Annual Report 2022

"Ma(n)chine Learning" is the title of the Annual Report 2022 in which four authors, both Italian and international, along with a generative intelligence chat, delve into the theme of the ability of humans and machines to learn from their mistakes.

The introduction is written by Giorgio Metta, the scientific director of the Italian Institute of Technology, who describes AI as "the new electricity", an invention that will have a strong impact on human habits and daily life.

In the text "Writing with artificial intelligence", Hanif Kureishi and his son Sachin discuss the use of AI-guided platforms for writing, highlighting their potential and the creative limitations they still possess.

In "To err is human, thankfully", written by Nicola Lagioia, practical and historical examples are presented to support the thesis that human minds are at the core of AI learning.

American author Peter Cameron, in his fictional story "Perfect Time", places humans at the center, exploring their evolving relationship with machines over time, even if they are sometimes bound by customs they are unwilling to let go of.

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Letters to stakeholder

Li Fanrong

The Chairman

Dear Stakeholder,

In 2022, I became Chairman of Pirelli. Since assuming this role, I have had numerous occasions to appreciate the company’s good standing and admirable international reputation and have understood that its prestige is based on a long history of dedication to technological innovation and a proven ability to adapt to change.

In fact, the changes in the world and global economy in 2022 posed many challenges to businesses across the globe. From supply chain disruptions to inflation and geopolitical tensions, it was a difficult year for many. The automotive sector was particularly impacted, yet Pirelli’s focus on the high end of the market and its consolidated relationships with the key carmakers in the Prestige and Premium segments proved an effective defense. This could be seen in the Company’s solid results, once again underlying the resilience of the business model as well as the preparedness and dedication of its people.

In this challenging context, the Company managed to maintain and even strengthen its ongoing efforts to improve the business’s sustainability and was again recognized at the international level for its efforts in this area which are central to the company business model and key to the future. A future in which the quest for an ever more sustainable mobility is also driving a fundamental change in the automotive industry, that is the switch from combustion engine cars to electric vehicles. Pirelli was among the first companies to not only see this trend emerging but to act upon it, quickly establishing a significant position in this market.

None of these accomplishments would have been possible without the hard work and dedication of Pirelli’s employees. They deserve recognition for their efforts and their commitment to the group’s shared goals.

With this solid foundation, even with the complex landscape ahead, Pirelli is well positioned to weather the challenges of 2023 as it did those of 2022, which was also the year that the company achieved a great milestone, celebrating 150 years of activity and success.

Thank you again for your continued support.

Li Fanrong

Marco Tronchetti Provera

Executive vice-chairman and CEO

Dear Stakeholder,

getting through the complexities of 2022 with positive results confirms Pirelli’s capacity to respond to challenging circumstances. In 2022, in fact, expectations of a full recovery after the pandemic came up against the Russia-Ukraine conflict and a slowdown of growth in a context of economic instability and pressure on prices.

Pirelli was able to contain these effects thanks to its significant exposure to High Value, the most resilient business segment, solid price discipline and the “local-for-local” approach which reduced the company’s exposure to increased logistics costs and interruptions along the supply chain. We ended the year with results above targets, which had been revised upwards several times during the year: revenues exceeded 6.6 billion euro, Adjusted Ebit was 977.8 million and net profit stood at 435.9 million, while net cash flow before dividends was above expectations at 516 million, thanks to an effective management of inventories.

Our technological competencies and constant commitment to research allowed us to accelerate the development of innovative, renewable, and recycled materials and further improve the stages tyre design and virtual development, with advantages in terms of time, costs, and environmental impact. In addition, Pirelli’s decarbonization plan continued, with 100% of the electrical energy acquired in North America and Europe certified from renewable sources. A goal to be extended worldwide by 2025, in line with Pirelli’s path to Carbon Neutrality by 2030.

The contribution of digitalization, which enables the sharing of data in real time in the factories, made our production processes even more efficient. The strategic role of data and Artificial Intelligence – themes of the 2022 Annual Report – also lead us to establish a new entity in Italy, in Bari, specialized in the creation of algorithms and strategic software for our business.

Our constant drive for innovation results in ever more evolved products, in the acquisition of market share in electric thanks to Elect technology and the further development of Cyber technology for sensor-fitted tyres which have a strategic role in driving safety. We also successfully launched the production of bicycle tyres at the Milan-Bollate plant, strengthened our leadership in moto and increased our global High Value production capacity in Mexico and Romania.

The Pirelli brand represents a fundamental lever for growth and its strength is constantly nourished by our sports’ sponsorships, such as our involvement in Motorsport where we continue to be protagonists in Formula 1, Superbike and over 350 auto competitions, as well as in the new adventure of Luna Rossa Prada Pirelli and the endeavors of “Alla Grande-Pirelli”. Making our brand more recognizable and original are the Pirelli Calendar, a powerful communication and brand enhancement tool, Pirelli HangarBicocca, a consolidated presence among the most esteemed museums of the world, and the Fondazione Pirelli, which develops its activities also in synergy with the foundations of other industrial groups through the Museimpresa project.

The year 2023 is unfolding as one characterized by instability because of the prolongation of the Russia-Ukraine conflict, persistent inflationary pressure in Europe and the USA, and the economic difficulties in Brazil and Argentina. Effects that are partially offset by the normalization of the Chinese economy following its post-Covid reopening. We will face it as we have faced our 150 years of history: with the passion and strength of our people and the trust of our stakeholders

My personal thanks to you all.

Marco Tronchetti Provera

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The authors

Cartoons by Liza Donnelly

She is an award-winning cartoonist and writer for The New Yorker Magazine and is a contributor to The New York Times, Washington Post and others. Author of 18 books for adults and children, Women On Men was a finalist for the Thurber Prize for American Humor.

Artificial Intelligence and Pirelli

For 150 years, Pirelli has placed innovation and progress at the core of its company, and it continues to do so with the development and support of artificial intelligence within its factory and team. Since 2018, Pirelli has been applying AI and its algorithms in production, sales, supply, and R&D processes, with the goal of coordinating and merging technology, business, and people with the common objective of maximizing efficiency within the company and continuously renewing itself in a future where humans are the creators, leaders, and integrators of technological progress.

To support the text that narrates the use of artificial intelligence within the company, five Pirelli employees have responded to five questions (each employee answered only the questions relevant to their area of expertise) to provide a more operational perspective on the subject.

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Interviews with Pirelli’s employees