Sit — Earnings Release 2022

Nov 3, 2022

9M 2022 – Results presentation

November 3, 2022

Highlights

• Q3 consolidated revenues are €95,7m in line with Q3 2021
• Q3 Divisional sales:
  • Heating accounts €77,0m, +1,0% vs PY
  • Metering at €17,3m is -8,4%, with Gas metering at -16,1% and Water metering at +11,2% vs PY
• 9M consolidated revenues are €290,4m, +1,5% vs 9M 2021
• Q3 one off non-recurring accrual for €8,8m due to dispute settlement
• 9M EBITDA adjusted of €35,6m, 12,3% of revenues vs €42,0m, 14,7%
• 9M Net income of €10,5m at 3,6% of revenues vs €9,1m, 3,2%
• 9M Net income adjusted of €8,2m at 2,8% of revenues vs €15,8m, 5,5%
• Net debt at €138,7m vs €123,6m of PY

Key financial results

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY
Revenues	290 4 ,	0% 100 ,	286 2 ,	0% 100 ,	5% 1 ,
EBITDA adjusted	35 6 ,	12 3% ,	42 0 ,	14 7% ,	(15 2%) ,
EBITDA	26 8 ,	9 2% ,	42 0 ,	14 7% ,	(36 2%) ,
adjusted EBIT	15 4 ,	3% 5 ,	23 1 ,	8 1% ,	(33 3%) ,
EBIT	6 5 ,	2 3% ,	23 1 ,	8 1% ,	(71 6%) ,
EBT	11 4 ,	3 9% ,	12 0 ,	4 2% ,	(4 9%) ,
Net income	10 5 ,	3 6% ,	9 1 ,	3 2% ,	15 2% ,
adjusted Net Income	8 2 ,	2 8% ,	15 8 ,	5 5% ,	(47 7%) ,
Cash flow from operations	(28 3) ,		7 0 ,
NTWC	81 0 ,		61 9 ,
financial debt Net	138 7 ,		123 6 ,

, unless otherwise stated €m	Q3 22	%	Q3 21	%	Chg . YoY
Revenues	95 7 ,	0% 100 ,	96 0 ,	0% 100 ,	(0 3%) ,
EBITDA adjusted	11 8 ,	12 3% ,	13 1 ,	13 6% ,	(9 9%) ,
adjusted EBIT	4 9 ,	5 1% ,	6 8 ,	7 1% ,	(28 8%) ,
adjusted Net Income	2 1 ,	2 2% ,	5 3 ,	5 5% ,	(60 7%) ,

• 9M consolidated revenues account 1,5% growth
• Divisional trends:
  • Heating: 9M +6,3%, Q3 +1,0%
  • Metering: 9M -17,1% , Q3 -8,4%
• EBITDA adjusted at €35,6m vs €42,0m of PY
• EBIT adjusted at €15,4m (5,3% of revenues) vs €23,1m (8,1%)
• Net income of €10,5m includes FV accounting effect of Warrant for +€8,7m
• Net income adjusted at €8,2m, 2,8% of revenues vs 5,5%
• Cash flow from operations is minus €28,3m after capex for €21,1m and increase in NTWC for €34,0m
• NTWC of €81,0m (20,9% of revenues) vs €61,9m of PY (16,2%) due to inventory and supply chain strategy
• Net financial debt stands at €138,7m vs 2021-year end of €106,7m vs €123,6 at PY

*Adjustment due to one off non-recurring accrual for €8,8m due to dispute settlement

Breakdown by Division

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY
Heating	234 8 ,	80 9% ,	220 9 ,	77 2% ,	6 3% ,
Metering	51 4 ,	17 7% ,	62 0 ,	21 7% ,	(17 1%) ,
Total business sales	286,2	98,6%	282,9	98,8%	1,2%
Other revenues	2 4 ,	4% 1 ,	3 3 ,	2% 1 ,	26 5% ,
Total revenues	290,4	100,0%	286,2	100,0%	1,5%

Breakdown by geography

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY
Italy	66	0%	89	3%	(25
	9	23	7	31	4%)
	,	,	,	,	,
(excuding	132	45	120	42	9
Italy)	2	5%	3	1%	8%
Europe	,	,	,	,	,
America	62	21	52	18	19
	6	6%	6	4%	1%
	,	,	,	,	,
Asia/Pacific	28	9	23	8	21
	7	9%	6	3%	5%
	,	,	,	,	,
Total revenues	290,4	100,0%	286,2	100,0%	1,5%

Consolidated revenue bridge (€m)

Consolidated revenues – Q3

Breakdown by Division

€m, unless otherwise stated	Q3 22	%	Q3 21	%	Chg. YoY
Heating	77,0	80,5%	76,2	79,4%	1,0%
Metering	17,3	18,0%	18,8	19,6%	(8,4%)
Total business sales	94,2	98,5%	95,0	99,0%	(0,8%)
Other revenues	1,4	1,5%	0,9	1,0%	52,0%
Total revenues	95,7	100,0%	96,0	100,0%	(0,3%)

Breakdown by geography

€m , unless otherwise stated	Q3 22	%	Q3 21	%	Chg . YoY
Italy	16	16	30	32	(47
	2	9%	7	0%	4%)
	,	,	,	,	,
(excuding	49	52	37	39	32
Italy)	8	0%	7	3%	0%
Europe	,	,	,	,	,
America	19	20	18	19	2
	2	1%	8	6%	3%
	,	,	,	,	,
Asia/Pacific	10	11	8	9	20
	5	0%	7	1%	4%
	,	,	,	,	,
Total revenues	95,7	100,0%	96,0	100,0%	(0 ,3%)

Consolidated revenue bridge (€m)

Q3 Heating sales by geography • Divisional sales:

, unless otherwise stated €m	Q3 22	%	Q3 21	%	Chg . YoY
Italy	15	19	14	18	6
	2	7%	3	8%	0%
	,	,	,	,	,
(excuding	33	4%	36	4%	(7
Italy)	4	43	1	47	5%)
Europe	,	,	,	,	,
America	17	2%	18	9%	(1
	9	23	2	23	7%)
	,	,	,	,	,
Asia/Pacific	10	13	6	10	38
	5	7%	7	0%	9%
	,	,	,	,	,
Total business sales	77,0	100,0%	76,2	100,0%	1,0%

9M Heating sales by geography

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY
Italy	45	19	43	19	4
	1	2%	0	5%	8%
	,	,	,	,	,
(excuding	101	0%	104	4%	(3
Italy)	0	43	7	47	5%)
Europe	,	,	,	,	,
America	59	5%	51	1%	2%
	8	25	0	23	17
	,	,	,	,	,
Asia/Pacific	28	12	22	10	30
	8	3%	1	0%	4%
	,	,	,	,	,
Total business sales	234,8	100,0%	220,9	100,0%	6,3%

• • Q3 +1,0%, -3,3% at same forex
  • 9M +6,3, +2,9% at same forex
• Italy. 9M accounts +4,8%, €2,1m increase vs PY. Catering segment is up €1,7m, +57,6%, and Direct Heating applications (Pellet Stoves and Space Heaters) grow (€+0,7m, +12,1%); Central Heating down €1,2m, -4,4%, mainly Flues
• Europe. 9M down €3,7m, -3,5% vs PY. Turkey (10,7% of Divisional sales) is down €1,5m, -5,4%, due to OEM demand in Central Heating; UK, (6,0% of Divisional sales) is down 14,3% in Flues (-21%) and Mechanical controls (-5%); Central Europe markets grow €4,6m, +12,8%
• America. 9M sales are up €8,8m, +17,2%, +5,2% at same forex
• Asia/Pacific. 9M accounts increase for €6,7m, +30,4%, +24,2% at same forex vs PY; China, 7,4% of divisional sales, accounts +€3,2m, +22,9%; Australia +€1,2m, +22%

Metering sales

Q3 Smart Gas Metering Q3 Water Metering

unless otherwise stated €m,	Q3 22	%	Q3 21	%	Chg . YoY
Residential	9	80	12	92	(27
	1	0%	5	8%	6%)
	,	,	,	,	,
Commercial	2	19	0	6	155
&	2	6%	9	4%	4%
Industrial	,	,	,	,	,
Other	0	0	0	0	(61
	0	4%	1	8%	1%)
	,	,	,	,	,
Total business sales	11,3	100,0%	13,5	100,0%	(16 ,1%)

€m , unless otherwise stated	Q3 22	%	Q3 21	%	Chg . YoY
finished	1	32	2	50	(27
Water	9	5%	7	1%	9%)
meters,	,	,	,	,	,
Water	3	59	2	41	6%
meter	5	2%	2	7%	57
parts	,	,	,	,	,
Other	0	8	0	8	13
	5	3%	4	2%	1%
	,	,	,	,	,
Total business sales	5,9	100,0%	5,3	100,0%	11,2%

9M Smart Gas Metering 9M Water Metering

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY	, unless otherwise stated €m
Residential	27 0 ,	81 7% ,	42 8 ,	91 7% ,	(37 0%) ,	finished Water meters,
Commercial & Industrial	5 8 ,	17 6% ,	3 6 ,	7 7% ,	61 7% ,	Water meter parts
Other	0 2 ,	0 6% ,	0 3 ,	0 6% ,	(27 6%) ,	Other
Total business sales	33,0	100,0%	46,7	100,0%	(29 ,3%)	Total business sales
9M 2022 foreign sales are ≈7%, mostly	Greece	and Bulgaria				9M 2022 geography breakdown: Portugal 23,6%, Spain

, unless otherwise stated €m	9M 22	%	9M 21	%	Chg . YoY
finished	7	41	7	50	(1
Water	6	2%	7	6%	9%)
meters,	,	,	,	,	,
Water	9	51	6	42	44
meter	4	3%	5	7%	5%
parts	,	,	,	,	,
Other	1	4%	1	7%	0%
	4	7	0	6	33
	,	,	,	,	,
Total business sales	18,4	100,0%	15,3	100,0%	20,3%

9M 2022 foreign sales are ≈7%, mostly Greece and Bulgaria 9M 2022 geography breakdown: Portugal 23,6%, Spain 30,3%, Rest of Europe 33,3%, Americas 6,7%, Asia/Pacific 6,1%

EBITDA adjusted bridge – 9M

From EBITDA to Net income – 9M

E-MARKET SDIR
CERTIFIED

, unless otherwise stated €m	9M 22	% of sales	9M 21	% of sales	Chg YoY
EBITDA	26 8 ,	9 2% ,	42 0 ,	14 7% ,	(36 2%) ,
of D&A impairment assets ,	20 2 ,		18 9 ,
EBIT	6 5 ,	2 3% ,	23 1 ,	8 1% ,	(71 6%) ,
(charges)/income financial Net	6 5 ,		(11 5) ,
forex (charges)/income Net	(1 6) ,		0 5 ,
EBT	11 4 ,	3 9% ,	12 0 ,	4 2% ,	(4 9%) ,
Taxes	(1 0) ,		(2 9) ,
income Net	10 5 ,	6% 3 ,	9 1 ,	2% 3 ,	2% 15 ,
Ebitda adjusted	35 6 ,	3% 12 ,	42 0 ,	7% 14 ,	(15 2%) ,
Ebit adjusted	15 4 ,	5 3% ,	23 1 ,	8 1% ,	(33 3%) ,
(charges)/income financial adjusted Net	(2 2) ,	(0 8%) ,	(2 9) ,	(1 0%) ,	(23 4%) ,
adjusted Net income	8 2 ,	2 8% ,	15 8 ,	5 5% ,	(47 7%) ,

• D&A for €20,2m, 7,0% of revenues vs €18,9m, 6,6%
• Net financial (charges)/income account changes in FV of Warrants for income of €8,7m that will be consolidated till EoY
• EBT of €11,4m at 3,9% of revenues
• 9M 21 taxes includes one off revenue for Patent Box ruling for €1,8m, net
• Net income of €10,5m at 3,6% of revenues vs 3,2% of previous year
• Net financial charges adjusted reflect improved funding conditions on new facilities

• Net income adjusted is equal to €8,2m

• 2022 adjustment due to one off non-recurring accrual for €8,8m for dispute settlement and FV revenues for warrant €8,7

• 2021 adjustment includes FV charge for warrant €7,6, refinancing charges €1,0 and patent box tax revenue €1,8

Net trade working capital

E-MARKET SDIR
CERTIFIED

€m, unless otherwise stated	2022.09	2021.12	9M 22 Change	2021.09	2020.12	9M 21 Change	YoY change
Inventory	101 7 ,	70 1 ,	31 6 ,	69 4 ,	56 5 ,	12 9 ,	32 3 ,
receivables Accounts	61 7 ,	56 1 ,	6 5 ,	66 6 ,	65 4 ,	3 1 ,	(4 9) ,
payables Accounts	(82 4) ,	(80 8) ,	(1 6) ,	(74 1) ,	(72 2) ,	(1 9) ,	(8 3) ,
Net Trade Working Capital	81,0	45,4	35,6	61,9	49,6	12,3	19,1
NTWC/Revenues	20,9%	11,9%	8,9%	16,2%	15,5%	0,7%	4,7%

Reported 2022 NTWC Accounts receivables adjusted 72,9 70,4 2,5 73,4 75,0 -1,6 -0,5

• YTD Inventory trend increase (+€31,6) reflects Heating seasonality, procurement strategy to address shortage issues and maintain customer service levels AR adjusted/Revenues 18,8% 18,5% 0,3% 19,2% 23,4% -4,2% -0,4%

Non recourse factoring 11,2 14,4 (3,1) 6,7 9,6 (2,9) 4,5

Capex account payables (3,0) (4,2) 1,2 (2,6) (3,0) 0,4 (0,4) Accounts payables adjusted (79,3) (76,6) (2,8) (71,5) (69,2) (2,3) (7,8) AP adjusted/Revenues 20,4% 20,1% 0,3% 18,7% 21,6% -2,9% 1,8%

Net Trade Working Capital adjusted 95,3 64,0 31,3 71,2 62,2 9,0 24,0 NTWC adjusted/Revenues 24,5% 16,8% 7,7% 18,6% 19,4% -0,8% 5,9%

Cash flow and Net debt

Change in net debt

, unless otherwise stated €m	9M 22	9M 21
cash flow Current	33 9 ,	42 8 ,
Change in NTWC	(34 0) ,	(12 2) ,
Inventory	(28 8) ,	(12 6) ,
Receivables Accounts	(4 2) ,	(1 0) ,
Payables Accounts	(1 0) ,	1 5 ,
Other working capital	(7 1) ,	(4 0) ,
Capex , net	(21 1) ,	(19 6) ,
Cash flow from operations	(28 3) ,	0 7 ,
Financial charges	(2 3) ,	(3 2) ,
Dividends paid	(7 3) ,	(6 9) ,
IFRS 16 - Leases	(0 7) ,	(1 5) ,
Other	6 6 ,	(3 0) ,
Change debt in net	(32 0) ,	(7 6) ,
debt Net - BoP	106 7 ,	116 0 ,

• Current cash flow of €33,9m vs €42,8m of PY
• NTWC burns €34,0m due to increase in Inventory for €28,8m that reflects seasonality in Heating business and procurement strategy to manage shortage issues
• Capex of €21,1m in line with forecasted project pipeline including New HQ and Labs
• Dividends paid in 2022 amount to €7,3m

Net financial position

unless otherwise stated €m,	30/09/2022	31/12/2021	30/09/2021
(Cash cash equivalents) &	(24 5) ,	(46 7) ,	(41 8) ,
Current debt , net	19 9 ,	20 1 ,	24 8 ,
debt Non current	127 8 ,	114 0 ,	121 6 ,
derivatives & M&A debt MTM	1 0 ,	3 4 ,	3 9 ,
IFRS 16 - Leases	14 5 ,	15 9 ,	15 1 ,
Net debt - EoP	138,7	106,7	123,6

• Net Debt/EBITDA: 3,09x vs 2,10x vs 2,28x of previous year

Final comments and outlook

• Q3 2022 confirmed high market volatility and accounted slow down of European end-markets
• Order portfolio is resilient but customer reaction to limited visibility is likely to delay orders and shipments
• Year end sales expected to confirm 2021FY level with an adjusted EBITDA margin slightly below 12%
• For 2023, current outlook provides:
  • inflationary environment in both costs and revenues
  • opportunities for market share growth in certain product families/applications
  • product portfolio enhancement
  • significant domestic and international tenders in the metering business

ANNEXES

Regulatory statement

The manager responsible for the preparation of the company's accounts, Paul Fogolin, hereby declares, as per article 154 bis, paragraph 2, of the "Testo Unico della Finanza", that all information related to the company's accounts contained in this presentation are fairly representing the accounts and the books of the company.

Paul Fogolin Chief Financial Officer paul.fogolin@sitgroup.it

Investor Relations Mara Di Giorgio +39 335 773 7417 investorrelations@sitgroup.it

Disclaimer

This presentation has been prepared by SIT S.p.A. only for information purposes and for the presentation of the Group's results and strategies.

For further details on the SIT Group, reference should be made to publicly available information.

Since at the moment there is no existing reliable market research which provide the required level of detail, nor any official data, the statements of key information, the assessments concerning the positioning of SIT Group and the assessments regarding the market and the market segments of the reference market are based exclusively on assessments carried out by SIT's management, in accordance to its own knowledge of the market and its analysis of the data gathered. For such reason, these statements and assessments may not be updated and/or may also be quite approximate. Due to the lack of reliable and standardized data and of market data provided by third parties, these assessments are necessarily subjective and are provided, unless otherwise specified, by SIT on the basis of the analysis of the data it, as a company, has gathered. These evaluations and the performance of the industries in which SIT operates could prove to be different from those assumed due to the known and unknown risks, the uncertainties and other causes.

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