Pirelli & C — Investor Presentation 2022

Nov 3, 2022

9M 2022 Financial Results

9M 2022 Financial Results

November 3rd, 2022

Disclaimer

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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.

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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.

Giorgio Luca Bruno, 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 unaudited non-IFRS financial measures derived from the Financial Statements, and (iii) are not an alternative to financial measures prepared in accordance with IFRS.

The APIs presented herein are EBIT, EBIT margin, EBITDA, EBITDA margin, net income and net income 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, EBIT adjusted and net income adjusted. In order to facilitate the understanding of our financial position and financial performance, this Presentation contains other performance measures, such as Net Financial Position, Operating Cash Flow, Net Cash Flow before Dividends and extraordinary Operations, Net Cash Flow before Dividends, Net Cash Flow, CapEx (Capital Expenditure), Liquidity Margin and ROIC (Return On Invested Capital).

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

Key Messages

> Solid 9M 2022 result driven by a resilient business model:

• Strengthened positioning in Car ≥18'', with market share gain in Replacement
• Robust Price/Mix (+20%) more than offsetting raw mat. & inflation headwinds
• Sound cash flow supported by efficient working capital management

> Global sector leadership confirmed in S&P Global 2022 Sustainability Assessment

> FY 2022 market outlook and targets

• H.V. demand (+6%) outperforming Standard (-2%); Repl. slightly softening vs. prev. indications
• Price discipline confirmed to mitigate raw mat. & inflation headwinds
• FY'22 guidance upgrade driven by higher price/mix and FX, while keeping a more cautious view on volumes

> Getting ready to face a tougher macroeconomic environment in 2023

• A more challenging scenario is outlining for 2023 with inflationary pressure and a less supportive demand
• Pirelli will leverage on its positioning in High Value and its operational strategy to minimize the external headwinds

9M 2022 Results highlights (1/2)

Solid performance despite a challenging environment …

€ million

1. Before amortization of PPA, non-recurring items, restructuring costs & other adjustments

9M 2022 Results highlights (2/2)

… supported by a resilient business model and strategy implementation

• Enhanced positioning in High Value, a more resilient segment with lower demand elasticity >
• Fast response to external scenario to manage headwinds impact >
• Well balanced regional footprint reducing supply shortages risk >
• Improved Cash Flow trend supported by sound working capital management

• P/Mix and efficiencies = 1.3x raw mat & inflation in 9M/3Q
• Internal Committees to deal with Russia and Energy issues
• Local for Local at 86% on avg in our regions (except N.A. with 50%)
• > Inventories at ~23% of sales in 9M (-0.5pp vs. 1H). On track with FY target of further reduction (~21%/~22%)
  -
  • 2023 Maturities already managed

>

Update on Sustainability

2025E 3Q'22 update

2022 S&P Global Sustainability Assessment:

Pirelli confirmed as Global Leader in the Auto Components sector with 85 points score (+8p vs 2021) vs a sector avg. of 24 points

Top ranked (100pp) areas include:

• Health & Safety Policy,
• Human Rights due diligence,
• Innovation,
• Cyber Security
• CO² reduction
• Management of Natural Resources
• Transparency of social & environmental reporting

SBTi¹ NET ZERO Commitment formalized in June '22

New SBTi¹ target approved in May, aligned to 1.5° scenario Agenda

Pirelli vs. market – outperformance in High Value confirmed in 3Q

• ► H.V.: share gain in Replacement while keeping a more selective approach to O.E. (focus on EV)
• ► Std. : lower exposure, in line with the Company Strategy

9M 2022 Strategy implementation: delivery in line with targets

Main programs	2022 targets	9M'22 main achievements
Commercial	• Focus on H.V. outperforming the market in ≥18" Replacement • More selective approach to O.E. • Lowering exposure to Standard	• Car ≥18": +9.4% vs. +6.8% of the mkt achieved by capturing: • solid Repl. demand across regions • O.E. rebound from 2Q , with strong focus on 19'' and EV • Car Std. weight to ~39% (-3pp YoY) in line with FY target
Innovation	• Expanding homologations in ≥19" and Specialties • Product renewal	• ~230 new car homolog. ~80% ≥19", ~40% Specialties, mainly EV • 8 high performance Car products with a focus on regional needs • 2 Wheels portfolio enriched to meet consumer demand
Competitiveness	• Progressing with Wave 2 efficiencies plan (€140M gross efficiencies)	• €86M gross savings, ~60% of FY target, consistent with projects development and objectives
Operations	• Increasing High Value capacity (+2M pcs, to 53M pcs, ~72% of tot. Car capacity) • Further improving capacity saturation	• Capacity deployment in line with FY target, saturation at ~90%; >90% in High Value • N.A. capacity increase project launched, reaching 8.5 mln H.V. pcs by 2025ye (+1.3 mln vs. 2022), in line with Ind. Plan • Mitigation actions to minimize external headwinds (e.g. Covid, energy crisis, etc) and ensure business continuity

Commercial Program delivery in 9M 2022

Strong over-performance driven by ≥19" & Specialties

Innovation program on Car

1 3PMSF* certification for unexpected weather conditions

2 Mileage warranty to better match N.A. consumers needs

3 Outstanding wet performances to ensure safety & control

4 Pass-by noise quieter by 2dB vs the leading competitors

"Convincing all-round talent with very good mileage and good efficiency, precise handling on wet roads and good aquaplaning qualities." (Auto Bild)

> "Balance between performance, ease of driving, and driver feeling" (Tyre Seeker)

Innovation Program: update on EVs

Pirelli EV homologation portfolio further enhanced

300 EV homologations worldwide, with the following main partners¹ :

Europe EV trade homologation portfolio vs. peers

Pirelli EV: already achieved FY 2025 target

12 9M 2022 Financial Results 1. Source: Trade homologation Catalogue @ September 2022 2. Homologated Ip5 in range @Sept 2022 (German Pricat). Since Homologations and Propulsion are not decleared, EV related IP5 is inferred from: O.E. Markings (+, NF0, T0, T1), Product (Pilot Sport EV, Ventus S1 EVO 3 EV), Product description, Size, Technologies (Elect, Enliten),HL sizes.

Innovation on 2 wheels

Strengthening our position in H.V. segment in 9M'22

Competitiveness programs progress

9M achievements in line with expectations and consistent with programs quarterly targets

	2021		2022 E
	FY ACT	Focusing on:	FY GUI	9M'22 ACT
Product Cost		 Modularity  Design speed and virtualization	~70% in 9M
Manufacturing		 Footprint optimization  Industrial IOT and flexible factory	~60% in 9M
SG&A		 Logistics network redesign and service differentiation  Procurement rationalization	~50% in 9M
Organization		 Digital processes and organization transformation	~70% in 9M
Total Gross Impact as % of baseline	~€155M ~4.0% of baseline '20		~€140M ~3.1% of baseline '21	~€86M ~1.9% of baseline '21

Operational programs: update on Energy

• monitoring the situation and implementing actions:
  • ► Risk and regulatory environment tracking to implement effective mitigation actions by Country
  • ► Ready to switch to alternative energy sources as operational back-up plan for German and Italian plants
  • ► Mitigation plan implemented to contain suppliers' risks
  • ► 44% of 2023 energy cost fixed
  • ► Well deployed energy efficiency program (e.g. curing presses insulation; photovoltaic panels; heating & lighting; mixing and curing process cycle time reduction; etc.)

1. Germany, Italy, Hungary, Slovakia, Poland, Slovenia, Serbia, Czech Rep – source BCG;

2. Bridgestone, Michelin, Continental, Goodyear.

9M'22 Sales bridge:

Record price/mix confirmed for the third quarter in a raw; solid High Value performance € million

9M/3Q 2022 adjusted EBIT bridge

Profitability supported by price/mix & efficiency covering 1.3x Raw Mat & Inflation headwinds in 9M/ 3Q

€ million

9M 2022 Net Income bridge

Earnings driven mainly by improving operating performance and lower non-rec. / rest. costs

€ million

9M'22 Net Financial Position

Better yoy cash flow trend driven by the solid operating performance

• ➢ Efficient inventory management (~23% of sales in 9M, -0.5pp vs. 1H) mainly finished products which minimized the impact of raw mat increase. On track with FY target of further reduction (~21%/~22%)
• ➢ Receivables at 18% (flat yoy) in line with the business seasonality
• ➢ Payables at 25.5% (+4pp yoy) coherently with the level of inventories and capex

Total Gross Debt structure as of September 30th 2022

€2 bln ESG financing in 2023 and strong cash-flow generation lead to sound liquidity position and early redemption of €553 mln bond originally due in Jan 2023

€ million

1. Including assets at FV through P&L; 2. Based on average gross debt and hedging of intragroup financing

20 9M 2022 Financial Results 3. 3.09% excluding inefficiencies due to poor liquidity on RUB hedging costs

2022 Car Tyre market outlook update: High Value outperforming Standard

High Value: confirmed O.E. trend supported by China; slightly milder Repl. expectations

~-2.5%

Repl. ~-3%

Pirelli FY 2022 targets update

Price/Mix and FX are driving guidance upgrade

€ billion	2021 A		2022 E
		Target @ 4-Aug-22	Target @ 3-Nov-22	• Vol.: flat (~+5% H.V., ~-6% Std)
Net Sales	5.33	~6.2 ÷ ~6.3	~6.5	(old: vol ~+0.5%÷~+1.5%) • Price/mix: ≥+17% (old: ~+13.5%/+14.5%)
adj. EBIT margin	15.3%	~15%	confirmed	• Forex: ~+5% (old: ~+2.5%)
CapEx (% of Sales)	0.35 (6.5%)	~0.39 (~6%)	confirmed
Net Cash Flow bef. Dividends	0.43	~0.45 ÷ ~0.47	~0.48
Net Financial Position NFP / adj. EBITDA	2.91 2.40x	~2.6 ≤2.0x	confirmed ~1.9x
ROIC1 Post taxes	17.6%	~19%	confirmed

A GLOBALLY ACKNOWLEDGED SUSTAINABILITY LEADERSHIP

Major ratings (November-22)

	last update	score	positioning in the reference sector
&	2022	2022 – GOLD CLASS; 2022 – score 85	Top score ATX Auto Components
	2021	A	Max score
	2021	Inclusion	Max score
	2021	AA	6% of the Auto components in AA
	2021	4.5 / 5	Top score Automobiles
	2021	LEAD	Only Automotive Company
	2021	10.3	Top score Tyre Sector
	2021	Platinum	Max score
	2021	ADVANCED	2° best score Automobile
Source: third party official rankings	= leading the ranking or initiative		9M 2022 Financial Results

Key Car Market Trends: Europe

Source: Pirelli tyre market estimates based on main data provider for the Region; historical market data may be subject to restatement

Key Car Market Trends: North America

27 9M 2022 Financial Results 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

-1

-11 -5

-5

-4 -12

Source: Pirelli tyre market estimates based on main data provider for the Region; historical market data may be subject to restatement

-9

Key Car Market Trends: Russia, Nordics, MEAI / South America

29 9M 2022 Financial Results 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

Economic results summary

€ million		3Q 2022	3Q 2021	∆ YoY	9M 2022	9M 2021	∆ YoY
	Net Sales	1,836.3	1,414.5	+29.8%	5,033.3	3,979.3	+26.5%
	Organic variation			+21.2%			+20.0%
	EBITDA1 adjusted	383.9	320.1	+19.9%	1,079.2	894.0	+20.7%
	% of net sales	20.9%	22.6%	-1.7 p.p.	21.4%	22.5%	-1.1 p.p.
	reported EBITDA	367.4	304.8	+20.5%	1,043.2	806.8	+29.3%
	% of net sales	20.0%	21.5%	-1.5 p.p.	20.7%	20.3%	+0.4 p.p.
	EBIT1 adjusted	271.9	221.4	+22.8%	753.5	598.8	+25.8%
	% of net sales	14.8%	15.7%	-0.9 p.p.	15.0%	15.0%	0.0 p.p.
	reported EBIT	227.0	177.7	+27.7%	632.2	426.3	+48.3%
	% of net sales	12.4%	12.6%	-0.2 p.p.	12.6%	10.7%	+1.9.p.p.
	Net income / (loss) from equity investments	0.8	(0.4)	n.m.	3.1	1.6	n.m.
	Financial income / (expenses)	(55.5)	(35.1)	+58.1%	(145.1)	(106.9)	+35.7%
	EBT	172.3	142.2	+21.2%	490.2	321.0	+52.7%
	Taxes	(46.0)	(37.6)	+22.3%	(130.9)	(84.8)	+54.4%
	Tax rate %	-26.7%	-26.4%		-26.7%	-26.4%
	Net Income / (loss)	126.3	104.6	+20.7%	359.3	236.2	+52.1%
	Earnings / (loss) per share (€ per share)	0.12	0.10		0.34	0.22
	Net income / (loss) adjusted	157.9	135.8		445.8	360.1

30 9M 2022 Financial Results 1. Adjustments refers to one-off, non-recurring and restructuring expenses to the amount of €36.0M (€69.3M in 9M 2021). Furthermore, in 9M 2021 were included expenses relative to the retention plan approved by the Board of Directors on February 26, 2018 to the amount of €4.6M and COVID-19 direct costs to the amount of 13.3M. With reference only to EBIT, amortization of intangible assets recognized as a consequence of Business Combinations amounting to €85.3M (€85.3M in 9M 2021).

Consolidated Balance Sheet

€ million		30/09/2022	31/12/2021	30/09/2021
	Fixed assets	9,006.6	8,912.4	8,822.5
	Inventories	1,464.3	1,092.2	973.7
	Trade receivables	1,169.0	659.2	939.4
	Trade payables	(1,625.3)	(1,626.4)	(1,092.1)
	Operating net working capital	1,008.0	125.0	821.0
	% of net sales1	15.8%	2.3%	15.8%
	Other receivables / payables	70.2	0.8	18.7
	Net working capital	1,078.2	125.8	839.7
	% of net sales1	16.9%	2.4%	16.2%
	Total net invested capital	10,084.8	9,038.2	9,662.2
	Equity	5,646.6	5,042.6	4,910.9
	Provisions	1,047.7	1,088.5	1,036.4
	Net financial position	3,390.5	2,907.1	3,714.9
	Total financing and shareholders' equity	10,084.8	9,038.2	9,662.2
	Attributable net equity	5,487.3	4,908.1	4,786.9
	Total net financial debt2	3,693.8	3,173.2	3,972.6

1. Last twelve months trailing revenues;

31 9M 2022 Financial Results 2. Total net financial debt = net financial position excluding non-current financial receivables and non-current derivative financial instruments

Net Cash Flow

€ million		1Q 2022	2Q 2022	3Q 2022	9M 2022	9M 2021
	Adjusted Operating income (EBIT)	228.5	253.1	271.9	753.5	598.8
	Amortiz. & depreciations (excl. PPA amortiz.)	104.6	109.1	112.0	325.7	295.2
	Investments in tangible and intangible assets (Capex)	(48.6)	(67.1)	(73.0)	(188.7)	(213.3)
	Increase in right of use	(8.1)	(33.2)	(9.2)	(50.5)	(59.6)
	Change in working capital/other	(841.6)	138.6	(49.6)	(752.6)	(705.6)
	Operating Cash Flow	(565.2)	400.5	252.1	87.4	(84.5)
	Financial income/(expenses)	(43.6)	(46.0)	(55.5)	(145.1)	(106.9)
	Taxes paid	(32.9)	(71.5)	(46.8)	(151.2)	(98.8)
	Cash-out for non recurring items and restructuring costs / other	(23.6)	(11.9)	(11.0)	(46.5)	(102.7)
	Dividend paid to minorities	-	(24.4)	(0.2)	(24.6)	-
	Exchange rates difference/other	(7.6)	(37.5)	1.9	(43.2)	12.4
	Net Cash Flow before extr. oper. / equity transactions / divid.	(672.9)	209.2	140.5	(323.2)	(380.5)
	Extraordinary operations	-	-		-	3.8
	Net Cash Flow before dividends	(672.9)	209.2	140.5	(323.2)	(376.7)
	Dividends paid by Parent	-	(159.9)	(0.3)	(160.2)	(79.8)
	Net Cash Flow	(672.9)	49.3	140.2	(483.4)	(456.5)

Raw Material costs trend and mix

Main raw materials price trend

Pirelli 9M 2022 mix (based on purchasing cost)

Pirelli manufacturing footprint

34 9M 2022 Financial Results 1. 49% Joint Venture with the Hixih Group 2. 63% Joint Venture with PT Astra Otoparts