Group revenues will be of approx. 2% of Group revenues and expected to grow in the next years.
• Prima Additive division (PA) has been established in 2018 and a new dedicated building has been completed in 2019.
• PA is active on both main AM technologies (Powder Bed Fusion and Direct Energy Deposition). PA will exhibit for the first time at Formnext 2019 in November in Frankfurt (main AM world exhibition). A set of new products will be introduced to the market in 2H19 and 1H20.

THE CHINA CHALLENGE

2D laser cutting stand alone machines are becoming a commodity in China; the number of competitors present at the Chinese MWCS Expo in Shanghai has considerably increased from 2017 to 2018.

High level Chinese manufactures have also started competition on 3D laser cutting machines

Strategy: Prima can count on its wide and high tech product range and will focus in particular on :

• the best available 3D machine on the market 2D top of the range laser machines integrated
• within automatic cells
• cooperation with Lead Laser for mid range products

OUR WEAKNESS

GROUP REORGANIZATION & COST SAVING INITIATIVES

ONE COUNTRY – ONE COMPANY CONCEPT Significant cost savings and tax optimization in Italy and USA

HUB CONCEPT FOR EU SUBSIDIARIES

Reduction of the number of legal entities and leaner branch offices structure (done in Belgium, Denmark and Baltics. To be extended to other countries).

DEMO ROOM RATIONALIZATION IN EUROPE

2 main spots in Italy and Finland. In other countries short dedicated events with reduction of demo machines in stock.

G&A – S&M COST SAVING INITIATIVES Several planned initiatives

R&D FOCUS ON FEW SIGNIFICANT PROJECTS Fiber laser, Additive Manufacturing, new mid range laser products etc.

FLATTER ORGANIZATION Shorter reporting chains, younger management

WORKFORCE REBALANCING No replacement of turnover, retirement incentives, temporary workforce reduction (if necessary).

BACK UP INFORMATION

REVENUES 2009 -2018

€/mio EBITDA 2009 -2018 €/mio

NET RESULT 2009 -2018

€

/mio

NFP

Debt/Equity

OUR GROUP | REGIONS WE SERVE

Aerospace. 6,7%

Building & Housing

Equipment. 17,4%

Energy. 4,9%

Healthcare, Medical & Others. 1,7% Mechanics & Machinery. 10,6%

Steel furnitures and

panels. 11,8%

White goods. 10,1%

Yellow goods and trucks.

0,7%

Subcontractors. 23,7%

OUR GROUP | INDUSTRIES WE SERVE

27

Aerospace. 4,7%

Automotive. 14,4%

Building & Housing Equipment. 14,6%

Energy. 2,7%

Healthcare, Medical & Others. 1,4%

Mechanics & Machinery. 13,3%

Steel furnitures and panels. 13,4%

White goods. 9,8%

Yellow goods and trucks. 2,5%

Subcontractors. 23,1%

Highlights 1H2019

P&L adjusted with non recurring items and IFRS 16

D '19 vs '18 %

Values in €/thousand	ACT 30.06.19	ACT 30.06.18	D '19 vs '18	D '19 vs '18 %
Order Intake	189.904	240.236	(50.332)	-21,0%
Backlog	136.055	191.962	(55.907)	-29,1%
Revenues	214.757	216.710	(1.953)	-0,9%
EBITDA	18.585	18.681	(96)	-0,5%
EBITDA%	8,7%	8,6%	0,1%	N/A
EBIT	6.480	10.826	(4.346)	-40,1%
EBIT%	3,0%	5,0%	-2,0%	N/A
Net Result	1.815	11.102	(9.287)	-83,7%
FCF	(26.628)	(9.256)	(17.372)	-187,7%
Net Financial Position	(132.824)	(75.544)	(57.280)	-75,8%
Headcount	1.856	1.834	2 2	1,2%

( % calculated over the revenues)

(headcount in units)

Values in €/thousand	ACT 30.06.19	ACT 30.06.18	D '19 vs '18	D '19 vs '18 %
Revenues	214.757	216.710	(1.953)	-0,9%
EBITDA	18.585	18.681	(96)	-0,5%
Non-Recurring Items	(1.150)	(1.286)
IFRS 16	2.689	-
EBITDA Adj	17.046	19.967	(2.921)	-14,6%
EBITDA Adj%	7,9%	9,2%	-1,3%	N/A
EBIT	6.480	10.826	(4.346)	-40,1%
Non-Recurring Items	(2.299)	(1.595)
IFRS 16	107	-
EBIT Adj	8.672	12.421	(3.749)	-30,2%
EBIT Adj%	4,0%	5,7%	-1,7%	N/A
Net Result	1.815	11.102	(9.287)	-83,7%
Non-Recurring Items	(2.440)	3.581
IFRS 16	(267)	-
Net Result Adj	4.522	7.521	(2.999)	-39,9%
NFP	(132.824)	(75.544)	(57.280)	-75,8%
IFRS 16	(26.146)	-
NFP Adj	(106.678)	(75.544)	(31.134)	41,2%

( % calculated over the revenues)

Source: company info + official communications to Consob

THE RASHANIMA TRUST (through Erste International SA) 29,10% LEE Joseph (directly or through World Leader Ltd.) 10,01% YUNFENG GAO (through Sharp focus International Ltd) 9,98%