Metalfrio S A : 2Q23 Earnings Release

Incomes or losses of the second quarter of 2023

August 18, 2023

São Paulo, Brazil, August 18, 2023 - Metalfrio Solutions S.A. (FRIO3) ("Metalfrio"), a global leader supplier of refrigeration solutions, announces its incomes or losses of the second quarter of 2023 ("2Q23"). The financial and operational information is according to the accounting standards practiced in Brazil and the International Financial Reporting Standards (IFRS), in Reais (BRL). The comparisons concern the second quarter of 2022 ("2Q22").

HIGHLIGHTS of the 2Q23 and 1S23

• Net revenue of BRL 498,9 MM in the period, 14.9% below 2Q22 and BRL 969,8 MM in the 1S23 (11% lower than 2022), the invoicing level of BRL 2 Bi per year reached by the Company over the last two years.
• The service division (Life Cycle + Begur + 3L) continues with a good performance posting a net revenue of BRL 53 MM a growth of 3.6% over 2Q22, representing 24.4% in South America's operation (10.6% in the Company's total in the quarter). The semester closed with BRL 177.4 MM of invoicing with an increase of 10.7% in relation to the same period of 2022.
• Gross profit in 2Q23 was BRL 90.9 MM with a gross margin of 18.2%, in comparison with BRL 77.3 MM (13.2%) in the last year. South America has contributed with BRL 41.7 MM, reaching a new record mark of 19.2% of margin; our EMEA operation, reached BRL 40.1 of gross profit, 4.4% higher than 2022 and a Gross Margin of 20.8% (12.6% in 2022). In the year to date, we had a Gross Profit of BRL 167.9MM (17.3% of gross margin) vs BRL 172.9 in 2022 (15.9% of Gross Margin).
• EBTIDA for the period was BRL 61.6 MM (margin of 11.9%), South America contributed BRL 30.1 MM, with a margin of 14%. In 2022, EBTIDA was BRL 54.2 MM, with a margin of 9.2%. In the semester, EBTIDA was BRL 97 MM (10% of margin) vs BRL 115 MM (10.6% Margin) in 2022.
• Net profit in the quarter was BRL 31.6 MM versus a loss of BRL 95.9 MM in 2022. Year to date, we had a profit of BRL 4.7 MM vs a loss of BRL 98.8 MM in 2022.

Company's Comments about the incomes or losses:

The second quarter is usually one of the two best of the year for the company for the high season at EMEA. In despite of that, the year remains quite challenging, not only due to the weak global economy but, in our case, impacted by the Russia/Ukraine conflict and the earthquake in Turkey, we report a quarter of encouraging margins and results, which prove that the strategies implemented to defend the company's profitability has brought good results.

Revenues for the period were 14.9% below the same period of last year mainly because of the drop in sales volumes out of the Turkish factory, as we will see, but still keeping the level of BRL 2 Bi per year.

The focus on the best businesses enabled the increase in gross profit in all geographies, achieving record margins of 19.2% in South America and 20.8% in EMEA, leading the company to a margin of 18.2%, which compares with 13.2% in the same period of the previous year.

The North American operation is still not at these levels, but shows a significant improvement, with a 19% growth in revenue and an increase in gross margin from 6.4% in 2Q22 to 10.1% in this quarter.

In global consolidated terms, there was an improvement in EBITDA margin which reached 12.3% compared to 9.2% in 2Q22.

Closing the financial results, the company is reporting a net profit of BRL 31.6 million in 2Q23, which leads to a positive result of BRL 4,7 million in the year.

Finally, as a result of cash management efforts, essential to the current reality of expensive and scarce resources, the company generated an operating cash of BRL 52.8 million, with all regions contributing positively.

Negotiations with Brazilian financial institutions to resolve the short-term debt are ongoing and formal steps are being taken to carry out the capitalization of the respective credits, according to a Notice do the Market recently disclosed by the Company.

Incomes or losses of the second quarter of 2023 - August 18, 2023

1

Incomes or losses of the second quarter of 2023

August 18, 2023

	(BRL million)		2Q23		2Q22		% Exchange		1S23		1S22		% Exchange
				Rate				Rate
	Net Revenue		498,9		586,5		-14,9		969,8		1089,3		-11,0
	Gross Profit		90,9		77,3		17,6		167,9		172,9		-2,9
	Operating Profit		47,1		40,0		47,1		71,0		17,6		71,0
	EBITDA		61,6		54,2		13,7		97,0		115,4		-16,0
	Adjusted EBITDA		61,6		54,2		13,7		97,0		115,4		-16,0
	Adjusted EBITDA Margin	12,3%	9,2%			10,0%	10,6%
	Net Profit		31,6		-95,9		-133,0		4,7		-98,8		-104,7

Net Revenue

Consolidated net revenue has decreased 14.9% in the second quarter to BRL 498.9 million vs BRL 586.5 million in the second quarter of 2022. Such decrease occurred due to a significant decrease in EMEA region, where we have found a more challenging macroeconomic scenario (Ukraine War, energy crisis, and earthquake in Turkey). The Net Revenue in South America advanced consistently with strategies taken in these regions of maintenance the margin levels and focus on our key accounts and our service provision through Life Cycle and 3L (Equipment rents). In North America, we had a growth of 19% in relation to the same period of 2022 because of the orders that was postponed to the second quarter as commented in the prior quarter. Highlight for the growth of 21.6% in the operation of services in North America.

Net Revenue 2023

(BRL million)

South America

North and Central America

Europe, Middle East, and

Africa

TOTAL

2Q23	2Q22

216.9 206.4

89.7 75.4

192.3 304.7

498.9 586.5

%

Excha

nge Rate

5.0

19.0

(36.9)

(14.9)

1S23

399.8

159.5

410.5

969.8

1S22

403.6

153.6

532.1

1,089.3

%

Exchan ge Rate

(0.9)

3.8

(22.9)

(11.0)

South America

The sales in the 2Q23 reached BRL 216.9 million (an increase of 5% in relation to the 2Q22).

The services continued with the consistent growth standard (3.6% 2Q23 vs 2Q22), and the participation increased to 24.4% in the total of revenues of the 2nd quarter 2023, basically through the achievement of new clients and the extension of services/areas serving our current clients, showing the strength of this business line of our Company (Life-Cycle + Begur + 3L).

Central and North America

In the 2Q23, the region has shown a 19% increase of Revenues in relation to the 2Q22, basically due to the recovery of the postponed volume in the first quarter.

The services also had a significant impact in the 2Q23 of 21.6% in comparison with 2022 and already represent 10.4%

of the 2023 total invoicing, in line with the company's global strategy.

Europe, Middle East, and Africa (EMEA)

In the 2Q23, EMEA's sales had a decrease of 36.9% in comparison with the 2Q22 and reached BRL 192.3 million.

Russia/Ukraine conflict and the resulting threat of energy and commodities crisis has decidedly affected the markets served by our factories in the region. The strategy was focused on defending profitability and the creation of cash in an environment of suppressed demand.

Over the last 6 months of 2022, the invoicing decrease was 22.9%

Incomes or losses of the second quarter of 2023 - August 18, 2023

2

Incomes or losses of the second quarter of 2023

August 18, 2023

Gross Profit (BRL million) & Gross Margin

The gross profit in the second quarter of 2023 was BRL 90.9 million (18.2% of Gross Margin) vs BRL 77.3 million (13.2% of gross margin) in 2022. The operations in Americas had margins higher than 2022, 19.2% in South America and 10.1% in North America (16.5% and 6.4% in 2022, respectively) due to the focus on profitability already commented above and the strengthening of services to our clients. Our EMEA operation, which in the first quarter suffered a lot with the local increase of the workforce costs, energy costs, and exchanging impacts, could reasonably mitigate such impacts, and in the second quarter reached a margin increase of 8.2 p.p. (20.8% in 2023 vs 12.6% in 2022) and increased from BRL 1.7 million in our Gross Profit of the region, even with the loss of 25.2% in the volume sold in the quarter before the same period of 2022, showing the strength of our operation, employees and other stakeholders.

Operating Expenses (SG&A)

Sales, general and administrative expenses increased to BRL 58 million in the 2Q23 (+ 8.7% vs 2Q22). As a percentage of Sales, SG&A increased from 9.2% to 11.7% in 2Q23.

In EMEA, we had an increase of 9.3% vs 2Q22 mainly due to inflation over payroll and currency effect upon expenses. In addition, South America had an increment of 0.6 p.p. vs 2Q22 concerning constitution to expected credit losses.

EBITDA & EBITDA Margin

EBITDA of the second quarter had an increase of 12,6% to BRL 61.6 million (BRL 54.2 kin 2022). EBTIDA margin was 12.3% in the 2Q23 vs 9.2% in the 2Q22.

In South America, we had an increment of 2.5% in our EBTIDA in the second quarter of 2023 (BRL 30.1 in 2Q23 vs BRL 29.3 in 2Q22) and a decrease of 0.3 pp in EBTIDA margin, decreasing from 14.2% in 2022 to 13.9% in 2023.

In our operations in North America, we kept the recovery of income and losses and a consequence of the operating improvements and better gross margins, where we had a negative EBTIDA of BRL 0.8 million in 2022 (1.1% of EBTIDA Margin) for a positive income of BRL 4.8 million (5.3% of margin).

Our operations in EMEA had an EBITDA of BRL 25.5 (13% of Margin) vs BRL 21.6 (7.1% of Margin) in 2Q22.

In the year to date, our EBTIDA was BRL 97 MM (10% of Margin) vs BRL 115.4 MM (10.6% Margin) in 2022.

Reconciliation of EBITDA and Adjusted EBITDA

	EBITDA (BRL million)			1Q22			2Q22			3Q22			4Q22			1Q23			2Q23		2Q23
														vs 2Q22
	OPERATING INCOME OR LOSS	49,1	40,0	26,1	26,1	23,3		47,1	17,6%
	Depreciation and amortization	12,1	14,2	14,0	14,7	12,1			14,5	2,8%

EBITDA

61,3

54,2

40,1

31,6

35,4

61,6 13,7%

Other special expenses/revenues (i, ii,	0,0	0,0	0,0	49,0	0,0		0,0
iii and iv)
Adjusted EBITDA	61,3	54,2	40,1	80,6	35,4		61,6		13,7%

1. Expenses with the closure of operations in South America countries totalizing (BRL 2.9)
2. Restructuring in Mexico with the write-off of obsolete inventories (BRL 16.0) and recognition of losses with the closure of operations (GDP BRL 5.3)
3. Recognition of expenses and costs with the operational sale with the company Asset365 (BRL 17.7)
4. Costs with the closure of the Danish operation (BRL 7.0)

Incomes or losses of the second quarter of 2023 - August 18, 2023

3

Incomes or losses of the second quarter of 2023

August 18, 2023

Financial Income and Loss

Net Income and Loss of the 2Q23 was still negatively impacted by the high interest rates, especially in Brazil, and registered a financial expense of BRL 9.5 million in the 2Q23 vs BRL 128.5 million in the 2Q22.

			23/22			23/22
Financial Income and Loss (BRL million)	2Q23	2Q22	Exchange	1S23	1S22	Exchange
			Rate			Rate
Income and loss with financial investments	1,2	1,6	-24,8%	2,8	3,6	-21,2%
Variation in the value of bonds and securities	0,0	0,0	n/a	2,8	0,0	0,0%
Other financial revenues	-0,2	0,3	-164,2%	1,1	0,9	24,4%
Interests and other revenues	1,0	1,9	-46,8%	6,7	4,5	49,3%
Interests with loans and loans	-61,0	-51,1	19,5%	-114,2	-60,9	87,6%
Variation in the value of securities	-3,9	-109,5	-96,4%	0,0	-121,1	n/a
Other financial expenses	-6,1	-7,9	-23,3%	-13,2	-46,3	-71,4%

Interests and other expenses	-71,0	-168,5	-57,8%		-127,5		-228,3	-44,2%
Income and loss with Hedge operations	0,0	-0,8	-100,0%		0,0		-5,3	-100,0%
Net exchange rate change	60,5	38,9	55,5%		58,5		57,8	1,2%

Net financial income and loss

-9,5-128,5

-92,6% -62,2-171,3

-63,7%

Net Profit/Loss

Net Profit in the 2Q23 was BRL 31.6 million in comparison with the Net Loss of BRL 95.9 million in the 2Q22. In the year to date, we had a profit of BRL 4.7 MM vs a loss of BRL 98.8 MM in 2022.

Working Capital

In the 2Q23, the working capital subtracted from financial assets and liabilities was BRL 598.7 million.

																				2Q23/		2Q23/
	Working Capital (BRL million)			2Q22			2Q22			3Q22			4Q22			1Q23			2Q23	2Q22		2Q22
													Exchange		Exchange
																				Rate		Rate
	A) Current asset (less financial assets):	1055,8		1204,9	1156,0	985,3	1121,8		1094,4	-110,5		109,1
	Accounts receivable from clients	430,1		540,4		513,2	431,2	515,0			45,3		154,5
				585,7
	Stock	460,9		492,0	467,3	397,3	399,8		366,0	-126,0		-31,3
	Others	164,8	172,5	175,5	156,7	207,1		142,7	-29,8	-14,0
	B) Current liability (less financial liabilities)	642,7		642,3	472,6	440,3	493,9		495,7	-146,6		55,4
	Accounts payable to suppliers and Drawee Risk	488,8		483,2	319,6	279,8	342,9		347,7	-135,5		67,9
	Others	153,9		159,1	153,0	160,5		151,0		148,0	-11,1		-12,5

Working Capital (A-B)	413,1	562,6	683,4	545,0	627,9
Days of receivables	65	70	96	68	81
Stock days	102	87	123	86	91
Days of suppliers	108	85	84	60	78

598,7 36,1 53,7

92 22 24

81 -6-5

77 -9 16

Cash Cycle

59

72

135

93

94

96 24 3

Incomes or losses of the second quarter of 2023 - August 18, 2023

4

Incomes or losses of the second quarter of 2023

August 18, 2023

Fixed assets

Fixed Asset

In the 2Q23, the net fixed asset was BRL 290.1 million (vs BRL 294.4 million in the 4Q22), which increase may be explained specially by the investments carried out in our plant in Turkey and Brazil.

Intangible assets

The total intangible asset of BRL 146.6 million in the 2Q23 (vs BRL 149.7 million in the 4Q22), which deduction may be explained by the amortizations in the quarter.

Fixed Asset (BRL

million)

Fixed

Intangible

Total

1Q22

253,2

157,2

410,3

2Q22 3Q22 4Q22 1Q23 2Q23

284,9 293,2 294,4 296,7 290,1

158,5	156,8	149,7	147,9	146,6

443,4 450,0 444,1 444,6 436,7

2Q23/

2Q22

Exchange

Rate

+5,2

-11,9

-6,7

Capitalization and Liquidity

In the 2Q23, the cash and cash equivalents were BRL 154.7 million, and the Gross Debt was BRL 1,505.3 million. We had in the semester a decrease of BRL 56.7 million of the net debt.

						2T23/	2T23/
Liquidity Indicators (BRL million)	2Q22	3Q22	4Q22	1T23	2Q23	2T22	4T22
Exchange	Exchange
						Rate	Rate

Cash and cash equivalents, bonds, and	198,0	201,1	211,4	148,3		154,7		-43,3	-56,7
securities
Short-term debt (CP)	1189,5	1359,4	1309,8	1367,8		1341,5		152,1	31,7
Long-term debt (LP)	239,1	225,1	195,4	181,1		163,8		-75,3	-31,6
Debt in USD	46,1	46,1	107,7	97,7		99,1		53,0	-8,6
Debt in BRL	728,7	728,7	899,1	900,1		931,4		202,7	32,0
Debt in EUR	473,7	473,7	319,8	383,4		295,2		-178,5	-24,6
Debt in TRY	165,5	165,5	152,6	152,6		148,2		-17,3	-4,4
16,0	16,0	10,5	10,5				-5,5	0,0
Debt in MXN		10,5
Debt in other currencies	0,0	8,4	15,6	5,6		20,9		20,9	-5,3
Gross Debt	1.428,5	1.584,5	1.505,2	1.548,9		1.505,3		76,8	0,1
Net Cash / (Net Debt)	-1230,5	-1383,4	-1293,9	-1400,6		-1350,6		-120,0	-56,7
Equity	-231,8	-264,3	-334,2	-356,8		-340,2		-108,4	-6,0
Cash and Cash Equivalent / CP Debt	0,2x	0,1x	0,2x	0,1x		0,1x		n/a	n/a
CP Debt / (CP + LP)	83,3%	85,8%	87,0%	88,3%		89,1%		n/a	n/a
Net Cash (Net Debt) / PL	5,3x	5,2x	3,9x	3,9x		4x		n/a	n/a
Net Debt / (Net Debt + PL)	123,2%	123,6%	134,8%	134,2%		133,7%		n/a	n/a

Equity

The equity in the 2Q23 was negative in BRL 340.2 million vs 4Q22 of BRL 334.2.

Incomes or losses of the second quarter of 2023 - August 18, 2023

5