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Sustainability Channel is the communication channel towards our stakeholders interested in Sustainable approach to the business.

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PIRELLI SUPPLIER AWARDS 2017: SUPPLIERS OF PRIMARY MATERIALS IN THE SPOTLIGHT

INNOVATION, QUALITY, EFFICIENCY AND SUSTAINABILITY: THE KEY FACTORS BEHIND THE CHOICE OF THE WINNERS

SPECIALISTS IN LOGISTICS, CYBER SECURITY, MACHINERY, MOULDS, AND EVENTS ALSO REWARDED

Milan, September 8, 2017 – The quality of any product always begins with the choice and characteristics of its primary materials: all the more so when we are talking about a tyre made up of many different ingredients, all which have a crucial impact on safety and performance. This was the key consideration that guided Pirelli’s cross-departmental team when it came to deciding the winners of this year’s Supplier Awards. In this, the sixth year of the annual awards, it is the suppliers of primary materials who have been the most successful, scooping four prizes of the nine available. This emphasis is justified by the numbers: 46% of Pirelli’s total expenditure (equivalent to 1.54 billion euros in 2016) goes towards primary materials.

Handing out the prizes to the suppliers who have shone throughout last year, delivering on-time quality to the supply chain or end product, was Pirelli’s Executive Vice Chairman and CEO Marco Tronchetti Provera, as well as Pirelli’s Head of Purchasing Pier Luigi de Cancellis, in a ceremony that took place at the Italian firm’s headquarters in Milan. The recipients of the awards, as well as primary materials suppliers, included producers of machinery and moulds, cyber security experts, logistics firms, and event management companies. The winners came from three continents – Europe, Asia and America – and six countries (China, Italy, Germany, Japan, Romania, the United States, and Thailand).

These are the companies who won the 2017 Supplier Awards:

Jiangsu Xingda Steel Tyre Cord Co Ltd (China): one of the premier producers of metallic reinforcements; Cabot Corporation: an American group which is a leader in carbon black production; Zeon Corporation: a Japanese company that supplies synthetic rubber; Thai Eastern Innovation: an important producer and exporter of natural rubber headquartered in Chonburi; Karl Eugen Fischer GmbH: a German supplier of tyre production machinery; Himile Mechanical Science and Technology: the world’s most important producer and supplier of tyre moulds; Com Divers Logistic Srl (Romania): a key player in the logistics sector; Reply: an Italian firm specialising in cyber security and IT services, and finally Newtonlab: an events company from Italy.

De Cancellis commented: “Pirelli’s corporate strategy, focused principally on the top of the range, is shared with all our suppliers, whom we consider to be genuine partners working towards common goals in terms of innovation, transparency, quality, flexibility and sustainability. To maintain the high standards that have always characterised our brand, it’s essential for us to have primary materials, services, and production systems that are at the very highest level, while complying with the stringent sustainability regulations we have set ourselves. With these objectives always in mind, Pirelli is constantly looking all over the world for the very best suppliers, which are continually verified.”

Pirelli’s purchasing department is made up of around 175 worldwide specialists. They manage more than 9500 global suppliers who are specially selected according to criteria such as capacity for innovation, quality of goods and services, sustainability, and efficiency within the supply chain. Pirelli’s constant analysis does not just stop at the suppliers themselves but also considers the suppliers of the suppliers.

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PIRELLI’S CONTRIBUTION TO THE UN GLOBAL OPPORTUNITY EXPLORER


Yesterday, April 26th, during the UN Global Compact Annual Conference in New Delhi, the Global Opportunity Explorer Platform was officially launched.

The platform is a joint project of Sustainia, DNV GL and the UN Global Compact, created with the aim of sharing hundreds of sustainable solutions and business opportunities addressing the Sustainable Development Goals (SDGs).

The SDGs are put at the centre of all the corporate solutions presented inside the Global Opportunity Explorer, with the belief that business plays significant role in making the world more sustainable by 2030.

Pirelli contributed to the platform presenting its business solution called “Sustainable Rubber Tapping that Improves Livelihoods” mainly linked to SDGs 4-Quality Education, 8-Decent Work and Economic Growth and 15-Life on Land.

The Natural Rubber Sustainability Program, activated in Indonesia with Kirana Megatara, was developed in order to spread awareness of the best growing and tapping techniques for rubber trees; this leads to higher revenues for farmers and lower rates for deforestation associated with unsustainable practices.

Click here to read more about Pirelli’s project on the Global Opportunity Explorer Platform

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BOARD OF PIRELLI & C. S.P.A. APPROVES RESULTS FOR YEAR ENDED 31 DECEMBER 2016

- Growth of all main economic indicators in 2016

- Further strengthening of Premium: volumes grow by 14.2% and revenues represent 64.0% of the Consumer business (61.5% in 2015)

- Improvement of price/mix: +5.0% thanks above all to the sales mix

- Progressive improvement in volumes, growth of 2.1% (+5.1% in fourth quarter)

- Efficiencies of 90.5 million euro: reaching 79% of 4-year 2014-2017 target of 350 million euro

- Profitability growth, with a total Adjusted Ebit margin of 14.8% (14.4% in 2015 on like-for-like basis). Record profitability for the Consumer business with an adjusted Ebit margin of 16.8% for the year (16.2% in 2015 on like-for-like basis)

- Significant improvement of net financial position

- Europe sees increased profitability. Apac and Nafta remain most profitable areas

- Investment in Research & Development of 228.1 million euro, equal to about 4% of total revenues (6% of Premium segment revenues)

- The process of Pirelli’s transformation continues

***

As an effect of the acquisition by Marco Polo Industrial Holding S.p.a. of Pirelli and its subsequent merger by incorporation of Marco Polo Industrial Holding S.p.A. into Pirelli, following the Purchase Price Allocation (PPA) conducted on the basis of that which is established in the relevant accounting principles, greater amortizations were booked mainly referable to immaterial assets identified in the context of this operation. The “EBIT adjusted” excludes – beyond non-recurring and restructuring charges – also amortization that refer to intangible assets identified in the PPA.

***

The Board of Directors of Pirelli & C. S.p.A. has reviewed and approved the group’s results for the year ended on December 31, 2016. The results for 2016 show growth in the main economic indicators.

Revenues amounted to 6,058.4 million euro, with organic growth of 7% at the annual level (on a like-for-like basis and net of forex effects, which were negative 5.4%) and of 8.7% in the fourth quarter. The revenue trend benefitted from strong growth – both in the Consumer and Industrial businesses – of the price/mix component (+5.0%) in particular thanks to improvement in the sales mix, as well as price increases in emerging markets.

Volumes’ performance was positive (+2.1% in 2016, +5.1% in the fourth quarter) thanks to the Consumer business (+3.5% during the year, +4.8% in the fourth quarter). The performance of Industrial volumes, negative at the annual level (-3.8%) as a result of the weakness of the South American market, registered growth in the fourth quarter of 6.5% thanks to the business’s recovery in the region, above all in the Replacement channel.

Premium saw improvement with volume growth of 14.2%, above the Premium market’s global trend (+9.4%). The segment posted organic growth of 12.3% to 3,244.6 million euro, accounting for a total of 64% of Consumer revenues, up from 61.5% in 2015 on a like-for-like basis.

The Adjusted Ebit (operating result before non-recurring and restructuring charges and amortization of intangible assets identified in the context of PPA) was 896.6 million euro (860.5 million in 2015 on a like-for-like basis), with an Adjusted Ebit margin growing to 14.8% compared with 14.4% in 2015 on a like-for-like basis. The improvement can be attributed to internal levers such as volumes’ growth, price/mix and efficiencies achieved to contrast forex volatility, increased raw material costs and inflation in emerging markets. Efficiencies totaled 90.5 million euro, bringing the total of efficiencies achieved since 2014 to 277.3 million euro, equal to 79% of the 4-year 2014-2017 target of 350 million euro.

The operating result (Ebit) was 724.2 million euro (compared with 786.1 million in 2015 on a like-for-like basis) and mainly reflects 66.6 million in non-recurring and restructuring charges linked to rationalization processes and costs related to reorganization activities of the Industrial segment and 105.8 million euro relative to amortizations for intangible assets resulting from the acquisition of Pirelli assets by Marco Polo.

The total net result was 147.6 million euro compared with -383.5 million in 2015. This figure included a loss of 559.5 million for the de-consolidation of Venezuela and a negative impact of 14.6 million euro deriving from the operational activities disposed of. The result from equity investments was negative 20 million euro (-41.4 million euro in the same period of 2015).

The net cash flow from operations shows a net improvement, passing from 701.4 million in 2015 to 882.7 million euro in 2016, thanks to the management of working capital, and after having sustained investments of 372.2 million euro (391.4 million in 2015), mainly earmarked for increases of Premium capacity in Europe, Nafta and China, as well as improvements in the mix.

The total net cash flow – before dividends and the effects deriving from the merger with Marco Polo Industrial Holding and from the re-organization of the industrial activities – was positive for 383.1 million euro (192.1 million euro in 2015) and include approximately 200 million euro of inflows deriving from the sale of some shareholdings (mainly the disposal of the investment held by Eurostazioni S,p.A. in Grandi Stazioni Retail) and real estate assets.

The net financial position on 31 December 2016 was negative 4,912.8 million euro, an improvement of 418.2 million compared with 5,331.0 million euro at the end of 2015. The positive performance stems mainly from the high level of cash generation, as well as an inflow of 266 million euro deriving from the entry, with a stake of 38%, of the Chinese fund Cinda into the capital of Pirelli Industrial in the context of the reorganization project of the industrial business.

Investments in Research & Development totaled 228.1 million euro, equal to about 4% of total sales, of which 191.0 million euro for activities linked to Premium products (about 6% of the segment’s sales).

At the geographic level, Apac registered, together with Nafta, the highest profitability of all the macro-areas, remaining at the twenties level. Revenue performance improved (organic growth +12.1% in 2016 and +25.4% in the fourth quarter) which include the sales of Jiaozou Aeolus Tyre from October 1, 2016. On a like-for-like basis, growth was 9% at the annual level and 17.9% in the fourth quarter, thanks to the positive performance of the Consumer business and the strengthening of the Original Equipment channel thanks to new homologations with European and local brands.

Nafta posted an Ebit margin at the twenties level, in line with 2015, with organic revenue growth of 12.0% in 2016 (+18.6% in the fourth quarter) thanks to the good performance of Premium and Super Premium.

Profitability in Europe improved to mid-teens level thanks to the 10.0% Premium revenue growth, supported by the good performance of sales both in the Original Equipment and Replacement channels. Organic revenues grew by 5.1%.

Meai registered stable profitability at the high-teens level, with organic revenues growth of 7.2%.

The reduction of profitability in South America (mid-single-digit) was mainly due to the performance of the Industrial business which discounted the market’s weakness, while profitability in the Consumer segment was confirmed at the high single-digit level. During the year, revenues at the organic level registered progress of 6.0% (-6.6% including forex effect of -12.6%). There was a marked improvement in performance in the fourth quarter with revenues growing 12%, in particular in the industrial business, with a volume increase above the market’s.

Forex volatility and the weakness of the market had a negative impact on the results in Russia (revenues down 1.0% net of forex) with profitability at break-even level, an improvement compared with the first nine months of 2016 thanks to a marked recovery in the fourth quarter (organic revenue growth of 9.6%, underpinned above all by the good performance of price/mix and a forex effect of +6.5%.

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