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Industrial Plan

PIRELLI: AIMS FOR WORLD LEADERSHIP IN THE PREMIUM SEGMENT IN 2015,

UPDATED INDUSTRIAL PLAN AND VISION TO 2015

WITH NEW TARGETS FOR 2012-2014

INNOVATIVE MARKETING, STRENGTH OF BRAND, NEW PRODUCTS, LEADING EDGE TECHNOLOGY, OPTIMISATION OF PRODUCTION AND EFFICIENT GEOGRAPHICAL LOCATION AS DRIVERS FOR GROWTH

INCREASING INVESTMENT UP TO A VALUE OF 2.2 BILLION EURO FOR THE PERIOD 2011 AND 2015 (2.4 BILLION EURO INCLUDING INDUSTRIAL INVESTMENTS IN RUSSIA) COMPARED WITH 1.9 BILLION EURO FOR THE PREVIOUS PLAN

IN 2015, A CONSOLIDATED EBIT MARGIN GREATER THAN 16% (COMPARED WITH 8.4% FOR 2010) DUE TO FOCUS ON THE PREMIUM SEGMENT, USE OF PRICE/MIX COMPONENT AND GROWTH OF THE CONSUMER SEGMENT AND REPLACEMENT CHANNEL

PROFITABILITY WILL INCREASE IN ALL REGIONS, EQUALLY BALANCED BETWEEN EMERGING AND MATURE MARKETS, WITH THE BIGGEST CONTRIBUTION FROM EUROPE, AS THE BIGGEST PREMIUM MARKET WORLDWIDE

IN EUROPE IN 2015, 80% OF CONSUMER REVENUES WILL COME FROM PREMIUM SEGMENT

STRENGTHENING OF PRESENCE IN RAPIDLY DEVELOPING ECONOMIES: AFTER RUSSIA AND ARGENTINA, NEW MOTO PROJECT IN INDONESIA

IN THE CAR SEGMENT IN 2015, 64% OF PREMIUM CAPACITY WILL BE LOCATED IN NEW PLANTS

INCREASED CASH GENERATION COMPARED WITH THE PREVIOUS PLAN: DESPITE FURTHER INVESTMENTS, THE NET DEBT/EBITDA RATIO IN 2015 WILL BE OF APPROX. 0.4, ONE OF THE BEST OF THE SECTOR

ESTIMATED EFFICIENCIES FOR A TOTAL 250 MILLION BETWEEN 2012 AND 2014

‘CONTINGENCY PLAN’ READY IF THE 2012 SLOWDOWN EVOLVES INTO A CRISIS IN DEMAND

THE PIRELLI BRAND VALUED AT 2.27 BILLION EURO, WILL SUSTAIN GROWTH IN THE PREMIUM SEGMENT

The Board of Directors of Pirelli & C. has approved the Industrial Plan and vision to 2015 and the updated targets for 2012-2014. The plan was presented today to the financial community by the Chairman and CEO of Pirelli & C., Marco Tronchetti Provera, the Coo, Francesco Gori, Director of Research and Development, Maurizio Boiocchi, and the Director for Planning & Management Control, Maurizio Sala.

THE PIRELLI PLAN IN BRIEF

“Pirelli aims to become world leader in the Premium segment in 2015, confirming the focused strategy presented in last year’s industrial plan.

In order to achieve these objectives, Pirelli aims to focus on: further drive on technological innovation which will create an unprecedented increase in the product range able to satisfy both ever-more sophisticated demands of a mature market such as Europe and the increasing demand for Premium products in rapidly developing markets. The launch of 18 products is planned for the Car segment by 2015, taking this business unit to 57% of all sales generated from new projects. As well as products and technology, Pirelli aims to optimise its production capacity and geographical presence with always newer plants (64% of Premium car capacity will be allocated to new plants) localised in countries with not only increasing demand but also favourable industrial costs. The new on-going projects in Russia (car), Mexico (car), Argentina (truck) and the new plant to be opened in Indonesia (moto) are also included in this strategy. The Moto business unit aims to consolidate its leadership position in the Premium segment, especially in Europe, confirming its role as a technological innovator while maintaining high levels of profitability. The Industrial business unit aims to achieve leadership based on technology aimed at the key markets with a focus on rapidly developing economies.

The brand value, estimated at 2.27 billion Euro, will also support innovative marketing strategies aimed both at the consumer and trade, facilitating segmentation, market enlargement and creation of brand loyalty in the client base.

Due to a focus on the Premium segment, the use of price/mix component, growth of the Consumer and Auto Parts channels which are more profitable and less cyclical, Pirelli foresees an increase in revenues and profitability for 2015. The EBIT margin for 2015 will be greater than 16%, almost double the 2010 figure of 8.4% and one of the best in the industry. Profitability will increase in all regions with a balance between mature and emerging markets. In all regions, the impact of the premium segment will increase, especially in Europe. Indeed, in 2015, this region will generate 80% of Consumer revenues for this segment.

The strong cash generation foreseen from today to 2015 (3.2 billion Euro compared with 2.1 billion in the previous Industrial Plan) will consent not only to sustain a significant and increasing investment plan (up to 2.4 billion Euro compared with 1.9 billion Euro of the previous Industrial Plan), but also to further improve the already solid financial position by reducing the Debt/EBITDA ratio to 0.4 in 2015 (compared with 0.7% in 2010). Further contribution will come from an efficiency plan of 250 million Euro between 2012 and 2014.

In a market showing signs of deceleration, even though not at crisis levels, Pirelli has also prepared a ‘Contingency Plan’ to guarantee optimal flexibility in managing any worsening of the negative trend”.

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