Annual Report • Apr 23, 2021
Annual Report
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ANNUAL FINANCIAL REPORT 2020
Humankind and technology in total synergy
This is a virtuous circle that unites humankind and nature with technology and the digital world. The path we have chosen to help build a sustainable future.
The Shareholders are convened to the Ordinary and Extraordinary Shareholders' Meeting to be held at the Company offices at Viale Europa 4 (Entry Gate 1), 24040 Stezzano (Bergamo) on 22 April 2021 at 10:30a.m. (in single calling), to resolve on the following
6.1 examination of Section I, drawn up pursuant to Article 123-ter, paragraph 3, of Legislative Decree No. 58 of 24 February 1998 (i.e., Remuneration policy for 2021). Resolutions pursuant to Article 123-ter, paragraphs 3-bis and 3-ter, of Legislative Decree No. 58 of 24 February 1998;
Relevant and ensuing resolutions.
Stezzano, 4 March 2021
On behalf of the Board of Directors The Chairman Alberto Bombassei
In light of the continuation of the state of health emergency, in compliance with Article 106, paragraph 4, of Legislative Decree No. 18/2020 (converted into Law No. 27/2020 ), extended by Legislative Decree No. 183/2020), the so called "Decreto Milleproroghe" (converted into law No. 21/2021), shareholders' attendance will take place solely through a proxy to the designated representative pursuant to Article 135-undecies of the TUF, i.e., Computershare S.p.A. Accordingly, individual shareholders will not allowed to attend in physical presence.
The information in this notice may be updated, changed or supplemented in view of the current emergency situation relating to the Covid-19 epidemic and related measures adopted by the competent authorities from time to time. Any and all updates, changes or additions to the information in this notice will be promptly circulated according to the same means used to publish this notice.
| Letter from the Chairman | 8 |
|---|---|
| Brembo Purpose | 10 |
| Company Officers | 12 |
| Summary of Group Results | 14 |
| Brembo and the Market | 18 |
|---|---|
| Sales Breakdown by Geographical Area and Application | 24 |
| Brembo's Consolidated Results | 26 |
| Group Structure | 32 |
| Brembo Worldwide | 34 |
| Performance of Brembo Companies | 36 |
| Investments | 42 |
| Research and Development | 44 |
| Risk Management Policy | 50 |
| Human Resources and Organisation | 60 |
| Environment, Safety and Health | 62 |
| Related Party Transactions | 64 |
| Further Information | 65 |
| Significant Events After 31 December 2020 | 69 |
| Foreseeable Evolution | 69 |
| Corporate Governance and Ownership Structure Report | 70 |
| Consolidated Disclosure of Non-Financial Information (NFI) | 70 |
| Information About the Brembo S.p.A. Dividend Proposal | 71 |
| Brembo S.p.A. Stock Performance | 72 |
| 2. Palmares 2020 |
76 |
|---|---|
| 3.Consolidated Financial Statements 2020 | 84 |
| Consolidated Financial Statements at 31 December 2020 | 84 |
| Explanatory Notes to the Consolidated Financial Statements at 31 December 2020 | 92 |
| Independent Auditors' Report | 158 |
| Attestation of the Manager in Charge of the Company's Financial Reports | 163 |
| 4. Separate Financial Statements 2020 |
166 |
| Financial Statements of Brembo S.p.A. at 31 December 2020 | 166 |
| Statutory Auditors' Report | 178 |
| Attestation of the Manager in Charge of the Company's Financial Reports | 192 |
Dear Shareholders,
We are living through an historic time that has placed severe strain on every sector of the economy and industry. The climate of extreme uncertainty has faced us with new challenges for our motivation, passion and willpower to prevail.
Brembo's solidity, organisation and ability to manage sudden, unexpected changes came even more clearly to the fore in 2020.
We can be therefore rightly proud of the results that the Company succeeded in obtaining during the year just ended, in which we felt the responsibility for swift, incisive action designed to safeguard the Group's profitability even more acutely.
Careful, effective management of the Company allowed Brembo to contain the negative impact of the pandemic and maintain its competitive positioning.
In 2020, Brembo Group's net consolidated revenues amounted to €2,208.6 million, down by 14.8% compared to the previous year, or by 13.3% on a like-for-like exchange rate basis. EBITDA for 2020 totalled €388.7 million (17.6% of revenues), compared to €512.2 million for 2019 (19.9% of revenues). EBIT was €181.1 million (8.2% of revenues), after depreciation, amortisation and impairment losses of €207.6 million.
Our performance in the fourth quarter of 2020 was particularly encouraging. At the geographical level, most of the markets in which we operate showed considerable growth. Sales grew by 7.9% in Italy, 0.9% in Germany, and 1.3% in France, whereas the United Kingdom showed a 5.1% decline. As far as non-EU countries are concerned, India rose by 22.1% (+34.0% on a like-for-like exchange rate basis), China grew by 19.4% (+21.3% on a like-for-like exchange rate basis), whereas Japan declined by -22.1% (-21.3% on a like-for-like exchange rate basis). South America decreased by 21.1% (while growing 9.2% on a like-for-like exchange rate basis), whereas North America (USA, Canada and Mexico) rose by 3.5% (+9.8% on a like-for-like exchange rate basis).
With regard to the market segments in which the Group operates, in the fourth quarter of 2020 car applications increased by 2.6%, motorbike applications by 6.4%, applications for commercial vehicles by 15.9% and racing applications by 8.1%.
These results were made possible by the work done by all the Brembo Group's personnel, who at 31 December 2020 numbered 11,039, up by 171 on the previous year.
I would like to highlight that, at such a critical time for the industry and the entire world, Brembo decided to formulate a new strategic vision and a new mission: becoming a Solution Provider, an objective that aims at increasingly close integration between products and services, in order to support our customers in rising to the challenges and grasping the opportunities presented by a rapidly transforming automotive industry.
In this new strategic vision, the sustainability of our products and processes remains central, as outlined in further detail in our Consolidated Disclosure of Non-Financial Information. Our desire to respond to the new mobility paradigm is leading us to design and manufacture increasingly high-performance brake systems that also contribute to reducing CO2 and fine particle emissions. This is the lens through which to view our acquisition of the Danish firm SBS Friction, which develops and manufactures brake pads for motorbikes using innovative, and ecofriendly sintered and organic materials. These are also the principles that in the year just ended resulted in the launch of the Greentive® disc and Enesys® technology, solutions that facilitate a decrease in consumption, increasing general vehicle efficiency. In an automotive industry increasingly focused on electrification, development of the Brake-By-Wire electric brake also continues, representing a true revolution for road vehicles, electric and otherwise.
In 2020 we reached a milestone we are also proud of: 500 wins in various races in over 45 years of participating in Motorsports, with 42 global titles bestowed on our drivers, builders and teams. These results prove the close ties between road and racing vehicles, between innovation and competitive success, which have always been part of Brembo's DNA.
In addition, there has been no shortage of important recognition of our work, which drives us to continue to pursue our goals and improve continuously. We were especially pleased to receive the 26th Compasso d'Oro for our rear brake caliper for the Formula E championships. The world's most prestigious industrial design award had already been given to Brembo in 2004 for its CCM disc brake system, proving the extent to which for the Company design represents an essential element of conceiving and making each product.
Now that 2020 has drawn to a close, we are entering a new, particularly important year marked by the 60th anniversary of Brembo's foundation in 1961: an entrepreneurial adventure that has its roots in an aptitude for innovation, fuelled by commitment, intuition and passion. Thanks to these values, what in 1961 began as a mechanic's shop has over the years become a universally known and appreciated global byword for excellence. We remain focused on the future and driven to pursue new goals: we look to a world that is more electric, digital, connected and sustainable, but also, increasingly, on a human scale.
The Chairman
Alberto Bombassei
Electrification, autonomous driving, digitalisation and sustainability are macro trends that are transforming the automotive world and are at the centre of the strategies of the market's main players.
For Brembo, the time has come to open up new paths in the future of the industry in which it operates and support its partners in meeting the challenges posed by the great changes taking place. The Group has decided to embark on a new path, based on a strategic vision, Turning Energy into Inspiration, and a mission: to become a Solution Provider.
Turning Energy into Inspiration is the vision that has arisen from Brembo's unique experience in braking systems, acquired during sixty years of history lived in a competitive and ever-changing context. Becoming an authoritative Solution Provider is the mission that aims to a high added value integration of products and services so as to anticipate the new mobility paradigms.
The path that Brembo has outlined for its future rests on three pillars:
The world has entered the era of data-centric artificial intelligence applications. The ability to analyse and manage data is a crucial skill for continuing to grow and create innovation. Brembo's new strategic vision provides for the widespread dissemination of a solid data culture within the Group. The objective is to become an innovative company that develops increasingly digital solutions.
With 29 plants in 19 production sites, 6 commercial sites and 5 R&D centres in 14 countries throughout the world, Brembo has been an international Group for some time. The globalisation process continues, with a particular focus on the company's innovative momentum. The strategic vision's objective is to create new centres of excellence for artificial intelligence in the main countries in which Brembo operates, to bring the Group's innovation even closer to its customers.
Brembo wants to target the new generations, who look at the automotive sector from points of view that are completely different from the past. The goal is to become a reference brand for them and inspire them with the same passion that has driven the Company since its beginning. Thanks to its leadership in motorsport and use of high-performance, reducedemissions technological solutions, Brembo will always be synonymous with an unparalleled driving experience.
Finally, at the heart of the new strategic vision there is the commitment to sustainability, a priority that Brembo has always applied to all its activities, products and processes, employees, supply chain and territories in which the Group operates, with the aim of actively contributing to the wellbeing of the planet, communities and people.
Being an increasingly digital company
Becoming a reference brand for the new generations as well
The General Shareholders' Meeting of the Parent Brembo S.p.A. held on 23 April 2020 confirmed the number of Board members at 11 and appointed the Board of Directors for the three-year period 2020-2022, i.e., until the General Shareholders' Meeting called to approve the Financial Statements for the year ending 31 December 2022.
| Chairman | Alberto Bombassei (1) (8) | |
|---|---|---|
| Executive Deputy Chairman | Matteo Tiraboschi (2) (8) | |
| Chief Executive Officer | Daniele Schillaci (3) (8) | |
| Directors | Valerio Battista (4) (9) Cristina Bombassei (5) (8) Laura Cioli (4) Nicoletta Giadrossi (4) (6) Elisabetta Magistretti (4) Umberto Nicodano (7) Elizabeth M. Robinson (4) Gianfelice Rocca (4) |
|
| Board of Statutory Auditors(10) | ||
| Chairwoman | Raffaella Pagani (6) | |
| Acting Auditors | Mario Tagliaferri Paola Tagliavini |
|
| Alternate Auditors | Myriam Amato (6) |
Stefania Serina
| Independent Auditors | EY S.p.A. (11) | ||
|---|---|---|---|
| Manager in Charge of the Company's Financial Reports |
Andrea Pazzi (12) | ||
| Committees | |||
| Audit, Risk & Sustainability Committee (13) | Laura Cioli (Chairwoman) Nicoletta Giadrossi Elisabetta Magistretti |
||
| Remuneration & Appointments Committee | Nicoletta Giadrossi (Chairwoman) Laura Cioli Elizabeth M. Robinson |
||
| Supervisory Committee | Giovanni Canavotto (Chairman) (14) Elisabetta Magistretti Alessandra Ramorino (15) |
||
| (1) The Chairman is the Company's legal representative and has powers of ordinary management, within the limits of the law. (2) The Executive Deputy Chairman is the Company's legal representative; the Board of Directors granted him special powers to manage the Company. (3) The Board of Directors granted the Chief Executive Officer, Daniele Schillaci, special powers to manage the Company, as well as powers, pursuant to Article 2381 of the Italian Civil Code, with reference to occupational health and safety (as per Legislative Decree No. 81/2008, as amended by Legislative Decree No. 106/2009), environmental protection and waste management. (4) Independent and Non-executive Directors pursuant to Article 148, paragraph 3, of TUF (as required by Articles 147-ter, paragraph 4, and 147-quater of TUF) and Article 2.2.3, paragraph 3, of the Corporate Governance Code of Borsa Italiana S.p.A. and the Corporate Governance Code of Brembo S.p.A. (Article 3.C.1). (5) The Director also holds the position of Executive Director in charge of the Internal Control and Risk Management System, as well as of Chief CSR Officer. |
(6) Director/Statutory Auditor elected from a minority list. (7) Non-executive Director. (8) Executive Directors. (9) This Director also holds the position of Lead Independent Director. (10) This Board holds the role of Internal Control & Audit Committee pursuant to Article 19 of Legislative Decree No. 39/2010. (11) The General Shareholders' Meeting held on 23 April 2013 assigned the mandate until the approval of the 2021 Financial Statements. (12) Appointed by the Board of Directors on 23 April 2020 pursuant to Article 27-bis of the By-laws. The appointment remains valid until the expiry of the current Board of Directors' term of office, i.e., until the General Shareholders' Meeting approving the Financial Statements for the year ending 31 December 2022. (13) This Committee also acts as the Related Party Transactions Committee. (14) External Advisor. (15) Chief Internal Audit Officer. |
Registered offices: CURNO (BG) – Via Brembo 25 Share capital: €34,727,914.00 – Bergamo Register of Companies Tax code and VAT Code No. 00222620163
| 31.12.2016 | 31.12.2017 | 31.12.2018 | 31.12.2019 | 31.12.2020 | % 2020/2019 |
|---|---|---|---|---|---|
| 2,279,096 | 2,463,620 | 2,640,011 | 2,591,670 | 2,208,639 | -14.8% |
| 443,714 | 479,963 | 500,885 | 515,169 | 388,685 | -24.6% |
| 19.5% | 19.5% | 19.0% | 19.9% | 17.6% | |
| 327,464 | 346,262 | 345,064 | 318,539 | 181,135 | -43.1% |
| 14.4% | 14.1% | 13.1% | 12.3% | 8.2% | |
| 312,208 | 335,537 | 325,357 | 307,691 | 156,044 | -49.3% |
| 13.7% | 13.6% | 12.3% | 11.9% | 7.1% | |
| 240,632 | 263,428 | 238,349 | 231,301 | 136,533 | -41.0% |
| 10.6% | 10.7% | 9.0% | 8.9% | 6.2% | |
| (euro thousand) | 31.12.2016 | 31.12.2017 | 31.12.2018 | 31.12.2019 | 31.12.2020 | % 2020/2019 |
|---|---|---|---|---|---|---|
| Net invested capital | 1,110,693 | 1,310,818 | 1,392,874 | 1,758,638 | 1,891,493 | 7.6% |
| Equity | 882,310 | 1,064,437 | 1,228,822 | 1,388,015 | 1,481,041 | 6.7% |
| Net financial debt | 195,677 | 218,597 | 136,911 | 346,189 | 384,677 | 11.1% |
| (euro thousand) | 31.12.2016 | 31.12.2017 | 31.12.2018 | 31.12.2019 | 31.12.2020 | % 2020/2019 |
|---|---|---|---|---|---|---|
| Personnel at end of year (No.) | 9,042 | 9,837 | 10,634 | 10,868 | 11,039 | 1.6% |
| Turnover per employee | 252.1 | 250.4 | 248.3 | 238.5 | 200.1 | -16.1% |
| Net investments | 260,751 | 356,241 | 285,575 | 247,336 | 187,815 | -24.1% |
| 31.12.2016 | 31.12.2017 | 31.12.2018 | 31.12.2019 | 31.12.2020 | |
|---|---|---|---|---|---|
| Net operating income/Revenue from contracts with customers |
14.4% | 14.1% | 13.1% | 12.3% | 8.2% |
| Income before taxes/Revenue from contracts with customers |
13.7% | 13.6% | 12.3% | 11.9% | 7.1% |
| Net investments/Revenue from contracts with customers |
11.4% | 14.5% | 10.8% | 9.5% | 8.5% |
| Net financial debt/Equity | 22.2% | 20.5% | 11.1% | 24.9% | 26.0% |
| Adjusted net interest expense(*)/Revenue from contracts with customers |
0.4% | 0.4% | 0.5% | 0.6% | 0.8% |
| Adjusted net interest expense (*)/Net operating income |
3.0% | 2.7% | 4.0% | 4.5% | 9.4% |
| ROI | 29.5% | 26.4% | 24.8% | 18.1% | 9.6% |
| ROE | 27.5% | 25.2% | 19.7% | 17.3% | 9.3% |
Notes:
ROI: Net operating income (rolling 12 months)/Net invested capital.
ROE: Net income (loss) before minority interests (rolling 12 months) (net of Result from discontinued operations)/Equity.
(*) This item does not include exchange gains and losses.
The excellence of a product that becomes performance in the results. The success of a Group that draws strength from reactivity to change, ability to dare and its diversified culture worldwide.
To correctly assess Brembo's performance in 2020, it is essential to consider the world macroeconomic scenario, specifically for the markets in which the Group operates.
Through the WEO (World Economic Outlook), its publication of reference for evaluating the evolution of the global economy, the IMF (International Monetary Fund) revised global growth upward for both 2020 and 2021 "The correction," explains Chief Economist Gita Gopinath, "reflects the positive effects of the onset of vaccinations and additional policy support at the end of 2020 in economies such as the United States and Japan." However, these reasons for optimism are opposed by the unknowns relating to the efficacy and rapidity of the vaccination campaigns, the new waves of cases and possible Covid-19 variants. Total losses to global production due to the pandemic are estimated at \$22 trillion for the 2020-2025 period and the global economic decline in 2020, while less than expected (-3.5% compared to the initial forecast of -4.4%) remains the worst since the Great Recession. GDP (Gross Domestic Product) will increase by 5.5% in 2021 (+0.3% compared to the previous estimates) and by 4.2% in 2022 (unchanged compared to previous estimates) — rates, in any event, far below the prepandemic levels.
The IMF's forecasts for the Eurozone call for a decline in GDP of 7.2% in 2020 (compared to the -8.3% estimated in October), whereas for 2021 the recovery will be limited to 4.2% (5.2% in the previous estimate). Between the resurgence of cases and the lockdowns, the IMF explains, economic activity weakened in late 2020, with effects that will trail into 2021. The IMF has revised its growth estimates for 2021 downwards compared to October in Germany, France and Spain. The German economy is expected to grow by 3.5% in 2021 (-0.7% compared to the October estimates) and by 3.1% in 2022 (unchanged). French GDP is forecast to expand by 5.5% in 2021 (-0.5%) and then by 4.1% in 2022 (+1.2%), whereas Spain's GDP is projected to grow by 5.9% (-1.3%) in 2021 and by 4.7% in 2022 (+0.2%). The IMF stresses that economic activity in the euro area and United Kingdom will remain the levels of late 2019 until at least 2022. This trend is due to the behavioural public health responses to infections, the flexibility and adaptability to limited travel of some economic activities, pre-existing political tendencies and structural rigidity. In the United Kingdom, the forecast is +4.5% for 2021 and +5.0% for 2022. Employment in the OECD area improved by 1.9 percentage points in the third quarter of 2020, increasing to 66.7%, after declining by 4.4 percentage points in the second quarter due to the Covid-19 crisis. The employment rate remains, in any event, 2.5 percentage points lower than in the first quarter, prior to the pandemic.
The IMF's estimates for the performance of the Italian economy improved in 2020, while its estimates of Italy's expected recovery worsened. After a lower-than-expected contraction in 2020, when GDP declined by 9.2% compared to the -10.6% forecast in October, in 2021 the economy will grow by 3.0%, or 2.2 percentage points less than previous projections. In 2022 GDP
is estimated to increase by 3.6% (+1.0% compared to the October estimates). The report by the Confindustria Research Office indicates that without interventions to reinforce companies' financial situations — above all an extension of debt maturities and without a robust recovery of sales and cash flow starting in 2021, in almost all sectors of industry and services excessive debt will jeopardise the flow of new investments in production in Italy.
Turning to the situation in the United States, the USA will limit the damages in 2020 to a decline in GDP of 3.4% (compared to the 4.3% estimated in October), to then recover to 5.1% in 2021, due to the support measures launched at the end of 2020, to which the Biden administration's economic plan will add its effects. The preliminary estimates call for the \$1.9-trillion package to increase GDP by 5.0% over the next three years, with a boost of 1.25% already in 2021. The Chairman of the Federal Reserve clarified that the U.S. central bank is ready to use all means at its disposal to support the economy for as long as necessary, following on the position taken by the European Central Bank, and also added that a federal aid package to support struggling companies and workers without jobs is deemed essential to getting the world's largest economy back on its feet.
In Japan, the IMF estimates that GDP will fall by 5.1% in 2020, followed by growth of 3.1% in 2021 (+0.8%), due in this case as well to the boost ensured by the budget measures introduced at the end of 2020. In the second half of 2021, Japan's economy will enter into its most robust recovery in decades, buoyed by the gradual easing of the pressures exerted by the Covid-19 pandemic. This is the scenario forecast by the economists consulted by Japan's Centre for Economic Research, who estimate that the world's number-three economy will grow by 3.4% in the next fiscal year (from April 2021 to March 2022). In particular, consumption is expected to recover next summer, due in part to the acceleration of the vaccination campaign. However, the recovery will only partially offset the 5.4% economic decline forecast for the current fiscal year. The government of Prime Minister Yoshihide Suga aims to restore the economy to pre-pandemic levels through stimulus measures, although economists regard this objective as overly ambitious in the short term, particularly in the light of the resurgence of the health emergency.
The IMF also expects that emerging markets and developing economies will enter into divergent recovery processes. In fact, there is expected to be a significant gap between China where effective containment measures, a robust response to public investments and the central bank's support for liquidity have facilitated a strong recovery — and other economies. In addition, as indicated in the October 2020 WEO, the pandemic is expected to undo the progress made in the area of reducing poverty over the past two decades. Nearly 90 million people are likely to fall below the poverty threshold in 2020-2021. China, which began its recovery at the end of 2020 (+6.5% increase in GDP in the fourth quarter), showed a different situation. Despite the pandemic, which broke out in Wuhan one year ago, and despite the open tensions with Trump's United States, China will be the only major economy to save itself from a recession, with growth of 2.3% in 2020, accelerating to 8.1% in 2021. Mention should be made of the IMF's revision of its growth estimates for the Indian economy, which after marking -8.0% in 2020, will resume its growth, reaching +11.5% in 2021 (estimate revised up by +2.7 percentage points compared to October) and 6.8% in 2022. The Russian economy also ended its growth in 2020 (-3.6%), with +3.0% growth forecast for 2021 and +3.9% for 2022. Due to the severe global pandemic, Brazil recorded a 4.5% recession in 2020. However, in the January update to the WEO, economists revised the percent growth for 2021 upwards by 0.8pps to +3.6%.
Turning to commodities trends, the average price of oil decreased sharply by 32.7% in 2020 to 41.26 dollars a barrel. In the last update to the WEO published in January 2021, IMF economists revised upwards the average prices of the three oil benchmarks — UK Brent, Dubai Fateh and West Texas Intermediate (WTI) — forecasting a price of USD 50.03 a barrel for the end of 2021, which is however below the average price reached in 2019. The estimate for the end of 2022 was also revised, but in the opposite direction, estimating a decrease of 2.4pps, with the price coming to USD 48.82 dollars a barrel.
In 2020, the world's main currencies, like other indicators, were affected by the impact of Covid-19 on the major global economies. Currencies experienced severe volatility, due in part to the measures taken by the main Central Banks in response to the health and economic emergency.
In 2020 the US dollar opened at 1.12 to then appreciate constantly until mid-February. It then reversed course and, after exceeding 1.15, appreciated sharply once more, reaching the low for the period of 1.0707 (20 March). The dollar then entered a lateral phase, followed by constant depreciation in the subsequent quarters, driving it to a high for the period of 1.2281 on 30 December, to close at 1.2271, above the average for the period of 1.1413.
Turning to the currencies of the other major markets in which Brembo operates at the commercial and industrial level, the pound sterling opened the year at around 0.85. It then appreciated moderately, driving the rate down to the low for the period of 0.8299 (18 February). The pound then depreciated sharply, driving the rate to the high for the period of 0.9299 (19 March). In the following months, after further sharp appreciation, the currency moved within a lateral range of 0.88-0.92, even in light of the Brexit developments, closing at 0.8990, above the average for the period of 0.8892.
The Polish zloty opened the period by reaching a low of 4.2219 (14 January). The currency then depreciated sharply and decisively, followed by a lateral phase before appreciating slightly to 4.4000. Then, after a lateral phase, the currency depreciated once more, driving the rate to a high for the year of 4.6225 on 29 October. Near the end of 2020, the zloty appreciated once again to about 4.4500 and then closed at 4.5597, above the average for the period of 4.4432.
The Czech Koruna opened the reporting period at around 25.50, to then appreciate, reaching a low for the period of 24.7930 on 17 February. It then depreciated sharply and suddenly, which drove it to the high of 27.8080 (24 March). The currency then appreciated until August, when it reversed course and depreciated once more. It closed 2020 by appreciating to 26.2420, with an average for the period of 26.4554.
The Swedish krona began the period at around 10.50, moving laterally for the first two months of 2020. The Scandinavian currency then depreciated sharply, driving the rate up to a high for the period of 11.1523 (19 March). After this peak, it appreciated steadily and constantly until mid-July. Then, after depreciating slightly until early October, it appreciated once again, leading the currency to reach a low of 10.0343 on 31 December, below the average for the period of 10.4881.
In the East, the Japanese yen began the period at around 120.00 to then appreciate constantly to reach a low for the period of 114.65 (6 May). It then reversed course and depreciated, driving the Japanese currency to around 127.00. The final part of the year saw lateral movement to then depreciate at the end of the year, with the rate at a high for the period of 127.2300 (29 December). It closed at 126.4900, above the average for the period of 121.7754.
The Chinese yuan/renminbi began the period at around 7.80, showing extreme volatility at the beginning of the year that led the currency to touch a low of 7.5538 (19 February). Then, after a period of fluctuation, the currency entered a lateral phase, followed by sharp depreciation that, starting in May, drove the rate up to a high for the period of 8.2637 (31 July). At the end of the year, the yuan appreciated until mid-November, to then reverse course, ending with depreciation to a closing value of 8.0225, above the average for the period of 7.8708.
The Indian rupee opened the year at around 80.00, to then appreciate, reaching a low for the period of 77.2345 (19 February). This was followed by a constant depreciation that drove the rate up to the high for the year of 90.3975 (22 December). At the end of the year it stood at 89.6605, above the average for the period of 84.5795.
In the Americas, the Brazilian real began the year at the low for the year of 4.4870. The currency then depreciated sharply and constantly to around 6.50 in May. The trend the reversed course, bringing the currency to 5.50. In the second half of the year the real depreciated further, driving the rate up to a high for the year of 6.7680 (29 October). In the final two months of the year it appreciated slightly leading the currency to end the year at 6.3735, with an average for the period of 5.8900.
Turning to the Mexican peso, the year began with appreciation that brought the currency to a low for the period of 20.0690 (19 February). The peso then depreciated sharply and decisively, driving the rate up to the high for the period of 27.0896 (6 April), followed by a lateral phase within the range 25.00-27.00, to then appreciate slightly in the fourth quarter of the year, closing the period at 24.4160, below the average for the year of 24.5118.
Finally, the Russian rouble began the year with a low for the period of 68.0410 (10 January). The currency then depreciated sharply, driving the rate to around 90.00 in April, to then appreciate slightly until early June. The currency then reversed course, depreciating constantly, driving it up to a high for the period of 93.7450 (2 November).
Near the end of the year the currency appreciated slightly, reaching a closing rate of 91.4671, above the average for the period of 82.6454.
Brembo is the world leader and acknowledged innovator of the brake disc technology for vehicles. It currently operates in 14 countries on 3 continents, through its production and business sites, and employs over 11,000 people worldwide. Manufacturing plants are located in Italy, Poland (Częstochowa, Dąbrowa Górnicza, Niepołomice), the United Kingdom (Coventry), the Czech Republic (Ostrava-Hrabová), Germany (Meitingen), Mexico (Apodaca and Escobedo), Brazil (Betim), China (Nanjing, Langfang), India (Pune, Chennai) and the United States (Homer). Other companies located in Spain (Zaragoza), Sweden (Göteborg), Germany (Leinfelden-Echterdingen), China (Qingdao), Japan (Tokyo) and Russia (Moscow) carry out distribution and sales activities.
Brembo's reference market is represented by the most important manufacturers of cars, motorbikes, commercial vehicles and racing cars and motorbikes. Constant focus on innovation, as well as technological and process development — factors that have always been fundamental to Brembo's philosophy — have earned the Group a strong international leadership position in the research, design and production of high-performance braking systems for a wide range of road and racing vehicles. Brembo operates in both the original equipment market and the aftermarket. Brembo's range of products for car and commercial vehicle applications includes brake discs, brake calipers, the side-wheel module and, increasingly often, the complete braking system, including integrated engineering services. All of these back the development of new models produced by vehicle manufacturers. In addition to brake discs and brake calipers, motorbike manufacturers are also offered brake master cylinders, light-alloy wheels and complete braking systems. In the car aftermarket, Brembo offers in particular brake discs, in addition to pads, drums, brake shoes, drum-brake kits and hydraulic components: a vast and reliable range of products allows the company to meet the needs of nearly all European vehicles.
In 2020, Brembo's consolidated net sales amounted to €2,208,639 thousand, down 14.8% compared to €2,591,670 thousand in 2019.
Information on the performance of the individual applications and their related markets — as available to the Company — is provided under the following headings.
Passenger Cars
The global light vehicle market closed 2020 with an overall sales decrease of 14.0% compared to 2019.
The Western European market (EU14+EFTA+United Kingdom) closed the reporting year with vehicle registrations down by 24.3% compared to 2019. All the main markets closed the year with negative figures; Germany -19.1%, France -25.5%, Italy -27.9%, Spain -32.3% and the United Kingdom -29.4%. The trend was negative also in Eastern Europe (EU12), with car registrations down by 23.0% compared to 2019. In Russia, light vehicle registrations closed 2020 down 9.1% compared to the previous year.
In the United States, sales of light vehicles decreased by 14.8% overall in 2020, compared to 2019. Also Brazil and Argentina showed a decrease in sales of 26.6% and 26.5%, respectively. In the Asian markets, though recovering as of May 2020, China closed the year with a negative light vehicle sales figure of -4.2% compared to 2019. Japan also recorded a negative trend, ending the year with an 11.5% decrease in sales.
Within this context, Brembo's net sales of car applications in 2020 amounted to €1,655,696 thousand, accounting for 75.1% of the Group's turnover, down by 14.8% compared to 2019.
Europe, the United States and Japan are Brembo's three most important markets in the motorbike sector.
In 2020, in Europe, registrations grew by 0.4% overall, compared to 2019, thanks to the significant growth reported in Germany, where they rose by 32.0% for the year. By contrast, registrations in other countries dropped: -5.6% in Italy, -4.0% in France, -11.0% in Spain, and -9.0% the UK. With regard to displacements, Brembo's target (over 500cc) declined by 4.0% compared to 2019, whereas ATVs (All Terrain Vehicles, quadricycles for recreation and work) rose by 10.0%.
In the United States, registrations of motorbikes, scooters and ATVs (All Terrain Vehicles, quadricycles for recreation and work) increased by 18.4% overall in 2020 compared to 2019. ATVs alone rose by 33.8%, whereas motorbikes and scooters together rose +11.4%.
In 2020, the Japanese market, considering displacements over 50cc overall, reported a 3.4% increase compared to the previous year, whilst the Indian market (motorbikes and scooters together) declined by 23.3%. In Brazil, registrations shrank by 15.0% overall compared to 2019.
Against this background, Brembo's net sales of motorbike applications amounted to €212,983 thousand in 2020, down 19.1% compared to €263,114 thousand for 2019.
compared to the previous year. Among the first five European markets by sales volume, a negative performance was reported by the United Kingdom (-33.6%), Germany (-24.0%), France (-24.1%), Spain (-21.7%) and Italy (-14.0%). In Eastern Europe, sales of commercial vehicles over 3.5 tonnes decreased by 32.8% in 2020 compared to the previous year.
In the reporting year, Brembo's net sales of applications in this segment amounted to €232,759 thousand, down by 10.3% compared to €259,545 thousand for 2019.
In the racing sector, where Brembo has maintained undisputed supremacy for years, the Group operates through three leading brands: Brembo Racing, braking systems for race cars and motorbikes; AP Racing, braking systems and clutches for race cars; Marchesini, magnesium and aluminium wheels for racing motorbikes.
In 2020, Brembo's net sales of applications in this segment amounted to €106,604 thousand, down by 15.0% compared to €125,473 thousand for 2019.
In 2020, the European commercial vehicles market (EU+EFTA) — Brembo's reference market — showed an 18.9% decrease in registrations.
In Europe, sales of light commercial vehicles (up to 3.5 tonnes) decreased by 17.6% overall compared to the previous year. All the main European markets by sales volume closed 2020 with a downtrend compared to the previous year (Germany: -12.2%; France: -16.1%; Italy: -15.0%; United Kingdom: -20.0%; Spain: -26.5%). In Eastern European countries, this segment dropped by 18.2% compared to 2019.
In Europe, the segment of medium and heavy commercial vehicles (over 3.5 tonnes) decreased by 25.7% in 2020
| (euro thousand) | 31.12.2020 | % | 31.12.2019 | % | Change | % |
|---|---|---|---|---|---|---|
| Italy | 244,932 | 11.1% | 276,973 | 10.7% | (32,041) | -11.6% |
| Germany | 400,738 | 18.2% | 504,623 | 19.5% | (103,885) | -20.6% |
| France | 81,963 | 3.7% | 97,382 | 3.8% | (15,419) | -15.8% |
| United Kingdom | 154,396 | 7.0% | 214,071 | 8.3% | (59,675) | -27.9% |
| Other European countries | 272,193 | 12.3% | 307,244 | 11.9% | (35,051) | -11.4% |
| India | 72,880 | 3.3% | 93,619 | 3.6% | (20,739) | -22.2% |
| China | 338,447 | 15.3% | 312,164 | 12.0% | 26,283 | 8.4% |
| Japan | 23,237 | 1.1% | 29,779 | 1.1% | (6,542) | -22.0% |
| Other Asian countries | 30,723 | 1.4% | 36,133 | 1.4% | (5,410) | -15.0% |
| South America (Argentina and Brazil) | 31,983 | 1.4% | 50,236 | 1.9% | (18,253) | -36.3% |
| North America (USA, Mexico and Canada) | 542,729 | 24.5% | 648,682 | 25.0% | (105,953) | -16.3% |
| Other countries | 14,418 | 0.7% | 20,764 | 0.8% | (6,346) | -30.6% |
| Total | 2,208,639 | 100.0% | 2,591,670 | 100.0% | (383,031) | -14.8% |
| (euro thousand) | 31.12.2020 | % | 31.12.2019 | % | Change | % |
|---|---|---|---|---|---|---|
| Passenger Car | 1,655,696 | 75.1% | 1,943,270 | 75.0% | (287,574) | -14.8% |
| Motorbike | 212,983 | 9.6% | 263,114 | 10.2% | (50,131) | -19.1% |
| Commercial Vehicle | 232,759 | 10.5% | 259,545 | 10.0% | (26,786) | -10.3% |
| Racing | 106,604 | 4.8% | 125,473 | 4.8% | (18,869) | -15.0% |
| Miscellaneous | 597 | 0.0% | 268 | 0.0% | 329 | 122.8% |
| Total | 2,208,639 | 100.0% | 2,591,670 | 100.0% | (383,031) | -14.8% |
Sales Breakdown by Application
| (euro thousand) | 31.12.2020 | 31.12.2019 | Change | % |
|---|---|---|---|---|
| Revenue from contracts with customers | 2,208,639 | 2,591,670 | (383,031) | -14.8% |
| Cost of sales, operating costs and other net charges/income (*) | (1,405,317) | (1,624,599) | 219,282 | -13.5% |
| Income (expense) from non-financial investments | 10,392 | 13,794 | (3,402) | -24.7% |
| Personnel expenses | (425,029) | (465,696) | 40,667 | -8.7% |
| GROSS OPERATING INCOME | 388,685 | 515,169 | (126,484) | -24.6% |
| % on revenue from contracts with customers | 17.6% | 19.9% | ||
| Depreciation, amortisation and impairment losses | (207,550) | (196,630) | (10,920) | 5.6% |
| NET OPERATING INCOME | 181,135 | 318,539 | (137,404) | -43.1% |
| % on revenue from contracts with customers | 8.2% | 12.3% | ||
| Net interest income (expense) and interest income (expense) from investments |
(25,091) | (10,848) | (14,243) | 131.3% |
| RESULT BEFORE TAXES | 156,044 | 307,691 | (151,647) | -49.3% |
| % on revenue from contracts with customers | 7.1% | 11.9% | ||
| Taxes | (17,802) | (68,208) | 50,406 | -73.9% |
| Result from discontinued operations | (304) | (6,422) | 6,118 | -95.3% |
| RESULT BEFORE MINORITY INTERESTS | 137,938 | 233,061 | (95,123) | -40.8% |
| % on revenue from contracts with customers | 6.2% | 9.0% | ||
| Minority interests | (1,405) | (1,760) | 355 | -20.2% |
| NET RESULT | 136,533 | 231,301 | (94,768) | -41.0% |
| % on revenue from contracts with customers | 6.2% | 8.9% | ||
| Basic and diluted earnings per share (euro) | 0.42 | 0.71 |
(*) The item is obtained by adding the following items of the Consolidated Statement of Income: "Other revenues and income", "Costs for capitalised internal works", "Raw materials, consumables and goods" and "Other operating costs".
In 2020, Brembo's net sales amounted to €2,208,639 thousand, down by 14.8% compared to 2019, following the lockdown measures adopted in all the countries where the Group operates to contain the spread of the Covid-19 virus. Details on the lockdown restrictions for the Group companies are given in section "Impacts of the Covid-19 Pandemic on the Consolidated Financial Statements at 31 December 2020" herein.
Car applications, which accounted for 75.1% of Group's sales, closed 2020 with a 14.8% decrease, as a result of the strong decline in the light vehicle market. In 2020, a negative performance was also reported by the other sectors in which the Group operates: applications for commercial vehicles (-10.3%), the motorbike segment (-19.1%) and the racing segment (-15.0%).
At geographical level, and with specific reference to Europe, Germany reported a 20.6% decline compared to 2019. Similarly, all other European countries showed a decrease: France (-15.8%), Italy (-11.6%), and the United Kingdom (-27.9%). In North America (USA, Mexico and Canada), sales decreased by 16.3%, and South America showed a 36.3% decline. In the Far East, in China Brembo's operations closed the year with an 8.4% increase, whereas Japan and India reported decreases (-22.0% and -22.2%, respectively).
In 2020, the cost of sales and other net operating costs amounted to €1,405,317 thousand, with a ratio of 63.6% to sales, up compared to 62.7% for the previous year. Within this item, costs for capitalised internal works included in intangible assets amounted to €22,573 thousand compared to €26,647 thousand for 2019.
Income (expense) from non-financial investments amounted to €10,392 thousand and was attributable to the effects of valuing the investment in the BSCCB Group using the equity method (€13,794 thousand in 2019).
Personnel expenses for 2020 amounted to €425,029 thousand, with a 19.2% ratio to sales, slightly up compared to the previous year (18.0%). At 31 December 2020, workforce numbered 11,039 (10,868 at 31 December 2019).
Gross operating income for 2020 was €388,685 thousand compared to €515,169 thousand in the previous year, with a ratio to sales of 17.6% (19.9% in 2019). Margins declined due to the decrease in volumes generated by the spread of the Covid-19 virus at global level, offset however by the measures adopted by Brembo, as described in further detail in the relevant section of this Report.
Net operating income amounted to €181,135 thousand (8.2% of sales), compared to €318,539 thousand (12.3% of sales) in 2019, after depreciation, amortisation and impairment losses of property, plant and equipment and intangible assets of €207,550 thousand, compared to depreciation, amortisation and impairment losses amounting to €196,630 thousand in 2019.
Net interest expense amounted to €25,212 thousand (€11,137 thousand in 2019) and consisted of net exchange losses of €8,118 thousand (net exchange gains of €3,209 thousand in 2019) and other net interest expense of €17,094 thousand (€14,346 thousand in 2019).
Net interest income from investments amounted to €121 thousand (€289 thousand in 2019) and was mainly attributable to the effects of valuing investments in associates using the equity method.
Result before taxes was positive at €156,044 thousand, down by 49.3% compared to €307,691 thousand for the previous year. Estimated taxes amounted to €17,802 thousand, with a tax rate of 11.4% (22.2% in 2019), chiefly due to the Patent Box relief measure as explained in greater detail in Note 30 of the Explanatory Notes.
The result from discontinued operations, negative for €304 thousand, was attributable to the contribution of the company Brembo Argentina S.A. in liquidazione, reclassified to this item following the Group's decision, taken in June 2019, to discontinue its industrial operations at the Buenos Aires plant.
The Group's net result was €136,533 thousand (6.2% of revenues), down 41.0% compared to €231,301 thousand for the previous year (8.9% of revenues).
| (euro thousand) | 31.12.2020 | 31.12.2019 | Change |
|---|---|---|---|
| Property, plant and equipment | 1,183,280 | 1,258,800 | (75,520) |
| Intangible assets | 219,567 | 228,281 | (8,714) |
| Net financial assets | 261,210 | 50,227 | 210,983 |
| Other receivables and non-current liabilities | 80,082 | 58,046 | 22,036 |
| Fixed capital | 1,744,139 | 1,595,354 | 148,785 |
| 9.3% | |||
| Inventories | 354,887 | 342,203 | 12,684 |
| Trade receivables | 385,439 | 391,925 | (6,486) |
| Other receivables and current assets | 119,315 | 95,870 | 23,445 |
| Current liabilities | (640,924) | (623,404) | (17,520) |
| Provisions / deferred taxes | (71,286) | (42,956) | (28,330) |
| Net working capital | 147,431 | 163,638 | (16,207) |
| 9.9% | |||
| Net invested capital from discontinued operations | (77) | (354) | 277 |
| NET INVESTED CAPITAL | 1,891,493 | 1,758,638 | 132,855 |
| 7.6% | |||
| Equity | 1,481,041 | 1,388,015 | 93,026 |
| Employees' leaving entitlement and other personnel provisions | 26,567 | 25,584 | 983 |
| Medium/long-term financial debt | 736,588 | 375,005 | 361,583 |
| Short-term net financial debt | (351,911) | (28,816) | (323,095) |
| Net financial debt | 384,677 | 346,189 | 38,488 |
| 11.1% | |||
| Net financial debt from discontinued operations | (792) | (1,150) | 358 |
| COVERAGE | 1,891,493 | 1,758,638 | 132,855 |
| 7.6% |
The Group's Statement of Financial Position reflects reclassifications of consolidated accounting statements, as described in the following pages. In detail:
Net Invested Capital at 31 December 2020 amounted to €1,891,493 thousand, up by €132,855 thousand compared to €1,758,638 thousand at 31 December 2019.
Net financial debt for 2020 amounted to €384,677 thousand compared to €346,189 thousand at 31 December 2019. Net financial debt increased by €38,488 thousand in the year, mainly due to the combined effect of the following factors:
The Explanatory Notes to the Consolidated Financial Statements provide detailed information on the financial position and its assets and liabilities items.
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| NET FINANCIAL POSITION AT BEGINNING OF YEAR (*) | (346,189) | (136,911) |
| Net operating income | 181,135 | 318,539 |
| Depreciation, amortisation and impairment losses | 207,550 | 196,630 |
| Gross operating income | 388,685 | 515,169 |
| Investments in property, plant and equipment | (162,052) | (213,657) |
| of which right of use assets | (37,755) | (38,165) |
| Investments in intangible assets | (28,273) | (38,111) |
| Investments in financial assets | (182,862) | (131) |
| IFRS 16 Initial recognition | 0 | (177,652) |
| Disposals | 2,510 | 4,432 |
| Net investments | (370,677) | (425,119) |
| Change in inventories | (23,913) | (7,604) |
| Change in trade receivables | 4,387 | 14,558 |
| Change in trade payables | 910 | (90,846) |
| Change in other liabilities | 10,028 | (34,364) |
| Change in receivables from others and other assets | (10,857) | (6,884) |
| Translation reserve not allocated to specific items | (16,379) | (1,037) |
| Change in working capital | (35,824) | (126,177) |
| Change in provisions for employee benefits and other provisions | 46,461 | (2,363) |
| Operating cash flows | 28,645 | (38,490) |
| Interest income and expense | (24,794) | (10,541) |
| Result from discontinued operations | (304) | (6,422) |
| Current taxes paid | (48,873) | (65,961) |
| Dividend paid in the year to minority shareholders | (640) | (800) |
| Buy-back of own shares | 0 | (11,329) |
| Interest (income)/expense from investments, net of dividends received | (303) | (3,714) |
| Dividends paid in the year | 0 | (71,541) |
| Net cash flows | (46,269) | (208,798) |
| Effect of translation differences on net financial position | 7,781 | (480) |
| NET FINANCIAL POSITION AT END OF YEAR (*) | (384,677) | (346,189) |
(*) See Note 13 of the Explanatory Notes to the Consolidated Financial Statements for a reconciliation with financial statements data.
Brembo's Directors have identified some alternative performance measures ("APMs") in the previous paragraphs, in order to provide a better understanding of the Brembo Group's operating and financial performance. These indicators are also tools that help the Directors to identify operating trends and take decisions about investments, allocation of resources and other operating decisions.
The following points enable a correct interpretation of the abovementioned APMs:
The APMs indicated below have been selected and represented in the Directors' Report on Operations since the Group deems that:
| Brembo S.p.A. | |||||
|---|---|---|---|---|---|
| 100% | Ap Racing Ltd. Coventry UK |
100% | Brembo Japan Co. Ltd. Tokyo Japan |
100% | Brembo North America Inc. Wilmington, Delaware - USA |
| 100% | Brembo Czech S.r.o. Ostrava-Hrabová Czech Republic |
100% | Qingdao Brembo Trading Co. Ltd. Qingdao - China |
49% | 51% Brembo México |
| 100% | Brembo Deutschland GmbH Leinfelden-Echterdingen - Germany |
100% | Brembo Nanjing Brake Systems Co. Ltd. Nanjing - China |
99.99% | S.A. de C.V. Apodaca - Mexico Brembo Do Brasil Ltda. |
| 100% | Brembo Poland Spolka Zo.o. Dąbrowa Górnicza - Poland |
99.99% | Brembo Brake India Pvt. Ltd. Pune - India |
Betim - Brazil 1.38% |
|
| 100% | Brembo Scandinavia A.B. Göteborg Sweden |
40% Brembo (Nanjing) Automobile |
98.62% | Brembo Argentina S.A. Buenos Aires - Argentina in dissolution and winding up |
|
| 100% | Brembo Russia Llc. Moscow Russia |
60% 66% |
Components Co. Ltd. Nanjing - China Brembo Huilian |
procedure | |
| 100% | La.Cam (Lavorazioni Camune) S.r.l. Stezzano - Italy |
(Langfang) Brake Systems Co. Ltd. Langfang - China Fuji Co. |
|||
| 68% | Corporación Upwards 98 S.A. Zaragoza - Spain |
1.20% | Shizuoka Japan |
||
| 50% | Brembo SGL Carbon Ceramic Brakes S.p.A. Stezzano - Italy |
||||
| Brembo SGL Carbon 100% Ceramic Brakes GmbH Meitingen - Germany |
|||||
| 30% | Innova Tecnologie S.r.l. In liquidazione Almenno San Bartolomeo - Italy |
||||
| 20% | Infibra Technologies S.r.l. Pisa Italy |
||||
| 20% | Petroceramics S.p.A. Milan Italy |
||||
| 10% | International Sport Automobile S.A.R.L. Levallois Perret - France |
||||
| 4.78% | Pirelli & C. S.p.A. Milan Italy |
This table complies with Article 125 | of Consob Resolution No. 11971 dated 14 May 1999. | ||
| E-Novia S.p.A. |
Milan Italy
3.28%
34
Brembo S.p.A.'s headquarters are located in Italy, Curno (Bergamo).
| Ap Racing Ltd. | |
|---|---|
| Brembo Deutschland GmbH Brembo SGL Carbon Ceramic Brakes GmbH |
|
| Brembo S.p.A. La.Cam S.r.l. Brembo SGL Carbon Ceramic Brakes S.p.A. Petroceramics S.p.A. Infibra Technologies S.r.l. |
|
| Brembo North America Inc. | |
| Corporación Upwards '98 S.A. | |
| Brembo México S.A. de C.V. Brembo do Brasil Ltda. |
|
| 14 19 Countries Manufacturing in the world sites |
5 Research and Development |
centres
Production sites Commercial sites Research & Development centres
The following figures were taken from the accounting situations and/or draft financial statements prepared by the companies in accordance with IAS/IFRS and approved by the respective Boards of Directors.
Brembo S.p.A. Curno (Italy)
Activities: analysis, design, development, application, production, assembly and sale of braking systems, light alloy castings for various sectors, including the car and motorbike industries.
The year 2020 closed with net sales amounting to €815,087 thousand, down 14.0% compared to €947,709 thousand in 2019. The item "Other revenues and income" amounted to €43,243 thousand in 2020 compared to €58,480 thousand in 2019, whereas capitalised development costs for the year totalled €18,186 thousand.
Gross operating income went from €161,481 thousand (17.0% of sales) in 2019 to €102,293 thousand (12.5% of sales) in 2020, whereas net operating income, after depreciation, amortisation and impairment losses of property, plant, equipment and intangible assets amounting to €64,313 thousand, closed at €37,980 thousand compared to €104,579 thousand for the previous year.
Net interest expense from financing activities amounted to €9,137 thousand compared to €1,764 thousand for 2019. Income from investments amounted to €46,593 thousand and was mainly attributable to the distribution of dividends by some subsidiaries.
In the reporting year, net income amounted to €85,505 thousand (to which the Patent Box relief measure contributed, as explained in Note 30 of the Explanatory Notes), compared to €179,153 thousand in 2019.
At 31 December 2020, the workforce numbered 3,041, decreasing by 101 compared to 3,142 at the end of 2019.
Coventry (United Kingdom)
Activities: production and sale of braking systems and clutches for road and racing vehicles.
AP Racing is the market leader in the production of brakes and clutches for racing cars and motorbikes.
The company designs, assembles and sells cutting-edge, hightech products throughout the world for the main F1, GT, Touring and Rally teams. It also produces and sells original equipment brakes and clutches for prestige car manufacturers.
Net sales amounted to GBP 35,609 thousand (€40,046 thousand) in 2020, compared to GBP 50,129 thousand (€57,140 thousand) in 2019. In the reporting year, net income amounted to GBP 1,808 thousand (€2,033 thousand), compared to GBP 4,860 thousand (€5,539 thousand) in 2019.
At 31 December 2020, workforce numbered 139, twelve fewer than at the end of 2019.
Pune (India)
Activities: development, production and sale of braking systems for motorbikes.
The company is based in Pune, India, and was originally set up in 2006 as a joint venture held in equal stakes by Brembo S.p.A. and the Indian company Bosch Chassis Systems India Ltd. Since 2008, the company has been wholly owned by Brembo S.p.A.
In 2020, net sales totalled INR 7,153,315 thousand (€84,575 thousand), with a net income of INR 602,703 thousand (€7,126 thousand). In 2019, net sales amounted to INR 8,543,321 thousand (€108,349 thousand), with a net income of INR 946,937 thousand (€12,009 thousand).
At 31 December 2020, the workforce numbered 821, compared to 644 in the previous year.
Activities: casting, production and sale of braking systems for cars.
The company was formed in 2009 and started its production activity in 2011. It carries out the casting, processing and assembly of brake calipers and other aluminium components. In 2020, net sales amounted to CZK 4,629,197 thousand (€174,981 thousand) compared to CZK 5,933,423 thousand (€231,145 thousand) in 2019, closing the year with a net loss of CZK 366,421 thousand (€13,851 thousand) compared to a net loss of CZK 14,044 thousand (€547 thousand) in 2019.
At 31 December 2020, workforce numbered 1,011, 55 more than the previous year.
Leinfelden – Echterdingen (Germany)
Activities: purchase and resale of vehicles, technical and sales services, as well as promotion of the sale of car brake discs.
The company, which is 100% owned by Brembo S.p.A., was formed in 2007. It specialises in buying cars for tests and encouraging and simplifying communications between Brembo and its German customers in the various phases of project planning and management. It also promotes the sale of brake discs for the car aftermarket only.
At 31 December 2020, net sales amounted to €2,157 thousand (€2,045 thousand for 2019), with a net income of €707 thousand (€550 thousand for 2019).
At 31 December 2020, workforce numbered eight, unchanged compared to the same date of the previous year.
Activities: production and sale of brake discs for the original equipment market.
The company is headquartered in Betim, Minas Gerais, and specialises in the manufacturing and sales of car brake discs in the South American OEM market.
Net sales for 2020 amounted to BRL 180,649 thousand (€30,670 thousand) and net loss to BRL 155 thousand (€26 thousand). In 2019, net sales amounted to BRL 216,028 thousand (€48,947 thousand) and net income was BRL 15,475 thousand (€3,506 thousand).
At 31 December 2020, workforce numbered 221, compared to 232 at the same date of the previous year.
Langfang (China)
Activities: casting, production and sale of brake discs for the original equipment market.
In 2016, Brembo S.p.A. acquired a 66% stake in Brembo Huilian (Langfang) Brake Systems Co. Ltd. (formerly Asimco Meilian Braking Systems (Langfang) Co. Ltd.), a Chinese company that owns a foundry and a plant for the manufacturing of cast-iron brake discs. This company supplies local car manufacturers, mainly including joint ventures among Chinese firms and European and U.S. top players. The remaining 34% of the share capital continued to be owned by the public company Langfang Assets Operation Co. Ltd., controlled by the Municipality of Langfang. The consideration for the transaction amounted to CNY 580,060 thousand (approximately €79.6 million).
Net sales amounted to CNY 579,890 thousand (€73,676 thousand) in 2020, compared to CNY 579,113 thousand (€74,880 thousand) in 2019. In the reporting year, net income amounted to CNY 34,332 thousand (€4,362 thousand), compared to CNY 39,781 thousand (€5,144 thousand) in 2019.
At 31 December 2020, workforce numbered 604, decreasing by 33 compared to the end of 2019.
Tokyo (Japan)
Activities: sale of braking systems for the racing sector and original equipment for cars.
Brembo Japan Co. Ltd. is Brembo's commercial company that handles the Japanese racing market. Through the Tokyo office, it provides primary technical support to the OEM customers in the area. It also renders services to the other Group companies operating in Japan.
Net sales amounted to JPY 653,520 thousand (€5,367 thousand) in 2020, compared to JPY 708,287 thousand (€5,803 thousand) in 2019. Net income for the reporting year was JPY 54,514 thousand (€448 thousand), compared to JPY 72,600 thousand in 2019 (€595 thousand).
At 31 December 2020, workforce numbered 18, unchanged compared to the figure at the end of 2019.
Activities: casting, production and sale of car brake discs for original equipment and the aftermarket; casting, production and sale of braking systems for cars and commercial vehicles.
As a result of the merger with Brembo México Apodaca S.A. de C.V. in 2010, the company is now 51% owned by Brembo North America Inc. and 49% owned by Brembo S.p.A.
In 2020, net sales amounted to USD 279,426 thousand (€244,835 thousand), with a net income for the year of USD 19,561 thousand (€17,140 thousand).
In 2019, net sales amounted to USD 278,760 thousand (€248,982 thousand), with a net income of USD 21,019 thousand (€18,774 thousand).
At 31 December 2020, workforce numbered 1,202, compared to 1,067 at the end of 2019.
Nanjing (China)
Activities: casting, production and sale of braking systems for cars and commercial vehicles.
The company, which is 60% owned by Brembo S.p.A. and 40% owned by Brembo Brake India PVT. Ltd., was set up in April 2016 and carries out casting, processing, assembly and sales of braking systems for cars and commercial vehicles.
At 31 December 2020, net sales amounted to CNY 906,627 thousand (€115,188 thousand), compared to CNY 769,727 thousand (€99,527 thousand) at the end of 2019.
Net income at 31 December 2020 was CNY 51,902 thousand (€6,594 thousand). In 2019, net income was CNY 9,766 thousand (€1,263 thousand).
At 31 December 2020, workforce numbered 359, compared to 306 in 2019.
Nanjing (China)
The company, a joint venture between Brembo S.p.A. and the Chinese group Nanjing Automobile Corp., was formed in 2001. Brembo Group acquired control over the company in 2008. In 2013, Brembo Group acquired full control from the Chinese partner Donghua Automotive Industrial Co. Ltd.
On 1 July 2017, the merger of Brembo Nanjing Foundry Co. Ltd. into Brembo Nanjing Brake Systems Co. Ltd. became effective. The transaction aimed at developing an integrated industrial hub, including foundry and manufacture of brake discs for the car OEM. At 31 December 2020, net sales amounted to CNY 1,048,864 thousand (€133,260 thousand) and net income was CNY 115,870 thousand (€14,721 thousand); in 2019, net sales amounted to CNY 1,068,896 thousand (€138,210 thousand) and net income was CNY 69,892 thousand (€9,037 thousand). At 31 December 2020, workforce numbered 550, compared to 583 at the end of 2019.
Wilmington, Delaware (USA)
Activities: development, casting, production and sale of brake discs for car original equipment and the aftermarket, and braking systems for cars, motorbikes and the racing sector.
Brembo North America Inc. is based in Homer, Michigan. It produces and sells OEM and aftermarket brake discs, as well as high-performance car braking systems. At the facility in Plymouth (Michigan), a Research and Development Centre develops new material and design solutions and distributes them on the US market.
Net sales for 2020 amounted to USD 300,020 thousand (€262,880 thousand) compared to net sales amounting to USD 399,220 thousand (€356,575 thousand) for the previous year. Net income was USD 16,371 thousand (€14,344 thousand) at 31 December 2020, compared to net income of USD 36,280 thousand (€32,405 thousand) for 2019.
At the end of the year, the workforce numbered 674, an increase of 11 compared to the end of 2019.
Dąbrowa-Górnicza (Poland)
Activities: development, casting, production and sale of brake discs and braking systems for cars and commercial vehicles.
The company produces OEM braking systems for cars and commercial vehicles in the Czestochowa plant. In the Dąbrowa-Górnicza plant, it has a foundry for the production of cast-iron discs destined for use in its own production plant or by other Group companies. The Niepolomice plant processes steel disc hats to be assembled onto the light discs manufactured at the Group's plants located in China, the United States, and in the Dąbrowa-Górnicza plant as well.
Net sales amounted to PLN 1,744,060 thousand (€392,526 thousand) in 2020, compared to PLN 2,095,622 thousand (€487,634 thousand) in 2019. Net income at 31 December 2020 was PLN 150,941 thousand (€33,971 thousand), compared to a net income of PLN 248,414 thousand (€57,804 thousand) for the previous year.
At the end of the year, workforce numbered 2,124, compared to 2,183 at the end of 2019.
Moscow (Russia)
Founded in July 2014, the Moscow-based company is wholly owned by Brembo S.p.A. It deals with promoting the sale of car brake discs for the aftermarket only.
Net sales for 2020 amounted to RUB 62,396 thousand (€755 thousand) compared to RUB 50,020 thousand (€690 thousand) in 2019; net income was RUB 19,193 thousand (€232 thousand) compared to RUB 10,346 thousand (€143 thousand) at 31 December 2019.
At the end of the year, workforce numbered three, unchanged compared to the end of 2019.
Göteborg (Sweden)
The company promotes the sale of brake discs for the car sector, destined exclusively for the aftermarket.
Net sales for the reporting year amounted to SEK 10,088 thousand (€962 thousand), with a net income of SEK 5,399 thousand (€515 thousand), compared to net sales of SEK 10,077 thousand (€952 thousand) and net income of SEK 5,234 thousand (€494 thousand) for 2019.
At 31 December 2020, workforce numbered 2, one more than at the same date of the previous year.
Zaragoza (Spain)
Activities: sale of brake discs and drums for cars, distribution of the brake shoe kits and pads.
The company carries out sales activities exclusively for the aftermarket.
Net sales for 2020 amounted to €23,318 thousand, compared to €28,964 thousand in 2019. Net income was €1,673 thousand, compared to €1,963 thousand in 2019.
At 31 December 2020, workforce numbered 69, two fewer than at the end of 2019.
La.Cam (Lavorazioni Camune) S.r.l. Stezzano (Italy)
Activities: precision mechanical processing, lathe work, mechanical component production and similar activities, on its own account or on behalf of third parties.
The company was incorporated by Brembo S.p.A.in 2010. In the same year, it leased from an important Group's supplier two companies specialising in processing aluminium, steel and cast-iron pistons for brake calipers intended for use in the car, motorbike and industrial vehicle sectors, and in the production of other types of components, including small high-precision metallic parts and bridges for car brake calipers, as well as aluminium caliper supports for the motorbike sector, chiefly produced for the Brembo Group. In 2012, La.Cam. acquired the business units of both companies.
In 2020, net sales, which were mainly to Brembo Group companies, amounted to €32,722 thousand compared to €39,738 thousand in 2019. Net income for 2020 was €1,251 thousand, compared to a net income of €1,693 thousand at the end of 2019.
At 31 December 2020, workforce numbered 163, compared to 173 for the previous year.
Activities: logistics and marketing activities in the economic and technological development hub of Qingdao.
Formed in 2009 and fully controlled by Brembo S.p.A., the company carries out logistics and marketing activities within the Qingdao technological hub for the aftermarket only.
Net sales for 2020 amounted to CNY 278,115 thousand (€35,335 thousand), compared to CNY 308,044 thousand (€39,831 thousand) for the previous year. Net income for the year was CNY 14,172 thousand (€1,801 thousand), down compared to CNY 9,830 thousand (€1,271 thousand) for 2019.
At 31 December 2020, workforce numbered 30, unchanged compared to the same date of 2019.
Stezzano (Italy)
Activities: design, development, production and sale of carbon ceramic brake discs.
As a result of the joint venture agreements finalised in 2009 between Brembo and SGL Group, the company is 50% owned by Brembo S.p.A. and in turn controls 100% of the German company Brembo SGL Carbon Ceramic Brakes GmbH. Both companies carry out design, development, production and sale of braking systems in general, and particularly of OEM carbon ceramic brake discs for top-performance cars, as well as research and development activities concerning new materials and applications.
Net sales at 31 December 2020 were €41,696 thousand, compared to €54,518 thousand at 31 December 2019. Net income for the year was €24,896 thousand, compared to net income of €24,836 thousand for 2019.
At 31 December 2020, workforce numbered 151, one more than at the end of 2019.
Meitingen (Germany)
Activities: design, development, production and sale of carbon ceramic brake discs.
The company was formed in 2001. In 2009, in executing the joint venture agreement between Brembo and SGL Group, Brembo SGL Carbon Ceramic Brakes S.p.A. acquired 100% of the company.
Net sales for 2020 amounted to €128,476 thousand, compared to €134,155 thousand for the previous year. At 31 December 2020, net income totalled €16,671 thousand, compared to a net income of €19,640 thousand for the previous year.
At 31 December 2020, workforce numbered 392, compared to 390 at the end of 2019.
Milan (Italy)
Activities: research and development of innovative technologies for the production of technical and advanced ceramic materials, geomaterial processing and rock mass characterisation.
Brembo S.p.A. acquired 20% of this company by subscribing a capital increase in 2006.
Net sales for 2020 amounted to €1,944 thousand, with a net income of €552 thousand. In 2019, net sales were €2,965 thousand and net income amounted to €1,351 thousand.
Milan (Italy)
Activities: development, design, industrialisation, manufacturing, installation and marketing of fibre optic sensors systems and photonic subsystems for sensing and communications.
On 5 February 2020, Brembo acquired a 20% stake in Infibra Technologies S.r.l., for a consideration of €800 thousand. The agreement with the current shareholders envisages Brembo's right to exercise a call option on the remaining 80% interest in the second half of 2024.
Net sales for 2020 amounted to €225 thousand, with a net loss of €44 thousand.
In 2020, Brembo's investment management policy, albeit in scaled-down form due to the lockdowns implemented in various countries to combat the effects of the Covid-19 pandemic, continued in line with the guidelines followed to date, with the aim of strengthening the Group's presence not only in Italy, but also at the international level.
Group's total net investments undertaken in 2020 at all operations amounted to €187,815 thousand, of which €122,482 thousand was invested in property, plant and equipment, €27,707 thousand in intangible assets, and €37,626 thousand in leased assets. The most significant investments were concentrated in Italy (33.9%), Czech Republic (26.1%), North America (17.2%) and Poland (14.4%).
In Italy, works on the new building in Curno, which houses the Carbon Factory, continued. The building has been designed in view of progressively verticalising — within a single production facility adjacent to Brembo's current hub — the entire development and production process for raw components used in carbon-fibre discs and pads for racing applications and for high-performance road vehicles. The building occupies an area of approximately 7,000 square metres, in addition to the 10,000 square metres of green space, parking and logistics and storage areas planned as part of the project. After having installed and started up the first systems in the previous year, additional machines continued to be installed in 2020 for a gradual increase in production capacity, reaching full operation in 2022.
To meet the need for new manufacturing spaces, at the end of 2020 Brembo Czech entered into a new operating lease for a building (designated O23) of approximately 22,000 square meters in the same business park where the current production facility is located. Painting, pad printing and assembly of fixed aluminium calipers will be transferred to the new building, as well as storage of semi-finished and finished products, in addition to a part dedicated to office space. The RoU (Right of Use) recognised, calculated over a period of 15 years, has a value of approximately €25 million.
The other investments in property, plant and equipment made by the Group primarily related to purchases of plant, machinery and equipment to increase the level of automation of production and constantly improve the mix and quality of factories.
With regard to investments in intangible assets, development costs for 2020 amounted to €22,266 thousand (11.9% of the Group's total investments), and were borne by the Parent and the U.S. subsidiary.
Innovation, sustainability and the mobility of the future. Brembo has always been committed to researching and developing cutting-edge technological solutions that not only stand out for their focus on performance, comfort and style, but also make preserving the environment a top priority.
The vehicles of the future are increasingly oriented towards the green model, electrification, overall efficiency and reduced emissions. We are focused on an integrated, complementary brake system in which caliper, disc, pad, suspension and control unit are in synergy with our new vision of mobility, where technology and the environment can coexist in constant equilibrium.
For many years, Brembo has been conducting specific research on mechatronic products, which are increasingly widespread in the automotive sector, thus honing skills that have now been applied to systems such as electric parking brakes and brakeby-wire systems for some time now.
Since the market requires constantly shorter time to market, the Group strongly concentrates its efforts and resources also on implementing increasingly advanced simulation methods, in which new virtual reality and augmented reality technologies are increasingly applied, in addition to designing uniform development processes at Brembo's Technical Centres based in Italy, Poland, North America, China and India.
In 2020, R&D activities mainly focused on the following aspects.
For its cast-iron discs, Brembo presented its customers and the press its Greentive® disc, the result of Brembo's experience in the field of brake systems and above all of the know-how and expertise gained through the European LowBraSys project. Greentive® disc is characterised by an innovative coating applied to the cast-iron brake surface, which ensures very low wear and tear, extends disc life and also reduces particulate emissions during braking, and hence the impact on the environment.
Another distinctive quality of Greentive® is its high resistance to corrosion, particularly appreciable for the new generations of electric vehicles, characterised by a different use of the brake system. Greentive®, designed especially for premium and luxury vehicles, encompasses the most advanced technological solutions and represents Brembo's first disc on the product road map to environmental sustainability.
In fact, work also proceeded on researching, developing and testing other unconventional solutions to be applied to cast-iron brake discs, with a focus on the study of materials, technologies and surface treatments in collaboration with European research centres and suppliers. Particular attention is being devoted to the new needs of hybrid and electric vehicles, which use regenerative braking and thus introduce new requirements for brake discs.
These new solutions, which aim to reduce environmental impact (lower emissions of CO2, fine particulates and wheel dust) and improve aesthetics and corrosion resistance, are meeting with strong interest among Brembo's main clients.
For conventional cast-iron brake discs, the simulation methods tied to system comfort and disc fluid-dynamics, with a focus on air flow within the entire wheel-side unit, continued to be strengthened in cooperation with various entities. According to precise guidelines applied throughout the automotive sector and all of Brembo's development activities, considerable attention is also paid to new solutions that are able to reduce disc weight, as a lower weight translates into lower vehicle fuel consumption, and consequently a smaller environmental impact (reduced CO2 emissions). This is an aspect that has become even more important due to the entry into force of the new European Regulation setting the new emissions limits for manufacturers. Work on discs for heavy commercial vehicles — an application segment which is of particular interest to Brembo — continued with a focus on improving performance. Activities therefore intensified with several customers, also outside Europe. The
applications developments related to such customers are underway and should be finalised during the next two years. The acquisition of new business with major European customers will enable the Group to further increase its market share in this specific segment.
In car applications, after having worked with a major German customer to develop the concept for the light brake disc currently installed in the entire platform of core vehicles, Brembo will also supply this product for the next generation of vehicles within the same platform. In 2020, the application development phase for the new models — some of which are fully electric was completed and their presentation to the market started in the fourth quarter of the year.
The light disc — which enables a reduction in weight of up to 15% compared to a conventional disc due to the combination of two different materials (cast iron for the braking ring and a thin steel laminate for the disc hat) — has also been successfully developed for other major automotive manufacturers, which are already using it in some of their models, including some ultrahigh-performance vehicles.
The development of composite street motorbike discs continued; new samples are under development so that concept validation may be finalised.
In the innovative handlebar master cylinder project (based on two Brembo patents), the use of BSSM (Brembo Semi-Solid Metal casting) technology is being assessed to reduce weights and improve the aesthetic aspect.
For the new range of products created for the Indian market, the four-piston front caliper and the handlebar master cylinder come in addition to the recently designed rear caliper. Both designs have been defined and the prototyping phase has now begun. In addition to its uniform design, the entire new product range has been designed to be able to be customised according to the needs of motorbike manufacturers.
Vehicle testing of the new low-vibration floating disc (concept patented by Brembo) is slated to begin by the first quarter of 2021.
On the basis of the positive results of the initial phases of development of brake-by-wire for motorbikes, a further development of the system has been planned for 2021 that calls for rationalisation of the layout, simplification and upgrades of the architecture.
In view of their presentation to the market, process and cost aspects relating to the new high-performance light discs are under evaluation. A design that identifies and makes full use of the technical content of the new discs is also in the works. Following a thorough process of assessment, the technical specifications of the new range of brakes and clutches for offroad applications were also formulated.
Brembo's commitment to increasing its presence in the scooter market is taking concrete form with the launch of six different projects for two important customers, with design work to take place in Italy and manufacturing in India.
Research on new materials for use in two-wheel vehicles is also continuing: pump and caliper concept prototypes have been built for light applications and concept validation testing is currently under way.
The motorbike innovation roadmap, with its constantly updated and content and timescales, entails three levels of progress: constant improvement of existing products, development of new concepts for products in the range and development of new technologies/products not currently in the portfolio.
Regarding the racing world, the Carbon/Carbon brake system for racing applications project (F1, LMP – Le Mans Prototype, IRL – Indy Racing League, and Super-Formula) includes three distinct areas, whose activities were partially completed in 2020 and will continue in the years to come:
For the first time, three racing brake systems are being tested (cast-iron disc, CCMR disc and carbon/carbon disc) at a
Brembo's development partner in Germany, also including the goal of quantifying their emissions.
In addition, a positive conclusion was reached to negotiation and development for the introduction of an offshoot of Brembo's CCMR carbon ceramic disc, derived from racing, for use in incoming Lamborghini GT models, in addition to the four McLaren applications in production since 2018.
An important 48 V electro-mechanical brake-by-wire project with hydraulic actuator and a safety concept based on F1 experience was launched with a top team in a major World Motorsport Championship. Brembo's first brake-by-wire racing season came to a positive conclusion and further development for 2021 are in the advanced stages of testing.
As regards the simulation field, testing is continuing of new calculation methodologies for the structural part and thermal properties of the disc, for the thermoelastic and fatigue calculation, as well as for integrating the calculation within the customer wheel unit — in other words, mechanical and thermal calculations with computational fluid dynamics (CFD) solutions. Continuing with an internal project of constant fine-tuning on testing benches and in simulations that began in 2012, several testing methods were refined and further enhanced.
The new methodology based on friction mapping for brake sizing is now well established and further experimental and theoretical development of the concept moved forward in 2020. In the MotoGP class of motorbike applications, new systems are available to all clients, including a new brake caliper ensuring amplified force and an anti-drag system. In line with the F1 initiatives, a series of new projects were confirmed with a major Italian motorbike manufacturer. The projects will be governed by a development contract with the manufacturer and will concern new brake and clutch systems. The debut on the track of the new 2020 MotoGP caliper, designed with the best available simulations, was a success and it was soon adopted by all the teams.
Finally, the new carbon-fibre and carbon-ceramic clutch prototypes were created by the subsidiary AP Racing, also supplied exclusively to an Italian racing team. This is the fourth clutch model designed and tested by AP Racing to be then placed on the market with the same client.
Mention should also be made of collaboration between Brembo and e-Novia for electronic development, as well as development synergies that will allow both organisations to grow in the coming years. E-Novia launched an ABS brake system for bicycles based on the concept developed and patented by Brembo Performance in 2016, whereas Brembo brought to the racetrack electromechanical systems with electronics developed by e-Novia according to Brembo's specifications. This system is currently also being tested at the testing facility at the Stezzano plant.
Due to the extensive experience it has gained over the years, Brembo Friction may now be considered a well established, stable entity, in line with a Company's philosophy constantly focused on continuous improvement. Today's customers expect increasingly flexible, customised friction materials, with demands met specifically and reactively through the synergistic efforts of the Research and Development department together with all of Brembo's other departments. Brake pads with increasingly advanced performance characteristics, paired with both carbon ceramic and cast-iron discs, designed for applications with increasingly more challenging objectives, require particularly sophisticated development processes.
Once again, the market is showing every confidence in Brembo Friction, whose excellence is confirmed by the most demanding car manufacturers, which choose Brembo's pads for their topend applications. All main markets — including the European one, which is very demanding when it comes to performance, and markets that are more demanding in terms of comfort, such as the U.S. and Asia, but also the more innovative markets, such as those focusing on electric calipers — can now benefit from Brembo's know-how on Cu-free (i.e., copper-free) friction materials.
The constant drive to innovation enabled the development of friction materials for light discs with extreme thermo-mechanical durability, such as those for the German market, coated with Si-Sic (silicon-silicon carbide).
Statistical models such as DOE and Montecarlo are increasingly used, as they are capable of optimising friction material formulations and identifying the raw materials that most influence their chemical and physical properties.
Development of friction materials with a constantly lower environmental impact reflects the constantly growing green push of global research. Projects such as AFFIDA and LIBRA flow from Brembo's increasingly close focus on the environment. AFFIDA, the natural extension of the COBRA project (which was part of the European Life+ project), in collaboration with the Mario Negri Institute, seeks to bring the innovative technology already developed by COBRA to the OE market. The project involves the study of cement-based materials to replace the phenolic binders commonly used in all friction materials. The new materials must perform on a par with their traditional predecessors, while also
meeting the high-performance standards required by the most demanding sporting applications and limiting fine particulate emissions and environmental impact. Various car and motorbike manufacturers are asking to use AFFIDA pads when developing their new applications. The prototype pre-industrialisation phase has now been successfully completed using a press created with ad-hoc technology that enables customers' demands to be met, and specific activity involving the individual brand has been launched to ensure further optimisation of the process, yielding the best performance and optimal comfort. The introduction of the cement-based binder proved decisive in reducing volatile organic compound (VOC) emissions, with important positive repercussions for the environment.
The LIBRA project, which has been ongoing since 2015, eliminated the steel backing plate in brake pads, replacing it with high-performance composite materials. The advantages are clear: from a lighter pad, with the resulting reduction in the overall brake system's weight, to a shorter production process. One of the top U.S. automotive firms is currently involved in intensive development, which has resulted in increasing recognition of the competitiveness and innovation achieved by the LIBRA project, and has even decided to use these components in its parking systems. A press fully devoted to manufacturing these specific pads was installed at the end of 2019 to prepare for mass production of the product and the shift to mass production. A new goal is to transfer the innovation and technology applied to these pads, now used for parking, to rear brake pads.
Finally, the constant demand from the market for brake systems increasingly integrated into the new vehicles resulted in the development of a new concept for a brake pad with embedded sensors. In 2020, using specific sensors embedded in the friction material, the first tests were performed, showing that real-time measurement of braking torque is possible.
In Car and Commercial Vehicle Systems, Brembo's goals — summed up in its offering of increasingly low-emission, high-performance products capable of offering the best driving experience — translate into the following activities aimed at identifying solutions designed to ensure Brembo's customers are completely satisfied.
The objective of low emissions, i.e., of contributing to the reduction of vehicle consumption and the resultant CO2 and fine particle emissions through braking systems, is pursued by adopting methods designed to minimise caliper mass, while maintaining performance, and reducing residual torque by formulating new characteristics of coupling between seals and pistons, in addition to optimising a pad sliding system based on a new concept.
After consolidating these technical solutions for fixed calipers — which resulted in the assignment of a share of the business relating to a platform of fully electric vehicles created by a major German manufacturer in 2019 —, the Group's focus shifted to the study and application of floating calipers for commercial vehicles. These solutions allowed the company to be competitive and contributed to winning the contract to renew the range of vehicles produced by a major European manufacturer, with production set to begin in 2023.
The product and process improvement work is constantly ongoing in the same way as the search for solutions to reduce mass, optimise performance and improve styling. Two examples of this continuous improvement aimed at providing state-of-the-art solutions for the high-performance market are the Dyadema® caliper, which entered into production in the second half of 2019 and was designed with the goal of considerably reducing track operating temperatures, and the Flexira™ caliper, developed to meet the needs of several new market segments.
In keeping with this vision, development continues for the Company's patented Bembo Semi-Solid Metal (BSSM) casting technology, which maintains equal performance while enabling a reduction in weight of 5 to 10% in relation to caliper geometry. Concept approval is currently underway, whereas start of production for the first vehicles is expected by the end of 2022. Brembo's first mechatronic products, namely various configurations of electric parking brakes, both for cars and commercial vehicles up to 7.5 tons, are being promoted with the Group's customers.
With regard to next-generation electric-drive vehicles, brake systems will change considerably in the coming years, above all as regards braking management and the interface with the vehicle. Brembo promotes the "best driving experience", particularly in this sector, offering the market its brake-by-wire systems, which have now reached a high degree of performance and function, thus ensuring that the digital brake system is ready for industrialisation and distribution. The industrialisation and launch planning phase has begun and pre-development activity is in progress with an important U.S. manufacturer, with Brembo set to become the first in the world to enter into production in 2022-2023.
Forming partnerships with the new players that have entered the electric vehicles market is a strategic priority: within this
framework, a leading U.S. customer has entrusted Brembo with supplying a front brake system for an electric commercial vehicle, which entered into production in 2021.
The ongoing evolution of simulation methodologies is focused on aspects linked to brake system comfort and caliper functionality. Brembo's objective is to develop the simulation capacity for the entire brake system, including the friction material. From this standpoint, the ability to rely on the knowhow and installed capacity within the Brembo Friction project represents a strength for the Group, which can position itself as a supplier of solutions for complete brake systems. On the other hand, the development of a methodology for simulating caliper functionality is aimed at establishing, during the design stage, the caliper characteristics that influence a constant performance over time and the car's pedal feel.
Digitalisation of the Brembo product life cycle is ensured by Product Development Methods that, with the GBUs (Global Business Units) and GCFs (Global Central Functions), provide methodological, operational and legal support for managing data and project flows, using and customising commercial PLM (Product Lifecycle Management) software tools.
PLM is also used to share design documents, development phases, the various technical bases and CAD drawings employed for numerical simulations.
The state of the art of simulation of products and physical processes is constantly monitored both to update the Company's technological and methodological content and to realise virtual models that are increasingly representative of the reality that they seek to reproduce, thus rendering them more efficient and predictive.
To this end, at Brembo particular emphasis is placed on "simulation process automation", which translates the routine manual operations performed by simulation analysts into automatic digital flows, with the goal of condensing into procedures the know-how gained in implementing simulations, reducing errors relating to manual performance of such simulations and also making them available to a broader audience.
On the basis of the know-how consolidated over the previous three years, in 2020 a process of enhancing the Data Science and High Performance Computing process began, which took the concrete form of initial doubling of resources dedicated to implementing the digital transformation of the Company. This includes the ongoing processes of:
Acting as a competence centre for all GBUs and GCFs, the team operates within a multi-disciplinary Digital Lab that brings together the expertise of Data Scientists, Big Data Engineers, Domain Experts and Project Managers, developed and constantly renewed through an intense internal training programme to ensure the spread of "Data Culture" according to Brembo.
Advanced R&D activities constantly monitor the evolution of vehicles, which can be summarised in a few general trends: electrification, advanced driver assistance systems (ADASs), autonomous driving, low environmental impact, and connectivity. The high level of integration will bring the brake system into dialogue with other vehicle systems, such as electric-drive motors and new suspension/steering concepts. Such integration will allow for increased active safety and the optimisation of functions, such as regenerative braking.
Brembo is continuing to develop and refine a new brake-by-wire system, whose peculiarity lies in its "decentralised" architecture, in which each wheel side has its own electromechanical actuator for generating and controlling the required braking force. This architecture is proving ideally suited to future vehicles with high-level autonomous driving capability, in addition to ensuring a greater control of the vehicle dynamics also in traditional vehicles. Mechatronics and system integration entail the development of new components for Brembo's products, including sensors, mechanisms and electric motor prototypes. Brembo is therefore coordinating a group of companies based in the Lombardy region within the framework of the funded project "Inproves", with the aim of creating brushless motors based on permanent magnets offering very high levels of performance, specifically designed for the brakes of the future. The first prototypes of motors designed by Brembo for its brake-by-wire actuators were created in the previous year, while a prototyping line for these motors was completed in 2020.
In addition, Brembo continued to conduct R&D activities in cooperation with international universities and research
centres with the aim to constantly seek out new solutions to apply to brake discs and calipers, in terms of new materials, innovative technologies and mechanical components. The need to reduce product weight is leading the research function to evaluate the use of unconventional materials, such as technopolymers or reinforced light metal alloys, to produce structural components. These partnerships also extend to methodological activities relating to development, involving the creation and use of increasingly sophisticated simulation and calculation tools.
Another initiative in this area is Brembo's investment in Infibra Technologies, a spin-off of the academic institution Sant'Anna - School of Advanced Studies of Pisa, specialised in developing photonic sensors through the use of fibre-optics as the sensor element.
After the LowBraSys project funded by the European Union
as part of its Horizon 2020 programme with the aim of proving that fine particle emissions can be reduced, work continued with other projects financed at the European level, such as MODALES (MOdify Drivers' behaviour to Adapt for Lower EmissionS), involving Brembo as a development partner. The goal of the MODALES project is to promote an understanding of the variability due to user (driver) behaviour and that due to vehicular emissions from powertrain, brakes and tyres. Its aim is to modify users' behaviour also through dedicated training. Within the framework of the Horizon 2020 programme, Brembo is also participating in the European consortium that is developing the funded project EVC1000. The goal of this project is to demonstrate the technological feasibility of a completely electric vehicle with a range of more than 1,000 km per charge, where Brembo's contribution is to provide a further refinement of its
brake-by-wire system.
Effective risk management is a key factor in maintaining the Group's value over time. In this regard, within the framework of its Corporate Governance system, the Group defined Brembo's Internal Control and Risk Management System (ICRMS) in compliance with the principles set out in Article 7 of the Corporate Governance Code of Listed Companies promoted by Borsa Italiana S.p.A. (hereafter referred to as "Corporate Governance Code") and, more generally, with national and international best practices.
This system represents the set of organisational structures, rules and procedures that allows the main business risks within the Group to be identified, measured, managed and monitored, while helping the company to be run in a manner that is sound, correct and consistent with the objectives defined by the Board of Directors, and favouring the adoption of informed decisions consistent with the risk profile, as well as dissemination of a proper understanding of risks, lawfulness and corporate values.
The Board of Directors is tasked with defining the general guidelines of the ICRMS, so that the main risks pertaining to Brembo S.p.A. and Group subsidiaries are properly identified, as well as adequately measured, managed and monitored. It shall also set criteria to ensure that such risks are compatible with sound and proper management of the Company. The Board of Directors is aware that the control processes cannot provide absolute assurances that the company objectives will be achieved and the intrinsic risks of business prevented; however, it believes that the ICRMS may reduce and mitigate the likelihood and impact of risk events associated with wrong decisions, human error, fraud, violations of laws, regulations and company procedures, as well as unexpected events. The ICRMS is therefore subject to regular examination and controls, taking account of developments in the Company's operations and reference context, as well as national and international best practices.
The Board of Directors has identified the other main corporate committees/functions relevant for risk management purposes, by defining their respective duties and responsibilities within the ICRMS scope. More specifically:
• the Audit, Risk & Sustainability Committee, tasked with
supporting the Board of Directors on internal control, risk management and sustainability issues;
Risks are monitored at meetings held on at least a monthly basis, where results, opportunities and risks are analysed for each business unit and geographical region in which Brembo operates. The meetings also focus on determining the actions required to mitigate any risks. Brembo's general risk-management policies and the bodies charged with risk evaluation and monitoring are included in the Corporate Governance Manual, in the Risk Management Policy and Procedure, in the Organisational, Management and Control Model (as per Italian Legislative Decree No. 231/2001) and in the reference layout for preparing accounting documents (as per Article 154-bis of TUF), to which the reader is referred. The Executive Director with responsibility for the Internal Control and Risk Management System fully enforces the risk management guidelines based on principles of prevention, cost effectiveness and ongoing improvement, as approved by the Board of Directors. In order to provide the organisation
with the instruments for defining the risk categories to which attention should be drawn, Brembo has developed a model which identifies and classifies risk classes by type, based on the managerial level or corporate function from which they originate or that is responsible for monitoring and managing them.
The Internal Audit function evaluates the effectiveness and efficiency of the overall Internal Control and Risk Management System on a regular basis and reports the results to the Chairman, the Executive Deputy Chairman, the Chief Executive Officer, the Board of Statutory Auditors, the Audit, Risk & Sustainability Committee and the Supervisory Committee of Brembo S.p.A. with reference to specific risks connected with compliance with Legislative Decree No. 231/2001. At least on an annual basis, it also reports to the Board of Directors.
The first-tier family risks based on the risk management policy are:
Brembo's top risks for each of the above-mentioned risk families are discussed below. The order in which they are discussed does not imply classification in terms of probability of occurrence or possible impact.
Based on its international footprint, Brembo is exposed to the country risk, which is however mitigated by the adoption of a policy of business diversification by product and geographical area, so that the risk can be balanced at Group level.
In addition, Brembo constantly monitors the development of political, financial and security risks associated with countries in which the general political and economic climate and tax system could prove unstable in the future, so as to take any measures suited to mitigating the potential risks.
Following the spread of the Covid-19 pandemic, operations at all Group's plants (Italy, the United Kingdom, Poland, Czech Republic, the United States, Mexico, Brazil, China and India) in 2020 were temporarily suspended for a period that varied from one country to the next.
Brembo has been following developments relating to the spread of the pandemic very closely since its outbreak, establishing a dedicated task force and promptly adopting all necessary measures to prevent, monitor and contain the virus at all of its locations worldwide, with the aim of protecting the health of employees and contractors (rearrangement of production layouts, sanitisation of the premises, personal protective equipment, temperature measurement, heat scans, blood tests, hygiene rules and social distancing, remote working, etc.).
Since the beginning of the pandemic, the Board of Directors of Brembo S.p.A. has always involved in its meetings the Chief CSR Office, the Safety Officers and top managers to analyse and monitor the implementation and application of the measures taken in response to the COVID-19 pandemic, in full accordance with the provisions issued by the competent authorities from time to time.
The Audit, Risk & Sustainability Committee, the Board of Statutory Auditors and Supervisory Body have always been kept promptly informed of company management and the epidemiological emergency and all measures have always been checked and verified in order to ensure operational continuity and people protection.
Brembo continues to monitor events very closely and also in 2021 will adopt further containment measures, where necessary. For further details see section "Impacts of the Covid-19 Pandemic on the Consolidated Financial Statements" herein.
Brembo is exposed to risks associated with the evolution of technology, in other words, the risk that competing products will be developed that are technically superior because they are built based on innovative technologies. In order to maintain its competitive edge, Brembo invests sizeable resources in R&D, conducting applied and basic research on both existing and newly applied technologies, such as mechatronics. For additional information, see the "Research and Development"
section in this Directors' Report on Operations. Product and process innovations — those currently being used, as well as those that may be used for production in the future — are patented to protect the Group's technological leadership.
Brembo targets the top-end segments of the automotive sector and, in terms of geography, generates most of its sales in Europe, North America and China. In order to reduce the risk of segment/market saturation in the countries where it operates, the Group has long ago implemented a strategy aimed at diversifying into other geographical areas and is gradually broadening its product range, also by focusing on the midpremium segment.
Investments in certain countries may be influenced by major modifications of the local regulatory framework, which could result in changes in the economic conditions existing at the time of the investment. For this reason, before investing in foreign countries, Brembo assesses the country risk carefully in the short, medium and long term. In general, M&A activities are accurately coordinated in all their aspects in order to mitigate any investment risks.
Brembo continues to engage in ongoing development aimed at strengthening its Sustainability Model and fulfilling its legal non-financial disclosure requirements under Legislative Decree No. 254/2016. With support from a specialised consulting firm, Brembo updated its sustainability risk assessment system, using measurement criteria in line with the Group's risk management methodology.
Brembo manages the risks linked to climate change, as well as the increase in regulatory requirements regarding a reduction in greenhouse gas emissions and, more generally, the growing pressure being applied by civil society and the end consumer to the development of products and industrial processes with a lower environmental impact. The focus on climate change risk has intensified and an in-depth analysis of the related risks is currently underway. Brembo considers the risk arising from the use of resources, such as water, with reference to all production sites, particularly those located in geographical areas marked by water scarcity; it also pays equal attention to risks linked to the pollution of waterbodies due to any contamination.
Safety in the workplace is always a priority where the relevant
risks are assessed and managed by the competent functions. In addition, Brembo's supply chain is becoming more and more globalised and strategic; therefore, suppliers are required to operate in accordance with the sustainability standards identified by the Group. Moreover, considering that potential risk factors exist within the supply chain, Brembo is implementing numerous measures aimed at all its suppliers, both in Italy and abroad, to promote the safeguard of the environment and ensure appropriate working conditions with a view to continuous improvement.
The main operating risks inherent in the nature of the business are associated with the supply chain, the unavailability of production facilities, product marketing, IT, issues involving health, job safety and the environment and, to a lesser extent, the regulatory framework of the countries in which the Group operates.
Supply chain risk manifests as the volatility of raw material prices and dependence on strategic suppliers, which could jeopardise the company's production process and ability to fill orders from clients in a timely manner by suddenly suspending supply arrangements. To mitigate this risk, the Purchasing Department identifies alternate suppliers to ensure the availability of critical materials (supplier risk management programme). The supplier selection process, including an assessment of suppliers' financial solidity — an aspect that has taken on growing importance in the current scenario — has been reinforced. By diversifying its sources, Brembo can also reduce its risk exposure to price increases (a risk that is however partially offset by reflecting price increases in sales prices).
Natural or accidental events (earthquakes, fires, etc.), malicious behaviour (acts of vandalism) or malfunctioning of systems may result in damage to assets, the unavailability of production facilities and discontinuity of operation of such facilities. Brembo therefore reinforced its risk mitigation process, through the planning of loss prevention engineering based on standards recognised at an international level. The aim of this process was to eliminate risk factors in terms of probability of occurrence and to implement protective measures aimed at limiting the impact
of this risk, thereby constantly enhancing the current operating continuity levels of the Group's production facilities.
Brembo considers the risk relating to the marketing of its products, in terms of their quality, safety and traceability, to be of fundamental importance. The Group has always been committed to mitigating this risk through robust quality controls. As part of this process, it has instituted a worldwide Supplier Quality Assurance function, specifically dedicated to quality control of components that do not meet Brembo's quality standards, in addition to constantly optimising its Failure Mode & Effect Analysis (FMEA).
Brembo attaches much importance to the operating continuity of its IT systems. In this regard, it has implemented risk mitigation measures aimed at guaranteeing network connectivity and data availability and safety, while also ensuring compliance with the European data protection regulation (GDPR) and the national laws applicable in each EU member country. These issues are growing in importance in light of the start of the Group's smart factory (Industry 4.0) process.
The Group's primary risks relating to health, job safety and the environment can be of the following types:
The occurrence of these could result in substantial criminal and/ or administrative penalties or pecuniary fines against Brembo. Furthermore, in particularly serious cases, the actions of public entities in charge of assessing the situation could interfere with Brembo's normal production activities, even causing production lines to halt or forcing the production facility to close. Brembo manages this type of risk by carrying out ongoing and systematic evaluations of its exposure to specific risks and reducing or eliminating those considered unacceptable. This procedure is organised within a Management System (which is compliant with international ISO 14001 and OHSAS 18001 standards and certified by an independent body) that covers job health and safety, as well as environmental aspects.
Brembo therefore implements all the activities necessary to allow it to effectively monitor and manage these aspects while scrupulously complying with applicable laws.
Some examples of activities that are currently underway include the definition and yearly review of:
In summary, although accidents and mistakes can happen, the Group has implemented systematic rules and management procedures that allow it to minimise the number of accidents, as well as the impact they may have. A clear-cut assignment of responsibility at all levels, the presence of independent internal control bodies that report to the company's highest officers and the application of the highest international management standards are the best way to guarantee the company's commitment to health, job safety and the environment.
The internationalisation strategies and, particularly, international industrial footprint development have also highlighted the need to strengthen operational management able to operate locally and communicate effectively with the GBUs (Global Business Units) and the GCFs (Global Central Functions), in order to improve the efficiency and effectiveness of the quality system and the capacity of production processes.
Brembo is exposed to risks arising from the failure to rapidly comply with changing laws and new regulations in the sectors and markets in which it operates. To mitigate this risk, each compliance function stays abreast of the relevant legal and regulatory developments, with the assistance of outside consultants, where necessary, through a constant process of legal and regulatory updates and research.
With reference to the risk of non-compliance with tax laws and regulations, or of operating in conflict with the principles or spirit
of the systems in the jurisdictions in which the Group operates, in accordance with the guidelines laid down in the Global Tax Strategy and the Brembo S.p.A.'s Tax Strategy adopted in 2019, Brembo pursues the goal of proactively managing the tax risk by ensuring that such risk is timely recognised, properly measured, monitored and contained through the Tax Control Framework. With regard to compliance risk on issues related to workers' health and safety and environmental protection, and in light of the complexity and lack of clarity of the applicable laws and regulations, and the uncertain and often lengthy period of time needed to obtain the necessary authorisations and patents, the Group relies on specific functions, such as the Health & Safety function and the Energy & Environment Department (see Operating Risks – Environment, Safety and Health section), tasked with handling the related complexities.
With reference to other compliance risks, reference should be made to the Corporate Governance and Ownership Structure Report available on Brembo's website (www.brembo.com, Company, Corporate Governance, Corporate Governance Reports section).
Among compliance-related risks, attention should be drawn to the risk associated with breaches of national, international and industry regulations, and unethical professional behaviour in breach of the Company's ethics policy that expose it to vicarious administrative liability, in addition to undermining the Group's reputation on the market. Such risk may be broken down into three levels:
The risk deemed most significant for the Group at a theoretical level relates to the case indicated in point 2 above, for the following reasons:
a lack, in other legal orders, of a system of exemption from liability similar to the one in force in Italy;
failure by subsidiaries to provide information to, and communicate with, the Parent in a consistently timely manner;
The probability that liability for offences committed outside Italy may be ascribed to the Parent is regarded as remote in light of the connection criteria set forth in the Italian Penal Code. However, it is theoretically plausible that a top manager or employee of Brembo S.p.A. might take action outside Italy in the context of his or her duties to the Parent or an international subsidiary. In the matter of corruption involving public officials, given the nature of its business, the Brembo Group does not engage in dealings with government officials, except in managing permits (such as building permits). As a result, offence-risk opportunities are considered to be very limited. The mitigating measures taken by the Group are regarded as sufficient to significantly reduce its exposure to cases of risk and are aimed at ensuring the global spread of a culture of
compliance through the establishment of specific principles of ethics and conduct, in addition to constant monitoring of legal changes, through implementation of the following:
and Procedures issued by the Parent and disseminated and applied worldwide;
In 2020, in response to the COVID-19 epidemiological situation, possible impacts on the processes and protocols implemented for the purposes of legal compliance, including safeguards for the purposes of Legislative Decree 231/2001, Anti-corruption, Anti-trust and GDPR, were evaluated. Generally, no impacts on control, monitoring and prevention of 231 offences, which continued without interruption, were identified. The application of the provisions and preventive measures continued constantly and successfully, due in part to the training activity carried out and the progressive monitoring conducted within the framework of ordinary legal activities.
With reference to litigation, the Legal & Corporate Department periodically monitors the progress of existing and potential litigations and determines the strategy to be applied and the most appropriate steps to take in managing them, involving specific corporate functions, when needed. The Administration and Finance Department is responsible for the appropriate checks or write-downs related to such risks and their economic effects.
The same ERP (Enterprise Resource Planning) software has been implemented at nearly all Group companies in order to prepare accurate and reliable financial reporting for the Group, while also improving the Internal Control and Risk Management System and the quality, timeliness and comparability of the data provided by the various consolidated companies.
In conducting its business, the Brembo Group is exposed to various financial risks, including market, commodities, liquidity and credit risks. Financial risk management is the responsibility of the Parent's Treasury & Credit Department, which, together with the Group's Finance Department, evaluates the main financial transactions and related hedging policies.
Since the Group's financial debt is partly subject to variable interest rates, it is exposed to the risk of interest-rate fluctuations. To reduce this risk, the Group has entered into several medium/ long-term fixed rate loan agreements, as well as specific hedging contracts (IRS), which account — including lease liabilities — for approximately 60% of gross financial position. The objective is to eliminate the variability of the borrowing costs associated with a portion of debt and benefit from fixed rates. The Group's Central Treasury & Credit Department constantly monitors rate trends in order to evaluate in advance the need for any changes to the financial indebtedness structure.
Since Brembo operates in international markets, it is exposed to exchange rate risks. To mitigate this risk, the Group uses natural hedging (offsetting receivables and payables) and hedges only net positions in foreign currency, using mostly, and where advisable, forward contracts in order to reduce exchange rate risk exposure.
The Group is exposed to changes in prices of main raw materials and commodities. In 2020, no specific hedging transactions were undertaken. However, it bears recalling that fixed prices are set in supply contracts with certain commodities suppliers for a given period of time and that the contracts in place with the main customers also provide for automatic periodic indexing on the basis of commodities prices; both these approaches thus mitigate the risk of fluctuations in commodities prices.
Liquidity risk can arise from Brembo's inability to obtain the financial resources necessary to guarantee its operations. The Central Treasury & Credit Department implements the main measures indicated below in order to minimise such risk:
Credit risk is the probability that a customer or one of the parties to a financial instrument will cause a financial loss by failing to perform an obligation. Exposure to credit risk arises, in particular, in relation to trade receivables. In this sense, it should be noted that the parties with whom Brembo has commercial dealings are primarily leading car and motorbike makers with a high credit standing. The current macroeconomic context has made continuous credit monitoring increasingly important, so that situations where there is a risk of insolvency or late payment can be anticipated.
Following on from the above mitigation measures, and in order to minimise the volatility and financial impact of any detrimental event, under its Risk Management Policy, Brembo has provided for the residual risks to be transferred to the insurance market, provided that they are insurable.
Brembo's changing needs through the years have been specifically reflected in its insurance coverage, which has been optimised to decrease the company's exposure to intrinsic risks related to the type of activities carried out by Brembo. All Brembo Group companies are currently covered against the following strategic risks: property all risks, general liability, general product liability, product recall. Additional coverage has been arranged locally based on the specific requirements of local legislation or collective labour contracts and/or corporate agreements or regulations.
Insurance analysis and transfer of the risks to which the Group is exposed are conducted in collaboration with a highstanding insurance broker, which supports this process with its international organisation and is responsible for the compliance and management of Group insurance programmes at global level.
In continuous and unstoppable movement
With the constant objective to keep its organisational structure aligned with the market's needs, in 2020 the Group continued to make numerous changes to its organisation, by enhancing its central safeguards, industrial presence and local entities, while also constantly ensuring that technical product and process innovation continues to play a central role.
The main change concerned Brembo's organisation, which in February 2020 began to evolve into a new organisational model designed to rise to meet the future challenges to be posed by the market.
The new model focuses on relationships with customers and development at the global level, within the framework of a coherent, reinforced brand strategy: Global Business Units (GBUs), Global Central Functions (GCFs) and Regions/ Countries are the crucial dimensions of Brembo's organisation. The interactions between them have been balanced for optimal management of the Group's growing complexity and scope, with the aim of providing the Group with global processes. These dimensions will provide Brembo — as a true global company — with common processes, systems and standards transversal to its GBUs and Regions/Countries. The new organisation also features simpler reporting lines, clear responsibilities for each role, increasingly streamlined, empowered processes and a strong commitment to, and focus on, advanced R&D, Digitalisation and Artificial Intelligence applications.
Within this context, the five GBUs, which report to the CEO, are fully and solely responsible at the global level for setting the commercial, customer relationship and technical product development strategy. The GCFs, which report to the Chairman, Executive Deputy Chairman and CEO, formulate functional strategies at the Group level in their areas of responsibility in order to effectively support implementation of the strategies of the business units, design common processes, systems and standards, provide global direction, guidance and control, methods, uniform know-how, learning and constant performance within the function and ensure the development of their professional families. Finally, the Regions/Countries contribute to formulating the GBUs' strategies within their geographical perimeter and are responsible for implementing those strategies at the local level; they are also responsible for executing the functional strategy and P&L at the Region/Country level, in addition to representing the Group in relations with local authorities and institutions.
Finally, within the new organisational model, in order to increase cost efficiency and reengineer processes, in June 2020 the Cost Engineering and Value Analysis areas were separated and placed within the new Business Process Transformation & Cost Efficiency GCF.
In the year just ended, strongly conditioned by the Covid-19 pandemic, Brembo Academy continued to design and provide training for Group personnel, while of course in a lower total number of training hours than in previous years. In accordance with the various reference legislation, and in compliance with the restrictions imposed to curb transmission, training was initially suspended and then redesigned to be fully available in virtual mode (synchronous distance classrooms) and thus also available to those working remotely.
Among the new projects implemented in 2020 that deserve particular attention at the corporate level, mention should be made of a Knowledge Management course focused on certifying colleagues who possess specific know-how and who, after specific mentoring, perfected methods for sharing their knowledge according to a structured approach. Some of them, like the external professionals, will become teachers at the Brembo Academy in addition to the 50 in-house trainers already certified and active for a considerable section of the internal catalogue.
Another strategic project relating to digital transformation is the "Culture of Data" provided in virtual classrooms by a team of internal Brembo Academy lecturers. After designing the content, the lecturers rotated through the various editions, meeting with renewed consent, also borne out by the high number of applications received in the 2021 Training Needs Survey. This course has also been expanded to include e-learning tools that can be used directly from Brembo's specific platform: "How to
Make Decisions with Data" is a first example, and other products will be launched in 2021.
In other e-learning initiatives, the project to spread institutional skills at the global level was launched, including the new release of Data Classification & Protection and Cyber Security and Phishing, along with basic, practical management skills, available in Italian and English. In addition, in the fourth quarter of 2020, training continued to spread management and technical skills, in addition to health and safety knowledge, a process that never stopped, as required by applicable legislation.
Brembo's commitment to environmental sustainability and safety continues to be an increasingly strategic and essential factor for developing the Group's business.
The year just ended was significantly conditioned by the continuing state of emergency caused by the Covid-19 pandemic, which imposed unforeseeable changes and adaptations to all the Group's operations. Such a sudden overturning of the global situation — with restrictions on movement and contacts with facilities, the intensification of remote working, the intermittent, unplanned closures of facilities, in keeping with the course of the pandemic and local restrictions — entailed a complete revision of the plans and programmes initially defined for 2020. Activities were oriented towards developing and improving the already existing or newly conceived management tools, designed to ensure increasingly strong, tangible management of environmental risks and ever more thorough and effective governance of prevention activities. The new focus of plans and programmes allowed Brembo to continue along its path of ongoing improvement of environmental sustainability issues, in view of concrete pursuit of the SDGs of the UN Agenda for Sustainable Development, for which the Group has pledged its support.
In particular, the areas of activity touched on the aspects described below.
Energy Management: since the extension of the Brembo Energy Platform monitoring tool to all the Group's facilities has been almost entirely completed, detailed electricity consumption data are now available to each factory's technical staff, who are responsible for preparing and analysing them to identify possible opportunities for improvement and savings.
In addition to electricity consumption data, the platform is designed to monitor data related to other vectors (such as natural gas, compressed air and water). Meter infrastructure is being upgraded for this monitoring so that it can transfer field data effectively to the platform to outline subsequent processing and actions. Another benefit offered by the tool is support for the energy management system, compliant with the ISO 50001 standard, implemented and integrated into the Group's environmental management system in 2019. The energy management system certification process began in December 2019 with the certification of the Group's first facility, but due to the pandemic the initial plan to extend the system and certification to the Group's other facilities was delayed, leading the certification of the three plants initially slated for 2020 to be postponed to 2021.
Environment and Energy Management System: during the year, the system underwent a revision process which led to the emission of updated versions of all the operating risk management procedures (regarding emissions, water and waste). The modifications introduced are a natural offshoot of the existing procedures and system, increasing the detail and severity of the requirements they contain, structuring them to ensure increasingly tangible, operational coverage of environmental risks.
In 2020, in support of the Environment and Energy Management System a specific IT application was released to manage environmental governance processes, with particular regard to satisfying all legislative requirements and risk assessment and management issues. ORME (Obligation and Risk Management for Environment and Energy) is the name given to this IT platform, now in use at all the Group's plants.
Circular Economy: after obtaining authorisation from the responsible authorities in the first half of 2020, at the Italian iron foundry industrial-scale testing began on a process capable of replacing the use of certain raw materials of primary origin with others deriving from the waste recovery chain. This new process does not change the foundry's direct environmental impact, but it does significantly improve the overall impact of the product throughout its life cycle.
Sustainability and energy efficiency goals: the sustainability goal set for 2020 (calculated as a percent reduction in CO2 emissions due to improvement actions with respect to the previous year's emissions) was 2.5% and has been far exceeded with a final result of 14.84%. An important contribution to achieving this result was provided by reaching 100% renewable electricity used in Italy and the change of the electricity supplier in Mexico to a renewable energy producer during the year. As for the sustainability target, the energy efficiency objective (calculated as a percent reduction in energy consumption), achieved through improvement measures such as those in the previous year, set at 1.75%, was reached and exceeded at 2.63%.
In 2020, alongside management of the Covid-19 pandemic, the Group's workplace health and safety activities continued. In detail:
All Group plants were awarded certification of the HS Management System pursuant to the ISO 45001 standard, updating the previous certifications that referred to the OHSAS 18001 standard. The process that led to this important result was launched in 2018/2019, through the performance of preliminary activities, such as: the training course on the ISO 45001 standard, the performance of gap analysis between ISO 45001 and OHSAS 18001, and the drafting of the new Group System. Training workshops for the plants (both in physical presence and then remotely) on the new ISO Management System were completed in early 2020, initially involving the participation of the General Managers and personnel of the local H&S authority. More intense training activity was then held at the plants, designed to adopt the Group's guidelines and formulate the local standard, as well as to implement all the new features introduced by the new system.
Despite the undeniable difficulties caused by the pandemic, the plants maintained the original planning of activities aimed at transition from OHSAS 18001 to ISO 45001 certification and all plants achieved this important result in December 2020.
The Group completed the application and implementation of the standards identified and planned during previous workshops, designed to identify the greatest risks present in the melting furnaces area, to find solutions to eliminate or mitigate those risks and to standardise methods and tools for managing emergencies.
The fourth quarter of 2020 saw the beginning of a process similar to that performed for the cast-iron foundries that resulted in identification of the main risks that may arise in the aluminium foundries production process and the definition of countermeasures and mitigation of such risks. This process involved the Aluminium Foundries Operations Department, along with representatives of the main plants.
In the case of mechanical processing, following the workshop held at the end of 2019, which involved central technologies and several mechanical disc processing plants, in 2020 the criteria, logic and safety standards (safety concept design) were formulated to design and implement future robotised lines, which will then be included in the supply specifications of the new lines.
In 2020, the accident frequency index reached the best result ever in Brembo's history, coming in under one (0.98), compared to 1.28 in 2019 and 1.16 in 2018, and, among the accidents that occurred, none caused permanent damage. Among the various Group plants, mention should be made of the excellent results of the frequency index measured at the Indian (0.11), Chinese (0.28) and Mexican (0.48) plants.
In compliance with Consob Regulation adopted with Resolution No. 17221 of 12 March 2010, as amended, Brembo S.p.A. adopted the Related Party Transactions Procedure. The procedure was approved for the first time by the Board of Directors of Brembo S.p.A. during the meeting held on 12 November 2010, after receiving the favourable opinion of the Control, Risk & Sustainability Committee, which also acts as Related Party Transactions Committee since it meets the requirements set out by the above-mentioned regulations. Said procedure was constantly updated to comply with the regulatory provisions in force from time to time, as well as with the existing practices. The procedure aims to ensure the full transparency and propriety of Related Party Transactions. The updated edition of Brembo's Related Party Transaction Procedure is available on Brembo's website (www.brembo.com, section Company, Corporate Governance, Governance Documents).
Brembo has examined and assessed the impact of Legislative Decree No. 49/2019 which transposed into Italian law the Directive EU 2017/828 (the so called "Shareholders' Rights II") on related parties and acknowledged the ensuing amendments introduced by Consob to the Rules for Issuers and the Regulations on Related Party Transactions on 10 December 2020, which will become effective on 1 July 2021. New developments are currently being analysed and examined with a view to updating the Procedure and introducing all new provision by 30 June 2021.
Detailed information on the Company's Related Party Transactions is provided in the Explanatory Notes to the Consolidated Financial Statements. During the reporting period, no atypical or unusual transactions were carried out with Related Parties. Furthermore, commercial transactions with Related Parties, also other than the Group companies, were carried out at fair market conditions. The financing transactions undertaken during the year with Related Parties are also discussed in Explanatory Notes to the Consolidated Financial Statements.
The World Health Organization (WHO) announced the spread of the disease Covid-19 from China, particularly from the Wuhan district in early January 2020. It then declared Covid-19 a global health emergency of international concern on 30 January. February saw the virus spread to Europe and America, resulting to the global lockdown in March and April.
Brembo has been following developments relating to the spread of the COVID-19 very closely since its outbreak, establishing a dedicated task force and promptly adopting all necessary measures to monitor, prevent and contain the pandemic at all of its locations worldwide.
In the first six months of 2020, all Group's plants were subject to lockdown periods, whose length varied from one country to the next: China (from 24 January to 13/16 February), Italy (from 16 March to 27 April), the United States (from 23 March to 17 May), Brazil (from 24 March to 24 May), the United Kingdom (from 25 March to 14 April), India (from 25 March to 4 May), Poland (from 27 March to 2 April), Czech Republic (from 28 March to 2 April) and Mexico (from 6 April to 18 May).
In view of the production sites' reopening, the Group has defined all necessary measures aimed at combating the virus and protecting the health of employees and contractors such as: rearrangement of production layouts, sanitisation of the premises, purchases of personal protective equipment, temperature measurement with heat scans, circulation of hygiene rules and social distancing, and extended remote working.
Moreover, after an initial donation of €150,000 in support of treatment facilities at Bergamo's Pope John XXIII Hospital, Brembo decided to support research into combating Covid-19 by donating €1 million to three leading Bergamo institutions: Pope John XXIII Hospital, the Bergamo Hospital Research Foundation (FROM) and the Mario Negri Institute, which are committed to the area most severely affected by the pandemic, through a combination of clinical and pharmacological research. With reference to financial aspects, in adopting the prudential approach proposed by the Board of Directors in its extraordinary meeting on 20 March 2020, the Shareholders' Meeting held on 23 April resolved not to distribute dividends related to the 2019 profit. This decision was made in order to support the Group's financial solidity and limit future economic and financial impacts. To face this difficult time for the market, between April and May 2020, the Group's financial structure was further reinforced by entering into new medium/long-term loans for a total amount of €425 million, in addition to a medium-term committed credit line of €100 million obtained in the fourth quarter of 2020 and not yet used, and available short-term credit lines for €418 million, which have not been used. These new loans enabled the Group to extend the average life of its debt, at costs in line with current levels.
Redundancy schemes and other forms of public support were activated to protect workers in all countries and contain the cost of idle personnel. In addition, plans were drawn up to contain discretionary, sponsorship and marketing costs and reduce or postpone investments, while also renegotiating several supply and lease contracts and implementing measures to contain working capital.
The main financial and operational risks to which the Group is exposed (as described in the "Risk Management Policy" section of this Report) have been analysed to assess the effects of the significant financial market and raw material market volatility caused by the Covid-19 pandemic. With specific regard to credit risk, it should be noted that Brembo's main counterparties — major car and motorbike manufacturers with high credit ratings — essentially discharged their commercial obligations. In addition, there have been no problems with the supply chain or particular financial tensions involving the Group's strategic suppliers to be reported. In general, the analysis conducted did not identify any critical issues capable of having significant impacts on the Group's operating results and financial position.
The Explanatory Notes to the Consolidated Financial Statements provide more in-depth information on the effects of the pandemic and the assessments made by the Directors.
On 5 February 2020, Brembo acquired a 20% stake in Infibra Technologies S.r.l., for a consideration of €800 thousand. The company is specialised in the development, design, industrialisation, manufacturing, installation and marketing of fibre optic sensors systems and photonic subsystems for sensing and communications. The agreement with the current shareholders envisages Brembo's right to exercise a call option on the remaining 80% interest in the second half of 2024.
In March 2020, Brembo adopted a non-speculative long-term approach and acquired a 2.22% stake (equal to €86,509 thousand) in the share capital of Pirelli S.p.A., a company that stands out in its sector as a player of excellence in terms of history, brand, leadership and pursuit of innovation. In the second quarter of 2020, Brembo acquired a further stake for €20,000 thousand, increasing its interest to 2.78%. An equity swap derivative contract with a nominal value of €70 million, maturing on 23 July 2020, for the purchase of an additional 20 million shares of Pirelli S.p.A., was also entered into on 13 May 2020. On 23 July 2020, the equity swap derivative contract signed in May was finalised. Accordingly, Brembo S.p.A. acquired 20 million shares in Pirelli S.p.A. for a total consideration of €75,455 thousand, increasing its stake in the company to 4.78%. At 31 December 2020, the investment was measured at fair value, pursuant to IFRS 9, leading to a €29,819 thousand increase in the value of the investment and of Group Equity, as reported in the Consolidated Statement of Comprehensive Income.
The General Shareholders' Meeting of the Parent Brembo S.p.A. held on 23 April 2020 approved the Financial Statements for the financial year ended 31 December 2019, allocating net income for the year amounting to €179,152,879.80 thousand as follows:
On 17 November 2020, Brembo signed an agreement to acquire a 100% stake in SBS Friction A/S, a Danish company based in Svendborg that develops and manufactures brake pads for motorbikes using particularly innovative and eco-friendly sintered organic materials. The transaction makes it possible to integrate a strategic component such as brake pads into Brembo's current product range, with a particular focus on the environment, and to further reinforce Brembo's leadership in the motorbike sector.
The General Shareholders' Meeting held on 23 April 2020 passed a new plan for the buy-back and sale of own shares with the following objectives:
The maximum number of shares that may be purchased is 8,000,000 that, with the 10,035,000 own shares already held (3.005% of share capital), represents 5.401% of the Company's share capital.
Own shares can be bought back and disposed of up to a maximum of €144 million:
The authorisation to buy back own shares is valid for a period of 18 months from the date of the resolution by the General Shareholders' Meeting.
Brembo has neither bought nor sold own shares in 2020.
The Company has adopted the opt-out system envisaged by Article 70, paragraph 8, and Article 71, paragraph 1-bis, of the Rules for Issuers (Board's Resolution dated 17 December 2012), thus opting out from the obligation to publish the required disclosure documents in the case of significant mergers, de-mergers, capital increase by way of contributions in kind, acquisitions and disposals.
In accordance with the requirements of Articles 36 and 39 of the Market Regulations (adopted with Consob Resolution No. 16191 of 29 October 2007 and amended with Resolution No. 16530 of 25 June 2008), Brembo Group identified six subsidiaries based in four countries not belonging to the European Union that are of significant importance, as defined under paragraph 2 of the same Article 36, and therefore fall within the scope of application of the Regulations.
Brembo Group believes that its current administrative, accounting
and reporting systems are adequate to ensure that the Parent's management and auditing firm receive any information regarding Statement of Income, Statement of Financial Position and Cash Flow figures, as necessary for preparing the consolidated financial statements.
For all companies included in the consolidation area, the Parent Brembo S.p.A. already has a copy of the By-laws and the composition and powers of the Corporate Bodies.
$$
\widehat{\mu_2}
$$
The reconciliation of Equity and Result for the year, as reported in the Parent's Financial Statements, and the Equity and Result for the year recognised in the Consolidated Financial Statements shows that the Group's Equity at 31 December 2020 was €720,253 thousand higher than the figure reported in the Brembo S.p.A. Financial Statements. Consolidated Net Result for the year, amounting to €136,533 thousand, was €51,028 thousand higher than that of Brembo S.p.A.
| Net income | Equity | Net income | Equity | |
|---|---|---|---|---|
| (euro thousand) | 2020 | at 31.12.2020 | 2019 | at 31.12.2019 |
| Brembo S.p.A. | 85,505 | 729,806 | 179,153 | 617,820 |
| Consolidation adjustments: | ||||
| Equity of consolidated companies and allocation of their result | 90,922 | 1,042,657 | 143,137 | 1,062,542 |
| Goodwill and other allocated surplus | 0 | 49,026 | 0 | 50,864 |
| Elimination of intra-Group dividends | (38,807) | 0 | (97,023) | 0 |
| Book value of consolidated shareholdings | 0 | (405,834) | 0 | (407,984) |
| Valuation of shareholdings in associate companies/JVs | ||||
| measured using the equity method | 414 | 19,809 | 3,984 | 19,811 |
| Elimination of intra-Group income | 220 | (5,606) | (300) | (6,537) |
| Other consolidation adjustments | (316) | 51,183 | 4,110 | 51,499 |
| Equity and result for the year attributable to minority interests | (1,405) | (30,982) | (1,760) | (30,852) |
| Total consolidation adjustments | 51,028 | 720,253 | 52,148 | 739,343 |
| Group consolidated equity and result | 136,533 | 1,450,059 | 231,301 | 1,357,163 |
On 7 January 2021, after issuing the press release dated 17 November 2020, Brembo completed the acquisition of SBS Friction A/S, a company based in Svendborg (Denmark) that develops and manufactures brake pads for motorbikes using particularly innovative and eco-friendly sintered organic materials.
The investment is 60% held by Brembo S.p.A. and 40%
by Brembo Brake India Pvt. Ltd. The total outlay for the transaction was 224 million Danish Kroner (€30.1 million), paid using available liquidity and subject to the usual adjustment mechanisms applicable to similar transactions. The enterprise value of the transaction was 300 million Danish Kroner (€40.3 million).
Our year-start orders backlog and the full utilisation of production capacity allow us to look with confidence towards 2021, despite the ongoing uncertainty on the development of the pandemic.
Brembo S.p.A.'s Corporate Governance and Ownership Structure Report pursuant to Article 123-bis of the Consolidated Law on Finance presented in an individual report, separate from the Directors' Report on Operations, has been published at the same time as the latter and is available on Brembo's website (www.brembo.com, Company, Corporate Governance, Corporate Governance Reports section).
The Consolidated Disclosure of Non-Financial Information for 2020 pursuant to Legislative Decree No. 254/2016 presented in an individual report, separate from the Directors' Report on Operations, has been published at the same time as the latter and is available on Brembo's website (www.brembo.com, in the Sustainability, Report, Report and Presentations section).
To conclude the description of the performance of the Brembo Group for the year ended 31 December 2020, based also on the examination of our Report concerning the Consolidated Financial Statements of the Brembo Group and the separate Financial Statements of Brembo S.p.A., in which we outlined the guidelines and operations, we submit for your approval our proposal for distributing Brembo S.p.A.'s net income
amounting to €85,505,062.96, as follows:
Stezzano, 4 March 2021
On behalf of the Board of Directors The Executive Deputy Chairman Matteo Tiraboschi
Brembo's stock closed 2020 at €10.80, a 2.35% decrease compared to year-start, reaching its high for the period on 24 November (€11.21) and its low on 3 April (€5.91).
The FTSE MIB index closed the year down 5.42%, whereas the BBG EMEA Automobiles Parts index rose by 12.19%.
In 2020, global economic performance was strongly conditioned by the COVID-19 pandemic, albeit with diversification by
geographical area. The rebound in economic activity at the global level between May and September reflected the easing of the restrictive measures introduced to slow transmission. Case numbers rose again in North America and Europe, but not in Asia. Nonetheless, late 2020 was characterised by the optimism, reflected in equity markets, relating to the news regarding the efficacy of the first vaccines against the virus.
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Share capital (euro) | 34,727,914 | 34,727,914 |
| No. of ordinary shares | 333,922,250 | 333,922,250 |
| Equity (excluding net income for the year) (euro) | 644,300,524 | 438,667,185 |
| Net income for the year (euro) | 85,505,063 | 179,152,880 |
| Trading price (euro) | ||
| Minimum | 5.91 | 8.20 |
| Maximum | 11.21 | 11.88 |
| Year-end | 10.80 | 11.06 |
| Market capitalisation (euro million) | ||
| Minimum | 1,973 | 2,738 |
| Maximum | 3,743 | 3,967 |
| Year-end | 3,606 | 3,693 |
An overview of stock performance of Brembo S.p.A. is given below, compared with that of the previous year.
Gross dividend per share 0.22 (*) 0
(*) To be approved by the Shareholders' Meeting convened on 22 April 2021.
Further information and updates regarding stock performance and recent corporate information are provided on Brembo's website: www.brembo.com - Investors section. Investor Relations Manager: Laura Panseri
An ever-richer record of achievements It is natural to be fast and reactive when you can rely on perfect braking. Where adrenaline and determination come from the awareness of always aiming for victory.
"Open wheels" Championships
| Formula 1 (calipers) | |
|---|---|
| Drivers' championship | |
| Constructors' championship | |
| Formula E | |
| Drivers' championship | António Félix da Costa |
| Team championship | DS Techeetah |
| Formula 2 | |
| Drivers' championship | Mick Schumacher |
| Constructors' championship | Prema Racing |
| Formula 3 | |
| Drivers' championship | Oscar Piastri |
| Team championship | Prema Theodore Racing |
| Super Formula | |
| Drivers' championship | Naoki Yamamoto - Nakajima Racing |
"Covered wheels" Championships
| FIA World Endurance Championship - WEC | ||||
|---|---|---|---|---|
| LMP2 (calipers) | F. Albuquerque, P. Di Resta, P. Hanson - United Autosports Oreca 07 Gibson |
|||
| GT AM F. Perrodo, E. Collard, N. Nielsen - AF Corse 488 GTE |
||||
| FIA GT World Challenge Europe | ||||
| Endurance Cup | Alessandro Pier Guidi - AF Corse | |||
| Nascar Cup Series | ||||
| Drivers' championship | Chase Elliott | |||
| Constructors' championship | Ford | |||
| DPI Class (calipers) | H. Castroneves, R. Taylor - Team Penske, Acura ARX |
|---|---|
| TCR Class | G. Chaves, R. Norman - Bryan Herta Autosport Hyundai Veloster N TCR |
| GTD Class | M. Farnbacher, M. McMurry - Meyer Shank Racing, Acura NSX GT3 |
| ARCA Menards Series | |
| Bret Holmes - Bret Holmes Racing - Chevrolet | |
| ARCA Menards East Series | |
| Sam Mayer - GMS Racing - Chevrolet | |
| Nascar Camping World Truck Series | |
| Scheldon Creed - GMS Racing - Chevrolet | |
| Southern Super Series | |
| Stephen Nasse - Jet Motorsports | |
| Lucas Oil Off Road Pro Lite | |
| Brock Heger | |
| Lucas Oil Off Pro 2 | |
| Jerett Brooks |
Constructors' championship Hyundai Motorsport
Rally Championships
Motorbike Championship
| MotoGP | |
|---|---|
| Drivers' championship | Joan Mir |
| Team championship | Team Suzuki Ecstar |
| Constructors' championship | Ducati |
| Moto2 (calipers, brake pads and pumps) | |
| Drivers' championship | Enea Bastianini |
| Team championship | Sky Racing Team VR46 |
| Constructors' championship | Kalex |
| Moto3 | |
| Drivers' championship | Albert Arenas |
| Team championship | Leopard Racing |
| Constructors' championship | Honda |
| FIM MotoE World Cup | |
| Drivers' championship | Jordi Torres |
SBK World Championships
| Drivers' championship | Jonathan Rea |
|---|---|
| Team championship | Aruba.it Racing - Ducati |
| Constructors' championship | Kawasaki |
| EWC Championship | |
| Team championship | Suzuki Endurance Racing Team |
| Moto America Superbike | |
| Drivers' championship | Cameron Beaubier - Yamaha YZF-R1M |
Off-road Championships
| Motocross | |
|---|---|
| MX2 | Tom Vialle - Red Bull KTM Factory Racing |
| Enduro | |
| E1 | Andrea Verona - TM 250 4T - Red Bull KTM Factory Racing |
| Junior | Hamish MacDonald - Sherco 250 4T |
| Trial GP e X-Trial | |
| Toni Bou - Montesa - Team Honda Repsol |
World SBK Championships
| Drivers' championship | Jonathan Rea |
|---|---|
| Team championship | Aruba.it Racing - Ducati |
| Constructors' championship | Kawasaki |
| Moto3 | |
| Drivers' championship | Albert Arenas |
| Team championship | Leopard Racing |
| Constructors' championship | Honda |
| FIM MotoE World Cup | |
| Drivers' championship | Jordi Torres |
"Open wheels" Championships
| Formula 1 (clutches) | ||
|---|---|---|
| Drivers' championship | ||
| Constructors' championship | ||
| IndyCar (clutches) | ||
| Drivers' championship | Scott Dixon - Chip Ganassi Racing | |
| Indy 500 (clutches) | ||
| Drivers' championship | Takuma Sato - Rahal Letterman Lanigan Racing | |
| NASCAR Xfiniti Series (no clutches) | ||
| Drivers' championship | Austin Cindric - Team Penske |
"Covered wheels" Championships
| Le Mans 24 Hours | |
|---|---|
| LMP1 (clutches) | S. Buemi, B. Hartley, K. Nakajima - Toyota Gazoo Racing |
| LMP2 (no clutches) | F. Albuquerque, P. Di Resta, P. Hanson - United Autosports |
| Oreca 07 Gibson | |
| IMSA WeatherTech SportsCar Championship | |
| DPI (clutches) | H. Castroneves, R. Taylor - Team Penske, Acura ARX |
| British Touring Car Championship | |
| Drivers' championship | Ash Sutton - Laser Tools Racing Infiniti |
| Team championship | Team BMW - 330i M Sport saloons |
| DTM (no clutches) | |
| Drivers' championship | René Rast - Audi Sport Team Rosberg |
| Australia Supercars Championship | |
| Drivers' championship | Scott Mclaughlin - Shell V-Power - Ford Mustang |
| Team championship | Shell V-Power Racing Team - Ford Mustang |
| WTCR | |
| Drivers' championship | Yann Ehrlacher - Cyan Racing Lynk & Co |
| Team championship | Cyan Racing Lynk & Co |
| Japanese Super GT | |
| 500 Class (no clutches) | |
| Drivers' championship | N. Yamamoto, T. Makino - Raybrig NSX-GT |
| Constructors' championship | Team Kunimitsu |
| 300 Class | |
| Drivers' championship | K. Fujinami, J. Paulo de Oliveria |
| Constructors' championship | Kondo Racing - Nissan GTR |
| WRC (clutches) | |
| Drivers' championship | Sébastien Ogier |
An ideal dynamic balance between research and technology, innovation and style. With a focus on performance and results.
And every goal is closer if you can rely on in-depth skills and great experience.
| (euro thousand) | Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Property, plant, equipment and other equipment | 1 | 975,824 | 1,064,307 | (88,483) | ||
| Right of use assets | 1 | 207,456 | 194,493 | 12,963 | ||
| Development costs | 2 | 92,292 | 87,241 | 5,051 | ||
| Goodwill and other indefinite useful life assets | 2 | 79,882 | 83,883 | (4,001) | ||
| Other intangible assets | 2 | 47,393 | 57,157 | (9,764) | ||
| Shareholdings valued using the equity method | 3 | 43,947 | 43,149 | 798 | ||
| Other financial assets (including investments in other companies and derivatives) |
4 | 217,263 | 2,716 | 7,078 | 3,716 | 210,185 |
| Receivables and other non-current assets | 5 | 18,242 | 12,901 | 5,341 | ||
| Deferred tax assets | 6 | 76,731 | 54,617 | 22,114 | ||
| TOTAL NON-CURRENT ASSETS | 1,759,030 | 1,604,826 | 154,204 | |||
| CURRENT ASSETS | ||||||
| Inventories | 7 | 354,887 | 342,203 | 219 | 12,684 | |
| Trade receivables | 8 | 385,439 | 1,775 | 391,925 | 2,094 | (6,486) |
| Other receivables and current assets | 9 | 119,315 | 95,870 | 23,445 | ||
| Current financial assets and derivatives | 10 | 1,938 | 1,439 | 499 | ||
| Cash and cash equivalents | 11 | 551,282 | 304,793 | 246,489 | ||
| TOTAL CURRENT ASSETS | 1,412,861 | 1,136,230 | 276,631 | |||
| ASSETS FROM DISCONTINUED OPERATIONS | 855 | 1,435 | (580) | |||
| TOTAL ASSETS | 3,172,746 | 2,742,491 | 430,255 |
| (euro thousand) | Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| GROUP EQUITY | ||||||
| Share capital | 12 | 34,728 | 34,728 | 0 | ||
| Other reserves | 12 | 37,428 | 107,325 | (69,897) | ||
| Retained earnings/(losses) | 12 | 1,241,370 | 983,809 | 257,561 | ||
| Net result for the year | 12 | 136,533 | 231,301 | (94,768) | ||
| TOTAL GROUP EQUITY | 1,450,059 | 1,357,163 | 92,896 | |||
| TOTAL MINORITY INTERESTS | 30,982 | 30,852 | 130 | |||
| TOTAL EQUITY | 1,481,041 | 1,388,015 | 93,026 | |||
| NON-CURRENT LIABILITIES | ||||||
| Non-current payables to banks | 13 | 548,220 | 196,558 | 351,662 | ||
| Long-term lease liabilities | 13 | 187,415 | 177,283 | 10,132 | ||
| Other non-current financial payables and derivatives | 13 | 953 | 1,164 | (211) | ||
| Other non-current liabilities | 14 | 14,891 | 5,147 | 9,472 | 3,782 | 5,419 |
| Non-current provisions | 15 | 42,990 | 12,494 | 30,496 | ||
| Provisions for employee benefits | 16 | 26,567 | 4,292 | 25,584 | 2,633 | 983 |
| Deferred tax liabilities | 6 | 26,421 | 28,410 | (1,989) | ||
| TOTAL NON-CURRENT LIABILITIES | 847,457 | 450,965 | 396,492 | |||
| CURRENT LIABILITIES | ||||||
| Current payables to banks | 13 | 175,998 | 257,655 | (81,657) | ||
| Short-term lease liabilities | 13 | 21,473 | 18,700 | 2,773 | ||
| Other current financial payables and derivatives | 13 | 3,838 | 1,061 | 2,777 | ||
| Trade payables | 17 | 474,906 | 9,289 | 473,996 | 8,223 | 910 |
| Tax payables | 18 | 7,405 | 6,135 | 1,270 | ||
| Current provisions | 15 | 1,875 | 2,052 | (177) | ||
| Other current payables | 19 | 158,613 | 2,825 | 143,273 | 1,988 | 15,340 |
| TOTAL CURRENT LIABILITIES | 844,108 | 902,872 | (58,764) | |||
| LIABILITIES FROM DISCONTINUED OPERATIONS | 140 | 639 | (499) | |||
| TOTAL LIABILITIES | 1,691,705 | 1,354,476 | 337,229 | |||
| TOTAL EQUITY AND LIABILITIES | 3,172,746 | 2,742,491 | 430,255 |
| (euro thousand) | Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| Revenue from contracts with customers | 20 | 2,208,639 | 227 | 2,591,670 | 406 | (383,031) |
| Other revenues and income | 21 | 23,478 | 3,418 | 33,965 | 3,972 | (10,487) |
| Costs for capitalised internal works | 22 | 22,573 | 26,647 | (4,074) | ||
| Raw materials, consumables and goods | 23 | (1,024,961) | (30,826) | (1,214,623) | (53,126) | 189,662 |
| Income (expense) from non-financial investments | 24 | 10,392 | 13,794 | (3,402) | ||
| Other operating costs | 25 | (426,407) | (10,805) | (470,588) | (8,392) | 44,181 |
| Personnel expenses | 26 | (425,029) | (4,834) | (465,696) | (7,290) | 40,667 |
| GROSS OPERATING INCOME | 388,685 | 515,169 | (126,484) | |||
| Depreciation, amortisation and impairment losses | 27 | (207,550) | (196,630) | (10,920) | ||
| NET OPERATING INCOME | 181,135 | 318,539 | (137,404) | |||
| Interest income | 28 | 34,062 | 48,237 | (14,175) | ||
| Interest expense | 28 | (59,274) | (59,374) | 100 | ||
| Net interest income (expense) | 28 | (25,212) | 21 | (11,137) | 68 | (14,075) |
| Interest income (expense) from investments | 29 | 121 | 289 | (168) | ||
| RESULT BEFORE TAXES | 156,044 | 307,691 | (151,647) | |||
| Taxes | 30 | (17,802) | (68,208) | 50,406 | ||
| Result from discontinued operations | 32 | (304) | (6,422) | 6,118 | ||
| RESULT BEFORE MINORITY INTERESTS | 137,938 | 233,061 | (95,123) | |||
| Minority interests | (1,405) | (1,760) | 355 | |||
| NET RESULT FOR THE YEAR | 136,533 | 231,301 | (94,768) | |||
| BASIC/DILUTED EARNINGS PER SHARE (euro) | 31 | 0.42 | 0.71 |
| (euro thousand) | 31.12.2020 | 31.12.2019 | Change |
|---|---|---|---|
| RESULT BEFORE MINORITY INTERESTS | 137,938 | 233,061 | (95,123) |
| Other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year: |
|||
| Effect of actuarial income/(loss) on defined benefit plans | (3,260) | 100 | (3,360) |
| Tax effect | 711 | 81 | 630 |
| Effect of actuarial income/(loss) on defined benefit plans, for companies valued using the equity method |
(415) | (399) | (16) |
| Fair value measurement of investments | 29,819 | 0 | 29,819 |
| Tax effect | (358) | 0 | (358) |
| Total other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year |
26,497 | (218) | 27,073 |
| Other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year: |
|||
| Effect of hedge accounting (cash flow hedge) of derivatives | (3,293) | (225) | (3,068) |
| Tax effect | 790 | 54 | 736 |
| Change in translation adjustment reserve | (68,266) | 10,191 | (78,457) |
| Total other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year |
(70,769) | 10,020 | (80,789) |
| COMPREHENSIVE RESULT FOR THE YEAR | 93,666 | 242,863 | (148,839) |
| Of which attributable to: | |||
| - Minority Interests | 770 | 1,910 | (1,140) |
| - the Group | 92,896 | 240,953 | (148,057) |
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 168,559 | 195,871 |
| Result before taxes | 156,044 | 307,691 |
| Depreciation, amortisation/impairment losses | 207,550 | 196,630 |
| Capital gains/losses | (1,695) | (2,157) |
| Income/expense from investments, net of dividends received | (413) | (3,984) |
| Financial portion of provisions for defined benefits and payables for personnel | 407 | 577 |
| Long-term provisions for employee benefits | 2,423 | 2,502 |
| Other provisions net of utilisations | 48,618 | (52) |
| Result from discontinued operations | (304) | (6,422) |
| Cash flows generated by operating activities | 412,630 | 494,785 |
| Current taxes paid | (48,873) | (65,961) |
| Uses of long-term provisions for employee benefits | (4,580) | (4,813) |
| (Increase) reduction in current assets: | ||
| inventories | (23,913) | (7,604) |
| financial assets | 136 | (5) |
| trade receivables | 4,387 | 14,558 |
| receivables from others and other assets | (9,175) | (6,306) |
| Increase (reduction) in current liabilities: | ||
| trade payables | 910 | (90,846) |
| payables to others and other liabilities | 18,382 | (26,374) |
| Translation differences on current assets | (16,503) | (814) |
| Net cash flows from/(for) operating activities | 333,401 | 306,620 |
| (euro thousand) 31.12.2020 |
31.12.2019 |
|---|---|
| Investments in: | |
| property, plant and equipment (162,052) |
(213,657) |
| of which right of use assets (37,755) |
(38,165) |
| intangible assets (28,273) |
(38,111) |
| financial assets (182,862) |
(131) |
| Price for disposal or reimbursement value of fixed assets 4,205 |
6,589 |
| Net cash flows from/(for) investing activities (368,982) |
(245,310) |
| Dividends paid in the year 0 |
(71,541) |
| Buy-back of own shares 0 |
(11,329) |
| Dividend paid to minority shareholders in the year (640) |
(800) |
| Change in fair value of derivatives 648 |
(1,920) |
| New lease agreements 35,616 |
38,167 |
| Reimbursement of lease liabilities (24,826) |
(24,436) |
| Loans and financing granted by banks and other financial institutions in the year 425,000 |
103,518 |
| Repayment of long-term loans and other financing (122,492) |
(120,205) |
| Net cash flows from/(for) financing activities 313,306 |
(88,546) |
| Total cash flows 277,725 |
(27,236) |
| Translation differences on cash and cash equivalents (1,054) |
(76) |
| CASH AND CASH EQUIVALENTS AT END OF YEAR 445,230 |
168,559 |
| Equity | Equity of Minority Interests |
Share capital and reserves of Minority Interests |
Result of Minority Interests |
Group equity | Net result for the year |
|---|---|---|---|---|---|
| 1,228,822 | 29,742 | 26,615 | 3,127 | 1,199,080 | 238,349 |
| 0 | 0 | 3,127 | (3,127) | 0 | (166,808) |
| (72,341) | (800) | (800) | (71,541) | (71,541) | |
| (11,329) | 0 | (11,329) | |||
| 181 | 0 | 181 | |||
| (399) | 0 | (399) | |||
| (171) | 0 | (171) | |||
| 10,191 | 150 | 150 | 10,041 | ||
| 233,061 | 1,760 | 1,760 | 231,301 | 231,301 | |
| 1,388,015 | 30,852 | 29,092 | 1,760 | 1,357,163 | 231,301 |
| 0 | 1,760 | (1,760) | 0 | (231,301) | |
| (640) | (640) | (640) | 0 | ||
| 0 | 0 | ||||
| (2,549) | 0 | (2,549) | |||
| (415) | 0 | (415) | |||
| 29,461 | 0 | 29,461 | |||
| (2,503) | 0 | (2,503) | |||
| (68,266) | (635) | (635) | (67,631) | ||
| 137,938 | 1,405 | 1,405 | 136,533 | 136,533 | |
| 1,481,041 | 30,982 | 29,577 | 1,405 | 1,450,059 | 136,533 |
In the vehicle industry components sector, the Brembo Group is active in the research, design, production, assembly and sale of disc braking systems, wheels and light alloy and metal casting, in addition to mechanical processes in general.
The extensive product range consists of high-performance brake calipers, brake discs, wheel-side modules, complete braking systems and integrated engineering services, supporting the development of new models placed on the market by vehicle manufacturers. Brembo's products and services are used in the automotive industry, for light commercial and heavy industrial vehicles, motorbikes and racing competitions.
Manufacturing plants are located in Italy, Poland (Częstochowa, Dąbrowa Górnicza, Niepołomice), the United Kingdom (Coventry), the Czech Republic (Ostrava-Hrabová), Germany (Meitingen), Mexico (Apodaca and Escobedo), Brazil (Betim), China (Nanjing, Langfang), India (Pune) and the United States (Homer). Other companies located in Spain (Zaragoza), Sweden (Göteborg), Germany (Leinfelden-Echterdingen), China (Qingdao), Japan (Tokyo) and Russia (Moscow) carry out distribution and sales activities.
The Consolidated Financial Statements of the Brembo Group for the year ended 31 December 2020 have been prepared in accordance with the provisions of European Regulation No. 1606/2002 and the IFRS effective at 31 December 2020, issued by the International Accounting Standard Board (IASB) and adopted by EC Regulations. IFRS means all international accounting standards and all interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC).
The Consolidated Financial Statements include the Consolidated Statement of Financial Position, the Consolidated Statement of Income, the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows, the Consolidated Statement of Changes in Equity, and these Explanatory Notes, in accordance with IFRS requirements.
On 3 March 2021, the Board of Directors approved the Consolidated Annual Report and requested that it be made available to the public and Consob, within the terms and according to the procedures provided for by applicable laws and regulations.
The Consolidated Financial Statements were prepared on the basis of draft Financial Statements for the year ended 31 December 2020, prepared by the Boards of Directors, or, when available, of Financial Statements approved at the Shareholders' Meetings of the relevant consolidated companies, appropriately adjusted to align them with Group classification criteria and accounting standards.
The Consolidated Financial Statements have been prepared in accordance with the general principle of providing a true and fair presentation of the Group's assets and liabilities, financial position, statement of income results and cash flows, based on the following general assumptions: going concern, accrual accounting, consistency of presentation, materiality and aggregation, prohibition of offsetting and comparative information.
The administrative period and the closing date for preparing the Consolidated Financial Statements correspond to the ones for the Financial Statements of the Parent and all the consolidated companies. The Consolidated Financial Statements are presented in euro, which is the functional currency of the Parent, Brembo S.p.A., and all amounts are rounded to the nearest thousand unless otherwise indicated.
The Consolidated Financial Statements provide comparison figures for the previous year. When applying an accounting standard or retroactively recognising an adjustment, or reclassifying financial statement items, the Group includes an additional column showing the Statement of Financial Position for the first comparison year.
The Group made the following choices in relation to the presentation of the Financial Statements:
The Financial Statements presented herein comply with Consob resolution No. 15519 of 27 July 2006.
Preparing financial statements in compliance with the applicable accounting standards requires management to make estimates that may have a significant effect on the items reported in the accounts. Estimates and associated assumptions are based on historical experience and other factors that are believed to be reasonable under the current circumstances and given the information available at the reporting date. Actual results may differ from these estimates. Estimates and associated assumptions are reviewed on an ongoing basis. Revisions of estimates are recognised in the period in which such estimates are revised. Management's decisions that have a significant impact on the financial statements and estimates, and have a significant risk of material adjustments to the book value of assets and liabilities in the next accounting period, are discussed in the notes to the individual financial statement entries.
The main estimates are used to recognise the capitalisation of development costs, recognition of taxes (including the estimate of any tax liabilities associated with tax litigation, underway or that is likely to occur), impairment of non-financial assets and the actuarial assumptions used in the valuation of defined benefit plans. Other estimates relate to provisions for contingencies, product warranties, inventory obsolescence, useful lives of certain assets, the designation of lease contracts and the determination of the fair value of financial instruments, including derivatives.
In particular, the following items should be noted:
The valuation and measurement criteria used are based on IFRS in force as of 31 December 2020 and endorsed by the European Union.
On 28 May 2020, the IASB published an amendment to the standard IFRS 16, which was then published in the Official Journal of the European Union on 12 October 2020 ("endorsement"). The amendment is applicable to financial statements for reporting periods beginning on or after 1 June 2020, and early adoption is permitted. The amendment allows a lessee not to apply the requirements of IFRS 16 relating to the accounting effects of contract modifications for rent concessions granted by lessors as a direct consequence of the Covid-19 epidemic. The amendment introduces a practical expedient according to which a lessee may choose not to account for rent concessions as if they were lease modifications. A lessee that chooses to adopt this practical expedient accounts for such concessions as if they were not contract modifications within the scope of IFRS 16.
The Group decided to use this practical expedient and at the level of Consolidated Financial Statements it had no material impacts overall; at the level of individual Group company, Brembo México S.A. de C.V. had the most material benefit with regard to a property lease contract for a total amount of €260 thousand.
The following new standards and amendments entered into force on 1 January 2020 and had no impacts on the Group's Consolidated Financial Statements:
The amendments to IFRS 3 clarify that in order to be considered a business, an integrated set of activities and assets must include, at minimum, an input and a substantive process that together contribute significantly to the ability to create outputs. In addition, it has been clarified that a business may exist without including all inputs and processes necessary to create outputs.
The amendments to IFRS 9 and IAS 39 provide a number of practical expedients that apply to hedging relationships that are directly affected by the interest rate reform of reference. A hedging relationship that is impacted by the reform is subject to uncertainty regarding the timing and the amount of interest rate benchmark-based cash flows of the hedged instrument.
The amendments provide a new definition of material in which it is stated that information is material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity. Materiality depends on the nature or magnitude of the information. An entity assesses whether information, either individually or in combination with other information, is material in the context of its financial statements, collectively considered. Information is obscured if it is communicated in a way that would have a similar effect for primary users of financial statements to omitting or misstating that information.
The Conceptual Framework is not a standard, and none of the concepts that it contains override the concepts or requirements of a standard. The scope of the Conceptual Framework is to support the IASB in developing standards, assist preparers in developing consistent accounting policies, where no standard applies to the specific circumstances, and to aid all parties involved in understanding and interpreting standards.
The revised version of the Conceptual Framework includes some new concepts, provides updated definitions and reporting criteria updated for assets and liabilities and clarifies some important concepts.
Other standards and amendments, not yet endorsed at the reporting date, are listed in the following table:
| Description | Endorsed at the reporting date |
Expected date of entry into force |
|---|---|---|
| Amendments to | ||
| • IFRS 3 — Business Combinations; | ||
| • IAS 16 — Property, Plant and Equipment; | ||
| • IAS 37 — Provisions, Contingent Liabilities and Contingent Assets; | ||
| • Annual Improvements 2018-2020 (All issued 14 May 2020) | YES | 1 January 2022 |
| Amendments to IAS 1 — Presentation of Financial Statements: Classification | ||
| of Liabilities as Current or Non-current | NO | 1 January 2023 |
| IFRS 17 — Insurance Contracts (issued in May 2017) | NO | 1 January 2023 |
The Group did not opt for early adoption of new standards, interpretations or amendments that have been issued but have not entered into force yet.
The Consolidated Financial Statements include the Financial Statements of the Parent, Brembo S.p.A., at 31 December 2020, and the Financial Statements of the companies controlled by Brembo S.p.A. pursuant to IFRS 10. Control arises when the Group is exposed, or has rights, to variable returns from its involvement with the investee and at the same time has the ability to influence those returns through its power over the said investee.
Specifically, the Group controls an investee if, and only if, the Group has:
It is generally presumed that the majority of voting rights confers control. In support of this assumption, where the Group holds less than the majority of voting rights (or similar rights), the Group considers all facts and circumstances relevant to determining whether it controls the investee, including:
The Group reconsiders whether it controls an investee if the facts and circumstances indicate that there have been changes in one or more of the three factors relevant to determining control. A subsidiary begins to be consolidated when the Group obtains control of it and ceases to be consolidated when the Group loses control. The assets, liabilities, revenues and costs of a subsidiary acquired or disposed of during the year are included in the Consolidated Financial Statements from the date the Group obtains control until the date the Group no longer controls the company.
Income (loss) for the year and other comprehensive income components are allocated to the shareholders of the Parent and minority interests, even if this results in a negative balance for the minority interests. Where necessary, the appropriate adjustments are applied to the financial statements of subsidiaries, so as to ensure compliance with the Group's accounting policies. All intra-group assets and liabilities, equity, revenues, costs and cash flows relating to transactions between Group entities are completely eliminated during the consolidation process.
Changes in percent interests in a subsidiary that do not entail a loss of control are recognised at equity. If the Group loses control of a subsidiary, it eliminates the related assets (including goodwill), liabilities, minority interests and other components of equity, while any profit or loss is recognised in the Statement of Income. The residual interest, if any, is measured at fair value.
The list of consolidated subsidiaries, associates and joint ventures that are accounted for using the equity method, along with information regarding their registered offices and the percentage of capital held, is included in the paragraph "Information About the Group" of these Explanatory Notes. No corporate transactions impacting the Group's consolidation area were performed in 2020.
On 30 June 2019, Brembo discontinued its industrial operations at the Buenos Aires plant and has placed the subsidiary Brembo Argentina S.A. in liquidation. Therefore, pursuant to IFRS 5 the company's assets and liabilities have been reclassified to "Assets/Liabilities from discontinued operations", whereas its statement of income items have been reclassified to "Result from discontinued operations".
Business combinations (established after the date of transition to IFRS) are accounted for using the purchase accounting method envisaged by IFRS 3.
The value of the entity included in the business combination is the sum of the fair value of the assets acquired and liabilities assumed, including contingent liabilities.
The cost of a business combination is identified as the fair value, at the date control is obtained, of the assets acquired, liabilities assumed and equity instruments issued for the purposes of the combination. That cost is then compared with the fair value of the identifiable assets, liabilities and contingent liabilities upon acquisition. Any excess of cost of the acquisition over the Group's share of the fair value of the identifiable assets, liabilities and contingent liabilities upon acquisition is recognised as goodwill. Any negative differences are charged directly to the Statement of Income. If the initial cost of a business combination can only be determined provisionally, adjustments to the initial provisional values must be made within twelve months of the acquisition date. Minority interests are recognised on the basis of the fair value of the net assets acquired. If a business combination involves more than one transaction, with successive share purchases, each transaction is treated separately using the cost of the transaction and fair value information on the assets, liabilities and contingent liabilities at the date of each transaction to determine the amount of any differences. When control of a company is obtained through a subsequent share purchase, the previously held interests are accounted for based on the fair value of identifiable assets, liabilities and contingent liabilities at the date control is acquired.
The acquiree measures contingent consideration at fair value at acquisition date. The change in fair value of contingent consideration classified as an asset or liability, in that it is a financial instrument falling within the scope of IFRS 9, must be recognised in profit or loss or in Other Comprehensive Income. If the contingent consideration is not within the scope of IFRS 9, it is measured in accordance with the relevant IFRS. If the contingent consideration is classified as an equity instrument, the original amount is not remeasured and its subsequent settlement is recognised in equity.
Goodwill is initially recognised at cost, as the difference of the aggregate of the value of the consideration transferred and the amount attributed to minority interests compared to net identifiable assets acquired and liabilities assumed by the Group. If the consideration is lower than fair value of net assets of the acquired subsidiary, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any impairment losses. For the purposes of impairment testing, goodwill acquired in a business combination is allocated from the acquisition date to each of the Group's cash-generating units that is expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree have been assigned to those units.
If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal. The goodwill associated with the operation disposed of is measured on the basis of the relative value of the operation disposed of and the portion of the cash-generating unit retained.
An associate is a company over which the Group exercises significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, without exercising control or joint control over the investee.
A joint venture is a joint arrangement whereby the parties that have joint control have rights to the net assets of the arrangement. Joint control is the contractually agreed sharing of control, which exists only when decisions about the relevant activities require the unanimous consent of all parties sharing control.
Considerations used to determine significant influence or joint control are similar to those required to determine control of subsidiaries.
The Group's equity investments in associates and joint ventures are accounted for using the equity method. Under the equity method, an equity investment in an associate or a joint venture is initially recognised at cost. The carrying amount is increased or decreased to recognise the investor's share of the investee's profit or loss realised after the acquisition date. The goodwill related to the associate or joint venture is included in the carrying amount of the investment and is not tested separately for impairment.
The Statement of Income reflects the Group's share of the profits or losses of the associate or joint venture. All changes in Other Comprehensive Income relating to such investees have been presented in the Group's Statement of Comprehensive Income. In addition, when an associate or a joint venture recognises a change directly in equity, the Group recognises its share of that change, where applicable, in its Statement of Changes in Equity. Unrealised gains and losses on transactions between the Group and associates or joint ventures are eliminated in proportion to the interest held in the associates or joint ventures.
The aggregate share of the net result of associates and joint ventures attributable to the Group is recognised in the Statement of Income and represents the income or loss after taxes and the amounts attributable to the other shareholders of the associate or joint venture.
The financial statements of associates and joint ventures are prepared at the same reporting date as the Group's Financial Statements. Where necessary, such financial statements are adjusted to bring them into line with the Group's accounting standards.
Once the equity method has been applied, at each reporting date the Group assesses whether there is objective evidence that the investments in the associates or joint ventures have become impaired. In such cases, the Group calculates the amount of the loss as the difference between the recoverable amount of the associate or joint venture and the carrying amount of the investment in its financial statements, and then accounts for that difference in the Statement of Income.
When significant influence over an associate or joint control of a joint venture is lost, the Group measures and recognises the residual investment at fair value. The difference between the carrying amount of the investment at the date significant influence or joint control is lost and the fair value of the residual investment and consideration received is recognised in the Statement of Income.
Shareholdings in other companies are classified and measured at fair values through other comprehensive income (OCI), as better described in the section "Financial Instruments – Financial Assets" below.
The financial statements of the Group Companies included in the Consolidated Financial Statements are denominated in the currency used in the primary market in which they operate (functional currency). The Group's Consolidated Financial Statements are denominated in euro, which is the functional currency of the Parent Brembo S.p.A.
At year end, the assets and liabilities of subsidiaries, associate companies and joint ventures whose functional currency is not the euro are translated into the currency used to prepare the consolidated Group accounts at the exchange rate prevailing at that date. Statement of Income items are translated at the average exchange rate for the period (as it is considered to represent the average of the exchange rates prevailing on the dates of the individual transactions). The differences arising from the translation of initial equity at end-of-period exchange rates and the differences arising as a result of the different method used for translating the result for the period are recognised under a specific heading of equity. If consolidated foreign companies are subsequently sold, accumulated conversion differences are recognised in the Statement of Income.
The following table shows the exchange rates used in the translation of financial statements denominated in currencies other than the Group's functional currency (euro).
| Euro against other currencies | 31.12.2020 | 2020 average | 31.12.2019 | 2019 average |
|---|---|---|---|---|
| U.S. Dollar | 1.227100 | 1.141282 | 1.123400 | 1.119598 |
| Japanese Yen | 126.490000 | 121.775447 | 121.940000 | 122.056369 |
| Swedish Krona | 10.034300 | 10.488130 | 10.446800 | 10.586660 |
| Polish Zloty | 4.559700 | 4.443177 | 4.256800 | 4.297528 |
| Czech Koruna | 26.242000 | 26.455446 | 25.408000 | 25.669748 |
| Mexican Peso | 24.416000 | 24.511767 | 21.220200 | 21.557279 |
| Pound Sterling | 0.899030 | 0.889215 | 0.850800 | 0.877307 |
| Brazil Real | 6.373500 | 5.890010 | 4.515700 | 4.413542 |
| Indian Rupee | 89.660500 | 84.579539 | 80.187000 | 78.850143 |
| Argentine Peso | 103.249400 | 80.756116 | 67.274900 | 53.800925 |
| Chinese Renminbi | 8.022500 | 7.870837 | 7.820500 | 7.733878 |
| Russian Rouble | 91.467100 | 82.645446 | 69.956300 | 72.459337 |
Transactions in currencies other than the functional currency are initially converted into the functional currency using the exchange rate prevailing at the date of the transaction. At the closing date of the accounting period, monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the exchange rate prevailing at that date. Exchange differences arising from such translation are recognised in the Statement of Income.
Non-monetary assets and liabilities denominated in currencies other than the functional currency that are carried at cost are translated using the exchange rate prevailing at the transaction date, while those carried at fair value are translated using the exchange rate prevailing on the date the fair value is determined.
Property, plant, equipment and other equipment are recognised at cost, net of the related accumulated depreciation and any impairment loss. The cost includes the purchase or production price and direct costs incurred for bringing the asset to the location and condition necessary for it to be capable of being operated; interest expense is also included, where applicable under IAS 23.
Subsequent to initial recognition, the asset continues to be carried at cost and depreciated based on its remaining useful life net of any impairment in value, taking into account any residual value.
Land, including land linked to buildings, is recognised separately and is not depreciated since it is regarded as having an indefinite useful life.
Costs for improvements and transformations that increase the value of assets (i.e., they result in probable future economic rewards that can be reliably measured) are recognised in the assets section of the Statements of Financial Position as increases to the assets in question or as separate assets. Costs are written off in the year in which they are incurred, where they relate to maintenance or repair and do not lead to any significant and measurable increase in productive capacity or in the useful life of the relevant asset.
Depreciation represents the economic and technical loss of value of the asset and is charged from when the asset is available for use; it is calculated using the straight-line method based on the rate considered representative of the useful life of the asset.
The range of expected useful lives of property, plant and equipment used for calculating depreciation is reported below:
| Category | Useful life |
|---|---|
| Land | Indefinite |
| Buildings | 10-35 years |
| Plant and machinery | 5-20 years |
| Industrial and commercial equipment | 2.5-10 years |
| Other assets | 4-10 years |
The residual values, useful lives and depreciation methods applied to property, plant and equipment are reviewed at the end of each year and prospectively corrected, where appropriate. Useful lives are unchanged compared to the previous year.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. It requires lessees to recognise all lease contracts in the financial statements on the basis of a single accounting model similar to that used to recognise finance leases that were governed by IAS 17. The lessee recognises a liability for payments of rental fees specified in the lease contract and an asset representing the right to use the underlying asset for the period of the contract. Lessees must recognise separately the interest paid on the lease liability and
amortisation of the right to use the asset. Lessees must also re-measure the lease liability when certain events happen (e.g., a change in lease contract conditions or a change in future lease payments caused by a change in an index or rate used to determine those payments). The lessee generally recognises the re-measured amount of the lease liability as an adjustment to the right to use the asset. The Group determines the lease term as the non-cancellable portion of the lease, together with the periods covered by the option to extend the lease, where it is reasonably certain that this option will be exercised, as well as the periods covered by the lease break option, if it is reasonably certain that this option will not be exercised.
Improvements to third-party assets that can be considered fixed assets are capitalised to the appropriate asset category and depreciated over the shorter of their useful life or the lease term.
The Group recognises intangible assets when the following conditions are met:
Intangible assets are initially measured at cost; subsequent to initial recognition, they are carried at cost less amortisation (except for goodwill and other intangible assets with indefinite useful lives), which is calculated using the straight-line method (beginning on the date the assets are available for use) over their useful lives, and net of any impairment losses, taking into account any residual value. The useful life of assets is reviewed periodically.
An intangible asset generated in the development phase of an internal project is recognised as asset if the Group can demonstrate:
Development costs are recognised in the Statement of Income. Similarly, in the case of externally acquired intangibles that qualify as research and development costs, only the costs attributable to the development phase are recognised as assets, provided that the above requirements are met.
Such costs are capitalised under "Development costs" and amortised when the development phase is concluded and the asset developed generates economic rewards. In the period in which internal development costs that can be capitalised are incurred, these costs are excluded from the Statement of Income item "Increase on internal works capitalised" and recognised in the item "Costs for capitalised internal works".
The range of expected useful lives of intangible fixed assets used for calculating amortisation is reported below:
| Category | Useful life |
|---|---|
| Development costs | 3 - 5 years |
| Goodwill and other fixed assets with indefinite useful lives | Indefinite |
| Industrial patents and similar rights | 5 - 10 years |
| Other intangible assets | 3 - 5 years |
The residual values, useful lives and amortisation methods applied to intangible assets are reviewed at the end of each year and prospectively corrected, where appropriate. Useful lives are unchanged compared to the previous year.
Goodwill, intangible assets with an indefinite life and development costs underway are systematically tested for impairment at least once a year, and whenever there are any indications of impairment.
Property, plant and equipment, as well as intangible assets that are subject to depreciation and amortisation are tested for impairment whenever indications of impairment arise.
Write-downs correspond to the difference between the carrying value and recoverable value of the assets in question. The recoverable value is the greater of the fair value of an asset or cash-generating unit less the costs of disposal and the value in use, determined as the present value of estimated future cash flows. The value in use is defined as the cash flows expected to arise from the use of an asset, or the sum of the cash flows in the case of more cash-generating units. The expected future cash flows are measured using the unlevered discounted cash flows method and each group of assets is discounted to the present value using the WACC method (weighted average cost of capital). If the recoverable amount is less than the carrying amount, the carrying amount is reduced to the recoverable amount, and, as a general rule, the impairment loss is recorded in the Statement of Income. When the impairment loss of an asset (except for goodwill) is subsequently reversed, the carrying value of the asset (or cash-generating unit) is increased to the new estimate of recoverable value, without exceeding the value prior to write-down.
Inventories of raw materials and finished products are stated at the lower of cost of acquisition or market value and the corresponding presumable net realisable value estimated from market trends.
The purchase cost includes costs incurred to bring each asset to the place it is stored. Manufacturing costs of finished products and semi-finished goods include direct costs and a portion of indirect costs that can be reasonably attributed to the products based on normal exploitation of the production capacity; interest expense is excluded. Work in progress is valued at production costs for the year, based on the progress report.
The cost of inventories of raw materials, finished goods, goods for resale and work-in-progress is calculated using the weighted mean cost method.
For raw materials, ancillaries and consumables, the presumable net realisable value corresponds to the replacement cost. For finished products and semi-finished goods, the presumable net realisable value
corresponds to the estimated sales price in the ordinary course of business, less the estimated costs of completion and costs to sell.
Inventories that are obsolete or characterised by a long turnover period are written down on the basis of their possible useful life or realisable value, by creating a special provision for inventory adjustment.
Cash and cash equivalents include cash balances, unrestricted deposits and other treasury investments with original maturities of up to three months. A treasury investment is considered as availability, when it is instantly convertible to cash with minimal risk of any fluctuation in value and, further, it is intended to meet short-term cash requirements and is not held as an investment.
For purposes of the Statement of Cash Flows, cash balances are stated net of bank overdrafts at the end of the period.
Provisions include certain or probable costs of a specific nature, the amount or settlement date of which could not be determined at year-end. A provision is recognised when:
Provisions are recognised at the present value of the expected expenditure required to settle the obligation in question. Where the Group expects some or all of the expenditure required to settle a provision to be reimbursed, such as for the case of insured risks, the reimbursement is treated as a separate asset and is recognised when, and only when, it is virtually certain that the reimbursement will be received. In this case, the expense relating to the provision is presented in the Statement of Income net of the amount recognised for the reimbursement. Provisions are periodically updated to reflect changes in cost estimates, timing and present value, if any; revisions to estimates are recognised under the same heading of the Statement of Income under which the original provision was recognised and in the Statement of Income of the period in which the change is made. When provisions are discounted to present value, the change resulting from the passage of time or interest rate fluctuations is recognised under "Net interest income (expense)".
Any provisions for restructuring costs are recognised when the company involved has approved a formal detailed plan and communicated it to the parties concerned.
A provision for costs arising from tax liabilities is recognised when the dispute to which the contingent liability refers is ongoing or likely.
Provisions for product warranty costs are recognised when products are sold. Initial recognition is based on historical experience, excluding exceptional events, for which a precise assessment is conducted. The initial estimate of the costs of warranty work is reviewed annually.
The difference between defined contribution plans, wholly unfunded defined benefit plans, wholly or partly funded defined benefit plans and other forms of long-term benefits is reported below.
Defined contribution plans are post-employment benefit plans under which a company pays contributions to an insurance company or pension fund and has no legal or constructive obligation to pay further contributions if, when the benefit right matures, the fund does not have sufficient assets to pay all benefits relating to employee service in the current or prior periods.
These contributions, which are paid for the services rendered by employees, are recognised in the same accounting period in which the services are rendered.
Defined benefit plans are post-employment benefit plans that entail a future obligation for the company. The company assumes actuarial and investment risks in relation to the plan.
To determine the present value of its obligations relating to such plans and the related service costs, the Group uses the "Projected Unit Credit Method".
This actuarial calculation method requires the use of unbiased and mutually compatible actuarial assumptions about demographic variables (mortality rate and employee turnover rate) and financial variables (discount rates and future increases in salary and benefits). When a defined benefit plan is wholly or partly funded by contributions paid either into a fund that is legally separate from the company or to an insurance company, any plan assets are measured at fair value. The obligation is therefore stated net of the fair value of the plan assets that will be used to directly meet such obligation.
Remeasurements, which include actuarial gains and losses, any changes in the effect of the assets ceiling (excluding net interest) and return on plan assets (excluding net interest) are recognised immediately in the Statement of Financial Position, debiting or crediting retained earnings through Other Comprehensive Income in the period in which they occur. Remeasurements are not reclassified through profit or loss in the following years.
Other long-term benefits refer to employee benefits other than post-employment benefits. They are accounted for in the same manner as defined benefit plans.
Own shares bought back are recognised at cost and are deducted from equity. No gain or loss is recognised in the Statement of Income on the purchase, sale, or cancellation of the company's own shares. The difference between the carrying amount and the consideration, in case of reissue, is recognised in the share premium reserve.
Government grants are recognised at fair value, when there is reasonable assurance that all necessary conditions attached to them have been satisfied and the grants will be received.
Grants received in recognition of specific expenses are recognised as liabilities and credited to the Statement of Income on a systematic basis over the periods necessary to match the grant income with the related expenditure. Grants received for defined assets that are recognised as fixed assets are accounted for as non-current liabilities and credited to the Statement of Income in relation to the period in which depreciation or amortisation is charged for the relevant assets.
The Group measures financial instruments, such as derivatives, at fair value at the end of each financial period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Fair value measurement assumes a sale of the asset or transfer of the liability taking place:
The principal or most advantageous market must be accessible to the Group.
Fair value measurement takes into account the characteristics of the asset or liability being measured that market participants would consider when pricing the asset or liability, assuming that market participants act with the aim of best satisfying their economic interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic rewards by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques appropriate to the circumstances and for which sufficient data for fair value measurement are available, thus maximising the use of observable inputs and minimising the use of unobservable inputs.
All assets and liabilities, the fair value of which has been measured or recognised in the financial statements, are categorised based on the fair value hierarchy, as described below:
The fair value measurement is categorised in its entirety in the hierarchy level of the lowest level input that has been used for the measurement.
For assets and liabilities that are measured at fair value on a recurring basis, the Group determines whether shifts have occurred between hierarchy levels and revises the categorisation (based on the lowest level input that is significant to the entire fair value measurement) at the end of each financial period.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets are initially recognised at their fair value, plus ancillary costs. Upon initial recognition, financial assets are classified, depending on their nature, in the following categories: financial assets at fair value through profit or loss, held-to-maturity investments, loans, receivables and financial assets available for sale.
Loans and receivables (the category of greatest significance for the Group) are non-derivative financial assets, with fixed or determinable payments, that are not quoted in an active market. After initial recognition, such financial assets are measured at amortised cost, using the effective interest rate method, less impairment losses. Amortised cost is calculated by including any discounts, premiums or fees and/or costs, which are an integral part of the effective interest rate. The effective interest rate is recognised as interest income in the Statement of Income. Impairment losses are recognised in the Statement of Income as interest expense. This category normally includes trade and other receivables.
When accounting for financial assets measured at amortised cost, the Group first assesses whether impairment exists for each financial assets that are individually significant, and collectively for financial assets that are not individually significant. The carrying amount of an asset is reduced by recognising a write-down provision, and the amount of the loss is recognised in the Statement of Income. Loans and the associated write-down provisions are derecognised when there is no realistic prospect that they may be recovered in future and the guarantees have been enforced or transferred to the Group. If, in a subsequent year, the amount of an estimated impairment loss increases or decreases because of an event occurring after the impairment is recognised, the previously recognised impairment loss is increased or decreased by adjusting the provision.
Financial assets are classified and measured at fair values through other comprehensive income (OCI) when they are held in a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets. Upon the initial recognition of investments in equity instruments, the Group may irrevocably elect to classifying its equity investments as equity instruments measured at fair value through other comprehensive income (OCI) where they meet the definition of an equity instrument pursuant to IAS 32 – Financial Instruments: Presentation and are not held for trading. The classification is determined for each instrument. Gains and losses on such financial assets are never transferred to profit or loss. Dividends are recognised as other income in profit or loss when entitlement to payment is approved, unless the Group benefits from such income as a recovery of part of the cost of the financial asset, in which case the profits are taken to the other comprehensive income (OCI). Equity instruments measured at fair value through OCI are not tested for impairment.
Financial assets are removed from the Statement of Financial Position when the right to receive cash flows ceases, the Group transfers the right to receive cash flows from the asset to a third party, or the Group assumes a contractual obligation to pay them in full and without delay, and (1) it has transferred substantially all of the risks and rewards of ownership of the financial asset, or (2) it has neither transferred nor retained substantially all of the risks and rewards of the asset, but has transferred control of the asset.
Where the Group has transferred the rights to receive the cash flows from an asset, or has entered into a contractual arrangement whereby it retains its contractual right to receive the cash flows from the asset, but assumes a contractual obligation to pay cash flows to one or more beneficiaries (pass-through arrangement), it evaluates the extent to which it has retained the risks and rewards of ownership.
Upon initial recognition, financial liabilities are classified among financial liabilities at fair value through profit or loss, loans and financing or derivatives designated as hedging instruments. All financial liabilities are initially recognised at fair value, in addition to directly attributable transaction costs, in the cases of loans, financing and payables. The Group's financial liabilities extend to trade payables and other payables, loans and financing, including account overdrafts, guarantees issued and derivative financial instruments, as well as lease liabilities.
Loans and payables (the category of greatest significance for the Group) are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Statement of Income when the liability is extinguished, as well as through the amortisation process.
Amortised cost is calculated by including the discount or premium, as well as costs and fees, which are an integral part of the effective interest rate. Amortisation at the effective interest rate is gradually recognised to profit or loss over the life of the loan.
Financial guarantees issued are contracts that require a payment to reimburse the holder of a debt instrument for a loss incurred by the holder due to default by the debtor on payment at the contractual due date. When the Group issues financial guarantees, the financial guarantee contracts are initially recognised as liabilities at fair value, plus the transaction costs directly attributable to issuing the guarantee. The liability is then measured at the greater of the best estimate of the outlay required to meet the guaranteed obligation at the reporting date and the initially recognised amount, less cumulative amortisation.
A financial liability is derecognised when the obligation underlying the liability is extinguished, cancelled or discharged. Where one existing financial liability is replaced by another attributable to the same borrower with substantially different conditions, or the conditions of an existing liability are substantially modified, such exchange or modification is accounted for by derecognising the original liability and recognising a new liability, with any differences between carrying amounts recognised in the Statement of Income.
A financial asset and a financial liability may be set off against one another, and the net balance presented in the Statement of Financial Position, if there is a legally enforceable right to set off the recognised amounts and the entity intends either to settle on a net basis or realise the asset and settle the liability simultaneously.
Loans, payables and other financial and/or trade liabilities with a fixed or determinable maturity are initially recognised at fair value, net of the transaction costs. After initial recognition, these payables are evaluated using the criterion of amortised cost at the effective interest rate.
Long-term debts for which an interest rate is not specified are recognised by discounting future cash flows at market rate, if the increase in payables arises from the passage of time, with subsequent recognition of interest through profit or loss, in item "Net interest income (expense)".
Derivatives, including embedded derivatives separated from their host contracts, are initially recognised at fair value. Derivatives are classified as hedging instruments when the relationship between the derivative and the object of the hedge is formally documented and the degree of coverage, which is periodically checked, is high.
When hedging derivatives hedge the risk of changes in the fair values of the hedged instruments, they are recognised at fair value through profit or loss. Accordingly, the hedged instruments are adjusted to reflect changes in fair value associated with the hedged risk.
When derivatives hedge the risk of changes in the cash flows of the hedged instruments (cash flow hedges), the hedges are designated on the basis of the exposure to changes in cash flows attributable to risks that may influence profit or loss at a later date. Such risks are generally associated with a recognised asset or liability (such as future payments of variable-rate debt).
The effective portion of the change in the fair value of the part of derivative contracts designated as hedges in accordance with the requirements of IFRS 9 is recognised in the Statement of Comprehensive Income (hedging reserve). That reserve is then released to the profit or loss when the hedged transaction is recognised in Statement of Income.
By contrast, the ineffective portion of the change in fair value, along with the entire change in the fair value of derivatives not designated as hedges or that do not meet the requirements presented in IFRS 9, is recognised directly in profit or loss.
Revenue from contracts with customers is recognised in the Statement of Income for an amount that reflects the consideration to which the entity claims entitlement in exchange for transferring the control of the goods or services to the customer.
Revenues are recognised net of sales returns, discounts, allowances and taxes that are directly associated with the sale of the product or provision of the service.
Sales of goods and services are recognised at the fair value of the consideration received when the following conditions are met:
Revenues on the sale of equipment and study and design services to customers may be recognised as follows:
Interest income/expense is recognised as interest income/expense after being measured on an accrual basis.
Current tax assets and liabilities are measured as the amount that is expected to be recovered from or paid to the taxation authorities. The tax rates and laws used to calculate that amount are those enacted, or substantially enacted, at the reporting date in the countries in which the Group operates and generates its taxable income. Management periodically assesses the position assumed in the income tax return, where tax laws are subject to interpretation, and recognises provisions, where appropriate.
Any differences between the calculation of taxes in the financial statements and income tax returns or amounts paid or provisioned for direct income tax disputes are presented under the item "Prior-years' taxes and other tax payables".
Deferred tax assets and liabilities are recognised in order to reflect the temporary differences between the value attributed to an asset/liability for tax purposes and that attributed based on the accounting standards applied at the reporting date. They are measured using the tax rates that are expected to apply in the year when the assets will be realised or the liabilities will be settled, based on prevailing tax rates or those already enacted or substantially enacted at the reporting date.
Deferred tax assets are recognised for all deductible temporary differences, unused tax credits and unused tax losses eligible to be carried forward, to the extent it is probable that sufficient future taxable income will be available to permit the use of the deductible temporary differences, unused tax credits and unused tax losses carried forward, except for the cases of:
The carrying amounts of deferred tax assets are reviewed at each reporting date and reduced to the extent it is no longer probable that there will be sufficient future taxable income to permit all or part of the credit concerned to be used. Unrecognised deferred tax assets are reviewed at each reporting date and are recognised to the extent it has become probable that taxable income will be sufficient to permit such deferred tax assets to be recovered.
Deferred tax liabilities are recognised on all taxable temporary differences, with the following exceptions:
Tax balances (current and deferred) attributable to amounts recognised directly in equity are also recognised directly in equity.
Current and deferred tax assets and liabilities are offset only when the legal right of offset exists; such amounts are recognised as receivables or payables in the Statement of Financial Position.
Dividends are recognised when the shareholders' right to receive payment is established under local law. The Parent recognises a liability to account for the distribution to its shareholders of cash or non-cash assets once the distribution has been appropriately authorised and is no longer at the company's discretion. Under current Italian company law, a distribution is authorised when it has been approved by the shareholders. The corresponding amount is recognised directly in equity.
The Group classifies non-current assets and disposal groups as held for sale if their carrying amount will be recovered primarily through sale rather than through continuing use. Such non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value net of costs to sell. Costs to sell are incremental costs directly attributable to disposal, excluding interest expense and taxes. The conditions for classification as held for sale are only considered to be met when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. The actions required to complete the disposal should indicate that it is unlikely that significant changes to the disposal will be made or that the disposal will be withdrawn. Management must be committed to the disposal, the completion of which must be expected to occur within one year of the classification date. Depreciation of property, plant and equipment and amortisation of intangible assets ceases when such assets are classified as available for sale. Assets and liabilities classified as held for sale are given separately among the current items of the Statement of Financial Position. Assets held for sale are excluded from result from continuing operations and are presented through profit or loss for the year in a single item as "Income/(loss) from assets held for sale".
Based on the IFRS 8 definition, an operating segment is a component of an entity:
In light of such definition, the Brembo Group's operating segments are five Divisions/Business Units: Discs, Systems, Motorbikes, Performance Group, After Market.
Each Division/Business Unit Director reports to the top management and periodically discusses with them operating activities, financial statements results, forecasts or plans.
The Group thus aggregated the operating segments as follows for the purposes of financial reporting:
The segments that are included in each aggregate are similar in terms of:
Transfer prices applied to transactions between segments for the exchange of goods and services are settled according to usual market conditions.
In light of the requirements of IFRS 8 in terms of revenues earned from major customers, where a single customer is defined as all companies that belong to a given Group, Brembo had three customers in 2020 who accounted for over 10% of consolidated net revenues. None of the single car manufacturers comprising such groups exceeded this limit.
| Total | Discs/Systems/Motorbikes | After Market / Performance Group |
Interdivision | Non-segment data | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 |
| Sales | 2,246,775 | 2,646,536 | 1,870,112 | 2,244,010 | 377,048 | 399,347 | (3,346) | (3,334) | 2,961 | 6,513 |
| Allowances and discounts |
(35,831) | (41,732) | (3,082) | (3,560) | (32,760) | (38,153) | 0 | 0 | 11 | (19) |
| Net sales | 2,210,944 | 2,604,804 | 1,867,030 | 2,240,450 | 344,288 | 361,194 | (3,346) | (3,334) | 2,972 | 6,494 |
| Transport costs | 18,647 | 22,469 | 12,992 | 16,787 | 5,641 | 5,668 | 0 | 0 | 14 | 14 |
| Variable production costs |
1,349,052 | 1,601,412 | 1,125,969 | 1,363,045 | 222,887 | 234,516 | (3,346) | (3,334) | 3,542 | 7,185 |
| Contribution margin | 843,245 | 980,923 | 728,069 | 860,618 | 115,760 | 121,010 | 0 | 0 | (584) | (705) |
| Fixed production costs | 400,882 | 404,167 | 375,223 | 380,224 | 23,334 | 22,084 | 0 | 0 | 2,325 | 1,859 |
| Production gross operating income |
442,363 | 576,756 | 352,846 | 480,394 | 92,426 | 98,926 | 0 | 0 | (2,909) | (2,564) |
| BU personnel costs | 166,330 | 191,729 | 104,844 | 122,047 | 43,660 | 50,152 | 0 | 0 | 17,826 | 19,530 |
| BU gross operating income |
276,033 | 385,027 | 248,002 | 358,347 | 48,766 | 48,774 | 0 | 0 | (20,735) | (22,094) |
| Costs for Central Functions |
102,831 | 104,225 | 69,456 | 76,926 | 11,438 | 12,278 | 0 | 0 | 21,937 | 15,021 |
| OPERATING INCOME (LOSS) |
173,202 | 280,802 | 178,546 | 281,421 | 37,328 | 36,496 | 0 | 0 | (42,672) | (37,115) |
| Extraordinary costs and revenues |
9,012 | 30,198 | 0 | 0 | 0 | 0 | 0 | 0 | 9,012 | 30,198 |
| Financial costs and revenues |
(26,323) | (12,994) | 0 | 0 | 0 | 0 | 0 | 0 | (26,323) | (12,994) |
| Income (expense) from investments |
10,494 | 14,064 | 0 | 0 | 0 | 0 | 0 | 0 | 10,494 | 14,064 |
| Non-operating costs and revenues |
(10,645) | (10,801) | 0 | 0 | 0 | 0 | 0 | 0 | (10,645) | (10,801) |
| Result before taxes | 155,740 | 301,269 | 178,546 | 281,421 | 37,328 | 36,496 | 0 | 0 | (60,134) | (16,648) |
| Taxes | (17,802) | (68,208) | 0 | 0 | 0 | 0 | 0 | 0 | (17,802) | (68,208) |
| Result before minority interests |
137,938 | 233,061 | 178,546 | 281,421 | 37,328 | 36,496 | 0 | 0 | (77,936) | (84,856) |
| Minority interests | (1,405) | (1,760) | 0 | 0 | 0 | 0 | 0 | 0 | (1,405) | (1,760) |
| NET RESULT | 136,533 | 231,301 | 178,546 | 281,421 | 37,328 | 36,496 | 0 | 0 | (79,341) | (86,616) |
The following table shows segment information on sales of goods and services and results at 31 December 2020 and 31 December 2019:
A reconciliation between the annual Consolidated Financial Statements and the above information is provided below:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| REVENUE FROM CONTRACTS WITH CUSTOMERS | 2,208,639 | 2,591,670 |
| Scrap sales (in the segment report they are subtracted from "Variable production costs") |
(11,094) | (15,127) |
| Differences between internal and statutory reports relating to developments activities |
7,685 | 11,525 |
| Capital gains on sale of equipment (in the Consolidated Financial Statements they are included in "Other revenues and income") |
1,778 | 2,592 |
| Effect of adjustment of transactions among consolidated companies | (547) | (25) |
| Miscellaneous recharges (in the Consolidated Financial Statements they are included in "Other revenues and income") |
2,261 | 3,606 |
| Reclassification of Brembo Argentina's revenues | 0 | 6,302 |
| Other | 2,222 | 4,261 |
| NET SALES | 2,210,944 | 2,604,804 |
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| NET OPERATING INCOME | 181,135 | 318,539 |
| Differences between internal and statutory reports relating to developments activities |
1,554 | (2,286) |
| Other differences between internal and statutory reports | 5,249 | 163 |
| Income (expense) from non-financial investments | (10,392) | (13,794) |
| Claim compensation and subsidies | (5,416) | (16,824) |
| Capital gains/losses on disposal of assets (in the segment report they are included in "Non-operating costs and revenues") |
(200) | (629) |
| Different classification of banking expenses (in the segment report they are included in "Financial costs and revenues") |
817 | 791 |
| Reclassification of Brembo Argentina | 10 | (5,337) |
| Other | 445 | 179 |
| OPERATING RESULT | 173,202 | 280,802 |
The breakdown of Group sales by geographic area of destination and by application is provided in the Directors' Report on Operations.
| Total | After Market / Discs/Systems/Motorbikes Performance Group Interdivision |
Non-segment data | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 |
| Property, plant and equipment | 1,183,280 | 1,258,800 | 1,073,821 1,156,099 | 74,322 | 69,931 | 5 | 5 | 35,132 | 32,765 | |
| Intangible assets | 127,275 | 141,040 | 103,837 | 116,272 | 17,653 | 18,374 | 0 | 0 | 5,785 | 6,394 |
| Financial assets and other non-current assets/liabilities |
83,570 | 63,356 | 369 | 443 | 0 | 0 | 0 | 0 | 83,201 | 62,913 |
| (a) Total fixed assets | 1,394,125 | 1,463,196 | 1,178,027 1,272,814 | 91,975 | 88,305 | 5 | 5 | 124,118 | 102,072 | |
| Inventories | 354,749 | 342,254 | 260,891 | 249,074 | 92,935 | 92,241 | 0 | 0 | 923 | 939 |
| Current assets | 523,126 | 495,826 | 345,509 | 353,795 | 47,970 | 44,827 | (16,525) | (15,312) | 146,172 | 112,516 |
| Current liabilities | (659,014) | (631,815) | (413,288) | (416,045) | (85,648) | (87,489) | 16,525 | 15,312 | (176,603) | (143,593) |
| Provisions for contingencies and charges and other provisions |
(63,800) | (33,699) | (514) | 0 | 0 | 0 | 0 | 0 | (63,286) | (33,699) |
| (b) Net working capital | 155,061 | 172,566 | 192,598 | 186,824 | 55,257 | 49,579 | 0 | 0 | (92,794) | (63,837) |
| NET INVESTED OPERATING CAPITAL (a+b) |
1,549,186 | 1,635,762 | 1,370,625 1,459,638 | 147,232 | 137,884 | 5 | 5 | 31,324 | 38,235 | |
| Extraordinary components | 342,307 | 122,876 | 53 | 53 | 0 | 0 | 0 | 0 | 342,254 | 122,823 |
| NET INVESTED CAPITAL | 1,891,493 | 1,758,638 | 1,370,678 1,459,691 | 147,232 | 137,884 | 5 | 5 | 373,578 | 161,058 | |
| Group equity | 1,450,059 | 1,357,163 | 0 | 0 | 0 | 0 | 0 | 0 | 1,450,059 1,357,163 | |
| Minority interests | 30,982 | 30,852 | 0 | 0 | 0 | 0 | 0 | 0 | 30,982 | 30,852 |
| (d) Equity | 1,481,041 | 1,388,015 | 0 | 0 | 0 | 0 | 0 | 0 | 1,481,041 1,388,015 | |
| (e) Provisions for employee benefits |
26,567 | 25,584 | 0 | 0 | 0 | 0 | 0 | 0 | 26,567 | 25,584 |
| Medium/long-term financial debt |
736,588 | 375,005 | 0 | 0 | 0 | 0 | 0 | 0 | 736,588 | 375,005 |
| Short-term financial debt | (352,703) | (29,966) | 0 | 0 | 0 | 0 | 0 | 0 | (352,703) | (29,966) |
| (f) Net financial debt | 383,885 | 345,039 | 0 | 0 | 0 | 0 | 0 | 0 | 383,885 | 345,039 |
| (g) COVERAGE (d)+(e)+(f) | 1,891,493 | 1,758,638 | 0 | 0 | 0 | 0 | 0 | 0 | 1,891,493 1,758,638 |
Statement of Financial Position data at 31 December 2020 and 31 December 2019 are provided in the tables below:
The following should be noted in regard to the non-segment data:
The Brembo Group is exposed to market, commodity, liquidity and credit risk, all of which are tied to the use of financial instruments.
Financial risk management is the responsibility of the central Treasury & Credit Department of Brembo S.p.A., which, together with the Finance Department, evaluates the main financial transactions and related hedging policies.
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices resulting from shifts in exchange rates, interest rates and equity security prices.
Interest rate risk applies to variable-rate financial instruments recognised in the Statement of Financial Position (particularly short-term bank loans, other loans, leases, bonds, etc.) that are not hedged by other financial instruments.
In order to fix the financial burden relating to a part of its debt, Brembo has mainly entered into fixed-rate financing contracts and interest rate swaps. However, the company continues to be exposed to interest-rate risk due to the fluctuation of variable rates.
A sensitivity analysis was performed to analyse the effects of a change in interest rates of +/- 50 base points compared to the rates at 31 December 2020 and 31 December 2019, with other variables held constant. The potential impacts were calculated on the variable-rate financial liabilities at 31 December 2020. The aforementioned change in interest rates would result in a higher (or lower) annual net pre-tax expense of approximately €1,133 thousand (€683 thousand at 31 December 2019), gross of the tax effect.
The average weekly gross financial debt was used to provide the most reliable information possible.
Brembo deals in international markets with currencies other than the euro and is therefore exposed to exchange rate risk.
To mitigate this risk, Brembo uses natural hedging (offsetting receivables and payables) and hedges only net positions in foreign currency, using mostly short-term financing denominated in the currency to be hedged, in order to offset any unbalances; currency forward contracts are also used to hedge this risk category.
A sensitivity analysis is provided below to illustrate the effects on pre-tax result arising on a positive (negative) change in exchange rates.
Starting with the exposures at 31 December 2020 and 2019, a change calculated as the standard deviation of the exchange rate with respect to the average exchange rate was applied to the average exchange rates for 2020 and 2019 to measure exchange rate volatility.
| 31.12.2020 | ||||||
|---|---|---|---|---|---|---|
| (euro thousand) | Change % | Effect of exchange rate increase |
Effect of exchange rate decrease |
Change % | Effect of exchange rate increase |
Effect of exchange rate decrease |
| EUR/CHF | 0.92% | (0.2) | 0.2 | 1.67% | 0.1 | (0.1) |
| EUR/CNY | 2.27% | (35.7) | 37.4 | 1.37% | (48.3) | 49.6 |
| EUR/CZK | 2.82% | 1.0 | (1.1) | 0.49% | (0.3) | 0.3 |
| EUR/DKK | 0.16% | (51.4) | 51.6 | 0.05% | 0.0 | 0.0 |
| EUR/GBP | 2.62% | 5.9 | (6.2) | 2.36% | 10.4 | (10.9) |
| EUR/INR | 4.18% | 5.4 | (5.9) | 1.50% | 0.4 | (0.4) |
| EUR/JPY | 2.56% | (38.5) | 40.6 | 2.23% | (16.1) | 16.9 |
| EUR/PLN | 2.28% | (21.0) | 22.0 | 0.78% | (5.7) | 5.8 |
| EUR/RUB | 9.25% | 29.0 | (34.9) | 2.61% | 0.0 | 0.0 |
| EUR/SEK | 2.20% | 26.7 | (27.9) | 1.47% | 16.5 | (17.0) |
| EUR/USD | 3.90% | 72.1 | (78.0) | 1.22% | 16.9 | (17.3) |
| PLN/CNY | 2.96% | 4.9 | (5.2) | 1.42% | 7.2 | (7.4) |
| PLN/EUR | 2.31% | (577.8) | 605.1 | 0.77% | (73.5) | 74.7 |
| PLN/GBP | 1.98% | 2.4 | (2.5) | 2.25% | 0.3 | (0.3) |
| PLN/JPY | 3.50% | 0.5 | (0.5) | 2.62% | 0.8 | (0.9) |
| PLN/USD | 4.09% | (35.5) | 38.6 | 1.67% | (2.7) | 2.8 |
| PLN/CHF | 2.65% | (0.7) | 0.7 | 2.01% | 6.5 | (6.8) |
| GBP/AUD | 3.97% | (0.7) | 0.7 | 2.13% | (0.9) | 1.0 |
| GBP/EUR | 2.69% | 14.8 | (15.6) | 2.35% | 39.8 | (41.7) |
| GBP/USD | 3.10% | 2.6 | (2.8) | 2.62% | (5.8) | 6.1 |
| USD/CNY | 2.69% | (1.3) | 1.3 | 2.15% | (3.4) | 3.5 |
| USD/EUR | 3.88% | 108.1 | (116.8) | 1.22% | 54.8 | (56.2) |
| USD/MXN | 8.12% | 89.5 | (105.3) | 1.41% | 30.8 | (31.7) |
| BRL/EUR | 12.37% | 47.7 | (61.2) | 3.07% | 15.1 | (16.0) |
| BRL/GBP | 9.95% | 0.1 | (0.2) | 4.31% | 0.0 | 0.0 |
| BRL/USD | 10.21% | 4.7 | (5.7) | 4.06% | 16.7 | (18.1) |
| JPY/EUR | 2.58% | 9.0 | (9.5) | 2.23% | 5.1 | (5.3) |
| JPY/USD | 1.89% | 0.8 | (0.9) | 1.46% | 0.9 | (1.0) |
| CNY/EUR | 2.26% | 211.8 | (221.5) | 1.38% | 246.2 | (253.1) |
| CNY/CHF | 1.90% | 11.2 | (11.6) | 2.84% | 0.0 | 0.0 |
| CNY/JPY | 1.92% | 0.6 | (0.6) | 3.41% | 4.9 | (5.2) |
| CNY/USD | 2.75% | (36.2) | 38.2 | 2.15% | (100.5) | 104.9 |
| INR/EUR | 4.28% | (64.3) | 70.0 | 1.49% | (11.2) | 11.6 |
| INR/JPY | 3.14% | 39.4 | (41.9) | 2.37% | 35.2 | (36.9) |
| INR/USD | 2.08% | 11.4 | (11.9) | 1.47% | (5.2) | 5.4 |
| CZK/EUR | 2.87% | 143.0 | (151.5) | 0.49% | 15.6 | (15.7) |
| CZK/GBP | 2.16% | (0.3) | 0.3 | 2.22% | (0.5) | 0.5 |
| CZK/PLN | 1.08% | 1.1 | (1.1) | 0.53% | 4.6 | (4.7) |
| CZK/USD | 4.67% | (44.6) | 49.0 | 1.40% | (0.4) | 0.4 |
The Group is exposed to changes in prices of main raw materials and commodities. In 2020, no specific financial hedging transactions were undertaken. However, it should be recalled that fixed prices are set in supply contracts with certain commodities suppliers for a given period of time and that the contracts in place with the main customers also provide for automatic periodic indexing on the basis of commodities prices; both these approaches thus mitigate the risk of fluctuations in commodities prices.
Liquidity risk can arise from a company's inability to obtain the financial resources necessary to guarantee Brembo's operation.
To mitigate liquidity risk, the Treasury & Credit area:
The following table provides information on payables, other payables and derivatives broken down by maturity. The maturities are determined based on the period from the reporting date to the expiry of the contractual obligations. The amounts shown in the table reflect undiscounted cash flows and the fair value of existing derivative liabilities. For fixed- and variable-rate financial liabilities, both principal and interest were considered for the different maturity periods; for variable-rate liabilities, the rate at 31 December 2020 plus the relevant spread was used.
| (euro thousand) | Carrying value | Contractual cash flows |
Within 1 year |
From 1 to 5 years |
Beyond 5 years |
|---|---|---|---|---|---|
| Non-derivative financial liabilities | |||||
| Short-term credit lines and bank overdrafts | 106,052 | 106,052 | 106,052 | 0 | 0 |
| Payables to banks (loans and bonds) | 618,166 | 634,998 | 73,303 | 372,374 | 189,321 |
| Payables to other financial institutions | 1,227 | 1,229 | 275 | 948 | 6 |
| Lease liabilities | 208,888 | 208,888 | 21,473 | 64,809 | 122,606 |
| Trade and other payables | 488,312 | 488,312 | 488,312 | 0 | 0 |
| Derivative financial liabilities | |||||
| Derivatives | 3,564 | 3,564 | 3,564 | 0 | 0 |
| Total | 1,426,209 | 1,443,043 | 692,979 | 438,131 | 311,933 |
Some of the Group's loan agreements require the satisfaction of financial covenants and the obligation for the Group to meet certain financial ratio levels.
In detail, the following covenants and relevant maximum thresholds are to be complied with:
If the covenants are not met, the financial institutions can request early repayment of the relevant loan.
The values of these covenants are monitored at the end of each quarter, and at 31 December 2020 the Group had complied with the covenants in question by a considerable margin.
Management believes that currently available lines of credit, apart from the cash flow generated by current operations, will allow Brembo to meet its financial requirements arising from investing activities, working capital management, and the payment of payables at their natural maturities.
In further detail, at 31 December 2020, unused bank credit facilities were 80% (a total of €523 million in credit facilities were available).
Credit risk is the risk that a customer or one of the parties to a financial instrument will cause a financial loss by failing to perform an obligation. Exposure to credit risk for the Group arises mainly in relation to trade receivables. Most parties with which the Group does business are leading car and motorbike manufacturers with high credit standings.
The Group evaluates the creditworthiness of all new customers using assessments from external sources and then assigns a credit limit.
To complete the disclosure of financial risks, the following information is provided:
a) the fair value hierarchy for the Group's assets and liabilities:
| 31.12.2020 | 31.12.2019 | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Financial assets (liabilities) measured at fair value | ||||||
| Forward contracts denominated in foreign currency | 0 | 186 | 0 | 0 | (347) | 0 |
| Interest rate swaps | 0 | (3,558) | 0 | 0 | (252) | 0 |
| Embedded derivative | 0 | 0 | 312 | 0 | 0 | 1,480 |
| Total financial assets (liabilities) measured at fair value | 0 | (3,372) | 312 | 0 | (599) | 1,480 |
| Assets (liabilities) for which fair value is indicated | ||||||
| Current and non-current payables to banks | 0 | (620,611) | 0 | 0 | (325,275) | 0 |
| Current and non-current lease liabilities | 0 | (208,888) | 0 | 0 | (195,983) | 0 |
| Other current and non-current financial liabilities | 0 | (1,227) | 0 | 0 | (1,439) | 0 |
| Total assets (liabilities) for which fair value is indicated | 0 | (830,726) | 0 | 0 | (522,697) | 0 |
Movements for the year of Level 3 were as follows:
| (euro thousand) | 31.12.2020 |
|---|---|
| Opening value | 1,480 |
| Movements in Statement of Income | (1,168) |
| Closing value | 312 |
b) a reconciliation between the classes of financial assets and liabilities identified in the Group's Statement of Financial Position and the types of financial assets and liabilities identified based on the requirements of IFRS 7:
| Carrying value | Fair value | ||||
|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | |
| Available-for-sale financial assets | 213,669 | 1,788 | 213,669 | 1,788 | |
| Financial assets held for trading | 1,000 | 0 | 1,000 | 0 | |
| Loans, receivables and financial liabilities valued at amortised costs: |
|||||
| Current and non-current financial assets (excluding derivatives) | 4,028 | 5,249 | 4,028 | 5,249 | |
| Trade receivables | 385,439 | 391,925 | 385,439 | 391,925 | |
| Loans and receivables | 66,515 | 57,813 | 66,515 | 57,813 | |
| Cash and cash equivalents | 551,282 | 304,793 | 551,282 | 304,793 | |
| Current and non-current payables to banks | (724,218) | (454,213) | (750,144) | (461,509) | |
| Current and non-current lease liabilities | (208,888) | (195,983) | (208,888) | (195,983) | |
| Other current and non-current financial liabilities | (1,227) | (1,626) | (1,227) | (1,626) | |
| Trade payables | (474,906) | (473,996) | (474,906) | (473,996) | |
| Other current liabilities | (158,613) | (143,273) | (158,613) | (143,273) | |
| Other non-current liabilities | (14,891) | (9,472) | (14,891) | (9,472) | |
| Derivatives | (3,060) | 881 | (3,060) | 881 | |
| Total | (363,870) | (516,114) | (389,796) | (523,410) |
The approach used to calculate fair value is the present value of the future cash flows expected to derive from the instrument being measured, determined by discounting the scheduled instalments at a rate equal to the forward rate curve applicable to each account payable. In detail:
The Group carries out transactions with parents, subsidiaries, associates, joint ventures, directors, key management personnel and other related parties. The Parent Brembo S.p.A. is a subsidiary of Nuova FourB S.r.l., which holds 53.523% of its share capital. Brembo did not engage in dealings with its parent in 2020, except for the dividend distribution.
Information pertaining to the fees paid to Directors and Statutory Auditors of Brembo S.p.A. and of other Group companies and additional information required is reported below:
| 31.12.2020 | 31.12.2019 | ||||
|---|---|---|---|---|---|
| (euro thousand) | Directors | Auditors | Directors | Auditors | |
| Emoluments and other incentives for the office held | 6,038 | 196 | 4,320 | 196 | |
| Participation in committees and specific tasks | 155 | 0 | 155 | 0 | |
| Salaries and other incentives | 3,587 | 0 | 4,956 | 0 |
The item "Salaries and other incentives" includes the estimate of the cost of the 2019-2021 plan reserved for the company's top managers and accrued in 2020, remuneration paid as salaries for the employee function and provisions for bonuses still to be paid.
The following table provides a summary of related party transactions with reference to balances of the Statement of Financial Position and Statement of Income:
| (euro thousand) | 31.12.2020 | 31.12.2019 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Related Parties | Related Parties | |||||||||||
| a) Weight of transactions or positions with related parties on items of the Statement of Financial Position |
Carrying value |
Total | Other* | Joint ventures |
Associates | % | Carrying value |
Total | Other* | Joint ventures |
Associates | % |
| Other financial assets (including investments in other companies |
||||||||||||
| and derivatives) | 217,263 | 2,716 | 0 | 0 | 2,716 | 1.3% | 7,078 | 3,716 | 0 | 0 | 3,716 | 52.5% |
| Inventories | 354,887 | 0 | 0 | 0 | 0 | 0.0% | 342,203 | 219 | 0 | 219 | 0 | 0.1% |
| Trade receivables | 385,439 | 1,775 | 5 | 1,696 | 74 | 0.5% | 391,925 | 2,094 | 14 | 2,005 | 75 | 0.5% |
| Other non-current liabilities | (14,891) | (5,147) | (5,147) | 0 | 0 | 34.6% | (9,472) | (3,782) | (3,782) | 0 | 0 | 39.9% |
| Provisions for employee benefits | (26,567) | (4,292) | (4,292) | 0 | 0 | 16.2% | (25,584) | (2,633) | (2,633) | 0 | 0 | 10.3% |
| Trade payables | (474,906) | (9,289) | (3,541) | (5,504) | (244) | 2.0% | (473,996) | (8,223) | (1,267) | (6,624) | (332) | 1.7% |
| Other current liabilities | (158,613) | (2,825) | (2,698) | (127) | 0 | 1.8% | (143,273) | (1,988) | (1,860) | (128) | 0 | 1.4% |
| 31.12.2020 | 31.12.2019 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Related Parties | Related Parties | ||||||||||||
| b) Weight of transactions or positions with related parties on items of the Statement of Income |
Carrying value |
Total | Other* | Joint ventures |
Associates | % | Carrying value |
Total | Other* | Joint ventures |
Associates | % | |
| Revenue from contracts with customers |
2,208,639 | 227 | 0 | 227 | 0 | 0.0% | 2,591,670 | 406 | 0 | 396 | 10 | 0.0% | |
| Other revenues and income | 23,478 | 3,418 | 20 | 3,224 | 174 | 14.6% | 33,965 | 3,972 | 21 | 3,778 | 173 | 11.7% | |
| Raw materials, consumables and goods |
(1,024,961) | (30,826) | (3) | (30,729) | (94) | 3.0% | (1,214,623) | (53,126) | (3) | (52,675) | (448) | 4.4% | |
| Other operating costs | (426,407) | (10,805) | (7,847) | (2,143) | (815) | 2.5% | (470,588) | (8,392) | (5,383) | (1,770) | (1,239) | 1.8% | |
| Personnel expenses | (425,029) | (4,834) | (4,834) | 0 | 0 | 1.1% | (465,696) | (7,290) | (7,284) | (6) | 0 | 1.6% | |
| Net interest income (expense) | (25,212) | 21 | 21 | 0 | 0 | -0.1% | (11,137) | 68 | 28 | (1) | 41 | -0.6% |
* Other related parties include key management personnel of the entity and other related parties.
Sales of products, supply of services and the transfers of fixed assets between Group companies were carried out at prices reflecting fair market conditions. The trading volumes reflect the internationalisation process aimed at constantly improving both operating and organisational standards and optimising synergies within the company.
From a financial standpoint, the subsidiaries operate independently, although some benefit from various forms of centralised financing. Since 2008, a zero-balance cash-pooling system has been effective, with Brembo S.p.A. as the pool leader. In 2013, an additional cash pooling arrangement was put in place, denominated in CNY, with Brembo Nanjing Brake Systems Co. Ltd. as pooler and Brembo Nanjing Automotive Components Co. Ltd., Qingdao Brembo Trading Co. Ltd. and Brembo Huilian (Langfang) Brake Systems Co. Ltd. as participants. The cash pooling is entirely based in China, and Citibank China is the service provider.
The key figures of Group companies are commented upon in the sections of the Directors' Report on Operations "Group Structure" and "Performance of Brembo Companies".
| COMPANY | HEADQUARTERS | SHARE CAPITAL | STAKE HELD | BY GROUP COMPANIES | ||
|---|---|---|---|---|---|---|
| Brembo S.p.A. | Curno (Bergamo) | Italy | Eur | 34,727,914 | ||
| AP Racing Ltd. | Coventry | United Kingdom | Gbp | 135,935 | 100% Brembo S.p.A. | |
| Brembo Deutschland GmbH | Leinfelden Echterdingen |
Germany | Eur | 25,000 | 100% Brembo S.p.A. | |
| Brembo North America Inc. | Wilmington, Delaware |
USA | Usd | 33,798,805 | 100% Brembo S.p.A. | |
| Brembo Czech S.r.o. | Ostrava-Hrabová | Czech Republic | Czk | 605,850,000 | 100% Brembo S.p.A. | |
| La.Cam (Lavorazioni Camune) S.r.l. | Stezzano (Bergamo) |
Italy | Eur | 100,000 | 100% Brembo S.p.A. | |
| Qingdao Brembo Trading Co. Ltd. | Qingdao | China | Cny | 1,365,700 | 100% Brembo S.p.A. | |
| Brembo Japan Co. Ltd. | Tokyo | Japan | Jpy | 11,000,000 | 100% Brembo S.p.A. | |
| Brembo Poland Spolka Zo.o. | Dąbrowa Górnicza | Poland | Pln | 144,879,500 | 100% Brembo S.p.A. | |
| Brembo Scandinavia A.B. | Göteborg | Sweden | Sek | 4,500,000 | 100% Brembo S.p.A. | |
| Brembo Nanjing Brake Systems Co. Ltd. | Nanjing | China | Cny | 492,030,169 | 100% Brembo S.p.A. | |
| Brembo Russia Llc. | Moscow | Russia | Rub | 1,250,000 | 100% Brembo S.p.A. | |
| 98.62% Brembo S.p.A. | ||||||
| Brembo Argentina S.A. in liquidazione | Buenos Aires | Argentina | Ars | 62,802,000 | 1.38% Brembo do Brasil Ltda. | |
| 49% Brembo S.p.A. | ||||||
| Brembo México S.A. de C.V. | Apodaca | Mexico | Usd | 20,428,836 | 51% Brembo North America Inc. | |
| Brembo (Nanjing) Automobile | Nanjing | China | Cny | 235,194,060 | 60% Brembo S.p.A. | |
| Components Co. Ltd. | 40% Brembo Brake India Pvt. Ltd. | |||||
| Brembo Brake India Pvt. Ltd. | Pune | India | Inr | 140,000,000 99.99% Brembo S.p.A. | ||
| Brembo do Brasil Ltda. | Betim | Brazil | Brl | 159,136,227 99.99% Brembo S.p.A. | ||
| Corporación Upwards '98 S.A. | Zaragoza | Spain | Eur | 498,043 | 68% Brembo S.p.A. | |
| Brembo Huilian (Langfang) Brake Systems Co. Ltd. |
Langfang | China | Cny | 170,549,133 | 66% | Brembo S.p.A. |
| Brembo SGL Carbon Ceramic Brakes S.p.A. | Stezzano (Bergamo) |
Italy | Eur | 4,000,000 | 50% | Brembo S.p.A. |
| Petroceramics S.p.A. | Milan | Italy | Eur | 123,750 | 20% | Brembo S.p.A. |
| Infibra Technologies S.r.l. | Pisa | Italy | Eur | 53,133 | 20% | Brembo S.p.A. |
| Brembo SGL Carbon Ceramic Brakes GmbH |
Meitingen | Germany | Eur | 25,000 | 100% | Brembo SGL Carbon Ceramic Brakes S.p.A. |
Details on the fees paid to the independent audit firm and other companies within its network pursuant to Article 149-duodecies of the Implementation Rules of Italian Legislative Decree No. 58 of 24 February 1998 are provided below:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Independent Auditors' fees for the provision of audit services: | ||
| - to the Parent Brembo S.p.A. | 225 | 225 |
| - to the subsidiaries (services provided by the network) | 422 | 422 |
| Independent Auditors' fees for the provision of auditing services for issuing attestation: |
||
| - to the Parent Brembo S.p.A. | 71 | 81 |
| Fees of entities belonging to the Independent Auditors' network for the provision of services: |
||
| - other services rendered to subsidiaries | 2 | 1 |
The Group had no commitments at the closing date of the 2020 Financial Statements.
Pursuant to Consob Notice No. 6064293 dated 28 July 2006, it is hereby specified that during 2020 the company did not carry out any atypical and/or unusual transactions, as defined by the said Notice.
In light of the interpretation provided by Assonime in its Circular No. 5 of 22 February 2019, the obligations to disclose and publish government grants established by Article 1, paragraphs 125-129, of Law No. 124/2017, as also governed by the subsequent Security Decree-Law (No. 113/2018) and Simplification Decree-Law (No. 135/2018), which introduced a series of disclosure and publication obligations for entities that engage in economic relations with the public administration, with effect from the 2018 financial statements, are not believed to apply in the following cases:
reference established by the government (for example, the ACE (economic growth aid) mechanism aimed at encouraging the reinvestment of profits);
In view of the foregoing, the Group analysed its situation and decided to disclose in this paragraph the amount it received in 2020 by way of grants disbursed by CSEA Cassa per i Servizi Energetici e Ambientali for energy-intensive undertakings, totalling €46 thousand overall.
On 7 January 2021, after issuing the press release dated 17 November 2020, Brembo completed the acquisition of SBS Friction A/S, a company based in Svendborg (Denmark) that develops and manufactures brake pads for motorbikes using particularly innovative and eco-friendly sintered organic materials.
The investment is 60% held by Brembo S.p.A. and 40% by Brembo Brake India Pvt. Ltd. The total outlay for the transaction was 224 million Danish Kroner (€30.1 million), paid using available liquidity and subject to the usual adjustment mechanisms applicable to similar transactions. The enterprise value of the transaction was 300 million Danish Kroner (€40.3 million).
The perfect dialogue between humankind and machine. An increasingly vast and in-depth knowledge communicates with technology and the possibilities it offers. Digitalisation and artificial intelligence are already our present.
The changes in property, plant and equipment are shown in the table below and described in this section.
| (euro thousand) | Land | Buildings | Plant and machinery |
Industrial and commercial equipment |
Other assets |
Assets in course of construction and payments on account |
Total |
|---|---|---|---|---|---|---|---|
| Historical cost | 31,301 | 398,384 | 1,261,071 | 227,951 | 63,006 | 108,796 | 2,090,509 |
| Accumulated depreciation | 0 | (109,663) | (711,554) | (186,503) | (38,822) | 0 | (1,046,542) |
| Write-down provision | 0 | (13) | (2,242) | 0 | 0 | (375) | (2,630) |
| Balance at 1 January 2019 | 31,301 | 288,708 | 547,275 | 41,448 | 24,184 | 108,421 | 1,041,337 |
| Changes: | |||||||
| Translation differences | 161 | 3,338 | 4,783 | 171 | 189 | 1,365 | 10,007 |
| Reclassification | 92 | 10,210 | 63,868 | 6,132 | 2,754 | (88,207) | (5,151) |
| Acquisitions | 357 | 20,514 | 88,603 | 18,302 | 4,064 | 43,652 | 175,492 |
| Disposals | 0 | (58) | (1,117) | (501) | (30) | (1,448) | (3,154) |
| Other | 0 | 0 | (651) | (29) | (3) | (1) | (684) |
| Depreciation | 0 | (18,309) | (110,219) | (19,243) | (5,508) | 0 | (153,279) |
| Impairment losses | 0 | 0 | (136) | (19) | 0 | (106) | (261) |
| Total changes | 610 | 15,695 | 45,131 | 4,813 | 1,466 | (44,745) | 22,970 |
| Historical cost | 31,911 | 433,396 | 1,406,365 | 250,247 | 68,480 | 63,986 | 2,254,385 |
| Accumulated depreciation | 0 | (128,980) | (811,555) | (203,968) | (42,830) | 0 | (1,187,333) |
| Write-down provision | 0 | (13) | (2,404) | (18) | 0 | (310) | (2,745) |
| Balance at 1 January 2020 | 31,911 | 304,403 | 592,406 | 46,261 | 25,650 | 63,676 | 1,064,307 |
| Changes: | |||||||
| Translation differences | (729) | (16,646) | (26,809) | (1,274) | (562) | (3,816) | (49,836) |
| Reclassification | 268 | 3,092 | 29,382 | 6,033 | 1,549 | (43,999) | (3,675) |
| Acquisitions | 15 | 6,580 | 55,920 | 10,363 | 2,299 | 49,120 | 124,297 |
| Disposals | 0 | (1) | (791) | (680) | 0 | (343) | (1,815) |
| Depreciation | 0 | (18,504) | (113,004) | (19,743) | (5,716) | 0 | (156,967) |
| Impairment losses | 0 | (5) | (434) | (7) | (13) | (28) | (487) |
| Total changes | (446) | (25,484) | (55,736) | (5,308) | (2,443) | 934 | (88,483) |
| Historical cost | 31,465 | 420,847 | 1,417,585 | 259,155 | 71,304 | 64,734 | 2,265,090 |
| Accumulated depreciation | 0 | (141,911) | (878,236) | (218,184) | (48,084) | 0 | (1,286,415) |
| Write-down provision | 0 | (17) | (2,679) | (18) | (13) | (124) | (2,851) |
| Balance at 31 December 2020 | 31,465 | 278,919 | 536,670 | 40,953 | 23,207 | 64,610 | 975,824 |
In 2020, investments were made in tangible fixed assets amounting to €124,297 thousand, including €49,120 thousand on fixed assets in course of construction.
As already noted in the Directors' Report on Operations, the Group continued its international development programme. This involved significant investments in Italy, Poland, North America and the Czech Republic.
Net disposals amounted to €1,815 thousand and refer to the normal cycle of machinery replacement, as it becomes unusable in production processes.
Total depreciation charges for 2020 amounted to €156,967 thousand (2019: €153,279 thousand).
The following table shows the movements in item "Right of use assets":
| (euro thousand) | Land | Buildings | Other assets | Total |
|---|---|---|---|---|
| Historical cost | 0 | 0 | 204 | 204 |
| Accumulated depreciation | 0 | 0 | (99) | (99) |
| Balance at 1 January 2019 | 0 | 0 | 105 | 105 |
| Changes: | ||||
| Translation differences | 0 | (10) | 7 | (3) |
| Effect of IFRS 16 FTA | 0 | 167,158 | 10,494 | 177,652 |
| Reclassification from leased assets to property, plant and equipment |
222 | 0 | (15) | 207 |
| New contracts/leases for the year | 483 | 25,116 | 12,566 | 38,165 |
| Unwinding of lease contract | 0 | (1,465) | (20) | (1,485) |
| Other | 0 | 0 | (4) | (4) |
| Depreciation | 0 | (14,229) | (5,915) | (20,144) |
| Total changes | 705 | 176,570 | 17,113 | 194,388 |
| Historical cost | 705 | 190,548 | 23,119 | 214,372 |
| Accumulated depreciation | 0 | (13,978) | (5,901) | (19,879) |
| Balance at 1 January 2020 | 705 | 176,570 | 17,218 | 194,493 |
| Changes: | ||||
| Translation differences | (41) | (5,118) | (464) | (5,623) |
| New contracts/leases for the year | 7 | 28,083 | 9,665 | 37,755 |
| Unwinding of lease contract | 0 | 0 | (129) | (129) |
| Other | 3,637 | (477) | (63) | 3,097 |
| Depreciation | (98) | (13,958) | (8,081) | (22,137) |
| Total changes | 3,505 | 8,530 | 928 | 12,963 |
| Historical cost | 4,530 | 212,698 | 30,524 | 247,752 |
| Accumulated depreciation | (320) | (27,598) | (12,378) | (40,296) |
| Balance at 31 December 2020 | 4,210 | 185,100 | 18,146 | 207,456 |
Among the increases, at the end of 2020 Brembo Czech entered into a new operating lease for a building (designated O23) of approximately 22,000 square meters in the same business park as that in which its current production facility is located. Painting, pad printing and assembly of fixed aluminium callipers will be transferred to the new building, as well as storage of semi-finished and finished products, in addition to a part dedicated to office space. The RoU (Right of Use) recognised, calculated over a period of 15 years, has a value of approximately €25 million.
Note 13 provides other information on the Group's financial commitment with respect to leased assets.
The changes in this item are shown in the table below and described in this section.
| Development costs |
Goodwill | Intangible assets with indefinite useful lives |
Sub-total | Industrial patents and similar rights |
Other intangible assets |
Total other intangible assets |
Total | |
|---|---|---|---|---|---|---|---|---|
| (euro thousand) | A | B | A+B | C | D | C+D | ||
| Historical cost | 182,299 | 92,911 | 1,401 | 94,312 | 39,008 | 127,840 | 166,848 | 443,459 |
| Accumulated amortisation | (108,607) | 0 | 0 | 0 | (29,737) | (82,909) | (112,646) | (221,253) |
| Write-down provision | (388) | (11,587) | (3) | (11,590) | (1,089) | 0 | (1,089) | (13,067) |
| Balance at 1 January 2019 | 73,304 | 81,324 | 1,398 | 82,722 | 8,182 | 44,931 | 53,113 | 209,139 |
| Changes: | ||||||||
| Translation differences | 144 | 1,158 | 3 | 1,161 | 3 | 242 | 245 | 1,550 |
| Reclassification | 0 | 0 | 0 | 0 | 18 | 2,867 | 2,885 | 2,885 |
| Acquisitions | 26,628 | 0 | 0 | 0 | 3,490 | 7,993 | 11,483 | 38,111 |
| Other | 0 | 0 | 0 | 0 | 1 | (459) | (458) | (458) |
| Amortisation | (11,153) | 0 | 0 | 0 | (1,331) | (8,780) | (10,111) | (21,264) |
| Impairment losses | (1,682) | 0 | 0 | 0 | 0 | 0 | 0 | (1,682) |
| Total changes | 13,937 | 1,158 | 3 | 1,161 | 2,181 | 1,863 | 4,044 | 19,142 |
| Historical cost | 209,139 | 94,665 | 1,404 | 96,069 | 42,542 | 138,436 | 180,978 | 486,186 |
| Accumulated amortisation | (119,828) | 0 | 0 | 0 | (31,090) | (91,642) | (122,732) | (242,560) |
| Write-down provision | (2,070) | (12,183) | (3) | (12,186) | (1,089) | 0 | (1,089) | (15,345) |
| Balance at 1 January 2020 | 87,241 | 82,482 | 1,401 | 83,883 | 10,363 | 46,794 | 57,157 | 228,281 |
| Changes: | ||||||||
| Translation differences | (773) | (3,991) | (10) | (4,001) | (17) | (1,082) | (1,099) | (5,873) |
| Reclassification | 0 | 0 | 0 | 0 | 551 | (3,140) | (2,589) | (2,589) |
| Acquisitions | 22,266 | 0 | 0 | 0 | 1,643 | 4,364 | 6,007 | 28,273 |
| Disposals | 0 | 0 | 0 | 0 | 12 | (578) | (566) | (566) |
| Amortisation | (14,533) | 0 | 0 | 0 | (1,482) | (9,035) | (10,517) | (25,050) |
| Impairment losses | (1,909) | 0 | 0 | 0 | (1,000) | 0 | (1,000) | (2,909) |
| Total changes | 5,051 | (3,991) | (10) | (4,001) | (293) | (9,471) | (9,764) | (8,714) |
| Historical cost | 229,986 | 90,020 | 1,394 | 91,414 | 44,563 | 136,674 | 181,237 | 502,637 |
| Accumulated amortisation | (133,714) | 0 | 0 | 0 | (32,404) | (99,351) | (131,755) | (265,469) |
| Write-down provision | (3,980) | (11,529) | (3) | (11,532) | (2,089) | 0 | (2,089) | (17,601) |
| Balance at 31 December 2020 | 92,292 | 78,491 | 1,391 | 79,882 | 10,070 | 37,323 | 47,393 | 219,567 |
The item "Development costs" includes costs for development, internal and external, for a gross historical cost of €229,986 thousand. During the reporting year, this item changed due to higher costs incurred in 2020 for development orders received both during the year and in previous years, for which additional development costs were incurred; amortisation amounting to €14,533 thousand was recognised for development costs associated with products that have already entered production.
The gross amount includes development activities for projects underway totalling €52,032 thousand. The total amount of costs for capitalised internal works charged to the Statement of Income in the item "Costs for capitalised internal works" during the year amounted to €22,573 thousand (2019: €26,647 thousand).
Impairment losses totalled €1,909 thousand and are recognised in the Statement of Income under "Amortisation, depreciation and impairment losses." Impairment losses refer to development costs incurred mainly by the Parent, Brembo S.p.A., in relation to projects that, consistent with the desire of the customer or Brembo, were not completed or underwent changes in terms of their end destination.
This item is the result to the business combinations and the ensuing allocation to the following GCUs:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Discs - Systems - Motorbikes: | ||
| Brembo North America Inc. (Hayes Lemmerz) | 13,910 | 15,194 |
| Brembo México S.A. de C.V. (Hayes Lemmerz) | 847 | 925 |
| Brembo Nanjing Brake Systems Co. Ltd. | 872 | 895 |
| Brembo Brake India Pvt. Ltd. | 7,344 | 8,212 |
| Brembo Huilian (Langfang) Brake Systems Co. Ltd. | 41,965 | 43,049 |
| After Market – Performance Group: | ||
| Corporación Upwards '98 (Frenco S.A.) | 2,006 | 2,006 |
| Ap Racing Ltd. | 11,547 | 12,201 |
| Total | 78,491 | 82,482 |
The change compared to 31 December 2019 was attributable to the change in consolidation differences.
CGUs are typically identified as the business being acquired and therefore tested for impairment. If the asset being tested for impairment refers to businesses operating in multiple business lines, it is attributed to all business lines in existence at the date of acquisition; this approach is consistent with valuations carried out at the acquisition date, which are typically based on the estimated recoverable amount of the entire investment.
The main assumptions used to determine the value in use of the cash-generating unit relate to the discount rate, the long-term growth rate and the cash flows arising on corporate business plans.
Cash flows for subsequent years were extrapolated using a prudential steady 1-1.5% medium- to long-term growth rate (1-1.5% in 2019), on a case by case basis. The Group's discount rate (Group WACC) used was 5.58% (7.29% in 2019), which reflected the current market assessments of the time value of money and the risks specific to the asset in question. The Board of Directors of Brembo S.p.A. approved the company business plans, 2021 budget forecasts and 2022-2024 plans, in some cases revised on the basis of the prospective market situation in the regions in which the CGUs are based.
In addition, following the Covid-19 pandemic multi-scenario hypotheses were formulated, including a break-even
scenario below which the specific asset would become impaired. The scenario deemed most representative of those prepared was then identified, without using an average or applying probability or weighting indices. The previously mentioned impairment tests did not indicate the need to recognise any impairment loss in the reporting year.
In the event of a change in the WACC from 5.58% to 6.08% and the growth rate from 1.0% to 0.5% (or from 1.5% to 1.0%), no previously unimpaired goodwill would have become impaired.
The changes in the WACC and in the growth rate described above are deemed reasonable. In this respect, only changes beyond reasonable levels would have resulted in impairment.
This item includes €1,030 thousand related to the Villar trademark, owned by the subsidiary Corporación Upwards '98 S.A., and for the remaining part, amounting to €361 thousand, the value of the trademark LF of Brembo Huilian (Langfang) Brake Systems Co. Ltd.
For information concerning impairment-testing methods, the reader is referred to the above discussion relating to goodwill. The impairment tests did not detect any impairment losses.
Acquisitions of "Other intangible assets" totalled €6,007 thousand and refer for €1,643 thousand to the filing of specific patents and trademarks, and for the remaining amount mainly to the share of the investment for the reporting year associated with the development of new features regarding the new ERP (Enterprise Resource Planning) system within the Group and the acquisition of other IT applications.
This item includes the Group's share of equity in companies that are valued using the equity method. The following table shows all relevant movements:
| (euro thousand) | 31.12.2019 | Acquisitions and new loans |
Write-ups/ Write-downs |
Dividends | Other changes |
31.12.2020 |
|---|---|---|---|---|---|---|
| Brembo Group SGL Carbon Ceramic Brakes | 42,224 | 0 | 10,392 | (10,000) | (415) | 42,201 |
| Petroceramics S.p.A. | 925 | 0 | 110 | (80) | 0 | 955 |
| Infibra | 0 | 800 | (9) | 0 | 0 | 791 |
| Total | 43,149 | 800 | 10,493 | (10,080) | (415) | 43,947 |
It should be noted that the impact on the Statement of Income of shareholdings valued using the equity method refers to two items: "Income (expense) from non-financial investments", attributable to the effect of the valuation using the equity method of the BSCCB Group, and "Interest income (expense) from investments", attributable to the valuation of associates using the equity method.
The following is a breakdown of the assets, liabilities, costs and revenues referring to joint ventures and associates.
| Brembo Group SGL Carbon Ceramic Brakes | ||
|---|---|---|
| (euro thousand) | 31.12.2020 | 31.12.2019 |
| Revenue from contracts with customers | 159,984 | 179,980 |
| Other revenues and income | 4,240 | 2,765 |
| Costs for capitalised internal works | 1,034 | 1,118 |
| Raw materials, consumables and goods | (49,548) | (54,889) |
| Other operating costs | (36,953) | (38,715) |
| Personnel expenses | (39,512) | (42,344) |
| GROSS OPERATING INCOME | 39,245 | 47,915 |
| Depreciation, amortisation and impairment losses | (10,650) | (9,482) |
| NET OPERATING INCOME | 28,595 | 38,433 |
| Net interest income (expense) | (481) | (480) |
| RESULT BEFORE TAXES | 28,114 | 37,953 |
| Taxes | (7,547) | (10,478) |
| NET RESULT FOR THE YEAR | 20,567 | 27,476 |
| % ownership | 50% | 50% |
| Other consolidation adjustments | 108 | 56 |
| GROUP NET RESULT | 10,392 | 13,794 |
| Property, plant, equipment and other equipment | 46,076 | 48,852 |
| Right of use assets | 15,374 | 17,146 |
| Development costs | 2,145 | 1,224 |
| Other intangible assets | 348 | 467 |
| Other financial assets (including investments in other companies and derivatives) | 131 | 131 |
| Receivables and other non-current assets | 73 | 0 |
| Deferred tax assets | 2,853 | 2,488 |
| TOTAL NON-CURRENT ASSETS | 67,000 | 70,308 |
| Inventories | 23,864 | 22,044 |
| Trade receivables | 16,421 | 13,226 |
| Other receivables and current assets | 3,420 | 6,148 |
| Current financial assets and derivatives | 0 | 1 |
| Cash and cash equivalents | 34,436 | 25,578 |
| TOTAL CURRENT ASSETS | 78,141 | 66,997 |
| TOTAL ASSETS | 145,141 | 137,305 |
Brembo Group SGL Carbon Ceramic Brakes
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Share capital | 4,000 | 4,000 |
| Other reserves | 30,798 | 25,962 |
| Retained earnings/(losses) | 27,404 | 25,594 |
| Net result for the year | 20,567 | 27,476 |
| TOTAL EQUITY | 82,769 | 83,032 |
| Long-term lease liabilities | 13,958 | 15,442 |
| Other non-current liabilities | 1,116 | 958 |
| Non-current provisions | 3,180 | 3,119 |
| Provisions for employee benefits | 6,337 | 5,094 |
| TOTAL NON-CURRENT LIABILITIES | 24,591 | 24,613 |
| Short-term lease liabilities | 1,912 | 1,971 |
| Trade payables | 25,538 | 16,065 |
| Tax payables | 1,359 | 3,011 |
| Other current payables | 8,972 | 8,613 |
| TOTAL CURRENT LIABILITIES | 37,781 | 29,660 |
| TOTAL LIABILITIES | 62,372 | 54,273 |
| TOTAL EQUITY AND LIABILITIES | 145,141 | 137,305 |
| % ownership | 50% | 50% |
| Goodwill | 1,033 | 1,033 |
| Other consolidation adjustments | (217) | (325) |
| CARRYING VALUE OF GROUP SHAREHOLDING | 42,201 | 42,224 |
| Petroceramics S.p.A. | Infibra Technologies S.r.l. | |||
|---|---|---|---|---|
| 31.12.2020 | 31.12.2019 | 31.12.2020 | ||
| Revenue from contracts with customers | 1,944 | 2,965 | 225 | |
| NET RESULT FOR THE YEAR | 552 | 1,351 | (44) | |
| % ownership | 20% | 20% | 20% | |
| GROUP NET RESULT | 110 | 270 | (9) | |
| TOTAL CURRENT ASSETS | 4,589 | 4,866 | 1,000 | |
| TOTAL NON-CURRENT ASSETS | 1,747 | 493 | 50 | |
| TOTAL CURRENT LIABILITIES | 1,338 | 523 | 98 | |
| TOTAL NON-CURRENT LIABILITIES | 222 | 211 | 119 | |
| TOTAL EQUITY | 4,776 | 4,625 | 833 | |
| % ownership | 20% | 20% | 20% | |
| CARRYING VALUE OF GROUP SHAREHOLDING | 955 | 925 | 167 |
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Shareholdings in other companies | 213,669 | 1,788 |
| Receivables from associates | 2,716 | 3,716 |
| Derivatives | 152 | 712 |
| Other | 726 | 862 |
| Total | 217,263 | 7,078 |
The item "Shareholdings in other companies" includes the 4.78% interest in Pirelli S.p.A., the 10% interest in International Sport Automobile S.a.r.l., the 3.28% interest in E-Novia S.p.A. and the 1.20% interest in Fuji Co. In March 2020, Brembo adopted a non-speculative long-term approach and acquired a 2.22% interest (equal to €86,509 thousand) in the share capital of Pirelli S.p.A., a company that stands out in its sector as a player of excellence in terms of history, brand, leadership and pursuit of innovation. In the second quarter of 2020, Brembo acquired a further stake for €20,000 thousand, increasing its interest to 2.78%.
In the second half of the year, Brembo acquired 20 million shares in Pirelli S.p.A. for a total consideration of €75,455 thousand, bringing its stake in the company to 4.78%.
At 31 December 2020, the investment was measured at fair value, pursuant to IFRS 9, leading to a €29,819 thousand increase in the value of the investment and of Group Equity, as reported in the Consolidated Statement of Comprehensive Income. The further change of €98 thousand on 31 December 2019 is attributable to the Parent's interest in consortium funds intended for research.
The item "Receivables from associates" includes the receivable deriving from the loan granted by Brembo to Innova Tecnologie S.r.l. in liquidazione, in which Brembo S.p.A. holds a 30% interest. The loan, the nominal amount of which is €9 million, was recognised for €2,716 thousand following the settlement agreement reached in 2016 with the majority shareholder of Innova Tecnologie S.r.l. in liquidazione, Impresa Fratelli Rota Nodari S.p.A. and Innova Tecnologie S.r.l. in liquidazione, and the subsequent €2,000 thousand reimbursement occurred in 2019 after the building was sold to third parties, as well as further €1,000 thousand in 2020. The residual value is deemed recoverable for €985 thousand, whereas the remaining part is covered by a provision for risks.
The item "Derivatives" refers to the fair value of derivative assets embedded in commercial contracts with customers to cover the exchange rate risk against JPY.
"Other" includes interest-free security deposits for utilities and car rental agreements.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Receivables from others | 17,671 | 12,589 |
| Income tax receivables | 537 | 278 |
| Non-income tax receivables | 34 | 34 |
| Total | 18,242 | 12,901 |
The item "Receivables from others" mainly includes the amounts related to contributions towards clients for the acquisition of long-term exclusive supply arrangements, which were released to the Statement of Income in accordance with the supply schedule for the clients.
Income tax receivables mostly refer to applications for tax refunds.
The net balance of deferred tax assets and liabilities is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Deferred tax assets | 76,731 | 54,617 |
| Deferred tax liabilities | (26,421) | (28,410) |
| Total | 50,310 | 26,207 |
Deferred tax assets and liabilities were generated mainly due to temporary differences for capital gains with deferred taxation, other income items subject to future deductions or taxation, prior years' tax losses and other consolidation adjustments o the effect of the net Patent Box relief, as explained in Note 30 in these Explanatory Notes (included in the table below, in item "Other movements").
Movements for the year are reported in the following table:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Balance at beginning of year | 26,207 | 39,006 |
| Deferred tax liabilities generated | (3,625) | (5,113) |
| Deferred tax assets generated | 30,052 | 21,943 |
| Use of deferred tax assets and liabilities | (7,927) | (23,555) |
| Exchange rate fluctuations | (1,705) | 191 |
| Other movements | 7,308 | (6,265) |
| Balance at end of year | 50,310 | 26,207 |
| Assets | Liabilities | Net | ||||
|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 | 31.12.2020 | 31.12.2019 |
| Property, plant, equipment and other equipment | 14,231 | 16,508 | 22,092 | 23,769 | (7,861) | (7,261) |
| Development costs | 28 | 28 | 0 | 0 | 28 | 28 |
| Other intangible assets | 9,711 | 1 | 5,123 | 6,091 | 4,588 | (6,090) |
| Equity shareholdings | 32 | 46 | 358 | 0 | (326) | 46 |
| Other financial assets | 1,016 | 6 | 88 | 140 | 928 | (134) |
| Trade receivables | 3,145 | 2,925 | 0 | 0 | 3,145 | 2,925 |
| Inventories | 13,819 | 11,520 | 0 | 0 | 13,819 | 11,520 |
| Other receivables and current assets | 114 | 189 | 457 | 754 | (343) | (565) |
| Financial liabilities | 869 | 60 | 0 | 0 | 869 | 60 |
| Other financial liabilities | 2,483 | 747 | 0 | 0 | 2,483 | 747 |
| Provisions | 9,983 | 3,264 | 0 | 0 | 9,983 | 3,264 |
| Provisions for employee benefits | 8,192 | 5,418 | 1,176 | 1,177 | 7,016 | 4,241 |
| Item of deferred tax assets Short/long-term lease liabilities |
1,297 | 1,318 | 0 | 0 | 1,297 | 1,318 |
| Trade payables | 286 | 451 | 0 | 0 | 286 | 451 |
| Cash and cash equivalents | 10 | 10 | 0 | 0 | 10 | 10 |
| Other liabilities | 13,317 | 12,655 | 1,609 | 1,792 | 11,708 | 10,863 |
| Other | 6,874 | 7,269 | 4,729 | 4,165 | 2,145 | 3,104 |
| Tax losses | 535 | 1,680 | 0 | 0 | 535 | 1,680 |
| Compensation balance | (9,211) | (9,478) | (9,211) | (9,478) | 0 | 0 |
| Total | 76,731 | 54,617 | 26,421 | 28,410 | 50,310 | 26,207 |
The nature of temporary differences that generated deferred tax assets and liabilities is detailed below:
The recognition of deferred tax assets was made by assessing the existence of the prerequisites for their future recovery based on updated strategic plans. In particular, it should be noted that the consolidated subsidiary Brembo Poland Spolka Zo.o. is located in a "special economic zone" and is entitled to deduct a percentage from 25% to 50% of its investments from its current taxes owed through 2026. At 31 December 2020, the company had used all the existing credit at 31 December 2019 besides the credit accrued in 2020.
Brembo Czech Sro. has two tax incentive plans, one of CZK 132.6 million (expiring in 2026) and another of CZK 63.78 million (expiring in 2029), on which the company recognised deferred tax assets equivalent to the total value that is expected to be recovered, amounting to Czk 177.4.
The company Brembo do Brasil Ltd. recognised deferred tax assets on the losses for the current and previous years for a total of €535 thousand, respectively, basing their assessment of the satisfaction of requirements for future recoverability of such assets on updated strategic plans.
It must be pointed out that:
unrecognised deferred tax assets of Brembo Czech Sro., calculated on tax losses for the year (CZK 370 million), amounted to CZK 54.88 million;
at 31 December 2020, deferred tax liabilities of €4,429 thousand were recognised on profits of subsidiaries, associates or joint ventures which the Group considers may be distributed in the foreseeable future;
A breakdown of net inventories, which are stated net of the inventory write-down provision, is shown below:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Raw materials | 144,669 | 143,177 |
| Work in progress | 66,938 | 68,010 |
| Finished products | 116,656 | 110,032 |
| Goods in transit | 26,624 | 20,984 |
| Total | 354,887 | 342,203 |
Movements in the inventory write-down provision, determined in order to align the cost of inventories to their estimated realisable value, are reported in the following table:
| (euro thousand) | 31.12.2019 | Provisions | Use/Release | Exchange rate fluctuations |
Reclassification | 31.12.2020 |
|---|---|---|---|---|---|---|
| Inventory write-down provision | 47,784 | 21,461 | (9,081) | (1,222) | 71 | 59,013 |
The inventory write-down provision is determined in order to align the cost of inventories to their estimated realisable value; the provision increased due to higher depreciation calculated on obsolete goods as a result of faster renewal of product ranges.
At 31 December 2020, the balance of trade receivables compared to the previous year was as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Accounts receivable from customers | 383,669 | 389,845 |
| Receivables from associates and joint ventures | 1,770 | 2,080 |
| Total | 385,439 | 391,925 |
The bad debt risk is not concentrated in any one area, as the Group has a large number of clients spread across the various geographical areas in which it operates.
Accounts receivable from customers are recognised net of the provision for bad debts, which amounted to €6,547 thousand.
Movements in the provision for bad debts are shown below:
| Exchange rate | |||||
|---|---|---|---|---|---|
| (euro thousand) | 31.12.2019 | Provisions | Use/Release | fluctuations | 31.12.2020 |
| Provision for bad debts | 4,448 | 3,064 | (842) | (123) | 6,547 |
Brembo Group's maximum credit risk exposure is the book value of the gross financial assets recognised in the Statement of Financial Position net of any amounts offset in accordance with IAS 32 and impairment losses recognised in accordance with IFRS 9.
Brembo has no credit insurance contracts; however, its business partners are leading car and motorbike manufacturers with high credit standing.
To express the creditworthiness of financial assets the Group has elected to distinguish between clients who are listed or not listed on the stock exchange. Listed clients are those listed on a stock market, directly or indirectly controlled by a listed company or closely connected to listed companies.
| Total | 391,986 | 396,373 |
|---|---|---|
| Unlisted clients | 79,078 | 78,287 |
| Listed clients | 312,908 | 318,086 |
| (euro thousand) | 31.12.2020 | 31.12.2019 |
The following table provides details on trade receivables that have not been adjusted for impairment, broken down by maturity.
| (euro thousand) | 31.12.2020 | Write-down 2020 | 31.12.2019 | Write-down 2019 |
|---|---|---|---|---|
| Current | 293,981 | 0 | 293,047 | 0 |
| Expired up to 30 days | 2,900 | 20 | 7,983 | 0 |
| Expired by 30 to 60 days | 8,946 | 218 | 9,661 | 0 |
| Expired by over 60 days | 7,081 | 2,393 | 7,395 | 1,930 |
| Total | 312,908 | 2,631 | 318,086 | 1,930 |
| % Ratio of expired receivables not written down | ||||
| to total exposure | 5.2% | 7.3% | ||
| Total expired receivables, not written down | 16,296 | 23,109 |
| (euro thousand) | 31.12.2020 | Write-down 2020 | 31.12.2019 | Write-down 2019 |
|---|---|---|---|---|
| Current | 70,613 | 0 | 69,450 | 30 |
| Expired up to 30 days | 1,416 | 0 | 2,346 | 2 |
| Expired by 30 to 60 days | 3,079 | 0 | 2,706 | 65 |
| Expired by over 60 days | 3,970 | 3,916 | 3,785 | 2,421 |
| Total | 79,078 | 3,916 | 78,287 | 2,518 |
| % Ratio of expired receivables not written down to total exposure |
5.8% | 8.1% | ||
| Total expired receivables, not written down | 4,549 | 6,349 |
Expired receivables from listed clients mainly refer to leading car manufacturers, and almost all the related repayment plans were set at the beginning of 2021.
With regard to the portion of expired receivables from unlisted clients, most of this amount has already been collected in the first months of 2021.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Income tax receivables | 70,505 | 50,680 |
| Non-income tax receivables | 30,572 | 28,256 |
| Other receivables | 18,238 | 16,934 |
| Total | 119,315 | 95,870 |
The item "Income tax receivables" includes the receivable recognised by the Parent in prior years in relation to the application of an IRES refund, concerning the non-deductibility for IRAP purposes of personnel expenses, and other applications for IRES and IRAP refund totalling €4,610 thousand, the €3,869 thousand R&D tax credit calculated pursuant to Ministerial Decree dated 27 May 2015, and the Patent Box benefit of €7,897 thousand for indirect exploitation.
The item "Non-income tax receivables" primarily includes the VAT receivables of the Parent and of subsidiaries located in Poland China and Mexico.
"Other receivables" mainly include advances paid to suppliers for goods and services, and other accrued income.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Other securities | 1,000 | 0 |
| Derivatives | 352 | 768 |
| Security deposits | 561 | 656 |
| Other receivables | 25 | 15 |
| Total | 1,938 | 1,439 |
"Other securities" refer to a temporary investment of liquidity in the Spanish subsidiary, already reimbursed in February 2021.
The item "Derivatives" refers to the fair value of derivative assets embedded in commercial contracts with customers to cover the exchange rate risk against JPY.
Cash and cash equivalents include:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Bank and postal accounts | 551,163 | 304,587 |
| Cash-in-hand and cash equivalents | 119 | 206 |
| Total cash and cash equivalents | 551,282 | 304,793 |
| Payables to banks: overdrafts and foreign currency advances | (106,052) | (136,234) |
| Cash and cash equivalents from the Statement of Cash Flows | 445,230 | 168,559 |
The items listed above can be converted readily into cash and are not exposed to a significant risk that their value may change. It is deemed that the book value of cash and cash equivalents approximates the fair value at the reporting date.
The increase in cash and cash equivalents was primarily due to the disbursement of new loans, as indicated below, in Note 13 of these Explanatory Notes.
It should be noted that, with regard to the amount recognised in the Statement of Cash Flows, interest paid in the year totalled €19,226 thousand (€16,009 thousand in 2019).
Group consolidated equity at 31 December 2020 increased by €92,896 thousand compared to 31 December 2019. Movements are given in the relevant statement.
The Parent's subscribed and paid up share capital amounted to €34,728 thousand at 31 December 2020. It is divided into 333,922,250 ordinary shares.
The table shows the composition of the share capital and a reconciliation of the number of shares outstanding at 31 December 2020 and 31 December 2019:
| (No. of shares) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Ordinary shares issued | 333,922,250 | 333,922,250 |
| Own shares | (10,035,000) | (10,035,000) |
| Total shares outstanding | 323,887,250 | 323,887,250 |
As part of Brembo's buy-back plan, in 2020 the Company neither purchased nor sold own shares.
The General Shareholders' Meeting of the Parent Brembo S.p.A. held on 23 April 2020 approved the Financial Statements for the financial year ended 31 December 2019, allocating net income for the year amounting to €179,152,879.80 thousand as follows:
This item changed due to dividends paid to minority shareholders, as well as to the change in consolidation differences.
This item is broken down as follows:
| 31.12.2020 | 31.12.2019 | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Due within one year |
Due after one year |
Total | Due within one year |
Due after one year |
Total |
| Payables to banks: | ||||||
| - overdrafts and advances | 106,052 | 0 | 106,052 | 136,234 | 0 | 136,234 |
| - loans | 69,946 | 548,220 | 618,166 | 121,421 | 196,558 | 317,979 |
| Total | 175,998 | 548,220 | 724,218 | 257,655 | 196,558 | 454,213 |
| Lease liabilities | 21,473 | 187,415 | 208,888 | 18,700 | 177,283 | 195,983 |
| Payables to other financial institutions | 274 | 953 | 1,227 | 462 | 1,164 | 1,626 |
| Derivatives | 3,564 | 0 | 3,564 | 599 | 0 | 599 |
| Total | 25,311 | 188,368 | 213,679 | 19,761 | 178,447 | 198,208 |
The following table provides a breakdown of "Payables to banks":
| Amount at | Amount at | Portion due | Portion due between |
Portion due | |
|---|---|---|---|---|---|
| (euro thousand) | 31.12.2019 | 31.12.2020 | within one year | 1 and 5 years | after 5 years |
| Payables to banks: | |||||
| Banca Popolare di Sondrio loan (€75 million) | 56,233 | 31,244 | 24,995 | 6,249 | 0 |
| BNL loan (€80 million) | 54,967 | 21,660 | 18,333 | 3,327 | 0 |
| Mediobanca loan (€130 million) | 44,964 | 4,998 | 4,998 | 0 | 0 |
| BNL loan (€300 million) | 0 | 299,326 | 0 | 174,408 | 124,918 |
| Banca Popolare di Sondrio loan (€125 million) | 0 | 125,057 | 140 | 87,423 | 37,494 |
| BNL loan (€100 million) | 99,889 | 99,906 | 18 | 74,894 | 24,994 |
| UBI loan (USD 35 million) | 20,753 | 9,503 | 9,503 | 0 | 0 |
| Banamex loan (USD 30 million) | 22,231 | 12,224 | 8,149 | 4,075 | 0 |
| EIB loan (€30 million, New Foundry Project) | 7,620 | 3,810 | 3,810 | 0 | 0 |
| Citi Nanjing loan (RMB 100 million) | 11,322 | 10,438 | 0 | 10,438 | 0 |
| Total payables to banks | 317,979 | 618,166 | 69,946 | 360,814 | 187,406 |
Among the most significant transactions closed in 2020, mention should be made of the disbursement of two medium-term loans, one from BNL of €300 million and another from Banca Popolare di Sondrio of €125 million, as well as a medium-term, committed line of credit of €100 million contracted from UBI Banca but not yet used.
It should be noted that several loans require compliance with certain financial covenants. At the reporting date, all of these covenants had been met. At 31 December 2020, there was no financial debt secured by collateral.
| 31.12.2020 | 31.12.2019 | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Fixed rate | Variable rate | Total | Fixed rate | Variable rate | Total |
| Euro | 356,632 | 230,596 | 587,228 | 240,551 | 24,749 | 265,300 |
| US Dollar | 0 | 21,727 | 21,727 | 0 | 42,983 | 42,983 |
| Chinese Renminbi | 0 | 10,438 | 10,438 | 0 | 11,322 | 11,322 |
| Total | 356,632 | 262,761 | 619,393 | 240,551 | 79,054 | 319,605 |
The following table shows the structure of loans, broken down by annual interest rate and currency:
The average variable rate applicable to the Group's debt is 0.93% and the average fixed rate is 0.96%.
In the second half of 2020, Brembo Group entered into a new IRS stipulated directly by the Parent, Brembo S.p.A., for a remaining notional amount of €200 million at 31 December 2020 (in addition to that entered into in 2019 with a remaining notional amount of €100 million), hedging the change in interest rate risk associated with a specific outstanding loan. This IRS falls within the requirement set forth in the accounting standards relating to hedge accounting (cash flow hedge).
The €3,518 thousand change in fair value at 31 December 2020 was recognised as a component of comprehensive income, net of the tax effect, given that the hedge is fully effective.
Changes in the Cash Flow Hedge Reserve are shown below, gross of tax effects:
| (euro thousand) | 31.12.2020 |
|---|---|
| Opening value | 225 |
| Fair value reserve releases | 3,507 |
| Movements from reserve for payment/collection of differentials | (214) |
| Closing value | 3,518 |
The following table shows the breakdown of "Other financial liabilities".
| (euro thousand) | Amount at 31.12.2019 |
Amount at 31.12.2020 |
Portion due within one year |
Portion due between 1 and 5 years |
Portion due after 5 years |
|---|---|---|---|---|---|
| Payables to other financial institutions: | |||||
| MIUR BBW loan | 188 | 0 | 0 | 0 | 0 |
| Libra loan | 75 | 64 | 12 | 46 | 6 |
| Ministerio Industria España | 1,363 | 1,163 | 262 | 901 | 0 |
| Total payables to other financial institutions | 1,626 | 1,227 | 274 | 947 | 6 |
| Lease liabilities | 195,983 | 208,888 | 21,473 | 64,809 | 122,606 |
| Total other financial liabilities | 197,609 | 210,115 | 21,747 | 65,756 | 122,612 |
Brembo Czech S.r.o. recognised a liability for leased assets of €25,025 thousand after entering into a new property lease contract.
With regard to payments relating to optional lease renewal periods not included in the calculation of liabilities at 31 December 2020, €22,698 thousand of lease instalments, relating solely to properties and due beyond five years, were not subject to discounting.
The following table shows the breakdown of the net financial position at 31 December 2020 (€384,677 thousand) and at 31 December 2019 (€346,189 thousand) based on the layout prescribed by Consob Communication No. 6064293 of 28 July 2006.
| (euro thousand) | 31.12.2020 | 31.12.2019 | |
|---|---|---|---|
| A | Cash | 119 | 206 |
| B | Other cash equivalents | 551,163 | 304,587 |
| C | Derivatives and securities held for trading | 1,352 | 768 |
| D | LIQUIDITY (A+B+C) | 552,634 | 305,561 |
| E | Current financial receivables | 586 | 671 |
| F | Current payables to banks | 106,052 | 136,234 |
| G | Current portion of non-current debt | 69,946 | 121,421 |
| H | Other current financial debts and derivatives | 25,311 | 19,761 |
| I | CURRENT FINANCIAL DEBT (F+G+H) | 201,309 | 277,416 |
| J | NET CURRENT FINANCIAL DEBT (I–E–D) | (351,911) | (28,816) |
| K | Non-current payables to banks | 548,220 | 196,558 |
| L | Bonds issued | 0 | 0 |
| M | Other non-current financial debts and derivatives | 188,368 | 178,447 |
| N | NON-CURRENT FINANCIAL DEBT (K+L+M) | 736,588 | 375,005 |
| O | NET FINANCIAL DEBT (J+N) | 384,677 | 346,189 |
The various components that gave rise to the change in net financial position during the current year are presented in the Statement of Cash Flows in the Directors' Report on Operations.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Social security payables | 2,236 | 1,087 |
| Payables to employees | 10,736 | 5,997 |
| Other payables | 1,919 | 2,388 |
| Total | 14,891 | 9,472 |
Items "Payables to employees", "Social security payables" and "Other payables" include the liability associated with the 2019-2021 three-year incentive plan reserved for top managers, to be settled in 2022.
This item is broken down as follows:
| (euro thousand) | 31.12.2019 | Provisions | Use/Release | Exchange rate fluctuations |
Other | 31.12.2020 |
|---|---|---|---|---|---|---|
| Provisions for contingencies and charges |
4,891 | 8,196 | (1,040) | (310) | 8 | 11,745 |
| Provision for product warranties | 9,655 | 28,007 | (4,187) | (414) | 59 | 33,120 |
| Total | 14,546 | 36,203 | (5,227) | (724) | 67 | 44,865 |
| of which short-term | 2,052 | 1,875 |
Provisions totalled €44,865 thousand, including a provision for product warranties, which rose by €28,007 thousand for probable future costs linked to contractual warranties, supplemental customer indemnities — in connection with the Italian agency contract — and the valuation of risks related to litigation underway, as well as an estimate of liabilities that could arise as a result of tax litigation underway, for which the reader is referred to Note 30 of these Explanatory Notes.
Group companies provide post-employment benefits through defined contribution plans or defined benefit plans. In the case of defined contribution plans, the Group companies pay contributions to public or private insurance institutes based on legal or contractual obligations or on a voluntary basis. Once such contributions have been paid, the companies have no further payment obligations.
Defined contribution plans include a plan relating to Brembo Huilian (Langfang) Brake Systems Co. Ltd and reserved for approximately 70 early retired employees, who have guaranteed monthly payments until they reach pension age.
The employees of the UK subsidiary AP Racing Ltd. have the benefit of a corporate pension plan (AP Racing Pension Scheme), which is made up of two sections: the first is a defined contribution plan for employees hired after 1 April 2001, and the second is a defined benefit plan for those already in service at 1 April 2001 (and previously covered by the AP Group Pension Fund). The defined benefit plan is funded by employer and employee contributions made to a trustee that is legally separate from the enterprise providing benefits to its employees.
Brembo Mexico S.A. de C.V., Brembo Japan Co. Ltd. and Brembo Brake India Pvt. Ltd. offer to their employees specific pension plans that qualify as defined benefit plans.
Unfunded defined benefit plans include also the "Employees' leaving indemnity" provided by the Group's Italian companies, in accordance with current applicable regulations.
The value of defined benefit plans is calculated on an actuarial basis using the "Projected Unit Credit Method". The item "Other employee provisions" also refers to other employee benefits.
| (euro thousand) | 31.12.2019 | Provisions | Use/ Release |
Interest expense |
Exchange rate fluctuations |
Other | 31.12.2020 |
|---|---|---|---|---|---|---|---|
| Employees' leaving entitlement | 18,755 | 0 | (1,547) | 208 | 0 | 642 | 18,058 |
| Defined benefit plans and other long-term benefits |
5,362 | 459 | (838) | 199 | (484) | 2,618 | 7,316 |
| Defined contribution plans | 1,467 | 1,964 | (2,195) | 0 | (43) | 0 | 1,193 |
| Total | 25,584 | 2,423 | (4,580) | 407 | (527) | 3,260 | 26,567 |
Liabilities at 31 December 2020 are given in the table below:
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
plan | Brembo Japan | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 | 31.12.2019 | |||||
| A. Change in defined benefit obligation |
|||||||||||
| 1. Defined benefit obligation at the end of prior year |
18,755 | 19,104 | 36,251 | 32,811 | 1,472 | 916 | 1,397 | 1,031 | 286 | 242 | |
| 2. Service cost: | |||||||||||
| Current service cost | 0 | 0 | 0 | 0 | 231 | 169 | 170 | 140 | 36 | 44 | |
| Past service cost | 0 | 0 | 17 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |
| 3. Interest expense | 208 | 333 | 702 | 920 | 94 | 84 | 80 | 73 | 4 | 1 | |
| 4. Cash flows: | |||||||||||
| Benefit payments from plan | 0 | 0 | (1,794) | (1,198) | 0 | 0 | (11) | (13) | 0 | 0 | |
| Benefit payments from employer |
(1,547) | (1,433) | 0 | 0 | (27) | (34) | (19) | (9) | (35) | (9) | |
| Other significant events: | |||||||||||
| 6. Remeasurements: | |||||||||||
| Effects of changes in demographic assumptions |
0 | 0 | (83) | (313) | 0 | 0 | 140 | 47 | 0 | 0 | |
| Effects of changes in financial assumptions |
642 | 751 | 6,382 | 2,337 | 146 | 216 | 13 | 50 | 0 | 0 | |
| Effects of experience adjustments (changes occurred since the previous measurement not in line with assumptions) |
0 | 0 | (123) | 16 | 147 | 63 | (74) | 89 | 0 | 0 | |
| 7. Effect of changes in foreign exchange rates |
0 | 0 | (1,945) | 1,678 | (190) | 58 | (165) | (11) | (14) | 8 | |
| 8. Defined benefit obligations at end of year |
18,058 | 18,755 | 39,407 | 36,251 | 1,873 | 1,472 | 1,531 | 1,397 | 277 | 286 | |
| B. Change in fair value of plan assets |
|||||||||||
| 1. Fair value of plan assets at the end of prior year |
0 | 0 | 33,666 | 28,587 | 0 | 0 | 378 | 285 | 0 | 0 | |
| 2. Financial income | 0 | 0 | 658 | 810 | 0 | 0 | 23 | 24 | 0 | 0 | |
| 3. Cash flows: | |||||||||||
| Total employer contributions: |
|||||||||||
| - employer contributions | 0 | 0 | 742 | 727 | 0 | 0 | 61 | 90 | 0 | 0 | |
| - employer direct benefit payments |
1,549 | 1,438 | 0 | 0 | 27 | 34 | 19 | 9 | 0 | 0 | |
| Benefit payments from plan | 0 | 0 | (1,794) | (1,198) | 0 | 0 | (11) | (13) | 0 | 0 | |
| Benefit payments from employer |
(1,549) | (1,438) | 0 | 0 | (27) | (34) | (19) | (9) | 0 | 0 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
plan | Brembo Japan | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 | 31.12.2019 | ||||
| Administrative costs on plan assets |
0 | 0 | 0 | 0 | 0 | 0 | (3) | (2) | 0 | 0 |
| Taxes on plan assets | 0 | 0 | 0 | 0 | 0 | 0 | (1) | (1) | ||
| 5. Remeasurements: | ||||||||||
| Return on plan assets (excluding interest income) |
0 | 0 | 3,899 | 3,260 | 0 | 0 | 4 | (1) | 0 | 0 |
| 6. Effect of changes in foreign exchange rates |
0 | 0 | (1,806) | 1,480 | 0 | 0 | (44) | (4) | 0 | 0 |
| 7. Fair value of plan assets at end of year |
0 | 0 | 35,365 | 33,666 | 0 | 0 | 407 | 378 | 0 | 0 |
| E. Amounts recognised in the Statement of Financial Position |
||||||||||
| 1. Defined benefit obligation | 18,058 | 18,755 | 39,407 | 36,251 | 1,873 | 1,472 | 1,531 | 1,397 | 277 | 286 |
| 2. Fair value of plan assets | 0 | 0 | 35,365 | 33,666 | 0 | 0 | 407 | 378 | 0 | 0 |
| 3. Funded status | 18,058 | 18,755 | 4,042 | 2,585 | 1,873 | 1,472 | 1,124 | 1,019 | 277 | 286 |
| 5. Net liability (asset) | 18,058 | 18,755 | 4,042 | 2,585 | 1,873 | 1,472 | 1,124 | 1,019 | 277 | 286 |
| F. Components of defined benefit cost |
||||||||||
| 1. Service cost: | ||||||||||
| Current service cost | 0 | 0 | 0 | 0 | 231 | 169 | 170 | 140 | 36 | 44 |
| Past service cost | 0 | 0 | 17 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total service costs | 0 | 0 | 17 | 0 | 231 | 169 | 170 | 140 | 36 | 44 |
| 2. Net interest expense: | ||||||||||
| Interest expense on defined benefit plans |
208 | 333 | 702 | 920 | 94 | 84 | 80 | 73 | 4 | 1 |
| Interest (income) on plan assets |
0 | 0 | (658) | (810) | 0 | 0 | (23) | (24) | 0 | 0 |
| Total net interest expense | 208 | 333 | 44 | 110 | 94 | 84 | 57 | 49 | 4 | 1 |
| 3. Remeasurement on other long-term benefits |
0 | 0 | 0 | 0 | 0 | 0 | 28 | 100 | 0 | 0 |
| 5. Defined benefit cost included in P&L |
208 | 333 | 61 | 110 | 325 | 253 | 255 | 289 | 40 | 45 |
| 6. Remeasurements (recognised in Other Comprehensive Income): |
||||||||||
| Effects of changes in demographic assumptions |
0 | 0 | (83) | (313) | 0 | 0 | 40 | 10 | 0 | 0 |
| Effects of changes in financial assumptions |
642 | 751 | 6,382 | 2,337 | 146 | 216 | 7 | 25 | 0 | 0 |
| Effects of experience adjustments (changes occurred since the previous measurement not in line with assumptions) |
0 | 0 | (123) | 16 | 147 | 63 | 3 | 53 | 0 | 0 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
plan | Brembo Japan | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 | 31.12.2019 | ||||
| Return on plan assets (excluding interest income) |
0 | 0 | (3,899) | (3,260) | 0 | 0 | (2) | 2 | 0 | 0 |
| Total remeasurements included in OCI |
642 | 751 | 2,277 | (1,220) | 293 | 279 | 48 | 90 | 0 | 0 |
| 7. Total defined benefit cost recognised in P&L and OCI |
850 | 1,084 | 2,338 | (1,110) | 618 | 532 | 303 | 379 | 40 | 45 |
| G. Net defined benefit liability (asset) reconciliation |
||||||||||
| 1. Net defined benefit liability (asset) |
18,755 | 19,104 | 2,585 | 4,224 | 1,472 | 916 | 1,019 | 746 | 286 | 242 |
| 2. Defined benefit cost included in P&L |
208 | 333 | 61 | 110 | 325 | 253 | 255 | 289 | 40 | 45 |
| 3. Total remeasurements included in OCI |
642 | 751 | 2,277 | (1,220) | 293 | 279 | 48 | 90 | 0 | 0 |
| 5. Cash flows: | ||||||||||
| Employer contributions | 0 | 0 | (742) | (727) | 0 | 0 | (61) | (90) | 0 | 0 |
| Employer direct benefit payments |
(1,547) | (1,433) | 0 | 0 | (27) | (34) | (19) | (9) | (35) | (9) |
| 7. Effect of changes in foreign exchange rates |
0 | 0 | (139) | 198 | (190) | 58 | (121) | (7) | (14) | 8 |
| 8. Net defined benefit liability (asset) at the end of year |
18,058 | 18,755 | 4,042 | 2,585 | 1,873 | 1,472 | 1,121 | 1,019 | 277 | 286 |
| H. Defined benefit obligation | ||||||||||
| 1. Defined benefit obligation by participant status |
||||||||||
| Actives | 18,058 | 18,755 | 0 | 0 | 1,873 | 1,472 | 1,531 | 1,397 | 0 | 0 |
| Vested deferred | 0 | 0 | 23,336 | 20,689 | 0 | 0 | 0 | 0 | 0 | 0 |
| Retirees | 0 | 0 | 16,071 | 15,562 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 18,058 | 18,755 | 39,407 | 36,251 | 1,873 | 1,472 | 1,531 | 1,397 | 0 | 0 |
| I. Plan assets |
||||||||||
| 1. Fair value of plan assets | ||||||||||
| Cash and cash equivalents | 0 | 0 | 52 | 10 | 0 | 0 | 0 | 0 | 0 | 0 |
| Equity instruments | 0 | 0 | 10,985 | 10,559 | 0 | 0 | 0 | 0 | 0 | 0 |
| Debt instruments | 0 | 0 | 5,399 | 5,181 | 0 | 0 | 0 | 0 | 0 | 0 |
| Derivatives | 0 | 0 | 11,012 | 10,194 | 0 | 0 | 0 | 0 | 0 | 0 |
| Investment funds | 0 | 0 | 7,917 | 7,722 | 0 | 0 | 0 | 0 | 0 | 0 |
| Assets held by insurance company |
0 | 0 | 0 | 0 | 0 | 0 | 410 | 378 | 0 | 0 |
| Total | 0 | 0 | 35,365 | 33,666 | 0 | 0 | 410 | 378 | 0 | 0 |
| 2. Fair value of assets that have quoted market prices |
||||||||||
| Cash and cash equivalents | 0 | 0 | 52 | 10 | 0 | 0 | 0 | 0 | 0 | 0 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
plan | Brembo Japan | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 31.12.2019 | 31.12.2020 | 31.12.2019 | ||||
| Equity instruments | 0 | 0 | 10,985 | 10,559 | 0 | 0 | 0 | 0 | 0 | 0 |
| Debt instruments | 0 | 0 | 5,399 | 5,181 | 0 | 0 | 0 | 0 | 0 | 0 |
| Derivatives | 0 | 0 | 10,811 | 10,194 | 0 | 0 | 0 | 0 | 0 | 0 |
| Investment funds | 0 | 0 | 7,917 | 7,722 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 0 | 0 | 35,164 | 33,666 | 0 | 0 | 0 | 0 | 0 | 0 |
| J. Significant actuarial assumptions |
||||||||||
| Weighted-average assumptions to determine benefit obligations |
||||||||||
| 1. Discount rate | 0.85% | 1.15% | 1.40% | 2.10% | 6.75% | 7.50% | 6.40% | 6.50% | 0.50% | 0.50% |
| 2. Rate of salary increase | N/A | N/A | N/A | N/A | 4.50% | 4.50% | 9.00% | 9.00% | N/A | N/A |
| 3. Rate of price inflation | N/A | N/A | 3.00% | 2.80% | 0.00% | 0.00% | 0.0% | 0.00% | 0.00% | 0.00% |
| 4. Rate of expected salary increases |
1.00% | 1.00% | 3.10% | 2.90% | 3.50% | 3.50% | 0.0% | 0.00% | 2.50% | 2.50% |
| Weighted-average assumptions to determine defined benefit cost |
||||||||||
| 1. Discount rate | 1.15% | 1.80% | 2.10% | 2.80% | 7.50% | 9.00% | 6.50% | 7.50% | 0.50% | 0.50% |
| 2. Rate of salary increase | N/A | N/A | N/A | N/A | 4.50% | 4.50% | 9.00% | 9.50% | N/A | N/A |
| 3. Rate of price inflation | N/A | N/A | 2.80% | 3.20% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| 4. Rate of expected salary increases |
1.00% | 1.50% | 2.90% | 3.40% | 3.50% | 3.50% | 0.00% | 0.00% | 2.50% | 2.50% |
By applying a uniform change in the discount rate by ± 25 basis points, the consolidated liabilities would have been respectively lower/higher by approximately €2.55 million compared to the base liabilities value of €61.1 million.
The average duration of the plans is 16.80 years.
At 31 December 2020, trade payables were as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Trade payables | 469,158 | 467,040 |
| Payables to associates and joint ventures | 5,748 | 6,956 |
| Total | 474,906 | 473,996 |
This item reflects the net amount due for the current taxes of the Group's companies.
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Tax payables | 7,405 | 6,135 |
Other current payables at 31 December 2020 are given in the table below:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Tax payables other than current taxes | 11,207 | 9,653 |
| Social security payables | 20,298 | 18,750 |
| Payables to employees | 55,909 | 56,089 |
| Other payables | 71,199 | 58,781 |
| Total | 158,613 | 143,273 |
"Other payables" also include deferred income in the form of public grants received and released to the Statement of Income in accordance with the related amortisation plans to which they refer, in addition to deferred income amounting to €43,121 thousand (€35,436 thousand at 31 December 2019) in the form of grants received by customers towards brake system development activities suspended until the conclusion of the development activity and then recognised over the useful lives of the products to which the grants refer.
The item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Revenue from sales of brake systems | 2,169,619 | 2,542,886 |
| Revenue from equipment | 19,356 | 28,327 |
| Revenue from study and design activities | 18,688 | 19,326 |
| Revenue from royalties | 976 | 1,131 |
| Total | 2,208,639 | 2,591,670 |
The breakdown of Group sales by geographic area of destination and by application is provided in the Directors' Report on Operations.
These are made up of:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Miscellaneous recharges | 8,396 | 6,113 |
| Gains on disposal of assets | 1,725 | 2,472 |
| Miscellaneous grants | 6,932 | 18,549 |
| Other revenues | 6,425 | 6,831 |
| Total | 23,478 | 33,965 |
The item "Miscellaneous grants" includes grants for research and development projects amounting to €998 thousand and a tax credit for research and development investment of €3,869 thousand, calculated pursuant to Ministerial Decree of 27 May 2015.
This item refers to the capitalisation of development costs incurred during the year, amounting to €22,573 thousand (2019: €26,647 thousand).
The item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Purchase of raw materials, semi-finished and finished products | 923,992 | 1,096,899 |
| Purchase of consumables | 100,969 | 117,724 |
| Total | 1,024,961 | 1,214,623 |
Income (expense) from non-financial investments amounted to €10,392 thousand and is attributable to the effects of valuing the investment in the BSCCB Group using the equity method (2019: €13,794 thousand).
These costs are broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Transports | 53,353 | 60,126 |
| Maintenance, repairs and utilities | 138,867 | 148,886 |
| Contracted work | 77,032 | 84,327 |
| Rent | 20,440 | 24,009 |
| Other operating costs | 136,715 | 153,240 |
| Total | 426,407 | 470,588 |
The item "Other operating costs" mainly includes the costs of travels, quality-related costs, insurance costs, as well as fees for legal, technical and commercial consulting.
Breakdown of personnel expenses is as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Wages and salaries | 307,085 | 332,101 |
| Social security contributions | 68,452 | 75,098 |
| Employees' leaving entitlement and other personnel provisions | 12,248 | 13,799 |
| Other costs | 37,244 | 44,698 |
| Total | 425,029 | 465,696 |
The average number and the year-end number of Group employees by category were as follows:
| Managers | White-collar | Blue-collars | Total | |
|---|---|---|---|---|
| 2020 average | 142 | 3,118 | 7,602 | 10,862 |
| 2019 average | 143 | 3,133 | 7,401 | 10,677 |
| Change | (1) | (15) | 201 | 185 |
| Total at 31 December 2020 | 140 | 3,111 | 7,788 | 11,039 |
| Total at 31 December 2019 | 145 | 3,115 | 7,608 | 10,868 |
| Change | (5) | (4) | 180 | 171 |
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Amortisation of intangible assets: | ||
| Development costs | 14,533 | 11,153 |
| Industrial patents and similar rights for original work | 1,085 | 1,011 |
| Licences, trademarks and similar rights | 397 | 320 |
| Other intangible assets | 9,035 | 8,780 |
| Total | 25,050 | 21,264 |
| Depreciation of property, plant and equipment: | ||
| Buildings | 18,504 | 18,309 |
| Plant and machinery | 113,004 | 110,219 |
| Industrial and commercial equipment | 19,743 | 19,243 |
| Other property, plant and equipment | 5,716 | 5,508 |
| Right of use assets | 22,137 | 20,144 |
| Total | 179,104 | 173,423 |
| Impairment losses: | ||
| Property, plant and equipment | 487 | 261 |
| Intangible assets | 2,909 | 1,682 |
| Total | 3,396 | 1,943 |
| TOTAL AMORTISATION, DEPRECIATION AND IMPAIRMENT LOSSES | 207,550 | 196,630 |
The item is broken down as follows:
Comments on impairment losses are provided in the notes to the Statement of Financial Position items.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Exchange rate gains | 31,948 | 45,126 |
| Interest income from employee's leaving entitlement and other personnel provisions | 689 | 833 |
| Interest income | 1,425 | 2,278 |
| Total interest income | 34,062 | 48,237 |
| Exchange rate losses | (40,066) | (41,917) |
| Interest expense from employees' leaving entitlement and other personnel provisions | (1,096) | (1,410) |
| Lease interest expense | (4,944) | (5,010) |
| Interest expense | (13,168) | (11,037) |
| Total interest expense | (59,274) | (59,374) |
| TOTAL NET INTEREST INCOME (EXPENSE) | (25,212) | (11,137) |
Interest expense includes the sum of €3,504 thousand relating to the tax settlement described in Note 30 of these Explanatory notes.
An analysis of the item is provided in the comment on the Statement of Financial Position item presented in Note 3 of these Explanatory notes.
This item is broken down as follows:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Current taxes | 55,755 | 62,977 |
| Deferred tax (assets) and liabilities | (18,500) | 6,725 |
| Prior years' taxes and other tax payables | (19,453) | (1,494) |
| Total | 17,802 | 68,208 |
The following is a reconciliation of theoretical and actual tax burden:
| (euro thousand) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Theoretical income taxes | 36,457 | 70,462 |
| Prior years' taxes and other differences | 22,335 | 5,273 |
| Tax incentive effects | (41,588) | (10,788) |
| DTA adjustment effect | (281) | 892 |
| Unallocated DTA effect | (405) | (2,003) |
| Current and deferred taxes (excluding IRAP) | 16,518 | 63,836 |
| Current and deferred IRAP | 1,284 | 4,372 |
| Total | 17,802 | 68,208 |
In the fourth quarter of the year, Brembo S.p.A. withdrew the petition for a ruling on the Patent Box filed in 2016 for periods 2016-2020 and opted for self-payment of the relief measure in its tax return (pursuant to the Growth Decree).
Brembo therefore included in its 2020 Income Form a benefit deriving from the direct exploitation of the intangible assets for the tax periods 2016, 2017, 2018 and 2019, acquiring it in three annual instalments, as well as a benefit arising from indirect exploitation of the intangible assets for tax period 2019, acquiring it in a single tranche. As for the benefit arising from the indirect exploitation of intangible assets for the tax periods 2016, 2017 and 2018, Brembo S.p.A. filed supplementary returns for these tax periods, acquiring them in a single instalment. The Patent Box benefit recognised among taxes and duties for the four years indicated above totalled €36,970 thousand, of which €9,961 thousand was recognised as a direct reduction in current taxes, €17,588 thousand by directly reducing taxes from previous years and €9,691 thousand as deferred tax assets. The method used to calculate the relief has already been audited by the Italian Revenue Agency during a specific inspection of tax period 2019 conducted in February 2021.
In 2021 the Company will include the Patent Box in self-payment in its 2021 Income Form for the tax period eligible for the relief (i.e., 2020), acquiring in a single instalment the benefit of the indirect exploitation of the intangible assets and that arising from the direct exploitation of the intangible assets in three annual instalments.
In the fourth quarter of 2020, in accordance with the relief scheme for intangible assets, Brembo S.p.A. entered into a settlement with the revenue authorities relating to the greater values of the intangible assets in relations with the Group's international subsidiaries for the year 2015. The settlement will be completed with regards to years after 2015 in 2021. The total charge for all years recognised under prior-year taxes, net of the positive adjustment for the same tax periods granted by an affected foreign tax authority, is €17,132 thousand.
The net benefit in terms of lower taxes for the year is thus €19,838 thousand.
The Group's actual tax rate is 11.4%, compared with a theoretical tax rate of 24.2% (at 31 December 2019: actual tax rate was 22.2%; theoretical tax rate was 24.3%).
Basic earnings per share were €0.42 at 31 December 2020 (€0.71 at 31 December 2019), and were calculated by dividing the net income or losses for the year attributable to holders of ordinary equity instruments of the Parent by the weighted average number of ordinary shares outstanding in 2020, amounting to 323,887,250 (2019: 324,691,266). Diluted earnings per share are identical to basic earnings per share inasmuch as no diluting transactions were undertaken.
On 30 June 2019, Brembo discontinued its industrial operations at the Buenos Aires plant. As a result, the subsidiary Brembo Argentina S.A. was placed in liquidation. Brembo took this decision as it was impossible to boost new projects because of the downtrend experienced by the Argentinian automotive sector and its quite discouraging recovery market, as well as because all main manufacturers decided not to proceed with industrial projects nor to launch new models.
Consequently, in accordance with IFRS 5, the Company's asset and liability items, net of intercompany payables, have been reclassified to "Assets/Liabilities from discontinued operations", whereas the Statement of Income items have been reclassified to "Result from discontinued operations", as shown here below.
| (euro thousand) | 31.12.2020 |
|---|---|
| Revenue from contracts with customers | 208 |
| Other operating costs | (182) |
| Personnel expenses | (16) |
| GROSS OPERATING INCOME | 10 |
| Depreciation, amortisation and impairment losses | 0 |
| NET OPERATING INCOME | 10 |
| Net interest income (expense) | (314) |
| RESULT FROM DISCONTINUED OPERATIONS | (304) |
| Inventories | |
| Trade receivables | 63 |
| Cash and cash equivalents | 792 |
| TOTAL CURRENT ASSETS | 855 |
| TOTAL ASSETS | 855 |
| Non-current provisions | (12) |
| TOTAL NON-CURRENT LIABILITIES | (12) |
| Trade payables | (79) |
| Other current liabilities | (49) |
| TOTAL CURRENT LIABILITIES | (128) |
| TOTAL LIABILITIES | (140) |
Stezzano, 4 March 2021
On behalf of the Board of Directors
The Executive Deputy Chairman Matteo Tiraboschi
4 March 2021
Matteo Tiraboschi Andrea Pazzi
Executive Deputy Chairman Manager in Charge of the Company's Financial Reports
A constant and unstoppable evolution
Organisations and infrastructures that are evolving into increasingly cutting-edge architectures, so as to adapt to and anticipate the needs of an ever more connected world. We are ready.
| (euro) | Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||||
| Property, plant, equipment and other equipment | 1 | 197,939,509 | 200,522,506 | (2,582,997) | ||
| Right of use assets | 1 | 77,348,362 | 81,123,084 | (3,774,722) | ||
| Development costs | 2 | 80,356,225 | 75,663,349 | 4,692,876 | ||
| Other intangible assets | 2 | 20,896,405 | 23,268,225 | (2,371,820) | ||
| Shareholdings | 3 | 354,601,527 | 353,801,527 | 800,000 | ||
| Other financial assets (including investments in other companies and derivatives) |
4 | 216,559,608 | 2,716,246 | 6,239,006 | 3,716,246 | 210,320,602 |
| Receivables and other non-current assets | 5 | 352,985 | 90,169 | 262,816 | ||
| Deferred tax assets | 6 | 31,895,648 | 11,027,377 | 20,868,271 | ||
| TOTAL NON-CURRENT ASSETS | 979,950,269 | 751,735,243 | 228,215,026 | |||
| CURRENT ASSETS | ||||||
| Inventories | 7 | 132,050,780 | 125,749,917 | 6,300,863 | ||
| Trade receivables | 8 | 184,118,357 | 76,209,231 | 184,940,636 | 82,381,161 | (822,279) |
| Other receivables and current assets | 9 | 61,226,822 | 612,550 | 43,498,073 | 17,728,749 | |
| Current financial assets and derivatives | 10 | 94,867,797 | 94,450,969 | 49,816,260 | 48,983,909 | 45,051,537 |
| Cash and cash equivalents | 11 | 413,023,943 | 164,699,131 | 248,324,812 | ||
| TOTAL CURRENT ASSETS | 885,287,699 | 568,704,017 | 316,583,682 | |||
| TOTAL ASSETS | 1,865,237,968 | 1,320,439,260 | 544,798,708 |
| (euro) | Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| EQUITY | ||||||
| Share capital | 12 | 34,727,914 | 34,727,914 | 0 | ||
| Other reserves | 12 | 116,555,679 | 118,821,269 | (2,265,590) | ||
| Retained earnings/(losses) | 12 | 493,016,931 | 285,118,001 | 207,898,930 | ||
| Net result for the year | 12 | 85,505,063 | 179,152,880 | (93,647,817) | ||
| TOTAL EQUITY | 729,805,587 | 617,820,064 | 111,985,523 | |||
| NON-CURRENT LIABILITIES | ||||||
| Non-current payables to banks | 13 | 533,706,718 | 157,729,012 | 375,977,706 | ||
| Long-term lease liabilities | 13 | 71,339,009 | 75,116,819 | (3,777,810) | ||
| Other non-current financial payables and derivatives |
13 | 52,325 | 63,699 | (11,374) | ||
| Other non-current liabilities | 14 | 11,943,535 | 5,147,357 | 5,527,162 | 2,150,935 | 6,416,373 |
| Non-current provisions | 15 | 35,328,306 | 6,905,297 | 28,423,009 | ||
| Provisions for employee benefits | 16 | 17,674,850 | 49,472 | 18,351,267 | 48,863 | (676,417) |
| TOTAL NON-CURRENT LIABILITIES | 670,044,743 | 263,693,256 | 406,351,487 | |||
| CURRENT LIABILITIES | ||||||
| Current payables to banks | 13 | 104,043,113 | 100,210,375 | 3,832,738 | ||
| Short-term lease liabilities | 13 | 7,714,745 | 6,956,780 | 757,965 | ||
| Other current financial payables and derivatives |
13 | 47,582,951 | 44,013,445 | 40,609,071 | 39,810,962 | 6,973,880 |
| Trade payables | 17 | 198,866,472 | 26,789,503 | 196,860,553 | 25,581,441 | 2,005,919 |
| Current provisions | 15 | 1,874,932 | 2,051,900 | (176,968) | ||
| Other current payables | 18 | 105,305,425 | 2,824,766 | 92,237,261 | 1,987,322 | 13,068,164 |
| TOTAL CURRENT LIABILITIES | 465,387,638 | 438,925,940 | 26,461,698 | |||
| TOTAL LIABILITIES | 1,135,432,381 | 702,619,196 | 432,813,185 | |||
| TOTAL EQUITY AND LIABILITIES | 1,865,237,968 | 1,320,439,260 | 544,798,708 |
| Notes | 31.12.2020 | of which with related parties |
31.12.2019 | of which with related parties |
Change |
|---|---|---|---|---|---|
| 19 | 815,087,373 | 121,364,630 | 947,708,941 | 156,734,871 | (132,621,568) |
| 20 | 43,242,815 | 31,141,172 | 58,480,135 | 36,783,640 | (15,237,320) |
| 21 | 18,186,270 | 21,086,691 | (2,900,421) | ||
| 22 | (375,288,017) | (76,760,705) | (432,684,933) | (113,957,633) | 57,396,916 |
| 23 | (191,908,486) | (23,315,906) | (207,629,215) | (21,380,017) | 15,720,729 |
| 24 | (207,027,139) | (4,950,363) | (225,480,873) | (7,290,448) | 18,453,734 |
| 102,292,816 | 161,480,746 | (59,187,930) | |||
| 25 | (64,312,644) | (56,901,847) | (7,410,797) | ||
| 37,980,172 | 104,578,899 | (66,598,727) | |||
| 26 | 11,105,941 | 7,983,900 | 3,122,041 | ||
| 26 | (20,243,090) | (9,748,393) | (10,494,697) | ||
| 26 | (9,137,149) | 3,172,866 | (1,764,493) | 2,051,429 | (7,372,656) |
| 27 | 46,593,037 | 46,550,275 | 101,527,660 | 108,346,140 | (54,934,623) |
| 75,436,060 | 204,342,066 | (128,906,006) | |||
| 28 | 10,069,003 | (25,189,186) | 35,258,189 | ||
| 85,505,063 | 179,152,880 | (93,647,817) | |||
| (euro) | 31.12.2020 | 31.12.2019 | Change |
|---|---|---|---|
| NET RESULT FOR THE YEAR | 85,505,063 | 179,152,880 | (93,647,817) |
| Other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year: |
|||
| Effect of actuarial income/(loss) on defined benefit plans | (628,704) | (735,621) | 106,917 |
| Tax effect | 150,889 | 176,549 | (25,660) |
| Fair value measurement of investments | 29,818,833 | 0 | 29,818,833 |
| Tax effect | (357,826) | 0 | (357,826) |
| Total other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year |
28,983,192 | (559,072) | 29,542,264 |
| Other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year: |
|||
| Effect of hedge accounting (cash flow hedge) of derivatives | (3,293,069) | (224,504) | (3,068,565) |
| Tax effect | 790,337 | 53,881 | 736,456 |
| Total other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year |
(2,502,732) | (170,623) | (2,332,109) |
| COMPREHENSIVE RESULT FOR THE YEAR | 111,985,523 | 178,423,185 | (66,437,662) |
This is a changing world in which we believe more and more. We are transforming energy into inspiration to help create a planet that is increasingly liveable, secure and sustainable.
| (euro) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (*) | 162,812,676 | 169,374,616 |
| Result before taxes | 75,436,060 | 204,342,066 |
| Depreciation, amortisation/impairment losses | 64,312,644 | 56,901,847 |
| Capital gains/losses | (370,808) | (436,269) |
| Write-ups/Write-downs of shareholdings | (42,162) | 6,818,480 |
| Financial portion of provisions for payables for personnel | 204,183 | 326,251 |
| Other provisions net of utilisations | 32,176,800 | (600,217) |
| Cash flows generated by operating activities | 171,716,717 | 267,352,158 |
| Current taxes paid | (10,162,911) | (24,391,951) |
| Uses of long-term provisions for employee benefits | (1,509,304) | (1,384,125) |
| (Increase) reduction in current assets: | ||
| inventories | (12,442,049) | (6,849,877) |
| financial assets | 29,817,827 | 45,700 |
| trade receivables and receivables from other Group companies | 994,600 | 36,020,297 |
| receivables from others and other assets | (11,061,553) | (14,086,540) |
| Increase (reduction) in current liabilities: | ||
| trade payables and payables to other Group companies | 2,005,919 | (15,195,966) |
| payables to others and other liabilities | 19,721,775 | (19,080,848) |
| Net cash flows from/(for) operating activities | 189,081,021 | 222,428,848 |
| (euro) | 31.12.2020 | 31.12.2019 |
|---|---|---|
| Investments in: | ||
| intangible assets | (23,212,865) | (29,801,177) |
| property, plant and equipment | (34,017,926) | (48,938,257) |
| right of use assets | (4,858,977) | (6,000,083) |
| financial assets (investments) | (212,680,461) | (6,530,849) |
| Price for disposal, or reimbursement value of fixed tangible and intangible assets | 622,832 | 2,308,095 |
| Net cash flows from/(for) investing activities | (274,147,397) | (88,962,271) |
| Dividends paid in the year | 0 | (71,541,195) |
| Loans to Group companies and amounts payable to companies participating in the centralised treasury system |
(41,264,577) | (55,392,816) |
| Change in fair value valuation of derivatives | 81,462 | (1,207,655) |
| New lease agreements | 4,095,768 | 6,000,083 |
| Reimbursement of lease liabilities | (9,658,893) | (8,096,754) |
| Buy-back of own shares | 0 | (11,328,529) |
| Loans and financing granted by banks and other financial institutions in the year | 425,000,000 | 100,000,000 |
| Repayment of long-term loans and other liabilities | (98,535,363) | (98,461,651) |
| Net cash flows from/(for) financing activities | 279,718,397 | (140,028,517) |
| Total cash flows | 194,652,021 | (6,561,940) |
| CASH AND CASH EQUIVALENTS AT END OF YEAR (*) | 357,464,697 | 162,812,676 |
(*) See Note 11 of the Explanatory Notes to the Separate Financial Statements for a reconciliation with financial statements data.
| Other reserves | ||||||
|---|---|---|---|---|---|---|
| (euro) | Share capital | Reserves | Treasury shares | Retained earnings (losses) |
Net result for the year |
Equity |
| Balance at 1 January 2019 | 34,727,914 | 143,796,319 | (13,475,897) | 243,111,799 | 114,106,469 | 522,266,604 |
| Allocation of profit for the previous year | 42,565,274 | (42,565,274) | 0 | |||
| Payment of dividends | (71,541,195) | (71,541,195) | ||||
| Buy-back of own shares | (11,328,529) | (11,328,529) | ||||
| Rounding | (1) | (1) | ||||
| Components of comprehensive income: | ||||||
| Effect of actuarial income/(loss) on defined benefit plans |
(559,072) | (559,072) | ||||
| Effect of hedge accounting (cash flow hedge) of derivatives |
(170,623) | (170,623) | ||||
| Net result for the year | 179,152,880 | 179,152,880 | ||||
| Balance at 1 January 2020 | 34,727,914 | 143,625,695 | (24,804,426) | 285,118,001 | 179,152,880 | 617,820,064 |
| Allocation of profit for the previous year | 1,125,037 | 178,027,843 | (179,152,880) | 0 | ||
| Reclassification (*) | (887,895) | 887,895 | 0 | |||
| Components of comprehensive income: | ||||||
| Effect of actuarial income/(loss) on defined benefit plans |
(477,815) | (477,815) | ||||
| Effect of hedge accounting (cash flow hedge) of derivatives |
(2,502,732) | (2,502,732) | ||||
| Fair value measurement of investments | 29,461,007 | 29,461,007 | ||||
| Net result for the year | 85,505,063 | 85,505,063 | ||||
| Balance at 31 December 2020 | 34,727,914 | 141,360,105 | (24,804,426) | 493,016,931 | 85,505,063 | 729,805,587 |
(*) A portion of the restricted reserve Re. Article 6 (2) of Legislative Decree No. 38/2005 was reclassified under retained earnings, since it is no longer subject to non-distributability.
Essential and contemporary. A design that expresses attention to the tiniest detail in all its nuances, always. And which generates spontaneous appeal and recognition.
Statutory Auditors' Report to the Shareholders' Meeting of Brembo S.p.A. called to approve the Financial Statements for the year ended 31 December 2020, pursuant to Article 153 of Legislative Decree No. 58 of 24 February 1998
Shareholders,
In this Report, drafted pursuant to Article 153 of Legislative Decree No. 58 of 24 February 1998 (the Consolidated Law on Finance, hereinafter "TUF") and in accordance with the recommendations made by Consob in Communication No. DEM/1025564 of 6 April 2001, as updated, the Board of Statutory Auditors relates the activity carried out during the year ended 31 December 2020 and until the date of this writing, in compliance with applicable legislation and also taking account of the Principles of Conduct for Boards of Statutory Auditors of Listed Companies recommended by the Italian National Board of Certified Accountants and Auditors (CNDCEC).
The Board of Statutory Auditors in office at the reporting date was appointed by the Shareholders' Meeting of Brembo S.p.A. (hereinafter "Brembo") held on 23 April 2020 and is made up as follows1 :
Pursuant to Article 144-quinquiesdecies of the Rules for Issuers, the list of offices held by members of the Board of Statutory Auditors at the companies set out in Book V, Title V, Chapters V, VI and VII of the Italian Civil Code, has been published by Consob on its website (www.consob.it). It bears remarking that Article 144-quaterdecies of the Rules for Issuers (Disclosure obligations to Consob) provides that those holding the office of member of the control body of just one issuer are not subject to the disclosure obligations imposed by that same Article and in this case are not included in the lists published by Consob. The Company discloses the main offices held by members of its Board of Statutory Auditors in its Corporate Governance and Ownership Structure Report. In this document, the Board of Statutory Auditors also certifies that it has verified that all of its members have complied with the aforementioned Consob regulations on the "limits to the cumulation of offices".
With regard to the applicable rules of conduct for Boards of Statutory Auditors of Listed Companies recommended by Italy's National Council of Chartered Accountants and Accounting Experts (CNDCEC), and specifically the new provision Q.1.1 on self-assessment by the board of statutory auditors (a periodic internal assessment process regarding whether members continue to meet eligibility requirements and the propriety and efficacy of the board's
1 The appointment was based on the two lists filed respectively by the majority shareholder Nuova FourB S.r.l. and a group of Asset Management Companies and other institutional investors (holding about 2.27836% of the share capital, overall).
functioning), it is acknowledged that the Board of Statutory Auditors has delivered its specific report to the Board of Directors, which examined it in its meeting held on 4 March 2021. In accordance with applicable legislation, the Board of Statutory Auditors' analyses of this kind were focused exclusively on verifying the composition of the control body within the framework of the annual self-assessment by company bodies. The findings of the most recent verification, on the basis of the Statutory Auditors' individual declarations, are presented in the 2020 Corporate Governance and Ownership Structure Report. The requirements of independence, as provided for in Article 148, paragraph 3, of TUF and Brembo's Corporate Governance Code, which is based on the Corporate Governance Code of Borsa Italiana S.p.A., integrity and professionalism pursuant to Article 148, paragraph 4, of TUF and the aforementioned limit on offices were verified. In addition to such verification, in accordance with current best practices, this year the Board of Statutory Auditors also took into account the following self-assessment elements: the ongoing professional development of its members; the conduct of meetings; participation frequency, duration and methods; time committed; trust and collaboration between members; and the flow of information between the statutory auditors. Under its responsibility, the Board of Statutory Auditors concluded that it had not identified deficiencies relating to the fitness of its members or the adequate composition and functioning of the Board.
The Board of Statutory Auditors fulfilled the supervisory duties mandated by Article 2403 of the Italian Civil Code and Article 149 of TUF, in addition to performing the supervisory functions required by Article 19 of Legislative Decree No. 39/2010, as amended by Legislative Decree No. 135/2016 (in effect from 5 August 2016), in its role as Internal Control & Audit Committee, supervising compliance with the principles of proper administration and, in particular, the suitability of the organisational, administrative and accounting structures adopted by the Company and the concrete functioning thereof, in addition to the actual implementation of the corporate governance rules set forth by relevant applicable regulations. The Board of Statutory Auditors also monitored the independence of the Independent Auditors in charge of auditing the accounts.
The information necessary to fulfil the above-mentioned supervisory duties was obtained through both frequent meetings with the heads of the competent corporate entities, and in particular its control functions, and participation by the Statutory Auditors in meetings of the Board of Directors, in meetings of the Board committees formed in accordance with the Borsa Italiana Corporate Governance Code, fully adopted by Brembo (the Audit, Risks & Sustainability Committee — which also acts as Related Party Transactions Committee and fulfils the duties set out in the Related Party Transactions Procedure adopted by the Committee pursuant to Article 4 of the Consob Regulation adopted by Resolution No. 17221 of 12 March 2010 and amended by Resolution No. 17389 of 23 June 2010 — and the Remuneration & Appointments Committee), as well as in meetings of the Supervisory Committee formed in accordance with Legislative Decree No. No. 231/2001.
In 2020, the Board of Statutory Auditors:
participated in the sessions of the Audit, Risks & Sustainability Committee, in its capacity as Related Party Transactions Committee, and jointly examined the issues discussed;
met regularly and exchanged information with the representatives of the independent auditors EY S.p.A.;
Pursuant to Article 153 of TUF and Article 2429, paragraph 2, of the Italian Civil Code, and in accordance with Consob recommendations and based on the main information obtained in the course of the Board's performance of its duties, the following information is reported:
With regard to the foregoing, the Board of Statutory Auditors has no particular remarks to relate.
3 With regard to the audit appointment, it should be noted that, upon reasoned proposal submitted by the Board of Statutory Auditors, the Shareholders' Meeting of 23 April 2013 appointed the audit firm EY S.p.A. as Independent Auditors for the years 2013 to 2021.
2 On the basis of a non-binding opinion from the Board of Statutory Auditors, on 23 April 2020 the Board of Directors confirmed Chief Administration & Finance Officer, Andrea Pazzi, in his role as Manager in charge of the Company's financial reports. The assignment is set to expire on the date of the Shareholders' Meeting called to approve the Financial Statements for the year ending 31 December 2022.
that develops and manufactures brake pads for motorbikes using eco-friendly sintered organic materials. The enterprise value of the transaction was 300 million Danish krone, equivalent to approximately €40.3 million.
become effective on 1 July 2021. New developments are currently being analysed and examined with a view to updating the Procedure and introducing all new provision by 30 June 2021.
also had meetings with the Head of Group Internal Audit, from whom it obtained information on the state of implementation of the Audit Plan for the year, the results of the checks carried out and remedial activities implemented and planned, as well as on related follow-up activities.
(customers, suppliers, trade associations and insurance companies) — and the process of collecting and validating data at a worldwide level in order to prepare the said Disclosure (which also entailed the update to the Procedure PG.W.CSRO-06 "Process of drafting the Consolidated Disclosure of Non-financial Information pursuant to Legislative Decree No. 254/2016").
It bears noting that the aforementioned audit activities did not identify any omissions, censurable conduct or irregularities that would need to be reported in this document. The Risk Management Function, the Legal Function, H&S, Internal Audit and the Supervisory Board, that the Board of Statutory Auditors met regularly, have not reported any particular critical issues falling within their respective remits. In addition, the Annual Report on Corporate Governance and the Ownership Structure did not highlight any criticalities that need to be reported in this document.
As already reported, it should be noted that in 2020, with a favourable opinion from the Audit, Risks & Sustainability Committee in its role as Related Party Transactions Committee, from the Remuneration & Appointments Committee and from the Board of Statutory Auditors, the derogations regarding to the proposals to review the 2020 remuneration policies were examined and approved by the Board of Directors, with a particular focus on the short- and long-term incentive systems (2020 MBO) and the alignment of the 2021 targets of the 2019-2021 LTIP.
The Company analysed the impacts of the changes introduced by Legislative Decree No. 49 of 10 May 2019, and in particular the modifications introduced with regard to the remuneration of directors (amendment of Article 123-ter of TUF), and the regulations issued by Consob with CONSOB Notice No. 21623 dated 10 December 2020 on the new disclosure layouts of Annex 3A, Scheme 7-bis, to the Rules for Issuers, in order to integrate these changes into the remuneration policies to be submitted to the Shareholders' Meeting convened for 22 April 2021 and into the 2021 Remuneration Policy and Remuneration Paid.
With regard to the paragraph regarding the "key aspects of the audit", the Independent Auditors considered the measurement of shareholding, in respect of the Separate Financial Statements, and the measurement of goodwill, in respect of the Consolidated Financial Statements, to constitute material issues.
Pursuant to Article 14, paragraph 2(e), of Legislative Decree No. 39/2010, the Independent Auditors also believe that the Directors' Report on Operations and the information contained in the Corporate Governance and Ownership Structure Report set out in Article 123-b0is, paragraph 4, of TUF are consistent with the Company's Separate Financial Statements and Consolidated Financial Statements for the year ended 31 December 2020.
It should be recalled that the report in question also complements the Independent Auditors' statement of independence pursuant to Article 6, paragraph (2)(a), of Regulation (EU) No. 537/2014.
Finally, the Board of Statutory Auditors acknowledged the Transparency Report drafted by the Independent Auditors and published on its website pursuant to Article 18 of Legislative Decree No. 39/2010.
Brembo and Group companies (based in Italy or abroad, both EU and non-EU) concerning services other than independent auditing, as described in the Notes to the Consolidated Financial Statements, pursuant to Article 149-duodecies of the Rules for Issuers on the disclosure of fees. A table summarising the tasks assigned to EY S.p.A. is set out below:
| (euro thousand) 2020 fees |
2019 fees |
|---|---|
| Independent Auditors' fees for the provision of audit services: | |
| - to the Parent Brembo S.p.A. 225 |
225 |
| - to the subsidiaries (services provided by the network) 422 |
422 |
| Independent Auditors' fees for the provision of auditing services for issuing attestation: | |
| - to the Parent Brembo S.p.A. 71 |
81 |
| Fees of entities belonging to the Independent Auditors' network for the provision of services: |
|
| - other services rendered to subsidiaries | 2 1 |
The Board of Statutory Auditors deemed the fees for non-auditing services (which never included those prohibited by Article 5, paragraph 1, of Regulation (EU) No. 537/2014) to be appropriate to the scope and complexity of the work carried out, and hence compatible with the auditing mandate, in the absence of any anomalies impacting on the Independent Auditors' independence criteria.
The year 2020 was greatly impacted by the Covid-19 pandemic from the economic and social point of view, and saw all companies at global level engaged on tackling a massive health emergency situation.
Brembo has been following developments relating to the spread of the Covid-19 very closely since the outbreak of the emergency, establishing a dedicated task force and promptly adopting all necessary measures to monitor, prevent and contain the pandemic at all of its locations worldwide.
In the first six months of 2020, all Group's plants were subject to lockdown periods, whose length varied from one country to the next. In view of the production sites' reopening, the Group has defined all necessary measures aimed at combating the virus and protecting the health of employees and contractors such as: rearrangement of production layouts, sanitisation of the premises, purchases of personal protective equipment, temperature measurement with heat scans, circulation of hygiene rules and social distancing, and extended remote working. In addition to the decision not to distribute dividends drawing on the 2019 profit, in order to support the Group's financial solidity and contain future impacts on its economic and financial performance, the Group's financial structure was further reinforced by entering into new medium/long-term loans.
Redundancy schemes and other forms of public support were activated to protect workers in all countries and contain the cost of idle personnel. In addition, plans were drawn up to contain discretionary, sponsorship and marketing costs and reduce or postpone investments, while also renegotiating several supply and lease contracts and implementing measures to contain working capital.
The Illustrative Report to the Financial Statements for the year ended 31 December 2020 provides details of the measures adopted to protect the Company's stakeholders during the Covid-19 emergency, the measures to mitigate the impact on profitability and cash generation and strengthen the Group's financial structure, the accounting impact of contributions and concessions from the various government authorities, designed to compensate even partially for the effects of the decline in revenues caused by the lockdown measures.
In this context and in consideration of the numerous regulations issued by the Italian authorities, and taking into account Consob Communication No. 1 of 16 February 2021, the Board of Statutory Auditors paid particular
attention to the planning process put in place by the Company, considering the possible impacts on the goals and business risks resulting from the pandemic, the use of economic support measures and their eventual stoppage, also overseeing the repercussions for the financial data of the actions put in place by the Administration Department. To this end, the reporting flows with the said Department, responsible for preparing the draft Financial Statements, were intensified, as were meetings with the Independent Auditors, even though held "remotely" in certain cases, in order to mutually exchange useful information for carrying out their respective duties also pursuant to Article 150, paragraph 3, of TUF.
The Board of Statutory Auditors has verified that in the 2020 Financial Report the Directors, in accordance with Consob and ESMA (European Securities and Markets Authority) recommendations, included the information set out above. In view of the forthcoming publication of this report, the Board of Statutory Auditors discussed with the Independent Auditors regarding the fair value measurement of company assets and liabilities, as at the date of the 2020 Financial Report, in accordance with IFRS 13, having regard to the aforementioned unusual situation that has emerged; the Board of Statutory Auditors did not acquire any information requiring disclosure in this report.
As for the annual Shareholders' Meeting called for 23 April 2021, the Board of Statutory Auditors reports that Decree Law No. 18 of 17 March 2020 ("Cura Italia"), as most recently extended under Decree Law No. 183 of 31 December 2020 ("Milleproroghe"), authorises the holding "behind closed doors" of ordinary and extraordinary shareholders' meetings, allowing companies to make provision in the notices of calling, also by way of derogation from the provisions of the By-laws, for the use of those tools — such as voting by correspondence, electronic voting, attending meetings using telecommunication media, the designated representative — that allow attendance at meetings and expression of voting rights without the need for shareholders to be physically present in a single place.
In this regard, the Board of Statutory Auditors will act in close coordination with the Board of Directors to ensure that the Shareholders' Meeting may be held in an orderly fashion, and the rights of the Shareholders regularly exercised, in accordance with the above provisions.
Having acknowledged the Financial Statements for the year ended 31 December 2020, the Board of Statutory Auditors, taking account of the specific duties assigned to the Independent Auditors relating to the auditing of the accounts and verification that the Financial Statements are reliable, has no objections to the approval of the Financial Statements or to the Board of Directors' motion regarding the distribution of an (ordinary) gross dividend of €0.22 per (ordinary) share outstanding and the carry forward of the residual ascertained profit for the year.
It bears also reminding that the approval of the Financial Statements at 31 December 2021 by the General Shareholders' Meeting marks the end of the nine-year legal auditing mandate entrusted to EY S.p.A. for the period 2013-2021. Therefore, in its role as the Internal Control and Audit Committee, on 25 February 2021, the Board of Statutory Auditors issued a recommendation prepared pursuant to Articles 13, paragraphs 1, and 17, paragraph 1, of Legislative Decree No. 135 of 17 July 2016 and Article 16 of Regulation (EU) No. 537/2014 of the European Parliament and of the Council of 16 April 2014.
Milan, 19 March 2021
THE BOARD OF STATUTORY AUDITORS Raffaella Pagani (Chairwoman) Mario Tagliaferri (Acting Auditor) Paola Tagliavini (Acting Auditor)
4 March 2021
Matteo Tiraboschi Andrea Pazzi
Executive Deputy Chairman Manager in Charge of the Company's Financial Reports
BREMBO S.p.A. Headquarters c/o Parco Scientifico Tecnologico Kilometro Rosso Viale Europa, 2 - 24040 Stezzano (BG) Italy Tel. +39 035 605.2111 - www.brembo.com E-mail: [email protected] - [email protected]
Editorial Consultancy: Lemon Comunicazione (Bergamo) Art work: PoliedroStudio srl (Telgate, Bergamo) Typeset: Secograf (San Giuliano Milanese) Translation: Koinè (Trieste)
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