Pirelli & C. 2001 financial statements

BOARD APPROVES 2001 FINANCIAL STATEMENTS

PIRELLI & C. GROUP FINANCIAL STATEMENTS
CONSOLIDATED SALES: 7,762 MILLION EUROS, +0.8%
OPERATING INCOME: 297 MILLION EUROS, -31.2%
COMPANY NET RESULT: 125 MILLION EUROS
GEARING EQUAL TO 0.38

PARENT COMPANY ACCOUNTS
NET INCOME: 148 MILLION EUROS
RECOMMENDED DIVIDEND 0.08 EUROS PER ORDINARY SHARE AND 0.09 EUROS PER SAVINGS SHARE; NO LONGER INCLUDES THE EXTRAORDINARY COMPONENT PAID IN 2000, BUT IS HIGHER THAN IN PREVIOUS YEARS

OPERATING INCOME FOR 2002 AT LEAST IN LINE WITH 2001 FIGURE

Milan, 28 March 2002 - The Pirelli & C. Board of Managing Partners met today and approved the company's full-year 2001 financial statements.

Consolidated financial statements
The 2001 financial year closed with a net result of 194 million euros, not comparable with the net result of 3,759 million euros recorded in 2000, as last year's figure was boosted by significant extraordinary income from the Pirelli SpA Group and from the Pirelli & C. Real Estate Group.

The Pirelli & C. share of the net result was equal to 125 million euros, against 1,405 million euros in 2000. Once again, comparisons with 2000 are influenced by the aforementioned income from extraordinary operations; when set against the 1999 figure (86 million euros), the net result showed a 45% improvement.

Net sales amounted to 7,762 million euros, up by 0.8% compared with 2000.

Operating income was 297 million euros (3.8% of sales), compared with 432 million euros (5.6% of sales) in the previous year. Results from manufacturing operations were affected by the significant downturn in the worldwide economic situation, and, in the second half of the year, by the deepening crisis in the reference market for our Telecommunications Cables and Systems Sector; in addition, lower earnings were generated as a result of the final tranche of the contract to supply Cisco Systems (59 million euros compared with 83 million euros). In the real estate business - a market where the underlying trend remained positive - the operating income of subsidiary company Pirelli & C. Real Estate grew to 44 million euros, (+28% on previous year).

The net financial position moved from a positive position of 2,635 million euros (December 31, 2000) to liabilities of 2,029 million euros (December 31, 2001). This change was principally a consequence of the investment in Olimpia (a total of 3,170 million euros, inclusive of associated charges); payment of taxes already accounted and provided for during the previous year (634 million euros), essentially associated with gains from Corning and Cisco; acquisition of Pirelli SpA shares (326 million euros); the dividend payout (329 million euros); and payment of 173 million euros in charges for production optimization actions, for which provisions had already been made in the 2000 accounts.

Shareholders' equity was 5,407 million euros, compared with 5,844 million euros at year-end 2000. The net equity per share attributable to Pirelli & C. is equal to 3.39 euro, compared with 3.52 euro in 2000.
The debt/shareholders' equity ratio corresponded to 0.38. Though comparison with the 2000 figure is once again influenced by extraordinary items, this ratio posted a clear improvement on 1999 (0.53).

Group employees were 39,771, against 42,509 at the end of 2000, with a decrease in manufacturing units and an increase in the real estate business.

The Pirelli & C. Group operates principally in the following businesses:
Cables and Systems (through subsidiary Pirelli SpA)
Tyres (through subsidiary Pirelli SpA)
Real estate (through subsidiary Pirelli & C. Real Estate)
Environment (through subsidiary Pirelli Ambiente SpA).

For information on the performance of the Cables and Systems and Tyres Sectors, please see the press release issued by Pirelli SpA yesterday; for information on the Real estate Sector, consult the press release issued by Pirelli & C. Real Estate on 13 March.

Pirelli & C. Ambiente SpA
The company completed disposal of its co-generation unit following the sell-off of its holding in subsidiary company Pirelli Energie Deutschland GmbH for a total value of 1.7 million euros, generating gains of 0.5 million euros. This sale enables the company to focus on environmental operations and on energy recovery from waste. The objective is to realize income-yielding innovative projects that tackle the problem of waste disposal in the most economically and environmentally appropriate manner.
The company result for 2001, still influenced by the energy unit start-up, was a 0.1 million euro loss, against a 2.5 million euro profit for the preceding year.

Licensing operations
During 2001 the Pirelli & C. Group presented a project to the fashion industry for development of recreational clothing and accessories for men and women, leveraging innovative design, leading-edge technology and high quality materials. The first fruits of this project are the PZero Aria parka and PZero Acqua footwear. Each item is made under licence by a company that possesses the most appropriate expertise in its specific sector.

Prospects for 2002
As regards the company's manufacturing operations, economic forecasts for the rest of the year lead us to believe that, as previously announced, there is expected to be a recovery starting in the second half of the year. Operating income of the manufacturing sector is estimated to match 2001 levels.
In the real estate business, prospects remain positive for the current year, particularly when considering the positive trend in this market.
Consolidated operating income is expected at least in line with 2001.

Parent company financial statements
The 2001 accounts of Parent company Pirelli & C. closed with a profit of 148 million euros. This was substantially in line with the figure for 2000 (260 million euros), after taking into account that last year the entry of dividends onto the books on an accrual basis led to the recording of higher dividends for 114 million euros higher.

The company's Board of Managing Partners shall recommend the distribution of a dividend of 0.08 euros per ordinary share and 0.0904 euros per savings share to the Shareholders' Meeting, convened for 10 May on first call and 13 May on second call. Dividend pay out is scheduled from 23 May 2002.

The Pirelli & C. Board of Directors shall also apply to the Shareholders' Meeting for revocation of the resolution passed by the Shareholders' Meeting on 10 May 2001 regarding a buyback of shares, as this has not been applied, and to authorize instead a buyback of ordinary and savings share up to a maximum value of 100 million euros, to be undertaken within 18 months from the date of the resolution, at a price per share no more than 15% higher or lower than the average reference price registered during the three preceding sessions, up to a maximum number of shares not exceeding 5% of the number of shares constituting the registered capital at that time, pursuant to the legal limit of a 10% capital holding.

The statements of income and balance sheet highlights in appendix have not yet been audited by the external auditors nor verified by the Board of Auditors.

Highlights of the full-year 2001 Group consolidated financial statements (.pdf file)
PARENT COMPANY PIRELLI & C. (.pdf file)


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