Reno De Medici S p A : The Board of Directors approves the 2020 Consolidated Financial Statements and the Draft Financial Statements of the Parent Company

Press release

The Board of Directors approves the 2020 Consolidated Financial Statements and the Draft Financial

Statements of the Parent Company

RDM GROUP'S EBITDA AT €83.8 MILLION

NET PROFIT MORE THAN DOUBLED TO €33.6 MILLION

PROPOSED A 1.4 EURO CENT DIVIDEND PER ORDINARY SHARE

• • CONSOLIDATED NET SALES AT €679.5 MILLION, DOWN 3.2% COMPARED WITH €701.6 MILLION AT DECEMBER 31, 2019.

• • CONSOLIDATED EBITDA AT €83.8 MILLION, UP 15.8% COMPARED WITH €72.4 MILLION AT DECEMBER 31, 2019.

• • CONSOLIDATED EBIT AT €47 MILLION, UP 54.4% COMPARED WITH €30.4 MILLION AT DECEMBER 31, 2019.

• • CONSOLIDATED NET PROFIT AT €33.6 MILLION, UP 115.1% COMPARED WITH €15.6 MILLION AT DECEMBER 31, 2019.

• • NET FINANCIAL DEBT DOWN TO €8.9 MILLION (€52 MILLION AT DECEMBER 31, 2019).

• • NET RESULT OF RENO DE MEDICI S.P.A. AT €22.7 MILLION (+42.7% COMPARED TO 31 DECEMBER 2019). PROPOSED A DIVIDEND OF €0.014 PER ORDINARY SHARE AND €0.0245 PER SAVINGS SHARE

Milan, March 19, 2021 - The Board of Directors of Reno De Medici S.p.A. examined and approved the Consolidated and Draft Financial Statements of the Parent Company for the year ending as of December 31, 2020, to be submitted to the Ordinary Shareholders' Meeting on 29 April 2021.

Michele Bianchi, CEO of the RDM Group, commented:

"Given the strong cash generation of 2020, the Board of Directors has proposed to the Ordinary Shareholders' Meeting the increase by 75% of the dividend per ordinary share from 0.8 eurocents in 2019 to 1.4 eurocents in 2020".

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Group's performance at December 31, 2020

In 2020, the market demand trend was favorable, more moderate in the WLC segment and more marked in the FBB segment. The RDM Group was able to take advantage of this trend by leveraging the essential nature of its products, mainly targeted to the agri-food and pharmaceutical sectors. Overall, the Group's volumes remained stable due to the reduced production at both the Ovaro plant, attributable to the weaker demand in the non-food and graphical applications sectors, and the Villa Santa Lucia plant, for causes not under the control of the Group. The decrease in Consolidated Net Sales (-3.2%) was therefore the result of stable volumes and lower selling prices than those applied in 2019. EBITDA margin amounted to 12.3% at the end of December 2020, up compared with 10.3% for 2019, thanks to favorable input costs, which prices for both recycled and virgin fibers, as well as energy, were lower compared with 2019. The increase in EBITDA margin generated a significant growth in the Group's Net Profit (+115.1%), thanks to lower write-downs and net financial expense, which fully offset higher taxes.

Group's performance in the WLC segment at December 31, 2020

The RDM Group's core business, WLC (White Lined Chipboard segment - coated paperboard for packaging based on recycled fibers) accounted for 83% of consolidated sales. In the second half of 2019, market demand entered in a positive trend that gained momentum in early 2020 and was supported, at the beginning of the Covid-19 pandemic, by increased demand for food packaging and concerns among packaging manufacturers of future shortages in the cartonboard supply chain. In the second half of 2020, this trend was partially reversed as several clients implemented destocking strategies for the inventories built up in previous months. Overall, in 2020 market demand in terms of volumes was in line with 2019 (-0.1%).

Within this environment, the volumes sold by RDM at the end of December 2020 were in line with the same period of 2019 (-0.1%). As already discussed in previous Reports, cartonboard production continued despite the Covid-19 pandemic, as it is an essential component of various types of packaging, primarily in the agri-food and pharmaceutical sectors, which represent the main end market for RDM's products. By contrast, demand declined in the non-food and graphical applications sectors, resulting in the need to plan stoppages at the Ovaro plant in the first half of the year, followed by a moderate recovery in the second half of 2020. In addition, the performance in terms of volumes was also affected by the halt at the Villa Santa Lucia plant in the first quarter, following the seizure of Cosilam Consortium's wastewater treatment plant by the competent judicial authority.

Turning to the main production factors, in 2020 the cost of paper for recycling were overall lower than those for the previous year. In the reporting year, the cost opened the period at the lowest levels reached in late 2019 to then suddenly increase in April and May, as a result of the reduced supply due to the measures implemented by various countries to contain the spread of the Covid-19 pandemic. In the second half of the year, the trend reversed its course following the increase of recycled paper supply linked to the reopening of many industrial and commercial businesses. The fourth quarter was marked by a further upward trend of the cost of paper for recycling, due to the increasing demand in the containerboard driven by the growth of e-commerce.

At the level of energy costs, in 2020 RDM continued to reap the greater benefits of its forward purchasing policy and recorded lower energy costs compared with the same period of 2019.

The selling prices of the RDM Group in 2020 were lower than those charged in the same period of 2019, as a result of the downtrend which began in the second half of 2019 and the low cost of raw materials. The decrease in Consolidated Net Sales reflects the Group's lower selling prices.

Group's performance in the FBB segment at December 31, 2020

The FBB segment (Folding Box Board - cartonboard for folding boxboard based on virgin fibers) accounted for 17% of RDM's consolidated sales. With regard to this segment, in the fourth quarter of 2020 demand continued the uptrend that began in previous quarters, with volumes up +5% at the end of December 2020 compared with the same period of 2019.

Virgin pulp costs remained lower than in the same period of 2019, confirming the downward trend that had emerged in the second half of 2018 and essentially stabilized in 2020.

In 2020, energy cost decreased compared with 2019.

In the context of steady robust demand, the French subsidiary R.D.M. La Rochette S.A.S. outperformed the market, increasing by 8.3% the tons sold in 2020 compared with 2019. The volume increase offset the decline in selling prices compared with 2019 and, together with the favorable price trend of virgin fibers and energy, led to the increase of the FBB segment's contribution to the Group's EBITDA. In fact, the French subsidiary's EBITDA margin (8.9%) exceeded its historical average, albeit remaining below the EBITDA margin reached in the RDM Group's core business.

A put option agreement for the sale of 100% of La Rochette's share capital was signed on February 16, 2021. The Consolidated operating profit (EBIT) at December 31, 2020 therefore included a €3.7 million write-down arising from the transaction. For further information, reference should be made to the press release published by Reno De Medici S.p.A. on February 16, 2021.

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Given such a positive context in terms of demand and evolution of the main production factors, the Group's EBITDA margin accelerated, fueled by several efficiency and integration programs launched by RDM at the beginning of 2017. Overall EBITDA margin stood at 12.3% at the end of 2020 compared with 10.3% for 2019.

The Group's Net Profit, which amounted to €33.6 million, grew compared with €15.6 million at December 31, 2019 (+115.1%). It reflects the positive EBITDA performance (+€11.5 million) and lower financial expense (€4.1 million) that fully offset higher taxes (€2.8 million). The increase in net profit was also attributable to the decline in write-downs (€5.1 million). In detail, the 2019 result had included some write-downs for a total amount of €10.3 million, of which €9.5 million regarding the fixed assets of R.D.M. La Rochette S.A.S., whereas 2020 included €5.2 million write-downs, of which €3.7 million arising from the put option agreement regarding R.D.M. La Rochette S.A.S. and €1.5 million from the sale of the land located in Boffalora Sopra Ticino (former Magenta paper mill) by notarial deed on February 11, 2021.

Main consolidated Income Statement figures at December 31, 2020:

Consolidated Net Sales amounted to €679.5 million compared with €701.6 million for the previous year. The €22.1 million decline compared with the previous year was mainly attributable to the decrease in average selling prices. Tons sold by the RDM Group at December 31, 2020 reached 1,184 thousand units compared with 1,174 thousand units in 2019.

In terms of geographical markets, the pro-rata contribution of sales was in line with December 31, 2019. Europe continued to represent the RDM Group's core market, accounting for 57% in both reporting years (€386.7 million in 2020 compared with €401.2 million in 2019). Italian sales accounted for 30% (€202 million) compared with 29% (€203.2 million) at December 31, 2019. Sales to the rest of the world stood at 13% (€90.8 million) compared with 14% (€97.2 million) in 2019.

The cost for raw materials and services amounted to €484.5 million, down €48.9 million compared with the previous year (€533.4 million). This item benefited from the positive trend reported by both recycled and virgin fibers and energy sources, in particular natural gas which represents the RDM Group's main component.

Personnel costs amounted to €108 million, up €3.9 million compared with 2019 (€104.1 million). This change was attributable to the contractual increases, the productivity improvement, as well as the accrual in the period of the 2020-2022 incentive plans for top management based on performance phantom shares and stock grants.

At December 31, 2020, Gross Operating Profit (EBITDA) stood at €83.8 million compared with €72.4 million for the same period of 2019 (+15.8%). The Group's EBITDA margin was 12.3%, up compared with 10.3% for 2019.

Consolidated operating profit (EBIT) amounted to €47 million, up (+54.4%) compared with €30.4 million at the end of December 2019. As described above, this item benefited from lower write-downs for €5.1 million.

The Group's Net Profit, which amounted to €33.6 million, grew compared with €15.6 million at December 31, 2019 (+115.1%). It reflects the positive EBITDA (+€11.5 million), lower write-downs (€5.1 million) and lower financial expense (€4.1 million), that fully offset higher taxes (€2.8 million).

Consolidated Net Financial Debt at December 31, 2020 amounted to €8.9 million, down €43.2 million compared with €52 million at December 31, 2019. The decline in this item was essentially due to the high EBITDA recorded and slightly to the decrease in working capital following the reduction in inventories, mainly of finished products. Signing new lease contracts under the purposes of IFRS 16 had a negative impact of about €3 million. In 2020, cash flows were impacted very marginally by non-payment or deferred payment by customers as a result of the Covid-19 emergency. Among financial transactions, worth of notice are the payment of dividends (€3 million) and the purchase of Friulia S.p.A.'s stake in R.D.M. Ovaro S.p.A. (€0.7 million).

In 2020, the Group's capital expenditure amounted to €21.9 million, compared with €29.8 million in 2019. With respect to the same period of the previous year, capital expenditure was impacted, and therefore slowed down, by the Covid-19 emergency due to the restricted mobility. Major investments included pulp preparation and gas turbine at the Villa Santa Lucia mill, and the first step for the Santa Giustina's boiler. On November 1, 2020, the new ERP system was launched at the Ovaro plant, whereas its implementation among the other Group companies has been continuing.