Tesmec — Investor Presentation 2019

Oct 31, 2019

• Stringing
• Energy Automation
• Railway
• Trencher

Integrated Solutions Provider

9M 2019 Results Presentation

Corporate Strategy >

• 9M 2019 Results >
• Outlook >

VISION

To be a technological partner in a changing world >

VALUE PROPOSITION

To supply addedvalue integrated solutions for our customers > Innovation

MISSION

To operate in the market of infrastructure for the transport of energy, data and material (oil and derivatives, gas, water). >

STRATEGY

Internationalization Integration >

STRINGING

• Overhead power lines construction & maintenance >
• Advanced methodologies for powerlines improvement >
• Zero emissions underground cable laying >

• Catenary lines construction & maintenance >
• Diagnostics systems >
• Big Data integrated solutions for safe infrastructure >

PLATFORMS FOR DIAGNOSTIC & DATA MANAGEMENT

ENERGY AUTOMATION ENERGY

• Telecommunications solutions for HV Grids >
• Grid Management: protection and metering solutions >
• Advanced sensors for fault passage indication, protection and monitoring >

• > Telecom networks, FTTH & long distance, power cable installation
• > Oil & Gas, Water pipelines
• > Bulk excavation, Quarries & Surfaces mining

COMBINE OPERATIONAL DATA IN THE CLOUD AND APPLY ADVANCED ANALYTICS

✓ Grassobbio, Patrica and Monopoli plants are fed by solar panels

• ✓ All Italian plants are certified according to ISO 9001-14001-45001
• ✓ By 31/12/2019 the main products of Tesmec Automation will be ISO 14067:2018 (Carbon footprint of products) certified

✓ The whole production process takes care of waste and complies with recycling regulations

STRINGING

FULL ELECTRIC MACHINE >

Zero emissions underground cable laying

Hybrid and electric railcars >

SUPER GRID AND SMART GRID RENEWABLE ENERGIES DIGITAL FOR GREEN

• Custom solutions for Smart Grid management >
• Energy consumption optimization through carbon footprint equipment >

TRENCHER

• Low pollution and low impact on environment >
• > Complete value chain for renewables

BIO OIL

Factories

	TRS	RAIL	STR	AUT
Tesmec SPA Grassobbio
Tesmec SPA Endine
Tesmec SPA Sirone (precision machining work)
Marais Durtal (FR)
Tesmec USA Alvarado (USA)
Tesmec Rail Monopoli
Tesmec Automation Patrica
Tesmec Automation Padova-Fidenza

• Corporate Strategy >
• 9M 2019 Results >
• Outlook >

NEW METHODOLOGY FOR RECONDUCTORING

• Age of grid in development Countries is higher than conductor lifespan
• Grant the quality of the network service, reducing outage period and related costs

NEW DEAL FOR NORTH AMERICA MARKET

• Nesco Agreement
• ICUEE Expo (1-3 October): launch of the brand-new electric machine and innovative continuous puller
• Reorganization of our presence on energy sector

NEW SAFER FASTER & CHEAPER METHODOLOGY

KEY OPPORTUNITIES IN GROWING MARKET SEGMENTS KEY OPPORTUNITIES IN INTERNATIONAL MARKETS

ENEL MARKET:

• Cybersecurity Integration in compliance with market requirements
• Continuous supplies of MV Smart devices in Italy and South America

ITALIAN MARKET:

• Push on supplies for primary and secondary substation Automation by market diversification

HV MARKETS:

• Invasive activities in North Africa
• Awarded High Voltage telecommunications tenders in Eastern Europe with supply in Q42019
• Ramp-up activities in Middle East

RUSSIA:

• Key direct supplies of SMT on the Rosseti Grid
• Growing supplies to local players (Engineering companies, EPC, installators) and activities for the market consolidation

KEY OPPORTUNITIES IN 5G and RENEWABLES BUSINESS KEY OPPORTUNITIES IN SURFACE MINING BUSINESS

• Digital & connected solutions: SAFETY first and easier PROJECT MANAGEMENT
• STRATEGIC RELATIONSHIP with Verax Network Solutions to provide effective solutions across the USA, utilizing line of fiber optic trenching solutions
• Growing recognition of Tesmec automatic cable laying technology for wind and solar farms

• ICUEE Expo (1-3 October): excellent results, great interest showed for Tesmec innovative solutions

• Focus on: PRODUCTIVITY, EXCAVATED MATERIAL SIZE, OPERATIVE COSTS

• Safe & efficient working methodologies
• INTEGRATED solutions: EQUIPMENT + SERVICES
• Bauxite project inauguration: Lizetta Project in Ivory Coast and key opportunities in African countries

INNOVATIVE FAST & SAFE METHODOLOGY for CATENARY MAINTENANCE OPERATIONS

• Certified solution (with remote control systems) for replacement of the contact wires – RFI Italy
• Technological solutions for refurbishment of the line RER C network - RC2 consortium France
• Less people on track, higher efficiency & Safety

SOLUTIONS TO ASSURE RAILWAY INFRASTRUCTURES RELIABILITY & SAFETY

• Specialized vehicles equipped with DIAGNOSTIC DEVICES and DIGITAL PLATFORM to measure and to manage big amount of data in real time.
• Diagnostic systems to grant SAFETY of the railway infrastructures.

NEW CONTRACT WITH ELZEL Elektrizace železnic Praha in CZECH REPUBLIC - approx. Euro 8 million Supply of 4 multi-purpose rail vehicles for the maintenance of railway lines, as well as for full maintenance service for 6 years

SOLUTION + DIAGNOSTIC SYSTEMS = guarantee operations in a SAFER, MORE EFFICIENT AND FASTER WAY

GROUP (€ mln)	9M 2019	9M 2018	Delta %
REVENUES	144,2	140,5	2,6% (1)
EBITDA (2) (3)	17,4	12,2	42,2%
% on Revenues	12,1%	8,7%
EBIT	3,9	1,4	169,8%
% on Revenues	2,7%	1,0%
Differences in Exchange (4)	1,3	(0,4)	n/a
% on Revenues	0,3%	-0,3%
PROFIT (LOSS) BEFORE TAX	1,4	(1,4)	196,6%
% on Revenues	0,9%	-1,0%
NET INCOME/(LOSS)	0,7	(0,7)	195,6%
% on Revenues	0,5%	-0,5%
GROUP (€ mln)	9M 2019	9M 2018	Delta %
NFP ante IFRS 16	97,8	92,9	-5,3%
NFP post IFRS 16 (3)	115,6

(1) + 0,9% at constant currencies

• (2) The EBITDA has been growing due to management actions rolled out after the results of end 2018, not yet lined up with expectations, but with a positive outlook in Q4.
• (3) Starting from the 1 st January 2019, the new IFRS 16 has been introduced. It impacts:
  • EBITDA +2,7 M€
  • Depreciation 2,5 M€
  • Net Results 0,3 M€
  • Intangible assets + 17,5 M€
  • NFP + 17,8 M€

The EBITDA ante IFRS would have been 14,7 M€

(4) The positive exchange differences are positive due to the favorable effects FX

ENERGY	9M 2019	9M 2018	Delta %
Revenues	31,5	30,2	4,2%
EBITDA*	3,8	2,3	66,4%
% on Revenues	12,0%	7,5%
* EBITDA ante IFRS 16 would have been 2,6 M€

• > Energy Automation Growth
• > Driven by European Market

P

TRENCHERS	9M 2019	9M 2018	Delta %
Revenues	89,4	94,2	-1,3%
EBITDA*	9,8	7,7	27,1%
% on Revenues	10,9%	8,2%
* EBITDA ante IFRS 16 would have been 8,6 M€

• > USA Market Growth
• > European Market Growth
• > Less impacts of Australia Projects
• > USA & Italy Profitability Impact

>	RFI-OCPD:	Execution	delay
---	-----------	-----------	-------

• > TSO: Project Execution delay
• > Awarded of new contracts postponed

C 心:09-1
	1
Company of the proportion of the program and the company of the company of the company of the comments of the comments of the comments of the control of the controlling the f

RAILWAY	9M 2019	9M 2018	Delta %
Revenues	23,3	16,1	44,6%
EBITDA*	3,8	2,3	65,2%
% on Revenues	16,5%	14,1%
* EBITDA ante IFRS 16 would have been 3,4 M€

9M 2019 Differences in Exchange

GROUP (Euro mln)	9M 2016	9M 2017	9M 2018	9M 2019
Differences in Exchange	(0,3)	(4,6)	(0,4)	1,3
of which:
Realised	0,0	0,1	0,1	0,2
Unrealised	(0,3)	(4,7)	(0,5)	1,1
Differences in Exchange for currency:
USD	(0,9)	(3,0)	0,6	0,8
ZAR	0,4	(0,6)	(0,6)	0,1
OTHER	0,2	(1,0)	(0,4)	0,4
Total	(0,3)	(4,6)	(0,4)	1,3

9M 2019 EBITDA

€ mln

* The impact of IFRS 16 is around 2,7 M€

9M 2018 The EBITDA is positively impacted by the results of the all segments 9M 2019

Financial Information (€ mln)	9M 2019	2018
Net Working Capital	70,1	48,9
Non Current assets	69,5	67,3
Right of use - IFRS 16	17,5	0,0
Other Long Term assets/liabilities	3,5	4,8
Net Invested Capital	160,6	121,0
Net Financial Indebtness	97,8	77,7
Lease liability - IFRS 16	17,8	0,0
Equity	45,0	43,3
Total Sources of Financing

	Increase of working capital due to Railways Business and the stock to
2018	support the growth of the 4th quarter 2019	9M 2019

9M 2019

31st October 2019 20

2018

OPERATING NET FINANCIAL POSITION

* From 1 st January 2019, the new IFRS 16 has been introduced, the impact is term of NFP is around 17,8 M€, otherwise the NFP would have been around 97,8 M€

• Corporate Strategy >
• 9M 2019 Results >
• Outlook >

GREEN PRODUCT LINE

• ✓ Zero emissions product line dedicated for urban area
• ✓ Approach with marketing actions on specific areas:

NEW MARKET POSITIONING IN CHINA

• ✓ Tesmec New Technology antenna for green & digital technologies in cooperation with local manufacturer
• ✓ Hub for neighbour markets: Asia Pacific Countries starting from South Korea & Taiwan

TOWARDS CYBERSECURITY REQUIREMENTS FOCUS ON ENGINEERING SOLUTIONS

Focus on reliable solutions for secure communication and M2M and M2H interface in order to provide stability of strategic assets (utilities substations).

Main drivers:

• Efficient device access control
• Compliance with cybersecurity standards
• Enhance infrastructure performance

Development of an engineering solutions starting from Tesmec ready-to-go telecommunication systems to increase productivity and reliability of infrastructure.

Main drivers:

• High control and automation capabilities
• Increase plant productivity

TOWARDS 5G – NEXT GENERATION OF BROADBAND CONNECTION

The costs and speed of building new 5G networks depend to a large extent on how quickly broadband providers can dig trenches along roads to lay fiber conduit

Main features of the new generation network:

• Massive device connectivity
• Ultra reliability
• High speeds
• Low communication latency

TESMEC has the solution for a "clean & fast" network deployment

FOCUS ON DIGITAL AND SUSTAINABLE WORKING PROCESSES

The acceptance and use of Surface Miners in mining applications has increased and is continuously growing.

Main drivers:

• safe operations
• efficient and digital equipment
• sustainable technology

Tesmec is committed in a continuous improvement of his range of solutions to increase productivity, reliability and costs saving

CERTIFIED & ENVIRONMENTALLY FRIENDLY METHODOLOGY INFRASTRUCTURES RELIABILITY & SAFETY

• INTERNATIONALIZATION OF HIGH-QUALITY SOLUTIONS
• Automated operations
  • Fleet Management

CENTRALIZED PLATFORM Unmanned diagnostic (software + devices)

Verification and validation process through IoT, Big Data and Analytics tools

2019 outlook

MACRO MARKET TRENDS xxx	+ Digital Transformation & Industry 4.0 Telecom – 5G Energy transition Mines – new methodology	- Economy is slowing → China – USA commercial → Middle East, Iran embargo
BUSINESS DRIVERS	> New products: impact on revenues ENERGY > New USA agreement: Transmission and Distribution > Important development on digital grids with cyber-security needs TRENCHERS → > New solutions for 5G & FTTx Clean & Fast methodology in USA, SA, UK, FR & DE > Mining: development of special tailor made solutions with key market: Africa > Diagnostic market developments → Full solutions in final test RAILWAY > Diagnostic + Web Platform
ECONOMICS & xxx FINANCIALS	1 Sales: relevant growth in 4Q 2 EBITDA %: improvement in comparison to 2018 Results 3 NFP: improvement NFP/EBITDA ratio due to cash generation related to the WIP reduction 4 Expected BACKLOG: increase in comparison to H1.2019 5 Back to dividends distribution policy

BACKLOG

Summary 9M 2019 Profit & Loss statement - Appendix A

Profit & Loss Account (Euro mln)	9M 2019	9M 2018	Delta vs 2018	Delta %
Net Revenues	144,2	140,5	3,7	2,6%
Raw materials costs (-)	(63,2)	(64,5)	1,3	-2,0%
Cost for services (-)	(26,2)	(23,9)	(2,3)	9,8%
Personnel Costs (-)	(38,7)	(36,4)	(2,3)	6,4%
Other operating revenues/costs (+/-)	(5,0)	(7,9)	2,9	-36,7%
Non recurring revenues/costs (+/-)	1,1	0,0	1,1	na
Portion of gain/(losses) from equity investments evaluated using the equity method	0,1	0,3	(0,2)	-74,7%
Capitalized R&D expenses	5,2	4,2	1,0	24,8%
Total operating costs	(126,8)	(128,2)	1,5	-1,1%
% on Net Revenues	(88%)	(91%)
EBITDA	17,4	12,2	5,2	42,2%
% on Net Revenues	12%	9%
Depreciation, amortization (-)	(13,5)	(10,8)	(2,7)	25,1%
EBIT	3,9	1,4	2,5	169,8%
% on Net Revenues	3%	1%
Net Financial Income/Expenses (+/-)	(2,6)	(2,8)	0,3	-10,5%
Taxes (-)	(0,6)	0,6	(1,3)	-197,8%
Minorities	-	-	-
Group Net Income (Loss)	0,7	(0,7)	1,5	196,9%
% on Net Revenues	1%	-1%

Summary 9M 2019 Balance Sheet - Appendix B

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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