Pirelli & C — Investor Presentation 2020

Aug 5, 2020

1H 2020 RESULTS

Milan, August 5th, 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.

Verbal explanation. This Presentation has to be accompanied by a verbal explanation. A simple reading of this Presentation without the appropriate verbal explanation could give rise to a partial or incorrect understanding.

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, EBIT adjusted, EBIT margin adjusted, Net Income adjusted, Net Income adjusted margin.

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.

KEY MESSAGES

>

FY 2020 outlook confirmed, with High Value proving again its resilience

> CO-CEO appointment to further accelerate our Transformation Program towards a leaner, faster and more profitable company

2020 OUTLOOK

MARKET AND PIRELLI PERFORMANCE

1H 2020 FINANCIAL REVIEW

APPENDIX

2020 OUTLOOK CONFIRMED, WITH H.V. PROVING ITS RESILIENCE

		First Outlook		Outlook @1Q		Outlook @2Q
		2020E (Apr)	Δ YoY %	2020E (May)	Δ YoY %	2020E (Aug)	Δ YoY %
CAR PRODUCTION (million cars)
	TOTAL			69.3	-22%	69.5	-22%	 confirmed
	PRESTIGE & PREMIUM			9.9	-17%	10.3	-14%
	SYNERGIC			59.4	-23%	59.2	-23%
CAR TYRE MARKET (million tyres)
	TOTAL	1,275	-19%	1,247	-20%	1,274	-19%	 confirmed
	≥18"	222	-14%	218	-15%	226	-13%	• 1H -28% • 2H -10%
	≤ 17"	1,050	-20%	1,029	-21%	1,047	-20%
CAR TYRE VOLUMES (million tyres)
	TOTAL	53	-18%	52	-19%	52	-19%	 confirmed
	≥18"	27	-11.5%	27	-12.5%	27	-12.5%	• 1H -30.5% • 2H -7%
	≤ 17"	27	-24%	26	-25%	26	-25%

IN ≥18" PLANNING TO REACH ALMOST 2019 LEVELS IN 2H DESPITE THE TOUGH EXTERNAL SCENARIO

PIRELLI COMPETITIVENESS PROGRAM AND «COVID ACTIONS» PROGRESSING AS PLANNED

1H 2020 RESULTS Milan, August 5th, 2020 6

A FURTHER REACHING TRANSFORMATION IS UNDERWAY

PIRELLI TRANSFORMATION: KEY HIGHLIGHTS • Each working Group is multidisciplinary: Business + People & Organization + Technology • Target Operating Model is composed by 14 integrated interfunctional journeys, covering the entire value chain from Consumer to Supplier. • Processes and Workflow Enabled by 4 Integrated Cloud Based Digital Platforms • AI Models Integrated in processes, to optimize allocations and work as early warning systems • Program is Consumer & Customer centric, with customer management processes among as first wave priorities SUMMARY OBJECTIVES SELECTED EXAMPLES OF PROGRESS UNDER WAY • >85% adoption of Smart Working technologies • New CRM adopted by >90% of the workforce in pilot countries • >15% of 2019 product codes frozen / removed from production and sales plans • Shared service-center for staff functions completed in Brazil • ~300 sizes already tested with virtualized design and target costing • Collaborative online sales conversion rate 4x in pilot country thanks to "click to buy" project • Increasing monthly mix coverage in plants: +10pp in best-in-class facilities • >70% of clients in Brazil sharing sell-out FASTER COMPANY LEANER COMPANY > > > > >

1H 2020 RESULTS Milan, August 5th, 2020 7

data

NEW ORGANIZATIONAL STRUCTURE TO MAXIMIZE OPERATIONAL EFFECTIVENESS

2020 TARGETS UPDATE

€ billion	2020 KEY TARGETS
		@ 13-May	@ 5-Aug
	2019 A	2020 E	2020 E
Net Sales	5.3	~4.3 ÷ ~4.4	~4.15 ÷ ~4.25	Volumes
adj. EBIT margin	0.9 17.2%	~14% ÷ ~15%	~12% ÷ ~13%	Price/mix Forex
CapEx	0.39	~0.13	confirmed
Net Cash Flow bef. Dividends	0.33	~0.23 ÷ ~0.26 assuming no div.	~0.19 ÷ ~0.22 assuming no div.	Raw Mat.
Net Financial Position (IFRS 16)	3.5	~3.3	confirmed	Slowdown

2020 OUTLOOK

MARKET AND PIRELLI PERFORMANCE

1H 2020 FINANCIAL REVIEW

APPENDIX

FULL IMPACT OF LOCKDOWN MEASURES IN 2Q 2020

1Q-2Q MARKET SCENARIO AND PIRELLI VOLUMES 2Q KEY TRENDS PIRELLI PERFORMANCE

High Value

• O.E. over-performing market through portfolio diversification (Apac and NA) >
• Repl. almost aligned to mkt. after 1Q trade destocking in EU and NA >
• Solid performance in Apac, with share increase in China
• EU trade destocking completed in April
• Underperforming in US, with destocking proceeding and lock downs impacting more the areas with higher concentration of Premium & Prestige Cars
• Price trend in line with expectations >

Standard

Highly impacted by Latam weakness (2Q Pirelli volumes ~-70%), with reduction of lower rims/less profitable mass market channels >

CHALLENGING OUTLOOK IN 2H CONFIRMED

KEY TRENDS IN 2H TYRE MARKET DEMAND

Assuming no 2nd wave of COVID

Channels

• O.E.: down double digit in line with car production >
• Repl.: down high single digit, with still a weak 3Q (slow Winter in EU and still low miles driven in US) >

High Value Regions

• APac: down mid-single digit (China rebound counterbalanced by other countries); positive Repl. ≥18" >
• EU: down double digit in both channels >
• NA: repl. down double digit, faster recovery in O.E. >

Standard Regions

• LatAm and Russia: down double digit, mainly in O.E.

DEEP DIVE ON COMPETITIVENESS AND COVID ACTIONS

PRODUCTION SLOWDOWN TO REDUCE STOCKS WHILE STRENGHTENING SALES CHANNELS

COST COMPET. & COVID ACTIONS

PRODUCTION SLOWDOWN

• Careful Production scheduling reducing Stock levels (over -2M pcs Car finished products)
• Accelerating integration with partners to optimize level of stock
• Faster mix rotation to match clients' service level

LOWERED COMPLEXITY

• Product range optimization
• Product Modularity reducing components and waste

COMMERCIAL DEVELOPMENT

DESTOCKING 2Q

• Commercial policy aimed at keeping low stock levels with distribution partners
• In EU activity completed in April, still running in N. America

ONLINE DEVELOPMENT

• Developing ad-hoc product offer for the channel
• Fast growing in China (market 2020E ~+20% YoY), Pirelli consolidating leadership in ≥18"

TRADE SERVICE

• Developed advanced "shopping windows" in EU to book and drive store traffic
• Launched new contactless service models at the PoS

INNOVATION: LAUNCHED NEW FLAGSHIP PRODUCT CINTURATO P7

TECH- BASED

PRODUCT DEVELOPMENT ACCELLERATION

• Product development speed-up thanks to simulation tools shortening design and testing phases
• New product features meeting evolving customer requirements towards sustainability and technology

INNOVATION INTRODUCTION OF NEW CINTURATO P7 FLAGSHIP PRODUCT

• 'intelligent' compound that adapts itself to temperature and driving conditions
• greater safety, efficiency and comfort

2020 TARGETS UPDATE: OPERATIONAL DRIVERS

€ billion					2020 MAIN OPERATIONAL DRIVERS
		@ 13-May	@ 5-Aug		@ 13-May	@ 5-Aug
	2019 A	2020 E	2020 E		2020 E	2020 E
				Volumes	~ -18% ÷ -20%	confirmed
Net Sales	5.3	~4.3 ÷ ~4.4	~4.15 ÷ ~4.25	• o/w High Value • o/w Standard	~ -14% ~ -26%	 
adj. EBIT margin	0.9 17.2%	~14% ÷ ~15%	~12% ÷ ~13%	Price/mix	~ +2%	confirmed
				Forex	~ -2%	~ -4%
CapEx	0.39	~0.13	confirmed
				Efficiencies (net of inflation)	~ +€110m	confirmed
Net Cash Flow bef. Dividends	0.33	~0.23 ÷ ~0.26 assuming no div.	~0.19 ÷ ~0.22 assuming no div.	Raw Mat.	~ +€15m	~ -€10m
				Cost Cutting (Covid Actions)	~ +€120m	confirmed
Position (IFRS 16)	Net Financial 3.5 ~3.3		confirmed	Slowdown	~ -€90m	confirmed
				Other costs	~ -€50m	~ -€70m

1 2020 OUTLOOK

2 MARKET AND PIRELLI PERFORMANCE

3 1H 2020 FINANCIAL REVIEW

4 APPENDIX

1H 2020 NET SALES BRIDGE

1H 2020 RESULTS Milan, August 5th, 2020 18

1H / 2Q 2020 ADJUSTED EBIT BRIDGE

1H 2020 CASH FLOW AND NET FINANCIAL POSITION

€ million

CURRENT CAPITAL STRUCTURE (JUNE 2020)

€ million

Liquidity Margin covering maturities until 1H'23, considering the extension option

1H 2020 RESULTS Milan, August 5th, 2020 21

1 2020 OUTLOOK

2 MARKET AND PIRELLI PERFORMANCE

3 1H 2020 FINANCIAL REVIEW

4 APPENDIX

2Q / 1H 2020 RESULTS HIGHLIGHTS

€ million

	2Q'19	2Q'20	Δ YoY	1H'19	1H'20	Δ YoY
Revenues	1,341	765	-43.0%	2,655	1,816	-31.6%
Organic Growth1			-38.3%			-28.5%
High Value Revenues	893	553	-38.0%	1,788	1,286	-28.1%
% on total Revenues	66.6%	72.4%	+5.8pp	67.3%	70.8%	+3.5pp
EBITDA adjusted2	321	24	-92.6%	636	268	-57.9%
Margin	23.9%	3.1%	-20.8pp	24.0%	14.7%	-9.3pp
EBIT adjusted3	221	(74)	n.m.	441	67	-84.9%
Margin	16.5%	-9.7%	-26.2pp	16.6%	3.7%	-12.9pp
PPA amortization	(29)	(29)		(57)	(57)
Non recurring & restructuring costs	49	(42)		42	(66)
EBIT	242	(145)		425	(57)
Margin	18.0%	-19.0%		16.0%	-3.1%
Results from Equity Investments	0	1		2	(5)
Financial Income (Charges)	38	(41)		(10)	(73)
EBT	280	(185)		417	(135)
Tax Rate	26.6%	n.m.		26.4%	24.4%
Net Income	206	(140)		307	(102)
Net Income adjusted3	133	(90)		256	(13)

adjustments, net financial expenses and taxes

1H 2020 PIRELLI BALANCE SHEET

€ million	30-June-2019	31-Dec-2019	30-June-2020
Fixed assets related to continuing operations (before IFRS 16)	9,016	9,007	8,619
Right of use IFRS 16	459	463	449
Fixed assets related to continuing operations (incl. IFRS 16)	9,475	9,470	9,068
Inventories	1,165	1,094	962
Trade receivables	862	649	628
Trade payables	(1,200)	(1,612)	(858)
Operating net working capital related to continuing operations	827	132	731
Other receivables / payables	244	81	145
Net Working Capital related to continuing operations	1,071	213	876
Net invested capital held for sale	1	-	-
Total net invested capital	10,547	9,683	9,944
Equity	4,664	4,827	4,404
Provisions	1,391	1,349	1,275
Net Financial Position (excl. IFRS 16)	4,022	3,024	3,782
Lease Obligations (IFRS 16)	470	483	482
Net Financial Position (incl. IFRS 16)	4,492	3,507	4,265
Total financing and shareholders' equity	10,547	9,683	9,944

2Q / 1H 2020 PIRELLI GROUP CASH FLOW

€ million

	2Q'19	2Q'20	1H'19	1H '20
Adjusted EBIT1	221	(74)	441	67
Depreciation & Amortization (excl. PPA amortization)	99	98	196	201
Capital expenditure	(90)	(25)	(168)	(81)
Rights of use (IFRS 16)	(14)	(24)	(17)	(47)
Change in working capital / other	10	132	(826)	(729)
Operating Cash Flow	227	107	(375)	(590)
Financial income / (expenses)	(62)	(41)	(110)	(73)
Taxes paid	(46)	(22)	(76)	(54)
Cash-out for non recurring items and restructuring costs	(18)	(28)	(34)	(49)
Exchange rates difference / other	(29)	(20)	(29)	8
Net cash flow before dividends & extraordinary operations	72	(4)	(623)	(758)
Financial asset disposals / (acquisitions)	-	-	(17)	-
Net cash flow before dividends	72	(4)	(641)	(758)
Dividends paid	(177)	-	(177)	-
Net cash flow	(105)	(4)	(817)	(758)

2020 E RAW MATERIAL GUIDANCE

€ million

COMMODITIES: AVERAGE COST OF GOODS SOLD

1H 2020 RESULTS Milan, August 5th, 2020 26

2020 E FOREX GUIDANCE

KEY CAR MARKET TRENDS: EUROPE

KEY CAR MARKET TRENDS: NORTH AMERICA

Milan, August 5th, 2020 29 Source: Pirelli tyre market estimates based on main data provider for the Region; historical market data may be subject to restatement; 1. N. America Replacement includes imports

KEY CAR MARKET TRENDS: ASIA PACIFIC

Milan, August 5th, 2020 30 Source: Pirelli tyre market estimates based on main data provider for the Region; historical market data may be subject to restatement

KEY MARKET TRENDS: RUSSIA & NORDICS / SOUTH AMERICA

Milan, August 5th, 2020 31 Source: Pirelli tyre market estimates based on main data provider for the Region; historical market data may be subject to restatement; 1. South America Replacement restated to include Brazilian imports

RAW MATERIAL COSTS TREND AND MIX

Main raw materials price trend

1H 2020 mix (based on purchasing cost)

MANUFACTURING FOOTPRINT AS OF JUNE 30TH, 2020