FORMULA 1 TYRES TAKE TO THE TRACK AT JEREZ

The Formula 1 World Championship is warming up its engines at Jerez, Spain, where the teams are taking part in a test session from 7-10 February, trying out the new Pirelli tyres. Each car will have available to it the soft, medium and hard variants, as well as wet weather and slick tyres.

In the improbable eventuality of rain at Jerez over the next few days, drivers will also be able to count on the return of the historic Cinturato.

The teams have available to them a maximum of 100 sets of tyres for the tests and can, as part of that quantity, choose which tread compounds to adopt during the four days.

This will be the session when drivers will try out the ‘squarer’ profiles which, as announced in Abu Dhabi, will ensure extremely high performance and last longer but without renouncing spectacle. The Jerez circuit has many variants, especially ample fast and slow corners, enabling the teams to sample their tyres in the various driving conditions.

The new Pirelli P Zero Silver, the first road car tyre derived from Formula 1 technology, will be presented at Jerez simultaneously.

PEERS & MARKETS

Key european stock market indices were mixed in the week from the 23rd to the 27th of January, 2012 (Milan +2%, London +0.1%, Frankfurt +1.7%, Paris -0.1%). According to the IMF, world GDP growth in 2012 will be slower than anticipated (+3.3% vs 4% previously), and Eurozone GDP will contract by 0.5%. The US Federal Reserve stated the intention to keep benchmark interest rates at the current low levels until 2014, and added that other stimulus measures are still on the table. In the bond market, the spread between Italian BTPs and German Bunds narrowed by approx. 100bps, after the successful outcome of Italian sovereign debt auctions (3y Ctz yield down to 3.76% from 4.85%).

Within the Auto & Parts sector (European index up 1.1% vs Stoxx 600 -0.2%), Auto OEMs and Parts producers outperformed, thanks to positive US durable goods data. Tyre stocks were weak, including Pirelli which ended the week down 1.9% at €7.08, in line with peers. According to brokers Exane, Equita and Intermonte, Pirelli will hit 2011 profitability targets notwithstanding the softness in Q4 volumes; attention now turns, according to Intermonte, to H1 2012 sales which should be sustained by the low level of summer tyre stock held by dealers.

PEERS & MARKETS

European stock markets advanced in the week from the 16th to the 20th of January 2012 (Milan +4.1%, London +1.6%, Frankfurt +4.3%, Paris +3.9%). Investors reacted positively to the newsflow around the Euro sovereign debt crisis, such as the strenghtening of the EFSF (worth $500 bln), the possible conclusion of the negotiations between Greece and private sector creditors and the increase in Euro-area bond purchases by the ECB in the secondary market (€3.7 bln). Over the week, the spread between Italian BTPs and German Bunds narrowed significantly.

Auto & Parts stocks were up strongly: sector index Stoxx posted a +8.9% increase over the week, as broker Goldman Sachs affirmed the attractiveness of the sector while upgrading Pirelli to Buy rating and increasing its Price Objective to €14.3 (from €9.4), making it the highest in the coverage universe. Pirelli closed the week up +9.6% at €7.22

Pirelli Investor Relations