Tesmec — Investor Presentation 2018

Oct 31, 2018

• Stringing
• Energy Automation
• Railway
• Trencher

Integrated Solutions Provider

9M 2018 Results Presentation

Corporate Strategy >

• 9M 2018 Results >
• 2018 Outlook & 2019 Trend >

STRINGING

• Overhead power lines construction & maintenance >
• Reconductoring and line improvement >

• Underground cable laying >

• Railway lines electrification >

• Catenary maintenance and diagnostic >
• Special Applications >

FULLY INTEGRATED SOLUTIONS PROVIDER

• Telecommunication & Teleprotection >
• Electronic integrated sensors, fault detection and measurement >

• Protections & Electronics for Distribution >

• > Telecom networks, FTTH & long distance, power cable installation

• Oil & Gas, Water pipelines
• > Bulk excavation of rock and
• > Quarries

TESMEC

" From Steel to sustainable Technology "

OUR MISSION

• Value added integrated solutions provider in the market of infrastructure for the transport of energy, data and material >
• Efficiency, digitalization, safety and sustainability are our drivers for the modernization of the infrastructures projects in the world >

• R&D investments: match the people and high know-how to meet the new demands of the markets >

• Corporate Strategy >

• 9M 2018 Results >
• 2018 Outlook & 2019 Trend >

A CONTINUOUS INNOVATION PROCESS in order to face the new challenges of the Energy sector

Focus on new digital technologies and innovative methodologies

DIGITAL MACHINES 4.0

A new digital HMI, drastically simplified

The new remote monitoring system, RE.M:

• Data Management
• Geofencing
• Proactive Maintenance Management
• Remote diagnostic and troubleshooting

HI-TECH STRINGING OPERATIONS WITH HELICOPTER

The Highest Transmission Towers in the world (380m) have been build for Sea High Voltage Conductors Crossing

The operation for Stringing the Pulling Rope on top of the two tall towers will be carried out by two main equipment:

• The new High-Speed Tensioning System TN1216 and CVR829 made by Tesmec
• A huge heavy Lifting Helicopter

From a start up to a major deployment on the market for protection, metering and control applications

Improve performance while minimizing OPEX and CAPEX

ITALIAN MARKET CONSOLIDATION

Become a recognized innovation hub through partnership in technological projects on the main TSO & DSO of the local market

INTERNATIONAL FOOTPRINT

Achieve business growth through expansion into new geographic areas:

• RUSSIA: mass production of the Smart Metering solution with revenues starting from end of Q3 and Q4 2018
• ALGERIA: First award of High Voltage telecommunications tenders with rump up of the supplies foreseen for 2019

Tesmec is a global group with a strong focus in different applications

Full integrated technological solutions supplier

MINING & QUARRIES APPLICATIONS

Anti-cyclical segment. Business opportunities in major Countries:

• Australia
• Africa
• Russia

PIPELINE INDUSTRY (Oil&Gas, water)

Positive trend of pipeline market. Important projects in:

• USA
• Middle East
• South Africa

CABLE LAYING SYSTEM (fiber and energy cables)

Know-how Integrated System thanks to collaboration with the leading players in the fields and open innovation approach

Railways business highlights

NEW RAILWAY HUB: Tesmec Rail

enhance the Group's activities in the railway business

Focus on R&D and innovative projects to develop technological solutions to anticipate market needs

KEY EVENTS:

• ✓ InnoTrans 2018, September 2018
• ✓ Inauguration Tesmec Rail, October 2018

TECHNOLOGICAL VEHICLES

FRANCE - Contract value of Euro 14.25 million

▪ Special Technological vehicles: 9 vehicles (n.6 different models) engineered to allow a correct execution of the works of catenary replacement in a complete security environment.

DIAGNOSTIC SOLUTIONS

Vehicles with hi-tech measuring systems to improve the control and maintenance of the national rail network.

% on Revenues 14,1% 13,1%

				ENERGY	9M2018	9M2017	Delta %
GROUP (€ mln)	9M 2018	9M 2017	Delta %	Revenues	30,2	44,8	-32,6%
				EBITDA	2,2	7,3	-68,9%
REVENUES	140,5	132,1	6,3%*	% on Revenues	7,5%	16,3%
EBITDA	12,2**	13,6	-9,9%
% on Revenues	8,7%	10,3%
EBIT	1,4	3,1	-53,6%	TRENCHERS	9M2018	9M2017	Delta %
% on Revenues	1,0%	2,4%		Revenues	94,2	76,1	23,8%
				EBITDA***	7,7	4,8	59,8%
Differences in Exchange	(0,4)	(4,6)	91,9%	% on Revenues	8,2%	6,3%
% on Revenues	-0,3%	-4,8%		*** without the Australian extra jobsite costs, the
PROFIT (LOSS) BEFORE TAX	(1,4)	(3,3)	57,3%	EBITDA would have been around 11,5 M€, 12,2%
% on Revenues	-1,0%	-2,5%		on revenues
				RAILWAY	9M2018	9M2017	Delta %
NET INCOME/(LOSS)	(0,7)	(1,8)	59,2%	Revenues	16,1	11,2	43,9%
% on Revenues	-0,5%	-1,4%		EBITDA	2,3	1,5	55,5%

GROUP (€ mln)	9M 2018	9M 2017	Delta %
NFP	92,9	93,5	0,6%

*+ 8,1% at constant currencies

** without the Australian extra jobsite costs, the EBITDA would have

been around 16,0 M€, 11,4% on revenues

2018 9M versus 1H

Euro/mln	1H - YTD		Q3		9M - YTD
	2018	2017	Var.	2018	2017	Var.	2018	2017	Var.
REVENUES	91,1	91,1	0,0%	49,4	41,0	20,5%	140,5	132,1	6,3%
EBITDA*	9,3	8,7	7,1%	2,9*	4,9	-40,8%	12,2**	13,6	-9,9%
EBITDA %	10,2%	9,6%		5,9%*	11,9%		8,7%**	10,3%
EBIT	2,4	2,0	18,1	(1,0)	1,1	-190,9%	1,4	3,1	-53,6%

• without the Australian extra jobsite costs, the Q3 EBITDA would have been around 6,9 M€, 14,0% on revenues
• ** without the Australian extra jobsite costs, the YTD EBITDA would have been around 16,0 M€, 11,4% on revenues

Actual Exchange Rate = 1,198

Difference 2.388

Difference 1.149

GROUP (Euro mln)	9M 2018	9M 2017	9M 2016
Differences in Exchange	(0,4)	(4,6)	(0,3)
of which:
Realised	0,1	0,1	0,0
Unrealised	(0,5)	(4,7)	(0,3)
Differences in Exchange for currency:
USD	0,6	(3,0)	(0,9)
ZAR	(0,6)	(0,6)	0,4
IDR	-	(0,6)	-
OTHER	(0,4)	(0,4)	0,2
Total	(0,4)	(4,6)	(0,3)

EBITDA 9M 2018

€ mln

31st October 2018 15

Financial Information (€ mln)	9M 2018	2017
Net Working Capital	64,8	60,8
Non Current assets	68,0	68,4
Other Long Term assets/liabilities	2,7	0,9
Net Invested Capital	135,5	130,1
Net Financial Indebtness	92,9	85,2
Equity	42,6	44,9

2017 Working capital impacts in Net Investing Capital 9M 2018

Working Capital evolution

2017 € 60,8 mln

Increase of trade receivables following sales closed at the end of the quarter and impact of work in progress contracts due to the rail growth

9M 2018 € 64,8 mln

OPERATING NET FINANCIAL POSITION

• Corporate Strategy >
• 9M 2018 Results >
• 2018 Outlook & 2019 Trend >

OUTLOOK
	1 Sales: target around 200 M€
ECONOMICS	2 EBITDA % in line with the previous year. The Q4 performance will be better but not enough to offset the Q3 Australian extra costs. Improvement due to better fixed costs absorption & efficiency in the business.
& FINANCIALS xxx	3 Positive «Net Profit»
	4 NFP: improvement is expected thanks to the normalization of working capital & operating profitability
	5 BACKLOG in line with 2018.Q3
	6 Efficiency & Productivity recovery plan on going
MACROECONOMIC IMPACTS	1 Inflation: tradeoff price increase / volume The higher costs will be offset by the price realization, the efficiency and cost discipline 2 €/\$ positive transaction Current Italian scenario: 3 ▪ limited business impact since our orders are connected to the investments in safety and
	security/resiliency areas both for railways and automation business ▪ 80% of Tesmec revenues are abroad
	4 Tesmec Business are focused anti-cyclical Industries with medium and long-term horizons

2019 Trend

BUSINESS MODEL	BLOCKCHAIN KNOW-HOW MODEL STRATEGIC PARTNERSHIP/COLLABORATIONS
GUIDELINES	> CONSOLIDATION OF THE BUSINESSES GROWTH THANKS TO HIGH ADDED VALUE TECHNOLOGICAL SOLUTIONS > IMPROVE OF THE MARGIN > NO FURTHER CAPEX TO INCREASE THE PRODUCTON CAPABILTY
BUSINESS DRIVERS	ENERGY TRENCHERS	> FOCUS ON RELIABILITY AND SECURITY OF SUBSTATION AUTOMATION SYSTEMS AND COMMUNICATION NETWORKS ✓ Cyber security protection is the highest priority for Tesmec: new developments to face the challenges of the industrial and utility customers > FOCUS ON NEW METHODOLOGY RELIABILITY AND 4.0 MACHINES RANGE > GROWTH IN THE ALL KEY MARKET SEGMENTS > ANTI-CYCLICAL INDUSTRIES (e.g.: mining) > KEY PARTNERSHIP IN RENAWABLES AND FTTH BUSINESS > DIGITALIZATION & INTEGRATED JOBSITE SOLUTIONS > RELIABILITY AND QUALITY > GLOBAL REPLY WITH LOCAL PARTNERS
	RAILWAY	> FOCUS ON SAFETY FOR PASSENGERS AND RAILWAY NETWORK > DATA REMOTE MANAGEMENT ✓ Solutions designed according to the latest European Standards: technologies on board which allow our vehicles to travel as passengers train and to achieve an efficient and eco-friendly jobsite execution ✓ Infrastructure diagnostic solutions: vehicles and platforms for data analysis and preventive maintenance

BACKLOG

Summary 9M 2018 Profit & Loss statement - Appendix A

Profit & Loss Account (Euro mln)	9M 2018	9M 2017	Delta vs 2017	Delta %
Net Revenues	140,5	132,1	8,4	6,3%
Raw materials costs (-)	(64,5)	(58,7)	(5,8)	10,0%
Cost for services (-)	(23,9)	(22,9)	(1,0)	4,2%
Personnel Costs (-)	(36,4)	(33,4)	(3,0)	8,8%
Other operating revenues/costs (+/-)	(7,9)	(7,4)	(0,5)	6,9%
Portion of gain/(losses) from equity investments evaluated using the equity method Capitalized R&D expenses	0,2 4,2	0,0 3,9	0,2 0,3	0,0% 6,5%
Total operating costs	(128,3)	(118,5)	(9,8)	8,3%
% on Net Revenues	(91%)	(90%)
EBITDA	12,2	13,6	(1,4)	-9,9%
% on Net Revenues	9 %	10%
Depreciation, amortization (-)	(10,8)	(10,5)	(0,3)	3,2%
EBIT	1,4	3,1	(1,7)	-53,6%
% on Net Revenues	1 %	2 %
Net Financial Income/Expenses (+/-)	(2,8)	(6,4)	3,6	-55,4%
Taxes (-)	0,7	1,5	(0,8)	-56,1%
Minorities	-	-	-	-
Group Net Income (Loss)	(0,7)	(1,8)	1,1	59,2%
% on Net Revenues	0 %	-1%

Balance Sheet (€ mln)	9M 2018	2017
Inventory	69,8	69,9
Accounts receivable	59,4	39,9
Accounts payable (-)	(52,9)	(39,5)
Op. working capital	76,3	70,3
Other current assets (liabilities)	(11,5)	(9,5)
Net working capital	64,8	60,8
Tangible assets	47,0	46,1
Intangible assets	17,0	18,3
Financial assets	4,0	4,0
Fixed assets	68,0	68,4
Net long term liabilities	2,7	0,9
Net invested capital	135,5	130,1
Cash & near cash items (-)	(23,7)	(21,5)
Short term financial assets (-)	(7,3)	(12,5)
Short term borrow ing	73,4	79,2
Medium-long term borrow ing	50,5	40,0
Net financial position	92,9	85,2
Equity	42,6	44,9
Funds	135,5	130,1

Disclaimer

The Manager responsible for preparing the company's financial reports, Gianluca Casiraghi, declares, pursuant to paragraph 2 of Article 154-bis of the Consolidated Law on Finance, that the accounting information contained in this presentation corresponds to the document results, books and accounting records.

Certain information included in this document is forward looking and is subject to important risks and uncertainties that could cause actual results to differ materially.

Any estimates or forward-looking statements contained in this document are referred to the current date and, therefore, any of the assumptions underlying this document or any of the circumstances or data mentioned in this document may change. Tesmec S.p.A. expressly disclaims and does not assume any liability in connection with any inaccuracies in any of these estimates or forward-looking statements or in connection with any use by any third party of such estimates or forwardlooking statements.

This document does not represent investment advice or a recommendation for the purchase or sale of financial products and/or of any kind of financial services. Finally, this document does not represent an investment solicitation in Italy, pursuant to Section 1, letter (t) of Legislative Decree no. 58 of February 24, 1998, or in any other country or state.

In addition to the standard financial reporting formats and indicators required under IFRS, this document contains a number of reclassified tables and alternative performance indicators. The purpose is to help users better evaluate the Group's economic and financial performance. However, these tables and indicators should not be treated as a substitute for the standard ones required by IFRS.

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