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Press Release Pirelli SpA

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
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 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 489 million (10.4% of sales) to
626 million (11.5% of sales). In addition to the
growth and efficiency operative factors, to this improvement of
137 million in the first nine months has also
contributed to an extent of 56 million (of which
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 231 million (4.9% of sales) in
the nine months of 1999 to 339 million (6.2% of
sales). This improvement is even more noteworthy if we consider
that it has been influenced by a depreciation of 29
million (of which 13 million due to the acquired
companies). In particular, the operating profit of the third
quarter has risen from 54 million in 1999 to
126 million.

In further details:

* the Cables and Systems Sector shows progressive sales equal to
3,276 million with an increase of 16.8% compared to
the first nine months of 1999; a progressive operating profit of
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 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
1,105 million with an increase of 21.2% compared to the same period
of 1999. The operating profit, rising from 19
million to 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
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
730 million, with an increase of 17.6% compared to same period of
1999, with an operating profit of 39 million (5.3%
on sales) compared to 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
111 million compared to 296 million
at June 30, 2000 and to a net debt of 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 1,051,618,718.28
through the issue of a maximum of n. 32,106,200 shares having a par
value of 0,52 each which will go to serve three
stock option plans restricted to around 750 Group executives and
cadres.