Significant Events During the Year


On January 13, 2011 Pirelli & C. S.p.A. sold its equity investment in CyOptics Inc. (34.4% shareholding) for US$ 23.5 million, corresponding to its carrying value at December 31, 2010.


On February 10, 2011 Pirelli successfully concluded its placement of an unrated, 5.125% coupon bond issue maturing in February 2016 and worth a nominal euro 500 million with international institutional investors on the Eurobond market. The placement is one of the actions being taken to streamline the Group debt structure by lengthening the average duration of debt and diversifying funding sources. Of this issue, which received requests totalling more than nine times the amount offered, 93% was placed with foreign investors.


On March 29, 2011 Pirelli presented the Cinturato P1, the new high-tech “green” tyre designed for small and mid-sized vehicles, which guarantees lower fuel consumption, respect for the environment, and high performance wet and dry conditions. Cinturato P1 has been chosen as original equipment by BMW, including the “runflat” version. Cinturato P1 extends Pirelli’s green range, which was inaugurated four years ago with the Cinturato P4 and P6 for city cars and midsized vehicles and was then further enhanced with the P7 for medium and high-powered vehicles.


On April 21, 2011 the Pirelli Ordinary Shareholders’ Meeting resolved to pay a dividend of euro 0.165 per ordinary share and euro 0.229 per savings share. The Shareholders’ Meeting filled all 20 seats on the Board of Directors for three financial years (until approval of the Annual Financial Report at December 31, 2013). The majority of seats on the Board of Directors (11 positions) are held by independent directors.

The Extraordinary Shareholders’ Meeting approved a voluntary reduction in share capital of euro 32,498,345.12, pursuant to Article 2445 Italian Civil Code, to be charged to equity. This reduction was effected to complete the assignment of shares in Prelios S.p.A. (formerly Pirelli RE S.p.A.) made in 2010, and did not involve any decrease in equity. The amount of the reduction was allocated to equity in order to eliminate the negative reserve that had been generated upon conclusion of the assignment operation. The reduction was completed in August.


On July 5, 2011, in order to strengthen its business in China, Pirelli acquired 15% of the company Pirelli Tyre Co. Ltd from the minority shareholder for 256 million Renminbi, or about euro 28 million. The shareholding of Pirelli consequently rose from 75% to 90%.

On July 7, 2011 Pirelli Ambiente, acting through its subsidiary Solar Utility S.p.A., acquired a 16.9% shareholding in GWM Renewable Energy II S.p.A., the vehicle that controls the renewable energy activities of the GWM Group. Solar Utility acquired this equity interest for a total investment of about euro 25 million, funded partly from the sale proceeds of its shareholding in GP Energia S.p.A., a joint venture established last year with GWM Renewable Energy, to which Solar Utility S.p.A. had contributed its own photovoltaic activities. The agreement is part of the project to simplify the equity investments of Pirelli Ambiente and has enabled the latter to participate in an international project in the renewable energy sector.

On July 25, 2011 Pirelli, Russian Technologies and Sibur Holding signed an agreement that lists the assets to be transferred to the new joint venture between Pirelli and Russian Technologies. This joint venture will be the principal entity responsible for management of the activities that can be converted back to Pirelli standards in the car and light truck sector in Russia, pursuant to the memorandum of understanding (MOU) signed on November 26, 2010. The agreement concerns two production sites that will allow the joint venture to produce about 11 million units by 2014. These assets will be transferred in exchange for a total consideration of euro 222 million, with the obligation being split between the partners in proportion to their shareholdings and an outlay of euro 55 million in 2011 and euro 167 million in 2012.

The Pirelli branded product may account for up to 50% of installed capacity. The joint venture will produce winter tyres for the replacement market, with a special focus on studdable tyres to meet demand in the Russian and CIS area markets. The joint venture will have a market share of about 20% in the premium segment. The forecast net sales for the joint venture is about euro 300 million in 2012, growing to over euro 500 million in 2014. That growth will be accomplished in part through investments of about euro 200 million in conversion and expansion of production capacity in 2012-2014. Following the start-up phase, profitability is expected to grow, with EBIT of 14% - 15% in 2014, the year when positive cash flow is forecast. As part of the agreements governing the joint venture between Russian Technologies and Pirelli, Pirelli may increase its shareholding from 50% to 75% with a three-year put and call option. The joint venture will be consolidated by Pirelli at the time of the acquisition, partly in consequence of an operating agreement between the partners.


On August 30, 2011 Pirelli inaugurated the expansion of its tyre plant in Slatina, Romania. Pirelli has already invested euro 300 million between 2005 and 2010 in the industrial centre, consisting of a car tyre factory and a steel cord production plant in Slatina, and a diesel engine particulate filter factory at Bumbesti Jiu-Gorj. This investment will top euro 450 million in 2014. As part of these investments, euro 160 million have been budgeted for the tyre plant expansion project – which will end in 2013 – aimed at increasing its production capacity and improving the overall competitiveness of Pirelli’s European industrial structure.

As a result of the additional investments, annual production at the Slatina car tyre factory will rise from 7 million units at the end of 2011 to over 10 million units when the project is completed. The Slatina tyre factory will become the biggest car tyre factory in the Pirelli Group.


On September 8, 2011 Pirelli presented PZero Silver, the first highway tyre derived from Formula 1, of which Pirelli is the exclusive supplier for the threeyear period 2011-2013. The new tyre is the fruit of Pirelli’s accumulated technological experience in Grand Prix competition.

On September 16, 2011, coinciding with the 100th anniversary celebration of its truck sector operations, at Izmit, Turkey, Pirelli presented three new lines of tyres conceived for use in critical winter conditions, longdistance transport and construction vehicles, respectively. The new tyres, which complete the Series 01, exploit patented late generation SATT technology. Pirelli operates the Group’s largest industrial centre in Turkey. This centre specialises not only in the production of tyres for medium-heavy vehicles but also for cars and motorsport, and the production of steel cord. Turkey, which is one of the most important countries for the Pirelli Truck Division, represents one of the countries that has made the biggest contribution to affirmation of the “P Lunga” on international markets in the trucking sector.

On September 20, 2011, “Pirelli Corso Venezia” was inaugurated in Milan. This is the first Pirelli PZero flagship store, designed by architect Renato Montagner, creative director of the PZero collections. This project is aimed at supporting the core business of Pirelli, which targets the premium and prestige segment, and which shares a constant commitment to research, innovation and technology with the tyres produced by the company.


On October 13, 2011, Pirelli illustrated a project for reinforcing its presence in Argentina during a meeting held in Buenos Aires with Argentine President Cristina Fernández de Kirchner and the Minister of Industry, Débora Giorgi. This project envisages construction of a new radial truck tyre plant intended to readjust the Company’s presence in South America. The project is still under evaluation and calls for making investments of about US$ 300 million, budgeted for an initial phase of development that will end by 2014. These investments are part of the overall investments planned for the commercial vehicle segment announced to the market last year when the Business Plan was presented.

On October 28, 2011 Pirelli announced the launch of a Level 1 American Depositary Receipt (ADR) programme for the United States market, designating JPMorgan as the depositary bank for management of the ADR. Launch of the programme, operative from November 2, 2011, addresses the aim of Pirelli to diversify its shareholders by attracting a larger number of American investors. Each Pirelli ADR (CUSIP 724256201) corresponds to one ordinary share of Pire - lli & C. S.p.A. traded on the Milan Stock Exchange.


On November 7, 2011 Pirelli and the Milan Polytechnic signed the JOINT LABS agreement, which aims to promote research and training in the tyre industry. The agreement, which has a three-year term (2011-2014), is concentrated on three areas of research: the Formula 1 tyre, innovative materials and the intelligent tyre (Cyber Tyre). The agreement also envisages training activities concentrated principally in Brazil, China and Mexico.

On November 8, 2011 the Pirelli & C. Board of Directors approved the Business Plan with 2015 vision and adjusted its 2012-2014 targets. Pirelli aims to achieve world leadership in the Premium segment in 2015, in confirmation of its strategy of focus already set out in 2010. The targets set for the timeline of the plan, envisage in 2012 consolidated revenue of about euro 6.7 billion, with growth of 16% (+10% excluding the Russia project), and EBIT margin of between 11% and 12%. Forecast revenue for 2014 is euro 7.7 billion, with an EBIT margin between 15% and 16%.

On November 16, 2011 Prof. Francesco Profumo resigned as member of the Pirelli Board of Directors after accepting his appointment as Minister of the Republic of Italy.


On December 14, 2011, in accordance with the agreement initialled on July 25, 2011 by Sibur Holding, Pirelli and Russian Technologies, transfer of the Kirov plant from Sibur Holding to the joint venture set up by Pirelli and Russian Technologies was finalised. Such plant has a production capacity of about 7 million units.

On December 16, 2011 Mr Enrico Tommaso Cucchiani resigned as Member of the Pirelli Board of Directors following his appointment as Chief Executive Officer of Intesa SanPaolo.

On December 23, 2011 Pirelli acquired from the Camfin Group the remaining 49% of Pirelli & C. Ambiente S.p.A., a company operating in the environment and sustainable development sectors, and of Pirelli & C. Eco Technology S.p.A., a company specialised in the production of antiparticulate filters and low environmental impact fuel. Upon completion of the transaction, Pirelli became the sole shareholder of the two companies (previously consolidated on its own financial statements). The two equity investments were transferred following a total outlay of euro 7 million by Pirelli. The two equity investments were appraised with the assistance of two major investment banks, carried out on the basis of the 2012-2014 business plans approved by the companies. Transfer of the two equity investments was already envisaged by the shareholders’ agreements between Pire - lli and Camfin as shareholders of the two companies, expiring in June 2012.

On December 28, 2011 Pirelli renewed until July 2017 the loan made to Prelios S.p.A. (formerly Pirelli RE S.p.A.). The loan totals euro 160 million (up euro 10 million from the euro 150 million previously lent) and envisages full repayment on maturity. The loan renewal was executed in accordance with the covenants assumed in 2010 by Pirelli & C. S.p.A. in favour of the financing banks of Pirelli RE S.p.A. (now Prelios S.p.A.) in order to obtain the necessary authorisation from those banks to spin off Pirelli RE from the Pirelli Group.