PIRELLI - 2009-2011 Industrial Plan: Strategic Guidelines and Targets

2009-2011 Industrial Plan: Strategic Guidelines and Targets

Despite the present macroeconomic scenario with all its critical and uncertain factors, the Pirelli Group has and will continue to develop measures to increase its competitiveness and enhance its efficiency. Reorganization, Business rationalization as well as the development of "green" technologies and products will be the levers supporting Pirelli in this process.

Guidelines:

Transformation. Over 2009-2011 Pirelli will use the discontinuity of external scenario to transform the Group, catching new opportunities for growth and development.
Focus on core business. The target is to achieve a better standing among the automotive industry leaders through better focus on Tyre, its core business, as well as on filters.
"Green performance". All the businesses of the Group will be geared to developing innovative products and solutions in line with the "green economy" concept that shows considerable growth opportunities in a number of sectors: sustainable mobility, environmental-friendly real estate and renewable energy. Environmental compliance and awareness are currently values acknowledged by the Governments of many Countries through financial aids and by consumers alike. Pirelli's ultimate target is to double, at the end of 2001, revenues from the "green" business vs the Group overall sales, moving from 20% to 40%.
2009-2011 Group target are displayed on "Target Achievements"

Pirelli Tyre

2009-2011 targets are: competitive strengthening of its business, profitability and cash generation increase (250 mln € in 2010-2011).

Strenghts:

Speed and flexibility. Pirelli Tyre timely reacted to the economic downturn by launching in 2008 a restructuring program to adjust its production capacity to the new market scenario.
Industrial positioning. 76% of Pirelli Tyre sales are concentrated in the Replacement business that is the least affected by the crisis of the automotive sector.
Geographic positioning. The Group is already in China, where start-up is over, in Latin America, Egypt, Turkey, Romania and Russia and it will further rationalize its manufacturing sites. More specifically, the industrial business already accounts for 87% of Pirelli's production which is concentrated in low cost countries. This is a unique competitive advantage vs the average of the 4 major competitors that concentrate only 50% of their production in these countries.
Innovation. The evolution of Mirs, Pirelli's robot-driven system for tyre production, will further develop through the use of new environmental-friendly materials. This will bring about both environmental and production costs benefits. "Green tyres", in line with new environmental standards, will be developed for a number of business segments.

www.it.pirellityre.com

Real Estate:

Focus on real estate management as well as special services. The target is a significant increase in the recurrent factor bringing it to a 50% level of contribution in 2011. The Italian market is central according to this new strategy.

Strenghts:

Sound assets and reduced debt. After the 400 mln/€ capital increase successfully made at the end of July 2009, the debt/net equity ratio is 0.61 vs. 2.81 on March 31, 2009.

New highly experienced management

www.pirellire.com

Broadband Solutions:

The company aims at broadening its product range and customer portfolio while strengthening its international presence and developing strategic partnerships.

Strenghts:

Know how. The Company dealing with broadband access solutions, offers a wide range of home and small office products, with access gateway, IpTv set-top-box, remote management systems and fixed-mobile convergence for the digital environment.
Competitiveness. The potential market value is currently estimated to be 2.5 bln €: a fast growing segment through the 'quadruple play' development and incentives for the enabling of new generation networks and gradual IpTV introduction.

www.pirellibroadband.com

Eco Technology:

Over the next 3/5 years, the target is to acquire a leading position in the "retrofit" technology sectors to control diesel emissions. Pirelli has a longstanding experience in "green" technologies and in the development of sustainable solutions.

Strenghts:

Knowhow. Pirelli owns the "feelpure" technology, a filtering system that can reduce by over 95% polluting emissions from diesel engines. The "retrofit" technology for commercial vehicles and buses on the road complies with the most recent European standards: Pirelli is the only company with Italian homologation and is certified to access Low Emission Zones in several countries (Switzerland, Denmark, Sweden, Norway, the Netherlands and UK). In May 2009 we obtained homologation in China and, although with some delay due to German bureaucracy, we paved the way for German homologations over the next few months (in the meantime we got the first one on Euro3 Light Duty vehicles in mid July '09).
Competitiveness. The anti-particulate filters business keeps on growing both because of increasingly stringent environmental standards and the introduction of incentives in a number of European countries with lower fitting costs.
Synergies. Synergies with Pirelli Tyre and their commercial and distribution networks are fundamental for the Pirelli Eco-Technology strategy.