Lettera del Presidente

from the

Dear Stakeholders,

2014 was a positive year for Pirelli. The figures illustrate that, despite a complex economic situation, we were able to capitalise on our work in recent years and continue to improve our processes and products, particularly in the high-end and top-end segments where our interests are focused. Today, we have a global market share for the Prestige segment close to 50% for Original Equipment: extraordinary growth compared to the 36% of 2011. Meanwhile, in the Premium Products segment our share in Europe, where the segment is concentrated, reaches nearly 20% compared to 14% just 4 years ago. This is the result of continuing efforts, recognised by the market, in trying to stay ahead of the needs of our consumers and car-manufacturing partners by offering them increasingly high-tech tyres that are always aligned with the evolution of demand. These results are possible thanks to the continuous improvement of our factories, staying close to their reference markets, constantly increasing process efficiency and creating value. This is also thanks to the development of capillary trade networks that continue to support a direct relationship with the market, meeting requirements.

Dialogue with investors has also been consistent, transparent and open. The new “Integrated Report” also forms a part of this dialogue: a single publication that describes the company's year through a unified and integrated approach, providing a direct, concise and functional representation of the various corporate dimensions, from finances to governance and sustainability. The 2014 financial statements document the first year of implementation of the 2014-2017 Three-Year Plan. In a year that was once again characterised by an unpredictable economic scenario, we were able to face the challenges offered by the global economy achieving the goals that we had set for ourselves: sales of more than 6 billion Euro, EBITDA up by 6.7% to over 1.1 billion Euro, a further increase in profitability, which reached 13.9% from 12.9% for the previous year, and a return on investments that increased to 22% from 20% in 2013. Thanks to the selective investments programme, efficiency and process optimisation, prior to the distribution of the dividends cash flow was equal to 312 million Euro, 5.2% of revenue (3.8% in 2013).

In a world of constant change we will continue to focus heavily on technology, maintaining an investment in Research & Development equal to 7% of the Premium sales. Technology will, in fact, continue to be an element of distinction and excellence in the competitive tyre industry. For this reason, in 2014 we added a Technology General Management team to the Operations General Management already established in 2013 in order to oversee all departments directly involved in the development of an increasingly sophisticated and evolved product. The development of the Cyber Tyre, the results from Formula 1 – for which we are the exclusive supplier – and the achievements in the numerous Motorsport competitions in which Pirelli participates are clear evidence of the capabilities of our technicians.

We will continue to place great importance on those who work at Pirelli, nurturing and developing talent. Sustainable development will also play a central role, as a priority for all of us. The Sustainability Plan that kept us at the top of the most influential industry rankings in 2014 will carry on this year. We will continue to set ourselves new targets, ensuring a solid future for our company.

To all of our Stakeholders, once again, thank you.

The Chairman and CEO
Marco Tronchetti Provera