INVESTOR PRESENTATION JUNE 2010

Transcription

1 JUNE 2010

2 Disclaimer This presentation contains statements that constitute forward-looking statements and does not constitute an offer or solicitation for the sale. purchase or acquisition of securities of any of the companies mentioned and is directed to professionals of the financial community. These statements appear in a number of places in this presentation and include statements regarding the intent. belief or current expectations of the customer base. estimates regarding future growth in the different business lines and the global business. market share. financial results and other aspects of the activities and situation relating to the Company. Such forward looking statements are not guarantees of future performance and involve risks and uncertainties. and actual results may differ materially from those in the forward looking statements as a result of various factors. Consequently it is recommended that they be viewed as indicative only. Analysts are cautioned not to place undue reliance on those forward looking statements. which speak only as of the date of this presentation. Pirelli & C. SpA undertakes no obligation 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 business or acquisition strategy or to reflect the occurrence of unanticipated events. Statement The Manager mandated to draft corporate accounting documents of Pirelli & C. SpA. Francesco Tanzi. attests as per art.154-bis. comma 2 of the Testo Unico della Finanza (D.Lgs. 58/1998) that all the accounting information contained in this presentation correspond to the documented results. books and accounting of the Company. 1

3 Agenda Pirelli Real Estate Separation Plan Pirelli 1Q 2010 Financial Review 2010 Outlook & Targets Pirelli Tyre & Parts Appendix

4 Pirelli Real Estate Separation Plan: strategic rationale Feb.11, 2009: '09-'11 "Transformation path announcement assets portfolio reshaping & core business focalization In the last 18 months Pirelli RE changed its business model, went through a deep restructuring program, strengthened its capital structure and reached financial sustainability Today the Real Estate market is showing signs of recovery Right time to split the 2 businesses with benefits for both P&C and PRE shareholders Benefits for P&C Benfits for PRE Corporate structure streamlining: a clearer equity story with a positive impact on valuation metrics Free-float increase & higher stock liquidity More corporate contestability More flexible capital structure Better chance to create a platform for future industrial aggregation 3

5 Pirelli Real Estate Separation Plan: process (1/2) STEP 1: P&C SHARES REVERSE STOCK SPLIT Par value of ordinary and savings shares cancelled, followed by a split by category 1:11 Ratio SHARES AFTER REVERSE SPLIT 475,740,182 12,251,311 Ordinary shares Savings shares 487,991,493 Total shares 1) Post reverse stock split accounting value 3.19 per share Capital Euros 2) = Total number of shares Rights on savings shares will remain the same 1)P&C own shares, post reverse split, equal to 351,590.9 ordinary shares and 408, )P&C capital 1,556,692,

6 Pirelli Real Estate Separation Plan: process (2/2) STEP 2 Assignment of Pirelli RE shares in portfolio through voluntary corporate capital reduction to P&C ordinary and savings Shareholders PRE s P&C Shareholding Assignment ratio 1:1 P&C s PRE shares to be assigned to Shareholders after reverse stock split (*) P&C s PRE shares not to be assigned to avoid split In shares Stake 487,798, % 487,231, , % Capital reduction equal to PRE stake value assigned to P&C Shareholders Price listed the day before the P&C Extraordinary Shareholders Meeting when transaction is approved (*) Post reverse splitting P&C s own shares in the portfolio, that is 351,590.9 ordinary shares and 408,342.6 savings shares shall not benefit from assignment rights to be attributed to P&C Shareholders in the 1:1 ratio. 5

7 Pirelli Real Estate Separation Plan: timing May, 4 th 2010 Board of Directors by July 2010 P&C Extraordinary Shareholders Meeting to approve: Shares value cancellation and reverse stock split Capital reduction through assignment of goods in kind by July 2010 Entry of the decision into the Registry of Companies by October 2010 Creditors opposition deadline by October 2010 PRE shares assigment 6

8 Pirelli Real Estate Separation Plan PRE equity structure changes CURRENT POST REVERSE STOCK SPLIT Camfin 14.8% Pirelli 58% Floating 1) 42% Other members of the P&C shareholders agreement Floating 2) 69.4% 15.8% To guarantee stability of Pirelli RE shareholding basis, some members of P&C shareholders agreement, to become future PRE shareholders, expressed their positive views to enter an agreement involving less than 30% of the relevant share capital. 1) Inclusive of PRE s own shares (0.1% of circulating capital) and stake of Intesa San Paolo, Assicurazioni Generali and Unicredit worth 0.1% 2) Of which 27.4% ex P&C floating (net of own shares) and 42% ex PRE floating 7

9 Agenda Pirelli Real Estate Separation Plan Pirelli 1Q 2010 Financial Review 2010 Outlook & Targets Pirelli Tyre & Parts Appendix 8

10 Pirelli 1Q 10 Key Financial Results /mln 1Q 10 1Q 09 YoY Key messages Revenues Organic growth (*) 1, , % +15.3% Tyre 2-digit revenues growth driven by our solid positioning EBITDA before Restruct. Costs Margin EBIT before Restruct. Costs Margin Restructuring Costs % 9.8% % 4.8% (2.6) (3.5) +44.8% +87.5% Strong profitability improvement Tyre EBIT margin close to 9% Pirelli RE EBIT break-even EBIT Margin Devaluation/sale of particip. in listed co % 4.5% % +3.1 p.p. Savings are on track both for Tyre and Real Estate Results from equity particip. PRE 0.0 (12.5) Other Results from participations (2.9) 13.0 Total Net Income Net Income post minorities PRE net income back to break-even Net Debt ,278.9 Limited cash absorption (-150 /mln vs -250 /mln) due to Pirelli Tyre sound working capital management (*) Homogeneous terms variations, excluding exchange rate effects 9

11 Pirelli EBIT trend /mln Organic EBIT: (2.3) Q 09 Tyre Eco Tech Real Estate Broadband access Other activities Restruct. Costs 1Q 10 10

12 Pirelli attributable net income 1Q 10 vs 1Q (0.3) (15.9) (3.4) 39.2 (8.1) 9.5 1Q 09 EBIT Results Deval./sale from equity particip. particip. PRE in listed co. Other results from particip. Financial charges and taxes Minorities 1Q 10 11

13 Pirelli 1Q 10 Net Financial Position /mln EBIT before restr. costs Dep/Am: Capex: NWC & others: (50.1) (155.9) FY 09 Operating Cash Flow Fin. Inc./Expen. & taxes Cash out Restr. Costs Others 1Q 10 12

14 Pirelli Debt Structure as of March 31, 2010 Net Financial Position Gross Debt Maturity /mln 1,768 1, Committed Line Drawdown 980 1, Other Borrowing Gross Debt Fin. Assets* Net Fin. position 294 Gross Debt maturity as of Mar. 31, % 9% 59% 14% Total Committed Lines Not Drawn 1Q & beyond Total *Financial receivables. cash and cash equivalents 13

15 2009 Shareholder Remuneration FY 09 Parent Company Net Income: /mln (vs /mln in 2008) Dividend distribution approved by Pirelli & C. AGM (21 April 2010) DPS N of Shares* Dividends mln /mln Ordinary shares 1.45 /cent 5, Saving shares 4.06 /cent** % of parent company Net Income Dividend Payment Schedule Coupon Detachment: 24 May, 2010 Dividend Payment: starting from 27 May, 2010 *Net of treasury shares: 3.9mln ordinary shares and 4.5mln savings shares. **2.03 /cent for the financial year 2008 and 2.03 /cent for the financial year

16 Agenda Pirelli Real Estate Separation Plan Pirelli 1Q 2010 Financial Review 2010 Outlook & Targets Pirelli Tyre & Parts Appendix 15

17 2010 Outlook Growing with value into a "pure Tyre company, a frontrunner in Green Performance" Tyre and Parts... ready for a new leap forward on a solid ground. Tyre ongoing growth by business differentiation improvement of our cost competitiveness investments acceleration to build up capacity Filters exploit domestic & global opportunities deriving from ever stricter anti-pollution regulations Synergic business (Ambiente & Pzero): breakeven... ready to create new business opportunities and enhance brand value Real Estate... ready to bring out intrinsic value: consolidate leadership in Italy as a Fund Management Company continue a derisking approach in Germany & Poland rifocus on the services platform to increase recurring profitability maintain a strict financial discipline 16

18 Pirelli &C 2010 FY targets update /bln 1Q 10 Results 2010 Targets 2010 Revised Targets Excl. PRE Group Revenues of which Green Performance % confirmed EBIT % post restructuring 7.6% 6.5-7% 6.5% 6.5% Capex >0.3 confirmed NFP * confirmed (*) Including 81.1 /mln cash out for dividends 17

19 Agenda Pirelli Real Estate Separation Plan Pirelli 1Q 2010 Financial Review 2010 Outlook & Targets Pirelli Tyre & Parts 1Q 2010 Results 2010 Outlook & Targets Appendix 18

20 Pirelli Tyre 1Q 2010 performance /mln 1Q 09 YoY% 1Q 10 YoY% Revenues EBITDA (before restruct. costs) margin EBIT (before restruct.costs) margin EBIT (after restruct.costs) margin % % Net Income 14.6 Revenue drivers Price/Mix Volume -13.9% -28.6% -40.7% % 6.2% -2.4 p.p p.p p.p. 1, % % +35.8% +60.8% % 8.6% % +1.6 p.p p.p p.p. 1Q 09 2Q 09 3Q 09 4Q 09 1Q % -18.1% +5.6% -13.3% +4.7% -3.3% -1.7% +15.6% +1.4% +17.4% Strong revenues growth through: exposure to high growth markets value strategy in mature markets Effective EBIT growth (+60% yoy) driven by 2 digit volume performance Cost efficiencies Rev. (before exch. rate impact) -11.2% -7.7% +1.4% +13.9% +18.8% Exch. Rate (*) -2.7% -1.5% -3.3% +4.8% +1.0% (*) 4Q 09 trend reflects the high Venezuela inflation impact 19

21 1Q 10 Results: Pirelli Tyre vs. main peers Revenues +19.8% +17.4% +1.4% Top 4 competitors* +15.4% +18.6%** Pirelli Performance drivers: Pioneers in raising prices in a less receptive competitive environment Sales Volumes Price/mix -1.9%** Ebit margin before restr. costs and special items Profitability 6.6% 8.8% 7.7% Profitability improvement due to: volume cost efficiencies factory saturation -1.4% 1Q 09 1Q 10 1Q 09 1Q 10 *Simple average: Michelin, Bridgestone excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech ** Volumes and price/mix trend refer to Michelin, Goodyear and Conti. 20

22 Pirelli Tyre: a solid positioning to capture growth Sales by geographical area 1Q 10 Actions and Results % on sales 100% 100% Yoy growth Europe 46% 42% Mature Markets Europe Strengthened position in value segments (Prestige and Premium OEMs) Green Performance products fuel replacement sales +13% North America North America 8% 9% Strong performance in Replacement and OE sales focusing on selective customers and OE platforms LatAm South America 31% 34% Emerging Markets Consolidating leadership across the region MEA 10% 9% +28% MEA Constrained capacity limiting sales Asia Pacific 5% 6% 1Q 09 1Q 10 Asia-Pacific China is driving the growth 21

23 Pirelli Tyre cost reduction program update 2010 Target 1Q10 Achievements 10 /mln gross savings on track with the annual program Initial benefits from 2009 headcount downsizing >60 /mln gross savings (before raw materials price increase), in line with Y Plan Positive impact on fixed cost following Spanish plant shutdown Start up costs at new Settimo Torinese plant while still producing upstream components at the old one 22

24 Pirelli Tyre operating performance /mln 50.8 (14.1) 7.6 (8.1) (5.2) Raw materials: (6.7) Labour / energy / other: (7.4) EBIT 1Q 09 (before restr. costs) Price mix Volume Cost of inputs Efficiencies Depreciation/ other costs Exchange rate EBIT 1Q 10 (before restr.costs) 23

25 Pirelli Tyre NFP evolution /mln EBIT (before restr. costs): Investments: Depreciation: Δ NWC & others: 98.1 (47.6) 48.3 (132.2) , (6.0) ,027.3 NFP: 95.2 FY 09 Financial charges / Taxes Operating Cash Flow Restructuring Cash out Other 1Q 10 Limited cash absorption (-95 /mln vs -255 /mln in 1Q 09) notwithstanding the seasonality of the business: inventories at efficient level tight credit policy 24

26 Consumer Business: key market trends Car tyre shipments. % (yoy) Europe 1Q 09 2Q 09 OE North America 4Q 09 1Q % +28% +12% +10% -1% -34% -20% -5% -8% Replacement Mercosur 3Q 09 +1% +70% +2% OE -49% -48% -13% -10% Replacement OE -18% -10% +2% Replacement -4% Sources: major external data provider for each region and Pirelli estimates 25-22% +3% +8% +8% +44% +25% +18% +25% -8% +11%

27 Consumer Business: Pirelli economics in 1Q Q 09 /mln YoY% 1Q 10 YoY% Revenues % % EBITDA (before restruct. costs) % % margin EBIT (before restruct.costs) margin 11.5% -3.0 p.p. 13.6% +2.1 p.p % % 6.2% -3.5 p.p. 8.9% +2.7p.p. 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 Price/Mix +6.6% +5.1% +3.6% -0.9% +1.2% Volume -14.7% -9.8% +1.7% +16.4% +14.9% Rev. (before exch. rate impact) -8.1% -4.7% +5.3% +15.5% +16.1% Exch. Rate(*) -2.3% -1.3% -2.2% +5.7% +0.4% Revenue drivers (*) 4Q 09 trend reflects the high Venezuela inflation impact 26 Strong top line performance driven by volume growth in all markets except MEA Profitability improvement due to: volume cost efficiencies factory saturation

28 Industrial Business: key market trends Car tyre shipments, 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 Europe +1% OE -62% -75% -66% -44% +12% Replacement -25% -33% +38% -14% +65% Mercosur +16% OE -29% -26% -27% +23% Replacement -16% -22% Sources: major external data provider for each region and Pirelli estimates 27-10% +26%

29 Industrial Business: Pirelli economics in 1Q 2010 /mln Revenues EBITDA (before restruct. costs) margin EBIT (before restruct.costs) margin 1Q 09 YoY% 1Q 10 YoY% % % % 11.9% -1.0 p.p % 12.3% +0.4 p.p % % 7.5% -1.7 p.p. 8.7% +1.2p.p. 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 Price/Mix +7.2% +6.8% +7.0% -3.5% +1.8% Volume -25.7% -20.9% -13.4% +14.0% +24.1% Rev. (before exch % -14.1% -6.4% +10.5% +25.9% -3.5% -2.2% -5.8% +2.9% +2.5% Revenue drivers rate impact) Exch. Rate(*) (*) 4Q 09 trend reflects the high Venezuela inflation impact 28 Top line growth driven by emerging markets High factory saturation

30 Pirelli Eco Technology: 1Q 10 Key Financial Results /mln FY 09 YoY 1Q % % -34% Ebitda (9.1) -18% (2.3) (0.2) Ebit (10.8) -8% (2.8) (0.8) Net income (13.7) (3.4) (1.4) Revenues YoY -13.9% 1Q 10 YoY % of which Filters Gecam NFP Filters sales growth driven by Italy Gecam sales slowdown due to tax increases on diesel additives New China operations and start up costs negatively impacting Q1 results NFP improving in line with FY 2010 target % -0.9%

31 Agenda Pirelli Real Estate Separation Plan Pirelli 1Q 2010 Financial Review 2010 Outlook & Targets Pirelli Tyre & Parts 1Q 2010 Results 2010 Outlook & Targets Appendix 30

32 Our Strategic Guidelines for A different growth strategy by business Consumer Industrial Pirelli Brand enhancing Premium Segment positioning (>70% of Consumer) in Europe and North America Further exposure in Emerging Markets to best seize growth opportunities Europe Full exploitation of our potentials in areas48% of 56% growth (LatAm, China) LatAm/ MEA/ASIA 27% 22% 18% 73% 78% 82% Improve our cost competitiveness Expected Results Levers Price/mix improvement contrast raw materials cost increase (cost headwind ~200 /mln at current natural rubber price >3,000 $/ton.) Cost efficiency program Production increase in low-cost countries >90% of Industrial (87% in 08) >70% for Consumer (61% in 08) a year in advance! with one factory closure in 2009 (Spain); the old factory in Settimo Torinese (Italy) will be definitively shutdown in Accelerate Investments to build up capacity: over 300 /mln in

33 Pirelli Tyre Selective Positioning in the Consumer Segment Sales Breakdown By Area Pirelli Focus % of sales 100% Emea Production By Area Segment Share 100% Prestige 38% % of production 100% 100% High Cost <39% <30% Low Cost >61% >70% 56% North America South America Asia Pacific 27% 6% Premium 11% 28% 29% 4% Market in 2009 Pirelli in 2009 Synergic Solid foothold in Europe, in prestige/premium segments Low exposure to North America Historical leadership in South America Growth opportunities in Asia-Pacific markets with new China source Source: LMC, Pirelli estimates 32 Pirelli in 2008 Pirelli in 2010 Leading brand in Prestige niche Development partner of all EU premium car makers Only high-end, high added value products Leading supplier to the Automotive in high cost countries Industry in South America Production Footprint moving forward Leader in the Motorcycle business with Pirelli and Metzeler Brands

34 Industrial Segment: a Unique Competitive Position Sales Breakdown By Area Pirelli Focus Production By Area % of sales % of production 100% Emea North America South America Asia Pacific 100% Southern EU and Near-East 27% High Cost 100% 100% 13% <10% 87% >90% 44% 15% China Latin America 11% 48% North Africa Low Cost 48% 8% Market in 2009 Pirelli in 2009 Leading position in Pirelli key markets Sales focus in high growth areas No presence in North America Proprietary steelcord technology Source: LMC, Pirelli estimates Pirelli in Pirelli in 2010 Product cost leadership supported by a low-cost production base

35 Latin America: present & future leadership LEADERSHIP Regional leadership with Net Sales of 1.9$/bln BEST RANGE No.1 local OEM Strategic supplier The only full range player: from 2 wheels tyres to Truck to Agro/OTR No.1 BRAND Top of Mind Brand in Mercosur with 100 yrs of history in Argentina and 80 yrs in Brazil Elected No.1 brand out of all sectors/brands in Brazil by male consumers OUR MAIN STRENGTHS Strongest Dealers network and 1st R&D Centre and Proving Ground created in the region Over 11k committed and loyal employees 34

36 Green Performance platform: Car & SUV LATEST CAR / SUV HIGHLIGHTS International Launch of Scorpion Verde (Barcelona, 15th-25th March), the first new green performance tyre for the SUV & Crossovers segment at the presence of 600 guests between Trade Press & Dealers Very balanced tyre; good on wet and dry surfaces; low fuel consumption; the lowest noise Very balanced summer tyre with very high mark on wet surface; low wear 35

37 US J.D. Power Original Equipment Award PIRELLI N.1 BY THE VOICE OF THE CUSTOMER Pirelli marks highest score in J.D. Power and Associates Original Equipment Tire Study in the Performance/Sport Category segment UHP PLATFORM RECOGNITION April 2010 Tire Customer Satisfaction Study highlights Pirelli with 38 pts above the segment average, a considerable improvement vs the 2009 result The study measured Pirelli s overall consumer satisfaction in the high and ultra-high performance segments Included in the study top fitments such as Aston Martin, Bentley, Ferrari, Lamborghini,Maserati, BMW and Porsche as well as Ford s recent highperformance Mustang GT and the new Camaro SS models 36

38 Diablo Rosso Corsa: the first tyre that can be customized THE TARGET Designed for sport naked and supersport bikers fitted with the same track & road tires THE TECHNOLOGY Three Zone Compound derived from WSBK experience Functional Groove Design: excellent slick like racetrack performance and great control on wet road THE BENEFITS Tires customization to match style & uniqueness of the riders on Provides at least 10 HP more than any other tested supersport tires (internal test) 37

39 Industrial: Green Performance platform 01 series reference Performance Area Green Area TRUCK HIGHLIGHTS: RETREADABILITY & MILEAGE Enhanced tyre life-cycle : improved mileage and environmental impact low rolling resistance fuel saving Tyre 1 First Life Tyre 1 Retr.1 Tyre 1 Retr.2 >3% Km less CO2 emission 38

40 Pirelli and Sustainable Performance Worldwide leader in Autoparts and consecutive year Tyre industry for the third Best in class for Economic, Environmental and Social dimension; Pirelli rating: 88% (+11pp yoy) vs. Autoparts & Tyre average 48% rating Excellence Areas: Health & Safety, Brand Management, Innovation Management, Human Capital development, Labour practice indicators, Talent attraction & retention, Environmental Reporting, Climate Strategy, Standards for Suppliers Included in all major sustainability global indexes: Sector mover 2010 and Gold class Company in the SAM Group and PwC "Sustainability Yearbook" In Sept 09 confirmed for 7 consecutive year Best Italian Company for Corporate Governance - GMI - Pirelli international rating: 9/10 vs Automobiles and Parts average 5/10 rating - Pirelli Country rating (Italy): 10/10 39

41 A proactive pricing policy Europe 2Q % Consumer Tyres +6% Industrial Tyres North America July 2010 China 1Q % Consumer Tyres April 2010 Middle Est Africa January % Consumer Tyres +10% Consumer and Industrial Tyres South America 2Q 2010 Differentiated price increases across the region on both Consumer and Industrial Tyres 40 +4% Consumer and Industrial Tyres

42 An accelerated investment plan: key projects (capacity increase from 2009 to 2011) RUSSIA Greenfield start up ITALY New green factory ROMANIA + 60% Car Tyres CHINA + 20% Truck Tyres + 100% Car Tyres EGYPT + 20% Truck Tyres MERCOSUR + 20% Truck Tyres + 25% Car Tyres Over 300 /mln investments in

43 Pirelli Tyre 2010 targets update /mln FY Targets (10 March 2010) 2010 Targets update >10% Revenues 3,993 +6% / + 8% EBIT % post restruct. 7.7% ~flat yoy (Implicit in the guidance ) (floor) 200 >250 EBIT post restruct. Raw Material Cost headwind Capex (Natural Rubber price 3000 $/ton.) >300 confirmed

44 Pirelli Eco Technology 2010 outlook RETROFIT (Industrial) Conservative 2010 Filters sales plan, while waiting for decision-making process on DPF adoption in Italy, France, Spain Reduced 2010 Gecam sales plan due to additional taxation in Italy and France Improved efficiency from Rumanian factory OEM (Car) Investments linked to new Chinese JV set up Overall double digit sales increase targeting 2010 breakeven and positive cash flow generation 43

45 Appendix 44

46 Pirelli & C Structure PIRELLI & C 100% Pirelli Tyre 51% 100% Pirelli Eco Technology Pirelli Labs Tyre & Parts 45 51% Pirelli Ambiente 100% PZero Moda 58% Pirelli RE 100% Pirelli Broadband Solutions

47 Pirelli Group 1Q 10 Results Profit & Loss and Net Financial Position by Business Unit /mln Pirelli Tyre Sales % % on organic sales Pirelli Eco Technology Pirelli Real Estate Broadband Access Others Pirelli & C. Cons. 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q 09 1, % -3.9% (0.5) , % -38.2% (0.2) % 37.1% (2.3) (4.3) (6.0) , % 15.3% % 6.1% 12.2% 9.8% % 5.7% 7.8% (2.6) 4.8% (3.5) (8.2) % % (2.9) EBITDA before Restruct Costs % 18.8% % on sales 13.2% 11.6% n.s. n.s. EBIT before Restruct Costs (0.8) (2.8) % on sales Restructuring Costs 8.8% (2.6) 6.6% (3.5) EBIT % on sales % % (0.8) (2.8) (2.2) (2.2) (7.1) (7.1) Devaluation/sale of particip.in listed companies (12.5) EBIT incl. income from equity part. 3.9 (14.7) Shareholders loans interests EBIT incl. income from equity part. and shareholders loans interests 10.4 (6.2) EBIT incl. inc. from equity part.after restr. costs. writedown/ reval (6.2) (5.3) (8.3) (0.7) 2.9 (21.8) (28.7) (4.1) (2.1) (0.1) (0.1) (1.1) (0.8) (34.6) (26.3) 1.0 (16.6) (12.0) %. 0.1% ,278.9 Results from equity partecipations 3.5 Other Financial Income/Charges (16.4) (23.1) (0.5) Fiscal Charges (29.2) (23.3) (0.1) Net income (1.4) % on sales 4.5% 1.6% (0.6) (3.4) Attributable Net income Net Financial Position 1, , (15.8) (3.1) (8.2) (23.6) (32.3) (517.8) (546.7)

48 Pirelli Group 1Q 10 Results Profit & Loss and Net Financial Position by Business Unit /mln Pirelli Ambiente Sales PZero Corporate Total Others 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q 09 1Q 10 1Q (1.5) % 46.2% 72.2% EBITDA before Restruct Costs (1.4) (0.7) 0.1 (0.9) (3.0) (4.4) (4.3) (6.0) EBIT before Restruct Costs (1.8) (0.8) 0.0 (0.9) (5.3) (6.5) (7.1) (8.2) (6.5) (7.1) (8.2) (3.1) 9.8 (3.1) 9.5 (0.3) 3.0 (0.7) 2.9 (1.1) (0.7) (1.1) (0.8) Restructuring Costs EBIT (1.8) (0.8) 0.0 (0.9) (5.3) Devaluation/sale of particip.in listed companies (0.3) Results from equity partecipations Financial Income/Charges (0.4) (0.1) (0.1) Fiscal Charges Net income (2.2) (1.2) 0.0 (1.0) (9.8) 5.9 (12.0) 3.7 Net Financial Position (567.5) (554.0) (517.8) (546.7) 47

49 Pirelli Balance Sheet /mln 1Q 10 FY 09 Fixed Assets 3,653.4 Net Working Capital Net Invested Capital , , Equity 2, ,494.7 Provisions Total Assets , ,818.0 Pirelli & C. attributable Equity 2, , Net Financial Position Equity per share 3,818.0 % Net Invested Capital % 65.6% P.Eco Tech. 1.3% 1.5% P.Real Est. 19.2% 20.3% 0.2% -0.1% 12.7% 12.7% P.Tyre PBS Others

50 Pirelli Group Cash Flow /mln 1Q 09 FY 09 1Q 10 EBIT before restructuring costs Depreciation Net investments (42.9) (227.8) (50.1) Working capital/other variations (262.8) (155.9) FREE CASH FLOW (204.0) (58.7) Financial income (expenses) (20.2) (85.4) (15.3) Tax charges (26.3) (97.9) (34.6) OPERATING CASH FLOW (250.5) (108.6) (2.4) - (45.8) (106.2) (38.3) PRE Capital increase subscribed by minorities Exchange rate differentials/others 7.2 (151.8) (2.7) (251.2) (149.6) Financial investments/divestitures Dividends paid Cash out for restructuring NET CASH FLOW 49

51 Pirelli Group: Net financial position 1Q 10 by Business /mln TYRE PRE OTHER BUSINESSES CORPORATE PIRELLI GROUP Gross Debt 1, ,768 to Corporate Financial receivables (97) (414) (26) (545) (511) Cash and cash equivalents (269) (18) (10) (282) (579) Net Financial Position 1, (568)

52 World Tyre Market Delta share 2008 vs 2000 (PNT) Total Market Market Share + 7.2% Bl$ % ,0% ,0% Bridgestone -3.2 Michelin -3.0 Goodyear -5.6 Continental -1.4 Pirelli ,0% ,0% ,0% Revenues Market share Source: Tire Business reports for data; 2009 Pirelli estimate E

53 Our growth strategy in the Consumer market Market Outlook Our Growth Strategy North America Car tires, Mln pieces +4 5% 1000 Replacement Keep growing our market share in the Replacement segment: new products, new customers, brand pull EMEA Replacement: EU + Nafta Emerging: +4% +3% +5-6% More selective and focused on OEMs, while increasing sales in Replacement with Green Performance products and winter re-stocking OE: EU Nafta Emerging: % Flat +20% +5-6% LatAm Consolidate leadership Replacement segments in both OE and OE 200 Asia-Pacific Source: LMC. Pirelli estimates 52 Exploit competitive China source to increase coverage and penetration in major APAC markets; initiate OE in China with European premium transplants

54 and in the Industrial market Market Outlook Our Growth Strategy Mln pieces. Percent. Radial + truck tires Emea +6 7% 140 Consolidate market recovery Replacement 120 LatAm Replacement: EU + Nafta Emerging: % +4-5% +5-6% 2010 OE: EU Emerging: 40 Consolidate leadership in Mercosur increasing share in Central America Asia Focus on Chinese market due to capacity saturation +10% +20% +6-7% SteelCord OE Source: LMC. Global Insight. Pirelli estimates 53 while Leverage vertical integration and innovation

55 1Q 10 Pirelli Tyre Mix Sales by business Sales by segment Car 60% Consumer 70% Motorbike 10% Steelcord & others 3% Industrial 30% Truck 27% Sales by channel Sales by region Replacement 77% Latin America 34% OE 23% North America 9% Asia Pacific 6% MEA 9% Europe 42% 54

56 1Q 10 Pirelli Tyre People Headcount People by region 28,078 Latin America 44% 27,304 North America 1% Asia Pacific 8% MEA 10% Mar. 09 Europe 37% Mar. 10 People by contract Permanent 91% People by cluster Workers 81% Employees 18% Temps & Agency 9% Management 1% 55

57 Raw Materials Raw Materials price trend Q mix (Based on purchasing cost) Natural Rubber 31% Synth. Rubber 22% (-5pp yoy) Carbon black 12% (+6pp yoy) (+1pp yoy) Steelcord 9% (stable) Chemicals 15% (stable) Textiles 11% 40.0 QI/07 QII/07 QIII/07 QIV/07 QI/08 QII/08 QIII/08 QIV/08 Natural Rubber (-2pp yoy) QI/09 QII/09 QIII/09 QIV/09 Brent Oil QI/10 QII/10

58 Pirelli Tyre: 20 industrial plants in 11 Countries (as of March 2010) Italy Bollate (MI) Car Settimo Torinese Car Settimo Torinese Truck Figline Valdarno Steelcord U.K. Burton Carlisle Germany Breuberg Merzig Car Car Car/Moto Steelcord Turkey Izmit Car/Truck Steelcord U.S.A Rome Car Romania Slatina Car/Steelcord Venezuela Guacara Car China Yanzhou Brazil Campinas Car Feira de Santana Car/Truck Santo André Truck/Agro Gravatai Moto/Truck Sumaré Steelcord 57 Argentina Merlo Egypt Car Alexandria Truck Car/Truck