“For more than 140 years Pirelli
has been anticipating
customer needs,
bringing to the market high-end
products on the pillars of innovation
and technical excellence.
It starts with the inspiration,
ambition and sense of belonging
of our people, who each leave their
unique mark by turning innovative
ideas into reality.
Today Pirelli delivers complete
solutions to its customers
– a combination of premium tyres
and related services.
And now that new changes
and challenges are on the horizon,
such as new mobility
and digital technology,
we are ready to seize
these new opportunities
with the same passion,
imagination and commitment.„
In cover: Pokras Lampas (3x3.30 m)
PIRELLI & C. S.p.A. - Milan
contents
LETTER FROM CHAIRMAN
LETTER FROM CEO
PREsENTATION OF 2015 PIRELLI INTE gRATEd REPORT
01.
directors’
report
on operations
MACROECONOMIC ANd MARkET sCENARIO
2
sIgNIFICANT EvENT s 2015
gROuP PERFORMANCE ANd REsuLT s
REsEARCH ANd dEvELOPMENT ACTIvITIEs
HIgHLIgHT s OF OTHER ACTIvITIEs
HIgHLIgHT s PARENT COMPANy
RIsk FACTORs ANd uNCERTAINTy
sIgNIFICANT EvENT s subsEquENT TO THE ENd OF THE yEAR
ALTERNATIvE PERFORMANCE INdICATORs
OTHER INFORMATION
02.report
on value chain
responsible
management
pag.
pag.
pag.
4
6
8
pag.
pag.
pag.
pag.
pag.
pag.
12
14
18
21
35
37
pag.
38
pag. 40
pag.
50
pag.
51
pag.
52
pag.
54
Contents / 2015 ANNUAL REPORT
ECONOMIC dIMENsION
ENvIRONMENTAL dIMENsION
sOCIAL dIMENsION
03.
consolidated
Financial
statements
FINANCIAL sTATEMENT s FORMATs
04.
ExPLANATORy NOTEs
sCOPE OF CONsOLIdATION
parent
Financial
statements
FINANCIAL sTATEMENT s FORMATs
ExPLANATORy NOTEs
ANNExEs TO THE ExPLANATOR y NOTEs
REPORT OF THE bOARd OF s TATuTORy AudITORs TO THE sHAREHOLdERs MEETINg
05.
06.
resolutions
certiFications
INdIPENdENT AudITOR’s REPORT ON THE CONsOLId ATEd FINANCIAL sTATEMENT
INdIPENdENT AudITOR’s REPORT ON THE PARENT FINANCIAL sTATEMENT
susTAINAbILITy AssuRANCE sTATEMENT
suMMARy TAbLEs gRI g4 + uNgC
pag.
64
pag.
pag.
79
95
pag.
130
pag.
132
pag.
140
pag. 210
pag. 220
pag. 222
pag. 228
pag. 262
pag. 270
pag. 278
pag. 282
pag. 284
pag. 286
pag. 288
pag. 292
3
directors’
report
on operations
MACROECONOMIC ANd MARkET sCENARIO
sIgNIFICANT EvENT s 2015
gROuP PERFORMANCE ANd REsuLT s
REsEARCH ANd dEvELOPMENT ACTIvITIEs
HIgHLIgHT s OF OTHER ACTIvITIEs
HIgHLIgHT s PARENT COMPANy
RIsk FACTORs ANd uNCERTAINTy
sIgNIFICANT EvENT s subsEquENT TO THE ENd OF THE yEAR
ALTERNATIvE PERFORMANCE INdICATORs
OTHER INFORMATION
pag.
pag.
pag.
pag.
pag.
pag.
12
14
18
21
35
37
pag.
38
pag. 40
pag.
50
pag.
51
pag.
52
4
Dear Stakeholders,This is the first time that I am speaking to you in my role as Chairman of Pirelli and it is something I take great pride in. It is the pride of someone who, together with you, will be part of the future of a company that represents Italian excellence in the world thanks to those elements that have always distinguished it: the quality of its people, its capacity to innovate and its technology. From the beginning, the Vice Chairman and CEO, Marco Tronchetti Provera, and I were united in the conviction that the sustainable growth of a company is based on product inno-vation, attention to one’s clients and team work. Pirelli will continue to focus on these values, now also able to count a strong industrial partner in ChemChina, alongside Camfin and Lti, in its shareholder structure, it will in fact give additional impetus to the company, which is already a leader, enabling it to strengthen its overall position in a strategic market like Asia and, in the Industrial segment, to become one of world leaders through the union of its assets with those of Cnrc, ChemChina’s tyre unit. In China alone, there were 279 million vehicles at the end of last year and it is foreseen that the 107 people per thousand who today own a vehicle will rise to 257 per thousand by 2024. The country aims to meet this growth by encouraging demand for alternative energy vehicles and therefore also stimulating demand for “green” tyres. It is a great opportunity for a company like Pirelli, whose Green Performance tyres last year accounted for 48% of tyre sales.Pirelli remains entrusted to the ability demonstrated over the years by its management, whose values I share. These include passion, multi-culture and care for employees, all of which I fervently believe in and which each year, among other things, bring me to personally visit the BlueStar International Summer Camps, a gathering of employees’ children from around the world. Working together also means each of us learning LETTER FROMCHAIRMANLetter from Chairman / 2015 ANNUAL REPORT 5
from the strengths of the others, contributing not only to the development of Pirelli, but to the responsible growth of the global economy in a world which is becoming ever bigger. ChemChina’s international alliances are based on a strategic, long term vision. This is what has made them success stories and which will enable us to build Pirelli’s future. The Chairman Ren JianxinLetter from Chairman / 2015 ANNUAL REPORT 6
LETTER FROM CEODear Stakeholders,in 2015 we laid the foundations to guarantee further growth for Pirelli. The agreement signed by our shareholders in Marco Polo Industrial Holding reconfigured the group’s profile, rein-forcing the company structure, further enlarging its international footprint and also offering new and significant perspectives for growth. The partnership will allow us to make the Industrial segment stronger, following a long search for a partner of the right international and production scale to enable us to tackle the challenges of the market. As well, even the Consumer segment will benefit from the new industrial link, which brings Pirelli the full potential of a fast growing market like Asia. We will devote 2016 to taking advantage of all the opportunities offered by the new alliance, after managing in 2015 to meet all the operational targets we had set, notwithstanding global economic instability. Our widespread international presence enabled us to offset the economic weakness of areas like Latin America with positive performances in the Nafta, Apac and European markets, where the demand for tyres, above all high end and very high end, was sustained. The profitability of the Consumer business grew to 16.2%, above target, while Premium revenues climbed above 60% of total Consumer revenues, exceeding the goals set in the Industrial Plan presented in London in 2013. The performance of the Industrial business, despite the difficult macro-economic conditions, above all in South America, achieved profitability in line with our expectations, with an Ebit margin of 8.8%. We will set off from these positive results to tackle a new year full of opportunities. We will continue to rely on our people, technology, inno-vation and the sustainable management of our products and processes to ensure our company a solid future. Facing Letter from CEO / 2015 ANNUAL REPORT 7
and overcoming challenges with passion, as we do every day in the many sporting competitions in which we take part, beginning with Formula 1 where we will continue to be the exclusive supplier for the next three years.Thank you again to all our Stakeholders. The Chairman and CEO Marco Tronchetti ProveraLetter from CEO / 2015 ANNUAL REPORT Presentation of 2015 Integrated Report / 2015 ANNUAL REPORT
presentation
oF 2015 integrated
report
The Pirelli 2015 integrated report (Annual Report 2015) aims to provide a comprehensive overview of the process
of creating value for the Company’s Stakeholders, as resulting from the integrated management of the financial,
productive, intellectual, human, natural, social and relational capitals. Reporting reflects the business model
adopted by Pirelli, which is inspired by the United Nations’ Global Compact, the principles of Stakeholder En-
gagement set forth by the AA1000, and the Guidelines of ISO 260001.
The financial capital, which comprises the company’s financial resources, drives the sustainable management
8
of the other capitals and is in turn influenced by the value created by the latter. In 2015, the management of the
business produced an EBIT before non-recurring and restructuring expenses equal to euro 918.5 million (14.6%
the EBIT Margin), with a growth of 6% as compared to the previous year and a return on investment (ROI) exclud-
ing financial assets and before restructuring costs equal to 24%, which represents an increase of two percentage
points as compared to 2014.
In turn, the Company’s productive capital, which includes 20 tyre factories in four continents, is managed in a
perspective of reducing environmental impacts, with targets by 2020 in terms of an increase in waste recovery
and a reduction of the specific indices of energy consumption, emissions and water withdrawal. In this regard,
the Company’s efforts in 2015 made it possible to contain the energy and emission inefficiency stemming primar-
ily from the drop in volumes in Brazil. At the same time, investment in renewable resources continued through
projects employing biomass for the production of steam (Brazil) and the use of wind energy (Mexico). A reduction
in the specific water withdrawal was then recorded, alongside an increase in the rate of waste recovery. All this
has helped to achieve efficiencies on costs amounting to 94.4 million euro in total.
The research and development activities, which have always been at the heart of Pirelli’s strategy, contribute
substantially to the improvement of environmental efficiency along the entire product life-cycle, from the inno-
vative raw materials to the process, distribution, use and up to the end of life of tyres. In 2015, Pirelli invested
214.4 million euro in research and development, i.e. 5.8% of premium revenues and 3.4% of total revenues. In turn,
Presentation of 2015 Integrated Report / 2015 ANNUAL REPORT
Pirelli’s Green Performance products, which combine performance and respect for the environment, at the end of
2015 represent 48%2 of total tyre turnover (46% in 2014 and 43% in 2013). The strong investment in innovation also
supplies Pirelli’s intellectual capital, which comprise a total portfolio of approximately 5,000 patents concerning
innovations of product, process and materials, as well as copyright, software, and a brand recognised worldwide.
The evolution of the cited capitals is closely related to human capital, at the heart of the Company’s growth. Merit,
rules, ethics and sharing of strong values and clear policies, attention to welfare and diversity are accompanied
by advanced instruments to attract and retain the best talents. The investment in the “culture of health and safety
at work” and in training is fundamental, with an injury frequency index that in 2015 decreased by 6% compared
to 2014 and an investment in training that reached 8.3 average days per employee, thus surpassing for the third
consecutive year the target of 7 average-per-capita days as envisaged by the Industrial Plan only as from 2015.
Pirelli’s social and relational capitals are based on the continuous and transparent dialogue that the Company
maintains with its stakeholders. This dialogue has led to the mapping of the Company’s materiality, which is
being upgraded during 2016 and analyses the expectations of Pirelli’s main stakeholder on issues related to
sustainable growth (see Section “Report on Value Chain Responsible Management”).
In methodological terms, the drafting of the Annual Report 2015 took into consideration the Integrated Reporting
principles contained in the framework of the International Integrated Reporting Council (IIRC), the Financial
Statements and Consolidated Financial Statements were drawn up according to IFRS international accounting
standards, and socio-environmental performance meets the Sustainability Reporting Guidelines of the Global
Reporting Initiative (version GRI-G4 - Comprehensive option). The Summary Tables, found at the end of the
9
report, link the specific GRI-G4 indicators with the principles of the Global Compact and the topics discussed in
the Annual Report.
1 Compliance of the Pirelli Sustainability Model with the AA1000 Principles and ISO26000 Guidelines was audited by a third party once again in
2015, as certified by the SGS Assurance Statement at the end of this report. The application of the requirements of Standard SA8000® by Pirelli
and the Group’s Suppliers is subjected to external and internal audits.
2 Figure obtained by weighing the value of sales of Green Performance tyres on the total value of sales of Group tyres. Green Performance prod-
ucts identify the tyres that Pirelli produces throughout the world and that fall under rolling resistance and wet skid resistance classes A, B, C
according to the labelling parameters set by European legislation.
General Information / 2015 ANNUAL REPORT
10
board oF directors 1
Chairman
Executive vice Chairman and CEO
director :
General Information / 2015 ANNUAL REPORT
Ren Jianxin
Marco Tronchetti Provera
yang xingqiang
Carlo Acutis
bai xinping
gustavo bracco
giorgio Luca bruno
Ze'ev goldberg
Andrey kostin
Jiao Chonggao
Emerson Milenski
Luca Rovati
Igor sechin
yang xun
Wang dan
Zhang Haitao
secretary of the board
Anna Chiara svelto
11
board oF statutory auditors 2
Chairman
statutory Auditor:
deputy Auditor:
independent auditing F irm
general m anager
Francesco Fallacara
Fabrizio Acerbis
Fabio Artoni
giovanni bandera
david Reali
Fabio Facchini
giovanna Oddo
Reconta Ernst & young s.p.A.
Maurizio boiocchi (Technology)
gregorio borgo (Operations)
1 Appointment: March 15, 2016. Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at December 31, 2018.
2 Appointment: May 14, 2015. Expiry: Shareholders’ Meeting convened for the approval of the Financial Statements at December 31, 2017 (David Reali, Giovanni Bandera e
Fabrizio Acerbis appointed on March 15, 2016)
12
Directors’ Report on Operations / 2015 ANNUAL REPORTdirectors’ report on operations01. MacroeconoMic
and Market
scenario
The international economy
Global economic activity continued to show signs of weakness in 2015, with 2.5% GDP growth, a slowdown compared to the previous
two years. The good performances of Europe and North America only partially offset the lower than expected growth in emerging
markets, which were impacted by a sharp drop in the prices of raw materials, the high volatility of financial markets and a reduc-
tion in capital flows and trade.
Growth Global GDP, (annual change in %)
Source: IHS, January 2016
2013
2014
2015
14
5
4
3
2
1
0
-1
-2
-3
World
Europe
NAFTA
Latam
CIS
MEA
APAC
The analysis of the dynamics of the various geographical areas, revealed that the recovery in economic activity in Europe had con-
tinued and had resulted in a GDP growth that for 2015 was expected to attain +1.8% (+1.4 in 2014), thanks to the positive performances
of the United Kingdom, Spain and Germany.
Economic activity was driven primarily by private consumption, which benefited both from the reduction in energy prices and from
an improvement in the conditions of the financial markets - followed by the introduction in January 2015 of the quantitative easing
program of the ECB. The weakening of the Euro against the US Dollar finally had the effect of improving the competitiveness of
exports of goods and services.
Inflation continues to be a reason of concern; in fact, the reduction in raw material prices continued in the last quarter of 2015 con-
tributing to an inflation rate of zero in the Eurozone for 2015. In this context, the European Central Bank cut interest rates twice
during the year bringing the interest rate on deposits with the ECB to -0.30% in December 2015, and also extended the government
Directors’ Report on Operations / 2015 ANNUAL REPORT securities purchase program by six months, until March 2017.
In the USA, GDP growth continues apace with +2.5% in 2015,
supported by improved labour market conditions and despite
the negative impact of the US Dollar appreciation on foreign de-
mand. The reduction in the unemployment rate (5% in Decem-
ber 2015 compared to 5.6% in the same month of 2014) and signs
of increases in wages provided the elements to the Federal Re-
serve to start an upward cycle of interest rates with an increase
of 25 basis points in December 2015 (first increase since 2006).
The economic crisis that hit Brazil and whose economy is ex-
pected to decline by more than 3% in 2015 was inevitably re-
flected in the other countries of Latin America by contributing
to an overall decline in GDP in the area. In addition to the sharp
depreciation of raw materials, Brazilian economic activity was
affected by the political crisis and the downgrade of the rat-
ing of government securities, together with the slowdown in
China, its first export market outlet. Argentina’s economy has
responded better (+1.6% GDP in 2015 - IHS estimate), thanks
to the containment of public spending implemented before the
autumn elections. Venezuela also closed the year in recession,
hit hard by the fall in oil prices, resulting in greater difficulty
for economic operators in obtaining “strong” currency for im-
porting the industrial goods required for production.
In China, the volatility of financial markets in the summer and
the devaluation of the Renminbi have highlighted the risks of
an excessive economic slowdown linked to a retreat from the
high levels of investment and borrowing that characterised the
years of strong growth and the transition towards the great-
er importance of domestic consumption. The year 2015 closed
with a growth of 6.9%, in line with expectations although lower
than the 7.3% in 2014, confirming the soft landing scenario.
Exchange rates
Currency markets in 2015 were characterized by the strength-
ening of the US Dollar, also as a result of expectations of a rise
in interest rates that materialized only in December. The appre-
ciation of the US Dollar against the Euro was more pronounced
in the first half of 2015, coinciding with the beginning of the
program to purchase sovereign bonds by the ECB; overall, the
Euro/US Dollar listing recorded an average of 1.11 US Dollars
per Euro in 2015 as compared to 1.33 in the previous year, rep-
resenting a depreciation of the Euro of 16%.
Even the Japanese currency was affected by the continuation of
the expansionary monetary policy of the Central Bank in 2015,
reaching an average of 121 Yen per US Dollar, down 13% as com-
pared to the 2014 average.
Also in decline as compared to the US Dollar in 2015 were the
currencies of the main emerging countries, especially countries
exporting raw materials.
The Brazilian Real stood at an average of 3.34 Real per US Dol-
lar in 2015, -30% over the previous year, affected by the down-
grade by rating agencies of political uncertainties.
Despite the volatility recorded in August, linked to the expan-
sion of the trading band, the average price of the Renminbi in
2015 amounted to 6.23 against the US Dollar, down 1.4% com-
pared to the average of the previous year.
Exchange rate: US Dollar per Euro
Source: European Central Bank, monthly data up to 31 December 2015
2012 avarage:
2012 avarage:
1.28
1.28
2013 avarage:
2013 avarage:
1.33
1.33
2014 avarage:
2014 avarage:
1.33
1.33
2015 avarage:
2015 avarage:
1.11
1.11
1.5
1.5
1.4
1.4
1.3
1.3
1.2
1.2
1.1
1.1
1.0
1.0
2012
2012
2013
2013
2014
2014
2015
2015
Exchange rate: Brazilian Real per USD
Source: European Central Bank, monthly data up to 31 December 2015
2012 avarage:
2012 avarage:
1.95
1.95
2013 avarage:
2013 avarage:
2.16
2.16
2014 avarage:
2014 avarage:
2.35
2.35
2015 avarage:
2015 avarage:
3.34
3.34
15
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
2012
2012
2013
2013
2014
2014
2015
2015
Automotive mArkets
The global auto market recorded an increase in registrations
of around 2% in 2015; the good trend in demand in the United
States, in Western Europe and in China more than offset the
weakness of the Brazilian and Russian markets, which were af-
fected by a general decline in economic activity and in particu-
lar a propensity towards purchasing durable goods. According
to IHS, the Premium segment, which includes the cars of the
most prestigious brands and is the most interesting segment
for Pirelli, confirmed a growth rate higher than the market rep-
resenting up to 10% of cars sold. This trend, which results in
continuous improvement of the vehicle fleet in circulation, has
been supported both by the markets with high incidence of tra-
ditionally high range vehicles, in particular Europe and North
America, and by emerging countries like China where growth
in the Premium segment is among the highest in the world.
Directors’ Report on Operations / 2015 ANNUAL REPORT
The car market in Europe recorded growth in registrations of 9% as compared to 2014, in response to strong demand for renewal of
the car fleet in Portugal, Spain, Ireland and Italy, which recorded double-digit growth; Germany, France and the UK recorded growth
rates above 5%.
In Latin America, the performance of the sector was strongly affected by a slowdown in economic activity and which led to a drop in
registrations in almost all markets. In Brazil, for example, which is the main market of the region, registrations were down by 24%.
Instead, the trend in the automotive market in China was favourable and where the pace of sales accelerated in the fourth quarter
due to a reduction in taxation.
Comparing the very favourable trend of 2014, in anticipation of the increase in consumption tax, penalized the trend of car registra-
tions in Japan, which closed 2015 with a -10%.
Global demand for commercial vehicles declined by about 7% in 2015 (IHS estimates): the upward trend in the NAFTA region (+13%
growth in registrations, in line with 2014) and the recovery of the European market (+16% of the segment > 3.5 tons) mitigated the de-
cline in Russian markets (-40%), and Brazil (-48%); the drop in sales in Russia and Latin America relates to the slowdown in economic
activity. Sales of commercial vehicles in China decreased by approximately 25% in 2015.
tYre mArkets
In 2015, the Car tyre market recorded a growth in volumes of 1.5%, which was slower than the +3.7% growth recorded for 2014. The
Premium segment (tyres with a rim diameter of 17-inch or more) was confirmed as increasing at a much higher rate, equal to 9%,
which in 2015 represented approximately a quarter of the total Car tyre market; growth in the Premium segment was stable for the
main markets of Europe, North America and Asia Pacific. As far as the radial segment of the Industrial tyre market is concerned
(Truck and Bus), 2015 recorded a decline of 1.0% as compared to 2014.
tyre sales, consumer market (annual change in %)
2011
2012
2013
2014
2015
16
Europe*
NAFTA
Latam**
China
Japan
Original Equipment
Replacement
Original Equipment
Replacement
Original Equipment
Replacement
Original equipment
Original Equipment
Replacement
3
3
10
-1
2
7
2
-13
8
-9
-12
17
-5
0
1
7
19
-1
0
0
5
-1
6
9
17
-4
4
4
2
5
3
-17
5
9
2
4
* Including Turkey, excluding Russia; ** Argentina, brazil and venezuela.
Note: the data excludes imports except for Latin America where the replacement segment includes imports. source: Pirelli estimates
tyre sales, industrial market (annual change in %)
2011
2012
2013
2014
2015
Europe*
NAFTA
Latam**
China
Japan
Original Equipment
Replacement
Original Equipment
Replacement
Original Equipment
Replacement
Original Equipment
Original Equipment
Replacement
32
-1
55
3
11
2
-15
-2
7
-8
-17
5
-11
-29
-4
-19
15
-4
6
7
-4
2
29
9
17
1
6
-4
2
16
10
-23
-3
-5
4
6
* Including Turkey, excluding Russia. ** Argentina, brazil and venezuela.
Note: the data excludes imports except Latin America where the spare parts segment includes imports. source: Pirelli estimates
7
4
2
4
-20
3
7
-6
-4
11
5
7
1
-48
-10
-23
-3
-3
Directors’ Report on Operations / 2015 ANNUAL REPORT The positive trend in economic activity in Europe and North America and continued growth of the economy in China, albeit at
lower rates, supported tyre market performance in 2015. The decline of the original equipment tyre market in Latin America can
be related to the difficult macroeconomic environment and led to a significant drop in vehicle production; the trend in the replace-
ment channel of the Consumer segment in Latin America was positive due to the growth and improvement of the mix of vehicles in
circulation which occurred in recent years.
In Russia, sales of tyres were affected by the general economic slowdown, which was adversely impacted by the collapse in oil
prices and the impact of the geopolitical tensions in the area on economic activity.
Raw Materials
In the course of 2015, the prices of the main raw materials declined further through being affected by the oil price. During the year,
Brent ranged from values of less than $ 50 per barrel in January to as high as $ 65 per barrel in May, before falling back in autumn
and ending the year below $ 40 per barrel; the average price of Brent in 2015 ($ 54 per barrel) represents a decrease of 46% as com-
pared to the average for the previous year ($ 99 per barrel). This trend was due to the increase in supply, supported by the production
of shale oil in the US and by the failure by OPEC to agree production cuts and weakening global demand.
The reduction in oil prices and uncertainties about the prospects of global demand also weighed on prices of natural rubber, which
continued the decline begun in 2011. Purchase prices (reference TRS20 Sicom) stood at an average of $ 1,369 per ton in 2015, down
20% as compared to the average price of 2014 ($ 1,711 per ton). Volatility in prices of butadiene, the main raw material for the produc-
tion of synthetic rubber was high: the rise in prices during the summer due to reduced supply, was followed by a decline in Septem-
ber that helped bring the annual average of euro 656 per tonne in 2015, down 31% as compared to 2014 (euro 944 per ton).
Prices of Raw Materials
Source: IHS
160
140
120
100
80
60
40
20
0
5,000
4,000
3,000
2,000
1,000
0
3,000
2,500
2,000
1,500
1,000
500
0
2012
2013
2014
2015
2012
2013
2014
2015
2012
2013
2014
2015
BRENT
BRENT
us$/barrel
US$/barrel
NATURAL RUBBER TSR20
us$/metric ton
NATURAL RUBER TSR20
US$/Metric ton
BUTADIENE
BUTADIENE
Euro/metric ton
Euro/Metric ton
17
Directors’ Report on Operations / 2015 ANNUAL REPORT siGniFicant
eVents in 2015
On January 9, 2015, Pirelli signed a contract for a new revolving credit facility (euro 800 million) and a ‘multicurrency term loan’
(euro 200 million) for a total value of euro 1 billion and a five-year term. The contract replaced the previous revolving credit facility
for euro 1.2 billion maturing in November 2015, which was thus terminated in advance. On February 13, 2015, an additional con-
tract was signed for a new credit line for a total value of euro 200 million for a five-year term, with conditions essentially in line
with those of the credit line above.
On January 27, 2015, a special Meeting of Shareholders of Pirelli & C. S.p.A. savings shares appointed Angelo Cardarelli as common
representative for the years 2015, 2016 and 2017.
18
On February 6, 2015, the sale was completed of the steelcord activities of Pirelli in Turkey (Izmit) to Bekaert and on March 27, 2015,
with the sale of the steelcord activities in China (Yanzhou), the transfer was completed to Bekaert of all the Pirelli steelcord activi-
ties. In line with what had already been disclosed to the market in February 2014, along with the announcement of the transaction,
the total value (Enterprise value) for 100% of the steelcord business was confirmed as euro 255 million.
On February 12, 2015, the Pirelli & C. S.p.A. Board of Directors examined the preliminary results of 2014 operations. On March
31, 2015, the Board of Directors of Pirelli & C. S.p.A. approved the financial statements for the year 2014, which closed with a total
net profit of euro 332.8 million (+8.6% as compared to the corresponding period in 2013) and a net profit for the parent company of
euro 258.0 million, up 34.4% as compared to the corresponding period in 2013.
The Board of Directors proposed to the Shareholders’ Meeting of May 14, 2015, distributing a dividend of Euro 0.367 per ordinary
share (0.32 in the previous year) and euro 0.431 per savings share (0.39 in the previous year). On May 13, 2015, the Pirelli &
C. S.p.A. Board of Directors approved the results at March 31, 2015, which closed with a further evident strengthening of the
Premium segment.
On March 22, 2015, China National Tire & Rubber Co. Ltd (CNRC), a subsidiary of ChemChina (ChemChina), Camfin S.p.A. (Camfin)
and the shareholders of Camfin (Coinv S.p.A. and Long-Term Investments Luxembourg S.A.) signed a binding agreement for a long-
term industrial partnership related to Pirelli. The objective of the partnership is to strengthen the development plans of Pirelli, its
presence in geographically strategic areas and a substantial doubling of volumes in the Industrial segment through the future in-
tegration of the Industrial segment of CNRC and Pirelli assets. The centrepiece of the agreement is the continuity and independence
of the current management structure of the Pirelli Group. Pirelli HQ and know-how will be kept in Italy: reinforced majorities are
required to authorise any move of the Headquarters and transfer to third parties of Pirelli know-how.
On April 16, 2015, Under a Memorandum of Understanding signed in 2014, Pirelli and Rosneft, identified Synthos, a company
based in Poland and which is a leading manufacturer of chemical raw materials, as the technology partner with which to develop
research, production and supply of synthetic rubber in Nakhodka, in the context of the FEPCO (Far East Petrochemical Company)
petrochemical hub. Pirelli, Rosneft and Synthos therefore signed a Memorandum of Understanding to conduct feasibility studies
related to activities concerning the requirements of the engineering and operational design of plants, as well as market studies,
investments and estimates of operating costs.
The three groups also intend to use the FEPCO petrochemical centre to produce synthetic rubber with the aim, inter alia, of
Directors’ Report on Operations / 2015 ANNUAL REPORT supplying Pirelli factories located in the APAC region. On Oc-
tober 22, 2015, the three companies signed a further memo-
randum of understanding related to the positive results of the
feasibility study begun in April and future cooperation in the
development of a project for the construction of a synthetic
rubber plant in Nakhodka. On June 19, 2015, Pirelli and Ros-
neft signed a cooperation agreement that extends the existing
partnership between the two companies in commercial and
marketing areas.
On April 20, 2015, Pirelli announced that - in connection with
the Ordinary Shareholders’ Meeting of Pirelli & C. S.p.A. - two
lists of candidates have been filed for the appointment of stat-
utory auditors by Camfin S.p.A. and its subsidiary Cam 2012
S.p.A., as well as by a group of asset management companies
and financial intermediaries. The company also announced
that Camfin S.p.A., concerning the agenda of the Shareholders’
Meeting on the appointment of the six members of the Board of
Directors, would move that the Shareholders’ Meeting confirm
the appointment of the directors Igor Sechin, Didier Casimiro,
Andrey Kostin (independent), Ivan Glasenberg (independent),
Petr Lazarev and Igor Soglaev - already co-opted on July 10,
2014 - thus leaving the number of members of the Board of
Directors unchanged at fifteen.
On May 14, 2015, the Shareholders’ Meeting of Pirelli & C.
S.p.A., approved the 2014 financial statements that closed with
a consolidated net profit of euro 332.8 million and a net profit
of the parent company of euro 258.0 million, resolving distri-
bution of a dividend of euro 0.367 per ordinary share and euro
0.431 per savings share.
Furthermore, the Shareholders’ Meeting approved the pro-
posal of Camfin S.p.A. regarding confirmation in office of
directors already co-opted in July 2014 and appointed a new
Board of Auditors composed of Francesco Fallacara, who was
appointed Chairman (taken from the minority list), Antonella
Carù and Fabio Artoni as Regular Auditors and Andrea Loren-
zatti (taken from the minority list), Fabio Facchini and Giovan-
na Oddo as Alternate Auditors. Lastly, the Meeting authorized
the Board of Directors to purchase and dispose of treasury
shares, not exceeding 10% of capital, for a maximum period
of eighteen months thus renewing the previous authorisation
resolved on June 12, 2014.
On June 23, 2015, the Board of Directors of Pirelli & C. S.p.A.
entrusted the role of financial advisors to support the evalua-
tions of the Board of Directors will be called upon to express
in relation to the transaction between Camfin S.p.A., China
National Chemical Co. and China National Tire & Rubber Co.
Ltd announced by Camfin on March 22, 2015 to Deutsche Bank
and Goldman Sachs International. The independent directors
of Pirelli also informed the Board of Directors of the appoint-
ment of Citigroup Global Markets Ltd as independent expert
related to the opinion required under article 39-bis, paragraph
2, Issuers Regulations.
On August 6, 2015, the Board of Directors of Pirelli & C. S.p.A.
approved the results at June 30, 2015 showing a growth in Pre-
mium volume of 10.4%
On August 11, 2015 - after the acquisition by Marco Polo In-
dustrial Holding S.p.A., of subsidiary of CNRC and the associ-
ate Camfin, of 20.34% of Pirelli & C. S.p.A. by Camfin S.p.A. and
the signing of the Pirelli shareholder agreement concerning,
in addition to share purchased, also the 5.85% stake held in-
directly by Camfin S.p.A. in Pirelli through Cam S.p.A. 2012
- Marco Polo Industrial Holding S.p.A. launched a mandatory
public purchase offer for all the ordinary shares of Pirelli of
euro 15 per share and a voluntary public purchase offer on all
the savings shares of euro 15 per share. On October 13, 2015,
at the end of the acceptance period of the public purchase offer
begun on September 9, 2015, Marco Polo Industrial Holding
S.p.A. announced it held 413,807,381 ordinary shares of Pirelli,
being 86.982% of the ordinary share capital and 84.798% of
the entire share capital. Marco Polo Industrial Holding also
announced a reopening of the terms of the offer between Octo-
ber 21 and 27, at the conclusion of which, on October 30, 2015,
it announced that it held in total - also including treasury
shares - 96.043% of the ordinary share capital of Pirelli. On
November 6, 2015, the offerer launched the joint procedure
for the acquisition of the remaining shares, after which it held
the remaining 3.957% of the ordinary share capital. On the
same date the shares were delisted. Extracts of the sharehold-
er agreements relating to the partnership are available on the
Pirelli website.
Also on August 11, 2015, as a result of changes in the share-
holding structure of Pirelli, the directors Paolo Fiorentino and
Gaetano Miccichè resigned from the Board of Directors of the
Company, in replacement of whom - on September 2, 2015
- the Board of Directors co-opted Ze’ev Goldberg and Bai Xin-
ping, qualified by the Board as “non-independent”.
On September 10, 2015, the Bondholder meeting of Pirelli In-
ternational Plc related to the bond issued by the company for a
total of euro 600 million guaranteed by Pirelli Tyre S.p.A. and
maturing in 2019, did not reach the quorum and therefore, the
Extraordinary Resolution in order to make some amendments
to the change of material shareholding clause of the bond reg-
ulation was not approved, and the latter therefore remains not
amended.
On September 24, 2015, the Bondholder meeting of Pirel-
li & C. S.p.A. related to the bond issued by the company for
a total of euro 500 million, guaranteed by Pirelli Tyre S.p.A.
19
Directors’ Report on Operations / 2015 ANNUAL REPORT On November 11, 2015, the Board of Directors of Pirelli & C.
S.p.A. approved the results as at September 30, 2015, with rev-
enues of euro 4,711.9 million, an increase of 4.0% as compared
to euro 4,528.7 million at September 30, 2014 and a strength-
ening in the Premium segment, which increased by 17.0% over
the previous year.
On November 23, 2015, the Pirelli Board of Directors decided
to convene 2016 an extraordinary meeting for February 15, to
resolve on the mandatory conversion of savings shares into
unlisted shares of a newly issued special category without vot-
ing rights, adoption of new Articles of Association and merger
with the parent company Marco Polo Industrial Holding S.p.A..
On December 22, 2015, the Board of Directors of Pirelli & C.
S.p.A. and Marco Polo Industrial Holding S.p.A. approved the
proposed merger. The merger between the two companies will
take place through the incorporation of Marco Polo Industrial
Holding S.p.A. into Pirelli & C. S.p.A.. It is also noted that, the
Board of Directors also approved early closure of the 2014-
2016 Long-Term Incentive Plan in view of the delisting of the
ordinary shares.
20
and maturing in 2016 approved the extraordinary resolution,
which provides for the amendment of the Bond Regulations,
in particular with reference to the provisions relating to the
change of material shareholding determined following the
transfer of approximately 20.34% of the ordinary share capital
of Pirelli & C. S.p.A. by Camfin S.p.A. to Marco Polo Industrial
Holding S.p.A. The amendments to the Regulations will allow
reimbursement by Pirelli & C. S.p.A. at the natural expiry in
February 2016, through financial resources already available.
On October 11, 2015, Pirelli announced that it had reached a
commercial agreement to remain in Formula 1 until 2019. De-
tails will follow in accordance with the procedure established
by the FIA.
On October 13, 2015, following an overrun of the threshold
of 50% of the ordinary share capital of Pirelli & C. S.p.A. by
Marco Polo Industrial Holding S.p.A., Pirelli announced that
with payment of the shares by the Bidder (October 20, 2015),
there was a “Change of Control” under two loans of Pirelli
International Plc that were guaranteed by Pirelli & C. S.p.A.
and Pirelli Tyre S.p.A.. Following this event, the lenders of the
“USD Private Placement” loans, amounting to 150 million US
Dollars, and a “Schuldschein”, for a residual amount of euro
37 million, will have the right to request early redemption for
a total amount equal to the nominal value at the time of re-
demption and any other ancillary costs related to the nature
of the contracts.
On October 14, 2015 - with effect October 19, 2015 - the di-
rectors Anna Maria Artoni, Didier Casimiro, Ivan Glasenberg,
Petr Lazarev and Igor Soglaev have resigned from the Board
of Directors of the company.
On October 20, 2015, the Board of Directors of Pirelli & C.
S.p.A. co-opted Ren Jianxin, Yang Xingqiang, Wang Dan, Tao
Haisu and Zhang Junfang in replacement of the Directors who
resigned on October 14, 2015. Following the resignations of
Marco Tronchetti Provera as Chairman and Alberto Pirelli as
Vice Chairman, the Board of Directors appointed Ren Jianxin
as Chairman, granting him legal representation of the compa-
ny as well as all other powers conferred upon the Chairman
under the current by-laws, without prejudice to the powers and
prerogatives of the Board of Directors, and Marco Tronchetti
Provera, already CEO, to Executive Vice Chairman, confirm-
ing the allocation of powers for the operational management
of Pirelli, already delegated to him. Given its new composi-
tion, the Board of Directors, which established the new Re-
lated-Party Committee, proceeded to a reorganization of the
members of the Board Committees responsible for fact find-
ing, advice and proposals.
Directors’ Report on Operations / 2015 ANNUAL REPORT GroUP PerF orMance
and resULts
In this document, in addition to the financial figures provided by the International Financial Reporting Standards (IFRS), alternative
performance indicators derived from IFRS are used in order to allow a better assessment of Group operations. These indicators
are: Gross Operating Margin, Fixed assets, Provisions, Operating Working Capital, Net Working Capital and Net Financial Position.
Reference is made to the paragraph “Alternative Performance Indicators” for a more detailed description of these indicators.
It is to be noted that as at December 31, 2015, Pirelli proceeded with the accounting deconsolidation of the Venezuelan subsidiary
(which is 96.22% owned), and with the recognition of the investment at fair value (equal to 18.9 million euro). The increasing and
permanent restrictions on foreign currency conversion and the continued reduction in the availability of the US Dollar in Venezuela
impeded, with an evident trend that could not be considered temporary, the payment of dividends, royalties and trade payables to
other companies of the Group. To these restrictions further regulatory restrictions were added, (for example, the control of sales
margins and particularly stringent labour regulations), which were also permanent, and which in fact did not permit the Group
to implement their business decisions onto the subsidiary’s business activities or to govern the subsidiary’s relative assets. Based
on this scenario, which is expected to endure for the near future, as confirmed as well by the latest official statement made by
President Maduro on February 17, 2016 according to which the SIMADI exchange rate currently at approximately 200 Bolivares
per US dollar will replace the SICAD exchange rate of 13.5 Bolivares per US dollar, and consistent with what other multinationals
had already done, it was decided that the requisite conditions had not been met in order for an accounting control to be carried out
on the subsidiary. The financial results of the Venezuelan subsidiary were consolidated for the entire financial year of 2015. The
deconsolidation of the subsidiary resulted in the recognition of a negative impact on the Income Statement to the amount of euro
559.5 million, which includes the derecognition of the Net Financial Position of the company, which as at December 31, 2015 was
positive to the amount of euro 277.7 million.
As a consequence of the deconsolidation, the group’s results will no longer include the results of the Venezuelan unit, and therefore
will no longer bear the impact of the recurring devaluations which we have seen in recent years, both at the level of results and
the net financial position. In addition, no further losses are foreseen linked to new supplies to the country; Pirelli could eventually
recoup part of the value which was almost totally devalued on December 31, 2015.
21
Directors’ Report on Operations / 2015 ANNUAL REPORT Pirelli closed 2015 with results in line with operational targets:
Net sales amounting to euro 6,309.6 million, with an annual growth of 4.8% (> euro 6.25 bln target 2015 ~ +4% as compared
to 2014), supported by a strong improvement in the price/mix component (+7.1% as compared to the target of ≥ 5.5%) result-
ing from price increases, higher sales in the Replacement segment and different geographical and product mix. This trend
more than offset the decline in volumes (-1.6%, mainly in emerging markets and in Industrial business) and the volatility of
exchange rates (-0.6%);
the Premium trend was higher than expected with a growth of +12.7% volume (≥ +10% target) and an incidence on Consumer
revenues up to 60% (55% in 2014).
profitability was up 5.7% as compared to 2014 with an EBIT before non-recurring and restructuring expenses amount-
ed to euro 918.5 million (euro 925 million 2015 target) and a margin of 14.6% (14.4 % in 2014). This result benefited from the
achievement of efficiencies for euro 94.4 million as a continuation of the four-year plan (2014-2017) and from euro 350 million
announced in November 2013 (euro 92,4 million efficiencies achieved in 2014);
net financial position negative for euro 1,199.1 million, euro 921.4 million excluding the impact of the deconsolidation of the
Venezuelan subsidiary. Compared to the target of euro 850 million, the net financial position at December 31, 2015 was affected
by the postponement of the sale of certain financial investments totalling approximately euro 120 million which were included
in the annual target.
22
Directors’ Report on Operations / 2015 ANNUAL REPORT 12/31/2015
12/31/2014
The consolidated financial statements of the Group can be summarised as follows:
(in millions of euro)
Net sales
gross operating margin before non-recurring and restructuring expenses
% of net sales
Operating income before non-recurring and restructuring expenses
% of net sales
Non-recurring and restructuring expenses
Operating income (loss)
% of net sales
Net income (loss) from equity investments
Financial income/(expenses)
Net income (loss) before tax adjusted (*)
Loss from deconsolidation of venezuela
Total net income (loss) before tax
Tax expenses
Tax rate % on net income (loss) before tax adjusted
Impairment of deferred tax assets
Net income (loss) from continuing operations
Net income (loss) from discontinued operations
Total net income (loss)
Net income (loss) adjusted (**)
Net income attributable to Pirelli & C. s.p.A.
Total net earnings per share attributable to Pirelli & C. s.p.A. (in euro)
Operating fixed assets
Inventories
Trade receivables
Trade payables
Operating Net working capital related to continuing operations
% of net sales
Other receivables/other payables
Total Net working capital related to continuing operations
% of net sales
Net invested capital held for sale
Total Net invested capital
Equity
Total Provisions
of which provisions held for sale
Total Net financial (liquidity)/debt position
of which Net Financial (liquidity)/debt position held for sale
Equity attributable to Pirelli & C. s.p.A.
Equity per share attributable to Pirelli & C. s.p.A. (in euro)
Investments in property, plant and equipment and intangible assets
Research and development expenses
% of net sales
Research and development expenses - Premium
% on sales Premium
6,309.6
1,242.7
19.7%
918.5
14.6%
(68.2)
850.3
13.5%
(41.4)
(328.2)
480.7
(559.5)
(78.8)
(182.5)
(38.0%)
(107.6)
(368.9)
(14.6)
(383.5)
298.2
(391.4)
(0.802)
3,780.5
1,053.9
676.2
(1,313.1)
417.0
6.6%
(107.6)
309.4
4.9%
-
4,089.9
2,343.5
547.3
-
1,199.1
-
2,280.1
4.672
391.4
214.4
3.4%
176.5
5.8%
Headcount (number at end of period)
Industrial sites (number)
(*) excluding the impact from deconsolidation of the venezuelan subsidiary
(**) excluding the impact from deconsolidation of the venezuelan subsidiary, impairment of deferred tax assets and net income (loss)
36,753
19
from discontinued operations
23
6,018.1
1,168.0
19.4%
869.2
14.4%
(31.3)
837.9
13.9%
(87.0)
(262.4)
488.5
-
488.5
(173.3)
(35.5%)
-
315.2
17.6
332.8
315.2
319.3
0.654
3,874.0
1,055.0
673.8
(1,394.4)
334.4
5.6%
33.9
368.3
6.1%
30.8
4,273.1
2,611.5
682.0
5.2
979.6
(5.8)
2,548.3
5.222
378.1
205.5
3.4%
174.5
6.9%
37,561
19
Directors’ Report on Operations / 2015 ANNUAL REPORT For a better understanding of the performance of the Group, here below is the economic data broken down by business segment.
(in millions of euro)
a
b
a+b = c
d
c+d = e
consumer
industrial
total tyre
other
business
total group
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Net sales
5,048.2
4,610.3
1,252.6
1,397.2 6,300.8
6,007.5
8.8
10.6
6,309.6
6,018.1
gross operating margin
before non-recurring
and restructuring expenses
Operating income (loss)
before non-recurring
and restructuring expenses
Non-recurring
and restructuring expenses
1,084.4
934.7
165.1
242.2
1,249.5
1,176.9
(6.8)
(8.9)
1,242.7
1,168.0
816.2
697.2
110.6
183.2
926.8
880.4
(8.3)
(11.2)
918.5
869.2
(53.3)
(20.8)
(13.0)
(7.0)
(66.3)
(27.8)
(1.9)
(3.5)
(68.2)
(31.3)
Operating income (loss)
762.9
676.4
97.6
176.2
860.5
852.6
(10.2)
(14.7)
850.3
837.9
Group net sales at December 31, 2015 amounted to euro 6,309.6 million, up 4.8% as compared to the euro 6,018.1 million for the
2014 financial year. Sales performance was supported by Consumer business (+9.5% overall growth, +7.9% organic change) while
the Industrial business (-2.6% organic change) was affected by a significant deterioration in the market in South America and the
adverse impact of exchange rates which were accentuated especially in the second half (-0.6% impact of exchange rates on Group
revenues, +1.6% on Consumer revenues, -7.7% on Industrial revenues).
24
Tyre business net sales amounted to euro 6,300.8 million, with organic growth of 5.5% over the previous year (+4.9% including
the impact of exchange rates).
Net sales of the Premium segment (tyres with a rim diameter equal to or greater than 17 inches for the car business, and radial
tyres, X-ply custom touring tyres, off-road and Sport Touring tyres with a speed rating of ≥H for the motorcycle business) totalled
euro 3,017.1 million (+19.0% as compared to euro 2,536.0 million in 2014), with an impact on turnover for Consumer business, in-
creasing to 60% (55% in 2014) and with volumes up by 12.7%.
The following table outlines the drivers of the Tyre sales performance:
1 Q
2 Q
3 Q
4 Q
cumulative
at 12/31
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
volume
of which Premium volume
Price/mix
Change on a like-for-like basis
Translation effect
Total change
-1.3%
10.0%
3.7%
2.4%
3.8%
22.2%
4.6%
8.4%
4.1%
-10.8%
6.5%
-2.4%
0.6%
11.0%
3.4%
4.0%
2.4%
6.4%
-0.2%
20.9%
6.0%
5.8%
-3.3%
12.2%
7.0%
3.7%
-9.4%
-4.2%
-3.6%
-0.5%
3.1%
17.3%
3.3%
6.4%
-3.1%
3.3%
-2.5%
18.3%
14.4%
11.9%
1.6%
10.7%
2.8%
4.4%
-1.6%
12.7%
7.1%
5.5%
2.0%
17.8%
4.2%
6.2%
-4.6%
-3.1%
-0.6%
-6.6%
7.3%
1.3%
4.9%
-0.4%
The total volumes were down 1.6% for the full year 2015, but with opposing trends between Consumer (+0.3%) and Industrial (-7.9%)
and between mature markets (+5.7%) and emerging ones (-4.8%).
The volume trend in the Consumer segment was supported by Premium growth in all markets (+12.7% overall growth as compared
to 2014, +18.3% in the fourth quarter) while Non-Premium (-6.7% volumes) was affected by weak demand in Latam and Russia, in
particular in the Original Equipment channel (car market in Latam -20%; car market in Russia -28%).
Directors’ Report on Operations / 2015 ANNUAL REPORT The trend in Industrial volumes (-7.9%) reflects worsening demand in South America (truck market down 48% in Original Equip-
ment and 10% in the replacement channel) and a slowdown in the Original Equipment channel in China (market -23%).
An improvement in the price/mix (+7.1% in 2015, +14.1% in the fourth quarter) affected both the Consumer business (+7.6% in 2015,
+14.1% in the fourth quarter) and the Industrial business (+5.3% in 2015, +15.4% in the fourth quarter) thanks to:
price increases, especially in South America in the face of the high volatility in exchange rates;
higher sales in the Replacement channel;
a different geographic mix with sales in markets with the highest average price (APAC and mature markets in Consumer busi-
ness; Europe for Industrial business);
an improvement of the product mix (Premium over Consumer, increased sales of the 01 Series in Truck, especially in South
America).
The breakdown of Tyre business net sales by geographical area and product category is as follows:
geographical area
2015
2014
Europe
Russia and CIs
NAFTA
south America
Asia\Pacific (APAC)
Middle East\Africa\India (MEAI)
TOTAL
product
Car
Motorcycle
Consumer
Truck
Agriculture
Industrial
TOTAL
Euro\mln
2,200.2
192.5
861.1
1,808.2
706.0
532.8
6,300.8
Euro\mln
4,658.0
390.2
5,048.2
1,123.0
129.6
1,252.6
6,300.8
yoy
7.0%
-19.1%
21.7%
-7.9%
26.4%
10.2%
4.9%
34.9%
3.1%
13.7%
28.6%
11.2%
8.5%
34.2%
4.0%
11.8%
32.7%
9.3%
8.0%
100.0%
100.0%
2015
2014
25
yoy
10.3%
1.1%
9.5%
-9.1%
-19.6%
-10.3%
4.9%
73.9%
6.2%
80.1%
17.8%
2.1%
19.9%
70.3%
6.4%
76.7%
20.6%
2.7%
23.3%
100.0%
100.0%
The operating income (loss) (EBIT) of the Group, amounted to euro 850.3 million, up 1.5% as compared to euro 837.9 million in
2014. The improvement by euro 12.4 million is due to euro 7.9 million in tyre business and euro 4.5 million to the other businesses.
Operating profit was affected by non-recurring and restructuring expenses totalling euro 68.2 million related primarily to:
a continuation also in 2015 of actions to rationalize facilities (euro 23.5 million)
the project for Business Industrial separation (euro 17.3 million) for future integration with CNRC tyre assets
the early termination of the management Long Term Incentive Plan 2014 - 2016 (higher charges of euro 24.1 million) as a result
of the delisting of ordinary shares.
Directors’ Report on Operations / 2015 ANNUAL REPORT Specifically, the trend in the operating income from the Tyre business shows the following trend:
(in millions of euro)
1 Q
2 Q
3 Q
4 Q
cumulative
at 12/31
2014 Operating income (loss)
204.9
229.1
206.3
Foreign currency translation from consolidation
Price/mix
volumes
Cost of prodution factors (commodities)
Cost of prodution factors (labour/energy/others)
Efficiencies
Amortisation, depreciation and other
Non-recurring and restructuring expenses
Change
9.4
31.0
(7.6)
16.4
(34.6)
21.1
(30.6)
3.3
8.4
4.8
25.2
3.1
8.5
(34.3)
24.7
(28.4)
5.5
9.1
2015 Operating income (loss)
213.3
238.2
(10.9)
48.4
(16.7)
(0.2)
(25.0)
26.8
(25.7)
1.0
(2.3)
204.0
212.3
(11.0)
112.6
(13.0)
(7.2)
(54.2)
21.8
(8.0)
(48.3)
(7.3)
205.0
852.6
(7.7)
217.2
(34.2)
17.5
(148.1)
94.4
(92.7)
(38.5)
7.9
860.5
Operating income of the Tyre business in 2015 amounted to euro 860.5 million (euro 852.6 million in 2014), with an EBIT margin
of 13.7% (14.7% before non-recurring charges and restructuring costs) which was a slight decrease over the previous year due to
higher non-recurring and restructuring expenses.
Overall, the trend in Consumer business more than offset the decline in Industrial business profitability that was affected by a
difficult macroeconomic environment in Latin America.
26
The improvement in operating income was affected by:
a positive contribution of the price/mix component (euro +217.2 million) and efficiencies (euro +94.4 million), which more than
offset a decline in volumes in emerging markets (euro -34.2 million the impact on Ebit) and an increase in depreciation and
other costs (euro -92.7 million, of which 31.0 million for higher depreciation, 31.5 million of higher costs partly related to the
development of the Premium segment, euro 28.6 million related to the different procurement methods of steelcord and euro 1.6
million for other costs);
a lower cost of raw materials (euro +17.5 million);
inflation increases in other factors of production which had a negative impact of euro 148.1 million and the negative impact of
foreign exchange (euro -7.7 million in the total year, euro -21.9 million in the second half);
the aforementioned higher non-recurring and restructuring expenses of euro 38.5 million.
Geographically, APAC (11.2% of tyre revenues, +1.9 percentage points over 2014) is confirmed as the area of greatest growth (+26.4%
revenues, +12.9% net of exchange rates) and among the most profitable with an EBIT margin before non-recurring and restructur-
ing expenses of over 20%, which was an increase over the previous year. The Premium segment is the main development driver
with an increase in revenues of 33.7% and an increase in market share in particular in Replacement and in the Super Premium
segment (tyres with rim diameter ≥18 inches). This result reflects how much Pirelli is positioned in the first equipment of Premium
car manufacturers produced in the area and the subsequent pull-through effect on the replacement channel, which are supported
by progressive growth in the distribution network in the geographical areas with the greatest market potential.
NAFTA (13.7% of revenues from tyre) recorded an increase in revenues of 21.7% in 2015 (+4.1% growth, net of exchange rates), which
was particularly marked in the fourth quarter with +28.3% (+11.9% organic growth). Revenue performance reflects the positive trend
in volume growth in excess of market trends, an improvement in the product mix thanks to the successful launch of new lines spe-
cifically developed for customers in the area, such as the PZero AS+, and a greater weight of sales in the replacement channel. The
present scenario of foreign exchange and the downward trend in raw material prices have led to a partial price adjustment, while
maintaining placement in segments of greater value unchanged.
Pirelli growth has been higher than the market trend in the Premium and Super Premium segments (+24.3% overall Premium reve-
Directors’ Report on Operations / 2015 ANNUAL REPORT nues), which benefited from an expansion of the FasTrack net-
work, growth in the sales channel of car dealers and geo-mar-
keting tools capable of optimising management of customer
inventory. Profitability (EBIT margin before restructuring ex-
penses) was significantly higher, being in the “low-twenties”
(“mid-teens” profitability of 2014).
MEAI (8.5% of tyre revenues) recorded revenue growth of
10.2% (8.8% net of exchange rates) with profitability before re-
structuring expenses in the “high-teens” and so stable as com-
pared to 2014 which was a confirmation of it being one of the
areas of highest profitability. This performance was supported
by the development in the Premium segment growing above
the market trend, especially in the Super Premium segment
and in countries of the Gulf area.
Europe (34.9% of revenues from the tyre business) ended
2015 with a growth in revenues of 7.0% (+5.7% net of ex-
change rates) thanks to the good performance of the Premi-
um segment (+11%) especially in the second quarter (+11.9%
sales in the third quarter, +22.1% in the fourth quarter) and a
gradual improvement in the price/mix component. The pos-
itive trend was supported by the greater weight of the Car
Dealer channel and better retail coverage. Profitability, net of
restructuring expenses, was in the “mid-teens” and so stable
as compared to 2014.
Russia (3.1% of tyre revenues, -0.9 percentage points com-
pared to 2014), despite an unfavourable scenario, displayed
organic growth in sales of 5.6% (-19.1% after the impact of
exchange rates). In a market in sharp decline (Replacement
-20%, Original Equipment -28%), Pirelli volumes were in lim-
ited decline (-4.1%) with a resulting improved market share.
Profitability before restructuring expenses was in the low
single-digits, which represented a decrease as compared to
the 2014 financial year (high single-digits), and was affected
by a deterioration in exchange rates and the trend in volumes
which was mitigated by a significant improvement in the mix,
the efficiencies program and the increase in exports.
South America (28.6% of tyre revenues, -4.1 percentage points
as compared to 2014) recorded a reduction in revenues of 7.9%
(+2.9% excluding the impact of exchange rates). The continua-
tion of the difficult market situation in the area, especially in
Original Equipment (market volume car -20% and truck -48%),
was reflected in the trend in sales volumes which were down
overall by 12.5%.
The negative trend in Original Equipment volumes was mit-
igated by a slight increase in the Car Replacement channel,
thanks to continued growth in the fleet and a good Premium
trend (volumes +12%, higher than the market trend). The trend
in revenues was supported by continued growth in the product
mix, price increases in Consumer (as of the first quarter) and
Industrial (from the second quarter) counteracting volatility
of exchange rates.
Profitability, before restructuring expenses, was “double-dig-
it”, a decrease as compared to 2014 due to the market down-
turn and consequently higher costs of saturation, as well as
high volatility of exchange rates.
To deal with this scenario, Pirelli is activating new efficiency
and restructuring plans and further price increases, and pro-
gressive growth in exports from the area.
The net income (loss) from Group equity investments was
unfavourable for euro 41.4 million (euro -87 million in 2014)
and relates mainly to:
the negative impact deriving from consolidation, using
the equity method, of results of the associated company
Prelios S.p.A. of twelve months (Euro 6 million relative to
the pro-rata loss of the fourth quarter 2014 and the first
nine months of 2015), and Indonesian Joint Venture PT
Evolution Tyres (euro 4.8 million related to the pro-rata
loss for the year 2015);
the negative impact of impairments on equity investments
in Prelios S.p.A. (euro 7 million), GWM Renewable Energy
II S.p.A. (euro 14.1 million), RCS MediaGroup S.p.A. (euro
7.3 million) and Alitalia - Compagnia Aerea Italiana S.p.A.
(euro 7.2 million), in order to align the carry value to the
fair value;
the positive impact deriving from the collection of divi-
dends for euro 6 million.
The balance for net financial income (expenses) is negative
for euro 328.2 million at December 31, 2015 and shows an in-
crease of euro 65.8 million as compared to the 2014 financial
year (negative for euro 262.4 million) essentially attributable
to accounting for rising inflation in Venezuela. The strong in-
crease recorded in the price index in Venezuela (estimated
at +189.9% at the end of December 2015) in fact generated a
loss of implicit value in monetary assets to the amount of euro
143.4 million (an impact of euro 28.9 million in 2014) which
is representative of the reduction in purchasing power. These
greater costs were partially offset by lower financial charges
relating to losses on exchange rates on trade payables for the
Venezuelan subsidiary (costs of euro 24.0 million for the 2015
financial year as compared to costs of euro 72.1 million, for
2014 financial year).
Excluding this effect, net financial expenses were essentially
stable as compared to the previous year and the average cost
of debt for the period was 5.90% (6.05% in 2014).
As described at the beginning of this section, the Group con-
sidered that at December 31, 2015 the requisite conditions of
27
Directors’ Report on Operations / 2015 ANNUAL REPORT Total net income was negative to the amount of euro 383,5
million as compared to the 2014 financial year which was
positive for euro 332.8 million; the share of net income at-
tributable to Pirelli & C. S.p.A. was negative at euro 391.4
million (euro 0.802 per share) as compared to the positive
result of euro 319.3 million for the previous financial year
(euro 0.654 per share).
The adjusted net income, would have been positive for euro
298.2 million as compared to the positive outcome for 2014,
to the amount of euro 315.2 million , excepting the impact de-
riving from the deconsolidation of the Venezuelan subsidiary,
the impairment of the deferred tax assets and the results from
discontinued operations.
Equity went from euro 2,611.5 million as at December 31, 2014
to euro 2,343.5 million as at December 31, 2015.
Equity attributable to Pirelli & C. S.p.A. as at December 31,
2015 amounted to euro 2,280.1 million (euro 4.672 per share)
compared to euro 2,548.3 million as at December 31, 2014
(euro 5.222 per share).
The change, which is analytically represented in the table
below, relates essentially to, the loss for the financial year, to
the positive effect of high inflation on the Venezuelan sub-
sidiary, to the positive fair value adjustment of financial as-
sets which were offset by the negative exchange rate effect
related to the translation of assets in foreign currency into
Euros, and to dividends paid.
28
IFRS 10 for implementing an accounting control on the Vene-
zuelan subsidiary had no longer been met. The deconsolida-
tion of the Venezuelan subsidiary was therefore proceeded
with, effective as of December 31, 2015, which simultaneously
revealed a loss for the deconsolidation of the Venezuelan
subsidiary to the amount of euro 559.5 million, mainly due
to the Net Financial Position which was positive for euro 277.7
million and the impairment of receivables which the Group
held towards the Venezuelan subsidiary to the amount of euro
225.5 million.
The tax expenses for the 2015 financial year amounted to
euro 182.5 million (euro 173.3 million in 2014) with a tax rate
on the income adjusted by the impact of the deconsolidation
of the Venezuelan company of 38.0% (37.3% net of the consol-
idation into shareholder equity of the associated companies)
as compared to 35.5% in 2014. The increase was mainly due
to higher non-deductible expenses incurred by the subsidiary
in Venezuela, attributable to the effect of the high inflation
recorded in the country and the impairment of trade items
(euro 66.3 million higher costs compared to 2014), which had
impacted on the tax rate by an amount equivalent to 4.6 per-
centage points (a tax rate of 33.4% excluding this effect);
Of final note, the impairment of deferred tax assets on tax
losses mainly carried out by the Parent company (euro 103.0
million) was attributable to the revision of the medium term
time-frame forecasts for the future taxable income of the com-
panies participating in the Italian Tax Grouping (tax consoli-
dation), for which a significant reduction, over the course of
this period, was expected due to the effect of the new financial
structure that the Group will assume as a consequence of the
merger with Marco Polo Industrial Holding S.p.A. and which
will come into effect in the first half of 2016. Also of note is
that the tax losses attributable to the Italian companies of the
Group can be carried forward without limit.
The net income (loss) from continuing operations was neg-
ative for euro 368.9 million (positive for euro 315.2 million in
2014). The downturn, as compared to 2014 for euro 684.1 mil-
lion, can be attributed to the non-recurring impacts mentioned
(deconsolidation of the Venezuelan subsidiary, impairment of
the deferred tax assets related to tax losses)
The net income (loss) from discontinued operations for
2015 was negative for euro 14.6 million. This result was main-
ly due to exchange rate losses from the translation into Euro of
the financial statements of the Turkish subsidiary accrued in
previous financial years, recorded in equity and reclassified
to the Income Statement for the first quarter of 2015 following
the sale of the steelcord business in Turkey in February 2015.
Directors’ Report on Operations / 2015 ANNUAL REPORT (in millions of euro)
Equity at 12/31/2014
Translation differences
Net income (loss)
Fair value adjustment of other financial assets/derivative instruments
Actuarial gains/(losses) on employee benefits
dividends paid
venezuela inflation effect
deconsolidation of venezuelan subsidiary
Other changes
Total changes
Equity at 12/31/2015
group
non-controlling
interests
total
2,548.3
(14.0)
(391.3)
24.9
12.5
(179.6)
280.3
-
(1.0)
(268.2)
2,280.1
63.2
(2.7)
7.8
-
-
(6.7)
11.0
(8.5)
(0.7)
0.2
63.4
2,611.5
(16.7)
(383.5)
24.9
12.5
(186.3)
291.3
(8.5)
(1.7)
(268.0)
2,343.5
The following is the reconciliation statement between the equity of the Parent Company and the consolidated equity of the
Parent Company shareholders.
(in millions of euro)
share
capital
treasury
reserves
net income
(loss)
total
Equity of Pirelli & C. S.p.A. at 12/31/2015
1,343.3
Net income (loss) of consolidated companies
(before consolidation adjustments)
share capital and reserves of consolidated companies
(before consolidation adjustments)
Consolidation adjustments:
carrying amount of equity investments
in consolidated companies
intercompany dividends
others
-
-
-
-
-
Consolidated equity of Group at 12/31/2015
1,343.3
572.3
-
1,759.7
(1,141.9)
167.3
(29.2)
1,328.2
(1.7)
(244.5)
-
-
(167.3)
22.1
(391.4)
1,913.9
(244.5)
1,759.7
(1,141.9)
-
(7.1)
2,280.1
29
As at December 31, 2015, the net financial position of the Group was negative for euro 1,199.1 million as compared to euro 979.6
million as at December 31, 2014, and was as follows:
(in millions of euro)
Current borrowings from banks and other financial institutions
Current derivative financial instruments
Non-Current borrowings from banks and other financial institutions
Total gross debt continuing operations
Cash and cash equivalents
securities held for trading
Current financial receivables
Current derivative financial instruments
Non-current financial receivables
Total financial receivables and cash
A
B
Net financial (liquidity)/debt position continuing operations
Net financial (liquidity)/debt position discontinued operations
A+B Total net financial (liquidity)/debt position
12/31/2015
12/31/2014
1,138.6
15.1
1,275.7
2,429.4
(1,082.7)
(78.2)
(11.9)
(6.8)
(50.7)
(1,230.3)
1,199.1
-
1,199.1
530.9
4.6
1,781.7
2,317.2
(1,166.7)
(61.4)
(41.5)
(6.1)
(56.1)
(1,331.8)
985.4
(5.8)
979.6
Directors’ Report on Operations / 2015 ANNUAL REPORT The structure of the gross financial debt, which amounted to euro 2,429.4 million, was as follows:
(in millions of euro)
use of committed credit facilities
bond 5,125% - 2011/2016
bond 1,750% - 2014/2019
EIb loans
usd private placement
schuldschein
Other loans
Financial
statements
12/31/2015
maturity date
2016
2017
2018
2019
379.5
500.0
600.0
-
500.0
-
150.0
100.0
137.8
37.0
625.1
-
37.0
511.3
-
-
-
20.0
13.8
-
79.9
113.7
4.7%
-
-
-
20.0
-
-
25.3
45.3
1.9%
-
-
600.0
10.0
27.6
-
1.5
639.1
26.3%
2020 and
beyond
379.5
-
-
-
96.4
-
7.1
483.0
19.9%
Total gross debt continuing operations
2,429.4
1,148.3
47.3%
At December 31, 2015, the Group had a liquidity margin of euro 1,981.4 million made up of euro 820.5 million of unused credit facil-
ities (euro 1.2 billion of committed lines) and euro 1,160.9 million of cash, cash equivalents and securities held for trading.
30
As also reported in the section on significant events of the year, it is reported that on October 13, 2015, as a result of exceeding the
threshold of 50%, by reason of the Public Offer, there was a “change of control” event on the “USD Private Placement” loans and
“Schuldschein”. In respect of the “USD Private Placement” for an aggregate of USD 150 million, it is here pointed out that the “change
of control” event, in accordance with contract provisions, led to the making of an offer for redemption from underwriters by Pirelli
International Plc, to which no sign-ups were received. Therefore, the original maturity date of the loan has been kept unchanged in
preparing the financial statements as at December 31, 2015. In respect of the “Schuldschein”, for a residual amount of euro 37 mil-
lion, it is here mentioned that only one investor holding euro 7 million of the security at December 31, 2015 had the right to request
early redemption for an amount equal to the nominal outstanding and interest accruing at the time of redemption and any other
ancillary costs related to the nature of the contract.
Directors’ Report on Operations / 2015 ANNUAL REPORT The trend in cash flows for the financial year was as follows:
(in millions of euro)
1 Q
2 Q
3 Q
4 Q
total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Operating income (loss) before
non-recurring and restructuring expenses
213.4
206.7
238.0
232.2
205.8
208.9
261.3
221.4
918.5
869.2
Amortisation and depreciation
78.5
70.6
79.7
73.3
78.0
76.0
88.0
78.9
324.2
298.8
Investments in property, plant
and equipment and intangible assets
(85.6)
(65.3)
(103.2)
(78.3)
(73.0)
(101.1)
(129.6)
(133.4)
(391.4)
(378.1)
Change in working capital/other
(895.2)
(686.6)
151.6
77.4
(113.7)
(155.0)
707.4
714.6
(149.9)
(49.6)
Operating net cash flow
(688.9)
(474.6)
366.1
304.6
97.1
28.8
927.1
881.5
701.4
740.3
Ordinary financial income/(expenses)
(52.1)
(43.3)
(61.3)
(48.8)
(67.1)
(43.6)
(147.7)
(126.7)
(328.2)
(262.4)
Ordinary tax expenses
(54.1)
(53.5)
(63.7)
(61.3)
(52.4)
(49.5)
(119.9)
(9.1)
(290.1)
(173.3)
Ordinary net cash flow
(795.1)
(571.4)
241.1
194.5
(22.4)
(64.3)
659.5
745.9
83.1
304.6
Financial investments/disinvestments
(14.4)
(3.7)
Other dividends paid to third parties
(7.6)
(0.5)
Cash Out for restructuring
(6.4)
(12.9)
-
-
(12.1)
6.6
(6.4)
(8.2)
(19.4)
-
-
-
(10.1)
(3.7)
(8.0)
(15.4)
(4.3)
(28.1)
(3.4)
(31.1)
2.8
(2.9)
(5.9)
-
-
-
(0.4)
(2.5)
(2.6)
14.2
-
-
-
-
-
-
-
-
-
-
(8.7)
9.1
-
(12.2)
-
-
-
0.7
72.1
24.0
72.1
107.6
(30.2)
107.6
(30.2)
-
-
-
(12.2)
(4.3)
-
-
-
31
10.5
-
2.5
Reversal of impairment in venezuela
included in financial expenses
deferred taxes included in financial
expenses
Exercise of Fenice share options
Net cash flow from discontinued
operations
differences from foreigh currency
translation/other
45.8
(46.0)
(37.4)
(11.9)
22.5
13.2
5.1
63.7
36.0
19.0
Net cash flow before dividends paid
(777.7)
(643.2)
212.4
187.2
(6.7)
(68.7)
764.1
836.5
192.1
311.6
dividends paid by Parent Company
deconsolidation of venezuelan subsidiary
Impact steelcord units disposal
-
-
24.4
-
-
-
(179.5)
(156.7)
-
35.6
-
-
-
-
(14.4)
-
-
-
-
(277.7)
-
-
(179.5)
(156.7)
(277.7)
-
-
187.9
45.6
187.9
Total net cash flow
(753.3)
(643.2)
68.5
30.4
(21.1)
(68.7)
486.4
1,024.3
(219.5)
342.8
The operating net cash flow for the year was positive at euro 701.4 million, from euro 740.3 million in 2014. In the last quarter,
operating net cash flow was positive at euro 927.1 million (euro 881.5 million in 2014) for the seasonality of working capital.
Total investments were made for euro 391.4 million (euro 378.1 million in 2014), mainly for an increase in Premium capacity in
Europe, NAFTA and China and an improvement in the mix.
Net cash flow (before dividends paid, deconsolidation of the Venezuelan subsidiary, and steelcord disposal) was positive for
euro 192.1 million (euro 311.6 million for 2014). As regards cash flow for the year, the partial divestiture of financial investments had
been expected, but which have been postponed until 2016 in view of the aforementioned transactions involving the Group in 2015.
Total net cash flow was negative for euro 219.5 million which included the payment of Parent Company dividends to the amount of
euro 179.5 million, and the deconsolidation of the net financial liquidity position of the Venezuelan subsidiary to the amount of euro
277.7 million, which was partially offset by the positive effect deriving from the sale of the steelcord business for euro 45.6 million.
Directors’ Report on Operations / 2015 ANNUAL REPORT Employees of the Group at December 31, 2015 totalled 36,753 as compared to 37,561 at December 31, 2014 due to the effect of effi-
ciencies especially in South America.
geographical area
12/31/2015
12/31/2014
Europe
Russia and CIs
NAFTA
south America
Middle Est/Africa/India (MEAI)
Asia/Pacific (APAC)
type
Executives
White collar
blue collar
Temps
11,498
3,319
1,720
13,041
3,319
3,856
31.3%
9.0%
4.7%
35.5%
9.0%
10.5%
36,753
100.0%
11,253
3,483
1,455
13,996
3,226
4,148
37,561
12/31/2015
12/31/2014
319
6,783
27,885
1,766
36,753
0.9%
18.5%
75.9%
4.8%
100.0%
313
7,024
27,776
2,448
37,561
30.0%
9.4%
3.9%
37.3%
8.6%
11.0%
100.0%
0.8%
18.7%
74.0%
6.5%
100.0%
The total at December 31, 2015 includes employees of the subsidiary Pirelli de Venezuela C.A..
32
CoNsumer BusiNess
The table below shows the results compared with the corresponding period of 2014:
(in millions of euro)
Net sales
yoy
gross operating margin
before non-recurring
and restructuring expenses
1 Q
2 Q
3 Q
4 Q
total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
1,237.4
1,128.7
1,284.3
1,159.6
1,239.9
1,178.0
1,286.6
1,144.0
5,048.2
4,610.3
9.6%
10.8%
5.3%
-
12.5%
-
9.5%
-
246.3
219.4
276.8
245.1
255.9
228.0
305.4
242.2
1,084.4
934.7
% of net sales
19.9%
19.4%
21.6%
21.1%
20.6%
19.4%
23.7%
21.2%
21.5%
20.3%
Operating income (loss)
before non-recurring
and restructuring expenses
182.0
162.7
210.0
186.8
190.4
167.3
233.8
180.4
816.2
697.2
% of net sales
14.7%
14.4%
16.4%
16.1%
15.4%
14.2%
18.2%
15.8%
16.2%
15.1%
Non-recurring and
restructuring expenses
(1.6)
(3.9)
(1.5)
(5.5)
(3.2)
(3.1)
(47.0)
(8.3)
(53.3)
(20.8)
Operating income (loss)
180.4
158.8
208.5
% of net sales
14.6%
14.1%
16.2%
181.3
15.6%
187.2
15.1%
164.2
13.9%
186.8
14.5%
172.1
15.0%
762.9
676.4
15.1%
14.7%
Directors’ Report on Operations / 2015 ANNUAL REPORT The table below provides a detailed breakdown of the market trend:
Original Equipment
Replacement
Original Equipment
1 Q
2 Q
+6.7%
+2.5%
+1.6%
+6.6%
+3.4%
+2.5%
Replacement
+2.0%
+5.0%
Original Equipment
-14.9%
-15.5%
Replacement
+2.4%
+1.7%
Europe (*)
NAFTA (**)
south
America
China
Original Equipment
+9.8%
+4.0%
The figures exclude import except for south America
(*) including Turkey; excluding Russia
(**) the figures for NAFTA exclude Mexico
cumulative
at June
3 Q
cumulative
at s eptember
4 Q
total
year
+6.7%
+9.9%
+3.0%
-0.8%
+2.1%
+3.8%
+3.6%
+5.7%
-15.2%
-21.0%
+2.1%
+5.3%
+6.9%
-6.0%
+7.6%
+1.6%
+5.8%
+11.2%
+2.6%
+1.8%
+4.4%
+3.3%
+7.3%
+3.6%
+2.4%
+4.1%
-17.2%
-28.6%
-20.0%
+3.2%
+2.0%
+2.7%
+16.4%
+2.8%
+6.6%
Net sales in 2015 totalled euro 5,048.2 million (annual target of euro > 5.0 billion, ~+4% as compared to 2014), with an organic
growth of 7.9% (+9.5% including the foreign exchange impact, which was higher than the target of > +8%) thanks to:
an improvement in the price/mix (+7.6%) due to the increasing impact of the Premium segment (60% of Consumer revenues in
2015 as compared to 55.0% for 2014), higher sales in the Replacement channel, and price increases in South America and Russia
which offset the trend in exchange rates;
the positive contribution of the volume component of +0.3%, with growth in APAC, NAFTA, Europe and MEAI which offset the
decline in South America and Russia (Original Equipment market -20% in Latam; -28% in Russia).
Premium net sales totalled Euro 3,017.1 million, which represented a total growth of 19.0% over the previous year (+11.7% excluding
the exchange rate impact), with growth in emerging markets of 29.4% and 15.0% in mature markets.
33
Organic growth in revenues in the fourth quarter was higher than in previous quarters (+14%) with the following dynamics:
+14.1% price/mix, which reflects the aforementioned price increases and a greater weight in Premium and also a different geo-
graphical mix (higher sales in APAC, NAFTA and Europe) and channel mix (higher sales in the Replacement channel);
-0.1% in volumes were affected by the continuation of the market downturn in Latin America and Russia.
Below is the analysis of the change in sales:
1 Q
2 Q
3 Q
4 Q
cumulative
at 12/31
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
volume
of which Premium volume
Price/mix
Change on a like-for-like basis
Translation effect
Total change
0.4%
10.0%
4.7%
5.1%
4.5%
9.6%
5.9%
22.2%
4.4%
10.3%
-9.2%
2.2%
11.0%
4.1%
6.3%
4.5%
1.1%
10.8%
4.3%
20.9%
5.8%
10.1%
-8.3%
1.8%
-1.4%
12.2%
7.8%
6.4%
-1.1%
5.3%
5.3%
17.3%
3.1%
8.4%
-3.5%
4.9%
-0.1%
18.3%
14.1%
14.0%
-1.5%
12.5%
4.5%
10.7%
2.5%
7.0%
-3.0%
4.0%
0.3%
12.7%
7.6%
7.9%
1.6%
9.5%
5.0%
17.8%
3.9%
8.9%
-6.0%
2.9%
Profitability improved during 2015 with an operating income before non-recurring and restructuring expenses of euro 816.2
million (+17.1% as compared to 2014) and a margin of 16.2% (15.1% in 2014) and in line with the 2015 target (~16%). In the fourth quar-
ter, profitability recorded a growth of 29.6% and a margin of 18.2% (+2.4 percentage points as compared to the same period of 2014)
thanks to the strong contribution of the price/mix component..
Operating income amounted to euro 762.9 million (with a marginality of 15.1%), an increase of euro 86.5 million as compared to
euro 676.4 million in 2014 (14.7% marginality) thanks to the aforementioned dynamics and progressive achievement of internal
efficiencies.
Directors’ Report on Operations / 2015 ANNUAL REPORT iNDustriAL BusiNess
The table below shows the results compared with the corresponding period of 2014:
(in millions of euro)
1 Q
2 Q
3 Q
4 Q
total
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Net sales
yoy
327.9
340.8
-3.8%
324.1
-7.8%
351.7
291.4
361.2
309.2
343.5
1,252.6
1,397.2
-19.3%
-
-10.0%
-
-10.3%
-
gross operating margin
before non-recurring
and restructuring expenses
47.2
60.9
42.3
63.6
29.5
59.2
46.1
58.5
165.1
242.2
% of net sales
14.4%
17.9%
13.1%
18.1%
10.1%
16.4%
14.9%
17.0%
13.2%
17.3%
Operating income (loss)
before non-recurring
and restructuring expenses
33.3
47.6
29.7
49.3
17.4
44.4
30.2
41.9
110.6
183.2
% of net sales
10.2%
14.0%
9.2%
14.0%
6.0%
12.3%
9.8%
12.2%
8.8%
13.1%
Non-recurring and
restructuring expenses
(0.4)
(1.5)
-
(1.5)
(0.6)
(2.3)
(12.0)
(1.7)
(13.0)
(7.0)
Operating income (loss)
% of net sales
32.9
10.0%
46.1
13.5%
29.7
9.2%
47.8
13.6%
16.8
5.8%
42.1
11.7%
18.2
5.9%
40.2
11.7%
97.6
7.8%
176.2
12.6%
The table below provides a detailed breakdown of the market trend:
34
1 Q
2 Q
cumulative
at June
3 Q
cumulative
at s eptember
4 Q
total
year
Europe (*)
NAFTA (**)
south
America
Original Equipment
+5.0%
+13.0%
Replacement
-1.0%
+6.0%
+9.0%
+10.0%
+3.0%
+9.0%
Original Equipment
+21.0%
+12.0%
+16.0%
+3.0%
Replacement
+5.0%
+4.0%
+4.0%
-2.0%
+10.0%
+17.0%
+5.0%
+4.0%
+12.0%
-6.0%
+2.0%
+0.0%
Original Equipment
-39.0% -42.0%
-43.0% -53.0%
-46.0% -58.0%
Replacement
-8.0%
-12.0%
-10.0%
-7.0%
-9.0%
-14.0%
China
Original Equipment
-29.0%
-31.0%
-30.0% -23.0%
-28.0%
-6.0%
+11.0%
+5.0%
+7.0%
+1.0%
-48.0%
-10.0%
-23.0%
The figures exclude import except for south America
(*) including Turkey; excluding Russia
(**) the figures for NAFTA exclude Mexico
The performance of the business has been affected by a negative economic situation in South America (50% weight of the regions
on business sales) characterized by a drop in Brazilian GDP of over 3% in 2015, a decline in industrial production and rising un-
employment. In this context, the truck and agro market demand declined sharply with volumes respectively down by 48% in truck
Original Equipment and 10% in truck Replacement.
Net sales totalled euro 1,252.6 million (euro ~1.25 billion target), a decrease of 10.3% as compared with 2014 (euro 1,397.2 million), -2.6%
excluding foreign exchange. The decline in volumes (-7.9%) was affected by the aforementioned decline in the market in Latin America
and a slowdown of the truck original equipment market channel in China (-23%). The trend in the price/mix component (+5.3%) was
positive thanks to an improved product and channel mix and progressive price increases in South America. These increases only par-
tially offset the foreign exchange impairment, considering high volatility in currencies, particularly the Brazilian real.
Directors’ Report on Operations / 2015 ANNUAL REPORT In the fourth quarter, the trend in organic sales was positive by 4.9% (-10.0% including the exchange rate effect) with volumes down
10.5% due to deterioration in demand in emerging markets (South America truck Original Equipment -58%, Replacement -14%, Chi-
na Original Equipment -6%) and a price/mix improvement of 15.4% due to increased prices and an improved channel mix.
Below is a breakdown of the change in sales:
1 Q
2 Q
3 Q
4 Q
cumulative
at 12/31
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
volume
Price/mix
Change on a like-for-like basis
-6.7%
-0.1%
-6.8%
5.4%
3.2%
Translation effect
Total change
3.0%
-15.4%
-3.8%
-12.2%
1.3%
-3.4%
-4.4%
-7.8%
-9.7%
4.8%
-4.9%
6.5%
-5.7%
-12.4%
-14.4%
-3.6%
-10.5%
4.0%
0.4%
-1.8%
15.4%
4.9%
-14.9%
-7.3%
3.9%
-3.4%
-3.3%
-7.9%
5.3%
-2.6%
-6.5%
5.0%
-1.5%
-7.7%
-8.5%
-18.1%
-19.3%
-1.4%
-10.0%
-6.7%
-10.3%
-10.0%
-2.2%
-4.7%
-12.2%
Operating income before non-recurring and restructuring expenses attained euro 110.6 million, amounting to 8.8% of sales
(>+8% target) and a decrease as compared to euro 183.2 million in 2014 (13.1% of sales).
The operating income amounted to euro 97.6 million (euro 176.2 million in 2014), with a margin of 7.8% as compared to 12.6% in
2014 (11.2% 2014 result excluding the total steelcord business and not just those relating to supplies to third parties).
The trend in profitability was affected by:
a decline in volumes;
the negativity of exchange rates, which worsened further in the third and fourth quarter (respectively -14.4% and -14.9%);
the impact from the different source of procurement for steelcord;
inflation of cost factors for production in Latin America and costs associated with the lower utilization of the production capacity
in the area. In this regard, new efficiencies and restructuring plans have been implemented to mitigate current impacts, while
further price increases were planned for the last quarter of the financial year.
35
researcH
and deVeLoPMent
actiVities
The Pirelli Group has always placed the ability to innovate products, processes and materials at the centre of its growth strategy.
In 2015, expenses on research and development totalled euro 214.4 million corresponding to 3.4% of sales, of which euro
176.5 million related to Premium (5.8% of Premium revenues).
Research and development focused on high-end products with significant results in terms of approvals. In 2015, Pirelli confirmed its
leadership in Original Equipment for high range, bringing approvals achieved to over 2,000. Special attention was paid to the products
Directors’ Report on Operations / 2015 ANNUAL REPORT 36
marked with obtaining new P Zero approvals on new models of
the most technologically advanced vehicles, such as the Porsche
911, Lamborghini Aventador, McLaren MP4-12C, the result of a
joint development between Pirelli researchers and engineers of
manufacturers. Since 2007, P Zero approvals have been 250 in
number. In particular, the P Zero Corsa System is in original
equipment on the most prestigious super sports cars: Aston
Martin, Audi, BMW-M, Ferrari, Lamborghini, Lotus, Maserati,
McLaren, AMG-Mercedes and Porsche GT.
Electronics in the tyre (like the microchip contained in the
Cyber Tyre, which allows reading of different road conditions
by sending information critical to trim and driving safety to
the vehicle) is a strategic guideline of Premium innovation by
Pirelli. CYBER FLEET™ is the innovative monitoring system
developed by Pirelli for truck fleets. Indeed, thanks to a tele-
matic box and special sensors applied to the inner surfaces of
tyres the system transmits values of the state of the tyres to
the central infrastructure. This way, they monitor the main
operating parameters such as pressure and temperature in
real time and report the situation to the fleet manager, while
also giving an alert in the event of a puncture or other hazard-
ous event, which might impact mobility and road safety.
The activity traditionally focused on the development of new
Premium and high-end products has now been accompanied
by increasing attention paid to reducing environmental impact.
Leadership in green materials is developed mainly through
research in biomaterials (silica from rice, natural rubber from
sources that are alternative to tree rubber) and recycling.
In particular, Guayule, a tree belonging to the Asteraceae fam-
ily, has also been introduced into the south of Europe, where
its cultivation is being tested, and has unique properties. The
natural rubber of Guayule is, in fact, a valid alternative to the
one extracted from Hevea Brasilianensis but it has never been
used for the production of high performance tyres.
This has happened thanks to Versalis (ENI), which in 2013
signed an agreement with Pirelli for the exclusive supply of
natural rubber from guayule in the production of tyres. Pirel-
li, with its center for research and experimentation, has creat-
ed a prototype tyre which has been tested on a Maserati Ghib-
li, a car with extremely high performance, which has darted
along the testing circuits of Vizzola and Balocco.
After only two years of laboratory experimentation, which al-
lowed their behaviour on the road to be predicted, the new
prototype containing Guayule was tested in all the most ex-
treme conditions and recorded the same level of performance
as apply to approvals achieved with synthetic polymers from
petroleum sources: replacing these polymers with alternative
and renewable raw materials is the objective of the research
and development of Pirelli, which for years has been a leader
in solutions for more sustainable mobility.
Patents, nearly a hundred a year for a total portfolio of 5000,
are the subject of the “Pirelli Invention Prize”. Award-winning
inventions are not all those covered by a patent (granted with
a merit exam), but only those that have been shown to be asso-
ciated with a competitive advantage for the company.
At the end of the last edition of the gold plates, the updated fig-
ures witnessed 177 award-winning inventions, 376 Gold Plates
given and 135 inventors awarded over the years.
Pirelli’s presence in the racing world involves more than 300
championships in 40 countries.
Pirelli has been confirmed as sole supplier for the FIA Formu-
la One World Championship, a position it held from 2011 until
2016, and is now working for the 2017-2019 three-year period.
The experience in Formula 1 has allowed development within
Pirelli R&D of new simulation models that allow a further reduc-
tion of the ‘time-to-market’ and an improvement in the quality
of designs related to road products to be achieved, so making
them more highly performing and in line with the highest re-
quirements set, and improving dynamic understanding based
on working temperature and the behaviour of materials.
In the area of car tyres, Pirelli also launched the new Cintura-
to All Season tyre in 2015.
The new product is a fine addition to the Pirelli range offering
a viable year round solution, in full compliance with local or-
dinances and the highest standards of safety in all road condi-
tions: perfect in the summer, without the loss of performance
typical of winter tyres with heat; optimal for non-extreme
winter conditions, so typical of an urban context, making it
possible to avoid the traditional seasonal changeover of tyres
and, especially, even in the event of a puncture, so allowing a
trip to continue without any need to stop and replace it, thanks
to the unique Seal Inside self-sealing technology.
The new Pirelli tyre is intended for medium or small capac-
ity recently registered cars and is available in 15, 16 and 17
inch diameters.
The great challenge that Pirelli technicians had to face in de-
veloping this new tyre was to submit a product that included
the best of a summer tyre and the best of a winter tyre. To
obtain this result, Pirelli engineers started from a directional
tread pattern, which allows optimization of water expulsion
capacity, through two wide longitudinal and lateral channels,
so greatly reducing the phenomenon of aquaplaning.
Thanks to its innovative design, noise has been reduced, both
outside the vehicle, in full compliance with the increasingly
stringent European regulations on noise pollution, and within,
to the benefit of the pleasure of driving.
A further distinctive feature of the new Cinturato All Season
is represented by 3D siping technology: the tread pattern of
the All Season is, in fact, designed in such a way that on dry or
wet surfaces the 3D sipes, by optimizing the movement of the
dowel, ensure the best braking and cornering performance
possible, so evening out the tyre wear profile and lengthening
its life. In cases of snowy roads, however, opening up, by the
dowels allows snow crystals to be captured, offering excellent
Directors’ Report on Operations / 2015 ANNUAL REPORT road holding. Not surprisingly, the All Season is characterized by winter certification 3PMSF (three-peak-mountain with snow-
flake), which is the symbol with a mountain with 3 peaks and a snowflake applied on the side of the tyre and also the symbol M+S,
that certifies absolute safety in winter conditions. The final development step on which the work of the Pirelli technicians focused,
involved the tread compound. Thanks to Full Silica technology, they were able to obtain a compound capable of performing at its
best under a wide range of temperatures and weather conditions: the optimum dispersion of silica within the compound and the
use of the latest generation functionalized polymers has in fact, allowed heat capacity of the type to be greatly enhanced. All these
technological innovations earned the victory of the new Pirelli Cinturato All Season victory, at its first outing in one of the most
prestigious tests of the international specialist press. The new All Season indeed tookfirst place in the authoritative German mag-
azine Autobild tests, earning a mark of “Exemplary”, thanks to “stable lateral grip and excellent road-holding in the wet”. The new
Cinturato is also the only All Season tyre with Seal Inside technology available on the replacement market. In the most important
measurements, the Cinturato All Season is equipped with this new construction technology which allows driving to continue with-
out air leakage even in cases of punctures of up to 4 mm. In such cases, in fact, the sealant mastic present inside the tyre forms a
sheath that wraps around the foreign body from the moment it penetrates, thus preventing leakage of air and consequent loss of
pressure. When the object is extracted, the mastic itself seals the exit hole. The mastic is itself covered by an exclusive film which
serves to protect it even before mounting the tyre on the rim.
The Seal Inside technology represents an additional benefit for the consumer while ensure greater safety and peace of mind: just
think that about 85% of accidental causes of pressure loss is due precisely to puncture by external objects. Moreover, this technology
can be used on any type of vehicle and does not require a dedicated rim or pressure monitoring systems.
HiGHLiGHts
oF otHer actiVities
37
Other activities include Pirelli Ambiente, PZero and Pirelli Design with the following breakdown:
(in millions of euro)
pirelli ambiente
pZero/pirelli
design
total other
business
2015
2014
2015
2014
2015
2014
Net sales
gross operating margin before
non-recurring and restructuring expenses
Operating income (loss) before
non-recurring and restructuring expenses
Non-recurring and restructuring expenses
Operating income (loss)
5.3
(0.4)
(1.4)
-
(1.4)
4.9
(2.2)
(3.8)
(0.8)
(4.6)
3.5
(6.4)
(6.9)
(1.9)
(8.8)
5.7
(6.7)
(7.4)
(2.7)
(10.1)
8.8
(6.8)
(8.3)
(1.9)
(10.2)
10.6
(8.9)
(11.2)
(3.5)
(14.7)
Net sales in 2015 amounted to euro 8.8 million as compared to euro 10.6 million in the same period of 2014.
The operating income (loss) shows a loss of euro 10.2 million, reflecting restructuring expenses of euro 1.9 million and a decrease
as compared to the loss of euro 14.7 million in 2014.
Directors’ Report on Operations / 2015 ANNUAL REPORT HiGHLiGHts
Parent coMPanY
The table below shows the summary of key economic and financial data:
(in millions of euro)
Operating income (loss)
Financial income/(expenses)
Net income (loss) from equity investments
38
Tax expenses
Net income (loss)
Financial assets
Equity
Net financial (liquidity)/debt position
12/31/2015
12/31/2014
(2.4)
(13.9)
122.3
(107.7)
(1.7)
1,475.3
1,913.9
(346.7)
28.6
(10.0)
192.7
46.7
258.0
1,439.6
2,056.2
(389.1)
The operating income (loss) was negative for euro 2.4 million due to higher non-recurring and restructuring expenses compared
to the previous financial, and mainly due to costs in connection with the separation of Industrial Business costs tied to the early
closure of the Long-Term Incentive plan following the delisting of ordinary shares.
The net income (loss) from equity investments was positive for euro 122.3 million as compared to euro 192.7 million for 2014;
and mainly includes dividends of euro 174.7 million, which were partially offset by the impairment of investments to the amount of
euro 52.3 million attributable mainly to Pirelli & C. Ambiente S.r.l. (euro 18.8 million), to Prelios S.p.A. (euro 14.1 million), to Alitalia
– Compagnia Aerea Italiana S.p.A. (euro 7.1 million) and to the RCS MediaGroup S.p.A. (euro 7.3 million).
Tax expenses include euro 103.0 million relating to impairment of deferred taxes directly attributable to the revision of forecasts
of the future taxable income of the companies participating in the Italian Tax Grouping (tax consolidation) for which a significant
reduction is expected due to the effect of the new financial structure that the Group will assume as a consequence of the merger
with Marco Polo Industrial Holding S.p.A. and which will come into effect in the first half of 2016.
Directors’ Report on Operations / 2015 ANNUAL REPORT The following table summarizes the values of the main financial assets at December 31, 2015:
(in millions of euro)
Equity investments in subsidiaries
Pirelli Tyre s.p.A.
Pirelli Ltda - brasil
Pirelli & C. Ambiente s.r.l.
Pirelli Labs s.p.A.
Pirelli uk Ltd
Pirelli group Reinsurance Company s.A.
Pirelli servizi Amministrazione e Tesoreria s.p.A.
Other
Total equity investments in subsidiaries
Equity investments in associates and other financial assets
Eurostazioni s.p.A.
Prelios s.p.A.
Fenice s.r.l.
gWM Renewable Energy II
Mediobanca s.p.A.
RCs Mediagroup s.p.A.
Fin. Priv. s.r.l.
Real Estate Investment Fund - Anastasia
European Institute of Oncology (Istituto Europeo di Oncologia s.r.l.)
Other
Total equity investments in associates and other financial assets
Total financial assets
12/31/2015
1,090.8
9.7
2.9
4.1
21.8
6.3
3.2
3.1
1,141.9
52.9
41.9
28.2
11.2
140.0
14.4
18.8
14.5
5.8
5.7
333.4
1,475.3
39
Equity went from euro 2,056.2 million to euro 1,913.9 million especially for the distribution of dividends to shareholders. The
change is shown in the following table:
(in millions of euro)
Equity at 12/31/2014
Net income (loss)
dividends paid
gains/(losses) recognised directly in Equity
Equity at 12/31/2015
2,056.2
(1.7)
(179.6)
39.0
1,913.9
Directors’ Report on Operations / 2015 ANNUAL REPORT The following table shows the composition of equity at December 31, 2015 and the comparison with the previous year:
(in millions of euro)
share capital
Legal reserve
Merger reserve
IAs reserve
Retained earnings
Net icome (loss)
12/31/2015
12/31/2014
1,343.3
152.1
12.4
96.5
311.3
(1.7)
1,913.9
1,343.3
139.2
12.4
57.5
245.8
258.0
2,056.2
risk Factors
and UncertaintY
40
Volatility in the macroeconomic context, financial market instability, complexity management processes and continuous legislative
and regulatory developments demand renewed capacity to protect and maximise the tangible and intangible sources of value that
characterise the corporate business model. Pirelli adopts a pro-active risk management system which, by systematically identify-
ing, analysing and assessing risk-prone areas, provides the Board of Directors and management with decision-making tools so that
they can anticipate and manage the effects of these risks guided by an awareness that an assumption of risk is a fundamental part
of business management and which allows the proactive reporting of possible risks or factors of opportunity that are generated
during the financial year and from a standpoint of continuous improvement in risk management practices.
The Pirelli Risk Model systematically assesses three categories of risk: the risks of the external environment, strategic risks and
operational risks, and which periodically are submitted to the Audit, Risks, Sustainability and Corporate Governance Committee.
1. exterNAL CoNtext risks
Risks whose occurrences are outside the sphere of influence of the company. This category includes risks related to macroeconomic
trends, changes in demand, competitor strategy, technological innovation, the introduction of new regulations, and country-specific
risks (economic, security, political and environmental risks).
2. strAtegiC risks
Risks that are typical for a specific business sector. Proper management of these risks is a source of competitive advantage or, on
the contrary, a cause for failure to achieve plan targets (three-yearly and yearly). This category includes market risk, product inno-
vation and process risk, human resources, raw material price risk, production process risk, financial risk and M&A risk.
Directors’ Report on Operations / 2015 ANNUAL REPORT To enable certification by the Chief Financial Officer, the com-
panies and relevant processes that feed and generate econom-
ic, equity or financial information have been mapped. Identifi-
cation of the Group companies and relevant processes is done
annually on the basis of quantitative and qualitative criteria.
The quantitative criteria involve identifying Group companies
that, in connection with selected processes, represent an ag-
gregate value exceeding a certain threshold of materiality.
Qualitative criteria involve the examination of processes and
of companies that, in the opinion of the Chief Financial Officer,
may present potential areas of risk, even if not included in the
quantitative parameters described above.
For each selected process, the risk / control objectives have
been identified related to preparing Financial Statements and
related disclosures as well as the effectiveness / efficiency of
the internal control system in general.
For each control objective verification activities have been im-
plemented and specific responsibilities have been assigned.
A supervisory system has been implemented on controls per-
formed by a mechanism of chain certifications; any problems
that come to light in the evaluation process are the subject of
action plans whose implementation is verified in subsequent
closings.
Lastly, a quarterly release has been scheduled by the Chief
Executive Officer and Chief Financial Officer of subsidiaries
of a declaration of reliability and accuracy of the data sent
for the purpose of preparing the consolidated Group Financial
Statement.
Around the dates of the Board of Directors meetings for ap-
proving consolidated data at 30 June and 31 December, the re-
sults of the verification activities are discussed by the Sectors
Chief Financial Officers with the Chief Financial Officer
In summary, a system has been adopted for continuous and
systematic control that provides a reasonable assurance re-
garding the reliability of the information and economic and
financial reporting.
The Internal Audit Department performs regular audits aimed
at verifying the adequacy of the design and operation controls
by sample on companies and processes, selected on the basis
of materiality.
On the basis of regular reports, the Chief Financial Officer has
reported to the Board of Directors on the effectiveness of the
System, through the Audit, Risks, Sustainability and Corpo-
rate Governance Committee.
41
3. operAtioNAL risks
Risks generated by the organization and by business process-
es, which do not involve any competitive advantage. This type
of risk includes Information Technology, Business Interrup-
tion, Legal & Compliance, Health, Safety & Environment and
Security risks.
Cutting across the risks mentioned above are social, envi-
ronmental and business ethics responsibility risks and
reputational risks.
Risks associated with social-environmental responsibility and
business ethics are risks associated with non-compliance with
local and international regulations and corporate policies re-
garding respect for human and labour rights, for the environ-
ment and for business ethics and can be generated both by the
organization and as part of its value chain, and even within the
supply chain. These risks can in turn lead to reputational risks.
Reputational risks relate to actions or events that could engen-
der a negative perception of the Company by its main stake-
holders. The main areas of risk in this category, in addition
to the aforementioned risks related to social-environmental
responsibility and business ethics, are also the inherent risks
of leadership, quality and the level of product innovation.
System of risk management and internal control relative
to the financial reporting process.
The Company has implemented a specific and detailed system
of risk management and internal control, supported by a dedi-
cated IT application, in connection with the process of prepar-
ing financial half-year and annual separate and consolidated
statements.
In general, the internal control system implemented by the
Company aims to ensure the safeguarding of equity, compli-
ance with laws and regulations, the efficiency and effective-
ness of business operations as well as the reliability, accuracy
and timeliness of financial reporting.
In particular, the process of preparing financial information
takes place via appropriate administrative and accounting
procedures that have been drawn up in accordance with crite-
ria established in Internal Control - Integrated Framework is-
sued by the Committee of Sponsoring Organizations of Trade-
way Commission.
The administrative/accounting procedures for the prepara-
tion of Financial Statements and all other financial reports
are prepared under the responsibility of the Chief Financial
Officer, who periodically attests to (in any case in the annual/
consolidated Financial Statements) their adequacy and effec-
tive application.
Directors’ Report on Operations / 2015 ANNUAL REPORT 42
1. externaL
context risks
Risks associated with general economic
conditions and changing demand
in the medium term
Pirelli expects the recovery in global economic activity to
continue gradually, driven by perspectives related to robust
growth in the US economy and, to a lesser extent, the Europe-
an and Japanese economies. This recovery will still be uneven
because emerging markets (particularly those of oil export-
ers) will continue to represent a real risk factor for the world
economy, due to a geopolitical scenario that is still highly un-
certain, especially in the Middle East area. Further elements
of uncertainty may arise not only from a worsening of the
current phase of Chinese economic slowdown (and subsequent
repercussions on the financial markets), but also from a signif-
icant worsening of the current recession that is characterizing
the Latin American continent.
EUROPE: IMPROVING OUTLOOK
The economic recovery should not only continue, but also ac-
celerate in 2016, while remaining at historically modest levels.
This growth forecast is supported by four main factors: the
current bearish trend in raw materials, the continuation of ex-
pansionary monetary policy by the ECB, a weak Euro and a re-
duction in the fiscal austerity measures. While on one hand, the
risks related to a Greek exit from the Eurozone have decreased
considerably in recent months there is, on the other, always the
uncertainty linked to the Middle East crisis and possible social,
political and economic repercussions for Europe.
UNITED STATES: EXPECTATIONS
FOR SUSTAINED GROWTH
Even with respect to a change in monetary policy, the fun-
damentals underlying the US economy remain solid and 2016
should confirm the economic recovery glimpsed during 2015.
Household consumption (which is expected to grow by about
3%) and the housing market, will remain the key drivers of
economic recovery, which will include, last, but not least, gov-
ernment spending, which after being a deductive factor for
two consecutive years, will return to making an important
contribution in 2016. The current trend in the US Dollar, com-
bined with increasing geopolitical uncertainty could limit the
contribution made by foreign demand.
CHINA: FURTHER SLOWDOWN IN GDP
In line with the main market operators, Pirelli expects eco-
nomic growth of the People’s Republic of China to slow further
in 2016, probably slightly below the government target (6.5%
-6.6% average growth in 2016-2020). A now endemic oversup-
ply, combined with high levels of debt and low rates of return
in key sectors such as heavy manufacturing, utilities and the
mining sector, will continue to be one of the main obstacles
to growth in the short to medium term. This structural slow-
down is not without risks, however, as demonstrated by the
recent increase in volatility in the Chinese financial market.
SOUTH AMERICA:
OUTLOOK STILL UNCERTAIN
The outlook for the Latin American continent also remains
negative in 2016 (-1.3% in 2015), in line with market expec-
tations for a growth rate substantially at zero and increasing
risks for a second year of recession. The Brazilian economy,
which significantly influences the regional average, is about
to experience another year of decline, coupled with a crisis
of confidence among consumers and businesses caused by
strong political uncertainty, high interest rates and inflation-
ary pressure (linked to the current trend of the BRL). The cur-
rent difficulty in implementing the fiscal/structural policies
the country needs, provide a glimpse of additional significant
risks in the short to medium term. As for the other two major
economies of the Latin American area (Argentina and Vene-
zuela), the latter deconsolidated as of December 31, 2015, the
macroeconomic scenario continues to be highly uncertain
both in terms of growth rates and currency profile.
RUSSIA: A SCENARIO
OF ONGOING RECESSION
The year 2016 should confirm, although to a slightly lesser ex-
tent, the recessionary forces that led the Russian Federation
growth rate into negative territory during 2015. The Russian
economy will face not only a highly critical exogenous setting
(low raw material prices/rising geopolitical tensions), but also
the unfavourable domestic content given by a fall of the index of
business confidence, growing inflationary pressure and high in-
terest rates. To this can then be added virtual isolation of Russia
in Western capital markets because of international sanctions.
Country risk
Pirelli has adopted a “local for local” strategy creating pro-
ductive presences in rapidly developing countries to respond
to the local demand with competitive industrial and logis-
tics costs. This strategy increases the competitiveness of the
Group by also allowing an overcoming of the phenomenon of
strengthening “trading blocs” and the increasing protectionist
measures (customs barriers or other measures such as tech-
nical prerequisites, product certification, administrative costs
related to import procedures, etc.).
Directors’ Report on Operations / 2015 ANNUAL REPORT In the context of this strategy, Pirelli operates in countries
(Argentina, Brazil, Mexico, Russia, China, Egypt, Turkey, Ven-
ezuela and Indonesia) where the general economic and politi-
cal context and tax regime may prove unstable in the future.
In fact, structural elements of risk persist in the LatAm area,
identifiable especially in the political-economic scenario of
Venezuela, and in Egypt, where, to date, political and social
instability is still high, and has led over the past few years,
to an alteration in normal market dynamics and, more gen-
erally, in the operating conditions of business which brought
about the deconsolidation of the Venezuelan company Pirelli
de Venezuela C.A. as of December 31, 2015. To these scenari-
os of uncertainty, the current economic and political crises in
the region Ukraine was then added, whose implication in the
medium to long term remains to this day still very uncertain.
The Group constantly monitors the evolution of risks (political,
economic / financial and security) connected with the coun-
tries in which it operates in order to continue to adopt timely
(and if possible in advance) measures to mitigate the potential
impacts of changes in the local context. Moreover, in situations
of underutilization of the capacity of some factories, shifts in
production between Group plants are possible.
Risks related to changes in demand
in the long term
Over the last few decades, some social and technological
trends have emerged that might have a material impact over
the medium-long term on the automotive sector and indirectly
on the tyre market. On the one hand, these are represented by
growing urbanisation (according to United Nations estimates,
about 70% of the global population will live in urban areas in
2050) and, on the other, by changes in the values and behav-
iour of younger generations (increase in the average age when
a driver’s license is obtained, loss of the importance of owning
a car, increased recourse to various types of car sharing).
These factors will be complemented by the spread of informa-
tion technologies, with a concurrent expansion of e-commerce
and/or telecommuting, and frequent regulatory changes in
both mature and emerging economies to limit the presence of
polluting vehicles within and near metropolitan areas. These
dynamics may be followed by an evolution in automotive sec-
tor demand (from changes to vehicle dimensions or type of
propulsion system to possible resizing of cars to satisfy the
transportation preferences of citizens), with contingent impact
on tyre sector dynamics.
Pirelli constantly monitors the evolutionary changes taking
place in automotive sector demand by actively participating
in international working groups, such as the one engaged
in the Sustainable Mobility 2.0 (SMP 2.0) project, sponsored
by the World Business Council for Sustainable Development
(WBCSD). The principal aim of SMP 2.0 is to study the possible
long-term evolution in urban mobility and promote solutions
that may improve the social, environmental and economic
well-being of the urban population.
2. strateGic risks
Risks related to the trend in prices
and availability of raw materials
Natural rubber, synthetic rubber and raw materials related to
oil (in particular chemicals and carbon black) will continue to
be a factor of uncertainty in the cost structure of the Group,
given their strong volatility in recent years and their impact
on the cost of the finished product.
For the main raw materials purchased by the Group, possible
price scenarios are constantly simulated based on historical
volatility and/or the best information available on the market
(e.g. forward prices). Based on different scenarios, increases in
selling prices and/or the different internal actions for recov-
ery of cost efficiency (use of alternative raw materials, reduc-
tion in product weight, improvement in process quality and
reduction in waste levels) are identified and are necessary to
ensure the levels of profitability expected.
Financial risks
The Group is exposed to financial risks, mainly related to the
exchange rate, obtaining financial resources in the market,
fluctuations in interest rates, the ability of customers to meet
their obligations to the Group and the price of financial assets
held in portfolio. Financial risk management is an integral
part of Group business management and is handled directly
by headquarters in accordance with guidelines issued by the
Finance Department on the basis of general risk management
strategies identified by the Managerial Risk Committee.
Exchange rate risk
The geographical distribution of Pirelli production and com-
mercial activities entails exposure to “transaction” and “trans-
lation” exchange rate risk.
The transaction exchange risk is generated by commercial
and financial transactions made in individual companies in
currencies other than the functional one, due to fluctuations
in exchange rates between the time when the commercial/
financial relationship originates and when the transaction is
completed (collection/payment).
The policy of the Group is to minimize the impact of trans-
action exchange rate risk related to volatility; for this, Group
procedures make Operating Units responsible for collecting
43
Directors’ Report on Operations / 2015 ANNUAL REPORT
44
complete information about the assets and liabilities that are
subject to transaction exchange rate risk (mainly represented
by receivables and payables in foreign currency). This risk
is hedged with forward contracts made, where possible, with
Group Treasury.
The managed positions subject to exchange rate risk are
mainly represented by receivables and payables denominated
in foreign currency.
The Group Treasury is responsible for hedging the net position
for each currency and, in accordance with established guide-
lines and restrictions, it closes all risk positions by trading
derivative hedging contracts on the market, which typically
take the form of forward contracts.
Furthermore, as part of the annual and three-year planning
process, the Group makes exchange rate forecasts by using
the best information available in the market. Any fluctuation
in the exchange rate between the time of planning and the
time when a commercial or financial transaction originates re-
sults in an exchange risk on future transactions with respect
to the objectives communicated to the market.
From time to time, the Group assesses the need to engage in
hedging transactions on future transactions for which it typi-
cally uses both forward and optional purchase or sale transac-
tions such as risk reversal (i.e., zero cost collar).
Pirelli owns controlling interests in companies that prepare
their Financial Statements in currencies other than the Euro,
which is used to prepare the consolidated Financial Statement.
This exposes the Group to currency translation risk, due to
the conversion into Euro of the assets and liabilities of subsid-
iaries operating in other currencies. The principal exposures
to currency translation risk are constantly monitored and it
is not currently deemed necessary to adopt specific policies to
hedge this exposure.
The year 2015 saw a significant depreciation of the main cur-
rencies of emerging countries of interest to Pirelli against the
US Dollar (USD), especially the Argentine Peso, the Turkish
Lira, the Brazilian Real and the Egyptian Pound. This gener-
al trend of depreciation of emerging currencies, partly due to
exogenous factors - such as the monetary policy of the US Fed-
eral Reserve - and specific internal macroeconomic conditions,
resulted in an overall negative effect for the Group.
As for 2016, Pirelli - in line with the main market operators
- expects a continuation of the current trend of depreciation
of the main currencies of emerging countries attributable,
once again, to the effect of the change in monetary policy by
the Federal Reserve and specific elements of country risk. In
particular, the Group expects strong volatility in the foreign
exchange market and a persistence of situations of weakness
or further devaluation of the currencies of emerging countries
where Pirelli operates, both against the Euro and the US Dollar.
Finally, as regards the Euro/US Dollar exchange, Pirelli ex-
pects a weaker Euro as compared to the levels at the end of
2015. Also in this case, significant elements of uncertainty
remain such as, among other things, the timing at which the
Federal Reserve will implement a rise in future interest rates
and any measures that the European Central Bank will adopt to
fine tune the Quantitative Easing program launched this year.
Liquidity risk
The principal instruments used by the Group to manage the
risk of insufficient financial resources being available to meet
financial and commercial obligations in the terms and dead-
lines established, comprise by its annual and three-year fi-
nancial and cash-pooling plans. These allow complete and fair
detection and measurement of incoming and outgoing cash
flows. Differences between plans and actual data are constant-
ly analysed.
The Group has implemented a centralised cash pooling sys-
tem for the management of collection and payment flows in
compliance with various local currency and tax laws. Banking
relationships are negotiated and managed centrally, in order
to ensure coverage of short and medium-term financial needs
at the lowest possible cost. The procurement of medium and
long-term resources in capital markets is also streamlined
through centralised management.
Prudent management of the risk described above requires the
maintaining of an adequate level of cash or cash equivalents
and/or highly liquid short-term financial instruments, and the
availability of funds through an adequate amount of commit-
ted credit facilities and/or recourse to capital markets.
In addition to the available portion of the two committed
credit facilities of Euro 1.2 billion in the aggregate, which in
December 2015 had been used for Euro 379.5 million in the
aggregate, the Pirelli Group resorts to capital markets diver-
sifying products and deadlines to seize the best opportunities
available each time.
It is hereby additionally mentioned that an extraordinary
general meeting of Pirelli shareholders on 15 February 2016
approved the project for merging by incorporation of the con-
trolling company Marco Polo Industrial Holding S.p.A. into
Pirelli. The effect of this merger will be that Pirelli will hold
the debt of Marco Polo Industrial Holding S.p.A. subscribed to
for the acquisition of Pirelli and amounting to about 4.2 bil-
lion. On 16 February 2016, the Board of Directors of Pirelli &
C. S.p.A. approved the essential outlines of the of refinancing
plan in respect of a counter value of up to a maximum of euro
7 billion, being the gross indebtedness of Pirelli as at 30 Sep-
tember 2015 (euro 2.67 billion) including the effects foreseen
in respect of the merger with Marco Polo Industrial Holding
Directors’ Report on Operations / 2015 ANNUAL REPORT S.p.A. (debt amounting to about euro 4.2 billion).
This outline for financing aims to extend the maturity of the
debt and optimise its structure thanks to recourse to bond and
banking markets. The terms and conditions of the refinancing,
including any guarantees required, will be defined in the light
of market conditions and practices of reference, also taking
into account the rights incorporated into the Terms and Condi-
tions for the benefit of holders of bond loans issued by Pirelli
International plc and guaranteed by Pirelli Tyre S.p.A. for an
aggregate of euro 600 million maturing in 2019 and which, as
already stated, will remain in force until its natural maturity.
The plan of refinancing approved today leaves the right for
Pirelli to activate as an alternative, if worthwhile, the Mergeco
Facility loan, already made available to the company by a pool
of banks in the area of the purchase offer made by Marco Polo
Industrial Holding S.p.A. in respect of Pirelli unchanged.
Interest rate risk
Fluctuations in interest rates affect the market value of fi-
nancial assets and liabilities of the Group and net financial
expenses.
Group policy aims to maintain the following ratio between fixed
rate and variable rate exposures: 70% fixed and 30% variable.
In order to maintain this trend ratio, the Group enters into de-
rivative contracts, typically interest rate swaps.
Price risk associated with financial assets
The Group is exposed to price risk only regarding the volatil-
ity of financial assets such as listed and unlisted stocks and
bonds, 3.7% of total assets of the Group. Derivatives hedges are
not normally set up to limit the volatility of these assets.
Credit risk
Credit risk represents Group exposure to contingent losses
resulting from default by commercial and financial counter-
parties.
Regarding commercial counterparties, in order to limit this
risk, Pirelli has implemented procedures to evaluate the po-
tential and financial solidity of its customers, monitor expect-
ed incoming cash flows and take credit recovery action if
necessary. The aim of these procedures is to define customer
credit limits, which if exceed blocking of supplies is applied.
In certain cases, customers are asked to provide guarantees,
mainly bank sureties issued by parties with the highest credit
or personal standing,
Less frequently, mortgage guarantees may be requested.
Another tool used for risk management of commercial receiv-
ables are insurance policies: as of January 2012 the company
has signed a master agreement expiring in December 2016
with a leading insurance company for worldwide coverage
(Egypt and Venezuela are excluded from the policy) of the
credit risk mainly related to sales of the spare parts segment
(with about 70% of acceptance rate in December 2015).
In the course of 2015, the general situation of trade receiva-
bles remained essentially in line with the closing of the pre-
vious year.
The Group operates only with highly rated financial counter-
parties for the management of its temporary cash surpluses or
trading in derivative instruments.
Pirelli does not hold public debt instruments from any Euro-
pean country, and constantly monitors its net credit exposure
to the banking system and does not have significant concen-
trations of credit risk.
3. oPerationaL risks
Environmental risks
Activities and products of the Pirelli Group are subject to nu-
merous environmental regulations related to the specificity of
the different countries in which the Group operates. These reg-
ulations have in common their tendency to evolve in an ever
more restrictive manner, also because of the growing concern
of the international community over the issue of environmen-
tal sustainability. Pirelli expects a gradual introduction of
stricter laws to occur in connection with the various environ-
mental aspects on which companies may impact (atmospheric
emissions, waste generation, impacts on soil, water use, etc.),
by virtue of which the Group plans to have to continue to make
investments and/or incur costs that could be significant.
In regard to impacts from Climate Change, no significant
risks have been found in relation to production processes or
markets in which the Company operates in the short to me-
dium term. In the long run, the uncertainties related to Cli-
mate Change will be considered also in light of the possible
evolution of the regulatory profile in both mature and emerg-
ing markets, in any case monitored by the company through
sensitivity analyses. Instead, in terms of opportunities, Pirelli
Green Performance tyres exhibit growth potential, given their
relevant lower environmental impact and the possible regu-
latory evolution in many countries, as it was in Europe with
European labelling standards.
Employee health and safety risks
In carrying on its activities, the Pirelli Group incurs expenses
and costs for the actions necessary to ensure full compliance
with its obligations under regulations regarding health and
45
Directors’ Report on Operations / 2015 ANNUAL REPORT 46
safety in the workplace. In Italy in particular, the law relat-
ing to health and safety in the workplace (Legislative Decree
81/08) and subsequent updates (Legislative Decree 106/09)
have introduced new obligations that have impacted on the
management of activities at Pirelli sites and models for allo-
cating responsibilities.
Failure to comply with current legislation involves crimi-
nal and/or civil penalties against those responsible and, in
some cases of violation of the legislation, on health and safety
against the Companies themselves, according to a European
model of strict liability of companies implemented in Italy
(Legislative Decree 231/01).
Product defect risk
Like all manufacturers of goods for sale to the public, Pirelli
may suffer liability claims related to alleged defects in mate-
rials sold or may be required to launch recall campaigns of
products. Although in recent years there have been no sig-
nificant cases and such events are however covered from an
insurance standpoint, their occurrence could have a negative
impact on the reputation of the Pirelli brand. For this reason,
the tyres manufactured by Pirelli are subjected to careful
quality analyses before being placed on the market, and the
entire production process is subject to specific “quality assur-
ance” procedures with safety and performance objectives be-
ing constantly raised.
Litigation risks
In carrying on its activities, Pirelli may become involved in
legal, fiscal, trade or labour law disputes. The Group adopts the
measures necessary to prevent and mitigate any penalties that
may result from such proceedings.
Risks associated with human resources
The Group is exposed to the risk of loss of resources in key
positions or with “critical know how”. To address this risk, the
Group adopts remuneration policies that are periodically up-
dated and are also based on changes occurring in the gener-
al macroeconomic scenario, as well as on the basis of salary
benchmarks. There will also be long-term incentive plans and
specific non-competition agreements (also with retention ef-
fect) with respect among other things, to the risk profiles of
the activities related to the business. Finally, specific “man-
agement” policies are adopted to motivate and retain talent.
Risks related to information systems
and network infrastructure
The information systems and ICT infrastructures are a funda-
mental support for the proper and continuous performance of
Group operations as they now cover almost all of business pro-
cesses. Unauthorized access, vulnerabilities in security sys-
tems or failures and malfunctions of information systems or
the technical infrastructure supporting them, can thus cause
serious repercussions to both company results and its image.
For these reasons, actions were taken in 2015 to mitigate risks
related to unauthorized access and improper use of the sys-
tems, with special attention being paid to Internet access. Ac-
tions were also taken to improve the continuity of ICT services
by replacing the infrastructure components characterized by
greater obsolescence and move increasingly towards the use of
redundant technical architectures both locally and centrally.
As for the risk mitigation deriving from the loss of informa-
tion, the technical solution of data backup was implemented,
based on distinct geographic hubs, and preparation of the new
Disaster Recovery solution was completed. Particular attention
was given to the review activity of Hardware and Software en-
vironments to activate the migration projects necessary from
architecture that will soon no longer be supported by suppliers.
A project is underway that will lead to the release of a new
centralized architecture for storage of documents with fiscal
and operational importance in compliance with regulations.
In view of the new service delivery methods via the Internet
(ex. Cloud and Mobile), it was decided to take action to fully
abide by Group Security standards specifically defined for
the use of such services. The architecture of perimeter secu-
rity devices (such as Internet Firewall and Web Filtering sys-
tems) was also revised to enhance the control against threats
via the Internet, introducing where appropriate, firewalling
application tools.
At Laboratories and Plants, re-engineering of application sys-
tems to overcome obsolescence issues of application platforms
began. Also at plant, a worksite was started together with IT
Security to manage the increasing complexity dictated by an
increasing need for integration and interoperability between
the information systems of the company and the solutions of
industrial suppliers that do not always respect the evolution of
the compliance of IT platforms with their product.
Business interruption risks
The territorial fragmentation of the operating activities of the
Group and their interconnection exposes to risk scenarios that
could cause the interruption of business operations for more or
less prolonged periods, with consequent effects on the “opera-
tional” capabilities and results of the Group itself.
Directors’ Report on Operations / 2015 ANNUAL REPORT
of 24 reputational risks specific to Pirelli, which will be peri-
odically verified and updated. This mapping derives from an
analysis of a series of internal and external drivers including:
negative events with an impact on reputation which have oc-
curred in the sector worldwide over the last ten years; inter-
views with external Key Opinion Leaders on sector trends, es-
pecially mobility and sustainability; interviews with internal
Key Opinion Leaders with particular reference to the analysis
of the probability of occurrence of the risks identified.
The risk events identified were then subjected to qualita-
tive-quantitative assessments by a sample representative of
the general public in the five key Pirelli countries and led to
the definition of governance and management structures, and
preparation of mitigation and/or crisis management plans.
Risks in social, environmental, business
ethics responsibility and third-party audit
Risk management at Pirelli is enterprise-wide and includes
identification, analysis and monitoring of environmental, social,
financial and business ethics risks that are directly or indirect-
ly associated with the company, at Pirelli affiliates or in rela-
tions with them, such as the sustainability of the supply chain.
Ad hoc assessments are also carried out before entering a
specific market, in order to assess any political, financial, en-
vironmental and social risks, including those connected with
human and labour rights. Together with constant co-ordi-
nation and monitoring at a corporate level, compliance with
Pirelli economic, social (especially human rights and labour
rights) and environmental sustainability rules is assessed in
periodic audits commissioned by Pirelli from specialised inde-
pendent firms, and by extensive Internal Audit activities.
Particular attention is dedicated to the sustainability of Pirelli
sites and the company supplier sites operating in emerging
countries.
Also during 2015, Pirelli commissioned third-party Audits of
its suppliers, in addition to continuing monitoring internally
through the activities of the Internal Audit Department.
47
Risk scenarios related to natural events or accidents (fires,
floods, earthquakes, etc.), wilful misconduct (vandalism, sabo-
tage, etc.), failure of the auxiliary plants or interruption of the
supply of utilities can, in fact, cause significant property dam-
age, reduction and/or interruption in production, particularly
if the event concerns production sites with high volumes or
specific products (high-end). Pirelli monitors its vulnerability
to catastrophic natural events (in particular flood, hurricane
and earthquake) with estimates of potential damage (given the
probability of occurrence) of all Group production sites. Anal-
yses confirm adequate monitoring of the Business interruption
risks is in place, thanks to a comprehensive series of securi-
ty measures, systems of prevention from harmful events and
mitigation of potential impacts on the business, also in view of
the current business continuity plans and insurance policies
in place to cover property damage and business interruption.
With reference to the earthquake risk, and specifically to the
facility in Turkey, particularly significant seismic events could
result in losses exceeding the limits insured resulting in nega-
tive impact on operating results.
Even the Pirelli supply chain, with special attention being
given to the Tier-1 suppliers, is subject to assessment in con-
nection with the potential risk of business interruption. The
Group is performing audits at the above suppliers to define a
series of mitigation measures to reduce the vulnerability of
its supply chain; in particular, extension of the portfolio of ap-
proved plants for each supplier, approval of materials/qualifi-
cation of alternative suppliers, increased levels of safety stock
of critical materials, etc.
reputAtioNAL AND
soCiAL-eNviroNmeNtAL
respoNsiBiLitY risks
Reputational risks
As of 2013, Pirelli has developed an ad hoc methodology for the
identification, measurement and management of reputational
risk, which is measured in terms of probability of occurrence
and impact on reputation. Reputational risk is a current or pro-
spective risk that might result in a loss of profits and affect
propensity to buy due to a negative perception of the Company
by one or more stakeholders. While on the one hand, reputa-
tional risk has to be construed as a contingent occurrence of a
negative event tied to one of the three macro-families of risks
mentioned above, on the other hand it must be managed as an
independent event precisely because its scope depends on the
expectations of stakeholders and the impact of the negative
event.
In 2014, the methodology chosen resulted in the identification
Directors’ Report on Operations / 2015 ANNUAL REPORT
Every Mark Is Unique / PIRELLI
Every Mark Is Unique / PIRELLI
Giovanni Allevi
Composer
“After years of concerts,
of music written and lived, what really
matters is to have loved.
Love is the only mysterious force capable
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On February 9, 2016 Pirelli and the Lombardy Region signed a competitiveness agreement for a regional grant of euro 1.9 mil-
lion to the R&D project “Total Safety System” conducted at the research center of Milan Bicocca. The project, which will last for 24
months and have a total cost of euro 5.35 million, is part of activities related to the development of a new generation of tyres based
on the concept of “total safety”. The project will allow Pirelli to study new product mixes oriented towards higher value-added seg-
ments, and to achieve positive results in environmental and social issues in terms of road safety, by reducing the fuel consumption
of vehicles and increasing tyre mileage.
On February 15, 2016, Ren Jianxin, Yang Xingqiang, Bai Xinping, Ze’ev Goldberg, Tao Haisu, Wang Dan and Zhang Junfang, previ-
ously co-opted by the Board, were reappointed as directors by the ordinary general meeting of Pirelli & C. S.p.A.. The Extraordinary
General Meeting also approved a proposal of mandatory conversion of savings shares into newly issued special category unlisted
shares without voting rights, as well as a proposal to adopt new Articles of Association. The mandatory conversion and adoption
of the new Articles of Association were also approved, to the extent applicable, by a special savings general meeting of Pirelli & C.
S.p.A.. The extraordinary general meeting of Pirelli & C. S.p.A. also approved the merger by incorporation of the controlling Parent
company Marco Polo Industrial Holding S.p.A. into Pirelli & C. S.p.A, for 6.30 Pirelli shares to be allotted after the merger to Marco
Polo International Holding Italy S.p.A. (Holdco) - the sole partner of Marco Polo Industrial Holding S.p.A. - for every 1 share held
before the merger by Marco Polo International Holding Italy S.p.A. (Holdco) in Marco Polo Industrial Holding S.p.A.. The merger is
expected to be finalised within the first half of 2016.
Following the mandatory conversion of savings shares into special category unlisted shares, the savings shares ceased
to be listed on regulated markets as of February 26, 2016.
On February 16, 2016, the Board of Directors of Pirelli & C. S.p.A. approved the essential lines of a refinancing plan for an amount
up to a maximum of euro 7 billion aimed at extending debt maturities and optimizing their structure thanks to the use of bond and
banking markets.
The terms and conditions of the refinancing, including any guarantees, will be defined in light of market conditions and practices
of reference, also taking into account the rights incorporated in the Terms and Conditions in favour of bond holders for euro 600
million maturing in 2019 and that will remain in place until maturity. The refinancing plan leaves the right to activate the loan
Mergeco Facility alternatively unchanged for Pirelli, if appropriate, and already made available to the company by a syndicate of
banks as part of the public purchase offer of Marco Polo Industrial Holding S.p.A. on Pirelli.
Following the confirmation by the General Meeting of the directors co-opted on September 2 and October 20, 2015, the Board of
Directors confirmed Ren Jianxin Chairman of the Board of Directors and the governance structure approved on October 20, 2015.
Directors’ Report on Operations / 2015 ANNUAL REPORT aLternatiVe
PerForMance
indicators
This document, in addition to the financial figures foreseen under International Financial Reporting Standards (IFRS), also includes
figures derived from the latter, although not actually required by IFRS (Non-GAAP Measures). These measures are presented in or-
der to allow a better assessment to be made of Group operations and shall not be considered alternatives to those required by IFRS.
In particular, the Non-GAAP Measures used are as follows:
Gross operating margin: is an intermediate economic figure derived from operating income, which excludes amortization of
tangible and intangible assets;
Fixed assets: this figure is the sum of “Property, plant and equipment”, “Intangible assets”, “Investments in associates and joint
ventures” and “Other financial assets”;
Provisions: this figure is the sum of “Provisions for liabilities and charges (current and non-current)”, “Personnel provisions”
and “Provisions for deferred taxes”;
Operating working capital: this figure is the sum of “Inventory”, “Trade receivables” and “Trade payables”;
Net working capital: this figure consists of the operating working capital and other receivables and payables not included in
“Net financial position”;
Net financial position: this figure is represented by gross financial debt less cash and cash equivalents and other financial
receivables.
51
Directors’ Report on Operations / 2015 ANNUAL REPORT otHer inForMation
Role of the Board of Directors
The Board of Directors is responsible for strategic guidance and supervision of the overall business activities, with authority over
the administration as a whole and is responsible for taking decisions that are the most important in economic/strategic terms, in
terms of structural impact on operations, or functional to exercising control and guidance of Pirelli.
The Chairman has the legal representation of the Company also in suit as well as all other powers granted according to the Articles
of Association
The Vice Chairman and CEO are granted exclusively powers for the ordinary management of the Company and the Group as well
as power to propose the Business Plan and Budget and any resolutions concerning strategic industrial partnerships or joint venture
of which Pirelli is a part to the Board of Directors.
Information on ownership structures
52
Share capital structure: the share capital subscribed and paid at the date of approval of the present financial report amounts to
euro 1,345,381 thousand and is represented by 487,991,493 registered shares without par value, subdivided as follows:
Ordinary shares
special shares
475,740,182
12,251,311
97.49%
2.51%
no. shares
% with respect to share capital
The ordinary shares include 351,590 Pirelli & C. S.p.A Treasury shares owned by the sole shareholder Marco Polo Industrial
Holding S.p.A., which also owns 93.268% of the Special Shares, including the special Treasury shares (408,342 shares) owned
by Pirelli & C. S.p.A.
The company is subject to management and coordination of Marco Polo International Italy S.p.A., which through Marco Polo Inter-
national Holding S.p.A. is the sole shareholder of Marco Polo Industrial Holding S.p.A..
On the website of the Company, agreements between the shareholders of Marco Polo International Italy S.p.A. are available that
contain provisions relating to the governance of Pirelli.
Security policy document
Although the Decree Law of February 9, 2012 no. 5 (containing the “Urgent provisions on simplification and development”) convert-
ed, with amendments, by Law April 4, 2012 no. 35, repealed the obligation to prepare/update the Security Policy Document, it is
noted that Pirelli & C. S.p.A. however updated the above document for the year 2015 in order to allow effective monitoring of the
adoption and compliance with the safety measures.
The Board of Directors
Milan, March 15, 2016
Directors’ Report on Operations / 2015 ANNUAL REPORT 53
Directors’ Report on Operations / 2015 ANNUAL REPORT 02.report
on value chain
responsible
management
54
Directors’ Report on Operations / 2015 ANNUAL REPORT Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
iNtroDuCtioN
This section of the report explores the sustainable manage-
ment model adopted by Pirelli and the tools for governing and
supporting the maintenance and creation of value, relations
with Stakeholders and connections related to the development
of financial, intellectual, human, social and relational capital.
The analysis has been performed through three macro chapters:
The Economic Dimension, which provides details of the dis-
tribution of added value, along with relations and perfor-
mances relating to Shareholders, Customers and Suppliers;
The Environmental Dimension, which describes sustaina-
ble development throughout the product lifecycle;
The Social Dimension, which brings together the para-
graphs dedicated to the Governance of Human Rights, the
Internal Community and the External Community.
The quantitative data reported highlight the development dur-
ing 2015 as compared to 2014 and 2013, with an overview of
the targets for 2016 and for the years to come.
For a detailed account of the awards Pirelli has received
in 2015, please see the “Sustainability” section of the Pire-
lli website, where a constant update of the “Sustainability
Channel” is also available.
Sustainable performances set forth in the Annual Report for
2015 have been subject to attestation by third parties (SGS
Italia S.p.A.).
sustAiNABLe
goverNANCe moDeL
The Pirelli Sustainability Model draws inspiration from the
United Nations Global Compact (which Pirelli has been a
member of since 2004, in addition to sitting on the Steering
Committee of the Global Compact LEAD since 2013) and the
principles of Stakeholder Engagement dictated by the AA1000
and ISO 26000 Guidelines.
Pirelli’s responsible management runs through the entire val-
ue chain. Each management area integrates its economic, so-
cial and environmental responsibility into its activity by con-
stantly communicating with other functions and stakeholders
so as to implement the strategic Guidelines of the Group.
The main management systems adopted include ISO 9001, ISO/
TS 16949, ISO/IEC 17025, ISO 14001, ISO 14064, OHSAS 18001
certifications. Moreover, from 2004 the company is inspired by
the requirements of Standard SA8000® as a reference tool for
managing Social Responsibility at its Affiliates and along the
supply chain. Details on the coverage of these certifications and
reference tools have been given in the “Customers”, “Supplier”,
“Environmental Dimension”, “Industrial Relations” and “Occu-
pational Health, Safety and Hygiene” sections of this report.
The Board of Directors approves the objectives and targets of
sustainable management integrated into the plan of the com-
pany alongside its annual financial statements.
Sustainable Governance finds its organisational foundations
in the Sustainability Steering Committee, body appointed in
2004 and composed of the Top Management of the company,
representing all businesses and all functional responsibili-
ties. The Committee meets ordinarily at least once a year and
guides the development of Sustainability within the Firm.
The organisational structure is then composed of Sustainabil-
ity and Group Risk Governance Department which has over-
sight of the management at Group level and proposes plans for
sustainable development to the Sustainability Steering Com-
mittee. The Sustainability Department receives support from
the Country Sustainability Managers for overseeing activities
covering all affiliates of the Group. The role of the Country
Sustainability Manager is currently held directly by country
CEOs, who are supported by their direct subordinates in the
operational management of local plans.
All countries where the Group is present with commercial and
industrial affiliates have an annual Sustainability Plan with
specific local targets identified in alignment with the sustaina-
bility targets defined in the Plan of the company. On a quarterly
basis countries report to the Sustainability and Group Risk Gov-
ernance Department the state of progress against the targets.
stAkeHoLDer eNgAgemeNt
The role of Pirelli in an economic and social context is tied to
its capacity to create value through a multi-stakeholder ap-
proach, i.e. by sustainable and lasting growth that can recon-
cile the interests and expectations of all those with whom the
company interacts and especially:
customers, since the Pirelli way of doing business is based
on customer satisfaction;
employees, at the basis of the wealth of knowledge and
driving force of the Group;
shareholders, investors and the financial community;
suppliers, with whom it shares a responsible approach to
business;
competitors, because improved customer service and mar-
ket position depend on fair competition;
the environment, institutions, governmental and non-gov-
ernmental bodies;
the communities of the various countries where the Group
operates on a stable basis, while being aware of its global
responsibilities as a Corporate Global Citizen.
56
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
universities located in each of the countries where Pirelli
has productive activities.
Stakeholders were engaged through a request made in their lo-
cal language to assign action priorities to a wide range of ESG
(Environmental, Social, Governance) issues. The priorities ex-
pressed by Pirelli and stakeholders have been consolidated and
displayed in a materiality matrix whose vertical axis indicates
the expectations of external stakeholders and horizontal axis
indicates the importance assigned by the Company to the ele-
ments analysed in terms of business success. The draft matrix
was then subjected to critical, independent evaluation by a lead-
ing company in ESG analysis. The experts compared the Pirelli
matrix with the content of ten international studies considered
the most reliable and significant, focusing on sustainability el-
ements impacting on the Auto Components sector, and assessed
the levels of prioritising of ESG issues on the sector. Following
this comparison, they suggested the opportunity of making
small changes in the positioning of ESG issues in Pirelli’s draft
matrix. The outcome of the process is the Pirelli materiality
matrix shown below. The upper right quadrant identifies the
elements of sustainability to which high materiality (i.e. impor-
tance) has been attributed by the stakeholders involved.
The Sustainability Plan targets for 2013-2017 with vision to 2020
that the Company gave itself, take into account the expectations
expressed by Stakeholders and integrate them considering the
development expected by the firm in the various matters.
It is right and adequate to underline that consolidation of the
materiality matrix at group level tends by its very nature to
vary strongly from the materiality matrices consolidated at sin-
gle country level. Sustainability elements positioned in an area
of low materiality in the matrix at group level may be result to
be highly material for a number of countries and specific stake-
holders who are more directly involved. So, independently of the
positioning of expectations in the group matrix, all the elements
of sustainability positioned in the different areas of the matrix
are material for the company and are met and managed in ac-
cordance with best international practices.
57
In this report there is a paragraph dedicated to each stake-
holder mentioned above, to which reference is made for fur-
ther qualitative and quantitative study.
The interactions between stakeholders conform to the AA1000
Model adopted by the company and are analysed in detail in
order to effectively manage relations with them and to create
sustainable and shared value.
Dialogue, interaction and involvement are calibrated to meet
the needs for consultation with the various types of stakehold-
er and include meetings, interviews, surveys, joint analyses,
roadshows and focus groups. Feedback received translates into
a corporate evaluation of the priorities of action and influences
the development strategy set out in the Plan of the company.
The process of planning sustainable management is charac-
terised by specific operational steps aimed at continuous im-
provement in performance: evaluation of the context through
benchmarks, dialogue with stakeholders, needs raised by in-
ternal functions, identification of risks and opportunities for
growth, defining projects and targets, implementing, monitor-
ing and reporting.
mAteriALitY ANALYsis
In 2016, starting with the “Global Stakeholder Dialogue” Pire-
lli will hold in Brussels in February, the company will update
the sustainability materiality matrix and will give account of
it in its next report. Reviews of the map will also provide input
to update the current Group Sustainability Plan with targets
to 2020, as specified later in this report.
The current materiality matrix comes from an in-depth activ-
ity of Stakeholder Engagement, which has led to dealing with
the expectations of the main stakeholders on these matters
and the importance they are recognized for the success of the
business. Given the complexity and the international extent of
the company’s stakeholders and the variety of their expecta-
tions, the panel of stakeholders of the Company from which
feedback was asked included:
the biggest original equipment customers;
hundreds of end customers for each representative market;
the most important dealers around the world;
numerous employees in the various countries where the
Group is present;
the biggest suppliers (in terms of sales to Pirelli) in each
procurement category;
the principal shareholders, investors and financial ana-
lysts of Pirelli;
national and supranational institutions and public admin-
istrations;
journalists from domestic and international newspapers;
NGOs present in each of the countries where Pirelli has
productive activities;
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Pirelli Materiality Matrix
5
4
I
S
N
O
T
A
T
C
E
P
X
E
S
R
E
D
L
O
H
E
K
A
T
S
3
R&D and product innovation
Product safety
Compliance
Employment sustainable management
Product energy efficiency
Human rights
Trasparent and complete reporting
Waste management
Process energy efficiency
Responsible management of supply chain
Evolution
of sustainable
mobility
Water management
2
Diversity management
Renewable energy
Corporate Citizenship
58
Biodiversity
2
3
IMPORTANCE FOR BUSINESS SUCCESS
4
5
mAiN poLiCies
The management Model adopted mirrors the main Group Policies, among which we can recall the “Values and Ethical Code”, the
“Code of Conduct” and the “Premium Integrity” Programme (to which an update paragraph is dedicated later in this report), the “So-
cial Responsibility Policy for Occupational Health, Safety and Rights, and Environment”, the “Equal Opportunities Statement”, the
“Green Sourcing Policy”, the “Global Tax Policy”, the “Corporate Lobbying Policy”, the Group Whistleblowing procedure (to which an
update paragraph is dedicated later in this report).
In 2015, the new Quality Policy, the “Global Personal Data Protection Policy” and the “Global Antitrust and Fair Competition Policy”
were issued. Additionally, in 2016, current provisions regarding Health, Safety, Environment and Human Rights contained in many
of the above-mentioned Policies will be updated and concentrated into two new dedicated Documents.
The Policies mentioned above have been communicated to all employees and are available on the website of the company in
multiple languages.
The Principles and provisions contained in the “Code of Ethics”, “Code of Conduct” and in the “Social Responsibility Policy for Oc-
cupational Health, Safety and Rights, and Environment” have been extended to suppliers and sub-suppliers through sustainability
clauses included in contracts; these clauses will be examined in depth in the Paragraph “Our Suppliers” of this report.
Premium Integrity Programme
In 2015 the process of analysing and implementing the “Premium Integrity” Programme continued in the main countries where the
Group operates. In the same way, during the year, the activity of training and communication on administrative liability of enter-
prises (foreseen under Legislative Decree 231/2001) was completed for the entire population of the Italian companies.
The Programme, which is available in twenty-two different languages on the company’s website, is the corporate reference for
preventing corruptive practices and represents a collection of principles and rules aimed at preventing or reducing the risk of
corruption. In the document, the Pirelli principles already set out in the Code of Ethics and the Code of Conduct, including zero
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
tolerance of “any guise or form, or in any jurisdiction, or even in
places where such activity is admissible in practice, tolerated,
or not challenged in the courts” are restated. Among the provi-
sions of the Programme there is the prohibition, addressed to
the recipients of the Code, of offering gifts and other utilities
that might constitute a breach of rules, or which are in conflict
with the Code, or may, if made public, constitute prejudice if
only to the image of Pirelli. Additionally, Pirelli “defend and
protect its corporate assets, and shall procure the means for
preventing acts of embezzlement, theft, and fraud against the
Group” and “condemns the pursuit of personal interest and/or
that of third parties to the detriment of social interests”.
Pirelli analyses profiles of corruption risk in the various
countries where it is present, assessing the adequacy of cor-
porate oversight and updating the risk analysis where there
is a change in the perimeter with the “entry” into countries of
“high risks” (on the basis of the Transparency index), defining
training and awareness programmes, where adequate.
More especially, the analysis of Risk Profiles is implemented
considering:
the perceived risks deriving from a combination of a level
of perceived corruption (associated to the Corruption Per-
ception Index calculated by Transparency International)
with the management perception of the country risk;
adequacy of oversight provided derived from the combi-
nation of the guaranteed protection in areas deemed to be
exposed to contingent corruption risks associated with the
benchmark provided by the Internal Audit Function on the
Internal Control System.
A map has emerged showing the vulnerability ranking for the
countries subjected to analysis, as shown in the following figure:
LUX
SVI
W
O
L
GER
FRA
UK
US
SPA
CIN
EGI
VEN
BRA
TUR
ARG
ROM
RUS
I
K
S
R
D
E
V
E
C
R
E
P
I
LOW
CONTROL ADEQUACY
H
G
H
I
HIGH
Referring to the contribution in favour of the External Com-
munity and sponsoring activities, Pirelli has for many years
adopted internal procedures defining roles and responsibili-
ties of the functions involved, the operational planning pro-
cess, the realisation, and the monitoring of the results.
The Pirelli procedure specifies that initiatives may not be
promoted in favour of beneficiaries that violate, directly or in-
directly, human rights, workers’ rights, the environment, or
business ethics.
The “Pirelli Values and Code of Ethics” also provide that the
firm “does not provide contributions, advantages, or other ben-
efits to political parties or trade union organizations, or to their
representatives or candidates, this without prejudice to its com-
pliance with any relevant legislation”.
Concerning the Group’s institutional relations, and especially
corporate lobbying activities, the Company has adopted a policy
for ensuring said activities are performed in abidance with the
principles ratified by the Code of Ethics and the Group Anti-
corruption Program, in line with International Corporate Gov-
ernance Network principles and in compliance with laws and
regulations effective in countries where Pirelli operates.
In terms of prevention and control, the audits carried out by
Internal Audit Department at Group affiliates include monitor-
ing crime risks, including corruption and fraud. In this regard
it is specified that, also in respect of 2015, there have been no
cases of corruption to report nor public legal actions concern-
ing corruption activities.
Additionally, in 2015 the implementation of the Functional
Segregation model (so-called Segregation of Duties) continued,
aimed at strengthening the system of internal controls and
preventing fraud.
Finally, in 2015 Pirelli continued to support Transparency In-
ternational’s activities, to which Pirelli adheres as supporter
for projects regarding education aimed at promoting an active
role of civic and moral education in strengthening civil society
against crime and corruption, believing that it is only through
proactive and concrete actions of values promotion that general
improvement in the quality of life can be achieved.
Reporting Procedure – Whistleblowing
The Group’s Whistleblowing Policy supports the Group’s inter-
nal compliance and control systems.
It is directed at Employees and external Stakeholders. Com-
municated to all employees in local language and made avail-
able to the eternal Community on the Pirelli Internet website,
the Policy governs the modalities of reporting breaches, sus-
pected breaches and inducement to breaches in the matter of
law and regulations, principles ratified by the Code of Ethics,
including, obviously, equal opportunities, principles of inter-
nal auditing, corporate rules and procedures, and any other
behaviour of commission or omission that might directly or
59
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
indirectly give rise to economic, financial or reputational damage for the Group and/or its companies.
The Whistleblowing channel is additionally incorporated expressly into the Sustainability Clauses included in every supplier
contract.
Reports may also be anonymously and protection of utmost confidentiality is at all times restated, as is zero tolerance in respect of
acts of reprisal of any kind.
Reports may concern the firm’s Directors, Auditors, Management or employees and, in general, anyone operating in Italy or abroad
for Pirelli or engaging in business relations with the Group. This includes partners, customers, suppliers, consultants, independent
contractors, accounting firms, and public institutions and entities.
The e-mail address ethics@pirelli.com has been made available for those who might wish to proceed with a report and is managed
centrally by the Independent Internal Audit Function. It applies to all the Group’s affiliates and to the External Community.
Internal Audit Department has the task of analysing all reports received, involving corporate functions required for the necessary
verification activities and scheduling a specific action plan.
If it is ascertained that a report is founded, there is a provision for adopting appropriate disciplinary and/or legal actions to safe-
guard the Company.
In respect of reports received in 2015, 2014 and 2103, the following is a summary table, together with a further study of reports
from 2015.
Total reports
Of which anonymous
Of which filed closed,
being absolutely generic
Of which founded
60
Report country of origin
Allegation made in the report
Outcome of cases investigated
2015
2014
2013
18
4
1
4
23
9
12
8
11
6
3
8
brazil, Egypt, Romania, Argentina,
Russia, Peru, Mexico, germany,
usA, uk
brazil, Egypt, Romania, Poland,
Argentina, Russia, Peru, saudi
Arabia, germany, usA, south Africa
Irregular behaviour of employees,
one case of inefficiency towards
customers
Irregular behaviour of employees,
one case of inefficiency towards
customers and one towards a
supplier
Italy, brazil, Argentina, venezuela
Irregular behaviour of employees,
one case of poor after-sales service
Review and integration
of processes where deemed
appropriate, orders by the functions
concerned and Human Resources
Management, actions to satisfy
customers.
Review and integration
of processes where deemed
appropriate, orders by the functions
concerned and Human Resources
Management, actions to satisfy
the customer and the supplier
Review and integration
of processes where deemed
appropriate, orders by the functions
concerned and Human Resources
Management, actions to satisfy
the customer
In 2015 the Whistleblowing procedure was activated 18 times. In particular:
18 reports were received from 10 different countries (Brazil, Egypt, Romania, Argentina, Russia, Peru, Mexico, Germany,
USA, UK);
33% of the reports (6 cases) were forwarded using the Group Whistleblowing email address ethics@pirelli.com, whereas 67% (12
cases) involved a letter to management to inform Internal Audit Department as per corporate rules;
78% of the reports (14 cases) were signed whereas the remaining 22% (4 cases) were received anonymously;
of the signed reports, three were activated by external Stakeholders, two in respect of inefficiencies suffered by customers and
one pertaining to a complaint made by a consumer; it is objectively impossible to confirm that there were, in absolute terms, no
further reports from external stakeholders received as a number of reports were, as specified, anonymous.
In general, the topics reported concerned, almost entirely, alleged irregular conduct by employees or managers and, in the remain-
ing cases, alleged inefficiencies towards customers and cases of non-compliance with group procedures.
Of the 18 reports received in 2015, at the beginning of 2016 three were found to be at verification and in-depth investigation stage,
whereas thirteen were found to have been concluded. In respect of the latter, specific verification activities involving, where neces-
sary, the corporate functions concerned were conducted.
On the basis of the analyses performed and the documentation made available, it was found that:
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
grammes which strengthen a safety culture among the
Group’s employees:
reducing specific emissions of CO2 by 15% and specific en-
ergy consumption by 18% by 2020 as compared to the 2009
figure, with an expected saving of about 20 €/mln and
350,000 tons of CO2 during the period 2015-2017;
reducing the specific drawing-off of water by 58% by 2020
with expected savings of water of more than 3,000,000 cu-
bic metres during the period 2015-2017;
towards zero waste to landfill: a rate of waste recovery of
95% by 2020, with expected savings of about 60 €/mln by
2017 thanks to the reuse of industrial wastes;
maintaining investment in Research and Development on
Premium products amounting to 7% of revenues in this
segment, with the aim of ever improving performance in
safety and environmental compatibility;
increasing investment to mitigate risk and the prevention
of Business Interruption CAGR -8.3% by 2017 as compared
with 2013;
a new proxy for monitoring fairness in compensation be-
tween genders, including elements of: performance, pay-
grade and seniority;
investment in employee training equivalent to an average
of 7 man days by 2015 and ≥ 7 in the following years;
adopting models that are ever more advanced for manag-
ing the economic, social and environmental responsibility
of the supply chain from a shared standpoint.
Evidence of progress is given as at the end of 2015 in the
areas specifically dealt with in the report, which may
be referred to.
61
in 11 cases objective corroborating evidence was not de-
tected such as to hold the facts contended in the reports
received to be true;
in the remaining 4 cases substantial truthfulness of the
facts attributed was detected, and in particular, 3 cases
concerned irregular conduct of employees and a case of in-
efficiency towards customers; the company then took steps
to implement the necessary actions, which concerned:
disciplinary sanctions;
actions aimed at removing the challenges received
from customers;
internal actions to improve the internal control system.
In all cases, at the outcome of inquiries, Internal Audit Depart-
ment additionally carried out at all times specific audit actions
on the corporate processes involved in the reports.
Internal Audit Department has periodically given account of
the reports received and the state of progress in the analyses
performed to the Control, Risks, Sustainability and Corporate
Governance Committee made up only of independent directors
and the Board of Auditors of Pirelli & C. S.p.A.
iNDustriAL pLAN 2013-2017
WitH sustAiNABiLitY
tArgets For 2020
The 2013-2017 Sustainability Plan includes objectives that go
to 2020. It integrates, supports, accompanies and protects the
Group’s Industrial Plan and has been developed in accord-
ance with the “Value Driver” model drawn up by the UN PRI
(Unite Nations Principles for Responsible Investment) and
UN Global Compact to encourage dialogue between investors
and firms on sustainability issues. Growth, productivity, gov-
ernance and risk management also constitute the guidelines
used in defining targets up to 2020. The Sustainability Plan
foresees, among other things:
Green Performance product net sales to be 48% of net tyre
sales in 2017;
improvement in rolling resistance, which by 2020 in the
car segment will be reduced by 40% as compared to 2007;
further expansion of Pirelli technology for producing silica
from rice husk applied to Premium tyres by 2017;
achieving results from activities in the search for alterna-
tive sources of natural rubber to Hevea and possible use of
guayule (a project with Versalis) by 2016;
dissemination of the use of innovative functionalised pol-
ymers that will achieve a reduced environmental impact,
greater process safety and efficiency by 2015;
reducing the accident frequency index by 90% by 2020 as
compared to 2009; the objective will be achieved thanks
to investments in machinery that are ever safer and pro-
Every Mark Is Unique / PIRELLI
Giacomo Agostini
15 times Motorcycle World Champion
“Beyond the numerous successes obtained,
to me leaving a mark in my business means, above all,
to have left good memories for all the fans who,
still today when I meet them in the street,
thank me for the emotions I was able transmit to them
during my career as a motorcycle racer.
My greatest satisfaction is, certainly,
to have been able to leave good and clean memories
of myself on and off the track.„
s
a
p
m
a
L
s
a
r
k
o
P
Every Mark Is Unique / PIRELLI
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
econoMic diMension
sHAriNg oF ADDeD vALue
The Values and Ethical Code of Pirelli ratify the undertaking of the Firm to operate to ensure responsible development over the
long term, while being aware of the bonds and interactions that apply between economic, social and environmental dimensions.
This is to combine the creation of value, company progress, the attention given to stakeholders and the raising standards of living
and environment quality.
Added Value means the wealth created over a given reporting period, calculated as the difference between the revenues generated
and the external costs sustained in the period. Distribution of added value among stakeholders allows the relations between Pirelli
and its main stakeholders to be expressed by focusing attention on the socio-economic system in which the Group operates.
distribution oF added value (in thousands of euros)
64
A Remuneration of employees
(1,295,130)
53.2%
(1,239,770)
54.0%
(1,210,928)
54.6%
TOTAL GROSS ADDED VALUE
2,435,873
2,296,127
2,218,034
2015 (*)
2014
2013
b Remuneration of public administration
C Remuneration of borrowed capital
d Remuneration of risk capital
(290,137)
(328,216)
(179,572)
11.9%
(173,309)
13.5%
(262,410)
7.4%
(156,745)
7.5%
11.4%
6.8%
(210,392)
(195,832)
(156,743)
E Remuneration of the company
(335,202)
13.8%
(457,278)
19.9%
(438,682)
F Contributions to the external community
(7,616)
0.3%
(6,615)
0.3%
(5,457)
9.5%
8.8%
7.1%
19.8%
0.2%
(*) Excluding Pirelli de venezuela deconsolidated as of 31.12.2015
The added value created in 2015 recorded an increase of 6.1% over 2014. Trends in the items determining gross global added value
as shown above, are set out in the Consolidated Financial statements of this report, to which reference is made for further study.
Contributions to the External Community
In 2015 the impact of expenses for corporate initiatives for the external community on the net result of the Group amounted to 4.4%
(2.0% in 2014, 1.8% in 2013).
As shown in the following table, over the three-year period 2013-2015, expenditure records a progressive increase, with 2015
witnessing growth in all the macro-areas of intervention (Training and Research, socio-cultural initiatives, Sport and Solidarity).
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
contributions to the eXternal community (in thousands of euros)
Training and Research
socio-cultural initiatives
sport and solidarity
Total
2015
2014
2013
876
4,864
1,876
7,616
810
4,541
1,264
6,615
819
3,839
799
5,457
For further study of the main initiatives supported by the contributions indicated above and relating to the governance model ,
please refer to the sections in this report on “Company Initiatives for the External Community”.
In line with the Code of Ethics, Pirelli “does not provide contributions, advantages, or other benefits to political parties or trade
union organizations, or to their representatives or candidates, this without prejudice to its compliance with any relevant legislation”.
LoANs AND CoNtriButioNs reCeiveD
From tHe puBLiC ADmiNistrAtioN
Romania. In the month of March 2012, the European Investment Bank (EIB) granted a sum of 10 million euros for the benefit of
Pirelli Tyres Romania S.r.l. as the final tranche of a loan contract for a total of 50 million euros granted to support an investment
of 263 million euros in respect of extending the Pirelli plant in Slatina, in Romania, intended for producing tyres for cars and
light commercial vehicles. The financing sits alongside a similar one granted in 2007 and fully reimbursed at the end of the 2013
tax year and received to support the construction of the same production site.
Also reported is: S.C. Pirelli Tyres Romania S.r.l. received 38.3 million euros in the aggregate from the Romanian state by way
of incentive for local investment, 9.3 million of which was in 2015.
Italy. During the 2015 accounting period Pirelli Labs received a contribution of 637 thousand euros from the Ministry of In-
struction, University and Research by way of incentive in the areas of eased financing in respect of a Research and Development
project and Pirelli Tyre S.p.A. collected a contribution by way of a non-refundable grant from the Piemonte Region of 2,836
thousand euros, again concerning a number of Research & Development projects.
65
Mexico. Since 2012 Pirelli Neumaticos S.A. de C.V. (Mexico) has received subsidies from the Government of the State of Guana-
juato (Mexico) for investments and the creation of employment for an aggregate amount of 10.8 million euros.
The company has also received subsidies from the Mexican Federal Government for investments and the creation of employment
concerning the ProMexico project for an aggregate figure of 5.9 million euros, 0.9 million of which was collected in 2015 (the
incentives have been paid since 2012).
United Kingdom. In the 2013 and 2014 tax years, Pirelli Tyres Ltd. (United Kingdom) received government subsidies under the
RGF-Regional Growth Fund for investments and the creation of employment tied to introducing new UHP products at the Carlisle
factory for an aggregate figure of 2.6 million euros. In 2015 no further government contributions were received.
FiNANCiAL CommuNitY
Pirelli considers financial communication to be of strategic importance as a fundamental tool for consolidating relations of trust
with the financial community. In accordance with the Values and Code of Ethics of the Group, Pirelli keeps a constant dialogue
going with analysts and investors (both institutional and individual) and bondholders via the investor relations function and the
Group’s Top Management, promoting communication that is between equals transparent, timely and accurate.
In 2015 the attention of financial markets focused on the sales/purchase and joint investment agreement between ChemChina,
CNRC and Camfin with the launch of a public tender offer of Pirelli’s share capital and which concluded successfully in October
with the subsequent delisting of the title. The agreements between shareholders of Pirelli foresee a return of the company to the
stock market within 4 years, at the end of the completion of the industrial project that will witness the strengthening of consumer
business in the areas of greatest growth, such as China, and the integration of tyre activities in the industrial segment of CNRC and
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Pirelli, thus creating the fourth player in industrial business
by size (revenues and turnover).
In 2016 and up until its return to the stock market, the compa-
ny intends to keep the dialogue with the financial communi-
ty open and ongoing with its usual transparency towards the
market and drawing inspiration from best market practices
for delisted companies.
our Customers
Pirelli business operations are represented by two main seg-
ments: Consumer (tyres for cars, SUV, light commercial vehi-
cles and motorcycles) and Industrial (tyres for buses, trucks,
agricultural equipment and steel cord). These businesses are
in turn pursued through two sales channels:
Original Equipment, addressed directly to the world’s lead-
ing car and truck makers;
Replacement, for the replacement of tyres on vehicles al-
ready in circulation.
Within Original Equipment, in Europe Pirelli can count on
a market share of Premium products of nearly 20% in 2015
compared to 14%, at which the company stood in 2011. In the
Prestige segment, which is the highest of the range, Pirelli
approaches 40%, with an increase compared to 36% in 2011.
Within Replacement, there are two broad types of Pirelli cus-
tomers: Specialised Resellers and Distributors. Specialised
Resellers are tyre specialists operating on the market in the
role of independent businesses; specialised dealers constitute
a fundamental point of contact between the Group and the end
consumer. Particular attention is devoted to specialised deal-
ers in terms of shared development to enhance the product
offering integrated with a high quality level of service, in com-
pliance with Pirelli values and consumer expectations. In 2015,
Pirelli can count on about 11,000 loyal resellers globally, with
a particular concentration in Europe, Asia-Pacific and South
America (about 80% of the total points of sale). The degree of
affiliation is diversified according to the market and the very
presence of Pirelli, ranging from a softer loyalty (fidelity Club),
which has as main objective for Pirelli territorial coverage
and for the dealer sales support; to franchise programmes, in
which through the exclusive of the partnership there is strong
focus on business development point of sale overall; up to the
maximum degree of affiliation, represented by points of sale
owned by Pirelli (311 points of sale worldwide). “Distributors”
are partners who are fundamental to guaranteeing continuity
in the supply of tyres to other specialised and non-specialised
resellers. They do so by offering local delivery and distribu-
tion services throughout the entire territory.
Customer Focus
Customer orientation is a central element of the Group “Val-
ues” and “Ethical Code”, and the “Group Quality Policy”, up-
dated in autumn 2015, communicated to all employees on the
occasion of the Pirelli World Quality Day held on November 12,
2015 and available on the Pirelli website.
Among the essential elements of the Pirelli approach to the
Customer:
consideration of the impact of its actions and behaviour on
the customer;
exploitation of every opportunity offered by doing business
to satisfy the customer’s needs;
anticipation of customer needs;
safety, reliability, high performance of products and servic-
es offered, in accordance with local regulations and more
developed national and international standards applicable,
as well as excellence of production systems and processes.
These commitments are outlined in the “General Purchase Con-
ditions” applied by the Group companies. In accordance with the
mentioned focus on customer care, Pirelli also adopted a clear
procedure to grant a feedback to any customer claim, which
involves immediate intervention with respect to the interlocutor.
Pirelli has received numerous awards for the quality of its prod-
ucts from important and prestigious customers.
Transparency in Communication
to the Customer
In the context of advertising communication, since 2009, Pire-
lli has defined a traceable and transparent process for all de-
cisions relating to advertising campaigns and related media
planning, both in the case of promotional activities managed
centrally and locally with central supervision. In terms of pro-
duction of advertising campaigns and media planning, Pirelli
uses specific auditing and certification structures that place
the Company at the highest levels in terms of transparency
and traceability in its advertising investment strategies. The
Pirelli Group endorses the IAB (Interactive Advertising Bu-
reau) and is associated with the UPA (Associated Advertising
Users), where Pirelli sits on the Steering Committee, among
other things dedicating ongoing commitment to support the
Advertising Code of Corporate Governance of the association.
Through the UPA, Pirelli is a member of the WFA (World Fed-
eration of Advertisers), which commits participating firms to
pursue honest, truthful and fair competition and communica-
tion in compliance with the Code of conduct and self-regula-
tion which they adopt. Consumer protection is also guaranteed
by the Company’s choice of suppliers in the communication
sector (creative agencies, media centres, production compa-
nies) that in turn belong to business and professional associa-
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
tions governed by Codes of Ethics regarding communication.
Compliance
Also in 2015:
no cases emerged of non-compliance with regulations or
voluntary codes concerning marketing activities, includ-
ing advertising, promotion and sponsorship;
no significant final penalties were levied and/or paid relat-
ing to infringement of laws or regulations, including those
relating to the supply and use of the Group’s products and/
or services;
no cases emerged of non-compliance with regulations or
voluntary codes concerning information and labelling of
products/services;
no cases of non-compliance with regulations or voluntary
codes concerning health and safety impacts of products/
services during their life cycle;
there were no documented complaints concerning both vi-
olation of privacy and/or the loss of consumers’ data;
no sales of any of the products sold by Pirelli were not
banned or disputed.
Customer Information and Training
Pirelli provides information to customer-distributors and end
customers on a continual basis. This information concerns both
the product and related initiatives, and is disseminated in a va-
riety of ways, including online communication, and this is com-
plemented by information distributed in hard copy format, as
well as the range of off-line and online training activities. On-
line communication was strengthened in 2015: the revision of
the websites and development on mobile devices increased the
number of hits to more than 9 million, confirming the growing
trend of the use of online as a fundamental touchpoint in the
search/purchase of tyres. The role of customer services on dig-
ital platforms is fundamental: “tyres for your car”, the product
catalogue and dealer locator confirm that customers are increas-
ingly well-informed and need clear and immediate responses to
their search on the web, as well as in mobility through smart-
phones. 70% of total access to Pirelli websites comes from search
engines. In 2015, Pirelli also continued to inform its customers
with a digital newsletter, Paddock News, whose main objective
is to provide an additional means of communication and contact
with the trade, and which consists of an international edition,
coordinated centrally from headquarters, and local-language
edition for each market in which Pirelli operates. Paddock News
features a gallery of new products and news from the Company
and its Business Units: Car, Motorcycle, Motorsport and Truck.
In terms of paper publications, the company magazines “Pirelli
World” and, for Brazil, “Giro”, continue to play a key role.
As for online communication related to Industrial Tyres, in
2015, FleetApp was launched, the application for transport pro-
fessionals, available in Italian, English, German and Turkish
free for Android and iOS, on Google Play and Apple Store. In
just a few steps you can get all the information on the intended
use, available sizes and labelling values, technical specifica-
tions, tread design and peculiarities of each tyre in the Pirelli
range as well as the Formula range, for the transport of per-
sons and/or goods. The application also includes an integrated
simulation tool that allows measuring of the possible fuel sav-
ings through using tyres providing higher performance from
an energy point of view.
Numerous exhibitions, events and initiatives in 2015 in which
Pirelli took part include:
the Commercial Vehicle Show, the largest exhibition on
transport of goods by road ever held at the National Exhibi-
tion Centre in Birmingham.
Autopromotec 2015, the event dedicated to the world of auto-
motive equipment and after market, now in its 26th edition,
where Pirelli was present with a large stand featuring tyres
for car, motorcycle and truck lines.
The “Driving Innovation 2015” event held at the suggestive
museum setting of Ca’ la Ghironda, near Bologna, and dur-
ing which new products were presented for commercial
transport: the new tyre for city buses MC:01 and XL range
in various lines of the 01 series.
the TRUCK DAYS event held between Stresa and Vizzola,
two days dedicated to tyres for industrial vehicles with the
participation of TEAM, purchasing group of German re-
sellers, and Pirelli Deutschland. A hundred resellers and
their fleet customers were invited to the event. On Pirelli’s
testing circuit, wet braking, noise, comfort and wet handling
tests were conducted. A space for in-depth study was dedi-
cated to the Cyberfleet functionalities. A unique opportunity
to learn the latest news about products, innovations to im-
prove performance, in addition to solutions for fleets.
The training of Customers on the product even in 2015 was in-
tense in all markets, both at the points of sale and at the Pirelli
sites with visits to the factory, R&D laboratories, and simulations
of tyre performance. About 4,500 dealers from 17 countries vis-
ited the two plants in Settimo Torinese (Italy) and Izmit (Turkey)
in addition to the circuit in Vizzola (Italy) and the R&D Centre in
Milan. Information and training are therefore conducted with a
360º approach.
During the year, expansion continued of the online training
platform Tyre Campus “The Road to Success”, covering a total
of 23 markets in 16 different languages. This platform aims
to grow the international coverage of training activities ex-
ponentially, by means of a homogeneous approach. Product
training is delivered in a highly engaging style and with a
path leading towards the final goal of certification. Pirelli cer-
tifies all its dealers who complete the proposed product train-
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
ing successfully. The certified dealer status is then indicated
in the dealer locator and on a plaque placed at the point of sale.
This way, consumers can be aware of which dealers are the
most knowledgeable and qualified on the technical features
and benefits of all the products of the Pirelli range. The plat-
form dissemination project is well advanced; in 2016, it is ex-
pected to complete its extension to other markets, introducing
new technical and commercial topics.
Also in order to support the product trainers in the markets in
classroom training to the trade, a library of technical content
was developed for classroom courses and the instrument “Tyre
Campus Houses”, which aims to concretely demonstrate the
characteristics of Pirelli tyres, the raw materials used for their
manufacturing and the differences between the different tread.
With these tools, Pirelli trainers around the world have concrete
and innovative support that allows customers to personally un-
derstand and verify the key characteristics and advanced tech-
nology of Pirelli products.
Listening and Exchanging Ideas as Sources
for Continuous Improvement
Customer relationships are managed by Pirelli principally
through two channels:
the sales organisation operating in the territory, which has
direct contact with the network of customers and which,
thanks to advanced information management systems, can
process and respond onsite to all the information require-
ments of the interlocutor; the sales structure is receives on-
going training on product and commercial issues through
the contribution of the Commercial Academy, one of the 10
Pirelli training Academies dedicated to the continuous de-
velopment and updating of skills of the entire sales network.
the Pirelli Tyre Contact Centers, 32 worldwide with more
than 150 employees, performing business operations in IT
support and order management (inbound), telemarketing
and teleselling (outbound).
In addition to traditional channels, 2015 saw Pirelli achieve
a significant rise internationally in user engagement through
Social Media channels, most notably Facebook and Twitter.
The Global Facebook Page dedicated to the brand reached
more than 1,143,297 followers and the Motorsport page about
362,500 in addition to another two Twitter accounts: Pirelli
(94,400 followers) and Pirelli Motorsport (65,700 followers).
The Company is also present on Instagram where, at the end
of 2015, it proposed a successful initiative related to the launch
of the Calendar, which collected more than 33,800 followers.
YouTube and Google Plus have also been confirmed as funda-
mental assets for the activation of special ad hoc projects. As
for the Motorcycle Business Unit, we reserve a mention for the
digital projects of the Metzeler and Pirelli brands. For Metzel-
er, in addition to the web page present in 10 countries world-
wide, a page dedicated to bikers has been active on Facebook
since 2012, with 270,000 fans and content posted in 14 differ-
ent countries in the relevant local languages. There has been
very positive feedback, over the years, from the activation
of the Metzeler Maps, the Ridexperience blog and “Answers”
feature that involves the users on the site. To maintain active
relationships with consumers, the @metzelermoto channel
on Twitter and YouTube was also created some time ago. For
the Pirelli Moto brand, a presence on Facebook is important,
with more than 300,000 fans connected and content posted in
many countries in the world, and special attention is dedicated
to Asian countries where Pirelli is developing its social media
presence. The Diablo Super Biker mobile application is also of
great importance, currently accounting for more than 350,000
downloads, and is greatly appreciated by the biker commu-
nity. For this App, there will be an update in early 2016 with
additional improvements (greater precision in calculating data
thanks to new algorithms, detection of weather and road sur-
face conditions, direct links to social media and the possibility
of sharing sessions). In general, the CRM project occupies a
priority position in the Business Unit, considering the biker
community as a group of product enthusiasts.
Also in 2015, the end customer direct listening activity contin-
ued through the Brand Tracking survey in the Top Ten Mar-
kets of Pirelli (Italy, Germany, Spain, France, United Kingdom,
Brazil, China, United States, Turkey and Russia). The ongoing
changes made to this study over the years have made it pos-
sible to refine and improve the precision of business insights
into the brand role, image profile and characteristics of the
different touchpoints that influence the end customer’s pur-
chase decision.
Pirelli also monitors its competitive position and its brand
image among end users through the detection of Key Perfor-
mance Indicators (KPI) such as Top of Mind, Brand Awareness
and Brand Consideration. The 2015 survey has confirmed the
position of Pirelli as one of the Top Two best recognised tyre
brands in Italy, Germany, Spain and the United Kingdom. In It-
aly, Pirelli has also confirmed its leadership in terms of Brand
Consideration. Outside Europe, Pirelli in Brazil was confirmed
in first place for each brand KPI; in China, Pirelli was con-
firmed in third place as the best-known brand and in second
place as a brand considered for purchase; Russia recorded
increasing values of brand consideration, which have moved
Pirelli up to fourth place. In general, in all countries, the per-
formance of Pirelli proves to be even more positive regarding
the key target premium with the values of all indicators being
higher than the more general targets of car owners: in China
in particular, we are in first place for brand consideration for
this target. There are two reference documents for brand po-
sitioning. One is the Brand Pyramid, which summarises the
values, personality and distinctive features of the Brand. The
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
other is the Brand Key, a work scheme created with the aim of
giving unity to product communication in terms of emotional
benefits, functional benefits, reason to believe, differential ele-
ments, target of reference.
In 2015, the Tyre Talk project also continued: a listening pro-
ject for trade customers, truly innovative for the tyre industry,
based on an innovative web-based research platform, which
can now count on the participation of more than 850 members
in seven markets that form a select panel of partners-custom-
ers, able to contribute to the understanding of the market dy-
namics, the development of new marketing levers and business
opportunities. Through constant search, contact and collection
of feedback which includes the innovative and transparent in-
volvement of customers in various types of surveys and online
forums, studies are conducted on various marketing issues
such as: the launch of new products, the management promo-
tional activities or materials at points of sale, the management
of F1-related activities, the evaluation of the Pirelli B2B por-
tal and the knowledge of approved tyres. The key issue is to
collect the opinion of customers on the behaviour of end con-
sumers, not only at the points of sale, but also in relation to the
purchase process, the perception of the brand and product, the
use of the labels introduced by the new European legislation,
service expectations related to tyre change.
In 2015, Pirelli also conducted the biennial survey on satis-
faction of its trade customers in the car tyre business. As in
previous years, the Dealer Satisfaction Survey aims to detect
the level of satisfaction of its customer base during the various
stages of company-customer interaction and to promote action
plans to improve customers’ perception of the performance of
Pirelli with respect to its main competitors in the various are-
as investigated (Product, Quality, Logistics, Sales & Marketing,
Customer Service). The 2015 survey focused on 7 countries
(Italy, Germany, UK, China, Brazil, USA, Turkey) with a total
of about 2,500 interviews. In the UK, the US and Brazil, the
interviews conducted at each point of sale in blind form (i.e.
on behalf of the research institute and not of Pirelli) included
in-depth interviews conducted with the main Key Customers
on behalf of Pirelli. This has made it possible to obtain timely
and wholly transparent feedback, which is useful for defining
targeted action plans for our principal partners. In terms of
overall satisfaction, on a scale of 0-100 (Completely satisfied =
100; Very satisfied = 75; Somewhat satisfied = 50; Not very sat-
isfied = 25; Not at all satisfied = 0), Pirelli is the best player in
Italy, UK and USA, and shows a performance comparable with
that of its main competitors in Germany while in Brazil, China
and Turkey, the scores on the direct distributors are > 75 up
to the maximum of 85 in Brazil. The percentage of completely/
very satisfied customers is on average above 75%.
Quality and Product Certification
ISO 9001: since 1970, the Group has had its own Quality
Management System introduced gradually at all production
centres and, since 1993, Pirelli has obtained certification of
its quality system under the ISO 9001 standard. Today 100%
of Pirelli facilities are certified with ISO 9001:2008, as are
the activities at the logistics hub in Manresa, Spain. In 2015,
the new Motorcycle Plant in Indonesia also obtained the ISO
9001:2008 certification.
ISO/TS 16949: In 1999 the Group obtained certification for its
Quality Management System in compliance with ISO/TS 16949
and it has since maintained compliance with the standard as
currently applicable. All plants, whether new or acquired, that
are suppliers of the automotive sector have obtained or contin-
ue to maintain this quality certification.
ISO/IEC 17025: Since 1993 the Materials and Experimentation
Laboratory of the Group and since 1996 the Experimentation
Laboratory of Pirelli Pneus (Latin America) hold the Quali-
ty Management System, and have been accredited under the
ISO/IEC 17025 standard. This system is maintained in accord-
ance with the standard in force and the ability of the laborato-
ries to perform accredited tests is evaluated annually. The labs
participate in proficiency tests organised by the International
Standard Organisation, by ETRTO or by international circuits
organised by auto manufacturers. Specifically in regard to car
tyres, the focus on quality is confirmed by Pirelli’s supremacy
in numerous product tests. It is also guaranteed by its collab-
oration on product development and experimentation with the
most prestigious partners (auto manufacturers, specialised
magazines, driving schools, etc.).
Product Certifications that allow the sale of products on var-
ious markets in compliance with the regulations in force in
each country are kept regularly up to date. The main product
certifications secured by the Pirelli Group concern the mar-
kets of EMEA (Europe, Middle East and Africa), NAFTA (North
America Free Trade Agreement), Brazil, Argentina, Uruguay,
China, Taiwan, India, Indonesia and South Korea and involve
all Pirelli plants. These certifications call for annual audits by
ministerial bodies in the countries in question or organisa-
tions delegated by them, which verify the compliance of the
product at the certified plant.
Focus on Human Health
and the Environment
All raw materials and auxiliary products are carefully test-
ed before they can be used in Group operating units. These
tests seek to identify potentially unacceptable risks to human
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
health and/or the environment. This assessment is performed
on a centralised basis and carried out in all countries where
Pirelli operates, taking account not only of the requirements
imposed by European regulations concerning the management
of hazardous substances, but also know-how currently availa-
ble worldwide (specifications, databases, etc.). There is ongoing
monitoring of producers and suppliers of raw materials used
by the Group, particularly with regard to the registration pro-
cesses of these substances by producers/distributors/import-
ers and in compliance with Regulation CE REACH 1907/2006.
Product Safety, Performance
and Eco-Sustainability
The commitment of Pirelli to the development of products that
are increasingly focused on combining eco- sustainability and
safety has led to renewal of its product lines. Compared with
the previous generation, this guarantees significant reductions
in parameters like rolling resistance, braking on surfaces with
low grip and the use of increasingly innovative materials.
In 2015, the Pirelli product range for the Car, SUV and Van
segment recorded a further improvement in the average level
of grading concerning the performance of increasingly inno-
vative materials designed to reduce rolling resistance, and
therefore the reduction of CO2 emissions, as well as increas-
ingly effective wet braking which contributes to road safety.
At the beginning of 2015, Cinturato AllSeason was launched
for the European market, the first “Total Mobility” product by
Pirelli, capable of guaranteeing safe mobility during all sea-
sons of the year even on snow-covered road surfaces, combined
with the innovative Seal Inside technology, a key contribution
to driving safety thanks to the technology of sealing the holes
generated by foreign bodies that allows avoiding risky stop-
pages for a possible tyre change and potentially dangerous
situations due to rapid tyre deflation.
For the Nordic markets, the Pirelli Ice Zero FR was introduced
on the market, a new generation of studless winter tyres for
extreme climates, suitable for driving even on icy surfaces. Ice
Zero FR is particularly attentive to environmental and safety
issues not only with regard to the improvements in terms of
reducing rolling resistance, braking distances on wet, snowy
or icy surfaces, but also as an innovative solution for urban
mobility, where the studded tyre is increasingly being banned
as it is a source of deterioration of the road surface.
For South American markets, a new product line was launched
dedicated to changeover and tuning called Cinturato P1 plus.
This product has been designed to combine a high level of per-
formance on both dry and wet roads, as requested by consum-
ers who want to customise their vehicles, with the adoption of
new construction solutions capable of reducing the weight of
the tyre to reduce rolling resistance and CO2 emissions.
In the Truck Business, Pirelli designs and sells high-per-
formance products in terms of safety and fuel savings. The
Serie01 tyres are comparable to best of our competitors in
energy efficiency (rolling resistance) and best-in-class in
terms of wet grip. In terms of safety, special mention should
be made of the tyres in the W:01 line as well as the TR:01 II
and TH:01 tyres, which, having passed the test imposed by
European regulations, feature the 3PMSF mark on their side-
wall. Regarding transportation of goods, a special mention is
deserved by H:01 XL tyres which, thanks to the increased load
index, can count on superior strength and integrity even in
the event of heavy use. In passenger transport, where safety
and comfort play a key role, 2014 saw the launch of the H:01
Coach line, aimed at equipping long-haul passenger vehicles
on motorways or trunk roads, and 2015 saw the launch of the
MC:01 line, aimed at equipping passenger vehicles on urban
and suburban routes. The range of Pirelli products offered for
efficient and sustainable mobility in the freight and passenger
transport sector is rounded off by a series of solutions, among
which the CyberFleetTM. This system automatically measures
tyre pressure and temperature under operating conditions,
thereby reducing fleet operating costs and making it possible
to reduce fuel consumption costs by simultaneously maxim-
ising efficiency in tyre maintenance and pressure control op-
erations. All of these features offer significant advantages in
terms of a reduction in CO2 emissions and therefore beneficial
effects from a reduced environmental impact and improved
road safety standards. Greater or lower tyre pressure than
what is recommended by the manufacturer leads to a higher
rolling resistance, irregular wear and tear, difficulty in con-
trolling the vehicle and lengthening of the braking distance,
all factors which have a negative impact fuel consumption,
tyre life and driving safety. To date, CyberFleetTM is used by
180 fleets in the world, with a total of about 150 million km
travelled, using through the dedicated application.
High-performance tyres are also manufactured with vegeta-
ble raw materials such as rice husks, an inedible substance
which is renewable and, above all, not taken from the food
chain, from which silica, the essential component in making
a tyre, is obtained. This type of silica is used in both high
performance products and also low rolling resistance tyres,
the product lines that reduce fuel consumption through lower
heating of the tyre during operation. In general, the use of
silica in tyres has an impact on road safety because it pro-
vides better wet grip and guarantees high performance levels.
Rice husk silica makes it possible to produce tyres that are
more environmentally friendly: the silica is extracted from the
waste vegetable matter with a lower use of fossil fuel energy,
resulting in significant environmental and cost benefits in a
global ecological approach from the production chain through
to the finished product. Further information on the eco-sus-
tainability of Pirelli products can be seen in the paragraphs
of this report dedicated to the Environment.
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For long-term reduction of CO2 emissions, Pirelli is committed to
using products with low environmental impact developing the
first high-performance UHP tyre with innovative materials that
contain natural rubber from the guayule tree. This set of tyres
was mounted on no less than a latest generation Maserati Ghibli
that put this new compound to the test on the tracks of Vizzola
and Balocco. It was a result of the agreement between Pirel-
li and Versalis (Eni) signed in 2013 for the exclusive supply of
natural guayule rubber to manufacture these tyres. Two years
later, Pirelli researchers were able to study the characteristics
of this new rubber in order to adapt the project to road use.
Awards
In 2015, Pirelli received several awards from its customers
that acknowledged not only the high quality and performance
of Pirelli brand products, but also the high level of attention
that the Group pays to product sustainability.
In April, for the second consecutive year, Pirelli won the “JD
Power Original Equipment Award” in the Performance Sport
category; Pirelli was thus confirmed as the first choice for
North American car manufacturers operating in the premium
sector; also significant was the second place obtained in the
Luxury category.
In June, Ford gave the “Green Pillar Award” to Pirelli, recognis-
ing not only the company’s commitment to sustainability but
also its ability to supply high-performance and quality tyres.
In July CNH Industrial awarded Pirelli the “2015 Supplier of
the Year Award”. Two projects led Pirelli to this success: the
construction of a biomass plant in Brazil able to ensure not
only energy savings but also a reduction in CO2 emissions and
the project in collaboration with the natural rubber processor
Kirana Megatara aimed at supporting farmers and their fam-
ilies through lessons on responsible cultivation practices with
rubber trees and scholarships.
In November 2015, Pirelli received the “Quality Through Ex-
cellence Award” from Volvo for the Chinese factory in Yang-
zhou; this award is given to the best supplier of tyres based on
the high quality and performance of the product.
In December, the Pirelli plant in Voronezh, Russia, received
the “Ford Q1 Award”, the prestigious certification given by
Ford to suppliers that succeed in reaching high quality prod-
uct standards.
Road Safety Culture and International
Initiatives
International initiatives and commitments are discussed in the
paragraphs “Company initiatives for the External Community”.
our suppLiers
As provided in the Values and Code of Ethics of Pirelli, suppli-
ers and external collaborators play a fundamental role in im-
proving the firm’s overall competitiveness. While seeking the
keenest competitive edge, the Group bases its relations with
suppliers and outside workers on fairness, impartiality and en-
suring equal opportunities for all parties concerned. In its turn,
the “Social Responsibility Policy for Occupational Health, Safe-
ty and Rights, and Environment” specifies that the Group’s sus-
tainable development strategies require, among other things,
a commitment to continuous improvement in issues of the en-
vironment, occupational health and safety connected with its
activities, abiding firmly by and supporting the content of the
Declaration of Universal Human Rights, the Declaration of the
International Labour Organisation on Fundamental Principles
and Rights at Work, the Rio Declaration on the Environment
and Development and the United Nations Convention against
Corruption. Likewise, the Policy lays down that Pirelli is com-
mitted to establishing and maintaining active the procedures
necessary for assessing and selecting suppliers and sub-sup-
pliers on the basis of their level of social and environmental
responsibility. Sustainable management of the supply chain is
thus set out in the Pirelli Quality Policy, in addition to being the
subject of the Green Sourcing Policy. The Policies mentioned
are available in many languages on the Pirelli website (Sus-
tainability Section), to which the reader is referred for more
details and full text.
Supply Chain Sustainable Management
System
Provisioning processes and partnership relations with sup-
pliers are guided by Pirelli’s Purchase Department and by
specialists present in the various affiliates worldwide. Respon-
sible management that is integrated in economic, social, envi-
ronmental and governance terms characterises the relations
between Pirelli and its suppliers. The “quality” of firms that
provide goods and services is also a fundamental element in
realising Pirelli premium strategy. The Model of Sustainable
Management of the Pirelli supply chain was verified by a third
party through a high-level method of verification, in accord-
ance with the AA1000 Assurance Standard (2008) in 2011, in
2013, in 2014 and in 2015, as can be seen in the letter of attesta-
tion of the Sustainability Reports for the years mentioned. The
social, environmental and business ethics that are the respon-
sibilities of a Pirelli supplier are assessed together with the
economic and product or service quality to be supplied, right
from the assessment at potential supplier stage. Analysis of ESG
performance (Environment, Social Governance) then continues
through the qualification stage of the future supplier pre-an-
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
alysed at the assessment phase, and then is “contractualised”
though the Sustainability Clauses included in every contract.
Verification of the supplier’s sustainability performance at the
post-contract stage is achieved through third-party audits. In
September 2014 on the institutional Pirelli website a “Suppli-
ers Areas” (Pirelli.com/suppliers) was released, a new section
dedicated to the world of supply. It is accessible to current and
potential Pirelli suppliers, as well as anyone with an interest in
knowing the management model adopted by the Firm in the ar-
eas of purchases of goods and services around the world. This
new channel of communication aims at the utmost clarity and
sharing of Values, Guidelines and standards adopted by Pire-
lli in relations with suppliers and set out via the publication
of support documentation such as, for example, the Supplier
Handbook. In 2015 the initiative was also promoted at a single
industrial country level and the release is underway.
The ESG Elements Analysed during
Suppliers Assessment, Selection,
Qualification and Audit Phases
Pirelli uses the same ESG performance approach throughout
the entire process of interactions with the supplier, although
in different ways among them, consistently with the intensi-
ty of the interactions characterising the specific procedural
steps. Beginning with the assessment stage, Pirelli suppliers
are evaluated against the management model and perfor-
mances, based on their awareness, in matters of:
human rights compliance with a focus on:
ban of child labour;
non-discrimination;
ban of forced or compulsory labour;
protection of freedom of association and free bargaining;
respect for the rights of indigenous populations and the
local community;
rejection of corporal punishment, mental and physical co-
ercion, and verbal abuse;
abidance by laws and industrial standards on working
hours and insurance that wages are sufficient to meet
workers’ basic needs;
monitoring performances in occupational health and safe-
ty and targets of improvement;
zero tolerance for any type of corruption in any form or
way, in any jurisdiction;
assessing and reducing the environmental impact of their
own products and services throughout their entire life cycle;
responsible use of environmental resources in view of con-
tinuous improvement;
capability of imposing the foregoing principles, values and
policies to any subcontractors and sub-suppliers, regularly
monitoring their actual compliance with this obligation.
During a first assessment of possible offers for goods or ser-
vices in the marketplace, a buyer who has been adequately
trained is able to gain a first impression of possible abidance
or violation by/of the requirements of the product and ESG as-
pects by the potential supplier. This allows any who are clear-
ly in possible breach of Pirelli expectations to be eliminated
from the roster of potential suppliers. Pirelli asks suppliers
who gain access to the qualification stage to use the portal
available in their local language. By accessing it, the supplier
views and simultaneously accepts the Pirelli economic, social,
environment and business ethics policies. This first step fore-
sees filling out a questionnaire concerning evidence of ESG
wherein a number of questions are “invalidating”, i.e. an in-
adequate response will prevent the qualification from being
processed favourably, since these are minimum requirements
for becoming a Pirelli supplier. These questions require the
potential supplier to attest that its firm:
checks workers’ ages before hiring them, and it ascer-
tains that all of its employees satisfy the minimum legal
working age;
uses workers provided with a written labour contract and
who work on a voluntary basis exclusively;
abides by workers’ rights of freedom of association and
participation in trade-union activities;
pays wages that meet the minimum legal standards;
manages disciplinary practices, if any, abiding by the law;
abides by and applies legislative/contract provisions in the
matter of work schedules, overtime and rest periods.
Depending on the goods categories in respect of which the sup-
plier has initiated the qualification procedure, a particularly
detailed questionnaire has to be filled out in which the supplier
is asked: to attach quality, environmental and health and safety
certifications; to document their approach to responsible man-
agement by attaching their Policies and Codes; to provide data
disclosing the rate of accidents at work; to attest the compliance
with labour laws as set forth above and to disclose the existence
of any pending lawsuit. Filling out the questionnaire is one of
the essential conditions required for qualification. The rating
relative to ESG elements has an incidence of 33% in the final
rating of candidate suppliers. The portal has additionally been
developed to support communications, awareness and training
campaigns being carried out for suppliers where sustainability
is an essential part. With regard to the contractual stage, from
2008 the Sustainability Clauses have been included system-
atically in contracts and orders for purchases of goods and/
or services and/or works, both with private suppliers and the
public administration (or bodies/companies controlled by the
latter) or NGOs all over the world.
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
In particular, the clauses:
call for awareness, on the part of suppliers, of the princi-
ples, commitments and values contained in Pirelli’s Sus-
tainability documents, i.e. “Values and the Code of Ethics”,
the “Code of Conduct” (anti-corruption) and the “Social
Responsibility Policy for Occupational Health, Safety and
Rights, and Environment” published and accessible on the
web, which enshrine the principles on the basis of which
Pirelli manages its activities and contractual or non-con-
tractual relations with third parties;
require Suppliers to confirm their commitment to:
not using or supporting the use of child and forced labour;
ensuring equal opportunity, freedom of association and
promotion of the development of each individual;
opposing the use of corporal punishment, mental or
physical coercion, or verbal abuse;
complying with the laws and industry standards con-
cerning working hours and ensuring that wages are
sufficient to cover workers’ basic needs;
establishing and maintaining appropriate procedures
to evaluate and select suppliers and sub-suppliers
based on their commitments to social and environ-
mental responsibility;
not tolerating any type or corruption in any form or le-
gal jurisdiction, even where such practices are allowed,
tolerated, or not subject to prosecution;
assessing and reducing the environmental impact of
their own products and services throughout their en-
tire life cycle;
using resources responsibly with the aim of achieving
sustainable growth that respect the environment and
the rights of future generations;
imposing the aforesaid principles, values and polices upon
any subcontractors and sub-suppliers and overseeing on a
regular basis their actual abidance by these obligations;
specifying that Pirelli reserves the right to verify at any
time through audits, either directly or through third par-
ties, that fulfilment of the obligations assumed by the sup-
plier (more details see below, in the following paragraph).
The Sustainability Clauses have been translated into 24 lan-
guages so as to ensure maximum clarity and transparency
towards suppliers in terms of the contractual obligations they
assume, not only in relations with the company itself, but also
in relations with their own suppliers. With a view of utmost
assurance, suppliers of the Pirelli Group have the Whistleblow-
ing Reporting Procedure (ethics@pirelli.com) at their disposal,
expressly indicated in the Clauses and by means of which any
breach or suspected breach they discern in relations with Pire-
lli referring to the contents of the “Values and Code of Ethics”,
“Code of Conduct” (anti-corruption) and the “Social Responsi-
bility Policy for Occupational Health, Safety and Rights, and
Environment” of the Group can be reported in total confiden-
tiality. In 2015 no Whistleblowing report was received signed
by a supplier. It is objectively impossible to confirm that there
were, in absolute terms, no further reports from external stake-
holders received, as a number of reports were anonymous, as
specified in the section “Group Procedure for reporting – Whis-
tleblowing”, which can be referred to for further details. More-
over, there is no evidence of Whistleblowing reports in regard
to violations by suppliers used by the Group.
Each contract for purchase bears the name of the contact buy-
er so that the person in question has at all times a corporate
channel available for any feedback. According to the matter
concerned, a contact buyer will then deal with the right per-
son/function.
The supplier is monitored by using the Vendor Rating pro-
cedure, aimed at defining the quality level of suppliers, the
quality of the commercial relationship, the technical-scientif-
ic collaboration and performance in relation to occupational
safety, the environment, and social responsibility through on-
site audits and the periodic monitoring of the progress of the
actions set down in any improvement plans signed with the
supplier. The Vendor rating results are reviewed annually and
commented by Purchase Department at meetings organised
with suppliers so as to identify any corrective actions or im-
provements needed in performance. The Vendor Rating covers
all the goods and geographical purchasing areas and is uti-
lized as an integral part of commercial negotiations.
Materiality of ESG Impacts
along the Supply Chain
Pirelli governs its sustainability by using a materiality analysis.
In environmental terms, the materiality of supply chain im-
pacts is prevalent in the category of raw materials and the use
of water in natural rubber transformation processes.
Social impacts (human and labour rights in particular) are ev-
idenced on the other hand in all categories of purchases with
reference to suppliers operating in countries considered more
at risk as compared to others from the standpoint of compli-
ance with domestic and international labour legislation.
There are many activities involving suppliers put in place by
the Company from the viewpoint of creating environmental and
social value that are inseparably tied to the creation of shared
economic value. This is the case of numerous agreements the
firm has reached with strategic suppliers for the development
of innovative materials with low environmental impact which
are described in detail in the section on “Research and Devel-
opment of Raw materials” in this report. Equally, Pirelli sup-
ports initiatives in support of social development within the
value chain extending to the second and third tier of the supply
chain. This latter is the case of the partnership between Pirelli
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
and one of its natural rubber suppliers in Indonesia aimed at
supporting the welfare of smallholders of plantations who are
the second or third tier in Pirelli Supply chain (Pirelli does not
purchase from plantations but from Transformers or dealers
who in turn purchase from plantations).
Both the sustainability of natural rubber and the management
of criticalities that may arise beyond a direct relationship with
a Supplier (second/third tier of the chain) represent one of the
main challenges for responsible management of the supply
chain. For this purpose, sector cooperation is an essential ele-
ment for meeting this responsibility effectively.
Audits by Third Parties
Since 2009, every year and with joint activities by the Group’s
Risk, Governance, Sustainability and Purchases functions,
buyers and local Sustainability Mangers are asked to identify
a list of suppliers who, on the basis of the findings of proper
Risk Assessment, are felt to be in need of an audit by a third
party at the time of the Annual Audit Campaign.
The “criticality” of the supplier guides the choice, and this may
be so since:
the supplier is bound to Pirelli by multi-year contracts;
the replacement of the supplier may be complex;
news of ESG risk events is received;
the economic burden of the purchase is significant and for
this reason an on-site verification of the supplier’s compli-
ance with Pirelli ESG expectations, signed by the supplier
at the contractual stage, is advised, via a third party audit
commissioned by Pirelli;
the supplier operates in a country at ESG risk;
the supplier has not yet undergone an ESG audit by Pirelli or
special criticalities have been detected in previous audits;
there is information, a perception or doubt concerning
possible breaches regarding social, environmental and/or
business ethics responsibilities.
In 2015 a preliminary sustainability Audit was introduced,
that is at the quality/approval stage, for all potential new
suppliers and/or implantation of raw material. Through these
Audits, which are carried out by third parties, the level of
compliance of the potential supplier is checked against the
main domestic and international regulations in Labour, Envi-
ronment and business ethics.
Methodologically, a team made up of Sustainability Department
and Purchases Department of the Group defines Guidelines for
selecting suppliers to undergo auditing, supporting the corre-
sponding local functions who operationally manage the pro-
cess. Purchasing Directors and Sustainability Managers who
coordinate the auditing activity locally are adequately trained
and made aware of the audit subject and method by the corre-
sponding central functions, i.e. Sustainability and Purchases.
The external auditors carry out the verification on the basis of
a checklist of parameters of sustainability deriving from the
Pirelli Code of Ethics, the SA8000® standard (a tool of refer-
ence officially adopted by the Group for managing social re-
sponsibility since 2004) and the “Social Responsibility Policy
for Occupational Health, Safety and Rights, and Environment”
of the Pirelli Group (consistent with the areas of social, envi-
ronmental and governance sustainability dictated by the Unit-
ed Nations Global Compact). Third-party audits, each of which
lasts on average 2-3 days in the field, include interviews with
workers, management and trade-union representatives.
Between the end of 2009 and the start of 2010, 72 audits were
carried out; between the end of 2010 and the start of 2011,
a further 56 were completed; in the second half of 2012, 62
new audits were commenced on suppliers of raw materials,
machinery, logistics and services which concluded in 2013. In
2014, 78 audits were performed and in 2015 a further 93 au-
dits were begun on suppliers in all the categories mentioned,
including potential suppliers of raw materials. In most cases
the 2015 audits involved Pirelli Tyre suppliers operating in
countries where the Company is present with industrial plan,
i.e. Brazil, Argentina, Egypt, China, Romania, Russia, Turkey,
Mexico and the United States, or countries from which Pirelli
purchases raw materials, such as Indonesia, Malaysia, Thai-
land, South Korea and Taiwan. Among the western countries
where the Group operates, audits were carried out on Pirel-
li Tyre suppliers in Italy, UK, Germany, France, Sweden, the
Czech Republic and the Netherlands.
On the basis of audit findings, where deemed necessary and
adequate, and given also the specific corrective actions sug-
gested by the independent Auditor, the supplier signs a recov-
ery plan aimed at preventing, mitigating or remedying any
non-compliances found. The plan foresees specific actions to
be implemented by precise deadlines in addition to clear iden-
tification of the responsible for the actions at the supplier site
and the follow-up method (documentary or in situ) that will be
followed by the Auditor to verify resolution of the non-compli-
ances detected during the Audit. The process of monitoring
the implementation status of suppliers’ recovery plans is dual:
on the one hand the third-party Auditor verifies the status of
implementation of the recovery plan, and on the other Internal
Audit Department of the Group verifies the adequacy of man-
agement and alignment of the corresponding local functions
(Sustainability and Purchases).
On the basis of the results of the audits carried out in 2015 and
as compared to 2014, the number of non-compliances record-
ed in absolute terms fell by approximately 40%, whereas the
average number of non-compliances per supplier dropped by
around 45%. The non-compliances recorded are linked to pro-
cesses of health and safety management, the use of overtime,
the improper implementation of Environmental Management
Systems and the lack of adequate oversight by the Supplier of
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
the sustainability of its own supply chain.
There were no cases of supplier relations being terminated
due to the findings from audits. In rare cases, agreements with
suppliers considered inadequate or at risk during the scouting
stage were not concluded.
Group “Green Sourcing” Policy
As at December 2012 Pirelli drew up and issued the “Green
Sourcing” Policy with the aim of stimulating and incentivis-
ing environmental awareness along the entire supply chain
and encouraging choices that might reduce the impact on the
environment of the goods and services supplied to Pirelli. The
Green Sourcing Policy implementation system was defined in
2013, both inside Pirelli and in relationships with the suppli-
ers. It is organised as follows:
publication of a Green Sourcing Manual, an internal doc-
ument containing operational Guidelines aimed at direct-
ing the activities of Pirelli functions involved in the Green
Sourcing process;
publication of the Green Purchasing Guidelines, a docu-
ment intended for Pirelli suppliers as part of the supply
agreement and based on the Green Sourcing Manual con-
taining the KPIs (Key Performance Indicators) for assess-
ing the Green Performance of these suppliers;
integration of Green Performance in the traditional pro-
cess of measuring supplier performance (vendor rating).
The Pirelli Green Sourcing Manual defines four areas of
Green Sourcing: Materials, Capex, Opex and Logistics. Inter-
departmental working parties comprised of Purchasing, R&D,
Quality, HSE and Sustainability, analysed the Green Sourcing
process associated with the merchandise categories falling
within the four areas mentioned above. Green Engineering
Guidelines were defined for the Materials and Capex areas,
where the design component (conceived in-house) is material
to the Pirelli core business. For the Opex and Logistic are-
as characterised by goods categories in respect of which the
design component is not equally significant, Green Operating
Guidelines have been defined by referring to internationally
recognised best practices.
So, the Green Sourcing Manual is a unique document that con-
tains:
the general part on Green Sourcing issues;
the Green Engineering Guidelines (Materials, Capex);
the Green Operating Guidelines (Opex, Logistics).
The Green Sourcing Manual will also be adopted by the Pirelli
Training Academy for training purposes by the functions in-
volved in the Green Sourcing process.
In 2014 and on the basis of the Guidelines of the Green Sourc-
ing Manual, the Pirelli Green Purchasing Guidelines were
published on the website www.pirelli.com, thus making them
available to Pirelli suppliers and to other stakeholders. In
addition to explaining the arrangements of the Pirelli Green
Sourcing system, it also contains the KPIs for assessing these
suppliers’ Green Performance. In China, Mexico, the United
States, Russia and Italy, by-invitation seminars have been held
at Pirelli offices on the Green Sourcing Guidelines for local
suppliers so as to inform and receive direct feedback on the
way they work. Again from the standpoint of informing and
disseminating the Pirelli Green Sourcing Policy and the Green
Purchasing Guidelines among stakeholders, in 2015 Pirelli ad-
ditionally accepted to contribute to activities of the Luigi Boc-
coni Business University (Milan, Italy) concerning Circular
Economy models through a Degree Thesis using Pirelli as a
“case-study” and aimed at bringing out the potential or the
Circular Economy in the tyre industry.
Additionally, in 2015 Pirelli developed an IT platform to sup-
port the launch of a campaign to measure the Green Perfor-
mance of Pirelli Suppliers through an electronic question-
naire to be filled out online, a campaign whose implementation
is planned for 2016.
Pirelli has also been invited to share its “Green” approach at
the Future Tire Conference 2016 (May 24 – 25, 2016, Essen,
Germany) during the “Future Factories and Supply Chain Fo-
rum” session with a presentation titled “Green sourcing in the
tire supply chain”.
CDP Supply Chain
For years Pirelli has participated in CDP Investor and, at the
request of customers, in the CDP Supply Chain. Implementing
its Green Sourcing Policy since 2014, Pirelli has in turn de-
cided to extend the request for CDP assessment to its own key
suppliers at Group level, identified in accordance with criteria
of environmental and economic materiality. The CDP Supply
Chain allows Pirelli to monitor Scope 3 emissions from its sup-
ply chain and ensures adequate awareness of supplier firms
in terms of climate change to identify and activate all possible
opportunities for reducing emissions of climate-altering gas-
es. In 2015, which was the second year of programme report-
ing, the excellent participation of Pirelli’s suppliers was con-
firmed; they responded to the assessment earning a disclosure
score higher than the global average of the panel of suppliers
responding to the CDP. This analysis has shown that, thanks
to actions taken to reduce emissions by Pirelli suppliers, in
2015 atmospheric emissions of more than 51 million tons of
equivalent CO2 were avoided, thus allowing economic savings
estimated at 149 million dollars.
Pirelli was the first firm among tyre producers to introduce
the CDP Supply Chain officially to its supply chain.
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Conflict Minerals
The concept of Conflict Minerals was introduced by Section
1502 of the Dodd-Frank Act, a United Sates federal law, in 2010.
The term “conflict minerals” refers to gold, columbite-tantalite
(conltan) cassiterite, wolframite and their derivatives, such as
tantalum, tin and tungsten, which come from (or are extracted
in) the Democratic Republic of Congo and/or bordering coun-
tries. The objective of the rules in respect of Conflict Minerals
(Conflict Mineral Rules) is to discourage the use of minerals
whose sale might finance violent conflicts in Central Africa,
where serious violations of human rights have been recorded
for many years. Under Conflict Mineral Rules, listed compa-
nies in the United States are required to perform reasonable
due diligence to trace the source of these materials, report the
findings to the SEC and publish them on their website, with
the first report to be published by May 3, 2014 (on 2013 oper-
ations) and updated each year thereafter. On March 5, 2014,
the European Commission proposed a draft Regulation setting
up an EU system of self-certification for importers of tin, tan-
talum, tungsten and gold who choose to import responsibly
into the Union. The proposed Regulation is accompanied by a
“Communication” (a proposal), a paper that presents the over-
all comprehensive foreign policy approach on how to tackle
the link between conflict and the trade of minerals extracted
in affected areas.
To give an idea of the scale of the phenomenon for Pirelli, it is
worth stating that the impact is very limited: the volume of
minerals (3T+G) used by Pirelli Tyre in one year in fact weighs
less than a ton, a quantity amounting to approximately one
millionth of the volume of raw materials used annually by the
Company and which is equally distributed among most of the
tyres produced. To give an example, a tyre weighing 10 kg
contains about 10 mg (milligrams) equivalent of tin, in the ex-
tremely low concentration of 1 ppm (one part per million).
The attention paid by Pirelli to human rights issues and, at the
same time, its position as supplier in the supply chain of cus-
tomers who are active in terms of due diligence, have led the
Firm to carry out a full inquiry into its supply chain to identify
any possible “conflict minerals”.
From a provisioning standpoint that contemplates only miner-
als that are “conflict-free”, Pirelli has asked its suppliers to fill
out the CFSI-CMRT (Conflict-Free Sourcing Initiative – Con-
flict Minerals Reporting Template) form developed by the EICC
(Electronic Industry Citizenship Coalition) and by GeSI (Global
and e-Sustainability Initiative) so as to give full visibility to
the supply chain as far back as the mines or foundries. The
suppliers polled cover 100% of the “conflict minerals” risk tied
to Group products. More than 90% of suppliers polled have al-
ready given precise indications concerning the source of the
materials in question and listing foundries as required by the
procedure. The findings of the inquiry lead to the conclusion
that these products are “conflict-free”. At the end of 2015, a
minimum number of suppliers, amounting to 0.01% of Pirelli
purchase spending, were unable to trace back to smelters for
all their supply chain.
Training of Suppliers on Sustainability
Following the training project aimed at strategic suppliers
and provided by an e-learning method in 2012, 2013 and 2014,
Pirelli extended these training sessions for suppliers in 2015
to strategic suppliers of “auxiliary materials”, off-takes and
moulds. This activity involved labour rights, human rights, re-
spect for the environment and business ethics. The tool used for
training was a platform specifically developed for this purpose
by the Pirelli Group. After receiving a personal ID and pass-
word, the supplier could connect with the online platform and
participate in training activities at any time. The course includ-
ed many practical examples and allowed participants to verify
the levels of compliance by their own organisations with the
various elements of ESG. In order to clarify the effectiveness of
e-learning, a self-assessment questionnaire was prepared that
participants filled out at the end of the training session.
Supplier Award
The Pirelli Supplier Award, which is assigned each year to
suppliers of excellence, aims to constantly improve relations
with parties from the standpoint of shared development.
The 2015 edition of the Supplier Award was held at the Pirelli
headquarters at Bicocca with the Pirelli CEO in attendance,
who gave the awards to nine suppliers operating in Indonesia,
Germany, Italy, Japan, China, the United Kingdom and San Ma-
rino. The suppliers had distinguished themselves in quality,
innovation, speed, sustainable performance, global presence,
price and level of assistance and service. A specific award
was dedicated to sustainable performance, acknowledging the
importance of “responsibility” strategies which really make a
difference by bringing benefits to the entire value chain.
Trend of Purchases
The Pirelli Tyre core business in 2015 accounts for 97% of
Group purchases (98% in 2014). The following tables show the
value of purchases made by Pirelli Tyre and the percentage of
the relative suppliers divided by geographical area. The data
provided reveals that the value of purchases in OECD areas
is approximately the same as the value of purchases in non-
OECD areas, while the number of suppliers is slightly higher
in OECD areas. 78% of suppliers (vs 77% in 2014 and 78% in
2013) (excluding raw material suppliers since they generally
don’t operate in countries where Pirelli has plants) operate
locally with respect to the supplied Pirelli Tyre affiliates, in
76
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
accordance with a “local for local” supply logic.
The following data also include those of the Venezuelan subsidiary, deconsolidated as of 31 December 2015.
percentage value oF pirelli tyre purchasing by geographical area
2015
2014
2013
OECD Countries
North America
Europe
Non-OECD Countries
Others (1)
south America
Asia
Africa
Others
47%
4%
4%
19%
15%
1%
10%
47%
4%
3%
21%
14%
1%
10%
percentage oF pirelli tyre suppliers by geographical area
2015
2014
2013
OECD Countries
North America
Europe
Non-OECD Countries
Others
south America
Asia
Africa
Others
48%
5%
3%
29%
4%
4%
7%
51%
4%
4%
27%
3%
4%
7%
40%
3%
3%
20%
20%
1%
13%
48%
3%
2%
28%
9%
2%
8%
The following table shows the breakdown in percentage of the value of Pirelli Tyre purchases by type. It is clear that the most
relevant and significant purchase category concerns raw materials, with a weight equal to 50% of the total, down from the previous
year due to lower commodity prices.
value oF purchases by type
Raw materials
supplies
services
Capital goods
2015
2014
2013
50%
5%
35%
10%
54%
5%
32%
9%
61%
5%
25%
9%
With reference to the percentages of Pirelli Tyre suppliers by type and number as at the following table, already from 2010 the con-
sumables and services suppliers categorisation criteria had been defined. The sum of the number of operators in the two categories
remains in excess of 80% of the total, even though the incidence on total purchases is significantly lower than, for example, that of
raw material purchases. The fragmentation of consumables and services suppliers is clearly visible compared to the substantial
concentration of raw materials purchases over a small number of operators.
77
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
percentage oF supplier by type oF purchase
Raw materials
supplies
services
Capital goods
2015
2014
2013
3%
35%
48%
14%
3%
33%
53%
11%
3%
35%
51%
11%
The following table represents the percentage composition in the value of the mix of raw materials purchased by Pirelli Tyre in
2015, 2014 and 2013. In 2015, there was a decrease in the weight of natural rubber compared to 2014 due to the reduction of the price
of the commodity. The volume of raw materials utilised for the production of tyres in 2015 amounted to approximately 1 million
tonnes, of which approximately 5% derives from recycled materials, in line with the previous year.
percentage raw materials purchased by pirelli tyre miX (by value)
2015
2014
2013
Natural rubber
syntethic rubber
Carbon black
Chemicals
Textile
steelcord
78
Targets for 2016
18%
25%
10%
20%
13%
14%
20%
28%
14%
19%
12%
7%
24%
29%
13%
16%
11%
7%
The following are the main objectives for the year 2016:
In-depth study of the most effective sustainable management methods of the second/third tier of the supply chain and the context
of natural rubber, through a dedicated table during Pirelli Global Stakeholder Dialogue to be held in Brussels in February 2016;
new training session on ESG issues dedicated to the Group’s strategic suppliers belonging to different product categories;
increase in the participation rate of Pirelli suppliers in the CDP Supply Chain.
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
enVironMentaL
diMension
The Pirelli Values and Ethical Code states that “A key consideration in investment and business decisions is environmental sustain-
ability, with the Group supporting eco-compatible growth, not least through the adoption of special technologies and production
methods (where this is operationally feasible and economically viable) that allow for the reduction of the environmental impact of
Group operations, in some cases even below statutory limits”.
The Pirelli approach to environmental management is also inspired by the United Nations Global Compact, in which Pirelli has par-
ticipated since 2004 (in addition to having a seat on the Steering Committee of the LEAD Global Compact), and the Rio Declaration
on Environment and Development. The above principles are also illustrated in the “Social Responsibility Policy for Occupational
Health, Safety, Rights and Environment”, according to which Pirelli undertakes to:
assess and reduce the environmental impact of its own products and services throughout their entire life cycle;
promote use of the most advanced technologies to achieve excellence in environmental protection;
manage its environmental activities in compliance with the highest international standards;
communicate and provide material information to internal and external stakeholders;
use material resources responsibly, with an aim to achieving sustainable growth that respects the environment and the rights
of future generations;
establish and maintain appropriate procedures to evaluate and select suppliers and subcontractors on the basis of their commit-
ment to environmental accountability.
Moreover, in the Group Quality Policy, updated at the end of 2015, Pirelli reiterates the safeguarding of the environment throughout
the product life cycle as a basic element of its Premium Strategy understood as cutting edge technology and product excellence.
In fact, through the Green Sourcing Policy, all the Group’s employees undertake to always consider the environmental impacts of
goods and services, whether designed or purchased.
tHe pireLLi group eNviroNmeNtAL strAtegY
Management of environmental issues has always played a key role in Pirelli business strategy. With a view to long-term management,
Pirelli monitors the Carbon Footprint and Water Footprint of its entire organisation and is committed to their progressive reduction.
The Group has adopted a control and monitoring system that allows the identification of the materiality of environmental impacts
throughout the product life cycle, allowing the identification of appropriate action plans.
The infographic on the following pages offers a single-image overview of the Pirelli approach to environmental management, aimed
at reducing its impact on resources, climate and ecosystems. As instantly evident, the materiality of environmental impacts is high-
ly concentrated in the use phase of the tyre.
The graph can be read either horizontally, following the stages of life of a tyre one by one, or vertically, thus being able to appreciate
the objectives of reducing the impacts that the Company has defined for each of the different stages of life, which will be explored
later in this chapter.
From a methodological point of view, these life cycle phases have been analysed using the Life Cycle Assessment, as defined by the
ISO 14040 family of standards. This method is capable of validating the results and strategic decisions related to it as objectively as
possible. Moreover, reporting of the emissions impacts also complies with the provisions of the GHG Protocol and GRI-G4 Guidelines.
79
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
LIFE
CYCLE
STAGES
DRIVERS
IMPACT:
CARBON & WATER
FOOTPRINT
80
MATERIALITY
RESPONSE
STRATEGY
RAW MATERIALS
SUPPLIERS
MANUFACTURING
PIRELLI
DISTRIBUTION
SUPPLIERS
USE
CUSTOMERS
Raw materials production and transport;
the impact is due to resources use
by suppliers’ plants
Tyre manufacturing:
in Pirelli’s plants the impact comes mainly
from electricity and natural gas consumption
Production and use of fuel by trucks
and ships of logistic suppliers,
Production and use of fuel
of customers’ cars
delivering Pirelli tyres all around the world
due to rolling resistance
END OF LIFE
WASTE RECOVERING ACTORS
End of life tyre management:
old tyres are prepared by specialized
companies to be reused as both energy
or regenerated raw material
Scope* 3
Scope 1+2+3
Scope 3
Scope 3
Scope 3
PED > Primary Energy Demand
GWP > Global Warming Potential
BWC > Blue Water Consumption
EP > Eutrophication Potential
23.4%
7.9%
4.5%
5.1%
90.8%
92%
86.9%
75.3%
5.1%
2.4% 1.2% 2.3%
<0.1% <0.1% <0.1% 0.4%
<0.1% 2.2% <0.1% 0.2%
PED
GWP BWC
EP
PED
GWP
BWC
EP
PED
GWP BWC
EP
PED GWP BWC
EP
PED GWP BWC
EP
Economical
High
Environmental
Medium
Economical
High
Environmental
Medium
Economical
Medium
Environmental
Low
Economical
Environmental
High
High
Economical
Environmental
Low
Low
Raw materials innovation
SILICA: expansion of the Pirelli
technology to produce silica from rice
husk also for Premium tyres
NATURAL RUBBER:
research on alternative sources;
Guayule project with Versalis (ENI Group)
FUNCTIONALIZED POLYMERS:
research on innovative polymers that
guarantee reduced environmental impact,
greater driving safety and improved
production efficiency
Process efficiency
Targets 2020 vs 2009
-18% Energy spec. consumption
-58% Water spec. withdrawal
-15% CO2 spec. emissions
>95% Recovered waste
ISO 14001 in all plants
Green Purchasing Guidelines
Scrap Reduction Program
Activation of CDP Supply Chain program
Specific Audits of suppliers in countries
with high environmental risk
Green Sourcing Policy
Green Logistic Procedure
Engagement to reduce supply chain
carbon & water footprint
Product efficiency
Targets 2020 vs 2007
RR -40% Car -20% Truck -10% Moto
to spread the recovery culture
Presence on the major
international worktables
WBCSD
ETRMA
Regenerated raw materials
Study projects with universities in order
to enhance the quality of regenerated
materials in order to increase
their presence in new compounds
Cyber Tyre development
CAR: “Base” System to manage tyre
performance through pressure
CAR: “Premium” System with management
of static load, tear consumption,
hydroplaning alert, road surface alert
and tyre vectorial strenghts
TRUCK: System to manage the tyres of whole
fleets, to minimize fuel consumption
Green Performance revenues 48%
on total revenues by 2017
* According to GHG Protocol
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
LIFE
CYCLE
STAGES
DRIVERS
IMPACT:
CARBON & WATER
FOOTPRINT
MATERIALITY
RESPONSE
STRATEGY
PED > Primary Energy Demand
GWP > Global Warming Potential
BWC > Blue Water Consumption
EP > Eutrophication Potential
23.4%
7.9%
4.5%
5.1%
Raw materials innovation
SILICA: expansion of the Pirelli
technology to produce silica from rice
husk also for Premium tyres
NATURAL RUBBER:
research on alternative sources;
Guayule project with Versalis (ENI Group)
FUNCTIONALIZED POLYMERS:
research on innovative polymers that
guarantee reduced environmental impact,
greater driving safety and improved
production efficiency
Activation of CDP Supply Chain program
Specific Audits of suppliers in countries
with high environmental risk
RAW MATERIALS
SUPPLIERS
MANUFACTURING
PIRELLI
DISTRIBUTION
SUPPLIERS
USE
CUSTOMERS
Raw materials production and transport;
Tyre manufacturing:
the impact is due to resources use
by suppliers’ plants
in Pirelli’s plants the impact comes mainly
from electricity and natural gas consumption
Production and use of fuel by trucks
and ships of logistic suppliers,
delivering Pirelli tyres all around the world
Production and use of fuel
of customers’ cars
due to rolling resistance
END OF LIFE
WASTE RECOVERING ACTORS
End of life tyre management:
old tyres are prepared by specialized
companies to be reused as both energy
or regenerated raw material
Scope* 3
Scope 1+2+3
Scope 3
Scope 3
Scope 3
90.8%
92%
86.9%
75.3%
PED
GWP BWC
EP
PED
GWP
BWC
EP
PED
GWP BWC
EP
PED GWP BWC
EP
PED GWP BWC
EP
5.1%
2.4% 1.2% 2.3%
<0.1% <0.1% <0.1% 0.4%
<0.1% 2.2% <0.1% 0.2%
81
Economical
Environmental
High
Medium
Economical
Environmental
High
Medium
Economical
Medium
Environmental
Low
Economical
High
Environmental
High
Economical
Low
Environmental
Low
Green Sourcing Policy
Green Logistic Procedure
Engagement to reduce supply chain
carbon & water footprint
Process efficiency
Targets 2020 vs 2009
-18% Energy spec. consumption
-58% Water spec. withdrawal
-15% CO2 spec. emissions
>95% Recovered waste
ISO 14001 in all plants
Product efficiency
Targets 2020 vs 2007
RR -40% Car -20% Truck -10% Moto
Cyber Tyre development
CAR: “Base” System to manage tyre
performance through pressure
CAR: “Premium” System with management
of static load, tear consumption,
hydroplaning alert, road surface alert
and tyre vectorial strenghts
TRUCK: System to manage the tyres of whole
fleets, to minimize fuel consumption
Presence on the major
international worktables
WBCSD
ETRMA
to spread the recovery culture
Regenerated raw materials
Study projects with universities in order
to enhance the quality of regenerated
materials in order to increase
their presence in new compounds
Green Performance revenues 48%
on total revenues by 2017
* According to GHG Protocol
Green Purchasing Guidelines
Scrap Reduction Program
accelerated growth of algae, which does not allow sunlight
to penetrate the surface of the water basins. This reduces
photosynthesis and thus reduces the production of oxygen.
Low concentrations of oxygen may cause mass death of fish
and anaerobic decomposition of organic material, seriously
compromising the entire ecosystem.
In terms of environmental materiality, the use phase of the
tyre appears to be the most dominant phase in each of the
four indicators mentioned above. In terms of economic mate-
riality, the amount of corporate spending in the manufactur-
ing phase is the most relevant, thus creating the opportunity
of reducing these impacts through investments in energy
efficiency.
In its response strategy, which may be consulted in the lower
part of the infographic and corresponding to what is also stated
in the Industrial Plan, Pirelli has adopted adequate manage-
ment models for the monitoring and managing of environmen-
tal issues, and has also voluntarily adopted specific targets to
reduce its impact in each phase of the product life cycle.
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
All impacts listed by the standards that are not mentioned,
both upstream and downstream of the industrial activity of
Pirelli, either do not apply or are not significant. The values
are shown as a percentage, as the objective of this infographic
is to show the difference in materiality between the various
life stages. To determine the Carbon Footprint and Water Foot-
print, Pirelli’s calculation model respectively follows the tech-
nical specification ISO-TS 14067 and ISO 14046.
The main environmental impacts are generated by various ac-
tivities related to the different stages of the lifecycle. In the
case of raw materials procurement, the main impact derives
from their production and distribution. In the case of tyre
manufacturing it derives from the consumption of electricity
and natural gas: in particular the main pressure in terms of
emissions into the atmosphere and water consumption related
to the production process is attributed to the production of the
latter. In the case of the distribution of new tyres and their use
by customers, the impact derives from the fuel consumption of
vehicles (in the case of customers, only the fuel consumption
related to the power absorbed by the rolling resistance of the
tyres is allocated). Finally, in the last phase of lifecycle con-
sidered, the impact derives from the preparation activity of
end-of-life tyres for their recovery, in the form of energy or
recycled raw material.
With regard to the carbon footprint, the infographic (see “driv-
ers” area) also contains the breakdown of emissions in the
three Scope categories from the GHG Protocol principles. The
central part of the infographic shows the actual quantification,
in percentage terms, of the Carbon Footprint and Water Foot-
print. These two aspects are summarised by four principal
indicators: Primary Energy Demand (PED), Global Warming
Potential (GWP), Blue Water Consumption (BWC) and Eutroph-
ication Potential (EP).
The values are managed in terms of GJ of energy, tons of CO2
equivalent, cubic metres of water and kilograms of equivalent
phosphates.
Primary Energy Demand (PED) refers to the quantity of re-
newable or non-renewable energy that is taken directly from
the hydrosphere, the atmosphere or the geosphere.
The Global Warming Potential (GWP) refers to the effect of
human activities on the climate, and is calculated in tonnes of
CO2 equivalent. The potential greenhouse effect is calculated
in relation to CO2, assuming that it would stay in the atmos-
phere for 100 years.
Blue Water Consumption (BWC) is given by the volume of
surface and underground water consumed as a result of the
production of a good or service. Consumption refers to the
fresh water used and then evaporated or incorporated in the
product. The Eutrophication Potential (EP) is the enrichment
of nutrients in a specific aquatic or terrestrial ecosystem.
Air pollution, water emissions and agricultural fertilisers all
contribute to eutrophication. The result in aquatic systems is
82
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
of the environmental impact of end-of-life tyres. In this regard,
in collaboration with Università degli Studi of Milan Bicocca,
as part of the Consortium for Research on Advanced Materi-
als (CORIMAV) and through the Fondazione Silvio Tronchetti
Provera, a new selective devulcanisation technology is being
studied for the recycling of materials derived from compounds
of End-of-Life Tyres, which allows a significant reduction of
production costs as well as the related environmental impact.
As part of new nano-fillers, Pirelli has started to industrially
introduce materials of mineral origin in partial replacement of
precipitated Silica and Carbon Black, with a reduced environ-
mental impact associated to the production of more than 75%
raw materials in terms of CO2 and water consumption, “saving”
in 2015 respectively 1,400 tonnes of CO2 and 7,500 tonnes of
water. In addition, in collaboration with Università degli Studi
of Milan Bicocca and Politecnico of Milan, Pirelli is developing
silica particles with an elongated shape that will allow further
reductions in fuel consumption.
As for biomaterials, as already mentioned Pirelli has focused
on silica resulting from rice husk. Rice husk is the outer shell
of the grain and constitutes 20% of raw rice by weight, which
is the main waste of this crop and is available in extremely
large quantities in many areas of the world. Today, rice husk
has several uses of varying types: animal bedding, organ-
ic fertilisers and solid fuel for the production of electricity
(in fact, rice husk has a discrete calorific value of about 14 MJ/
kg). However, in the less developed areas of the world it is still
not valued, and is burned in the open air without exploiting
its full potential. In one of these areas, in Brazil, Pirelli has
developed a production process capable of obtaining industri-
al silica from rice husk, 18% of the weight of which consists
precisely of silica. The Pirelli industrial process for the extrac-
tion of this raw material is considered thermally autonomous
thanks to the combustion of the carbonaceous part of the rice
husk: this allows a reduction of more than 90% of the quantity
of CO2 emitted per kg of silica compared to the conventional
process, which instead exploits fossil energy sources. Pirel-
li has set itself the goal of supplying 30% of the production
requirement in South America with silica derived from plant
sources by 2017.
83
reseArCH
AND DeveLopmeNt
oF rAW mAteriALs
The research and development of innovative materials are
key to the design and fabrication of ever-more sustainable
tyres that guarantee reduced environmental impact, during
the use and end-of-life phases, greater driving safety and
production efficiency.
Pirelli has activated Joint Development Agreements with
leading suppliers for the study of new polymers that are able
to further improve the characteristics of tyres for rolling
resistance, low temperature performance, mileage and road
grip. In this regard, Pirelli Research & Development focuses,
among other things, on:
high-dispersion silica for wet grip, rolling resistance and
durability;
high-performance carbon black derived from racing com-
petition applications for extreme grip;
biomaterials, such as silica from renewable sources, lignin
and plasticisers of plant origin;
nanofillers for more stable compounds, lighter structures
and highly impermeable liners;
new silanes to guarantee performance stability and pro-
cessability;
vulcanisation agents and stabilisers with reduced environ-
mental impact.
The Joint Labs agreement (2012-2017) between Pirelli and
Politecnico of Milan, aimed at research and training in the
tyre industry covers nanotechnology, the development of new
synthetic polymers, new bifunctional chemicals and new bi-
opolymers: Pirelli is working with the University to develop a
natural rubber obtained from sources other than the rubber
tree. Research is aimed at diversifying the potential supply
sources, to reduce pressure on biodiversity in producer coun-
tries and allow the Company to manage the potential scarcity
of raw materials with greater flexibility.
In turn, a joint research project is underway between Pirel-
li and Versalis (Eni) on the use of natural guayule rubber in
the manufacturing of tyres. The guayule (Parthenium argen-
tatum) is a non-edible shrub that needs little water and no pes-
ticides, and represents an alternative source to natural rubber,
thanks also to its hypo-allergenic properties, unlike the more
common Hevea brasiliensis rubber. The first test of a tyre with
compounds using guayule rubber as an alternative to synthet-
ic rubber (from oil sources) was successfully conducted in De-
cember 2015 on ultra-high-performance tyres (UHP) installed
on a Maserati Ghibli.
The innovation of raw materials also entails the improvement
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
proDuCt AND use pHAse: greeN perFormANCe tArgets
Also in line with its position in the Premium and Prestige Segment, Pirelli develops and introduces increasingly sophisticated
products on the market, responding to a macroeconomic scenario in constant and rapid evolution.
The major corporate investment in research and development on ever-more innovative compounds, structures and tread patterns
allows Pirelli products to achieve extremely high performance in terms of braking in dry and wet conditions and, at the same time,
improved environmental performance such as:
less rolling resistance – lower CO2 emissions;
less noise – reduced noise pollution;
increased mileage – lengthening of tyre life and reduced exploitation of resources;
improved retreadability – less waste needing disposal;
reduced weight – less use of raw materials and lower impact on natural resources.
Pirelli adopted objectives for improvement on the environmental performance of its products in an objective, measurable and trans-
parent manner, as shown in the graphs below. Regarding the most important environmental aspect, the materiality of which was
presented in the infographic related to the life cycle of the tyre, Pirelli is committed to reducing by 2020, with respect to the 2007
average, the weighted average rolling resistance of its products by 40% as regards tyres for Cars, 20% for Truck products and 10%
for Motorcycle products.
CAR
84
TRUCK
GREEN AREA SAFETY AREA
Rolling resistance reduction
Wet grip
Weight reduction
5O% 1OO% 15O%
Dry grip
Mileage
Noise reduction
GREEN AREA SAFETY AREA
Rolling resistance
reduction
Traction
Weight reduction
Mileage
Noise reduction
Tear resistance
15O%
1OO%
10OO
5O%
Braking
Retreadability
Handling
2OO7
2O14
2O15
2O2O
2OO7
2O14
2O15
2O2O
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
MOTO
GREEN AREA SAFETY AREA
Rolling resistance reduction
Wet performance
Weight reduction
5O% 1OO% 15O%
Braking
2OO7
2O14
2O15
2O2O
Mileage
Predictability
This product strategy sees its highest expression in the CinturatoTM P7TM Blue; with this solution Pirelli was the first manufacturer
in the world to offer the market a tyre that, in some measurements, boasts the double A on the Eurolabel scale. This product is avail-
able, depending on the measurements, both in double A class and in B class for rolling, while always maintaining A for wet grip. On
average the Cinturato P7 Blue guarantees 23% less rolling resistance than the Pirelli reference (class C for rolling resistance) and
therefore, lowers fuel consumption and less harmful emissions. A vehicle with Cinturato P7 Blue tyres that runs 15,000 km a year
consumes 5.1% less fuel (equivalent to 52 litres), reduces greenhouse gas emissions of 123.5 kilograms of CO2 and has a wet braking
distance 9% lower than the Pirelli reference (class B for wet grip) in the same segment.
Comparative TÜV SÜD tests showed that, at a speed of 80 km/h on a wet surface, the P7TM Blue reduces braking by 2.6 metres
compared to a tyre classified B. The Cinturato P7 Blue was developed for medium-high cylinder cars, as a further evolution of the
Cinturato P7, the renowned Pirelli Green Performance tyre released in 2009.
It has to be mentioned the approval for the new Tesla Model X electric SUV, of the Scorpion Zero Asimmetrico, a specific tyre for
larger and more powerful SUVs, able to guarantee rally car performance. The Pirelli Scorpion Zero Asimmetrico allows immediate
discharge into the ground of the maximum power and driving torque, while retaining good energy efficiency in order to ensure the
autonomy of the electric vehicle.
As regards Truck, the focus on mileage and rolling resistance finds perfect synthesis in the new MC:01 line, used for urban trans-
port. The need for more sustainable transport is one of the main demands emerging from the major metropolitan areas around
the world. With its MC:01 product and through a new tread pattern design technology and the use of low hysteresis compounds,
Pirelli has succeeded in combining an 18% reduction in rolling resistance1 compared to the old product, with a substantial increase
in mileage and thus the duration of the tyre in its first life. Moreover, an additional improvement has been achieved in terms of
safety performance, regarding wet grip and braking2 (reducing the braking distance by 2.4 m vs. previous product), where Pirelli
products have an advantage, and in terms of performance on snow, to pass the test in order to obtain the 3PMSF certification (3
peak mountain Snow Flake). The confirmation of this performance is highlighted in a label that is at the top of this segment in fuel
savings, as well as the wet grip class. Added to this is a further improvement in the durability of the casing of the :01 series that
enables this tyre to be marked with a load index higher than the previous product and therefore also improved retreadability in
the casing, extending the overall life of the tyre.
mANAgemeNt oF eND-oF-LiFe tYres
In terms of materiality, the end-of-life phase of the product has a low proportion of the total impact of the tyre on the environment,
as already highlighted in the infographic related to the Group’s environmental strategy. In Europe, about 95% of end-of-life tyres
(ELT) are recovered (Source ETRMA - Annual Report 2013/2014), in Japan the value is 88% (source: JATMA - Tyre Industry of Japan
2015), while in the US the amount of recovered tyres comes to 92% (source: RMA - 2013 US Scrap Tyre Management).
For years now, Pirelli has been involved in the management of ELT, collaborating with leading national and international ref-
1 Rolling Resistance test ISO28580 standard
2 Wet grip Test ISO 15222 standard (wet braking)
85
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
erence bodies. Pirelli is in fact active in the Tyre Industry
Project (TIPG) of the World Business Council for Sustainable
Development (WBCSD), in the ELT working group of ETRMA
(European Tyres and Rubber Manufacturers’ Association) and,
at national and local level, it interacts directly with leading
organisations active in the recovery and recycling of ELTs. As
a member of TIPG, Pirelli Tyre has collaborated on the publi-
cation of a report on the management of ELTs, taking a proac-
tive approach to raising the awareness both within emerging
countries and those that do not yet have a system for recycling
ELTs, in order to promote their recycling and reuse accord-
ing to defined management models, which have already been
launched successfully.
The tyre is a mixture of many valuable materials that at
end-of-life allow two paths of recovery: recovery of material
or energy. In the recovery of material, the reclaimed rubber
is already reused by Pirelli in the compounds for new tyres,
thus contributing to the reduction of the related environmen-
tal impact. Thanks to research and development activities
conducted by Pirelli on innovative materials in collaboration
with major universities, it will be possible in the near future to
improve the quality of recovered material in terms of their af-
finity with the other ingredients of the compounds, resulting
in an increase in the amount of recoveries used in compounds
with an additional environmental benefit.
enVironMentaL
iMPact oF PireLLi’s
ProdUction sYsteM
eNviroNmeNtAL
mANAgemeNt sYstem
AND perFormANCe
moNitoriNg
In 2015, all the industrial production facilities of Pirelli Tyre
and the tyre testing field in Vizzola Ticino (Varese) have Envi-
ronmental Management Systems certified under International
Standard ISO 14001:2004.
International Standard ISO 14001 was adopted by Pirelli as a
benchmark in 1997, and since 2014 all the certificates have
been issued with ANAB international accreditation (ANSI-ASQ
National Accreditation Board: accrediting entity of the United
States). Group policy mandates implementation and certifica-
tion under ISO 14001 and, as a result, this is also applied to
new facilities. The certification activity, together with control
and maintenance of previously implemented and certified sys-
tems, is coordinated on a centralised basis by the Health, Safe-
ty and Environment Department.
As regards environmental management, a review is current-
ly underway of the procedures and guidelines to ensure their
adequacy with the new requirements introduced with the re-
vision of the ISO 14001:2015 standard.
The environmental, health and safety performance of every tyre
manufacturing site is monitored with the web-based Health,
Safety and Environment Data Management (HSE-DM) system,
which is processed and managed centrally by the Health, Safe-
ty and Environment Department. Pirelli has also improved the
CSR-DM (CSR Data Management), an IT system for managing
Group sustainability information, which is used to consolidate
the economic, environmental and social performance of all
Group business units worldwide. Both systems support consoli-
dation of the performance accounted for in this report.
sCope oF reportiNg
The performance types described comes from the three year
period 2013-2014-2015 and consolidate the entire perimeter of
the Group, including Pirelli de Venezuela deconsolidated as
of 31 December 2015. The amount of finished product in 2015
was approximately 1,020,000 tonnes. From the end of 2014, the
reporting scope has seen the exclusion of the steel cord busi-
ness unit due to its sale to a company outside the Group. In
line with the principles set by GRI, the historical value of the
environmental indicators reported below was recalculated ex-
cluding the data of steel cord production facilities in the years
2014 and 2013. Therefore, the following figures comprise the
impact of all Pirelli units: from industrial units to commercial
and administrative sites.
treNDs iN eNviroNmeNtAL
perFormANCe iNDiCes
2015 saw a stabilisation of production volumes: the tonnes of
finished product fell by less than half a percentage point com-
pared to 2014 (an increase when calculated on a comparable
basis), of which an important part occurred in Brazil, due to
exogenous factors related to the relevant economic trend. This
change in volume, together with the geographical redistribu-
tion, has had a particular impact on environmental perfor-
mance indices. Endogenous factors that significantly impact
the performance of the above indices are the productive focus
on Premium products, characterised by higher energy inten-
sity, more stringent quality specifications, more complex pro-
cessing and smaller production batches than for market prod-
ucts in the medium-low range.
These factors have had an impact on emission and energy
consumption indices, while the indices relating to water with-
drawal and waste recovery improved slightly, with specific
waste production that has remained stable.
86
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Energy Management
Pirelli monitors, manages and reports its energy consumption through three main indicators:
absolute consumption, measured in GJ, which includes the total consumption of electrical energy, thermal energy, natural gas
and petroleum derivatives (fuel oil, gasoline, diesel, and LPG);
specific consumption, measured in GJ per tonne of finished product, which indicates the energy used to produce one tonne of
finished product;
specific consumption, as measured in GJ per euro of Operating Income.
The Sustainability Plan 2013-2017 with Vision and Target 2020, fully integrated within the Industrial Plan presented to the finan-
cial community in November 2013, provides for a reduction of 18% of specific energy consumption by 2020 compared to 2009 values.
In the course of 2015, the energy efficiency plan continued at all Group plants, already initiated in recent years and characterised
by actions aimed at:
improving energy management systems, through timely measurement consumption and a daily focus on technical indicators;
improving the quality of energy transformation by streamlining resource and plant use;
improving the efficiency of distribution plants;
improving the efficiency of production plants;
recovering energy for secondary uses;
applying targeted maintenance plans in order to reduce energy waste.
Actions and investments for energy efficiency meet the criteria of economic sustainability normally applied to Pirelli’s industrial
projects, accompanied by the assessment of environmental impacts. The areas for technical action concern the traditional themes
applied to each industrial area, such as modernisation of thermal insulation, maintenance of distribution plants, use of technologies
using inverters, and special projects assessed according to the needs of each manufacturing site.
In 2015, various interventions were made. In particular, the installation continues of LED lighting systems (Light Emitting Diode)
to replace less efficient systems. To speed up the replacement plan, Pirelli also uses “Light Service” contracts, which guarantee both
energy savings of more than 50% and the quality of light achieved.
Centrifugal compressors have been installed to replace volumetric compressors, with a recovery of electrical efficiency greater
than 10%.
Great attention is recognized to efficiency in thermal energy conversion. Specific projects on steam generators, related to the auto-
mation of combustion, to the cleaning of the inner surfaces, to the insertion of drivers of supply pumps.
The South American context, the Brazilian one in particular, has led to an increase in the specific energy index (weighted on tonnes
of finished product) of 2.8% compared to 2014, which remains more than 7% lower than the figure in 2009, the year on which the
2020 target is based.
The energy efficiency plan applied to factories in 2015 allowed about 46,600 GJ in savings. This value was calculated for each facto-
ry considering the production volumes of the reporting year and the change in efficiencies achieved in 2015 from the previous year.
Energy savings, net of South America, amounted to 400,182 GJ.
The reported data were calculated by using direct measurements according to procedure (GHG Corporate Standard) and were sub-
sequently converted into GJ by using heating values from official IPCC sources.
Absolute Consumption (GJ)
Specific Consumption (GJ/tonFP)
Specific Consumption (GJ/k€)
14,000,000
13,000,000
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
13.30
13.20
13.10
13.00
12.90
12.80
12.70
16.80
16.60
16.40
16.20
16.00
15.80
15.60
15.40
15.20
2013
2014
2015
2013
2014
2015
2013
2014
2015
87
Electricity
40%
Other
2%
Natural Gas
34%
Steam
24%
Absolute Consumption (GJ)
Specific Consumption (GJ/tonFP)
Specific Consumption (GJ/k€)
14,000,000
13,000,000
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
13.30
13.20
13.10
13.00
12.90
12.80
12.70
16.80
16.60
16.40
16.20
16.00
15.80
15.60
15.40
15.20
2013
2014
2015
2013
2014
2015
2013
2014
2015
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Absolute
Consumptions
gJ
specific
Consumptions
gJ/tonneFP
gJ/€000
2013
2014
2015
13,153,424
13,193,753
13,506,565
13.25
16.63
12.88
15.74
13.24
15.88
Electricity
40%
Other
2%
Natural Gas
34%
Steam
24%
Distribution of Energy Sources
As illustrated in the graph “Distribution of energy sources”, among the direct sources, natural gas can be found as well as, in small-
er quantities, other liquid fuels such as oil, LPG and diesel (classified as “other”).
These direct sources constitute 36% of the total; the remaining 64% consists of indirect sources such as purchased electricity
and vapour.
Finally, taking into account the geographical distribution of Pirelli and according to IEA data (International Energy Agency), it
has been estimated that the portion of electricity from renewable sources used by Pirelli in 2015 amounted to 38% of the total
electricity used.
Every industrial facility fully respect legislative provisions regarding energy consumption and management. The legislative sit-
uation affecting the Company includes the introduction of periodic audit mechanisms on energy management and use, as well as
possible tariff incentives. In this regard, there were no critical elements or non-conformities.
Throughout Europe, the Energy Efficiency Directive 2012/27/EU, issued to accelerate the achievement of the 20-20-20 objectives,
introduces the obligation for all large companies and all major energy consumers to conduct energy audits. At Pirelli, this obligation
is fulfilled by optimising the management systems already existing at the factory, ISO 14001 and ISO 50001 where present, with the
aim of exploiting any opportunities proposed in the various EU countries.
In 2015, the energy diagnoses of all Pirelli’s factories and of Milan offices were carried out successfully. The outcome did not show
any particular areas of non-compliance with the Energy Performance Indicators (ENPI) established by the Directive for the various
areas of consumption. However, areas for improvement were indicated, which will be subject to technical and economic evaluation.
The German plant has successfully renewed its ISO 50001:2011 certification.
Management of Greenhouse Gas Emissions and Carbon Action Plan
Pirelli monitors and reports its emissions of greenhouse gases through the calculation of CO2eq, which takes into account the con-
tribution of carbon dioxide, as well as methane (CH4) and nitrous oxide (N2O). Greenhouse gases are generated by the combustion
of hydrocarbons at production sites, mainly to operate heat generators that power Group plants, particularly those that produce
steam for vulcanisers, or from the consumption of electrical or thermal energy. The former are called “direct emissions”, or Scope
1 emissions, as they are produced at Company production sites, while the emissions resulting from electrical power or thermal
energy consumption are defined as “indirect emissions”, or Scope 2 emissions as they are not produced within the perimeter of
company production sites but at the plants that generate the energy and steam purchased and consumed. Performance as measured
by energy and greenhouse gas emissions is calculated on the basis of coefficients obtained from the following official sources:
IPCC: Guidelines for National Greenhouse Gas Inventories (2006);
IEA: CO2 Emissions from Fuel Combustion;
and are reported according to the scheme proposed by:
GHG Protocol: A Corporate Accounting and Reporting Standard.
Regarding Scope 2 CO2eq emissions, the national average coefficients are defined with respect to the last year available of the above
reports and updated annually. It should be noted that the tyre production industry is not a carbon-intensive industry; in fact, it falls
within the European Emission Trading Scheme only with reference to thermal power plants above 20 MW of installed capacity. The
Company is not subject to any other specific regulations at the global level.
As in the case of energy, Pirelli monitors and accounts for its direct (Scope 1) and indirect (Scope 2) CO2 by using three principal
indicators:
absolute emissions, as measured in tonnes;
specific emissions, as measured in tonnes per tonne of finished product;
specific emissions, as measured in tonnes per euro of Operating Income.
88
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
The Pirelli Industrial Plan set a reduction target of specific emissions of CO2 equal to -15% by 2020 compared to 2009 values. The
strong link between the trend of energy consumption and CO2 emissions recorded an increase of 2015 specific emissions weighed
on tonnes of finished product of +3% over the previous year and +1% compared with the index weighed on the operating income.
As indicated above, the trend has been strongly affected by the geographic redistribution and in particular by the reduction in
production volumes in areas with a lower emission impact, such as Brazil.
In terms of biogenic CO2 as generated by the small rice husk silica manufacturing site, Pirelli emitted about 5,650 tonnes of CO2eq in
2015.This amount is not counted in the absolute emissions of the Group mentioned above as it is generated from fuel of biogenic origin.
The Pirelli management, calculation and reporting model of emissions of greenhouse gases was certified by an independent third
party according to the ISO 14064-1 Standard. The inspection meets the criteria of relevance, competence, independence, terminol-
ogy and methodology.
All energy efficiency actions described in the preceding paragraph contribute to reducing the environmental indicators related to
greenhouse gas emissions. Parallel to this, Pirelli has developed a more specific “Carbon Action Plan”, with the target of increasing
the use of energy from renewable sources. Among the various projects already underway, it is worth highlighting the photovoltaic
power plant with 500 kW installed power at the plant in Rome, GA, USA. This project makes it possible to reduce emissions by 5%
at the manufacturing plant concerned.
At the plant in Settimo Torinese, a cogeneration plant is in operation for the production of electricity, steam and hot water. There
are two cogeneration modules, for a total of nearly 6 MW of electricity: a 4.8 MW turbine unit powered by natural gas and a 1
MW internal combustion engine powered by vegetable oil, which ensures 20% of energy from renewable sources. The plant is
completed with an approximately 1.2 MWe photovoltaic plant, complementing the generation of renewable energy at the plant.
Actions completed in the past few years, in particular those related to energy efficiency, allowed the avoidance of about 12,000
tonnes of CO2eq in 2015, value calculated using the same analysis for energy savings. The savings net of South America amounted
to nearly 30,000 tonnes of CO2eq.
At the beginning of 2016, two new projects were activated that will ensure the supply of energy from renewable sources.
In Brazil, the installation was completed of a Biomass plant for vapour generation. The plant allows the use of wood waste from
a local supply chain. The expected environmental benefits of the production of energy from biomass will allow replacing 52,500
MWh/year of energy from fossils and equal to a saving of 10,500 tonnes/year of CO2 emissions.
1,000,000
Pirelli is already studying the extension of this technology to other plants in Brazil.
900,000
In Mexico, an agreement was signed for the dedicated supply of electricity from wind power. This will guarantee 3 MW of renew-
able energy, at present equal to more than 30% of the electricity consumption of the plant, with an economic advantage over the
700,000
purchase of electricity from the national grid.
600,000
The effects of these projects will be seen in the 2016 reports.
Specific Emissions (ton/tonFP)
Absolute Emission (ton)
1,100,000
800,000
0.980
0.960
0.950
0.970
0.965
0.955
0.975
1.20
1.22
1.23
1.18
1.16
1.19
1.21
1.17
Absolute Emission (ton)
500,000
400,000
0.980
300,000
0.975
0.945
Specific Emissions (ton/tonFP)
0.940
0.935
0.930
1.23
1.22
Specific Emissions (tonCO2/k€)
1.15
1.14
1.13
1.12
1,100,000
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
2013
0.970
2014
2015
2013
1.21
2014
2015
2013
2014
2015
0.965
0.960
0.955
0.950
0.945
0.940
0.935
0.930
1.20
1.19
1.18
1.17
1.16
1.15
1.14
1.13
1.12
2013
2014
2015
2013
2014
2015
2013
2014
2015
2013
2014
2015
Distribution of Greenhouse Gas Emissions
According to Scope
Absolute Emissions
tonne
963,020
970,704
995,889
of which scope 1
of which scope 2
tonne
tonne
263,690
732,199
Specific Emissions
tonne/tonneFP
tonne/€000
0.970
0.948
0.976
1.22
1.16
1.17
Scope 2
74%
Scope 1
26%
Scope 2
74%
Scope 1
26%
Specific Emissions (tonCO2/k€)
89
15,000,000
14,000,000
13,000,000
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Water Management
15,000,000
18.0
Absolute Withdrawal (m3)
Specific Withdrawal (m3/tonFP)
20.0
Specific Withdrawal (m3/k€)
17.0
16.0
11,000,000
12,000,000
13,000,000
14,000,000
10,000,000
Efficient and conscious water use is one of the principal components of the Pirelli environmental strategy, which has undergone
numerous improvements over the last years. These activities have involved and continue to involve both the overall efficiency of
production processes, from design of machinery to Facility Management activities, and the contribution which every employee can
make in reducing consumption of this precious resource.
The Pirelli Industrial Plan set a reduction target of specific water withdrawal of 58% by 2020 compared to the 2009 value.
From 2009 to today, thanks to the efforts of all the production facilities, 30 million cubic metres of water have been saved: an
amount slightly lower than the absolute withdrawal during three years by the entire Pirelli Group. This figure might be the one
that best expresses the commitment of the Company to the protection of water sources in the communities where it operates. In fact,
aside from the quantitative and global aspect, Pirelli dedicates great attention to the local context of water resources, aware that any
2014
water savings or improvement in discharges immediately and directly benefits the local community.
In 2015 it recorded an absolute withdrawal of slightly above 11 million cubic metres, with a reduction in the specific withdrawal
of 3% compared to 2014 and 42% compared to 2009. To provide an overview of water withdrawal, Pirelli monitors and reports the
following three indicators:
Specific Withdrawal (m3/tonFP)
Specific Withdrawal (m3/k€)
8,000,000
6,000,000
9,000,000
5,000,000
7,000,000
2014
2013
2013
2015
2015
20.0
10.0
18.0
18.0
14.0
14.0
16.0
16.0
13.0
12.0
15.0
15.0
17.0
8.0
11.0
9.0
12.0
14.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
Absolute Withdrawal (m3)
2013
2014
2015
13.0
absolute withdrawal, measured in cubic metres, which comprises the total withdrawal of water by the Group;
specific withdrawal, measured in cubic metres per ton of finished product, which indicates the withdrawal of water used to
11.0
make one ton of finished product;
10.0
specific withdrawal, as measured in cubic metres per euro of Operating Income.
10.0
12.0
8.0
4.0
6.0
9.0
2.0
2013
2014
2015
2013
2014
2015
2013
2013
2014
2015
2014
2015
8.0
0.0
Absolute Withdrawal
Specific Withdrawal
(m3)
(m3/tonneFP)
(m3/€000)
13,834,000
11,512,000
11,163,000
13.9
17.5
11.2
13.7
11.0
13.1
90
Specific Withdrawal (m3/tonFP)
Absolute Withdrawal (m3)
15,000,000
14,000,000
13,000,000
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
18.0
17.0
16.0
15.0
14.0
13.0
12.0
11.0
10.0
9.0
8.0
Specific Withdrawal (m3/k€)
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2013
2014
2015
2013
2014
2015
2013
2014
2015
All the figures reported in this section have been collected by taking direct or indirect measurements, and are communicated by
the local units.
Tyre
95%
The two graphs below show the weight of the water procurement per type of source and the distribution of absolute withdrawals
per type of production business.
Ecotechnology
and Others
non-production
5%
Distribution of Water Withdrawal by Use
Type of Water Sources
Tyre
95%
Inside wells
60%
Ecotechnology
and Others
non-production
5%
Public acqueduct
22%
Outside wells
and surface water
18%
Tyre
95%
Inside wells
60%
Inside wells
60%
Public acqueduct
22%
Outside wells
and surface water
18%
Ecotechnology
and Others
non-production
5%
Public acqueduct
22%
Outside wells
and surface water
18%
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
60% of the water withdrawn is pumped from wells inside the facilities and authorised by the competent authorities. Furthermore,
Pirelli obtains about one-fifth of its requirements from surface water, while dedicating special care to guaranteeing that this vol-
ume is marginal in relation to the volume of the affected water bodies (always less than 5%). About 10% of the volume taken from
surface water bodies is pumped from waterways located in Brazil and protected by national legislation.
Lastly, about 300,000 cubic metres of water used, equivalent to approximately 3% of total withdrawal, are obtained from the waste
water treatment of its production processes.
A total of about 8.3 million cubic metres of domestic and industrial waste water were discharged, with 68% of this into surface
water bodies, but always in quantities that are marginal in relation to the volume of the receiving bodies (always less than 5%) and
without significantly impacting biodiversity. The remaining amount was discharged into sewer networks. Before being discharged
into the final recipient, industrial waste water – adequately treated as necessary – is periodically subjected to analytical tests that
certify compliance with locally applicable statutory limits. In particular, as regards the quality of industrial effluents of the Tyre
facilities, indicative average values are: 6 mg/l of BOD5 (Biochemical Oxygen Demand), 24mg/l of COD (Chemical Oxygen Demand)
and 12 mg/l of Total Suspended Solids.
WasteManagement
The improvement of environmental performance deriving from the production and management of waste is achieved through:
innovation of production processes, with the aim of preventing the production of waste at the source, progressively reducing the
processing of rejects and replacing current raw materials with new materials that have a lower environmental impact;
operating management of generated waste, aimed at identifying and ensuring the selection of waste treatment channels that can
maximise recovery and recycling, gradually eliminating the amount sent to the landfill with the Zero Waste to Landfill vision;
streamlining packaging management, both for the packaging of purchased products and the packaging for products made by
the Group.
Pirelli monitors and reports on its own waste production, as measured and communicated by all operating units, using three key
indicators:
91
absolute production, as measured in tonnes;
specific production, as measured in kilograms per tonne of finished product;
specific production, as measured in kilograms per euro of Operating Income.
The Industrial Plan envisages that more than 95% of waste produced should be sent for recovery by 2020, with a Zero Waste to
Landfill vision, extending to all operating affiliates the approach already adopted successfully by the factories in Breuberg (Ger-
many) and Rome (United States).
In line with what is mentioned in the paragraph “Trends in Environmental Performance indices”, in 2015 91% of waste was recov-
ered, with an increase of 1% over the previous year and 18% compared to 2009, the baseline year on which the 2020 target is based.
Specific waste production saw a stabilisation of the figure, which stood at 121 kg per tonne of finished product. Hazardous wastes
represent slight less than 9% of total production and are sent in their entirety to plants located in the same country where they
are produced.
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Absolute Production (ton)
Specific Production (kg/k€)
Specific Production (kg/tonFP)
160
150
140
130
120
110
100
170
165
160
155
150
145
140
135
130
2013
2014
2015
2013
2014
2015
2013
2014
2015
Non-hazardous
91%
Hazardous
9%
15%
10%
9%
85%
90%
91%
Recovery (including
recycling and reuse)
Landfill or incineration
without energy recovery
2013
2014
2015
Absolute Production (ton)
Specific Production (kg/tonFP)
Specific Production (kg/k€)
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
160
150
140
130
120
110
170
165
160
155
150
145
140
135
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
100%
90%
80%
70%
60%
50%
92
40%
30%
20%
10%
0%
60,000
Absolute Production (ton)
2013
2014
160
100
Specific Production (kg/tonFP)
2015
2013
2014
170
130
Specific Production (kg/k€)
2015
2013
2014
2015
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
150
140
130
120
110
100
(tonne)
2013
(kg/tonneFP)
2014
(kg/€000)
2015
Absolute Production
2013
2015
2014
specific Production
165
160
155
150
145
140
2013
135
130
133,000
2013
133
168
Non-hazardous
91%
2014
Hazardous
9%
2015
122,000
123,000
2014
120
2015
146
121
145
Waste by Type of Treatment
Waste by Type
Non-hazardous
91%
Hazardous
9%
15%
10%
9%
85%
90%
91%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
15%
10%
9%
2013
2014
2015
Other Environmental Aspects
Recovery (including
recycling and reuse)
Landfill or incineration
without energy recovery
85%
2013
91%
Solvents
90%
Solvents are used as ingredients in processing, mainly to reactivate vulcanised rubber, during the fabrication and finishing of
tyres. Pirelli is committed to the progressive reduction of these substances, both by optimising the use of solvents, and by spreading
solvent-free technologies for operations that may be performed even without the use of these substances. This resulted in a further
reduction in the specific consumption of solvents of more than 10% at the end of 2015 compared to the previous year and of 34%
compared to 2009, with related emissions overall slightly lower than total consumption.
Landfill or incineration
without energy recovery
Recovery (including
recycling and reuse)
2014
2015
Absolute Consumption
specific Consumption
tonne
kg/tonnePF
2013
2014
2015
2,560
2.6
2,420
2.4
2,100
2.1
Absolute Consumption (ton)
3,000
2,500
2,000
1,500
1,000
Specific Consumption (kg/tonFP)
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2013
2014
2015
2013
2014
2015
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
of Consorzio Forestale Unione Agricoltori di Pavia (Forest Con-
sortium Farmers Union of Pavia). The activities financed with
Pirelli’s contribution will be carried out in 2016.
The union of the two projects has allowed the decrease of 165%
of 2014 emissions, thus going well beyond what is required by
our corporate policy with a view to increasing environmental
responsibility.
93
Biodiversity
Pirelli pays the utmost attention to ensuring that corporate ac-
tivities do not interfere with the biodiversity characteristic of
the contexts in which the Company operates. Currently, there
are two Pirelli facilities located within protected and high val-
ue areas for biodiversity: the facility in Vizzola Ticino (Varese,
Italy) and the facility in Gravataí (Brazil).
The Vizzola Ticino site contains the tyre test track, has an area
of 0.26 square kilometres and is part of the area of Parco del
Ticino in Lombardy, an MAB area (Man and Biosphere, a collec-
tion of 425 biosphere reserves located in 95 countries around
the world) defined by UNESCO. It features 21 species included
on the IUCN Red List, of which: 15 are classified as “of least
concern (LC)”, 1 as “near threatened (NT)”, 3 as “vulnerable (V)”,
1 as “endangered (EN)” and 1 as “Critically Endangered (CR)”.
To ensure the utmost protection of the natural environment in
which the Vizzola test track is located, Pirelli has implement-
ed an ISO 14001 certified Environmental Management System
in accordance with the Parco del Ticino. Environmental im-
pact on biodiversity in the area are not significant; however,
several interventions were carried out, both directly by the
Company and by the Park Authority, to mitigate and improve
the interactions of Pirelli’s activities with the natural environ-
ment, as stipulated in the agreement signed in 2001.
The Gravataí site (Brazil), measuring 0.57 square kilometres,
including 0.16 sq km of land ecosystem protected under feder-
al law. Here again, Pirelli has implemented an ISO 14001 certi-
fied environmental management system to guarantee that all
potential impact on the environment and on biodiversity, while
deemed relatively insignificant, should be duly considered and
managed in every case to reduce all possible interference to a
minimum.
Also in 2015 Pirelli decided to offset the CO2 emissions pro-
duced by its fleet the previous year through the purchase of
carbon credits. Direct results of the Pirelli car policy, this ini-
tiative promotes the choice of vehicles that have a lower envi-
ronmental impact and supports a project to save forests.
The cars of the Italian company fleet in 2014 issued 1,073
tonnes of CO2, a decrease of more than 15% over the previous
year’s value. In order to offset this impact on the climate,
Pirelli purchased carbon credits through two projects: an
international one, conducted in Turkey, related to the produc-
tion of renewable energy from hydroelectric sources and an
Italian one based on sustainable forest management.
In particular, the latter is located in Lombardy, near the basin
of the Po River in the town of Cava Manara. Pirelli’s contribu-
tion has enabled the maintenance of 39 hectares of land and the
care of 39,000 plants, with the ultimate objective of rebuilding
a forest that can evolve naturally, thus ensuring the survival of
a large ecological corridor distributed along the banks of the
river Po. The project is being carried out with the collaboration
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
NOX Emissions
Absolute Consumption (tonNOx)
Specific Consumption (kgNOx/tonFP)
2,200
2.10
NOX emissions derive directly from the energy-generating processes used. In 2015, the index based on tonnes of finished product
marked a decrease of 8% compared to 2013.
The following graph shows the weight in 2015 of the direct and indirect emissions of NOX out of the total NOX emissions. The emis-
sions have been calculated by using the BUWAL 250 and IDEMAT 2001 emission factors defined.
2,000
1,800
2.00
2.05
1.95
1,600
2013
1,400
2014
2,023
1.98
1.90
2015
1.85
1,943
1.90
1.80
2015
2014
2013
Distribution of NOX Emission
2014
2015
Indirect
83%
Direct
17%
Absolute Emissions
specific Emissions
tonneNOx
kgNOx/tonneFP
2,046
2.06
1,200
1,000
2013
Absolute Consumption (tonNOx)
Specific Consumption (kgNOx/tonFP)
2,200
2,000
1,800
1,600
1,400
1,200
1,000
2.10
2.05
2.00
1.95
1.90
1.85
1.80
94
2013
2014
2015
2013
2014
2015
Other Emissions and Environmental Aspects
Indirect
83%
Direct
17%
The production process does not directly use substances that are harmful to the ozone layer. These are instead contained in certain
closed circuits of the cooling and air conditioning plants. Therefore, except for accidental and unforeseeable losses, there are no
free emissions into the atmosphere that can be correlated with Pirelli manufacturing activities.
Direct emissions of SOX, caused by the combustion of diesel and fuel oil, was estimated to be about 27 tonnes in 2015 (U.S. EPA
emissions standards).
As regards the management of packaging, tyres are generally sold without packaging.
The environmental management systems implemented at the production units have assured constant and prompt monitoring and
intervention regarding potential emergency situations that may arise, as well as the reports received from stakeholders.
In the course of 2015, there were no significant environmental spills and no significant complaints related to environmental issues
or related penalties.
Expenses and investments
In the three-year period 2013-2015, environmental expenditure related to the production process exceeded Euro 57.7 million, of
which over 34% was allocated in 2015. About 86% of this amount concerned normal management and administration of factories,
while the remaining 14% was dedicated to preventive measures and improvement in environmental management.
To complete the picture it should be noted that, consistent with the materiality analysis published at the beginning of this section
of the report, the most significant expenses that Pirelli dedicates to the environment are those relating to product Research & De-
velopment: in 2015, the Company invested Euro 214.4 million in research and innovation of its products, with a constant focus on
safety performance, reduction of the environmental impact and, simultaneously, on increased production efficiency.
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
sociaL diMension
HumAN rigHts goverNANCe
The Pirelli Group pursues and supports the respect of human rights affirmed in international venues. These values have always
been firmly anchored in corporate management. Human Rights Governance is fully integrated in the Sustainable Management
System adopted by Pirelli, which is based on the United Nations Global Compact, the ISO26000 Guidelines and the provisions of
SA8000® Standard and underlying international standards.
Pirelli also informs its governance of Human Rights on the recommendations contained in the “UN Guiding Principles for Business
and Human Rights: implementing the United Nations Protect, Respect and Remedy Framework”.
Pirelli’s commitment in favour of human rights is expressly stated in the document “Values and Ethical Code” approved by the
Board of Directors and, in detail, in the “Social Responsibility Policy for Occupational Health, Safety and Rights, and Environ-
ment”, which states that the Group’s sustainable development strategies require, among other things, a commitment to continuous
improvement of aspects of occupational health and safety at work of its activities, without prejudice to respect and support of the
contents of the Universal Declaration of Human Rights and the International Labour Organization’s Declaration on Fundamental
Principles and Rights at Work. The policy specifies Pirelli’s commitments with respect to each of the ILO Core Labour Standards,
and the related extension to the supply chain. The “Equal Opportunities Statement” is dedicated to the Group commitment to equal
opportunities and non-discrimination.
All of the aforementioned documents have been distributed to employees in their local language. They are also an integral part of
the sustainability contract clauses applied to Group suppliers, as well as being published on the Pirelli website in the languages
spoken by employees and principal suppliers.
The oversight of the respect of human rights was relevant also in the materiality matrix of sustainability factors for the Group’s
strategies, published in this report and which consolidate the views of all the categories of the Company’s stakeholders, including
employees, suppliers, institutions and dozens of NGOs in the countries in which the Company operates.
Human and Labour Rights will also be subject to special discussion during the “Pirelli Global Stakeholder Dialogue”, which the
Company will hold in Brussels in 2016 and which will be publicly reported on the website during the year.
The human rights management processes are handled by the Pirelli Sustainability & Risk Governance Department, which acts in
concert with the affected and responsible functions, with reference to both the Internal and External Community.
On the management side of risk pertaining to Human Rights and labour rights in the world, before investing in a specific market,
Pirelli conducts ad hoc assessments of any political, financial, environmental and social risks, including those related to the respect
of human and labour rights. The external and external context is monitored in those countries where the Company operates, in view
of preventing negative impacts on human rights in the ambit of the sphere of corporate influence, and if applicable, remedying them.
Any violation of human rights can be reported to the Company through the Whistleblowing Reporting Procedure, to which a par-
agraph is dedicated in this report and to which reference is made for further information on Reports received in recent years. Of
these, in 2015 no reports involved alleged violations of human rights or the ILO Core Labour Standards, with specific reference to
forced and child labour, freedom of association and collective bargaining, discrimination.
In terms of materiality in the corporate value chain, the respect for human rights and labour rights assumes particular importance
in human resources and the supply chain management.
The management of human and labour rights in the Internal Community at Pirelli is outlined in the paragraph on “Compliance with
statutory and contractual obligations in terms of overtime, leave, association and bargaining, equal opportunities and non-discrimina-
tion, prohibition of child and forced labour”, to which reference is made for related details. The management of human rights in the con-
text of the supply chain is outlined in the paragraph on Pirelli suppliers in this report, to which reference is made for further details.
Both management areas - suppliers and employees - are overseen through training and monitoring tools consolidated over years.
95
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
In terms of training on the Pirelli Model, new employees’ attention is drawn to the Group’s Sustainability Policies and the commit-
ments they involve, as detailed in the “Ethical Code”, the “Code of Conduct”, the “Equal Opportunities Policy”, and the “Social Re-
sponsibility Policy for Occupational Health, Safety, Rights, and Environment”. Also with reference to the fact Pirelli complies with
and upholds the contents of the “Universal Declaration of Human Rights”, the International Labour Organization’s “Declaration on
Fundamental Principles and Rights at Work”, the “Rio Declaration on Environment and Development” and the United Nations “Con-
vention against Corruption”, as well as the provisions of Standard SA8000®, including the ban on forced labour and child labour,
up to freedom of collective bargaining, equal opportunities and non-discrimination. All of the above is also the subject of training
for all the Sustainability and Purchasing Managers of the Group, and the Group’s suppliers through annual sessions involving all
categories of supply deemed critical for the materiality of sales at Pirelli and the social context in which they operate (in particular
in developing countries).
Together with constant co-ordination and monitoring at corporate level, compliance with Pirelli human rights and labour rights
requirements as well as environmental sustainability and business ethics rules is assessed in periodic audits commissioned by
Pirelli to specialised independent firms, as well as through Audits performed by the Pirelli Internal Audit Department. Audit ac-
tivities conducted in 2015 both by Pirelli facilities and by suppliers’ facilities are extensively covered in this report, as part of the
aforementioned paragraphs “Our Suppliers” and “Compliance with statutory and contractual obligations in terms of overtime, leave,
association and bargaining, equal opportunities and non-discrimination, prohibition of child and forced labour”.
Reference is made to the paragraph “Our Suppliers” in this report also with regard to the discussion of the topic “Conflict Minerals”.
internaL coMMUnitY
The Human Capital Sustainable Management Model is inspired by the Global Compact principles, the SA8000® Standard, which for
years has been the reference tool for the Group’s Social Responsibility management, and the ISO 26000 Guidelines. This results in
and in the specific commitments that the Company states in the its “Values and Ethical Code”, in the “Social Responsibility Policy for
Health, Safety and Rights, Environment” and in the “Equal Opportunities Statement”, communicated to all Employees in the local lan-
guage as well as made available to the External Community in the Sustainability section of the website www.pirelli.com/corporate.
96
pireLLi empLoYees ArouND tHe WorLD
Pirelli employees as at 31 December 2015 amounted to 36,753 (vs. 36,795 in 2014 and 36,142 in 2013) thus presenting a substantial
employment stability compared to the previous year.
breakdown oF employees* by category
2015**
TyRE busINEss
OTHER ACTIvITIEs***
TOTAL PIRELLI
eXecutives
white collars
blue collars
total
316
3
319
6,936
30
6,966
29,360
108
29,468
36,612
141
36,753
2014
eXecutives
white collars
blue collars
total
TyRE busINEss
OTHER ACTIvITIEs***
TOTAL PIRELLI
308
4
312
7,034
60
7,093
29,278
112
29,390
36,620
176
36,795
2013
eXecutives
white collars
blue collars
total
TyRE busINEss
OTHER ACTIvITIEs***
TOTAL PIRELLI
310
6
316
6,965
85
7,050
28,654
123
28,777
35,929
213
36,142
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
2015** vs 2014
TyRE busINEss
OTHER ACTIvITIEs***
TOTAL PIRELLI
2015** vs 2013
TyRE busINEss
OTHER ACTIvITIEs***
TOTAL PIRELLI
eXecutives
white collars
blue collars
total
8
-1
7
-98
-30
-127
82
-4
78
eXecutives
white collars
blue collars
total
7
-3
4
-29
-55
-84
706
-15
692
-7
-35
-42
683
-72
611
* The figures do not include the personnel related to the steelcord business sold in 2014
** Includes Pirelli de venezuela deconsolidated as of 31 december 2015
*** Includes Pirelli Eco Technology
breakdown oF employees* by geographical area and gender
tyre business
other activities
total pirelli
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
12,327
1,436
12,225
3,239
3,056
2,351
14,678
284
815
80
799
1,720
13,041
3,319
3,855
62
140
12,405
2,413
0
0
0
1
1,436
12,225
3,239
3,057
284
815
80
799
78
0
0
0
1
79
0
0
0
0
62
14,818
1,720
13,041
3,319
3,856
97
TOTAL PIRELLI
32,283
4,329
36,612
141
32,362
4,391
36,753
tyre business
other activities
total pirelli
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
12,172
1,260
13,173
2,751
3,008
2,388
195
823
73
776
14,561
1,455
13,996
2,824
3,784
90
85
175
12,262
2,473
14,735
0
0
0
1
91
0
0
0
0
0
0
0
1
1,260
13,173
2,751
3,009
195
823
73
776
1,455
13,996
2,824
3,785
85
176
32,455
4,340
36,795
TOTAL PIRELLI
32,364
4,255
36,620
2013
Europe
NAFTA
south America
MEA
Asia Pacific
tyre business
other activities
total pirelli
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
11,963
994
13,046
2,811
2,817
2,526
14,488
104
108
212
12,067
2,634
14,700
158
759
76
780
1,152
13,805
2,887
3,597
0
0
0
1
0
0
0
0
0
0
0
1
994
13,046
2,811
2,818
158
759
76
780
1,152
13,805
2,887
3,598
TOTAL PIRELLI
31,630
4,298
35,929
105
108
213
31,735
4,406
36,142
2015**
Europe
NAFTA
south America
MEA
Asia Pacific
2014
Europe
NAFTA
south America
MEA
Asia Pacific
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
2015** vs 2014
tyre business
other activities
total pirelli
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL PIRELLI
155
176
-948
488
48
-81
-37
89
-8
7
23
74
117
265
-955
495
71
-7
-12
-23
-35
0
0
0
0
0
0
0
0
0
0
0
0
-12
-23
-35
143
176
-948
488
48
-93
-61
89
-8
7
23
51
82
265
-955
495
71
-42
2015** vs 2013
tyre business
other activities
total pirelli
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
MEN
WOMEN
TOTAL
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL PIRELLI
364
442
-820
428
239
653
-175
126
57
4
19
31
189
568
-764
432
258
683
-26
-46
-72
0
0
0
0
0
0
0
0
0
0
0
0
-26
-46
-72
338
442
-820
428
239
627
-221
126
57
4
19
-15
117
568
-764
432
258
611
* The figures do not include the personnel related to the steelcord business sold in 2014
** Includes Pirelli de venezuela, deconsolidated as of 31 december 2015
98
Workforce Flows by Geographic Area, Gender and Age
The following data refer to Pirelli Group incoming/outgoing employees. The disposals and acquisitions of companies or business
units, and changes in work schedules from full to part-time are not considered.
employee* Flows by geographic area in the three -year period 2013-2015
2015**
2014
2013
INCOMING
OUTCOMING
INCOMING
OUTCOMING
INCOMING
OUTCOMING
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL
1,737
701
1,590
1,041
586
5,655
1,604
443
2,478
570
519
5,614
1,950
570
1,401
539
686
5,146
1,504
626
1,369
188
469
4,155
1,805
507
2,945
573
789
6,619
1,891
355
2,527
531
596
5,900
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
2015** employee Flows by geographical area, gender and age: total values
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
1,049
500
914
635
401
600
198
657
392
185
88
3
20
14
0
1,449
558
1,409
1,030
493
TOTAL
3,499
2,031
125
4,939
288
143
181
11
93
716
570
304
1,158
416
316
647
132
1,170
132
202
388
1,240
7
151
22
1
378
2,288
561
445
2,763
2,283
569
4,912
364
65
190
9
74
702
2015** employee Flows by geographical area, gender and age: percentage values
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL
60%
71%
57%
61%
68%
62%
35%
28%
41%
38%
32%
36%
5%
0%
1%
1%
0%
2%
83%
80%
89%
99%
84%
87%
17%
20%
11%
1%
16%
13%
36%
69%
47%
73%
61%
49%
40%
30%
47%
23%
39%
41%
24%
2%
6%
4%
0%
10%
77%
85%
92%
98%
86%
87%
23%
15%
8%
2%
14%
13%
2014 employee Flows by geographical area, gender and age: total values
99
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
1,294
363
921
505
512
531
198
468
34
174
124
1,698
9
13
0
0
554
1,256
538
620
252
16
145
1
66
766
384
679
84
335
533
226
603
90
129
205
16
87
14
5
1,257
612
1,213
184
401
TOTAL
3,595
1,405
146
4,666
480
2,248
1,580
327
3,666
247
14
156
4
68
489
2014 employee Flows by geographical area, gender and age: percentage values
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL
66%
64%
66%
94%
75%
70%
27%
35%
33%
6%
25%
27%
6%
2%
1%
0%
0%
3%
87%
97%
90%
100%
90%
91%
13%
3%
10%
0%
10%
9%
51%
61%
50%
45%
72%
54%
35%
36%
44%
48%
28%
38%
14%
3%
6%
7%
1%
8%
84%
98%
89%
98%
85%
88%
16%
2%
11%
2%
15%
12%
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
2013 employee Flows by geographical area, gender and age: total values
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
1,030
384
1,950
534
602
661
121
974
38
187
115
2
22
1
0
1,481
442
2,747
567
667
TOTAL
4,500
1,980
140
5,903
324
65
199
6
122
716
580
279
741
76
1,399
1,019
417
471
104
122
570
0
109
10
3
1,432
299
2,332
528
504
3,146
2,062
692
5,096
459
56
195
3
92
804
2013 employee Flows by geographical area, gender and age: percentage values
incoming
outcoming
<30
30-50
>50
MEN
WOMEN
<30
30-50
>50
MEN
WOMEN
Europe
NAFTA
south America
MEA
Asia Pacific
TOTAL
57%
76%
66%
93%
76%
68%
37%
24%
33%
7%
24%
30%
6%
0%
1%
0%
0%
2%
82%
87%
93%
99%
85%
89%
18%
13%
7%
1%
15%
11%
31%
79%
55%
79%
79%
53%
39%
21%
40%
20%
20%
35%
30%
0%
4%
2%
1%
12%
76%
84%
92%
99%
85%
86%
24%
16%
8%
1%
15%
14%
100
* The figures do not include the personnel related to the steelcord business sold in 2014
** Includes Pirelli de venezuela, deconsolidated as of 31 december 2015.
During the year, the Company operated internationally to rebalance the employment level aligning it to the needs of volume related
to high market volatility, maintaining an occupational balance at the end of 2015 in line with that of 2014.
Among mature countries where Pirelli operates (i.e. those internationally defined as “mature” or “non-emerging” markets), in
Italy, there was on one hand, the reorganisation of the production facility in Bollate by virtue of the agreements signed with
the trade unions, on the other, the strengthening of HQ structures mainly in the areas dedicated to research and development.
As for emerging markets where Pirelli operates (i.e. those internationally defined as “emerging”, namely Romania, Russia, Ar-
gentina, Brazil, Chile, Colombia, Mexico, Venezuela, Egypt, Turkey, China), the Company increased the number of employees
in China, Romania, Mexico and Turkey, acting on the organisation and production processes in line with market requirements.
As for Brazil, following the country’s crisis and the related negative impact in the Tyre sector, there was a reorganisation of the
production structure, which led to a reduction in employees at the four production sites in the country, mainly acting on flexi-
bility reduction and work organisation.
2014 showed a decrease of both incoming and outgoing flows compared to the previous year, mainly due to slightly lower growth in
production volumes to that recorded in the period 2013-2012.
Pirelli does not employ anyone under the age of 15. There are 50 young people aged between 15 and 18 (34 in Brazil, 7 in Germany,
5 in the UK, 2 in Sweden and Venezuela and 1 in Switzerland), each for training and integration plans, in harmony with local laws.
DiversitY mANAgemeNt
Pirelli is characterised by a multinational context where individuals manifest a great diversity, whose conscious management
simultaneously creates a competitive advantage for the Company and a shared social value.
Pirelli’s commitment to compliance with equal opportunities and the enhancement of diversity in the workplace is expressed in the
main Group Sustainability documents: the “Values and Ethical Code” approved by the Board of Directors, the “Social Responsibility
Policy for Occupational Health, Safety and Rights, Environment” and the “Declaration on Equal Opportunities”. These documents have
been distributed to all employees in their local language and published on the institutional website www.pirelli.com/Sustainability.
While respecting the cultural differences of the individual countries, what necessarily unites all Pirelli affiliates in the same cul-
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
ture are its shared corporate values, policies and rules, which are applied everywhere with the sole difference of the language into
which they are translated.
In 2015, remote training was provided in 24 countries on issues of diversity management at the company and its related value,
already initiated in 2014 in Italy. The course, developed centrally in collaboration with local representatives in order to ensure
maximum effectiveness, has been translated into 11 languages and offered to all employees, on line or in print copy.
Pirelli monitors the level of acceptance and appreciation of diversity perceived by employees within their own reality. The survey
is conducted as part of the annual My Voice climate survey, conducted in the local language at Group level (please see the dedicated
paragraph in this report). The results of the survey, conducted at the end of 2014 and communicated to employees at the start of 2015
were particularly appreciated with regard to the perception of the respect for Diversity within the Company, with a strong impact
on the overall Trust Index with respect to the company. The results of the survey carried out at the end of 2015 will be communi-
cated to employees in the first quarter of 2016 and reported in the next Annual Report.
A functional tool for the management of Equal Opportunity and the prevention of risk of breach thereof is the Group Whistleblow-
ing Procedure, through which employees, suppliers and the external Community can anonymously report any suspected violation.
Also in 2014, there were no whistleblowing reports concerning acts of discrimination. For further information on reports received
in 2015, 2014 and 2013, reference is made to the paragraph “Group Reporting Procedure - Whistleblowing”.
Internationality and multiculturalism are the characteristic elements of the Group: Pirelli operates in over 160 countries on five
continents, and 91.4% of employees (at December 31, 2015) worked outside of Italy.
Awareness of the cultural differences that create the identity of the Company entails displaying the utmost confidence in manage-
ment of local origin: 71% of Senior Managers work in their country of origin, where Senior Managers are those reporting directly to
the Chairman and CEO as at December 31, 2015.
In order to develop the innovative and managerial potential inherent in multiculturalism and in dealings with different professional
environments, the Company promotes the growth of its managers through international mobility: 57% of active Senior Managers in
2015 have in fact experienced at least one inter-company assignment during their professional experience within the Pirelli Group.
At the end of 2015, moreover, 13% of expatriates were women (up from 12% in 2014).
Below is a breakdown of employees by gender in the three-year period 2013-2014-2015, expressed as the percentage weight of
women against the total number of employees in each job category, the data shown in the following table show substantial stability
in 2015 compared to 2014. The percentage of women of the total Pirelli population stood at 12%, of total executives at 9%, of total
managerial positions at 19% and of total workers at 8%. However, the percentage of women in Managers positions rose to 21%, the
latter being an important element as this category constitutes a growth pool.
101
eXecutives
cadre
eXec+cadre
(=tot.managers)
white collars
blue collars
total
2013
2014
2015*
10%
9%
9%
20%
20%
21%
18%
19%
19%
34%
32%
32%
8%
8%
8%
12%
12%
12%
*Includes Pirelli de venezuela, deconsolidated as of 31 december 2015.
Analysing the breakdown of gender in terms of employment contract, the table below shows that in 2015, there was an increase in
the substantial balance between men and women already recorded in 2014. We also note the further growth of permanent employ-
ment contracts, which in 2015 make up 95% of the total contracts compared to 93% in 2013-2014.
2013
2014
2015*
M
F
TOT
M
F
TOT
M
F
TOT
PERMANENT
TEMPORARy
AgENCy
93%
7%
0%
96%
3%
1%
93%
7%
0%
93%
7%
0%
97%
3%
0%
93%
7%
0%
95%
4%
1%
96%
3%
1%
95%
4%
1%
*Includes Pirelli de venezuela, deconsolidated as of 31 december 2015.
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
The rate of employee return to work after maternity/paternity
leave at Pirelli in relation to its total workforce in all indus-
trial countries where the Company operates was positive. In
particular: one year after the maternity and paternity event
which occurred in 2014, 2015 saw 89% of women (the same
figure as the previous period of reference 2013-2014) and 100%
of men (vs. 98% in the previous period of reference 2013-2014)
still being employed by the Company. The difference in the
data between genders should be considered natural in light of
the different socio-cultural contexts in which Pirelli female
workers are inserted.
In the context of gender diversity, Pirelli pays special atten-
tion to remuneration equality, constantly monitoring this is-
sue. The countries considered significant in the analysis at
the end of 2015 were Brazil, China, Germany, Italy, Romania,
Turkey, Mexico, Venezuela, Argentina, Egypt, the USA and
Russia, representing approximately 3/4 of the total workforce
subject to the remuneration policy (executives, managers and
employees). At a methodological level, it should be noted that
the remuneration differentials between men and women were
calculated for each country and at the same weight of positions
held, cross-checking the “grade” (i.e. the weight attributed to
each position on the basis of various factors) with elements
such as performance and professional seniority. This valua-
tion method allows objectivity and accuracy of the survey
and evaluation: in fact, it should be noted that data calculated
and/or reported only at Group level would be unable to pay
due attention to the structural differences of the various local
markets, the different professional seniorities and the logic of
remuneration markets with special features not comparable
with each other.
The average of remuneration differentials between men and
women recorded in these countries is equal to 1% in favour of
women for white collars and 5% in favour of men for cadres,
compared to 3% in 2014 and 6% in 2013 for white collars and
3% in 2014 and 4% in 2013 for cadres in favour of men.
Some examples:
Italy, which has an difference between average remu-
neration for men and average remuneration for women of
around 13% in favour of women for the category of employ-
ees (compared to 5% in 2014 and 2% in 2013 in favour of
men) and 1% also in favour of women (2% in 2014 in favour
of women and 3% in 2013 in favour of men) for the category
of cadre;
Turkey, where the differential is in favour of men for 4%
for the category of employees (5% in 2014 and 6% in 2013);
Romania, where for the category of employees the differ-
ential is equal to 5% in favour of men (compared to 7% in
favour of women in 2014, 3% in 2013);
Brazil, where for the category of employees the differential
is equal to 5% in favour of women (4% in favour of men in
2014 and 8% in 2013) and for the category of cadre it is
equal to 4% also in favour of men (1% in 2014, 4% in 2013);
Germany, which showed a difference between average re-
muneration for men and average remuneration for women
of around 4% in favour of men for the category of employ-
ees (5% in 2014) and 3% also in favour of men for the cate-
gory of cadre (2% in 2014);
Venezuela, which showed a difference between average re-
muneration for men and average remuneration for women
of around 3% in favour of women for the category of em-
ployees (4% in favour of men).
Finally, with reference to the population of executives, of
which women account for 9% (figure unchanged compared to
2014 and 2013), there is an average remuneration difference of
5% in favour of men (in 2014, the ratio was 6% in favour of men,
while in 2013 the ratio was 1% in favour of women).
In the various markets, the “professional seniority” factor, still
on average of benefit of men, continues to have a strong impact
on the remuneration trend. On the other hand, the number of
women entering the labour market will contribute to an in-
creasingly greater gender balance over the medium term, also
in terms of professional seniority, when the average seniority
of women will have grown sufficiently to be comparable to that
of men in most markets.
In regard to the standard salary of new hires during their
first year of work at Pirelli, this is greater than the minimums
prescribed by local legislation and there are no differences
between men and women or any other sort of diversity.
The inclusive culture which at Pirelli informs its way of doing
business permeates corporate life even in the case of disabil-
ity, as explained in the Pirelli Policy on equal opportunities,
applied at all Affiliates of the Group. Under applicable local
laws, approximately 1.2% of total employees in 2015 have some
form of disability, as in 2014, however with the following con-
siderations: the percentage measurement of disabled employ-
ees in the multinational context of the company clashes with
the objective difficulty of measuring their number, both be-
cause in many countries where the Group is present, there are
no specific laws or regulations promoting their employment
and therefore disabilities are not automatically detected, and
because in many countries this information is deemed confi-
dential and protected by privacy laws. It is therefore likely that
the actual percentage of disabled persons working at Pirelli
might be higher, although any estimates would be discrimi-
natory per se.
With reference to the “age” factor of the company population,
as can be seen from the table below, it is homogeneous be-
tween gender, young on average and having increased slightly
in the last three years.
102
2013*
Women
Men
Total
2014**
Women
Men
Total
2013*
Women
Men
Total
2014**
Women
Men
Total
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
average age by category and gender
eXecutives
cadre
white
collars
blue
collars
average
46
48
48
eXecutives
cadre
49
49
49
2015***
eXecutives
cadre
Women
Men
Total
49
50
50
42
44
43
43
45
44
43
45
44
white
collars
white
collars
37
38
38
37
38
38
38
39
38
blue
collars
blue
collars
36
36
36
36
36
36
36
37
37
average
average
37
36
36
37
37
37
37
38
38
* Information applies to 99.8% of the workforce
** Information applies to 100% of the workforce
*** Information applies to 100% of the workforce, including Pirelli de venezuela, deconsolidated as of 31 december 2015
The following table represents the average length of service by professional category and gender: even in 2015, there were no signif-
icant differences between men and women, whilst there was a significant increase of the average seniority of women in blue collar
category (7 years compared to 4 in 2014 and 2013) and an average which has grown steadily over the last three years, reflecting a
heightened sense of belonging.
103
average Job seniority
eXecutives
cadre
white
collars
blue
collars
average
12
16
16
14
16
16
14
15
15
cadre
cadre
13
14
14
14
14
14
14
15
14
white
collars
white
collars
8
9
8
8
9
9
9
10
10
blue
collars
blue
collars
4
8
8
4
8
8
7
9
9
average
average
6
8
8
7
9
9
8
10
10
eXecutives
2015***
eXecutives
Women
Men
Total
* Information applies to 99.8% of the workforce
** Information applies to 100% of the workforce
*** Information applies to 100% of the workforce, including Pirelli de venezuela, deconsolidated as of 31 december 2015
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
The following procedures and activities to promote equal op-
portunities have been well-established for years:
the use, as far as possible, of candidate lists with a signifi-
cant presence of women in recruitment processes;
the use of training to promote cultural change connected
with the promotion of diversity, with specific modules ded-
icated to “Diversity Management,” beginning with courses
for new hires (e.g. Pirelli’s Way Joining the Group);
the taking of positive measures regarding cultural and re-
ligious diversity (such as different foods that are clearly
marked in company canteens so that everyone may freely
comply with their own religious dietary restrictions);
“multilingual” book stores at the factories;
welcome kits for those joining Pirelli at a facility in a coun-
try other than their home country.
Welfare and work-life balance initiatives (in regard, refer
to the paragraph “Welfare and initiatives in favour of the
Internal Community” in this report).
remuNerAtioN
AND sustAiNABiLitY
The remuneration policies adopted by Pirelli aim to ensure
fair remuneration in line with the individual’s contribution to
the success of the Company, recognising the performance and
quality of the individual’s professional input, in a philosophy
of sustainable remuneration. The purpose is twofold: on the
one hand to attract, retain and motivate critical employees,
while on the other to reward and promote conduct that is as far
as possible consistent with the corporate culture and values.
Compensation policies and processes for Group management
(intended as the overall Executives) are managed by the cen-
tral Human Resources department, while for non-executive
personnel they are handled on an individual country basis.
Once again in 2015, and in accordance with market best prac-
tices, the impact of the (short-term and medium-term) variable
component on the aggregate remuneration of Group manage-
ment remained very high, which means that there is a strict
correlation between remuneration and performance. Members
of Group Management in general are connected to the Annual
Incentive Plan (MBO) linked to the achievement of annual eco-
nomic-financial objectives of the Group and/or Business Unit
and/or Region and the qualitative assessment resulting from
the Performance Management Tool, which allows greater rele-
vance to be attributed to organisational conduct (how), and not
simply the results achieved (how much) in a logic of sustaina-
ble remuneration over time.
In 2014, some changes and improvements were made to the
annual incentive system (MBO) which, over the three year pe-
riod 2014-2016, is no longer related to the Triennial Incentive
Plan (LTI) but includes a form of deferred payment to the fol-
lowing year of a part (25%) of the annual incentive accrued
subject to accrual of the MBO of the following year. Payment
of an additional amount equal to a variable percentage of the
entire MBO accrued during the previous year will be paid in
line with the degree that the MBO is achieved in the following
year (this mechanism is designed to roll throughout the entire
three-year period 2014-2016).
The General Policy on Remuneration also approved for 2015
by the Board of Directors of Pirelli establishes principles and
Guidelines to which Pirelli abides in order to determine and
monitor the application of related remuneration practices:
Directors with special powers/offices, General Managers
and Executives with strategic responsibilities;
the Senior Managers and the other executives of the Group.
Specifically, the Remuneration Guidelines for the top manage-
ment figures listed above cover fixed and variable remunera-
tion, both short and medium-long term, (it is specified in this
regard that Pirelli currently does not offer forms of remuner-
ation through equity); indemnity in the event of dismissal;
resignation and termination of employment; clawback clauses
for Top Management.
Consistently with the variable compensation mechanisms
adopted at the international level, the long-term incentive plan
(LTI) 2014-2016 is entirely self-financed, given that the relat-
ed liabilities are included in the profit and loss figures of the
Industrial Plan. The plan involves an on/off condition, repre-
sented by the creation of value in the three year period, and
three objectives:
Total Shareholder Return (TSR) for the Group, with an ag-
gregate target weight of 60% of the LTI bonus;
Return on Sales (ROS) for the Group and the Business Unit
or Region depending on the organisational unit of the Ex-
ecutive, with a weight at target of 30% of the LTI bonus;
the position achieved by Pirelli in selected global sustain-
ability indicators (Dow Jones Sustainability World Index
ATX Auto Components sector and FTSE4Good Global Index
sector Automobile & Parts), with a target weight of 10% of
the LTI award. The accruable pro-rata of the incentive in-
creases in relation to Pirelli’s position in the ranking, up to
a maximum pro-rata of twice the accruable value at per-
formance target in case of achieving leadership. The two
indices mentioned, in their complementarity, cover all the
issues of sustainability and macro-areas of management
on which Pirelli has set targets (emissions levels, water or
energy consumption, environmental impact of products,
sustainable chain management supply etc.).
The Board of Directors’ meeting of December 22, 2015 re-
solved the early closure at the end of 2015 of the 2014-2016 LTI
plan (thus one year before its natural expiry). The changed
shareholder structure and the simultaneous delisting - which
104
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
in fact resulted in non-measurability of many of the objectives
contained in the LTI plan - have meant that the medium-term
objectives of the company should necessarily be revised in
the incoming three-year period (2016-2018) in light of a new
Industrial Plan that will be more fully valued in numerical
terms during 2016.
With a view to retaining management, the Board of Directors
also approved the payment in 2 instalments (April 2016 and
April 2017) on the basis of reporting the newly measured goals
- even in terms of percentage opportunities for each individual
participant - on the values for the two-year period (2014-2015).
iNterNAtioNAL moBiLitY
The theme of international mobility has always been impor-
tant to Pirelli, with a view to achieving cultural and value
integration while still respecting diversity, an approach that
the Company considers crucial to maintaining and creating
value in the long term. The dissemination of the Pirelli indus-
trial culture throughout the world and the transfer of valuable
technical and managerial know-how to new start-ups is also a
key instrument in support of the Group’s geographical expan-
sion strategy.
In 2015, about 90 new inter-company expatriates were record-
ed, compared with about 50 postings in 2014 and about 70 in
2013. For more than a third, the postings were to major indus-
trial countries, such as China and Russia, and mobility flows
continued from emerging countries to mature countries.
At December 31, 2015, the expatriate population totalled about
217 persons (vs. 214 in 2014 and 244 in 2013), belonging to
19 nationalities, who moved to 34 different countries on five
continents, of whom 71% were non-Executive employees and
13% were women. The overall expatriate population consists
in equal amounts (50%) of Italian and foreign citizens, demon-
strating the concrete progress being made towards the goal
of creating an increasingly international management team.
The Pirelli International Mobility Policy (the new and current
version applied as of 2013 postings) has been standardised
and shared within all the affiliates, with common treatment
rules in order to enable uniform management of the expatriate
personnel of the entire Group.
It includes a principle of fiscal neutrality pursued through
the implementation of a so-called “tax equalisation” policy,
which allows neutralising of the tax differences that arise in
the destination country with respect to the country of origin,
ensuring the application of equitable and appropriate remu-
neration principles, in addition to the assignment of certain
benefits closely related to care for expatriates and their ac-
companying families.
empLoYer BrANDiNg
Pirelli considers it crucial to enter the market by transmitting
drivers that distinguish the group, that is, Business, People
and Change, which include the cardinal principles on which
the Company bases its business approach, such as technologi-
cal know-how and product innovation, technological and com-
mercial leadership in the highest segment of the market, the
tension of the people towards results and the meritocracy that
always ensures the best growth for employees, both locally
and internationally.
In addition to disseminating the company principles, Employer
Branding is also a valuable tool to give visibility to job opportu-
nities aimed at recent graduates, not only in the Italian market
but globally. Considering only the countries where Pirelli has
a presence with one or more production plants in Europe, the
United States, South America, the Middle East, Africa, Russia
and Asia-Pacific, over 200 events, projects and meetings were
organised in 2015, where the Company promoted its own Em-
ployer Branding initiatives.
These activities are carried out also thanks to the network
of contacts and partnerships with some prestigious universi-
ties in the various countries, such as the Beijing University
of Chemical Technology in Beijing, the University of Munich
in Germany, the Nottingham Trent University in the United
Kingdom, the Politehnica University of Bucharest in Romania,
the ESIC - Business Marketing School in Spain, the Universi-
dad de Buenos Aires in Argentina, the Universidad Tecnológi-
ca del Centro in Venezuela, the Instituto Tecnológico de Estu-
dios Superiores de México, the Keio University in Japan, the
American University of Cairo in Egypt.
Pirelli is also collaborating actively, at corporate level in Italy,
with Milan Politecnico Turin Politecnico, Milan Bocconi and
Catholic Universities and Turin University. The latter Univer-
sities are located close to the Pirelli offices in Italy and the
Company has always considered them to be a benchmark for
economic and engineering education of young people. With
these institutions, Pirelli has organised Career Days, round
tables, Job Fairs, as well as company presentations and oppor-
tunities to meet with students directly at the company, aimed
at “personally experiencing” the reality of the Group.
The business-education partnerships described above are
placed within the context of the “European Pact for Youth” of
which Pirelli is a co-initiator, a Youth Pact that was signed dur-
ing the last Enterprise 2020 Summit (held in November 2015
in Brussels ) by the European Commission, CSR Europe and
a group of companies. The Pact aims to promote the growth
of new generations through the promotion of partnerships
with Universities, training courses, internships and masters’
courses: the objective of reducing the skills gap between dif-
ferent countries and different cultures is fundamental, trying
105
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
as much as possible to ensure that young people receive the
training needed to enter the new professions required by a
labour market whose expectations are constantly evolving.
Among the channels of Employer branding used by Pirelli,
the internet plays an important role: on its pirelli.com website,
the Company provides a channel for those who wish to submit
their application for specific open positions, as well as provid-
ing full disclosure on its corporate history, management mod-
els adopted, objectives and results achieved; targeted channels
are also used by Pirelli for the publication of its job offers,
including LinkedIn where just in the last year Pirelli has
doubled its followers, thus becoming the most visited profile
among tyre manufacturers.
DeveLopmeNt
Performance Management
Performance Management (PM) means the process whereby
the contribution of each employee in an organisation is de-
fined, observed and assessed at Pirelli, a unique and funda-
mental opportunity for the development and orientation of
each with respect to a series of predefined indicators that are
critical to the success of the Company and the employee.
During the process, particular value is given at the time of
feedback, which provides a transparent and open dialogue
between the manager and the employee, from the phase of
defining the individual objectives to that of assessment of the
results achieved.
The Performance Management process involves all Pirelli staff
worldwide (executives, managers and employees) and in 2015
saw a “redemption” rate (assessment sheets completed com-
pared to the total of open sheets) equal to 94%, of which the
completion rate by women involved in the process was 93%.
To support the quality of assessments, Pirelli has introduced
the so-called Calibration Meetings. These are meetings organ-
ised by the managers of the individual functions, Business
Units and countries, with their direct reports, and with the
heads of Human Resources of reference, during which the as-
sessments of people who belong to a specific organisational
unit are pooled with the objective of ensuring a shared and
balanced distribution of the assessment, to ensure a process
that is as consistent, homogeneous and objective as possible.
Talent Review
The Talent Review process aims to place “people in the right
place”, or to ensure business continuity through the coverage
of strategic positions with the best talents, both centrally and
at each Affiliate. Key positions are those positions that have a
direct impact on the strategic success and competitive advan-
tage of the organisation. Each of these positions also includes
a vacancy risk identification in the following 12-18 months, in
such a way that concrete mitigation actions can be implement-
ed, where necessary.
“Talents” are employees who, in addition to having demonstrat-
ed positive performance in the previous 3 years, possess the
potential to hold, immediately or within the next two years,
key positions within the organisation. In fact, they represent
the future of the Company for the coverage of strategic po-
sitions. The focus on talents is also demonstrated by the nu-
merous skills assessment projects concluded in 2015, follow-
ing increasing focus on the analysis of the talent of people to
support the company strategy. The talent management process
also includes meeting and discussion sessions between man-
agers, which aim to share and standardise the criteria for the
definition of talent within the organisation.
Pirelli is established as a company with a strong predisposi-
tion to developing talent from within: 95% of the people who
hold key positions have grown and been promoted internally.
The pipeline of talents has a strong international and multi-
cultural connotation, as their origin includes as many as 29
different nationalities.
In 2016, the development process of talents within the Group
will continue, through consolidation of career plans, also with a
view to providing the means for structured growth within the
organisation and mitigating the retention risk of Pirelli talents.
trAiNiNg
2015 saw further consolidation of the Training@Pirelli train-
ing model (introduced in 2013), a system which is organised
and structured globally and equipped to respond to needs that
could arise at any time locally, in each of the countries where
Pirelli is present.
The training offering is based on one hand on the strategic
priorities of the organisation and the different functions, and
on the other on the needs that arise each year from the Perfor-
mance Management process.
The three “pillars” on which Training@Pirelli is based are the
Professional Academy, the School of Management and the Lo-
cal Education. The first two are designed centrally and accord-
ing to the cases provided centrally or locally, while Local Edu-
cation is managed and implemented directly in the individual
countries to meet the specific local needs.
The entire training offering is communicated and managed
via the online training portal LearningLab.
In 2015, Pirelli received the Silver Award in the category “Best
Corporate University” embodying the identity, the culture and
the brand of the Organization for its stakeholders” by the Glob-
al Council of Corporate Universities. The award is aimed at the
most important Corporate Universities worldwide.
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Professional Academies
There are ten Pirelli Professional Academies: Product Acad-
emy, Manufacturing Academy, Commercial Academy, Qual-
ity Academy, Supply Chain Academy, Purchasing Academy,
Finance Academy, Planning & Control Academy, Human Re-
sources Academy, Information Technology Academy.
Sustainable Management elements are throughout the Acade-
mies, with focus for example on product life cycle (LCA – Life
Cycle Assessment), environmental efficiency of the process,
health and safety, sustainable management of the supply
chain, risk management, diversity management, etc.
The Academies target the entire Group population and aim to
provide continuous training, encourage cross-functional col-
laboration, ensure the exchange of expertise and know-how
among countries and support the implementation of tools and
procedures within the organisation.
The faculty of the Academy is mainly composed of internal
trainers, experts from the specific functions who, based on the
training needs and logistical needs, act at central, regional and
local level, or through online seminars and webinar sessions.
In 2015, an internal process was implemented globally for the
training and certification of Pirelli trainers, already complet-
ed in some countries. Participation in the internal “Train the
trainer” course is a fundamental requirement of this process,
aimed at ensuring and aligning the skills of all trainers re-
garding classroom management methods and delivery of the
technical content of the Academy.
The Academy model involves a significant figure from the
function guiding each Academy, supported by one or more
professionals from the same function and from the Group
Training function, which ensures consistency in the methods
of approach, delivery and evaluation of learning in addition to
collaboration with the local training teams.
Every year, the Professional Academies meet both the Top Man-
agement and the local training representatives, with the objec-
tive of strategic alignment and sharing of the results achieved.
In 2015, the Academy offered 225 courses globally.
School of Management
The School of Management (SOM) is the training structure
dedicated to the development of the management culture with-
in Pirelli.
The training model is based on 3 areas: Business, People and
Change, and is aimed at the populations of Executives, Mid-
dle Management/Senior Professionals and New Graduates/
Junior Staff.
The focus of management training is calibrated and outlined
every year based on the business challenges that the company
is required to face.
The training aimed at executives is preferably provided cen-
trally (Milan) in order to allow participants to discuss com-
pany strategies directly with Senior Management and share
them at inter-departmental and geographical level.
In 2015, 6 editions of SOM were provided for Group Executives,
of which 4 in Milan and 2 in Brazil (for Pirelli Executives oper-
ating in Brazil, Argentina and Venezuela).
The training offer aimed at Middle Management and Senior
Professionals, designed centrally and thus delivered locally,
saw the holding in 2015 of more than 50 editions in 11 coun-
tries of the Group, which were attended by about 800 people.
Also in 2015, in response to a need that emerged from the
MyVoice survey, several workshops were organised on “feed-
back management” in the manager-employee relationship,
involving the whole central management population, giving a
total of about 300 people in the classroom.
The School of Management then continued to offer constantly up-
dated services through the Train your Brain section, an online
tool available to all managers on the LearningLab platform.
As for the population of new graduates, in 2015 saw consolida-
tion of the two-year course Warming Up@Pirelli, which was
launched in 2013.
The programme aims to provide a homogeneous view of the
Pirelli reality for all young new recruits in the different coun-
tries. The main themes include: the Sustainable Management
Model adopted by the Company, the strategies, the product,
processes, customers, markets and all other matters regarding
basic skills that Pirelli considers important for a young person
who wishes to become part of the company’s future. During the
two-year training course, participants have the opportunity to
work on various company projects of interest proposed by var-
ious functions, in order to apply innovative approaches and de-
velop cross-functional teamwork. The macro-structure of the
course, defined centrally in terms of content and process steps,
is organised in various countries with appropriate adjustments
aimed at enhancing the local specificities. In 2015, Warming
Up@Pirelli involved 210 young new recruits globally.
Local Education
The training provided locally responds to the specific training
needs of the local context and culture of the country of refer-
ence. The seminars cover areas of expertise ranging from the
improvement of interpersonal skills to stress management,
from the development of IT, language and regulatory skills up to
seminars on issues of welfare and diversity at the Company. In
the latter area the following courses in 2015 deserve a mention:
Parents at Work, dedicated to the parents of children aged 0 to
6 with the aim to teaching them to exploit the parenting expe-
rience as a “gym” for the development and consolidation of man-
agerial skills and conduct to be used in the workplace as well.
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Focus: Training on Sustainability
In addition to training on the specific sustainable manage-
ment processes that cover all the Academies of the Group, as
described above, in 2015 training also continued on the Pirelli
Sustainable Management Model, with an update of the current
state of the Company’s Sustainability Plan. Training was di-
versified according to the target group. In the context of the
international corporate course Pirelli’s Way Joining the Group,
the Group’s Sustainable Management strategy is presented to
all new employees, starting from the multi- stakeholder ap-
proach in the context of integrated economic, environmental
and social management. Training in the Pirelli Model also
draws the attention of new recruits to the Group’s Sustaina-
bility Policy and related commitments, as expressed through
the Ethical Code, Code of Conduct, Equal Opportunity Policy,
Social Responsibility Policy for Occupational Health, Safety
and Rights and Environment, in addition to the requirements of
the SA8000® Standard and internationally recognised human
rights, starting with the prohibition of forced and child labour,
up to the freedom of collective bargaining, equal opportunities
and non-discrimination. All of these issues are also the subject
of training courses for all Sustainability and Purchasing Man-
agers of the Group.
In 2015, remote training was provided in 24 countries on issues
of diversity management at the company and related values, al-
ready initiated in 2014 in Italy. The course, developed centrally
in collaboration with local representatives in order to ensure
maximum effectiveness, has been translated into 11 languages
and offered to all employees, on line or in print copy.
In July 2015, Pirelli brought all its Sustainability managers
together in Milan at a convention dedicated to exploring the
long-term management strategies adopted by the company,
new scenarios and future objectives. The event involved the
active participation of the entire Top Management of the Com-
pany, with strong cross-functional alignment with a view to
achieving the Group targets as well as demonstrating the fun-
damental teamwork that enables the Company to prevent risks
and, above all, create lasting and shared value.
Pirelli Training Performance
In 2015, Pirelli’s investment in Training continued with an ex-
tremely positive trend, recording a number of average days of
training per capita of 8.3 (vs. 8.2 in 2014 and 7.2 in 2013), thus
for the third consecutive year surpassing the target of 7 days
on average per capita promised in the Industrial Plan, which
was only expected to be achieved from 2015.
With reference to the people involved, the average days of
training for blue collars in 2015 rose to 9.4 (vs. 9.2 in 2014 and
7.1 in 2013), and also the number of average days for manage-
ment and white collars increased, reaching in 2015 4.8 (vs. 4.3
in 2014 and 7.5 in 2013).
Pirelli intends to maintain increasingly structured homoge-
neity of the training offer, continuing in the coming years to
deliver a number of average days of training per capita greater
than or equal to 7 and reaching, with at least one day per capi-
ta, 90% of employees by 2017. In 2015, training involved 87% of
the workforce (vs. 80% in 2014) with at least one day on aver-
age per capita and recorded a use of courses that substantially
reflects the gender distribution of Pirelli employees, with a
substantial balance in terms of equality of training access.
Lastly, of the total training provided by Pirelli in 2015, ap-
proximately 78% was in the Professional Academies, with an
increasing focus on health, safety and environment topics,
which amounted to 13% of total training hours delivered.
Average days of training per capita3
Pirelli average
Pirelli average
2015
2015
2014
2015
2014
2014
2013
2013
2013
2015
2015
2014
2015
2014
2014
2013
2013
2013
2015
2015
2014
2015
2014
2014
2013
2013
2013
0
0
0
0
0
0
0
0
0
Pirelli average
4
4
4
4
4
6
6
6
Blue Collars
Blue Collars
Blue Collars
6
6
4
6
White Collars
White Collars
White Collars
4,8
4,8
4,8
4,3
4,3
4,3
4
4
4
6
6
6
8,3
8,3
8,2
8,3
8,2
8,2
10
10
10
9,4
9,4
9,2
9,4
9,2
9,2
10
10
10
10
10
10
7,2
7,2
8
7,2
8
8
7,1
7,1
8
7,1
8
8
7,5
7,5
8
7,5
8
8
2
2
2
2
2
2
2
2
2
3 Includes Pirelli de Venezuela deconsolidated as of 31 December 2015.
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ListeNiNg:
group opiNioN surveY
For years, Pirelli has consolidated the climate survey as a tool
for active listening of its employees, as a basis for setting cen-
tral and local improvement plans. The annual survey is called
“My Voice” and involves all Pirelli employees around the world.
Questionnaire management is attributed to a third party, pro-
viding anonymity to the respondents. Pirelli then receives the
results in aggregate form.
The process related to My Voice involves the submitting of the
questionnaire to employees around the world in November/
December, the subsequent return of results from February of
the following year, and the definition and implementation of
specific action plans by Country/Function/Business Unit in
the months until the following survey.
The survey carried out at the end of 2015, which confirmed the
positive trend of the overall response rate (87% vs. 85% in 2014
and 61% in 2013) will involve communication of the results to
employees in the first quarter of 2016 and the related report-
ing in the following financial statements.
This report outlines the result of the survey conducted at the
end of 2014 and the results of which were announced to em-
ployees in the first quarter of 2015.
The overall response rate to My Voice in the year 2014 was
85%, showing sharp growth over 2013, mainly due to the sharp
increase in participation among workers (+28.2%, from 56.7 %
in 2013 to 84.9% in 2014).
As for the results, the global employee Trust Index with re-
spect to the Company stood at 60% in 2014, consisting of 60%
among blue collars and 59% among white collars, slightly low-
er than the previous year but slightly higher than the bench-
mark of Italian multinational companies.
The results of the survey confirmed the characteristic fea-
tures of Pirelli, already recognised in the 2013 survey, i.e. a
workplace characterised by a strong sense of belonging and
pride, full of resources for employees and attentive to health
and safety management and diversity; similarly, the survey
confirmed the areas on which it is necessary to continue work-
ing, mainly related to the relationship between manager and
employee, in terms of direct relation and recognition.
The results of the 2015 survey were communicated to all em-
ployees in detail and with the utmost transparency starting
in February 2015, both through dedicated communications
on the company Intranet and through face-to-face meetings.
Like every year, the areas for improvement identified for each
specific country and functional area were thus analysed, and
priorities for intervention and concrete actions were defined
with targets and precise implementation schedules.
In December 2015, Pirelli Tyre Co. was awarded the title of
“2015 Best Companies to Work For in Greater China”: this rec-
ognition was assigned by Great Place to Work - A consulting
firm specialising in climate surveys - to 27 companies, select-
ed from a panel of 112 participating companies distributed
throughout the territory of Hong Kong, Mainland China and
Taiwan and belonging to 10 different industrial sectors. In the
evaluation process, Great Place to Work® took into account the
responses of the employees of the participating companies to
the 58 statements that make up the Trust Index Survey. All HR
teams and Senior Management of the participating companies
were asked to complete a questionnaire on personnel manage-
ment policies and practices in place at each of the participat-
ing companies.
WeLFAre AND iNitiAtives
For tHe iNterNAL
CommuNitY
At organisational level, Pirelli for years has had the figure of
the “Group Welfare Manager”, who is entrusted with the su-
pervision of welfare activities, jointly with the many central
and local functions concerned, including Health and Safety at
Work, Industrial Relations and Equal Opportunity Managers
of the Group.
The welfare initiatives that Pirelli offers to its employees dif-
fer from country to country, in accordance with the specific
needs identified in different social contexts in which the affili-
ates operate. The focus below will be on the initiatives carried
out in Italy.
In terms of tools that facilitate the use of initiatives by Employ-
ees, in 2015, a special section dedicated to welfare was set up
on the company Intranet, where all Group Affiliates have the
opportunity to promote and raise awareness of local activities.
Overall, welfare activities activated at Pirelli Affiliates in the
world are related to four areas of action:
health (e.g. health care, information and awareness cam-
paigns);
family (e.g. scholarships, summer camps for employees’
children, inter-company crèche);
free time (e.g. open days, sporting and cultural activities);
workplace (e.g. flexible working hours, facility, individu-
al development training, cultural growth and group cel-
ebrations).
Historically, moreover, Pirelli at all its production units pro-
vides Infirmaries at which health and medical specialists are
available to all employees during working hours. These facil-
ities provide counselling for health problems outside work as
well as first aid care and health supervision for workers ex-
posed to specific risks. The infirmaries also support the var-
ious health-related promotional campaigns that are launched
at local level, as well as prevention campaigns.
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As an example of welfare activities activated locally, the fol-
lowing is an outline of some of the initiatives implemented in
Italy and in other Group countries in 2015.
In Italy:
new policy for allocation of internal parking at Bicocca (Mi-
lan), drafted up as a result of input received from a dedi-
cated survey on mobility conducted among all employees;
extension of the offering on the People Care portal, with
new services and agreements (both national and local) and
that of the “People Care for Bicocca” counter, which offers
various time-saving services at special prices (laundry,
reception of private parcels, shoemaker, payment of bills);
extension of the number of days offered as part of the
Bambini in Bicocca (Children at Bicocca) project, which
guarantees babysitting/kids club service for employees’
children of school age (5-10) during school holidays;
the continuation of the “#sentirmibene” campaign initia-
tives, launched in late 2014, which consist of a series of in-
itiatives to promote wellness and healthy lifestyles among
employees;
The “Wellness@IPP” initiative, inaugurated in April 2015,
which offers some courses (Pilates, Yoga, BackSchool) to
employees at discounted prices in the early-evening hours
at the facilities of the Piero Pirelli Institute;
2016 “A Year of Safety” calendar made at Bollate: distrib-
uted to all employees of the plant and the result of a photo
shoot that involved some employees, along with their chil-
dren, photographed wearing personal protective equip-
ment (PPE), confirming the constant attention and involve-
ment paid at all levels to safety at the factory;
Open Day at the plant in Settimo Torinese, open to all em-
ployees and their families, which involved over 3,000 peo-
ple in the various activities on offer, including educational
workshops, visits to the departments, games and music;
The activation of a dedicated tax consultancy counter at
Settimo Torinese and the opening of recreational spaces
such as the company library and football field.
In other countries where Pirelli operates:
the “Employee Assistance & Wellbeing” programme called
ICAS, launched in Mexico in September 2015: a consulting
and telephone listening service, active 24/7, which pro-
vides counselling, support in the emotional and practical
management of day-to-day activities and life management
services to support employees. The programme is con-
stantly promoted internally through electronic and print
communications.
The second “Deutsche Diversity Tag” organised in Germa-
ny in June 2015 in collaboration with the “Charta der Viel-
falt” organisation to promote and raise awareness among
employees of the issue of diversity, also highlighting the
ethnic and cultural wealth of Pirelli Deutschland.
Through various initiatives (multi-ethnic food and drinks
banquets, quizzes, brochures) during the 2015 event, the
aim was to promote and stimulate the sharing of experienc-
es among those present with a view to mutual enrichment.
the “Faz Bem” project: same as #sentirmibene Italian, for
employees and their families, aimed at promoting the im-
provement of the quality of life and sporting activities in
Brazil, in particular through various communication and
engagement initiatives.
The initiative “Férias Dirigidas and Acampamento de
Férias”: recreation and integration activities offered every
year, at locations near the Brazilian plants, to the children
of employees during working hours during school holidays
and targeted at children/teenagers aged 6 to 17.
The well-being of workers also comes from a working environ-
ment that is psycho-socially adequate and stimulating, where
they feel valued and in which psychosocial risks and work-re-
lated stress are effectively prevented and countered. To this
end, as part of the company’s global programme called “Ex-
cellence in Safety”, in partnership with DuPont Sustainable
Solutions, Pirelli performs in-depth analyses and acts on key
areas and issues such as improvement of the organisational
structure, clarity of tasks and roles, empowerment of workers,
improvement of communication in the organisation, sharing of
objectives and motivation with respect to a common strategy.
iNDustriAL reLAtioNs
The Industrial Relations Policy adopted by the Group is based
on respect for constructive dialogue, fairness and roles. Guar-
anteeing and respecting free trade union activities is one of
the key values on which Pirelli bases its own Human Capital
Management System. Relations and negotiations with trade
unions are managed locally by each affiliate in accordance
with the laws, national and/or company-level collective bar-
gaining agreements, and the prevailing customs and practices
in each country. At this level, these activities are supported
by the central departments, which coordinate the activities
and ensure that the aforementioned principles are observed
throughout the Group.
Industrial Relations also have an active role in the Group’s
commitment in terms of health and safety, characterised by
active participation on the part of the union and workers. In
fact, 80% (vs. 79% in 2014) of Group employees are covered
by representative bodies that periodically collaborate with the
Company and the support of specialists in monitoring and con-
fronting current issues and the awareness plans/programmes,
in view of continuous dialogue aimed at improving the various
activities operated by Pirelli to protect the health and safety
of its own workers.
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In 2015, the Industrial Relations activities reached important
negotiating results both in Italy and abroad. Many collective
agreements were renewed: in particular in Italy, the Compa-
ny’s role in the renewal of the national collective agreement
of the Rubber Plastics sector for the three-year period 2016-
2018 was significant, as well as the negotiations that led to the
renewal, without any conflict, of collective agreements in the
United Kingdom, Brazil, Argentina, Venezuela, Mexico and, in
January 2016, in Turkey.
During the year, the Company operated internationally to re-
balance the employment level, aligning it to the needs of vol-
ume related to high market volatility, maintaining a Group oc-
cupational balance at the end of 2015 in line with that of 2014.
In Italy, the Company continued with the organisational ra-
tionalisation process at the production site in Bollate. In June
2015, an agreement was signed with the trade unions at the
factory and the territorial trade unions under which the re-
balancing of the production mix with other types of premium
tyres was agreed, in order to support the production revenues
expected in the period 2016-2017. It was also agreed to adjust
the management structure, with a new reference staff for the
smooth operation of the business; excess staff were managed
in a non-traumatic way through the extension of the solidari-
ty contract for the 2016-2017 two-year period. This agreement
also includes the Company’s willingness to provide about 16
hours of training per capita in the two-year period 2016-2017,
aimed at professional growth, versatility and safety culture.
In Brazil, the Company has initiated a process of reorgan-
isation in the face of the crisis of the country that has also
generated a sharp decline in consumption in the automotive
industry impacting on the Tyre market. Specifically, there
was a production rebalancing and the consequent downsiz-
ing of personnel, both of staff functions and within the es-
tablishments of Campinas, Santo André, Gravataí and Feira di
Santana, acting primarily on reducing flexibility and on work
organisation. This organisational rationalisation, managed
through the trade union dialogue, was based on specific trade
agreements at site level.
At the same time, in Romania, Mexico, China and Turkey, the
Company increased the workforce acting on the organisation
and production processes in line with market needs. In Italy,
central Functions related to product research and development
and innovation have been further strengthened.
As part of the announced industrial reorganisation and en-
hancement project by the Group aimed at giving independent
importance to the Industrial Business (Truck, Agro and OTR
tyres), in 2015, the Company informed union interlocutors in
the countries concerned about the planned corporate opera-
tions, with the creation of companies dedicated to the Indus-
trial Business and the related passage within them of all the
assets, related activities and the workers engaged in this busi-
ness, with effect from January 1, 2016.
Lastly, it is noted that in March 2015, the sale process of the
steel cord business to the Bekaert Group was completed, with
the latest regulatory approvals also being obtained from the
local authorities.
European Works Council (EWC)
The Pirelli European Works Council (EWC), formed in 1998,
holds its ordinary meeting once a year after presentation of
the Group Annual Financial Report, where it is informed about
the operating performance, operating and financial forecasts,
investments made and planned, progress in research, and, as
occurred at the annual meeting in 2015, about the progress of
the company’s Sustainability Plan. The agreement establishing
the EWC provides for the possibility of holding other extraor-
dinary meetings to informal delegates in case of transnational
events concerning significant changes to the corporate struc-
ture: opening, restructuring or closing of premises, important
and widespread changes in work organisation. EWC delegates
are provided with the IT tools they need to perform their duties
and a connection to the corporate intranet system, for the re-
al-time communication of official Company press releases.
In February 2015, the Council consisted of 13 members from
the offices of the countries entitled to representation in the
Council, i.e.: Italy, Germany, Spain, Sweden, Romania and the
United Kingdom.
Compliance with Statutory and Contractual
Obligations Governing Overtime, Time
Off, Association and Negotiation, Equal
Opportunities and Non-Discrimination,
Bans on Child and Forced Labour
Group policy has always promoted compliance with all legal
and/or contractual requirements concerning working hours,
the use of overtime and the right to regular days of rest. These
requirements are often the subject of agreements with trade
unions, in line with the regulatory context of each country.
There are no restrictions on any worker’s right to use his/
her total number of holidays. The holiday period is generally
agreed between the worker and the Company. Pursuant to its
Social Responsibility Policy for Occupational Health, Safety
and Rights, and Environment and in accordance with the re-
quirements of the International Standard SA8000®, adopted
in 2004 as a reference tool for the management of social re-
sponsibility within its affiliates, Pirelli verifies the application
of the requirements in terms of respect for human and labour
rights through periodic audits, both commissioned to special-
ised third-party companies and performed by the Internal Au-
dit Department. Particular attention is devoted to the sustain-
ability of Pirelli’s sites (and the company’s suppliers) operating
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
in emerging countries. The three-year internal auditing plan
covers all Pirelli sites. Normally every audit is carried out by
two auditors and takes three weeks on-site. The Internal Au-
dit Team received training on the environmental, social and
business ethics elements of an audit from function directors
to enable them to carry out an effective, clear and structured
audit, granting Pirelli effective control over all aspects of sus-
tainability. If compliance violations are found during these
audits, an action plan is agreed between the local managers
and central management, with precise implementation dates
and responsibilities. The Internal Audit Department monitors
the development of the shared action plans, through specific
follow-ups. All managers from the affiliates involved in the
audits are adequately trained and informed on the audit object
and procedures by the applicable central functions, in par-
ticular: Sustainability and Industrial Relations. The external
and internal auditors conduct audits based on a check-list of
sustainability parameters derived from the SA8000® Stand-
ard, from “Pirelli Policy of Social Responsibility for Health,
Safety and Rights at Work, Environment” and the Group “Val-
ues and Ethical Code”.
Considering the last three years, in 2013, the Internal Audit
Department carried out audits in Argentina, the USA, Ro-
mania and Brazil; in 2014, in Italy, the United Kingdom and
China; in 2015, in Mexico, Russia (Voronezh plant) and the
United Kingdom. In 2016, the audits will continue in Germa-
ny, Russia (Kirov plant) and the UK (follow-up). The non-con-
formities emerged in 2015 as a result of the audits mentioned
above were the subject of the action plans agreed between the
local managers and central management, and will be subject
to follow-ups in 2016 by the Internal Audit Department. None
of the audits revealed any breach of ILO Core Labour Stand-
ards, with specific reference to forced labour or child labour,
freedom of association and collective bargaining, and non-dis-
crimination.
Labour and Social Security Lawsuits
In 2015, as in previous years, the level of work and social se-
curity litigation remained low. Just as in previous years the
level of litigation remains high in Brazil, to the point of repre-
senting about 90% of all the labour lawsuits currently pend-
ing against the entire Group. Labour lawsuits are extremely
common in this country and depend on the peculiarities of
the local culture. As such, they affect not only Pirelli but also
the other multinational companies operating there. Labour
lawsuits are generally initiated when an employment contract
is terminated, and they usually involve the interpretation of
regulatory, legal and contractual issues that have long been
controversial. The Company has made a major commitment
to prevent and resolve these conflicts – to the extent possible –
including through settlement procedures.
Unionisation Levels and Industrial Action
It is impossible to measure exactly the consolidated percent-
age of union membership at Group companies, since this in-
formation is not legitimately available in all countries where
Pirelli has a presence (over 160 countries on five continents).
However, it is estimated that around 50% of Pirelli employees
are trade union members. As to the percentage of workers cov-
ered by collective agreement, in 2015 it stood at 80% (vs. 79% in
2014). This figure is associated with the historical, regulatory
and cultural differences between each country.
Collective agreements were renewed without any conflict and
strikes. The labour unrest in 2015 refers exclusively to Italian
plants on support actions related to national issues of politi-
cal-union relevance (e.g. reform of the labour market)
Occupational Retirement
and Health-Care Plans
The Group has defined contribution and defined benefit funds,
with a substantial prevalence of the former kind over the lat-
ter. To date, the only defined benefit plans are:
in the United Kingdom, where the fund relating to the tyre
business has been closed to new employees since 2001 for
the introduction of a defined contribution scheme (and
closed to future accumulations for all active employees as
of April 1, 2010), while the funds related to the cable busi-
ness sold in 2005 were closed to future accumulations in
the same year.
in the United States, where the fund was closed in 2001
(since 2003, it has not been tied to salary increases) for the
introduction of a contribution scheme (and only applies to
retired employees);
in Germany, where the fund was closed to new hires from
1982.
Other defined benefit plans exist in Holland and Sweden, but
they represent a relatively insignificant liability for the Group.
The Group also maintains various supplemental health-care
plans at its affiliates according to local requirements. These
health-care schemes vary from country to country in terms
of allocation levels and the types of coverage provided. The
plans are managed by insurance companies or funds created
ad hoc, in which the Company participates by paying a fixed
amount as is done in Italy, or an insurance premium as is done
in Brazil and the United States. For the economic-equity meas-
urement of the above benefits, reference is made to the Con-
solidated Financial Statements, notes “Employee funds” and
“Personnel Costs”.
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oCCupAtioNAL HeALtH,
sAFetY AND HYgieNe
Management Model and System
The Pirelli approach to responsible management of Health,
Safety and Hygiene at Work is based on the principles and
commitments stated in the Group “Values and Ethical Code”,
in the “Social Responsibility Policy for Occupational Health,
Safety and Rights, and Environment” and in the “Quality Poli-
cy”, the texts of which are communicated to all Group employ-
ees in their local languages, and published in the Sustainabil-
ity section of the Pirelli website, to which reference is made to
fully view the content.
The Safety at Work Management System, as well as the envi-
ronmental system introduced at the production units of Pirelli
Tyre, was developed on the basis of procedures and Guidelines
elaborated centrally in order to consolidate a “common lan-
guage” within the Group that ensures sharing, alignment and
management efficiency.
Pirelli adopts a Safety Management System structured
and certified according to the OHSAS 18001:2007 and ISO
14001:2004 Standards. All certificates are issued with ANAB
international accreditation (ANSI-ASQ National Accreditation
Board - US accrediting body). Also in 2015, RINA Services
S.p.A. was the evaluator of conformity of Safety and Environ-
ment Management Systems of Pirelli Tyre.
At the end of 2015 all the Pirelli Tyre production facilities are
certified according to OHSAS 18001:2007 and ISO 14001:2004
Standards with the exception of the facility in Rome (United
States), where a management system is operative, applied un-
der the local regulations, which is similar to the OHSAS 18001
Standard and such that an activity of parallel certification in
the content would be of relative value.
In the course of 2015, Pirelli started drafting a new Policy,
exclusively focused on Health, Safety and Environment” (el-
ements currently covered in the “Social Responsibility Pol-
icy for Occupational Health, Safety and Rights, and Envi-
ronment”). The new Policy, the issue of which was initially
scheduled for 2015, will instead be issued in 2016 in order to
allow both proper alignment with the ISO14001:2015 standard
and full congruence with the new corporate structures being
finalised in 2016.
Safety Culture
The Zero Accidents Target is a strong and precise corporate
position. Pirelli strongly believes that leaders play a strate-
gic role in risk prevention. Their behaviour must therefore
be an example for all employees. From an industrial point of
view, this objective is pursued through investments aimed at
technical improvement of work conditions, while constantly
insisting on the cultural and behavioural aspect of all Com-
pany players.
Safety culture is of paramount importance: it is necessary to
pursue it in accordance with the rules, while maintaining a
very clear idea of everyone’s responsibilities to themselves,
others, and their own family. This approach, together with the
involvement and continuous internal dialogue between man-
agement and workers, has allowed a sharp decline in histori-
cal injury indexes.
In support of the Management Model outlined above and with
particular focus on the implementation of a standard approach
to Behavioural Safety within the Group, in 2013, the Company
signed a global agreement with DuPont Sustainable Solutions
for the global implementation of the “Excellence in Safety”
Programme, started in 2014 at sites in the United Kingdom,
Venezuela, Argentina, Mexico, Turkey, Romania and extended
in 2015 to all Group production sites. A specific Steering Com-
mittee, chaired by the Operations General Manager, monitors
the progress of the programme.
In particular, in 2015, in addition to the strengthening and
consolidation of the safety culture concepts based on conduct,
the focus on Leading Indicators was further developed, namely
measuring what preventive measures should be implemented
and how this should be done, rather than Lagging Indicators,
namely reactive indicators, such as the number or frequency
of accidents.
The sharing of the Safety Culture was also supported by the
communication of monthly newsletters like the Safety Bulle-
tin, and the periodic publication of significant events through
the traditional channels of internal communication.
As part of the collaboration with DuPont Sustainable Solutions,
Pirelli is also developing the theme of prevention of psychoso-
cial risks and work-related stress. Some of the most important
areas of intervention of the “Excellence in Safety” Programme
are in fact related to the improvement of the organisation-
al structure, the clarity of the tasks and roles, empowering
workers, improving communication within the organisation,
the sharing of objectives, motivation with respect to a common
strategy: all substantial issues for a work environment that
is psycho-socially appropriate and stimulating for workers.
The management of work-related stress is also the subject of
the European Agency Campaign for Health and Safety in the
Workplace (EU-OSHA) for the 2014-2015 two-year period, of
which Pirelli was as usual a partner, once again confirming
its commitment to promoting a healthy working environment
in which employees feel valued and psychosocial risks are ef-
fectively prevented and countered.
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Safety Training
In addition to safety training offered locally at every Pirelli location (which is illustrated in the section of this report dedicated to
employee training), special mention should be made of Group activities and projects, which simultaneously target several countries
by allowing an alignment of culture and vision, fully benefiting pursuit of the Company’s own improvement targets. The Manu-
facturing Academy merits a special mention. This is the Pirelli Professional Academy dedicated to the sphere of factories, where
health, safety and environment issues are discussed in detail. In 2015, the training on risk assessments related to machinery was
completed. It should be noted that over 13% of the training provided by Pirelli in 2015 involved issues of Health and Safety at Work.
In 2015, the seventh edition of the Pirelli Health, Safety and Environment world meeting was also held. The annual meeting was
held at the Pirelli production centre in Silao, Mexico. The purpose of this meeting, which brings together all managers responsible
for Health and Safety in the Group, is to pool the best practices applied by the various Pirelli sites in the world, with a view to pro-
moting continuous improvement.
Monitoring of Performance
Alongside establishing specific guidelines and procedures for implementing management systems, Pirelli uses the web-based
Health, Safety and Environment Data Management (HSE-DM) system, elaborated and managed centrally by the Health, Safety and
Environment Department. This system makes it possible to monitor HSE performance and prepare numerous types of reports as
necessary for management or operating purposes.
The HSE-DM system collects all the information on accidents occurred at the factories, Group fitting Units, European and Brazilian
Equities and logistics units managed directly by Pirelli (accident analysis, corrective action taken, etc.). If the dynamics of a par-
ticular case are significant, all the plants are not only provided with the information via a system called Safety Alert, but are also
urged to conduct an internal audit as to whether conditions similar to the ones that caused the injury also exist at their plants and
to define any possible corrective measures. By using this system, every site is able to audit the solutions adopted by other plants in
order to share the best choices.
Performance
In 2015, Pirelli reached an Accident Frequency Index (FI) of 0.48 with a reduction of 6% compared to 2014 and 73% compared to
2009. The target of the Industrial Plan and Sustainability Plan is for a reduction by 2020 in the Frequency Index of 90% compared
to 2009.
The Accident Frequency Index, analysed by gender, also in 2015 remains significantly lower for women than the Group average,
reflecting the fact that the female population is generally engaged in activities with lower risk than the male population.
Below is a summary table of the FI values in the last three-year period:
Frequency Index (FI)
FI Male
FI Female
2015*
2014
2013
0.48
0.52
0.14
0.51
0.57
0.12
0.62
0.68
0.18
FI = number of accidents / hours actually worked x 100,000
The Accident Severity Index (SI) in the Group in 2015 was 0.16, substantially in line with the 2014 figure of 0.16.
Below is a summary table of the SI values in the last three-year period:
severity Index (sI)
0.16
0.16
0.18
2015*
2014
2013
The most representative injuries involve events resulting in contusions, cuts and fractures to upper limbs.
Both in the case of the Frequency Index and the Severity Index, Europe and Latin America have a higher rate than the other geo-
graphical areas where Pirelli operates (Africa, Asia, North America and Oceania), although it has been steadily declining for years.
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With reference to commuting accidents and accidents involving temporary workers (not included in the calculation of the FI and
SI mentioned above), the following table shows the total number registered in the group in the last three years. In particular, in
2015, there were 19 accidents involving temporary workers at the Group and 157 commuting accidents; the latter were substantially
related to road safety shortages in emerging countries.
Commuting accidents
Accidents with temporary workers
157
19
133
10
107
7
2015*
2014
2013
The Accident Frequency Index related to employees of external companies operating at the premises of the Group amounted to 0.37
(below the average of the Pirelli Group), down from the value of 0.52 in 2014.
In 2015, the occupational diseases Frequency Index stood at a value of 0.07, corresponding to a few dozen people out of all the em-
ployees of the Group.
FI Occupational illnesses
0.07
0.04
0.09
2015*
2014
2013
As part of the production process, there were no workers with high incidence or high risk of diseases related to their occupation.
*: The performances also include those of the Venezuelan subsidiary, deconsolidated as of 31 December 2015.
Fatalities
2015: there were two fatalities among employees of the group. One at the operating unit in Yanzhou (China), one at the operating
unit in ATCO (Egypt), for which the Safety Alert process previously described was immediately activated in the Group.
2014: there was no fatal accident involving Group employees or employees of independent contractors working at the Group’s
operating sites.
2013: there was no fatal accident involving Group employees or employees of independent contractors working at the Group’s
operating sites.
115
Best Practices 2015
Six Pirelli manufacturing plants were “sites of excellence” in 2015, since no employees were injured there in the year:
Breuberg MOTO (Germany)
Camaçari (Brazil)
Didcot (UK)
Ecosil (Brazil)
Sorocaba (Brazil)
Ibiritè (Brazil)
These results should be attributed to the constant focus on leading indicators, namely in terms of prevention.
Health and Safety Expenditure
In the three-year period 2013-2015, expenditure for Health and Safety by the Group exceeded Euro 40 million, of which over 25%
was invested in 2015.
The expenditure made targeted improvements on machines and plant and, more in general, the workplace environment as a whole (ex.
improvement of microclimate and lighting conditions, changes in layout for ergonomic improvement of activities, measures to protect
the healthfulness of infrastructure, etc.).
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
Health and Safety Targets
2020: reduction in the Accident Frequency Index of 90%
compared to 2009 (underway);
2013-2015: implementation and consolidation of the sys-
tems BBS-Behaviour Based Safety, LOTO-LockOut/TagOut,
POWRA-Point of Work Risk Assessment (underway);
2014-2018: global implementation of the “Excellence in
Safety” programme with Dupont (underway);
2015-2017: completion of integration of Health, Safety and
Environment KPIs for the sale/commercial/equities areas;
2016: new issuance of Health, Safety and Environment Pol-
icy in alignment with the ISO14001:2015 Standard.
externaL
coMMUnitY
iNstitutioNAL reLAtioNs
oF tHe pireLLi group
In all the countries where Pirelli operates, the aim of Intui-
tional Affairs Department focuses on creating corporate value
by managing structural relations with institutional stakehold-
ers so as to ensure adequate representation of their interests.
In accordance with the Pirelli Values and Code of Ethics, all
activities carry the imprint of criteria of utmost transparen-
cy, legitimacy and responsibility, both as regards information
disseminated publicly and relations managed with institution-
al contacts. In the area of institutional relations, Pirelli acts
above all via active monitoring and in-depth analysis of the
institutional and legislative context so as to verify any impli-
cations of concern and identify stakeholders of reference. In-
stitutional dialogue is further enhanced by projects and initi-
atives carried out in collaboration with institutional players in
promoting and supporting corporate matters of public interest.
The most important of the tools that ensure absolute trans-
parency of lobbying processes, which are again in any event
achieved in full abidance of the principles ratified in the
Group’s “Code of Ethics” and Anti-corruption Programme”, is
the implementation of the “Institutional Relations Policy - Cor-
porate Lobbying”, approved in February 2015 by the Pirelli
Board of Directors. The Corporate Lobbying policy describes
the principles and methods for representing corporate inter-
ests with public decision-makers in accordance with criteria of
legitimacy, propriety and transparency. All initiatives of rep-
resentation take advantage additionally of the collaboration of
the legal and internal audit Functions in addition to being in
line with international best practices (International Corporate
Governance Network) and, of course, in full compliance with
laws and regulations in the countries where Pirelli operates.
The “Lobbying Policy” is published on the Pirelli website.
The widespread geographic distribution of the Pirelli Group’s
industrial and economic interests requires a multi-level ap-
proach, made via an extended ramification of institutional
relations thus concerning a domestic, community and inter-
national dimension.
Pirelli Institutional Affairs Department contributes active-
ly to the global political-economic debate and additionally
keeps watch over developments in the main matters of cor-
porate interest, also thanks to collaboration with various se-
lected think tanks that are recognised worldwide, including
in particular collaboration with the Institute for International
Political studies, the International Affairs Institute, The Trilat-
eral Commission, The Foundation for the Analysis, Study and
Research into Reform of Democratic Institutions, the Aspen
Institutes and the Italy-China Foundation.
In Italy, the Group interacts with a system of relations that
involve the main institutional bodies at both central and lo-
cal levels. In the area of Parliament, attention is above all fo-
cused on analysing corporate interests present in legislative
processes and initiatives of the Standing Committees of the
Chamber and Senate. At times, Institutional Affairs Depart-
ment intervenes in parliamentary business to enhance the
awareness of technical information, studies and specialist
analyses pertaining to the Group’s business.
In the area of government, Pirelli has constant contact with
the structures of the Presidency of the Council, the main Min-
istries of reference and the entities that correlate therewith.
Especially important among the usual activities performed
are the initiatives promoted in the matters of: questions re-
lating to the Group’s industrial development; promoting and
strengthening international relations in countries where the
Group is present with industrial sites, analysing and study-
ing in-depth impacts relating to the regulatory governance of
tyres and their entire life-cycle; matters relating to road safety
and environmental sustainability, both as regards production
processes and in respect of the product itself.
Relations with European Institutions focus on consolidating
relations with stakeholders and monitoring legislation. The
ongoing dialogue and discussion with the Commission and the
European Parliament concern a wide range of matters of cor-
porate interest; transport, energy and environmental policy,
industrial policy, research and innovation. During the various
stages of processing and forming European regulation, Pire-
lli represents Group interests with Community stakeholders
with an approach that is at all times directed towards utmost
transparency and propriety.
The Pirelli Group is filed with the European Registry for
Transparency, which was set up by an institutional agree-
ment by and between the European Parliament and the Eu-
ropean Commission.
At an international level Pirelli interacts with the main con-
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
tacts in the countries where its production sites are located.
When necessary, the Group encourages moments of discus-
sion and dialogue directed towards mutual understanding and
with the purpose of promoting representation of its interests
through a strategy based on a clear perception of its business.
Referring to the initiatives of greatest importance during the
course of the year in Italy, the Group headquarters, the follow-
ing stand out:
Visit to the R&D laboratories in Bicocca, Milan
Last February Italy’s Prime Minister visited the Research
and Development Centre at Pirelli-Bicocca as part of a series
of initiatives directed towards Italian industrial excellences,
which represent the heart of the technological innovation of
the Group’s products and processes.
EXPO 2015 and the Charter of Milan
Pirelli hosted the “Expo of ideas” Day within the prestigious
HangarBicocca as part of a project for collaboration with the
Ministry for Agriculture Policy and Forests, sought as prepa-
ration for the initiatives of the Universal Exhibition 2015.
HangarBicocca was selected due to its natural vocation for
hosting important international events and was in this way
the backdrop for the most important event for defining the
content of EXPO 2015 and the charter of Milan. The initiative
was set up entirely by Pirelli and witnessed the participation
of 500 experts and high-level intuitional representatives from
the whole world
Festival of Innovation and Science in Settimo Torinese.
Again in 2015, to follow up the rich collaboration with local
institutions, Pirelli took an active part in bringing to fruition
the Festival of Innovation and Science. The Festival provided
an opportunity to institutional authorities and the local com-
munity to appreciate and acknowledge the excellences of the
Settimo Torinese plant.
Pirelli and ChemChina
Again in Italy, and to ensure the communication of informa-
tion to all institutional stakeholders, the Prime Minister and
the main Ministries of reference were given indications con-
cerning Pirelli’s involvement in the market transaction under-
taken by Camfin, ChemChina and other partners. Among the
other topics set out for parliamentary bodies it was possible
to underscore the opportunities and industrial prospects and
guarantee of continuity of the Group’s presence in Italy.
By way of testimony to the entrepreneurial and economic ties
between Italy and China, Pirelli then, at the invitation of the
Chinese authorities, took part in the celebration of the 45th
anniversary of diplomatic relations between Italy and China,
organised at the Zuccari Hall of the Senate of the Republic.
International Activities
With a view to prioritising relations with the institutions of
the countries where it is present, Pirelli encourages and takes
part in initiatives for international promotion achieved by the
Italian Government and Governments of the counties where
industrial sites are located.
In terms of “economic diplomacy”, besides a series of bilateral
initiatives, Pirelli takes an active part in a number of Business
Councils with Egypt, Mexico, Thailand and China.
In particular Pirelli has been awarded the Chair of the Busi-
ness Council with Mexico, a country where the Group pos-
sesses an important industrial installation for producing car
tyres. During its term as chair Pirelli has sought to promote
specific initiatives aimed at developing contacts between the
entrepreneurial activities of the two countries, with a meeting
of the Italy – Mexico Business Council in the historic Palazzo
Clerici, the offices of the Institute for Studies of International
Politics, which hosted the event. At the conclusion of the meet-
ing of entrepreneurs a select delegation of Italian and Mex-
ican entrepreneurs took part in a restricted meeting in the
presence of the President of the United Mexican States, the
Mexican Minister of the Economy, the Italian Prime Minister
and the Minister for Economic Development. The meeting was
followed by the conference “Italy & Mexico: Common Pathways
in Global Development”, organised in collaboration with ISPI.
Further confirmation of the active role also played in the field
of economic and commercial relations with countries where
it is present, in the area of the Italy – Egypt Business Council,
Pirelli took part in a series of events attended by important
institutional Egyptian and Italian players, where it was pos-
sible to study matters tied to the development of political and
economic cooperation between the two countries in-depth. A
further significant step was provided by the Group taking part
in the Sharm el Sheik summit of the Egypt Economic Develop-
ment Conference.
When the Formula 1 Gran Prix was held in Sochi, a select rep-
resentation of the Top Management of Pirelli met the President
of the Russian Federation. The occasion allowed the authori-
ties in attendance to get to know the technological challenges
the Group deals with in Formula 1 and its industrial commit-
ment in the country.
Worthy of mention was the visit made by the Prime Minis-
ter of the Russian Federation, the Minister for Industry and
Commerce and the Italian Ambassador to Russia to the Pirelli
Installation at Voronezh, which is used for producing car and
winter tyres.
Pirelli naturally continues its relations with the United States
of America through the activities of the USA Pavilion, which
contributed to bringing various initiatives organised by the
Consulate of the United States of America in Milan and the
State Department to fruition. The most important initiatives
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
include the visit to EXPO by the First Lady and the American
Secretary of State. In the context of the latter, Marco Tronchetti
Provera took part, together with a select group of entrepre-
neurs, in the Executive Forum at Expo held in the presence of
the Secretary of State. This was a moment of discussion and
dialogue of special significance in the light of the many chal-
lenges facing both countries on a global scale.
Again, in the international area, Pirelli intervened during
the State visit to Indonesia by the President of the Republic
of Italy, accompanied by the Minister for Economic Develop-
ment. In this country, the Group has recently set in motion an
important joint venture with PT Astra Otoparts for producing
motorcycle tyres. During the State visit, Pirelli also signed a
Memorandum of Understanding as part of the forum on oppor-
tunities for bilateral economic cooperation.
By way of tribute to the deep bonds of belonging with Brazil,
where the Group boasts a historic industrial presence, Pirelli
supported a series of projects promoted by the Roman Ambas-
sador and the Consulate of Brazil in Milan to support Brazilian
culture in Italy.
priNCipAL iNterNAtioNAL
CommitmeNts
For sustAiNABiLitY
The attention of Pirelli to sustainability is also expressed
through participation in numerous projects and programmes
promoted by international organisations and institutions in
the area of social responsibility. The following are some of
the main commitments undertaken by the Group worldwide
(numerous activities and agreements existing locally at the
affiliated companies are not included).
UN Global Compact Lead
In addition to being an active member of the Global Compact
since 2004, Pirelli is part of the Global Compact Lead Com-
panies, an initiative launched in 2011 at the World Econom-
ic Forum in Davos by United Nations Secretary-General Ban
Ki-moon, where it has been on the Steering Committee since
2013. Pirelli endorses the “Blueprint for Corporate Sustainabil-
ity Leadership”, which offers leadership guidelines envisaged
in the Global Compact to inspire advanced and innovative
sustainability performance in terms of management capacity
for the creation of sustainable value. In 2015, Pirelli actively
participated in the following Lead projects:
Realizing Long-Term Value for Companies and Investors,
a joint initiative of the UN Global Compact and the United
Nations Principles for Responsible Investment (UNPRI) in
which Pirelli has the role of co-chair, aimed at improving
communication between companies, the market and inves-
tors on environmental, social and governance issues;
Roadmap for Integrated Sustainability, a project that aims
to create tools for full sustainability integration in the ac-
tivities of individual company functions;
Post-2015 Development Agenda, in which the Lead Com-
panies work on the alignment between development of the
business and Development Goals;
Participation in this project has led Pirelli to have an active
role in the drafting of the new Sustainable Development Goals
(SDGs). The objectives for sustainable development were pre-
sented in New York in September 2015 and will accompany the
activities of sustainable companies until 2030. In early 2016,
the UN Global Compact will publish the Industry Matrix of the
transport sector, a document which describes examples of ap-
plication of the SDGs to company activities; Pirelli contributed
to the latter publication sharing various business case studies
related to activities carried out in 2015.
Since 2014, Pirelli has been a Founding Participant of the SSE
Corporate Working Group, the group of companies that pro-
vide their own evaluations and indications as part of the Sus-
tainable Stock Exchanges (SSE) initiative promoted by UNPRI,
United Nations Conference on Trade and Development, United
Nations Environment Programme Finance initiative and the
UN Global Compact. The initiative is based on a platform for
exchange of ideas and assessments, which aims to increase
the attention of world stock markets, investors, regulators and
companies to the sustainable performance of companies.
ETRMA – European Tyre and Rubber
Manufacturers Association
ETRMA is the main partner of the EU institutions for the sus-
tainable development of new European policies for the sector
and for their proper implementation. With the institutional
support of the Pirelli Group, in 2015 the association continued
to raise awareness of the European Commission and Europe-
an Union Member Countries on the implementation of market
surveillance for monitoring compliance with regulations on
the general safety of vehicles and tyres and on energy effi-
ciency, as well as the labelling of tyres in European countries,
and through the strengthening of the partnership with the
national associations of the sector of which Pirelli is an active
member.
In 2015, ETRMA continued providing support to the implemen-
tation of the new CARS 2020 (Competitive Automotive Regula-
tory System) strategy, whose challenges include access to raw
materials, the need for new skills and greater work flexibility,
sustainability of production processes and the need to ensure
compliance with new and sophisticated product regulations
focused on safety and environmental impact. The CARS 2020
strategy is part of the Europe 2020 strategy, in which ETRMA
118
is equally involved. It aims at defining the economic and social
actions of the European Union over the next decade and the
programme of activities to raise awareness, for example, of
road safety and sustainable mobility.
In the area of new skills, the European Automotive Skills Coun-
cil was created, of which ETRMA is an active part. Moreover,
ETRMA is heavily involved in the implementation of the Emis-
sion Trading Scheme, with the aim of reducing the economic
impact of European energy policies and the European Innova-
tion Partnership on Raw Materials and guaranteeing fair and
unrestricted access to key raw materials for the sector. Finally,
the association is successfully promoting sustainable manu-
facturer responsibility practices for the management of end-
of-life tyres, thanks to which Europe maintains a more than
95% recovery rate, through close collaboration with the various
operating partnerships existing in European countries.
The good ETRMA and European practices constitute an inter-
national benchmark.
IRSG – International Rubber Study Group
Pirelli is a member of the Industry Advisory Panel of the In-
ternational Rubber Study Group (IRSG), an intergovernmental
organisation that brings together rubber producers and con-
sumers, acting as a valuable platform for discussion on issues
regarding the supply and demand for natural and synthetic
rubber. It is the principal source of information and analysis
on all aspects related to the rubber industry.
Under IRSG, Pirelli has since 2012 engaged, inter alia, in the
Sustainability Rubber Project, which aims to create a Global
Standard of Sustainable Management for the rubber industry.
In May 2014, during the World Rubber Summit, the initiative
Sustainable Natural Rubber was officially launched, based on
the recommendations of the Heads of Delegation and the In-
dustry Advisory Panel. The aim of the initiative is to achieve
the application of a voluntary standard on sustainable natural
rubber which is valid for all stakeholders and complementa-
ry to economic, social and environmental programmes being
promoted in the producing nations. During 2015, the pilot test
started on voluntary basis and involved all the stakeholders
of the supply chain. It should be mentioned that about 85% of
natural rubber is produced by small farmers owning less than
3 hectares of land; the decision to plant trees and produce nat-
ural rubber therefore depends on opportunity cost and there-
fore an adequate long-term plan to ensure stable growth that
must be based on sustainability. In this context, the coopera-
tion within the industry is very precious.
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
WBCSD – World Business Council
for Sustainable Development
Pirelli again actively participated in the WBCSD (World Busi-
ness Council for Sustainable Development) in 2015. This is a Ge-
neva-based association of about 200 multinational companies
based in over 30 countries that have made a voluntary commit-
ment to link economic growth to sustainable development.
In particular, Pirelli endorses two projects: Tire Industry Pro-
ject and Sustainable Mobility Project 2.0.
The Tire Industry Project (TIP), whose members account for
about 70% of global production capacity of tyres, was launched
in 2005 with the objective to seizing, but above all anticipat-
ing, the challenges of sustainable development through the
assessment of the potential impact on health and environment
of tyres throughout their life cycle. The project also extends
its evaluation activities to raw materials, tyre debris and na-
no-materials.
On the latter issue, in collaboration with the Organization
for Economic Co-Operation and Development (OECD), a spe-
cific guide was developed for the sectors that contains best
practices of reference for research, development and in-
dustrialisation of new nano-materials, so as to ensure that
the use of any nano-material is safe for people and the en-
vironment; the document is available at the link http://
www.oecd.org/chemicalsafety/nanosafety/nanotechnolo-
gy-and-tyres-9789264209152-en.htm .
The TIP group members also continued promotion in emerg-
ing countries, particularly in China, the largest automotive
market in the world, of best practices in the management of
End of Life Tyres (ELT), on enhancing their recovery and re-
use as a resource (secondary raw material), with the aim of
reducing the exploitation of raw materials and the attendant
environmental impact.
The Sustainable Mobility Project 2.0 (SMP 2.0), in which Pire-
lli has participated since 2013, has developed a vision up to
2050 linked to an idea of urban mobility that is universally
accessible and with low environmental impact, as regards the
transport of both passengers and goods in an urban context.
The three-year project (2013-2015) involves international com-
panies in the automotive, auto & parts, transportation, oil & gas
and information and communication technology sectors. The
project led to the development of a set of sustainable mobility
indicators, the creation of a “tool box” of solutions available
in the public domain as the result of in-house innovation and
led to the identification of six pilot cities (Hamburg, Bangkok,
Campinas, Chengdu, Indore, Lisbon), with which a coopera-
tion project has been started for the development of their sus-
tainable mobility plans. Among the six pilot cities selected,
Campinas (Brazil), in addition to being the site of an important
Group plant, sees Pirelli taking on the role of task force lead-
er for the project. At the conclusion of the project in January
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Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
2016, a stakeholder dialogue will be organised with key local
stakeholders, with the aim of sharing the results of the project
and drawing attention to sustainable mobility, road safety and
highly pollutant emissions.
EU-OSHA – European Agency for Safety
and Health at Work
For the seventh consecutive year, Pirelli continued to be an
official partner of the European Occupational Safety and
Health Agency (EU-OSHA) in 2015. Every two years the Agen-
cy tackles a different issue. The 2014-2015 campaign “Healthy
Workplaces Manage Stress” focused on the issue of stress and
psychosocial risks in the workplace and aimed to encourage
employers, executives, and workers and their representatives
to collaborate together towards the management of these risks.
In endorsing the Campaign and launching a series of targeted
initiatives, Pirelli confirmed its commitment to promoting a
healthy work environment, where employees feel valued and
psychosocial risks are effectively prevented and countered.
CSR Europe
Since 2010, Pirelli has been a member of the Board of CSR
Europe, represented by the Group Sustainability and Risk
Governance Director. CSR Europe is a network of companies
in Europe that are leaders in the area of corporate social re-
sponsibility. Its members include fifty-nine multinational
companies and forty-five national partner organisations from
thirty-five European countries. In addition to several collab-
orative projects between companies to improve the perfor-
mance of company management, CSR Europe has placed the
priority on the European campaigns “Skills for Jobs” and “Sus-
tainable Living in Cities”, as well as on the “Enterprise 2020”
initiative, recognised by the European Commission as a par-
ticularly important example of Business Leadership to support
the achievement of the policy objectives of Europe.
Through Enterprise 2020, CSR Europe promotes collaboration,
innovation and in order to shape the contribution of compa-
nies to the Europe 2020 strategy for intelligent, sustainable
and inclusive growth. The strategy outlined by CSR Europe to
achieve the 2020 objectives of the European Union has been
reaffirmed in the “Enterprise Manifesto 2020” presented in
Milan in June 2015 during the conference “Last Call to Europe
2020”. The manifesto was followed by the “Enterprise Summit
2020” in November, an event during which Pirelli formalised
its role as co-initiator of the “European Pact for Youth”, long
advocated by the European Commission and aimed at support-
ing the increase of youth employment through education and
training as essential tools to adapt the competences of young
people to the new expectations of the market. In this context
the active collaborations between Pirelli and the different uni-
versities around the world is central.
Thanks to its acknowledged expertise in the field of social and
environmental responsibility, Pirelli chose CSR Europe to or-
ganise the Pirelli Global Stakeholder Dialogue, which is taking
place in Brussels in February 2016. The results of the stakehold-
er dialogue will be published on the Group’s website in 2016.
International Commitments
against Climate Change
For years Pirelli has renewed its commitment to the fight
against climate change, promoting the adoption of adequate
energy policies for the reduction of CO2 emissions.
During 2015, Pirelli continued with the “Road to Paris 2015”
project, in which the company participated the previous year
by signing three initiatives that are consistent with and relat-
ed to its sustainable development strategy:
Responsible Corporate Engagement in Climate Policy;
Put a Price on Carbon;
Climate Change Information in Mainstream Filings of
Companies Communication.
In accordance with these initiatives, during 2015, Pirelli
joined the “Business for COP 21 Initiative” and participated
in various side events organised in Paris during the Climate
Change Conference of the United Nations.
In 2014, the company signed the “Trillion Tonne Communiqué”,
an initiative coordinated by the Prince of Wales’s Corporate
Leaders Group and managed by the University of Cambridge.
The document requires that global emissions over the next 30
years should remain below the trillion tonnes of greenhouse
gases in order to avoid a rise in average global temperature
higher than 2°C and thus avoid disruptive climate impacts that
are inevitably associated. In 2012, Pirelli signed The “Carbon
Pricing Communiqué”; in 2011 it signed the “2nd Challenge
Communiqué”, while in 2010 it signed the “Cancún Commu-
niqué”, in 2009 it signed the “Copenhagen Communiqué” and
in 2007 it signed the “Bali Communiqué”, the first document
for the development of concrete strategies through joint work
by Governments on a comprehensive global climate agreement.
CompANY iNitiAtives
For tHe exterNAL
CommuNitY
As specified in the Group “Values and Ethical Code”, Pirelli pro-
vides support to educational, cultural, and social initiatives for
promoting personal development and improving living stand-
ards. The Company does not provide contributions, advantages,
or other benefits to political parties or trade union organisa-
tions, or to their representatives or candidates, this without
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prejudice to its compliance with any relevant legislation.
Since the founding in 1872, Pirelli has been aware of its im-
portant role in the promotion of civil progress in all the com-
munities where it operates and, capitalising on the Company’s
natural strengths, it has identified three focus areas: road
safety, technical training and solidarity through sporting
activities for young people. Pirelli for some years has adopt-
ed an internal procedure to regulate Group companies’ con-
tributions to the External Community, in relation to the roles
and responsibilities of the functions involved, the operational
process of planning, realising and monitoring the initiatives
and the disclosures regarding the same. Essential support in
the identifying of the actions that best satisfy local require-
ments comes from the dialogue with locally operating NGOs.
Priority is given to those initiatives whose positive effects on
the External Community are tangible and measurable accord-
ing to objective criteria. The internal procedure also specifies
that no initiatives may be taken in favour of beneficiaries for
whom there is direct or indirect evidence of violation of hu-
man rights, worker rights, environmental protection or busi-
ness ethics.
Road safety
Pirelli is synonymous worldwide not only with high perfor-
mance, but also safety. Together with environmental protec-
tion, road safety is the key element of the Green Performance
strategy that inspires the Group’s industrial and commercial
choices. Pirelli’s commitment to road safety takes the form
of numerous training and awareness-raising activities, but
above all it translates into research and the ongoing appli-
cation of innovative technological solutions for sustainable
transport. Pirelli is also highly focused on the achievement of
road accident reduction objectives identified by the European
Commission in the European Road Safety Charter, of which
the Company is a signatory with the following undertakings:
contribute to consumer knowledge about the fundamentals
of road safety, through experience and safe driving courses;
increase the awareness of young drivers on the causes of
road accidents through specific initiatives.
provide information material on winter road safety at the
points of sale, with the support of the Pirelli website (po-
tential reach of 9 million users worldwide in one year) and
sites dedicated to information on winter ordinances;
organise training seminars, in collaboration with associ-
ations, on issues of road safety related to the tyre and its
related uses;
train international dealers on the importance of the tyre
in road safety and the performance differences between
winter and summer tyre; the activity has been ongoing
for over two years and has involved most of the countries
in which Pirelli has a direct presence; in 2015 there were
more than 700 classroom training courses for dealers from
around the world with more than 14,000 participants;
actively participate in national programmes on road safety,
in agreement with associations, institutions, universities,
manufacturers of cars and motorcycles or collaborating
with law enforcement agencies for the preparation of a
useful module for detection of the state of use of the tyre.
In Italy, Pirelli has developed a training programme in the
area dedicated to dealers, with a focus on safety and perfor-
mance differences between summer tyres, winter and All Sea-
son. The Company also dealt with the definition of summer/
winter tests by Assogomma and actively participated in road
tests with the involvement of government agencies, journalists
and specialists in the automotive sector. As in previous years,
also in 2015, Pirelli dedicated a website to the collection of
updates related to the winter ordinances in force on Italian
territory (www.ordinanzeinvernali.it).
In Turkey, Pirelli has continued an extensive e-learning pro-
ject on road safety and the importance of the tyre at university
level called “Traffic is Life - Traffic Safety”: the course, eligible
for university credits, was introduced in 14 universities and
taken by almost 16,000 students.
In Russia, Pirelli has promoted, with the collaboration of the
traffic police, a day in favour of “defensive driving”, which in-
volved more than 1,200 people. Also in Russia, in Kirov, Pirelli
organised a “Picnic Tour” to promote safe driving and the “I
Myself” rally, dedicated entirely to women, with the main ob-
jective of promoting compliance with the rules of good driving.
In Poland, Pirelli has sponsored an art competition on the
theme of safe driving, and in the UK, Pirelli sponsored “Tyre
Safe”, an initiative to promote road safety.
In 2015, when Formula 1 returned to Mexico, Pirelli launched a
highly successful educational programme on road safety that
involved the use of F1 driving simulators.
In regard to heavy vehicle transport, in 2015 Pirelli Truck
continued the activities it had already undertaken in previous
years, dedicated to sustainable mobility and road safety. There
is an important tutorial on Pirelli CyberFleet system on the pi-
relli.com/tyre website, which offers fleet managers the oppor-
tunity to quantify the benefits of a correct measurement of the
pressure and temperature of the tyres in terms of regularity
of wear, fuel economy and road safety. In parallel, meetings
have been organised during the year at European level with
fleets and dealers, aimed at raising awareness on sustainabil-
ity in freight transport through the introduction of tools for
tyre pressure monitoring (Cyber and FleetCheck systems).
There were many initiatives in favour of education for road safe-
ty also by the Pirelli Motorcycle Business Unit, which in 2015
continued the collaboration with driving schools for the devel-
opment of practical and safe on-road and off-road experience.
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Training
The promotion of technical education and training are old
values that are well-established in the history of Pirelli. The
Group continues to benefit from technical and research coop-
eration with various Universities around the world, beginning
with the Milan and Turin Polytechnic Universities, and also
the Shandong University in China and the University of Craio-
va and the Politehnica of Bucharest in Romania, among others.
In 2015, in Italy, the collaboration with Università di Milano
Bicocca led to the patent of a new super compound for tyres
based on nano-particles. The new compound is the result of a
three-year study conducted with the University of Prague and
carried out in the scope of activities of the PhD in Science and
Nanotechnology of Materials of the university of Milan.
In Romania, Pirelli has collaborations with several local uni-
versities that have led to the creation of an academy for infor-
mation technology and an automotive Masters’ course with
scholarships and internships. During the year, the “Train
Yourself for Success” programme involved 43 students from
Alexe Marin College and Metallurgic College in Slatina. The
training focused on electrical and mechanical skills required
in the production process at the factory, as well as modules
on Health, Safety and Environment and emergency manage-
ment. More than 28 students were selected for recruitment
at the factory. In collaboration with local authorities, Pirelli
also participates in the START programme, aimed at train-
ing the unemployed.
Technical training has a fundamental role in the creation of a
skilled labour pool needed to maximise plant productivity. In
Mexico, the Piero Pirelli Institute for technical training was
inaugurated, in the presence of the Governor of the State of
Guanajuato. Within the institute, which will have an impor-
tant role in the Silao community, there will be numerous class-
rooms, a showroom on the process, materials and 3D models of
the product, workshops and production workstations that will
use both virtual reality and physical warehouse simulators,
service areas and offices.
In Egypt, Pirelli carried out a major restoration project at the
school in El-Bieda. In particular, the restoration is focused on
health facilities, the playground, gardens, exterior painting
and polycarbonate windows.
In Turkey, Pirelli has also managed a restoration, in this case
of the Turk Pirelli Primary School. Furthermore, also in Tur-
key teaching programmes in technical schools were organised
by expert volunteers from Pirelli and involved 60 students.
In Russia, Pirelli bought machinery for a carpentry class.
In Brazil, Pirelli supports Educandario Imaculado Coracao de
Maria in Amélia Rodrigues, an elementary school run by Ital-
ian nuns and attended by 918 children.
In Yanzhou, China, Pirelli has an active internship pro-
gramme: some students selected from the Universities with
which Pirelli collaborates, participate in training activities
at the factory in product, quality, safety and research areas.
Also in China, Pirelli has signed an agreement with the Qing-
dao University for Science and Technology, which provides 36
scholarships for outstanding students.
In the UK, Pirelli continues to organise apprenticeships, in
collaboration with local technical schools and sponsorship of
career fairs. This year Pirelli has also supported a programme
to combat cyber bullying in schools.
In Germany, partnerships with local universities are coming
to fruition with an extensive apprenticeship programme.
Training does not only concern the production process at the
factory; for Pirelli, the tyre’s entire life cycle is important. In
fact, the Group focuses heavily on disseminating sustainable
agriculture practices for raw materials such as natural rub-
ber. In Indonesia, in collaboration with the supplier Kirana
Megatara, the “Rubber Productivity Enhancement Project”
with three main objectives has been launched:
Educating natural rubber farmers by teaching the correct
procedures for rubber extraction enabling the protection
of natural resources (maximising productivity and main-
taining and extending the life of trees);
Distributing high-quality seeds to farmers to increase pro-
ductivity of rubber trees;
Giving scholarships to the children of natural rubber grow-
ers, to allow them to go to school and buy school books.
Sport and Social Responsibility
There is a close link between solidarity and sport, in a virtu-
ous circle where commitment to sports becomes synonymous
with the commitment to promoting solidarity and ethics, es-
pecially amongst young people. Getting young people involved
in sport is a way to teach the notion of integration to children
from different social groups, and helps prevent negative situa-
tions like isolation and solitude. Pirelli signed a global agree-
ment not only for the sponsorship of the professional football
club FC Internazionale Milano (“Inter”), but also as a partner of
the global social project Inter Campus. Since 1997, Inter Cam-
pus has developed social, flexible cooperation and long-term
actions, in 29 countries around the world with the support of
200 local operators, using football as an educational tool to
offer needy boys and girls aged between 6 and 13 the right to
play. Since 2008, Inter, Pirelli and Comunità Nuova have been
running the Inter Campus social project in Slatina, Romania.
The sports and recreational activities are organised for the
entire year, involving over 100 children from different social
contexts who have been learning team spirit, social integra-
tion and the values of friendship through football for over two
years. Since 2012, Pirelli and Inter have replicated the expe-
rience of Inter Campus in Mexico: Inter Campus Silao, near
the Pirelli factory, inaugurated by President Felipe Calderon,
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involves about 150 children in the area. In the United States,
the first Inter Campus was inaugurated in 2014 by Pirelli and
Inter along with the Youri Djorkaeff Foundation. The Campus
is located in the community of Inwood, a neighbourhood in
New York City, and involves more than 120 children. Also in
2014, Pirelli and Inter inaugurated together an Inter Campus
project in Voronezh, Russia, involving two local orphanages: in
May, the construction of the football field was completed and
100 shirts were distributed to the children.
Pirelli also sponsors baseball in Venezuela with the Pirelli
Sports Club, a school with over 300 children and adolescents,
and with athletes preparing for Major League sports in the
USA; basketball, volleyball, soccer, cycling, judo, windsurf-
ing, go-karting and swimming in Brazil, to name a few. In the
United States, Pirelli sponsored the local team Rome Braves in
Georgia, as well as various sporting events related to philan-
thropy, especially with a donation to R.A.C.E. (Racing Aware-
ness Charity Events of Rome).
In the UK, Pirelli organised a rally with great success in Carl-
isle for the Richard Burns Foundation which helps medical
research; it also sponsored various sporting events linked to
philanthropic fund-raising. In Carlisle, the company bought a
football field for the community. In France and other locations,
some employees took part in a race for charity; in Germany,
Pirelli made donations for youth sports clubs.
In Kirov, Russia, Pirelli sponsored the “Pirelli Cup” in ice
hockey.
In Egypt, Pirelli built a sports centre for youths on a plot of
3,000 square metres donated by the Ministry of Youth. The
centre is the site of many activities, including the Pirelli
League Cup, a semi-annual sports tournament.
Solidarity
The responsible approach taken by Pirelli to involvement and
inclusion takes the form of social solidarity activities world-
wide. The Company supports educational and didactic pro-
grammes that are able to give less fortunate children the tools
to improve their condition; it contributes scholarships and re-
search projects, firmly believing in training as vital to individ-
ual growth and the economic growth of a country.
In Brazil, where Pirelli has been historically active in the lo-
cal community with social projects, the Company provided for
about 150 children in the city of Feira de Santana, near the
Pirelli factory, in an after-school programme with 15 differ-
ent types of activities. A similar project is near the Gravataí
factory, which is aimed at social inclusion and includes music
and dance activities in addition to more traditional education-
al activities. Also in Brazil, Pirelli supports the kindergartens
of Dr. Klaide in Santo André and Escadinha do Tempo in Me-
leiros, which guarantee not only educational activities but also
medical, dental and psychological visits, in addition to food,
for 280 children.
Pirelli supports the Fundació Mambre in Spain, a foundation
that operates as a facilitator in social inclusion processes, sup-
porting homeless people on their individual growth paths. In
addition, the Company supports programmes providing food
for needy families, and a warehouse for the storage of food for
the poor. Pirelli collaborates with the AMPANS association for
the “Salut i Pedals” project, contributing bicycles to promote the
sport. The AMPANS is dedicated to the cognitively disabled.
In Russia, the employees in Moscow gave support to an or-
phanage, by organising activities and gifts for the children
there and providing cooking courses. A group of employees
took part in a race in support of “Naked Hearts”, the associa-
tion run by Natalia Vodyanova. The Kirov factory employees
have volunteered at a day-care centre and made tyre dona-
tions to the orphanage.
In Switzerland, there has been a major donation of tyres by an
organisation in support of the disabled.
In Turkey, Pirelli has continued to support the Foundation for
the Training and Protection of Mentally Disabled Children
(ZİÇEV), offering a sum that covers the supply of gas for heat-
ing of the building.
In Venezuela, initiatives were organised to give education-
al toys to needy children and look after children during the
school holidays while offering fun activities.
In Germany, Pirelli has made donations to the Red Cross and
in favour of the disabled.
In Mexico, some employees ran a race in support of a nursing
home for the elderly.
In Argentina, a campaign was organised for food donations to
help a community kitchen for children, and a marathon was
sponsored in support of children with cancer.
In the UK, Pirelli has dealt with many community initiatives,
including, in particular, the project Burton Albion Community
Trust Ghana, which helps a group of young people to make a
trip to Ghana to provide help in community projects such as
building houses or teaching in schools. Furthermore, also in
the UK, Pirelli has offered support to communities in Cum-
bria, which was affected by severe flooding, both through fi-
nancial assistance and through the donation of food, clothes,
water and toys for the evacuees.
Health
Pirelli considers contributing to improving the health services
of the communities where it operates to be important. Since
2008 Pirelli Tyres Romania, in collaboration with the Niguar-
da Hospital in Milan, has supported the professional training
of medical and nursing professionals and the donation of med-
ical equipment and devices to Slatina Hospital. Over 270 pro-
fessionals were trained in this programme, and specifically
in oncology, paediatric care and emergency care. Pirelli Tyres
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Romania has also provided dental treatment to around 350
children in Slatina through the project Overland for Smile.
In the UK, the philanthropic activities of Pirelli in the field
of health include sponsorships, fundraisers and donations for
research and medical care. In 2015, Pirelli also sponsored
an award to recognise the professionalism of some hospital
employees.
In Spain, Pirelli participated in the Day of Solidarity Somos
Uno, raising funds for biomedical research for serious child-
hood diseases. In France, the Group sponsored a car race to
support cancer care at the hospital. Since 2010, Pirelli has sup-
ported the Pequeno Principe Hospital in Curitiba, the biggest
paediatric hospital in Brazil.
In Kirov, Russia, 244 employees donated blood, and in Ven-
ezuela, there has been a campaign for Preventive Medicine.
Environmental Initiatives
Many Pirelli employees around the world enthusiastically
participate every year in environmental projects.
In Egypt, a competition was also promoted in 2015 for the best
ideas about recycling of factory waste materials (pieces of
wood, building materials, etc.): six teams participated, divided
among three local villages. Among the more useful projects
are the strengthening of the roofs of houses, the construction
of protected bus stops, and construction projects of bins for the
collection of garbage, a stadium, and a nursery.
Environmental recycling projects have also been organised in
Romania, where more than 250 volunteers gathered in Slatina
to participate in a national recycling competition.
In Venezuela also in 2015, Pirelli organised a large group of
volunteers to clear beaches and nearby public areas. In China,
Pirelli employees were involved in planting trees.
In Mexico, in addition to planting trees, Pirelli employees
cleaned up a large landfill of used tyres. In Germany, Pirelli
made a donation to an association for the protection of nature.
In Voronezh, Pirelli participated in planting trees in the local
project “Victory Forest”. Employees have also collected more
than 150 kg of batteries for recycling.
Culture and Social Value
The internationality of Pirelli also emerges from the love for
culture, with initiatives in many countries worldwide also in
2015. The attention to culture, and even more the commitment
to preserve it, spread it and enhance it, are part of social value
creation DNA.
Pirelli is among the sponsors of the Museum of Modern Art
of Sao Paulo, one of the most important structures in Latin
America which, in addition to the permanent collection, every
year offers major exhibitions, seminars, events and courses.
Also in Brazil, Pirelli has supported the exhibition of Marino
Marini, an Italian artist globally known for brass sculptures,
and, at the Pinacoteca de Sao Paulo, the exhibition of Nuno
Ramos. Pirelli also supports the exhibition of Marinella Pire-
lli, on 50 years of artistic activities with a particular focus on
the poetic creative process and luminous objects. Pirelli has
given support to the event ArtRio, a collection of 100 nation-
al and international galleries, and since 2015, has supported
the Museu da Imagem and do Som in Sao Paulo, a diversified
museum that gives space to new artists selected to exhibit
photographic works, film, dance and music. In Brumadinho,
Pirelli supports the Instituto Inhotim, with a famous collection
of contemporary art and a collection of plants from around the
world. In the field of music, Pirelli sponsors the Mozarteum
project, which presents great international orchestras of clas-
sical music in Brazil and in Argentina; in Brazil, it has also
sponsored a musical work, “Sou Toda Coração”. In 2015, Pirelli
sponsored the publication of a book and the presentation of a
documentary, “Amazon Roots”, about the life of the communi-
ties in the Amazon rain forest, collected through interviews,
testimonies, photos and videos.
In many countries, Pirelli is conducting a mission, as an Ital-
ian multinational company, to protect and disseminate Italian
culture abroad. The projects in 2015 include events dedicated
to the Italian theatre, cinema and songs that took place in Ar-
gentina. In the latter country Pirelli is also sponsor of the Lucio
Fontana Prize, which reached its 4th edition in 2015, promoted
by the Buenos Aires Consulate General of Italy and reserved
for emerging artists of Italian origin residing in Argentina.
Pirelli is also very attentive to the preservation of local cul-
tures. In China, it supports research on Confucianism support-
ing the China Confucius Website and Confucius Culture Month.
In the United States, in Rome (Georgia), the location of a Pire-
lli factory, there is sponsorship of the Rome Area Council for
the Arts.
In Romania, Pirelli offered a complimentary theatre evening
to the community of Slatina and was one of the main sponsors
of the “Zilele Eugen Ionescu” theatre festival.
In Turkey, Pirelli sponsored the 22nd Istanbul Jazz Festival,
with the “NETTWORK” concert (Charnett Moffett, Stanley Jor-
dan, Cyrus Chestnut and Jeff Watts).
Pirelli’s Australian headquarters hosted research into the in-
fluence of Italian culture on business.
In Voronezh, Russia, Pirelli sponsored the Governor’s Charity
Ball, with the aim of raising funds for young talents in the
region: musicians, artists, athletes and young researchers. In
addition, Pirelli gave support to the “Literary Jam” project or-
ganised as part of the Year of Literature in Russia. Equipped
with Pirelli tyres from the Voronezh site, a team of journalists
from Rossiyskaya Gazeta made a literary journey in the coun-
try visiting the homes of famous authors and cooking their
recipes. Also in Russia, an exhibition was presented of the
Pirelli Calendar at Multimedia Art Museum in Moscow, while
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in Kirov, Pirelli gave the city a statue representing the “Itala”
Car of 1907, winner of the Rally from Paris to Beijing with
Pirelli sponsorship.
pireLLi FouNDAtioN
One of the missions of the Fondazione Pirelli, or Pirelli Foun-
dation, established in 2009, is the preservation of the Group’s
historic and cultural heritage and the promotion of its cor-
porate culture through local initiatives and projects having a
strong social impact, exhibition activities, as well as collabora-
tions with other cultural institutions. Numerous projects were
carried out again in 2015 to develop and promote the Pirelli
archives. Among these, the following are noted in particular:
Publication of the volume “Una Musa tra le Ruote (The
Muse in the Wheels). Pirelli: a century of art at the service
of the product”, which traces the history of Pirelli’s com-
munication from 1872 to 1972 through 200 works by great
artists such as Armando Testa, Bruno Munari, Riccardo
Manzi, Bob Noorda, Ezio Bonini to advertise Pirelli prod-
ucts. The book, published and distributed by Corraini in
Italian and English, was presented on June 24, 2015 at La
Triennale di Milano, an event organised under the patron-
age of AIAP (Italian Association of Visual Communication
Design) and the Design Museum and was attended by over
1,000 people;
Publication on the website www.fondazionepirelli.org of the
digital library in Italian and English versions of the Pirelli
Historical Archive documents divided into sections: texts,
photographs, sketches and drawings, business magazines;
Expo 2015: exhibition on the history of Pirelli’s technologi-
cal excellence. Coinciding with the Italian Grand Prix, the
creation of an exhibition involving texts and images from
the history of research and development by the Company,
accompanied by cars and motorcycles by Italian manufac-
turers renowned for their excellence;
Participation in the 14th Enterprise Culture Week promot-
ed by Confindustria, on the theme “L’impresa va in scena”
(The company goes on stage): guided tours to the historical
archive space, Bicocca degli Arcimboldi and Pirelli Head-
quarters with the involvement of a group of professional
actors. The event was attended by over 500 people;
Exhibitions designed for the community of Pirelli em-
ployees: creation of exhibitions on the issues of women
workers, health and nutrition in the company (history of
the company canteen, colonies, stores of food and welfare
services) and on Christmas in the Pirelli world. 1,175 em-
ployees were involved;
Pirelli’s participation as a main partner in “#ioleggoper-
chè” (a project set up by the Italian Publishers’ Associa-
tion): creation of reading promotion initiatives for Pirelli
employees and their children;
Partnership with the International Council on Archives,
Business Archives (ICA/SBA) section: annual internation-
al conference for company archivists, hosted in the Pirelli
Auditorium on June 15 and 16. The event was attended by
120 corporate archivists from around the world;
Participation in the “restyling” project for the reception
space in the new Children’s department of the Niguarda
Hospital: opening to students at the NABA (New Academy
of Fine Arts in Milan) of the iconographic heritage of the
company’s Historical Archive to redefine the decorative el-
ements and signage in the new hospital ward;
The “Pirelli Educational Foundation” project aimed at stu-
dents, with the aim of bringing younger people closer to
the labour world and the values on which the Pirelli corpo-
rate culture is based: extension of the offer of educational
and creative exhibitions on road safety and sustainabili-
ty to raise awareness among children and young people,
through workshops and multimedia tools, on tyre recycling
and reuse policies and the research conducted by Pirelli
into new materials and innovative processes that ensure a
lower environmental impact. In 2015, there were over 150
educational courses, which involved over 2,500 children;
“Bambini in Bicocca” project: for the third consecutive year
the Foundation collaborated in the project with the Pirelli
Human Resources Department, creating the educational
and training courses aimed at employees’ children being
welcomed into the Company during school holidays. The
children had the opportunity to learn about the workplace
of their parents, to visit and learn about the heritage of the
Pirelli Historical Archive and learn about techniques for
tyre recycling and reuse. The project involved more than
225 children aged between 5 and 10 for 7 days;
Educational activities for university students (about 300)
from major Italian universities and academies (Università
degli Studi di Milano-Bicocca, Nuova accademia di belle
arti di Milano, Università Luigi Bocconi, Politecnico di
Milano, etc.) and those abroad (School of management of
Paris, Universidad Peruana de Ciencias Aplicadas of Lima,
etc.). Moreover, since 2010 the Foundation has had a seat
on the Board of Trustees of the Scuola dell’Infanzia G.B.
Pirelli in Varenna, just as it actively supports the activities
of the Istituto di Istruzione Superiore Leopoldo Pirelli high
school in Rome, where the annual Premio Leopoldo Pirelli
prize was established in 2011, and used as a scholarship for
particularly worthy students. The collaboration with the
Association for Excellence Training also continues.
In 2015 approximately 9,000 researchers, students, historians
and designers visited the Foundation headquarters and con-
ducted research at the Pirelli Historical Archive. About 1,500
of its materials were provided for exhibitions and publications,
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also internationally. The development and promotion of the
enormous artistic heritage of the Group also relies on digital
communication. In addition to the website www.fondazione-
pirelli.org, implemented by the section devoted to visits and
consulting of materials of the Historical Archive, the Founda-
tion constantly updates its own Facebook page and Instagram
and Pinterest accounts.
HANgArBiCoCCA
Pirelli HangarBicocca, which with its 15,000 square metres
is one of the largest exhibition venues in Europe, is a space
dedicated to the production, exhibition and promotion of con-
temporary art, created in 2004 from the reconversion of a vast
industrial facility that belonged to Ansaldo-Breda. The pro-
gramming of solo exhibitions by the most important interna-
tional artists is distinguished by a character of research and
experimentation and special attention to site-specific projects
which are capable of maintaining a dialogue with the unique
features of the space. The project was revamped in 2012 with
the belief that contemporary art is a priority area for research,
experimentation and critical reflection on the most important
contemporary themes: values that have been part of the cor-
porate culture of Pirelli for more than 140 years. Pirelli is
Co-Founder and Promoter of the Pirelli HangarBicocca Foun-
dation. The 2015 artistic programme, curated by Artistic Di-
rector Vicente Todolí and curator Andrea Lissoni and new cu-
rator Roberta Tenconi, presented artists of great international
profile, alternating exhibitions of very successful names with
exhibitions of emerging artists. The programme managed
to attract an Italian and international audience composed of
art experts, representatives of the most important museums,
trade journalists and the general press, as well as an equally
large number of enthusiasts, families and students. During
the year, there were a total of 200,000 visitors who visited the
6 large exhibition projects dedicated to international artists
created in 2015:
Joan Jonas (New York 1936) October 2, 2014 – February 1,
2015
Céline Condorelli (Paris 1974) December 11, 2014 – May 10,
2015
Juan Muñoz (Madrid 1953 – Ibiza 2001) April 9, 2015 – Au-
gust 30, 2015
Damián Ortega (Mexico City, 1967) June 5, 2015 – November
8, 2015
Philippe Parreno (Oran, Algeria, 1964) October 22, 2015 –
January 14, 2016
Petrit Halilaj (1986; Kostërrc, Skenderaj-Kosovo) December
3, 2015 – March 13, 2016
The vocation of Pirelli HangarBicocca is that of a place open to
the city and its hinterland, of an institution that accompanies
the normal exhibition activity with a range of programmes
intended to attract even the non-specialised public to contem-
porary art. The HB Public programme accompanied the ex-
hibitions with a full calendar of events, guided tours to the
exhibitions and the district, projections and meetings with the
key players in art and culture. During the year, there were
about 20 cultural events (day and/or evening) that involved
more than 5,000 visitors in activities related to ongoing ex-
hibitions as well as a 3-day summer festival in July, which
was attended by over 3,000 people. The HB Kids and HB Fam-
ily programme is continuing regularly and offers creative
activities and workshops to introduce children aged 4 to 14
to the languages of contemporary art while accompanied by
their parents: in 2015, the Education Department offered 220
creative activities attended by about 3,000 children, of whom
more than half were aged between 4 and 6. The education de-
partment has also enhanced guided tours offering more than
600 activities in both Italian and foreign languages in addi-
tion to the “Art on Sunday” format involving cultural media-
tors in Sunday lessons of the history of the art related to the
exhibitions. For students from all types and level of schools,
Pirelli HangarBicocca conceived the HB School programme,
which complements traditional art education with a method-
ology inspired by the principle of educating with art. In 2015,
more than 5,940 students took part in the HB School activ-
ities. Between 2013 and 2015, Pirelli HangarBicocca further
strengthened relations with major international museums and
official cultural bodies from many countries. Among these
were: MoMa in New York, Stedelijk Museum in Amsterdam,
MACBA in Barcelona, Museo Reina Sofía in Madrid, Camden
Arts Centre in London, Van Abbemuseum in Eindhoven, MIT
in Boston, Louvre in Paris.
During the year, Pirelli HangarBicocca also hosted 30 private
events, of which there were two major events of national sig-
nificance:
“Expo of Ideas” conference and round table with top repre-
sentatives from Italian institutions. February 7, 2015.
“Io leggo perché” (I read because) on the occasion of the
National Book Day, live on RAI. April 23, 2015.
The activities of Pirelli HangarBicocca generate, among other
things, significant induced employment: in 2015, the creation
of exhibitions and major initiatives involved 36 companies and
generated 9,900 days/worker.
126
Report on Value Chain Responsible Management / 2015 ANNUAL REPORT
127
Every Mark Is Unique / PIRELLI
Every Mark Is Unique / PIRELLI
Agnes Gund
Art Collector and Patron
“Being involved with the Pirelli calendar
alongside my granddaughter Sadie, and
working with and getting to know the remarkable
Annie Leibovitz was an extraordinary experience
that certainly left a mark on me. I suppose
the idea of “leaving my mark” would be the hope
that I have helped increase the opportunities for arts education
for New York City school children and beyond.
I also know I have left a mark through
my four children and twelve grandchildren
who have always been true to themselves and continue to inspire me
and “leave their mark” on those around them.„
s
a
p
m
a
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s
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r
k
o
P
03.consolidated
Financial
statements
130
Directors’ Report on Operations / 2015 ANNUAL REPORT Consolidated Financial Statements / 2015 ANNUAL REPORT
consolidated statement oF Financial position (in thousands of euro)
12/31/2015
12/31/2014
9 Property, plant and equipment
10
Intangible assets
11
Investments in associates and J.v.
12 Other financial assets
13 deferred tax assets
15 Other receivables
16 Tax receivables
Non-current assets
17
Inventories
14 Trade receivables
15 Other receivables
18 securities held for trading
19 Cash and cash equivalents
16 Tax receivables
27 derivative financial instruments
Current assets
Assets held for sale
Total Assets
132
20.1 Equity attributable to owners of the group:
share capital
Reserves
Net income (loss)
20.2 Equity attributable to non-controlling interests:
Reserves
Net income (loss)
20 Equity
23 borrowings from banks and other financial institutions
25 Other payables
21 Provisions for liabilities and charges
13 Provisions for deferred tax liabilities
22 Employee benefit obligations
26 Tax payables
Non-current liabilities
23 borrowings from banks and other financial institutions
24 Trade payables
25 Other payables
21 Provisions for liabilities and charges
26 Tax payables
27 derivative financial instruments
Current liabilities
Liabilities related to assets held for sale
Total Liabilities and Equity
2,419,453
968,541
167,348
225,121
123,724
147,624
6,169
4,057,980
1,053,929
676,192
165,408
78,167
1,082,726
62,410
61,305
3,180,137
-
7,238,117
2,280,177
1,343,285
1,328,258
(391,366)
63,367
55,578
7,789
2,343,544
1,275,688
98,631
77,906
43,622
362,540
2,646
1,861,033
1,138,592
1,313,131
404,172
63,221
62,445
51,979
3,033,540
-
7,238,117
2,522,464
984,002
186,783
180,741
248,564
169,145
12,068
4,303,767
1,055,016
673,808
265,274
61,404
1,166,669
73,960
29,104
3,325,235
44,037
7,673,039
2,548,345
1,343,285
885,769
319,291
63,157
49,611
13,546
2,611,502
1,781,726
74,692
97,799
53,029
458,945
3,397
2,469,588
530,890
1,394,312
443,477
67,030
100,761
42,835
2,579,305
12,644
7,673,039
consolidated income statement (in thousands of euro)
29 Revenues from sales and services
30 Other income
Changes in inventories of unfinished, semi-finished and finished products
Raw materials and consumables (net of change in inventories)
31 Personnel expenses
32 Amortisation, depreciation and impairment
33 Other costs
Increase in Fixed Assets for Internal Work
Operating income (loss)
34 Net income (loss) from equity investments
share of net income (loss) of associates and j.v.
gains on equity investments
losses on equity investments
dividends
2.5 deconsolidation of the venezuelan subsidiary
35 Financial income
36 Financial expenses
Net income (loss) before tax
37 Tax
Net income (loss) from continuing operations
38 Net income (loss) from discontinued operations
Total net income (loss)
Attributable to:
Owners of the parent
Non-controlling interests
Consolidated Financial Statements / 2015 ANNUAL REPORT
2015
2014
6,309,633
168,635
53,856
(2,106,886)
(1,295,130)
(327,004)
(1,955,550)
2,757
850,311
(41,393)
(9,002)
-
(38,420)
6,029
(559,491)
73,964
(402,180)
(78,789)
(290,137)
(368,926)
(14,651)
(383,577)
(391,366)
7,789
6,018,063
204,076
71,634
(2,083,896)
(1,239,770)
(304,855)
(1,829,766)
2,447
837,933
(87,000)
(55,147)
18,989
(54,715)
3,873
-
91,677
(354,087)
488,523
(173,309)
315,214
17,623
332,837
319,291
13,546
133
Consolidated Financial Statements / 2015 ANNUAL REPORT
consolidated statement oF other comprehensive income (in thousands of euro)
A
Net income (loss)
Components of other comprehensive income:
B - Items that will not be reclassified to income statement:
Net actuarial gains (losses) on employee benefits
Tax effect
Total B
C - Items reclassified / that may be reclassified to income statement:
Exchange differences from translation of foreign financial statements:
gains / (losses) for the period
(gains) / losses reclassified to income statement
Fair value adjustment of other financial assets:
gains / (losses) for the period
(gains) / losses reclassified to income statement
Fair value adjustment of derivatives designated as cash flow hedges:
gains / (losses) for the period
(gains) / losses reclassified to income statement
134
Tax effect
Fair value adjustment of derivatives designated as net investment hedges:
gains / (losses) for the period
Total C
share of other comprehensive income related to associates and joint ventures
Total D
E
Total components of other comprehensive income (B+C+D)
A+E Total comprehensive income (loss)
Attributable to:
Owners of the Parent
Non-controlling interests
2015
2014
(383,577)
332,837
12,473
(18,910)
(6,437)
(30,263)
18,138
(12,125)
(148,597)
131,952
(57,232)
2,103
38,853
100
(5,231)
20,628
4,992
(215)
(1,045)
-
26,039
1,090
1,090
20,692
(362,885)
(368,022)
5,136
(3,497)
19,262
(3,252)
(4,761)
(31,979)
4,340
4,340
(39,764)
293,073
279,899
13,174
Consolidated Financial Statements / 2015 ANNUAL REPORT
consolidated statement oF changes in e Quity at 12/31/2015 (in thousands of euro)
attributable to the parent
share
capital
trans-
lation
reserve
total
ias
reserves*
other
reserves/
retained
earnings
total
attributa-
ble to the
parent
non
con-
trolling
interests
total
Total at 12/31/2014
1,343,285
(283,430)
(436,204)
1,924,694
2,548,345
63,157
2,611,502
Сomponents
of other
comprehensive
income
Net income (loss)
Total
conprehensive
income (loss)
dividends paid
venezuela inflation
effect
deconsolidation
of the venezuelan
subsidiary
Other
-
-
-
-
-
-
-
(13,993)
37,338
-
23,345
(2,653)
20,692
-
-
(391,366)
(391,366)
7,789
(383,577)
(13,993)
37,338
(391,366)
(368,021)
5,136
(362,885)
-
-
-
-
-
-
-
(179,572)
(179,572)
(6,656)
(186,228)
280,345
280,345
11,015
291,360
-
-
(8,502)
(8,502)
40,427
(41,347)
(920)
(783)
(1,703)
Total at 12/31/2015
1,343,285
(297,423)
(358,439)
1,592,754
2,280,177
63,367 2,343,544
(in thousands of euro)
135
breakdown oF ias reserves *
reserve For Fair value
adJustment oF
available-For-sale
Financial assets
reserve
For cash
Flow hedge
reserve For
actuarial
gains/losses
taX
eFFect
total
ias
reserves
56,120
(20,246)
(547,147)
75,069
(436,204)
40,043
4,777
12,473
(19,955)
37,338
-
-
40,345
82
40,427
96,163
(15,469)
(494,329)
55,196
(358,439)
Total at 12/31/2014
Other components
of other comprehensive
income
Other changes
Total at 12/31/2015
Consolidated Financial Statements / 2015 ANNUAL REPORT
consolidated statement oF changes in e Quity at 12/31/2014 (in thousands of euro)
attributable to the parent
share
capital
translation
reserve
total
ias
reserves*
other
reserves/
retained
earnings
total
attrib-
utable
to the
parent
non
con-
trolling
interests
total
Total at 12/31/2013
1,343,285
(228,301)
(452,545)
1,713,628
2,376,066
60,523 2,436,589
Other components
of other
comprehensive
income
Net income (loss)
Total
conprehensive
income
dividends paid
venezuela inflation
effect
disposal of
minorities stakes
Acquisition through
capital increase
reserved to third
parties
disposal of
steelcord
Other
-
-
-
-
-
-
-
-
-
136
(55,129)
15,737
-
(39,392)
(372)
(39,764)
-
-
319,291
319,291
13,546
332,837
(55,129)
15,737
319,291
279,899
13,174
293,073
-
-
-
-
-
-
-
-
-
-
-
(156,743)
(156,743)
(3,358)
(160,101)
49,090
49,090
1,929
51,019
(3,015)
(3,015)
5,631
2,615
-
-
-
-
10,300
10,300
(21,372)
(21,372)
604
2,444
3,048
(3,669)
(621)
Total at 12/31/2014
1,343,285
(283,430)
(436,204)
1,924,694
2,548,345
63,157
2,611,502
(in thousands of euro)
Total at 12/31/2013
Other components
of other comprehensive
income
Other changes
Total at 12/31/2014
breakdown oF ias reserves *
reserve For Fair value
adJustment oF
available-For-sale
Financial assets
reserve
For cash
Flow hedge
reserve For
actuarial
gains/losses
taX
eFFect
total
ias
reserves
35,631
(30,499)
(518,039)
60,361
(452,545)
20,488
10,252
(29,884)
14,879
15,737
-
-
776
(172)
604
56,120
(20,247)
(547,147)
75,069
(436,204)
Consolidated Financial Statements / 2015 ANNUAL REPORT
consolidated statement oF cash Flows (in thousands of euro)
01/01 - 12/31/2015
01/01 - 12/31/2014
Net income (loss) before taxes
Amortisation, depreciation, impairment losses and reversals of impaired
property, plant and equipment and intangible assets
Reversal of financial expenses
Reversal of financial income
Reversal of dividends
Reversal of gains/(losses) on equity investments
Reversal of share of net income from associates and joint ventures
Ordinary taxes
Change in inventories
Change in trade receivables
Change in trade payables
Change in other receivables/payables
Change in provisions for employee benefit obligations and other provisions
Other changes
A Net cash flows provided by (used in) operating activities
Investments in property, plant and equipment
disposal of property, plant and equipment
Investments in intangible assets
Acquisitions of investments in subsidiaries
Exercise of Fenice share options
disposals (Acquisition) of investments in associates and Jv
disposals (Acquisition) of financial assets
disposal of steelcord
dividends received
B Net cash flows provided by (used in) investing activities
Other changes in equity
Change in financial payables
Change in financial receivables/securities held for trading
Financial income (expenses)
dividends paid
C Net cash flows provided by (used in) financing activities
Net cash flows provided by (used in) operating activities
Net cash flows provided by (used in) investing activities
Net cash flows provided by (used in) financing activities
D Net cash flows provided by (used in) discontinued operations
E Total cash flows provided (used) during the period (A+B+C+D)
F Cash and cash equivalents at beginning of financial year
G Exchange differences on translation of cash and cash equivalents
H Deconsolidation of the Venezuelan subsidiary
I Cash and cash equivalents at end of financial year (E+F+G+H) (°)
(°) of which:
cash and cash equivalents
bank overdrafts
480,702
327,004
402,180
(73,964)
(6,029)
38,420
9,002
(182,737)
(86,127)
(139,377)
29,574
42,875
43,975
(14,044)
871,452
(375,012)
9,936
(16,382)
-
(12,157)
-
(8,493)
45,600
6,029
(350,479)
-
234,346
2,670
(304,246)
(189,561)
(256,791)
919
-
-
919
265,102
1,150,605
(70,890)
(277,659)
1,067,158
1,082,726
(15,568)
137
488,523
304,855
354,087
(91,677)
(3,873)
35,726
55,147
(173,309)
(104,203)
(32,621)
160,209
(14,152)
(28,860)
(18,487)
931,365
(367,201)
11,292
(10,763)
17,886
-
(17,458)
(455)
125,600
3,873
(237,226)
5,631
112,700
(40,458)
(190,325)
(160,101)
(272,553)
(27,500)
-
454
(27,046)
394,541
806,856
(50,792)
-
1,150,605
1,166,668
(16,063)
Every Mark Is Unique / PIRELLI
Eva Herzigova
Model and Actress
“I would like to leave a mark with a THANK YOU.
A heartfelt thank you to the wonderfully
talented photographers, hair and make-up artists,
fashion editors and stylists,
magazines, fashion houses, designers and brands,
directors and production teams, my support teams,
my friends and above all my family, who over so many years
have and continue to believe in me.
For the wonderful experiences and the many amazing
images that will tell the story of the small part
I have been fortunate to play
in the history of this extraordinary
world of fashion. THANK YOU.„
s
a
p
m
a
L
s
a
r
k
o
P
Every Mark Is Unique / PIRELLI
Consolidated Financial Statements / 2015 ANNUAL REPORT
exPLanatorY notes
1. GeneraL inForMation
Pirelli & C. S.p.A. is a corporation organised under the laws of the Republic of Italy.
Founded in 1872, it is a holding company which manages, coordinates and finances the operations of its subsidiaries, primarily
active in the tyre industry; other activities are represented by technologies for low emissions and in the field of renewable energy.
The registered office of the company is in Milan, Italy.
These Financial Statements have been prepared using the Euro as the accounting currency and all values have been rounded to
thousands of Euro unless otherwise indicated.
On March 15, 2015, the Board of Directors authorised the publication of these Consolidated Financial Statements.
140
Following the outcome of the Public Purchase Offer launched by Marco Polo Industrial Holding S.p.A. and subsequent purchase
transactions on the ordinary shares of Pirelli & C. S.p.A. led to Marco Polo holding 100% of the shares of this category, the ordinary
shares were revoked from listing on October 6, 2016, Additionally, a General Meeting on February 15, 2016, in an extraordinary
session approved a proposal for the mandatory conversion of savings shares into a special category of unlisted new issue shares
without voting rights. Due to this resolution the saving shares were also delisted on February 26, 2016.
Pirelli & C. S.p.A. is subject to the management and coordination of Marco Polo International Italy S.p.A., which indirectly is the
sole shareholder of Marco Polo Industrial Holding S.p.A. that directly controls the Company. Both the aforesaid companies are ulti-
mately controlled by China National Chemical Corporation (“ChemChina”), a “state-owned enterprise” (SOE) under Chinese law, with
registered office in Beijing, referable to the Central Government of the People’s Republic of China.
2. Basis oF Presentation
2.1 FiNANCiAL stAtemeNts FormAts
The Group has adopted for the presentation of the Statement of Financial Position, the Income Statement, the Statement of Compre-
hensive Income, the Statement of Changes in Equity, the Statement of Cash Flows and the Explanatory Notes, and are accompanied
by the Directors’ Report on Operations.
The format adopted for the Statement of Financial makes a distinction between current and non-current assets and liabilities.
The format adopted for the Statement of Financial Position classifies assets and liabilities as current and non-current.
The Group has opted to present the gains/(losses) components for the financial year in a separate Income Statement, rather than
include these components directly in the Statement of Comprehensive Income. The format of the Income Statement adopted provides
for the classification of the expense by nature.
The Statement of Comprehensive Income includes the results for the financial year and, for homogeneous categories, the revenues
and costs which, in accordance with IFRS, are recognised directly in equity.
The Group has decided to present both the tax effects and reclassifications to the Income Statement of gains/(losses) recognised in
equity in previous years directly in the Statement of Comprehensive Income and not in the Explanatory Notes.
The Statement of Changes in Equity sets forth, in addition to total gains/(losses) for the financial year, the amounts of transactions
Consolidated Financial Statements / 2015 ANNUAL REPORT
by the parties that have joint control have rights to the net as-
sets of said entity. Joint ventures are distinguished from joint
operations that are configured instead as agreements that give
the parties of the agreement, which have joint control of the
initiative, rights on individual assets and obligations for indi-
vidual liabilities relating to the agreement. The Group does not
currently have any agreements for joint operations.
The main changes in the scope of consolidation during the
2015 financial year relate to the sale on February 6, 2015 of
the subsidiary Celikord A.S. (Turkey) and on March 27, 2015 of
the Chinese subsidiary Sino Italian Wire Technology Co. Ltd.
as completion of the sale of the steelcord activity to Bekaert;
Furthermore, the deconsolidation of the Venezuelan subsidi-
ary effective as of December 31, 2015 while maintaining the
consolidated financial results for the entire financial year of
2015. The fair value of the investment has been recorded as as-
sets available for sale. Please refer to section “Deconsolidation
of the subsidiary Pirelli de Venezuela C.A.” for more details.
141
with equity holders and the changes which occurred during
the financial year in retained earnings.
In the Cash Flow Statement, the cash flows deriving from op-
erating activities are presented using the indirect method,
according to which the gain or loss for the financial year is ad-
justed by the effects of non-monetary items, by any deferment
or accrual of past or future operating receipts or payments,
and by any revenue or cost items connected with the cash
flows arising from investing activities or financing activities.
2.2 sCope oF
CoNsoLiDAtioN
The scope of consolidation includes the subsidiaries, associ-
ates and joint arrangements.
Subsidiaries are defined as all the companies held over which
the Group has at the same time:
decision-making power, or the ability to direct the relevant
activities of the investee, i.e. activities that have a signifi-
cant influence on the results of the investee;
the right to variable results (positive or negative) resulting
from the investment in the entity;
the ability to use its own decision-making power to deter-
mine the amount of the results arising from the invest-
ment in the entity.
The Financial Statements of subsidiaries are included in the
consolidated Financial Statements beginning on the date when
a controlling interest is acquired until such time that control
ceases to exist. The share of equity and the results attribut-
able to non-controlling interests are separately indicated re-
spectively in the consolidated Statement of Financial Position
and consolidate Income Statement.
All companies over which the Group could exercise signifi-
cant influence as defined by IAS 28 – Investments in Asso-
ciates are considered associates. This influence is presumed
to exist when the Group holds a percentage of voting rights
between 20% and 50%, or when - even with a lower share of
voting rights – it has the power to participate in determining
financial and operating policies by virtue of specific legal rela-
tionships, such as, for example, participation in shareholders’
agreements together with other significant forms of exercise
of governance rights.
Joint arrangements are agreements under which two or more
parties have joint control under a contract. Joint control is the
shared control, established by agreement, of an economic ac-
tivity, which exists only when, decisions on these activities
require the unanimous consent of all the parties sharing con-
trol. These agreements may give rise to joint ventures or joint
operations.
A joint venture is a joint control agreement of an entity where-
Consolidated Financial Statements / 2015 ANNUAL REPORT
2.3 iNFormAtioN oN suBsiDiAries
The consolidated Financial Statements of Pirelli & C. S.p.A. include the assets and liabilities of approximately 100 legal entities. The
following is a list of the subsidiaries which are considered to be significant:
12/31/2015
12/31/2014
registered
oFFice
% oF the
group
% oF
non-con-
trolling
interests
% oF the
group
% oF
non-con-
trolling
interests
Pirelli Tyre Co. Ltd
yanzhou (China)
Alexandria Tire Company s.A.E.
Alessandria (Egypt)
Pirelli China Tyre N.v.
Pirelli deutschland gmbH
deutsche Pirelli Reifen Holding gmbH
E-vOLuTION Tyre b.v.
Pirelli Tyre s.p.A.
Pirelli Neumaticos s.A.I.C.
142
Pirelli Industrie Pneumatici s.r.l.
Heinenoord
(The Netherlands)
breuberg/Odenwald
(germany)
breuberg/Odenwald
(germany)
Heinenoord
(The Netherlands)
Milan (Italy)
buenos Aires
(Argentina)
settimo Torinese
(Italy)
100.00%
100.00%
100.00%
90.00%
89.11%
100.00%
100.00%
100.00%
10.00%
90.00%
10.89%
89.11%
10.00%
10.89%
100.00%
100.00%
100.00%
65.00%
35.00%
65.00%
35.00%
Pirelli Neumaticos s.A. de C.v.
Mexico City (Mexico)
100.00%
Pirelli International plc
burton on Trent
(united kingdom)
Pirelli Pneus Ltda
santo Andrè (brazil)
TP Industrial de Pneus brasil Ltda
sao Paulo (brazil)
Comercial e Importadora de Pneus Ltda
sao Paulo (brazil)
Pirelli Tyres Ltd
Pirelli Tire LLC
burton on Trent
(united kingdom)
Rome (usA)
s.C. Pirelli Tyres Romania s.r.l
slatina (Romania)
Turk-Pirelli Lastikleri A.s.
Istanbul (Turkey)
100.00%
100.00%
100.00%
64.00%
100.00%
100.00%
100.00%
100.00%
Limited Liability Company Pirelli Tyre
Russia
Closed Joint stock Company "voronezh
Tyre Plant"
Moscow (Russia)
100.00%
voronezh (Russia)
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
36.00%
64.00%
36.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
The complete list of subsidiaries is provided in the annex “Scope of Consolidation: A list of companies included in the consolidation
using the line-by-line method”.
Minority interests in the subsidiaries of the Group are not significant either individually or in aggregate form.
2.4 CoNsoLiDAtioN
priNCipLes
The Financial Statements used for consolidation purposes are
those of the companies included in the scope of consolidation,
prepared as at the date of Financial Statements of the parent
company and adjusted as necessary, in accordance with the
IAS/IFRS principles applied by the Group.
The financial statements expressed in foreign currencies have
been translated into Euro at the period-end exchange rates
for the Statement of Financial Position and at the average ex-
change rates for the financial year for the Income Statement,
with the exception of Financial Statements of companies op-
erating in high-inflation countries, whose Income Statements
are translated at period-end exchange rates.
The differences arising from the translation of opening equity
at period-end exchange rates are recognised in the reserve for
translation differences, together with the difference between
the net income (loss) for the period translated at the period-end
rate and at the average rate for the period. The reserve for
translation differences is reclassified in the Income Statement
upon disposal of the company that generated the reserve.
The consolidation policies may be summarised as follows:
subsidiaries are consolidated on a line-by-line basis, ac-
cording to which:
the assets, liabilities, revenues, and costs in the Finan-
cial Statements of subsidiaries are assumed in their full
amounts, regardless of the percentage of ownership;
the carrying amount of investments is eliminated
against the underlying share of net equity;
the financial and operating transactions between com-
panies consolidated on a line-by-line basis, including
dividends distributed within the Group, are eliminated;
non-controlling interests are appropriately record-
ed under net equity. Similarly the quota of earnings
or losses attributable to non-controlling interests are
shown separately in the Income Statement;
with disposal of any subsidiary which brings about a
loss of control, any goodwill that may be attributable to
the subsidiary is taken into consideration in determin-
ing the gain or loss from the disposal;
in the case of further interests acquired after acqui-
sition of a controlling interest, any difference between
the purchase cost and the corresponding fraction of
acquired equity is recognised in equity; likewise, the
effects of sale of non-controlling interests without loss
of control are also recognised in equity.
investments in associates and joint ventures are accounted
for under the equity method, on the basis of which the car-
rying amount of the investments is adjusted by:
Consolidated Financial Statements / 2015 ANNUAL REPORT
the investor’s share of the post-acquisition results of
the associate or joint venture ;
the allocable amount of gains and losses recognised
directly in the equity of the associate or joint venture,
in accordance with the applied accounting standards;
dividends paid by the subsidiary;
if the Group’s share in the losses of the associate/ joint
venture exceeds the carrying amount of the invest-
ment in the Financial Statements, the carrying amount
of the investment is eliminated and the share of any
further losses is recognised under “Provisions for lia-
bilities and charges,” to the extent that the Group has a
contractual or implicit obligation to cover these losses;
gains resulting from sales made by subsidiaries to joint
ventures or associates are eliminated in proportion to
the percentage of equity interest in the acquiring entity.
2.5 DeCoNsoLiDAtioN oF
tHe suBsiDiArY pireLLi
De veNezueLA C.A.
The subsidiary Pirelli de Venezuela C.A., which is 96.22%
owned by the Group, produces, markets and distributes Con-
sumer and Industrial tyres in Venezuela. The negative evolu-
tion of the macroeconomic situation, the regulatory control of
the currency market and exchange rates and the continued re-
duction in the availability of the US Dollar in Venezuela which
can be purchased through the official exchange mechanisms,
have led to the emergence of a structural situation where com-
panies are unable to convert the Venezuelan Bolivar into US
Dollars. As a result, the Venezuelan subsidiary is no longer
able to pay dividends and royalties, or able meet its trade lia-
bilities to other companies in the Group.
Further regulatory restrictions were then added to the lim-
itations already existing on the significant activities of the
Group, which could not be considered temporary, such as the
control of the margins on sales and a particularly stringent
labour legislation, which, combined with the existing restric-
tions, did not in fact allow the Group to develop and implement
their decisions on the relevant activities of the subsidiary.
Based on this scenario, which is expected to continue for the
foreseeable future, as confirmed as well by the latest official
statement made by President Maduro on February 17, 2016
according to which the SIMADI exchange rate currently at
approximately 200 Bolivares per US dollar will replace the
SICAD exchange rate of 13.5 Bolivares per US dollar, it was
considered that the requisite conditions of IFRS 10 to carry
out an accounting control on the subsidiary had not been met,
and therefore deconsolidation of the subsidiary was proceeded
with, effective as of December 31, 2015; (the Income Statement
of the Venezuelan subsidiary was consolidated for the entire
143
Consolidated Financial Statements / 2015 ANNUAL REPORT
financial year of 2015) and the investment recorded as an asset
available for sale and recognised at fair value.
The deconsolidation of the Venezuelan subsidiary resulted in
the recognition of a negative impact on the Income Statement
to the amount of euro 559.5 million, which includes:
negative impact of consolidation the positive net financial
position to the amount of euro 277.7 million;
negative impact of euro 138.3 million deriving from losses
from the translation into Euro of the Financial Statements
of the subsidiary accrued during the course of the previ-
ous financial year, recognised under equity and reclassi-
fied in the income statement;
negative impact to the amount of euro 225.5 million result-
ing from the impairment of receivables that the Group held
towards the Venezuelan subsidiary, which were all reset to
zero based on the expectations of future collection;
positive impact due to the recognition at fair value of the
investment in the Venezuelan subsidiary, estimated at
euro 18.9 million, which was substantially representative
of the liquidity present in the country, and which was
impaired by the SIMADI exchange rate, which, following
the latest official statements of February 17, 2016 was to
replace the SICAD exchange rate. The SIMADI exchange
rate, which is currently trading at around 200 Bolivars to
the US Dollar, will be mostly allowed to fluctuate freely.
The fair value of the investment in Pirelli de Venezuela
C.A. was recorded under financial assets available for sale
and will be assessed at fair value;
other positive impacts to the amount of euro 63.1 million
Future financial year results for the Group shall not include
the results of the Venezuelan company. Revenues from the
sales of raw materials and finished products to the Venezuelan
subsidiary, as well as revenues from dividends and royalties,
shall be recognised only at such time when payment has been
effected. As a consequence of the deconsolidation, the Group’s
results shall no longer include the results of the Venezuelan
subsidiary, and therefore will no longer bear the impacts of
the recurring devaluations which have characterised recent
financial years, at both the level of the Income Statement and
the Net Financial Position. No further losses are foreseen
linked to new supplies in the country; Pirelli could eventually
recoup part of the value which was almost totally devalued as
at December 31, 2015.
144
3. accoUntinG
standards
3.1 ACCouNtiNg
stANDArDs ADopteD
Pursuant to regulations no. 1606 issued by the European Par-
liament and the European Council in July 2002, the consoli-
dated Financial Statements of the Pirelli & C. Group have been
prepared in accordance with International Financial Report-
ing Standards in force issued by the International Account-
ing Standards Board (“IASB”) and endorsed by the European
Union, as at December 31, 2015, and the measures issued in
implementation of article 9 of Italian Legislative Decree no.
38/2005. The term “IFRS” includes all the revised Internation-
al Accounting Standards (“IAS”) and all the interpretations of
the International Financial Reporting Interpretations Commit-
tee (“IFRIC”), formerly the Standing Interpretations Committee
(“SIC”). Due to the approval by General Meeting of the manda-
tory conversion of the unlisted savings shares of a special new
issue category without voting rights, as of February 26, 2016,
the company is no longer listed on the Milan Stock Exchange.
The company will continue to prepare consolidated Financial
Statements on the basis of IFRS accounting principles, in ac-
cordance with the discretion provided for by Art. 3 of Legisla-
tive Decree 38/2005
The consolidated Financial Statements have been prepared
in accordance with the historical cost method, with the ex-
ception of:
derivative financial instruments, financial instruments
held for trading, financial assets available for sale, which
are measured at fair value;
Financial Statements of companies operating in hyperin-
flationary economies, which are prepared according to the
current cost method.
Business combinations
Corporate acquisitions are accounted for under the acquisition
method.
When a controlling interest in a company is acquired, good-
will is calculated as the difference between:
the fair value of the price plus any non-controlling inter-
ests in the acquired entity, measured at fair value (if this
option is chosen for the acquisition in question) or in pro-
portion to the share of the non-controlling interest in the
net assets of the acquired entity;
the fair value of the assets and liabilities acquired.
If this difference is negative, that difference is immediately
recognised as income in the Income Statement.
In cases of acquisition of control of a company in which a
non-controlling interest was already held (step acquisition),
the investment held previously is recognised at fair value and
the effects of this adjustment are recognised in the Income
Statement.
Costs for the business combination are recognised in the In-
come Statement.
Contingent consideration, i.e. the obligations of the buyer to
transfer additional assets or shares to the seller if certain fu-
ture events occur or specific conditions are met, are recognised
and measured at fair value at the acquisition date as a portion
of the consideration transferred in exchange for the acquisi-
tion itself. Subsequent changes in the fair value of these agree-
ments are normally recognised in the Income Statement.
Intangible assets
Intangible assets with finite useful lives are measured at
cost less accumulated amortisation and accumulated impair-
ment losses.
Amortisation is calculated on a straight-line basis and begins
when the asset is available for use or operable in the opinion
of management and ceases on the date when the asset is clas-
sified as held for sale or is derecognised.
Gains and losses resulting from the sale or disposal of an in-
tangible asset are determined as the difference between the
net sale proceeds and the carrying amount of the asset.
Goodwill
Goodwill is an intangible asset with indefinite useful life, and
consequently is not amortised. Goodwill is tested for impair-
ment in order to identify any impairment losses at least annu-
ally or whenever there are indications of an impairment loss,
and is allocated to cash generating units for this purpose.
Trademarks and licenses
The trademarks and licenses for which the conditions for clas-
sification as an intangible asset with an indefinite lifespan are
not fulfilled are assessed at the cost less accumulated amor-
tisations and losses. The cost is amortised over the contract
period or the useful lives of the assets, whichever is shorter.
The trademarks for which the conditions for classification as
an intangible asset with an indefinite lifespan are fulfilled are
not systematically amortised and are instead subject to an im-
pairment test at least once a year.
Consolidated Financial Statements / 2015 ANNUAL REPORT
Software
Software license costs, including direct incidental costs,
are capitalised and recognised in the Financial Statements
net of accumulated amortisation and accumulated impair-
ment losses. Software is amortised over its useful life on a
straight-line basis.
Customer relationships
Customer relationships are intangible assets acquired in a
business combination and are recognised in the Financial
Statements at their fair value as at the purchase date. These
are amortised according to their useful life.
Research and development costs
Research costs for new products and/or processes are ex-
pensed when incurred. There are no development costs that
satisfy the conditions for capitalisation under IAS 38.
Property, plant and equipment
Property, plant and equipment are recognised at their pur-
chase or production cost, including directly attributable inci-
dental expenses.
Subsequent expenses and the cost of replacing certain parts
of property, plant and equipment are capitalised only if they
increase the future economic benefits of the related asset. All
other costs are expensed in the Income Statement as incurred.
When the cost of replacing certain parts is capitalised, the
carrying amount of the replaced part is recognised in the In-
come Statement.
Property, plant and equipment are recognised at cost less ac-
cumulated depreciation and accumulated impairment losses,
except for land, which is not depreciated and is recognised at
cost less accumulated impairment losses.
Depreciation is recognised starting from the month in which
the asset is available for use, or is potentially capable of pro-
viding the economic benefits associated with it.
Depreciation is charged monthly on a straight-line basis at rates
that allow the depreciation of the assets until the end of their
useful life or, in cases of disposal, until the last month of use.
The depreciation rates applied are as follows:
buldings
Plant
Machinery
Equipment
Furniture
Motor vehicles
3% - 10%
7% - 20%
5% - 20%
10% - 33%
10% - 33%
10% - 25%
145
Consolidated Financial Statements / 2015 ANNUAL REPORT
Government grants to capital account related to property,
plant and equipment are recognised as deferred income and
credited to the Income Statement over the period of deprecia-
tion of the relevant assets.
Borrowing costs directly attributable to the purchase, con-
struction or production of a qualifying asset (defined as an
asset that requires a significant amount of time in order to
be prepared for use) are capitalised as part of the cost of the
asset. Capitalisation of borrowing costs ceases when substan-
tially all the activities necessary to render the qualifying as-
set available for use have been completed.
Leasehold improvements are classified as property, plant and
equipment, consistently with the nature of the cost incurred.
The depreciation period corresponds to remaining useful life
of the asset or the residual period of the lease agreement,
whichever is the shorter.
Spare parts of significant value are capitalised and depreciated
over the estimated useful life of the assets to which they refer.
Any dismantling costs are estimated and added to the cost of
property, plant and equipment with a corresponding accrual
to provisions for liabilities and charges if the conditions for
accruing such provisions are met. They are then depreciated
over the remaining useful life of the assets to which they refer.
Assets acquired under finance lease agreements, in which
substantially all the risks and rewards of ownership are
transferred to the Group, are recognised as property, plant
and equipment at their fair value or, if lower, at the present
value of the minimum lease payments, with a corresponding
entry for the relevant financial payable. Lease instalment pay-
ments are allocated between interest expense, recognised in
the Income Statement, and principal repayment, which reduc-
es the financial payable.
Leases in which the lessor maintains substantially all the
risks and rewards associated with ownership are classified
as operating leases. Costs referring to an operating lease are
recognised as an expense in the Income Statement over the
lease term on a straight-line basis.
Property, plant and equipment are derecognised from the
Statement of Financial Position at the time of disposal or re-
tirement from use and, consequently, when no future econom-
ic benefits are expected to derive from their sale or use.
Gains and losses resulting from the sale or disposal of prop-
erty, plant and equipment are determined as the difference
between the recoverable amount and the carrying amount
of the asset.
146
Impairment of assets
Property, plant and equipment
and intangible assets
Whenever there are specific indicators of impairment, and at
least annually for intangible assets with indefinite useful life,
including goodwill, property, plant and equipment and intan-
gible assets are tested for impairment.
The test consists of an estimate of the recoverable amount of
the asset and a comparison with its carrying amount.
The recoverable amount of an asset is its fair value less costs
to sell or its value in use, whichever is the higher, where the
latter is the present value of the expected future cash flows
arising from the use of the asset and those deriving from its
disposal at the end of its useful life, excluding income taxes
and applying a discount rate, net of taxes, reflecting current
market assessments of the time value of the money and risks
specific to the asset. There is no need to estimate both amounts
because it is sufficient to verify that one of the two amounts is
higher than the carrying amount to establish that no impair-
ment has occurred.
If the recoverable amount is lower than the asset carrying
amount, the latter is reduced to the recoverable amount. This
reduction constitutes an impairment loss, which is recognised
in the Income Statement.
In order to assess impairment, assets are allocated to the low-
est level at which independent cash flows are separately iden-
tifiable (cash generating units).
Specifically, goodwill must be allocated to the cash generat-
ing unit or group of cash generating units, complying with the
maximum level of aggregation allowed, which must never be
greater than the operating segment.
If there is evidence that an impairment loss, which had been
recognised in previous years and relating to tangible or intan-
gible assets other than goodwill, may no longer apply or can
be reduced, the recoverable amount of the asset is estimated
again, and if it is higher than the net book value, the net book
value is increased up to the recoverable amount. The rein-
statement of value may not exceed the carrying amount that
would have been recognised (net of impairment and deprecia-
tion or amortisation) had no impairment loss been recognised
in previous years.
The reversal of an impairment loss other than goodwill is rec-
ognised in the Income Statement.
An impairment loss recognised for goodwill may not be re-
versed in subsequent financial years.
Any loss due to a reduction in value recognised in interim
(half-yearly) Financial Statements for goodwill may not be re-
instated in the Income Statement for the subsequent annual
financial year.
Investments in associates and joint ventures
After applying the net equity method, if there are indicators
of impairment, the value of investments in associates and joint
ventures accounted for must be compared with the recovera-
ble amount (known as the impairment test). The recoverable
amount corresponds to fair value less costs to sell or the value
in use, whichever is the higher.
For the purposes of impairment testing, the fair value of an
investment in an associate or joint venture with shares listed
on an active market is always equivalent to its market value,
irrespective of the percentage of ownership. In the case of in-
vestments in unlisted companies, the fair value is determined
using estimates based on the best information available.
To determine the value in use of an associate or joint ven-
ture an estimate of own quota of the current value of future
cash flows it is thought will be generated by the associate or
joint-venture, including financial flows deriving from the op-
erating assets of the associate or joint-venture and the consid-
eration deriving from any final assignment of the investment
(known as the discounted cash flow – asset side criterion).
If there is evidence that an impairment loss recognised in pre-
vious years may no longer apply or can be reduced, the recov-
erable amount of the investment is estimated anew, and if it is
higher than the amount of the investment, the latter amount is
increased up to the recoverable amount.
Reinstatement of value may not exceed the amount of the in-
vestment that would have been recognised (net of impairment)
had no impairment loss been recognised in previous years.
The reinstatement of the value of investments in associates
and joint ventures is recognised in the Income Statement.
Financial assets available for sale
Financial assets available for sale include investments in enti-
ties other than subsidiaries, associates and joint ventures and
other financial assets not held for trading. They are recognised
in the Statement of Financial Position as “Other financial assets.”
They are measured at fair value, if this can be reliably de-
termined.
Gains and losses deriving from changes in fair value are rec-
ognised in a specific equity reserve.
When a reduction in fair value has been recognised directly
in equity and there is objective evidence that the asset was
impaired, losses recognised up to that time in equity are
transferred to the Income Statement. A prolonged (meaning
more than 12 months) or significant (meaning more than 50%
for instruments issued by entities operating in banking sector
and more than one-third for instruments issued by entities
operating in other sectors) reduction in the fair value of equi-
ty instruments and as compared with their cost is considered
objective evidence of impairment.
This threshold revision was drawn from an update of a his-
Consolidated Financial Statements / 2015 ANNUAL REPORT
torical analysis carried out in 2008 and reflects only an ad-
justment to new conditions. The significant increase in the
volatility of the financial markets in fact has, and particularly
in the banking sector, led to the presence of exceptional cir-
cumstances for which it was deemed appropriate to revise the
threshold value for the definition of lasting impairment losses
with reference to the securities belonging to said sector. On
the other hand, there has been no change in the criterion for
the definition of the duration threshold of “prolonged” impair-
ment losses (12 months). In the event of sales, gains and losses
recognised up to that time in equity are transferred to the
Income Statement.
Any impairment losses of a financial asset available for sale
recognised in the Income Statement may be reinstated through
the Income Statement, with the exception of those recognised
for share securities classified as available for sale, which may
not be reinstated with effects upon the Income Statement.
Financial assets available for sale, whether securities for debt
or equity, for which fair value is not available, are accounted
for at cost, less any impairment losses based on the best mar-
ket information available at the date of Financial Statements.
Purchases and sales of financial assets available for sale are
accounted for at the settlement date.
Inventories
147
Inventories are valued at cost (determined under the FIFO
method) or estimated realisable value whichever is the lower.
The measurement of inventories includes direct costs of mate-
rials and labour and indirect costs. Provisions are calculated
for obsolete and slow-moving inventories, taking into account
their expected future use and estimated realisable value. The
realisable value is the estimated selling price, net of all costs
estimated to complete the asset and selling and distribution
costs that will be incurred.
Cost includes incremental expenses and borrowing costs qual-
ifying for capitalisation, similarly to what has been described
for property, plant and equipment.
Receivables
Receivables are initially recognised at their fair value, which
normally corresponds to the consideration agreed or to the
present value of the amount that will be collected. They are
subsequently measured at amortised cost, less provisions for
impairment losses. Amortised cost is calculated by using the
effective interest rate method, which is equivalent to the dis-
count rate that, when applied to future cash flows, renders the
present value of such cash flows equal to the initial fair value.
Impairment losses on receivables are calculated according to
counterparty default risk, which is determined by consider-
ing available information on the solvency of the counterparty
Consolidated Financial Statements / 2015 ANNUAL REPORT
and historical data. The carrying amount of receivables is re-
duced indirectly by accruing provisions. Individual material
positions that are objectively found to be partially or entirely
uncollectable are impaired individually.
The amount of the impairment loss reflects the estimate of fu-
ture recoverable flows and the applicable date of collection,
recovery costs and expenses, and the fair value of guarantees,
if any. The positions that are not written down individually
are included in groups with similar characteristics in terms
of credit risk, and are impaired as a group on an increasing
percentage basis as the period during which they are over-
due increases. The Group impairment procedure also applies
to receivables not yet due. The impairment percentages are
determined on the basis of historical experience and statis-
tical data. When the conditions that led to impairment of the
receivables no longer apply, impairment losses recognised in
previous periods are reversed in the Income Statement up to
the amortised cost that would have been recognised had no
impairment loss been recognised. Receivables in currencies
other than the functional currency of the individual compa-
nies are adjusted to year-end exchange rates, with a balancing
entry in the Income Statement. Receivables are derecognised
when the right to receive cash flows is extinguished, when
substantially all the risks and rewards connected with hold-
ing the receivable have been transferred, or when the receiv-
able is considered definitely uncollectable after all necessary
credit recovery procedures have been completed. When the
receivable is derecognised, the relative provision is also re-
versed if the receivable had previously been impaired.
Payables
Payables are initially recognised at their fair value, which
normally corresponds to the consideration agreed or to the
present value of the amount that will be paid. They are sub-
sequently measured at amortised cost. Amortised cost is cal-
culated by using the effective interest rate method, which is
equivalent to the discount rate that, when applied to future
cash flows, renders the present value of such cash flows equal
to the initial fair value. Payables in currencies other than the
functional currency of the individual companies are adjusted
to the year-end exchange rates, with a balancing entry in the
Income Statement. Payables are derecognised from the Finan-
cial Statements when the specific contractual obligation has
been extinguished.
148
Financial assets measured at fair value
through the Income Statement
This category includes financial instruments mainly purchased
to be sold in the short term and classified under current assets
as “Securities held for trading”, financial assets that are
initially recognised at fair value through Income Statement,
classified as “Other financial assets,” and derivatives (except
those designated as effective hedging instruments), classified
as “Derivative financial instruments.”
They are measured at fair value with a balancing entry in the
Income Statement. Transaction costs are expensed in the In-
come Statement.
Purchases and sales of these financial assets are accounted for
at the settlement date.
Cash and cash equivalents
Cash and cash equivalents include bank deposits, postal de-
posits, cash and cash equivalents on hand, and other forms of
short-term investment whose original maturity is three months
or less. Current account overdrafts are recognised as current
liabilities under financial payables. The amounts included in
cash and cash equivalents are recognised at their fair value and
any changes are recognised in the Income Statement.
Provisions for liabilities and charges
Provisions for liabilities and charges include accruals for cur-
rent obligations (legal or constructive) deriving from a past
event, to meet which an outflow of resources will probably be
necessary and whose amount can be reliably estimated.
Changes in estimates are recognised in the Income Statement
for the financial year in which the change occurs.
If the effect of discounting is significant, provisions are pre-
sented at their present value.
Employee benefit obligations
Employee benefits paid after termination of the employment
relationship under defined benefit plans and other long-term
benefits are subject to actuarial measurements. The liability
recognised in the Financial Statements is the present value of
the Group’s obligation, net of the fair value of any plan assets.
For defined benefit plans, actuarial gains and losses deriving
from adjustments based on past experience and changes in
actuarial assumptions are fully recognised in equity for the
financial year in which they occur.
For other long-term benefits, actuarial gains and losses are
recognised immediately in the Income Statement.
The provision for employee leaving indemnities (TFR) of Ital-
Consolidated Financial Statements / 2015 ANNUAL REPORT
ian companies with at least 50 employees is considered a de-
fined benefit plan only for the portion accrued prior to Janu-
ary 1, 2007 (and not yet paid as at the date of the Financial
Statements), whereas subsequent to that date, it is considered
a defined contribution plan.
The net interest calculated on net liabilities is classified under
financial expenses.
Costs relating to defined contribution plans are recognised in
the Income Statement when incurred.
accumulated in equity remain suspended in equity until the
hedged item displays its effects on the Income Statement. Sub-
sequently they are reclassified in the Income Statement over
the financial years in which the asset acquired or liability as-
sumed impacts upon the Income Statement.
When the hedged item is no longer expected to have any
impact on the Income Statement, the fair value adjustments
accumulated in equity are immediately recognised in the In-
come Statement.
Derivative financial instruments
designated as hedging instruments
In accordance with IAS 39, hedging financial instruments are
accounted for in the manner set forth for hedge accounting
only when:
formal designation and documentation of the hedging re-
lationship between the hedging derivative and the hedged
item exist at the beginning of the hedge;
it is expected that the hedge will be highly effective;
its effectiveness can be measured reliably;
this hedge is highly effective during the various financial
years for which it is designated.
These derivative instruments are recognised at fair value.
The following accounting treatments are applied based on the
type of hedge:
Fair value hedge – if a derivative financial instrument is
designated as a hedge against exposure to changes in the
fair value of an asset or liability attributable to a specific
risk, the gain or loss resulting from subsequent changes
in fair value of the hedging instrument is recognised in
the Income Statement. For the portion attributable to the
hedged risk, the gain or loss on the hedged item modifies
the carrying value of that item (basis adjustment), and it
too is recognised in the Income Statement;
Cash flow hedge - if a derivative instrument is designated as
a hedge against exposure to the variable cash flow of an as-
set or liability recognised in the Statement of Financial Po-
sition or a highly probable future transaction, the effective
portion of the change in fair value of the hedging instru-
ment is recognised directly in equity, while the ineffective
portion is immediately recognised in the Income Statement.
Amounts recognised directly in equity are reclassified in
the Income Statement in the financial year when the hedged
item produces an effect on the Income Statement.
When a hedging instrument expires or is assigned, terminat-
ed, exercised, or no longer meets the conditions to be designat-
ed as a hedge, or if designation is voluntarily revoked, hedge
accounting is discontinued and the fair value adjustments
For derivative instruments that do not meet the requirements
established by IAS 39 for adoption of hedge accounting, please
see the section “Financial assets at fair value through Income
Statement”.
Purchases and sales of these derivative financial instruments
are accounted for at the settlement date.
Determination of the fair value
of financial instruments
The fair value of financial instruments listed on an active
market is based on market prices at the date of Financial
Statements. The market prices used for financial assets are the
bid prices, whereas for financial liabilities they are the ask-
ing price. The fair value of instruments that are not listed on
an active market is determined by using measurement tech-
niques with a variety of methods and assumptions that are
based on market conditions at the date of financial statements.
The fair value of interest rate swaps is calculated as the pres-
ent value of expected future cash flows.
The fair value of forward exchange contracts is determined
by using the forward rate at the date of financial statements.
Income taxes
Current taxes are determined on the basis of a realistic fore-
cast made of the charges payable under the current tax regu-
lations of the country.
Deferred taxes are calculated according to the temporary
differences applying between the asset and the liability
amounts in the Financial Statements and their tax basis (full
liability method), and are classified under non-current assets
and liabilities.
Deferred tax assets on tax losses which have been carried-for-
ward, as well as on temporary differences, are only recognised
when there is a likelihood of future recovery over the time
period covered by the forecasts of the business plan.
Current and deferred tax assets and liabilities are offset when
the income taxes are levied by the same tax authority and
when there is a legally enforceable right to offset. Deferred
tax assets and liabilities are determined according to enacted
tax rates that are expected to be applicable to taxable income
149
Consolidated Financial Statements / 2015 ANNUAL REPORT
in the years when those temporary differences are expected
to be recovered or settled, with reference to the jurisdictions
where the Group operates.
The deferred tax liabilities related to investments in subsid-
iaries, associates and joint ventures are not recognised if the
participating entity can control the rollover of temporary differ-
ences and they are unlikely to arise in the foreseeable future.
Deferred taxes are not discounted.
Deferred tax assets and liabilities are credited or debited to
equity if they refer to items that have been credited or debited
directly in equity during the financial year or during previous
financial years.
Equity
Treasury shares
Treasury shares are recognised as a reduction in equity.
If they are sold, reissued or cancelled, the resulting earnings
or losses are recognised in equity.
Costs of equity transactions
Costs that are directly attributable to equity transactions of
the parent are recognised as a reduction in equity.
150
Recognition of Revenue
Revenue is measured at the fair value of the consideration re-
ceived for the sale of products or provision of services.
Sales of products
Revenue from sales of products is recognised when all the fol-
lowing conditions are met:
the material risks and rewards of ownership of the goods
have been transferred to the buyer;
effective control over the goods and the normal continuing
level of activities associated with ownership have ceased;
the amount of revenue have been reliably determined;
it is likely that the economic benefits deriving from the sale
will be enjoyed by the company;
costs incurred or to be incurred have been reliably de-
termined.
If the nature and extent of involvement of the seller are such
that the risks and rewards of ownership are not in fact trans-
ferred, then the recognition date of the revenues is deferred
until the date on which this transfer can be considered to
have taken place.
Provision of services
Revenue from provision of services is recognised only when
the results of the transaction can be measured reliably, by ref-
erence to the state of completion of the transaction at the date
of financial statements.
The results of a transaction can be measured reliably only
when all the following conditions are met:
the amount of revenue can be reliably determined;
it is likely that the company will enjoy the economic bene-
fits of the transaction;
the stage of completion of the transaction at the date of
Financial Statements can be reliably measured;
the costs incurred for the transaction and the costs to be
incurred to complete it can be reliably determined.
Interest income
Interest income is recognised on a time proportion basis that
considers the effective return on the asset.
Royalties
Royalties are recognised on an accrual basis, according to the
substance of the relevant agreement.
Dividends
Dividend income is recognised when the right to receive pay-
ment arises, which normally corresponds to the resolution ap-
proved by the General Meeting for the distribution of dividends.
Income (loss) per share
Income (loss) per share is calculated by dividing Group income
(loss) by the weighted average number of outstanding shares
during the financial year. To calculate diluted earnings per
share, the weighted average number of outstanding shares is
adjusted by assuming the conversion of all shares having a
potentially dilutive effect.
Operational sectors
The operational sector is a part of the Group that engaging
in business activities from which it may earn revenues and
incur expenses, and whose operating results are regularly re-
viewed by top management with a view to making decisions
about resources to be allocated to the segment and assessing
its performance, and for which discrete financial statement in-
formation is available.
Accounting standards
for hyperinflationary countries
Group companies operating in high-inflation countries recal-
culate the amounts of their non-monetary assets and liabilities
in their individual Financial Statements to eliminate the dis-
torting effects caused by the loss of purchasing power of the
currency. The inflation rate used to implement the inflation
accounting corresponds to the consumer price index.
Companies operating in countries where the cumulative in-
flation rate over a three-year period approximates or exceeds
100% adopt inflation accounting and discontinue it in the event
that the cumulative inflation rate over a three-year period
falls below 100%.
Gains or losses on the net monetary position are recognised in
the Income Statement.
Non-current assets held for sale
and disposal groups
Non-current assets and disposal groups are classified as held
for sale if their carrying value is recovered mainly through
sale rather than through continuous use. This occurs if the
non-current asset or disposal group are available for sale un-
der current conditions and the sale is highly probable, or if a
binding program for sale has already begun, activities to find a
buyer have already commenced and it is expected that the sale
will be completed within one year after the classification date.
On the consolidated Statement of Financial Position, the
non-current assets held for sale and the current and non-cur-
rent assets/liabilities of the disposal group are presented as a
separate item from other assets and liabilities, and their totals
are reflected in current assets and liabilities respectively.
Non-current assets classified as held for sale and disposal
groups are measured at the lower between carrying amount
and fair value less costs to sell.
Property, plant and equipment and intangible assets classified
as held for sale are not depreciated or amortised.
Discontinued operations
A discontinued operation is a component that has been dis-
posed of or classified as held for sale and that represents an
important business unit or geographical area of activity, and
pertains to a single, coordinated disposal programme.
On the Consolidated Income Statement for the period, the Net
income (loss) of the discontinued operations, as well as the
gain or loss resulting from fair value measurement net of the
costs of sale or from disposal of the assets or disposal groups
constituting the discontinued operation, are combined into a
single item at the end of the Income Statement separately from
the income (loss) from continuing operations.
Cash flows for discontinued operations are shown separately
in the statement of cash flows.
The foregoing information is also presented for the compara-
tive period.
Consolidated Financial Statements / 2015 ANNUAL REPORT
3.2 ACCouNtiNg
stANDArDs
AND iNterpretAtioNs
eNDorseD AND iN ForCe
From JANuArY 1, 2015
In accordance with IAS 8 “Accounting Policies, changes in ac-
counting estimates and errors” the IFRS effective from Janu-
ary 1, 2015 are indicated below:
IFRIC 21 – Levies.
This interpretation clarifies the accounting of deferred tax
and government taxes other than income taxes, in par-
ticular it defines the time when an entity can recognize
these liabilities. Application of this interpretation will not
have any impact on Financial Statements.
“Improvements” to IFRS 2011-2013 (issued by the IASB in
December 2014).
The IASB issued a series of amendments to four standards
in force in particular regarding the following aspects:
meaning of “IFRS in force” in IFRS 1 First adoption of
IFRS;
the non-applicability to joint arrangements of IFRS 3
Business Combinations;
the portfolio exception for the determination of fair val-
ue in IFRS 13 Fair Value Measurement;
the clarification of the interrelationships between IFRS
3 and IAS 40 to classify an investment as a property
investment or property for use by the owner in IAS 40
Property Investments.
Application of these amendments will not have any impact on
Financial Statements.
3.3 iNterNAtioNAL
ACCouNtiNg
stANDArDs AND/or
iNterpretAtioNs tHAt
HAve BeeN issueD
But Not Yet iN ForCe
AND/or eNDorseD
Pursuant to IAS 8 - “Accounting standards, changes in ac-
counting estimates and errors”, the new standards and inter-
pretations that have been issued but have not yet come into
force or have not yet been endorsed by the European Union
at December 31, 2015, and which are therefore not applicable,
are listed below.
151
Consolidated Financial Statements / 2015 ANNUAL REPORT
None of these standards and interpretations has been adopted
in advance by the Group.
Amendments to IAS 19 - Employee benefits - defined ben-
efit plans: contributions from employees or third parties
These amendments apply to the contributions that employ-
ees or third parties pay to defined-benefit pension funds to
simplify accounting in certain specific circumstances.
These amendments have been endorsed by the European
Union came into force on February 1st, 2015 and have been
applicable since January 1st, 2016. Future application of
these amendments will not have any impact.
“Improvements” to IFRS 2010-2012 cycle (issued by the
IASB in December 2013).
The IASB issued a series of amendments to 7 standards
in force, in particular regarding: the definition of vesting
conditions in IFRS 2 – Share-based payments; recognition
of contingent consideration in a business combination in
IFRS 3 – Business Combinations; aggregation of operating
segments and the reconciliation of the total assets of the
reporting segments as compared with the total assets of
the entity in IFRS 8 – Operational Sectors; proportional re-
statement of accumulated depreciation in IAS 16 – Property,
plant and equipment and IAS 38 – Intangible assets; identi-
fication and certain disclosures related to key managers in
IAS 24 – Disclosures on transactions with related parties.
These amendments, which have been endorsed by the Eu-
ropean Union, came into force on February 1, 2015 and
have been applicable since January 1, 2016. The amend-
ments made to IFRS 2, IAS 16 and IAS 38 are not applica-
ble to the Group. As concerns the amendments to the other
IAS / IFRS, the future application of these amendments
will not have a significant impact on Group Financial
Statements or disclosures.
Amendments to IFRS 11 – Joint Arrangements – accounting
for the acquisition of investments in joint operations
The amendments to IFRS 11 specify the accounting treat-
ment to be applied in case of acquisition of investments
in joint operations that constitute a business as defined
by IFRS 3.
Said amendments have been endorsed by the European
Union and are applicable from January 1, 2016. Impacts on
Financial Statements deriving from the future application
of said amendments are not foreseen.
Amendments to IAS 16 and IAS 38 – Explanation of the
depreciation methods deemed acceptable
With these amendments, the IASB has sought to clarify that
the use of methods based on revenues for the calculation of
depreciation is not correct because the revenues generated
by an asset reflect factors other than the consumption of
the future economic benefits embodied in the asset itself.
This consumption must represent the base principle for the
calculation of depreciation.
Said amendments, which have been endorsed by the Eu-
ropean Union, apply from January 1, 2016. Future applica-
tion of these amendments will not have any impact on the
Group’s Financial Statements.
Amendments to IAS 27 – application of the equity method
in the separate Financial Statements
Following said amendments, the use of the equity method
will be allowed as an option in accounting of investments
in subsidiaries, associates and joint ventures also in the
separate Financial Statements.
Said amendments, which have been endorsed by the Euro-
pean Union, apply from January 1, 2016. The impacts deriv-
ing from the adoption of the equity method in the separate
Financial Statements for the evaluation of the investment
in subsidiary, associated companies and joint ventures are
in the course of being analysed.
“Improvements” to IFRS 2012-2014 cycle (issued by the
IASB in September 2014)
The IASB has issued a series of amendments to 4 stand-
ards that are currently in force, relative to the following
issues: amendment to the method of divestiture in IFRS
5 - Non-current assets held for sale and discontinued op-
erations; service contracts and applicability of the amend-
ments to IFRS 7 to interim Financial Statements in IFRS 7 -
Financial Instruments: additional disclosures; discount rate
to be applied in IAS 19 - Employee Benefits; disclosure of
information presented “in other parts of the interim Finan-
cial Statements” in IAS 34 Interim Financial Statements.
Said amendments, which have been endorsed by the Euro-
pean Union and apply from January 1, 2016. Future applica-
tion of these amendments will not have any impact on the
Group’s Financial Statements.
Amendments to IAS 1 – disclosure initiative
Amendments to IAS 1, related to the disclosure initiative
project, aim to clarify and improve the requirements of
IAS 1 itself.
Said amendments, which have been endorsed by the Euro-
pean Union, apply from January 1, 2016. The impact on dis-
closures in consolidated Financial Statements is currently
being analysed.
Amendments to IFRS 10 and IAS 28 - sale or transfer of
assets from an investing company to an associate or joint
venture
The IASB issued said amendments to eliminate an incon-
152
Consolidated Financial Statements / 2015 ANNUAL REPORT
uary 1st, 2018, has not yet been endorsed by the European
Union and allows a choice between total or partial retro-
spective application.
The impacts of the future application of the principle are
currently being analysed.
IFRS 16 – Leases
The new leasing standard, which will replace the current
IAS 17 stipulates a consolidated accounting model for the
lessor according to which all leases must be stated in the
asset and liability statement. The concept of operating leas-
ing is no longer included.
The lessor must state the leased property under “buildings,
facilities and equipment” in the assets and liability state-
ment and, at the same time, include the financial liabilities
for the current value of future payments.
The only exceptions allowed are for short-term leasing (less
than or equal to 12 months) and “small asset” leasing (e.g.
office furniture, PCs) for which accounting is similar to that
currently adopted for operative leases. If a lease contract
includes a service, this does not need to be capitalised.
This principle, which was expected to come into force as
of January 1st, 2019, has not yet been endorsed by the Eu-
ropean Union. Quantification of the impacts of the future
application of the principle is currently being determined.
Amendments to IAS 7 – (disclosure initiative)
The goal of these modifications is to improve information
regarding the net flow generated/absorbed by investment
activity and liquidity of the item, especially given restric-
tions applying to the use of cash and cash equivalents and
similar means within the cash flow statement.
This principle, which is expected to come into force as of
January 1, 2017, has not yet been endorsed by the European
Union. The impact of the consolidated Financial Statements
on the disclosures is currently being analysed.
Amendments to IAS 12 – Acknowledgement of deferred tax
assets on unrealised losses.
These amendments clarify how deferred tax assets in re-
spect of debt instruments valued at fair value are to be ac-
counted for.
This principle, whose coming into force is foreseen for Jan-
uary 1, 2017 has not yet been approved by the European
Union. These amendments do not apply to the Group.
153
sistency found between IFRS 10 and IAS 28 stating that,
if the assets sold/transferred constitute a business as de-
fined by IFRS 3, the possible gain or loss must be recog-
nised fully and any gain or loss shall be recognised only
for the related portion.
These amendments, whose coming into force has been put
back indefinitely, have not yet been endorsed by the Euro-
pean Union. Future application of these amendments will
not have any impact on the Group’s Financial Statements as
the current accounting treatment followed by the Group is
already compliant.
Amendments to IFRS 10, IFRS 12 and IAS 28 – investments
in investment entities – application of the exception to con-
solidation
These amendments introduce some clarifications about
the requirements to be met in the accounting treatment
required for investment entities.
These amendments, which are expected to come into force
with effect from January 1, 2016, have not yet been en-
dorsed by the European Union and have no impact on the
Group, as none of the entities belonging to the group qual-
ifies as investment entity within the meaning of IFRS 10.
IFRS 9 – Financial Instruments
IFRS 9, which will supplant IAS 39 – Financial Instru-
ments: Detection and measurement, is divided into 3 parts:
Classification and measurement of financial instru-
ments according to the basis of the entity’s business
model and the features of the cash flows generated by
the financial instruments themselves.
Impairment of financial instruments based on a new
and unique impairment model based on the recogni-
tion of expected losses of an entity. This model does not
apply to equity instruments and provides operational
simplifications for trade receivables.
Hedge accounting based on a more flexible approach
than that set forth in IAS 39.
This principle, which was expected to come into force
as of January 1st, 2018, has not yet been endorsed by
the European Union. The impacts of the future applica-
tion of the principle are currently being analysed. The
amendments relating to financial liabilities are not ap-
plicable to the Group.
IFRS 15 – Sales from contracts with customers
The new model of revenue recognition of IFRS 15 is based
on identification of the various contractual obligations
(“performance obligations”) contained within each individ-
ual sales contract and on revenue recognition based on the
fulfilment of individual contractual obligations.
This principle, which is expected to come into force on Jan-
Consolidated Financial Statements / 2015 ANNUAL REPORT
4. FinanciaL risk
ManaGeMent
PoLicY
The financial risks the Group is exposed to financial risks
are principally associated with foreign exchange rates, fluc-
tuations in interest rates, the price of financial assets held as
investments, the ability of customers to meet their obligations
to the Group (credit risk), and raising funds on the market
(liquidity risk).
Financial risk management is an integral part of Group busi-
ness management and is handled directly by the headquarters
in accordance with guidelines issued by the Finance Manage-
ment on the basis of general risk management strategies de-
fined by the Managerial Risk Committee.
4.1 tYpes oF FiNANCiAL
risks
Exchange rate risk
154
The widespread geographical distribution of Group produc-
tion and trade activities entails exposure to transaction and
translation exchange rate risk.
Transactional exchange rate risk
This risk is generated by the trade and financial trans-
actions of the individual companies that are executed in
currencies other than the functional currency. Exchange
rate fluctuations between the time when the trade or finan-
cial relationship is established and when the transaction
is completed (collection or payment) may generate foreign
exchange gains or losses.
The Group aims to minimise the impact of transaction ex-
change rate risk related to volatility. To achieve this objec-
tive, group procedures make Operating Units responsible
for collecting complete information about the assets and li-
abilities that are subject to transaction exchange rate risk.
This risk is hedged with forward contracts made with the
Group Treasury.
The items subject to exchange rate risk are mainly repre-
sented by receivables and payables denominated in foreign
currency.
Group Treasury is responsible for hedging the net posi-
tion for each currency and, in accordance with established
guidelines and restrictions, closes all risk positions by
trading derivative hedging contracts in the market, which
typically take the form of forward contracts.
The Group has not seen fit to opt for hedge accounting
pursuant to IAS 39, insofar as the representation of the
economic and financial effects of the hedging strategy on
foreign exchange rate risk is still substantially guaranteed
even without adopting such option.
Furthermore, as part of the annual and three-year plan-
ning process, the Group makes exchange rate forecasts by
using the best information available in the market. The
fluctuation in exchange rates between the time when the
forecast is made and the time when the trade or financial
transaction occur represents the exchange rate risk on fu-
ture transactions.
In accordance with established policy, the Group monitors
the opportunity to hedge future transactions, with each
hedge being authorised by the Finance Department on a
case-by-case basis. Hedge accounting in accordance with
IAS 39 is used when the conditions are met.
Currency translation risk
The Group owns controlling interests in companies that
prepare their Financial Statements in currencies other
than the Euro, which is used to prepare the consolidated
Financial Statements. This exposes the Group to currency
translation risk, which is generated by the conversion into
Euro of the assets and liabilities of these subsidiaries.
The principal exposures to currency translation risk are
constantly monitored; it is not currently deemed necessary
to adopt specific policies to hedge this exposure.
Approximately 23% of the total consolidated net equity
at December 31, 2015 was expressed in Euros (compared
to approximately 17% as at December 31, 2014). The most
significant currencies other than Euro for the Group are
the Brazilian Real (15.6%; 17% as at December 31, 2014), the
Turkish Lira (5.6%; 7% as at December 31, 2014), the Chi-
nese Renminbi (14.7%; 12% as at December 31, 2014), the
Romanian Leu (12.8%; 13% as at December 31, 2014), the
Egyptian Lira (3.8%; 3% as at December 31, 2014), the Brit-
ish Pound Sterling (6.8%; 4% as at December 31, 2014), the
Argentine Peso (1.6%; 2% as at December 31, 2014), the US
Dollar (3.2%; 5% as at December 31, 2014) and the Mexican
Peso (6.2%; 6% as at December 31, 2014).The Group is no
longer exposed to any exchange rate translation risks asso-
ciated with the Venezuelan Bolivar due to deconsolidation
of the Venezuelan subsidiary Pirelli de Venezuela C.A..
Consolidated Financial Statements / 2015 ANNUAL REPORT
The table below shows the effects on consolidated equity deriving from a hypothetical appreciation/depreciation of the aforesaid
currencies against the Euro, with all other conditions being equal:
(in thousands of euro)
brazilian Real
Turkish Lira
Chinese Renminbi
Romanian Leu
Egyptian Pound
british Pound
Argentinian Pesos
us dollar
Mexican Pesos
appreciation oF 10%
depreciation oF 10%
12/31/2015
12/31/2014
12/31/2015
12/31/2014
40,700
14,667
38,311
33,267
9,889
17,722
4,267
8,367
16,156
46,756
20,311
34,333
35,444
9,811
12,344
5,922
14,600
17,156
196,677
(33,300)
(12,000)
(31,345)
(27,218)
(8,091)
(14,500)
(3,491)
(6,845)
(13,218)
(150,008)
(38,255)
(16,618)
(28,091)
(29,000)
(8,027)
(10,100)
(4,845)
(11,945)
(14,036)
(160,917)
Total on consolidated equity
183,346
Interest rate risk
Interest rate risk is the risk that the fair value or the future cash flows of a financial asset or liability will change due to fluctuations
in market interest rates.
Group policy is to attempt to maintain the following ratio between fixed rate and variable rate exposures: 70% fixed and 30% variable.
In order to maintain this trend ratio, the group enters into derivative contracts, typically interest rate swaps, to hedge for which
hedge accounting is activated when the conditions set out in IAS 39 are fulfilled.
155
The following is an outline of the effects on net income and shareholders’ equity directly arising from an increase or decrease of
0.50% in the level of interest rates for all currencies to which the Group is exposed, with all other conditions being equal:
(in thousands of euro)
Impact on net income (loss)
Total
direct impact on equity
Total
+0.50%
-0.50%
12/31/2015
12/31/2014
12/31/2015
12/31/2014
(2,240)
(2,240)
-
-
(1,790)
(1,790)
2,034
2,034
2,246
2,246
-
-
1,790
1,790
(3,457)
(3,457)
Price risk associated with financial assets
The exposure of the Group to price risk is limited to the volatility of financial assets such as listed and unlisted equities and bonds,
for approximately 4.2% of the total consolidated assets at December 31, 2015 (3.2% at December 31, 2014); such assets are classified
as financial assets available for sale and securities held for trading.
Derivatives hedges are not set up to cover the volatility of these assets.
Financial assets available for sale consist of listed securities amounted to euro 154,355 thousand (euro 128,404 thousand at De-
cember 31, 2014) and those represented by securities indirectly associated with listed shares (Fin. Priv. S.r.l. and Emittenti Titoli
S.p.A.) amounted to euro 23,576 thousand (euro 18,071 thousand at December 31, 2014); these financial assets represent 58.7% of total
financial assets subject to price risk (60.4% at December 31, 2014); a +5% change in the above listed securities, other things being
Liquidity risk
Liquidity risk represents the risk that financial resources
available are insufficient to meet the financial and trade obli-
gations pursuant to contractual terms and conditions.
The principal instruments used by the Group to manage li-
quidity risk comprise its annual and three-year financial and
cash-pooling plans. These allow complete and fair detection and
measurement of incoming and outgoing cash flows. The differ-
ences between plans and actual data are analysed constantly.
The Group has implemented a centralised cash pooling sys-
tem for the management of collection and payment flows in
compliance with various local currency and tax laws. Bank-
ing relationships are negotiated and managed centrally, in
order to ensure coverage of short and medium-term financial
needs at the lowest possible cost. Procurement of medium and
long-term resources on the capital market is also streamlined
through centralised management.
Prudent management of the risk described above requires
maintaining an adequate level of cash or cash equivalents
and/or highly liquid short-term financial instruments, and
the availability of funds through an adequate amount of com-
mitted credit facilities and/or recourse to the capital market,
while diversifying the products and their maturities to seize
the best available opportunities.
At December 31, 2015 the Group had, aside from cash and secu-
rities held for trading of euro 160,893 thousand (euro 1,228,073
thousand at December 31, 2014), unused committed credit fa-
cilities of euro 820,480 thousand (euro 1,125,000 thousand at
December 31, 2014), maturing in the first quarter of 2020.
Consolidated Financial Statements / 2015 ANNUAL REPORT
equal, would result in a positive change of euro 7,716 thousand
of Group shareholders equity (positive euro 6,414 thousand at
December 31, 2014), while a -5% change of these listed secu-
rities, other things being equal, would result in a decrease of
euro 6,998 thousand in Group equity and a decrease of euro
718 thousand in net income/loss for the Group (at December 31,
2014 a decrease of euro 5,333 thousand in consolidated share-
holders’ equity and a decrease of euro 1,081 thousand in Group
net income/loss).
Credit risk
Credit risk represents Group exposure to contingent losses re-
sulting from default by either trade or financial counterparties.
The Group is exposed to credit risk as part of its operating
activities and financing activities.
In order to limit trade counterparty default risk, the Group has
implemented procedures to evaluate its customers’ potential
and financial solidity, monitor expected incoming cash flows
and take credit recovery action if necessary.
The aim of these procedures is to define customer credit limits.
Further sales are suspended when those limits are exceeded.
In certain cases, customers are asked to provide guarantees;
these mainly consist of bank sureties issued by parties with
the highest credit standing, or personal guarantees. Less fre-
quently, mortgage guarantees may be requested.
Another instrument used by the Group to manage the risk as-
sociated with trade receivables is the stipulation of insurance
policies that aim to cover the risk of non-payment through the
accurate selection of covered customers in collaboration with
the insurance company, which undertakes to indemnify the
Group in the event of customer insolvency.
The Group operates only with highly rated financial counter-
parties for the management of its temporary cash surpluses or
trading in derivative instruments, and constantly monitors its
exposure to individual counterparties. The Group does not hold
public debt instruments of any European country, and con-
stantly monitors its net credit exposure to the banking system.
The Group does not have significant concentrations of credit
risk.
The disclosure related to the maximum credit exposure, which
is represented by the gross receivables, is included in notes 14
and 15 respectively regarding “Trade receivables” and ”Other
receivables”.
156
Consolidated Financial Statements / 2015 ANNUAL REPORT
The maturities of financial liabilities at December 31, 2015 may be broken down as follows:
(in thousands of euro)
Trade payables
Other payables
Financial instruments
borrowings from banks
and other financial institutions
within 1
year
1 , 313 ,131
404,172
51,979
1 to 2 years
2 to 5 years
over 5
years
total
-
27,843
-
-
42,883
-
-
27,905
-
1 , 313 ,131
502,803
51,979
1,138,592
113,220
1,066,177
96,291
2,414,280
2,907,874
141,063
1,109,060
124,196
4,282,193
The maturities of financial liabilities at December 31, 2014 may be broken down as follows:
(in thousands of euro)
Trade payables
Other payables
Financial instruments
borrowings from banks
and other financial institutions
within 1
year
1,394,312
443,477
42,835
1 to 2 years
2 to 5 years
over 5
years
total
-
3,938
-
-
37,661
-
-
1,394,312
33,093
-
518,169
42,835
530,890
827,414
863,048
91,264
2,312,616
2,411,514
831,352
900,709
124,357
4,267,932
157
The use of the two syndicated lines (granted respectively to Pirelli & C. S.p.A. and Pirelli International Plc) of euro 379,520 thousand
at December 31, 2015 has been classified under non-current borrowings from banks. Please see note 23.
Of further note, an extraordinary general meeting of Pirelli & C. S.p.A shareholders on February 15, 2016 approved the project for
merging by incorporation of the controlling company, Marco Polo Industrial Holding S.p.A., into Pirelli & C. S.p.A.
The effect of this merger will be that Pirelli will hold the debt of Marco Polo Industrial Holding S.p.A. (ex Bidco) subscribed to for the
acquisition of Pirelli and amounting to about 4.2 billion. On February 16, 2016, the Board of Directors of Pirelli & C. S.p.A. approved
the essential outlines of the of refinancing plan in respect of a counter value of up to a maximum of euro 7 billion, being the gross
indebtedness of Pirelli & C. S.p.A as at September 30, 2015 (euro 2.7 billion) including the effects foreseen in respect of the merger
with Marco Polo Industrial Holding S.p.A. (debt amounting to about euro 4.2 billion). This outline for financing aims to extend the
maturity of the debt and optimise its structure thanks to the recourse to bond and banking markets. The terms and conditions of
the refinancing, including any guarantees required, will be defined in the light of market conditions and practices of reference, also
taking into account the rights incorporated into the Terms and Conditions for the benefit of holders of bond loans issued by Pirelli
International plc and guaranteed by Pirelli Tyre S.p.A. for an aggregate of euro 600 million maturing in 2019 and which, as already
stated, will remain in force until its natural maturity.
The approved refinancing plan does not alter Pirelli’s right to activate as an alternative, if and when appropriate, the Mergeco
Facility loan, already made available to the company by a pool of banks in the area of the Public Purchase Offer made by Marco
Polo Industrial Holding S.p.A. in respect of Pirelli & C. S.p.A..
Consolidated Financial Statements / 2015 ANNUAL REPORT
5. inForMation on Fair VaLUe
5.1 FAir vALue meAsuremeNt
In respect of financial instruments measured at fair value, the following table shows the classification of these instruments on the
basis of the hierarchy of levels pursuant to IFRS 13, reflecting the significance of the inputs used in determining the fair value. The
following levels are defined:
level 1 – unadjusted quotations recorded on an active market for assets or liabilities subject to valuation;
level 2 – inputs different from the listed prices referred to at the preceding level, which are observable on the market either
directly (as in the case of prices) or indirectly (because they are derived from prices);
level 3 – inputs that are not based on observable market data.
The following table shows assets and liabilities carried at fair value as at December 31, 2015, divided into the three levels defined
above:
(in thousands of euro)
note
carrying
amount
at 12/31/2o15
level 1
level 2
level 3
FINANCIAL ASSETS
Financial assets carried at fair value through income statement:
158
securities held for trading
Current derivative financial instruments
Financial hedging instruments:
Current derivative financial instruments
Available-for-sale financial assets:
Other financial assets
Equities and shares
Investment funds
TOTAL ASSETS
18
27
27
12
78,167
49,166
12,139
-
-
-
210,643
154,355
14,478
225,121
364,593
-
154,355
154,355
78,167
49,166
12,139
23,576
14,478
38,054
177,526
FINANCIAL LIABILITIES
Financial liabilities carried at fair value through income statement
Current derivative financial instruments
Financial hedging instruments:
Current derivative financial instruments
TOTAL LIABILITIES
27
27
(51,974)
(5)
(51,979)
-
-
-
(51,974)
(5)
(51,979)
-
-
-
32,712
-
32,712
32,712
-
-
-
Consolidated Financial Statements / 2015 ANNUAL REPORT
The following table shows assets and liabilities carried at fair value as at December 31, 2014, divided into the three levels
defined above:
(in thousands of euro)
note
carrying
amount
at 12/31/2o14
level 1
level 2
level 3
FINANCIAL ASSETS
Financial assets carried at fair value through income statement:
securities held for trading
Current derivative financial instruments
Financial hedging instruments:
Current derivative financial instruments
Available-for-sale financial assets:
Other financial assets
Equities and shares
Investment funds
TOTAL ASSETS
18
27
27
12
FINANCIAL LIABILITIES
Financial liabilities carried at fair value through income statement
Current derivative financial instruments
Financial hedging instruments:
Current derivative financial instruments
TOTAL LIABILITIES
27
27
The following table shows the changes that occurred in level 3 during 2015:
(in thousands of euro)
Opening balance
Foreign currency translation differences
Increases / subscription of capital
Impairment
Fair value adjustments through Equity
Other changes
Closing balance
61,404
25,634
3,470
165,919
14,822
180,741
271,249
(32,824)
(10,011)
(42,835)
-
-
-
128,402
-
128,402
128,402
61,404
25,634
3,470
18,071
14,822
32,893
123,401
-
-
-
(32,824)
(10,011)
(42,835)
12/31/2015
-
-
-
19,446
-
19,446
19,446
-
-
-
19,446
327
20,806
(8,376)
374
135
32,712
These financial assets are primarily represented by share investments in the European Institute of Oncology (euro 5,754 thousand),
Equinox Two S.C.A. (euro 4,425 thousand) and Tlcom I LP (euro 644 thousand) and F.C. Internazionale (euro 293 thousand).
The item increases refers mainly to the capital increase related to the investment in Alitalia – Compagnia Aerea Italiana S.p.A.
(euro 1,766 thousand) and to recogniton of the investment in the subsidiary Pirelli de Venezuela C.A. (euro 18,877 thousand) which
was deconsolidated as of December 31, 2015.
The item impairment refers mainly to investments in Equinox Two S.C.A. (euro 460 thousand) and Alitalia-Compagnia Aerea
Italiana S.p.A (euro 7,115 thousand) and F.C. Internazionale Milano S.p.A. (euro 265 thousand).
During the financial year 2015, there were no transfers from level 1 to level 2 or vice versa, nor from level 3 to other levels or vice versa.
The fair value of financial instruments traded on active markets is based on the price quotations published at the date of Financial
Statements. These instruments, included in level 1, comprise primarily equity investments classified as financial assets available for sale.
159
Consolidated Financial Statements / 2015 ANNUAL REPORT
The fair value of financial instruments not traded on active markets (e.g. derivatives) is measured by means of techniques that
maximise the use of observable and available market data, using widely applied financial measurement techniques:
market prices for similar instruments;
the fair value of interest rate swaps is calculated by discounting estimated future cash flows based on observable yield curves;
the fair value foreign exchange derivatives (forward contracts) is determined by using the forward exchange rate at the date of
Financial Statements.
5.2 CAtegories oF FiNANCiAL Assets AND LiABiLities
The table below shows the carrying amounts for each class of financial asset and liability identified by IAS 39:
(in thousands of euro)
FINANCIAL ASSETS
Financial assets carried at fair value through income statement
securities held for trading
Current derivative financial instruments
Loans and receivables
Other non-current receivables
Current trade receivables
Other current receivables
Cash and cash equivalents
160
Available-for-sale financial assets
Other financial assets
Hedging financial instruments
Current derivative financial instruments
FINANCIAL LIABILITIES
Financial liabilities carried at fair value through income statement
Current derivative financial instruments
Financial liabilities carried at amortised cost
Non-current borrowings from banks
and other financial institutions
Other non-current payables
Current borrowings from banks and other financial institutions
Current trade payables
Other current payables
Hedging financial instruments
Current derivative financial instruments
note
carrying amount
at 12/31/2015
carrying amount
at 12/31/2014
18
27
15
14
15
19
12
27
27
23
25
25
24
25
27
78,167
49,166
127,333
147,624
676,192
165,408
1,082,726
2,071,950
61,404
25,634
87,038
169,145
673,808
265,274
1,166,669
2,274,896
225,121
180,741
12,139
2,436,543
3,470
2,546,146
51,974
32,824
1,275,688
98,631
1,138,592
1,313,131
404,172
4,230,214
5
4,282,193
1,781,726
74,692
530,890
1,394,312
443,477
4,225,097
10,011
4,267,931
Consolidated Financial Statements / 2015 ANNUAL REPORT
6. caPitaL ManaGeMent PoLicY
The Group’s objective is to maximise the return on net invested capital while maintaining the ability to operate over time, ensuring
adequate returns for its shareholders and benefits for other stakeholders, with a sustainable financial structure.
In order to achieve these objectives, as well as pursuing satisfactory earnings results and generating cash flows, the Group may
adjust its dividend policy and the configuration of Company capital.
The main indicators used by the Group to manage its capital are:
R.O.I.: Ratio (%) of operating Income (loss) over average net invested capital: the indicator represents the ability of the corporate
results to remunerate net invested capital, defined as the sum of fixed assets and net working capital. The Group’s objective is
to have this ratio higher than the weighted average cost of capital (WACC);
Gearing: This is calculated as the ratio between net debt and equity. It is an indicator of the sustainability of the ratio between
debt and equity, which takes into account the market situation and the trend in the cost of capital and debt at different times;
R.O.E. (return on equity): this is calculated as the ratio (%) between net income (loss) and average equity. It is an indicator
representing the Group’s ability to remunerate its shareholders. The objective is for this indicator to be higher than the rate of
return on a risk-free investment, correlated with the nature of the operated businesses.
The figures for 2015 and 2014 are shown below:
R.O.I. (operating income / average net invested capital)
gearing (net financial position/equity)
R.O.E. (Return on Equity -net income / equity)
2015
2014
20.34%
0.51
n.s.
19.20%
0.38
13.19%
161
7. estiMates and assUMPtions
Preparation of the Consolidated Financial Statements entails management making estimates and assumptions which, under cer-
tain circumstances, are founded on difficult and subjective assessments and estimates that are based on historical experience,
and assumptions that are periodically considered reasonable and realistic in light of the circumstances applying. The results that
actually emerge may therefore differ from such estimates. Estimates and assumptions are reviewed periodically and the effects of
any changes made to them are reflected in the Income Statement in the period in which the estimate is revised. If such estimates
and assumptions, based on the best evaluation currently available, should differ from actual circumstances, they will be modified
accordingly for the period in which the actual circumstances differ.
It is to be noted that the situation caused by the economic and financial crisis has entailed making extremely uncertain assumptions
about future performance. Therefore, it cannot be ruled out that next financial year’s results will be different from those estimat-
ed and that adjustments to the carrying value of the relevant items might be necessary, including significant adjustments, which
obviously cannot be estimated or foreseen at this time. Such estimates affect the carrying amounts of certain assets and liabilities,
costs and revenues, and also disclosures relating to contingent assets/liabilities at the date of Financial Statements.
The estimates and assumptions relate mainly to the assessments of the recoverability of the intangible assets, to the definition of
the useful lives of property, plant and equipment, to the assessment of the recoverability of investments in associated companies, to
the recoverability of receivables, to the recognition/measurement of provisions for risks and charges, to the evaluation of pension
schemes and other post-employment benefits, to the exchange rates used in relation to activities by the Group in Venezuela, and
to the reasons which brought about the deconsolidation of the subsidiary as at December 31, 2015, and are based on data which
reflects the best available information.
Consolidated Financial Statements / 2015 ANNUAL REPORT
Estimates entailing greater subjectivity
and having a particularly material impact
What follows is a brief description of the accounting policies
that, more than others, require management to exercise great-
er subjectivity in the calculation of estimates, and for which
a change in the conditions underlying the assumptions used
could have a material impact on the consolidated Financial
Statements, or for which there is a risk that material adjust-
ments to the carrying amount of assets and liabilities may
emerge in the financial year subsequent to the reference peri-
od of the Financial Statements.
Goodwill
In accordance with the accounting standards adopted for prepa-
ration of the Financial Statements, goodwill is tested annually
in order to ascertain the existence of any impairment losses to
be recognised in the Income Statement. In particular, the test
requires the allocation of goodwill to cash generating units and
subsequent determination of their recoverable amount, that is
fair value or value in use, whichever is the greater.
If the recoverable amount proves to be lower than the carry-
ing amount of the cash generating units, the goodwill allocat-
ed to them is impaired. Determination of the recoverable value
of the cash generating units entails using estimates that de-
pend on subjective assessments and on factors that can change
over time, with consequent and possibly material effects on
the measurements made by management.
Impairment of property, plant
and equipment and intangible assets
In accordance with the reference accounting standards, prop-
erty, plant and equipment and intangible assets are tested to
ascertain whether or not there has been an impairment loss
when there are signs that difficulties are to be expected in the
recovery of their net carrying amount through use.
The identification of aforesaid indications requires that the
Directors make subjective judgments based on information
available from both internal and external sources, as well as
on historical experience.
Moreover, if it is determined that a potential impairment loss
may be generated, this loss is calculated using appropriate
measurement techniques.
Proper identification of elements indicating the existence of a
potential impairment loss, and estimates for calculating the
amount of such losses, depend on subjective assessments and
factors that may vary over time, so affecting the assessments
and estimates made by management.
Impairment of investments in associates
and joint ventures
After applying the equity method, where there are indicators
of impairment of assets, the value of investments in associates
and joint ventures is compared to the recoverable value (so-
called impairment test). The recoverable amount corresponds
to the fair value less costs to sell, or the value in use, which-
ever is the higher.
For the purposes of the impairment test of Prelios S.p.A., a list-
ed affiliate, the recoverable value was determined as equal to
the fair value corresponding to the stock market value on De-
cember 30, 2015. In the case of Fenice S.r.l., an associate with
unlisted shares, the fair value was determined on the basis
of valuation prepared by an independent third-party profes-
sional, making use of estimates based on the best information
available. Specifically, an income approach was used based on
the options criterion. For the investment in GWM Renewable
Energy II S.p.A., the recoverable value was determined by as-
sessing in a transparent manner Greentech Energy System
A/S, a company listed on the Danish market and the compa-
ny’s principal asset.
Pension funds
Group companies have set up pension plans, healthcare plans
and other defined benefit plans in different countries for their
employees, mainly in the United States and the United King-
dom. Both funds were closed to new entries, in 2005 and 2001
respectively; so the actuarial risk relates only to previous defi-
cits. Management uses different actuarial assumptions to cal-
culate the liabilities and the future returns on assets serving
these employee benefit plans. Actuarial assumptions of a fi-
nancial nature regard the discount rate, the inflation rate and
trends in healthcare costs.
Actuarial assumptions of a demographic nature essentially
regard mortality rates.
The Group has identified discount rates deemed to be bal-
anced, given the context.
Exchange rate used for the translation
into foreign currency of trade items of Pirelli
de Venezuela C.A., and the deconsolidation
of the subsidiary as at December 31, 2015.
It is to be noted that as at December 31, 2015 in Venezuela
the currency system was characterised by the simultaneous
presence of an official exchange rate (the so-called CENCOEX),
equal to 6.3 Bolivar to the US Dollar, and the exchange rates
derived from auctions managed in accordance to the SICAD
system (13.5 Bolivars to the US Dollar, 14.70 Bolivar to the Euro
at the exchange rate set at the last auction held in September
2015, applicable to the Automotive industry sector, which is
considered strategic for the country), as well as the SIMADI
162
Consolidated Financial Statements / 2015 ANNUAL REPORT
Deferred tax assets
Deferred tax assets are accounted for on the basis of fore-
casts of taxable earnings expected in future financial years.
Assessing the expected taxable earnings for the purpose of
accounting for deferred taxation depends on factors that can
vary over time, and may lead to significant effects on the
measurement of deferred tax assets.
To determine the adjustment, forecast figures and business
plans consistent with those used for the impairment tests and
described in the foregoing paragraph in connection with the
recoverable amount of non-current assets have been taken
into account. It is also deemed that the adjustment items are
sufficient to cover the risk of deterioration with respect to the
assumptions in the plan, given the fact that net deferred tax
assets relate to temporary differences/tax losses that, to a sig-
nificant extent, can be recovered over a very long time, and
the recovery of which is therefore compatible with scenarios
in which the actual data might deviate negatively with re-
spect to the assessments made by management.
Provisions for liabilities and charges
Provisions are set aside against contingent legal and fiscal li-
abilities, representing the risk of losing lawsuits. The value of
provisions recognised in the Financial Statements relating to
these liabilities represents the best estimate date of Financial
Statements made by management for lawsuits and tax claims
regarding a vast range of issues which are subject to the ju-
risdiction of a number of countries. Such an estimate entails
making assumptions that depend on factors that may change
over time and which may therefore have a material impact
with respect to the current estimates made by management
for the preparation of the Consolidated Financial Statements.
163
exchange rate in force which amounted to 198.7 Bolivars to
the US Dollar applicable to imports that did not need specif-
ic authorisation from the government and which is controlled
by the Venezuelan Central Bank based on the parity setting
of the open market. Based on the most recent available doc-
umentary evidence, the Group had already during the 2014
financial year considered it appropriate to adjust an exchange
rate of 12 Bolivars to the US Dollar (SICAD exchange rate as
at December 31, 2014) on all business transactions in foreign
currency of the subsidiary and outstanding as at the date of
the Financial Statements, with a subsequent recognition for
the 2014 financial year of foreign exchange losses totalling
euro 72.1 million.
During the course of the 2015 financial year the SICAD I ex-
change rate was superseded by the SICAD exchange rate (13.5
Bolivars to the US Dollar - 14.70 Bolivars to the Euro); this in-
crease in the exchange rate led to an impact on the Income
Statement totalling euro 23.9 million, of which euro 17.0 million
was due to the adjustment of open items as at December 31, 2014
and euro 6.9 million for transactions which occurred in 2015.
It is noted that the Group proceeded with deconsolidation of
the subsidiary Pirelli de Venezuela C.A., effective as of De-
cember 31, 2015. The decision to proceed with the deconsoli-
dation was mainly due to the fact that the Venezuelan subsid-
iary was no longer able to pay dividends and royalties, or able
to meet its trade liabilities towards other companies of the
Group. To these limitations on the relevant activities of the
Venezuelan subsidiary, which were not temporary, addition-
al permanent regulatory restrictions were imposed, which
included a control on sales margins by the local authorities,
as well as a particularly stringent labour legislation. Given
this scenario, which was expected to endure for the foresee-
able future, it was considered that the requisite conditions of
IFRS 10 had not been met in order for an accounting control
to be carried out on the subsidiary, being the aforementioned
conditions which in fact did not permit the Group to devel-
op and implement decisions on the relevant activities of the
subsidiary. Therefore, the deconsolidation of the subsidiary
was proceeded with. Given the complexity of the Venezue-
lan scenario, the previously summarised considerations and
assumptions inevitably relied on complex and subjective as-
sessments and estimates based on historical experience, and
are considered reasonable and realistic in the circumstances;
these assessments and assumptions resulted in significant
overall effects on the consolidated Financial Statements of the
Pirelli Group. Please refer to note 2, “Basis of Presentation –
Deconsolidation of the subsidiary Pirelli de Venezuela C.A.”
for more details on these effects.
Consolidated Financial Statements / 2015 ANNUAL REPORT
8. oPerationaL sectors
The operational sectors regarding separate disclosure are defined below:
Consumer Business sector: includes for vehicles and motorcycles tyres made for both the original equipment channel and the
replacement channel;
Industrial Business sector: includes tyres for trucks and vehicles for agricultural use both for the original equipment channel
and the replacement channel;
Results broken down by sector for 2015 are as follows:
(in thousands of euro)
Total net sales
gross operating margin
depreciation and amortisation
Operating income (loss)
Net income (loss) from equity investments
Financial income (expenses)
deconsolidation of the venezuelan subsidiary
Net income (loss) before tax
Tax
164
Net income (loss) from continuing operations
Results broken down by sector for 2014 were as follows:
consumer
industrial
other business
2015
5,048,200
1,252,600
8,833
6,309,633
1,031,109
(268,204)
762,905
152,107
(54,502)
97,605
(8,697)
(1,502)
(10,199)
1,174,519
(324,208)
850,311
(41,393)
(328,216)
(559,491)
(78,789)
(290,137)
(368,926)
(in thousands of euro)
Total net sales
gross operating margin
depreciation and amortisation
Operating income (loss)
Net income (loss) from equity investments
Financial income (expenses)
Net income (loss) before tax
Tax
Net income (loss) from continuing operations
consumer
industrial
other business
2014
4,610,320
1,397,200
10,543
6,018,063
913,925
(237,515)
676,410
235,200
(59,000)
176,200
(12,385)
(2,292)
(14,677)
1,136,740
(298,807)
837,933
(87,000)
(262,410)
488,523
(173,309)
315,214
Consolidated Financial Statements / 2015 ANNUAL REPORT
Assets, liabilities and investments broken down by sector as at December 31, 2015 are as follows:
(in thousands of euro)
goodwill
Allocated assets
unallocated assets
TOTAL ASSETS
Allocated liabilities
unallocated liabilities
TOTAL LIABILITIES
Investments:
consumer
industrial
other
business
other
total
12/31/2015
572,703
3,706,289
-
4,278,992
1,540,747
-
306,423
893,050
-
1,199,473
463,100
-
-
13,100
-
-
-
1,746,552
879,126
4,612,439
1,746,552
13,100
1,800
1,746,552
7,238,117
-
2,005,647
-
2,888,926
2,888,926
1,540,747
463,100
1,800
2,888,926
4,894,573
property, plant and equipment
intangible assets
333,572
14,587
40,998
1,795
442
-
Assets, liabilities and investments broken down by sector as at December 31, 2014 were as follows:
(in thousands of euro)
goodwill
Allocated assets
unallocated assets
TOTAL ASSETS
Allocated liabilities
unallocated liabilities
TOTAL LIABILITIES
Investments:
consumer
industrial
other
business
other
577,347
3,780,689
-
4,358,036
1,580,253
-
309,766
1,021,015
-
1,330,781
558,668
-
-
46,149
-
1,938,073
1,938,073
46,149
10,170
1,938,073
7,673,039
-
2,149,091
-
2,912,446
2,912,446
1,580,253
558,668
10,170
2,912,446
5,061,537
property, plant and equipment
intangible assets
302,512
8,860
64,300
1,903
389
-
-
-
367,201
10,763
Business assets consist mainly of property, plant and equipment and intangible assets, leased assets, inventories, trade receivables
and other receivables. Financial receivables, cash and cash equivalents, other financial assets, securities held for trading and both
current and deferred tax assets are excluded.
Business liabilities mainly comprise trade payables and other payables, advances from customers and provisions for liabilities and
charges and employee benefits. Financial payables and both current and deferred tax liabilities are excluded.
Investments in property, plant and equipment were focused on an increase in Premium capacity in Europe, NAFTA and China
and improvement in the mix.
-
-
-
-
375,012
16,382
total
12/31/2014
887,113
4,847,853
165
Consolidated Financial Statements / 2015 ANNUAL REPORT
Sales by geographic area are provided below. They are allocated on the basis of the country where the customer resides.
(in thousands of euro)
Europe
Russia & CIs
NAFTA
south America
Asia/Pacific (APAC)
Middle Est/Africa/India (MEAI)
2015
2014
2,209,033
192,500
861,100
1,808,200
706,000
532,800
35.01%
3.05%
13.65%
28.66%
11.19%
8.44%
2,067,300
237,900
707,500
1,963,463
558,400
483,500
34.35%
3.95%
11.76%
32.63%
9.28%
8.03%
Total
6,309,633
100.00%
6,018,063
100.00%
Non-current assets by geographic area are allocated below. They are allocated on the basis of the country where the assets are
located.
(in thousands of euro)
Europe
Russia & CIs
NAFTA
south America
166
Asia/Pacific (APAC)
Middle Est/Africa/India (MEAI)
Non-current unallocated assets
12/31/2015
12/31/2014
1,202,887
159,913
265,429
413,980
399,059
67,600
879,126
35.50%
4.72%
7.83%
12.22%
11.78%
2.00%
25.95%
1,172,336
184,422
244,563
565,850
384,110
68,072
887,113
33.44%
5.26%
6.97%
16.14%
10.95%
1.94%
25.30%
Total
3,387,994
100.00%
3,506,466
100.00%
The allocated non-current assets shown in the previous table consist of property, plant and equipment and intangible assets,
excluding goodwill. The non-current unallocated assets pertain to goodwill (see note 10).
9. ProPertY, PLant and eQUiPMent
As at December 31, 2015, the breakdown and changes of property, plant and equipment are as follows:
(in thousands of euro)
12/31/2015
12/31/2014
gross
value
accumulated
depreciation
net
value
gross
value
accumulated
depreciation
net
value
Land
buildings
Plant and machinery
95,599
969,155
3,231,137
-
95,599
103,808
-
103,808
(375,339)
593,816
1,025,895
(407,017)
618,878
(1,726,778)
1,504,359
3,344,879
(1,790,305)
1,554,574
Industrial and trade equipment
644,704
(467,045)
177,659
671,027
(486,105)
184,922
Other assets
184,500
5,125,095
(136,480)
48,020
206,295
(146,013)
60,282
(2,705,642)
2,419,453
5,351,904
(2,829,440)
2,522,464
Consolidated Financial Statements / 2015 ANNUAL REPORT
gross value (in thousands of euro)
12/31/2014
inFlation
eFFect
decons.
subsidiary
veneZuela
trans-
lation
diFFer.
inc.
dec.
reclas-
siF.
other 12/31/2015
Land
103,808
buildings
1,025,895
8,368
92,475
(12,705)
(3,515)
-
(297)
(140,597)
(48,377)
41,499
(2,128)
158
(93)
(218)
481
95,599
969,155
Plant and
machinery
Industrial
and trade
equipment
Other
assets
3,344,879
186,534
(276,919)
(196,712) 255,015
(89,322)
7,992
(331)
3,231,137
671,027
37,361
(57,349)
(47,466) 45,855
(28,691)
23,384
583
644,704
206,295
59,307
(57,547)
(7,626) 32,643
(14,965)
(31,441)
(2,165)
184,500
5,351,904
384,045
(545,117)
(303,696) 375,012 (135,403)
-
(1,650)
5,125,095
accumulated depreciation (in thousands of euro)
12/31/2014
inFlation
eFFect
decons.
sub-
sidiary
vene-
Zuela
trans-
lation
diFFer.
reclas-
siF.
dec. deprec. other 12/31/2015
buildings
(407,017)
(85,239)
131,559
19,641
-
1,017
(34,665)
(635)
(375,339)
Plant and
machinery
Industrial
and trade
equipment
Other
assets
(1,790,305)
(106,439)
168,794
104,173
16 84,427
(190,854)
3,410
(1,726,778)
(486,105)
(31,516)
50,649
34,116
1,465 26,279
(62,609)
675
(467,045)
167
(146,013)
(17,198)
26,820
4,131
(1,481)
13,744
(16,552)
71
(136,480)
(2,829,440)
(240,392)
377,823
162,061
- 125,467
(304,680)
3,521
(2,705,642)
net value (in thousands of euro)
12/31/2014
inFla-
tion
eF-
Fect
decons.
subsidi-
ary ven-
eZuela
trans-
lation
diFFer.
inc. dec.
re-
clas-
siF.
depre-
ciation
other 12/31/2015
Land
103,808
8,368
(12,705)
(3,515)
-
(297)
158
-
618,878
7,236
(9,038)
(28,736)
41,499
(1,111)
(93)
(34,665)
(218)
(154)
95,599
593,816
1,554,574
80,095
(108,125)
(92,539) 255,015 (4,895)
8,008
(190,854)
3,080
1,504,359
184,922
5,845
(6,700)
(13,350) 45,855
(2,412)
24,849
(62,609)
1,258
177,659
buildings
Plant and
machinery
Industrial
and trade
equipment
Other assets
60,282
42,109
(30,727)
(3,495) 32,643
(1,221)
(32,922)
(16,552)
(2,097)
48,020
2,522,464
143,653
(167,294)
(141,635) 375,012 (9,936)
-
(304,680)
1,870
2,419,453
The changes as at December 31, 2014 were as follows:
Consolidated Financial Statements / 2015 ANNUAL REPORT
gross value (in thousands of euro)
12/31/2013
inFla-
tion
eFFect
dis -
con-
tinued
opera-
tions
business
combi-
nation
trans-
lation
diFFer.
inc.
dec.
re-
clas-
siF.
other 12/31/2014
Land
106,896
1,753
(8,832)
buildings
1,099,434
19,373
(70,214)
-
-
289
-
(1,858)
5,533
27
103,808
(38,182) 32,606
(30,137)
13,484
(469)
1,025,895
Plant and
machinery
Industrial
and trade
equipment
Other
assets
3,480,584
36,549
(203,033)
742
(6,171) 256,945 (203,863)
(22,224)
5,350
3,344,879
691,235
7,636
(16,664)
230,162
14,970
(8,653)
-
-
(4,658)
40,411
(74,896)
28,153
(190)
671,027
(14,345)
37,239
(25,543)
(24,946)
(2,588)
206,295
5,608,311
80,281
(307,396)
742
(63,067) 367,201 (336,297)
-
2,130
5,351,904
accumulated depreciation (in thousands of euro)
12/31/2013
inFla-
tion
eF-
Fect
dis -
con-
tinued
opera-
tions
busi-
ness
combi-
nation
trans-
lation
diFFer.
re-
clas-
siF.
dec. deprec. other 12/31/2014
168
buildings
(429,450)
(17,553)
26,410
Plant and
machinery
Industrial
and trade
equipment
Other
assets
(1,909,024)
(20,117)
119,883
(507,690)
(6,210)
10,795
(153,699)
(3,683)
6,343
(2,999,863)
(47,564)
163,431
net value (in thousands of euro)
-
-
-
-
-
16,375
(782)
29,166
(32,267)
1,085
(407,017)
(13,045)
1,917 201,873
(173,458)
1,666
(1,790,305)
(1,166)
1,469
71,704
(56,030)
1,023
(486,105)
935
(2,604)
22,262
(16,135)
567
(146,013)
3,099
- 325,005
(277,890)
4,341
(2,829,440)
12/31/
2013
inFla-
tion
eF-
Fect
dis -
con-
tinued
oper-
ations
busi-
ness
combi-
nation
trans-
lation
diFFer.
inc. dec.
re-
clas-
siF.
depre-
cia-
tion
other
12/31/
2014
Land
106,896
1,753
(8,832)
buildings
669,984
1,819
(43,804)
-
-
289
-
(1,858)
5,533
-
(21,807) 32,606
(971)
12,702
(32,267)
27
616
103,808
618,878
Plant and
machinery
Industrial
and trade
equipment
Other
assets
1,571,560
16,432
(83,150)
742
(19,216) 256,945
(1,990) (20,307)
(173,458)
7,016
1,554,574
183,545
1,426
(5,869)
76,463
11,287
(2,310)
-
-
(5,824)
40,411
(3,192)
29,622
(56,030)
833
184,922
(13,410)
37,239
(3,281)
(27,550)
(16,135)
(2,020)
60,282
2,608,448
32,717
(143,965)
742
(59,968) 367,201 (11,292)
- (277,890)
6,472
2,522,464
Consolidated Financial Statements / 2015 ANNUAL REPORT
The increases for 2015 mainly relate to investments aimed at the increase in Premium capacity in Europe, NAFTA and China and
the improvement in the mix.
The ratio of additions to property, plant and equipment to depreciation in 2015 was 1.23 (1.32 in 2014).
Property, plant and equipment in progress as at December 31, 2015, included in the individual categories of property, plant and
equipment, totalled euro 140,103 thousand (euro 183,829 thousand as at December 31, 2014).
Impairments during 2015, included in the “gross value-decreases” column of the above table totalled euro 2,796 thousand (euro
6,048 thousand in 2014) and mainly relate to buildings, plant and machinery and trade equipment in Russia, the United Kingdom
and Italy.
Regarding restrictions on the ownership of assets, it should be noted that:
the subsidiary Alexandria Tire Company S.A.E. (Egypt) has pledged, as collateral for loans granted by National Bank of Egypt,
the value of its plant and machinery for euro 893 thousand (euro 2,416 thousand as at December 31, 2014);
the subsidiary Pirelli Pneus Ltda. (Brazil) has pledged, as collateral for loans granted by BNDES (Banco Nacional de Desenvolvi-
mento) and litigation with the INSS (National Social Security Institution of Brazil), its machinery and land for a total of euro
32,704 thousand (euro 43,130 thousand as at December 31, 2014);
the subsidiary Pirelli Neumaticos SAIC (Argentina) has pledged its own land and buildings for a total of euro 5,036 thousand
(euro 9,646 thousand as at December 31, 2014) as collateral for a loan from Banco de la Nacion Argentina;
the subsidiary Dackia Aktiebolag pledged its facilities and equipment for a total of euro 55 thousand to guarantee assets re-
ceived through leases from Nordea Bank;
the subsidiary Pirelli Neumaticos S.A. de C.V. (Mexico) refunded the loan provided by Bancomext in full and redeemed the lands,
buildings and facilities pledged (euro 68,230 thousand as at December 31, 2014).
The value of the facilities and other assets for which the Group signed a financial leasing agreement is included in the related cat-
egories of property, land and equipment.
The breakdown of the item is listed below:
169
(in thousands of euro)
Leased buldings
Other leased assets
Leased plant
and machinery
12/31/2015
12/31/2014
cost
accumulated
depreciation
net
value
cost
accumulated
depreciation
net
value
2,519
2,325
107
4,951
(1,549)
(2,092)
(107)
970
233
-
2,979
2,396
101
(1,465)
(2,052)
(101)
1,514
344
-
(3,748)
1,203
5,476
(3,618)
1,858
Payables for financial leases are included in the financial payables (note 23).
The total of future minimum payments in respect of non-terminable operation leasing transactions amounts to euro 504,156 thou-
sand, of which
euro 83,048 thousand within one year
euro 225,670 thousand between one and five years
euro 195,437 thousand beyond five years
Consolidated Financial Statements / 2015 ANNUAL REPORT
10. intanGiBLe assets
The breakdown and changes in intangible assets for the 2015 financial year were as follows:
(in thousands of euro)
Patents and
intellectual property
rights
Concessions/
licenses/trademarks
- finite life
Concessions/
licenses/trademarks
- indefinite life
goodwill
Application software
Other intangible
assets
12/31/2014
translation
diFFerences
inc.
dec.
amorti-
sation
reclassiF. other 12/31/2015
17
-
-
55,848
(4,074)
1,131
(15)
-
-
2
(5,795)
(5,832)
354
41,632
-
-
-
-
(7,987)
(42)
1,552
887,113
15,676
25,348
-
-
(9,422)
5,832
-
6,210
-
-
57
369
5,832
879,126
14,031
27,918
(978)
13,699
(15)
(4,295)
(6,210)
-
-
-
-
-
984,002
(13,081)
16,382
(15)
(19,527)
-
780
968,541
The changes which occurred for the 2014 financial year were as follows.
170
(in thousands of euro)
12/31/2013
trans-
lation
diFFer-
ences
discontin-
ued opera-
tions
eFFect
oF
business
combina-
tion
inc. dec.
amorti-
sation
other 12/31/2014
49
(9)
-
-
-
52,683
(5,633)
(2)
5,496
858
913,017
(12,505)
(17,300)
3,901
-
-
-
-
(23)
-
17
(6,959)
9,405
55,848
-
-
887,113
18,201
(51)
(35)
-
7,111
(32)
(10,068)
550
15,676
30,029
(3,527)
-
758 2,794
(213)
(3,867)
(626)
25,348
1,013,979
(21,725)
(17,337)
10,155 10,763
(245)
(20,917)
9,329
984,002
Patents and
intellectual
property rights
Concessions/
licenses/
trademarks
goodwill
Application
software
Other
intangible
assets
Consolidated Financial Statements / 2015 ANNUAL REPORT
The table below sets forth the allocation of goodwill for the operational sector, the cash generating unit (CGU) to which it was allo-
cated for impairment testing and the method used to measure the recoverable amount:
(in thousands of euro)
operating segment
cgu
12/31/2015
12/31/2014
Consumer
Industrial
Consumer
Industrial
572,703
306,423
879,126
577,347
309,766
8 87,113
recoverable
amount
value in use
value in use
As at December 31, 2015, goodwill was tested for impairment (using the assistance of independent third party) and which involved
estimating the recoverable value of the CGU and comparing it with the net carrying amount of the relevant assets, including good-
will.
Value in use corresponds to the discounted value of the future cash flows that are expected to be associated with the CGU, using a
discount rate that reflects the specific risks for the individual CGU at the measurement date.
The key assumptions used by management are the estimates of future increases in sales, in operating cash flows, in the rate of
growth of terminal values and in the average weighted cost of capital (discount rate).
The expected cash flows cover a two-year period (2016-2017), and refer to the 2016 Budget, and for 2017, to the “2014-2017 Business
Plan” announced to the financial community on November 6, 2013, corrected downwards by a percentage which corresponds to the
negative variance between the 2016 Budget and the 2016 Old Plan, as well as the new updated forecasts for 2017.
With reference to the CGU Consumer segment, since the new updated forecast for 2017 presented higher cash flows compared to the
2017 Old Plan, the 2017 Old Plan was considered prudent. With reference to the CGU Industrial segment the updated forecasts for
2017 result as being more prudent than the 2017 Old Plan and therefore the updated forecasts for 2017 were used.
171
The cash flows for the 2016 Budget and those of the updated 2017 forecast as well as those in the updated 2017 Old Plan, all take the
deconsolidation of the Venezuelan subsidiary into account.
Additionally, the reasonableness of the explicit forecast for the margins for the period as compared to the consensus for estimates
of the sector players operating in the Premium segment was verified.
The calculation also included the hypothetical cash flows deriving from the disposal of the CGUs at the end of the explicit period
(assumed to be equal to the present value of the perpetual stream of cash flow generated in the last year of the forecast).
The discount rates, defined at the average cost of capital net of taxes, applied to prospective cash flows and the growth factors used
are listed in the following table:
operating
segment
cgu
2015
2014
discount
rate (wacc)
growth
rate ( g )
wacc - g
discount
rate (wacc)
growth
rate (g)
wacc - g
Consumer
Consumer
Industrial
Industrial
8.45%
8.45%
-
-
8.45%
8.45%
8.00%
8.00%
-
-
8.00%
8.00%
On the basis of these tests, no impairment loss was recognised.
A sensitivity analysis was also carried out of the results for the CGU in question: in all cases the values in use remain higher than
the carrying amounts even assuming a change in key parameters such as:
a change in discount rates by 100 basis points;
a change in the growth rate by 100 basis points;
an change in the EBITDA margin of 150 basis points.
Consolidated Financial Statements / 2015 ANNUAL REPORT
The “Concessions, licences and trademarks” with a defined useful life item totalling euro 41,632 thousand mainly including
trademarks deriving from the acquisition, which occurred in the 2014 financial year, of 29 sales outlets belonging to the Abouchar
network (euro 4,354 thousand), from purchases that occurred during the course of the 2013 financial year, of 25 sales outlets be-
longing to Wagner in Germany (euro 8,003 thousand), from the purchases made during the course of the 2012 financial year in
Russia (euro 1,568 thousand) and the Dackia retail chains in Sweden (euro 19,878 thousand).
The “Concessions, licences and trademarks” with an undefined useful life totalling euro 5,832 thousand, include the Camp-
neus brand which is owned by the Brazil subsidiary. During the 2015 financial year, due to the revision of the business strategy and
the positioning of the brands relative to the Brazilian sales networks, it was considered that the Campneus brand met the require-
ments to be classified as an intangible asset with an indefinite useful life. The brand was subjected to a specific impairment test on
the basis of which the value in use was determined to higher than the value recorded in the Financial Statements.
“Other intangible assets” which totalled euro 27,918 thousand include the fair value assessment of customer relationships and
trade partners deriving from the acquisition of the Abouchar sales network in 2014 (euro 576 thousand) and from the purchases
made in 2012 in Russia (euro 3,167 thousand) and Sweden (Dackia – euro 4,302 thousand).
11. inVestMents in associates
and Joint VentUres
The changes in investments in associates and joint ventures that occurred in the period are as follows:
172
(in thousands of euro)
Opening balance
Increases
distribution of dividends
Impairment
12/31/2015
12/31/2014
associates
Jv
total
associates
Jv
total
158,885
27,898
186,783
12,157
(1,950)
(21,742)
-
-
-
12,157
(1,950)
(21,742)
111,525
118,665
(1,211)
(20,394)
19,941
12,109
-
-
131,466
130,774
(1,211)
(20,394)
share of net income (loss)
(4,192)
(4,810)
(9,002)
(53,769)
(1,378)
(55,147)
share of other components
recognized in Equity
Reclassifications and other
1,090
12
-
-
1,090
12
4,340
-
4,340
(271)
(2,774)
(3,045)
Closing balance
144,260
23,088
167,348
158,885
27,898
186,783
Investments in associates and joint ventures are accounted for in Consolidated Financial Statements using the equity method.
Consolidated Financial Statements / 2015 ANNUAL REPORT
11.1 iNvestmeNts iN AssoCiAtes
The breakdown by individual investment is as follows:
(in thousands of euro)
12/31/2014 inc.
dis -
trub.
oF divi-
dends
im -
pair-
ment
share
oF net
income
(loss)
share oF other
components
recogniZed
in eQuity
re-
class.
and
other
12/31/2015
Eurostazioni
s.p.A.
Prelios s.p.A.
Fenice s.r.l.
gWM Renewable
Energy II s.p.A.
Idea granda
società
Consortile r.l.
60,541
55,534
-
-
16,023
12,157
25,112
633
-
-
-
(1,680)
-
1,637
-
-
-
-
(7,000)
(6,039)
-
(14,085)
(533)
-
-
-
(270)
(124)
210
-
(575)
1,665
-
-
-
Other companies
1,042
Total associates
158,885
12,157
(1,950)
(21,742)
(4,192)
1,090
-
-
-
60,498
41,920
29,845
134
11,161
(100)
(22)
12
-
836
144,260
The investment in GWM Renewable Energy II S.p.A. (16.87% as at December 31, 2015, unchanged as compared to the previous fi-
nancial year) is classified as an associate (although there is a percentage of ownership of less than 20%) since the Group exercises
significant influence due to the presence of its managers on the company’s Board of Directors.
173
Increases in 2015 refer entirely to the purchase of an investment totalling 7.32% in Fenice S.r.l. On July 29, 2015, the Fenice Credi-
tor Partners (Pirelli & C. S.p.A., Unicredit S.p.A. and Intesa San Paolo S.p.A.) in fact exercised the right to purchase the entire quota
held by Feidos 11 in Fenice pursuant to the “Right of Redemption” set forth in Fenice S.r.l. by-laws and a purchase option set forth in
shareholder agreements. Execution of the transfer occurred on September 3, 2015. On September 25, 2015, Fenice Creditor Partners
also updated the Side Agreements by making a number of changes. It is here mentioned that the updates to the Side Agreements
constituted a modification/integration of the previous Agreement, which therefor remains valid between the shareholders and
Feidos 11 with particular reference to the earn-out clause for Feidos 11 in the event of transfer by Fenice of the Prelios B shares it
holds within 12 months of exercising the purchase option.
Although the percentage of ownership is greater than 50%, based on the provisions
of the shareholder agreement, this does not entail control over Fenice S.r.l by Pirelli.
Impairments refer to the investments in Prelios S.p.A. for euro 7,000 thousand, GWM Renewable Energy II S.p.A. for euro 14,085
thousand, Idea Granda Società Consortile for euro 533 thousand and Serenergy for euro 124 thousand.
With reference to the investment in Prelios S.p.A., it has been felt that the Group’s negative results and the difference between fair
value, represented by the security listing on December 31, 2015 (euro 0.283 per share) and book value in consolidated Financial
Statements post-application of the equity method (euro 0.33 per share) represented an impairment indicator. The value of the equity
investment was therefore adjusted to its recoverable value, represented by its actual fair value.
With reference to the investment in GWM Renewable Energy II S.p.A., it has been felt that the trend in the stock exchange assessment
of Greentech Energy System A/S, the company’s primary asset, which was significantly below the book value of the equity invest-
ment in GWM Renewable Energy II S.p.A., represented an impairment indicator as at December 31, 2015. The value of the equity in-
vestment was therefore adjusted to its recoverable value, represented by the fair value of GWM Renewable Energy S.p.A. determined
by valuing by way of transparency at Fair Value the investment therein held by the company Greentech Energy Systems A/S an rep-
resented by its Stock Exchange value. From the comparison, there is a loss of value in the Income Statement of euro 14,085 thousand.
itive for euro 1,090 thousand), refers primarily to euro 1,665
thousand, prorated (62.56% until September 30, 2015 and
69.88% after this date) of gains recognised directly in equity
by Fenice S.r.l. in the 2015 financial year, following the fair
value adjustment of the 210,988,201 Category B Prelios S.p.A.
shares it held; these shares are classified for Fenice S.r.l. as fi-
nancial assets available for sale. The fair value of the Category
B Prelios shares was determined based on the market value
as at December 31, 2015 of the ordinary Prelios S.p.A. shares
(euro 0.283) per share.
Investments in associates have accounted for using the equity
method are not significant in terms of their impact on the con-
solidated assets total, either individually, or in aggregate form.
11.2 equitY iNvestmeNts
iN JoiNt veNtures
The Group holds an equity investment of 60% (of ownership
unchanged from the previous financial year) in PT Evoluzione
Tyres, a jointly controlled entity which operates in Indonesia,
and is active in the production of tyres. Although the compa-
ny is now 60% owned due to contractual agreements between
shareholders, it falls within the definition of a joint venture as
the governance rules explicitly require the unanimous con-
sent in decisions relating to the significant activities.
The equity investment accounted for using the equity method,
is not significant in terms of the impact on the total consoli-
dated assets.
Consolidated Financial Statements / 2015 ANNUAL REPORT
With reference to the investment in Fenice S.r.l., it is to be noted
that the withdrawal of partner Feidos 11 has in fact “frozen” part
of the asymmetry applying under the previous version of the
Side Agreements regarding the Fenice allocation of net reve-
nues. Conversely the clause that provides for an asymmetrical
allocation of earnings amongst the Creditor Partners applies.
Since the allocation between Creditor Partners is now asym-
metrical and given too that the earn-out clause remains valid
for Feidos 11 in case of the sale of the Prelios B shares it holds
within 12 months of exercising the purchase option, it has been
felt that this asymmetry represents an impairment indicator
and therefore the investment has been subjected to an impair-
ment test with the goal of comparing the investment value af-
ter application of the equity method with its recoverable value,
represented by the fair value.
The fair value of the investment as at December 31, 2015,
which Pirelli determines with the help of a professional in-
dependent third party, was found to be higher than its book
value and therefore no impairment was applied.
To estimate the fair value, an income approach was used based
on the criterion of options and the use of level 2 inputs.
The estimate was made starting from the liquidation prefer-
ence, i.e. the preferential/asymmetric sharing mechanism of
any income from Fenice itself following the sale of Prelios class
B shares. As presumed date of sale it was decided to adopt the
date of first expiry of the side agreement, that is July 31, 2018.
As the payoff is asymmetrical, it was reproduced on the basis
of a portfolio of long and short positions of options, valued as at
December 31, 2015 on the basis of the Black & Scholes formula.
The impairment found for Idea Granda Società Consortile rep-
resents an adjustment to the equity investment value at its
Fair Value represented by the sales price; the company was
indeed sold during 2015.
The share of net income (loss) of associates (negative for
euro 4,192 thousand) mainly refers to Prelios S.p.A. (loss of
euro 6,039 thousand) partially offset by the pro-quota positive
operating income of Eurostazioni S.p.A. (gains of euro 1,637
thousand).
As performed on December 31, 2014, the Prelios S.p.A. Finan-
cial Statements used in applying the equity method refer to a
different closing date as compared to December 31, 2015; in
particular, the portion accruing to the 2015 financial year and
amounting to euro 6,039 thousand is made up of the sum of:
loss for the fourth quarter of the 2014 financial year (euro
2,620 thousand);
loss for the first nine months of 2015financial year (euro
3,419 thousand).
The Share of other components recognised in equity (pos-
174
Consolidated Financial Statements / 2015 ANNUAL REPORT
12. otHer FinanciaL assets
These amounted to euro 225,121 thousand compared to euro 180,741 thousand as at December 31, 2014 and are qualified as finan-
cial assets available for sale.
The transactions that occurred in the financial year are as follows:
(in thousands of euro)
Opening balance
Translation differences
Increases
decreases
Impairment
Fair value adjustments recognised in Equity
Other
Closing balance
The breakdown by individual investment is as follows:
(in thousands of euro)
12/31/2015
12/31/2014
180,741
305
20,870
-
(15,751)
38,853
103
225,121
185,009
378
57,035
(42,894)
(13,434)
(5,231)
(122)
180,741
12/31/2015
12/31/2014
historical
cost
cumulative Fv
adJustments
recogniZed in
eQuity
Fv adJustments
recogniZed in
income statement
Previous periods
2015
Fair
value
Fair
value
175
A
B
C
D
A+B+C+D
90,247
37,480
134
127,861
38,344
14,458
13,250
4,039
7,213
373
1,406
117
7,881
18,877
3,940
109,898
237,759
76,955
(27,234)
-
139,968
-
-
(15,860)
(7,265)
14,355
-
(104)
30
106,650
21,620
134
76,955
(43,094)
(7,369)
154,353
128,404
-
(31,229)
(7,115)
-
(5,562)
-
-
-
-
-
18,787
14,478
5,754
5,382
5,349
14,473
14,822
(6,655)
(265)
(222)
(701)
-
(47)
(61)
-
(2,996)
(460)
293
104
644
4,789
4,425
-
-
18,877
(1 ,111)
(434)
2,617
(48,476)
(8,382)
70,768
(91,570)
(15,751)
225,121
558
151
665
3,598
4,447
-
2,892
52,337
180,741
9,891
1,228
1,715
-
-
-
4,672
-
-
222
17,728
94,683
Listed securities
Mediobanca s.p.A.
RCs Mediagroup s.p.A.
Other companies
Unlisted securities
Alitalia - Compagnia Aerea
Italiana s.p.A.
Fin. Priv. s.r.l.
Fondo Anastasia
European Institute of Oncology
(Istituto Europeo di Oncologia
s.r.l.)
F.C. Internazionale Milano s.p.A.
Euroqube
Tlcom I LP
Emittenti Titoli
Equinox Two sCA
Pirelli de venezuela C.A.
Other companies
Total
Consolidated Financial Statements / 2015 ANNUAL REPORT
The increases mainly refer to the subscription of Alitalia - Compagnia Aerea Italiana S.p.A. (euro 1,766 thousand) and of the fair
value of the subsidiary Pirelli de Venezuela C.A. (euro 18,877 thousand) deconsolidated as of December 31, 2015. The fair value of the
subsidiary is substantially represented by the liquidity in the country impaired by the SIMADI exchange rate, which following the
latest official statements on February 17, 2016, is to replace the SICAD exchange rate.. The SIMADI exchange rate, which is currently
trading at around 200 Bolivars to the US Dollar, will mostly be allowed to fluctuate freely.
The impairments item mainly refers to investments in RCS MediaGroup S.p.A. for euro 7,265 thousand, Alitalia-Compagnia Aerea
Italiana S.p.A for euro 7,115 thousand, Equinox Two S.C.A. for euro 460 thousand and F.C. Internazionale Milano S.p.A. for euro 265
thousand.
The fair value adjustment recognised in equity mainly refers to equity investments in Mediobanca S.p.A. (positive for euro
33,318 thousand), Fin.Priv. S.r.l. (positive for euro 4,314 thousand) and Emittenti Titoli (positive for euro 1,191 thousand).
The fair value of listed financial securities corresponds to the listing on the Stock Exchange as at December 31, 2015.
The fair value of unlisted financial instruments was determined by making estimates based on the best information available.
13. deFerred tax assets and ProVision
For deFerred tax LiaBiLities
The composition is the following:
(in thousands of euro)
176
deferred tax assets
Provision for deferred tax liabilities
12/31/2015
12/31/2014
123,724
(43,622)
80,102
248,564
(53,029)
195,535
Deferred tax assets and deferred tax liabilities are offset when a legal right exists to offset current tax receivables and current tax
payables, and the deferred taxes refer to the same legal entity and the same tax authority.
Their composition gross of the offsets made is as follows:
(in thousands of euro)
Deferred tax assets
of which recoverable within 12 months
of which recoverable beyond 12 months
Provision for deferred tax liabilities
of which recoverable within 12 months
of which recoverable beyond 12 months
12/31/2015
12/31/2014
260,454
64,484
195,970
(180,352)
(20,103)
(160,249)
354,697
76,718
277,979
(159,162)
(11,090)
(148,072)
80,102
195,535
Consolidated Financial Statements / 2015 ANNUAL REPORT
The tax effect of temporary differences and of tax losses carried forward which make up the item at December 31, 2015 and at
December 31, 2014 is shown in the following table:
(in thousands of euro)
Deferred tax assets:
Provisions for future liabilities and charges
Employee benefit obligations
Inventories
Tax losses carried forward
Amortisation and depreciation
Trade receivables and other receivables
Trade payables and other payables
derivatives
Other
Total
Provision for deferred tax liabilities:
Amortisation and depreciation
Other
Total
12/31/2015
12/31/2014
49,950
108,593
20,258
7,486
24,534
12,650
24,105
2,330
10,548
260,454
(102,794)
(77,558)
(180,352)
22,386
103,966
14,492
127,645
4,888
15,299
44,099
2,828
19,094
354,697
(112,011)
(47,151)
(159,162)
The decrease posted under deferred tax assets is primarily attributable to tax asset depreciation on fiscal losses reported by the
Pirelli & C. S.p.A. parent company. (euro 102,970 thousand) and the US subsidiary Pirelli Tire LLC. (euro 4,600 thousand). The
impairment of the Parent company is directly related to the adjustment of the forecasts on future taxable gains of the companies
participating in the Italian tax regime for which there is a significant reduction due to the new financial structure that the Group
will assume following the reverse merger with the parent company Marco Polo Industrial Holding S.p.A. planned for the first half
of 2016. It should be noted that tax losses related to the Italian companies of the Group can be carried forward indefinitely.
177
As at December 31, 2015, the value of the active deferred taxes not recognised for temporary differences amounted to euro 25,862
thousand (euro 39,530 thousand as at December 31, 2014), and those relative to tax losses amounted to euro 144,891 thousand (euro
37,857 thousand as at December 31, 2014): these amounts refer to situations where recovery was not thought likely.
The breakdown by maturity of the value of tax losses, for which no deferred tax assets were recognised, are shown below:
(in thousands of euro)
year oF maturity
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
without maturity date
12/31/2015
12/31/2014
842
7,988
5,646
7,835
3,651
6,396
3,996
5,521
4,902
38,884
12,690
878
890
455,548
555,667
1,508
8,191
5,577
7,674
3,643
6,010
4,012
5,121
-
37,066
12,690
878
890
72,075
165,334
Consolidated Financial Statements / 2015 ANNUAL REPORT
Of the total tax losses without maturity, euro 396,675 thousand refers to losses posted by the Spanish subsidiary Pirelli Neumaticos
and euro 48,632 thousand in losses due to the UK subsidiary Pirelli UK Ltd. relation to which no sufficient taxable income to recover
those losses is expected. The increase in fiscal losses for which deferred taxes have not been recognised is mainly attributable to
the reversal mentioned of deferred income on tax losses of the Parent company.
The tax effect of gains and losses recognised directly in equity is negative for euro 19,955 thousand (positive for euro 14,879
thousand in 2014), and is disclosed in the Statement of Comprehensive Income; these changes were mainly due to the tax effects
associated with the actuarial gains/losses on employee benefit obligations and the adjustment of derivatives in cash flow hedges to
their fair value.
14. trade receiVaBLes
The breakdown of trade receivables is set forth as follows:
(in thousands of euro)
12/31/2015
12/31/2014
total
non-current
current
total
non-current current
Customers
942,000
Provision for bad debts
(265,808)
676,192
-
-
-
942,000
719,000
(265,808)
(45,192)
676,192
673,808
-
-
-
719,000
(45,192)
673,808
178
Out of the trade receivables total of euro 942,000 thousand (euro 719,000 thousand as at December 31, 2014), gross of the provision
for bad debts, euro 375,798 thousand are overdue (euro 125,204 thousand as at December 31, 2014).
The increase in gross receivables was primarily due to the reclassification of third party receivables due to the Group as at Decem-
ber 31, 2015 from the Pirelli de Venezuela C.A.deconsolidated at December 31, 2015, (euro 220,725 thousand); these receivable were
then fully impaired. This increase is offset by the decrease derived from the deconsolidation, of the receivables due from third
parties to the Venezuelan subsidiary (euro 89.615 thousand).
Receivables overdue and not yet due were measured in accordance with the Group accounting policies described in the section on
adopted accounting standards.
Impaired receivables include both significant single positions subject to individual impairment as well as positions sharing similar
credit risk characteristics that have been regrouped together and impaired on a collective basis.
The change in the provision for bad debts is shown below:
(in thousands of euro)
Opening balance
Translation differences
Increases
Provision for receivables from venezuelan subsidiary
decreases
deconsolidation of provision for bad debts of the venezuelan subsidiary
Other
Closing balance
12/31/2015
12/31/2014
45,192
(2,108)
14,181
220,725
(11,904)
(487)
208
265,808
41,573
(1,251)
16,389
-
(11,504)
-
(15)
45,192
Consolidated Financial Statements / 2015 ANNUAL REPORT
Increases to the provision for bad debts (excluding accruals of the Venezuelan subsidiary) were recognised in the Income State-
ment as “Other costs” (note 33).
For trade receivables, the carrying amount is considered to approximate its fair value.
15. otHer receiVaBLes
The breakdown of other receivables is as follows:
(in thousands of euro)
Financial receivables
Trade accruals and deferrals
Receivables from employees
Receivables from social security
and welfare institutions
Receivables from tax authorities
not related to income taxes
Other receivables
Provision for bad debts
total
12/31/2015
non-
current
current
total
12/31/2014
non-
current
current
62,626
22,689
6,958
7,139
50,738
2,468
1,254
11,888
20,221
5,704
97,651
21,962
13,227
56,167
4,147
1,561
41,484
17,815
11,666
-
7,139
10,643
-
10,643
95,556
8,809
86,747
102,889
12,123
90,766
123,262
318,230
(5,198)
84,355
147,624
38,907
188,364
170,606
434,736
-
(5,198)
(317)
95,147
169,145
-
93,217
265,591
(317)
313,032
147,624
165,408
434,419
169,145
265,274
179
Non-current financial receivables (euro 50,738 thousand) principally include the amounts in escrow accounts in connection with
tax and legal disputes of the subsidiary Pirelli Pneus Ltda (Brazil), bearing interest at market rates, for euro 41,267 thousand (euro
49,956 thousand as at December 31, 2014).
Current financial receivables (euro 11,888 thousand) refer to euro 2,367 thousand to prepaid commissions on the revolving and
term loan multicurrency facility granted to Pirelli & C S.p.A. and to interest paid in advance on loans taken out by the subsidiary
Turk-Pirelli Lastikleri A.S., for euro 3,529 thousand deposited by the Egyptian company to guarantee payments in foreign currency.
The decrease as compared to December 31, 2014 is mainly due to reimbursement of the loan granted to associate Sino Italian Wire
Technology Co Ltd. as part of the sale of the steelcord business (euro 31,195 thousand).
Receivables from tax authorities not related to income taxes (euro 95,556 thousand) relate in particular to receivables on VAT,
withholding and property taxes.
Other non-current receivables (euro 84,355 thousand) mainly refer to amounts in escrow in connection with lawsuits and tax
litigation involving the Brazilian units (euro 59,300 thousands), receivables for guarantees for the benefit of Pirelli that may be
exercised if contingent liabilities materialise in relation to the acquired company Campneus Lider de Pneumaticos Ltda (Brazil),
for euro 7,637 thousand, and a receivable amounting to euro 13,768 thousand relating to a cash contribution in connection with the
signing of an equity partnership agreement.
Other current receivables (euro 38,907 thousand) mainly include advances paid to suppliers of euro 15,544 thousand, receivables
from the disposal of property not used for industrial operations in Brazil of euro 2,352 thousand, and contributions for research and
development to be received from the Region of Piedmont for euro 1,062 thousand.
Consolidated Financial Statements / 2015 ANNUAL REPORT
The movement of the other current receivables and the related provision for bad debts includes the reclassification of intercompany
receivables previously held by Brazilian and Italian third parties against the Venezuelan subsidiary (euro 4,855 thousand)..
For other current and non-current receivables, the carrying amount is considered to approximate their fair value.
16. tax receiVaBLes
Tax receivables relate to income taxes and total euro 68,579 thousand (of which euro 6,169 thousand is included in non-current
assets), as compared to euro 86,028 thousand as at December 31, 2014 (of which euro 12,068 thousand is included in non-current
assets). This amount mainly refers to receivables for tax prepayments made in respect of taxes for the financial year, receivables for
withholding tax paid to foreign entities of euro 15,619 and IRES (corporate income tax) receivables from previous years recognised
in respect of Pirelli & C. S.p.A. for approximately euro 5,343 thousand.
17. inVentories
The breakdown of inventories is as follows:
(in thousands of euro)
Raw and auxiliary materials and consumables
sundry materials
Work in progress and semi-finished products
180
Finished products
goods for resale
Advances to suppliers
12/31/2015
12/31/2014
208,012
6,796
67,710
769,610
-
1,801
210,699
7,193
70,966
759,387
2,357
4,414
1,053,929
1,055,016
The inventory total (which also takes the effect of the deconsolidation of the Venezuelan subsidiary into account to the amount
of euro 30,039 thousand) was substantially stable for 2015 as compared to the previous financial year in terms of both value and
composition. The impairment of stocks, expressed net of reinstatements, amounted to euro 11,095 thousand (reversals amounted to
euro 7,736 thousand as at December 31, 2014).
Inventories are not subject to any collateral pledges.
18. secUrities HeLd For tradinG
Securities held for trading amounted to euro 78,167 thousand as compared to euro 61,404 thousand as at December 31, 2014, an
increase of euro 16,763 thousand.
They consisted of:
unlisted floating-rate bonds for euro 68,040 thousand (euro 57,735 thousand as at December 31, 2014);
unlisted fixed-rate bonds for euro 10,095 thousand (euro 3,631 thousand as at December 31, 2014);
unlisted equities for euro 32 thousand (euro 38 thousand as at December 31, 2014);
The fair value of listed financial instruments corresponds to their stock market price as at December 31, 2015.
The fair value of unlisted financial instruments has been determined by making estimates on the basis of the best information available.
Changes in fair value are recognised in the Income Statement as “Financial income”.
Consolidated Financial Statements / 2015 ANNUAL REPORT
without par value and having normal entitlements, for a total
of euro 1,345,381 thousand. Share capital is presented net of the
value of treasury shares (351,590 ordinary shares and 408,342
savings shares), for a net total of euro 1,343,285 thousand. Total
treasury shares represent 0.16% of the share capital.
Equity per share was euro 4,672, as compared to euro 5,222
as at December 31, 2014.
20.2 equitY AttriButABLe
to NoN-CoNtroLLiNg
iNterests
The equity attributable to non-controlling interests went
from euro 63,157 thousand as at December 31, 2014 to euro
63,367 thousand as at December 31, 2015, mainly due to the
net income for the 2015 financial year which was positive for
euro 7,789 thousand, and which was offset by the decrease
due to the deconsolidation of the Venezuelan subsidiary to the
amount of euro 8,502 thousand.
181
19. casH and casH
eQUiVaLents
Cash and cash equivalents went from euro 1,166,669 thousand
as at December 31, 2014 to euro 1,082,726 thousand as at De-
cember 31, 2015. These were essentially invested on the mar-
ket as short-term maturity deposits with major banking coun-
terparties at interest rates which are in line with prevailing
market conditions. The evident decrease as compared to the
previous financial year and which is attributable also to the
deconsolidation of the Venezuelan subsidiary effective as of
December 31, 2015, highlights a positive Net Financial Position
of euro 277,659 thousand.
In the cash flow statement, the balance of cash and cash
equivalents is net of bank overdrafts amounting to euro 15,568
thousand as at December 31, 2015 (euro 16,063 thousand as at
December 31, 2014).
20. eQUitY
20.1 equitY AttriButABLe
to tHe pAreNt
CompANY
Equity attributable to the Parent Company went from euro
2,548,345 thousand at December 31, 2014 to euro 2,280,177
thousand at December 31, 2015.
This change as compared to December 31, 2014 (negative for
euro 268,168 thousand), was substantially due to the net in-
come of the year (negative for euro 391,366 thousand), the
combined effect of inflation/devaluation deriving from the ap-
plication of hyperinflation accounting in Venezuela (positive
for euro 280,345 thousand), the fair value adjustment of de-
rivative financial instruments in cash flow hedges excluding
the relative tax effect (positive for euro 4,777 thousand), the
fair value adjustment of financial assets/investments availa-
ble for sale (positive for euro 38,853 thousand), the actuarial
losses on pension funds excluding the related tax effect (posi-
tive for euro 12,473 thousand), the payment of dividends (euro
179,572 thousand), the differences resulting from the trans-
lation into Euro of the foreign Financial Statements (negative
for euro 145,945 thousand) which were offset by the positive
effect coming from the reclassification in Income Statement of
previous foreign exchange losses due to the deconsolidation of
the Venezuelan subsidiary and the disposal of the steelcord
business (euro 131,952 thousand).
The subscribed and paid-up share capital at December 31,
2015 (including treasury shares in portfolio) is represented
by 475,740,182 ordinary shares and 12,251,311 savings shares,
Consolidated Financial Statements / 2015 ANNUAL REPORT
21. ProVisions For LiaBiLities and cHarGes
The changes that occurred during the financial year are shown below:
non-current portion (in thousands of euro)
Opening balance
Translation differences
Increases
uses
Reversals
Other
Closing balance at 12/31/2015
12/31/2015
97,799
(19,750)
10,179
(9,686)
(705)
68
77,906
The non-current portion of provisions for liabilities and charges mainly refers to accruals made by the Brazilian subsidiary Pirelli
Pneus Ltda for lawsuits and tax litigation (euro 34,894 thousand) and labour lawsuits (euro 24,470 thousand) and by the parent compa-
ny Pirelli & C. S.p.A. for tax litigation (euro 9,886 thousand) and trade risks, site remediation and labour disputes (euro 4,501 thousand).
Increases mainly refer to accruals for labour disputes of the subsidiary Pirelli Pneus Ltda – Brazil.
Uses relate to costs incurred, mainly in labour lawsuits by the subsidiary Pirelli Pneus Ltda – Brazil and in labour lawsuits and site
clean-up by the parent company Pirelli & C. S.p.A..
182
current portion (in thousands of euro)
Opening balance
Translation differences
Increases
uses
Reversals
deconsolidation of the venezuelan subsidiary
Other
Closing balance at 12/31/2015
12/31/2015
67,030
49
21,382
(21,255)
(9,528)
(1,655)
7,198
63,221
The current portion of provisions for liabilities and charges mainly includes accruals for technical claims and product warranties
(euro 17,574 thousand), site remediation of disused areas of land (euro 4,522 thousand), reorganisation and closure of business units
(euro 1,443 thousand), litigation for occupational diseases (euro 10,237 thousand), tax risks (euro 10,323 thousand), labour lawsuits
(euro 2,509 thousand) and industrial accident insurance (euro 3,677 thousand).
Increases mainly refer to provisions for product claims, labour lawsuits, occupational diseases, tax risks and site remediation of
disused areas of land.
Uses are mainly related to costs incurred to close pending actions against business units domiciled in Italy for occupational disease
lawsuits and in Germany for corporate reorganisation, and claims received by various units within the Group, site remediation of
disused areas of land and settlement of legal disputes.
Consolidated Financial Statements / 2015 ANNUAL REPORT
The reversals of excess provisions mainly concerned technical claims (euro 1,616 thousand), tax (euro 1,046 thousand) and legal
risks (euro 1,765 thousand), industrial/workplace accident insurance (euro 1,437 thousand), labour lawsuits (euro 1,400 thousand)
and legal disputes (euro 1,075 thousand).
22. eMPLoYee BeneFit oBLiGations
The item includes:
(in thousands of euro)
Pension funds:
funded
unfunded
Employee leaving indemnities (TFR - Italian companies)
Healthcare plans
Other benefits
Pension funds
12/31/2015
12/31/2014
154,413
96,375
38,625
21,449
51,678
362,540
203,183
107,899
42,451
22,337
83,075
458,945
The following table shows the breakdown of pension funds as at December 31, 2015:
(in thousands of euro)
Funded funds
Present value of funded
liabilities
Fair value of plan assets
Unfunded funds
Present value of unfunded
liabilities
12/31/2015
germany sweden
total
unFunded
pension
Funds
usa
uk
other
countries
total
Funded
pension
Funds
-
-
-
-
-
158,483
1,247,129
5,846
1,411,458
-
(122,875)
(1,129,387)
(4,783)
(1,257,045)
92,779
3,596
96,375
-
-
-
-
Net liabilities recognised
92,779
3,596
96,375
35,608
117,742
1,063
154,413
183
Consolidated Financial Statements / 2015 ANNUAL REPORT
The following table shows the breakdown of pension funds as at December 31, 2014:
(in thousands of euro)
12/31/2014
germany
sweden
total
unFunded
pension
Funds
usa
uk
other
countries
total
Funded
pension
Funds
Funded funds
Present value of funded
liabilities
Fair value of plan assets
Unfunded funds
-
-
Present value of unfunded
liabilities
104,008
Net liabilities recognised
104,008
-
-
3,891
3,891
-
-
158,128
1,205,203
5,985
1,369,316
(116,931)
(1,044,306)
(4,896)
(1,166,133)
107,899
-
-
-
-
107,899
41,197
160,897
1,089
203,183
The characteristics of the principal pension funds in place at December 31, 2015 are as follows:
Germany: this is an unfunded defined-benefit plan based on the final salary. It provides a pension in addition to the state pen-
sion. The plan was closed in October 1982; the participants in this plan are thus employees whose employment began prior to
that date;
USA: this is a funded defined-benefit plan based on the final salary. It provides a pension in addition to the state pension and is
administered by a trust. The plan was closed in 2001 and frozen in 2003 for employees who were transferred to a defined-con-
tribution scheme. All participants in this plan have retired;
UK: these are funded defined-benefit plans based on the final salary. They provide a pension in addition to the state pension and
are administered in trusts. These plans were closed in 2001. The Pirelli Tyres Ltd plan was frozen in 2010 for employees hired
before 2001, who were transferred to a defined contribution plan. The plan operated by the subsidiary Pirelli UK Ltd, which
includes the employees in the Cables and Systems segment sold in 2005, was already frozen as at the date of the sale in 2005;
Sweden: this involves a defined benefit plan (ITP2), which was closed to new participants, and the only participants are retired
employees and recipients of deferred pensions.
184
Consolidated Financial Statements / 2015 ANNUAL REPORT
The changes in net liabilities in 2015 for funded and non-funded defined benefit pension fund assets are as follows:
(in thousand of euro)
Opening balance at January 1, 2015
Translation difference
Movements through income statement:
current service cost
interest expense / (income)
Remeasurements recognized in equity:
actuarial (gains) / losses from change in demographic
assumptions
actuarial (gains) / losses from change in financial assumptions
experience adjustment (gains) losses
return on plan assets, net of interest income
Employer's contributions
Employee contributions
benefits paid
settlements
Other
present value oF
gross liabilities
Fair value
oF plan assets
total net
liabilities
1,477,209
92,124
1,093
54,996
56,089
3,964
(38,623)
(4,807)
-
(39,466)
-
24
(77,120)
(342)
(685)
(1,166,127)
(77,050)
-
(45,993)
(45,993)
-
-
-
5,576
5,576
311,082
15,074
1,093
9,003
10,096
3,964
(38,623)
(4,807)
5,576
(33,890)
(51,992)
(51,992)
(24)
77,120
-
1,445
-
-
(342)
760
Closing balance at December 31, 2015
1,507,833
(1,257,045)
250,788
185
The changes in net liabilities occurring in 2014 were as follows:
(in thousand of euro)
Opening balance at January 1, 2014
Translation difference
Movements through income statement:
current service cost
interest expense / (income)
Remeasurements recognized in equity:
(gain) loss from change in demographic assumptions
(gain) loss from change in financial assumptions
experience (gains) losses
return on plan assets, net of interest income
Employer's contributions
Plan participants' contributions
benefits paid
Other
Closing balance at December 31, 2014
present value oF
gross liabilities
Fair value
oF plan assets
total net
liabilities
1,196,912
92,263
895
54,973
55,867
12,630
170,829
11,885
-
195,343
-
22
(62,668)
(531)
1,477,209
(880,907)
(75,846)
-
(42,086)
(42,086)
-
-
-
(187,135)
(187,135)
316,005
16,416
895
12,887
13,781
12,630
170,829
11,885
(187,135)
8,208
(44,006)
(44,006)
(22)
62,668
1,207
-
-
675
(1,166,127)
311,082
Consolidated Financial Statements / 2015 ANNUAL REPORT
The service cost is included in the item “Personnel expenses” (note 31), while interest expense/(income) is included in the item
“Financial expenses” (note 36).
The following table shows the breakdown of funded pension fund assets:
(in thousand of euro)
shares
bonds
Insurance policies
deposits
balanced funds
Real Estate
derivatives
Other
12/31/2015
12/31/2014
listed
unlisted
total
%
listed
unlisted
total
%
70,957
361,394
432,351
173,429
116,948
290,377
-
250,344
-
-
-
-
4,783
4,996
4,783
255,340
109,778
109,778
207,262
207,262
(51,834)
(51,834)
8,989
8,989
34%
23%
0%
20%
9%
16%
-4%
1%
74,725
269,765
344,490
30%
203,615
161,826
365,441
-
63,913
846
-
113,151
4,896
4,468
187,179
73,210
-
-
8,533
4,896
68,381
188,025
73,210
113,151
8,533
31%
0%
6%
16%
6%
10%
1%
494,730
762,315
1,257,045
100%
456,249
709,878
1,166,127
100%
The principal risks to which the Group is exposed in relation to pension funds are detailed as follows:
volatility of assets serving the plans: to limit the liabilities, investment strategy privileges assets which are expected to have
relatively high and stable returns over the long-term. This means that certain investments, such as listed shares, feature high
volatility over the short term, and that this exposes the plans to risks of reduction in the value of assets in the short-term, conse-
quently increasing liabilities. However, this risk is mitigated by the diversification of the investments into different investment
classes, through different investment managers and different investment styles. Moreover, the investments are continuously
revised in response to market conditions, with adjustments to maintain the overall risk at adequate levels;
changes in bond yields and expected inflation: forecasts of falling yields on bonds and/or rising inflation lead to an increase in
the value of liabilities. Plans reduce this risk by making investments in “liability hedging” assets. In the United Kingdom, the
protection assured by a portfolio of this type has been built up over the last several years, and from the second quarter of 2014
has reached 100% of the value of the liabilities covered by assets;
life expectancy: growing life expectancy entails an increase in the value of plan liabilities. Plans do not protect themselves di-
rectly against this risk. UK plans have set in motion a process that will lead to being protected against longevity risks initially
to an extent of 50% of liabilities covered by assets. Liabilities are measured by using prudent hypotheses whose adequacy is
revised periodically.
In the UK, management of the assets of the plans has delegated, under the supervision and within a precise mandate attributed
by the Trustees, to a Fiduciary Manager who operates according to a model of Liability Driven Investment (LDI), or having as a
reference, liabilities (liability benchmark) so as to minimise volatility (and thus the risk) of the deficit, which in fact did reduce to
about one third as compared to the levels applying before its introduction (early 2011). The key parameters of this mandate may be
summarised as follows:
a mix of assets under dynamic management over time, rather than a fixed strategic allocation;
hedging of about 100% of the risk related to interest and inflation rates – meaning a percentage of the asset value – through the
use of debt instruments (government bonds) and derivatives;
management of foreign exchange risk with the goal of hedging at least 70% of the exposure to foreign currencies held in the
portfolio through use of forward contracts
In the United Kingdom, funding arrangements and funding policies are revised once every three years. The next evaluation of
funding is foresee for 2017. In the United States evaluations of funding are made on an annual basis.
Contributions expected to be paid into unfunded pension funds during the 2016 financial year amount to euro 6,351 thousand,
whereas those funded amount to euro 36,415 thousand.
186
Consolidated Financial Statements / 2015 ANNUAL REPORT
Employee leaving indemnities (TFR)
Changes for the financial year in Employee leaving indemnities (Italian companies) are as follows:
(in thousands of euro)
Opening balance
Liabilities held for sale
Movements through income statement:
current service cost
interest expense
Remeasurements recognized in equity:
actuarial (gains) losses arising from changes in financial assumptions
experience (gains) losses
Indemnities/advanced payments
Other
Closing balance
12/31/2015
12/31/2014
42,451
-
207
737
(1,932)
-
(2,053)
(785)
38,625
44,496
(6,574)
146
1,254
5,787
(748)
(2,129)
219
42,451
The cost of labour is included in the item “Personnel expense” (note 31), whereas interest expense is included in the item “Financial
expenses” (note 36).
Contributions which are expected to be paid into Employees’ leaving indemnities during the 2016 financial year amount to euro
1,707 thousand.
Healthcare plans
187
This item refers exclusively to the healthcare plan in place in the United States subsidiary.
(in thousands of euro)
Liabilities recognised at 12/31/2015
Liabilities recognised at 12/31/2014
The following changes occurred during the period:
(in thousands of euro)
Opening balance
Translation differences
Movements through income statement:
current service cost
interest expense
Remeasurements recognized in equity:
actuarial (gains) losses arising from changes in financial assumptions
actuarial (gains) losses arising from changes in demographic assumptions
experience (gains) losses
benefits paid
Closing balance
usa
21,449
22,337
12/31/2015
12/31/2014
22,337
2,508
5
819
(632)
(392)
(1,970)
(1,228)
21,449
17,333
2,585
4
773
1,610
854
303
(1,125)
22,337
Consolidated Financial Statements / 2015 ANNUAL REPORT
The cost of labour is included in the item “Personnel expense” (note 31), while the interest expense is included in the item “Financial
expenses” (note 36).
Contributions expected to be paid into the healthcare plan during 2016 total euro 1,566 thousand.
Additional information regarding post-employment benefits
Net actuarial losses accrued in 2015 and recognised directly in equity totalled euro 17,675 thousand (at December 31, 2014 net ac-
tuarial losses totalled euro 30,263 thousand).
The principal actuarial assumptions used at December 31, 2015 are as follows:
italy
germany netherlands sweden
uk
usa
discount rate
Inflation rate
Expected rate of wage and salary increases
Healthcare cost trend rates - initial
Healthcare cost trend rates - final
2.10%
1.25%
-
-
-
2.10%
1.75%
3.00%
-
-
2.10%
1.75%
2.00%
-
-
2.75%
1.50%
3.90%
3.05%
-
-
-
-
-
-
4.05%
N/A
N/A
8.00%
4.50%
The principal actuarial assumptions used at December 31, 2014 are as follows:
188
discount rate
Inflation rate
Expected rate of wage and salary increases
Healthcare cost trend rates - initial
Healthcare cost trend rates - final
italy
germany netherlands sweden
uk
usa
1.75%
1.50%
-
-
-
1.75%
2.00%
3.00%
-
-
1.75%
2.00%
2.00%
-
-
2.40%
1.50%
3.70%
2.98%
-
-
-
-
-
-
3.75%
N/A
N/A
6.00%
4.50%
The following table shows the analysis of the payment by due dates related to the post-employment benefits:
(in thousands of euro)
Pension funds
Employees’ leaving indemnities (TFR)
Healthcare plan
within 1
year
1 to 2 years 3 to 5 years
over 5
years
total
76,798
1,707
1,566
80,071
77,725
1,727
1,571
81,024
239,232
6,554
4,625
418,352
12,566
7,360
250,410
438,276
812,107
22,554
15,122
849,781
The weighted average duration of obligations for post-employment benefits is 15.36 years (15.73 years at December 31, 2014).
Consolidated Financial Statements / 2015 ANNUAL REPORT
The following table sets forth the sensitivity analysis for the relevant actuarial assumptions at the end of the financial year:
(in %)
impact on post employment beneFits
change
in assumption
increase
in assumption
decrease
in assumption
discount rate
Inflation rate (only uk plans)
0.25%
decrease by
0.25%
increase by
3.61%
3.15%
increase by
decrease by
3.83%
2.63%
At the end of 2014 the situation was as follows:
(in %)
impact on post employment beneFits
change
in assumption
increase
in assumption
decrease
in assumption
discount rate
Inflation rate (only uk plans)
0.25%
decrease by
0.25%
increase by
3.77%
2.48%
increase by
decrease by
3.96%
1.97%
The sole purpose of the above analysis consists in estimating the change in liability according to changes in the discount rates and
inflation rate in the United Kingdom close to the principal assumption in respect of rates themselves, rather than referring to an
alternative set of assumptions.
The sensitivity analysis of the liability related to post-employment benefits is based on the same method used to calculate the lia-
bility recognised in Financial Statements.
189
Other long-term benefits
The table below sets forth a breakdown of other long-term benefits:
(in thousands of euro)
Long-term incentive plans
Jubilee awards
Leaving indemnities - non Italian companies
Other long-term benefits
12/31/2015
12/31/2014
-
17,348
26,881
7,449
51,678
10,909
17,252
46,340
8,574
83,075
The decrease in the Long-term incentive plans item is directly attributable to the reclassification of the amount allocated in 2014
under “Other current liabilities” and “Other non-current liabilities” due to the decision taken by the Board of Directors on December
22, 2015 to close early the Long Term Incentive Plan 2014-2016 for Management of the Pirelli Group and approved by the Board of
Directors and General Meeting of Pirelli & C. S.p.A., respectively, on February 27 and June 12 2014, in view of the delisting of the
ordinary shares of Pirelli & C. S.p.A.
The decrease in the item “Leaving indemnities” was mainly attributable to the deconsolidation of the Venezuelan subsidiary (euro
44,283 thousand).
Consolidated Financial Statements / 2015 ANNUAL REPORT
23. BorroWinGs FroM Banks
and otHer FinanciaL institUtions
The following table sets forth the amounts owed to banks and other financial institutions:
(in thousands of euro)
total
12/31/2015
non-
current
current total
12/31/2014
non-
current
current
bonds
1,231,006
731,224
499,782
1,214,297
1,214,297
-
borrowings from banks
1,129,394
540,403
588,991
1,034,380
563,735
470,645
borrowings from other financial institutions
20,517
2,344
18,173
16,028
Financial leasing payables
Accrued financial expenses and deferred
financial income
Other financial payables
507
25,593
7,263
186
1,086
1,055
903
14,973
183
25,530
43,644
159
43,485
321
63
1,333
5,930
3,181
1,577
1,604
190
2,414,280
1,275,688
1,138,592
2,312,616
1,781,726
530,890
The item bonds refers to:
for the current portion, to the unrated bond placed by Pirelli & C. S.p.A. on the Eurobond market of an aggregate nominal
amount of euro 500 million, with a fixed coupon of 5.125% and maturity in February 2016;
for the non-current portion:
the private placement made by Pirelli International Plc on the American market for an aggregate nominal amount of USD 150
million (equal to euro 137,779 million based on the exchange rate at December 31, 2015), with a duration of between 5 and 12
years and an average coupon of 5.05%. Following exceeding the threshold of 50%, of the ordinary capital of Pirelli by Marco
Polo Holding, there was a “change of control” event on the loan. In accordance with contract provisions, Pirelli International
Plc, made an offer or redemption to underwriters, to which no sign-ups were received. Therefore, the original maturity date
of the loan has been kept unchanged in preparing the Financial Statements as at December 31, 2015.
the unrated bond, placed by Pirelli International Plc on the Eurobond market in November 2014 for a nominal amount of euro
600 million, with a fixed coupon of 1.75%. In respect of this loan, as already advised to the market, no “change of control”
event occurred and so it will remain in being until its natural maturity.
The carrying amounts of the bonds were determined as follows:
(in thousands of euro)
Nominal value
Transaction costs
Amortisation of effective interest rate
Adjustment for fair value hedge
12/31/2015
12/31/2014
1,237,728
(13,828)
7,106
-
1,231,006
1,223,548
(13,828)
4,304
273
1,214,297
Borrowings from banks, amounting to euro 1,129,394 thousand refer mainly to,:
loans granted by the European Investment Bank (EIB) to Pirelli Tyre S.p.A. for research and development projects and to S.C.
Pirelli Tyres Romania S.r.l. for local industrial investments. These loans total euro 150,000 thousand (euro 250,000 thousand at
December 31, 2014), fully used, of which euro 100,000 thousand was classified as current bank borrowings, and the remainder,
totalling euro 50,000 thousand, was classified as non-current bank borrowings (at December 31, 2014 euro 150,000 thousand
Consolidated Financial Statements / 2015 ANNUAL REPORT
used committed credit facilities of euro 820,480 thousand (euro
1,125,000 thousand at December 31, 2014) maturing in 2020.
Accrued financial expenses and deferred financial in-
come (euro 25,530 thousand) mainly refer to the portion of
interest accrued on bonds (euro 23,757 thousand; euro 23,656
thousand at December 31, 2014) and accrued interest on bank
loans for euro 853 thousand (euro 1,203 thousand as at De-
cember 31, 2014). As at December 31, 2014, this also included
interest rate swaps for euro 18,152 thousand.
Other current financial payables sums received from Mon-
te Titoli for the purchase of Pirelli shares by Marco Polo In-
dustrial Holding and which must be reimbursed to a number
of shareholders (euro 1,805 million) and new funding for euro
2,619 thousand.
Other non-current financial payables includes the guar-
antee deposit towards Prelios S.p.A. of euro 1,332 thousand,
related to the lease of the R&D building, for the entire duration
of the lease (October 15, 2012 – October 14, 2018).
Current and non-current financial payables backed by se-
cured guarantees (pledges and mortgages) totalled euro 8,526
thousand (euro 84,747 thousand at December 31, 2014).
The reduction is attributable to the full repayment of the debt
and the cancellation of the mortgage of the Mexican subsidiary.
191
Current financial payables include the quota part of non-cur-
rent financial payables, which amount to euro 793,051 thou-
sand (euro 278,700 thousand as at December 31, 2014) which
will be adjusted during the subsequent financial year.
was classified as non-current bank borrowings and euro
100,000 thousand was classified as current bank borrow-
ings). On December 16, 2015, Pirelli Tyre S.p.A. repaid the
maturing tranche of euro 100,000 thousand;
euro 279,520 thousand (euro 75,000 thousand at Decem-
ber 31, 2014) for the use of the revolving line of credit and
multicurrency term loan facility with a five year dura-
tion of euro 1,000,000 thousand granted to Pirelli Inter-
national Limited which was subscribed to on January 9,
2015, and which replaces the revolving credit facility for
euro 1,200,000 thousand. These uses were classified as
non-current bank borrowings;
euro 100,000 thousand for use of the euro 200,000 thou-
sands’ revolving line of credit and multicurrency term loan
facility with a five year duration granted to Pirelli & C.
S.p.A., which was subscribed to on February 13, 2015. These
uses were classified as non-current bank borrowings;
euro 37.000 thousand relative to the Schuldschein (origi-
nally for a nominal aggregate of euro 155,000 which was
partially reimbursed in June 2015 to the amount of euro
112,000 thousand, and in December 2015 to the amount of
a further euro 6,000 thousand) a loan syndicated by the
lender on the basis of a debt certificate governed under
German law granted to Pirelli International Plc and which
was disbursed on 14 December 2012, with original maturi-
ty in June 2016, to the amount of euro 32,000 thousand and
in December 2017 for the residual amount of euro 5,000
thousand. This last tranche has been reclassified under
short-term liabilities as a result of the “change of control”
event as provided for by the contractual conditions;
euro 72,242 thousand relative to loans classified as cur-
rent bank borrowings granted in favour of the Mexican
subsidiaries by HSBC for euro 32,575 thousand, by Banco
Santander and Banco BBVA for euro 15,867 thousand each
and by Citibank for euro 7,933 thousand. These loans have
a maturity of 180 days and are not covered by any sort of
guarantee.
euro 2,975 thousand relative to loans granted by Banco
Nacion Argentina between October 2011 and June 2012 in
favour of Pirelli Neumaticos S.A.I.C. The duration of the
loan is 5 years, expiring in October 2016, provides for
monthly repayments amounting to euro 296 thousand and
is backed by secured guarantee;
use of credit lines at local level, in China, Brazil, Co-
lombia, Egypt, Turkey and USA, to the amount of euro
484,468 thousand, of which euro 374,962 thousand was
classified as current bank borrowings, and the remain-
der, totalling euro 109,506 thousand was classified as
non-current bank borrowings.
As at December 31, 2015 the Group had, aside from cash and
financial assets held for trading of euro 1,160,893 thousand, un-
Consolidated Financial Statements / 2015 ANNUAL REPORT
The carrying amount of current financial payables is considered to approximate their fair value. The table below compares the fair
value of non-current financial payables with their carrying amount:
(in thousands of euro)
Pirelli & C. s.p.A. bonds
Pirelli International Plc bonds
Private placement - Pirelli International Plc
borrowings from banks
Other financial payables
12/31/2015
12/31/2014
carrying
amount
Fair value
carrying
amount
Fair value
-
594,022
137,202
540,403
4,061
-
594,054
131,761
678,671
4,060
1,275,688
1,408,546
498,940
592,483
122,873
563,735
3,695
1,781,726
523,565
605,184
147,731
566,125
3,695
1,846,300
The public bonds issued by Pirelli & C. S.p.A. and by Pirelli International Plc are listed on an active market and the related fair value
was measured with reference to prices at the end of the year. They are thus classified as level 1 in the hierarchy.
The fair value of the private placement in U.S. Dollars issued by Pirelli International Ltd and the fair value of the bank borrowings
were calculated by discounting each debtor cash flow at the market swap rate for the currency and at the reference maturity date,
increased by the Group credit rating. They are classified as level 2 in the hierarchy.
At December 31, 2015, the breakdown of borrowings from banks and other financial institutions to lenders by interest rate and by
currency of origin of the debt was as follows:
192
(in thousands of euro)
EuR
usd (us dollar)
bRL (brazilian Real)
CNy (Chinese Renminbi)
RON (Romanian Leu)
TRy (Turkish Lira)
ARs (Argentinian Peso)
Other currencies
Current payables
EuR
usd
bRL (brazilian Real)
CNy (Chinese Renminbi)
RON (Romanian Leu)
MxN (Mexican Pesos)
ARs (Argentinian Pesos)
Non current payables
FiXed rate
Floating rate
total
654,417
3,272
322,750
7,734
99
26,871
2,975
79,423
33,515
-
-
-
-
-
-
7,536
687,932
3,272
322,750
7,734
99
26,871
2,975
86,959
1,097,541
96%
41,051
4%
1,138,592
599,361
137,217
53,971
-
-
-
-
380,285
-
21,708
33,358
49,788
-
-
979,646
137,217
75,679
33,358
49,788
-
-
790,549
62%
485,139
38%
1,275,688
1,888,090
78%
526,190
22%
2,414,280
Consolidated Financial Statements / 2015 ANNUAL REPORT
A breakdown as at December 31, 2014 was as follows:
(in thousands of euro)
EuR
bRL (brazilian Real)
CNy (Chinese Renminbi)
RON (Romanian Leu)
TRy (Turkish Lira)
ARs (Argentinian Peso)
Other currencies
Current payables
EuR
usd (us dollar)
bRL (brazilian Real)
CNy (Chinese Renminbi)
RON (Romanian Leu)
MxN (Mexican Pesos)
ARs (Argentinian Pesos)
Non current payables
FiXed rate
Floating rate
total
124,828
176,540
34,333
106
46,731
5,192
23,630
119,530
-
-
-
-
-
411,360
77%
119,530
23%
1,193,922
123,045
130,271
-
-
-
3,860
151,356
-
44,051
40,883
49,495
44,843
-
244,358
176,540
34,333
106
46,731
5,192
23,630
530,890
1,345,278
123,045
174,322
40,883
49,495
44,843
3,860
1,451,098
81%
330,628
19%
1,781,726
193
1,862,458
81%
450,158
19%
2,312,616
As at December 31, 2015 non hedging derivatives were created in respect of variable rate debt whereas as at December 31, 2014
the value of fixed rate debt included both debts that were contractually for a fixed rate and debt denominated at a variable rate in
respect of which hedging derivatives were created.
The Group’s exposure to fluctuations in interest rates on financial payables, both in terms of the type of rate and their resetting,
are summarised below:
(in thousands of euro)
12/31/2015
12/31/2014
total
FiXed rate
Floating
rate
total
FiXed rate
up to 6 months
1,136,210
1,095,032
From 6 to 12 months
From 1 to 5 years
More than 5 years
4,536
1,177,479
96,055
4,536
692,467
96,055
41,178
-
635,162
130,602
185,003
130,602
485,012
1,459,288
1,459,288
-
87,565
87,565
Floating
rate
450,158
-
-
-
2,414,280
1,888,090
526,190
2,312,616
1,862,458
450,158
The average cost of debt for 2015 was at 5.90% (6.05% for 2014).
With regard to the presence of financial covenants and negative pledge clauses, it is to be noted that:
the revolving and term loan multicurrency facility granted to Pirelli International Plc for a total of euro 1,000,000 thousand,
and withdrawn for euro 279,520 thousand foresees in cases of negative pledges, an undertaking not to grant secured guarantees
Consolidated Financial Statements / 2015 ANNUAL REPORT
beyond the threshold defined as being Euro 200,000 thousand or 5% of Total Assets (as per the consolidated Financial Statements
of Pirelli & C. S.p.A.) whichever is the higher, with the exception of secured guarantees on existing debt or debt to replace it,
and to be granted pursuant to law in respect of trade finance, project finance and subsidised finance, or on loans granted by
supranational entities;
the revolving and term loan multicurrency facility granted to Pirelli & C. S.p.A. for a total of euro 200,000 thousand, and used
for euro 100,000 thousand foresees, in cases of negative pledges, an undertaking not to grant secured guarantees beyond the
threshold defined as being euro 200,000 thousand or 5% of Total Assets (as per the consolidated Financial Statements of Pirelli &
C. S.p.A.) whichever is the higher, with the exception of secured guarantees on existing debt or debt to replace it, to be granted
pursuant to law in respect of trade finance, project finance and subsidised finance, or on loans granted by supranational entities;
the private placement for a total of USD 150 million with due dates falling between December 5, 2017 and December 5, 2024
envisages, aside from the commitments indicated herein above:
keeping to a ratio between non-centralised indebtedness (referring to companies other than Pirelli International Plc, Pirelli
& C. S.p.A. and Pirelli Tyre S.p.A.) and total assets as reported in the consolidated Financial Statements of Pirelli & C. S.p.A.
and set at 25% (and the ratio between “secured” debt and total assets not exceeding 15% in any event);
introduction of a financial covenant whereby the ratio applying to gross operating margin and financial expenses as report-
ed in the consolidated Financial Statements of Pirelli & C. S.p.A. be greater than or equal to 3.5 when the ratio between net
consolidated indebtedness and gross operating margin is greater than 2.5.
These parameters were fully satisfied as at December 31, 2015.
in cases of negative pledges, an undertaking not to grant secured guarantees beyond the threshold defined as being Euro
100,000 thousand or 3% of Total Assets whichever is the higher (as per the consolidated Financial Statements of Pirelli &
C. S.p.A.), with the exception of secured guarantees on existing debt or debt to replace it, to be granted pursuant to law in
respect of to trade finance, project finance and subsidised finance, or on loans granted by supranational entities.
the Schuldschein subscribed to by Pirelli International Plc for a nominal total amount of euro 37,000 thousand, with due dates
falling between June 2016 and December 2017 (originally for an aggregate nominal sum of euro 155,000 and partially reim-
bursed in June and December 2015) envisages, in cases of negative pledges, an undertaking not to grant secured guarantees
beyond the threshold defined as being euro 100,000 thousand or 3% of Total Asset, whichever is the highest (as defined in the
Consolidated Financial Statements of Pirelli & C. S.p.A.), with the exception of secured guarantees on existing debt or any debt
which replaces it (to be granted pursuant to law) relating to trade finance, project finance, subsidised finance, or any loans
granted by supranational entities.
The other outstanding financial payables do not contain financial covenants.
24. trade PaYaBLes
Trade payables are listed in the following table:
(in thousands of euro)
suppliers
bill and notes payable
12/31/2015
non-
current
current
total
-
-
-
1,281,810
1,377,024
31,321
17,288
1,313,131
1,394,312
12/31/2014
non-
current
current
-
-
-
1,377,024
17,288
1,394,312
total
1,281,810
31,321
1,313,131
The evident decrease in 2015 as compared to 2014 includes the deconsolidation of the Venezuelan subsidiary to the amount of euro
44,522 thousand.
The carrying amount of trade payables is considered to approximate their fair value.
194
Consolidated Financial Statements / 2015 ANNUAL REPORT
25. otHer PaYaBLes
Other payables are listed in detail in the following table:
(in thousands of euro)
Accrued trade liabilities
and deferred trade income
Tax payables not related to income taxes
Payables to employees
Payables to social security
and welfare institutions
dividends payable
Other payables
total
12/31/2015
non-
current
current
total
12/31/2014
non-
current
current
65,812
40,450
25,362
69,354
36,230
33,124
76,682
149,446
3,485
24,186
73,197
125,260
121,692
103,211
4,622
-
117,070
103,211
66,402
22,195
44,207
75,356
29,098
46,258
6,879
137,582
502,803
-
8,315
98,631
6,879
129,267
404,172
9,624
138,932
518,169
-
4,742
74,692
9,624
134,190
443,477
Non-current accrued trade liabilities and deferred trade income relate, for euro 37,670 thousand to capital contributions re-
ceived for investments made in Mexico and Romania, whose benefits are recognised in the Income Statement in proportion to the
costs for which the contribution has been disbursed.
Current accrued trade liabilities and deferred trade income include euro 5,403 thousand for government grants by the Pied-
mont Region, relating to financing for plants aimed at the realization of the New Technological Centre and whose benefits are
recognised in the Income Statement in proportion to the costs for which the contribution was granted, euro 4,119 thousand in tax
incentives for the Gravatai project carried out in Brazil and deferred for the duration of the amortisation period of the investment,
euro 2,940 thousand for various trade initiatives, euro 2,235 thousand for the portion not yet recognized in the Income Statement
of the state contributions received for the investment of Slatina in Romania and euro 2,128 thousand for costs related to insurance
coverage in some Eurozone countries.
195
Tax payables not related to income taxes is mainly comprised of payables for VAT or equivalent taxes, indirect taxes not related
to income, and withholding tax for employees.
Payables to employees mainly include compensation accrued during the period but not yet paid, including a estimate of LTI incen-
tives, as well as the value of the three-year monetary incentive plan Long Term Incentive 2014 - 2016, for Pirelli Group Management,
closed early by resolution of the Board of Directors following the delisting of ordinary shares of Pirelli & C. S.p.A.
Other current payables (euro 129,267 thousand) mainly include:
euro 78,333 thousand for the purchase of property, plant and equipment (euro 76,398 thousand as at December 31, 2014);
euro 9,914 thousand for income withholding tax (euro 8,342 thousand as at December 31, 2014);
euro 6,467 thousand for payables to representatives, agents, professionals and consultants (euro 8,061 thousand as at Decem-
ber 31, 2014);
euro 6,851 thousand for payables to directors, statutory auditors and supervisory bodies (euro 1,662 thousand as at De-
cember 31, 2014).
euro 4,747 thousand in advances from customers (euro 16,839 as at December 31, 2014);
euro 2,963 for customer refunds.
The deconsolidation of the Venezuelan subsidiary impacted particularly on the reduction of payables towards employees to the
amount of euro 26,553 thousand and payables towards social security and welfare institutions to the amount of euro 3,857 thousand.
For other current and non-current payables, it is considered that their value approximates fair value.
Consolidated Financial Statements / 2015 ANNUAL REPORT
26. tax PaYaBLes
Tax payables totalling euro 65,091 thousand (of which euro 2,646 thousand was recognised in non-current liabilities), mainly relate
to national and regional income taxes which decreased compared to euro 104,158 thousand as at December 31, 2014 (of which euro
3,397 thousand was recognised in non-current liabilities).
27. deriVatiVe FinanciaL instrUMents
The item includes a fair value assessment of derivative instruments and the breakdown is the following:
(in thousands of euro)
12/31/2015
12/31/2014
current
assets
current
liabilities
current
assets
current
liabilities
Without adoption of hedge accounting
Foreign currency derivatives - trade transactions
42,327
(36,825)
Foreign currency derivatives - included in net financial
position
6,840
(15,149)
Interest rate derivatives
Other derivatives - included in net financial position
196
Hedge accounting adopted
cash flow hedge:
Foreign currency derivatives - trade transactions
Interest rate derivatives
Other derivatives
fair value hedge
-
-
-
11,608
530
Interest rate derivatives - included in net financial position
-
-
-
-
-
(5)
-
61,305
(51,979)
19,765
5,868
-
-
2,113
606
545
207
29,104
(26,002)
(2,553)
(2,180)
(2,089)
-
(10,011)
-
-
(42,835)
- Total derivatives included in net financial position
6,840
(15,149)
6,075
(4,642)
Derivative financial instruments without adoption of hedge accounting
The value of foreign currency derivatives corresponds to the fair value of forward currency purchases/sales outstanding as at
the closing date of the period. These involve hedges of Group trade and financial transactions for which hedge accounting was not
adopted. Fair value has determined by using a forward exchange rate as at the date of Financial Statements.
Derivative financial instruments with adoption of hedge accounting
Cash flow hedge
The value of interest rate derivatives, recognised among current liabilities for euro 11,608 thousand refers to fair value assess-
ment of 4 cross currency interest rate swaps negotiated in November 2012 to cover the exchange rate risk exposure and limit expo-
sure to the risk rate associated with the private placement by Pirelli International Plc on the US market for a total nominal amount
of USD 150 million with a duration of between 5-12 years (see note 23 “Borrowings from banks and other financial institutions”).
The goal is to cover the change in debt cash flows denominated in foe reign currency (principal and interest) tied to changes in
Consolidated Financial Statements / 2015 ANNUAL REPORT
be ascertained and ruled.
Judgement has been suspended by the Court of Milan pending
a final ruling by community judges. Pirelli has impugned the
order for suspension before the Court of Cassation.
On November 23, 2015, Prysmian Cavi e Sistemi served suit
on Pirelli for damages before the High Court of Justice against
Prysmian and other members of the cartel by National Grid
and Scottish Power, a company felt to have been injured by an
alleged illicit understanding. Specifically, Prysmian has sub-
mitted a plea to obtain from Pirelli and Goldman Sachs, based
on the role played at the time by its parent companies, to hold
it harmless in respect of any obligations to indemnify National
Grid and Scottish Power.
Pirelli has challenged a flaw in jurisdiction of the High Court
of Justice because, since the action recalled above before the
Court of Milan is still pending, it holds that a decision in re-
spect of merit must be handed down by the aforementioned
court submitted to.
On the basis of careful judicial analyses and supported by
opinions drawn up by outside counsel, Pirelli believes it is not
involved in the alleged irregularities of its former subsidiary
and that full final liability for any breach must be borne exclu-
sively by the company directly involved.
As a consequence of the foregoing, assessment of the risk is
such as not to require any specific provision to be set aside in
annual Financial Statements as at December 31, 2015.
197
exchange rates. The amount for this derivative found in equity
is negative for euro 4,987 thousand.
28. coMMitMents and
continGencies
Commitments to purchase property,
plant and equipment
Commitments for the purchase of tangible fixed assets amount
to euro 131,074 thousand (euro 167,122 thousand as at Decem-
ber 31, 2014), and mainly refer to the companies in Romania,
Brazil, Mexico and Italy.
Commitments to purchase of equity
investments/fund units
These refer to commitments to purchase shares in Equinox
Two S.c.a., a private equity company specialised in invest-
ments in listed and unlisted companies with high growth po-
tential, for a maximum counter value of euro 2,208 thousand.
Other contingencies
At the beginning of April 2014 the European Commission
communicated to Pirelli, and other parties involved (includ-
ing Prysmian Cavi e Sistemi, a subsidiary of Pirelli until July
2005), a decision taken at the conclusion of a antitrust inves-
tigation initiated for the energy cables business and which
provides for a penalty against Prysmian of approximately
euro 104 million for a portion of which, amounting to euro 67
million, Pirelli is jointly liable with Prysmian. This decision
confirms that there was no direct involvement by Pirelli in
the alleged cartel. The alleged antitrust violation is attrib-
utable solely to the principle of “parental liability”, because,
during part of the period of the alleged cartel, Prysmian was
controlled by Pirelli. Pirelli appealed to the European Court
of Justice against the decision of the European Commission,
challenging application of the principle of “parental liability”.
Indeed, Pirelli believes that the principle of “parental liability”
is not applicable to it.
The European Commission also ordered Pirelli to deposit bank
surety to cover the payment, if and when due, of 50% of the
penalty levied on Prysmian and Pirelli jointly. As a conse-
quence of the foregoing, on December 17, 2014, Pirelli provided
the Commission with the sureties requested.
Pirelli has commenced legal action before the Court of Milan
so that the obligation of Prysmian to hold Pirelli harmless
from any claim made including that made by the European
Commission, in connection with the aforementioned penalty,
Consolidated Financial Statements / 2015 ANNUAL REPORT
29. reVenUes FroM saLes and serVices
A breakdown of revenue from sales and services is as follows:
(in thousands of euro)
Revenues from sale of goods
Revenues from services
30. otHer incoMe
A breakdown of this item is as follows:
(in thousands of euro)
gains on disposal of property, plant and equipment
Rent income
Insurance indemnities and other refunds
Recoveries and reimbursements
198
government grants
Other income
2015
2014
6,187,347
122,286
6,309,633
5,913,216
104,847
6,018,063
2015
2014
1,846
7,259
13,547
62,643
5,968
77,372
168,635
18,279
7,887
17,277
58,467
6,981
95,185
204,076
Gains on disposal of property, plant and equipment in 2014 included mainly gains to the amount of euro 6,261 thousand deriv-
ing from sale of the land in the Sumaré area in Brazil, for a total of euro 9,365 thousand, from sale of land and buildings in Germany
and Turkey.
The item recoveries and reimbursements includes in particular:
tax refunds for euro 15,082 thousand arising from tax facilitations in Argentina, Egypt, and in the state of Bahia in Brazil on
trade exports;
refunds of taxes and duties totalling euro 21,926 thousand received in Italy for euro 12,459 thousand, in Brazil for 5,575 thousand
as reimbursement of tax credits for fiscal payables (VAT) in respect of the 2013 and 2014 financial years and in Germany for euro
3,294 thousand in the form of contributions for tyre disposal and contributions for the purchase of gas and energy;
proceeds from the sale of scrap materials obtained from Egypt, Turkey and the United Kingdom for a total of euro 10,990 thousand;
recoveries of costs for marketing events, rental management fees, development and product transfer in Italy, Germany and the
United Kingdom for a total of euro 4,079 thousand;
refunds from utilities (electricity) for euro 2,169 thousand.
The item other income includes income from sports for euro 34,351 thousand (euro 36,676 thousand in 2014), income from the re-
lease of provisions for liabilities and charges for euro 10,152 thousand (euro 22,040 thousand for 2014) and provisions for bad debts
of euro 3,842 thousand. The reduction of the item “other” amounting to about euro 17,813 thousand, is due to the increased release
during the 2014 financial year of the contingencies fund for a total of euro 11,888 thousand mainly related to guarantees issued
within the area of extraordinary transactions occurring in previous financial years and lower income achieved from sports activity
to the amount of euro 2,325 thousand.
Consolidated Financial Statements / 2015 ANNUAL REPORT
31. PersonneL exPenses
The breakdown of this item is as follows:
(in thousands of euro)
Wages and salaries
social security and welfare contributions
Costs for employee leaving indemnities and similar
Costs for defined contribution pension funds
Costs for defined benefit pension funds
Costs for jubilee awards
Costs for defined contribution healthcare plans
Other costs
2015
2014
1,016,961
171,939
30,097
22,313
1,093
3,222
40,834
8,671
1,295,130
960,867
174,268
31,539
21,390
895
5,865
38,742
6,204
1,239,770
Personnel expenses include non-recurring events for a total of euro 47,621 thousand (3.7% of the total) of which euro 24,112 thou-
sand for the early closure of the LTI plan and euro 23,509 thousand tied to restructuring costs.
In 2014, the item included euro 24,744 thousand for restructuring costs (2.0% of the total).
32. aMortisation, dePreciation
and iMPairMent
199
The breakdown of this item is as follows:
(in thousands of euro)
Amortisation
depreciation
Impairment of property, plant and equipment
2015
2014
19,527
304,681
2,796
327,004
20,917
277,890
6,048
304,855
Impairment mainly relates to buildings, plants, machinery, and industrial and trade equipment located in Russia and Italy. Of
these impairments, euro 1,867 thousand qualifies as non-recurring events (0.6% of the item total).
Consolidated Financial Statements / 2015 ANNUAL REPORT
33. otHer costs
A breakdown of this item is as follows:
(in thousands of euro)
selling costs
Purchases of goods for resale
Fluids and power
Advertising
Professional advice
Maintenance
Warehouse operating costs
Leases, rental and lease installments
Outsourcing
Travel expenses
IT expenses
key managers compensations
Other provisions
duty stamps, duties and local taxes
Canteen
bad debts
Insurance
Cleaning expenses
Waste disposal
security expenses
Telephone expenses
Other
200
2015
2014
315,773
314,651
199,438
243,081
76,534
66,891
60,865
122,133
40,966
55,895
28,281
14,269
31,562
43,375
26,464
14,182
30,329
19,472
20,707
12,493
11,997
206,192
1,955,550
305,041
306,783
223,611
219,051
53,968
66,276
53,578
113,253
44,961
49,241
27,435
10,058
26,341
37,916
24,052
16,389
28,587
21,031
2 1 ,111
12,081
12,181
156,821
1,829,766
The other costs item includes non-recurring events for euro 18,743 thousand (1% of the total of the item) related primarily to pro-
fessional services connected to the spin-off transaction from Industrial.
In 2014 the item included euro 1,800 thousand (0.1% of the item total) of expenses connected with real estate gains achieved
in Brazil.
Consolidated Financial Statements / 2015 ANNUAL REPORT
34 net incoMe (Loss)
FroM eQUitY inVestMents
34.1 sHAre oF Net iNCome (Loss)
oF AssoCiAtes AND JoiNt veNtures
The Group’s share of net income (loss) for associates and joint ventures accounted for under the equity method was negative to the
amount of euro 9,002 thousand, as compared to the negative result of euro 55,147 thousand for the 2013 financial year.
It basically comprised the transposition of the result portions for the investment in Prelios S.p.A. (negative for euro 6,039 thousand,
as compared to euro 23,612 thousand in 2014), in Eurostazioni S.p.A. (positive for euro 1,637 thousand compared to euro 3,587 thou-
sand in 2014) and in PT Evoluzione Tyre (negative for euro 4,810 thousand as compared to euro 1,378 thousand in 2014).
In 2014, the share also included the share for investments in Fenice S.r.l. (negative for euro 30,770 thousand) and in GWM Renew-
able Energy II S.p.A. (negative for euro 3,244 thousand).
In this regard, reference should be also made to the foregoing note 11 “Investments in associates and joint ventures”.
34.2 gAiNs oN equitY iNvestmeNts
These can be analysed thus:
(in thousands of euro)
gain on the disposal of subsidiaries
Conversion effect of Prelios s.p.A. bond
Other income from investments
2015
2014
-
-
-
-
201
4,781
13,307
901
18,989
The gain on the disposal of subsidiaries includes the results from the disposal of the investment in Pirelli Finance (Luxembourg) S.A..
34.3 Losses oN equitY iNvestmeNts
This item as follows:
(in thousands of euro)
Fair value adjustment of Prelios s.p.A. class b shares
Impairment of investments in associates
Impairment of available-for-sale financial assets
Other losses on investments
2015
2014
-
21,742
15,751
927
38,420
4,772
20,393
29,294
256
54,715
Impairment of investments in associates refers to investments in Prelios S.p.A. for euro 7,000 thousand and GWM Renewable
Energy II S.p.A. for euro 14,085 thousand. In this regard, reference should be made to foregoing note 11 “Investments in associates
and joint ventures”.
The item impairment of available-for-sale financial assets mainly refers to investments in Alitalia – Compagnia Aerea Italiana
S.p.A. (euro 7,115 thousand), in RCS MediaGroup S.p.A. (euro 7,265 thousand) and Equinox Two S.C.A. (euro 460 thousand). In 2014
Consolidated Financial Statements / 2015 ANNUAL REPORT
the item referred mainly to investments in RCS MediaGroup S.p.A. (euro 15,860 thousand), Alitalia – Compagnia Aerea Italiana
S.p.A. (euro 11,229 thousand), Equinox Two S.C.A (euro 1,764 thousand).
34.4 DiviDeNDs
Dividends in 2015 amounted to euro 6,029 thousand compared to euro 3,873 thousand in 2014.
These refer primarily to euro 3,938 thousand for the investment in Mediobanca S.p.A. (euro 2.363 thousand in 2014), for euro 788
thousand for revenues from common investment funds (euros 680 thousand in 2014) for euro 513 thousand in Fin. Priv. S.r.l. (euro
308 thousand in 2014) and euro 202 thousand for Emittenti Titoli S.p.A..
35. FinanciaL incoMe
The breakdown of this item is as follows:
(in thousands of euro)
Interests
Other financial income
Fair value measurement of currency derivatives
2015
2014
64,444
9,520
-
73,964
40,100
8,595
42,982
91,677
202
Interests include euro 29,858 thousand for interest income from financial institutions (euro 15,405 thousand as at December 31,
2014), euro 22,139 thousand of interest on fixed income shares (euro 10,475 thousand as at December 31, 2014), euro 6,596 thousand
for interest rate swaps (euro 8,337 thousand in 2014), euro 2,333 thousand for trade receivables interest (euro 2,620 thousand in
2014) and euro 1,604 thousand for interest on state securities (euro 2,058 thousand as at December 31, 2014).
The other financial income item primarily includes euro 8,226 thousand interest on tax credits and interest accrued on security
deposits paid by the Brazilian associates for legal and fiscal disputes.
36. FinanciaL exPenses
A breakdown of this item is as follows:
(in thousands of euro)
Interests
Fees
High inflation effect venezuela
Other financial expenses
Net losses on foreign currency translation
Net interest costs on employee benefit obligations
Fair value measurement of securities held for trading
Fair value measurement of currency derivatives
Fair value measurement of other derivatives
2015
2014
108,699
20,981
143,477
6,678
84,146
17,362
10
19,817
1,010
124,757
17,100
28,974
9,736
147,973
19,453
477
-
5,617
402,180
354,087
Consolidated Financial Statements / 2015 ANNUAL REPORT
Interests include euro 26,789 thousand for bonds issued by Pirelli & C. S.p.A. in 2011 (euro 26,730 thousand in 2014), euro 6,548
thousand for the private placement made by Pirelli International Plc on the US market at the end of 2012 (euro 5,805 thousand in
2014), euro 12,035 thousand for bonds placed by Pirelli International Plc on the Eurobond market in November 2014 and euro 8,672
thousand for interest on interest rate swaps (euro 22,996 thousand in 2014).
Net losses on foreign currency translation totalling euro 84,146 thousand (losses from exchange rate totalling euro 2,360,410
thousand and gains from exchange rate of euro 2,276,264 thousand) refer to adjustment to year-end exchange rates of items ex-
pressed in currencies other than the functional currency outstanding at the date of the Financial Statements and net losses on items
closed during the course of the financial year.
The Fair value measurement of currency derivatives item refers to the purchase/sale of the trade and financial transaction
hedging in agreement with the exchange rate risk management policy for the Group. For operations which were open at the end of
the financial year, the fair value has been determined by applying the exchange rate at the end of the date of Financial Statements.
The fair value assessment is made up of two elements: the interest component, tied to the interest rate difference between the two
items covered by the individual hedging, amounting to a net hedging expense of euro 61,756 thousand and an exchange rate com-
ponent equal to a net income of euro 41,939 thousand.
Comparison of these net losses on exchange rates, totalling euro 84,146 thousand, with the fair value measurement of the foreign
exchange component of currency hedges negotiated as part of the Group currency risk management strategy (net gain of euro
41,939 thousand, as previously indicated in the “fair value measurement of currency derivatives” item), shows that management of
foreign exchange risk is substantially in balance, considering that the negative imbalance, amounting to euro 42,207 thousand is
mostly related to the depreciation of the Venezuelan currency (euro 23,970 thousand) and the Egyptian currency (euro 10,114 thou-
sand) that are not subject to hedging. The adjustment to the 13.5 Bolivars to the US Dollar (14.70 Bolivar to the Euro) exchange rate
for a significant part of trade transactions in foreign currency registered by the subsidiary Pirelli de Venezuela C.A. has an impact
on the Venezuelan currency which is outstanding as of December 31, 2015.
Net interest costs on employee benefit obligations primarily includes euro 9,004 thousand regarding the pension funds, euro
737 thousand for employee leaving indemnities (TFR) and euro 819 thousand for healthcare plans (see note 22 “Employee benefit
obligations”).
203
Fair value measurement of other derivatives instruments (see note 27 “Derivative financial instruments”) mainly consists of
euro 2,119 thousand related to the gains on derivatives maturing in the period and euro 2,751 thousand relating to the loss from an
adjustment to fair value of other derivatives for which hedge accounting has not been activated.
37. taxes
A breakdown of the income taxes for the period is as follows:
(in thousands of euro)
Current taxes
deferred taxes
2015
2014
187,139
102,998
290,137
194,949
(21,640)
173,309
The Group’s effective tax burden for 2015 in respect of current taxes is wholly attributable to taxes payable by the Tyre Segment
(euro 185,657 thousand) for the positive taxable income of its subsidiaries, partially offset by the accounting recognition by Pirelli
& C. S.p.A. of the positive effects deriving from the option for domestic tax consolidation.
The increase in total tax burden reflects the impact resulting from assessment of the sustainability of deferred tax assets recog-
nised in relation to prior-period tax losses of deferred tax assets on tax losses carried forward in relation to the lack of expected
recoverability of the tax losses by the Italian companies in the Group as a result of the new financial structure that the Group
will take on due to the reverse merger with the parent company Marco Polo Industrial Holding S.p.A. planned for the first half of
2016. The increase in tax expense was also affected by the effect of higher non-deductible expenses of the Venezuelan subsidiary
Consolidated Financial Statements / 2015 ANNUAL REPORT
attributable to an effect of the high levels of inflation recorded in country and the devaluation of the trade payables/receivables.
The reconciliation between estimated taxes and effective taxes is presented below:
(in thousands of euro)
gains / (losses) before taxes
Reversal of deconsolidation of the venezuelan subsidiary
Reversal of share of net income (loss) of associates and joint ventures
A) Total taxable income
B) Estimated taxes
Main causes for changes between estimated and effective taxes:
Income not subject to taxation
Non-deductible costs
use of tax losses carried forward
unrecognised deferred tax assets and/or release of deferred tax assets previously recognised
Taxes not related to income and costs for tax assessment
Other
C) Effective taxes before release of deferred tax assets previously recognised
Released deferred tax assets
D) Effective taxes after release of deferred tax assets previously recognised
Theoretical tax rate (b/A)
Effective tax rate before release of deferred tax assets previously recognised (C/A)
204
Effective tax rate post release of deferred tax assets previously recognised (d/A)
2015
2014
(78,789)
559,491
9,002
489,704
144,984
(78,898)
82,371
(14,995)
22,250
13,192
12,645
181,549
108,588
290,137
30%
37%
59%
488,523
-
55,147
543,670
176,327
(65,539)
91,402
(5,961)
9,259
806
(32,986)
173,309
-
173,309
32%
29%
29%
The Group’s estimated tax burden has been calculated by taking into account the nominal tax rates of the countries where the
Group’s principal companies operate, as shown below:
Europe
Italy
germany
Romania
great britain
Turkey
Russia
NAFTA
usA
Mexico
Central and South America
Argentina
brazil
venezuela
Asia / Pacific
China
Middle East / Africa
Egypt
2015
2014
31.40%
29.58%
16.00%
20.00%
20.00%
20.00%
38.00%
30.00%
35.00%
34.00%
34.00%
31.40%
29.58%
16.00%
21.50%
20.00%
20.00%
38.00%
30.00%
35.00%
34.00%
34.00%
25.00%
25.00%
22.50%
30.00%
Consolidated Financial Statements / 2015 ANNUAL REPORT
The nominal tax rate in Great Britain was reduced from 21.5% in 2014 to 20.0% in 2015, in accordance with local tax laws (Finance
Act 2015).
The nominal tax rate in Egypt also decreased, going from 30% in 2014 to 22.5% in 2015 as a result of a change in legislation.
38. assets and LiaBiLities HeLd For saLe
and discontinUed oPerations
As a result of the signing of a sale agreement for 100% of the steelcord business inked by Pirelli and Bekaert on February 28, 2014,
steelcord business qualifies as a “discontinued operation”. With the sale on February 6, 2015 of the steelcord activities in Turkey
and on March 27, 2015 in China, the sale of the entire Pirelli steelcord business to Bekaert was completed. The steelcord activities
were part of the Industrial business operating segment.
It is recalled in this regard that the steel cord business provided the steel cord required for the production of tyres and that the
sales agreement with Bekaert includes a long-term supply agreement for providing Pirelli with this material.
The result of discontinued operations is as follows:
income statement discontinued operations (in thousands of euro)
2015
2014
Revenues from sales and services
Raw materials and consumables (net of change in inventories)
Personnel expenses
Amortisation, depreciation and impairment
Other costs
Operating income (loss)
Net income (loss) from investments
Financial expenses
Net income (loss) before tax
Tax
Net income (loss)
Gain (loss) on disposal
Disposal tax effect
Net gain (loss) on disposal
Reversal of reserve on foreign currency translation
Net income (loss) from discontinued operations
205
11,058
(10,139)
(484)
-
-
435
-
435
-
435
(1,136)
(13,950)
(14,651)
25,698
(7,820)
73,500
(24,358)
(15,611)
(2,200)
(24,999)
6,332
411
(1,700)
5,043
(2,000)
3,043
-
17,878
(3,298)
17,623
(705)
(431)
The net loss on disposal for euro 1,136 thousand (inclusive of indirect taxes on the sale amounting to euro 431 thousand) refers
to the sale of the Turkish subsidiary Celikord A.Ş and Chinese associate Sino Italian Wire Technology Co. Ltd. This loss partially
reduces the net capital gain (before rollover of exchange reserves), for a total of euro 17,878 thousand, registered for the 2014 finan-
cial year relating to the sale of the steel cord activities in Italy, Brazil and Romania. When preparing the Financial Statements as at
December 31, 2014, steel cord activities in China and Turkey had been valued at the lower of the book value or their fair value on
the basis of elements predictable as at that date.
The reversal of reserve on foreign currency translation relates to foreign exchange losses from the translation into Euro of
the financial statements of the Turkish subsidiary, accruing in previous years, recorded in equity, and reclassified to the Income
Statement following the sale.
Consolidated Financial Statements / 2015 ANNUAL REPORT
39. diVidends Per sHare
In 2015, Pirelli & C. S.p.A. paid to its shareholders, dividends based on 2014 earnings of euro 0.367 for each of the 475,388,592
ordinary shares (excluding treasury shares) and euro 0.431 for each of 11,842,969 savings shares (excluding treasury shares) for a
total of euro 179,572 thousand.
In 2014 Pirelli & C. S.p.A. paid to its shareholders, dividends based on 2013 earnings of euro 0.32 for ordinary shares (excluding
treasury shares) and euro 0.39 for savings shares (excluding treasury shares). Total dividends paid out amounted to euro 156,743
thousand.
40. HYPerinFLation
In accordance with Group accounting policies regarding the criteria for entering/removing from accounts in respect of inflation,
the subsidiary Pirelli de Venezuela C.A. has adopted inflation accounting with effect from the preparation of the consolidated Fi-
nancial Statements at December 31, 2009. It is the only Group company operating in a high-inflation country. The price index used
for this purpose was a mixed index: up until December 31, December, 2007, a consumer price index (IPC) covering only the cities
of Caracas and Maracaibo was used. Beginning in 2008, the Banco Central de Venezuela and the National Institute for Statistics
started to publish a national consumer price index (Indice Nacional de precios al consumidor - INPC) that covers the entire country
and uses December 2007 as its basis for calculation.
For the Financial Statements as at December 31, 2014 an inflation index of 192.8% has been used, calculated on the basis of an
estimate made of annual inflation, amounting to 189.9%, to which an inflation adjustment for the 2014 year, being the difference
applying between the official inflation index for the 2014 year (66.54%) and the estimate of this index used at the end of the previ-
ous financial year (68.84%) has been added. The official inflation index published by the Banco Central de Venezuela was found to
amount to 180.9%.
206
december 31, 2013
december 31, 2014
december 31, 2015
indeX
conversion Factor
498.1
831.0
2,434.0
1.6684
2.9289
1.0000
Losses on net monetary positions are recognised in the Income Statement as “Financial Expenses” (note 36) for euro 143,477 thou-
sand (euro 28,974 thousand for 2014).
41. reLated PartY transactions
Related party transactions, including intercompany transactions, are neither unusual nor exceptional, but are rather part of the
ordinary course of business of Group companies. These transactions, when not carried out at standard conditions or dictated by
specific regulations, are settled on an arm’s length basis and executed in compliance with the rules set out in the Procedure for
Related Party Transactions the Group has taken on.
Consolidated Financial Statements / 2015 ANNUAL REPORT
The effects of related party transactions on the Consolidated Income Statement, and Statement of Financial Position, of the Pirelli &
C. Group as at December 31, 2015 are shown below.
transactions with associates and Joint ventures (in millions of euro)
Revenues from sales/services
and other income
Other costs
3.4
31.5
The amount refers mainly to, rental income and relevant management fees paid by Prelios
group (euro 2,0 million), to services rendered to Prelios s.p.A. (euro 0.1 million), to services
rendered to PT Evoluzione Tyres (euro 0.9 million), and royalties paid by Idea granda società
Consortile s.r.l. to Pirelli & C. Ambiente s.r.l. (euro 0.2 million).
The amount includes energy purchases and machinery lease from Industriekraftwerk
breuberg gmbH (euro 22.2 milion), costs for the purchase of goods from sino Italian Wire
Technology Co. Ltd (euro 7.7 million) and PT Evoluzione Tyres (euro 1.3 milion), and services
provided by CORIMAv (euro 0.2 million).
Financial income
0.4
The amount refers to interest from the loan granted to sino Italian Wire Technology Co. Ltd.
Current trade receivables
1.4
The amount mainly concerns receivables for services provided to Prelios group s.p.A. (euro
0.7 million) and to PT Evoluzione Tyres (euro 0.7 million)
Other current receivables
0.1
The amount refers to financial receivables from Fenice s.r.l. (euro 0.1 million).
Non-current borrowings from banks
and other financial institutions
1.3
security deposit received from Prelios s.p.A. as guarantee for the rental of the Milan
premises.
Current trade payables
Other current payables
22.4
This amount mainly consists of payables for the purchase of energy from Industriekraftwerk
breuberg gmbH.
0.1
Other current payables refers to the deferral of a portion of the rental charges for the Milan
premises of Prelios s.p.A. (euro 0.1 million).
transactions with other related party (in millions of euro)
Financial expenses
0.7
The expenses are related to interests payable to unicredit (euro 0.2 million) and Intesa-san
Paolo group (euro 0.4 million)
207
Benefits for key managers of the company
As at December 31, 2015, the compensation to which key managers with strategic responsibilities were entitled to amounted to
euro 27,853 thousand (euro 18,268 thousand as at December 31, 2014). The portion relating to employee benefits was recognised
in the Income Statement as “Personnel expenses” for euro 13,584 thousand (euro 8,209 thousand as at December 31, 2014) and for
euro 14,269 thousand under the item “Other Costs” in the Income Statement (euro 10,058 thousand as at December 31, 2014). The
remuneration also includes euro 1,572 thousand for employee leaving indemnity (TFR) and retirement benefits (euro 1,835 thousand
as at December 31, 2014).
42. siGniFicant eVents sUBseQUent
to tHe end oF tHe FinanciaL Year
On February 9, 2016 Pirelli and the Lombardy Region signed a competitiveness agreement for a regional grant of euro 1.9 million
to the R & D project “Total Safety System” conducted at the research centre of Milan Bicocca. The project, which will last for 24
months and have a total cost of euro 5.35 million, is part of activities related to the development of a new generation of tyres based
on the concept of “total safety”. The project will allow Pirelli to study new product mixes oriented towards higher value-added seg-
ments, and to achieve positive results in environmental and social issues in terms of road safety, by reducing the fuel consumption
of vehicles and increasing tyre mileage.
On February 15, 2016, Ren Jianxin, Yang Xingqiang, Bai Xinping, Ze’ev Goldberg, Tao Haisu, Wang Dan and Zhang Junfang, previ-
ously co-opted by the Board, were reappointed as directors by the ordinary general meeting of Pirelli & C. S.p.A. The Extraordinary
General Meeting also approved a proposal of mandatory conversion of savings shares into newly issued special category unlisted
shares without voting rights, as well as a proposal to adopt new Articles of Association. The mandatory conversion and adoption
of the new Articles of Association were also approved, to the extent applicable, by a special savings general meeting of Pirelli & C.
Consolidated Financial Statements / 2015 ANNUAL REPORT
S.p.A.. The extraordinary general meeting of Pirelli & C. S.p.A. also approved the merger by incorporation of the controlling Parent
company Marco Polo Industrial Holding S.p.A. into Pirelli & C. S.p.A, for 6.30 Pirelli shares to be allotted after the merger to Marco
Polo International Holding Italy S.p.A. (Holdco) - the sole partner of Marco Polo Industrial Holding S.p.A. - for every 1 share held
before the merger by Marco Polo International Holding Italy S.p.A. (Holdco) in Marco Polo Industrial Holding S.p.A.. The merger is
expected to be finalised within the first half of 2016.
Following the mandatory conversion of savings shares into special category unlisted shares, the savings shares ceased
to be listed on regulated markets as of February 26, 2016.
On February 16, 2016, the Board of Directors of Pirelli & C. S.p.A. approved the essential lines of a refinancing plan for an amount
up to a maximum of euro 7 billion aimed at extending debt maturities and optimizing their structure thanks to the use of bond and
banking markets.
The terms and conditions of the refinancing, including any guarantees, will be defined in light of market conditions and practices
of reference, also taking into account the rights incorporated in the Terms and Conditions in favour of bond holders for euro 600
million maturing in 2019 and that will remain in place until maturity. The refinancing plan leaves the right to activate the loan
Mergeco Facility alternatively unchanged for Pirelli, if appropriate, and already made available to the company by a syndicate of
banks as part of the public purchase offer of Marco Polo Industrial Holding S.p.A. on Pirelli.
Following the confirmation by the General Meeting of the directors co-opted on September 2 and October 20, 2015, the Board of
Directors confirmed Ren Jianxin Chairman of the Board of Directors and the governance structure approved on October 20, 2015.
43. otHer inForMation
Research and Development Expenses
208
Research expenses rose from euro 205.5 million in 2014 (3.4% of sales) to euro 214.4 million in 2015 (3.4% of sales). They were entered
in the Income Statement as incurred since the requirements set under IFRS standards regarding their capitalisation do not subsist.
Compensation for Directors and Statury Auditors
(in thousands of euro)
directors
statutory Auditors
Employees
2015
2014
12,772
200
12,972
The breakdown by category of the average consolidated headcount of employees is as follows:
(in thousands of euro)
Executives and white collar staff
blue collar staff
Temporary workers
2015
2014
7,379
27,748
2,346
37,473
8,553
198
8,751
7,536
28,546
2,854
38,936
Consolidated Financial Statements / 2015 ANNUAL REPORT
Compensation for the auditing firm
Pursuant to the applicable regulations, details are listed below of the aggregate compensation paid during the 2015 financial year for
auditing and other non-auditing services , rendered by the company Reconta Ernst and Young S.p.A. and other entities of their network:
(in thousands of euro)
company that provided
the service
company that
received the
service
partial
Fees
total
Fees
Independent auditing
services and certification
services (1)
Reconta Ernst & young s.p.A.
Pirelli & C. s.p.A.
Reconta Ernst & young s.p.A.
Network Ernst & young
subsidiaries
subsidiaries
Reconta Ernst & young s.p.A.
Pirelli & C. s.p.A.
services other than auditing
Reconta Ernst & young s.p.A.
Network Ernst & young
subsidiaries
subsidiaries
492
572
2,052
3,116
86.7%
-
-
480 (2)
480
13.3%
3,596
100.0%
(1) the item “independent auditing and certification services” includes amounts paid for auditing services and other services that envisage the issu-
ance of an auditor’s report as well as amounts paid for the so called certification services since they create synergies with the auditing services.
(2) support for the analysis of the distribution network and go-to-market activities.
Exchange rates
The main exchange rates used for consolidation are as follows:
(local currency against euro)
209
period-end
average
12/31/2015
12/31/2014
change
in %
2015
2014
change
in %
14.6975
9.1895
1.4897
1.5116
1.5417
1.0887
14.5692
9.3930
1.4829
1.4063
1.6058
1.2141
35.7769
38.4336
1.0835
8.5214
3.1776
4.5245
14.1357
18.9074
16.9530
4.2504
7.0696
79.6972
0.7340
1.2924
8.6840
2.8207
4.4821
10.3818
17.8808
14.0353
3.2270
7.4291
68.3427
0.7789
131.0700
145.2300
0.88%
(2.17%)
0.46%
7.49%
(3.99%)
(10.33%)
(6.91%)
(16.16%)
(1.87%)
12.65%
0.95%
36.16%
5.74%
20.79%
31.71%
(4.84%)
16.61%
(5.77%)
(9.75%)
14.6975
9.3533
1.4776
1.4186
1.5256
1.1096
14.5692
9.0986
1.4726
1.4672
1.6833
1.3295
35.2600
40.2949
1.0679
8.5460
3.0153
4.4444
10.2493
17.5516
14.1737
3.6935
6.9103
67.7749
0.7259
134.3157
1.2146
9.4226
2.9042
4.4442
10.7954
17.6321
14.4062
3.1206
8.1669
50.9928
0.8066
140.3142
0.88%
2.80%
0.34%
(3.31%)
(9.37%)
(16.54%)
(12.50%)
(12.08%)
(9.30%)
3.83%
0.00%
(5.06%)
(0.46%)
(1.61%)
18.36%
(15.39%)
32.91%
(10.00%)
(4.28%)
venezuelan bolivar
swedish krona
Australian dollar
Canadian dollar
singaporean dollar
u.s. dollar
Taiwan dollar
swiss Franc
Egyptian Pound
Turkish Lira (new)
New Romanian Leu
Argentinian Peso
Mexican Peso
south African Rand
brazilian Real
Chinese Renminbi
Russian Ruble
british Pound
Japanese yen
Consolidated Financial Statements / 2015 ANNUAL REPORT
scoPe oF consoLidation
companies consolidated line-by-line
company
business
headQuar-
ter
cur-
ren-
cy
share
capital
%
hold-
ing
held by
EUROPE
Austria
Pirelli gmbH
Belgium
Pirelli Tyres belux s.A.
France
Pneus Pirelli s.A.s
Germany
deutsche Pirelli Reifen Holding gmbH
drahtcord saar geschaeftsfuehrungs
gmbH I.L in liquidation
drahtcord saar gmbH & Co. kg I.L.
in liquidation
driver Handelssysteme gmbH
Pirelli deutschland gmbH
Pirelli Personal service gmbH
Pk grundstuecksverwaltungs gmbH
Pneumobil gmbH
TP Industrial deutschland gmbH
(ex T3 Industrial germany gmbH)
Greece
210
Tyre
Tyre
Wien
Euro
726,728
100.00% Pirelli Tyre (suisse) sA
brussels
Euro
700,000
100.00% Pirelli Tyre (suisse) sA
Tyre
villepinte
Euro
1,515,858
100.00%
Pirelli Tyre s.p.A.
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
breuberg /
Odenwald
Euro
7,694,943
100.00%
Pirelli Tyre s.p.A.
Merzig
Euro
60,000 50.00%
Merzig
Euro
30,000,000 50.00%
breuberg /
Odenwald
breuberg /
Odenwald
breuberg /
Odenwald
Hoechst /
Odenwald
breuberg /
Odenwald
breuberg /
Odenwald
Euro
26,000
100.00%
Euro
26,334,100
100.00%
Euro
Euro
Euro
Euro
25,000
100.00%
26,000
100.00%
259,225
100.00%
25,000
100.00%
Pirelli deutschland
gmbH
Pirelli deutschland
gmbH
deutsche Pirelli
Reifen Holding gmbH
deutsche Pirelli
Reifen Holding gmbH
deutsche Pirelli
Reifen Holding gmbH
deutsche Pirelli
Reifen Holding gmbH
deutsche Pirelli
Reifen Holding gmbH
deutsche Pirelli
Reifen Holding gmbH
Elastika Pirelli C.s.A.
Tyre
kallithea (Athens)
Euro
11,630,000
99.90%
Pirelli Tyre s.p.A.
Pirelli Hellas s.A. (in liquidation)
The Experts in Wheels - driver Hellas s.A.
Tyre
Tyre
Athens
us $
22,050,000
79.86%
Pirelli Tyre s.p.A.
kallithea (Athens)
Euro
100,000
72.80% Elastika Pirelli C.s.A.
0.10% Pirelli Tyre (suisse) sA
Consolidated Financial Statements / 2015 ANNUAL REPORT
companies consolidated line-by-line
company
business
headQuar-
ter
cur-
ren-
cy
share
capital
%
hold-
ing
held by
Italy
driver Italia s.p.A.
driver servizi Retail s.p.A.
Hb servizi s.r.l.
Maristel s.p.A.
Pirelli & C. Ambiente s.r.l.
Pirelli Consumer Italia s.r.l.
Pirelli Industrie Pneumatici s.r.l.
Pirelli Labs s.p.A.
Pirelli servizi Amministrazione
e Tesoreria s.p.A.
Pirelli sistemi Informativi s.r.l.
Pirelli Industrial s.r.l.
(ex-Pirelli Tyre Commerciale Italia s.r.l.)
Pirelli Industrial s.r.l.
Pirelli Tyre s.p.A.
Poliambulatorio bicocca s.r.l.
servizi Aziendali Pirelli s.C.p.A.
Tyre
Tyre
services
services
sustainable
mobility
Tyre
Tyre
services
services
Information
systems
services
services
Tyre
services
services
Milan
Milan
Milan
Milan
Milan
Milan
Euro
Euro
Euro
Euro
Euro
Euro
350,000
71.48%
Pirelli Tyre s.p.A.
120,000
100.00%
Pirelli Tyre s.p.A.
10,000
100.00%
Pirelli & C. s.p.A.
1,020,000
100.00%
Pirelli & C. s.p.A.
10,000
100.00%
Pirelli & C. s.p.A.
10,000
100.00%
Pirelli & C. s.p.A.
settimo Torinese
(To)
Euro
40,000,000 100.00%
Pirelli Tyre s.p.A.
Milan
Milan
Milan
Milan
Milan
Milan
Milan
Milan
Euro
Euro
Euro
Euro
Euro
Euro
Euro
Euro
5,000,000
100.00%
Pirelli & C. s.p.A.
2,047,000
100.00%
Pirelli & C. s.p.A.
1,010,000
100.00%
Pirelli & C. s.p.A.
10,000
100.00%
Pirelli Tyre s.p.A.
30,000
100.00%
Pirelli Tyre s.p.A.
756,820,000
100.00%
Pirelli & C. s.p.A.
10,000
100.00%
Pirelli Tyre s.p.A.
104,000
92.25%
Pirelli & C. s.p.A.
211
2.95%
Pirelli Tyre s.p.A.
1.95%
Pirelli & C. Ambiente
s.r.l.
0.95%
Pirelli servizi
Amministrazione
e Tesoreria s.p.A.
0.95%
Pirelli Labs s.p.A.
0.95%
Pirelli sistemi
Informativi s.r.l.
ultrasic s.r.l.
The Netherlands
E-vOLuTION Tyre b.v.
Pirelli China Tyre N.v.
Pirelli Tyres Nederland b.v.
Poland
driver Polska sp. z o.o.
Pirelli Polska sp. z o.o.
TP Industrial Polska sp. z o.o.
(ex T3 Industrial Poland sp z.o.o.)
sustainable
mobility
Milan
Euro
20,000
100.00%
Pirelli & C. Ambiente
s.r.l.
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Rotterdam
Rotterdam
Rotterdam
Warsaw
Warsaw
Warsaw
Euro
Euro
Euro
Pol.
Zloty
Pol.
Zloty
Pol.
Zloty
261,700,000
65.00%
Pirelli Tyre s.p.A.
38,045,000
100.00%
Pirelli Tyre s.p.A.
18,152
100.00% Pirelli Tyre (suisse) sA
100,000
68.00% Pirelli Polska sp. z o.o.
625,771
100.00%
Pirelli Tyre s.p.A.
5,000
100.00%
Pirelli Tyre s.p.A.
Consolidated Financial Statements / 2015 ANNUAL REPORT
companies consolidated line-by-line
company
business
headQuar-
ter
United Kingdom
CTC 2008 Ltd
Tyre
burton on Trent
Pirelli Cif Trustees Ltd
Financial
burton on Trent
cur-
ren-
cy
british
Pound
british
Pound
share
capital
%
hold-
ing
held by
100,000
100.00%
Pirelli uk Tyres Ltd
4
25.00%
Pirelli general
Executive Pension
Trustees LTd
Pirelli general &
Overseas Pension
Trustees LTd
Pirelli Tyres Executive
Pension Trustees LTd
Pirelli Tyres Pension
Trustees LTd
Pirelli International plc
Financial
burton on Trent
Euro
250,000,000
100.00%
Pirelli Tyre s.p.A.
Pirelli Motorsport services Ltd
Tyre
burton on Trent
Pirelli general Executive Pension
Trustees Ltd
Pirelli general & Overseas Pension
Trustees Ltd
212
Pirelli Tyres Executive Pension
Trustees Ltd
Pirelli Tyres Ltd
Pirelli Tyres Pension Trustees Ltd
Financial
burton on Trent
Financial
burton on Trent
Financial
burton on Trent
Tyre
Tyre
burton on Trent
burton on Trent
Pirelli uk Ltd
Financial
burton on Trent
Pirelli uk Tyres Ltd
TP Industrial uk Limited
Slovakia
Tyre
Tyre
burton on Trent
burton on Trent
british
Pound
british
Pound
british
Pound
british
Pound
british
Pound
british
Pound
british
Pound
british
Pound
british
Pound
1
100.00%
Pirelli Tyre s.p.A.
1
100.00%
Pirelli uk Ltd
1
100.00%
Pirelli uk Ltd
1
100.00%
Pirelli Tyres Ltd
16,000,000
100.00%
Pirelli uk Tyres Ltd
1
100.00%
Pirelli Tyres Ltd
163,991,278
100.00%
Pirelli & C. s.p.A.
85,000,000
100.00%
Pirelli Tyre s.p.A.
1
100.00%
Pirelli Tyre s.p.A.
Pirelli slovakia s.R.O.
Tyre
bratislava
Euro
6,638.78
100.00%
Pirelli Tyre s.p.A.
Romania
s.C. Pirelli & C. Eco Technology RO s.r.l.
sustainable
mobility
Oras bumbes-
ti-Jiu
s.C. Pirelli Tyres Romania s.r.l.
Tyre
slatina
Rom.
Leu
Rom.
Leu
40,000,000
100.00%
Pirelli & C. Ambiente
s.r.l.
853,912,300
100.00%
Pirelli Tyre s.p.A.
companies consolidated line-by-line
company
business
headQuar-
ter
Russia
Closed Joint stock Company
"voronezh Tyre Plant"
OOO Pirelli Tyre services
Limited Liability Company
"AMTEL-Russian Tyres"
Limited Liability Company Pirelli Tyre
Russia
Limited Liability Company
"vyatskaya shina"
Open Joint stock Company
"kirov Tyre Plant"
Spain
Euro driver Car s.L.
Omnia Motor s.A. - sociedad
unipersonal
Pirelli Neumaticos s.A. - sociedad
unipersonal
TP Industrial Espana y portugal s.L.-
sociedad unipersonal
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre
Tyre & Fleet s.L. - sociedad unipersonal
Tyre
Consolidated Financial Statements / 2015 ANNUAL REPORT
cur-
ren-
cy
Russian
Rouble
Russian
Rouble
Russian
Rouble
Russian
Rouble
Russian
Rouble
Russian
Rouble
share
capital
%
hold-
ing
held by
1,520,000,000
100.00%
Limited Liability
Company Pirelli Tyre
Russia
54,685,259
95.00% Pirelli Tyre (suisse) sA
5.00%
Pirelli Tyre s.p.A.
10,000
100.00%
4,000,000
99.91%
Limited Liability
Company Pirelli Tyre
Russia
E-vOLuTION Tyre
b.v.
0.09%
OOO Pirelli Tyre
services
4,912,000
100.00%
354,088,639
100.00%
Open Joint stock
Company "kirov Tyre
Plant"
Limited Liability
Company Pirelli Tyre
Russia
voronezh
Moscow
Moscow
Moscow
kirov
kirov
L'Hospitalet del
Llobregat
Euro
951,000
56.15%
Pirelli Neumaticos
s.A. - sociedad
unipersonal
213
0.32%
Omnia Motor s.A. -
sociedad unipersonal
L'Hospitalet del
Llobregat
L'Hospitalet del
Llobregat
L'Hospitalet del
Llobregat
L'Hospitalet del
Llobregat
Euro
1,502,530
100.00%
Pirelli Neumaticos
s.A. - sociedad
unipersonal
Euro
25,075,907
100.00%
Pirelli Tyre s.p.A.
Euro
3,000
100.00%
Pirelli Tyre s.p.A.
Euro
20,000
100.00%
Pirelli Neumaticos
s.A. - sociedad
unipersonal
Sweden
dackia Aktiebolag
Inter Wheel sweden Aktiebolag
Pirelli Tyre Nordic Aktiebolag
Switzerland
Tyre
Tyre
Tyre
Taby
karlstad
bromma
Pirelli group Reinsurance Company sA
Reinsurance
Lugano
Pirelli Tyre (suisse) sA
TP Industrial (suisse) sA
Tyre
Tyre
basel
basel
swed.
krona
swed.
krona
swed.
krona
swiss
Franc
swiss
Franc
swiss
Franc
31,000,000
100.00%
Pirelli Tyre s.p.A.
1,000,000
100.00%
dackia Aktiebolag
950,000
100.00%
Pirelli Tyre s.p.A.
8,000,000
100.00%
Pirelli & C. s.p.A.
1,000,000
100.00%
Pirelli Tyre s.p.A.
100,000
100.00%
Pirelli Tyre s.p.A.
Consolidated Financial Statements / 2015 ANNUAL REPORT
companies consolidated line-by-line
company
business
headQuar-
ter
Turkey
Turk-Pirelli Lastikleri A.s.
Pirelli Otomobil Lastikleri A.s.
Hungary
Tyre
Tyre
Istanbul
Istanbul
Pirelli Hungary Tyre Trading and services
Ltd
Tyre
budapest
cur-
ren-
cy
Turkey
Lira
Turkey
Lira
Hun.
Forint
share
capital
%
hold-
ing
held by
204,500,000
100.00%
Pirelli Tyre s.p.A.
85,000,000
100.00%
Pirelli Tyre s.p.A.
3,000,000
100.00%
Pirelli Tyre s.p.A.
NORTH AMERICA
Canada
Pirelli Tire Inc.
U.S.A.
Pirelli North America Inc.
Pirelli Tire LLC
CENTRAL/SOUTH AMERICA
Argentina
Tyre
Tyre
Tyre
st-Laurent (que-
bec)
Can. $
6,000,000
100.00% Pirelli Tyre (suisse) sA
New york (New
york)
us $
10
100.00%
Pirelli Tyre s.p.A.
Rome (georgia)
us $
1
100.00%
Pirelli North America
Inc.
214
Pirelli Neumaticos s.A.I.C.
Tyre
buenos Aires
TP Industrial Tyres s.A.
Tyre
buenos Aires
Brazil
Comercial e Importadora de Pneus Ltda
CPA - Comercial e Importadora de
Pneus Ltda
Ecosil - Industria quimica do brasil Ltda
Tyre
Tyre
Tyre
sao Paulo
barueri
Meleiro
Pirelli Ltda
Financial
sao Paulo
Pirelli Pneus Ltda
Tyre
santo Andrè
Pirelli Properties Ltda
Financial
santo Andrè
RF Centro de Testes de Produtos
Automotivos Ltda
TP Industrial de Pneus brasil Ltda
TLM - Total Logistic Management
serviços de Logistica Ltda
Tyre
Tyre
Tyre
Elias Fausto (sao
Paulo)
san Paolo
santo Andrè
Arg.
Peso
Arg.
Peso
bra.
Real
bra.
Real
bra.
Real
bra.
Real
bra.
Real
bra.
Real
bra.
Real
bra.
Real
bra.
Real
101,325,176
95.00%
Pirelli Tyre s.p.A.
5.00%
Pirelli Pneus Ltda
100,000
95.00%
Pirelli Tyre s.p.A.
5.00%
Pirelli Pneus Ltda
101,427,384
64.00%
Pirelli Pneus Ltda
200,000
100.00%
Comercial e Importa-
dora de Pneus Ltda
9,699,055
97.88%
Pirelli Pneus Ltda
14,000,000
100.00%
Pirelli & C. s.p.A.
750,117,627
100.00%
Pirelli Tyre s.p.A.
2,000,000
100.00%
Pirelli Ltda
6,812,000 100.00%
Pirelli Pneus Ltda
90,020,522
99.00%
Pirelli Tyre s.p.A.
3,074,417
99.98%
Pirelli Pneus Ltda
0.02%
Pirelli Ltda
Consolidated Financial Statements / 2015 ANNUAL REPORT
companies consolidated line-by-line
company
business
headQuar-
ter
Chile
Pirelli Neumaticos Chile Ltda
Tyre
santiago
cur-
ren-
cy
Chile
Peso/
000
share
capital
%
hold-
ing
held by
1,918,451
99.98%
Pirelli Pneus Ltda
0,02%
Pirelli Ltda
Colombia
Pirelli de Colombia sAs
Tyre
santa Fe de
bogota
Col.
Peso/
000
3,315,069
96.12%
TP Industrial de
Pneus brasil Ltda
Pirelli Tyre Colombia s.A.s.
Tyre
santa Fe de
bogota
Perù
Pirelli de Peru s.A.C.
Tyre
Lima
Mexico
Pirelli Neumaticos de Mexico s.A. de C.v.
Tyre
Mexico City
Pirelli Neumaticos s.A. de C.v.
Tyre
silao
Pirelli servicios s.A. de C.v.
Tyre
silao
servicios Pirelli Mexico s.A. de C.v. (In
liquidation)
Tyre
Mexico City
TP servicios Industrial Tyre Mexico s.A.
de C.v.
Tyre
Mexico City
TP Tyre industrial Mexico s.A. de C.v.
Tyre
Mexico City
Col.
Peso/
000
Nuevos
soles
Mex.
Peso
Mex.
Peso
Mex.
Peso
Mex.
Peso
Mex.
Peso
Mex.
Peso
2.28%
Pirelli de venezuela
C.A.
1.60%
TLM - Total Logis-
tic Management
serviços de Logistica
Ltda
57,080,000
100.00%
Pirelli Pneus Ltda
837,745
100.00%
Pirelli Pneus Ltda
215
35,098,400
99.98%
Pirelli Tyre s.p.A.
0.02%
Pirelli Ltda
3,249,016,500
99.40%
Pirelli Tyre s.p.A.
0.60%
Pirelli Pneus Ltda
50,000
99.00%
Pirelli Tyre s.p.A.
1.00%
Pirelli North America
Inc.
50,000
99.00%
Pirelli Pneus Ltda
1.00%
Pirelli Ltda
50,000
99.00%
Pirelli Tyre s.p.A.
1.00%
TP Industrial de
Pneus brasil Ltda
50,000
99.00%
Pirelli Tyre s.p.A.
1.00%
TP Industrial de
Pneus brasil Ltda
Consolidated Financial Statements / 2015 ANNUAL REPORT
companies consolidated line-by-line
company
business
headQuar-
ter
cur-
ren-
cy
share
capital
%
hold-
ing
held by
AFRICA
Egypt
Alexandria Tire Company s.A.E.
Tyre
Alexandria
International Tire Company Ltd
Tyre
Alexandria
South Africa
Pirelli Tyre (Pty) Ltd
Tyre
Centurion
OCEANIA
Australia
Egy.
Pound
Egy.
Pound
s.A.
Rand
393,000,000
89.08%
Pirelli Tyre s.p.A.
0.03% Pirelli Tyre (suisse) sA
50,000
99.80%
Alexandria Tire
Company s.A.E.
1
100.00% Pirelli Tyre (suisse) sA
Pirelli Tyres Australia Pty Ltd
Tyre
sydney
Aus. $
150,000
100.00% Pirelli Tyre (suisse) sA
New Zealand
Pirelli Tyres (NZ) Ltd
Tyre
Auckland
N.Z. $
100
100.00%
Pirelli Tyres Australia
Pty Ltd
ASIA
China
216
Pirelli Tyre Co., Ltd
Pirelli Tyre Trading (shanghai) Co., Ltd
Tyre
Tyre
yanzhou HIxIH Ecotech Environment
Co., Ltd
sustainable
mobility
Korea
yanzhou
shangai
yanzhou
Pirelli korea Ltd
Tyre
seoul
Japan
Ch.
Ren-
minbi
us $
Ch.
Ren-
minbi
korean
Won
1,721,150,000
90.00% Pirelli China Tyre N.v.
700,000
100.00% Pirelli China Tyre N.v.
130,000,000
100.00%
Pirelli Tyre Co. Ltd
100,000,000
100.00%
Pirelli Asia Pte Ltd
Pirelli Japan kabushiki kaisha
Tyre
Tokyo
Jap. yen 2,200,000,000
100.00%
Pirelli Tyre s.p.A.
Singapore
Pirelli Asia Pte Ltd
Taiwan
Tyre
singapore
sing. $
2
100.00% Pirelli Tyre (suisse) sA
Pirelli Taiwan Co. Ltd
Tyre
New Taipei City
N.T. $
10,000,000
100.00% Pirelli Tyre (suisse) sA
Consolidated Financial Statements / 2015 ANNUAL REPORT
investments accounted For by the eQuity method
company
business
headQuar-
ter
cur-
ren-
cy
share
capital
%
hold-
ing
held by
EUROPE
Germany
Industriekraftwerk breuberg gmbH
Cogeneration
Hoechst / Oden-
wald
Euro
1,533,876
26.00%
Pirelli deutschland
gmbH
Greece
Eco Elastika s.A.
Italy
Tyre
Athens
Euro
60,000
20.00% Elastika Pirelli C.s.A.
Consorzio per la Ricerca di Materiali
Avanzati (CORIMAv)
Eurostazioni s.p.A.
Fenice s.r.l.
Financial
Financial
Financial
gWM Renewable Energy II s.p.A.
Enviroment
Prelios s.p.A.
Romania
Financial
Milan
Rome
Milan
Rome
Milan
s.C. Eco Anvelope s.A.
Tyre
bucarest
Spain
Euro
Euro
Euro
Euro
Euro
Rom.
Leu
103,500 100.00%
Pirelli & C. s.p.A.
160,000,000
32.71%
Pirelli & C. s.p.A.
41,885,034
69.88%
Pirelli & C. s.p.A.
15,063,016
16.87%
Pirelli & C. s.p.A.
426,441,257
29.22%
Pirelli & C. s.p.A.
160,000
20.00%
s.C. Pirelli Tyres
Romania s.r.l.
signus Ecovalor s.L.
Tyre
Madrid
Euro
200,000
20.00%
Pirelli Neumaticos s.A.
- sociedad
unipersonal
217
ASIA
Indonesia
PT Evoluzione Tyres
Tyre
subang
$ usA
68,000,000
60.00%
Pirelli Tyre s.p.A.
Consolidated Financial Statements / 2015 ANNUAL REPORT
other investments considered signiFicant
company
business
head-
Quarter
cur-
rency
share
capital
%
hold-
ing
held by
Belgium
Euroqube s.A. (in liquidation)
services
brussels
Euro
84,861,116
17.79%
Pirelli & C. s.p.A.
France
Aliapur s.A.
Italy
Fin. Priv. s.r.l.
Poland
Centrum utylizacji Opon Organizacja
Odzysku s.A.
United Kingdom
Tyre
Lion
Euro
262,500
14.29%
Pneus Pirelli s.A.s.
Financial
Milan
Euro
20,000
14.29%
Pirelli & C. s.p.A.
Tyre
Warsaw
Pol. Zloty
1,008,000
14.29% Pirelli Polska sp. ZO.O.
Tlcom I Ltd Partnership
Financial
London
Euro
1,154
9.39%
Pirelli uk Ltd
Tunisia
société Tunisienne des Industries
de Pnéumatiques s.A.
Venezuela (*)
Tyre
Tunis
Tun. dinar
12,623,469
15.83%
Pirelli Tyre s.p.A.
Pirelli de venezuela C.A.
Tyre
valencia
ven.
bolivar/
000
20,062,679
96.22%
Pirelli Tyre s.p.A.
218
(*) subsidiary deconsolidated at 12/31/2015
Consolidated Financial Statements / 2015 ANNUAL REPORT
219
04.parent
Financial
statements
220
Directors’ Report on Operations / 2015 ANNUAL REPORT Parent Financial Statements / 2015 ANNUAL REPORT
statement oF Financial position (in euro)
12/31/2015
12/31/2014
7
8
9
Property, plant and equipment
Intangible assets
Investments in subsidiaries
10
Investments in associates
11 Other financial assets
12
deferred tax assets
13 Other receivables
Non-current assets
14
Trade receivables
13 Other receivables
15 Cash and cash equivalents
16
17
18
19
222
Tax receivables
derivative financial instruments
Current assets
Total assets
Equity:
share capital
Other reserves
Retained earnings reserve
Net income (loss)
Total Equity
borrowings from banks and other financial institutions
23 Other payables
20 Provisions for liabilities and charges
21
Employee benefit obligations
Non-current liabilities
19
borrowings from banks and other financial institutions
22
Trade payables
23 Other payables
20 Provisions for liabilities and charges
24
Tax payables
Current liabilities
Total Liabilities and Equity
95,168,661
6,595,475
1,141,926,126
134,332,227
199,062,058
-
15,499,628
1,592,584,175
41,687,151
984,868,245
146,152
62,105,317
339,959
1,089,146,824
2,681,730,999
1,343,285,421
261,111,674
311,232,731
(1,701,751)
1,913,928,075
101,332,467
6,562,751
14,346,127
2,103,617
124,344,962
523,734,313
40,932,464
34,374,696
400,001
44,016,488
643,457,962
2,681,730,999
98,475,019
6,004,723
1,141,058,670
125,099,440
173,459,081
119,085,130
509,063,077
2,172,245,140
32,745,336
422,632,944
7,883
91,003,635
208,573
546,598,371
2,718,843,511
1,343,285,421
209,191,418
245,738,903
257,963,959
2,056,179,701
500,590,378
-
17,055,654
4,194,187
521,840,219
21,997,360
27,302,326
24,571,419
2,656,657
64,295,829
140,823,591
2,718,843,511
income statement (in euro)
25
Revenues from sales and services
26 Other income
27
28
29
Raw materials and consumables
Personnel expenses
Amortisation, depreciation and impairment
30 Other costs
Operating income (loss)
31
Net income (loss) from equity investments
gains on equity investments
losses on equity investments
dividends
32
33
Financial income
Financial expenses
Net income (loss) before taxes
34
Taxes
Net income (loss)
Parent Financial Statements / 2015 ANNUAL REPORT
2015
2014
22,793,825
121,961,642
(303,230)
(33,122,362)
(6,987,974)
(106,701,393)
(2,359,492)
122,321,771
-
(52,340,619)
174,662,390
17,078,556
(30,997,521)
106,043,314
(107,745,065)
(1,701,751)
19,321,622
123,892,638
(233,230)
(28,236,505)
(5,870,715)
(80,274,818)
28,598,992
192,741,651
18,941,099
(139,120,559)
3 1 2 ,9 2 1 , 1 1 1
19,619,201
(29,615,039)
211,344,805
46,619,154
257,963,959
statement oF other comprehensive income (in thousands of euro)
A
B
Net income (loss)
Other components of other comprehensive income:
Items that will not be reclassified to income statement:
Net actuarial gains (losses) on employee benefits
Total B
C
Items reclassified / that may be reclassified to income statement:
Fair value adjustment of other financial assets:
gains / (losses) for the period
(gains) / losses reclassified to income statement
Total C
B+C
Total other components of other comprehensive income
A+B+C Total comprehensive income (loss) for the year
2015
2014
(1,702)
257,964
223
69
69
(156)
(156)
38,854
100
38,954
39,023
37,321
(5,542)
20,632
15,090
14,934
272,898
Parent Financial Statements / 2015 ANNUAL REPORT
statement oF changes in e Quity (in thousands of euro)
share
capital
legal
reserve
merger
reserve
ias
reserve
retained
earnings
reserve
net
income
(loss)
total
Total at 12/31/2013
1,343,285
129,620
12,467
42,576
220,185
191,891
1,940,024
Profit Allocation as per resolution of June 12, 2014:
dividends
Legal Reserve
Reatined Earnings
Other components of other
comprehensive income
Net income (loss)
-
-
-
-
-
-
9,595
-
-
-
-
-
-
-
-
-
-
-
14,934
-
Profit Allocation as per resolution of May 14, 2015:
dividends
Legal Reserve
Retained Earnings
Other components of other
comprehensive income
Net income (loss)
-
-
-
-
-
-
12,898
-
-
-
-
-
-
-
-
-
-
-
39,021
-
-
-
-
-
(156,743)
(156,743)
(9,595)
25,554
(25,554)
-
-
-
14,934
257,964
257,964
(179,572)
(179,572)
(12,898)
65,494
(65,494)
-
-
-
39,021
(1,702)
(1,702)
-
-
-
-
Total at 12/31/2014
1,343,285
139,215
12,467
57,510
245,739
257,964
2,056,180
Total at 12/31/2015
1,343,285
152,113
12,467
96,531
311,233
(1,702)
1,913,928
224
(in thousands of euro)
ias reserve
reserve For Fair value
adJustment oF Financial
assets available-For-sale
reserve
For actuarial
gains/losses
total
Balance at 12/31/2013
Other components of other comprehensive income
Balance at 12/31/2014
Other components of other comprehensive income
Balance at 12/31/2015
40,422
15,090
55,512
38,952
94,464
2,154
42,576
(156)
14,934
1,998
57,510
69
39,021
2,067
96,531
Parent Financial Statements / 2015 ANNUAL REPORT
statement oF cash Flow s (in thousands of euro)
Net income (loss) before taxes
Amortisation, depreciation, impairment losses and reversals of impaired property, plant and equipment
and intangible assets
gains/(losses) on equity investments
Reversal of financial income
Reversal of financial expenses
Taxes
Change in trade receivables/payables
Change in other receivables/payables and other provisions
Change in employee benefit obligations
Capital (gains)/losses on sales of plant, property and equipment and intangible assets
A
Net cash flows provided by (used in) operating activities
Investments in property, plant and equipment
disposal of property, plant and equipment
Investments in intangible assets
Investments in subsidiaries
Investments in associates
Investments in other financial assets
disinvestments in subsidiaries
dividends received
B
Net cash flow provided by (used in) investing activities
dividends paid
Change in financial receivables
Interests receivable and other financial income
Change in financial payables
Interests payable and other financial expenses
C
Net cash flow provided by (used in) financing activities
2015
2014
106,043
211,345
6,988
5,871
(122,322)
(192,742)
(17,079)
30,998
(107,745)
4,688
132,427
(2,023)
-
31,975
(1,455)
-
(19,619)
29,615
46,619
478
(61,935)
2,571
(91)
22,112
(553)
458
(2,818)
(3,135)
(22,663)
(13,030)
(23,337)
(1,766)
20
174,662
-
(5,349)
15,271
312,921
122,643
306,583
(179,572)
(156,745)
(60,243)
(161,927)
13,853
102,479
19,619
(34)
(30,998)
(29,615)
(154,480)
(328,702)
225
D
Total cash flow in the period provided by (used in) continuing operations (A+B+C)
138
(7)
E
Net cash and cash equivalents at beginning of year
F
Net cash and cash equivalents at end of the period (D+E)
8
146
15
8
Every Mark Is Unique / PIRELLI
Every Mark Is Unique / PIRELLI
Steve McCurry
Photographer
“People often ask me how I describe a good photograph.
Aesthetics alone will take you only so far.
I believe that a successful photograph has to tell a story
about the human condition and the connections between people
that resonate at the most basic emotional level.
If I am successful, my pictures should be understood by anyone,
regardless of their individual circumstances.„
s
a
p
m
a
L
s
a
r
k
o
P
Parent Financial Statements / 2015 ANNUAL REPORT
exPLanatorY notes
1. GeneraL inForMation
Pirelli & C. S.p.A. (hereinafter also the “Company” or the “Parent Company”) is a corporation organised under the laws of the Re-
public of Italy.
Founded in 1872, it is a holding company that manages, coordinates and finances the operations of its subsidiaries.
At the reporting date, the main investment of the Company is a shareholding in Pirelli Tyre S.p.A. – a company operating in the tyre
sector - of which it owns 100% of the share capital.
The registered office of the Company is in Milan, Italy.
228
Following the outcome of the Public Purchase Offer made by Marco Polo Industrial Holding S.p.A. and subsequent transactions of
purchase in respect of the ordinary shares of Pirelli & C. S.p.A. which led to Marco Polo Industrial Holding S.p.A. to holding 100%
of this category share, they were delisted on October 6, 2015. Additionally, the General Meeting, in extraordinary sitting, approved
a motion for obligatory conversion of savings shares into special category unlisted shares of new issue and without voting rights.
Following this resolution, savings shares too were delisted with effect from February 26, 2016.
Pirelli & C. S.p.A. is subject to the management and coordination of Marco Polo International Italy S.p.A., which indirectly is the
sole shareholder of Marco Polo Industrial Holding S.p.A. that directly controls the Company. Both the aforesaid companies are ulti-
mately controlled by China National Chemical Corporation (“ChemChina”), a “state-owned enterprise” (SOE) under Chinese law, with
registered office in Beijing, referable to the Central Government of the People’s Republic of China.
2. Basis oF Presentation
FormAt oF FiNANCiAL stAtemeNts
The separate financial statements at December 31, 2015 consist of a Statement of Financial Position, an Income Statement, a State-
ment of Other Comprehensive Income, a Statement of Changes in Equity, a Statement of Cash Flows and Explanatory Notes, and are
accompanied by the Directors’ Report on Operations.
The format adopted for the Statement of Financial Position classifies assets and liabilities as current and non-current.
The components of profit/loss for the year are presented in a separate Income Statement, and not included directly in the Statement
of Other Comprehensive Income. The Income Statement adopted classifies costs by their nature.
The Statement of Other Comprehensive Income includes the result for the period and, for homogeneous categories, revenues and
expenses which, in accordance with IFRS are recognised directly in equity. The Company has decided to present both tax effects
and reclassifications in the Income Statement recognised directly in equity in previous periods directly in the Statement of Other
Comprehensive Income and not in the Explanatory Notes.
The Statement of Changes in Equity includes amounts of transactions with equity holders and the changes in the period of retained
earnings.
In the Statement of Cash Flows, cash flows deriving from operating activities are presented using the indirect method, according to
which the profit or loss for the period is adjusted by the effects of non-monetary items, by any deferment or accrual of past or future
Parent Financial Statements / 2015 ANNUAL REPORT
operating receipts or payments, and by any revenue or cost
items connected with the cash flows arising from investing
activities or financing activities.
The Statement of Financial Position and Income Statement are
presented in Euro, while the Statement of Other Comprehen-
sive Income, the Cash Flow Statement, the Statement of Chang-
es in Equity and the values stated in the Explanatory Notes are
presented in thousands of Euro.
3. accoUntinG
standards
Pursuant to Italian Legislative Decree no. 38 of February 28,
2005, the separate financial statements of Pirelli & C. S.p.A.
have been prepared in accordance with the International Fi-
nancial Reporting Standards issued by the International Ac-
counting Standards Board (“IASB”) and endorsed by the Eu-
ropean Union, in force at December 31, 2015. The term “IFRS”
includes all the revised International Accounting Standards
(“IAS”) and all the interpretations of the International Finan-
cial Reporting Interpretations Committee (“IFRIC”), formerly
the Standing Interpretations Committee (“SIC”).
Following approval by the General Meeting of obligatory con-
version of saving shares into special category unlisted shares
of new issue and without voting rights. Due to this resolution
the saving shares were also delisted on February 26, 2016. The
company will continue to prepare separated financial state-
ments on the basis of IFRS accounting principles taking ad-
vantage of the leave granted under at. 3 of Legislative Decree
no. 38/2005.
The separate financial statements have been prepared using
the historical cost basis except for derivative financial instru-
ments, and financial assets available for sale, which are meas-
ured at fair value.
These separate financial statements have been prepared on a
going concern basis.
Information concerning the principal risks and uncertainties
has been summarised in the management report.
The accounting policies used in preparing the separate finan-
cial statements are the same as used for the preparation of the
consolidated financial statements, where applicable, except in
connection with the valuation of investments in subsidiaries
and associates and dividends, as indicated below.
criteria of IAS 28.
In the event that a loss pertaining to the Company exceeds
the carrying amount of the investment and the subsidiary is
obliged to fulfil legal or implicit obligations of the subsidiary
or in any event cover its losses, any excess over the carrying
amount is recognized in a specific provision for liabilities un-
der the provisions for liabilities and charges.
In the presence of specific impairment indicators, the value of
investments is subjected to impairment tests. For the purposes
of an impairment test, the carrying amount of the investment is
compared with the recoverable amount, which is defined as fair
value less costs to sell or value in use, whichever is the greater.
If the recoverable amount of an investment is lower than the
carrying amount, the latter is reduced to the recoverable
amount. This reduction constitutes an impairment loss, which
is recognised in the Income Statement.
For the purposes of the impairment test in cases of invest-
ments in listed companies, fair value is determined with ref-
erence to the market value of the investment regardless of the
percentage of ownership. In cases of investments in unlisted
companies, fair value is determined using estimates based on
the best information available.
The value in use is determined by applying “Discounted Cash
Flow - asset side”, as accepted by the relevant accounting
standards, and which consists in calculating the present value
of the future cash flows estimated to be generated by the in-
vestee, including cash flows arising from operating activities
and any final payment from the sale of the investment.
If the reason for impairment ceases to apply, the carrying
amount of the investment is recognised in the Income State-
ment, up to original cost.
DiviDeNDs
Dividend income is recognised in income statement when
the right to receive payment is established, which normally
matches the time of the resolution approved by the Sharehold-
ers’ Meeting for the distribution of dividends.
4. FinanciaL risk
ManaGeMent
PoLicY
iNvestmeNts
iN suBsiDiAries AND
AssoCiAteD CompANies
Investments in subsidiaries and related companies are stated
at cost, adjusted for any impairment losses according to the
The Group is exposed to financial risks. These are principally
associated with foreign exchange rates, fluctuations in interest
rates, the price of financial assets held as investments, the abil-
ity of customers to meet their obligations to the Group (credit
risk), and the raising of funds in the market (liquidity risk).
Financial risk management is an integral part of Group busi-
ness management and is handled directly by headquarters in
229
Parent Financial Statements / 2015 ANNUAL REPORT
accordance with guidelines issued by the Finance Department
on the basis of general risk management strategies defined by
the Managerial Risk Committee.
4.1 tYpes oF FiNANCiAL
risks
Exchange rate risk
This risk is generated by the commercial and financial trans-
actions that are executed in currencies other than the Euro.
Exchange rate fluctuations occurring between the time when
the commercial or financial relationship is established and
when the transaction is completed (collection or payment) may
generate foreign exchange gains or losses.
The objective of the Group is to minimise the effects on the
Income Statement of foreign exchange rate risk related to vol-
atility. To achieve this objective, Group procedures make Op-
erating Units responsible for collecting complete information
about the assets and liabilities that are subject to transaction
exchange rate risk. This risk is hedged with forward contracts
made with Group Treasury.
Items subject to exchange rate risk are mainly represented
by receivables and payables denominated in foreign currency.
Group Treasury is responsible for hedging the net position for
each currency and, in accordance with established guidelines
and restrictions, it closes all risk positions by trading deriva-
tive hedging contracts in the market, which typically take the
form of forward contracts.
The Group does not felt it is worthwhile to activate hedge ac-
counting pursuant to IAS 39, insofar as the representation of
the economic and financial effects of the hedging strategy on
foreign exchange rate risk is still substantially covered even
without adopting this option.
Furthermore, it is mentioned at this point that exchange rate
forecasts are made as part of the annual and three-year plan-
ning process using the best information available in the mar-
ket. Any fluctuation in exchange rates between the time when
the forecast is made and the time when the commercial or fi-
nancial transaction occurs represents the exchange rate risk
on future transactions.
The suitability of hedging future transactions, with each
hedge being authorised by the Finance Department on a case-
by-case basis, is monitored continuously. When the conditions
are met, hedge accounting in accordance with IAS 39 is used.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash
flows of a financial asset or liability will change due to fluctu-
ations in market interest rates.
Group policy is to seek to maintain the following ratio be-
tween fixed rate and variable rate exposures: 70% fixed and
30% variable.
In order to maintain this trend ratio, the Group enters into de-
rivative contracts, typically interest rate swaps, to hedge for
which hedge accounting is activated when the conditions set
out in IAS 39 are met.
As part of this policy, individual Group companies may pres-
ent situations of greater or lesser exposure to changes in in-
terest rates; in detail, at December 31, 2015, the Company had
a positive net financial position, wherein financial debt had an
allocation of 80% fixed and 20% floating and financial receiva-
bles had an allocation of 52% fixed and 48% floating.
At December 31, 2014, the Company had a net financial posi-
tion where financial debts had an allocation of 88% fixed 12%
floating rate, gross of interest rate swaps for hedging purpos-
es, while financial loans were entirely at a variable rate.
All other conditions being equal, a hypothetical increase
or decrease of 0.50% in the level of interest rates would re-
sult - year on year - in a net positive impact on the income
statement of euro 1,726 thousand, in the case of an increase
occurring, and a negative impact of euro 1,726 thousand, in
the case of a decrease.
Price risk associated with financial assets
The company is exposed to price risk confined to the volatil-
ity of financial assets such as listed and unlisted stocks and
bonds; these assets are classified as financial assets availa-
ble for sale.
Derivatives hedges to limit the volatility of these assets are not
normally set up.
An increase of 5% in the share price, all other things being
equal, would entail an increase of euro 8,860 thousand in
shareholders equity (euro 7,244 thousand at December 31,
2014), a decrease of 5% in the shares, all other things being
equal, would entail a decrease of euro 8,142 thousand in net
equity (euro 6,163 thousand at December 31, 2014) and euro 718
thousand of expenses in the Income Statement of the Company.
Credit risk
Credit risk represents the exposure of the Company to con-
tingent losses resulting from default by trade and financial
counterparties. The exposure of the Company from trade ob-
ligations is mainly towards Group companies in respect of fi-
nancial obligations totally towards Group companies.
To limit the risk from commercial obligations towards third
parties, the Company has implemented procedures to eval-
uate the potential and financial solidity of its customers to
monitor expected cash flows and take credit recovery action
if necessary.
230
Parent Financial Statements / 2015 ANNUAL REPORT
The Company operates only with highly rated financial counterparties for the management of its temporary cash surpluses and con-
stantly monitors its exposure to individual counterparties.
The Company does not hold public debt instruments from any European country, and constantly monitors its net credit exposure
to the banking system.
Liquidity risk
Liquidity risk represents the risk that the available financial resources of the Company be insufficient to meet its financial and
commercial obligations pursuant to the contractual terms and conditions set.
The principal instruments used by the Group to manage liquidity risk comprise its annual and three-year financial and cash-pool-
ing plans. These allow complete and fair detection and measurement of incoming and outgoing cash flows. The differences between
plans and actual data are analysed constantly.
Prudent management of the risk described above requires maintaining an adequate level of cash or cash equivalents and/or highly
liquid short-term financial instruments, and the availability of funds through an adequate amount of committed credit facilities
and/or recourse to capital markets.
The Parent Company has implemented a centralised cash pooling system for management of collection and payment flows in com-
pliance with various local currency and tax regulations. Negotiation and management of bank credit lines in the short and long
term takes place centrally, partly in order to maximise economic benefits.
At December 31, 2015 Pirelli & C. S.p.A. had a “Term and Revolving Facility”, with Mediobanca as leader, of euro 200 million – five-
year duration.
The line is divided into: Term Facility of euro 100 million (used) and a Revolving Facility of euro 100 million, which at December
31, 2015 was not used by the Company.
The maturities of financial liabilities at December 31, 2015 may be broken down as follows:
(in thousands of euro)
borrowings from banks
and other financial institutions
Trade payables
Other payables
up to 1 year
From 1 to 3
years
over 3 years
total 12/31/2015
523,734
40,932
34,375
599,041
-
-
6,563
6,563
101,332
-
-
101,332
625,066
40,932
40,938
706,936
The maturities of financial liabilities at December 31, 2014 may be broken down as follows:
(in thousands of euro)
borrowings from banks
and other financial institutions
Trade payables
Other payables
up to 1 year
From 1 to 3
years
over 3 years
total 12/31/2014
21,997
27,302
24,571
73,870
498,940
-
-
498,940
1,650
-
-
1,650
522,587
27,302
24,571
574,460
231
Parent Financial Statements / 2015 ANNUAL REPORT
5. inForMation on Fair VaLUe
5.1 FAir vALue meAsuremeNt
In relation to financial instruments measured at fair value, the following table shows the classification of these instruments on the
basis of the hierarchy of levels pursuant to IFRS 13, reflecting the significance of the inputs used in determining the fair value. The
following levels are defined:
Level 1 – unadjusted quotations recorded on an active market for assets or liabilities subject to valuation;
Level 2 – inputs different from the quoted prices referred to at the preceding level, which are observable on the market either
directly (as in the case of prices) or indirectly (because they are derived from prices);
Level 3 – inputs that are not based on observable market data.
The following table shows assets and liabilities measured at fair value at December 31, 2015, divided into the three levels defined
above:
(in thousands of euro)
Available-for-sale financial assets:
Other financial assets
equities and shares
investment funds
232
Derivative hedging instruments
Current derivative financial instruments
Total
note
carrying amount
at 12/31/2015
level 1
level 2
level 3
11
11
17
184,584
154,324
14,478
340
-
-
23,576
14,478
340
6,684
-
-
199,402
154,324
38,394
6,684
At December 31, 2014, the breakdown was as follows:
(in thousands of euro)
note
carrying amount
at 12/31/2014
level 1
level 2
level 3
Available-for-sale financial assets:
Other financial assets
equities and shares
investment funds
Derivative hedging instruments
Current derivative financial instruments
Total
11
11
17
During 2015, there were no transfers from level 1 to level 2 or vice versa.
158,637
128,271
14,822
209
-
-
18,071
14,822
209
12,295
-
-
173,668
128,271
33,102
12,295
Parent Financial Statements / 2015 ANNUAL REPORT
The following table shows the changes that occurred in level 3:
(in thousands of euro)
Opening balance
Increases
Reclassification
valuation adjustment
Fair value adjustments recognized in Equity
Closing balance
12/31/2015
12/31/2014
12,295
1,767
100
(7,852)
374
6,684
118,671
9,043
(104,087)
(11,641)
309
12,295
During the year, there were no transfers from level 3 to other levels or vice versa (refer to note 11).
The fair value of financial instruments traded on active markets is based on price quotations published at the reporting date. These
instruments, which are included in level 1, comprise primarily equity investments classified as financial assets available for sale.
The fair value of financial instruments not traded on active markets (e.g. derivatives) is measured by means of techniques that
maximise the use of observable and available market data and using widely applied financial measurement techniques:
market prices for similar instruments;
the fair value of interest rate swaps is calculated by discounting estimated future cash flows based on observable yield curves;
the fair value of foreign exchange derivatives (forward contracts) is determined by using the forward exchange rate at the
reporting date.
233
Parent Financial Statements / 2015 ANNUAL REPORT
5.2 CAtegories oF FiNANCiAL Assets AND LiABiLities
The table below shows the carrying amounts for each class of financial asset and liability identified by IAS 39:
(in thousands of euro)
FINANCIAL ASSETS
Loans and receivables
Other non-current receivables
Current trade receivabels
Other receivables
Cash
Available-for-sale financial assets:
Other financial assets
Derivative hedging instruments
derivative financial instruments
Total financial assets
FINANCIAL LIABILITIES
Financial liabilities at amortized cost
Non-current borrowings from banks
and other financial institutions
Current borrowings from banks
and other financial institutions
Current trade payables
Other non-current payables
Other current payables
Total financial liabilities
234
note
carrying amount
at 12/31/2015
carrying amount
at 12/31/2014
13
14
13
15
11
17
19
19
22
23
23
15,500
41,687
984,868
146
199,062
340
1,241,603
101,332
523,734
40,932
6,563
34,375
706,936
509,063
32,745
422,633
8
173,459
209
1,138,117
500,590
21,997
27,302
-
24,571
574,460
Parent Financial Statements / 2015 ANNUAL REPORT
6. caPitaL ManaGeMent PoLicY
The objective of the Company is to maximise its return on net invested capital while maintaining an ability to operate over time,
and ensuring adequate returns for its shareholders and benefits for other stakeholders through a sustainable financial structure.
In order to achieve these objectives, and pursue satisfactory earnings results and generating cash flows, the Company may adjust
its policy regarding dividends and the configuration of Company capital.
The main indicators used by the Company to manage its capital are as follows:
1) R.O.I. (Return on investment): this is calculated as the ratio in percentage terms between operating income (loss), including
income (loss) from investments, and average net invested capital: the indicator represents the ability of corporate results to re-
munerate net invested capital, which is defined as the sum of fixed assets and net working capital. The net income (loss) from
investments is included in the calculation as the main representative magnitude of the performance of an investment holding
company. The objective of the Group is for this ratio to be higher than the weighted average cost of capital (WACC);
2) Gearing: this is calculated as the ratio between net debt and equity. It is an indicator of the sustainability of the ratio between
debt and equity, which takes into account the market situation and trends in the cost of capital and debt at different times;
3) R.O.E. (Return on equity): this is calculated as the ratio, in percentage terms, between net income (loss) and average equity. It
is an indicator representing the ability of the Company to remunerate its shareholders. The objective is for this indicator to be
higher than the rate of return on a risk-free investment, correlated with the nature of the businesses operated.
The figures for 2015 and 2014 are shown below:
1) R.O.I. (Ratio between operating income inclusive of net income from equity investments
and average net invested capital)
2) gearing*
3) R.O.E. (Return on Equity)
* this index is not applicable in view of positive net financial (liquidity) debt position in Fy 2015 and 2014
2015
2014
7.32%
N/A
-0.09%
12.86%
N/A
12.91%
235
Parent Financial Statements / 2015 ANNUAL REPORT
7. ProPertY, PLant and eQUiPMent
The movements during the period 2014-2015 are summarised in the following table:
(in thousands of euro)
gross
value
Land
buildings
Plant and ma-
chinery
Industrial and
commercial
equipment
Other assets
balance at
12/31/2013
inc.
dec.
balance at
12/31/2014
inc.
dec.
balance at
12/31/2015
21,209
110,852
5,066
1,193
13,964
152,284
-
-
-
-
(97)
-
-
-
21,112
110,852
-
-
5,066
923
1,193
-
-
-
-
-
553
553
(362)
(459)
14,155
152,378
532
1,455
(21)
(21)
accumulated
depreciation
balance
at
12/31/2013
depreciation dec.
balance
at
12/31/2014
(39,348)
(4,806)
(1,158)
(8,591)
(53,903)
depreciation dec.
(4,018)
(61)
(11)
(671)
(4,761)
-
-
-
21
21
(4,018)
(51)
(11)
-
-
-
(533)
(4,613)
362
362
21,112
110,852
5,989
1,193
14,666
153,812
balance
at
12/31/2015
(43,366)
(4,867)
(1,169)
(9,241)
(58,643)
236
buildings
Plant and machinery
Industrial and com-
mercial equipment
Other assets
(35,330)
(4,755)
(1,147)
(8,420)
(49,652)
net
value
Land
buildings
Plant and
machinery
Indus-
trial and
commercial
equipment
Other
assets
balance at
12/31/2013
inc./
dec.
21,209
(97)
75,522
311
46
-
-
-
5,544
553
102,632
456
depreciation
balance at
12/31/2014
inc./
dec.
depreciation
balance at
12/31/2015
-
(4,018)
(51)
(11)
(533)
(4,613)
21,112
71,504
-
-
260
923
35
-
5,564
532
98,475
1,455
-
(4,018)
(61)
(11)
(671)
(4,761)
21,112
67,486
1,122
24
5,425
95,169
No financial expenses on property, plant and equipment were capitalised.
No impairment was carried out during the 2015 financial year.
Parent Financial Statements / 2015 ANNUAL REPORT
8. intanGiBLe assets
The changes during the period 2014-2015 were as follows:
(in thousands of euro)
12/31/2013
inc. depreciation 12/31/2014 inc. depreciation 12/31/2015
software licenses
515
558
(217)
856
837
(268)
1,425
Other:
software expenses
343
-
expenses for other
projects
3,269
2,577
(163)
(877)
180
-
4,969
1,981
(132)
(1,828)
48
5,122
TOTAL
4,127
3,135
(1,257)
6,005
2,818
(2,228)
6,595
Increases in the year consist mainly of charges incurred for implementing staff management systems (euro 1,396 thousand for a
project under development), for the activation of a new SAP system for treasury management (euro 330 thousand) and for the pur-
chase of licenses (euro 837 thousand).
No impairment was carried out during the 2015 financial year.
9. inVestMents in sUBsidiaries
These amounted to euro 1,141,926 thousand (euro 1,141,058 thousand at December 31, 2014), an increase as compared to the previous
year of euro 868 thousand.
237
Below are details:
(in thousands of euro)
Pirelli servizi Amministrazioni e Tesoreria s.p.A.
Maristel s.p.A.
Pirelli Labs s.p.A.
Pirelli sistemi Informativi s.r.l.
Pirelli & C. Ambiente s.r.l.
Pirelli Tyre s.p.A.
Pirelli Tyre Commerciale s.r.l.
PZero srl
servizi Aziendali Pirelli s.C.p.A.
Hb servizi s.r.l.
Pirelli Ltda
Pirelli uk ltd.
Pirelli group Reinsurance Company s.A.
Pirelli Consumer Italia s.r.l.
TOTAL
12/31/2015
12/31/2014
3,238
1,315
4,079
1,655
2,878
3,238
1,315
4,079
1,655
-
1,090,755
1,085,861
-
-
103
-
9,666
21,871
6,346
20
20
4,894
103
2,010
9,666
21,871
6,346
1,141,926
1,141,058
Parent Financial Statements / 2015 ANNUAL REPORT
The table pursuant to article 2427 of the Civil Code is provided in the annexes.
It is here mentioned that on July 28, 2015, the deed of merger of PZero S.r.l. into Pirelli Tyre S.p.A. was signed, effective from
August 1, 2015.
The changes are outlined below:
(in thousands of euro)
Opening balance
subscriptions, increases and replenishment of capital
Impairment
decreases
Closing balance
12/31/2015
12/31/2014
1,141,058
27,557
(21,775)
(4,914)
1,141,926
1,162,188
13,030
(23,670)
(10,490)
1,141,058
Increases refer to the recapitalization of Pirelli & C. Ambiente S.r.l. for euro 21,643 thousand, the increase of investment in Pirelli
Tyre S.p.A. for euro 4,894 thousand following the merger with PZero S.r.l., a capital contribution of euro 1,000 thousand into HB
Servizi S.r.l. and establishment of the company Pirelli Consumer Italia S.r.l. for euro 20 thousand and which is a company set up in
the area of the project for corporate reorganisation of the Industrial business unit.
Impairments relate to the investment in Pirelli & C. Ambiente S.r.l. (euro 18,765 thousand) and in HB Servizi S.r.l. (euro 3,010
thousand) and in this case the excess over the carrying amount has been recorded in a specific provision for liabilities and charges.
The value of the two investments has been adjusted to their fair value, which is estimated to be the value of shareholders’ net equity.
238
The decreases, amounting to euro 4,914 thousand, refer to the investment in PZero S.r.l. merged into Pirelli Tyre S.p.A. for euro 4,894
thousand and to the sale of the subsidiary Pirelli Industrial S.r.l. (formerly Pirelli Tyre Commerciale S.r.l.) to Pirelli Tyre S.p.A..
10. inVestMents in associates
At December 31, 2015, these amounted to Euro 134,332 thousand (euro 125,100 thousand at December 31, 2014).
The breakdown is as follows:
(in thousands of euro)
Listed securities
Prelios s.p.A.
Unlisted securities
Consortium for the Reseaкch into Advanced Materials (CORIMAV)
Eurostazioni s.p.A. - Rome
Fenice s.r.l.
gWM Renewable Energy II s.p.A.
TOTAL
12/31/2015
12/31/2014
41,920
56,037
104
52,937
28,179
11,192
134,332
104
52,937
16,022
-
125,100
Parent Financial Statements / 2015 ANNUAL REPORT
The following table shows the changes:
(in thousands of euro)
Opening balance
subscriptions, increases and replenishment of capital
Impairment
Closing balance
12/31/2015
12/31/2014
125,100
23,349
(14,117)
134,332
93,062
112,622
(80,584)
125,100
The increases for the year refer to investments in Fenice S.r.l. (euro 12,157 thousand) and the acquisition by Pirelli & C. Ambiente
S.r.l. of the shareholding in GWM Renewable Energy II S.p.A. (euro 11,192 thousand).
The increase in the investment in Fenice S.r.l. is due to the purchase of a portion of 7.32% of the capital. On July 29, 2015, the Cred-
itor Partners of Fenice (Pirelli & C. S.p.A., Unicredit S.p.A. and Intesa San Paolo S.p.A.) actually exercised the right to purchase the
entire portion held by Feidos 11 in Fenice under a “Redemption Right” required by the by-laws of Fenice S.r.l. and a purchase option
provided for in side agreements. Transfer was carried out on September 3, 2015. On September 25, 2015, the Creditor Partners of
Fenice also updated the Side Agreement by making a number of changes. It is here mentioned that the updated Agreement consti-
tutes a modification/integration of the previous Agreement, and so it remains valid between the partners and with respect to Feidos
11, with particular reference to the earn-out clause in favour of Feidos 11 in the case of sale by Fenice of Prelios B shares held by it
within 12 months from exercising the purchase option.
On December 21, 2015, the subsidiary Pirelli & C. Ambiente S.r.l. purchased the investment in GWM Renewable Energy II S.p.A.
amounting to 16.87% of the company capital.
The impairment refers to the investment in Prelios S.p.A. (euro 14,117 thousand) as it was considered that the loss made by the
company, and the difference between the share price at December 31, 2015 (euro 0.283 per share) and the carrying amount of euro
0.378 per share, represents an impairment indicator. The value of the investment was therefore adjusted to the recoverable amount,
represented by fair value.
239
11. otHer FinanciaL assets
At December 31, 2015, these amounted to euro 199,062 thousand (euro 173,459 thousand at December 31, 2014).
Below are details:
(in thousands of euro)
Available-for-sale financial assets
Listed securities
Mediobanca s.p.A. - Milan
RCs Mediagroup s.p.A. - Milan
Unlisted securities
Fin. Priv srl
Real Estate Investment Fund - Anastasia
Alitalia - Compagnia Aerea Italiana s.p.A.
European Institute of Oncology (Istituto Europeo di Oncologia s.r.l.)
F.C. Internazionale Milano s.p.A.
Other companies
Total
12/31/2015
12/31/2014
139,969
14,356
18,787
14,478
-
5,754
293
5,425
106,650
21,621
14,473
14,822
5,349
5,382
558
4,604
199,062
173,459
Parent Financial Statements / 2015 ANNUAL REPORT
The table below shows the changes in the item available-for-sale financial assets:
(in thousands of euro)
Opening balance
Increases
decreases
Fair value adjustment in Equity
Impairment
Reclassification
Closing balance
12/31/2015
12/31/2014
173,459
1,766
-
38,854
(15,117)
100
199,062
176,764
56,579
(42,764)
(5,542)
(11,578)
-
173,459
The increases relate to the subscription of 678,914,731 Alitalia-Compagnia Aerea Italiana S.p.A. shares for euro 1,766 thousand.
After this operation the investment of the company reached 1.56% of the share capital.
Fair value adjustments in equity mainly relate to investments in Mediobanca S.p.A. (positive for euro 33,318 thousand), Fin. Priv.
S.r.l. (positive for euro 4,314 thousand), Emittente Titoli (positive for euro 1,191 thousand), Istituto Europeo di Oncologia S.r.l. (positive
for euro 372 thousand), Fondo Comune di investimento Anastasia (negative for euro 344 thousand).
The impairments item mainly refers to the investment in RCS Mediagroup S.p.A. (euro 7,265 thousand), Alitalia-Compagnia Aerea
Italiana S.p.A. (euro 7,115 thousand), Movincom Servizi S.p.A. (euro 337 thousand) and F.C. Internazionale Milano S.p.A. (euro 265
thousand).
240
The fair value of listed securities matches the stock market price at December 30, 2015. For unlisted securities and real estate
funds, the fair value was estimated on the basis of available information.
Further details are set out in the Annexes to the explanatory notes.
12. deFerred tax assets
In 2015, an impairment of deferred tax assets (euro 102,970 million) was recorded and was directly attributable to the revision
of forecasts over a medium period time horizon of future taxable income of companies participating in Italian tax consolidation,
for which, during this period, a significant reduction is expected due to the new financial structure that the Group will take on as a
result of the merger with Marco Polo Industrial Holding S.p.A. and expected in the first half of 2016. It should be noted that the tax
losses relating to Group Italian companies are carried forward indefinitely.
Parent Financial Statements / 2015 ANNUAL REPORT
13. otHer receiVaBLes
Other receivables can be broken down as follows:
(in thousands of euro)
Other receivables from subsidiaries
Financial receivables from subsidiaries
guarantee deposits
Other receivables from third parties
Receivables from tax authorities not related
to income taxes
Financial accrued interest income
Financial prepaid expenses
12/31/2015
non
current
current
total
12/31/2014
non
current
current
-
-
695
14,181
-
-
624
3,555
3,039
-
3,039
964,472
901,917
500,000
401,917
-
1,616
9,405
3,453
2,367
2,244
9,726
7,425
5,286
2,059
637
8,426
-
-
-
1,607
1,300
7,425
5,286
2,059
total
3,555
964,472
695
15,797
9,405
3,453
2,991
1,000,368
15,500
984,868
931,696
509,063
422,633
Current financial receivables from subsidiaries mainly include loans disbursed in favour of Pirelli Tyre S.p.A. (euro 350,000
thousand, duration 02/24/2014 - 02/24/2016), Pirelli Industrie Pneumatici S.r.l. (euro 150,000 thousand, duration 04/02/2014 -
04/04/2016) and the use of euro 462,000 thousand of the short-term credit facility (euro 600,000 thousand) by Pirelli Tyre S.p.A..
Other non-current receivables from third-parties refer mainly to a contribution made in cash upon signing an investment
partnership contract.
241
Current accrued financial interest income mainly refers to interest accrued but not yet received on financial receivables from
the subsidiary Pirelli Tyre S.p.A. for euro 2,715 thousand, Pirelli Industrie Pneumatici S.r.l. for euro 738 thousand.
Financial prepaid expenses mainly refer to commissions on the revolving and term loan credit facility.
For other receivables, it is considered that the carrying amount approximates fair value.
14. trade receiVaBLes
These amounted to euro 41,687 thousand compared to euro 32,745 thousand the previous year.
The breakdown is as follows:
(in thousands of euro)
Receivables from subsidiaries
Receivables from associates
Receivables from other companies
Total receivables
Provision for bad debts
12/31/2015
12/31/2014
36,902
406
7,481
44,789
(3,102)
41,687
30,389
-
5,458
35,847
(3,102)
32,745
Parent Financial Statements / 2015 ANNUAL REPORT
Of total gross trade receivables amounting to euro 44,789 thousand (euro 35,847 thousand at December 31, 2014), euro 7,481 thou-
sand are towards other companies (euro 5,458 thousand as at December 31, 2014) of which euro 6,894 thousand fell due on Decem-
ber 31, 2015.
Receivables due and past due have been written down based on the Group policies described in the paragraph relating to manage-
ment of credit risk within the “Financial Risk Management Policy”.
The impaired receivables include both significant positions written down separately, and positions with similar characteristics in
terms of credit risk, grouped and written down on a collective basis.
The analysis of trade receivables by geographical area is as follows:
12/31/2015
12/31/2014
receivables From
subsidiaries
receivables From
other companies
receivables From
subsidiaries
receivables From
other companies
Italy
Rest
of Europe
Other
92.42%
6.88%
0.70%
100.00%
79.26%
20.40%
0.34%
100.00%
94.38%
5.46%
0.16%
100.00%
35.00%
28.13%
36.87%
100.00%
The change in the provision for bad debts is shown below:
242
(in thousands of euro)
Opening balance
Increases/decreases
12/31/2015
12/31/2014
3,102
-
3,102
3,042
60
3,102
For trade receivables, the carrying amount is considered to approximate fair value.
15. casH and casH eQUiVaLents
These amounted to euro 146 thousand (euro 8 thousand at December 31, 2014).
(in thousands of euro)
bank deposits
Cash on hand
12/31/2015
12/31/2014
140
6
146
3
5
8
Parent Financial Statements / 2015 ANNUAL REPORT
16. tax receiVaBLes
These amounted to euro 62,105 thousand (euro 91,004 thousand at December 31, 2014). The amount mainly includes:
receivables from the inland revenue for withholding tax (euro 26,397 thousand);
receivables from Group companies participating in tax consolidation for euro 27,842 thousand (euro 39,112 thousand at Decem-
ber 31, 2014). The decrease as compared to the previous year depends essentially on a lower contribution of the positive taxable
result achieved by Pirelli Tyre S.p.A.;
receivables from the inland revenue for IRES for 2008/2014 of euro 5,343 thousand (euro 5,058 thousand at December 31, 2014)
and for VAT litigation in 2004 (euro 1,102 thousand).
17. deriVatiVe FinanciaL instrUMents
The item amounted to euro 340 thousand (euro 209 thousand at December 31, 2014).
18. eQUitY
Equity amounted to Euro 1,913,928 thousand (euro 2,056,180 thousand at December 31, 2014). The analysis of changes and their
composition are provided in the main financial statements.
18.1 sHAre CApitAL
The share capital at December 31, 2015 amounted to euro 1,345,381 thousand, and was represented by 475,740,182 ordinary and
12,251,311 special shares.
Share capital is shown net of treasury shares, amounting to euro 969 thousand for ordinary shares (no. shares 351,590, representing
0.07% only of ordinary shares) and euro 1,126 thousand for special shares (no. shares 408,342, representing 3.33% only of special
shares) and therefore amounted to euro 1,343,285 thousand. The total of treasury shares represents 0.16% of the share capital.
The table below shows an analysis of the availability and distribution of individual equity items.
243
(in thousands of euro)
share capital (1)
Legal reserve
Other reserves
Merger Reserve
IAs Reserve
Retained earnings
Total
Non available share (2)
Residual available share
amount
possible
use
available
share
summary oF reserves
use in 2013-2015
1,343,285
152,114
-
b
12,467
96,531
A, b, C
-
311,233
A, b, C
1,915,630
-
152,114
12,467
-
311,233
475,814
(6,595)
469,219
-
-
-
-
-
A - increase the share capital; b - cover losses; C - distribute to the shareholders.
(1) Total value of euro 2.095 thousand net of nr. 351.590 ordinary shares and nr.408.342 savings shares without nominal value
(2) Represents the total amount of the non distributable share due to cover multi-year unamortized deferred costs in accordance with ex-Article
2426 of the Italian Civil Code
Parent Financial Statements / 2015 ANNUAL REPORT
19. BorroWinGs FroM Banks
and otHer FinanciaL institUtions
The item borrowings from banks and other financial institutions can be broken down as follows:
(in thousands of euro)
12/31/2015
12/31/2014
total
non current current
total
non current current
bonds
borrowings from other
financial institutions
Other financial payables
Accrued liabilities
499,833
101,332
1,805
22,096
-
499,833
498,940
498,940
101,332
-
-
-
1,805
22,096
1,650
-
21,997
1,650
-
-
625,066
101,332
523,734
522,587
500,590
-
-
-
21,997
21,997
The item bonds refers to an unrated bond placed by Pirelli & C. S.p.A. on the Eurobond market for an aggregate nominal amount of
euro 500 million, with a fixed coupon of 5.125% and maturity in February 2016.
The carrying amount of the bond at December 31, 2015 was determined as follows:
244
(in thousands of euro)
Nominal value
Transaction costs
Amortisation of effective interest rate
Adjustment for fair value hedge
12/31/2015
12/31/2014
500,000
(5,296)
5,129
-
499,833
500,000
(5,296)
3,964
272
498,940
The borrowings from other financial institutions item mainly includes euro 100,000 thousand relating to the use of the revolving
and term loan credit facility for euro 200,000 thousand with duration five years subscribed on February 13, 2015.
The accrued liabilities essentially refer to interest that has accrued on the bond loan but has not yet been paid for euro 21,974
thousand.
Below is the fair value of borrowings from banks and other financial institutions, compared with the relevant carrying amount:
(in thousands of euro)
bond
Other non-current borrowings
carrying amount
Fair value
12/31/2015
12/31/2014
12/31/2015
12/31/2014
499,833
498,940
101,332
601,165
1,650
500,590
502,935
101,332
604,267
523,565
1,650
525,215
Borrowings from banks and other financial institutions are denominated in euros.
Parent Financial Statements / 2015 ANNUAL REPORT
20. ProVisions For LiaBiLities and cHarGes
Below are the changes for the non-current part during the period:
provision For liabilities and charges - non-current part (in thousands of euro)
Opening balance
Increases
Releases
uses
Closing balance
12/31/2015
12/31/2014
17,056
264
(410)
(2,564)
14,346
37,167
1,012
(19,455)
(1,668)
17,056
Increases are mainly due to the allocation to adjust the provision to the actual demand for legal and tax disputes.
Uses refer substantially to costs associated with reclamation.
The provision for liabilities and charges current portion amounted to euro 400 thousand and refers to the surplus over carrying
amount, for the adjustment of the value of the investment in HB Servizi S.r.l..
21. eMPLoYee BeneFit oBLiGations
Employee benefit obligations amounted to euro 2,104 thousand (euro 4,194 thousand at December 31, 2014). This item includes provi-
sion for employee leaving indemnities which amounts to euro 1,548 thousand (euro 1,489 thousand at December 31, 2014) and other
employee benefits of euro 555 thousand (euro 2,705 thousand at December 31, 2014).
The decrease is attributable to reclassification of the amount allocated in 2014 under Other current liabilities and Other non-cur-
rent liabilities due to the decision taken by the Board of Directors on December 22, 2015 in respect of early closing of the Long-
Term Incentive Plan 2014-2016 for the Management of the Pirelli Group and approved by the Board of Directors and Shareholders
of Pirelli & C., respectively on February 27 and June 12, 2014, in view of the delisting of the ordinary shares of Pirelli & C. S.p.A..
245
Employee leaving indemnities (TFR)
The changes during the year 2015 for the provision for leaving indemnities are as follows:
(in thousands of euro)
Balance at 12/31/2013
Movements through income statement
Actuarial (gains)/losses recognized in Equity
Indemnities, advance payments, relocations
Balance at 12/31/2014
Movements through income statement
Actuarial (gains)/losses recognized in Equity
Indemnities, advance payments, relocations
Balance at 12/31/2015
The amounts shown in the Income Statement have been included in the item “Personnel Expenses” (note 28).
1,114
92
156
127
1,489
89
(69)
39
1,548
Parent Financial Statements / 2015 ANNUAL REPORT
The net actuarial losses accrued in 2015 and attributed directly to net equity, amount to euro 68 thousand. The cumulative amount
at December 31, 2015 of net income attributed directly to net equity amounts to euro 2,066 thousand (euro 1,998 thousand at De-
cember 31, 2014).
The principal actuarial assumptions used at December 31, 2015 are as follows:
2015
discount rate
Inflation rate
The principal actuarial assumptions used at December 31, 2014 were as follows:
2014
discount rate
Inflation rate
2.1%
1.3%
1.8%
1.5%
Employees in service at December 31, 2015 came to 131 units (125 units at December 31, 2014).
Other conditions being equal, a hypothetical change of 0.25% in the discount rate would result in a decrease in liabilities amounting
to 2.57%, in the case of an increase occurring (2.37% at December 31, 2014), and an increase in liabilities of 2.64%, in the case of a
decrease (2.43% at December 31, 2014).
246
22. trade PaYaBLes
This breakdown of trade payables is as follows:
(in thousands of euro)
Payables to subsidiaries
Payables to associates
Payables to other companies
12/31/2015
12/31/2014
825
607
39,500
40,932
1,149
56
26,097
27,302
The carrying amount of trade payables is considered to approximate their fair value.
The change over December 31, 2014 in the item payables to other companies refers mainly to costs incurred for transactions of
corporate reorganisation.
Parent Financial Statements / 2015 ANNUAL REPORT
23. otHer PaYaBLes
The breakdown is as follows:
(in thousands of euro)
12/31/2015
12/31/2014
total
non-current current
total
non-current current
Payables to subsidiaries
10,796
Payables to social security
and welfare institutions
Payables to employees
Other payables
Accrued liabilities
deferred income
2,296
17,017
9,834
-
995
-
-
6,182
381
-
-
10,796
8,119
2,296
1,989
10,835
9,453
-
995
3,989
9,884
590
-
40,938
6,563
34,375
24,571
Payables to subsidiaries refer to receivables related to VAT consolidation.
-
-
-
-
-
-
-
8,119
1,989
3,989
9,884
590
-
24,571
Payables to social security and welfare institutions mainly include contributions payable to INPS and INAIL.
Payables to employees refer to the wages to be paid to employees. This item includes a payable for the LTI incentive 2014-2016, due
to the early closure of the Long-Term Incentive Plan 2014 - 2016 approved by the Board of Directors of Pirelli & C. S.p.A.
247
Other payables include liabilities for compensation to be paid to directors and auditors, for withholding taxes on income from
self-employed and employed work and other minor items.
For other payables it is considered that the carrying amount approximates their fair value.
24. tax PaYaBLes
These amounted to euro 44,016 thousand (euro 64,296 thousand at December 31, 2014) mainly including payables IRES tax (euro
27,309 thousand) and payables for WHT (euro 15,385 thousand).
25. reVenUes FroM saLe and serVices
These mainly refer to:
(in thousands of euro)
sale of services to subsidiaries
sale of services to other companies
2015
2014
22,062
732
22,794
18,707
615
19,322
The increase is mainly due to reorganization of facilities with the consequent extension of services provided to Group’s Italian
affiliates.
Parent Financial Statements / 2015 ANNUAL REPORT
26. otHer incoMe
This amounted to euro 121,962 thousand, (euro 123,892 thousand in 2014), and is as follows:
(in thousands of euro)
Other income from subsidiaries
Other income from other companies
2015
2014
110,571
11,391
121,962
104,357
19,535
123,892
Other income from subsidiaries includes royalties paid by Group companies in order to use the trademark (euro 83,865 thou-
sand in 2015 - euro 80,087 thousand in 2014), recovery of expenses and other income (euro 17,603 thousand in 2015 - euro 14,450
thousand in 2014), rents and recoveries of management fees on rents (euro 9,102 thousand in 2015 - euro 9,820 thousand in 2014).
Other income from other companies mainly consists of royalties paid by other companies in order to use the Pirelli trademark
(euro 3,579 thousand in 2015 - euro 2,109 thousand in 2014), reversal of excess funds (euro 260 thousand in 2015 - euro 10,000
thousand in 2014), recovery of expenses and other incomes (euro 3,775 thousand in 2015 - euro 3,287 thousand in 2014), rents and
recoveries of management fees on rents (euro 3,777 thousand in 2015 - euro 9,820 thousand in 2014).
27. raW MateriaLs & consUMaBLes
248
These amounted to euro 303 thousand (euro 233 thousand in 2014) and include purchases of advertising materials, fuel and other
materials.
28. PersonneL exPenses
These amounted to euro 33,122 thousand (euro 28,237 thousand in 2014) broken down as follows:
(in thousands of euro)
Wages and salaries
social security and welfare contributions
Employee leaving indemnities (TFR)
Leaving indemnities and similar obbligations
Other costs
Staff in service on average is as follows:
Executives: 36
Employees: 92
Workers: 2
2015
2014
27,136
4,497
72
1,075
342
33,122
22,301
4,473
62
1,030
371
28,237
The increase over the previous year is essentially due to what was described previously in note 21 in connection with variable
annual medium term incentives (three-year LTI plan 2014/2016).
Parent Financial Statements / 2015 ANNUAL REPORT
29. aMortisation, dePreciation
and iMPairMent
The breakdown is as follows:
(in thousands of euro)
depreciation - property, plant and equipment
Amortisation - intangible assets
30. otHer costs
The breakdown of other costs is the following:
(in thousands of euro)
services rendered by subsidiaries
Advertising
Consultancy and collaboration services
Accruals for the provision of future liabilities and charges
Legal and notarial expenses
Travel expenses
Compensation of board members and supervisory board
Membership fees and contributions
Rental and lease instalments
IT expenses
Power, gas and water expenses
security service
Insurance premiums
Patents and trademarks expenses
Cleaning and property ordinary maintenance expenses
Property maintenance
Other
2015
2014
4,761
2,227
6,988
4,613
1,258
5,871
2015
2014
5,664
29,728
18,446
265
3,882
10,514
2,813
5,031
9,602
2,295
2,032
2,200
1,627
1,339
278
1,111
9,874
106,701
249
6,473
25,076
8,917
1,071
1,564
3,442
2,928
3,516
9,808
2,445
1,836
1,839
1,228
764
551
985
7,832
80,275
Parent Financial Statements / 2015 ANNUAL REPORT
31. net incoMe (Loss)
FroM eQUitY inVestMents
31.2. Losses oN equitY iNvestmeNts
These amounted to euro 52,341 thousand (euro 139,121 thousand in 2014), in detail:
(in thousands of euro)
Impairment losses on equity investments in subsidiaries:
PZero s.r.l.
Pirelli & C. Ambiente s.r.l.
Pirelli Finance Luxembourg s.A.
Impairment losses on equity investments in associates:
Prelios s.p.A.
Fenice s.r.l.
Impairment losses on other financial assets:
Prelios category b shares
Alitalia s.p.A. - Compagnia Aerea Italiana s.p.A.
250
RCs Mediagroup s.p.A.
Movincom servizi s.p.A.
Others
Losses on disposals:
sirio s.p.A.
2015
2014
-
18,766
3,410
14,117
-
-
7,115
7,265
337
400
931
52,341
10,169
16,156
-
35,657
44,927
4,772
11,229
15,860
-
351
-
139,121
Impairment losses on equity investments in subsidiaries refer to an adjustment in respect of the subsidiary Pirelli & C. Am-
biente S.r.l. and HB Servizi S.r.l.
Impairment losses on equity investments in associates refer to an adjustment of Prelios S.p.A.
Impairment losses on other financial assets mainly refer to impairments on investments available for sale, in Alitalia – Com-
pagnia Aerea Italiana S.p.A. (euro 7,115 thousand), RCS MediaGroup S.p.A. (euro 7,265 thousand).
For fuller details please see the notes relating to equity investments in subsidiaries, associates and other financial assets
Parent Financial Statements / 2015 ANNUAL REPORT
31.3. DiviDeNDs
These amounted to euro 174,662 thousand compared to euro 312,921 thousand in 2014. In detail:
(in thousands of euro)
From subsidiaries:
Pirelli Tyre s.p.A. - Italy
Pirelli Ltda - brasil
Pirelli sistemi Informativi s.r.l. - Italy
Pirelli servizi Amministrazione e Tesoreria s.p.A. - Italy
Pirelli Labs s.r.l. - Italy
Maristel s.p.A. - Italy
Pirelli group Reinsurance Company sA
From associates:
Eurostazioni s.p.A. - Italy
From other companies:
Mediobanca s.p.A. - Italy
sirio s.p.A. - Italy
ECA Ltd - great britain
Fin. Priv. s.r.l. - Italy
Emittente Titoli s.p.A. - Italy
Anastasia Fund - Italy
Euroqbe s.A. (in liquidation) - belgium
2015
2014
163,000
294,000
-
-
-
1,000
-
3,309
167,309
1,680
1,680
3,938
137
24
513
202
788
71
5,673
174,662
7,671
500
800
-
1,000
4,299
308,270
1,011
1,011
2,363
-
-
308
33
680
256
3,640
312,921
251
The reduction as compared to 2014 is due essentially to non-collection of the interim dividend from Pirelli Tyre S.p.A. which will be
resolved and collected in a single settlement.
32. FinanciaL incoMe
These amounted to euro 17,079 thousand (euro 19,619 thousand in 2014).
They mainly include interest on loans granted to the subsidiary Pirelli Tyre S.p.A. (euro 11,583 thousand in 2015, euro 13,964 thou-
sand in 2014) and Pirelli Industrie Pneumatici S.r.l. (euro 2,991 thousand in 2015, euro 3,791 thousand in 2014).
33. FinanciaL exPenses
These amounted to euro 30,998 thousand (euro 29,615 thousand in 2014 and essentially include euro 26,789 thousand for interest ac-
crued on the Bond (euro 26,730 thousand in 2014) and euro 533 thousand related to interest on loans (euro 2,440 thousand in 2014).
Parent Financial Statements / 2015 ANNUAL REPORT
34. taxes
Taxes are analysed in the following table:
(in thousands of euro)
Current income taxes
Foreign WHT
Regional tax on production (IRAP)
Taxes previous years
Consolidated corporate income tax (IREs)
Other taxes
A
Total Current income taxes
Deferred taxes
Through tax consolidation
On tax losses carried forward
B
Total Deferred taxes
A+B Total Taxes
2015
2014
8,184
-
(1,353)
4,037
150
11,018
322
(119,085)
(118,763)
(107,745)
18,373
(2,257)
(1,503)
5,669
9,331
29,613
(767)
17,773
17,006
46,619
252
Current taxes include the effect of withheld income from foreign sources for previous years, as well as the benefits of fiscal consol-
idation of the Italian group, and release of funds previously set aside. Total taxes also reflect the impairment of deferred tax assets
in connection with the expected recoverability of tax losses by the Italian Group companies (refer to note 12).
Parent Financial Statements / 2015 ANNUAL REPORT
The transfer of the estimated tax burden to the current in 2015 is analysed in the following table:
(in thousands of euro)
Net Income (loss) before tax
Net income (loss) from discontiuned operations
Net income (loss) before tax including income
from discontiuned operations
Tax rate
Estimated tax
Decrease
detaxation of dividends
gains on disposal of share investments
Reserves
Other decrease
deferred tax
Income from WHT previous years
Increase
Impairment
Taxes previous years
Not recovered WHT
Release of deferred tax
Other increase
A
B
ires
irap
106,043
106,043
106,043
-
-
-
C=A-B
106,043
106,043
106,043
d
27.5%
5.57%
E = C*d
(29,162)
(5,907)
(35,069)
F
g
H
I
L
M
N
O
P
q
R
45,425
18,485
63,909
-
1,342
373
-
8,184
(14,138)
(521)
-
(102,970)
-
-
961
-
-
-
-
-
-
-
1,342
1,334
-
8,184
(14,138)
(521)
-
(102,970)
(3,346)
(13,539)
(16,885)
253
Taxes
s=E+F+g+H+I+L+M+N+O+P+q+R
(94,813)
Current tax burden Pirelli & C. S.p.A.
Net income from tax consolidation
Total tax
Net income (loss)
S
T
U=S+T
V=C+U
-
-
(94,813)
(94,813)
(94,813)
(12,932)
(12,932)
(107,745)
-
(107,745)
(1,702)
Parent Financial Statements / 2015 ANNUAL REPORT
The transfer of the estimated tax burden to the current in 2014 is analysed in the following table:
(in thousands of euro)
Net Income (loss) before tax
Net income (loss) from discontiuned operations
Net income (loss) before tax including income
from discontiuned operations
Tax rate
Estimated tax
Decrease
detaxation of dividends
gains on disposal of share investments
Reserves
Other decrease
deferred tax
Income from WHT previous years
254
Increase
Impairment
Taxes previous years
Not recovered WHT
Release of deferred tax
Other increase
A
B
ires
irap
211,345
211,345
211,345
-
-
-
C=A-B
211,345
211,345
211,345
d
27.5%
5.57%
E = C*d
(58,120)
(11,772)
(69,892)
F
g
H
I
L
M
N
O
P
q
R
81,417
1,315
3,209
10,265
35,465
18,373
(40,379)
(1,852)
18,484
961
-
-
(9,931)
99,901
1,315
3,209
11,226
35,465
18,373
(40,379)
(1,852)
-
-
(3,923)
-
(3,923)
Taxes
s=E+F+g+H+I+L+M+N+O+P+q+R
45,770
(2,258)
43,512
Current tax burden Pirelli & C. S.p.A.
Net income from tax consolidation
Total tax
Net income (loss)
tAx CoNsoLiDAtioN
S
T
U=S+T
V=C+U
45,770
(2,258)
43,512
3,106
3,106
48,876
(2,258)
46,618
257,963
It is mentioned at this point that starting from 2004, the Company has exercised an option for consolidated taxation as consolidator,
pursuant to art. 117 and following of the TUIR, with regulation of relations arising from adhering to consolidation through special
“Regulations”, and which involves a common procedure for the application of laws and regulations.
Said regulation has been updated in subsequent years as a result of amendments made within the companies participating in the
agreement and the related shareholding structure, as well as in the light of the corrective and supplementary interventions occur-
Parent Financial Statements / 2015 ANNUAL REPORT
ring in relevant legislation.
The above amendments have concerned particularly the remuneration of the tax losses used by the companies adhering to the con-
solidation. Adoption of consolidation allows the Parent Company Pirelli & C. S.p.A. to offset any taxable income or loss of the Parent
Company with those of its resident subsidiaries that have exercised the option, but taking into account that any tax losses accrued
during periods prior to the introduction of group taxation may only be used by the companies concerned.
35. reLated PartY transactions
Related Party Transactions, including intra-group transactions, are not classified as unusual and occur during the ordinary course
of business of Group companies. Such transactions, when not concluded at standard conditions or dictated by specific regulations,
are in any case conducted under market conditions (at arm’s length).
The tables below show the main transactions with related parties for the years ended December 31, 2015 and December 31, 2014
(amounts are expressed in euro millions).
YeAr 2015
trANsACtioNs WitH suBsiDiAries
(in millions of euro)
items oF balance sheet
Current assets
Trade receivables
36.9
Refers mainly to receivables for services/provisions (euro 33.6 million Pirelli Tyre s.p.A., euro 2.6 million Pirelli
Tyre Russia, euro 0.2 million Pirelli sistemi Informativi s.r.l., euro 0.2 million PZero s.r.l.)
Other receivables
971.4
Refers mainly: for euro 814,7 million to loans granted and related interest accrued and not paid with Pirelli
Tyre s.p.A.; eur 153,7 million to a loan granted and related interest accrued but not paid with Pirelli Industrie
Pneumatici s.r.l.; euro 2,4 million to the intra-group current account with Pirelli International Plc
255
Tax receivables
27.8
The amount refers to receivables from group companies that adhere to tax consolidation (mainly euro 25.8
million Pirelli Tyre s.p.A., euro1.8 million Pirelli Industrie Pneumatici s.r.l)
Financial instruments
0.3
The sum refers to receivables for hedging income and related accruals from Pirelli International Plc
Currents liabilities
Trade payables
Other payables
Tax payables
0.8
11.3
Refer mainly to payables for the provision of services (the main ones are: euro 0.3 million Pirelli Tyre s.p.A.,
euro 0.3 million Pirelli Amministrazione e Tesoreria s.p.A., euro 0.1 million servizi Aziendali Pirelli s.c.p.a.)
Refer mainly to payables to group companies that adhere to vAT consolidation, the main ones are:
euro 10.6 million Pirelli Tyre s.p.A., euro 0,1 million driver Italia s.p.A. and the deferred liablity for rent
in force withPirelli Tyre s.p.A. euro 0.5 million
16.5
Refers to payables to subsidiaries that adhere to tax consolidation, mainly euro 16.3 million Pirelli Tyre, euro 0,1
million Pirelli & C. Ambiente s.r.l.
Parent Financial Statements / 2015 ANNUAL REPORT
(in millions of euro)
items oF income statement
Revenues from sales
and services
22.1
The amount mainly refers to service agreements. The main relations are: euro 20.8 million Pirelli Tyre s.p.A.,
euro 0.3 million Pirelli & C. Ambiente s.r.l., euro 0.3 million Pirelli sistemi Informativi s.r.l., euro 0.2 milion Pirelli
servizi Amministrazione e Tesoreria s.p,A.,euro 0.2 million Hb servizi s.r.l.)
Other income
109.2
Other costs
5.4
The amount mainly refers to: brand license agreements (euro 82,8 million Pirelli Tyre s.p.A., euro 1,0 million
Pirelli Tyre Russia); other recoveries (euro 17,2 million Pirelli Tyre s.p.A., euro 0.4 million Pirelli sistemi
Informativi s.r.l.); lease agreements (euro 0,8million Pirelli sistemi Informativi s.r.l., euro 5,7 million Pirelli Tyre
s.p.A., euro 0,3 million Pirelli servizi Amministrazione e Tesoreria s.p.A., euro 0.1 million Pirelli Ambiente s.r.l.)
The amount mainly refers to charges for various services and expenses (euro 1.2 million Pirelli servizi
Amministrazione e Tesoreria s.p.A., euro 1,4 million Pirelli sistemi Informativi s.r.l., euro 1.2 million Pirelli Tyre
s.p.A., euro 0.7 Hb servizi s.R.L., euro 0.4 million servizi Aziendali Pirelli s.c.p.a.).
Net income (loss)
from equity investments
- dividends
167.3
These refer to: euro 163.0 million Pirelli Tyre s.p.A., euro 3.3 million Pirelli group Reinsurance Company s.r.l.,
euro 1.0 million Pirelli Labs s.p.A
Financial income
15.8
Taxes
26.8
Income deriving from loans granted (euro11,6 million Pirelli Tyre s.p.A, euro 3,0 million Pirelli Industrie
Pneumatici s.r.l., euro 0,7 million Pirelli & C. Ambiente s.r.l.) and hedging transactions euro 0.5 million Pirelli
Internatonal Plc.
Refer to income and expenses with group companies that adhere to tax consolidation. Tax income - the main
items are: Pirelli Tyre s.p.A. euro 24.3 million, Pirelli sistemi Informativi s.r.l. euro 0.2 million, Pirelli Industrie
Pneumatici s.r.l. euro 1.9 mllion; Tax charges - the main items are: Pirelli Tyre s.p.A. euro 0.3 million
(in millions of euro)
Сash Flow investments and disinvestments
Investments in
subsidiaries
33.9
The amount refers for euro 21.7 million to the capital increase in Prelli Ambente s.r.l., for euro 1.0 million for
capital payments in Hb servizi s.r.l. and for euro 11.2 million to the acquisition of gWM Renewable Energy II
s.p.A. by Pirelli Ambiente s.r.l.
256
trANsACtioNs WitH AssoCiAtes
(in millions of euro)
items oF balance sheet
Current assets
Trade receivables
Other receivables
Currents liabilities
Trade payables
Other payables
Non-current liabilities
0.4
0.1
0.6
0.1
The sum refers to receivables for services rendered to Prelios s.p.A.
The amount refers to the loan and its applicable interest provided to Fenice s.r.l.
Refers to payables for services received from Lambda s.p.A. (euro 0.5 million) and from Corimav (euro 0.1 million)
Refers to deferred liabilities to Prelios s.p.A. for rent of the R&d building
Financial payables
1.3
Refers to the Prelios s.p.A. security deposit for rent of the R&d building
(in millions of euro)
items oF income statement
Other income
1.4
The amount refers to the rent of the R&d building by Prelios s.p.A.
Other costs
0.2
Refers to relations with the Consortium for Research on Advanced Materials - Corimav (euro 0.2 million)
Net income (loss) from
equity investments -
dividends
1.7
The amount refers to dividends distributed by Eurostazioni s.p.A.
Parent Financial Statements / 2015 ANNUAL REPORT
YeAr 2014
trANsACtioNs WitH suBsiDiAries
(in millions of euro)
items oF balance sheet
Current assets
Trade receivables
30.4
Refers mainly to receivables for services/provisions (euro 27,9 million Pirelli Tyre s.p.A., euro 1,6 million Pirelli Tyre
Russia, euro 0,3 million Pirelli sistemi Informativi s.r.l., euro 0,2 million PZero s.r.l.)
Other receivables
408.4
Refers mainly: for euro 365,7 million to loans granted and related interest accrued and not paid with Pirelli Tyre
s.p.A.; euro 33,2 million to a loan granted and related interest accrued but not paid with Pirelli Ambiente s.r.l.; euro
5,2 million to the intra-group current account with Pirelli servizi Amministratizione e Tesoreria s.p.A.
Tax receivables
39.1
The amount refers to receivables from group companies that adhere to tax consolidation (mainly euro 38,7 million
Pirelli Tyre s.p.A., euro 0,2 million Pirelli sistemi Informativi s.r.l., euro 0,1 million Pirelli servizi Amministrazione e
Tesoreria s.p.A.)
Non-current assets
Other receivables
500.0 Refer to loans granted to Pirelli Tyre s.p.A. (euro 350,0 million) to Pirelli Industrie Pneumatici s.r.l. (euro 150,0 million)
Currents liabilities
Trade payables
1.1
Refer mainly to payables for the provision of services (the main ones are: euro 0,5 million Pirelli Tyre Ltd., euro 0,3
million Pirelli Amministrazione e Tesoreria s.p.A., euro 0,1 million servizi Aziendali Pirelli s.c.p.a., euro 0,1 million
Pirelli sistemi Informativi s.r.l.)
Other payables
8.2
Refer mainly to payables to group companies that adhere to vAT consolidation, the main ones are: euro 7,8 million
Pirelli Tyre s.p.A., euro 0,1 million PZero s.r.l.
257
Tax payables
18.6
Refers to payables to subsidiaries that adhere to tax consolidation, mainly euro 18,4 million Pirelli Tyre,
euro 0,1 million Pirelli Ambiente s.r.l.
(in millions of euro)
items oF income statement
Revenues from sales
and services
18.7
The amount mainly refers to service agreements. The main relations are: euro 17,3 million Pirelli Tyre s.p.A., euro
0,4 million Pirelli Ambiente s.r.l., euro 0,3 million Pirelli sistemi Informativi s.r.l., euro 0,4 million PZero s.r.l.)
Other income
102.6
Other costs
6.3
The amount mainly refers to: brand license agreements (euro 78,7 million Pirelli Tyre s.p.A., euro 1,2 million
Pirelli Tyre Russia); other recoveries (euro 13,7 million Pirelli Tyre s.p.A., euro 0,1 million Pirelli International Ltd);
lease agreements (euro 1,1 million Pirelli sistemi Informativi s.r.l., euro 6,5 million Pirelli Tyre s.p.A., euro 0,3
million Pirelli servizi Amministrazione e Tesoreria s.p.A.)
The amount mainly refers to charges for various services and expenses (euro 2,1 million PZero s.r.l., euro 1,1
million Pirelli servizi Amministrazione e Tesoreria s.p.A., euro 1,1 million Pirelli sistemi Informativi s.r.l., euro
0,6 million Pirelli Tyre s.p.A., euro 0,5 million Pirelli Tyre Russia, euro 0,2 million Pirelli Tyres Limited, euro 0,3
million servizi Aziendali Pirelli s.c.p.a.)
Net income (loss) from
equity investments -
dividends
308.3
They refer to: euro 294,0 million Pirelli Tyre s.p.A., euro 7,7 million Pirelli Ltda, euro 4,3 million Pirelli group
Reinsurance Company s.r.l., euro 1,0 million servizi Aziendali Pirelli s.c.p.a., euro 0,8 million Pirelli servizi
Amministrazioni e Tesoreria s.p.A., euro 0,5 million Pirelli sistemi Informativi s.r.l..
Financial income
18.6
Income deriving from loans granted (euro 13,9 million Pirelli Tyre s.p.A, euro 3,8 million Pirelli Industrie
Pneumatici s.r.l., euro 0,7 million Pirelli Ambiente s.r.l.).
Taxes
35.7
Refer to income and expenses with group companies that adhere to tax consolidation. Tax income - the main
items are: Pirelli Tyre s.p.A. euro 36,3 million, Pirelli sistemi Informativi s.r.l. euro 0,2 million; Tax charges - the
main items are: Pirelli Tyre s.p.A. euro 1,2 million
(in millions of euro)
Сash Flow investments and disinvestments
Investments in
subsidiaries
13.0
The amount refers for euro 11,0 million to the capital increase in PZero s.r.l., for euro 2,0 million for the
acquisition and capital payments in Hb servizi s.r.l.
Parent Financial Statements / 2015 ANNUAL REPORT
trANsACtioNs WitH AssoCiAtes
(in millions of euro)
items oF balance sheet
Current assets
Other receivables
0.1
The amount refers to the loan and its applicable interests provided to Fenice s.r.l.
Currents liabilities
Trade payables
Other payables
0.1
0.1
Non-current liabilities
Refers to payables for services received from Corimav
Refers to deferred liabilities to Prelios s.p.A. for rent of the R&d building
Financial payables
1.7
Refers to the Prelios s.p.A. security deposit for rent of the R&d building
(in millions of euro)
items oF income statement
Other income
Other costs
Net income (loss) from
equity investments -
dividends
gains from equity
investments
258
1.7
The amount refers to the rent of the R&d building by Prelios s.p.A.
0.2
Refers to relations with the Consortium for Research on Advanced Materials - Corimav (euro 0,2 million)
1.0
The amount refers to dividends distributed by Eurostazioni s.p.A.
13.3
Refers to the gain following the conversion of the Prelios s.p.A. bond.
trANsACtioNs WitH reLAteD pArties
tHrougH DireCtors
(in millions of euro)
items oF income statement
Other costs
6.6
The amount refers to FC Internazionale Milano s.p.A. sponsorship costs
trANsACtioNs WitH otHer reLAteD pArties
(in millions of euro)
items oF income statement
Other income
0.1
The amount refers to the leasing agreement with Camfin s.p.A.
Financial expenses
0.2
Interests on credit facility to banca IMI banca Intesa (euro 0,1 million) and unicredit (euro 0,1 million)
BeNeFits For keY mANAgers oF tHe CompANY
The compensation payable to key managers amounted to euro 8,237 thousand at December 31, 2015 (euro 6,582 thousand at De-
cember 31, 2014) of which being recognised in the Income Statement as “Personnel Expenses” euro 5,457 thousand (euro 3,638
thousand in 2014) and in the Income Statement as “Other Costs” euro 2,781 thousand (euro 2,944 thousand at December 31, 2014).
Compensation also includes euro 355 thousand for employee leaving indemnity (TFR) and retirement benefits (euro 353 thousand
at December 31, 2014).
Parent Financial Statements / 2015 ANNUAL REPORT
36. otHer inForMation
exterNAL AuDitors’ Fees
The table below shows the fees paid in financial year 2015 for the audit services and those paid for other non-audit services carried
out by the audit firm Reconta Ernst & Young S.p.A..
(in thousands of euro)
Independent auditing services
and certification services (1)
company that
provided the service
company that
received the service
partial
Fees
total
Fees
Reconta Ernst & young s.p.A.
Pirelli & C. s.p.A.
492
492
(1) the item "independent auditing services and certification services" includes amounts paid for legal accounting auditing services and other
services that envisage the issuance of an auditor's report as well as amounts paid for certification services linked with legal auditing activities
37. coMMitMents and continGencies
guArANtees proviDeD oN BeHALF
oF suBsiDiAries AND otHer CompANies
The guarantees were issued for loans and contractual commitments of subsidiaries for euro 1,109,997 thousand.
The sum includes euro 1,103,617 thousand for guarantees given for the benefit of Pirelli Tyres Ltd. (UK) and Pirelli UK Ltd. in respect
of local pension funds.
259
otHer risks
At the start of April 2014, the European Commission notified Pirelli and other Parties involved (among which being Prysmian Cavi
and Sistemi, controlled by Pirelli up until July 2015) of a decision taken at the conclusion of antitrust inquiries begun in respect of
the energy cables business, and which foresees a penalty to be borne by Prysmian amounting to around euro 104 million for a part
of which, amounting to euro 67 million, Pirelli is liable jointly with Prysmian. This decision confirms the fact that there was no
involvement of Pirelli in the alleged cartel. The antitrust Breach contested is attributable exclusively to a principle of the so-called
“parental liability” as during part of the period of the alleged cartel, Prysmian was a subsidiarity of Pirelli. Pirelli has submitted
recourse to the Court of the European Union against the decision of the European Commission, challenging application of the prin-
ciple of “parental liability”.
The European Commission has additionally demanded Pirelli file a bank surety to cover payment, if and when owed, of 50% of the
penalty applied to Prysmian and Pirelli jointly. As a consequence of the foregoing, Pirelli handed over the guarantee requested by
the Commission on December 17, 2014.
Pirelli has taken legal action before the Court of Milan so that the obligation of Prysmian to hold Pirelli harmless from any de-
mand including that of the European Commission in connection with the aforesaid penalty be held and ruled. Judgement has been
suspended by the Court of Milan pending the final judgement of community judges. Pirelli has impugned the order of suspension
before the Court of Cassation.
On November 23, 2015, Prysmian Cavi e Sistemi served suit for damages commenced before the High Court of Justice against
Prysmian and other participants in the cartel, on the part of National Grid and Scottish Power, a company that felt it had been
injured by the alleged illicit understanding. Specifically, Prysmian submitted a plea to have Pirelli and Goldman Sachs, based on
the role played at the time of the cartel, of its controlling companies, hold it harmless in respect of any obligations to indemnify
National Grid and Power.
Pirelli has raised a flaw in jurisdiction of the High Court of Justice as the action before the Court of Milan recalled above is pending,
and feels that the decision as to merit must be put before the Court previously addressed. Pirelli, on the basis of careful judicial anal-
yses supported by authoritative opinions from outside counsel, does not feel it is involved in the alleged irregularities of its former
On February 16, 2016, the Board of Directors of Pirelli & C.
S.p.A. approved the essential lines of a refinancing plan for an
amount up to a maximum of euro 7 billion aimed at extending
debt maturities and optimizing their structure thanks to the
use of bond and banking markets.
The terms and conditions of the refinancing, including any
guarantees, will be defined in light of market conditions and
practices of reference, also taking into account the rights in-
corporated in the Terms and Conditions in favour of bond hold-
ers for euro 600 million maturing in 2019 and that will remain
in place until maturity. The refinancing plan leaves the right
to activate the loan Mergeco Facility alternatively unchanged
for Pirelli, if appropriate, and already made available to the
company by a syndicate of banks as part of the public pur-
chase offer of Marco Polo Industrial Holding S.p.A. on Pirelli.
Following the confirmation by the General Meeting of the
directors co-opted on September 2 and October 20, 2015, the
Board of Directors confirmed Ren Jianxin Chairman of the
Board of Directors and the governance structure approved on
October 20, 2015.
Parent Financial Statements / 2015 ANNUAL REPORT
subsidiary and that full final liability for any breach must be
borne exclusively by the company directly involved.
As a consequence of the foregoing, the assessment of the of risk
is such that it does not require any specific provision to be made
in the annual Financial Statements as at December 31, 2015.
38. siGniFicant
eVents
sUBseQUent
to tHe end
oF tHe Year
On February 9, 2016 Pirelli and the Lombardy Region signed a
competitiveness agreement for a regional grant of Euro 1.9 mil-
lion to the R & D project “Total Safety System” conducted at the
research center of Milan Bicocca. The project, which will last
for 24 months and have a total cost of Euro 5.35 million, is part
of activities related to the development of a new generation of
tyres based on the concept of “total safety”. The project will al-
low Pirelli to study new product mixes oriented towards higher
value-added segments, and to achieve positive results in envi-
ronmental and social issues in terms of road safety, by reducing
the fuel consumption of vehicles and increasing tyre mileage.
On February 15, 2016, Ren Jianxin, Yang Xingqiang, Bai Xin-
ping, Ze’ev Goldberg, Tao Haisu, Wang Dan and Zhang Jun-
fang, previously co-opted by the Board, were reappointed as
directors by the ordinary general meeting of Pirelli & C. S.p.A.
The Extraordinary General Meeting also approved a proposal
of mandatory conversion of savings shares into newly issued
special category unlisted shares without voting rights, as well
as a proposal to adopt new Articles of Association. The manda-
tory conversion and adoption of the new Articles of Association
were also approved, to the extent applicable, by a special sav-
ings general meeting of Pirelli & C. S.p.A.. The extraordinary
general meeting of Pirelli & C. S.p.A. also approved the merg-
er by incorporation of the controlling Parent company Marco
Polo Industrial Holding S.p.A. into Pirelli & C. S.p.A, for 6.30
Pirelli shares to be allotted after the merger to Marco Polo
International Holding Italy S.p.A. (Holdco) - the sole partner of
Marco Polo Industrial Holding S.p.A. - for every 1 share held
before the merger by Marco Polo International Holding Italy
S.p.A. (Holdco) in Marco Polo Industrial Holding S.p.A.. The
merger is expected to be finalised within the first half of 2016.
Following the mandatory conversion of savings shares
into special category unlisted shares, the savings
shares ceased to be listed on regulated markets as of
February 26, 2016.
260
Parent Financial Statements / 2015 ANNUAL REPORT
261
annexes to tHe
exPLanatorY notes
movements oF e Quity investments From 12/31/2014 to 12/31/2015
12/31/2014
changes
12/31/2015
number
oF shares
carrying
amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
number oF shares
(€/thousand)
number
carrying amount
oF shares
(€/thousand)
% oF total
eQuity inv.
oF which
direct
INVESTMENTS IN SUBSIDIARIES
ITALY
Unlisted:
Pirelli servizi Amministrazioni e Tesoreria s.p.A.
Maristel s.p.A. - Milan
Pirelli Labs s.p.A. - Milan
Pirelli sistemi Informativi s.r.l. - Milan
Pirelli & C. Ambiente s.r.l.
Pirelli Tyre s.p.A. - Milan
Pirelli Industrial s.r.l. (former Pirelli Tyre Commerciale Italia s.r.l.) - Milan
Pirelli Consumer Italia s.r.l. - Milan
PZero srl - Milano
servizi Aziendali Pirelli s.C.p.A. - Milan
262
Hb servizi srl
Total investments in subsidiaries - Italy
FOREIGN COMPANIES
Brasil
Pirelli Ltda
T3 brasil Industrial de Pneus Agricol
Pirelli Pneus Ltda
UK
Pirelli uk ltd. - London - ordinary
Switzerland
Pirelli group Reinsurance Company s.A.
Total investments in foreign subsidiaries
Total investments in subsidiaries
INVESTMENTS IN ASSOCIATES
ITALY
Listed
Prelios s.p.A. - Milan (*)
Total listed Italian companies
Unlisted
Fenice srl
Consorzio per le Ricerche sui Materiali Avanzati (CORIMAv)
Eurostazioni s.p.A. - Rome
gWM Renewable Energy II s.p.A. - Rome
Total unlisted companies
Total investments in associates - Italy
Total investments in associates
(*) quota 29.2% refers to the percentile of the investment in the voting capital
2,047,000
1,020,000
5,000,000
1 quota
1 quota
3,237.5
1,315.2
4,079.1
1,655.4
-
756,820,000
1,085,860.9
-
-
1 quota
95,940
-
20.0
-
4,894.3
103.3
2,010.2
1,103,175.9
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
100.0
-
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
92.3
-
14,000,000
9,665.9
100.0
100.0
-
-
-
-
-
-
-
-
163,991,278
21,871.1
100.0
100.0
163,991,278
21,871.1
100.0
100.0
800,000
148,127,621
1 quota
1 quota
52,333,333
-
6,345.8
37,882.8
1,141,058.7
56,036.7
56,036.7
16,022.1
103.5
52,937.1
-
69,062.8
125,099.4
125,099.4
100.0
100.0
800,000
100.0
100.0
29.2
29.2
32.8
100.0
32.7
-
32.8
100.0
32.7
-
12,863,908
148,127,621
29.2
29.2
69.9
100.0
32.7
16.9
69.9
100.0
32.7
16.9
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
756,820,000
1,090,755.2
100.0
100.0
100.0
100.0
100.0
100.0
-
-
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
-
100.0
92.3
100.0
14,000,000
9,665.9
100.0
100.0
-
-
-
-
2,047,000
1,020,000
5,000,000
1 quota
1 quota
95,940
-
-
-
-
-
1
1 quota
1 quota
52,333,333
12,863,908
-
-
-
-
-
-
-
-
-
-
-
-
-
2,877.6
4,894.3
(20)
20.0
(4,894.3)
(2,010.2)
867.4
867.4
(14,116.6)
(14,116.6)
12,157.0
11,192.3
23,349.3
9,232.7
9,232.7
3,237.5
1,315.2
4,079.1
1,655.4
2,877.6
20.0
103.3
-
-
-
-
-
1,104,043.3
6,345.8
37,882.8
1,141,926.1
41,920.1
41,920.1
28,179.1
103.5
52,937.1
11,192.3
92,412.1
134,332.1
134,332.1
Directors’ Report on Operations / 2015 ANNUAL REPORT Parent Financial Statements / 2015 ANNUAL REPORT
movements oF e Quity investments From 12/31/2014 to 12/31/2015
12/31/2014
changes
12/31/2015
number
oF shares
carrying
amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
number oF shares
(€/thousand)
number
oF shares
carrying amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
Pirelli Industrial s.r.l. (former Pirelli Tyre Commerciale Italia s.r.l.) - Milan
756,820,000
1,085,860.9
INVESTMENTS IN SUBSIDIARIES
ITALY
Unlisted:
Pirelli servizi Amministrazioni e Tesoreria s.p.A.
Maristel s.p.A. - Milan
Pirelli Labs s.p.A. - Milan
Pirelli sistemi Informativi s.r.l. - Milan
Pirelli & C. Ambiente s.r.l.
Pirelli Tyre s.p.A. - Milan
Pirelli Consumer Italia s.r.l. - Milan
PZero srl - Milano
servizi Aziendali Pirelli s.C.p.A. - Milan
Hb servizi srl
Total investments in subsidiaries - Italy
FOREIGN COMPANIES
T3 brasil Industrial de Pneus Agricol
Brasil
Pirelli Ltda
Pirelli Pneus Ltda
UK
Pirelli uk ltd. - London - ordinary
Switzerland
Pirelli group Reinsurance Company s.A.
Total investments in foreign subsidiaries
Total investments in subsidiaries
INVESTMENTS IN ASSOCIATES
Prelios s.p.A. - Milan (*)
Total listed Italian companies
ITALY
Listed
Unlisted
Fenice srl
Eurostazioni s.p.A. - Rome
gWM Renewable Energy II s.p.A. - Rome
Total unlisted companies
Total investments in associates - Italy
Total investments in associates
Consorzio per le Ricerche sui Materiali Avanzati (CORIMAv)
(*) quota 29.2% refers to the percentile of the investment in the voting capital
2,047,000
1,020,000
5,000,000
1 quota
1 quota
1 quota
95,940
-
-
-
-
-
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
92.3
-
-
-
-
-
-
-
-
14,000,000
9,665.9
100.0
100.0
163,991,278
21,871.1
100.0
100.0
800,000
100.0
100.0
148,127,621
29.2
29.2
1 quota
1 quota
52,333,333
-
32.8
100.0
32.7
-
32.8
100.0
32.7
-
3,237.5
1,315.2
4,079.1
1,655.4
20.0
4,894.3
103.3
2,010.2
1,103,175.9
-
-
-
-
6,345.8
37,882.8
1,141,058.7
56,036.7
56,036.7
16,022.1
103.5
52,937.1
-
69,062.8
125,099.4
125,099.4
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
12,863,908
-
-
-
-
2,877.6
4,894.3
(20)
20.0
(4,894.3)
-
(2,010.2)
867.4
-
-
-
-
-
-
867.4
(14,116.6)
(14,116.6)
12,157.0
-
-
11,192.3
23,349.3
9,232.7
9,232.7
2,047,000
1,020,000
5,000,000
1 quota
1 quota
3,237.5
1,315.2
4,079.1
1,655.4
2,877.6
756,820,000
1,090,755.2
-
-
-
95,940
-
-
20.0
-
103.3
-
1,104,043.3
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
-
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
100.0
-
92.3
100.0
263
14,000,000
9,665.9
100.0
100.0
-
1
-
-
-
-
-
-
163,991,278
21,871.1
100.0
100.0
800,000
148,127,621
1 quota
1 quota
52,333,333
12,863,908
100.0
100.0
29.2
29.2
69.9
100.0
32.7
16.9
69.9
100.0
32.7
16.9
6,345.8
37,882.8
1,141,926.1
41,920.1
41,920.1
28,179.1
103.5
52,937.1
11,192.3
92,412.1
134,332.1
134,332.1
Parent Financial Statements / 2015 ANNUAL REPORT
movements oF other available-F or-sale Financial assets From 12/31/2014 to 12/31/2015
12/31/2014
other changes
12/31/2015
number
oF shares
carrying
amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
number
oF shares
(€/thousand)
number
carrying amount
oF shares
(€/thousand)
% oF total
eQuity inv.
oF which
direct
264
INVESTMENTS IN OTHER COMPANIES
ITALIAN LISTED COMPANIES
Mediobanca s.p.A. - Milan
RCs Mediagroup s.p.A. - Milan
Total other Italian listed companies
Total other listed companies
ITALIAN UNLISTED COMPANIES
Aree urbane s.r.l. (in liquidation) - Milan
C.I.R.A. - Centro Italiano di Ricerche Aerospaziali s.c.p.A. - Capua (CE)
15,753,367
23,135,668
1 quota
30
106,650.3
21,620.3
128,270.6
128,270.6
-
-
Alitalia - Compagnia Aerea Italiana s.p.A. - Rome
229,104,399
5,348.6
CEFRIEL - società Consortile a Responsabilità limitata
Consorzio dIxIT (in liquidation) - Milan
MIP Politecnico di Milano - graduate school of business società
consortile per azioni già Consorzio per L’Innovazione nella gestione
di Azienda -Mip -(Master Imprese Politecnico) Milano
Consorzio Milano Ricerche - Milan
Fin breda s.p.A. (in liquidazione) - Milan
società generale per la Progettazione Consulenze
e Partecipazioni (ex Italconsult) s.p.A. - Roma
Emittenti Titoli s.p.A. - Milan
F.C. Internazionale Milano s.p.A. - Milan
Fin. Priv. s.r.l. - Milan
Istituto Europeo di Oncologia s.r.l. - Milan
Nomisma - società di studi Economici s.p.A. - bologna
Redaelli sidas s.p.A. (in liquidazione) - Milan
s.In.T s.p.A. - Torin
Consorzio Movincom scrl
Movincom servizi s.p.A.
Tiglio I s.r.l. - Milan
Total other Italian unlisted companies
FOREIGN COMPANIES
Libia
Libyan-Italian Joint Company - ordinary shares b
Belgium
Euroqube s.A. (in liquidation)
U.S.A.
gws Photonics Inc - Wilmington - private shares b
gws Photonics Inc - Wilmington - private shares C
UK
Eca International
Total other foreign companies
OTHER PORTFOLIO SECURITIES
1 quota
1 quota
12,000
1 quota
1,561,000
1,100
229,000
55,805,625
1 quota
1 quota
959.429
750,000
90,000
1
435,600
1 quota
300
67,570
1,724,138
194,248
100
Fondo Comune di Investimento Immobiliare - Anastasia - nr quote 53
53 quota
Total other portfolio securities
TOTAL AVAILABLE-FOR-SALE FINANCIAL ASSETS
-
-
-
-
-
-
3,597.5
558.1
14,473.3
5,381.8
243.5
-
92.7
6.0
372.7
109.7
30,183.9
31.5
151.2
-
-
-
182.7
14,822.0
14,822.0
173,459.2
1.8
4.4
-
0.1
2.7
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
9.7
0.6
1.0
17.8
-
-
1.8
4.4
-
0.1
2.7
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
9.7
0.6
1.0
17.8
-
-
2.8
2.8
-
-
Fair value
valuation
at 12/31/2015
33,318.4
33,318.4
33,318.4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,191.3
4,313.9
372.0
1.8
5,879.0
(343.5)
(343.5)
38,853.9
678,914,731
(5,348.6)
908,019,130
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,753,367
23,135,668
1 quota
30
1 quota
1 quota
12,000
1 quota
1,561,000
1,100
229,000
55,805,625
1 quota
1 quota
959,429
750,000
90,000
1
435,600
1 quota
300
1,724,138
194,248
100
53
33,318.4
(7,264.6)
26,053.8
26,053.8
-
-
-
-
-
-
-
-
-
-
-
-
1,191.3
(265.2)
4,313.9
372.0
(83.2)
-
1.8
(2.8)
(237.6)
(2.3)
(60.7)
(46.7)
(343.5)
(343.5)
25,602.9
(46.7)
67,570
139,968.7
14,355.7
154,324.4
154,324.4
-
-
-
-
-
-
-
-
-
-
-
-
4,788.8
292.9
18,787.2
5,753.8
160.3
-
94.5
3.2
135.1
107.4
30,123.2
31.5
104.5
136.0
14,478.5
14,478.5
199,062.1
1.8
4.4
-
0.1
1.5
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
4.4
0.6
1.0
17.8
-
-
-
-
1.8
4.4
0.1
1.5
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
4.4
0.6
1.0
17.8
-
-
-
2.8
2.8
Parent Financial Statements / 2015 ANNUAL REPORT
movements oF other available-F or-sale Financial assets From 12/31/2014 to 12/31/2015
12/31/2014
number
oF shares
carrying
amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
Fair value
valuation
at 12/31/2015
other changes
12/31/2015
number
oF shares
(€/thousand)
number
oF shares
carrying amount
(€/thousand)
% oF total
eQuity inv.
oF which
direct
C.I.R.A. - Centro Italiano di Ricerche Aerospaziali s.c.p.A. - Capua (CE)
Alitalia - Compagnia Aerea Italiana s.p.A. - Rome
229,104,399
5,348.6
CEFRIEL - società Consortile a Responsabilità limitata
Consorzio dIxIT (in liquidation) - Milan
MIP Politecnico di Milano - graduate school of business società
consortile per azioni già Consorzio per L’Innovazione nella gestione
di Azienda -Mip -(Master Imprese Politecnico) Milano
INVESTMENTS IN OTHER COMPANIES
ITALIAN LISTED COMPANIES
Mediobanca s.p.A. - Milan
RCs Mediagroup s.p.A. - Milan
Total other Italian listed companies
Total other listed companies
ITALIAN UNLISTED COMPANIES
Aree urbane s.r.l. (in liquidation) - Milan
Consorzio Milano Ricerche - Milan
Fin breda s.p.A. (in liquidazione) - Milan
società generale per la Progettazione Consulenze
e Partecipazioni (ex Italconsult) s.p.A. - Roma
Emittenti Titoli s.p.A. - Milan
F.C. Internazionale Milano s.p.A. - Milan
Fin. Priv. s.r.l. - Milan
Istituto Europeo di Oncologia s.r.l. - Milan
Nomisma - società di studi Economici s.p.A. - bologna
Redaelli sidas s.p.A. (in liquidazione) - Milan
s.In.T s.p.A. - Torin
Consorzio Movincom scrl
Movincom servizi s.p.A.
Tiglio I s.r.l. - Milan
Total other Italian unlisted companies
FOREIGN COMPANIES
Libia
Belgium
U.S.A.
Euroqube s.A. (in liquidation)
Libyan-Italian Joint Company - ordinary shares b
gws Photonics Inc - Wilmington - private shares b
gws Photonics Inc - Wilmington - private shares C
UK
Eca International
Total other foreign companies
OTHER PORTFOLIO SECURITIES
Fondo Comune di Investimento Immobiliare - Anastasia - nr quote 53
53 quota
Total other portfolio securities
TOTAL AVAILABLE-FOR-SALE FINANCIAL ASSETS
15,753,367
23,135,668
1 quota
30
1 quota
1 quota
12,000
1 quota
1,561,000
1,100
229,000
55,805,625
1 quota
1 quota
959.429
750,000
90,000
1
435,600
1 quota
300
67,570
1,724,138
194,248
100
106,650.3
21,620.3
128,270.6
128,270.6
-
-
-
-
-
-
-
-
3,597.5
558.1
14,473.3
5,381.8
243.5
-
92.7
6.0
372.7
109.7
30,183.9
31.5
151.2
-
-
-
182.7
14,822.0
14,822.0
173,459.2
1.8
4.4
-
0.1
2.7
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
9.7
0.6
1.0
17.8
-
-
-
1.8
4.4
-
0.1
2.7
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
9.7
0.6
1.0
17.8
-
-
-
2.8
2.8
33,318.4
-
33,318.4
33,318.4
-
-
-
-
-
-
-
-
-
1,191.3
-
4,313.9
372.0
-
-
1.8
-
-
-
5,879.0
-
-
-
-
-
-
(343.5)
(343.5)
38,853.9
-
-
-
-
15,753,367
23,135,668
33,318.4
(7,264.6)
26,053.8
26,053.8
-
-
1 quota
30
678,914,731
(5,348.6)
908,019,130
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,191.3
(265.2)
4,313.9
372.0
(83.2)
-
1.8
(2.8)
(237.6)
(2.3)
(60.7)
1 quota
1 quota
12,000
1 quota
1,561,000
1,100
229,000
55,805,625
1 quota
1 quota
959,429
750,000
90,000
1
435,600
1 quota
-
300
(46.7)
67,570
1,724,138
194,248
100
53
-
-
-
(46.7)
(343.5)
(343.5)
25,602.9
265
139,968.7
14,355.7
154,324.4
154,324.4
-
-
-
-
-
-
-
-
-
4,788.8
292.9
18,787.2
5,753.8
160.3
-
94.5
3.2
135.1
107.4
30,123.2
31.5
104.5
-
-
-
136.0
14,478.5
14,478.5
199,062.1
1.8
4.4
-
0.1
1.5
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
4.4
0.6
1.0
17.8
-
-
2.8
-
1.8
4.4
-
0.1
1.5
5.2
14.3
3.4
7.1
0.4
3.7
2.8
0.5
14.3
6.1
3.3
4.6
10.0
5.8
4.4
0.6
1.0
17.8
-
-
2.8
-
Parent Financial Statements / 2015 ANNUAL REPORT
inventory at 12/31/2015
list oF eQuity investments in subsidiaries and associates
(pursuant to art. 2427 oF the civil code)
(in thousands of euro)
legal
address
carrying
amount
share %
share
capital
attrib-
utable
eQuity
attribut-
able net
income
(loss)
EQUITY INVESTMENTS IN SUBSIDIARIES - ITALY
Pirelli servizi Amministrazioni e Tesoreria
s.p.A.
Maristel s.p.A.
Pirelli Ambiente s.r.l.
Pirelli sistemi Informativi s.r.l.
Pirelli Labs s.p.A.
Pirelli Tyre s.p.A.
Pirelli Consumer Italia s.r.l.
servizi Aziendali Pirelli s.c.p.a.
Hb servizi srl
Milan
Milan
Milan
Milan
Milan
Milan
Milan
Milan
Milan
Total equity investments in subsidiaries
- Italy
EQUITY INVESTMENTS IN FOREIGN SUBSIDIARIES
Switzerland
3,238
100.0%
1,315
2,878
1,655
4,079
1,090,755
20
103
0
1,104,043
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
92.3%
100.0%
2,047
1,020
10
1,010
5,000
3,991
2,137
2,878
2,207
5,484
33
11
(17,135)
52
(77)
756,820
1,292,960
264,218
10
104
10
16
276
389
(4)
18
(1,582)
Pirelli group Reinsurance Company s.A.
Lugano
6,346
100.0%
7,383
14,024
4,089
Brasil
Pirelli Ltda
UK
Pirelli uk ltd.
sao Paulo
9,666
100.0%
3,294
1,374
(3,880)
London
21,871
100.0%
250,000
283,822
17,663
Total equity investments in foreign
subsidiaries
Total equity investments in subsidiaries
EQUITY INVESTMENTS IN ASSOCIATES - ITALY
37,883
1,141,926
Consortium for the Reserach into
Advanced Materials (CORIMAv)
Eurostazioni s.p.A.
Fenice s.r.l.
Prelios s.p.A.
gWM Renewable Energy II spa
Total equity investments in associates
- Italy
Total equity investments in associates
* data not yet available
Milan
Rome
Milan
Milan
Rome
104
100.0%
104
104
32.7%
69.9%
29.2%
16.9%
165,233
23,345
426,432
*
*
*
52,937
28,179
41,920
11,192
134,332
134,332
0
*
*
*
266
Parent Financial Statements / 2015 ANNUAL REPORT
267
Every Mark Is Unique / PIRELLI
Jonathan Rea
2015 SBK World Champion
“When thinking about motorcycling in the future,
I hope I leave my mark as someone who is remembered
for always giving 100% no matter the circumstances
and also for having fun when I ride the motorcycle.
For me that is the most important,
because when we strip it back I started competing
because it was fun and to this day
I always have a lot of fun when I race!„
s
a
p
m
a
L
s
a
r
k
o
P
Every Mark Is Unique / PIRELLI
Parent Financial Statements / 2015 ANNUAL REPORT
rePort oF tHe
Board oF stat UtorY
aUditors to tHe
GeneraL MeetinG
oF sHareHoLders
Dear Shareholders,
The Board of Statutory Auditors must, in the terms of art. 2429 paragraph 2 of the Civil Code report to the general meeting on the
results of the corporate financial year and the activity performed in meeting its duties and making comments and proposals con-
cerning the financial statements and their approval.
During the course of the financial year the Board of Statutory Auditors performed its tasks of oversight in the terms foreseen under
current regulations and taking into account standards of conduct recommended by the National Council of Qualified Accountants
and Accounting Experts and the provisions of the Consob in the matter of corporate controls and the activities of the Board of
Statutory Auditors.
270
* * *
The financial statements for the 2015 financial year show revenues amounting to euro 6,309.6 million , an operating income (loss)
(Ebit) of euro 850.3 million with an Ebit margin attaining 13.7% of these revenues.
The aggregate consolidated loss, which includes residual amount of assets and liabilities held for sale (final tranche of Steelcord
business) amounts to euro -383.5 million. This loss was mainly brought about by the deconsolidation of the Venezuelan company
(euro -559.5 million).
It is here mentioned that as at the date of reference December 31, 2015, Pirelli has proceeded to deconsolidating the Venezuelan
equity invested company (held 96.22%) and recognize the fair value of the investment (amounting to euro 18.9 million). The grounds
for this deconsolidation have been the growing and permanent restrictions on converting foreign currency and the increasingly
lower availability of USA dollars in the country which, in a manner that cannot be held to be temporary, do not permit payment of
dividends, royalties and commercial payables to other companies of the Group. To this must be added further regulatory limitations
(for example controls of sales margins and especially stringent labour legislation), which are not temporary either, and which in fact
do not allow the Group to implement business decisions on the assets of the equity invested company nor govern its main activities.
On the basis of this scenario the company has considered, in line with what has already been done by other multinationals, that
conditions required for assuming accounting oversight on the company in the terms of IFRS 10 did not apply. The economic results
of the Venezuelan company have been consolidated for the entire 2015 financial year. Deconsolidation of the equity invested Vene-
zuelan company has led to detecting an adverse impact in the Income Statement for euro 559.5 million including deconsolidation of
the net financial position of the company which as at December 31, 2015 was favourable for euro 277.7 million. A detailed analysis
of the intention to proceed to deconsolidation was provided to the Board of Statutory Auditors in its meeting on March 10, 2016 held
jointly with the Audit, Risks, Sustainability and Corporate Governance Committee.
Consolidated net financial position is negative for euro 1,199.1 million (979.6 at the end of 2014).
The parent company Pirelli & C. S.p.A. closed the financial year with a net loss of euro 1.7 million (net profit of euro 258 million in
2014) mainly due to impairments of deferred taxes plus for euro 103 million.
* * *
Parent Financial Statements / 2015 ANNUAL REPORT
We here point out that the financial statements for Pirelli & C. S.p.A. have been drawn up on the basis of the IAS/IFRS international
accounting standards issued by the International Accounting Standards Board (IASB) and approved by the European Union, applying
as at December 31, 2015 With effect from February 26, 2016 it no longer has shares listed on the Milan Stock Exchange. In the con-
solidated financial statements as at December 31, 2015 the company declared that it will continue to prepare consolidated financial
statements on the basis of IFRS accounting standards, on the basis of the option granted under art. 3 of Legislative Decree. 38/2005.
In the Directors’ Report on Operations, the main risks and uncertainties are itemised and account is given of the foreseeable pro-
gress in management.
The financial statements for the Company are made up of a statement of financial position, an income statement, a statement of other
comprehensive income, a statement of changes in equity, a statement of cash flows and explanatory notes.
The financial statements are accompanied by Directors’ Report on Operations.
AppoiNtmeNt oF tHe BoArD oF stAtutorY AuDitors
The Board of Statutory Auditors in office as at the date of this report is made up thus:
Dr. Francesco Fallacara (Chairman), appointed by the General meeting of shareholders on May 14, 2015
Dr Fabio Artoni (statutory auditor), appointed by the General meeting of shareholders on May 14, 2015
Dr. Fabrizio Acerbis (statutory auditor), appointed by the General meeting of shareholders on March 15, 2016
Dr. Giovanni Bandera (statutory auditor) appointed by the general meeting of shareholders on March 15, 2016
Dr. David Reali (statutory auditor) appointed by the General meeting of shareholders on March 15, 2016
Deputy auditors are Dr. Fabio Facchini and Dr. Giovanna Oddo.
The Board of Statutory Auditors expires from office by completion of mandate with the General Meeting of Shareholders called to
approve the financial statements as at December 31, 2017
The Board of Statutory Auditors was, from January 1, 2015 up until May 14, 2015, made up of Francesco Fallacara, Chairman, An-
tonella Carù and Sebastiano Umile Iacovino, statutory auditors and from May 14, 2015 to March 15, 2016 by Francesco Fallacara,
Chairman, Antonella Carù and Fabio Artoni, statutory auditors.
In the light of these circumstances, and considering the inspection activities performed by the oversight body in office during the
course of the financial year 2015, it must be pointed out that all mention in this report of oversight and verification activities per-
formed during the course of the financial year is to be understood as referring to the actions of the members pro tempore in office
of auditing body.
271
sigNiFiCANt eveNts
The significant events are detailed in the Directors’ Report on Operations. In particular:
On August 11, 2015 – following the acquisition by Marco Polo Industrial Holding S.p.A., a company controlled by CNRC and with
an equity investment by Camfin, of 20.34% Pirelli & C. S.p.A. from Camfin S.p.A. and the signing of the Pirelli side agreement
with subject matter, in addition to the quota acquired, also the 5.85% of the capital held indirectly by Camfn S.p.A. in Pirelli
through Cam 2012 S.p.A. - Marco Polo Industrial Holding S.p.A. launched a mandatory POA on the entirety of ordinary shares
of Pirelli at 15 euros per share and a voluntary POA on the entirety of savings shares at 15 euros per share.
On November 6, 2015 ordinary shares were delisted
On November 23, 2015 the Board of Directors of Pirelli convened an extraordinary general meeting to resolve on a mandatory
conversion of savings shares into special category unlisted shares of new issue without voting rights, adoption of new articles
of association and merger with the controlling company Marco Polo Industrial Holding S.p.A.
On December 22, 2015 the Board of Directors of Pirelli & C. S.p.A. and Marco Polo Industrial Holding S.p.A. approved the project
for merger through incorporation of Marco Holding Industrial Holding S.p.A. into Pirelli & C. S.p.A.
As also set out by directors in their report among significant events after the end of the financial year we would mention:
On February 15, 2016 an extraordinary general meeting of partners of Pirelli & C. S.p.A.:
approved the project for merger by incorporation of the controlling company Marco Polo Industrial Holding S.p.A. into Pirelli
& C. S.p.A. on the basis of 6.30 Pirelli shares to be assigned post-merger to Marco Polo Industrial Holding Italy S.p.A. (Holdco)
Parent Financial Statements / 2015 ANNUAL REPORT
- sole partner in Marco Polo Industrial Holding S.p.A. - for each 1 share held prior to the merger by Marco Polo Industrial
Holding S.p.A. (Holdco) in Marco Polo Industrial Holding S.p.A. It is foreseen that the merger can be concluded in the first
half-year of 2016.
also approved the proposal for mandatory conversion of savings shares into special category unlisted shares of new issue
and without voting rights. Following the mandatory conversion of savings shares into special category unlisted shares, the
savings shares cease to be listed on regulated markets with effect from February 26, 2016
approved the proposal to adopt new articles of association.
On March 15, 2016 the General meeting:
dealt with the appointment of the Board of Directors in the persons of Messrs. REN Jianxin, President, Marco Tronchetti
Provera Executive Vice President and Chief Executive Officer, Carlo Acutis, Giorgio Luca Bruno, Andrey Kostin, Igor Sechin,
YANG Xun, BAI Xinping, Ze’ev Goldberg, Emerson Milenski, WANG Dan, ZHANG Haitao, Gustavo Bracco, JIAO Chonggao,
Luca Rovati e YANG Xingqiang, Directors; the new Board of Directors will expire as at the general meeting of shareholders
convened to approve the financial statements as at December 31, 2018.
Consistently with new provisions of the articles of association, it resolved an increase to 5 in the number of regular mem-
bers of the Board of Statutory Auditors appointing regular auditors Fabrizio Acerbis, Giovanni Bandera and David Reali – of
which one by way of replacement for regular auditor Antonella Carù resigning from office with effect from the same date
and did not deal – consistently with the new provisions of the articles of association – with replacement of the alternate au-
ditor Andrea Lorezatti, who resigned with effect from the date 15/3/2016. The board will expire as at the general meeting
convened to approve the financial statements as at December 31, 2017.
AtYpiCAL AND uNusuAL trANsACtioNs
Significant transactions detected in the 2015 financial year are set out in detail in the Directors’ Report on Operations. No atypical
or unusual transactions were found to apply.
272
trANsACtioNs iNtrAgroup or WitH reLAteD pArties
In the terms of art. 2391-bis of the Civil Code and Consob resolution no. 17221 dated March 12, 2010 bearing “Regulations in respect
of transactions with related parties”, subsequently modified by Consob resolution no. 17389 dated June 23, 2010, on November 3,
2010 the Board of Directors of Pirelli & C. S.p.A. subject to the favourable opinion by the Committee concerned made up only of
independent directors (appointed for this in the terms of art. 4 of the Regulation mentioned by specific resolution of the Board of
Directors) unanimously approved a “Procedure for transactions with related parties”
Following revoking of all shares from listing, the Board of Directors also revoked the foregoing procedure among others with effect
from March 15, 2016.
We would point out that the Procedure adopted by the Company and followed in respect of transactions effected during the course
of the 2015 financial year (i) is consistent with the standards contained in the Consob Regulations mentioned, (ii) was made public
on the website of the Company (www.pirelli.com)
During the course of the 2015 financial year transactions with related parties both intragroup and third parties were carried out.
Intragroup transactions examined by us were found to be done in the ordinary course of business as being essentially made up of
mutual administration, financial and organisational services. They were governed by applying normal conditions determined in
accordance with standard parameters, and which reflect the actual enjoyment of the services, and were performed in the interests
of the Company as they aimed to rationalise the use of Group resources.
Transactions with non-intragroup related parties examined by us were these too found to be of an ordinary kind (as falling into
the ordinary carrying on of the operational business or financial business connecter therewith) and/or concluded at conditions
equivalent to those of the market or standard, and meeting the interests of the Company. These transactions were notified to us
periodically by the Company.
We took part in meetings of the Audit, Risks, Sustainability and Corporate Governance Committee (also meeting as Committee
for Transactions with Related Parties) during which it expressed a favourable opinion in respect of a number of transactions with
related parties of “lesser relevance” as the Committee assessed the interests of the Company in performing the transaction and the
related conditions as being worthwhile and proper.
Parent Financial Statements / 2015 ANNUAL REPORT
Transactions with Related Parties are indicated in the notes commenting upon the financial statements for the financial year and
the consolidated financial statements of the Company wherein the consequent economic, assets and liabilities effects are set out.
We have had oversight on abidance by the Procedure concerning this adopted by the Company and the propriety of the process
followed by the Board and Committee concerned in the matter of qualifying related parties and we have nothing to report.
impAirmeNt test proCeDure
We would report that following revoking of the listing the Board of Directors was no longer bound, as suggested in the joint doc-
ument of the Bank of Italy/Consob/ISVAP dated March 3, 2010, to approve autonomously and beforehand in respect of the time of
approval of the financial statements, that the prescriptions of international accounting standard IAS 36 were met concerning an
impairment test, subject to prior sharing of this by the Audit, Risks, Sustainability and Corporate Governance Committee.
The impairment test procedures were conducted by the Company on the goodwill allocated to the Consumer and Industrial cash
generating units and were submitted at the meeting to approve the financial statements in a manner preliminary as compared to
the passing the resolution for approval of these, on March 15, 2016.
In the explanatory notes to the financial statements information and outcomes are shown in the terms of the assessment process
followed with the aid of a highly qualified expert.
oversigHt ACtivities iN tHe terms oF LegisLAtive
DeCree 39/2010 “LegAL AuDitiNg oF ACCouNts”
The Board of Statutory Auditors together with the Audit, Risks, Sustainability and Corporate Governance Committee had oversight
in respect of:
financial information process;
effectiveness of the system of internal control, internal auditing and risk management
legal auditing of annual accounts and consolidated accounts;
independence of the firm of auditors, especially in respect of the provision of non-auditing services.
273
* * *
Activities of oversight of the financial briefing process
The Board of Statutory Auditors checked upon there being adequate rules and processes presiding over the process of “forming”
and “disclosing” financial information and so expresses an assessment of adequacy in respect of the process of forming of the finan-
cial information and does not feel that there are queries for submission to the General meeting.
Oversight of activities on the effectiveness of internal control, internal auditing
and risk managements systems and legal auditing of annual accounts
and consolidated accounts
The Board of Statutory Auditors, together with the Audit, Risks, Sustainability and Corporate Governance Committee met with the
Director of Internal Audit on a quarterly basis so being informed in connection with the results of the actions of auditing aimed at
verifying the adequacy and operation of the System of Internal Control, abidance by the law, corporate procedures and processes
and activity of implementing related plans for improvement. It also received the Audit Plan for the financial year and related actual
figures as well as the Annual Risk Assessment and Annual Risk Management Plan.
Additionally, at half-yearly intervals it received from the Audit, Risks, Sustainability and Corporate Governance Committee and
from the Oversight Body, their respective reports on activities performed.
The Board of Statutory Auditors also took due note of what was reported by the Chief Financial Officer who at the time of approv-
ing the the financial statements confirmed the adequacy and suitability of the powers and means granted to them by the Board of
Directors of the Company, confirming too having had direct access to all the information necessary for producing accounting data,
without any need for authorisation whatsoever; the Board of Statutory Auditors also took due note that the Chief Financial Officer
reported having taken part in the internal flows of briefing for accounting purposes and having approved all the corporate proce-
Parent Financial Statements / 2015 ANNUAL REPORT
dures bearing on the income statement and the statement of financial position of the Company.
The Board of Statutory Auditors hereby expresses an assessment of adequacy of the system of internal control, internal auditing
and governance of risks overall, and there are no queries to be submitted to the General Meeting.
The Board of Statutory Auditors met the firm of auditors at least quarterly intervals and from these meetings no fundamental
questions arising at the time of auditing came to light nor significant shortcomings in the system of internal control in respect of
the process of financial briefing, also in the terms of what is laid down under art. 19, paragraph 3 of Legislative Decree 39/2010.
Activities of oversight in respect of the independence of the firm of auditors,
especially in respect of matters concerning the provision of non-auditing services
The Board of Statutory Auditors had oversight in respect of the independence of the Firm of Auditors and in particular received pe-
riod evidence of the appointments other than for auditing services to be attributed (or attributed on the basis of specific regulatory
provisions) to the Legal Auditor of accounts.
In respect of the independence of the Firm of Auditors, a detailed procedure was issued at a Group level in this regard and which
sets forth a prohibition in respect of all companies of the Pirelli Group of awarding appointments to companies belonging to the
network of the Legal Auditor appointed without prior and expressed authorisation from the Chief Financial Officer, who, with the
aid of the Internal Audit Director, has the task of verifying the fact that the appointment to be awarded does not fall among those
not admitted under art. 17 of the Legislative Decree mentioned no. 39/2010 and that in any event, given its features, does not impact
upon the independence of the auditor.
All appointments other than those of legal auditor of accounts or are mandatory in the terms of the law of and foresee an annual
compensation in excess of 50 thousand euros are to be submitted to prior examination by the Board of Statutory Auditors of Pirelli
& Company, save for grounded and specific reasons. the Internal Audit Director has provided the Board of Statutory Auditors with
a listing on a quarterly basis of the non-auditing services awarded to the Auditor.
During the course of the 2105 financial year Reconta Ernst&Young S.p.A. performed activities summarised below for the benefit of
the Group:
(in thousands of euro)
Independent auditing
services and certification
services (1)
services other
than auditing
company that
provided the service
company that
received the service
partial
Fees
total
Fees
Reconta Ernst & young s.p.A.
Pirelli & C. s.p.A.
Reconta Ernst & young s.p.A.
Network Ernst & young
subsidiaries
subsidiaries
Reconta Ernst & young s.p.A.
Pirelli & C. s.p.A.
Reconta Ernst & young s.p.A.
Network Ernst & young
subsidiaries
subsidiaries
492
572
2,052
3,116
86.7%
-
-
480 (2)
480
13.3%
3,596
100.0%
(1) the item “independent auditing and certification services” includes amounts paid for auditing services and other services that envisage the
issuance of an auditor’s report as well as amounts paid for the so called certification services since they create synergies with the auditing services.
(2) support for the analysis of the distribution network and go-to-market activities.
The Board of Statutory Auditors deems that the considerations mentioned above are adequate to the size, complexity and character-
istics of the works carried out and believes also that the appointments (and related compensation) other than auditing services are
not such as to impact upon the independence of the Legal Auditor.
In this latter regard, it is here pointed out that the Audit, Risks, Sustainability and Corporate Governance Committee shared this
assessment.
274
Parent Financial Statements / 2015 ANNUAL REPORT
orgANisAtioNAL struCture
The Board of Statutory Auditors has assessed the organisational structure of Company as being adequate to its needs and suited to
ensuring abidance by standards of proper administration.
CompeNsAtioN oF DireCtors AND DirigeNti
WitH strAtegiC respoNsiBiLities
During the course of the financial year the Board of Statutory Auditors expressed the opinion required under the law in respect of the
compensations paid to directors awarded special appointments, expressing the opinion foreseen under article 2389 of the Civil Code.
The Board of Statutory Auditors detected the fact that the system of compensation applying foresees awarding compensation utilis-
ing a fixed element and an additional (variable) element tied to the economic results achieved, also in the long term at a Group level
and related to achieving specific objectives set by the Board of Directors as proposed by the Remuneration Committee.
During the meeting on December 22, 2015, the Board of Directors, as proposed by the Remuneration Committee and subject to prior
approval by the Board of Statutory Auditors, resolved early closing as at December 31, 2015 of the three-year cash incentive plan
2014/2016 (LTC 2014/2016).
At the subsequent meeting on March 15, 2016 following on from the foregoing resolution, the Board of Directors resolved approval of
the MBO proposal for 2016 and the LTI proposal 2016/2018, a three-year incentive plan connected with attaining creation of positive
value in the three-year period and two further distinct objectives.
This three-year incentive plan is directed towards all executives in general of the group and foresees settling the incentive at the
end of the three-year term.
FurtHer ACtivities oF tHe BoArD
oF stAtutorY AuDitors
275
In exercising its functions, the Board of Statutory Auditors, as prescribed under article 149 of the Consolidation Act, oversaw:
the observance of the law and memorandum of association;
the abidance by principles of proper administrations;
the adequacy of the structure of the Company in respect of matters of its concern;
the manner of actual implementation of rules of corporate governance foreseen in codes of conduct to which the Company,
through briefings to the public, has declared abiding by for the 2015 financial year;
the adequacy of dispositions imparted to subsidiary companies in the terms of art. 114, paragraph 2, of Legislative Decree