The document provides an overview of Pirelli Group's key financial results for 2008 and targets for 2009-2011. It summarizes that Pirelli Group revenues were €4.6 billion in 2008, down slightly from 2007. The net financial position was €1.028 billion at the end of 2008. The targets for 2009-2011 are to reduce the net financial position to around €1 billion in 2009 and less than €800 million by 2011 through cost savings, working capital management, and asset sales. Pirelli Real Estate's net financial position excluding shareholders' loans is targeted to decrease from €862 million in 2008 to around €350 million in 2009 and €200 million in 2011 through capital increases, non-core asset
2. Agenda
Pirelli Group 2008 Key Financial Results
Pirelli Group ‘09 –‘11: Net Financial Position Targets
| 1
3. Pirelli Group – 2008 Key Financial Results
Pre closing – Unaudited figures
Euro / Mln
FY- '08 YoY % Q4 - '08 YoY % 4Q08 Results Drivers
(*) (*) deterioration of market
Revenues 4,648 -0.5% 980 -10%
conditions for both tyre &
real estate business
EBITDA beforere structuring 397 -31% 6 -95%
-% 8.5% Raw material cost impact
as high as in Q3 combined
EBIT before restructuring 188 -48% (44) n.m. with volume slowdown
-% 4.1%
Restructuring (144) (95) acceleration of restructuring
initiatives on both Tyre and
EBIT after restructuring 44 -88% (139) n.m. PRE
Net Financial Position 1,028 stable vs. 9M08 figure
(*) Homogeneous terms variation, not including exchange rate effects and, in 2007, DGAG assets deconsolidation.
| 2
4. Pirelli Group – 2008 Net Financial Position
Pre closing – Unaudited figures
Euro / Mln
108.3 (81.3) 1,028.1
168.0
835.5
(302.1)
173.3
126.4
FY07 Operating Financial Income Speed Fin. Invest. Change in FY08
Dividends
NFP Cash Flow & Fiscal Charg. Acquisition & Other Cons. Area NFP
| 3
5. Pirelli Group – 2008 Net Financial Position by
Business
Pre closing – Unaudited figures
Euro / Mln TYRE PRE Other Corporate P&C
Business Group Cons
Gross Debt 1,609 911 29 511 2,110
to Corporate 432 492 27
Financial receivables (121) (573) (17) (938) (699)
Cash and cash equivalents (222) (49) (3) (109) (383)
Net Financial Position 1,266 289 9 (536) 1,028
| 4
6. Pirelli Group – Debt Structure
Pre closing – Unaudited figures
Net Financial Position Gross Debt Maturity
909
Euro / Mln 2,110 1,082
681
Committed Line
1,070
Drawdown
1,028 161 228
69
306 92
170
Other Borrowing 890 734 136
150
Corporate bond 150
434
Gross Fin. Net Fin.
Debt Assets * Position 150
2008 2009 2010 2011 2012
639
Total Committed Total 136
Lines not drawn 785 10
0
*Financial receivables,cash and cash equivalents
| 5
7. Agenda
Pirelli Group 2008 Key Financial Results
Pirelli Group ‘09 –‘11: Net Financial Position Targets
| 6
8. Pirelli Group: ’09 –’11 : Net Financial Position Target
Guidelines - Actions Target
PRE :
Gross Debt reduction €/Mln
Disposal of “Non Core” Assets
NFP Stable
NFP 08 1,028
Pre Clos.
TYRE :
Investments
Continuous selection
On going control
Ratio Inv/Deprec. ~1/1
NFP 2009 ~ 1,000
NWC Management
Stocks reduction
Efficiency on Receivables
Cash Flow 09-11
Before Dividends
~ 250
Sales/Average NWC from
9 to 11
Other Business : NFP 2011
< 800
Cash Neutral Before Dividends
Opportunity sales of financial
assets
| 7
9. PIRELLI RE FINANCIAL TURNAROUND
Claudio De Conto
CEO Finance – Pirelli Real Estate
10. Agenda
Pirelli RE straightforward financials
Pirelli RE financial turnaround
| 1
11. Pirelli Real Estate – Preliminary 2008 Results
Unaudited figures
€/mln 2007 Net of
2008 DGAG temporary 2007
Consolidation
Pro quota aggregate revenues 775.6 949 1,043.7
Consolidated revenues (*) 365.1 334.1 428.8
Operating Income before layoffs &
(17.7) 12 33.4
Real estate revaluation/ devaluation
Income from equity particip. before layoff &
Real estate revaluation/ devaluation (42) 71.6 71.6
Operating Income incl. Income from
equity particip. before layoffs & (59.7) 83.6 105.1
Real estate revaluation/ devaluation(**)
Real estate revaluation/ devaluation (135.8) 67.5 67.5
Lay Offs (44.2)
Operating Income incl. Income from
equity participations (**) (239.7) 151.1 172.6
(*) 2007 values do not include sales at cost of DGAG real estate assets amounting to 1.295,6 €/mln
(**) Excluding Facility management result for 74.6 €/mln, which is included in "discontinued operations“ (in 2007 discontinued operations worth 49.5 €/mln) and
financial interests on participations (23.0 €/mln vs. 24.1 €/mln in 2007)
| 2
12. Details on 2008 Operating results
Unaudited figures
€/mln
Change in Operating income including income from equity participations
(excluding real estate devaluation/ revaluation and layoffs)
(113.6)
83.6
Income from equity participations
(29.7)
(21.6)
(74.0)
(18.0)
(59.7)*
2007 Success SPVs Derivatives 2008
EBIT Fees results
actual on SPVs Pre-closing
SPVs= special purpose vehicles
(*) Excluding Facility management result for 74.6 €/mln, which is included in "discontinued operations“ (in 2007 discontinued operations worth 49.5 €/mln) and financial interests on
participations (23.0 €/mln vs. 24.1 €/mln in 2007)
| 3
14. Financial Situation of Funds/SPVs participated by Pirelli RE as of ’08 FY
Unaudited figures
100%
13.0 3.6
Euro / bn 0.6 *
0.4
2.6
SPVs DEBT Pro-Quota Shareholders’ NPL RE Assets
PRE Loans
Ero B o 2,577
154
M?? 176
778
MATURITY
Euro / mln
High Street 1,469
425
RE Assets 2009 2010 2011 Beyond
* Of which NPls 0,2 €/mln.
| 5
15. Pirelli Real Estate: Net Asset Value as of Dec 2008
Unaudited figures
Real Estate NAV at 100% (€/bn)* Real Estate NAV Pro quota (€/bn)*
AUM RE participated
14.1 15.0 11.3 3.5 3.8 3.0
10.1 2.6
1.2 0.4
SHL**
0.8
SHL** 3.7
Book Value Mkt Value Net Debt NAV Book Value Mkt Value Net Debt NAV
Despite devaluation in 2008, the real estate portfolio shows a pro quota implied capital gain (difference
between Market value and Book value) of approx. 260 €/mln, with a total real estate NAV of 0.8 €/bn
* excluding non participated RE AUM
** SHL=Shareholders’ Loan
| 6
16. Agenda
Pirelli RE straightforward financials
Pirelli RE financial turnaround
| 7
18. Net Debt excluding Shareholders' loans 2009-2011
1000
900 862
816
800
700
600
500
400 ~350
300 ~200
200
100
0
2007 2008 2009 E 2011 E
Capital increase for 400€/mln
Significant reduction in 2009 also thanks to:
Sale of non core assets (NPLs portfolios)
Value enhancing of Fund & Asset Management through a strategic partnership
| 9
19. Targets 2009-2011
2008 2009 ACTIONS 2011
Asset Under Management (BV) 14.4 slight decrease no acquisitons stable
1 €/bn disposals
€/bn RE assets
Operating Income (60) 20/30 50 €/mln costs ~100
Including Income from equity savings
Fund Mgmt.
participations valorization
€/mln
| 10