Sit — Investor Presentation 2023

Nov 9, 2023

9M 2023 – Results presentation

November 9, 2023

Highlights

• Q3 consolidated revenues are €75,2, -21,4% vs Q3 2022
• Q3 Divisional sales:
  • Heating accounts €52,7, -31,5% vs PY
  • Metering at €64,0 is +25,2%, with Gas metering at +31,9% and Water metering +12.2%vs PY
• Heating European expected to slow down significantly in Q4 vs PY
• 9M consolidated revenues are €242,1, -16,6% vs 9M 2022
• 9M EBITDA adjusted of €21,9 minus 38,4% vs €35,6m of PY
• 9M Net income adjusted of €0,9 vs €8,2 of PY
• Impairment loss on goodwill for €17,0 accounted in H1 reporting due to megatrend in heating sector and impact on gas appliances
• Net debt at €159,0 vs €138,7 of PY

Key financial results

€M, unless otherwise stated	9M 23	%	9M 22	%	Chg. YoY
Revenues	242,1	100,0%	290,4	100,0%	(16 ,6%)
EBITDA adjusted	21,9	9,1%	35,6	12,3%	(38 ,4%)
EBITDA	20,0	8,3%	26,8	9,2%	(25 ,1%)
EBIT adjusted	1,2	0,5%	15,4	5,3%	(92 ,2%)
EBIT	(20 ,2)	(8 ,3%)	6,5	2,3%	(408 ,7%)
EBT	(24 ,9)	(10 ,3%)	11,4	3,9%	(317 ,2%)
Net income	(19 ,4)	(8 ,0%)	10,5	3,6%	(284 ,9%)
Net Income adjusted	0,9	0,4%	8,2	2,8%	(89 ,3%)
Cash flow from operations	(21 ,5)		(24 ,8)
NTWC	85,2		81,0
financial Net debt	159,0		138,7

€M, unless otherwise stated	Q3 23	%	Q3 22	%	Chg . YoY
Revenues	75,2	100 0% ,	95 ,7	100 0% ,	(21 ,4%)
adjusted EBITDA	7,5	9 9% ,	11,8	12 3% ,	(36 6%) ,
EBIT adjusted	0 ,4	0 ,5%	4,9	5,1%	(91 8%) ,

• 9M consolidated revenues account 16,6% decrease
• Divisional trends:
  • Heating: 9M -25,0%, Q2 -31,5%
  • Metering: 9M +24,4% , Q2 +25,2%
• EBITDA adj at €21,9M vs €35,6M of PY
• EBIT adj at €1,2M (0,5% of revenues) vs €15,4M (5,3%)
• Net income adjusted at €0,9M, 0,4% of revenues vs 2,8%
• Cash flow from operations is minus €21,5M after capex for €15,8M
• NTWC of €85,2M (26,3% of revenues) vs €81,0M (20,9%) of PY
• Net financial debt stands at €159,0M vs 2022 year end of €130,5M vs €138,7 of PY

• Adjustments in EBIT includes impairment loss on goodwill for €17,0M and non-recurring restructuring costs

Consolidated revenues – 9M

€M, unless otherwise stated	9M 23	%	9M 22	%	Chg. YoY
Heating & Ventilation	176,1	72,7%	234,8	80,9%	(25,0%)
Metering	64,0	26,4%	51,4	17,7%	24,4%
Total business sales	240,1	99,2%	286,2	98,6%	(16,1%)
Other revenues	2,0	0,8%	4,2	1,4%	(51,2%)
Total revenues	242,1	100,0%	290,4	100,0%	(16,6%)

Breakdown by Division Consolidated revenue bridge

Consolidated revenues – Q3

€M , unless otherwise stated	Q3 23	%	Q3 22	%	Chg . YoY
Ventilation Heating &	52 7 ,	70 1% ,	77 0 ,	80 5% ,	(31 5%) ,
Metering	21 6 ,	28 7% ,	17 3 ,	18 0% ,	25 2% ,
Total business sales	74,3	98,8%	94,2	98,5%	(21 ,1%)
Other revenues	0 9 ,	1 2% ,	1 4 ,	1 5% ,	(39 0%) ,
Total revenues	75,2	100,0%	95,7	100,0%	(21 ,4%)

Breakdown by Division Consolidated revenue bridge

Q3 sales by geography

, unless otherwise stated €M	Q3 23	%	Q3 22	%	Chg . YoY
Italy	6	13	15	19	(54
	9	1%	2	7%	2%)
	,	,	,	,	,
(excuding	27	52	33	43	(16
Italy)	9	9%	4	4%	5%)
Europe	,	,	,	,	,
America	9	3%	17	2%	(45
	7	18	9	23	9%)
	,	,	,	,	,
Asia/Pacific	8	7%	10	13	(21
	3	15	5	7%	6%)
	,	,	,	,	,
Total business sales	52,7	100,0%	77,0	100,0%	(31 ,5%)

9M sales by geography

€M, unless otherwise stated	9M 23	%	9M 22	%	Chg . YoY
Italy	28	16	45	19	(36
	5	2%	1	2%	7%)
	,	,	,	,	,
(excuding	92	52	101	43	(8
Italy)	0	2%	0	0%	9%)
Europe	,	,	,	,	,
America	32	18	59	25	(45
	5	4%	8	5%	7%)
	,	,	,	,	,
Asia/Pacific	23	13	28	12	(19
	1	1%	8	3%	9%)
	,	,	,	,	,
Total business sales	176,1	100,0%	234,8	100,0%	(25 ,0%)

• Divisional sales
  • Q2 -31,5%, -29,7% at same forex
  • H1 -25,0%, -24,4% at same forex
• Italy, 9M down 36,7% due to change in incentives regulations with all product segments impacted. Higher impact in Direct Heating (-58,5%) due to pellet stoves.
• Europe. 9M down €9,0M, -8,9% vs PY. Turkey (18,9% of Divisional sales) is up €8,3M, +32,9%, due to Fans (+€2,8) and mechanical controls; UK, (8,1% of Divisional sales) is overall in line with PY with flues (+29,4% YTD); Central Europe markets in 9M are down for €11,6M (-29,4%) mainly in Central Heating with Heat Recovery Units up €1,1M, +14,0%
• America. 9M sales are down €27,4M, -45,7%. Impact in both Direct Heating and SWH applications.
• Asia/Pacific H1 accounts decrease for €5,7M, -19,9%, -14,8% at same forex vs PY; China posted a Q3 at -8,2% bringing 9M down €1,8M, -16,5%, -8,6% at same forex vs PY; Australia, 2,7% of divisional sales, accounts a 9M decrease of €1,9M, -28,3%, 23,6% at same forex

European Heating end-market quarterly trend

• FY 2023E boilers end market expected at -14,4%, Heat pumps at -5,8%
• Q3 23E boilers end market expected at -7,7%, Heat pumps at -13,5%
• Q4 23E boilers end market expected at -29,0%, Heat pumps at -27,0%

Metering sales

Q3 Smart Gas Metering Q3 Water Metering

Residential	12 ,5	83 9% ,	9 1 ,	80 0% ,	38 ,4%
Commercial Industrial &	2 ,4	15 8% ,	2 2 ,	19 6% ,	6 1% ,
Other	0 0 ,	0 3% ,	0 0 ,	0 ,4%	9 6% ,
Total business sales	14,9	100,0%	11,3	100,0%	31,9%

€M, unless otherwise stated	Q3 23	%	Q3 22	%	Chg. YoY
finished Water meters,	2,4	36,1%	1,9	32,5%	24,8%
Water meter parts	3,6	54,3%	3,5	59,2%	3,0%
Other	0,6	9,5%	0,5	8,3%	29,0%
Total business sales	6,7	100,0%	5,9	100,0%	12,2%

9M Smart Gas Metering 9M Water Metering

€M, unless otherwise stated	Q3 23	%	Q3 22	%	Chg . YoY	unless otherwise stated €M,
Residential	12 ,5	83 9% ,	9 1 ,	80 0% ,	38 ,4%	finished Water meters,
Commercial Industrial &	2 ,4	15 8% ,	2 2 ,	19 6% ,	6 1% ,	Water meter parts
Other	0 0 ,	0 3% ,	0 0 ,	0 ,4%	9 6% ,	Other
Total business sales	14,9	100,0%	11,3	100,0%	31,9%	Total business sales
9M Smart Gas Metering						9M Water Metering
unless otherwise stated €M,	9M 23	%	9M 22	%	Chg. YoY	unless otherwise stated €M,
Residential	36,5	82,2%	27,0	81,7%	35,4%	finished Water meters,
Commercial & Industrial	7,8	17,5%	5,8	17,6%	34,3%	Water meter parts
Other	0,1	0,3%	0,2	0,6%	(37 ,9%)	Other
Total business sales	44,5	100,0%	33,0	100,0%	34,7%	Total business sales

unless otherwise €M, stated	9M 23	%	9M 22	%	Chg. YoY
finished Water meters,	7,1	36,7%	7,6	41,2%	(5 ,8%)
Water meter parts	10,6	54,5%	9,4	51,3%	12,5%
Other	1,7	8,8%	1,4	7,4%	26,1%
Total business sales	19,5	100,0%	18,4	100,0%	5,9%

9M 2023 Foreign sales are ≈4%, mostly Greece and Croatia 9M 2023 geography breakdown: Portugal 18,8%, Spain 38,4%, Rest of Europe 32,2%, Americas 7,6%, Asia/Pacific 3,0%

From EBITDA to Net income – 9M

EMARKET SDIR
CERTIFIED

€M, unless otherwise stated	9M 23	% of sales	9M 22	% of sales	Chg. YoY
EBITDA	20,0	8,3%	26,8	9,2%	(25,1%)
D&A, impairment of assets	40,2		20,2
EBIT	(20,2)	-8,3%	6,5	2,3%	(408,7%)
Net financial (charges)/income	(5,2)		6,5
Net forex (charges)/income	0,5		(1,6)
EBT	(24,9)	-10,3%	11,4	3,9%	(317,2%)
Taxes	5,5		(1,0)
Net income	(19,4)	-8,0%	10,5	3,6%	(284,9%)
Ebitda adjusted	21,9	9,1%	35,6	12,3%	(38,4%)
Ebit adjusted	1,2	0,5%	15,4	5,3%	(92,2%)
Net financial (charges)/income adjusted	(5,2)	(2,1%)	(2,2)	(0,8%)	130,2%
Net income adjusted	0,9	0,4%	8,2	2,8%	(89,3%)

• D&A for €20,7M, 8,6% of revenues vs €20,2M, 7,0%
• Impairment of assets for €19,5M (GW for €17,0M)
• EBIT of minus €20,2M vs €6,5M of PY
• Net financial (charges) €5,2M vs net financial income of €6,5 in PY due to changes in FV of Warrants expired in July 22
• EBT of minus €24,9M vs €11,4M of PY (both include one off items)
• 9M 23 taxes revenue for deferred tax assets
• Net income of minus €19,4M vs €10,5M of PY
• Adjustments in 9M 23 refer to impairment losses and non-recurring restructuring costs
• Adjustments in 9M 22 refer to change in FV of Warrants

€M, unless otherwise stated	2023.09	2022.12	9M 23 Change	2022.09	2021.12	9M 22 Change	YoY change
Inventory	98 2 ,	91 4 ,	6 9 ,	101 7 ,	70 1 ,	31 6 ,	(3 5) ,
receivables Accounts	50 3 ,	63 8 ,	(13 5) ,	61 7 ,	56 1 ,	5 6 ,	(11 4) ,
payables Accounts	(63 2) ,	(81 4) ,	18 2 ,	(82 4) ,	(80 8) ,	(1 6) ,	19 1 ,
Trade Working Capital Net	85,2	73,8	11,5	81,0	45,4	35,6	4,2
NTWC/Revenues	26,3%	18,8%	7,6%	20,9%	11,9%	8,9%	5,5%

Reported 9M 23 NTWC: +€11,5M YTD Non recourse factoring 11,6 13,3 (1,7) 11,2 14,4 (3,1) 0,4 Accounts receivables adjusted 61,9 77,1 (15,2) 72,9 70,4 2,5 (11,0)

• Inventory increase (+€6,9M) due mainly to Gas Metering build up for planned production AR adjusted/Revenues 19,1% 19,6% -0,5% 18,8% 18,5% 0,3% 0,3%
• Account Receivables (-€13,5M) and Account Payables (+€18,2M) reflects decrease in volumes Capex account payables (5,2) (4,8) (0,4) (3,0) (4,2) 1,2 (2,2)

Accounts payables adjusted (58,1) (76,6) 18,5 (79,3) (76,6) (2,8) 21,3 AP adjusted/Revenues 17,9% 19,5% -1,5% 20,4% 20,1% 0,3% -2,5%

Net Trade Working Capital adjusted 102,0 91,9 10,1 95,3 64,0 31,3 6,8

Cash flow and Net debt

Change in net debt

, unless otherwise stated €M	9M 23	9M 22
cash flow Current	22 3 ,	33 9 ,
Change in NTWC	(9 ,7)	(34 0) ,
Inventory	(5 1) ,	(28 8) ,
Receivables Accounts	3 14 ,	(4 2) ,
Payables Accounts	(18 9) ,	(1 0) ,
Other working capital	(18 2) ,	(7 ,1)
Capex , net	(15 8) ,	(17 6) ,
Cash flow from operations	(21 ,5)	(24 8) ,
Financial charges	(5 2) ,	(2 3) ,
Dividends paid	-	(7 3) ,
IFRS 16 - Leases	(0 6) ,	(0 7) ,
Other	(1 1) ,	3 1 ,
Change in debt net	(28 ,5)	(32 0) ,
debt Net - BoP	130 ,5	106 ,7
Net debt - EoP	159 0 ,	138 ,7

• YTD change in NTWC absorbs €9,7M. Inventory increase in Gas Metering business while trend in AR and AP reflect decrease in volumes
• Other working capital (-€18,2M) includes dispute settlement with customer accrued in 2022
• Capex for €15,8M vs €17,6M of PY

Net financial position

unless otherwise stated €m,	30/09/2023	31/12/2022	30/09/2022
(Cash & cash equivalents)	(17 2) ,	(23 ,5)	(24 ,5)
debt Current , net	54 9 ,	20 ,5	19 9 ,
debt Non current	108 6 ,	117 ,5	127 8 ,
MTM derivatives & M&A debt	(0 6) ,	1 2 ,	1 0 ,
IFRS 16 - Leases	13 2 ,	14 9 ,	14 ,5
debt Net - EoP	159,0	130,5	138,7

• Net Debt/EBITDA LTM: 4,75x vs 2,77x vs 3,09x of previous year

• Waiver on June 30 covenants was timely agreed by all lenders, covenant reset currently underway

Final comments and outlook

Looking forward we highlight two different trends

• Metering is riding a positive cycle leveraging competitive position and product portfolio
• Heating is suffering weak demand in end-market due to confusing regulation, incentives cancellation, high inflation and interest rate impact on household spending. Value chain is still overloaded with excess stock, de-stocking will take longer than expected

FY 2023 outlook

• Smart Gas Metering will maintain high double-digit growth (20% ≈ 25%) thanks to key projects with domestic top clients
• Water Metering will grow between 10% ≈ 15% partially recovering the Q2 delay
• Heating & Ventilation: the typical seasonality of H2 did not take place with further slowdown is expected (-25% ≈ -30%)
• At consolidated level sales forecasts are expected to be further reduced. FY sales at -18% ≈ -21%
• Cost reduction activities already in place with main structural effects expected from the beginning 2024
• EBITDA adjusted margin forecasted below double digit, between 9% ≈ 10%
• Net debt expected in line with H1 reported level (approx €150M)

Future developments

• Management is still working on a series of projects to accelerate internationalization and value generation, redesigning business portfolio targeting growth segments and cash generation potential

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.

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