FY 2016 Financial Results. March 31 st, 2017

Transcription

1 FY 206 Financial Results March 3 st, 207

2 KEY MESSAGES > Solid FY 206 results, with a strong 4Q, sustained by: Premium outperformance across markets, now accounting for 64% of Consumer sales Highest price/mix improvement in the industry First signs of recovery in emerging markets (e.g. South America and Russia) in 4Q Sound profitability, with record EBIT margin in Consumer (6.8%), through internal levers (volume, price/mix and efficiencies) > Pirelli transformation process continues: Creation of a pure Industrial tyre Company, while the activities for the proposed integration with Aeolus a listed company on the Shanghai Stock Exchange are proceeding Creation of the sole pure Consumer tyre Company in view of its future listing > Geneva Motor Show a showcase for Pirelli new products and solutions, the result of the new Consumer strategic approach: Pirelli Colored edition, the super-specialty to respond to increasing Prestige and Premium customer needs for personalization Pirelli Connesso: the first Consumer App providing safety and tyre management services FY 206 RESULTS

3 INDUSTRIAL REORGANIZATION: STEPS TAKEN SO FAR 206 Jan. 207 Swap of 0% of Pirelli Industrial with 80% of Aeolus s Car tyre business completed on October, 206; Pirelli Industrial valuation: 700 million equity value (00%) Marco Polo 00% Pirelli-Aeolus know-how & technology license agreement signed Pirelli Industrial is renamed PTG (Prometeon Tyre Group S.r.l.) PTG Pirelli license agreement on brand & technology know-how signed 00% CINDA 2, a Chinese investment fund, joins Pirelli Industrial with a 38% stake for an equity value of 266 million, already included in Pirelli s 206 cash-flow statement PTG other shareholders are: TP Industrial holding (a Pirelli company) with 52% & Aeolus 0% High Grade 38% Invest. (CINDA) 2 TP Industrial holding 52% PTG 3 (ex Pirelli industrial) 0% Aeolus Mar. 207 Assignment of TP Industrial holding to Marco Polo, Pirelli sole shareholder, with Pirelli becoming a pure Consumer Company The assignment will ensure that Pirelli and TP Industrial can pursue their own independent paths to growth and independently developed strategies 600 million refinancing of PTG with a 3 years duration (which may be extended for 2 additional -year terms) is agreed and signed with major global banks; the refinancing will ensure Pirelli Industrial financial independence ~50% of PTG refinancing will be used to repay the debt towards Pirelli accelerating its deleveraging process 00% TP Industrial holding 52% PTG 3 (ex Pirelli industrial) Marco Polo 00% Consumer only Simplified structure; Marco Polo is owned by CNRC (65%), Camfin (22.4%) and Long Term Investment (2.6%); 2 China Cinda (HK) Holdings Company Limited (CINDA), a wholly-owned subsidiary of China Cinda Asset Management Co., Ltd. (stock code 0359.HK), through its vehicle High Grade Investment Management Limited; 3 PTG: Prometeon Tyre Group S.r.l. FY 206 RESULTS 2

4 PIRELLI COLOR EDITION: A SUPER-SPECIALTY FOR PRESTIGE & PREMIUM CUSTOMERS > A breakthrough high tech product extending Pirelli s specialty offer (Pirelli Noise Canceling System, Run-Flat & Self-Sealing) > On offer: 4 base colors available for the P Zero and Winter Sottozero tyre lines, plus Bespoke on demand > A unique technology, deriving from F, based on innovative materials that guarantee vivid and durable colors over time Yellow Red Silver White Bespoke > The answer to increasing Prestige and Premium customer need for personalization, design and technological excellence > Pricing (for the full set of tyres): 4 base colors ~% / 3% of Prestige Car price, in line with car customization options; on demand for the bespoke version (customized colors chosen > Now available in the Replacement channel for the Prestige segment only, whose car parc amounts to ~2.5 million cars globally > from the pantone palette, and possibility of applying names and markings to the tyre) Available for pre-order now on color.pirelli.com for North America, Europe and the Far East, on sale since Summer 207 FY 206 RESULTS 3

5 PIRELLI CONNESSO: THE FIRST CONSUMER CONNECTED TYRE SOLUTION IN THE INDUSTRY > A digital platform, using a sensor (embedded in the tyre connected to Pirelli Cloud) and a smartphone app to constantly P ZERO CONNESSO how it works APP CLOUD communicate with the driver TYRE DATA Pressure > Pirelli Connesso meets the Consumer s need for safety, Temperature vehicle and cost efficiency & maintenance, establishing a direct Vertical load link with the final customer and dealer network Tyre wear > > Services available at launch: tyre wear and diagnostics enabling preventive maintenance, optimization of tyre performance, alerts, tyre change recommendation, tyre dealer locator and appointment booking In future releases: tyre diagnostics when vehicle is not in use, tyre replacement at vehicle location Tyre residual mileage ALERTS Pressure loss Excessive tread wear Seasonal tyre change TYRE DEALER > Pirelli Connesso is the result of an incubator program TAILOR MADE SERVICES developed in California by Pirelli in conjunction with leading digital companies Sensor Safety Performance Tailor made content > Pirelli Connesso will first be available in 9 size for Prestige cars from Summer 207 in the US only, and later in Europe and the Far East Prevention Tyre data Tyre consultation and assistance Lifestyle More information on Pirelli Connesso and its services are available on connect.pirelli.com FY 206 RESULTS 4

6 206 SUSTAINABILITY PERFORMANCE (/2) EXPRESSED THROUGH THE «RETURN ON CAPITAL» ADOPTED MODEL Growth Green performance revenues 2 (weight on Tyre revenues) Human Capital Accident Frequency Index (#accidents/worked hours x 00,000) Training days per capita (# of days) Process Efficiencies Energy specific consumption (GJ/ton FP ) CO 2 specific emissions (ton/ton FP ) Water Specific withdrawal (m 3 /ton FP ) Waste Recovery (%) Pirelli sustainability model is inspired by the Value Driver framework of the UN-PRI (United Nations Principles for Responsible Investment) and UN Global Compact. 2 Green performance reveues relate to products that fall under rolling resistance and wet grip classes A, B, C according to the labeling parameters set by EU, considering worldwide production and not only the EU one 42.7% 46.2% 5 206A Target % yoy (Nov. 203 ) -80% vs % vs ,8 vs. 8.3 in since % yoy -7% vs % vs % yoy -3.6% vs % vs % yoy 50.5% 54.2% 56.5% -46% vs % vs % vs >95% vs % no waste to landfill and efficiency actions for scrap internal recovery

7 206 SUSTAINABILITY PERFORMANCE (2/2) EXPRESSED THROUGH THE «RETURN ON CAPITAL» ADOPTED MODEL Supply chain Focus on Natural Rubber Sustainability to increase transparency on non-tier. 64 new third party ESG audits on site: +7% of audited suppliers without non-conformities vs 205. Carbon Disclosure Project on Pirelli supply-chain: analyzed suppliers globally avoided emission for about 29 million tons of CO2 equivalent, with estimated savings of $62 million. Risk Governance Operational risk: updated methodology to assess and mitigate business interruption risks connected to IT, raw materials supply chain, security areas. Group issued Policies: Antitrust Policy, Consumer Data Protection (Privacy) Policy, Quality Policy, Health, Safety and Environment Policy, Human Rights (incl. Conflict Minerals), Product Stewardship Policy. 6

8 AGENDA FY 206 RESULTS 2 CONSUMER AND INDUSTRIAL PERFORMANCE 3 APPENDIX FY 206 RESULTS 7

9 million PIRELLI KEY FINANCIAL RESULTS FY 5 Reported adj. FY 5 excl. Venezuela FY 6 Δ YoY vs FY 5 excl. Venezuela 206 FY highlights Revenues 6, , , % Organic Growth % EBITDA before non-recurring items & Restr. Costs,242.7,55.7, % Margin 9.7% 9.4% 9.5% +0. pp EBIT adjusted % Margin 4.7% 4.4% 4.8% +0.4 pp Amortization from PPA (6.2) (6.2) (05.8) Non-recurring items & Restr. costs (68.2) (68.2) (66.6) EBIT Margin 3.5% 3.2% 2.0% Solid organic growth, backed by Premium outperformance and price/mix Trends improving in 4Q (+8.7% organic growth) Profitability increasing, sustained by price/mix and efficiencies Consumer profitability at record 6.8% (+0.6 pp YoY) PPA: additional amortization, due to allocation of purchasing price paid by Marco Polo, arising from Pirelli / Marco Polo merger Results from Equity Investments (4.4) (20.0) Financial Income / (Charges) (328.2) (440.3) PBT adjusted Venezuela decons. impact (559.5) PBT (78.8) Tax Rate n.m. -44.% Net income (loss) before disc. Operations (368.9) 47.6 Discontinued operations (4.6) 0.0 Net Income (loss) (383.5) 47.6 Results from equity investments: mainly related to Prelios, Fenice and Eurostazioni Financial charges increasing, as a consequence of the Marco Polo Industrial debt consolidation 4Q 6 and 4Q 5 data available in the appendix; 2 Excluding exchange rate effects; 3 before amortization of PPA, non-recurring items and restructuring costs FY 206 RESULTS 8

10 FY 206 PERFORMANCE BY REGION Tyre Sales Consumer Sales Industrial Sales Tyre EBIT Margin adjusted 3 million Δ YoY Organic growth Δ YoY Organic growth 2 Δ YoY Organic growth 2 Total 6, % +7.% 5, % +8.2% % +2.6% 4.8% (+0.2 pp YoY) Europe 35% 38% +3.5% +5.% 42% +5.8% 6% -20.2% Europe Mid-teens (improving YoY) NAFTA 6% +0.7% +2.0% 8% +2.% 2% -29.7% NAFTA Twenties (stable YoY) Russia & CIS MEAI APac South America 46% -2.3% +7.3% 3% 8% 3% 22% -9.5% -3.% +9.0% -6.6% -.0% +7.2% +2.% +6.0% 40% +.9% -9.5% +7.6% +7.9% -.6% 82% -.5% -0.0% -.4% +24.% -4.5% Russia MEAI APac South America Break-even (declining YoY) High-teens (stable YoY) Twenties (stable YoY) Mid-single digit (declining YoY) Excluding exchange rate effects and Venezuela; 2 Excluding exchange rate effects, Venezuela and Consumer / Industrial perimeter change; 3 before amortization of PPA, non-recurring items and restructuring costs FY 206 RESULTS 9

11 FY 206 PREMIUM PERFORMANCE BY REGION million Δ YoY Organic Growth Total 2, , % +2.3% Europe 47% 47% +0.0% +2.0% Sound performance in SuperPremium & Prestige, and solid Winter season Progress in selected distribution channels (e.g. Car Dealers, independent dealers), with new services available (e.g. mobile fitting) Confirmed leadership in technological niches NAFTA 25% 26% +2.4% +2.8% Premium and SuperPremium continue to grow thanks to OE-Marked tyres and North American products; good performance of Winter Increased retail penetration in selected customers Russia & CIS MEAI APac South America 28% 27% % 4% 8% 5% % 4% 8% 4% FY 205 FY % +6.8% +9.7% -.4% +6.8% +2.5% +2.9% +2.6% Russia & CIS: improving performance sustained by rebound in volumes at year end MEAI: Super Premium growth, thanks to the expansion in selected networks APac: growth supported by pull-through and push-through projects, retail expansion South America: sound volumes in 4Q supporting a recovery in the Region Weight on Consumer Revenues 6% 64% Excluding exchange rate effects, Venezuela and Consumer / Industrial perimeter change FY 206 RESULTS 0

12 PIRELLI GROUP OPERATING PERFORMANCE million 9 (78) (7) (55) (94) EBIT FY 5 adjusted Volume Price / Mix Efficiencies D&A & other costs Raw Materials FX Other input costs (labour / energy / other) Other Business EBIT FY 6 adjusted Note: FY 205 EBIT net of Venezuela; before amortization of PPA, non-recurring items and restructuring costs; 4Q details available in the appendix FY 206 RESULTS

13 FY 206 NET FINANCIAL POSITION million 5,33 Financial charges Taxes (440) (6) Eurostazioni & Greentech Real estate disposal 09 9 (883) (200) 86 (266) 232 4,93 Variation of Bidco NFP 4 (34) EBIT adjusted D&A (excl. amort. of intang. from PPA) Aeolus Car Debt 5 Exchange rate differentials / other (74) (24) Investments 2 (372) NWC & other 7 FY 5 3 Op. Cash Flow Fin. Income / Expenses & taxes Cash Out non rec. items & restr. costs Asset Disposal FX / Other Cash-in from CINDA entering Pirelli Ind. Change in Net Debt perimeter FY 6 before amortization of PPA, non-recurring items and restructuring costs; 2 Tangible and intangible investments; 3 Including Marco Polo Industrial Holding Debt; 4 Increase of Bidco loan costs, up to the date of the merger with Pirelli & C.; 5 Net Financial Position of Aeolus Car business, consolidated in Pirelli accounts FY 206 RESULTS 2

14 PIRELLI DEBT STRUCTURE AS OF DECEMBER 3, 206 Net Financial Position Gross Debt Maturity million 6,624,7,538 Committed Line Drawdown Debt Capital Market Other Borrowings Liquidity Profile million Liquidity position 5, Gross Debt, Receivables & other assets Fin. Assets Total committed lines not drawn due 2020 Cash & Cash Equivalents 4,93 Net Fin. Position,582, % 3.% 30.2% & beyond Debt Profile Cost of debt 5.82% 2,057, Gross debt profile: ~5% Fixed and ~85% Floating Average debt maturity: ~2.5 years,998, %, % Liquidity Margin 2,582 Taking into account the Merger between Pirelli & C. S.p.A. and Marco Polo Industrial Holding S.p.A., which became effective on June st, 206; acquisition facilities turned into Pirelli s debt FY 206 RESULTS 3

15 AGENDA FY 206 RESULTS 2 CONSUMER AND INDUSTRIAL PERFORMANCE 3 APPENDIX FY 206 RESULTS 4

16 KEY TYRE RESULTS million Q 6 YoY 2Q 6 YoY 3Q 6 YoY 4Q 6 YoY FY 6 YoY Revenues, %, %, %, % 6, % o/w Premium % % % % 3, % EBITDA before non-recurring items & restr. costs % % % %, % Margin 20.2% +.2 pp 8.9% -0.8 pp 8.8% +0. pp 20.4% -0.4 pp 9.6% +0. pp EBIT adjusted % % % % % Margin 5.2% +. pp 4.% -0.7 pp 4.3% +0.7 pp 5.9% +0. pp 4.8% +0.2 pp EBIT Margin 2.3%.8%.8% 2.% 2.0% Revenue drivers Q 6 2Q 6 3Q 6 4Q 6 FY 6 Volumes -0.8% +0.8% +3.7% +5.% +2.% o/w Premium +.7% +5.0% +5.9% +4.% +4.2% Price/Mix +6.% +5.9% +4.3% +3.7% +5.0% Organic growth (before exchange rate impact) +5.3% +6.7% +8.0% +8.8% +7.% Exchange Rate -9.3% -8.3% -2.3% -.5% -5.4% Revenues (w/o Venezuela) -4.0% -.6% +5.7% +7.3% +.7% % vs. same period of 205, excl. Venezuela; 2 before amortization of PPA, non-recurring items and restructuring costs FY 206 RESULTS 5

17 CONSUMER BUSINESS : PIRELLI PERFORMANCE million Q 6 YoY 2 2Q 6 YoY 2 3Q 6 YoY 2 4Q 6 YoY 2 FY 6 YoY 2 Revenues, %, %, %, % 5, % o/w Premium % % % % 3, % % revenues 67.% +5.9 pp 63.3% +.6 pp 63.6% 0.0 pp 62.4% +3. pp 64.0% +2.5 pp EBITDA before non-recurring items & restr. costs % % % %, % Margin 22.6% +2.3 pp 20.7% -0.8 pp 20.8% 0.0 pp 22.3% +0. pp 2.6% +0.4 pp EBIT adjusted % % % % % Margin 7.3% +2. pp 5.9% -0.5 pp 6.3% +0.6 pp 7.8% +0.2 pp 6.8% +0.6 pp EBIT Margin 4.% 3.4% 3.6% 3.7% 3.7% Revenue drivers Q 6 2Q 6 3Q 6 4Q 6 FY 6 Volumes +.7% +2.% +5.5% +4.8% +3.5% o/w Premium +.7% +5.0% +5.9% +4.% +4.2% Price/Mix +5.2% +5.8% +4.5% +3.4% +4.7% Organic growth (before exchange rate impact) +6.9% +7.9% +0.0% +8.2% +8.2% Perimeter Consumer / Industrial -0.3% +4.6% +2.2% -0.8% +.5% Exchange Rate -7.6% -7.5% -.8% -0.6% -4.4% Revenues (w/o Venezuela) -.0% +5.0% +0.4% +6.8% +5.3% Results refer to the two different businesses based on view by product (Industrial vs. Consumer products) in accordance with IFRS 8 (Operating Segments); this view does not represent the current structure by legal entities of Pirelli Consumer & Pirelli Industrial; 2 % vs. same period of 205, excl. Venezuela; 3 before amortization of PPA, non-recurring items & restr. costs FY 206 RESULTS 6

18 China South America NAFTA CONSUMER BUSINESS: KEY MARKET TRENDS Europe Market trend % YoY O.E. REPLACEMENT 4Q 5 FY 5 Q 6 2Q 6 3Q 6 4Q 6 FY (2) () O.E REPLACEMENT (4) 7 O.E. (29) (20) (29) (5) (3) (2) REPLACEMENT (7) (2) (4) () (3) Russia excluded, Turkey excluded in 206 (included in 205); 2 NAFTA Replacement includes imports; 3 South America Replacement restated to include Brazilian imports Source: Local tyre manufacturer associations FY 206 RESULTS 7

19 INDUSTRIAL BUSINESS : PIRELLI PERFORMANCE million Q 6 YoY 2 2Q 6 YoY 2 3Q 6 YoY 2 4Q 6 YoY 2 FY 6 YoY 2 Revenues % % % % % EBITDA before non-recurring items & restr. costs % % % % % Margin 0.0% -4.2 pp 8.3% -4.3 pp 8.2% -.5 pp 0.3% -3.2 pp 9.2% -3.3 pp EBIT adjusted % % % % % Margin 6.% -3.8 pp 3.6% -5.2 pp 3.8% -.8 pp 5.9% -0. pp 4.9% -2.8 pp EBIT Margin 4.3% 3.0% 2.6% 3.6% 3.4% Revenue drivers Q 6 2Q 6 3Q 6 4Q 6 FY 6 Volumes -0.% -4.5% -3.8% +6.5% -3.8% Price/Mix +9.% +6.3% +3.9% +5.6% +6.4% Organic growth (before exchange rate impact) -.0% +.8% +0.% +2.% +2.6% Perimeter Consumer / Industrial +.% -8.% -9.0% +4.3% -6.% Exchange Rate -5.4% -.5% -4.6% -6.5% -9.9% Revenues (w/o Venezuela) -5.3% -27.8% -3.5% +9.9% -3.4% Results refer to the two different businesses based on view by product (Industrial vs. Consumer products) in accordance with IFRS 8 (Operating Segments); this view does not represent the current structure by legal entities of Pirelli Consumer and Pirelli Industrial; 2 % vs. same period of 205, excl.venezuela; 3 before amortization of PPA, non-recurring items & restr. costs FY 206 RESULTS 8

20 INDUSTRIAL BUSINESS: KEY MARKET TRENDS Europe China South America Market trend % YoY 4Q 5 FY 5 Q 6 2Q 6 3Q 6 4Q 6 FY 6 O.E REPLACEMENT () (7) 8 3 (3) O.E. (58) (48) (43) (20) (7) (3) (29) REPLACEMENT 2 (4) (0) (8) 2 (4) 4 (2) O.E. (6) (23) 2 Russia excluded, Turkey excluded in 206 (included in 205); 2 Non-pool members imports not included Source: Major external data providers for each Region and Pirelli estimates FY 206 RESULTS 9

21 AGENDA FY 206 RESULTS 2 CONSUMER AND INDUSTRIAL PERFORMANCE 3 APPENDIX FY 206 RESULTS 20

22 PIRELLI / MARCO POLO MERGER: PURCHASE PRICE ALLOCATION IMPACT > Following the merger of Marco Polo into Pirelli, the acquisition price excess amounting to 6 billion ( 7.3 billion acquisition price minus Pirelli net equity adjusted at the acquisition date) has been allocated through the Purchase Price Allocation process (PPA) to the fair value of Pirelli assets and liabilities as of September, 205 (acquisition date) > Due to the subsequent reverse merger of Marco Polo into Pirelli, the PPA effects are included in Pirelli accounts: billion (0.) (.5) Excess Acquisition Price to be Allocated Trademark Total Technology Customer Relationship Fixed Asset Fair Value Adjustment Contingent Liabilities Deferred Taxes Residual Goodwill > It is worth noticing that intangible assets are continuously regenerated inside the Group incurring certain costs that cannot be capitalized (e.g. R&D costs for technology, commercial costs for brand, etc.); as consequence the amortization related to such assets duplicates the cost recorded in P&L In order to neutralize this effect and make the Income Statement figures for 206 more comparable with those of previous periods, we introduced, in line with industry best practices, the adjusted EBIT measure, which does not include either non-recurring or restructuring expenses, as well as the PPA amortizations attributable to intangible assets FY 206 RESULTS 2

23 PIRELLI BALANCE SHEET million FY 5 (reported ) FY 5 (restated 2 ) FY 6 FIXED ASSETS 3, ,36.4 0,299.2 Inventories,053.9,053.9,055.6 Trade receivables Trade payables (,33.) (,320.) (,498.5) NET OPERATING WORKING CAPITAL Other payables / receivables (07.6) (.0) (30.7) Net Working Capital (74.3) NET INVESTED CAPITAL 4, , ,224.9 Total Net Equity 2, ,28.6 3,274.9 Provisions , ,037.2 Net Financial Position,99. 5,33.0 4,92.8 TOTAL 4, , ,224.9 Attributable Net Equity 2,280. 3, ,34. Pirelli & C. reported consolidated financial statement; 2 Marco Polo Industrial Holding S.p.A. consolidated financial statement FY 206 RESULTS 22

24 million PIRELLI KEY FINANCIAL RESULTS 4Q 5 Reported adj. 4Q 5 excl. Venezuela 4Q 6 Δ YoY vs 4Q 5 excl. Venezuela Revenues,597.7,423.4, % Organic Growth +8.7% EBITDA before non-recurring items & Restr. Costs % Margin 2.9% 20.6% 20.4% -0.2pp EBIT adjusted % Margin 6.5% 5.6% 5.8% +0.2 pp Amortization from PPA (.6) (26.5) Non-recurring items & Restr. Costs (59.) (3.4) EBIT Margin 2.7% 2.0% Results from Equity Investments (35.2) 32.7 Financial Income / (Charges) (47.7) (56.9) PBT (540.2) 59.5 Tax Rate n.m. -2.7% Net income before disc. operations (660.) 24.9 Discontinued operations Net Income (660.) 24.9 Attributable Net Income (660.4) 8.4 Investments Net Debt,99. 4,92.8 Excluding exchange rate effects; 2 before amortization of PPA, non-recurring items and restructuring costs; 3 Tangible and Intangible investments FY 206 RESULTS 23

25 PIRELLI GROUP OPERATING PERFORMANCE million 22 (26) (6) 34 (3) (20) EBIT 4Q 5 adjusted Volume Price / Mix Efficiencies D&A & other costs Raw Materials FX Other input costs (labour / energy / other) Other Business EBIT 4Q 6 adjusted Note: 4Q 205 EBIT net of Venezuela; before amortization of PPA, non-recurring items and restructuring costs FY 206 RESULTS 24

26 PIRELLI GROUP CASH FLOW million Q 5 2 2Q 5 2 3Q 5 2 4Q 5 2 FY 5 2 Q 6 2Q 6 3Q 6 4Q 6 FY 6 EBIT adjusted Amortization (excl. PPA amortization) Capital Expenditure (85.6) (03.2) (73.0) (29.6) (39.4) (74.0) (82.0) (82.4) (33.8) (372.2) Working capital / other variations (895.2) 5.6 (3.7) (49.9) (75.9) 0.4 (5.7) OPERATING CASH FLOW (688.9) (499.9) Financial income / (expenses) (52.) (6.3) (67.) (47.7) (328.2) (82.7) (98.) (02.6) (56.9) (440.3) Taxes (54.) (63.7) (52.4) (9.9) (290.) (27.2) (25.9) (28.6) (34.6) (6.3) NET OPERATING CASH FLOW (795.) 24. (22.4) (609.8) Financial / assets (investments) divestments (4.4) (0.4) (2.2) 6.6 (20.4) (5.2) Other dividends paid (7.6) (2.5) - - (0.) - (2.4) (2.) Cash-out for non-rec. items and restr. costs (6.4) (2.6) (3.7) (5.4) (28.) (9.5) (.4) (8.8) (7.4) (57.) Venezuela impact on financial charges Release of deferred tax liabilities incl. In tax charges (22.) (7.4) (29.5) Deferred tax assets included in fiscal charges Fin. charges incl. in Debt acquisition Bidco costs post merger / other refinancing adjustments already included in financial charges Exchange rate differentials / others 45.8 (37.4) (70.) (33.) 3.7 (03.4) (92.9) NET CASH FLOW BEFORE DIVIDENDS & EXTRAORDINARY ITEMS Note: Venezuela deconsolidated since 3 December 205; before amortization of PPA, non-recurring items and restructuring costs; 2 reported adjusted FY 206 RESULTS 25 (777.7) 22.4 (6.7) (704.6) Dividends paid - (79.5) - - (79.5) Impact of Steelcord disposal (4.4) Impact of Venezuela deconsolidation on NFP (277.7) (277.7) Variation of Bidco NFP from / to 3/5/ (34.3) - - (34.3) Bidco costs post merger / other refinancing adjustments (23.0) (23.0) Impact of Aeolus Car NFP (73.6) (73.6) Cash-in from Cinda of sales 38% of P.I NET CASH FLOW (753.3) 68.5 (2.) (29.5) (704.6) ,

27 OPERATING NET WORKING CAPITAL AND CAPEX SEASONALITY TREND Operating Net Working Capital million CapEx million Δ = Δ = % 2 on FY sales % on FY sales Q 2Q 3Q 4Q Q 2Q 3Q 4Q Q 2Q 3Q 4Q Q 2Q 3Q 4Q CapEx / Sales 5.5% 6.4% 4.8% 8.% 5.2% 5.4% 5.3% 8.8% NWC definition: inventories + trade receivables - trade payables +/- other payables / receivables; 2 On 205 Net Sales excluding Venezuela FY 206 RESULTS 26

28 FY 206 PIRELLI TYRE MIX Sales by Business Sales by Segment Industrial 6% Car 78% Consumer 84% Agro 2% Truck 4% Motorbike 6% Sales by Channel Sales by Region O.E. 23% South America 22% NAFTA 6% Asia Pacific 3% Replacement 77% Europe 38% MEAI 8% Russia 3% FY 206 RESULTS 27

29 DECEMBER 206 PIRELLI PEOPLE Headcount People by Region 35,856 37,050 South America 32% NAFTA 6% Asia Pacific 3% Dec '5 Dec '6 Europe 32% MEAI 9% Russia 8% People by Contract People by Cluster Temps & Agency 5% Employees 95% Management % Staff 20% Workers 79% Without Venezuela headcount, including Aeolus headcount FY 206 RESULTS 28

30 PIRELLI PLANTS IN THE WORLD AS OF DECEMBER 3 ST 206 U.S. Rome Car U.K. Burton Car Carlisle Car GERMANY Breuberg Car / Moto ITALY Bollate Car Settimo Torinese Car Low-cost countries RUSSIA Kirov Car Voronezh Car MEXICO Silao Car TURKEY ROMANIA Slatina Car Izmit Car / Truck BRAZIL CHINA Campinas Car Feira de Santana Car / Truck Santo André Agro / Truck Gravatai Moto / Truck ARGENTINA Merlo Car EGYPT Alexandria Truck INDONESIA Subang Moto (JV) Yanzhou Car / Moto / Truck Jiaozuo Car Excluding Venezuela FY 206 RESULTS 29

31 RAW MATERIALS Raw Material Price Trend Brent Oil (in $ / barrel) Natural Rubber (in $ / tons) Yearly Average 4,59 Natural Rubber: Sicom Brent: 3, , , , ,370,378 Q0 2Q0 3Q0 4Q0 Q 2Q 3Q 4Q Q2 2Q2 3Q2 4Q2 Q3 2Q3 3Q3 4Q3 Q4 2Q4 3Q4 4Q4 Q5 2Q5 3Q5 4Q5 Q6 2Q6 3Q6 4Q6 FY 206 Mix (Based on Purchasing Cost) 33% Raw mat. costs on sales Natural Rubber 7% (-pp YoY) Steel Reinf. 5% (+pp YoY) Textiles 4% (+pp YoY) Synth. Rubber 25% (0ppYoY) Chemicals 2% (+pp YoY) Carbon Black 8% (-2ppYoY) FY 206 RESULTS 30

32 DISCLAIMER This presentation is not and does not constitute an offer to sell or the solicitation, invitation or recommendation to purchase any securities in the United States or any other jurisdiction. The information included in this presentation is not intended to constitute or form part of, and should not be construed as, an offer or invitation to subscribe for, underwrite or otherwise acquire, any securities of any of the companies mentioned nor should it or any part of it form the basis of, or be relied on in connection with, any contract to purchase or subscribe for any securities not shall it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever. This presentation may contains statements that may constitute forward-looking statements based on Pirelli & C SpA s current expectations and projections about future events. All statements other than statements of historical fact included in the presentation are forward-looking statements. Any projection, forecast, estimate or other forward-looking statement included in the presentation, including non-ifrs measures only illustrates hypothetical performance under specified assumptions of events or conditions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Pirelli & C SpA s control that could cause the actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Past performance cannot be relied on as a guide to future performance. Forward looking statements speak only as at the date of this presentation the Pirelli & C SpA expressly disclaims any obligations or undertaking to release any update of, or revisions to, any forward looking statements in this presentation. No statement in this presentation is intended to be a profit forecast. Consequently it is recommended that they be viewed as indicative only. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. Pirelli & C. SpA, its shareholders, directors or representatives, undertakes no obligation to update or keep current the information contained in this presentation, to correct any inaccuracies which may become apparent, or to publicly announce the result of any revision to the statements made herein, or to release publicly the results of any revisions to these forward looking statements which may be made to reflect events and circumstances after the date of this presentation, including, without limitation, changes in Pirelli & C. SpA s business or acquisition strategy or to reflect the occurrence of unanticipated events. This presentation contains certain data and forward looking statements regarding the automotive industry that were obtained from publicly available information, independent industry publications and reports prepared by industry consultants. Pirelli & C. SpA has not independently verified such data and forward looking statements and cannot guarantee their accuracy or completeness. Industry terms used by Pirelli & C. SpA may differ from those used by other operators in the automotive industry which may mean certain metrics are not comparable with other operators who report similar metrics. FY 206 RESULTS 3