IRCE S p A : Half-yearly financial report as of 30 june 2021

HALF-YEARLY FINANCIAL REPORT

AS OF 30 JUNE 2021

Half-Yearly Financial Report as of 30 June 2021

TABLE OF CONTENTS

HALF-YEARLY FINANCIAL REPORT AS OF 30 JUNE 2021

Corporate Bodies

Interim report on operations

Condensed consolidated half-yearly financial statements as of 30 June 2021

Consolidated Statement of Financial Position

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the condensed consolidated half-yearly financial statements

Attachments

Consolidated Income Statement for the second quarter of 2021

Consolidated Statement of Comprehensive Income for the second quarter of 2021

Certification pursuant to Article 154-bis, paragraph 5, of Italian Legislative Decree no. 58 of 24 February 1998

Report of the independent auditors

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Half-Yearly Financial Report as of 30 June 2021

CORPORATE BODIES

BOARD OF DIRECTORS
CHAIRMAN	MR	FILIPPO CASADIO
EXECUTIVE DIRECTOR	MR	FRANCESCO GANDOLFI COLLEONI
NON-EXECUTIVE DIRECTOR	MR	GIANFRANCO SEPRIANO
INDEPENDENT DIRECTOR	MS	FRANCESCA PISCHEDDA
NON-EXECUTIVE DIRECTOR	MR	ORFEO DALLAGO
INDEPENDENT DIRECTOR	MS	GIGLIOLA DI CHIARA
BOARD OF STATUTORY AUDITORS
CHAIRMAN	MR	FABIO SENESE
STANDING STATUTORY AUDITOR	MR	ADALBERTO COSTANTINI
STANDING STATUTORY AUDITOR	MS	DONATELLA VITANZA
SUBSTITUTE STATUTORY AUDITOR	MR	GIANFRANCO ZAPPI
SUBSTITUTE STATUTORY AUDITOR	MS	CLAUDIA MARESCA
INDEPENDENT AUDITORS
Deloitte & Touche S.p.A.
CONTROL AND RISKS COMMITTEE
MS GIGLIOLA DI CHIARA
MR GIANFRANCO SEPRIANO
MS FRANCESCA PISCHEDDA
REMUNERATION COMMITTEE
MS FRANCESCA PISCHEDDA
MR GIANFRANCO SEPRIANO
MS GIGLIOLA DI CHIARA
INTERNAL AUDIT
MR FABRIZIO BIANCHIMANI
SUPERVISORY BODY
MR FRANCESCO BASSI
MR GABRIELE FANTI
MR GIANLUCA PIFFANELLI

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Half-Yearly Financial Report as of 30 June 2021

INTERIM REPORT ON OPERATIONS AS OF 30 JUNE 2021

The consolidated financial statements of IRCE Group (hereinafter also the "Group") for the first half year of

2021 (hereinafter also the "Group") closed with a profit of € 6.65 million.

Consolidated turnover was € 228.04 million, 66.8% higher than € 136.69 million recorded in the first half of 2020, thanks to the combined effect of the increase in sales volumes and the price of copper (LME quotation in Euro, in the first half of 2021, was 51.4% higher than in the first six month of 2020). For a correct reading of the data, please note that in the second quarter of 2020, due to the effects of the pandemic and the measures taken by the various countries to contain it, sales had drastically reduced.

In the first half of this year, sales in both our areas of business, winding wires and energy cables, confirm the recovery of demand, which gained further vigour also compared to the first quarter of the year.

In this context, turnover without metal1 increased by 51.6%; the winding wire sector raised by 40.8% and the cable sector recorded a growth by 93.4%.

Consolidated turnover without metal		2021		2020	Change
(€/million)		1st half		1st half
	Value	%	Value	%	%
Winding wires	34.57	73.9%	24.55	79.5%	40.8%
Cables	12.22	26.1%	6.32	20.5%	93.4%
Total	46.79	100%	30.87	100.0%	51.6%

The following table shows the changes in results compared to the first half of 2020, including adjusted EBITDA and EBIT.

Consolidated income statement data	1st half 2021	1st half 2020	Change
(€/million)
Turnover2	228.04	136.69	91.35
EBITDA3	16.97	2.58	14.39
EBIT	11.41	(0.99)	12.40
Profit/(Loss) before tax	10.06	(0.27)	10.33
Result for the period	6.65	(0.43)	7.08
Adjusted EBITDA4	15.71	2.94	12.77
Adjusted EBIT4	10.15	(0.63)	10.78

Consolidated net financial debt, at the end of June 2021, was € 72.75 million, up from € 39.74 million at the end of 2020, as a result of the growth in sales volumes and the cooper price.

Consolidated statement of financial position data	30/06/2021	31/12/2020	Change
(€/million)
Net invested capital	204.35	162.36	41.99
Shareholders' equity	131.60	122.62	8.98
Net financial debt5	72.75	39.74	33.01

• Turnover without metal corresponds to overall turnover after deducting the metal component.
  2 The item "Turnover" consists in the "Revenues" as recognised in the income statement.
  3 EBITDA is a performance indicator the Group's Management uses to assess the operating performance of the company and is not an IFRS measure; IRCE S.p.A. calculates it by adding depreciation/amortisation, provisions and write-downs to EBIT.

• Adjusted EBITDA and EBIT are respectively calculated as the sum of EBITDA and EBIT and the gains/losses on copper and electricity derivatives transactions (€ -1.26 million in the first half of 2021 and € +0.36 million in the first half of 2020). These are indicators the Group's Management uses to monitor and assess operating performance and are not IFRS measures. Given that the composition of these measures is not regulated by the reference accounting standards, the criterion used by the Group may not be consistent with that adopted by others and therefore not comparable.

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Half-Yearly Financial Report as of 30 June 2021

Shareholders' equity was positively affected by the change in the translation reserve mainly due to the revaluation of the Brazilian real (which accounted for € 2.76 million), which, from the beginning of the year,

increased by 8%.

Investments

The Group's investments, in the first half of 2021, were € 2.12 million and mainly concerned IRCE SpA and the Brazilian subsidiary IRCE Ltda.

Main Risks and Uncertainties

The Group's main risks and uncertainties, as well as risk management policies, are detailed below:

Market risk

The Group is strongly concentrated on the European market (some 70% of consolidated turnover); the risk of major contractions in demand or of worsening of the competitive scenario may significantly impact the results. To address these risks, the medium-term strategy of the Group focuses on geographic diversification in non-EU countries, with the fastest growing market for our products. It is the pursuit of this strategy that led to the establishment in China of the company Irce Electromagnetic Wire (Jiangsu) Co. Ltd with the aim of producing and serving the local market.

Risk associated with changes in financial and economic variables

• Exchange rate risk
  The Group primarily uses the euro as the reference currency for its sales transactions. It is exposed to exchange rate risks in relation to its copper purchases, which it partly carries out in dollars; it hedges such transactions using forward contracts. It is also exposed to foreign currency translation risks for its investments in Brazil, the UK, India, Switzerland, Poland, China and Czech Republic.
  As for the foreign currency translation risk, the Group believes this risk mainly concerns the investment in Brazil due to the high volatility of the real, which affects the investment's carrying amount. It should be noted that, during the first half of 2021, the Brazilian currency had an extremely fluctuating trend, and then closed on 30 June 2021 with a re-valuation of about 8% on the value at the end of 2020. However, it should be emphasized that the Brazilian subsidiary continues to record improving economic results also in Euro, not causing the fluctuations in the exchange rate particular concern.
• Interest rate risk
  The Group obtains short and medium/long-term bank financing mainly at floating rates. The risk of wide fluctuations in interest rates is not considered significant and therefore the Group does not implement special hedging policies.
• Risks related to fluctuations in the prices of raw materials
  The main raw material used by the Group is copper. The changes in its price can affect margins as well as financial requirements. In order to mitigate the potential effect on margins of changes in the price of copper, the Group implements a hedging policy using forward contracts on the positions generated by operating activities. During the first half of 2021, the price of copper continued to grow as in the second half of 2020, reaching an all-time high, with an average price on the first half of 2021 of 7.54 Euro / kg.
• Risks associated with the procurement of raw materials at reasonable prices
  The uncertainty about the price trend of many raw materials, in particular plastics, materials for insulation and electricity, as well as the extent of the required increases could make complex their absorption or their timely transfer to sales prices.

5 Net financial debt is measured as the sum of short-term and long-term financial liabilities minus cash and financial assets (see note

15). It should be noted that the methods for measuring net financial debt comply with the methods for measuring the net financial position as defined by Consob's Notice no. 5/21 of 29 April 2021, which incorporates the ESMA Guideline published on 4 March 2021.

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