Pirelli & C — Earnings Release 2020

Apr 3, 2020

PIRELLI MEASURES AGAINST COVID-19 AND 2020 GUIDANCE UPDATE

03 april 2020

DISCLAIMER

In General. This document, is referred to herein as the "Presentation". This document has been prepared by Pirelli & C. S.p.A. ("Pirelli" or the "Company" and, together with its subsidiaries the "Group"). The Presentation is being furnished to you for information purposes only and for use in presentations of the results and strategies of the Group.

No distribution of this Presentation. This Presentation is being furnished to you solely for your information and may not be reproduced, in whole or in part, or redistributed to any other individual or legal entity.

Forward-looking statement. "Forward-looking statements" (which expression shall include opinions, predictions or expectations about any future event) that may be contained in the Presentation are based on a variety of estimates and assumptions by the Group, including, among others, estimates of future operating results, the value of assets and market conditions. These estimates and assumptions are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo-political, competitive and financial risks that are outside of the Group's control. There can be no assurance that the assumptions made in connection with the forward-looking statements will prove accurate, and actual results may differ materially. The inclusion of the forward-looking statements herein should not be regarded as an indication that the Group considers the forward-looking statements to be a reliable prediction of future events and the forward-looking statements should not be relied upon as such. Neither the Group nor any of its representatives has made or makes any representation to any person regarding the forward-looking statements and none of them intends to update or otherwise revise the forward-looking statements to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the forward-looking statements are later shown to be in error.

The forward-looking statements does not take into account any additional negative effects that may arise from impacts on the global market in which Pirelli operates and more generally on the macroeconomic scenario, also following any further governmental measures related to the spread of Covid-19 (SARS-CoV-2).

No update. The information and opinions in this Presentation is provided to you as of the dates indicated and the Group does not undertake to update the information contained in this Presentation and/or any opinions expressed relating thereto after its presentation, even in the event that the information becomes materially inaccurate, except as otherwise required by applicable laws.

No offer to purchase or sell securities. The information, statements and opinions contained in this Presentation are for information purposes only and do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. None of the securities referred to herein have been, or will be, registered under the U.S. Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction of the United States or in Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would be unlawful (the "Other Countries"), and there will be no public offer of any such securities in the United States. This Presentation does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or the Other Countries.

Rounding. Due to rounding, numbers presented throughout this Presentation may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

Neither the Company nor any member of the Group nor any of its or their respective representatives, directors, employees or agents accept any liability whatsoever in connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it.

Francesco Tanzi, the manager in charge of preparing the corporate accounting documents, declares that, pursuant to art. 154-bis, paragraph 2, of the Legislative Decree no. 58 of February 24, 1998, the accounting information contained herein correspond to document results, books and accounting records. ****

Non-IFRS and Other Performance Measures

This Presentation contains certain items as part of the financial disclosure which are not defined under IFRS. Accordingly, these items do not have standardized meanings and may not be directly comparable to similarly-titled items adopted by other entities.

Pirelli management has identified a number of "Alternative Performance Indicators" ("APIs"). These APIs (i) are derived from historical results of Pirelli & C. S.p.A. and are not intended to be indicative of future performance, (ii) are non-IFRS financial measures and, although derived from the Financial Statements, are unaudited and (iii) are not an alternative to financial measures prepared in accordance with IFRS.

The APIs presented herein include EBIT, EBIT margin, EBITDA, EBITDA margin.

In addition, this Presentation includes certain measures that have been adjusted by us to present operating and financial performance net of any non-recurring events and non-core events. The adjusted indicators are EBITDA adjusted, EBITDA margin adjusted, EBITDA adjusted without start-up costs, EBITDA margin adjusted without start-up costs, EBIT adjusted, EBIT margin adjusted, EBIT adjusted without start-up costs, EBIT margin adjusted without start-up costs.

In order to facilitate the understanding of our financial position and financial performance, this Presentation contains other performance measures, such as CapEx (Capital Expenditures) or Investments in property, plant & equipment, Operating working capital related to continuing operations, Net Financial (liquidity) / debt Position, Net financial (liquidity)/debt position without IFRS 16, Operating net cash flow, Net cash flow and Net cash flow before dividends.

These measures are not indicative of our historical operating results, nor are they meant to be predictive of future results.

These measures are used by our management to monitor the underlying performance of our business and operations. Similarly entitled non-IFRS financial measures reported by other companies may not be calculated in an identical manner, consequently our measures may not be consistent with similar measures used by other companies. Therefore, investors should not place undue reliance on this data.

AGENDA

PIRELLI MEASURES AGAINST COVID-19 1

• EXTERNAL SCENARIO EVOLUTION 2
• 2020 GUIDANCE UPDATE 3

MEASURES TO PROTECT HUMAN CAPITAL

PIRELLI PREVENTION MEASURES PREVENTION

• Company task force in contact with all the Institutions' crisis units in each country
• HSE globally co-ordinating actions based on risk assessment
• Policy with 4 risk scenarios for measures to be taken in all the Group's facilities
• Promoted the progressive adoption of smart working
• Suspended all business trips unless strictly necessary
• Issued guidelines for the access to crowded areas and supplied workplaces with first-aid kits and healthcare material
• 24/7 emergency phone service where medical doctors, security and HSE specialists assist employees

Health of our employees, their families and the community our top priority

CONSTANT MONITORING

SUPPORT TO CONTRAST COVID-19 EMERGENCY

SOME EXAMPLES

GLOBAL

• 5 Million RMB donated to Coronavirus Relief Efforts through the Yanzhou Charity Federation of Jining city, Shandong Province
• 90,000 N95 masks, 350,000 general medical masks, 500 thermometers, and 86,000 gloves sent directly to China from Italy, Germany, Mexico, Argentina

ITALY

• €750,000 for Milan's L.Sacco Hospital, founded by Pirelli's employees (~€220,000, an amount doubled by Pirelli) and donations of over €300,000 from Pirelli's partners (incl. Camfin and Fondazione Silvio Tronchetti Provera)
• Donation of 65 ventilators for intensive care therapy, 5,000 protective suits for healthcare workers and 20,000 face masks in cooperation with Lombardy's Region

MEASURES AGAINST COVID

• Pirelli, in light of the present Covid-19 emergency, has decided to cancel the production and launch of the 2021 Pirelli Calendar. In the context of other initiatives already undertaken by the company, "The Cal" project will donate €100,000 to the fight against and research into Coronavirus.

OPERATIONS AT MANUFACTURING FACILITIES

PIRELLI MANUFACTURING FOOTPRINT

IN CHINA

• > Production halted in 2 plants for ~1 month between February and March, now fully operational
• > Output gradually returning to normal levels

IN ALL OTHER REGIONS

• > Since the Covid outbreak, production has been proceeding at a slower pace
• > Production temporary halted starting from march 20
• > Adoption of temporary lay-off scheme

PIRELLI SOLID BALANCE SHEET CONFIRMED

€ million

721 598 452 82 150 48 ^{200 78} 2020 66 1,743 2021 2024 56 2022 125 970 2023 41 195 2025 & beyond 1,450 1,811 1,145 639 215 % on total Gross Debt 27% 3% 33% 21% 12% 4% 252 can be extended to 2022 1,743 can be extended to 2024 With extension option 22% 3% 6% 21% 44% 4%

GROSS DEBT MATURITY – PRO FORMA @ 31.03.2020

KEY HIGHLIGHTS AND RECENT DEVELOPMENTS

GROSS DEBT MATURITY @ 31.12.2019

• 1Q 2020 NEW REFINANCING further reinforcing our Financial structure:
  • €800 mln Sustainable bank line (5Y maturity) increases the already available liquidity margin to face 2020-2022 maturities
  • €200 mln credit line, maturing in June 2020, brought to Sept. 2021

• Therefore PIRELLI's debt maturities are covered for the next 3 years (1Q 2020-1Q 2023) by Liquidity and Committed Bank Lines >

>

PIRELLI MEASURES AGAINST COVID-19 1

EXTERNAL SCENARIO EVOLUTION 2

2020 GUIDANCE UPDATE 3

MARKET VIEW ON THE COVID OUTBREAK IMPACT

8

AGENDA

PIRELLI MEASURES AGAINST COVID-19 1

EXTERNAL SCENARIO EVOLUTION 2

2020 GUIDANCE UPDATE 3

QUARTERLY ASSUMPTIONS FOR NEW GUIDANCE GUIDANCE

QUARTERLY DYNAMICS

PIRELLI CAR EXP. VOLUMES

• APAC: February and March strongly impacted by Covid (Vol ~–38%), with February ~-80% in China confirmed and ~-50% in March • EU: market slowdown in Feb, march affected by crisis • N. America: market slowdown in Feb, late march affected by crisis • Other Regions: late march affected by crisis 1Q 2Q 3Q 4Q • APAC: slow recovery of market demand • EU, N. America & Other Regions: full impact of lockdowns • APAC: stable demand, only mild slowdown • EU, N. America & Other Regions: slow recovery of market demand • All Regions stabilized, only mild slowdown ~-18% Negative YoY Positive YoY Total ≥18" ≤17" ~-18% ~-11.5% ~-24% PIRELLI MARKET ~-19% ~-14% ~-20%

2020 COSTS: ON TOP OF 2020-2022 COMPETITIVENESS PROGRAM ACTIVATED ADDITIONAL COST MEASURES TO PROTECT MARGIN

COMPETITIVENESS PROGRAM FULLY ON TRACK NEW ACTIONS TO CONTAIN COSTS

• Quick operations slowdown anticipating sales contraction to limit costs and contain stock >
• Review of Communication and Marketing activities in term of spending and contents >
• Aggressive Cost containment on all discretionary spending, with HQ leading the effort ("Q2 stand-still") >
• Renegotiation of several suppliers' contracts >
• 2020 Short Term Incentive Plan cancelled >
• R&D spending prioritization following new market scenario >
• Distribution efficiencies >
• Full capitalization of lower input costs (Raw Materials, Energy) >

2019 DIVIDENDS: NO PAYMENT IN 1H 2019, RIGHT TO EVALUATE IN 2H 2019

In the light of the spread of the pandemic and its potential duration and given the uncertainty surrounding its geographical extent, as well as the slowdown that it could cause on the demand, on the car market and on the entire economic cycle, it is proposed to resolve upon the:

• amendment of the allocation of 2019 profits (equal to Eur 273,241,811.00) to be submitted in the next Shareholders' Meeting, cancelling the payment of the dividend – resolved during the meeting held on the 2 nd of March – and consequently carrying forward the entire amount of the profits; >
• the Board of Director will evaluate to call a Shareholders' Meeting, during the second half of the year, to propose a possible distribution, should the uncertainty related to the development of the pandemic and its effects on the economic cycle and business appear clearer, thus increasing visibility regarding the Group's financial performance. >

MANAGEMENT COMPENSATION: 2020 ACTIONS GUIDANCE

~€31 Mln of cost reduction

2020E DELEVERAGE CONFIRMED THANKS TO A SOLID CASH FLOW AND DIVIDEND WITHDRAW: €230/260 MLN OF NET DEBT REDUCTION GUIDANCE UPDATE

• Investment project reduction in line with the new market outlook: ~€ 130m of CapEx (-57% vs feb. guidance) mainly devoted to maintenance, mix and quality improvement; shift of some investments to 2021-2022 (e.g. in OE and Motorsport) >
• Lower taxes cash-out linked to the new operating income level, including cash out optimization >
• Working Capital: more cautious view on payables and receivables (strict control), while continuing inventory containment >

2020 TARGETS UPDATE

		@ FEB 19	@ APR 03	UPDATE
€ billion	2019 A	2020 E	2020 E
Net Sales	5.3	~ 5.4	~ 4.3 – 4.4 •	Tot. Vol.: ~-18% / -20% High Value: ~-14%
adj. EBIT margin	0.9 17.2%	~ flat YoY	• 14.0% – 15.0%	Standard: ~-26%
CapEx	0.39	~ 0.3	~ 0.13
Net Cash Flow bef. Dividends	0.33	~ 0.4	~ 0.23 – 0.26 assuming no dividends
Net Financial Position (IFRS 16)	3.5	~ 3.3	confirmed

2020-2022 Plan targets will be revised within 4Q 2020

GUIDANCE