Sustainability Channel

PIRELLI & C SpA BOARD APPROVES RESULTS FOR 3 MONTHS ENDED 31 MARCH 2012: IMPROVEMENT IN ALL ECONOMIC INDICATORS AND FURTHER GROWTH IN PROFITABILITY

PIRELLI & C. SPA

• REVENUES 1,556.5 MILLION EURO, +11.1% COMPARED WITH 1,400.9 MILLION EURO ON 31 MARCH 2011

• OPERATING RESULT (EBIT) AFTER RESTRUCTURING CHARGES 209.4 MILLIONI  EURO (+46.1% COMPARED WITH 143.3 MILLION EURO ON 31 MARCH 2011)

• EBIT MARGIN ON 31 MARCH 2012 AT 13.5% COMPARED WITH 10.2% FOR THE SAME PERIOD IN 2011

• CONSOLIDATED NET PROFIT 125.3 MILLION EURO, AN INCREASE OF 54% COMPARED WITH 81.4 MILLION EURO AT END MARCH 2011

• ATTRIBUTABLE CONSOLIDATED NET PROFIT 122.9 MILLION EURO, AN INCREASE OF 48.4% COMPARED WITH THE PRIOR 82.8 MILLION EURO

• NET FINANCIAL POSITION NEGATIVE 1,305 MILLION EURO, AN INCREASE FROM NEGATIVE 737.1 MILLION EURO AT END DECEMBER 2011

TYRE BUSINESS

• REVENUES 1,542.6 MILLION EURO, +11.4% COMPARED  WITH 1,384.5 MILLION EURO ON 31 MARCH 2011

• PREMIUM REVENUES 584.4 MILLION EURO, +29.2% FROM 31 MARCH 2011

• OPERATING RESULT (EBIT) AFTER RESTRUCTURING CHARGES 215.2 MILLION EURO, +41.2% COMPARED WITH 152.4 MILLION EURO ON 31 MARCH 2011

• EBIT MARGIN ON 31 MARCH 2012 GREW TO RECORD LEVEL OF 14% COMPARED WITH 11% IN THE SAME PERIOD OF 2011

2012 TARGETS

•        REVENUE TARGET REVISED TO APPROXIMATELY 6.45 BILLION EURO, AN INCREASE OF 14% COMPARED WITH 2011 (PREVIOUS TARGET: ~6.6 BILLION EURO, UP 17%)

•        EBIT FORECAST: AT LEAST 800 MILLION EURO, MARGIN ABOVE 12% (PREVIOUS ESTIMATE: MARGIN ABOVE OR EQUAL TO 12%)

•        INVESTMENT TARGET LOWERED TO APPROXIMATELY 500 MILLION EURO (PREVIOUS ESTIMATE: APPROXIMATELY 560 MILLION EURO)

•        NET FINANCIAL POSITION TARGET CONFIRMED NEGATIVE AT BELOW 1 BILLION EURO BEFORE DIVIDENDS

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ORGANIZATIONAL MODEL RE-DEFINED. INTRODUCES ROLES OF CTO (CHIEF TECHNICAL OFFICER) AND CCO (CHIEF COMMERCIAL OFFICER) REPORTING TO THE CHAIRMAN AND CEO

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The Board of Directors of Pirelli & C. SpA today reviewed and approved intermediate results for the 3 months ended 31 March 2012.

The continual strengthening of production in rapidly growing economies and the focus on the Premium segment, which as well as being the most profitable segment is also the tyre market’s fastest growing, enabled Pirelli to end the first quarter of 2012 with further improvements in key economic indicators and profitability, notwithstanding the persistent macro-economic slowdown, particularly in Western economies.

Consolidated revenues on 31 March 2012 totaled 1,556.5 million euro, an increase of 11.1% compared with 1,400.9 million euro in first quarter 2011. The consolidated operating result after restructuring charges was 209.4 million euro, with an increase of 46.1% compared with 143.3 million euro in first quarter 2011 and saw the margin on revenues rise by over three percentage points to 13.5% compared with 10.2% in the same period of 2011. The net result was 125.3 million euro, an increase of 54% from 81.4 million euro in first quarter 2011.

The consolidated net financial position was negative 1,305.0 million euro compared with 737.1 million at end 2011 (negative 712.8 million euro on 31 March 2011), reflecting a normal seasonal variation in the business working capital, as well as payment, of 154.5 million euro, for the acquisition of the Russian plants in Kirov and Voronezh.

For the Tyre activities, which represent almost all (99%) group sales, the quarter registered a further increase in sales (+11.4% to 1,542.6 million euro) and a further increase in profitability which reached the record level of 14% compared with 11% in the same period of 2011. In a market context discounting the global economic slowdown, these results were achieved thanks to the continual improvement of the sales mix – increasingly focused on Premium products – and the ability to use the price lever to offset increases in the cost of raw materials, which in the quarter had an impact of approximately 85 million euro, as well as constant improvement in efficiencies, which totaled 26 million euro in the period.

With regard to the Premium segment, in particular, in the first quarter of 2012 revenues grew 29.2% compared with the same period a year earlier in 2011 to 584.4 million euro, and in the Car business represented 52.6% of the total, with an increase of over five percentage points compared with 47.4% in the same period of 2011.

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The Board of Directors approves 2010 results

A meeting of the Board of Directors of Pirelli & C. SpA today reviewed and approved the group’s results for 2010, a year which saw significant growth at the operating level and all targets set on 14 October 2009 beaten.

The positive operating performance was underpinned by the core tyre business which accounts for 98.4% of Group sales. Pirelli Tyre registered sales growth of 19.5% (+16.2% net of exchange rate effects) sustained in particular by price/mix effectiveness (8.9%) and volume growth (+7.3%).

Pricing actions compensated for increased production costs, in particular raw material costs. The progressive and strategic shift of the mix towards Premium products, increased volumes and constant attention to improving company efficiency all contributed to the significant increase in Pirelli Tyre’s profitability: in 2010 Ebit before restructuring charges reached 10% of sales for the first time (8.7% in 2009), while Ebit after restructuring charges rose to 9.5% of sales from 7.7% in 2009. The Consumer division contributed to the result with a post-restructuring-charges margin of 9.6% (7.4% in 2009) while the Industrial division’s was 9.2% (8.5% in 2009).

With reference to group targets, where the activities of Pirelli Re and Pirelli Broadband Solutions are considered discontinued operations and contribute only to the net result (2009 data were reclassified to enable like-for-like comparison):

• revenue: 4,848.4 million euros (+19.2% from 2009) compared with “approximately 4.8 billion euro” target. Of this, 37% stemmed from “green” activities (25% at end 2009) compared with a 36% target
• Ebit margin after restructuring charges: 8.4% compared with “over 7.5%” target
• Net financial position: negative 455.6 million euros, significantly better than “under 700 million euro” target

Pirelli Tyre, ended the year with:

• Revenues of 4,772 million euros (+19.5% from 2009) compared with “above 4.7 billion euro” target
• Ebit margin after restructuring charges: 9.5% (7.7% in 2009), compared with a “greater than 8.5%” target

The focus on core tyre sector industrial activities and the transformation of Pirelli into a pure tyre company was completed during the year with the separation of Pirelli RE from the Pirelli & C. group (finalized on 25 October 2010 with the attribution of Pirelli RE shares to Pirelli shareholders and the voluntary reduction of company capital) and the disposal of Pirelli Broadband Solutions. Despite the negative 223.8 million euro impact of these discontinued operations, the total consolidated net profit on 31 December 2010 was 4.2 million euros compared with a loss of 22.6 million euros in 2009, while the net attributable result was a positive 21.7 million euros, substantially in line with 22.7 million euros of 2009. The net consolidated result excluding discontinued operations was a positive 228 million euros, almost three times the 2009 result of 77.6 million euros.

The consolidated operating result, after restructuring charges of 24.7 million euros compared with 55.2 million euro in 2009, was 407.8 million euros compared with 249.7 million euro in 2009, equal to 8.4% of revenues compared with 6.1% in 2009. Revenues in 2010 were 4,848.4 million euros, an increase of 16.0% on a like-for-like basis and net of exchange rate effects (4,067.5 million euros in 2009).

The consolidated net financial position on 31 December 2010 was negative 455.6 million euros (after dividend payments of 81 million euros) compared with negative 528.8 million euros on 31 December 2009, thanks to inflows from the disposal of non-strategic assets and, above all, the positive contribution of net operations inflows from Pirelli Tyre, a positive 167.7 million euros (395.4 million euros in 2009), notwithstanding investment that nearly doubled from 2009 (405.0 million euros in 2010 compared with 217.4 million euros), particularly aimed at the increase of production capacity.

It is with noting that in 2010, the value of investments in research and development remained at around 3% of sales, one of the highest levels in the sector. This enables the company to continually enrich its patents’ portfolio (today numbering over 4,500) and renew its offering of Premium products, as well as continually innovating material-mixing and tyre-building processes in all product segments, and developing alternative materials with lower costs and lower environmental impact…

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Pirelli confirmed world leader in Dow Jones Sustainability Indexes for the fourth year in a row

For the fourth year in a row, Pirelli was confirmed world leader in the Autoparts and Tires sector in the Dow Jones Sustainability Europe and Dow Jones Sustainability World indexes.

For the second year in a row, Pirelli was also the only Italian company to be ranked as world leader in its sector.

The 2010 review was carried out by SAM Group, the Swiss asset management group in charge of the assessment and selection process for admission to the Dow Jones Sustainability Indexes. Criteria include corporate governance, risk management, codes of conduct, brand management and innovation processes. On the environmental front, SAM looks at reporting, environmental policies, procedures and systems, responsible product management, climate change and emissions reduction strategy and energy efficiency. There are also social criteria: development and management of human resources, philanthropy, health and safety in the workplace, supply chain management and stakeholder engagement.