Sit — Investor Presentation 2019

Oct 1, 2019

#madebySIT SIT hosts the media & financial community

October 1, 2019

AGENDA

• 1. Company overview
• 2. Market scenario and priorities for SIT
• 3. Customers trends
• 4. Financial guidelines

Company overview

SIT at a glance

• SIT develops and manufactures measuring devices and systems for safety and high performance of gas equipment
• SIT currently operates in two business divisions and holds 90 patents and strong co-development relationships with long term customers
  • o Heating: SIT has a dominant position in all the segments of the domestic heating and large catering sector
  • o Smart Gas Metering: SIT owns highly innovative technology that has enabled a stunning 5 year CAGR in the Italian market (+70.5%)
• Approximately 65% of the sales are concluded outside Italy through a global sales network coverage
• Sustained and consistent organic growth in both revenues (7.8% 2013-18 sales CAGR) and margins (7.3% 2013-18 EBITDA adj CAGR)

Heating

• SIT develops and manufactures components and systems for the control, regulation and safety of gas appliances for domestic heating, cooking and large catering facilities
• Revenues 2018: €287.0m (79.9%)

5

Smart Gas Metering

• SIT has developed a new generation of connected and remotely controlled static gas meters that measure directly the gas consumption in cubic meters (without need of any compensation devices)
• 96,7% 2,6% • Revenues - 2018: €72.1m (20.1%) Smart Gas Meters Products Appliances Customers Smart Grids Residential Commercial & Industrial Other (0.8%)

Global coverage…

…on a local for local production base

Headquarter Italy Abroad

• All centralized SG&A functions
• R&D (mechanical controls, electronics, integrated systems, new product platforms)
• Labs for R&D and reliability (new project will upgrade and expand lab facilities for both Heating and Smart Gas Metering)

Milano

• Smart Metering Head office
• Sales & Tender Management
• R&D department
• Procurement & Quality

Rovigo

• Mechanical controls, Integrated systems, Sensors, Smart Gas Meters
• Captive aluminum die casting and machining
• High volumes automated assembly lines

Macerata

• Flue exhaust systems, Fans • R&D department and testing
• facilities • Assembly lines, direct
  • shipments to customers

Brasov - Romania

• Mechanical controls, Integrated systems, Smart Gas Meters
• High and low volumes assembling
• Direct shipments and direct inspections

Hoogeven - Netherlands

• Electronic controls
• Electronics R&D
• European and US customers

Monterrey - Mexico

• Mechanical controls
• Markets served: N.A.F.T.A., Australia and Argentina

Suzhou - China

• Mechanical controls
• Purchasing hub
• Moved to new plant in 2014
• Local and international OEM customers

A strong organic growth path

• SIT was able to achieve growing revenues in the long run: the 5.8% 10 year CAGR came with an improvement in our margins (+8.6% 10 year EBITDA adj. CAGR)
• Some cyclicality is inherent the business we operate but SIT was able to reach new heights after the periodical slowdown of the past

9

Market scenario and priorities for SIT

Decabornization

Scenario macro trends Implications and priorities for SIT

Global residential heating and cooking

• Gas will maintain a key role at least for the next decade
• Maximize return from current profit pool
• Evaluate adjacencies not linked to gas consumption for mid-long term opportunities

*LHF: Liquid Hydrocarbon Fuel *SHF: Solid Hydrocarbon Fuel

Power to gas

Scenario macro trends Implications and priorities for SIT

• Hydrogen and biomethane will be injected into the network
• Adapt and prepare products for H2 / biomethane

Servitization

Scenario macro trends Implications and priorities for SIT

From devices to services

• Market growth led by network solutions, new services and big data analytics
• Investigate opportunities for servitization
• From devices to IoT and intelligent equipment, data management and services

Heating – Market, competitors and development priorities

Heating addressable market – underlying size and trend

2018 Volumes in Mpcs/year

Heating competition overview

	Valves				CMS		Integrated	Electronics		Fans						Flues
	Boilers	SWH	IWH	Fireplace	Furnace	Valve	Electronics	systems	BIC - IFC/DF	Connectivi ty	Premix <40 kW	Premix <70 kW	Premix <40 kW	Std. Efficiency	Pellet	Cooker Hoods
	✓	✓		✓		✓	✓	✓	✓	✓	✓		✓	✓	✓	✓	✓
	✓	✓			✓	✓	✓		✓	✓
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Heating development priorities

• Gas adaptive and combustion management solutions
• Integrated systems

• Renewal of fan product line-up (improved performance and new applications)

• New products development to strengthen offering for North America

• Aftermarket

Metering – Market, competitors and development priorities

Metering addressable market – underlying size and trend

• On global scale, smart penetration will continue with moderate but constant growth expected in all market segments (+2-4% per year)
• Confirmed development opportunities in European Markets for new installations of smart meters and replacements
• UK market deployment will peak over the next 3 years
• Italian market expected to recover from 2023 thanks to replacement
• Indian opportunity in pre-paid and walk-by smart meters

Smart Metering competition overview

	Gas	Valves	Gas	network CMS	Integrated	Water Electronics	Heat	Electricity	solutions/services Software Fans Flues
	Boilers SWH Residential	IWH Fireplace C&I	Furnace Valve	Valve Electronics	Residential systems Electronics meters	BIC - C&I meters IFC/DF	Connectivi Premix Meters kW <40 ty	Premix Meters kW <70	Premix Std. / MDC MDM kW Efficiency <40	Smart Grids Pellet (NTW)	Cooker Data Hoods management
	✓	✓
	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓	✓
	✓	✓	✓	✓	✓	✓		✓	✓		✓
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Metering development priorities

• Residential Meter Zigbee SMETS 2 for UK
• Residential Meter Walk-by for India
• NBIoT (Narrow Band Internet of Things)

• New Platform (New Mechanics and Electronics)

• Explore H2 opportunities and prepare meters for H2/CH4 blends (Hy4Heat award from BEIS - Department for Business, Energy & Industrial Strategy – UK Government)

Key enabling factors

• Digital transformation
  • Business model review through connectivity and servitization
  • Digital process reengineering and digital enablers (CRM, 3D printing, etc.)
  • Digital identity
• Lean manufacturing
• Industry 4.0
• New R&D Labs
• New R&D organization and new product development process
• After market enhancement

Customers trends

Heating Customers trends

Metering Customers trends

• Concentration (M&A and tenders)
• Good financially trend
• Investments in smart grids / smart metering
• Network digitalization and optimisation (balancing, leakages …)
• Energy efficiency
• Concentration (M&A and tenders)
• Investment mainly for regulated activities
• Network digitalization, workforce enhancement
• Sustainability, Decarbonisation
• Combined purchasing of gas and electricity meters
• Multi "fuel" network data management (Water, District Heating, Gas and Electricity)

Financial guidelines

Guidelines

In the current macro scenario and in consideration of the initiatives underway, we expect:

• Organic top-line increase in the range of low single digit growth
• EBITDA margin in line with recent years average
• Capex in line with last 3 years average
• NFP expected stable/improving

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.

Statements contained in this presentation, particularly those regarding any SIT Group possible or assumed future performance, are or may be forward looking statements and in this respect they involve some risks and uncertainties.

Any reference to past performance of the SIT Group shall not be taken as an indication of future performance.

This document does not constitute an offer or invitation to purchase or subscribe for any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.

By attending or reading this presentation you agree to be bound by the foregoing terms.