Sabaf S p A : Results at 30 June 2023 were approved

PRESS RELEASE

Ospitaletto (BS), 5 September 2023

SABAF: RESULTS AT 30 JUNE 2023 WERE APPROVED

• CONSOLIDATED RESULTS FOR THE FIRST HALF OF 20231

adj REVENUE: €114.9 million (€107.7 million in H2 2022 +6.7%; €144.2 million in H1 2022 -20.3%)

REVENUE: €109 million (€107.4 million in H2 2022 +1.5%; €145.7 million in H1 2022 -25.2%)

adj EBITDA: €15.6 million (€11.3 million in H2 2022 +38.1%; €25 million in H1 2022 -37.7%)

EBITDA: €11.4 million (€13.2 million in H2 2022 -13.6%;€ 26.9 million in H1 2022 -57.5%)

adj EBITDA/REVENUE: 13.6% (10.5% in H2 2022 and 17.4% in H1 2022)

EBITDA/REVENUE: 10.5% (12.3% in H2 2022 and 18.5% in H1 2022)

adj EBIT: €7.1 million (€2.9 million in H2 2022 +152%; €17 million in H1 2022 -58.3%)

EBIT: €1.9 million (€3.8 million in H2 2022 -51.7%;€18 million in H1 2022 -89.7%)

adj NET PROFIT: €3.2 million (€7.3 million in H2 2022; €14.8 million in H1 2022)

NET PROFIT: €-1.4million (€2.2 million in H2 2022; €13 million in H1 2022)

GENERATED FREE CASH FLOW €13.2 million

NET FINANCIAL DEBT AT 30 JUNE 2023: €73.8 million

(€84.4 million at 31 December 2022, €94.8 million at 30 June 2022)

CONSOLIDATED RESULTS FOR Q2 2023

adj REVENUE: €56.8 million (€58.1 million in Q1 2023 -2.3%;€73.4 million in Q2 2022 -22.6%)

REVENUE: €50.9 million (€58.1 million in Q1 2023 -12.3%;€74.8 million in Q2 2022 -32%)

adj EBITDA: €8.5 million (€7.1 million in Q1 2023 +18.6%; €12 million in Q2 2022 -29.2%)

EBITDA: €4.9 million (€6.5 million in Q1 2023 -25.2%;€13.9 million in Q2 2022 -64.8%)

adj EBITDA/REVENUE: 14.9% (12.3% in Q1 2023 and 16.3% in Q2 2022)

EBITDA/REVENUE: 9.6% (11.2% in Q1 2023 and 18.5% in Q2 2022)

adj EBIT: €4.2 million (€2.9 million in Q1 2023 +47.3%; €7.9 million in Q2 2022 -46.2%)

EBIT: €0.4 million (€1.5 million in Q1 2023 -76.1%;€9 million in Q2 2022 -96.0%)

adj NET PROFIT: €1.8 million (€1.4 million in Q1 2023; €7.2 million in Q2 2022)

NET PROFIT: €-0.6million (€-0.8 million in Q1 2023; €5.6 million in Q2 2022)

1 The normalised consolidated economic results (adj) exclude the impact of the application of IAS 29 (Financial Reporting in Hyperinflationary Economies) and the start-up costs of Sabaf India, Sabaf Mexico and the Induction division. This representation allows a better understanding of the Group's performance and of its comparison with previous periods.

Pietro Iotti, Chief Executive Officer of Sabaf, commented:

"Sabaf improved its operating profitability for the third consecutive quarter in a market still characterised by weak demand. In the first half of the year, a positive free cash flow of €13.2 million was generated, although investments of €11.5 million were incurred.

The difficult economic situation did not slow down the implementation of our strategy to strengthen the competitive position and ensure sustainable growth in the medium to long term. We undertook four main actions: the acquisition of the US company Mansfield Engineered Components LLC (MEC), which not only increased our penetration of the US market but also the diversification our product range; the progress of the induction cooking development project; and the start of operation of our new factories in India and Mexico, which will bring us closer to our main customers; the strong technical and commercial integration of all Group entities.

In the second half of the year, we expect a significant growth in turnover and a further improvement in profitability as a result of these projects and the measures taken to make the cost structure more efficient".

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The Board of Directors of Sabaf S.p.A. met today in Ospitaletto to approve the Half-Yearly Report at 30 June 2023.

It should be noted that as from April 2022, Turkey - the country where Sabaf has production plants - is considered to be a "hyperinflationary" economy according to the criteria set out in "IAS 29 - Financial Reporting in Hyperinflationary Economies". The press release commented on the normalised consolidated economic results excluding the impact of the application of IAS 29. The normalised economic results exclude also the start-up costs of Sabaf India, Sabaf Mexico and the Induction division. This representation allows a better understanding of the Group's performance and a more accurate comparison with previous periods.

Consolidated results for the first half of 2023

		Sequential							YoY
Half-year results	H1 2023		H2 2022		∆%			H1 2023		H1 2022		∆%			12M 2022
Sales revenue	108,962	107,369				108,962	145,684				253,053
Hyperinflation - Turkey	5,983	376				5,983	(1,467)				(1,091)
Normalised sales revenue	114,945		107,745		+6.7%			114,945		144,217		-20.3%			251,962
EBITDA	11,414	13,206				11,414	26,886				40,092
EBTIDA %	10.5	12.3				10.5	18.5				15.8
Start-up costs	1,154	438				1,154	266				704
Hyperinflation - Turkey	3,029	(2,348)				3,029	(2,121)				(4,469)
Normalised EBITDA	15,597		11,296		+38.1%			15,597		25,031		-37.7%			36,327
Normalised EBITDA%	13.6		10.5					13.6		17.4					14.4
EBIT	1,855	3,842				1,855	18,045				21,887
EBIT %	1.7	3.6				1.7	12.4				8.6
Start-up costs	1,466	509				1,466	311				820
Hyperinflation - Turkey	3,795	(1,527)				3,795	(1,311)				(2,838)
Normalised EBIT	7,116		2,824		+152%			7,116		17,045		-58.3%			19,869
Normalised EBIT%	6.2		2.6					6.2		11.8					7.9
Net result	(1,422)	2,241				(1,422)	13,008				15,249
Net result %	-1.3	2.1				-1.3	8.9				6.0
Start-up costs	1,373	457				1,373	298				756
Hyperinflation - Turkey	3,286	4,624				3,286	1,453				6,077
Normalised net result	3,237		7,322		-55.8%			3,237		14,759		-78.1%			22,082
Normalised net result %	2.8		6.8					2.8		10.2					8.8

In the first half of 2023, the Sabaf Group achieved normalised sales revenue of €114.9 million, up 6.7% compared to €107.7 million in the second half of 2022 (-20.3% compared to €144.2 million in the first half of 2022; -22.8% on a like-for-like basis).

The global market for household appliances continues to experience the economic weakness that has been evident since the second half of 2022. Sales in the first half of 2023 still show a recovery compared to the figure at the end of 2022, also due to the gradual reduction of destocking.

Normalised EBITDA for the first half of 2023 was €15.6 million, or 13.6% of sales and up by 38.1% compared to the figure of €11.3 million (10.5%) in the second half of 2022 (€25 million in the first half of 2022, 17.4%). The result benefited from the measures taken to manage operations more efficiently and from lower energy and raw material costs compared to the previous half-year. However, the still lower than normal levels of activity did not allow a return to the usual levels of profitability.

Normalised EBIT was €7.1 million (6.2%), up 152% compared to €2.8 million (2.6%) in the second half of 2022 (€17 million in the first half of 2022, 11.8%).

Normalised net profit for the period was €3.2 million (€7.3 million in the second half of 2022 - when positive income taxes of €5.8 million were recognised - and €14.8 million in the first half of 2022).

Consolidated results for Q2 2023

		Sequential							YoY
Quarterly results	Q2 2023		Q1 2023		∆%			Q2 2023		Q2 2022		∆%			12M 2022
Sales revenue	50,899	58,063				50,899	74,832				253,053
Hyperinflation - Turkey	5,899		84					5,899	(1,467)				(1,091)
Normalised sales revenue	56,798		58,147		-2.3%			56,798		73,365		-22.6%			251,962
EBITDA	4,885	6,529				4,885	13,862				40,092
EBTIDA %	9.6	11.2				9.6	18.5				15.8
Start-up costs	800	354				800	210				704
Hyperinflation - Turkey	2,778	251				2,778	(2,121)				(4,469)
Normalised EBITDA	8,463		7,134		+18.6%			8,463		11,951		-29.2%			36,327
Normalised EBITDA%	14.9		12.3					14.9		16.3					14.4
EBIT	358	1,497				358	8,960				21,887
EBIT %	0.7	2.6				0.7	12.0				8.6
Start-up costs	983	483				983	232				820
Hyperinflation - Turkey	2,897	898				2,897	(1,311)				(2,838)
Normalised EBIT	4,238		2,878		+47.3%			4,238		7,881		-46.2%			19,869
Normalised EBIT%	7.5		4.9					7.5		10.7					7.9
Net result	(631)	(791)				(631)	5,554				15,249
Net result %	-1.2	-1.4				-1.2	7.4				6.0
Start-up costs	936	438				936	225				756
Hyperinflation - Turkey	1,517	1,769				1,517	1,453				6,077
Normalised net result	1,822		1,416		+28.7%			1,822		7,232		-74.8%			22,082
Normalised net result %	3.2		2.4					3.2		9.9					8.8

In the second quarter, the Group recorded normalised sales of €56.8 million, down by 2.3% compared to the first quarter of 2023 (-22.6% compared to €73.4 million in the second quarter of 2022).

Normalised EBITDA for the second quarter was €8.5 million, or 14.9% of turnover and up by 18.6% compared to the figure of €7.1 million (12.3%) in the first quarter of 2023 (€12 million in the second quarter of 2022, 16.3%).

Normalised EBIT was €4.2 million (7.5%), up 47.3% compared to €2.9 million in the first quarter of 2023 (4.9%) (€7.9 million in the second quarter of 2022, 10.7%).

Normalised net profit for the period was €1.8 million (€1.4 million in the first quarter of 2023 and €7.2 million in the second quarter of 2022).

Balance sheet, cash flows and financial debt at 30 June 2023

	(€/000)	30/06/2023		31/12/2022	30/06/2022
	Non-current assets	166,788		171,276	154,593
	Short-term assets2	124,256		134,709	173,159
	Short-term liabilities3	(63,810)		(55,329)	(70,517)
	Net working capital4	60,446		79,380	102,642
	Provisions for risks and charges, post-employment benefits, deferred	(9,087)		(10,128)	(8,982)
	taxes
	Net invested capital	218,147		240,528	248,253
	Short-term net financial position	7,757		(6,030)	(17,858)
	Medium/long-term net financial position	(81,588)		(78,336)	(76,935)
	Net financial debt	(73,831)		(84,366)	(94,793)
	Shareholders' equity	144,316		156,162	153,460
	(€/000)	30/06/2023		31/12/2022	30/06/2022
	Cash and cash equivalents at beginning of period	20,923		43,649	43,649
	Net profit/(loss) for the period	(1,422)		15,249	13,008
	Amortisation and adjustments to cost and revenue items	13,947		20,152	12,731
	Change in net working capital	10,840		(2,954)	(27,141)
	Other changes from operations	974		(8,154)	(6,807)
	Cash flows from operations	24,339		24,293	(8,209)
	Cash flows from investment activities (net of disposals)	(11,127)		(20,856)	(11,018)
	Free cash flow	13,212		3,437	(19,227)
	Change in financial assets and liabilities	(6,261)		(8,334)	(4,314)
	Buy-back of shares	(462)		(1,862)	(1,189)
	Payment of dividends	-		(6,690)	(6,690)
	Cash flows from financing activities	(6,723)		(16,886)	(12,193)
	Changes in the scope of consolidation	(783)		(5,045)	(97)
	Foreign exchange differences	776		(4,232)	211
	Net cash flows for the period	6,482		(22,726)	(31,306)
	Cash and cash equivalents at end of period	27,405		20,923	12,343

In the first half of 2023, operations generated cash flows of €24.3 million, partly due to the significant reduction in working capital.

Net investments for the half-year came to €11.1 million (11 million in the first half of 2022 and €20.9 million for the whole of 2022), with the largest share going to the new Mexican plant, where the production of burners was recently started.

1. Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
2. Sum of Trade payables, Tax payables and Other liabilities
3. Difference between short-term assets and short-term liabilities

Generated free cash flow in the first half of 2023 is positive for €13.2 million (€3.4 million in the whole of 2022 and -€19.2 million in the first half of 2022).

At 30 June 2023, net financial debt was €73.8 million, of which €3.5 million related to operating leases and €0.8 million related to financial leases, all recognised in accordance with IFRS 16 (€84.4 million at 31 December 2022 and €94.8 million at 30 June 2022), against a shareholders' equity of €144.3 million.

Significant events after first half of 2023

On 14 July 2023, Sabaf acquired 51% of Mansfield Engineered Components LLC ("MEC"), a US company based in Mansfield (Ohio) and the leading North American manufacturer of hinges for household appliances, designed and manufactured to meet the high-quality levels and demanding standards required by the US market. The acquisition was based on an evaluation of MEC of USD 21 million (Enterprise Value). In the first half of 2023, MEC recorded revenues of USD 17.9 million.

In connection with the acquisition transaction, the Board of Directors approved a 10% share capital increase, reserved for Montinvest s.r.l., a company controlled by Fulvio Montipò, for a total consideration of € 17.3 million, executed on 20 July 2023.

Outlook

For the second half of the year, the Group expects demand in the household appliances market to remain broadly stable compared to the first half of the year, affected by the general macroeconomic situation (high interest rates, slow decline in inflation).

The consolidation of the results of the newly acquired MEC, the start of sales of induction cooking components and the contribution of the production plants in India and Mexico, however, will allow for a significant growth in revenues compared to the second half of 2022.

Profitability in the second half of the year is expected to improve further.

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The results will be presented to the financial community at 4.00 p.m. today, 5 September 2023, during a conference call (call [phone] a few minutes before the scheduled start).

The Half-Yearly Report at 30 June 2023 will be made available to the public in accordance with and within the time limits prescribed by the law.

Pursuant to article 154-bis, paragraph 2 of the Italian Consolidated Finance Act (Testo Unico della Finanza), the Company's Financial Reporting Officer Gianluca Beschi declares that the financial disclosure contained in this press release corresponds to the Company's records, books and accounting entries. Quarterly results and normalised data are unaudited. Annexes: consolidated financial statements

For further information:

Investor Relations	Media relations
Gianluca Beschi	Maria Giardini [phone]
tel. [phone]	[e-mail]
[e-mail]	Arnaldo Ragozzino + 39 335 6978581
www.sabafgroup.com	[e-mail]

Founded in the early fifties, SABAF has grown consistently over the years to become the key manufacturer in Italy - and one of the leading producers in the world - of components for household appliances. In recent years, through a policy of organic investments and through acquisitions, the Group expanded its product range and is now active in the following segments of the household appliance market: hinges and electronic components. In 2022, the Group announced its entry into the induction cooking components market. Technological expertise, manufacturing flexibility, and the ability to offer a vast range of components - tailor-made to meet the requirements of individual manufacturers of cookers and built-in hobs and ovens and in line with the specific characteristics of its core markets - are Sabaf's key strengths in a sector featuring major specialisation, constantly evolving demand and an ever-increasing orientation towards products assuring total reliability and safety. The Sabaf Group has approximately 1,500 employees in Italy, Turkey, Poland, Brazil, China, India and Mexico. In addition to the Sabaf brand, the Group operates under the brands ARC (professional burners), Faringosi Hinges, C.M.I. and Mansfield (hinges), Okida and P.G.A. (electronic components).