Earnings call transcript: Pirelli & C’s Q2 2025 highlights strong H1 growth

Pirelli & C. S.p.A. reported solid financial performance in the first half of 2025, showcasing revenue growth and strategic advancements in its high-value tire segment. The company achieved €3.5 billion in revenues for H1, with organic growth at 4.4%. Net profit rose to €264 million, improving from €231 million in the same period last year. The company’s stock experienced a slight uptick, reflecting investor confidence in its strategic direction and operational efficiency.

Key Takeaways

• Revenues reached €3.5 billion in H1 2025, with a 4.4% organic growth rate.
• Net profit increased to €264 million, up from €231 million in H1 2024.
• Pirelli launched innovative products, including a new P ZERO tire and a tire made with 70% bio-based materials.
• The company maintained a strong focus on manufacturing efficiency and local supply chains.
• Full-year revenue is forecasted between €6.7 billion and €6.8 billion.

Company Performance

Pirelli & C. demonstrated robust performance in the first half of 2025, driven by strategic initiatives in product innovation and market expansion. The company capitalized on its high-value tire segment, which now constitutes 80% of its sales, a 3 percentage point increase. This strategic focus has allowed Pirelli to gain market share, particularly in the Asia Pacific and North American regions.

Financial Highlights

• Revenue: €3.5 billion in H1 2025, with 4.4% organic growth.
• Adjusted EBIT: €558 million, a 3.6% increase year-over-year.
• Net Profit: €264 million, up from €231 million in H1 2024.
• Net Financial Position: €2.68 billion.
• Cost of Debt: Reduced to 4.88% from 5.06% at the end of 2024.

Outlook & Guidance

Pirelli has set its full-year revenue forecast between €6.7 billion and €6.8 billion, with expected volume growth of about 1% and a price mix improvement of 3-3.5%. The company anticipates an adjusted EBIT margin of 16% and cash generation of €550 million. Investments are projected at €420 million, representing 6% of revenue. According to InvestingPro data, analysts maintain a bullish outlook on the stock, with comprehensive analysis available in the Pro Research Report, which provides detailed insights into the company’s growth trajectory and market position.

Executive Commentary

CEO Marco Tronchetti Provera remarked, "We look to the future with confidence. We are ready to face the external complexities and to outperform our peers." Executive Casaluci emphasized the company’s strategic focus, stating, "Our target is to accelerate the conversion of standard capacity into high value."

Risks and Challenges

• Supply Chain Disruptions: While Pirelli boasts a strong local-for-local supply chain, global disruptions could impact operations.
• Market Saturation: The flat global car tire market presents challenges, with the standard segment expected to decline.
• Macroeconomic Pressures: Economic uncertainties could affect consumer demand and pricing strategies.

Pirelli & C.’s strategic focus on high-value products and operational efficiency positions it well for future growth, despite potential challenges in the global tire market.

Full transcript - Pirelli & C SPA (PIRC) Q2 2025:

Event Moderator: Ladies and gentlemen, welcome to Pirelli’s conference call in which Pirelli’s management will present the company’s first half 2025 results. The live webcast of the event and the presentation slides are available in the investor relations section of the Pirelli website. I remind you that the Q&A session will follow the presentation. Now I would like to introduce Mr. Marco Tronchetti Provera. Please go ahead, sir.

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Thank you and good evening. Ladies and gentlemen. The results for the first half of 2025 once again confirm the resilience of our business model which continues to generate value in a complex and challenging external environment. We closed the semester with strong results expected higher than our peers. We stand out for organic growth, okay? Organic growth of 4.4% driven by solid commercial performance. Improved profitability thanks to the effectiveness of internal levers which more than offset the negative impacts of the external environment. Solid cash generation supported by the operational performance and disciplined working capital management. Finally, significant progress in sustainability, a core element of our strategy. Geopolitical and trade tensions continue to weigh on the outlook for 2025. Recent estimates point to a slowdown in global economic growth which is even more pronounced in the United States.

In addition, global inflation of 3.2% and 2.7% in the United States, high volatility is expected in exchange rates. Concerns about U.S. economic outlook, uncertainties about Fed policies and high U.S. public debt have pushed the dollar into its lowest level against euro in four years. This trend continued to be uncertain and the relations between the dollar and the different currencies remain volatile. We see now that there has been revaluation of the dollar lately. The Agreement on Tariffs between the EU and U.S. which is going to be ratified in the coming days, on the one hand, reduces uncertainty and prevents a trade escalation, while on the other hand imposes significant costs on exports and is expected to fuel inflationary pressures. In this context, the ability to react is crucial. As Minister Casaluci will illustrate, we are taking concrete measures to manage risks and save opportunities.

We are continuing with our commercial strategy focused on strengthening the high value segment which is proving its resilience to expected mid single digit growth. Also for the second half of the year, the continuous improvement in price mix will allow us to offset the higher negative impact of exchange rates on profitability. While our tariff mitigation plan has already delivered positive results in the second quarter and we expect further benefits in the second half of the year. Based on results achieved in the first half and considering the high volatility of the external scenario, we have updated our expectations for the year confirming our targets. Profitability with an adjusted EBIT margin around 16% and cash with net cash flow before dividends of approximately €550 million. Now I give the floor to Mr. Casaluci, please.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you, Mr. Tronchetti, and good evening everyone.

Casaluci, Executive, Pirelli & C. S.p.A.: C. S.p.A. closes the first half of 2025 with results among the best in the industry. Revenues of approximately €3.5 billion, plus 4.4% excluding forex, due to the success of the commercial strategy. Profitability at 16%, up year on year, supported by the effectiveness of internal levers. With the tariff mitigation plan already in place from the second quarter, net profit significantly improved to 14% thanks to lower financial expenses. The deleveraging process is progressing with a year on year reduction in debt of €300 million, solid cash generation before dividends in the second quarter, €193 million, stable year on year. When we exclude the impact of the sale of Tatya to CTS, significant progress was also achieved on sustainability. The accident rate was reduced by 3% compared to the end of 2024 thanks to actions to prevent accidents and raise awareness about safety at work.

The decarbonization plan continues in line with the net zero target for 2040. Energy efficiency and machinery electrification projects have led to a reduction in our absolute emissions of 16.5%. The reduction of Scope 3 emissions is in line with the 2025 target. In cooperation with Jaguar Land Rover, we developed the first tire with over 70% bio-based and recycled materials. Finally, still on the environmental front, we reduced water withdrawal at group level by 7.2% compared to the end of 2024. These results confirm our global leadership in the sector as recognized by the most important indices like Standard & Poor’s Global Sustainability Yearbook 2025, where we are the only tiremaker ranking in the top 1%. Let us now take a closer look at our performance. As we will see in the next few slides, we strengthened our position in the high value segment.

We consolidated this technological leadership, especially by introducing new products, enlarging the homologation portfolio, and accelerating the Cyber Tyre development. At the same time, we continued with operational efficiency programs to support profitability, which is confirmed to be the highest in the industry among tier one. The first half of 2025 confirmed the effectiveness of our commercial strategy with growth in car 18 inches up, exceeding that of the market. We gained market share in both channels in original equipment, particularly in Asia Pacific and North America due to the strengthening of partnership with local carmakers. In replacement, we outperformed the market in all regions. Leveraging the effectiveness of our pull through strategy and product innovation in car 17 inches and below, we continue to reduce our exposure, in particular in South America where we accelerated our exit from less profitable distribution channels.

Let’s now move to the innovation programs that helped boost our technological leadership. In the first six months of this year we got around 110 new technical homologations focused on 19 inches and above specialties and EVs. These were obtained from leading premium and prestige OEMs like Ferrari, Porsche, BMW, and Aston Martin and pure electric vehicle carmakers such as Tesla, Zeekr, Nio, Lucid, and Isoceras. We have the broadest portfolio of market homologations, around 1,300 in car 19 inches and above, more than three times the average of our peers. These results lay the foundations for future growth in high value replacement due to a loyalty rate that remains around 80%. Let’s move on product innovation on slide number nine.

At the beginning of May, we presented the fifth generation of the P ZERO, a brand that in the last 40 years has been a synonym of ultra high performance. Developed from our experience in motorsport, P ZERO has always been able to anticipate the needs of the premium and prestige segments. The market has already responded positively. Over 150 homologations have already been obtained, more than 380 planned, and the product has been chosen by the most important premium and prestige car manufacturers. The most advanced artificial intelligence and visual design techniques were used to develop the fifth generation. These allowed us to test every single detail of the product well in advance, optimize development times, and improve grip, braking, and handling both on dry and wet roads.

Tire reviews awarded the new P ZERO Best Ultra High Performance tire as it offers the highest level of performance and safety. Furthermore, as testimony of Pirelli’s ongoing commitment to sustainability, the version of P ZERO developed for Jaguar Land Rover is made from more than 70% natural and recycled materials. In the two wheels business, our offering expanded with the launch of two motorcycle tires and four dedicated to cycling. For motorcycles, where Pirelli is the leader in the high value segment, we expanded our range with DIABLO, Power Cruiser, and Scorpion MX, both the result of our experience in racing where we achieved the best teams in cycling. Innovation continues with the launch of Cinturato Evo TLR, P ZERO Race TLR, Niro, and two new versions of the Scorpion XC.

Here too, the drive for innovation comes from the world of racing where we collaborate with the best professional teams like Trek and Alpecin, and the success of Pirelli products is proven by recent wins in the most prestigious competitions such as Paris-Roubaix, Milano-San Remo, and several legs of the Tour de France. Finally, we accelerated the development of Cyber Tyre by implementing several projects. The partnership with Bosch started in 2024 was renewed and technological cooperation strengthened. Our Cyber Tyre is already integrated in premium prestige vehicles and at the same time, further projects are being assessed. In addition, agreements and contracts were signed for infrastructure monitoring. The first agreement was signed with Movyon, a company of the Autostrade per l’Italia Group, for the mapping of motorway sections managed by ASPI.

An agreement has been signed with the Puglia region to implement an innovative monitoring system for the regional road network. This system will combine data collection from TAJ processed by Pirelli Cyber Tyre hardware and software system, visual data collected with university technology using the onboard cameras and sensor fusion software and algorithm that will provide integrated mapping of asphalt and road signs, creating a detailed map of roads and their state of repair. In addition to innovation, our brand is one of the key factors driving the choice of high value customers. Through new strategic partnerships with major international sporting competitions, we are aiming to further increase the visibility of our brand. Formula One plays a key role in this with strong growth globally and especially in the United States.

2025 also saw the renewal and expansion of our partnerships in the world of sport such as the 2026 Winter Olympics and Paralympics in Milano-Cortina, MotoGP, where Pirelli will be the sole tire supplier from 2027, Luna Rossa, where we are continuing our collaboration as a sponsor and technical partner, and the Australian Open Tennis Championship. All this contributes to making the Pirelli brand increasingly distinctive, internationally recognized as synonymous with performance, sport, and high technology. Let us now move to the operations programs that have contributed to improving our profitability. In the first half of the year they generated gross efficiency of $70 million, 45% of the full year target. The greatest benefits come from the manufacturing product cost programs through increasing automation in factories, reduced energy consumption, and innovation in product design.

Both programs are set to accelerate further in the coming months in line with project development and will be the main sources of efficiency gains in the second half of the year. The SGMA and organization projects are also making a positive contribution, with benefits deriving from the rationalization of the supply chain and optimization of logistics, and the digitization of processes and upskilling of personnel. Let’s focus on the manufacturing program, which will continue to play a key role in future efficiency programs. We are paving the way for the factory of the future, making our plants increasingly competitive, efficient, and sustainable. Automation, digitization, and electrification will enable us to optimize production processes, reduce operating costs, and improve the group’s profitability in the medium term. The transformation of our factories develops along four strategic axes.

First, the smart manufacturing, which through the virtualization and digitization of control systems will enable real-time monitoring of the plant fleet, KPI, the optimization of processes, and the development of innovative solutions in a very short time. Second, energy efficiency through the ongoing electrification of the curing phase and the adoption of continuous monitoring systems for intelligent consumption control. Third, process innovation through advanced technologies such as the side effect detection system, which uses AI and computer vision to identify and analyze the effects with greater precision. Finally, automation, which we are adopting in the handling of products in the factory with benefits in terms of efficiency, flexibility, but also safety. Last but not least, we are still working on making our supply chain even more resilient.

We are developing an integrated planning system that goes from the raw material suppliers to the end consumer to ensure the faster response time. Our footprint is now 86% local for local, which helps us reduce logistics risk and response time. The U.S. remains the only area with a low local for local supply. We are promoting the transition to a sustainable value chain with the aim of reducing environmental impact and increasing transparency throughout the supply chain in line with our 2040 net zero target. Finally, logistics excellence. We already guaranteed 98% coverage of all requests within 24 hours, and we will continue to optimize flows to improve customer service and keep operating costs down. I will now hand over to Mr. Bolkin.

Bocchio, CFO, Pirelli & C. S.p.A.: Thank you, Mr. Casaluci. Let’s now turn to the dynamics that shaped our performance in the first half of 2025 compared to the same period of last year. Solid commercial performance resulted in an organic growth of 4.4%. Volumes were positive, plus 0.5%, with growth in the high value segment more than offsetting the reduction in exposure to standard. High value now accounts for approximately 80% of total sales, up 3 percentage points compared to previous year. The price mix improved, it was plus 3.9%, mainly supported by the product and region mix and marginally by the price component. The latter reflects the indexation of original equipment prices to raw material costs and the first commercial renegotiations in response to U.S. tariffs. On the other hand, the impact of exchange rates was minus 2.9%, affected by the sharp depreciation of the U.S.

dollar and the volatility of emerging market currencies against the euro, as shown in slide 17. In the first half, profitability improved by 0.4 percentage points year on year, reaching 16% in the first half of 2025. Adjusted EBIT was €558 million, up 3.6% due to the effectiveness of internal levers. More specifically, the positive contribution of price mix for €94 million more than offset the increase in the cost of raw materials for €51 million and the negative impact of the exchange rates for €19 million due to the dynamics already described. The balance between efficiencies and inflation was positive thanks to the acceleration of competitiveness programs in the second quarter. Finally, the contribution of volumes for €6 million limited the impact of depreciation and amortization, which were negative for €15 million, and other costs, negative for €4 million.

It should be noted that on May 3rd came into force the U.S. tariff of 25% on imports of car tires from Europe and Brazil, as well as universal tariffs on motorcycle and cycling tires with different percentages depending on the country of production. The overall impact of these tariffs in the first half of the year was €15 million, but thanks to the mitigation measures in place, the net impact was negative by €6 million. This figure is included in the bridge in this slide under the item other. Let’s now review the performance of net profit, which was €264 million, up from €231 million in the first half of 2024.

This trend reflects the improvement in operating performance of €19 million whose dynamics I’ve just described, a slight increase in non-recurring costs of €6 million due to higher layoff and write-off charges, and a reduction in net financial expenses of €53 million, mainly attributable to a lower non-monetary impact related to hyperinflation accounting. Finally, the increase in taxes of €34 million compared to the first half of 2024 is due to an unfavorable year-on-year comparison, as the value for the first half of 2024 included the benefits of the patent box and the impact of the positive settlement of tax disputes. Pirelli & C. S.p.A. closed the first half of 2025 with a negative net financial position of approximately €2.68 billion. Operating net cash flow was -€217 million, in line with the seasonality of the business and improving by €62 million compared to the first half of 2024.

This was mainly supported by the operating performance commented in the previous slide and lower working capital absorption due to the efficient inventory management and to the usual seasonality of trade receivable and trade payables, which accounted respectively for 13% and 23% of revenues. Net cash flow before dividends at minus €504 million was affected by the impact of tariffs and currency devaluation as well as extraordinary transactions completed during the first six months of the year. Plus €43 million from the sales of data, minus €19 million related to other transactions, the main one being the capital contribution payment to the joint venture with the Public Investment Fund of Saudi Arabia. Net cash flow before dividends in the second quarter of 2025 was positive at €193 million.

Excluding the aforementioned positive effect related to the sale of data to CTS, it was essentially in line with the figure for the second quarter of 2024, which was €154 million. Let’s now move to slide number 20. As of June 30, 2025, the gross debt of the group was approximately €3.87 billion. Considering financial assets of approximately €1.19 billion, the net financial position was for approximately €2.68 billion. The liquidity margin is at €2.24 billion, of which €1.5 billion in committed credit lines not drawn. This margin covers debt maturities for approximately three and a half years, that is until Q4 2028. The cost of debt calculated over the last 12 months stood at 4.88%, down from 5.06% at the end of last year. The reduction is attributable to the decline in interest rates in the eurozone.

Finally, at the end of last June, sustainable finance continues to account for approximately 70% of the group’s gross debt, or 84.4% if we consider the holding company’s debt, in line with the 100% target announced for the end of 2025. I hand back over to Mr. Casaluci.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you, Mr. Bocchio. Let’s now turn to the market outlook for 2025. We confirm a substantially flat car tire market, minus 1% plus 1%. High value remains the most resilient segment, with mid single digit growth expected in line with the first half. In car 17 inches and below, demand for the year is expected to decline by low single digits. In this scenario, Pirelli confirms its strategy of strengthening the car 18 inches and above segment, with market share gain in both channels in the second half. In original equipment, we will benefit from the reinforced partnerships with premium local manufacturers both in Asia Pacific and North America. In replacement 18 inches and up, we target to outperform markets in all regions. Finally, in cars 17 inches and below, we continue to reduce exposure to the less profitable products and channels. The tariff scenario is still evolving.

An agreement was reached between Europe and the U.S. administration on July 27. Meanwhile, regarding Brazil, Pirelli is analyzing the measure concerning the tariffs announced on July 30, yesterday, to verify its application to the various product segments based on current regulations. The U.S. tariff scenario is as follows: 25% on car tire imports from Europe from May 3 to July 31 and 15% from August 1, subject to ratification; 25% from May 3 on imports from Brazil. The measure announced yesterday by the U.S. Administration is currently under analysis. From a preliminary internal analysis, it appears that car tires continue to be subject to 25% tariffs, while motorcycles are subject to 50%. No tariffs on imports from Mexico, as our products are USMCA compliant. Finally, universal tariffs on imports of motorcycle and bicycle tires from all countries, with different percentages depending on the source.

In this context, in light of the uncertainties on Brazil, we confirm the gross impact of €60 million for the year and €30 million following the mitigation plan implementation already launched in the second quarter. Therefore, €30 million net impact. Let us now move to our targets. Despite the worsening of the Forex scenario compared with May expectations, we confirm our targets for profitability and cash flow due to the solid organic growth and the effectiveness of the mitigation plan. For the full year 2025, we forecast revenues between €6.7 and €6.8 billion, volumes growing by approximately 1%, price mix improving between 3% and 3.5% compared to the 2% to 3% previously indicated, and negative exchange rate impact now expected at -4.5% to -0.4% compared to the previous -2.5% to -1.5%.

Profitability is expected to be 16% with improved price mix and the mitigation plan helping to reduce the impact of tariffs and the more negative exchange rates. The guidance implies an adjusted EBIT of approximately €1,080 million at the midpoint, in line with the figure indicated in May in case of tariff application. For the rest of the year, investments are consumed at €420 million, roughly 6% on revenue, and cash generation of approximately €550 million is consumed as well as the resulting deleverage target. I now give the floor to Mr. Tronchetti for the final remarks.

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Thank you, Mr. Casaluci. The first half results confirm the effectiveness of our strategy, which has produced solid results despite the difficult external context. We face challenges from the environment with determination, reacting quickly and in a coordinated manner. This confirms our adaptability and the strength of our business model, thanks to a clear vision, strong execution capabilities, and the de-risking actions we are implementing. We look to the future with confidence. We are ready to face the external complexities and to outperform our peers both in terms of profitability and cash. This will allow us to achieve our delivery target by year end, ensuring greater flexibility and laying a solid foundation for growth in the coming years. This ends our presentation, so we may open the Q&A session. Thank you.

Event Moderator: This is again the event Moderator. Thank you, Mr. Tronchetti Provera, who will now begin the question and answer session. To enter the queue for questions, please click on the Q and A icon on the left side of your screen. When announced, please click Continue on the pop-up window. If you are connected in audio only, please press 1 on your telephone. The first question is from Akshat Kacker of JPMorgan. Please go ahead.

Good evening Akshat, from JPMorgan. I have three questions please. The first one is a clarification on tariffs. If I understand you correctly, you have reiterated the gross and net impact from tariffs for this year, despite mentioning that we have lowered tariffs from Europe to the U.S. down from 25% to 15%. That’s where initial assessment on Brazil is, that it stays at 25%. Could you just tell me how is the total or the growth of a net impact the same as your previous assessment? That’s the first question. The second one is on pricing. We have really seen an improvement on the profit bridge in the second quarter. Could you talk about the general inventory situation in Europe and North America as you see it today? What is your pricing or commercial strategy as you go into the second half, please?

The last one is on the standard business. Could you just generally talk about the changing market dynamics in the South American market, particularly the Brazilian market, and what that means for your standard business going forward and the margins. Thank you so much.

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Mr. Kazaluch.

Casaluci, Executive, Pirelli & C. S.p.A.: Yes, thank you for your questions. Tariff impact based on our estimation done in May, where we were expecting a 25% from Europe imports, moving from 25% to 15%, which is anyhow something that is still to be finally confirmed by executive orders, will improve, of course, the situation in the second half from August on, not the entire second half, but not significantly because we already paid the 25% starting from May till end of July and we already have stocks partially covering the demand of the following month. Of course, there is an improvement, but not meaningful and partially compensated by the worsening scenario of the duties from Brazil. All in all, we are confirming the expectation done in May. Clearly, we welcome the news of the reducing from 25% to 15% also because this will benefit on the next impact if things will remain as for today.

There is a high level of volatility pricing wise. In our price mix of the first half, we have a slightly positive impact mainly driven by the original equipment indexation because of the raw material negative trend over the previous months. All in all, we see a price discipline all around. Clearly, in the United States, the duties on import, considering that the total demand of the country is around 300 million tires on a yearly basis and installed capacity is around 170 million tires, it is logic to imagine an inflationary environment but it is too early to arrive at any kind of conclusion on that. We are monitoring carefully as far as standard is concerned. We are accelerating our exit strategy of the standard in the lowest, in the less profitable channel in South America, both in Brazil and Argentina.

I would say mainly in Argentina because the imported tires from Asia is increasing. We face a trade down accelerated in the region. Having still opportunity to reduce our exposure to standard, we are accelerating. This is the main reason why you see a slightly lower performance in terms of volume compared to our previous guidance. Thank you.

Thank you very much.

Event Moderator: The next question is from Monica Bosio of Intesa Sanpaolo. Please go ahead.

Yes, good evening and thanks for taking my questions. I have three questions. The first is if you can remind me what is your capacity production in Brazil and how much is standard and how much is high value? What will be the strategy from now on? I’m just wondering, as you are exiting the less profitable segment distribution segment, are you willing to convert part of the standard capacity into high value? Alternatively, are you going to restructure some capacity production in Brazil? That’s my first question. The second one is on the original equipment market in the U.S. I was wondering if you have seen some pre-buyer effect in the first half, also in the second quarter, and what are you expecting for the original equipment market in the last part of the year? According to most of the providers, the U.S.

market should go down in the post quarter. The very last question is on the raw material impact. It was roughly €51 million in the first half. Should we expect a reversal in the second half? If you can indicate the total impact for the full year. Thank you very much.

Casaluci, Executive, Pirelli & C. S.p.A.: Okay, thank you. Thank you also for your question.

Casaluci, Executive, Pirelli & C. S.p.A.: Latin America, Brazil.

Casaluci, Executive, Pirelli & C. S.p.A.: You asked us for Brazil. Our total production capacity in Brazil today is around 11 million tires. 50% already converted in high value.

Casaluci, Executive, Pirelli & C. S.p.A.: 50% still remaining in standard. Our target is to.

Casaluci, Executive, Pirelli & C. S.p.A.: Accelerate the conversion of the standard capacity into high value. In the following years, we plan to go basically to zero standard capacity also in South America, improving the high value capacity. We don’t have restructuring plans in the coming years. I remind you that we already did restructuring in 2019 in Brazil, and we closed one factory in Rio Grande do Sul. Today, we have our actual footprint that we do consider the right one, both supporting the conversion into high value of the local demand, which is already visible in the roadmap of the carmakers in Brazil, and the export into the United States.

As far as the United States market is concerned, we see a second half of the year with a high value market remaining mid single digit positive, with original equipment improving its performance, moving from negative into positive, also thanks to a favorable comparison versus last year. You most probably remind that in the last months of 2023, the original equipment in the United States lost a lot of volumes because the carmakers decided to reduce the spend stock in the trade. We see the opportunity of recovery in the original equipment, while the replacement we do expect to remain around mid single digit growth in the second half, exactly as it happened in the first half. We haven’t seen significant pre-buying behavior in the customers. Maybe something in April before the application of duties that started in May, but then with a negative impact on May and June.

All in all, the second quarter, I would say, has been a stable trend. Raw material impact in the second half is expected to be slightly negative. Of course, it’s improving compared to the first half, where it has been €51 million negative headwinds. We do expect a slightly negative impact on the second half.

Perfect. Thank you very much. Thank you.

Event Moderator: The next question is from Thomas Besson of Kepler Cheuvreux. Please go ahead.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you very much.

Good evening. I have a couple of questions about these.

Firstly, could you give us an update?

On the topic of the first half.

Which has been your.

Let’s say, your.

Attempt to change the stake of your larger shareholder or the willingness to have the lower stake to have the possibility to not be eventually seen as controlled by a Chinese investor. Is there anything new on that front? Because unless I missed it, I didn’t hear anything on the topic. My second question is on some of the non-operating lines of your PNF. Could you just confirm what we should expect for 2025 in terms of net financial charges and tax rates?

Thank you.

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Thank you for your question. Shareholder structure control etc. No news for the time being. The discussions are ongoing, and we expect that at the end the company could continue without any restrictions this growth in any region. We are dealing with this, and we are in an open dialogue. Until now there is nothing new, nothing urgent, and nothing new that there is the certainty that this problem will be solved. Thank you. I leave the floor to Mr. Bocchio.

Bocchio, CFO, Pirelli & C. S.p.A.: Thank you. For the second question, I will take it related to the nonoperative lines below the adjusted EBITDA. We can confirm that the non recurring is expected to be in the ballpark between $55 million to $60 million for the full year. Financial charges, we are expecting to be between $220 million to $230 million. We confirm our original guidance for the tax rate, which would be between 28% to 30% on the full year.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you very much, both of you.

Event Moderator: The next question is from Stephen Benhamou of BNP Paribas. Please go ahead.

Yes, good evening everyone. I have three questions if I may. The first one is regarding the efficiency gains. Can you please elaborate on the crash program coming on top of the AP decision brigade, and what could be the contribution in H2? The second question is regarding the price mix. Can you please give us the breakdown between price and mix in Q2? You revised up your price mix objectives for the full year. How much of this is structural versus temporary? This is my second question. The last question is regarding the Cyber Tyre sale. You did a focus today on these tires. Can you please give us an indication of the contribution of those tires globally and in the U.S. in terms of volumes and revenues? Thank you.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you. As far as the efficiency program, we have divided in two as we presented the all in all gross efficiency.

Casaluci, Executive, Pirelli & C. S.p.A.: Program which has been already part of.

Casaluci, Executive, Pirelli & C. S.p.A.: Our initial plan, counting for €150 million.

Casaluci, Executive, Pirelli & C. S.p.A.: Euro is divided among the different plan presented product cost, that is roughly on the full year base, €70 or €60 million. Sorry, another €50 million roughly coming from manufacturing, €23 million from organization.

Casaluci, Executive, Pirelli & C. S.p.A.: Impact and $33 million roughly from the SG&A. This is the $150 million growth efficiency already part of our plan.

Casaluci, Executive, Pirelli & C. S.p.A.: On top of that, we have fast.

Casaluci, Executive, Pirelli & C. S.p.A.: Cost tightening activities all around the world to support us in the mitigation plan. Here we are talking about cost discipline and cost reduction at 360 degrees in all regions, not necessarily concentrated in the United States because we are asking all the countries to support the mitigation plan with positive results so far. We are on track with this price mix. The impact in the first half of the price is slightly positive, as I said before, due to the original equipment indication. All in all, the major driver.

Casaluci, Executive, Pirelli & C. S.p.A.: In the first half, it has been the product mix with roughly 2.5 percentage points out of the 3.9%.

Casaluci, Executive, Pirelli & C. S.p.A.: We also had a positive region mix of roughly 1 point, mainly due to the acceleration of the exit strategy in the standard segment in South America already mentioned. If we target the full year.

Casaluci, Executive, Pirelli & C. S.p.A.: As we presented in our guidance, we do.

Casaluci, Executive, Pirelli & C. S.p.A.: Expect a second half, which is the implicit expectation of the second half, between 2% and 2.5% improvement with a stable performance on the product mix.

Casaluci, Executive, Pirelli & C. S.p.A.: In this case, we do expect.

Casaluci, Executive, Pirelli & C. S.p.A.: A slightly negative channel mix impact because we do expect the recovery of the regional equipment, mainly driven by North America and Europe. In the second half, price remains slightly positive with a reduction of the indication impact of the original equipment because of the well-known trend on raw material. Cyber Tyre still very the numbers. We don’t communicate and we say the numbers, but in terms of impact is still minimum because it is a technology in the introduction phase. We do expect significant growth in terms of penetration in the coming years. We are hardly working with a lot of carmakers to introduce the technology. These will be well explained during our next industrial plan.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you.

Thank you.

Event Moderator: The next question is from Martino De Ambroggi of Equita. Please go ahead.

Thank you. Good evening everybody. On the issue for the major shareholder, if I remember correctly, the government had a time limit. It was July today to provide a decision on the Golden Power exercise and so on. Am I wrong?

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Thank you for the question. I think that the process is ongoing, and we believe that, being also August starting from tomorrow, a time in which obviously there are a lot of people going on holiday, including us, we believe that it will be postponed for another month or two.

There is not a precise time limit.

Now there is no specific because it is in the hands of the government, continues his deep analysis, and the Golden Power obviously continues the deep analysis, and they are listening to many, many different sources. I think that we skip August and we will go to September. That’s my view.

Okay. Concerning there are still too many moving parts for tariffs, was the likelihood to see extra CapEx to fix the imbalance in your footprint, considering the current definition of tariffs, if any.

There is no extra CapEx in the plan that will be presented. We will see the evolution of the investment, which will remain within the framework or the % of sales that we had until now. There are, for the time being, no extraordinary investments. When we talk about new capacity, new investments, these investments are deployed in the next years. It will be year after year absorbed. We don’t have a different policy of investment now, and we don’t need, as far as we can see, any possible extraordinary investment. Thank you.

Thank you. Very last, on pricing in North America, I don’t know if you can provide any additional comment on the pricing environment in this area.

Casaluci, Executive, Pirelli & C. S.p.A.: No, it’s too early to have a clear understanding. The only comment we can do is as a general comment, because based on what I said before, the total installed capacity in the U.S. is around 170 million tires, while the total demand of the market on a yearly basis is 300 million. If the duties will remain, it’s logic to imagine an inflationary environment, but till now, no measured information. Thank you.

You are not moving anything.

We are evaluating the commercial conditions customer by customer, both in replacement and original equipment. As you can imagine, it’s not only a question of price, it’s also related to the incoterms, to the stock level. We are in a phase of evaluation of everything. You can imagine it’s very early. We are in the first stage because the duties with Europe, for example, are even not yet finally confirmed by the U.S. administration. Everything is under development.

Okay, thank you very much.

Event Moderator: The next question is from Christophe of Deutsche Bank. Please go ahead.

Good evening. Thank you for taking my questions. The first one, again coming back to the topic of tariffs. Assuming that the 15% from Europe into the U.S. are confirmed and the 25% from Brazil as well, do you have the ability or would it make sense also with regards to production costs in the two regions to shift more volumes from Europe into the U.S. and sort of lower the export from Brazil? Is this potentially a sizable mitigation opportunity that you have, or because of again cost imbalances or obviously shipping, etc., it doesn’t make sense. Probably great if you could comment on that. Then a clarification question on pricing, and sorry to come back to that, did I understand it correctly that you say essentially pricing slight positive in H2 as in H1 despite indexation fading and as a delta, obviously replacement pricing would be slightly positive.

Last question, just on the inventory situation in the U.S., has the tariff had any more significant implications for the inventory there or is it basically as you saw it before? Thank you.

Casaluci, Executive, Pirelli & C. S.p.A.: Thank you for your questions. Yes, we have a certain degree of flexibility in the allocation among Brazil, Mexico, and Europe. We are trying to optimize the global supply chain for the United States. In case the environment will remain as today, so 15% duty from Europe and 25% on car tires from Brazil, we will try to optimize the different sources of production for the United States. Nevertheless, Mexico will remain by far the most important source of production for the U.S., representing roughly 55% of the total volumes in the United States. I remind that this is so far a duty-free area for the USMCA-compliant products. On price, we don’t give a disclosure on the second half between price mix and price and mix.

What I can tell you is that the original equipment indexation will be less significant compared to the first half and so is in reduction. That’s logic because it’s linked to the trend of the raw material. Inventories in the United States today are, I would say, at a normal level. We don’t see major impact of the duties because there has been, as I said before, a slight anticipation on the pre-buying approach in April, compensated by rebalance of the inventories during the months of May and June. Thank you so much.

Event Moderator: The next question is from Gianluca Bertuzzo at Intermonte. Please go ahead.

Casaluci, Executive, Pirelli & C. S.p.A.: Hello, good evening and thank you for taking my question. I have a couple on tariffs. The first one relates to the spare capacity in Mexico. As you said, it is a duty-free spare country. What is the level of flexibility you appear to increase exports? The second one relates still on tariffs, but to the competitive environment. Where do you see Pirelli positioned in all this environment? I mean, it seems that you may be at some disadvantage to more localized players, but at the same time you may be at an advantage compared to other players of the market. Can you maybe provide us a description, a framework for that? Thank you.

Casaluci, Executive, Pirelli & C. S.p.A.: Yes, thank you so much. Mexico today for Pirelli is fully saturated. You can imagine, has been always.

Casaluci, Executive, Pirelli & C. S.p.A.: The.

Casaluci, Executive, Pirelli & C. S.p.A.: Case, but now even more so. We have two activities in place. The first is we could keep on growing in terms of capacity, which was already in our industrial plan. We are still investing in production capacity growth in Mexico, and this is a mid to long term plan. In the short term, we are trying to reduce as much as possible all the production done in Mexico not dedicated to the United States. We are trying to free capacity of production today addressed to markets different than the U.S., like Europe or Mexico itself, and to reallocate this demand to other plants not being subject to duties. I would say compared to the other players, I would consider Pirelli more or less in an average situation. There are players able to satisfy their demand with the local capacity in the United States.

There are players even more exposed to duties than us. Clearly, for us it is key, the USMCA agreement, and to assure that Mexico remains not subject to duties. In this environment, I feel that we are in an average situation compared to our competitors.

Casaluci, Executive, Pirelli & C. S.p.A.: Okay, thank you very much.

Event Moderator: Mr. Francati. Provera. There are no more questions registered at this time.

Marco Tronchetti Provera, CEO, Pirelli & C. S.p.A.: Thank you. This ends our presentation. Happy summer to everybody, and I wish you a very good evening. Bye.

Bye.

Event Moderator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.

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