Pirelli & C — Investor Presentation 2023

Jul 27, 2023

1H 2023 Financial Results

1H 2023 Financial Results

July 27th, 2023

Disclaimer

In General. This disclaimer applies to this document and any oral comments of any person presenting it. This document, taken together with any such oral comments, 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 subsidiary 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 forwardlooking 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 the worsening of the crisis in Ukraine.

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.

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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.

Miscellanea. This Presentation has been prepared on a voluntary basis. Pirelli is therefore not bound to prepare similar presentations in the future, unless where provided by law.

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.

Fabio Bocchio, 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

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Solid 1H'23 results in a still challenging environment

• Outperformance in ≥18'' Repl. despite a softer than expected market demand
• Price/mix and efficiency covering 1.3x Raw Mat, FX & Inflation headwinds
• Sound cash flow trend in line with business seasonality; efficient stock management continues

FY 2023 market outlook and targets

• More cautious market outlook (-2% YoY), while High Value resilience confirmed (+6pp vs. Standard)
• Stronger Price/mix driving to Ebit margin upgrade
• Adjusted Ebit and Cash generation confirmed despite a more cautious view on demand and forex

1H'23 Results highlights

Strong operating performance confirming the resilience of our business model

€ million

Pirelli Sustainability achievements in 1H'23: for People, Planet and Mobility

5 1H 2023 Financial Results 1. RR: Rolling Resistance, WG: Wet Grip and ICE, focus on new labelled IPcodes; 2. IP codes: Identification Product Codes, extra EU labelling scales are converted to EU labelling grades, for WG. ICE Pictogram is included; 3. Reference tyre: 235/45R20 100H XL S-ZERO(MO) IP 17884, official target 3% excl. Metals; 4. Figure including both share from direct procurement (51%) and national electric grid mix based on Int. Energy Agency data (23%); 5. thanks to a combination of physical segregation and mass balance approach. Depending on tyre size, biobased and recycled content ranges between 29-31% and 25-27% respectively. Bio-based materials are natural rubber, textile reinforcements, biochemicals, bio-resins and lignin, while recycled materials are metallic reinforcements, chemicals and – through mass balance - synthetic rubber, silica and carbon black; Claim validated by Bureau Veritas

Agenda

2Q/1H'23 Car volumes – Pirelli vs. Market

Trend improving vs. 1Q but below expectations (destocking in EU & NA. , slow China recovery) Pirelli outperformance confirmed in ≥18'' driven by North America and APac

7 1H 2023 Financial Results Source: Pirelli market estimates based on third party and associations of tyre producers market data

2023 Strategy implementation: 1H 2023 delivery in line with targets

1H'23 Commercial program delivery

Higher weight of ≥18" on Car Volumes, with increasing incidence of Elect and sales in US and APac

Innovation program delivery - New P Zero™ generation

Meeting High-End Consumers demand for Safety, Performance and Sustainability

• Designed for High-End Electrified Vehicles ›
• Unmatched Eco-Safety Performances ›
• A step towards a reduced Environmental impact ›

• ›
• Max. Road Performance & Driving pleasure ›
• Sporty driving and daily use ›

• The choice of Prestige Car Manufacturers Derived from Pirelli's Motorsport experience ›
  • Designed for Hyper Cars and Super Cars ›
  • Maximum Dry Performance on track ›

ALL PRODUCED IN EUROPE WITH 100% RENEWABLE ENERGY¹

Eco-Safety champion for High-End EV, designed for sustainable mobility

11 1H 2023 Financial Results 1. Thanks to a combination of physical segregation and mass balance approach. Depending on tyre size, bio-based and recycled content ranges between 29-31% and 25-27% respectively. Bio-based materials are natural rubber, textile reinforcements, bio-chemicals, bio-resins and lignin, while recycled materials are metallic reinforcements, chemicals and - through mass balance - synthetic rubber, silica and carbon black; 2. Internal calculated by comparing the fossil-based and mineral materials associated to a set (4 tyres) of P Zero™E (235/45R189 vs same size of P Zero ™ (PZ4); 3. Vs standard UHP tyre P Zero ™ (PZ4 size 235/45R18), normalized by mileage, according to ISO 14026 and ISO 14067 verified by Bureau Veritas; 4. in g/1000km Vs standard UHP tyre P Zero ™ (PZ4 size 235/45R18); results from the 23CPC11 report of comparative test carried out on Electric Vehicles in June 2023 by Dekra test Centre Z.A.

Wave 3 Competitiveness programs: 1H results

Achievements in line with expectations and the seasonality of programs' delivery

Operations: Pirelli to acquire 100% of Hevea-Tec

• Founded in 1999, Hevea-Tec is the largest independent natural rubber processor in Brazil
• Enterprise Value: ~€21m
• Deal expected to close by the end of 2023, after the approval from Antitrust authorities

Potential Benefits

SUSTAINABILITY & INNOVATION R&D

• increase the use of non-fossil-based materials in the tyres
• launch of new FSC® certified projects

ENHANCEMENT OF NATURAL RUBBER LOCAL FOR LOCAL SUPPLY

• ensure continuity of supply in the region with greater efficiency
• reduce CO² emissions

IMPROVE PIRELLI'S RAW MAT. STOCK MANAGEMENT

Jaci, São Paulo

1H/2Q'23 Sales bridge

Growth driven by solid price/mix improvement despite soft market demand and weak FX

€ million

1H'23 adjusted EBIT bridge

Profitability supported by price/mix and efficiency covering 1.3x Raw Mat, FX & Inflation headwinds € million

1H'23 Net Income bridge

Earnings driven by improving operating performance

€ million

1H'23 Net Financial Position

Net Cash Flow bef. div. 1H'23 at -535M vs -464M in 1H'22 - stable yoy excluding LTI impact (-468M)

➢ Long Term Incentives are related to '20-'22. From 2024 LTI will switch to "rolling" system with aligned annual impact on P&L and Cash flow ›

Total Gross Debt structure as of June 30th 2023

Liquidity margin fully covering debt maturities up to 2025ye. ESG-financing weight on gross debt at ~58%

18 1H 2023 Financial Results 1. including assets at FV through P&L; 2. Based on average gross debt and hedging of intragroup financing

Agenda

2023 Global Car Tyre Market Outlook

A more cautious view due to softer trend in China and EU and weaker South American market High Value resilience confirmed

Main highlights by segment / channel

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• O.E. ≥18": a more cautious view on China recovery post pandemic
• Repl. ≥18'': Softer demand trend in EU (following the trends in 1H but improving YoY in 2H) and China ›
  • Car ≤17": demand trend on OE and Replacement reflecting a weak economic environment (South America and EU)

FY 2023 targets: Stronger Price/mix driving to Ebit margin upgrade

Adjusted Ebit and Cash generation confirmed despite a more cautious view on demand and forex

€ billion	2022 A		2023 E	• Vol.: ~-2% ÷ -1%
		TARGET @11 May '23	TARGET @27 July '23	(old: flat / ~+1%) • Price/mix: ~+7% ÷ ~+8%
Net Sales	6.62	~6.6 ÷ ~6.8	~6.5 ÷ ~6.7	(old: ~+4.5% ÷ ~+5.5%) • Forex: ~-7% ÷ ~-6% (old~-4.5% ÷ ~-3.5%)
adj. EBIT margin	14.8%	>14%÷ ~14.5%	~14.5%÷ <15%
CapEx (% of Sales)	0.40 (6.0%)	~0.40 (~6%)	confirmed
Net Cash Flow bef. Dividends	0.52	~0.44 ÷ ~0.47	confirmed
Net Financial Position NFP / adj. EBITDA	2.55 1.8x	~2.35 ~1.65x ÷ ~1.7x	confirmed
ROIC1 Post taxes	20.3%	~20%	confirmed

Agenda

2023 Forex guidance

Main avg. exchange rates	2022 A	2023 E (Jul guid)	∆ YoY (vs. EUR)	2023 E (Feb guid)	∆ YoY (vs. EUR)
EUR / USD /	1.05	1.10	~-4%	1.08	~-2%
EUR / CNY /	7.08	7.63	~-7%	7.50	~-6%
EUR / BRL /	5.45	5.54	~-2%	5.73	~-5%
TOT. IMPACT ON SALES			~-7% ÷-6%		~-4.5%÷-3.5%

A globally acknowledged sustainability leadership

Major ratings	Last update	Score	Positioning in the reference sector
	2022	86	Top score ATX Auto Components
	2023	TOP 1% ESG	Max Score
	2022	A	Max Score
	2022	SUPPLIER ENGAGEMENT LEADER	Max Score
	2023	4.5 / 5	Top score Auto parts
	2023	11.2	Top ESG Rated
	2022	AA	6% of the Auto components in AA
	2022	Platinum	Max score

Key Car Market Trends: Europe

Key Car Market Trends: North America

26 1H 2023 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

Key Car Market Trends: Russia, MEAI / South America

28 1H 2023 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		2Q 2023	2Q 2022	∆ YoY	1H 2023	1H 2022	∆ YoY
	Net Sales	1,737.8	1,675.9	+3.7%	3,437.5	3,197.0	+7.5%
	Organic variation			+9.1%			+10.4%
	EBITDA1 adjusted	379.4	362.2	+4.7%	739.1	695.3	+6.3%
	% of net sales	21.8%	21.6%	+0.2 p.p.	21.5%	21.7%	-0.2 p.p.
	reported EBITDA	367.9	350.2	+5.1%	718.6	675.8	+6.3%
	% of net sales	21.2%	20.9%	+0.3 p.p.	20.9%	21.1%	-0.2 p.p.
	EBIT1 adjusted	269.3	253.1	+6.4%	517.4	481.6	+7.4%
	% of net sales	15.5%	15.1%	+0.4 p.p.	15.1%	15.1%	0.0 p.p.
	reported EBIT	229.3	212.6	+7.9%	440.0	405.2	+8.6%
	% of net sales	13.2%	12.7%	+0.5 p.p.	12.8%	12.7%	+0.1 p.p.
	Net income / (loss) from equity investments	3.9	1.5	n.m.	6.2	2.3	n.m.
	Financial income / (expenses)	(54.7)	(46.0)	+18.9%	(106.9)	(89.6)	+19.3%
	EBT	178.5	168.1	+6.1%	339.3	317.9	+6.7%
	Taxes	(50.9)	(44.9)	+13.4%	(96.7)	(84.9)	+13.9%
	Tax rate %	-28.5%	-26.7%		-28.5%	-26.7%
	Net Income / (loss)	127.6	123.2	+3.6%	242.6	233.0	+4.1%
	Earnings / (loss) per share (€ per share)	0.12	0.11		0.23	0.22
	Net income / (loss) adjusted	156.4	152.3		298.3	287.9

29 1H 2023 Financial Results 1. Adjustments refers to one-off, non recurring and restructuring expenses to the amount of €20.5M (€19.5M in 1H 2022). With reference only to EBIT, amortization of intangible assets recognized as a consequence of Business Combinations amounting to €56.9M (€56.9M in 1H 2022).

Consolidated Balance Sheet

€ million		30/06/2023	31/12/2022	30/06/2022
	Fixed assets	8,821.7	8,911.1	9,017.1
	Inventories	1,418.7	1,457.7	1,396.8
	Trade receivables	895.1	636.5	936,4
	Trade payables	(1,405.1)	(1,973.3)	(1,454.2)
	Operating net working capital	908.7	120.9	879.0
	% of net sales1	13.3%	1.8%	14.7%
	Other receivables / payables	(101.7)	42.3	100.2
	Net working capital	807.0	163.2	979.2
	% of net sales1	11.8%	2.5%	16.4%
	Total net invested capital	9,628.7	9,074.3	9,996.3
	Equity	5,455.6	5,453.8	5,419.6
	Provisions	1,085.6	1,067.9	1,046.0
	Net financial position	3,087.5	2,552.6	3,530.7
	Total financing and shareholders' equity	9,628.7	9,074.3	9,996.3
	Attributable net equity	5,335.4	5,323.8	5,268.9
	Total net financial debt2	3,226.8	2,683.8	3,808.1

30 1H 2023 Financial Results 1. Last twelve months trailing revenues; 2. Total net financial debt = net financial position excluding non-current financial receivables and non-current derivative financial instruments

Net Cash Flow

€ million

	1Q 2023	2Q 2023	1H 2023	1H 2022
Adjusted Operating income (EBIT)	248.1	269.3	517.4	481.6
Amortiz. & depreciations (excl. PPA amortiz.)	111.6	110.1	221.7	213.7
Investments in tangible and intangible assets (Capex)	(53.2)	(70.3)	(123.5)	(115.7)
Increase in right of use	(15.1)	(26.5)	(41.6)	(41.3)
Change in working capital/other	(868.8)	(6.8)	(875.6)	(703.0)
Operating Cash Flow	(577.4)	275.8	(301.6)	(164.7)
Financial income/(expenses)	(52.2)	(54.7)	(106.9)	(89.6)
Taxes paid	(29.0)	(32.3)	(61.3)	(104.4)
Cash-out for non recurring items and restructuring costs / other	(12.6)	(10.2)	(22.8)	(35.5)
Dividend paid to minorities	-	(3.9)	(3.9)	(24.4)
Exchange rates difference/other	(20.2)	(18.2)	(38.4)	(45.1)
Net Cash Flow before extr. oper. / equity transactions / divid.	(691.4)	156.5	(534.9)	(463.7)
Extraordinary operations	-	-	-	-
Net Cash Flow before dividends	(691.4)	156.5	(534.9)	(463.7)
Dividends paid by Parent	-	-	-	(159.9)
Net Cash Flow	(691.4)	156.5	(534.9)	(623.6)

Raw material costs trend and mix

Source: Natural Rubber - Sicom; Brent - www.oilnergy.com