Panariagroup Industrie Ceramiche S p A : Press release of 13/11/2020- h.16.00 - The Board of Directors approves the Consolidated Quarterly Report as of 31st September 2020.

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PRESS RELEASE

IMPROVEMENT IN NET FINANCIAL POSITIVON AND GROSS OPERATING MARGINS DESPITE THE COVID-19 EMERGENCY

PANARIAGROUP Industrie Ceramiche S.p.A : the Board of Directors approves the Draft Financial Statements at 30th September 2020.

In the first 9 months of 2020, despite the Covid-19 emergency, there is an improvement in Gross Operating Margin (+1.8 Euro million) and Net Financial Position (-25.1 Euro million).

In the third Quarter 2020, even more marked the positive difference on 2019 results, with an increase in Revenues of 3.3 Euro million and in Gross Operating Margin (+3.4 Euro million).

• Consolidated net revenues came to Euro 269.8 million, with a decrease of 7.6% on September 2019.
• Gross Operating Margin came to Euro 27.7 million (Euro 25.9 million at 30th September 2019), with an increase of 6.9% on the previous year.
• The Consolidated net result was negative for Euro 7.5 million, after an Impairment of asset equal to Euro 6.5 million (negative for Euro 1.8 million at 30th September 2019).
• Financial Indebtness before-IFRS16 amounted to 92.5 Euro million (111.5 Euro million at soth September 2019).

The Board of Directors of Panariagroup Industrie Ceramiche S.p.a, Group specialized in the production and distribution of ceramic material for high-end and luxury floor and wall coverings, today approved the Financial Statements at 30 September 2020, drafted in accordance with International Financial Reporting Standards (IFRS).

The Group's results were significantly affected by the impact of the worldwide spread of the Covid-19 virus, which caused a marked slowdown in the economy in general, and consequently also in our reference sector.

The trend in revenues in 2020, instead of following the usual seasonal pattern, closely followed the various phases of the virus' evolution, which had a limited impact in the first quarter, caused a negative shock in the second quarter and then saw its effects ease in the third.

In particular, in our Group we observed, in the same period of the previous year, a 4% decrease in revenues (Euro -3.9 million) in the first quarter, a 20% decrease (Euro -21.7 million) in the second quarter and a reversal of the trend in the third quarter with growth of approximately 4% (Euro +3.4 million), with an overall effect of - 7.6% (Euro -22.2 million).

In this context, so difficult to interpret and manage, the Group was able to contain the negative economic effects, obtaining, in the first 9 months of 2020, an improvement in EBITDA, both in absolute terms (Euro +1.8 million) and in relative terms, with GOP as a percentage of Production Value increasing from 8.5% to 10.6%.

In the third quarter, the improvement in operating margin is even more marked: EBITDA increased from Euro 5.1 million to Euro 8.5 million, an increase of Euro 3.4 million.

The achievement of improved operating profit margins, in a complex situation such as the current one, is to be considered a very important result, and is the result of the incisive actions implemented by the Group, both for the structural increase in profitability and to tackle the sudden impact of the pandemic on turnover.

On the financial side, Panariagroup has operated with two main objectives: the improvement of the Net Financial Position level and the restructuring of the medium/long-term financial debt with the aim of maintaining considerable room on the short-term facilities

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This targets have been efficiently managed with significant results in term on Net Financial Position; the improvement on NFP ante-IFRS 16 equal to Euro 19.1 million is even higher on Net Financial Position including IFRS 16 effects (Euro 25.1 million).

In addition to the significant reduction in financial indebtedness, the Group has significantly extended the average duration of its loans, thanks to the execution of new medium/long-term transactions during the year for Euro 36 million and the obtainment of Covid moratoria which allowed the shifting of Euro 20.6 million originally due in 2020 to subsequent years.

Thanks to the combined effect of the reduction in the Net Financial Position, the restructuring of medium/long- term debt and the obtainment of new loans, the balance of cash and cash equivalents as at 30 September 2020 was a credit balance of Euro 33.3 million.

CONSOLIDATED FINANCIAL HIGHLIGHTS (thousand euros)

Nature	09/30/2020		09/30/2019		var. €
Revenues from sales and services		269,839		292,041	(22,202)
Value of Production		260,654		303,249	(42,595)
Gross Operating Profit		27,687		25,909	1,778
Net Operating Profit		(6,917)		139	(7,056)
Consolidated Net Profit		(7,494)		(1,799)	(5,695)

"The results of the Third Quarter 2020 - said Emilio Mussini, Chairman of Panariagroup - allowed us to absorb and successfully overcome a great part of the Covid-19 impact suffered in the months of March, April and May. Starting from June, we ever overcame the revenues of 2019 and decreased constantly the financial debt."

"The Company was able to react in a flexible and fast way to the crisis - continued Mussini - modifying some management policies and with effective choices in term of optimisation and planning. The results are already evident in the improvement of the Gross Operating Margin, with an increase of 7% in respect with September 2019. In addition, the Group operated in order to increase the financial strength, an essential element to face this uncertainty moment and to look forward to the post-Covid phase with ambitious industrial and commercial development programs."

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Consolidated Revenues

Consolidated Revenues decreased by Euro 22.2 million compared to 30 September 2019, with a reduction of 7.6%.

The turnover of the Group's foreign markets is equal to 83% of the total, with the share of non-Europeanmarkets equal to 45 % of total turnover.

The current situation has highlighted the strategic value of Panariagroup's structure even more, which is geographically diversified, both from a commercial and distribution point of view and from a logistical and productive one.

In the main business area following trends are reported:

EUROPE - Turnover in European markets fell by 4.6% overall compared with 2019, with a solid recovery in the third quarter (+7.2% compared with the same period last year).

The drop in sales mainly concerned the countries most affected by the epidemic, such as Spain, France and the United Kingdom, with decreases of between 15% and 30%; the Eastern Europe area also fell (-14%). On the other hand, the growing results achieved in some of the Group's main markets, such as Germany, Austria and Switzerland, should be viewed positively.

The share of the European markets on total revenues was 38%.

USA - Turnover in the US market was down 1.7%, with an improved performance in the third quarter (+2.2% compared with the same period last year).

Despite the difficult environment, our American BU was able to continue its development plan on new distribution channels with excellent results; this allowed us to almost completely offset the negative effects that the pandemic had on the performance of the most consolidated sales channels.

The share of the US market on total revenues was 36%.

ITALY - The Italian market, which dropped 15% (decrease of 16.3% for the sector), was definitely among the sectors hit hardest by the spread of the virus, also due to the lock-down that concerned the commercial activities of our industry for an extremely long period of time, with a dramatic impact in March, April and May. After a fall of 27% in the first half of the year, there was an excellent recovery in the third quarter (+17% on the same period of the previous year).

The share of the Italian market on total revenues was 17%.

ASIA, CANADA, SOUTH AMERICA, OCEANIA AND AFRICA - the Group also suffered a decrease in turnover linked to the pandemic; the overall decrease of 20% is, however, an improvement compared to the figure for the first half of the year, when there was a reduction of 27%.

The main difficulties were encountered in Asia, particularly in the Far East; in this area, the third quarter did not show a positive "rebound" as in Europe, but a substantial alignment with 2019.

The share of the "other markets" on total revenues was 9%.

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OPERATING RESULTS

EBITDA came to Euro 27.7 million, equal to 10.6% of Production Value (Euro 25.9 million at 30 September 2019, equal to 8.5%

The improvement in operating margins is a hugely significant result, given the considerable decrease in turnover and the notable reduction in production in the 9 months of 2020.

The decrease in revenues compared with the previous year (-7.6%), caused entirely by external factors, had a significant negative impact on the Group's operating results, but the impact on operating margins stemming from the decrease in production (-15.8%) compared with the same period last year was equally significant.

In view of these negative premises, which concern the backbone of the business, the Group has implemented all possible actions to offset their effects, with a recovery of profitability in other aspects of business management.

In this regard, it should be noted, first of all, that during 2019 a series of important activities had already been implemented in all the Group's Business Units and in all business segments, aimed at recovering profitability; after a two-year period below expectations, the expected results were achieved in 2020.

The development of these initiatives was accompanied by an extraordinary activity related to the Covid-19 emergency, determined by the need to promptly and incisively tackle the negative economic impacts that the spread of the pandemic has generated.

In 2020, the Group was also able to benefit from the significant reduction in gas and electricity tariffs, whose significant growth was one of the main causes that had affected the economic results of the previous two years.

The Net Operating Margin was a negative Euro 6.9 million (positive Euro 0.1 million at 30 September 2019).

This intermediate result is strongly influenced by the impairment of Asset of Euro 6.5 million, already accounted in the Half-Year Statement, as result of the Impairment Test performed in accordance with IFRS principles; this allowance, merely done for accounting purposes, has to be considered as non-recurring.

Amortisation/depreciation, including therein that deriving from rights of use, rose slightly compared with 2019; it should be noted that despite the prolonged down-time imposed by the lock-downs, amortisation/depreciation were calculated in their entirety, according to the international accounting standards.

Financial expenses increased by Euro 1.2 million, mainly due to the trend in the USD/EUR exchange rate; while in 2020 we recorded an exchange rate loss of Euro 0,5 million, in 2019 we recorded an exchange rate gain of Euro 0.5 million.

The consolidated net result was a loss of Euro 7.5 million (loss of Euro 1.8 million as at 30 September 2019).