pirelli & c e tyre · pirelli & c. spa undertakes no obligation to release publicly the...

JUNE 2010

INVESTOR PRESENTATION

June 2010INVESTOR PRESENTATION

Disclaimer

This presentation contains statements that constitute forward-looking statements and does not constitute an offer or

solicitation for the sale. purchase or acquisition of securities of any of the companies mentioned and is directed to

professionals of the financial community.

These statements appear in a number of places in this presentation and include statements regarding the intent. belief or

current expectations of the customer base. estimates regarding future growth in the different business lines and the global

business. market share. financial results and other aspects of the activities and situation relating to the Company.

Such forward looking statements are not guarantees of future performance and involve risks and uncertainties. and actual

results may differ materially from those in the forward looking statements as a result of various factors. Consequently it is

recommended that they be viewed as indicative only.

Analysts are cautioned not to place undue reliance on those forward looking statements. which speak only as of the date of

this presentation.

Pirelli & C. SpA undertakes no obligation to release publicly the results of any revisions to these forward looking statements

which may be made to reflect events and circumstances after the date of this presentation. including. without limitation.

changes in Pirelli & C. SpA business or acquisition strategy or to reflect the occurrence of unanticipated events.

StatementThe Manager mandated to draft corporate accounting documents of Pirelli & C. SpA. Francesco Tanzi. attests – as per

art.154-bis. comma 2 of the Testo Unico della Finanza (D.Lgs. 58/1998) – that all the accounting information contained in

this presentation correspond to the documented results. books and accounting of the Company.

1


Agenda

Pirelli 1Q 2010 Financial Review

Pirelli Real Estate Separation Plan

Pirelli Tyre & Parts

Appendix

2010 Outlook & Targets

2

2

8

14

17

42


Pirelli Real Estate Separation Plan: strategic rationale

Feb.11, 2009: '09-'11 "Transformation path” announcement – assets portfolio reshaping & corebusiness focalization

In the last 18 months Pirelli RE changed its business model, went through a deep restructuringprogram, strengthened its capital structure and reached financial sustainability

Today the Real Estate market is showing signs of recovery

Benefits for P&C Benfits for PRE

Corporate structure streamlining:

a clearer equity story with a positiveimpact on valuation metrics

More flexible capital structure

Free-float increase & higher stockliquidity

More corporate contestability

Better chance to create a platform forfuture industrial aggregation

Right time to split the 2 businesses with benefits for both P&C and PRE shareholders

3


Par value of ordinary and savings shares cancelled, followed by a split by category

SHARES AFTER REVERSE SPLIT

475,740,182

12,251,311

487,991,493

Ordinary shares

Savings shares

Total shares 1)

3.19 € per share

Capital Euros 2)

= Total numberof shares

2)P&C capital 1,556,692,865.28 €

1:11 Ratio

Post reverse stock

split accounting

value

Rights on savings shares will remain the same

Pirelli Real Estate Separation Plan: process (1/2)

STEP 1: P&C SHARES REVERSE STOCK SPLIT

1)P&C own shares, post reverse split, equal to 351,590.9 ordinary shares and 408,342.6

4


Assignment ratio 1:1

STEP 2

487,798,972

487,231,561

57.99 %

(*) Post reverse splitting P&C’s own shares in the portfolio, that is 351,590.9 ordinary shares and 408,342.6 savings shares shall not benefit from assignment rights to beattributed to P&C Shareholders in the 1:1 ratio.

Pirelli Real Estate Separation Plan: process (2/2)

In shares Stake

567,411 0.1%

Assignment of Pirelli RE shares in portfolio through voluntary corporate capitalreduction to P&C ordinary and savings Shareholders

P&C’s PRE shares to be assigned toShareholders after reverse stock split (*)

P&C’s PRE shares not to beassigned to avoid split

Capital reduction equal to PRE stakevalue assigned to P&C Shareholders

PRE’s P&C Shareholding

Price listed the day before the P&CExtraordinary Shareholders’ Meetingwhen transaction is approved

5


P&C Extraordinary Shareholders’ Meeting to approve:

Shares value cancellation and reverse stock splitCapital reduction through assignment of goods in kind

Pirelli Real Estate Separation Plan: timing

Board of Directors

PRE shares assigment

Entry of the decision into the Registry of Companies

Creditors’ opposition deadline

May, 4th 2010

byJuly 2010

byJuly 2010

byOctober 2010

byOctober 2010

6


PRE equity structure changesPirelli Real Estate Separation Plan

Pirelli

58%

CURRENT POST REVERSE STOCK SPLIT

1) Inclusive of PRE’s own shares (0.1% of circulating capital) and stake of Intesa San Paolo, Assicurazioni Generali and Unicredit worth 0.1%

To guarantee stability of Pirelli RE shareholding basis, some members of P&C shareholders’agreement, to become future PRE shareholders, expressed their positive views to enter anagreement involving less than 30% of the relevant share capital.

2) Of which 27.4% ex P&C floating (net of own shares) and 42% ex PRE floating

Floating 1)

42%Other

members ofthe P&C

shareholders’agreement

15.8%

Camfin

14.8%

Floating 2)

69.4%

7


Agenda




Appendix


8


Pirelli 1Q’10 Key Financial Results

€/mln

Revenues

EBITDA before Restruct. Costs

Margin

EBIT before Restruct. Costs

Margin

Restructuring Costs

EBIT

Margin

Devaluation/sale of particip. inlisted co.

Total Net Income

Net Income post minorities

Net Debt

Key messages

(*) Homogeneous terms variations, excluding exchange rate effects

Results from equity particip. PRE

Other Results from participations

Tyre 2-digit revenues growth drivenby our solid positioning

Strong profitability improvement

Limited cash absorption (-150€/mlnvs -250 €/mln) due to Pirelli Tyresound working capital management

Organic growth (*)

1,212.0

+15.3%

147.3 101.7

12.2% 9.8%

(2.6)

91.7

38.9

39.2

7.6% 4.5%

46.8

9.5

678.4

0.0

(2.9)

1.1

(3.5)

(12.5)

13.0

0.3

1,043.0 +16.2%

1Q’091Q’10 YoY

94.3 50.3

7.8% 4.8%

+87.5%

+44.8%

1,278.9

Savings are on track both for Tyre andReal Estate

Tyre EBIT margin close to 9%

Pirelli RE EBIT break-even

PRE net income back to break-even

+95.9%

+3.1 p.p.

9


Pirelli EBIT trend

46.8

2.0

6.1

(2.3)

1.1 0.9

1Q’101Q’09 TyreEcoTech

RealEstate

Broadbandaccess

Otheractivities

Restruct.Costs

91.7

Organic EBIT: 44.0

37.1

€/mln

10


Pirelli attributable net income 1Q’10 vs 1Q’09

39.2

1Q’09 EBIT Deval./saleparticip.

in listed co.

Financialcharges

and taxes

Other resultsfrom particip.

1Q’10

9.5

Resultsfrom equity

particip. PRE

Minorities

44.9

(15.9)

(0.3)

(3.4)

12.5

(8.1)

11


Pirelli 1Q’10 Net Financial Position

94.353.0

(50.1)(155.9)

528.8

FY’09

49.9

Fin. Inc./Expen.& taxes

38.3

Cash outRestr. Costs

1Q’10

58.7

OperatingCash Flow

Others

2.7 678.4

€/mln

EBIT before restr. costsDep/Am:Capex:NWC & others:

12


Pirelli Debt Structure as of March 31, 2010

Total CommittedLines Not Drawn

895

25

294

145

319

160

1,040

249

Committed LineDrawdown

Other Borrowing

1,090

980

788

1,768

678

-

Total

925

*Financial receivables. cash and cash equivalents

€/mln

745

Gross Debt maturity as of Mar. 31, 2010 59% 14%18% 9%

180

100

1Q’10 2010 2011 2013 &beyond

2012

Net Financial Position Gross Debt Maturity

60

Net Fin.

position

Fin.

Assets*

Gross

Debt

13


2009 Shareholder Remuneration

FY’09 Parent Company Net Income: 112.6 €/mln (vs -189.5 €/mln in 2008)

Dividend distribution approved by Pirelli & C. AGM (21 April 2010)

Dividend Payment Schedule

Coupon Detachment: 24 May, 2010

Dividend Payment: starting from 27 May, 2010

Ordinary shares

Saving shares

DPS N° of Shares* Dividends

1.45 €/cent

4.06 €/cent** 130 5.3

75.85,229

mln €/mln

72% of parentcompany Net Income

81.1

14

*Net of treasury shares: 3.9mln ordinary shares and 4.5mln savings shares.**2.03€/cent for the financial year 2008 and 2.03€/cent for the financial year 2009


Agenda




Appendix


15


2010 Outlook

ongoing growth by business differentiation

improvement of our cost competitiveness

investments acceleration to build up capacity

Tyre and Parts .... ready for a new leap forward on a solid ground.

Real Estate .... ready to bring out intrinsic value:

consolidate leadership in Italy as a Fund Management Company

continue a derisking approach in Germany & Poland

rifocus on the services platform to increase recurring profitability

maintain a strict financial discipline

Growing with value into a "pure Tyre company, a frontrunner in Green Performance"

Filters

Synergic business (Ambiente & Pzero): breakeven .... ready to create new business opportunities and enhance brand value

Tyre

exploit domestic & global opportunities deriving from ever stricter anti-pollution regulations

16


Pirelli &C 2010 FY targets update

EBIT %post restructuring

4.7-4.833%

6.5-7%

NFP

2010Targets

0.7*

1.2

7.6%

1Q’10 Results

0.7

Group Revenuesof which “Green Performance”

Capex

(*) Including 81.1 €/mln cash out for dividends

€/bln

>0.3

2010 RevisedTargets

Excl. PRE

4.6-4.7

≥6.5%

4.9-5.0

≥6.5%

confirmed

confirmed

confirmed

17


Agenda

1Q 2010 Results



Appendix




18


Pirelli Tyre 1Q 2010 performance

Revenues

margin

EBITDA (beforerestruct. costs)

EBIT (beforerestruct.costs)

926.9

107.8

11.6%

61.0

6.6%

-13.9%

-28.6%

-40.7%

margin

EBIT (afterrestruct.costs)

57.5 -42.7%

Net Income 14.6

6.2%margin

-2.4 p.p.

-2.9 p.p.

-3.1 p.p.

1,110.0

146.4

13.2%

98.1

8.8%

+35.8%

+60.8%

95.5 +66.1%

50.1

8.6%

+1.6 p.p.

+2.2 p.p.

+2.4 p.p.

+19.8%

Revenue drivers

Price/Mix

Exch. Rate(*)

Volume

Rev. (before exch.rate impact)

+1.4%

+17.4%

+1.0%

+18.8%

+6.9%

-18.1%

-2.7%

-11.2%

+5.6%

-13.3%

-1.5%

-7.7%

-1.7%

+15.6%

+4.8%

+13.9%

+4.7%

-3.3%

-3.3%

+1.4%

1Q’09 2Q’09 3Q’09 4Q’09 1Q’10

€/mln

(*) 4Q’09 trend reflects the high Venezuela inflation impact

Strong revenues growth

through:

exposure to high growth

markets

value strategy in mature

markets

Effective EBIT growth (+60% yoy)

driven by

2 – digit volume performance

Cost efficiencies

1Q’10YoY%1Q’09 YoY%

19


1Q’10 Results: Pirelli Tyre vs. main peers

*Simple average: Michelin, Bridgestone excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech** Volumes and price/mix trend refer to Michelin, Goodyear and Conti.

+15.4%

Reven

ue

s

Top 4 competitors*

Sales

+18.6%**

-1.9%**Volumes Price/mix

Ebit margin before restr. costs and special items

6.6%

Pro

fita

bil

ity

1Q’09 1Q’10

8.8%

-1.4%

7.7%

+19.8%

+17.4%

+1.4%

1Q’09 1Q’10

Pioneers in raising prices in a less

receptive competitive environment

Profitability improvement due to:

volume

cost efficiencies

factory saturation

Pirelli Performance drivers:

20


Pirelli Tyre: a solid positioning to capture growth

1Q’10 Actions and Results

Europe

NorthAmerica

MEA

1Q’09 1Q’10

46%

8%

5%

10%

AsiaPacific

Europe

Strengthened position in value segments (Prestigeand Premium OEMs)

Green Performance products fuel replacement sales

North America

Strong performance in Replacement and OE salesfocusing on selective customers and OE platforms

LatAm

Consolidating leadership across the region

MEA

Constrained capacity limiting sales

Asia-Pacific

China is driving the growth

42%

9%

Yoy growth

9%

6%

MatureMarkets

EmergingMarkets

+13%

+28%

Sales by geographical area

SouthAmerica

31%34%

% on sales 100% 100%

21


10 €/mln gross savings on track with the annualprogram

>60 €/mln gross savings(before raw materials price

increase), in line with ‘09-’113Y Plan

Initial benefits from 2009 headcount downsizing

Positive impact on fixed cost following Spanishplant shutdown

Pirelli Tyre cost reduction program update

2010 Target 1Q10 Achievements

Start up costs at new Settimo Torinese plantwhile still producing upstream components at theold one

22


Pirelli Tyre operating performance

EBIT 1Q’10(before

restr.costs)

Depreciation/other costs

Exchangerate

EfficienciesCost ofinputs

VolumePricemix

EBIT 1Q’09

(before restr.costs)

(5.2)

7.650.8

6.1

(8.1)

98.1

61.0

(14.1)

€/mln

Raw materials: (6.7)

Labour / energy / other: (7.4)

23


Pirelli Tyre NFP evolution

1Q’10

22.2

45.61,122.5

EBIT (before restr. costs): 98.1

Investments: (47.6)

Depreciation: 48.3

Δ NWC & others: (132.2)

RestructuringCash out

Financialcharges /

Taxes

OperatingCash Flow

(6.0)

33.4

FY’09

1,027.3

Other

Limited cash absorption (-95 €/mln vs -255 €/mln in 1Q’09) notwithstanding the seasonality of the business:

inventories at efficient level

tight credit policy

NFP: 95.2

€/mln

24


Consumer Business: key market trends

1Q’09 2Q‘09

Car tyre shipments. % (yoy)

OE

Replacement

OE

Replacement

-34% -20%

-5% -8%

-49% -48%

-13%

No

rth

Am

eri

ca

Eu

rop

eM

erc

osu

r

-18% -10%

+2%

-10%

OE

Replacement

-4%

4Q‘09

+18%

+12%

+2%

+44%

+18%

+8%

3Q‘09

-1%

+1%

-22%

-8%

+11%

+3%

1Q’10

+28%

Sources: major external data provider for each region and Pirelli estimates

+10%

+70%

+8%

+25%

+25%

25


Consumer Business: Pirelli economics in 1Q 2010

Revenues

margin



670.5

77.4

11.5%

41.9

6.2%

-10.4%

-28.8%

-42.2%

margin

-3.0 p.p.

-3.5 p.p.

780.9

106.0

13.6%

69.5

8.9%

+37.0%

+65.9%

+2.1 p.p.

+2.7p.p.

+16.5%

Revenue drivers

Price/Mix

Exch. Rate(*)

Volume


+1.2%

+14.9%

+0.4%

+16.1%

+6.6%

-14.7%

-2.3%

-8.1%

+5.1%

-9.8%

-1.3%

-4.7%

-0.9%

+16.4%

+5.7%

+15.5%

+3.6%

+1.7%

-2.2%

+5.3%

1Q’09 2Q’09 3Q’09 4Q’09 1Q’10

€/mln

Strong top line performancedriven by volume growth in allmarkets except MEA

Profitability improvement due to:

volume

cost efficiencies

factory saturation



26


Industrial Business: key market trends

-75%

-25%

-29%

-16%

-44%

+12%

+16%

+23%

-33%

-26%

-22%

-62% -66%

-14%

-27%

-10%

+1%

+38%

+65%

+26%

Merc

osu

r OE

Replacement

Car tyre shipments,

OE

Replacement

Eu

rop

e

Sources: major external data provider for each region and Pirelli estimates

1Q’09 2Q‘09 4Q‘093Q‘09 1Q’10

27


1Q’09 2Q’09 3Q’09 4Q’09 1Q’10

Industrial Business: Pirelli economics in 1Q 2010

256.4

30.4

11.9%

19.1

7.5%

-22.0%

-28.1%

-36.8%

-1.0 p.p.

-1.7 p.p.

329.1

40.4

12.3%

28.6

8.7%

+32.9%

+49.7%

+0.4 p.p.

+1.2p.p.

+28.4%

Revenue drivers

Price/Mix

Exch. Rate(*)

Volume


+1.8%

+24.1%

+2.5%

+25.9%

+7.2%

-25.7%

-3.5%

-18.5%

+6.8%

-20.9%

-2.2%

-14.1%

-3.5%

+14.0%

+2.9%

+10.5%

+7.0%

-13.4%

-5.8%

-6.4%

Top line growth driven byemerging markets

Revenues

€/mln

margin



margin

High factory saturation



28


Pirelli Eco Technology: 1Q’10 Key Financial Results

14.3

(2.3)

(3.4)

26.8

(2.8)

-13.9%

3.7

10.6

Revenues

Ebitda

Net income

NFP

€/mln

Ebit

Filters

Gecam

Filters sales growth driven by Italy

Gecam sales slowdown due to tax increases on diesel additives

New China operations and start up costs negatively impacting Q1 results

NFP improving in line with FY 2010 target

of which

19.6

(1.4)

42.0

(0.8)

+37.1%

9.1

10.5

(0.2)

1Q ’09 YoY 1Q’10 YoY

145.9%

-0.9%

56.6

(13.7)

47.2

(10.8)

-10%

18.5

38.1

(9.1)

FY ’09 YoY

236%

-34%

-8%

-18%

29


Agenda

1Q 2010 Results



Appendix




30


2

1

Our Strategic Guidelines for 2010

A different growth strategy by business

Consumer Industrial

Pirelli Brand enhancing Premium Segmentpositioning (>70% of Consumer) in Europeand North America

Price/mix improvement

Cost efficiency program

Production increase in low-costcountries

Levers Expected Results

contrast raw materials cost increase (cost headwind~200€/mln at current natural rubber price >3,000 $/ton.)

56% 48%

Improve our cost competitiveness

3

Accelerate Investments to build up capacity: over 300€/mln in 2010

>90% of Industrial (87% in ‘08)

>70% for Consumer (61% in ‘08)

with one factory closure in 2009 (Spain); the old factory in

Settimo Torinese (Italy) will be definitively shutdown in 2010

Full exploitation of our potentials in areas ofgrowth (LatAm, China)

Further exposure in Emerging Markets to best seizegrowth opportunities

2008 2009

22%27%

78%73%

2010

18%

82%LatAm/MEA/ASIA

Europe

a year in advance!

31


Pirelli Tyre Selective Positioning in the Consumer Segment

Emea

Sales Breakdown By Area

NorthAmerica

SouthAmerica

AsiaPacific

Production By Area

% of production

Solid foothold in Europe, in prestige/premiumsegments

Low exposure to North America Historical leadership in South America Growth opportunities in Asia-Pacific markets

with new China source

Source: LMC, Pirelli estimates

HighCost

LowCost

Only high-end, high added value productsin high cost countries

Production Footprint moving forward

Prestige

Premium

Synergic

SegmentShare

Pirelli Focus

Leading brand in Prestige niche Development partner of all EU premium

car makers Leading supplier to the Automotive

Industry in South America Leader in the Motorcycle business with

Pirelli and Metzeler Brands

<30%

>70%

<39%

>61%

Pirelli in 2008 Pirelli in 2010

100%100%

Market in 2009 Pirelli in 2009

% of sales

100%100%

4%

29%

56%

11%

38%

27%

6%

28%

32


Industrial Segment: a Unique Competitive Position

Emea

Sales Breakdown By Area

NorthAmerica

SouthAmerica

AsiaPacific

Production By Area

% of production

HighCost

LowCost

Pirelli Focus

Pirelli in 2008 Pirelli in 2010

100%100%

Market in 2009 Pirelli in 2009

% of sales

15%

100%100%

48%

11%

8%

48%

Sales focus in high growth areas

No presence in North America

Product cost leadershipsupported by a low-costproduction base

Leading position in Pirelli keymarkets

Proprietary steelcordtechnology

Latin America

Southern EU

and Near-East

NorthAfrica

China

<10%13%

44%

27%

>90%87%

Source: LMC, Pirelli estimates

33


Regional leadership with Net Sales of

1.9$/bln

LEADERSHIP

BEST RANGE

No.1 local OEM Strategic supplier

The only full range player: from 2

wheels tyres to Truck to Agro/OTR

No.1 BRAND

Top of Mind Brand in Mercosur with 100yrs of history in Argentina and 80 yrs in Brazil

Elected No.1 brand out of allsectors/brands in Brazil by male consumers

OUR MAIN STRENGTHS

Strongest Dealers network and 1st R&D

Centre and Proving Ground created in the region

Over 11k committed and loyal employees

Latin America: present & future leadership

34


LATEST CAR / SUV HIGHLIGHTS

Green Performance platform: Car & SUV

International Launch of Scorpion Verde(Barcelona, 15th-25th March), the first newgreen performance tyre for the SUV &Crossovers segment at the presence of 600guests between Trade Press & Dealers

“Very balanced tyre; good onwet and dry surfaces; low fuelconsumption; the lowest noise”

“Very balanced summer tyrewith very high mark on wetsurface; low wear”

35


PIRELLI N.1 BY ‘THE VOICE OF THE CUSTOMER’

US J.D. Power Original Equipment Award

Pirelli marks highest score in J.D. Power andAssociates Original Equipment Tire Study in thePerformance/Sport Category segment

April 2010 Tire Customer Satisfaction Studyhighlights Pirelli with 38 pts above the segmentaverage, a considerable improvement vs the 2009result

The study measured Pirelli’s overall consumersatisfaction in the high and ultra-high performancesegments

Included in the study top fitments such as AstonMartin, Bentley, Ferrari, Lamborghini ,Maserati, BMWand Porsche as well as Ford’s recent high-performance Mustang GT and the new Camaro SSmodels

UHP PLATFORM RECOGNITION

36


Diablo Rosso Corsa: the first tyre that can be customized

Three Zone Compound derived from WSBKexperience

Functional Groove Design: excellent slicklike racetrack performance and great controlon wet road

THE TECHNOLOGY

THE BENEFITS

Tires customization to match style &uniqueness of the riders on www.pirelli.it/drc

Provides at least 10 HP more than any othertested supersport tires (internal test)

THE TARGET

Designed for sport naked and supersport

bikers fitted with the same track & road tires

37


low rolling resistance

fuel saving >3%

less CO2 emission

TRUCK HIGHLIGHTS: RETREADABILITY & MILEAGE

Industrial: Green Performance platform

Tyre 1 First Life Tyre 1 Retr.1 Tyre 1 Retr.2

Enhanced tyre life-cycle : improved mileage and environmental impact

600.000 Km

Performance Area

Green Area

01 seriesreference

38


Pirelli and Sustainable Performance

Best in class for Economic, Environmental and Social dimension; Pirelli rating: 88% (+11pp yoy)vs. Autoparts & Tyre average 48% rating

Worldwide leader in Autoparts and Tyre industry for the thirdconsecutive year

Excellence Areas: Health & Safety, Brand Management, Innovation Management, Human Capitaldevelopment, Labour practice indicators, Talent attraction & retention, Environmental Reporting, ClimateStrategy, Standards for Suppliers

Included in all major sustainability global indexes:

Best Italian Company for Corporate Governance - GMI- Pirelli international rating: 9/10 vs Automobiles and Parts average 5/10 rating

- Pirelli Country rating (Italy): 10/10

In Sept ‘09 confirmed for

7 consecutive year

Sector mover 2010 and Gold classCompany in the SAM Group andPwC "Sustainability Yearbook"

39


A proactive pricing policy

Middle Est AfricaJanuary 2010+10% Consumer and IndustrialTyres

North AmericaJuly 2010+4% Consumer Tyres

April 2010+4% Consumer Tyres

Europe2Q 2010+4% Consumer Tyres+6% Industrial Tyres

South America2Q 2010Differentiated price increases acrossthe region on both Consumer andIndustrial Tyres

China1Q 2010+4% Consumer and IndustrialTyres

40


Over 300 €/mln investments in 2010

An accelerated investment plan: key projects(capacity increase from 2009 to 2011)

RUSSIAGreenfield start up

CHINA+ 20% Truck Tyres+ 100% Car Tyres

ROMANIA+ 60% Car Tyres

ITALYNew green factory

EGYPT+ 20% Truck Tyres

MERCOSUR+ 20% Truck Tyres+ 25% Car Tyres

41


Pirelli Tyre 2010 targets update

EBIT %post restruct.

+6% / + 8%

~flat yoy

2010Targets

(10 March 2010)

Revenues

Capex

€/mln

>300

>10%

2010Targets update

confirmed

3,993

7.7%

FY’09

217

EBITpost restruct.

(Implicit in theguidance

320÷330)

320÷330(floor)

308.5

Raw MaterialCost headwind

200(Natural Rubber

price ≥3000$/ton.)

>250

42


Conservative 2010 Filters sales plan, while waiting fordecision-making process on DPF adoption in Italy,France, Spain

Reduced 2010 Gecam sales plan due to additionaltaxation in Italy and France

Improved efficiency from Rumanian factory

Investments linked to new Chinese JV set up

Overall double digit sales increase targeting 2010breakeven and positive cash flow generation

Pirelli Eco Technology 2010 outlook

OEM (Car)

RETROFIT (Industrial)

43


Appendix

44


PirelliAmbiente

Pirelli EcoTechnology

Pirelli Labs PZero Moda Pirelli REPirelli

BroadbandSolutions

Pirelli & C Structure

Pirelli Tyre

PIRELLI & C

Tyre & PartsTyre & Parts

58%100% 51% 100% 51% 100%100%

45


Profit & Loss and Net Financial Position by Business UnitPirelli Group – 1Q’10 Results

Sales

∆%

∆ % on organic sales

EBITDA before Restruct Costs

% on sales

EBIT before Restruct Costs

Restructuring Costs

EBIT

Other Financial Income/Charges

Fiscal Charges

EBIT incl. income from equity part.

Net income

% on sales

Attributable Net income

Net Financial Position

€/mlnPirelli Tyre

PirelliEco Technology Broadband AccessPirelli Real Estate Others Pirelli & C. Cons.

Shareholders’ loans interests

EBIT incl. inc. from equity part.after restr.costs. writedown/ reval.

EBIT incl. income from equity part.and shareholders’ loans interests

Results from equity partecipations

Devaluation/sale of particip.in listed companies

% on sales

% on sales

1Q’10 1Q’09

1,110.0 926.9 19.6 14.3 51.7 53.8 27.2 44.0 3.5 4.0 1,212.0 1,043.0

19.8% 37.1% -3.9% -38.2% 16.2%

18.8% 37.1% -3.9% -38.2% 15.3%

146.4 107.8 (0.2) (2.3) 5.1 (0.5) 0.3 2.7 (4.3) (6.0) 147.3 101.7

13.2% 11.6% n.s. n.s. 1.1% 6.1% 12.2% 9.8%

98.1 61.0 (0.8) (2.8) 3.9 (2.2) 0.2 2.5 (7.1) (8.2) 94.3 50.3

8.8% 6.6% 0.7% 5.7% 7.8% 4.8%

(2.6) (3.5) (2.6) (3.5)

95.5 57.5 (0.8) (2.8) 3.9 (2.2) 0.2 2.5 (7.1) (8.2) 91.7 46.8

8.6% 6.2% 7.6% 4.5%

0.3 0.0 0.3

0.2 3.5 0.0 (12.5) (3.1) 9.5 (2.9) 0.5

3.9 (14.7)

6.5 8.5 6.5 8.5

10.4 (6.2)

10.4 (6.2)

(16.4) (23.1) (0.5) (0.6) (5.3) (8.3) 1.1 0.4 (0.7) 2.9 (21.8) (28.7)

(29.2) (23.3) (0.1) (4.1) (2.1) (0.1) (0.1) (1.1) (0.8) (34.6) (26.3)

50.1 14.6 (1.4) (3.4) 1.0 (16.6) 1.2 2.8 (12.0) 3.7 38.9 1.1

4.5% 1.6% 3.2%. 0.1%.

0.4 (15.8) 39.2 9.5

1Q’10 1Q’09 1Q’10 1Q’09 1Q’10 1Q’09 1Q’10 1Q’09 1Q’10 1Q’09

1,122.5 1,521.8 42.0 26.8 55.3 309.3 (23.6) (32.3) (517.8) (546.7) 678.4 1,278.9

46


Profit & Loss and Net Financial Position by Business Unit€/mln

Sales

∆%

EBITDA before Restruct Costs

EBIT before Restruct Costs

EBIT


Pirelli Ambiente PZero Total OthersCorporate

1Q’10 1Q’09

Restructuring Costs

Results from equity partecipations

Devaluation/sale of particip.in listedcompanies

Financial Income/Charges

Fiscal Charges

Net income

1Q’10 1Q’09 1Q’10 1Q’09 1Q’10 1Q’09

1.9 1.3 3.1 1.8 (1.5) 0.9 3.5 4.0

46.2% 72.2%

(1.4) (0.7) 0.1 (0.9) (3.0) (4.4) (4.3) (6.0)

(1.8) (0.8) 0.0 (0.9) (5.3) (6.5) (7.1) (8.2)

0.0 0.0

(1.8) (0.8) 0.0 (0.9) (5.3) (6.5) (7.1) (8.2)

0.3 0.0 0.3

(0.3) (3.1) 9.8 (3.1) 9.5

(0.4) (0.1) (0.3) 3.0 (0.7) 2.9

(0.1) (1.1) (0.7) (1.1) (0.8)

(2.2) (1.2) 0.0 (1.0) (9.8) 5.9 (12.0) 3.7

46.1 4.8 3.6 2.5 (567.5) (554.0) (517.8) (546.7)

Pirelli Group – 1Q’10 Results

47


Pirelli Balance Sheet

4,078.2

4,078.2

3,818.0

3,818.0

2,596.0 2,494.7

803.8 794.5

3,653.4 3,596.2

424.8 221.8

Equity

Provisions


Total Assets

Fixed Assets

Net Working Capital

Net Invested Capital

Pirelli & C. attributable Equity

Equity per share

678.4 528.8

2,271.8 2,175.0

0.423 0.405

1Q’10 FY’09

% Net Invested Capital

31.03.2010 31.12.2009

P.Tyre

P.Eco Tech.

P.Real Est.

PBS

Others

66.6%

1.3%

19.2%

0.2%

12.7%

65.6%

1.5%

20.3%

-0.1%

12.7%

€/mln

48


1Q ‘09

EBIT before restructuring costs 50.3

Depreciation 51.4

Net investments (42.9)

Working capital/other variations (262.8)

FREE CASH FLOW (204.0)

Financial income (expenses) (20.2)

Tax charges (26.3)

OPERATING CASH FLOW (250.5)

Financial investments/divestitures 37.9

Dividends paid

Cash out for restructuring (45.8)

Exchange rate differentials/Others 7.2

NET CASH FLOW (251.2)

297.0

211.1

(227.8)

275.8

556.1

(85.4)

(97.9)

372.8

219.1

(2.4)

(106.2)

(151.8)

498.9

-

PRE Capital increase subscribedby minorities

- 167.4

Pirelli Group Cash Flow

FY’09

94.3

53.0

(50.1)

(155.9)

(58.7)

(15.3)

(34.6)

(108.6)

-

(38.3)

(2.7)

(149.6)

-

1Q’10

-

€/mln

49


TYRE PREOTHER

BUSINESSESCORPORATE

PIRELLIGROUP

Gross Debt 1,489 487 104 259 1,768

to Corporate 400 66 79

Financial receivables (97) (414) (26) (545) (511)

Cash and cash equivalents (269) (18) (10) (282) (579)

Net Financial Position 1,123 55 68 (568) 678

Pirelli Group: Net financial position 1Q’10 by Business

€/mln

50


93

70

81

6972

102

128

140

2000

+ 7.2%

2001 2002 2003 2004 2005 2006 2007 2008

World Tyre MarketDelta share 2008vs 2000 (PNT)

-3.2

-3.0

-5.6

-1.4

+0.6

Michelin

Bridgestone

Goodyear

Continental

Pirelli

0,0%

5,0%

10,0%

15,0%

20,0%

Revenues Market shareSource: Tire Business reports for 2000-2008 data; 2009 Pirelli estimate

TotalMarket

Bl$ %

0.0

30.0

60.0

90.0

120.0

112

MarketShare

2009E

51

131


Source: LMC. Pirelli estimates

Car tires, Mln pieces North AmericaKeep growing our market share in the

Replacement segment: new products, newcustomers, brand pull

EMEAMore selective and focused on OEMs, while

increasing sales in Replacement with GreenPerformance products and winter re-stocking

LatAmConsolidate leadership in both OE and

Replacement segments

Asia-PacificExploit competitive China source to increase

coverage and penetration in major APACmarkets; initiate OE in China with Europeanpremium transplants

OE

Replacement

+4÷5%

0

200

400

600

800

1000

2008 2009 2010 2011

2010 Replacement: +4%

EU + Nafta +3%

Emerging: +5-6%

2010 OE: +6%

EU Flat

Nafta +20%

Emerging: +5-6%

Market Outlook Our Growth Strategy

Our growth strategy in the Consumer market …

52


Source: LMC. Global Insight. Pirelli estimates

OE

Replacement

+6÷7%EmeaConsolidate market recovery

LatAmConsolidate leadership in Mercosur while

increasing share in Central America

AsiaFocus on Chinese market due to capacity

saturation

SteelCordLeverage vertical integration and innovation

0

20

40

60

80

100

120

140

2008 2009 2010 2011

Market Outlook Our Growth Strategy

Mln pieces. Percent. Radial + truck tires

2010 Replacement: +5%

EU + Nafta +4-5%

Emerging: +5-6%

2010 OE: +10%

EU +20%

Emerging: +6-7%

… and in the Industrial market

53


1Q’10 Pirelli Tyre Mix

Car60%

Motorbike10%

Steelcord& others

3%Truck27%

Sales by segment

Sales by regionReplacement

77%

OE23%

Consumer70%

Sales by business

Industrial 30%

Sales by channel

LatinAmerica

34%MEA9%

Asia Pacific6%

Europe42%

North America9%

54


1Q’10 Pirelli Tyre People

People by cluster

Workers81%

Management1%

Employees18%

People by contract

Europe37%

North America1%Latin America

44% Asia Pacific8%

Permanent91%

Temps &Agency

9%

MEA10%

Headcount

Mar. ‘09 Mar. ‘10

27,304

28,078

People by region

55


Raw Materials

Synth. Rubber22%

Natural Rubber31%

Q1 2010 mix Raw Materials price trend

Textiles11%

Steelcord9%

Chemicals15%

Carbon black12%

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

220.0

QI/07 QII/07 QIII/07 QIV/07 QI/08 QII/08 QIII/08 QIV/08 QI/09 QII/09 QIII/09 QIV/09 QI/10 QII/10

Natural Rubber Brent Oil

(Based on purchasing cost)

(-5pp yoy)

(+6pp yoy)

(-2pp yoy)

(stable)

(+1pp yoy)

(stable)

56


Pirelli Tyre: 20 industrial plants in 11 Countries (as of March 2010)

Rome Car

Burton CarCarlisle Car

U.K.

U.S.A

Guacara Car

Venezuela

Merlo Car

ArgentinaCampinasFeira de SantanaSanto AndréGravataiSumaré

CarCar/Truck

Truck/AgroMoto/Truck

Steelcord

Brazil

Alexandria Truck

Egypt

Yanzhou Car/Truck

China

Bollate (MI)Settimo TorineseSettimo TorineseFigline Valdarno

CarCar

TruckSteelcord

Italy

Slatina Car/Steelcord

Romania

Izmit Car/TruckSteelcord

Turkey

BreubergMerzig

Car/MotoSteelcord

Germany

57

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