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PIRELLI Industrial Plan: Sustainability Plan 2013-2017 with selected targets for 2020

Today Pirelli group’s top management presented the Pirelli Industrial Plan to the financial community, in London.

With a vision to 2020, Pirelli Sustainability Plan fully integrates the group’s Industrial Plan, and was developed in accordance with the “Value Driver” model of UN PRI and UN Global Compact. Growth, productivity, governance and risk management are the guidelines throughout which the 2020 targets were set.

Links:

Pirelli Industrial Plan -“Sustainability Plan”

Pirelli Industrial Plan – FULL BOOKLET

Pirelli Industrial Plan – Press Release (please see page10 for Sustainability)

Pirelli Industrial Plan – dedicated web section


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The Pirelli & C. SpA Board approves Consolidated Results at 30 September 2013

• STRONG DEMAND IN EMERGING COUNTRIES OFFSETS WEAKNESS IN EUROPE AND RUSSIA

• GROWTH IN VOLUMES IN THIRD QUARTER SUSTAINED MAINLY BY PREMIUM

• OPERATING IMPROVEMENT IN THIRD QUARTER COMPARED WITH LAST YEAR AND THE PRIOR QUARTER THANKS TO EFFICIENCIES AND DESPITE EXCHANGE RATE EFFECT

• IN THE THIRD QUARTER EBIT MARGIN GROWS TO 13.2% FROM 12.6% A YEAR EARLIER

PIRELLI & C. SPA

• REVENUES 4,649.9 MILLION EURO ON 30 SEPT. 2013 (+1.7% COMPARED WITH 4,574.1 MILLION A YEAR EARLIER), AN INCREASE OF 8.3% WITHOUT EXCHANGE RATE EFFECT

• PREMIUM REVENUES: 1,675.3 MILLION EURO (+3.9% FROM 1,612.3 MILLION A YEAR EARLIER)

• TOTAL VOLUMES +6.0% IN THE NINE MONTHS

• PREMIUM VOLUMES +11.7% IN THE NINE MONTHS

• INDUSTRIAL VOLUMES +11.8% IN THE NINE MONTHS

• EBIT: 581.7 MILLION EURO (-3.2% FROM 600.8 MILLION A YEAR EARLIER)

• EBIT MARGIN AT 12.5% FROM 13.1% A YEAR EARLIER

• NET PROFIT 258.1 MILLION EURO (-14.9% FROM 303.3 MILLION A YEAR EARLIER)

• NET FINANCIAL POSITION NEGATIVE 1,970.9 MILLION EURO (1,732.6 MILLION EURO ON 30 JUNE 2013) FOLLOWING IMPACT OF PRELIOS OPERATION

TYRE ACTIVITIES

• REVENUES 4,625.8 MILLION EURO (+1.8% COMPARED WITH 4,542.9 MILLION A YEAR EARLIER), AN INCREASE OF 8.4% WITHOUT EXCHANGE RATE EFFECT

• EBIT 599.8 MILLION EURO (-3.3% FROM 620.3 MILLION A YEAR EARLIER)

• EBIT MARGIN 13.0% FROM 13.7% A YEAR EARLIER

• CONSUMER BUSINESS EBIT MARGIN 12.8% (14.8% A YEAR EARLIER)

• INDUSTRIAL BUSINESS EBIT MARGIN 13.5% (10.5% A YEAR EARLIER)

2013 TARGETS

• TOTAL REVENUES SEEN AT APPROX. 6.2 BILLION (APPROX. 6.3-6.35 BILLION PREVIOUSLY)

• TOTAL VOLUMES INCREASE BETWEEN 6% AND 6.5% (BETWEEN 5.5% AND 6.5% PREVIOUSLY)

• CONSOLIDATED EBIT APPROX. 790 MILLION EURO (DUE TO EXCHANGE RATE EFFECTS AND RUSSIA PERFORMANCE COMPARED WITH APPROX. 810 MILLION PREVIOUSLY)

• INVESTMENT CONFIRMED AT APPROX. 400 MILLION EURO

• CASH GENERATION BEFORE DIVIDENDS CONFIRMED ABOVE 200 MILLION EURO AND NET FINANCIAL POSITION BELOW 1.2 BILLION EURO, BEFORE PRELIOS IMPACT

• BOARD CO-OPTS GAETANO MICCICHẾ

* * *

Following the coming into effect from 1 January 2013 of the new principle IAS 19 revised “Benefits to employees”, the data relative to 2012 were restated. In the present document, the comments of variation with respect to 30 September 2012 always refer to restated data, unless otherwise indicated.

* * *

The Board of Directors of Pirelli & C. SpA today reviewed and approved the interim financial results as of 30 September 2013.

The first nine months of 2013, as had already emerged in the first six months, reflected the weakness in the European economy which for Pirelli meant a falloff in sales in the area, albeit with signs of recovery in the third quarter compared with the previous quarter. The Russian market also showed signs of slowing due to changes in the economic climate and a fall in vehicle registrations following the end of government incentives, with a consequent downturn in consumer demand, both for the Original Equipment and Replacement markets.
The healthy trend in emerging markets meanwhile has more than offset the weakness in mature markets, with an 8% increase in revenues compared with a fall in sales in Europe and North America. Performance was particularly positive in South America (+9%) and in Apac (+16%), while the Middle East/Africa area reported results in line with the previous-year period.

Volumes grew in both business segments: +3.9% in Consumer (+6% in Q3) thanks to increased sales in South America and Premium’s strong performance in China and Nafta as well as Europe, while Industrial growth was 11.8% (+4.0% in Q3) mainly focused in South America.

Performance for the Premium segment was positive, with 3 times the growth in volumes compared with those of the Consumer segment, and a favourable trend in demand in emerging countries, in particular in the third quarter.

Sales and operating profit in the first nine months of 2013 both felt the impact of exchange rates, which were particularly unfavourable in the third quarter of 2013 largely due to currency devaluations in Latin America, Turkey, Egypt and Japan. Notwithstanding forex effects, EBIT in Q3 came to 201.0 million euro, up 2.8% from the corresponding period of 2012. This figure includes a negative exchange rate impact of 18.8 million euro.

Net cash flow from operations was also positive in the third quarter (as in Q2), for 45.3 million euro compared with a negative 62.1 million euro in the same period of 2012.

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PIRELLI & C. SPA BOARD APPROVES RESULTS FOR 6 MONTHS ENDED 30 JUNE 2013

• DECIDED OPERATIONAL IMPROVEMENT IN SECOND QUARTER, WITH REVENUE AND PROFITABILITY GROWTH COMPARED WITH FIRST QUARTER

• GROWTH DRIVEN BY EMERGING MARKETS, EUROPE ALSO RECOVERING

• POSITIVE OPERATIONS’ CASH FLOW IN SECOND QUARTER THANKS TO MANAGEMENT OF WORKING CAPITAL

PIRELLI & C. SPA

RISULTS FOR SECOND QUARTER 2013

• REVENUES: 1,594.8 MILLION EURO IN SECOND QUARTER (+8.8% COMPARED WITH 1,465.3 MILLION EURO IN SECOND QUARTER 2012 AFTER -1.3% IN FIRST QUARTER 2013)

• TOTAL VOLUMES +8.8% IN SECOND QUARTER (-7.6% IN SECOND QUARTER 2012 AND AFTER +3.9% IN FIRST QUARTER 2013)

• PREMIUM VOLUMES +12.9% IN SECOND QUARTER (+12.3% IN SECOND QUARTER 2012 AND AFTER +4% IN FIRST QUARTER 2013)

• EBIT: 200.9 MILLION EURO (+4.2% COMPARED WITH 192.7 MILLION EURO IN SECOND QUARTER 2012 AND AFTER -15.5% IN FIRST QUARTER)

• EBIT MARGIN 12.6% (13.1% IN SECOND QUARTER 2012 AND 11.7% IN FIRST QUARTER 2013)

• NET PROFIT 78 MILLION EURO (94.9 MILLION EURO IN SECOND QUARTER 2012 AND 72.1 MILLION IN FIRST QUARTER 2013)

• OPERATIONS’ CASH GENERATION 188.3 MILLION EURO (-316.8 MILLION IN FIRST QUARTER 2013 AND -80.9 MILLION EURO IN SECOND QUARTER 2012)

FIRST HALF RESULTS 2013

• REVENUES: 3,131.1 MILLION EURO ON 30 JUNE 2013 (+3.6% COMPARED WITH 3,021.8 MILLION A YEAR EARLIER), AN INCREASE OF 8.6% NET OF EXCHANGE RATE EFFECT

• TOTAL VOLUMES +6.3% IN THE SEMESTER (-7.5% A YEAR EARLIER)

• PREMIUM VOLUMES +8.3% IN THE SEMESTER (+14% A YEAR EARLIER)

• INDUSTRIAL VOLUMES +16.1% IN THE SEMESTER (-11.8% A YEAR EARLIER)

• EBIT: 380.7 MILLION EURO ON 30 JUNE 2013 (-6.1% COMPARED WITH 405.3 MILLION A YEAR EARLIER)

• EBIT MARGIN 12.2% ON 30 JUNE 2013 (13.4% A YEAR EARLIER)

• NET FINANCIAL POSITION NEGATIVE 1,732.6 MILLION EURO

(1,205.2 MILLION ON 31 DECEMBER 2012, 1,702.7 ON 30 JUNE 2012)

TYRE ACTIVITIES

• REVENUES: 3,114.0 MILLION EURO ON 30 JUNE 2013 (+3.8% COMPARED WITH 3,000.3 ON 30 JUNE 2012), AN INCREASE OF 8.8% NET OF EXCHANGE RATE EFFECT

• EBIT: 392.8 MILLION EURO ON 30 JUNE 2013 (-6% COMPARED WITH 418.2 MILLION ON 30 JUNE 2012) WITH AN EBIT MARGIN OF 12.6% (13.9% ON 30 JUNE 2012)

• CONSUMER BUSINESS EBIT MARGIN 12.4% (15.2% ON 30 JUNE 2012)

• INDUSTRIAL BUSINESS EBIT MARGIN 13.1% (10.2% ON 30 JUNE 2012)

2013 TARGETS

• TOTAL REVENUES SEEN BETWEEN 6.3 AND 6.35 BILLION EURO

• CONSOLIDATED EBIT AT AROUND 810 MILLION EURO, IN LINE WITH THE BASE OF PREVIOUS RANGE (810-850 MILLION EURO)

• INVESTIMENTS CONFIRMED AT AROUND 400 MILLION EURO

• CASH GENERATION BEFORE DIVIDENDS CONFIRMED AT ABOVE 200 MILLION EURO AND NET FINANCIAL POSITION BELOW -1.2 BILLION EURO, BEFORE THE RECLASSIFICATION OF PRELIOS CREDIT

Following the coming into effect from 1 January 2013 of the new principle IAS 19 revised “Benefits to employees”, the data relative to 2012 were restated. In the present document, the comments of variation with respect to the first half of 2012 always refer to restated data, unless otherwise indicated.

The Board of Directors of Pirelli & C. SpA today reviewed and approved financial results for the six months ended 30 June 2013.

The first half of 2013, as had already emerged in the first quarter, confirmed the weakness of the European economy, even if there are signs of recovery in the second quarter. In the first half, the negative influences on consumer dynamics translated in the European tyre market into a 5% contraction in demand both in the Original Equipment and Replacement channels. In the second quarter, nonetheless, a recovery in demand resulted in a 3% increase on an annual basis in the Consumer segment replacement channel after a fall of 11% in the first three months of the year, as well as a confirmation of the positive growth rates in the Premium segment on which Pirelli is focused. The performance of the South American markets was positive overall in both segments and in China for the Consumer part: in these areas, as in Nafta, the Premium segment continued to grow.

In the semester, Pirelli’s group results reflect overall macroeconomic performance and, as such, underscore a reduction in sales and results in Europe, offset by growth in other geographic areas and with marked signs of recovery in the second quarter compared with the first three months of the year.

The second quarter of 2013, in fact, saw 8.8% growth in revenues on an annual basis after the 1.3% decline of the preceding quarter, in particular thanks to the positive dynamics of emerging Countries, where performance sustained the Premium segment and the Industrial business, concentrated in these geographic areas.

Profitability (12.6% compared with 11.7% in the preceding three months) benefitted from the positive volume performance (+8.8% after +3.9%) and the improvement in price/mix (+5.1% in the second quarter compared with zero impact in the preceding quarter) which, together with a fall in the cost of raw materials and continuous efficiencies, contributed to the balancing of increased costs of production factors, costs in support of future growth in Premium (industrial costs for the Mexico and Russia start-ups, and commercial and marketing costs), as well as higher amortizations linked to the peak in investments of the last two years. The reduction of the operating result compared with the first half of 2012 was essentially due to the greater impact of consolidation exchange rates which had an impact of around 19 million euro.

Operations’ cash generation was also positive in the quarter, for 188.3 million euro after negative 316.8 million euro in the first quarter of 2013, as a consequence of the working capital performance which was markedly better compared with the previous year.

Pirelli & C. SpA

Consolidated revenues on 30 June 2013 amounted to 3,131.1 million euro – an increase of 3.6% compared with 3,021.8 in the first half of 2012. Excluding a negative impact of 5% linked to exchange rates, total revenues grew 8.6%. In the second quarter, in particular, revenues were1,594.8 million euro, with an increase of 8.8% (1,465.3 million euro) which follows a contraction of 1.3% experienced in the first three months of 2013.

Gross operating margin (EBITDA) before restructuring costs was 533.5 million euro, a reduction of 3.1% compared with 550.3 million euro in the same period of 2012. In the second quarter, in particular, the gross operating margin was 278.2 million euro, an increase of 9% compared with 255.3 million euro in the first quarter of the year and 2.6% compared with 271.2 million in the second quarter of 2012.

The operating result (Ebit) was 380.7 million euro, a decrease of 6.1% compared with 405.3 million in the same period of 2012. The negative variation of 24.6 million euro was due for about 19 million euro to the effect of exchange rates. The positive contribution of volumes (+46 million euro), price/mix stability and lower raw material costs (+68.2 million euro impact on Ebit), together with gross efficiencies, covered the higher production costs, including amortizations. The result was also impacted by restructuring charges of 7.4 million euro linked to constant measures for the rationalization of structures (14.5 million non- recurring charges in first half 2012). The Ebit margin – expressed as a percentage of sales – in the first half stood at 12.2%, compared with 13.4% in first half 2012.

In the second quarter, Ebit was 200.9 million euro (+4.3% compared with 192.6 million in second quarter 2012), with an Ebit margin of 12.6%, an improvement from 11.7% in the first three months of 2013 (13.1% in second quarter 2012).

The result from shareholdings on 30 June 2013 was negative 24.3 million euro and principally reflects consolidation using the net asset method linked to Rcs Mediagroup, negative 12.6 million euro, and the adjustment of the value of the stake in Mediobanca (10.4 million).

The total consolidated net profit was 150.1 million euro, a decrease of 31% from 218.5 million euro in the same period of 2012. In the second quarter of 2013 net profit was 78 million euro, a decrease of 17.8% compared with 94.9 million in the second quarter of 2012, but an increase of 8.2% from 72.1 million in the preceding quarter.

The consolidated net profit attributable to Pirelli & C. Spa in June amounted to 151.4 million euro, compared with 216.3 million euro in the same period of 2012.

Consolidated net assets on 30 June 2013 stood at 2,321.8 million euro compared with 2,389.4 million euro on 31 December 2012. Consolidated net assets attributable to Pirelli & C. SpA amounted to 2,279.3 million euro, compared with 2,337.4 million euro on 31 December 2012.

The consolidated net financial position was negative 1,732.6 million euro compared with 1,680.2 million euro on 31 March 2013 and 1,205.2 on 31 December 2012. The variation essentially reflects the usual seasonality of net working capital, concentrated in the first quarter of the year, and dividend payments to shareholders in the second quarter of 159.8 million euro, of which 156.7 million euro of the Parent Company. Gross debt stood at 2,562.5 million euro (2,455.5 million euro at end December 2012).

Net cash flow from operations in the first half of 2013 was negative 128.5 million euro, essentially as a result of the usual seasonality of working capital which absorbed cash which was, however, lower than in the same period of 2012. During the period, investments were made totaling 164 million euro (1:1 the relationship to amortizations), focused in the development of Premium in particular in Russia, Mexico, Romania and China. In the second quarter the net cash flow from operations’ management was positive188.3 million euro, also thanks to the performance of net working capital which was decidedly better than in the second quarter of 2012 (-80.9 million euro).

Total net cash flow improved, passing from negative 965.6 million euro in the first half of 2012 to -527.4 million euro on 30 June 2013. The first half number reflects, among other things, about 20 million euro relative to the impact on the net financial position of variations in exchange rates and 159.8 million euro relative to the payment of dividends. Total cash flow in the second quarter of 2013, before the cited dividend payments, was therefore positive 107 million euro.

The Group headcount on 30 June 2013 was 38,138 (37,338 on 31 December 2012).

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