London, 18 May 2010 Pan European Small/Mid Cap Conference
Agenda Pirelli Real Estate Separation Plan 2010 Outlook & Targets Pirelli Tyre & Parts Pirelli RE UBS Pan European Small/Mid Cap Conference 2
Pirelli Real Estate Separation Plan: strategic rationale Feb.11, 2009: '09-'11 "Transformation path” announcement – assets portfolio reshaping & core business focalization In the last 18 months Pirelli RE changed its business model, went through a deep restructuring program, strengthened its capital structure and reached financial sustainability Today the Real Estate market is showing signs of recovery Right time to split the 2 businesses with benefits for both P&C and PRE shareholders Benefits for P&C Benefits for PRE Free-float increase & higher stock Corporate structure streamlining : liquidity a clearer equity story with a positive impact on valuation metrics More corporate contestability More flexible capital structure Better chance to create a platform for future industrial aggregation UBS Pan European Small/Mid Cap Conference 3
Pirelli Real Estate Separation Plan: process (1/2) STEP 1: P&C SHARES REVERSE STOCK SPLIT Par value of ordinary and savings shares cancelled, followed by a split by category SHARES AFTER REVERSE SPLIT 1:11 Ratio 475,740,182 Ordinary shares Savings shares 12,251,311 Total shares 1) 487,991,493 Post reverse stock Capital Euros 2) 3.19 € per share split accounting = Total number value of shares Rights on savings shares will remain the same 1)P&C own shares, post reverse split, equal to 351,590.9 ordinary shares and 408,342.6 2)P&C capital 1,556,692,865.28 € UBS Pan European Small/Mid Cap Conference 4
Pirelli Real Estate Separation Plan: process (2/2) STEP 2 Assignment of Pirelli RE shares in portfolio through voluntary corporate capital reduction to P&C ordinary and savings Shareholders PRE’s P&C Shareholding In shares Stake Assignment ratio 1:1 487,798,972 57.99 % P&C’s PRE shares to be assigned to Shareholders after reverse stock split (*) 487,231,561 P&C’s PRE shares not to be assigned to avoid split 567,411 0.1% Price listed the day before the P&C Capital reduction equal to PRE stake Extraordinary Shareholders’ Meeting value assigned to P&C Shareholders when transaction is approved (*) Post reverse splitting P&C’s own shares in the portfolio, that is 351,590.9 ordinary shares and 408,342.6 savings shares shall not benefit from assignment rights to be attributed to P&C Shareholders in the 1:1 ratio. UBS Pan European Small/Mid Cap Conference 5
Pirelli Real Estate Separation Plan: timing May, 4 th 2010 Board of Directors P&C Extraordinary Shareholders’ Meeting to approve: by Shares value cancellation and reverse stock split July 2010 Capital reduction through assignment of goods in kind by Entry of the decision into the Registry of Companies July 2010 by Creditors’ opposition deadline October 2010 by PRE shares assigment October 2010 UBS Pan European Small/Mid Cap Conference 6
Pirelli Real Estate Separation Plan PRE equity structure changes CURRENT POST REVERSE STOCK SPLIT Camfin 14.8% Floating 2) Floating 1) Pirelli Other 69.4% 42% 58% members of the P&C shareholders’ agreement 15.8% To guarantee stability of Pirelli RE shareholding basis, some members of P&C shareholders’ agreement, to become future PRE shareholders, expressed their positive views to enter an agreement involving less than 30% of the relevant share capital. 1) Inclusive of PRE’s own shares (0.1% of circulating capital) and stake of Intesa San Paolo, Assicurazioni Generali and Unicredit worth 0.1% 2) Of which 27.4% ex P&C floating (net of own shares) and 42% ex PRE floating UBS Pan European Small/Mid Cap Conference 7
Agenda Pirelli Real Estate Separation Plan 2010 Outlook & Targets Pirelli Tyre & Parts Pirelli Re UBS Pan European Small/Mid Cap Conference 8
2010 Outlook Growing with value into a "pure Tyre company, a frontrunner in Green Performance" Tyre and Parts .... ready for a new leap forward on a solid ground. Tyre ongoing growth by business differentiation improvement of our cost competitiveness investments acceleration to build up capacity Filters exploit domestic & global opportunities deriving from ever stricter anti-pollution regulations Synergic business (Ambiente & Pzero): breakeven .... ready to create new business opportunities and enhance brand value UBS Pan European Small/Mid Cap Conference 9
Pirelli &C 2010 FY targets update € /bln 2010 2010 Revised 1Q’10 Results Targets Targets Excl. PRE Group Revenues 1.2 4.7-4.8 4.9-5.0 4.6-4.7 of which “Green Performance” 33% confirmed EBIT % ≥ 6.5% ≥ 6.5% 7.6% 6.5-7% post restructuring Capex >0.3 confirmed NFP 0.7 0.7* confirmed (*) Including 81.1 € /mln cash out for dividends UBS Pan European Small/Mid Cap Conference 10
Pirelli Debt Structure as of March 31, 2010 Net Financial Position Gross Debt Maturity € /mln 1,768 1,090 249 1,040 Committed Line 980 Drawdown 895 678 160 145 60 Other Borrowing 788 319 100 25 294 Gross Fin. Net Fin. Debt Assets* position Gross Debt maturity as of Mar. 31, 2010 18% 9% 59% 14% 1Q’10 2010 2011 2012 2013 & beyond 745 Total Total Committed Lines Not Drawn 925 180 - *Financial receivables. cash and cash equivalents UBS Pan European Small/Mid Cap Conference 11
Agenda Pirelli Real Estate Separation Plan 2010 Outlook & Targets Pirelli Tyre & Parts Pirelli Re UBS Pan European Small/Mid Cap Conference 12
Pirelli Tyre 1Q 2010 performance YoY% YoY% 1Q’09 1Q’10 € /mln Revenues 926.9 -13.9% 1,110.0 +19.8% Strong revenues growth EBITDA (before through: 107.8 -28.6% 146.4 +35.8% restruct. costs) exposure to high growth margin 11.6% -2.4 p.p. 13.2% +1.6 p.p. markets EBIT (before 61.0 -40.7% 98.1 +60.8% restruct.costs) value strategy in mature margin 6.6% -2.9 p.p. 8.8% +2.2 p.p. markets EBIT (after 57.5 95.5 -42.7% +66.1% restruct.costs) Effective EBIT growth (+60% yoy) margin 6.2% -3.1 p.p. +2.4 p.p. 8.6% driven by Net Income 14.6 50.1 2 – digit volume performance Cost efficiencies 1Q’09 1Q’10 2Q’09 3Q’09 4Q’09 Revenue drivers Price/Mix +6.9% +5.6% +4.7% -1.7% +1.4% Volume -18.1% -13.3% -3.3% +15.6% +17.4% Rev. ( before exch. -11.2% -7.7% +1.4% +13.9% +18.8% rate impact ) Exch. Rate (*) -2.7% -1.5% -3.3% +4.8% +1.0% (*) 4Q’09 trend reflects the high Venezuela inflation impact UBS Pan European Small/Mid Cap Conference 13
1Q’10 Results: Pirelli Tyre vs. main peers Top 4 competitors* Pirelli Performance drivers: +19.8% Revenues +18.6%** +17.4% +15.4% Pioneers in raising prices in a less receptive competitive environment +1.4% -1.9%** Sales Volumes Price/mix Ebit margin before restr. costs and special items Profitability Profitability improvement due to: volume 7.7% 8.8% cost efficiencies 6.6% factory saturation -1.4% 1Q’09 1Q’10 1Q’09 1Q’10 *Simple average: Michelin, Bridgestone excl Diversified Prod.; Goodyear, Continental: Rubber Group excl Conti Tech ** Volumes and price/mix trend refer to Michelin, Goodyear and Conti. UBS Pan European Small/Mid Cap Conference 14
Our Strategic Guidelines for 2010 1 A different growth strategy by business Consumer Industrial Further exposure in Emerging Markets to best seize Pirelli Brand enhancing Premium Segment growth opportunities positioning (>70% of Consumer) in Europe and North America 18% 27% 22% Europe Full exploitation of our potentials in areas of 56% 48% growth (LatAm, China) 82% LatAm/ 73% 78% MEA/ASIA 2008 2009 2010 2 Improve our cost competitiveness Expected Results Levers Price/mix improvement contrast raw materials cost increase ( cost headwind >250 € /mln ) Cost efficiency program > 90% of Industrial (87% in ‘08) Production increase in low-cost a year in advance! > 70% for Consumer (61% in ‘08) countries with one factory closure in 2009 (Spain); the old factory in Settimo Torinese (Italy) will be definitively shutdown in 2010 3 Accelerate Investments to build up capacity: over 300 € /mln in 2010 UBS Pan European Small/Mid Cap Conference 15
Latin America: present & future leadership LEADERSHIP Regional leadership with Net Sales of 1.9$/bln BEST RANGE No.1 local OEM Strategic supplier The only full range player: from 2 wheels tyres to Truck to Agro/OTR No.1 BRAND Top of Mind Brand in Mercosur with 100 yrs of history in Argentina and 80 yrs in Brazil Elected No.1 brand out of all sectors/brands in Brazil by male consumers OUR MAIN STRENGTHS Strongest Dealers network and 1 st R&D Centre and Proving Ground created in the region Over 11k committed and loyal employees UBS Pan European Small/Mid Cap Conference 16
A proactive pricing policy Europe 2Q 2010 +4% Consumer Tyres North America +6% Industrial Tyres China July 2010 1Q 2010 +4% Consumer Tyres +4% Consumer and Industrial April 2010 Middle Est Africa Tyres +4% Consumer Tyres January 2010 +10% Consumer and Industrial Tyres South America 2Q 2010 Differentiated price increases across the region on both Consumer and Industrial Tyres UBS Pan European Small/Mid Cap Conference 17
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