Consolidated Financial Statement

CONSOLIDATED BALANCE SHEET (in thousands of Euros)

12/31/2007

12/31/2006

of which
related parties

of which
related parties

8

Property, plant and equipment

1,650,485

 

1,574,589

 

9

Intangible assets

672,540

 

516,374

 

10

Investments in associates and joint ventures

534,194

 

3,825,928

 

11

Other financial assets

958,272

 

1,006,898

 

12

Deferred tax assets

58,524

 

64,230

 

14

Other receivables

672,894

520,827

705,828

334,211

15

Tax receivables

12,278

 

10,917

 

27

Financial instruments

3,849

 

-

 
 

Non-Current Assets

4,563,036

 

7,704,764

 

16

Inventories

776,474

 

715,533

 

13

Trade receivables

1,098,927

123,668

999,669

168,125

14

Other receivables

241,475

22,072

356,205

11,888

17

Securities held for trading

114,039

 

119,174

 

18

Cash and cash equivalents

2,057,682

 

269,574

 

15

Tax receivables

43,281

 

33,432

 

27

Financial instruments

58,326

 

29,147

 
 

Current Assets

4,390,204

 

2,522,734

 
 

Total Assets

8,953,240

 

10,227,498

 
 

19;1

Attributable to the equity holders of the company:

2,980,231

 

3,879,591

 
 

- Share capital

1,555,934

 

2,789,950

 
 

- Other reserves

1,259,746

 

1,971,026

 
 

- Retained earnings

-

 

286,057

 
 

- Income (loss) for the year

164,551

 

(1,167,442)

 

19;2

Attributable to the minority interest:

823,840

 

806,966

 
 

- Reserves

664,799

 

688,351

 
 

- Income for the year

159,041

 

118,615

 
 

Total Equity

3,804,071

 

4,686,557

 
 

24

Borrowings from banks and other financial institutions

788,198

 

1,377,426

 

26

Other payables

23,300

 

132,880

 

22

Provisions for other liabilities and charges

146,331

 

145,119

 

12

Deferred tax liabilities

44,625

 

42,931

 

23

Employee benefit obligations

349,142

 

415,850

 

21

Tax payables

11,211

 

9,708

 

27

Financial instruments

6,782

 

4,751

 
 

Non-Current Liabilities

1,369,589

 

2,128,665

 

24

Borrowings from banks and other financial institutions

871,759

2,869

1,562,262

242

25

Trade payables

1,323,588

29,148

1,102,456

25,085

26

Other payables

1,394,673

21,522

536,902

3,440

22

Provisions for other liabilities and charges

71,340

 

116,525

 

21

Tax payables

45,707

-

48,769

688

27

Financial instruments

72,513

 

45,362

 
 

Current Liabilities

3,779,580

 

3,412,276

 
 

Total Equity And Liabilities

8,953,240

 

10,227,498

 

CONSOLIDATED INCOME STATEMENT (in thousands of Euros)

2007

2006

     

of which
related parties

 

of which
related parties

29

Revenues from sales and services

6,504,537 *

298,565

4,841,224

371,439

30

Other income

286,361

72,720

292,763

104,138

 

- of which, nonrecurring events

2,818

     
 

Change in inventories of work in process, semifinished
and finished products

29,921

 

6,840

 
 

Raw materials and consumables used

(3,037,315) *

 

(1,773,194)

 

31

Personnel costs

(1,156,170)

(14,504)

(1,075,771)

(5,417)

 

- of which, nonrecurring events

5,186

     

32

Amortization, depreciation and impairments

(218,678)

 

(215,328)

 

33

Other expenses

(2,048,657)

(116,627)

(1,683,944)

(111,081)

 

- of which, nonrecurring events

   

(13,200)

 
 

Increase in property, plant and equipment from internal work

6,891

 

8,796

 
 

Operating Profit

366,890

 

401,386

 

34

Financial income

340,408

31,203

876,388

17,258

 

- of which, nonrecurring events

55,901

 

631,600

 

35

Financial expenses

(416,163)

(4,474)

(342,572)

(32)

36

Dividends

34,459

6,600

65,857

26,344

37

Gains (losses) from changes in fair value of financial assets

(20,179)

 

(55,956)

 

38

Share of earnings (losses) of associates and joint ventures

118,608

 

103,958

 
 

Income before income taxes

424,023

 

1,049,061

 

39

Income taxes

(133,503)

 

(127,848)

 
 

Income from continuing operations

290,520

 

921,213

 

40

Income (loss) from discontinued operations

33,070

 

(1,970,039)

 
 

Income (loss) for the year

323,590

 

(1,048,826)

 
 

Attributable to:

       
 

- equity holders of the company

164,549

 

(1,167,441)

 
 

- minority interest

159,041

 

118,615

 
 

41

Earnings per share (Euros per thousand of shares)

       
 

Basic earnings per share

       
 

- continuing operations

24.47

 

150.24

 
 

- discontinued operations

6.12

 

(368.87)

 
   

30.59

 

(218.63)

 

* of which Euros 1,295.6 million relates to the partial deconsolidation of Pirelli & C. Real Estate’s DGAG activities.

CONSOLIDATED STATEMENT OF RECOGNIZED INCOME AND EXPENSE (in thousands of Euros)

2007

2006

A

Income (loss) for the year

323,590

(1,048,826)

 

Differences on translation transferred to the income statement for the sale
of investments, previously recognized in equity

(70,455) a

(28,700) b

 

Change in fair value change of cash flow hedges transferred to the income statement
for the sale of investments, previously recognized in equity

(48,653) a

-

 

(Gains) losses transferred to the income statement on available-for-sale financial assets, previously recognized in equity

1,019

(126,796)

 

Gains (losses) transferred to the income statement, previously
recognized in equity

(118,089)

(155,496)

 

Differences on translation of foreign currency financial statements

7,679

(66,143)

 

Changes in fair value on available-for-sale financial assets

(96,535)

23,870

 

Net actuarial gains (losses) on employee benefits

2,589

51,081

 

Changes in fair value on derivatives designated as cash flow hedges

(5,535)

38,189

 

Tax effect

(2,856)

(6,935)

B

Income (expenses) recognized directly in equity

(212,747)

(115,434)

A+B

Total income (expenses) recognized in equity

110,843

(1,164,260)

 

Attributable to:

   
 

- equity holders of the company

(54,739)

(1,267,166)

 

- minority interest

165,582

102,906

a Referring to the sale of Olimpia S.p.A.

b Referring to the private placement of the 38.9% stake in Pirelli Tyre S.p.A.

Consolidated statement of cash flows (in thousands of Euros)

2007

2006

     

of which
related
parties

 

of which
related
parties

 

Income from continuing operations before taxes

424,023

 

1,049,061

 
 

Amortization, depreciation / impairment (losses) reversals of intangible assets and property, plant and equipment

218,678

 

215,328

 
 

Financial expenses

416,163

 

342,572

 
 

Financial income

(340,408)

 

(876,388)

 
 

Dividends

(34,459)

 

(65,857)

 
 

Valuation of financial assets

20,179

 

55,956

 
 

Share of earnings (losses) of associates and joint ventures
(net of dividends received)

45,845

 

(20,977)

 
 

Income taxes

(133,503)

 

(127,848)

 
 

Change in inventories

25,302

 

(34,477)

 
 

Change in trade receivables/payables

(85,366)

 

27,957

 
 

Change in other receivables/payables

113,467

 

(54,324)

 
 

Change in employee benefit obligations and other provisions

(108,987)

 

(29,608)

 
 

Other changes

10,045

 

(8,131)

 

A

Net cash flows provided by (used for) operating activities

570,979

 

473,264

 
 

Investments in property, plant and equipment

(286,709)

 

(255,456)

 
 

Disposals of property, plant and equipment including gain/loss

14,911

 

11,906

 
 

Investments in intangible assets

(17,037)

 

(54,884)

 
 

Disposals of intangible assets including gain/loss

4,764

 

192

 
 

Acquisitions of investments in associates and joint ventures

(262,727)

 

(427,585)

 
 

Disposals of investments in associates and joint ventures

23,650

 

1,315

 
 

Acquisitions of other financial assets

(101,907)

 

(251,386)

 
 

Disposal of other financial assets

16,849

 

374,516

13,500

 

Pirelli Tyre S.p.A. private placement

-

 

715,800

 
 

Dividends received

34,459

 

65,857

 
 

Net investment in business combinations

(352,858)

 

(140,000)

 

B

Net cash flows provided by (used for) investing activities

(926,605)

 

40,275

 
 

Change in share capital and share premium reserve

7,499

 

27,254

 
 

Other changes in equity

(54,289)

 

(12,727)

 
 

Sale (purchase) of Pirelli Real Estate S.p.A. treasury shares

(53,999)

 

84,400

 
 

Change in financial payables

(1,287,705)

 

926,396

 
 

Change in financial receivables

(51,509)

 

(18,768)

 
 

Change in financial payables/receivables for acquisitions

395,302

 

-

 
 

Financial income/expenses (net of gains on avail.-for-sale fin. assets )

(141,578)

 

(99,346)

 
 

Dividends paid

(74,400)

 

(162,672)

(29,089)

C

Net cash flows provided by (used for) financing activities

(1,260,679)

 

744,537

 
 

Net cash flows provided by (used for) operating activities

       
 

Net cash flows provided by (used for) investing activities

3,364,209

 

(1,138,894)

 
 

Net cash flows provided by (used for) financing activities

       

D

Total cash flows provided by (used for) discontinued operations

3,364,209

 

(1,138,894)

 
 

E

Total cash flows provided by (used for) during the year (A+B+C+D)

1,747,904

 

119,182

 
 

F

Net cash and cash equivalents, at beginning of the year

259,389

 

146,310

 

G

Exchange differences on translation of cash and cash equivalents

3,182

 

(6,103)

 

H

Net cash and cash equivalents, at end of the year

2,010,475

 

259,389

 
 

o

of which:

       
 

cash

2,057,682

 

269,574

 
 

bank overdrafts

(47,207)

 

(10,185)

 

The consolidated statement of cash flows shows transactions with related parties that cannot be deduced directly from the other statements.