Pirelli & C Spa Azioni

Q1 2023 results confirmed the resilience of our business model, with performance that is improving year on year and among the best in the industry. Scenario we foresee for 2023 remains characterized by a slowdown in economic growth, substantially in line with February expectations, and an inflation rate staying high, especially of consumer prices, despite a reduction in energy transportation and raw material costs. All 2023 targets are confirmed and supported by the delivery of our strategic programmes. On Golden Power, final measures are expected to be issued after the 4th of June, termed for filing the slates for Board of Directors' renewal. In compliance with the best corporate governance principles, today the Board has resolved to submit to the AGM taking place on June 29, the proposal to postpone the renewal of the Board after the conclusion of the Golden Power Procedure. A subsequent General Meeting will be called, presumably before July 31, and consequently current Directors will remain in power until the renewal of the Board. The update of the Industrial Plan is postponed and is now due before the end of 2023. The deleveraged target of a net debt and adjusted EBITDA ratio of one time by 2025 is confirmed. Let's go to the results. Pirelli closes the first quarter of 2023 with a solid economic and financial performance. Top-line growth, 12% year-on-year plus, driven by price mix and strengthening on high value, now equal to 75% of the group revenues. Adjusted EBIT of 248 million, with a margin of 14.6 in line with full-year target. Net income of 115 million, growing by 5%. Net cash absorption in line with the same period last year, and is counting the build-up of investments in the fourth quarter of 2022. Efficient inventory management, particularly of raw materials, continued in the quarter. I remind you that the high incidence of these inventories in 2022 was due to both rising inflation and actions to contain supply chain risks. Moving on, I would like to give you an update on sustainability. Our commitment to health and safety at work is continuing, with the launch of a global awareness campaign on the World Day promoted by the International Labour Organization on April 28th. On product sustainability, we will introduce new product lines with high content of renewable and recycled materials already in 2023. While the collaboration with the key stakeholders is being intensified in view of the introduction of the Euro 7 tire wear regulation, which will come into force in June 2025. On the industrial front, the decarbonisation of plants through the transition to renewable energy and energy efficiency programs continues. Our commitment to the fight against climate change has once again been recognized by CDP, which confirmed the A rating for Pirelli last February. I now leave the floor to Mr. Casalucci.

Thank you, Mr. Tronchetti, and good evening, everybody. Let us analyze both the market dynamics and Pirelli's performance. In the first three months of 2023, the global car tire demand declined by four percentage points year over year, with a very different trend by segments and channels. Pirelli outperformed the market thanks to our faster strengthening in high value. Original equipment market growth plus 3% year-over-year was supported by easing supply chain tensions, particularly in semiconductors. More specifically, in the high-value segment, Pirelli saw over 7% volume growth year-over-year in line with the market, while in standard, Pirelli's performance reflects greater selectivity in this channel and halting of car production in Russia due to the Ukraine conflict. Replacement demand remained weak, minus 7% year over year, reflecting the volatile macroeconomic environment. In 18 inches and above, Pirelli outpaced the market by around 3 percentage points, Pirelli plus 3% versus a flattish market. driven by market share gain, mainly in North America. In 17 inches and below, Pirelli minus 11 versus a market minus 8, we continue to focus on a mix more oriented towards higher range sizes. The first quarter results reflect the implementation of the key programs in the industrial plan. On the commercial program, Consistent with our strategy, we have outperformed the car 18 inches and above market by gaining sharing replacement, particularly in North America, increased exposure to original equipment 19 inches and above, reaching 82% of car 18 inches and above original equipment volumes, which is nine points above last year, and electric vehicles. Reduced exposure to standard, which accounted for 36% of car volumes in Q1. On the innovation program, achieved 60 technical homologations concentrated in 90 niches and above, about 85%, and specialties, about 70%. Strengthened EV positioning and focus on sustainability. while the two wheels business saw the launch of two products based on racing experience. On the competitiveness program, gross benefits of about 10 million were achieved, in line with expectations and project development schedules. On the operations program, the saturation level of the plants stands at about 90%, more than 95% on the high value. in view of the lower level of production in Russia. In addition, the program to decarbonize plants through the use of renewable energy sources and energy efficiency programs continues. Let's start from the commercial program. In the car 18 inches and above segment, we recorded growth of 5% compared to plus 2.6% of the market. driven by products with higher technological content, the 19 inches and above and specialties. In the original equipment, car 18 inches and above, our performance, plus 7.5 volumes versus a plus 7.1 of the market, is characterized by an increasing selectivity in favor of electric vehicles. 100% of their year-on-year volume growth is related to EV homologations. In the replacement 18 inches and above channel, volume plus 3% compared to a minus 0.2 of the market, growth was driven mainly by the replacement product lines introduced in 2022, particularly in North America. On the product innovation front, our activity continued in the first quarter, with an increasing focus on sustainability and performance. In CAR, our EV portfolio stands at more than 350 homologations worldwide, mainly in 19 inches and ABO and specialties, with an OE market share of 1.5 times that of premium and prestige internal combustion engine vehicles. In addition, the sustainability roadmap continues with a strong focus on renewable and recycled materials. In 2023, our products will already have a sustainable material content well above our standards and becoming a benchmark for the industry. As for motorbikes, Pirelli has been confirmed sole supplier for all classes of the Superbike World Championship until 2026. and our portfolio was further expanded with an introduction of the new Diablo Supercorsa, the result of 20 years of experience in racing. Finally, in cycling, the Pizzero Rosso tubeless ready was introduced, produced in Italy and aimed at performance with low rolling resistance and excellent handling. The competitiveness program in the first quarter recorded gross efficiencies of 10 million, equal to 10% of the annual target and in line with the timing of project development. The contribution of the efficiencies will be more evident starting from the second quarter. Reviewing our performance in the first quarter, in the product cost area, the adoption of a modular design and design-to-cost approach continued. aimed at reducing structure complexity and tire weight. In the manufacturing area, the results of which will be visible starting in the second quarter, projects are being implemented. Said projects are aimed at improving the production process by leveraging on industrial IoT, predictive maintenance, and energy efficiency programs. In the SG&A, the process of optimizing the logistics network and supply chain continues. And finally, in the organization area, the process of digitization and staff upskilling is progressing. Thank you so much, and I now leave the floor to Mr. Bocchio.

Thank you, Mr. Casalucci, and good evening to all. Let us analyze the dynamics of the top line in the first quarter. The volume trend, minus 3.1% at group level, reflects the weakness of market demand. As Mr. Casalucci already explained, we gained share in car 18 inches and above despite price increases, while we reduced our exposure to standard in line with our strategy. Strong improvement in price mix, plus 15.1%, supported by a solid price discipline to counteract input cost inflation, and the continued improvement of the product mix through increased exposure to high value and improved micro-mix. The forex impact was broadly neutral, minus 0.3% in first quarter, or minus 4 million euro, where the year-on-year devaluation of renminbi, Argentine peso, was offset by the dollar's appreciation. In the first quarter, 2023, the adjusted EBIT amounted to €248 million, up 9% year-on-year, with a margin of 14.6%, in line with the full-year target. The contribution from internal levels more than offset the weakness of the external scenario. In particular, price mix plus €198 million and efficiencies plus €10 million More than covered, the drop in volumes, worth minus €20 million, linked to the weak market demand, and the increase in the cost of raw materials, minus €78 million, including the related exchange rate impact, which was particularly significant in the first quarter. This impact, which reflects the growth in the oil price, its derivatives and rayon, is expected to improve in the coming quarters. The internal levels also offset the inflation of other production factors, such as energy, labour and transport, for an amount of €69 million, and the negative exchange rate effect, minus €15 million, due to the revaluation of the currencies in our main production hubs, particularly in Mexico, whose currency appreciated by 15% against the euro. Let's look now at the net income dynamics for the quarter. Net income increased 5 million year-on-year. The trend takes into account the already mentioned improvement in the operating performance, the 2 million higher restructuring and non-recurring costs, the year-over-year increase of the net financial charges reflecting the rise of interest rates in the Eurozone and high cost of hedging forex risks in Russia, we will discuss this trend in a couple of slides, the 6 million increase in tax charges related to the higher operating results, as the tax rate is at 28.5%, reflecting a different mix of result generation by country. Net income adjusted, meaning excluding all the one-offs and no recurring items, is positive for 142 million euro at the end of March. Net cash flow in the first three months was negative €691 million, in line with the seasonality of the business and with the first quarter of 2022. The change in operating net cash flow mainly reflects the improvement in operating performance, absorbed by higher investment activity and higher working capital. The trend reflects the usual seasonality of the business, with the increase in trade receivables following the start of the summer campaign, and the reduction in trade payables linked to the trend in investments and raw materials. The careful management of inventories is to be highlighted, with an incidence on sales that is reduced to 21.5 percent, thanks to the actions on raw materials. It should be remembered that in 2022, the high incidence of these inventories was due to both rising inflation and actions to contain supply chain risks. On the other side, Finnish product inventories are stable. The group gross debt as of March 2023 stands at approximately €4.9 billion. Considering the approximately €1.6 billion of financial assets, our net financial position is equal to €3.2 billion. 2023 debt maturities have already been fully managed, and liquidity margin allows the coverage of maturities until Q2 2025. During the first quarter of 2023, Pirelli early repaid both a should-shine financing originally coming due in July 2023 for an amount of 223 million euro, and a bilateral bank loan original coming due in August 2023 for an amount of €125 million. Pirelli also issued a €600 million five-year bond, which was very well received by the market. This issuance marked a debut for Pirelli in the investment-grade rating space. It was also the first sustainability-linked benchmark-sized bond from a time-maker company. ESG financing now represents 57% of our gross debt, confirming the centrality of the sustainability strategy. Finally, our last 12 months' cost of debt stands at 4.31%, 27 basis points up from December 2022. This increase reflects both the rise in interest rates, mainly in the Eurozone, and the higher cost for hedging against currency risks, in particular in Brazil and Russia. I now leave the floor back to Mr. Tronchetti.