Chairman's Letter

piece by piece we have laid the basis for the "pirelli of the future" which continues to demostrate its capacity
to respond with
determination
to the
difficulties and
opportunities
which appear
along its path. 

The year 2013 was an intense one, full of change and satisfaction, during which we achieved important goals, notwithstanding the unfavorable economic context. And it was above all a year of transformation for Pirelli, which saw a strengthening of its international profile thanks to the growing interest of institutional investors who today represent over 43% of capital, almost three times the 2009 level.

This opening to the market was also facilitated by the resolution, after over 20 years, of the shareholder pact. Piece by piece, we have laid the basis for the “Pirelli of the future” which, also thanks to lean and agile governance, continues to demonstrate its capacity to respond with determination to the difficulties and opportunities which appear along its path.

We compensated for the slowdown in Europe by concentrating on emerging markets which continue to grow in importance. We accelerated our focus on the Premium segment while, at the same time, managing to extract more value from the truck segment.

Investors showed their appreciation for these choices, which constitute the solid core of the industrial plan which we presented in London last November and which clearly delineates the path which Pirelli will take over the next four years. We further increased our size, with sales exceeding six billion euro, but above all, thanks to our focus on the Premium segment, profitability reached 13%, in line with the best levels of the tyre sector.

From now until 2017, the period of our industrial plan, we want to do even better, bringing it to over 15%. These results are achievable because of the quality and professionalism of Pirelli’s people and thanks to technologies which enable us to produce and develop high-end products around the world - factors which are the basis for solid cash generation.

Our organizational model has also evolved significantly, moving hand in hand with the “cultural” transformation which saw us move from a logic of “volumes” to one of “value”. After an initial phase during which, in order to speed up this transformation, all functions reported directly to the Chairman and CEO, we created a General Operations Directorate to flank the Chief Technical Officer, focused on product development, quality and the relationship with car makers.

The capacity to innovate, which has always distinguished Pirelli and which each year sees us spend 7% of our Premium revenues on Research & Development, enables us to satisfy the most demanding requests of car makers in Original Equipment as well as anticipating the evolution of consumer demand, in terms of the quality of customer service and, on the product front, in terms of performance, safety, advanced technology.

Technology which we are again committed to supplying to the world of Formula 1, where we are exclusive suppliers for another three years.

The group’s sustainability plan, with vision to 2020, reinforced our strategy of continuous improvement in social and environmental performance; an integrated approach which saw Pirelli’s confirmation at the top of the most prestigious sustainability indices.

We have overcome many challenges and many others are sure to emerge, but we are determined to remain the protagonists in a story of success.

So to all of our Stakeholders, thank you once again.

Chairman and CEO Marco Tronchetti Provera