Pirelli & C — Interim / Quarterly Report 2015

Aug 6, 2015

PIRELLI 1H 2015 RESULTS

MILANO – AUGUST 06, 2015

AGENDA

KEY MESSAGES

> Solid H1 2015 results despite market volatility in South America and Russia

• Quality top-line growth: Premium outperformance and best price/mix improvement in the industry
• Profitability confirmed at high level: yoy Ebit improvement by internal levers (price/mix and efficiencies)

> FY 2015 targets confirmed in a more cautious South American market scenario

• Backed by better performance of NAFTA, stronger Consumer business offsets Industrial business trend
• Recovery plan in South America already in place: cost cutting measures and production adjustments to secure profitability and cash flow

AGENDA

1H 2015 RESULTS

2015 OUTLOOK & TARGETS

1H 15 TYRE OVERVIEW

APPENDIX

PIRELLI KEY FINANCIAL RESULTS

€/Mln	1H 14	1H 15	Δ yoy	2Q 14	2Q 15	Δ yoy	Q2 highlights
Revenues	2,986.9	3,178.5	+6.4%	1,513.7	1,610.1	+6.4%
Organic Growth*			+3.2%			+4.0%	Progressive improvement in organic growth driven by Premium
EBITDA before Restr. Costs	582.8	609.6	+4.6%	305.5	317.7	+4.0%	outperformance, Industrial volume rebound and strong price/mix
Margin	19.5%	19.2%	-0.3 p.p.	20.2%	19.7%	-0.5 p.p.
EBIT before Restr. Costs	438.9	451.4	+2.8%	232.2	238.0	+2.5%
Margin	14.7%	14.2%	-0.5 p.p.	15.3%	14.8%	-0.5 p.p.	• Profitability performance sustained
Restructuring Costs	(12.7)	(4.8)		(7.0)	(1.5)		by internal levers
EBIT	426.2	446.6	+4.8%	225.2	236.5	+5.0%	• Efficiency program well on track with FY 2015 targets (50% achieved in
Margin	14.3%	14.1%	-0.2 p.p.	14.9%	14.7%	-0.2 p.p.	1H)
Results from Equity Investments	(27.2)	(4.0)		(13.4)	(1.5)
Financial Income / (Charges)	(92.1)	(113.4)		(48.8)	(61.3)		• Financial charges discount Bolivar
PBT	306.9	329.2		163.0	173.7		impact on trade receivables (14€/mln), in line with guidance, and
Tax Rate	-37.4%	-35.8%		-37.6%	-36.7%		interest rate increase in Russia
Net income before discontinued operations	192.1	211.4	+10.0%	101.7	110.0	+8.2%	• 1H'15 tax rate in line with FY 2015 guidance
Discontinued operations	1.7	(14.9)		0.6	1.9
Net Income	193.8	196.5		102.3	111.9
Attributable Net Income	189.1	190.8		99.4	108.8
Investments**	143.6	188.8		78.3	103.2		212 €/mln Net Cash Flow before
Net Debt	1,935.2	1,664.4		1,935.2	1,664.4		dividends and Steelcord cash-in

* Excluding exchange rate effects

** Tangible and Intangible investments

1H 2015 PERFORMANCE BY REGION

* Excluding exchange rate effects

PREMIUM PERFORMANCE BY REGION

* Excluding exchange rate effects

PIRELLI NET INCOME 1H 2015 VS 1H 2014

€/Mln

PIRELLI DEBT STRUCTURE AS OF JUNE 30, 2015

Gross Debt Maturity

Liquidity Profile

Liquidity Margin	1,662.7
Total committed lines not drawn due 2015	728.9
Liquidity position	933.8
€/Mln

Debt Profile

• ~ 50% of the debt maturity beyond 2016
• Cost of debt 6.24% as of June 30th, 2015
• Gross debt profile ~70% Fixed and ~30% Floating
• Average debt maturity: ~ 2.5 years

PIRELLI 1H 2015 NET FINANCIAL POSITION

€/Mln

* Tangible and intangible investments

AGENDA

KEY MESSAGES

1H 2015 RESULTS

2015 OUTLOOK & TARGETS

1H 2015 TYRE OVERVIEW

APPENDIX

2015 REGIONAL TARGETS UPDATE: BETTER NAFTA OFFSETS LATAM

Tyre Market (	yoy)	2015 Pirelli Tyre Business Target		What has changed vs. the previous guidance
		Revenues	EBIT Margin**
A T F A N	Car ~ +1% o/w Premium >+5% Truck* > +3%	Mid single-digit = = organic growth (>20% in €)	Low twenties increasing YOY	• Supportive ForEx, mix improvement and favourable impact from Mexico and Latam production sources
c a P A	Car ~ +4% o/w Premium > +10% Truck* -2%	= Mid-teen organic = growth (>20% in €)	Twenties = increasing YOY	• Strategy confirmed: outperforming Premium market leveraging on OE pull-through and retail development
AI E M	Car ~ +5% o/w Premium ~+9% Truck* > +2%	= High single-digit = organic growth = (mid teens in €)	High teens = stable YOY	• Outgrowing Premium segment in key countries
E P O R U E	Car ~ +2% o/w Premium ~ +11% Truck* > +2%	= Mid single-digit = organic growth	Mid teens = stable YOY	• Strategy confirmed: Premium leadership consolidating fully benefitting on OE pull through, new product launch and selected retail approach
M A T A L	Car OE ~ -14% Repl. ~+1% o/w Premium > +15% Truck* OE -36% Repl. -6%	= Low single-digit organic growth (low single digit in €)	Double-digit declining YOY	• Market weakness in non-Premium and OE, unchanged focus on value • Temporary reduction of production output in Brazil against lower demand
A SI S U R	Car ~ -18% o/w Premium ~ -15% Truck* -10%	Mid single-digit = organic growth (mid-teen decline in €)	High single-digit = increasing YOY	• Coping with market contraction by focusing on value, efficiencies and higher exports
TOTAL	Car ~ +1% o/w Premium +7% Truck* ~ -1%	= =		=  vs previous guidance
				* All steel only ** Before Restructuring Costs

FY 2015 GUIDANCE

	2015 targets May 2015	2015 targets August 2015
Revenues • Volumes - o/w Premium	~ 6.4 € bln ~+2% ≥+10%	> 6.35 € bln +0.5% ÷ +1% confirmed	Lower Industrial volumes (Latam and APac) and weaker Car OE demand in Latam and Russia
• Price/mix • Foreign Exchange Total revenues growth	~+4% ~+1% ~ +6.5%/+7%	confirmed confirmed ~ +6%	2015 FX Guidance confirmed
EBIT post restructuring • Non-recurring expenses	~ 930 € mln ~40	confirmed ~30 lower valuation adjustments (restructuring costs confirmed)	Yearly avg EUR/USD 1.10 EUR/RUB 65.0 USD/BRL 3.0 USD/VEF 20.0 USD/ARS 11.5
2015 EBIT risk of 30€/mln scenarios further deteriorate, with utilization rate down to 30% in Venezuela and volumes -10/-15% YoY in Argentina	should Venezuela and Argentina	confirmed
Capex Net cash flow before dividends and	< 400 € mln ≥ 300 € mln	confirmed confirmed
Steelcord disposal Net Financial Position	~850 € mln	confirmed

2015 CONSUMER & INDUSTRIAL GUIDANCE

Consumer Business
	2015 targets May 2015	2015 Targets August 2015
Revenues	~ 5.0 € bln	> 5.0 € bln
• Volumes	>+2%	+1.5% ÷ +2%
- o/w Premium	≥+10%	confirmed
• Price/mix	≥+4%	~ +4.5%
• Forex	~ +2%	confirmed
Total	>+8%	confirmed
EBIT margin before non-recurring items	≥16%	>16%

Industrial Business
	2015 targets May 2015	2015 Targets August 2015
Revenues	~1.4 € bln	~1.35 € bln
• Volumes	~ +1%	~ -3%
• Price/mix	>+2.5%	~ +1%
• Forex	~ -2%	confirmed
Total	~ +1.5%	~ -4%
EBIT margin before non-recurring items	~ 11%	~ 10%

AGENDA

1H 2015 RESULTS

2015 OUTLOOK & TARGETS

1H 2015 TYRE OVERVIEW

APPENDIX

KEY TYRE RESULTS

	1Q'15	∆ %	2Q'15	∆ %	1H'15	∆ %
Revenues	1,565.3	+6.5%	1,608.4	+6.4%	3,173.7	+6.5%
o/w Premium	726.9	+13.6%	770.5	+19.4%	1,497.4	+16.5%
EBITDA before restr. costs	293.5	+4.7%	319.1	+3.4%	612.6	+4.0%
Margin	18.8%	-0.3 p.p.	19.8%	-0.6 p.p.	19.3%	-0.5 p.p.
EBIT before restr. costs	215.3	+2.4%	239.7	+1.5%	455.0	+1.9%
Margin	13.8%	-0.5 p.p.	14.9%	-0.7 p.p.	14.3%	-0.7 p.p.
EBIT	213.3	+4.1%	238.2	+4.0%	451.5	+4.0%
Margin	13.6%	-0.3 p.p.	14.8%	-0.4 p.p.	14.2%	-0.4%

Revenue drivers	1Q'15	2Q'15	1H'15
∆ Price/Mix	+3.7%	+3.4%	+3.5%
∆ Volumes	-1.3%	+0.6%	-0.3%
o/w Premium	+10.0%	+11.0%	+10.4%
∆ Revenues (before exchange rate impact)	+2.4%	+4.0%	+3.2%
∆ Exchange Rate	+4.1%	+2.4%	+3.3%

PIRELLI TYRE OPERATING PERFORMANCE

CONSUMER BUSINESS: PIRELLI PERFORMANCE

	1Q'15	∆ %	2Q'15	∆ %	1H'15	∆ %
Revenues	1,237.4	+9.6%	1,284.3	+10.8%	2,521.7	+10.2%
o/w Premium	726.9	+13.6%	770.5	+19.4%	1,497.4	+16.5%
% revenues	58.7%	+2.0 p.p.	60.0%	+4.4 p.p.	59.4%	+3.2 p.p.
EBITDA before restr. costs	246.3	+12.3%	276.8	+12.9%	523.1	+12.6%
Margin	19.9%	+0.5 p.p.	21.6%	+0.5 p.p.	+20.7%	+0.4 p.p.
EBIT before restr. costs	182.0	+11.9%	210.0	+12.4%	392.0	+12.2%
Margin	14.7%	+0.3 p.p.	16.4%	+0.3 p.p.	15.5%	+0.2 p.p.
EBIT	180.4	+13.6%	208.5	+15.0%	388.9	+14.3%
Margin	14.6%	+0.5 p.p.	16.2%	+0.6 p.p.	15.4%	+0.5 p.p.

Revenue drivers	1Q'15	2Q'15	1H'15
∆ Price/Mix	+4.7%	+4.1%	+4.4%
∆ Volumes	+0.4%	+2,2%	+1.3%
o/w Premium	+10.0%	+11.0%	+10.4%
∆ Revenues (before exchange rate impact)	+5.1%	+6.3%	+5.7%
∆ Exchange Rate	+4.5%	+4.5%	+4.5%

INDUSTRIAL BUSINESS: PIRELLI PERFORMANCE

	1Q'15	∆ %	2Q'15	∆ %	1H'15	∆ %
Revenues	327.9	-3.8%	324.1	-7.8%	652.0	-5.8%
EBITDA before restr. costs	47.2	-22.5%	42.3	-33.5%	89.5	-28.1%
Margin	14.4%	-3.5 p.p.	13.1%	-5.0 p.p.	13.7%	-4.3 p.p.
EBIT before restr. costs	33.3	-30.0%	29.7	-39.8%	63.0	-35.0%
Margin	10.2%	-3.8 p.p.	9.2%	-4.8 p.p.	9.7%	-4.3 p.p.
EBIT	32.9	-28.6%	29.7	-37.9%	62.6	-33.3%
Margin	10.0%	-3.5 p.p.	9.2%	-4.4 p.p.	9.6%	-4.0 p.p.

-2.7pp vs. 1H 2014 excl. Steelcord business

Revenue drivers	1Q'15	2Q'15	1H'15
∆ Price/Mix	-0.1%	+1.3%	+0.7%
∆ Volumes	-6.7%	-4.7%	-5.7%
∆ Revenues (before exchange rate impact)	-6.8%	-3.4%	-5.0%
∆ Exchange Rate	+3.0%	-4.4%	-0.8%

2015 PROFITABILITY GUIDANCE

Driver	2015 targets May 2015 Impact	2015 targets Aug 2015 Impact	 vs. previous guidance
Volumes	+2% of sales	+0.5% ÷ +1% of sales	-20 € mln on Ebit (lower volumes with below-average profitability)
Price/Mix	~ +4% of sales	Confirmed
Forex	+1% of sales	confirmed
	Δ YoY on EBIT	Δ YoY on EBIT
Efficiencies	~ +90 €/mln	confirmed
Raw Materials	+30 €/mln	+40 €/mln	+10 €/mln
Other Input Costs	~ -135 €/mln	~ -145 €/mln	-10 €/mln due to lower saturation of plants in South America and higher inflation
D&A	-30 €/mln	confirmed
Other Costs	-60€/mln	-50€/mln	+10 €/mln due to lower commercial costs in line with the new volume scenario
Minor businesses	~  YoY slightly positive (FY15E EBIT: < -10 €/mln )	confirmed
Non recurring expenses	-10 €/mln	0 €/mln	+10 €/mln due to lower valuation adjustments
Ebit	930 €/mln	Confirmed

2015 RAW MATERIAL GUIDANCE

Raw material breakdown 1H 2015

AGENDA

KEY MESSAGES

1H 2015 RESULTS

2015 OUTLOOK & TARGETS

1H 2015 TYRE OVERVIEW

APPENDIX

PIRELLI GROUP – 2Q 2015 RESULTS

Profit & Loss Statement and Net Financial Position by Business Unit

	Pirelli tyre		Other		Pirelli	& C. Cons.
€/Mln	2Q'14	2Q'15	2Q'14	2Q'15	2Q'14	2Q'15
SALES	1,511.3	1,608.4	2.4	1.7	1,513.7	1,610.1
EBITDA before Restr. Costs	308.7	319.1	(3.2)	(1.4)	305.5	317.7
% of sales	20.4%	19.8%			20.2%	19.7%
EBIT before Restr. Costs	236.1	239.7	(3.9)	(1.7)	232.2	238.0
% of sales	15.6%	14.9%			15.3%	14.8%
Restructuring Costs	(7.0)	(1.5)	0.0	0.0	(7.0)	(1.5)
EBIT	229.1	238.2	(3.9)	(1.7)	225.2	236.5
% of sales	15.2%	14.8%			14.9%	14.7%
Results from equity participations					(13.4)	(1.5)
Financial income/charges					(48.8)	(61.3)
EBT					163.0	173.7
Fiscal Charges					(61.3)	(63.7)
Net income before discontinued operations					101.7	110.0
Discontinued operations					0.6	1.9
Net Income					102.3	111.9
Attributable Net Income					99.4	108.8
Net Financial Position					1,935.2	1,664.4

PIRELLI GROUP – 1H 2015 RESULTS

Profit & Loss Statement and Net Financial Position by Business Unit

	Pirelli tyre		Other		Pirelli & C. Cons.
€/Mln	1H'14	1H'15	1H'14	1H'15	1H'14	1H'15
SALES	2,980.8	3,173.7	6.1	4.8	2,986.9	3,178.5
EBITDA before Restr. Costs	589.0	612.6	(6.2)	(3.0)	582.8	609.6
% of sales	19.8%	19.3%			19.5%	19.2%
EBIT before Restr. Costs	446.4	455.0	(7.5)	(3.6)	438.9	451.4
% of sales	15.0%	14.3%			14.7%	14.2%
Restructuring Costs	(12.4)	(3.5)	(0.3)	(1.3)	(12.7)	(4.8)
EBIT	434.0	451.5	(7.8)	(4.9)	426.2	446.6
% of sales	14.6%	14.2%			14.3%	14.1%
Results from equity participations					(27.2)	(4.0)
Financial income/charges					(92.1)	(113.4)
EBT					306.9	329.2
Fiscal Charges					(114.8)	(117.8)
Net income before discontinued operations					192.1	211.4
Discontinued operations					1.7	(14.9)
Net Income					193.8	196.5
Attributable Net Income					189.1	190.8
Net Financial Position					1,935.2	1,664.4

PIRELLI GROUP – 2014 QUARTERLY RESULTS

		Q1'14	Q2'14		Q3'14		Q4'14		FY'14
€/Mln	Tyre	Group	Tyre	Group	Tyre	Group	Tyre	Group	Tyre	Group
SALES	1,469.5	1,473.2	1,511.3	1,513.7	1,539.2	1,541.8	1,487.5	1,489.4	6,007.5	6,018.1
EBITDA before Restr. Costs	280.3	277.3	308.7	305.5	287.2	284.9	300.7	300.3	1,176.9	1,168.0
% of sales	19.1%	18.8%	20.4%	20.2%	18.7%	18.5%	20.2%	20.2%	19.6%	19.4%
EBIT before Restr. Costs	210.3	206.7	236.1	232.2	211.7	208.9	222.3	221.4	880.4	869.2
% of sales	14.3%	14.0%	15.6%	15.3%	13.8%	13.5%	14.9%	14.9%	14.7%	14.4%
Restructuring Costs	(5.4)	(5.7)	(7.0)	(7.0)	(5.4)	(5.4)	(10.0)	(13.2)	(27.8)	(31.3)
EBIT	204.9	201.0	229.1	225.2	206.3	203.5	212.3	208.2	852.6	837.9
% of sales	13.9%	13.6%	15.2%	14.9%	13.4%	13.2%	14.3%	14.0%	14.2%	13.9%
Results from equity partecipations		(13.8)		(13.4)		(5.1)		(54.7)		(87.0)
Financial Income / (Charges)		(43.3)		(48.8)		(43.6)		(126.7)		(262.4)
EBT		143.9		163.0		154.8		26.8		488.5
Fiscal Charges		(53.5)		(61.3)		(49.5)		(9.0)		(173.3)
Net Income before discontinued operations		90.4		101.7		105.3		47.8		350.4
Discontinued Operations		1.1		0.6		0.9		15.0		17.6
Net Income		91.5		102.3		106.2		32.8		332.8
Attributable Net Income		89.7		99.4		101.4		28.8		319.3
Net Financial Position		1,965.6		1,935.2		2,003.9		979.6		979.6

PIRELLI GROUP CASH FLOW

€/Mln	1Q'14	2Q'14	1H'14	1Q'15	2Q'15	1H'15
EBIT before restructuring costs	206.7	232.2	438.9	213.4	238.0	451.4
Depreciation / Amortization	70.6	73.3	143.9	78.5	79.7	158.2
Net investments	(65.3)	(78.3)	(143.6)	(85.6)	(103.2)	(188.8)
Working capital / other variations	(686.6)	77.4	(609.2)	(895.2)	151.6	(743.6)
OPERATING CASH FLOW	(474.6)	304.6	(170.0)	(688.9)	366.1	(322.8)
Financial income / (expenses)	(43.3)	(48.8)	(92.1)	(52.1)	(61.3)	(113.4)
Taxes	(53.5)	(61.3)	(114.8)	(54.2)	(63.7)	(117.8)
NET OPERATING CASH FLOW	(571.4)	194.5	(376.9)	(795.1)	241.1	(554.0)
Financial investments/divestments	(3.7)	2.8	(0.9)	(14.4)	(0.4)	(14.8)
Other dividends paid	(0.5)	(2.9)	(3.4)	(7.6)	(2.5)	(10.1)
Cash-out for restructuring	(12.9)	(5.9)	(18.8)	(6.4)	(2.6)	(9.0)
Deval. Venezuela incl. in financial charges	-	-	-	-	14.2	14.2
Net cash flow from discontinued operations	(8.7)	10.5	1.8	-	-	-
Exchange rate differentials / others	(46.0)	(11.9)	(57.9)	45.8	(37.4)	8.4
NET CASH FLOW BEFORE DIVIDENDS & STEELCORD	(643.2)	187.1	(456.1)	(777.7)	212.4	(565.3)
Dividends paid	-	(156.7)	(156.7)	-	(179.5)	(179.5)
Impact on NFP Steelcord units disposal	-	-	-	24.4	35.6	60.0
NET CASH FLOW	(643.2)	30.4	(612.8)	(753.3)	68.5	(684.8)

PIRELLI BALANCE SHEET

€/Mln	FY'14	1H'15
FIXED ASSETS	3,874.0	4,012.6
Inventories	1,055.0	1,131.8
Trade receivables	673.8	1,002.0
Trade payables	(1,394.4)	(1,163.5)
NET OPERATING WORKING CAPITAL	334.4	970.3
Other payables/receivables	33.9	119.2
Net Working Capital	368.3	1,089.5
Net Invested Capital held for sale	30.8	-
NET INVESTED CAPITAL	4,273.1	5,102.1
Total Net Equity	2,611.5	2,772.3
Provisions	682.0	665.4
Net Financial Position	979.6	1,664.4
TOTAL	4,273.1	5,102.1
Attributable Net Equity	2,548.3	2,707.5
Equity per Share (euro)	5.22	5.55

CONSUMER BUSINESS: KEY MARKET TRENDS

1H 2015 RESULTS 27

INDUSTRIAL BUSINESS: KEY MARKET TRENDS

* Turkey included and Russia excluded

** Non-pool members' imports not included

1H 2015 PIRELLI TYRE MIX

1H 2015 RESULTS 29

JUNE 2015 PIRELLI PEOPLE

1H 2015 RESULTS 30

PIRELLI PLANTS IN THE WORLD

RAW MATERIALS

Raw Material Price Trend

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15

1H 2015 Mix (Based on Purchasing Cost)

1H 2015 RESULTS 32

DISCLAIMER

This presentation contains statements that constitute forward-looking statements based on Pirelli & C SpA's current expectations and projections about future events 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 expressed in or implied by these forward looking statements as a result of various factors, many of which are beyond the ability of Pirelli & C SpA to control or estimate precisely. 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.

Statement

\

The 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.