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Pirelli SpA Consolidated Results at September 30, 2000

Milan, 7 November 2000 – The Board of
Directors of Pirelli SpA has today examined the Group’s
consolidated financial statements at September 30, 2000.

The first nine months of the year have been
characterised by an essentially unchanged competitive scenario if
compared with 1999, with tensions on raw materials prices. The good
volumes trend, together with on-going actions to reduce costs and
improve production activity, allowed a significant increase in
results in comparison with the previous year. If compared with the
first half of this year, the third quarter shows a considerably
high acceleration of the growth in profitability.

The results for the first nine months can be
summarised as follows:

Consolidated sales revenues, equal to
Euro 5,430 million, show an increase of 14.9% compared to the same
period of the previous year. In the first quarter only, sales
amounted to Euro 1,832 million with an increase of 19.4% compared
to the same period of 1999.

The gross operating profit, with an
increase of approx. 28%, rises from Euro 489 million (10.4% of
sales) to Euro 626 million (11.5% of sales). In addition to the
growth and efficiency operative factors, to this improvement of
Euro 137 million in the first nine months has also contributed to
an extent of Euro 56 million (of which Euro 28 million in the third
quarter) the contract with Cisco for the supply of optical
components. According to the strategic alliance signed at the end
of 1999, the supply to Cisco will continue until its biennial
expiration.

The operating profit, before financial
costs and provisions for taxes, shows an even bigger increase,
equal to 46.7%, rising from Euro 231 million (4.9% of sales) in the
nine months of 1999 to Euro 339 million (6.2% of sales). This
improvement is even more noteworthy if we consider that it has been
influenced by a depreciation of Euro 29 million (of which Euro 13
million due to the acquired companies). In particular, the
operating profit of the third quarter has risen from Euro 54
million in 1999 to Euro 126 million.

In further details:

* the Cables and Systems Sector shows
progressive sales equal to Euro 3,276 million with an increase of
16.8% compared to the first nine months of 1999; a progressive
operating profit of Euro 217 million, with an increase of approx.
84% and a return on sales of 6.6% (compared to 4.2% in the same
period of 1999). The “supply agreement” with Cisco has also
contributed with Euro 56 million to this improvement; but even
without this effect, the profitability on sales (4.9%) shows a
progress if compared with the previous periods.

In the third quarter of 2000 only, sales amount
to Euro 1,105 million with an increase of 21.2% compared to the
same period of 1999. The operating profit, rising from Euro 19
million to Euro 93 million, shows a return on sales of 8.4% (5.9%
without considering the Cisco effect) compared to 2.1% in the third
quarter of 1999.

* In the first nine months of the year, the
sales of the Tyre Sector – compared to the same period of 1999 -
reached Euro 2,155 million with an increase of 12.4%, showing an
improvement of 3.5% of the operating profit in terms of absolute
value, with a return on sales of 6.8% (7.4% in 1999).

In the third quarter of 2000 only, sales amount
to Euro 730 million, with an increase of 17.6% compared to same
period of 1999, with an operating profit of Euro 39 million (5.3%
on sales) compared to Euro 42 million (6.8% on sales) in the same
period of 1999; this results have been influenced by the erosion of
selling prices and the increase of raw material costs.

The Net financial position is positive to
an extent of Euro 111 million compared to Euro 296 million at June
30, 2000 and to a net debt of Euro 1,017 at December 31, 1999. The
variation in the last quarter is largely due to the effect of the
BICC acquisition.

With regard to the forecast for the full
year
, the operating profit is expected to continue keep up with
the positive trend to date. In addition to this, extraordinary
items are expected from the CISCO operation and from the ongoing
production restructuring and rationalisation measures as well as
from the Corning operation, the closing of which is expected before
the end of the year as already announced.

***

Finally the Board of Directors of Pirelli
S.p.A., availing themselves of the powers conferred on them by the
Shareholders at the Annual General Meeting at the time, resolved to
increase the share capital up to a maximum of Euro 1,051,618,718.28
through the issue of a maximum of n. 32,106,200 shares having a par
value of Euro 0,52 each which will go to serve three stock option
plans restricted to around 750 Group executives and cadres.