Financial Overview

(in million euros)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	Rate of change (%)	Factors
Overall
Sales	6,071.5	5,654.8	7.4	-
Operating income	780.8	581.9	34.2	-
Sales by business unit
Tire Sector	6,031.3	5,601.6	7,7	1)

 
Factors
1)
-In 2012, net sales totalled 6,031.3 million euros, up 7.7% from the 5,601.6 million euros reported a year earlier.

-In the premium segment, on which the Group growth strategy is focused, net sales totalled 2,075.4 million euros, up 20.9% from 2011.

-Net sales in the consumer business, where the impact of growth in the premium segment is concentrated, rose by 12.6%, while the industrial business, which is more exposed to macroeconomic changes, contracted by -3.9%,

-When broken down by sales channels, 76% of sales refer to the replacement channel, while original equipment accounts for 24%.

Acquisitions

-In 2012, the Company and Russian Technologies announced that they have finalized the transfer of the Voronezh tyre plant in Russia from Russian petrochemical company Sibur Holding to the Pirelli-Russian Technologies joint venture. This follows the transfer, also from Sibur, in December 2011 of the Kirov tyre plant. The joint venture has invested a total of 222 million euros in the transfer operations and will spend a further 200 million from 2012 to 2014 on plant improvement and business development. Annual revenues are expected to be around 300 million euros in 2012 and more than 500 million by 2014. Voronezh will specialize in tyres with an output of 2 million pieces a year in 2012 to reach 4 million in 2014, while Kirov already produces 6.5 million pieces annually. (From a press release on February 29, 2012)

Contracts

-In 2012, the Company announced that BMW has chosen the 21-inch P Zero as original equipment on its SUVs, the X5 and X6 (E70). The P Zero is homologated for the BMW X5 and X6 in these sizes: 285/35R21 105Y XL for front; and 325/30R21 108Y XL for rear. This fitment lines up alongside the other Pirelli tyres that equip BMW models such as the 1 Series, 3 Series, 3 Series GT, 5 Series, 6 Series Gran Coupe and 7 Series, as well as the current X1 and X3 SUV models. (From a press release on October 15, 2012)

-In 2012, the Company announced that it is supplying its tires to the following car manufacturers for their models, including the vehicles presented at the Geneva Motor Show 2012:
・ P Zero - Ferrari, Maserati, McLaren, Lamborghini, Audi, BMW, Mercedes-Benz, the Ferrari "Berlinetta F12", the Porsche "911 Carrera" and "Boxster", the Bentley "GTC" and "V8", the Aston Martin "V12 Zagato", and the Lotus "Exige-S" and "Evora-GT";
・ P Zero Silver - the Audi "A5" and the "Mercedes-Benz CLS";
・ P Zero Corsa System - Aston Martin, BMW, Ferrari, Lamborghini, Maserati, McLaren, Mercedes-Benz, Mercedes-AMG, Porsche GT, Audi, the Porsche "911 Carrera" and "Boxster", the Bentley "GTC" and "V8", the Aston Martin "V12 Zagato", and the Lotus "Exige-S" and "Evora-GT";
・ Cinturato P7 - Audi, BMW, Mercedes-Benz, Volvo, Mini and Volkswagen;
・ Scorpion Verde - Audi, Mercedes-Benz, Volkswagen, Volvo, Porsche and Land Rover;
・ Winter Sottozero Series II - Ferrari, Aston Martin, Bentley, Jaguar, Lamborghini, Porsche and BMW.
(From a press release on March 6, 2012)

R&D Expenditure

(in million euros)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Overall	178.9	169.7	149.7
% of Sales	2.9%	3.0%	3.1%

R&D Activity

-The Company now operates one research centre in Italy and eight application centres around the world. Its Research and Development Department has over 1,200 employees.

-The Company currently holds over 4,500 patents.

Capital Expenditure

(in million euros)

	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011	FY ended Dec. 31, 2010
Overall	470.9	626.2	438.6

Investment Outside Italy

<Mexico>
-In 2012, the Company announced that the construction of the new tyre plant in Mexico to serve NAFTA markets, was close to completion and production is expected to begin in the first quarter of 2012. (From a press release on March 12, 2012)