Pininfarina S p A : DRAFT FINANCIAL STATEMENTS 2021

PRESS RELEASE

(Translation from the Italian original which remains the definitive version)

DRAFT 2021 FINANCIAL STATEMENTS

CORONAVIRUS AND REFERENCE MARKETS

INFORMATION REQUIRED BY CONSOB PURSUANT TO ART. 114.5 OF LEGISLATIVE DECREE NO. 58/98

GOING CONCERN ISSUES AND OUTLOOK FOR 2022

ANNUAL REPORT ON CORPORATE GOVERNANCE AND OWNERSHIP STRUCTURE

REMUNERATION REPORT

CONSOLIDATED NON-FINANCIAL STATEMENT

Cambiano, 23 March 2022 - The Board of Directors of Pininfarina S.p.A., chaired by Paolo Pininfarina, met today and approved the draft 2021 separate and consolidated financial statements, the annual report on corporate governance and ownership structure, the remuneration report and the consolidated non-financial statement.

The 2021 and 2020 key financial figures of the Pininfarina Group are as follows:

(€'million)	Draft 2021 financial
	statements	2020	Variation
Revenue	66.8	67.0	-0.2
EBITDA	2.3	-7.1	9.4
EBIT	4.1	-21.5	25.6
Net financial expense	-1.7	-1.9	0.2
Profit/loss for the year	2.4	-24.4	26.8
Net financial position	6.9	2.4	4.5
Equity	40.2	34.2	6.0

EBITDA is the operating profit or loss gross of amortisation, depreciation, provisions, impairment losses, reversals of impairment losses and utilisation of provisions.

EBIT is the operating profit or loss.

Pursuant to article 154-bis.2 of the Consolidated Finance Act, the manager in charge of financial reporting, Gianfranco Albertini, states that the financial disclosures provided in this press release are consistent with the relevant documentation, ledgers and accounting records.

Pininfarina Group, the coronavirus and the reference market

The conditions of the Pininfarina Group's reference market for 2021 were better than those of one year earlier.

The Group did not have to interrupt or restrict any of its activities during the year as a result of the Covid-19 pandemic.

The general pick-up in demand with substantially stable prices was stronger in the design activities, both for the automotive and industrial design and architecture markets.

All the group companies grew their design activities leading to a generalised upturn in profit margins, while the engineering operations' volume is in line with 2020, with a significant reduction in operating losses.

The Group discontinued its engineering business in Italy, which was operated by Pininfarina Engineering S.r.l., as a result of the decision of 26 October 2020 to wind up the subsidiary. The winding up procedure should be completed in 2022.

Turning to the performance of the various group companies, Pininfarina S.p.A.'s revenue rose by roughly 9% over 2020, recording an operating profit and a returning to making a profit for the year. It achieved this results partly thanks to the non-recurring effects of reversing impairment losses previously recognised on certain assets and releasing provisions for risks and charges. The upsurge in demand in all sectors combined with the reduction in operating expenses and overheads drove this turnaround from the losses recorded in the previous two years.

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In Germany, Pininfarina Deutschland's revenue was in line with 2020 and it managed to reduce its losses significantly thanks, in part, to its plan to reduce is workforce and operating expense commenced in the previous year.

The Chinese operations, run by Pininfarina Shanghai, which had been adversely affected by the public health emergency, especially in the first six months of the 2020, revived by approximately 48% with a consequent improvement in profit margins.

The architecture and industrial design sectors, managed by Pininfarina of America in the US market, continued to expand, with volumes up 48%, confirming the improvement in profitability already seen in 2020.

Pininfarina Group's financial performance and financial position

The Group recognised revenue of €66.8 million for 2021, in line with the previous year (€67 million). The current year figure no longer includes the results of Pininfarina Engineering S.r.l. as it commenced its winding up process in October 2020.

The gross operating loss of €7.1 million for 2020 improved to a gross operating profit of €2.3 million thanks to the growth and consequent operating profitability achieved in the design and architecture segment by all group companies.

The operating profit came to €4.1 million, partly attributable to the reversal of impairment losses previously recognised on certain assets (€2.7 million) and the release of some provisions (€2.8 million), compared to an operating loss of €21.5 million in 2020. In addition to the gross operating loss, the 2020 operating loss was due to the impairment losses of €1.8 million recognised on buildings and other assets, net accruals of €6.5 million to the restructuring provision, as well as other impairment losses of €5.2 million. These accruals and impairment losses were partially offset by the utilisation of the provision for losses to complete contracts (€3.1 million). In 2021, the Group did not recognise any specific impairment losses or accruals; on the contrary, as mentioned above, it reversed impairment losses previously recognised on certain assets by €2.7 million and released €2.8 million from the restructuring provision.

Net financial expense decreased to €1.4 million from €1.9 million for 2020. The improvement is mainly due to a decrease in interest expense incurred by the parent and Pininfarina Deutschland and the financial gain arising from the Small Business Administration's forgiveness of the loan of approximately €0.2 million granted to Pininfarina of America.

The Group recognised a tax expense of €0.2 million compared to €1 million in the previous year, when the deferred tax assets recognised by the Pininfarina Deutschland Group were reversed.

As a result of the above, the Group recorded a profit for the year of €2.4 million compared to a loss of €24.4 million for the previous year.

Equity increased by €6 million to €40.2 million at the reporting date, principally due to the profit for the year and the capital increase carried out during the year.

The Group's net financial position came to €6.9 million, compared to a net €2.4 million at 31 December 2020. The improvement is mostly due to the same reasons for the increase in equity described above.

The workforce numbered 486 at the reporting date (31 December 2021: 639; -24%). The decrease is mostly due to the winding up of Pininfarina Engineering S.r.l. in Italy and the reduction of engineering activities' personnel in Germany.

Cash flows

The Group's cash and cash equivalents (€29.4 million) increased by €0.8 million during the year, mostly due to the parent's capital increase completed on 25 June 2021.

The Group paid off all its bank overdrafts. Its non-current bank loans and borrowings decreased by €2.5 million, due to the combined effect of the repayment of an annual instalment of €3.6 million, the forgiveness of Pininfarina of America Corp's loan of €0.2 million and the parent's unrealised interest expense of €1.3 million arising from amortised-cost accounting.

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Neither the parent, Pininfarina S.p.A., nor its subsidiary Pininfarina Engineering S.r.l. in liquidation availed themselves of the loans provided for by the measures approved by the Italian government to support companies or granted by banks. The subsidiary Pininfarina of America Corp. received a bank loan of roughly €0.2 million as part of the measures introduced by the Small Business Administration to tackle the effects of the pandemic in the United States. In April 2021, the Small Business Administration waived its right to repayment of the loan.

Pininfarina S.p.A.'s financial debt

The parent has continued to meet its obligations, without undue distress, including those under the debt rescheduling agreement (2016-2025) with certain banks. Such agreement took effect on 30 May 2016 and provides for just one financial covenant (consolidated equity at a minimum of €30 million), compliance with which is assessed at 31 March each year up until repayment of the loan. At 31 March 2021, the covenant had been complied with and, although irrelevant for contractual purposes, it is still complied with at the reporting date. Should the minimum equity threshold not be complied with, the agreement would not be automatically terminated, as it provides for specific remedies and the lending banks can also waive their right to take action. The Mahindra Group has provided a surety that is enforceable if the parent fails to meet its obligations under the rescheduling agreement. Reference should be made to the financial risk management section of the notes for more information on the parent's financial debt and debt rescheduling agreement.

Support and relief measures

In accordance with ESMA recommendations (Public Statement 32-63-972 of 20 May 2020 and reiterated in Public Statement 32-63-1186 of 29 October 2021), the support and relief measures already enjoyed or that will be enjoyed by the Group are summarised below:

• in Italy, the Covid-19-government-sponsoredlay-off scheme for 70 employees for a total of 22,740 hours;
• in Germany, the government-sponsoredlay-off scheme (Kurzarbeit) for 68 workers for a total of 26,761 hours;
• in 2020, in the US, the subsidiary Pininfarina of America Corp. received a loan of approximately €0.2 million, bearing interest at 1% p.a. and repayable in 18 monthly instalments starting from January 2021. On 23 April
  2021, the subsidiary was notified of the Small Business Administration's acceptance of its application for the non-repayment of the loan as part of the measures for helping businesses to overcome the negative effects of the spread of the coronavirus.

The Group plans to continue to use the social shock absorbers made available by the government in Italy.

Information required by Consob (the Italian Commission for listed companies and the stock exchange) pursuant to article 114.5 of Legislative decree no. 58/98

1. The net financial position of the Pininfarina Group and Pininfarina S.p.A., with separate classification of current and non-current items, are attached hereto.
2. The Group has no past-due liabilities (of a commercial, financial, tax or social security nature). No actions against the Group have been filed by creditors.
3. The Group's and parent's related party transactions are attached hereto. Except for a major trading transaction (supply of design and engineering services) between the parent and its associate Automobili Pininfarina GmbH during the year. The related party transactions are substantially unchanged from those reported in the interim separate and condensed interim consolidated financial statements at 30 June 2021.
   Revenue from related party transactions accounted for 6% of the Group's total revenue for the year, compared to 7.1% for the first half of 2021 (19% in 2020);
4. Under the existing Rescheduling Agreement between the parent and the banks, there is just one financial covenant, to be checked annually beginning from 31 March 2018: consolidated equity at a minimum level of €30 million. At 31 March 2021, it had been complied with. The Group has no further loans and borrowings carrying clauses that limit its use of financial resources.

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1. On 12 May 2021, when the shareholders approved the interim financial report at 31 March 2021, Pininfarina S.p.A. announced that its outlook for 2021 was revenue in line with 2020, along with an operating loss and a loss for the year although they would be smaller than those for the previous year. These expectations were confirmed when both the interim financial reports at 30 June and 30 September 2021 were approved. On the basis of the consolidated figures for the entire year, the expectation about revenue was confirmed, while its forecast smaller operating loss and loss for the year were better than expected as it recognised an operating profit and a profit for the year. Other than the above, the parent has not disclosed any other financial forecasts.

Going concern issues in the light of the Covid-19 pandemic

The estimated effects of Covid-19 for 2021

The Group was not directly negatively affected (e.g., downturns in activities and/or cancellations of orders) by the coronavirus during 2021. The outlook for 2022 does not currently anticipate adverse impacts caused by Covid-19.

Group's performance, outlook and going concern issues

In their comments on the 2020 figures, the directors had explained that the sluggish conditions of the Group's reference markets were due to two factors: the continuation of the negative economic cycle of the global automotive industry and the Covid-19 pandemic, which put additional constraints on commercial projects, slowing down the acquisition of new contracts and/or reducing expected contract profit margins.

In this environment of weak reference markets and given the expectations about their future performance, the parent tackled three closely related issues:

• maintaining an appropriate level of liquidity for the Group's requirements;
• protecting the capitalisation level required by the law and bank agreements;
• creating the conditions for restoring profitability as soon as possible.

The capital increase resolved by the shareholders on 16 March 2021 to strengthen the parent's liquidity and capitalisation was successfully concluded on 25 June 2021. The parent collected proceeds totalling €23.6 million, increasing its liquidity accordingly. They partly arose from injections already made by its majority shareholder in the previous year (€20 million) and partly by the non-controlling investors' subscription of their shares in 2021 (€3.6 million).

The subsidiary Pininfarina Deutschland Holding GmbH collected the outstanding consideration for the sale of one of its buildings in the first quarter of 2021. Considering the nature of the Group's customers, there are no particular collection issues as there are no past due amounts which may affect the Group's cash flows from operating activities and its working capital performance was satisfactory.

In the foreseeable future, the following should be taken into account: the parent's net financial position amounts to €6.9 million, comprising cash and cash equivalents and financial assets of €27.3 million and loans and borrowings of €20.4 million, whose current portion amounts to €3.8 million. The group's net financial position amounts to €6.9 million at the reporting date. According to the 12-month cash budget prepared by the directors, the parent's and Group's financial resources at the reporting date should be adequate to cover the expected operating cash outflows, as well as the outlays necessary to complete the winding up procedure of Pininfarina Engineering S.r.l. in liquidation and to repay the current portion of loans and borrowings when they become due.

Based on the current situation, the directors believe that the parent's and Group's financial resources at the reporting date are adequate to cover cash outflows for the next twelve months.

Not only in order to comply with the requirements of the Italian Civil Code governing share capital protection, the parent must monitor its equity at consolidation level closely. Indeed, the only financial covenant provided for by the existing debt restructuring agreement is a minimum level of €30 million (this is checked on 31 March every year and had been complied with at 31 March 2021). Considering the group's performance in the first few months of 2022, there are no reasons to believe that compliance with the financial covenant at the next

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assessment date of 31 March 2021 is at risk. The Mahindra Group has provided a surety that is enforceable if the parent fails to meet its obligations under the rescheduling agreement.

The recently-completed capital increase to strengthen the parent's financial position has already been discussed.

In order to tackle their performance issues and return to a profit-making position, considering the market performance of the last two years and currently foreseeable outlook, the parent and the Group adopted various measures in 2020 and 2021, including the winding up of the subsidiary Pininfarina Engineering S.r.l., given the market conditions and its no longer sustainable performance, implementation of a redundancy plan for Pininfarina Deutschland GmbH, involving 46 people (approximately 20% of its workforce), reduction of the number of direct and indirect staff working at Pininfarina S.p.A., in order to bring the professional skills and number of resources into line with the current market requirements and a plan to reduce operating expense and overheads, also by increasing resort to outsourcing in some cases. Moreover, the Group developed new commercial projects to better tailor its services to the continuous changes in market demand.

With respect to the winding up of Pininfarina Engineering S.r.l., in the previous year, the Group recognised a restructuring provision to fully cover the obligations reasonably expected at 31 December 2020 on the basis of the collective trade union agreements, the legal requirements, the individual agreements and, given the usual outcome of these procedures, the possible refusal to participate in the plan envisaged by the collective agreements by employees who oppose the agreement. The winding up procedure continued throughout 2021 and all the subsidiary's employment agreements were terminated in the first half of November 2021 substantially in line with the established redundancy plan and using less outflows of resources than those reasonably forecast when the provision was accrued. The procedure is currently nearing completion, the residual risks have been identified and, at the reporting date, the Group maintained a restructuring provision of €0.5 million expected to be used while releasing the excess accrual of €2.3 million.

At 30 September 2021, all the individual agreements with the redundant 46 workers at Pininfarina Deutschland GmbH envisaged in its restructuring plan had been signed. They cover the workers' termination benefits as provided for in the restructuring plan at 31 December 2020.

Operating profit margins improved considerably in 2021 compared to the previous year, confirming the soundness of the actions taken in this respect in the previous year. Business opportunities and prices offered were stable, in line with the trend envisaged by the directors for this year.

As described in the 2020 annual financial report, the market situation of that year, which reflected social difficulties that are well known throughout the world, was one of the most difficult in recent decades, particularly in the market sectors in which the Pininfarina Group operates. The demand for services continues to exist for design-related activities albeit much less so for pure engineering based on technical deliverables and the downwards pressure on prices seen in 2020 has eased.

In order to deal with this situation, the parent is rapidly redirecting their available resources towards those activities considered most likely to generate profits.

The directors also checked whether the previously-prepared financial projections, which are based on the positive effects of the restructuring and refocusing actions undertaken by the Group starting from 2020 and the use of operating cash flows in 2022, were still valid. The 2021 figures show considerable improvement in the operating performance even though sales volumes are in line with the previous year's lows. The Group recognised an operating profit of €4.1 million. Net of the releases of provisions and reversals of impairment losses recognised during the year, the Group would have recognised an operating loss of €0.4 million, which, despite being still negative, would have been significantly better than the €21.5 million operating loss recognised in the previous year.

Although the Group's financial position, financial performance and cash flows improved considerably in 2021, its ability to continue as a going concern will still require significant efforts in terms of sales volumes, cost containment and costs to win future contracts. According to the directors, given the issues described above, there continues to be significant uncertainty about the achievement of the production volumes and improved profitability goals, as they depend on a prolonged recovery of the markets in which the Group and the parent operate in the next few years, as well as on changes in the costs to obtain contracts and procurement costs

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