Pirelli & C Spa Azioni

Ladies and gentlemen, welcome to Pirelli's conference call, in which Pirelli Top Management will present companies' first half 2026 results. A live webcast of the event and the presentation slides are available in the investor relations section of the Pirelli website. I remind you that the Q&A session will follow the presentation. Now, I would like to introduce Mr. Marco Tronchetti Provera. Please, go ahead, sir.

Thank you. Good evening, ladies and gentlemen. The first half results confirm Pierelli's ability to generate value in an uncertain environment marked by growing geopolitical tensions. We have further consolidated our leadership in the high-value segment by leveraging on the strength of our brand, technological innovation, and a distinctive product portfolio. The resilience of our business model and implementation of strategic priorities allowed us to maintain a profitability among the best in the industry, offsetting the negative effects of pension in the Middle East, U.S. tariffs and exchange rate volatility. Cash flow generation remains in line with the seasonality of the business and with the expectations for the full year reflecting the group's financial discipline. The second half of the year, the macroeconomic and geopolitical picture is expected to remain volatile. The resumed conflicts in the Middle East has further pressure on energy costs, with Brent price back at about $90 per barrel, and the TTF gas approaching 60 euros per megawatt hour. Furthermore, there are persistent signs of weak demand, especially in car manufacturing and the standard segment. while demanding a high value replacement is proving resilient to a single digit growth rate. Despite the challenging external environment that I described, based on the quality of our first half results, we are confirming our full year targets for revenue growth, profitability, and cash generation. Now I give the floor to Mr. Casaluci.

Thank you, Mr. Branchetti, and good evening. Direlli has reported solid results for the first half of the year, in line with our expectations. Revenues reached approximately 3.5 billion euro, with organic growth of 2.5%, driven by stronger high value, accounting now for 82% of group sales, and price mix improvement. Adjusted EBIT amounted to 558 million euro. Thank you very much. and a greater profit contribution from equity participations in the first quarter of the year. The net financial position is of approximately 1.9 billion euro and includes the debt consolidation of the Chinese joint venture, Husheng Tai, amounting to approximately 210 million euro, as well as the payment of approximately In the second quarter, the net cash flow before dividends and M&A transactions was positive at 148 million euro, in line with the level recorded in the same period last year. Our long-term strategy for value creation and development continues to benefit from progress in sustainability. Over the past six months, we achieved tangible results in all areas. In health and safety, The prevention and awareness-raising programs contributed to a significant reduction of the accident-at-work frequency index, reducing the index by 54% compared with the first half of 2025. The decarbonization plan continues in line with the 2014 E0 target. Energy efficiency and machinery electrification projects led to a 13.5% decrease of our emissions compared to last year, and the reduction of emissions by our suppliers is also in line with our 2027 target. Furthermore, we made significant progress in developing circular supply chains for the recovery and integration of sustainable materials into production processes, as we will see in the next slide. Finally, energy and water efficiency programs allowed for a 6.7% year-on-year reduction of water consumption for production purposes. We started three partnerships on key raw materials, namely carbon black, steel and synthetic rubber. Our target is accelerating the transition to materials circularity from increasingly sustainable and flexible supply chains. More specifically, in the United States, we started a collaboration with Boulder Industries, a company specialized in retrieving carbon black from end-of-life tires. This raw material is then recycled and used for new tires. This project received the Value Chain Collaboration Award from the Tire Recycling Foundation. In China, together with our strategic partner Shinda, We gave a remarkable contribution to the development of a pilot project to include the recycled steel among the materials certified under ISCC+, the major international standard for the certification of recycled and bio-based materials traceability across the supply chain. In Europe, we developed an integrated chain with PIRUM, BASF and SYNTHOS, to turn end of life products into circular ISS Plus certified materials, including synthetic rubber to be reused in large scale production processes by guaranteeing high quality performance and traceability standards. Through these partnerships, We will strengthen our strategy on circular materials with the target of bringing products made from over 80% bio-based and recycled materials to the market by 2030. Let's now analyze our first half operating performance. In line with our strategic priorities, we gained share in the high value segment. In the major geographic areas and business lines by leveraging on technological innovation and sizing market opportunities. Innovation represents a distinct factor in our strategy. In the first six months of the year, we expanded our homologation portfolio and widened the product range. We also consolidated our position in the segments of higher value, In the cyber tire, the latest test confirmed the competitive edge of our technology. We proved that connectivity applied to tires through a physical sensor can be translated into tangible benefits for both safety and driving experience. Efficiency plan Proceeds according to schedule. In the first six months, the efficiency plan generated gross benefits of 81 million euro, that is approximately 54% of the full year target. Let's start from the commercial performance in the first six months. We gained market share in the high value segment, recording a volume growth of 3.5% and strengthened our position in the car and motor segments. We also continued our selectivity process in the standard segment, minus 8% on volumes, by reducing our exposure to segments with lower profitability, mainly in South America. In the second quarter, the volume trend, minus 1.5% at group level, reflects a greater reduction in the exposure to the standard segment, volumes minus 11% versus a minus 4 in Q1, Outcome of a strategy based on value and protection of profitability in an extremely competitive environment. While the high value trend, plus 3%, reflects a lower growth of the motor segment after a strong performance in the first quarter and a more limited growth in the car original equipment due to demand slowdown. In the second half of the year we expect high value performance to strengthen, supported by a solid replacement demand in Europe, as well as the gradual improvement of the North American market. In the standard segment we expect a gradual trend normalization. Let's now move to product innovation, which is one of the key drivers of differentiation in future growth. In the first half, In the spring of 2026 we obtained approximately 200 new homologations mainly concentrated in high range, size, specialties and electric vehicles. These results confirm our role reference technology partner for both premium and prestige car makers. Examples of these include their partnerships on the most advanced electric cars like Ferrari Luce and Radeon R2S. as well as premium SUVs like Audi Q7 and Q9. Innovation also means constant renewal of the product portfolio. In the car segment, in North America, we launched the new Scorpion All Season 4, developed with an increasingly virtual approach which led to an improvement in mileage, comfort and driving control. The value of our technological solutions is also confirmed by comparative tests In the first half, we obtained 8 victories from leading European specialist magazines, which awarded several products in the Cinturato, Pizzero and Scorpion lines. Also in the two wheels business, we continue to incorporate the racing experience into our products. In the motor segment, we launched Metzeler Sportec 01 RS. Developed from the racing know-how to offer top performance on the road. While in the cycling segment, we introduced two new Cinturato lines designed for gravel riding, a rapidly growing segment. Within product innovation, CyberTire is one of the most distinctive solutions in the industry. Through sensors integrated into the tire and our own algorithms, Cyber Solutions can turn a tire from a passive car component into a smart sensor that can exchange data with the vehicle in real time and provide accurate information about the tire and road condition. All these data allow the electronic systems of vehicle, from ABS to stability control and traction, to be able to react more effectively and accurately, thus improving safety, control and driving experience. Recent tests carried out on our Wizzola testing track, also attended by international trade press, positively proved the value of this technology under particularly challenging conditions. Tests showed the tangible advantages in terms of safety and control of the vehicle. In emerging braking tests from 100 km per hour, the system allowed for a reduction of braking space of approximately 5 meters. On wet surface, vehicle stability and grip improved, and in the event of aquaplaning, a better control of the vehicle was achieved in circumstances where, without cyber tire support, the behavior of the car would have been much more critical. These results prove that immediate and real data availability from the tire allows the vehicle to fully exploit the potential safety treatment on board, with actual benefits for the driver. Interest by car manufacturers and media confirms the role of CyberTire as an enabling technology for connected mobility as well as further development of ADAS systems and autonomous driving. CyberTire is a unique solution in the industry, strengthening Pirelli's leadership in integrating tire, vehicle and digital platforms. It provides new opportunities for growth and value creation along the entire mobility ecosystem. Besides innovation, brand is one of our Pirelli's distinctive assets. Recent market analysis confirmed the strength and uniqueness of our positioning, with Pirelli brands associated to high-tech, prestige and motorsport concepts. During the first half of the year, we further strengthened this positioning, with targeted actions in strategic markets. In the United States, we started a multi-year partnership with Miami Open, one of the most prestigious international tennis events, giving even more visibility to the brand in a country which is crucial for our future growth. In Europe, we consolidated the presence at iconic events such as the Goodwood Festival of Speed and the 24 Hours of Spa. Occasions that highlight Pirelli's association with innovation, performance and technological excellence. Finally, the partnership agreement with Formula 1 was renewed until 2028, confirming Pirelli's role at the pinnacle of motorsport. These activities contribute to enhance our brand's global relevance and strengthen Pirelli's high-end positioning. supporting our ability to continue growing in the high value and most profitable segments. I would like to conclude these sections by mentioning transformative efficiency. A fundamental pillar in terms of competitivity roadmap, this transformation involves the whole value chain, from product design to manufacturing. We are making full use of simulation, virtualization and modularity, which means standardization of materials and semi-finished products. The aim is to reduce complexity in the factories, while maintaining best of the industry quality and performance, and accelerating time to market. An example of these is the Virtual Compounder, our own platform based on artificial intelligence which allows to virtually develop and optimize compounds, identifying the most promising solutions before physical validation. Results are already tangible, we reduced prototypes by 20%, development time was cut by 30% and in parallel, We are speeding up the introduction of bio-based and recycled materials into our products. Furthermore, we continue investing in digitization, automation and electrification to increase productivity, quality and manufacturing flexibility. I now give the floor to Mr. Bocchio. Thank you.