Pirelli & C Spa Azioni

Good evening, ladies and gentlemen. The first nine months of 2023 were marked by highly volatile volatility of the macroeconomic scenario. The demand slowed down, high inflation and a gradual increase of interest rates. In spite of these headwinds, Pirelli's results in the first nine months confirmed the strength of our business model. The price mix among the best in the industry improving profitability thanks to internal levers, and improving cash generation in the third quarter, thanks to an efficient management of the working capital. These results lead us to confirm our guidance on the top level of the range of both profitability and cash flow. High value remains our core segment, in which we also aim to strengthen our presence in new areas, such as Saudi Arabia through our partnership with public investment funds. Finally, we consider it appropriate to postpone the industrial plant presentation to March 2024 with the full year 2023 results, given the uncertainties linked to the international environment. On October 26th, we signed a joint venture agreement with the Public Investment Fund in Riyadh to establish a new plant in Saudi Arabia. Thanks to this partnership, the Israeli share will reinforce its position in a strongly growing market, creating both a domestic and regional champion. Saudi Arabia will become an important global production hub in the automotive industry, with a focus on electric vehicles. The Public Investment Fund is leading the change through the development of production capacity, infrastructure and supply chains. a remarkable investment in future mobility, such as electric vehicles. Electric vehicles' car market is expected to grow at a compound annual growth rate of 30% over the next 10 years. In 2032, 40% of new cars will be electric, compared to the current 6%. At the same time, the high-value-time market will double by 2032, from 3.3 million in 2023 to 6.6 million in 2032. The plant is expected to have production capacity of 3.5 million cartiles, of which one-third I value under Pirelli brand through an off-take agreement, two-thirds high-quality products under the local joint venture brand. Pirelli will offer technical support and expertise to design, develop, and manage the plant. The total expected investment for the plant will be around 550 million U.S. dollars, And the joint venture will benefit from the government tax and investment incentives. For Pirelli, the maximum cash out will be approximately 56 million U.S. dollars, with a neutral impact on our 2025 deleverage target. And now I leave the floor to Mr. Casalucci. Please.

Thank you, Mr. Tronchetti. The results of the first nine months of 2023 confirmed the resilience of our business model. A 7.4% top-line organic growth supported by the strong increase of the price mix. A 15.2% profitability at the upper end of the target range. A net income of €411 million with a plus 14% growth due to the improved operating performance as well as benefits from the patent box, which will be further explained by Mr. Bocchio. The continuation of the deleverage process with the reduction of debts by approximately 250 million compared with the same period in 2022. In terms of sustainability, the results of the first nine months are remarkable. In July, we launched the new Pirelli P Zero E, the perfect fit for premium and prestige electric vehicles. The new P Zero is a mix between technology and sustainability, with unprecedented results in the UHP tyre market. It is the first tyre on the market with a triple A class in the European labelling, rolling resistance, wet braking and noise. Tire wear was reduced by 42% compared with the previous generation, thanks to virtualization and new materials. And it has more than 55% bio-based and recycled components, as certified by third parties. To enhance transparency towards consumers, we have introduced a new logo which identifies tyres with at least 50% of bio-based and recycled materials, as certified by Buro Veritas. The renewal of the Formula One Agreement focuses on sustainability, which is core to our partnership. From 2024, all Formula One tyres will have the FSC certification, Forest Stewardship Council, as it is already happening for some of our consumer products. Finally, our progress towards decarbonisation is above our expectations. Therefore, Pirelli will define a new short- and long-term science-based target, in line with our net-zero commitment. Our extensive effort to this transition is addressed to the whole value chain, including Scope 3 emissions. In this regard, we have organized events for our European dealers to discuss in detail low-carbon products and technologies. while our high-emission suppliers were involved in defining challenging decarbonisation targets, in line with Pirelli's strategy. The result of the first nine months reflected the implementation of the key strategic programmes. On the commercial side, we kept on consolidating our leadership in high value, while the exposure to standards was further reduced, now at 37% of the car volumes. On the innovation program, our partnership with OEMs has resulted in around 260 new technical homologations, mainly in 19 inches and above NDVs. Consolidated our positioning on electric vehicles with a portfolio of around 470 homologations. On the competitivity program, we reached 65% of our yearly efficiency target, in line with our project development timeline. On the operational side, the level of saturation of our plants is of approximately 90%, around 95% in the high value. In both the first nine months and the third quarter, we have kept a value-oriented commercial strategy with a higher selectivity in the standard segment and in the original equipment channel of the high-value segment. In replacement, 18 inches and above, plus 2% in first nine months and in third quarter, growth was mainly driven by the new product lines while keeping a sound price discipline. We have consolidated our positioning in this segment. Our market share in the third quarter is in line with the third quarter 2022 and the highest since 2019. In original equipment, 18 inches and above, our performance is marked by a growing selectivity with a focus on 19 inches and above. where EVs account for over 26% of OE volumes, plus seven percentage points versus the first nine months of 2022. The trend of third quarter, minus 1% versus a flat market, further discounts an unfavorable comparison base in China, where last year we overperformed during post-COVID market rebound. Let us now address product innovation in the two high growth segments, electric vehicle and SUV. Our leadership in the electric vehicle premium and prestige segments was further confirmed at the Munich Motor Show, where Pirelli was on 25% of the electric vehicles and on 30% of the plug-in hybrids. Furthermore, Pirelli was fitted the only hydrogen car on the show. In the SUV segment, we launched the new Scorpion MS, an all-season original equipment product mainly for electric vehicles, starting from Maserati Grecale Folgore. The new Scorpion meets consumers' needs and is characterized by high comfort, mileage and safety on wet surfaces. Our strong commitment to innovation and technology was acknowledged by FIA which confirmed Pirelli as the exclusive tyre supplier in Formula 1 until 2027, with the option of extending the term by one more year. At the end of this agreement, Pirelli will be involved in the most important car racing competition for 18 consecutive years. Formula 1 is a source of continued innovation. It is an open-air laboratory where we test new product solutions and innovate processes and technologies. Among the novelties in the Formula One renewal, our strong commitment to sustainability. From 2024, all of our tires will be FSC certified. This ensures full traceability of raw materials coming from forests, preservation of biological diversity in plantations, and benefits to local communities and workers. Finally, Formula One offers a growing global media exposure, especially in the United States, the country with the highest number of races, representing a strategic market for Pirelli. Let us now move to the competitiveness program. In the first nine months, we achieved gross efficiencies of approximately €61 million, equal to 65% of the objective for the full year and in line with the expected development of the projects. In detail, the greater benefits come from the product cost project. We keep on adopting an approach to modular design and design to cost, to decrease the complexity of the structure and the weight of tires. the manufacturing project is going to generate, as expected, the strongest efficiencies in the last part of the year, with the implementation of both projects to improve the manufacturing processes, which thanks to the industrial IoT will have particular benefits on predictive maintenance, and of energy consumption reduction projects. On SG&A, we are progressing with the optimization process of logistics and supply chain. And finally, the organization project goes on with process digitization and staff upscaling. I now leave the floor to Mr. Bocchio for the analysis of the results.

Thank you, Mr. Casalucci, and good evening all. Let's analyze now our performance in detail. The revenues of the first nine months recorded a 2.5% growth, plus 7.4% net of the strong Forex volatility. The volume trend, minus 3% at group level in the first nine months and minus 4.6% in the third quarter, reflects the general weakness of car market demand, minus 1% in the first nine months and in the third quarter, and in the two-wheel business. And the greater selectivity of Pirelli in car standard tires and high-value original equipment, especially in the third quarter. Significant improvement in price mix, plus 10.4 percent in the first nine months and plus 6.8 percent in the third quarter, which we expect to be among the best in our industry. The price mix was supported by a solid price discipline and a continued improvement of the product mix. Forex impact was negative, minus 4.9% in nine months, with a worsening trend in the third quarter, equal to minus 8.4%, following the devaluation of the dollar, renminbi, and other currencies of emerging countries against the euro. In the first nine months of 2023, the adjusted EBIT reached 783 million euro, plus 4% year-on-year, and a 15.2% margin, a slight improvement versus the same period of 2022. The price mix of 449 million euro and the structural efficiencies of 61 million covered 1.4 times the impact of the negative external scenario. the increase in raw material costs for 77 million euro, including the related forex impact, the inflation of input costs for 180 million related to energy, labor, and transportation, and the negative impact of exchange rates for 115 million euro due to the revaluation of the Mexican peso, about plus 12 percent against the euro, with a direct impact on costs because Mexico is our production hub for North America, and the devaluation of the dollar, renminbi, and other South American currencies in the third quarter. Our internal levels also cover the impact of volumes negative for €65 million, as well as the increase in DNA for €26 million and other costs for €19 million. In the third quarter, profitability improved with a margin of 15.4%. It was 14.8% in the third quarter of 2022 due to the strong contribution of the price mix, plus 104 million, and efficiencies, plus 31 million euro, that more than compensated for inflation, negative 49 million euro, and forex for 63 million euro. The negative impact of volumes for €36 million was partially offset by raw materials, plus €22 million. Let's now review the dynamics of the net income, which increased 14% year-on-year. The trend reflects the already mentioned improvement of the operating performance, which more than offset the increase in net financial charges linked to a rise in interest rates in the eurozone. lower non-recurring and restructuring costs, as well as improve the results from equity investment. And finally, the reduction in taxes, triggered by the signature of the Italian Patent Box Agreement last August, with the tax rate at 22 percent, substantially in line with our expectation for the full year 2023. The adjusted net income amounts to 453 million euro. In the first nine months of 2023, the net cash flow was minus €368 million, in line with the business seasonality. When we excluded the €67 million long-term incentives paid in Q2, the cash flow before dividends shows a €20 million improvement compared with the first nine months of 2022. The change in the net operating cash flow mainly reflects an improvement in operating performance, CAPEX, mainly located to high-value activities, and working capital trend, including long-term incentives. Let's discuss the dynamics of the working capital. It should be highlighted that inventories were carefully managed, and its incidence on sales decreased to 20.4 percent, thanks to the normalization of raw material stock from the second half of 2022. On the contrary, the other components of the working capital reflected the usual business seasonality, namely an increase in trade receivables with a weight of around 16% on revenues and the reduction of trade payables with an incidence of 22% on revenues. In the third quarter, the net cash flow before dividends was positive for €167 million, improving compared with €141 million in the same period of 2022 due to an optimized inventory management, as already pointed out. The net financial position at the end of September amounts to approximately 3.1 billion euro, essentially in line with that of last June, as a result of the already mentioned cash generation in the third quarter and the payment of dividends. Gross debt is approximately €4.3 billion, decreasing compared with the €4.6 billion of June. Financial assets are approximately €1.2 billion. In the third quarter of the year, we repaid in advance a €600 million bilateral loan maturing in February 2024, using part of the available cash and the €300 million bilateral ESG loan underwritten in June and maturing in February 2026. At the end of September, ESG financing covered approximately 67% of the overall debt, up from 58% at June. The liquidity margin stands at €1.9 billion and allows the repayment of debts with maturity until the end of 2025. Exposure to interest rates is perfectly balanced between fixed and floating. The cost of debt is 4.75%, 30 basis points more than in the first half of the year, penalized by the restrictive monetary policy adopted in the Eurozone. I now return the floor to Mr. Casalucci.