Ladies and gentlemen, welcome to Pirelli's Conference Call in which Pirelli top management will present the company's First Quarter 2025 Results. A live webcast of the event, and the presentation slides are available in the Investor Relations section of the Pirelli website. I remind you that the Q&A session, will follow the presentation. Now I would like to introduce Mr. Marco Tronchetti Provera. Please go ahead, sir.

Thank you. Thank you very much, and good evening ladies and gentlemen. The results of the first quarter of 2025, confirms the solidity of our business model in a challenging external scenario. We closed the quarter with an organic growth of 4.7%. This result, achieved through a consistent commercial performance is among the best in the industry. Conti is 3.9, Michelin minus 2.5, Goodyear minus 2.2, which is expected at - minus 1.3. Improvement in profitability, which is confirmed to be the highest in Tier 1 Conti 13.4%. Bridgestone expected 10.6%, Goodyear 4.6%, and the cash trend in line with the usual business seasonality. We expect the overall scenario to remain uncertain in 2025 due to the persisting commercial tensions. At macroeconomic level, the latest estimates forecast a slowdown in economic growth and a still high inflationary pressure. In this context, the High Value market confirms its resilience with mid-single-digit growth forecast for 2025, while demand in the Standard segment is expected to decline. Given the solid performance in the first quarter, we confirm 2025 targets. Tariff scenario remains uncertain in terms of duration and impact as negotiation between the U.S. administration, its major commercial partners are still underway. Mitigation plan is already being implemented. In case the current tariffs are kept for the rest of the year, our mitigation plan will ensure the achievement of the adjusted EBIT, and cash generation target. In the lower end of the range, and therefore to reach the deleverage target. Finally, an update on governance. Negotiation with Sinochem Group did not produce a solution to adjust the governance, to fully comply with the U.S. regulations. Our results confirm the solidity of the company that has grown and will keep on growing. The position of our customers for the Cyber Tyre hardware and software system shows that Pirelli's strategy and technological development are going to in the right direction. The launch of Pirelli P ZERO fifth generation confirms the company's technological leadership. Finally, in China, the company has become the leader in the high end electric segment. Therefore, we should keep on doing whatever we can to safeguard the company development and growth. There is nothing more control of Pirelli. There is an historical culture over and the market. The company interest will prevail hopefully also with the support of Sinochem Group in line with the bylaws principles of the shareholders agreement. And I now give the floor to Mr. Casaluci. Please.

Thank you. Thank you, Mr. Tronchetti, and good evening. Pirelli closed the first quarter of 2025 with an improvement of results in all metrics. Revenues at approximately €1.8 billion growing by 3.7%, 4.7% if we consider net of ForEx. Thanks to an increased exposure to High Value, now accounting 81% of group sales, up four percentage points, compared with the first quarter of 2024, and a mix improvement within the High Value segment. Adjusted EBIT is approximately €280 million plus 6.5% year-over-year, with a profitability of 15.9%, improving year-on-year, thanks to internal levers contribution. Net income at €127 million with a 27% growth, compared with the same period of 2024, which discounted higher non-monetary impacts related to the application of high hyperinflation accounting. Net financial position stands at approximately minus €2,6 billion, with a debt reduction of €312 million, compared with the end of March 2024. In the first quarter of '25, cash absorption before dividends amounted to €697 million, in line, as Mr. Bocchio, will discuss, with the first quarter of last year despite higher investments, and an inventory increase in the U.S., in view of introduction of tariffs. Let's now talk about the operating performance. Slide 5 summarizes the results produced by the single programs. In the commercial program, we kept to our strategy of focusing on High Value and selectivity on Standard. To strengthen our position in High Value markets, on April the 23rd, we signed an agreement with CTS, tyre service provider in Northern Europe. The contract provides for the sale of Dackia AB chain with approximately 100 of sale in Sweden, of which 60 fully owned for around €24 million. Our partnership, with CTS will allow Pirelli to expand its commercial presence to Northern Europe, through a CTS efficient distribution system, and a wider market coverage, not only in Sweden, but also in other Nordic markets. Pirelli will remain Dackia's main provider at least up to 2030. The agreement is in line with our distribution model, based on partnerships, more flexible and less dilutive in terms of profitability, than direct control over retail chains. The transaction is subject to various authorizations, and is due to be finalized by July 25. As for the innovation program, we launched two new products for the car, and two for the motor business. Pirelli technological leadership, was confirmed by comparative tests conducted by some of the major specialist magazines. These tests ranked our car, the Cinturato C3 and Cinturato SF3 and moto Diablo Supercorsa V4 SP products at the top of their categories. Regarding the Cyber Tyre, we continue to collaborate with premium and prestige OEMs over the joint development of control systems of new car models. We also cooperate with Movyon, a company of the Autostrade per l'Italia Group for the monitoring of road surface. In the operations program, we achieved 25 million efficiencies that more than cover the impact of inflation. Plant saturation was equal to 91%, and the decarbonization plan for our factories has progressed with the electrification of the curing phase. Let's start with the commercial program on Slide number 6. In the first quarter of 2025, our performance in the Car segment was in line with the market, although the single segment moved in opposite directions. In car, 18 inches up, we gained market share replacement in the major regions, benefiting from our effective pull through strategy and product innovation. Whereas, we kept our selective approach to original equipment with an increasing focus on the higher rim sizes. Volumes are growing in 19 inches up segment, now accounting for approximately 86% of the 18 inches and up volumes. In the car below 17 inches, we further reduced our exposure, marketing plus 1%, Pirelli minus 7%, especially in South America, where Pirelli revised its distribution strategy, to focus on the more profitable channels. The innovation program continues as illustrated in Slide number 7, with the launch of four product lines. Two, as I said, of which are for the Car segment and two for motorcycles. These products are boosting the performance level. For cars, we introduced the new Cinturato, a summer tyre for Premium vehicles in Europe, which record the top performance in the tyre reviews test, due to its excellent grip on both dry and wet and wet surfaces, and Scorpion XTM AT for all terrain segments in the North American market. For motorcycles, we launched two products, both of them based on motorsports experience. DIABLO POWERCRUISER addressed it to the custom touring segment, with a sport like approach, and Scorpion MX32 Mid Soft originally used in motorsport competitions, and now also available to racing enthusiasts. Finally, the efficiency program generated a €25 million in the first quarter, in line with expectations and project development timelines. In detail, the highest benefit comes from manufacturing through the implementation of automation projects in the factories, electrification of the curing phase, and reduction of energy consumption. An additional contribution comes from the following projects. SG&A, where the rationalization of the supply chain and general cost is progressing alongside the optimization of logistics. Organization, thanks to advancement of digitization in internal processes and employee upscaling. Finally, the product cost project, will produce as expected greater benefits from the second quarter of the year, deriving from the adoption of innovative design programs like design modularity, and virtualization that allowed us a 30% reduction of tyre development time. And I'll give the floor to Mr. Bocchio.

Thank you, Mr. Casaluci, and good evening. Let's now review our performance compared with the first quarter of 2024. As already indicated, our sales amounted to approximately €1.76 billion with an organic growth of 4.7% due to a solid commercial performance. We recorded a positive trend in volumes plus 0.8%, reflecting the strengthening in the car 18 inches, and above and the progressive reduction of exposure to 17 inches, and below with the High Value now accounting for 81% of our sales, thus plus four percentage point year-over-year. Our price mix was strongly improving, plus 3.9%, mainly supported by the product and regional mix and marginally by price increase in the original equipment channel, due to raw materials cost indexation clauses. Negative instead, the impact of ForEx, minus 1%. Although improving compared with the previous quarter, it was minus 4.8% in Q4, 2024. This is attributable to the volatility of emerging market currencies against the euro, and just partially mitigated by the U.S. dollar appreciation. We now move to the adjusted EBIT, which in the first quarter of 2025, amounted to €280 million, growing by 6.5% over the same period of 2024. EBIT margin reached 15.9%, improving year-on-year by 40 basis points, thanks to the effectiveness of internal levers. More in detail, the positive contribution of €42 million from the price mix, more than offset the cost increase of raw materials. It was minus €22 million, mainly due to natural rubber and oil derivatives. Starting from this quarter, the impact of raw materials in our reporting only takes into account the price variations of commodities and the relevant impact in our COGS. The exchange rate impact on raw materials, is included in the ForEx item. Efficiencies stood at €25 million fully covering the €24 million inflation impact. Exchange rates had a slightly positive impact, plus €4 million, due to the U.S. dollar appreciation, and the devaluation of the Mexican peso. The latter is a relevant currency for our cost basis since Mexico is mainly a production source. Finally, volumes generated a positive contribution plus €6 million, which covered the impact of D&A minus €8 million, and other costs minus €5 million, mainly related to marketing and reversion development. Let's now review the net income amounting to €127 million higher than the €100 million of the same period of 2024. This trend reflects the €17 million improvement of operating performance whose dynamics I just described, the slight increase of €4 million in non-recurring costs, the reduction of net financial charges by €51 million, of which €40 million are due to the lower non-monetary impact relating to hyperinflation accounting and €11 million, to lower financial charges. Finally, the tax increase of €37 million more than in the first quarter of 2024, is due to an unfavorable year-on-year comparison basis since the value recorded last year included the benefits from the Patent Box and the impact of the positive settlement of tax litigations. The rally closed the first quarter of 2025, with a negative net financial position equal to approximately €2.62 billion. The net cash flow before dividends of the first quarter was negative €697 million, in line with the business and working capital seasonality. The net operating cash flow negative before €555 million, reflects the operating performance we have just discussed, the investments of €60 million, mainly in High Value technology upgrade and plant automation, increase in the right of use mainly related to efficiency projects in Romania warehouses, while the negative working capital trend amounting to €866 million discount. The increase in inventory levels in not mostly in North America after U.S. administration announced the introduction of tariffs, 22% the weight of inventories on the revenues compared with the 21.7% in December 2024. And the usual seasonality of trade receivables, 14.6% the weight of revenues, and trade payables, 23.5% the weight of revenues. As of the 31st of March 2025, the group's gross debt amounted to approximately €3.86 billion. Considering that financial assets amounted to around €1.2 billion, the net financial position is about $2.6 billion. The liquidity margin is equal to €2.5 billion, of which $1.5 billion in undrawn committed credit lines. Such margin covers debt maturities for approximately 3.5 years that, is until fourth quarter 2028. The cost of debt over the last 12 months is 4.96%, decreasing slightly, compared with the end of last year. This reduction is attributable to the lower interest rates in the Eurozone on the one side, and on the other, the optimization of the debt mix, due to a lower exposure to high yield currencies. Finally, at the end of March, sustainable finance keeps on accounting for 70% of the group's gross debt. That is 84.5%, when we take into account the holding company's debt in line with the announced target of 100% for the end of 2025. And I'll give the floor back to Mr. Casaluci.

Thank you. Thank you, Mr. Bocchio. Let's now switch to 2025 market outlook. Our expectations for an essentially flat car market minus 1% plus 1%, are confirmed. However, the possible economic slowdown could have a negative impact on consumer demand, especially in the second half of the year. More specifically, we expect a low single-digit decline in original equipment, due to the prolonged weakness of car production both in Europe and North America, and a stable market, or slightly growth in the replacement channel. Anyhow, High Value confirms as the most resilient segment with a mid-single-digit growth expectation, driven by replacement. In the car 17 inches and below, demand is expected to record a low single-digit negative trend in both channels. In this scenario, Pirelli confirms its strategy of gaining market share in the car 18 inches and above, and decreasing its exposure to Standard. Let me give now an update on the United States tariff scenario, and our mitigation plan. As it is known, the U.S. generates over 20% of the group's revenues. Our local plant in Georgia, highly automated, covers around 5% of the local demand. Our sales in U.S., are supported by importing approximately 55% of demand from Mexico, and approximately 40% from Brazil and Europe. The tariff scenario is constantly evolving, as shown by both the agreement reached in the recent days, by the United States administration with the U.K., and the announcements of negotiations with other major trading partners. The tariffs we are currently exposed to, are a 25% on car tyres imported from Europe and Brazil from May 3. As car manufacturers have obtained the duty refunds on imported parts, possible exemptions on our OE sales, are in the process of being defined. While for the replacement channel, it will depend on the negotiations of individual states. No tariffs on imports from Mexico at the moment, because all our products are USMCA compliant. Universal reciprocal tariffs on motorbike and bicycle tyres imported from all countries with different rates according to the source. Based on the current tariff scenario, we revised our mitigation plan, which now includes the optimization of flows and the inventory increase in the U.S., already implemented in the first quarter. A revision of the commercial agreement currently in force in U.S. market and the crash program to cost - to cut costs at group's level, in addition to the benefits from the already announced transformation program. We are also monitoring other highly volatile external factors such as the exchange rate trends, especially the euro dollar rate, the raw material trend, given the current reduction in the cost of natural rubber and oil derivatives, and the demand trend as the GDP and consumption are cooling down. Based on the results achieved in the first quarter, Pirelli confirms that the target disclosed on February 26 and reiterated on April 28. Revenues between approximately €6.8 billion and €7 billion, with volumes increasing between around 1% and 2%. Price mix improving by about 2% to 3%, mainly driven by the product mix. Negative impact from ForEx between approximately minus 2.5% and minus 1.5%. Profitability is expected to increase year-over-year with an adjusted EBIT margin of around 16%. Net cash generation before dividends, is expected between about $550 million and €570 million. We confirm investments of approximately €420 million, around 6% of revenue. Finally, we confirm the deleverage target at approximately one-time the net debt to adjusted EBITDA ratio, with a net financial position of around €1.6 billion. As already mentioned, the tariff scenario is continuously evolving. Should the current tariffs stay in force until the end of the year, the mitigation plan already discussed will ensure the achievement of the adjusted EBIT and cash generation target, at the low end of the guidance range, therefore, reaching the deleverage target. And now I'll leave the floor to Mr. Tronchetti for the final remarks.

Thank you, Mr. Casaluci. The external scenario remains challenging. Commercial tensions are damping economic growth with possible impacts on consumer demand. To sail these stormy waters, we are relying on our leadership on High Value, effectiveness of our business model, and our quick responsiveness to external challenges. The objective for 2025 are clear, consolidate our technological leadership, maintain a best-in-class profitability in Tier 1, and achieve our deleverage target. So that's the end of our presentation. And I give the floor to all of you. And I thank you for your attention.

Thank you. [Operator Instructions] The first question is from Akshat Kacker, JPMorgan. Please go ahead.

Good evening. Thank you. Akshat from JPMorgan. I have three questions, please. The first one on governance and the shareholder structure. You mentioned that negotiations haven't yielded a positive outcome. I just wanted to ask, what are the next steps on this front that minority shareholders should look out for? And also, I remember from October last year, Sinochem was found in violation of the Golden Power procedure. Is there an update on that, please? That’s the first question. The second question is on tariffs and the mitigation plan. It's very encouraging to see you guide at the lower end of the guidance irrespective of the tariffs. Could I just ask for more details there, please, based on what we know today, what is the gross cost impact on the business? And what are the mitigation actions that you’re looking at both in the near term, and if you're looking for additional U.S. capacity in the medium term? That's the second question. And the third question is just broadly over your pricing strategy across the globe, not just in North America. How are you thinking about pricing over and above raw material, and other cost inflators in 2025, please? Thank you.

Thank you. Thank you very much. So the governance of Pirelli is written and is clear I think, to all of you. The Golden Power intervened on June 2023, and they restated the governance that was changed unilaterally by the Sinochem Group, with exchange of management. Let's say that the merge between Sinochem China new managers. And they intervene in changing the rules of the governance that were set on the bylaws on the precondition of the fact, which were in an easy way granting the leadership of the management of Pirelli long-term, the capture of Pirelli, and the management was in the hands of the managers that were stated by Camfin. It was the initial stand in 2015, the initial governance. His willingness to change coming from an outside world, from new leaders of Sinochem Group, made them in a position Camfin only to accept, because at the time there was 46% of the shares in the hands of different state owned Chinese companies. 10% was in the hands of Silk Road Fund and 37% in the hands of Sinochem Group. This merger, it created a discontinuity. We found a new shareholder, bigger, and the shareholder had to - appeal to the Golden Power, because this change in governance had to be declared to the Golden Power. They declared it and the Golden Power Intervened, in fact, restating the same condition of the governance state at the beginning, in line with the bylaws and the fact. And then the Sinochem Group didn’t react to the decision. They said that they were aligning the strategy to the DPCM Golden Power, a new law. And in fact, we see lately an attitude that we don't really understand, because the motivation there is no motivation at the end of the day. Facts are that the Board of Pirelli, considering the best interest of Pirelli and considering the conserve opinion that gave to the Board the responsibility to set the governance in terms of control. They said that clearly that was related to IFRS. And so the Board, majority of the Board voted for the change, and now we do not have control on Pirelli, because of the decision of the Board. And lately, there have been attitude that are in the in the press release without any explanation were against the transparency that we were providing for the market. We tried and we are still trying so we never stopped to do it to find agreement. There are three main points to consider. There is no control. There is a shareholder targeting 39.9%, having 36.4%, and there is the market and the Golden Power. So on our strategy, we look to the results. And results are supporting our strategy. The Sinochem Group with the Golden Power, they have now there will be the decision if they are in compliance or not with the provision of the Golden Power. She's no links nor, let's say, any exchange of information between the shareholder, Sinochem Group, and the Board members. We have seen lately that the situation is a bit different. And if there is already a procedure in in the Golden Power that is analyzing, if their action is agreed between the Board members that are also, let's say, top managers of the of the Sinochem Group. In this scenario, we expect the decision of Golden Power coming. And there is a second point that, is obviously this proposal that is not known. So Pirelli asked to be transparent to - in order to discuss it. Unfortunately, the answer was negative. And so we took the evidence of this facts and we described in our press release. It was also with majority vote, because of some leaders. And so at the end of the day, the company is doing well. The governance is okay. There is nothing more control. And so we go forward with our strategy, and we are confident that in America, everything will be developed nicely, and in accordance with the American laws as it happens in 160 countries in the world, because Pirelli distributing in more than 160 countries this product always aligning the governance to the rules of the market. And now I leave the floor to Mr. Casaluci about the American market, how we are developing our position. Thank you.

Thank you. Thank you, Mr. Tronchetti. So mitigation plan was defined based on the current duties scenario. That just to summarize, it’s 25% duties from Europe and Brazil on car tyres, not tariffs from Mexico, and the reciprocal tariffs on two wheel imports. Let's see now. Let's see what will happen in the in the future. And if these would be confirmed, the application of these duties will generate a negative impact roughly around €60 million at EBIT level. And the mitigation plan, we presented that I will recap later on will represent roughly a positive impact to compensate the €60 million negative on duties of around €30 million, €35 million positive impact. That’s the conclusion is that in our estimation with the actual scenario of duties, we will have a negative impact maximum around €25 million, €30 million at EBIT level. That's the reason why we feel confident to assure in case this scenario will remain, the - low level of the guidance as worst scenario, of course. We are also confident that the situation will improve and the mitigation plan on the duties will come also from the negotiations between Europe and United States, as happened with United Kingdom. The mitigation plan includes the optimization of flows and inventory increase in United States already implemented, this last one, but to maximize as much as possible the export from Mexico into U.S., provision of the commercial agreements currently in force in U.S. market that is not only price, it's a set of actions. It’s a review of the Incoterms, it's price, it's the opportunity to take a refund from the original equipment. And last, but not least, a cash program on cost all around the country, not only focusing on U.S. This is a short-term. Long-term, as we already announced, that we want to plan. We plan a growing capacity, local capacity, and this will happen independently from the duties environment, because it was already part of our long-term plan. Thank you.

Thank you.

The next question is from Monica Bosio in Intesa Sanpaolo. Please go ahead. Ms. Bosio, we cannot hear you. Maybe your line is on mute. Ms. Bosio, could you please check your microphone, please? The next question is from Martin Harry, Bernstein. Please go ahead.

Hi, yes. Can you can you hear me okay?

Yes. Please go ahead, sir.

Okay. Great. Yes, so a couple of questions on the tariffs and the mitigation. I mean, the first one, you are a very efficient company with a high utilization rate, a cost saving program already in place. So I'm interested where you can find the incremental savings, what is the target of those incremental plans and how quickly will they be implemented? The second one on the tariffs as well, within the section 232 legislation, as written there is the stated intention to also tariff the non-U.S. content of USMCA imports, once a process is established to do this. So I just wondered what proportion of the content of the Mexico produced tyre is non-U.S., and what’s your expectation on when, if ever that change may occur in the U.S. market? And also, is that something maybe on top of your existing target? Thanks very much.

Thank you. So starting with the Section 232. As the Mexican leadership is dealing with the American leadership, and there are continuous contracts. Right now, the production from Mexico goes on as it used to go with NAFTA first and USMCA afterwards. The content of American products being, let's say, a part of the car tyres, there is no request on our side to have content, because as everybody knows, we are the inside natural rubber and materials that are not possible to be bought in America. So we continue business as usual. And we believe that when we will be in a condition to define, and start the investment in U.S., part of the negotiation is also not only for Mexico, but trying to have a reduction on duties coming from Europe and Brazil. So it's still a situation that is not defined, but it seems to me that it's going to the right directions, and will be in full compliance with the American laws. Please, Mr. Casaluci for the other question.

Yes. Well, cost cutting is a fresh cost cutting plan. There are always flexibility to act on cost, if we if we consider the full perimeter of the company at 360 degrees, and heading in front of our three quarters. So we are addressing cost at 360 degrees. Of course, we'll accelerate the manufacturing efficiencies mainly in the programs with the shorter payback, mainly driven by energy consumption reduction that is due, for example, on the increase of the decarbonization programs and the electrification programs. But above all, we are working on the SG&A at 360 degrees. So we are confident that we will we will deliver these, and it will be part of our transformation program. The question of increasing the acceleration and the cost discipline.

Thank you.

The next question is from Martino De Ambroggi, Equita. Please go ahead.

Thank you. Good evening, everybody. The first is on CapEx. You can remind us what is CapEx plan without any U.S. tariff and if you are planning any upgrade, or just a reshuffle of the CapEx plan following the tariff introduction? And always on price, you mentioned during the speech that there is a possibility of tariff exemption for original equipment imports. I suppose it is 20%, 25% of the total imports from Brazil and Europe. I don't know if there is a different mix for these imports. And last on Sinochem again sorry, I clearly understand it's a very sensitive issue. Is it correct that the goal is to see Sinochem below 25% to be compliant with the U.S. first? And I don’t know if you can elaborate on what are the possible scenarios here on your view?

Thank you, Mr. Casaluci, then I'll answer.

Okay. Yes, I will answer on the first two questions. CapEx wise no, we maintain our CapEx target for 2025, but its continued being around €420 million. There is still relatively low level of CapEx dedicated to U.S., because our plan to increase the production capacity will not have major impact in 2025. So the duties U.S. will not affect our CapEx all in all. Just to remind that roughly 30% of our CapEx is stable, dedicated to base load, the maintenance, and so on. While the remaining 70% has been switched in the last two years, mainly on activities of efficiency, technological upgrades, sustainability, HSE. So everything that will make our plans more efficient, and more sustainable looking forward. So today, 60% of our CapEx are dedicated to these activities, while no more than 50% on production capacity growth. The second demand is yes. You are right. More or less, 25% of what we import is related to the original equipment. And this is the volume where we are working with our partners in the car industry, the OEMs, to find the way to take advantage of the refund that has been committed by the U.S. administration. But is - a negotiation, let me say, that has been started in the last days. So we are in the middle of the process of setting the new condition. Thank you.

Thank you, Mr. Casaluci. So regarding your question about agreement, or not with the Sinochem Group. So this is obviously an important question. What we know in our experience on the legal terms, on the Golden Power, the situation of an important shareholder not disclosing the reason why he's acting in the Board, not in the best interest of Pirelli. So leaving aside for a moment, the shareholder by looking to the Board. I think that one day soon will happen that the best interest of the company will prevail. Our projects are for the next month. So we are dealing with the American authorities. We are dealing with the Georgia to have the, let's say, the incentive they used to provide. So in my opinion, this situation, they find a way, because the best interest of the company will prevail. It's also the value for the shareholders, which means that it's also the value for the Sinochem Group. I think that we will find a reasonable ways sooner or later, but the strategy of the company will not change, and we will go on the way we are going today. Thank you.

Thank you.

The next question is from Gianluca Bertuzzo, Intermonte. Please go ahead.

Hi. Good evening to everybody. Thank you for my question. First one is on tariffs. I was wondering about the response of competition. Did you see in terms of commercial discipline some markets like discounting, applying price increase. And if so, to what extent this price increase are coming? They are trying to fully cover the cost for tariffs, or the price increase are less? Second question is on electric vehicle tyres. There has been a lot going on the OE market for EVs. Does all these changes to regulation specific situation of some player impacting performance you expect from EV tyres and your plans? Thank you.

Well, in terms of commercial condition in United States, it’s really early to give you clear trend of the market. We see different reactions. It's still very confused and under development. What we know is that we will review the commercial condition that is as I said before, is a set of activities and including the Incoterms, and the way of managing inventories and so on. But it’s early to give you a clear understanding on the on the market development in U.S. While on EV tyres, we are fully confident that we will face an acceleration on the EV penetration. China, okay, we know is already in place on the first quarter of this year. We recorded roughly 50% of the new car registration are electric vehicles already. And new electric vehicles concept or pure EV or a plug in hybrid vehicles. And also Europe is facing an acceleration. Is what we saw in the first quarter is a growth year-over-year of around 40% on car registration - on new EV or pure EV or hybrid plug in. Reaching a weight on the total car registration in Europe that is close to the 20%. So we are confident that these will accelerate again. And as far as car is concerned, we see an enormous opportunity. Because as we explained it more times that the EV requires size with higher performance and a higher technology in terms of noise control, in terms of rolling resistance, in terms of grid, in terms of load index. And so, here is where we see that the technological leadership, is providing a competitive advantage. So my view is absolutely positive on this area. Thank you so much.

Okay. I'll follow-up on the inventories. The increasing inventories you adding the U.S. to offset the tariff impact, it will allow you to cover second quarter demand, or even the third quarter or fourth quarter? Just understand the level of the inventories increase, what kind of flexibility it provides you?

Well, it goes without saying that April has been, but it's not in my numbers of the Q1. But March and April, I would say, been a good has been a good month in terms of both sell-in and sell-out, because sort of restocking was visible in the market. Most probably, May would be more a month of retuning on the stock level. But all in all, I don’t see nothing that is worrying about the inventories level in U.S. It’s a bit higher than the average of this period of year for the reason mentioned, but it’s not it’s not worrying. And supported the good performance of the Q1, both in terms of volume and product mix. While if we if you want an outlook out of out of United States is sorry. For U.S., when we talk about inventories, this is true for both our own inventories that we transferred in our warehouse before the duties that were in place, and the inventories on our partner of distribution. Out of U.S., the stock is absolutely under control. China is at the normal level. And Europe is a bit higher than the average of the season, because the sell out in April was not so good, but in May, it's starting a very good sell-out season. And winter is quite low, which is creating good expectation for the winter selling season -- selling season sorry.

Thank you very much.

The next question is from Stephen Benhamou from BNP Paribas. Please go ahead.

Yes. Good afternoon, everyone. I have one question regarding your price mix. So please can you please give us a breakdown between the price and the mix in Q1? And so, you're much higher than the full guidance of plus 2% to plus 3%. So can you please elaborate on the reasons why to anticipate a lower prices impacting in the coming quarters? This is my first question. The second question is about the seasonality. So Q2 and Q3, are historically your biggest quarters in terms of profitability. Do you anticipate margins, to be above your three objectives of around 16%? Thank you.

Hi, Benhamou. Thank you for the question. I'll take this one. Price mix in Q1, as we said, it was a very sound of 3.9% for the positive 3.9%, mainly driven by the good mix performance. Most specifically looking at the mix, we had a very consistent product mix improvement, which was higher than two percentage point. Channel mix was roughly flat, and the positive regional mix at about 1%. A little bit stronger than expected, driven by the sound performance we had on the High Value North America and the weaker performance on the Standard sales in in South America. So price was slightly positive, but very slightly positive, and it was mainly linked within taxation of the original equipment prices related to the ongoing situation of the commodities. Now for the remaining part of the year, for the next few quarters, we are expecting a product mix, the price mix to keep on being aligned with the full year guidance. So to be one of the support for the total value of the EBIT, and the generation of the EBIT margin for the company, but we expect to be more aligned in Q2, thank you for we expect that full year guidance. And the profitability that we are expecting for the next quarter, is roughly aligned at about 16% for all of the quarter. So we don’t foresee major movement, compared to what we achieved in quarter one. We would be in the ballpark of roughly 16%.

Sorry, if I may add, the first quarter is right when you said the implicit of this following quarter, it looks a little bit below the first quarter. Because in the first quarter, on top of the product mix, well explained by Fabio, we have been supported by a positive region mix, because of the good performance of U.S. producers, and because of the acceleration of the exit in in Standard in South America. That’s the only difference, but the product mix will remain absolutely stable.

Okay. Thank you.

The next question is from Ross MacDonald from Citi. Please go ahead.

Yes. Good evening, Heather it's Ross from Citi. Congrats on the on the results. I have three questions. I think two are follow-ups, so I'll start with those. Just on the pricing commentary, I mean, I look at the Michelin net pricing, I think slightly higher potentially in in Q1, and they’re talking about EUDR specific price inflation. So I'd just be curious, when you talk about indexation within the net price benefit in Q1 is that it for the full year? Or do you have some more sort of inflators that you can pass through potentially related to things like the EUDR that haven't been done just yet. The second follow-up was really on the inventory situation, just to help me understand exactly what you’re seeing there. So how should we think about the net working capital build in 2Q? I assume you’ve been building inventories in the U.S. right up until May 2nd, let's say. And then you will begin to work those down into the dealer network from here. So what does that mean for Q2 volume? Should we expect strong selling in the U.S. in Q2 as you work down the company inventory? And then the final question, obviously, last time we spoke, you were talking around leaning on the Brazilian factories to potentially mitigate any tariffs, but the situation has changed. So, given that you’re losing some share in in in Brazil on the Standard side in line with your strategy, where does that leave the Brazilian footprint in terms of capacity utilization? And how should we think about, the utilization Brazil from here? Thank you.

So thank you for your questions. I will answer to the first one on the indexization, and the last one on the capacity. And then, I will leave to Fabio to answer to the working capital expectations for the next quarter. But the indexization on that is affecting the positive performance on price will be mainly related to the original equipment and affecting positively the first half. Then we will have the COGS impact and the pricing impact on the new raw material scenario starting from the second half. But as Fabio said, all in all, the vast majority of our price mix performance in the first quarter, and also in the remaining part of the year is related to product mix. So this - will not change significantly our price mix performance. Brazilian capacity today, we have opportunity to produce more. And but - when we mentioned it on the optimization of the flow, it means that we are taking advantage of the Brazilian capacity to maximize High Value sales in South America and Mexico. Sorry free creating a more spec capacity in Mexico to support U.S. sales. That's a way to reduce clearly, only reduce partially the impact on duties from Brazil that today are in place for the U.S. market. This is a tactical action to try to optimize the actual footprint. But in Brazil, we will never ever lose the High Value market share. What - we are losing and this is driven by the strategy is our market share in Standard mainly 13, 14, 15 inches where we are exiting from this segment, because our under strong attack of the - trade down of Asian brands. So, we want to stay out from this segment, to protect profitability and taking advantage of the new capacity, for the High Value market. It is growing very fast in Brazil. Thank you.

And talking about instead the inventories, obviously, the inefficient working capital management has been for the past few year and this even today, our priority number one in order to stabilize and to support our cash flow generation. And finally, our goal that is the leverage of the company. So we took we defined to increase a little bit the stock during the end of quarter one. That's why the inventories overall arrived at about 22% of the last 12 months net sales. But we are expecting now for the next few quarters to finalize again, to a more efficient level. So I am expecting during the Q2, and then Q3 a reduction in the level of inventories, compared to the to the top line. And going back to what we consider to be a more efficient level of inventories.

Very clear. Can I maybe follow-up very quickly just on the on the price mix feedback you gave there? If I look at the drop through on price mix in Q1, it's about 63%. So just be curious, given the raw math comment you made around the second half, what a fair estimate for price mix drop through the rest of the year, would be given that comment?

Drop through in the quarter one, has been about 64%, and we don't foresee major variation for the next few quarters. So we are expecting it to be 64% to 65% until the end of the year.

Okay. Thank you.

The next question is from Thomas Besson, Kepler Cheuvreux. Please go ahead.

Thank you very much. I have three questions about this. First, I’d like you to come back on distribution. Think you've announced a disposal in Sweden. Can you mention revenues of the disposal assets in 2024 and confirm the specific liabilities for your 2025 profit? And can you remind us how much of your distribution you still own in LatAm, the Nordics, or Russia? I think it's more partnerships in China or Europe? So the first question on distribution. The second, I'd like to come back to Cyber Tyres, please. Can you give us rough idea of Cyber Tyre revenues in 2024 or in Q1, '25, please? And lastly, I'd like to come back and apologies for that. I know it's sensitive, but it's a topic on which we get a lot of questions as well, on your relationship with Sinochem. Could you explain how you see the positive outcome you're looking for, happening practically and be positive for both sides, because otherwise, it's a bit tricky to envisage. And confirm that what you would eventually lose if the current shareholding stays as it is? It is just an incentive from Georgia, can you mention the amount of that annual incentive, please? Thank you.

Thank you for your question. So the development with Sinochem is in a way positive, because there is no more control by Sinochem. Now we have the shareholders that are supporting Pirelli, Camfin, obviously, and the market. And there are also rules in the market, whereby if you don't provide any motivation on your behavior against the interest of the company, there are consequences. So we strongly believe that at the end of the day, they will align their interest with the interest of the company, because the company will continue its strategy, and there are no reason not to continue. The technology, I'll remind you, is also protected by law. And then we are in a position that you mentioned revenues on Cyber. You know better than I know that technology, is something that goes on and on, and then delivers a lot after a few years. Now we are providing already, to some carmakers our Cyber that is a mix between software and hardware. And we have the agreement with Bosch. This is going on well. And we have also requests from Koreans, Chinese, and American companies, to introduce our technology to them. And so, we are underway. It's like to ask us in 1985, if P ZERO line would have been successful. It has been successful, and we had the fifth generation. And so, I believe, and we do believe, and we have all the signs that our technology year-after-year will be placed, because it's related to safety, information, real-time information. So we have millions of kilometers that have been made. We have information. We have digitalized our system. So we are obviously confident that it is a winning technology. There is no going backward to other technologies. And we've seen again, at the end of the day, we will be in line with the interest of Pirelli. I've never seen in my life a shareholder voting against, the interest of the company, because it's like shooting in the feet. I mean at the end of the day, they have to provide value to themselves. So we are not scared. We fight. We have great support by shareholders. And I think that - we don't know why. So the interesting part of it, and can that happen looking forward, is that there is no reason to keep a position that is not in line with the growth of the company, the spreading of technology around. So and really is counter-deductive that the technology will be stopped is also protected by the Golden Power. So I really don't see, if not a good end for all that story. Please, Mr. Casaluci.

Yes. Thank you so much. Very quickly on all the other questions. Dackia has not been only a sale of their network. It's been an agreement with CTS, including the sales from our side to them of the networks, for an amount on cash of €24 million, as announced, and an agreement as a counterpart of a long-term supply agreement, not only in Sweden, but in the all Nordics markets, because they have a wider network. Second, on Brazil, we have our own network. We control and is an equity Campneus, and on top, we have also partnership with other retail network and distributors. We are market leader in Brazil. And we are also in the phase, to optimize the footprint of the Campneus network. But will remain our network, of course. Cyber Tyre sales we don't disclose, is in a development phase, the technology. Nevertheless, more than 100,000 tyres minimum are already circulating, mainly United States, sensorized and working. But we don't disclose the numbers now. We are still in a very early stage of the introduction of the technology. These will be disclosed in our next industrial plan, with a long-term view on the penetration of this technology. Last, for the industrial investment in U.S., of course, we are looking for incentivization, and is used to do - to be possible in the United States. We are exploiting different states. Of course, Georgia is where we are. So it's our first choice. And to solve the governance issues mentioned by Mr. Tronchetti is also part of this plan, because we need - of course, we miss a bit of flexibility, you can imagine, and effectiveness right now considering the U.S. regulations. But we are very confident that we will find the best solution for the future of our industrial presence in the United States. Thank you.

Thank you very much.

The next question is from Monica Bosio, Intesa Sanpaolo. Please go ahead.

Yes. Good evening. I hope you can hear me now. Most of my questions have been already answered, but I'm just wondering if you can indicate to us, what has been the market share gain in USA in the first quarter. I'm not asking the market share, but the market share gain in the first quarter. And if you have a target by year-end. And my second question is on the raw material impact, the expectation for the full year overall? Thank you.

Thank you. In terms of market share, the first quarter in United States, in North America, generally speaking, but specifically in the United States has been quite positive. We are well satisfied of our performance. I can say, around one point of gain in original equipment and 0.5 point in replacement, which we do consider a very good performance. And we want to keep this performance for the full year, of course, possibly. We will do our best to do it. Raw material, I think Fabio can...

Yes. On the raw materials, actually in the first quarter, we had a negative impact, and that was related mainly to natural rubber and butadiene, just partially compensated by the oil derivatives. Natural rubber is due to the fact that the quarter one, 2024, it was just above $1,500 per ton, and now it was just below - in this quarter, it was just below $2,000 per ton. And butadiene, it was last year at about $800, and now it is more than €1,000 per ton. What we are expecting is still to have a negative impact from the raw material from the commodities in quarter two, because the trend in commodities is getting softer a little bit. But for Q2, we still expect a negative impact, even higher negative than quarter one. But then if the commodity will stay as we are experiencing them in these weeks, probably for the second half of the year, we may see a reduction in the negative impact in our results.

Okay. Thank you very much. Thank you.

And the last question is from Edoardo Spina, HSBC. Please go ahead.

Good evening. I have one question. If we focus on the electric vehicle market, OE, especially the battery electric vehicle, can you give us a better idea about the market share that you have in OE you project for the next 12 to 24 months, between the European carmakers, the Chinese carmakers, and maybe the American carmakers, just so I understand, given that there is different rate of growth of these carmakers sometimes? Thank you.

Yes. Well, the market share - I always talk about High Value segment and premium segment. Also the market share I mentioned before in U.S. are related to the 18 inches and above market. So back to your question, our market share average on the EV premium is 1.5 times our market share in the internal combustion engine. So if our premium market share in the ICE in original equipment stays around 20%, in EV, the pure EV, is around 28%, 30% of market share. And it's quite similar if we consider Europe and China. This is helping us to derisk the company also in favor of the fast-growing Chinese new premium EV players. In U.S., it's very similar, but we only have a couple of players in U.S., Tesla, Rivian and Lucid, of course. That's more or less the target share we have. Thank you.

Okay. Thank you.

Gentlemen, Mr. Tronchetti Provera, there are no more questions registered at this time. I turn the conference back to you, for any closing remarks.

So thank you very much. Thank you to all of you for your interesting questions. Have a good evening. Bye-bye.

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