De' Longhi SpA: presentation first quarter 2020 results

Q1 2020 results

Q1 2020 RESULTS

Foreword

Since Oct. 1st 2019, some contributions to customers (previously included within the financial charges section of the Profit & Loss scheme) were treated as commercial premiums, hence netting revenues. However, for comparative purposes, in some cases, the figures herein presented may be "normalized", i.e. reported on a comparable basis with those of the previous year, hence excluding the effects deriving from the change of treatment of the financial discounts.

Moreover,"normalized" figures exclude the non-recurring costs related to the COVID-19 outbreak.

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Q1 2020 RESULTS

Definitions & assumptions

In this presentation:

• Adjusted stands for "before non recurring items and inputed costs of the stock option plan"
• ForEx or FX stand for Foreign Exchange Rates;
• "M" stands for million and "bn" stands for billion.
• Normalized stands for excluding the change of treatment of the financial discounts and the non- recurring costs related to the COVID-19;
• Organic stands for net of Foreign Exchange Rates and hedging derivatives effects;
• Q1 stands for first quarter (January 1st - March 31st);
• Reported stands for official data including the application of IFRS-16 accounting standard and the change of treatment of the financial discounts.

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CONTENTS

• Update on COVID-19
• Q1 2020 results
• Appendix

Q1 2020 RESULTS

How we have been acting

Profitability

LiquidityDistribution

Production

People	Give back

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Q1 2020 RESULTS

People: our top priority

Safeguards to protect our employees

Flexible working practices

Prevention measures in the workplace:

• Wearing the surgical mask;
• Keeping the minimum safety distance from other people;
• Cleaning the hands frequently with the appropriate gel;
• Keeping the desk and work tools clean;
• Individual access to vending machines, with food to be consumed at the workplace;
• Establishing shifts to access the canteen;
• Replacing physical meetings with video conferences as much as possible.

Several activities to keep our employees informed and connected each other (courses, videos, speeches, training, webinars).

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Q1 2020 RESULTS

Production: diversification strategy as a strength

Italian plant	Romanian plants	Chinese plants
Full capacity	Full capacity	Full capacity

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Updated May 12th 2020

Q1 2020 RESULTS

Profitability: actions the Group has taken straightaway

We acted immediately to mitigate the negative impacts of the Covid-19 outbreak on the business:

• new personnel hirings temporary suspended;
• other cost cuttings and savings:
• • general expenses;
  • merchandising;
  • travels and conferences;
• utilization of governmental job aid measures (like the Italian "Cassa Integrazione") in every country, wherever available, and/or days of vacation.

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Q1 2020 RESULTS

Distribution: support from e-commerce

Over the last three years, the on-line sales have constantly increased their weight on our total revenues.

Both pure on-line players and the brick-and- mortar retailers have boosted their sales in the digital domain.

100%	Penetration for distribution channels
80%
60%
40%
20%

0%

FY17	FY18	FY19
On-line		Off-line

30.0%	Growth rate of e-commerce in Q1
20.0%
10.0%
0.0%
-10.0%
	Gen '20	Feb '20	Mar '20
	Off-line	On-line

Based on company's estimates

The growth of the on-line sales have shown the importance of investing into e-commerce and digital marketing.

The tug of war between e-tailers and brick&mortar will continue in the coming years and we want to support all our partners and distributors in both channels, in the best way.

Based on company's estimates	9

Q1 2020 RESULTS

Liquidity: cash is king

Cash and cash equivalents (M€)		Total Net Financial Position (M€)

400					731	752	800
350			665				700
300				569			600
250		458					500
200	358						400
150							300
100							200
50							100
-							-	Reported data
	2015	2016	2017	2018	2019	Q1 2020

Euro million	Q1 2020
Cash and cash equivalents	752.4
Other financial receivables	114.6
Current financial debt	-127.2
Current net financial assets / (debt)	739.7
Non current net financial assets / (debt)	-404.7
Total Net Financial Position	335.0

Over the years, the Group has maintained a healthy balance sheet, that today represents a precious shelter to sail safely across the crisis.

In order to further expand the available liquidity:

• the company has undersigned new medium term financing for 150 M€, and
• the AGM has rejected the proposal of the BoD to distribute a dividend (proposed 80 M€).

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Q1 2020 RESULTS

Give back: supporting local communities

The De' Longhi Group has donated 3.1 M€ for the fight against Covid-19:

"It is a deserved solidarity contribution - comments Giuseppe de' Longhi, Chairman of the Board

• for a territory to which this company and my family feel intimately linked and the sign of a tangible presence, for what it's up to us as a company, in this moment of extreme need ".

Some De'Longhi employees work as volunteers in several communities.

Hospitals in Russia&Ukraine

Hospitals in Poland&Czech Rep.

Hospitals in France

Grassroots Hospital Donations

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CONTENTS

• Update on COVID-19
• Q1 2020 results
• Appendix

Q1 2020 RESULTS

Highlights

In the first quarter 2020 (in normalized terms):

• due to the Corona virus we have faced some complexity due to the temporary halt of the Chinese platform (then re-started) and the lockdown in many markets, but they didn't materially affect the Q1 results thanks to







our prompt reaction;

Revenues of € 396.4 M, up 5.3% (+4.4% organic and +4.5% in reported terms);

adjusted Ebitda of € 45.2 M (€ 42.1 M in reported terms), equal to 11.4% of revenues;

in Q1 the Group has increased the A&P spending to support the brands' leadership according to the plans.

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Q1 2020 RESULTS

The topline

	reported		normalized	reported
	Q1 2020		Q1 2020	Q1 2019
Revenues	393.3		396.4	376.4
change %	4.5%		5.3%
organic ch. %	3.6%		4.4%

• The Q1 2020 normalized revenues grew by 5.3% (4.5% reported), mainly thanks to the double digit growth of the coffee segment;
• All regions, excepted MEIA, were in positive territory, with some countries at a double digit pace, like Germany, France, Northern America and Greater China;
• The currency effect on revenues added 0.9% of growth versus last year.

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Q1 2020 RESULTS

Revenues by market & product

Russia, Ukr. &

CIS

9.1%

others SW_EU

11.9%

	others NE-EU
UK	14.5%
4.5%
France
8.4%	MEIA	Q1 2020
Q1 2020	5.1%

Germany 16.0%

Australia & NZ

4.2%

North America

8.7%

greater China

Italy others APA Japan 4.0%

7.5% 2.7% 3.4%

MAIN ORGANIC UPS & DOWNS

UP DOUBLE DIGIT	Germany, France, US&Canada, China&HK
UP SINGLE DIGIT	Spain&Portugal, Russia&CIS, Japan
DOWN	Australia&NewZeland, Saudi Arabia, Italy, UK

MAIN ORGANIC UPS & DOWNS

UP DOUBLE DIGIT	FULLAUTO, PUMP ESPRESSO, SINGLE SERVE
UP SINGLE DIGIT	KITCHEN MACHINES, IRONING
DOWN	FLOORE CARE, FOOD PROCESSORS

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Q1 2020 RESULTS

Revenues by region

EUR million	Q1-2020	chg. %	organic	Q1-2020	chg. %	organic
chg. %	normalized	chg. %
North East Europe	111,1	3,4%	2,0%	111,4	3,7%	2,4%
South West Europe	171,0	10,5%	10,2%	173,7	12,2%	11,9%
EUROPE	282,0	7,6%	6,8%	285,1	8,7%	8,0%
APA (Asia/Pacific/Americas)	91,2	4,8%	3,7%	91,2	4,8%	3,7%
MEIA (MiddleEast/India/Africa)	20,0	-26,3%	-27,6%	20,0	-26,3%	-27,6%
TOTAL REVENUES	393,3	4,5%	3,6%	396,4	5,3%	4,4%

• the South-WestEurope region expanded by 12.2%, boosted by France and Germany, combined with a good performance of Spain, Portugal and Greece; weak environment for Italy and Austria, that have faced the first effects of the lockdown;
• North-EastEurope grew by 3.7%, supported in particular by the double digit growth of Russia, Ukraine and Cis; sluggish trends in the Scandinavian countries and Czech Republic;
• APA was up 4.8%, driven by a double digit expansion of Northern America and Greater China; Australia and New Zealand were negative due to the currency effect;
• MEIA region heavily down because of the tough local macroeconomic scenario and temporary stop of shipments from China.

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Q1 2020 RESULTS

Revenues by product: coffee makers

1. The segment has exceeded 50% of total revenues.

1. Single serve category bounced back from previous year: both Nespresso and DolceGusto products achieved a

double digit growth;

Q1 2020

1. full-autoand manual coffee makers maintain an outstanding double digit growth pace.

Based on management accounts

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Q1 2020 RESULTS

Revenues by product: food preparation

1. Food preparation still down in the first months, however….

1. ….positive signs coming from high single digit growth of the Kitchen machines, the main category of the segment.

+ 8.1%

organic

Q1 2020

Based on management accounts

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Q1 2020 RESULTS

Revenues by product: comfort & home care

1. Ironing systems performed well, while the floore care category has witnessed a drop in sales.

1. Comfort products flat versus last year, with portable air conditioning strongly bouncing back while heating in negative territory due to the warm winter season.

Based on management accounts

Q1 2020

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Q1 2020 RESULTS

Margins

	reported		normalized	reported
	Q1 2020		Q1 2020	Q1 2019
net ind. margin	198.3		201.3	181.7
% of revenues	50.4%		50.8%	48.3%
adjusted Ebitda	42.1		45.2	36.5
% of revenues	10.7%		11.4%	9.7%
Ebitda	36.6		44.3	35.1
% of revenues	9.3%		11.2%	9.3%
Ebit	17.6		25.2	16.6
% of revenues	4.5%		6.4%	4.4%
Net Income	11.0		14.4	11.4
% of revenues	2.8%		3.6%	3.0%

• Ebitda margin benefited by higher volumes, a positive prix-mix and savings in the COGS;
• in Q1 the Group boosted the A&P spent, in line with the plan;
• the non recurring costs related to Covid-19 amounted to 4.6 M€, of which 3.1 M€ were donated by the Group for the fight to the outbreak and 1.5 M€ were other costs related to the outbreak;
• net income was impacted by higher tax take by 4.8 M€

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Q1 2020 RESULTS

Q1 '20 adjusted Ebitda bridge (normalized )

	1.3
	0.6
1.4
		1.6

8.1

45.2

36.5

adj. ebitda Q1 19	volumes	Price/Mix	industrial costs	FX	other costs	adj. ebitda FY20
						normalized

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Q1 2020 RESULTS

Balance sheet

	reported		reported
EUR million	Mar. 31,		Mar. 31,
2020		2019
Net Working Capital	256.6		345.5
Net Equity	1,190.7		1,097.6
Net debt / (Net cash)	-335.0		-144.0
N.W.C. / Revenues	12.1%		16.8%

		reported
Change		Dec. 31, 2019		Change
-88.9		318.8	-62.2
93.1		1,190.5	0.2
-191.0		-277.8	-57.2
-4.7 pp		15.2%		-3.1 pp

• The net financial position as at March 31st reached € 335 M, thanks to a 57.2 M€ cash generation provided by the operating activities and the strong improvement of the net working capital (NWC);
• The free cash flow - before dividends - stood at € 246.4 M€ in the 12 months;
• The NWC decreased to € 256.6 M, improving as a percentage of revenues from 16.8% (March '19) to 12.1%, mainly thanks to the decrease of the inventory level and of the trade payables-receivables balance.

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Q1 2020 RESULTS

The net cash flow in Q1 2020 (reported )

13.4

27.2 35.5

35.5

57.2

Maintenance Capex plus the new factory in Romania and HQ offices in Treviso.

335.0

277.8

NFP at Dec. 31,	Operating CF	CF fromNWC	CF from Equity	Capex	Free Cash Flow NFP at Mar. 31,
2019			(other)		2020

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Q1 2020 RESULTS

The net cash flow in 12 months (reported )

11.2

37.7

85.5

55.3

283.0

246.4

335.0

144.0

NFP at Mar. 31, Operating CF	CF fromNWC CF from Equity	Capex	Free Cash Flow Dividends NFP at Mar. 31,
2019	(other)		2020

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APPENDIX

Disclaimer

This presentation might contain certain forward-looking statements that reflect the company's current views with respect to future events and financial and operational performance of the company and its subsidiaries.

Forward looking statements are based on De' Longhi's current expectations and projections about future events. The forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward looking statements. Potential risks and uncertainties include such factors as general economic conditions, foreign exchange fluctuations, competitive product and pricing pressures and regulatory developments, many of

which are beyond the ability of De' Longhi to control or estimate. Consequently, De' Longhi S.p.A. cannot be held liable for potential material variance in any looking forward in this document.

Any forward-looking statement contained in this presentation speaks only as of the date of the document. Any reference to past performance or trends or activities of De' Longhi S.p.A. shall not be taken as a representation or indication that such performance, trends or activities will continue in the future. De' Longhi S.p.A. disclaims any obligation to provide any additional or updated information, whether as a result of a new information, future events or results or otherwise.

This presentation does not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments.

The manager responsible for preparing the company's financial reports declares, pursuant to paragraph 2 of Article 154-bis of Legislative Decree no. 58 of February 24 1988, that the accounting information contained in this presentation corresponds to the results documented in the books, accounting and other records of the company.

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THANK YOU.

Contacts:

Investor Relations:

Fabrizio Micheli / Samuele Chiodetto

1. [phone] [e-mail]