Annual Report • Apr 19, 2019
Annual Report
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ANNUAL REPORT 2018
This year, we have selected a series of evocative motorbike racing
From the more traditional and thrilling Formula 1 to the more recent and sustainable Formula E, from the MotoGP to the SuperBike Championship, together with NASCAR, WRC, Motocross and other categories of motor sports, racing has always been in Brembo's DNA.
images to illustrate our Annual Financial Report.
A chequered flag waving at the finish line, smiles and embraces on the podium. Every victory is a measure of our performance: a visible sign of our deep passion, commitment and constant striving towards innovation, our ability to listen to and work with others, the safety of our vehicles and our constant drive to overcome our limits.
This year, we have selected a series of evocative motorbike racing images to illustrate our Annual Financial Report. From the more traditional and thrilling Formula 1 to the more recent and sustainable Formula E, from the MotoGP to the SuperBike Championship, together with NASCAR, WRC, Motocross and other categories of motor sports, racing has always been in Brembo's DNA.
ANNUAL REPORT 2018
The Shareholders are convened to the Ordinary and Extraordinary Shareholders' Meeting to be held at the Company offices at Viale Europa 4 (Gate 1 entrance), 24040 Stezzano (Bergamo) on 18 April 2019 at 10:30a.m. CET, in single calling, to resolve on the following
Stezzano, 4 March 2019
On behalf of the Board of Directors
The Chairman Alberto Bombassei
| Letter from the Chairman | 6 |
|---|---|
| Company Officers | 10 |
| Summary of Group Results | 12 |
| Brembo and the Market | 16 |
|---|---|
| Sales Breakdown by Geographical Area and Application | 24 |
| Brembo's Consolidated Results | 26 |
| Group Structure | 34 |
| Brembo Worldwide | 36 |
| Performance of Brembo Companies | 40 |
| Investments | 46 |
| Research and Development | 50 |
| Risk Management Policy | 58 |
| Human Resources and Organisation | 66 |
| Environment, Safety and Health | 68 |
| Related Party Transactions | 72 |
| Further Information | 73 |
| Foreseeable Evolution | 75 |
| Corporate Governance and Ownership Structure Report | 78 |
| Consolidated Disclosure of Non-Financial Information | 78 |
| Information About the Brembo S.p.A. Dividend Proposal | 79 |
| Brembo S.p.A. Stock Performance | |||
|---|---|---|---|
| Palmares 2018 | 83 | ||
| Consolidated Financial Statements 2018 | 93 | ||
| Consolidated Financial Statements at 31 December 2018 | 94 | ||
| Explanatory Notes to the Consolidated Financial Statements at 31 December 2018 | 104 | ||
| Independent Auditors' Report | 182 | ||
| Attestation of the Manager in Charge of the Company's Financial Reports | 187 | ||
| Separate Financial Statements 2018 | 189 | ||
| Financial Statements of Brembo S.p.A. at 31 December 2018 | 190 | ||
| Statutory Auditors' Report | 200 | ||
| Attestation of the Manager in Charge of the Company's Financial Reports | 212 |
In the reporting year, the global economy continued to grow, albeit more slowly than expected. The International Monetary Fund then revised global GDP forecasts down slightly for both 2019 and 2020.
The main reason for this revision of global growth had to do with the adverse effects of the higher tariffs raised in the United States and China, the weaker performances of several economies (particularly in Asia and Europe), and less robust financial markets.
Within this especially complex economic scenario, 2018 was a year of continuity for Brembo.
In fact, 2018 results confirmed the effectiveness of the strategic plans for business growth, consolidation and sustainability that Brembo has conceived and implemented in recent years.
The Group's total revenues reached €2,640 million, up by 7.2% on the previous year (+9.6% on a like-for-like exchange rate basis).
Gross operating income was €500.9 million, up by €20.9 million compared to 2017.
Net result was €238.3 million, down 9.5% compared to the previous year.
Attention should also be drawn to net financial debt, which amounted to €136.9 million, down considerably (by nearly €104 million from 30 September to 31 December 2018).
All the Group's business segments grew, with the exception of the racing sector, which declined by 2.1%.
Car applications increased by 6.7% compared to the previous year, while applications for motorbike and commercial vehicles grew by 9.7% and 12.8%, respectively.
At geographical level, and in Europe in particular, growth was reported by Germany (+5.3%), the United Kingdom (+7.9%) and France (+34.4%) compared to 2017, whereas Italy showed a slight decline of 3.2%. Sales in North America (the USA, Canada and Mexico) — always one of the Group's key markets — closed 2018 up by 3.9% (+8.2% on a like-for-like exchange rate basis), whereas the South American market (Argentina and Brazil) declined by 11.4%, despite growing by 16.8% on a like-for-like exchange rate basis.
Results on the main Asian markets were excellent. In China — which remains the world's number-one car market — Brembo grew by 12.0% (+14.6% on a like-for-like exchange rate basis), and in India by 17.7% (+29.2% on a like-for-like exchange rate basis). By contrast, Japan declined by 7.4% (-6.8% on a like-for-like exchange rate basis).
Brembo's 2018 operating results demonstrate — despite the severe uncertainty that began to weigh on the global automotive industry near year-end — the Group's ability to pursue its growth objectives thanks to its comprehensive planned investments in technology, processes, products and, above all, people.
The determination to rise to the new challenges and constant changes the Group faces in its business with new ideas — and the ability to turn them into best-in-class applications on ever tighter schedules — has always been one of the strengths of Brembo and of all those who work with it worldwide, who are characterised by a high level of education.
In fact, one quarter of those who work at Brembo hold a university degree, and most of them has a degree in engineering or another scientific or technical discipline.
Brembo now benefits from the daily efforts of over 10,600 staff — almost 800 more than in the previous year — spread across 15 countries in three continents.
The Group's new production hubs — including the Nanjing plant, which is already operating and will be inaugurated in the first half of 2019 — are scaling up to full operation as planned. Within the framework of a local-based organisation, its facilities will ensure that Brembo is able to meet the needs of its clients where they operate, while also retaining strong competitive adaptability against the background of the frequent changes in global economic and legislative scenarios.
The production performance of the Group's new plants in China, the United States and Poland, together with its constant striving for innovation, enable it to take a determined approach to facing the complex scenarios seen in today's automotive industry, where the rise of electric vehicles, the drive to reduce emissions and self-driving vehicles will play an increasingly significant role.
This year Brembo is once again publishing its Consolidated Disclosure of Non-Financial Information, a detailed report describing the strategies and actions implemented by the Group and the results achieved in the pursuit of sustainable economic growth, together with a reduced environmental and social footprint of its business.
We therefore look to the current year with confidence, while remaining vigilant for clear negative signs from the global economy and politics.
Trusting in our resources and strengths, we are certain that we have laid a sound, lasting foundation for meeting the challenges that lie ahead of us as effectively as possible.
The Chairman
Alberto Bombassei
Tactics and synergy. A common way of thinking for a shared goal. It all begins with teamwork.
Formula 1 Championship 2018
The General Shareholders' Meeting of the Parent Brembo S.p.A. of 20 April 2017 confirmed the number of Board members at 11 and appointed the Board of Directors for the three-year period 2017-2019, i.e., until the General Shareholders' Meeting called to approve the Financial Statements for the year ending 31 December 2019.
| Independent Auditors | EY S.p.A. (12) | |
|---|---|---|
| Alternate Auditors | Myriam Amato (7) Marco Salvatore |
|
| Acting Auditors | Alfredo Malguzzi Mario Tagliaferri |
|
| Chairwoman | Raffaella Pagani (7) | |
| Board of Statutory Auditors(11) | ||
| Giovanni Canavotto (6) Laura Cioli (4) Nicoletta Giadrossi (4) (7) Umberto Nicodano (8) Gianfelice Rocca (4) |
||
| Directors | Valerio Battista (4) (10) Cristina Bombassei (5) (9) Barbara Borra (4) |
|
| Chief Executive Officer and General Manager | Andrea Abbati Marescotti (3) (9) | |
| Executive Deputy Chairman | Matteo Tiraboschi (2) (9) | |
| Chairman | Alberto Bombassei (1) (9) |
| Control, Risks & Sustainability Committee (14) | Laura Cioli (Chairwoman) Barbara Borra Nicoletta Giadrossi |
|---|---|
| Remuneration & Appointments Committee | Barbara Borra (Chairwoman) Nicoletta Giadrossi Umberto Nicodano |
| Supervisory Committee | Alessandro De Nicola (Chairman) (15) Laura Cioli Alessandra Ramorino (16) |
| (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 and General |
(7) Candidate for the position of Director proposed by a group of minority shareholders and elected by the Shareholders' Meeting/Statutory Auditor elected from a minority list. (8) Non-executive Director. (9) Executive Directors. |
Registered offices: CURNO (BG) – Via Brembo 25 Share capital: €34,727,914.00 – Bergamo Register of Companies Tax code and VAT Code No. 00222620163
| (euro thousand) | 31.12.2014 | 31.12.2015 | 31.12.2016 | 31.12.2017 | 31.12.2018 | % 2018/2017 |
|---|---|---|---|---|---|---|
| Revenue from contracts with customers | 1,803,335 | 2,073,246 | 2,279,096 | 2,463,620 | 2,640,011 | 7.2% |
| Gross operating income | 279,800 | 359,919 | 443,714 | 479,963 | 500,885 | 4.4% |
| % on revenue from contracts with customers | 15.5% | 17.4% | 19.5% | 19.5% | 19.0% | |
| Net operating income | 178,449 | 251,282 | 327,464 | 346,262 | 345,064 | -0.3% |
| % on revenue from contracts with customers | 9.9% | 12.1% | 14.4% | 14.1% | 13.1% | |
| Result before taxes | 164,916 | 243,499 | 312,208 | 335,537 | 325,357 | -3.0% |
| % on revenue from contracts with customers | 9.1% | 11.7% | 13.7% | 13.6% | 12.3% | |
| Net result for the year | 129,054 | 183,962 | 240,632 | 263,428 | 238,349 | -9.5% |
| % on revenue from contracts with customers | 7.2% | 8.9% | 10.6% | 10.7% | 9.0% | |
| (euro thousand) | 31.12.2014 | 31.12.2015 | 31.12.2016 | 31.12.2017 | 31.12.2018 | % 2018/2017 |
|---|---|---|---|---|---|---|
| Net invested capital (1) | 839,510 | 878,569 | 1,110,693 | 1,310,818 | 1,392,874 | 6.3% |
| Equity | 536,330 | 687,547 | 882,310 | 1,064,437 | 1,228,822 | 15.4% |
| Net financial debt (1) | 270,387 | 160,688 | 195,677 | 218,597 | 136,911 | -37.4% |
| (euro thousand) | 31.12.2014 | 31.12.2015 | 31.12.2016 | 31.12.2017 | 31.12.2018 | % 2018/2017 |
|---|---|---|---|---|---|---|
| Personnel at end of year (No.) | 7,690 | 7,867 | 9,042 | 9,837 | 10,634 | 8.1% |
| Turnover per employee | 234.5 | 263.5 | 252.1 | 250.4 | 248.3 | -0.9% |
| Investments | 126,776 | 155,908 | 263,570 | 360,684 | 287,738 | -20.2% |
| (euro thousand) | 31.12.2014 | 31.12.2015 | 31.12.2016 | 31.12.2017 | 31.12.2018 | |
|---|---|---|---|---|---|---|
| Net operating income/Revenue from contracts | ||||||
| with customers | 9.9% | 12.1% | 14.4% | 14.1% | 13.1% | |
| Income before taxes/Revenue from contracts with customers |
9.1% | 11.7% | 13.7% | 13.6% | 12.3% | |
| Investments/ Revenue from contracts with customers |
7.0% | 7.5% | 11.6% | 14.6% | 10.9% | |
| Net financial debt/Equity | 50.4% | 23.4% | 22.2% | 20.5% | 11.1% | |
| Adjusted net interest expense(*)/ | ||||||
| Revenue from contracts with customers | 0.7% | 0.6% | 0.4% | 0.4% | 0.5% | |
| Adjusted net interest expense (*)/Net operating income |
7.1% | 4.9% | 3.0% | 2.7% | 4.0% | |
| ROI (2) | 21.3% | 28.6% | 29.5% | 26.4% | 24.8% | |
| ROE (3) | 24.0% | 27.0% | 27.5% | 25.2% | 19.7% |
(1) A breakdown of these items is provided in the Statement of Financial Position included in this Directors' Report on Operations.
(2) Net operating income / Net invested capital x annualisation factor (days in the year/days in the reporting period).
(3) Net income (loss) before minority interests / Equity x annualisation factor (days in the year/days in the reporting period).
(*) This item does not include exchange gains and losses.
Formula 1 brake system 2018 Championship
In order to better assess Brembo's performance in 2018, an analysis of the worldwide macroeconomic scenario is given here below, with particular reference to the markets in which the Group operates.
The global economy continues to grow, albeit more slowly than estimated in October. The IMF (International Monetary Fund) has estimated GDP (gross domestic product) growth of +3.7% in 2018, in line with its October forecast. It has instead revised GDP growth slightly downwards to +3.5% in 2019 and to +3.6% in 2020, or by 0.2 and 0.1 percentage points, respectively, on the October estimates, thus aligning its forecasts with the growth seen in 2018. According to the January 2019 update to the World Economic Outlook published by the IMF, the main reason for the revision of global growth relates to the negative effects of tariff increases enacted in the United States and China, the weaker performances of several economies (particular in Asia and Europe) but also weakening financial market sentiment, as well as a contraction in Turkey now projected to be deeper than anticipated.
In its January update the IMF also revised its growth projections downwards for the Eurozone, which reported +1.8% in 2018 and estimated growth of +1.6% in 2019 — 0.3 percentage points below last autumn's forecast. The Washington-based economists revised down GDP growth forecasts for 2019 in all major Eurozone countries, particularly Spain (+2.2%), Germany (+1.3%), France (+1.5%) and Italy (+0.6%) – lower percentages than estimated in the October report due to the weakening of some economies, and particularly Germany, Italy and France. In the United States, growth amounted to +2.9% in 2018. Growth forecasts for 2019 remain unchanged at +2.5%, whereas growth is expected to slow slightly in 2020 (+1.8%). In the Eurozone Economic Outlook, the economists at the Eurostat confirm that in the fourth quarter of 2018 GDP increased in the Euro Area at a lower rate than in the previous quarter (+0.2% versus +0.4%). The slowdown was the result of the decreases witnessed in Germany (-0.2%) and Italy (-0.1%). The contraction in Germany was due in part to the temporary decline in the German automotive industry, which had an adverse impact on the contribution of foreign demand to growth in the Eurozone, whereas in Italy all components of domestic demand weakened. Spain showed stabilisation of its rate of growth (+0.6%), whereas the pace of growth quickened in France (+0.4%). The slowdown in the Eurozone was anticipated by the performance of the ESI (Economic Sentiment Indicator), which has been falling since the end of 2017 (although essentially stable in November). Weak industrial production growth continued in October (+0.2% versus +0.1% in the third quarter), driven by the production of capital goods (+1.0%). In the first quarter of 2019, industrial production is expected to stabilise, followed by a recovery in the first half of the year (+0.2% for both the first and second quarters of 2019). Over the forecasting horizon, the Eurozone's economy is expected to expand slightly, with constant GDP growth in the three quarters considered (+0.3%). The job market continued to improve in the fourth quarter of 2018, with an increase in employment (+0.2% on the previous quarter), and the lowest unemployment rate of recent years (8.1% in October, stable compared to the previous month). The current level of production capacity utilisation in the manufacturing sector remained high, suggesting a more robust recovery of investments in the coming months following on the slight increase in the fourth quarter of the year (+0.2%). Gross fixed investments will increase in early 2019 (+0.5%) and then slow in the second and third quarters of 2019 (+0.4%).
According to the details of the IMF's estimates, growth in Italy was +1.0% in 2018 and is estimated to amount to +0.6% in 2019, 0.4 percentage points below the October estimates, due to weak domestic demand and higher borrowing costs. This forecast is not entirely aligned with the figure cited by the Italian government in its update to its economic and finance document (DEF), which estimates an increase in GDP of +1.0% in 2019, in line with 2018. According to the IMF, in addition to decreasing the estimated average growth for this year, the stagnation of economic activity in the second half of 2018 entails an essentially nil knock-on effect in the coming year. This is in addition to the persistently high levels of government bond yields and deteriorating expectations regarding economic growth and international trade. These adverse factors are only partly offset by the recent fall in the oil and fuel prices, which result in greater purchase power for households and lower costs for businesses.
Turning to the U.S. situation, the IMF expects that growth estimates in the United States will remain unchanged: after peaking at 2.9% in 2018, GDP growth is set to decline to 2.5% in 2019 and then to soften further to 1.8% in 2020 with the unwinding of fiscal stimulus and as the federal funds rate temporarily overshoots the neutral rate of interest. Nevertheless, the projected pace of expansion is above the US economy's estimated potential growth rate in both years. Strong domestic demand growth will support rising imports and contribute to a widening of the US current account deficit. The growth expectations for the United States have also been confirmed by the European Commission, whose experts, however, foresee a possible downwards revision of growth rates due to the presence of increasing risks, such as tighter financial conditions, unfavourable changes in trade policy and a sharp tightening in fiscal policy in 2020.
The Japanese economy continued to recover, consolidating growth throughout the country at about 0.9% in 2018. According to the most recent update to the World Economic Outlook, the growth rate is expected to rise to 1.1% in 2019, 0.2 percentage points above the October forecast. The growth of the Japanese economy is expected to moderate in 2020 to around 0.5%. The preliminary reading of the PMI prepared by Markit/Nikkei showed that it closed the month of December down slightly to 52.6 points from 52.9 points at the end of September.
The BRIC economies (Brazil, Russia, India and China) are continuing to grow, albeit less robustly than estimated in October. The Chinese economy will slow due to the combined influence of tighter financial conditions and growing tensions surrounding trade tariffs. Growth in China amounted to 6.6% in 2018 and is expected to decline to 6.2% in 2019. Attention should be drawn to the Caixin manufacturing PMI, which in December fell by 0.5 percentage points to 49.7, indicating a slight worsening of operating conditions. According to the IMF's estimates, the Indian economy is poised to pick up in 2019, benefiting from lower oil prices and eased inflation pressures. The Russian economy continues to recover, growing by 1.7% in 2018, with GDP growth in 2019 estimated at 1.6%. The slowing growth was due to the lower price of oil expected in the near term. Brazil, which has emerged definitively from the profound depression of 2015-2016, grew by 1.3% in 2018. In the January update to the WEO, the growth forecast for 2019 was revised up by 0.1 percentage points to 2.5%.
Turning to commodities trends, the average price of oil increased from August 2018 to December 2018 to 68.58 dollars a barrel. In the last update to the World Economic Outlook published in January, IMF economists revised downwards the average prices of the three oil benchmarks — UK Brent, Dubai Fateh and West Texas Intermediate (WTI) — forecasting a price of 58.95 dollars a barrel at the end of 2019 and of 58.74 dollars a barrel at the end of 2020, with a decrease of -9.63% compared to year-end 2018.
The U.S. dollar began 2018 by depreciating slightly against the euro compared to year-end 2017, followed by a lateral phase (January to April), during which rates fluctuated between 1.22 and 1.25. From May on, the U.S. currency began to appreciate rapidly, reaching 1.13 around August. The dollar then entered another lateral phase within the range of 1.18 to 1.13, reaching a low of 1.1261 on 13 November, below the annual average rate of 1.18149. At the end of the period, the currency stood at 1.145.
Turning to the currencies of the other major markets in which Brembo operates at the commercial and industrial level, the pound sterling closed a year marked by strong volatility: it opened 2018 by appreciating slightly and then entered a phase of lateral movement, during which it fluctuated until March within a range of 0.87 to 0.89. It then appreciated rapidly to 0.8628 on 17 April. In the following months, it depreciated sharply, bringing the rate to an annual high of 0.9068 on 28 August. The subsequent phase of severe volatility returned the pound sterling to around 0.87, after which it went on to end the year with further depreciation, driving the rate above the average for the period of 0.884747. At the end of the period, the currency stood at 0.89453.
The Polish zloty began 2018 by depreciating constantly against the euro, climbing to 4.3915 on 3 July. In the second half of the year, the currency reversed course, appreciating again to around 4.25 in mid-August, after which it moved laterally within a range of 4.35 to 4.25 until the end of the reporting period. At the end of the period, the currency stood at 4.3014, value above the annual average rate of 4.260575.
The Czech koruna began 2018 by appreciating sharply, driving the rate to a low of 25.192 on 2 February. In the following months, it continued to depreciate rapidly against the euro, driving the rate to a high of 26.073 on 3 July. In the second half of the year, the currency appreciated markedly until October, after which it reversed direction sharply until the end of the year. At the end of the period, the currency stood at 25.724, above the annual average rate (25.643155).
The Swedish krona began 2018 by depreciating sharply against the euro, driving the exchange rate above 10.60 in early May. It then fluctuated within a range of 10.30 to 10.40, after which it depreciated, bringing the rate to a high of 10.6923 on 29 August. In the following months, it reversed trend, appreciating against the euro and ending the year at levels near the average for the period of 10.256743. At the end of the period, the currency stood at 10.2548.
In Asia, the Japanese yen opened the year in a phase of lateral movement within the range of 134 to 137 and then proceeded to appreciate in first few months of the year to around 130. After lateral fluctuation and considerable volatility, the exchange rate fell to a low of 125.67 on 15 August. In the final months of the year, following further depreciation to 132, it then recovered to the levels of the low for the year near the end of the period. At the end of the period, the currency stood at 125.85, below the year average rate of 130.409562.
The Chinese yuan/renminbi began 2018 with lateral movement within the range of 7.90 to 7.70 until the end of April. Then, as a result of growing trade tensions, the currency underwent swift, decisive appreciation, driving the rate to a low of 7.4174 on 29 May, to then abruptly reverse direction, climbing to a high of 8.0958 on 25 September. In the fourth quarter, the currency appreciated slightly, ending the year at around the average for the period of 7.807350. At the end of the period, the currency stood at 7.8751.
The Indian rupee began the year by reaching a low for the period of 76.0215 on 9 January. The currency then depreciated, returning to the range of 78 to 81, remaining in this lateral phase until August. In the following months, the rupee depreciated sharply, driving the rate to a high for the period of 85.7615 on 11 October. In the final months of the year, the currency then appreciated once more to 79, ending the year at around the period average of 80.727734. At the end of the period, the currency stood at 79.7298.
In the Americas, the Brazilian real opened 2018 by depreciating sharply and steadily against the euro, reaching 4.60 in early June. It then entered a highly volatile phase, within a range of 4.60 to 4.35. Near the end of July, it then depreciated rapidly once again, bringing the rate to a high for the period of 4.8942 on 17 September. The Brazilian real then reversed course, appreciating sharply to 4.20 near the end of October. The real then gave ground again in the final two months of the year, depreciating once more to close at 4.4440, above the annual average rate of 4.30873.
The Mexican peso began the year with lateral movement within a range of 23.50 to 22.50 until the end of the first quarter. It then appreciated slightly against the euro, reaching 22.20 in early April, when it sharply reversed direction, bringing the exchange rate to a high for the period of 24.3141 on 13 June. After this peak, the Mexican peso appreciated swiftly and decisively until mid-August, when the rate reached a low for the year of 21.3613. After a volatile period in September and October, it then depreciated once more, ending the year at near the average rate for the period of 22.716019. At the end of the period, the currency stood at 22.4921.
The Argentine peso opened the period at its low for the year of 22.124. The currency then depreciated gradually and constantly to a high for the period of 47.8342 on 1 October, due in part to the interest rate increase announced by the country's central bank. The currency then reversed course, returning to around 40 in early November, to close the year with further slight depreciation.
At the end of the period, the currency stood at 43.1593, well above the average rate for the period (32.908882).
Finally, the Russian rouble began the reporting period by appreciating against the euro, reaching its low for the year of 68.0535 on 9 January. It then reversed direction, retreating to around 80 in mid-April. The rouble then appreciated sharply to 72, remaining within the range 72-74 until early August, when it began to depreciate once more against the euro, bringing the exchange rate to a high for the period of 81.2688 on 10 September. The currency then entered a new period of volatility, appreciating against the euro to around 74, to then conclude the year by giving ground again, remaining far above the annual average rate of 74.055072. At the end of the period, the currency stood at 79.7153.
Brembo is the world leader and acknowledged innovator of the brake disc technology for automotive vehicles. It currently operates in 15 countries on 3 continents, through its production and business sites, and employs over 10,000 people worldwide. Manufacturing plants are located in Italy, Poland (Czestochowa, Dąbrowa Górnicza, Niepołomice), the United Kingdom (Coventry), the Czech Republic (Ostrava-Hrabová), Germany (Meitingen), Mexico (Apodaca and Escobedo), Brazil (Betim), Argentina (Buenos Aires), 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.
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 2018, Brembo's consolidated net sales amounted to €2,640,011 thousand, up 7.2% compared to €2,463,620 thousand in 2017.
Information on the performance of the individual applications and their related markets — as available to the Company — is provided under the following headings.
The global light vehicle market closed 2018 with an overall sales decrease of 0.5% compared to 2017. This represented the first decline of global sales on an annual basis since 2010.
The Western European market (EU15+EFTA) closed the reporting year with vehicle registrations down by 0.8% compared to 2017. Among the main markets, France and Spain were the only two countries that closed 2018 with a sales increase: France grew by 3.0% and Spain by 7.0%. Sales declined in all other countries compared to 2017: Germany declined by -0.2%, Italy by -3.1% and the United Kingdom by -6.8%. The trend was instead positive in Eastern Europe (EU12), with car registrations up 8.0% compared to 2017. In Russia, registrations of light vehicles showed positive signs for the second year in a row and closed 2018 with a 12.8% increase in sales compared to the previous year.
In 2018, sales of light vehicles in the United States grew by 0.6% overall compared to 2017. In Brazil and Argentina, sales showed a positive trend for the second consecutive year, closing 2018 with an overall increase of 7.1%.
With reference to Asian markets, China closed 2018 on a negative trend, after years of growth: sales of light vehicles declined by -3.1% compared to 2017; nevertheless, China remained the number-one market in the world. Japan recorded a positive trend, ending 2018 with a 0.8% increase in sales.
Within this scenario, Brembo's net sales of car applications in 2018 amounted to €2,018,391 thousand, accounting for 76.5% of the Group's turnover, up by 6.7% compared to 2017.
Europe, the United States and Japan are Brembo's three most important markets in the motorbike sector.
In Europe — where the top motorbike markets are Italy, Germany, France, Spain and the UK — registrations rose by 9.0% overall in 2018 compared to 2017. All the main European markets closed 2018 with an increase over the previous year. With regard to displacements, Brembo's target (over 500cc) grew by 3.0% compared to 2017. Instead, ATVs (All Terrain Vehicles, quadricycles for recreation and work) declined by 14.0%.
In the United States, registrations of motorbikes, scooters and ATVs (All Terrain Vehicles, quadricycles for recreation and work) decreased by 2.7% overall in 2018 compared to 2017. ATVs alone declined by 2.9%, whereas motorbikes and scooters together reported a -2.7% downtrend.
In 2018, the Japanese market, considering displacements over 50cc overall, reported a 5.0% increase, whilst the Indian market (motorbikes and scooters together) rose by 13.0%.
In Brazil, registrations grew by 10.0% overall compared to 2017. Against this background, Brembo's net sales of motorbike applications amounted to €248,940 thousand in 2018, up 9.7% compared to €226,858 thousand for 2017.
In 2018, the European commercial vehicles market (EU+EFTA) — Brembo's reference market — showed a 3.2% increase in registrations, thus reporting growth for the sixth year in a row. In Europe, sales of light commercial vehicles (up to 3.5 tonnes) increased by 3.1% overall compared to the same period of 2017. Among the first five European markets by sales volume, three closed 2018 with an uptrend compared to the previous year (Germany: +5.4%; Spain: +7.8%; France: +4.6%), whereas a decline was reported by Italy (-6.0%) and the United Kingdom (-1.3%). In Eastern European countries, this segment grew by 10.2% over 2017.
In Europe, the segment of medium and heavy commercial vehicles (over 3.5 tonnes) rose by 3.5% compared to the previous year. Among the first five European markets by sales volume, growth was recorded in Italy (+5.1%), France (+8.1%) and Germany (+2.9%), whereas sales decreased in Spain (-2.0%) and the United Kingdom (-4.0%). In Eastern Europe, sales of commercial vehicles over 3.5 tonnes improved by 7.9% compared to the previous year.
In 2018, Brembo's net sales of applications in this segment amounted to €255,191 thousand, up by 12.8% compared to €226,134 thousand for 2017.
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 2018, Brembo's net sales of applications in this segment amounted to €116,696 thousand, down by 2.1% compared to €119,254 thousand for 2017.
Only at full speed do you really feel the air against you. Then comes that special thrill you feel when you know you can count on perfect braking performance.
IMSA WeatherTech SportsCar Championship 2018
| (euro thousand) | 31.12.2018 | % | 31.12.2017 | % | Change | % |
|---|---|---|---|---|---|---|
| Italy | 279,964 | 10.6% | 289,182 | 11.7% | (9,218) | -3.2% |
| Germany | 595,659 | 22.5% | 565,645 | 23.0% | 30,014 | 5.3% |
| France | 99,105 | 3.7% | 73,738 | 3.0% | 25,367 | 34.4% |
| United Kingdom | 207,336 | 7.8% | 192,164 | 7.8% | 15,172 | 7.9% |
| Other European countries | 284,060 | 10.8% | 232,633 | 9.4% | 51,427 | 22.1% |
| India | 83,504 | 3.2% | 70,957 | 2.9% | 12,547 | 17.7% |
| China | 303,603 | 11.5% | 271,155 | 11.0% | 32,448 | 12.0% |
| Japan | 32,361 | 1.2% | 34,951 | 1.4% | (2,590) | -7.4% |
| Other Asian countries | 38,503 | 1.5% | 26,973 | 1.1% | 11,530 | 42.7% |
| South America (Argentina and Brazil) | 58,354 | 2.2% | 65,893 | 2.7% | (7,539) | -11.4% |
| North America (USA, Mexico and Canada) | 645,247 | 24.5% | 621,314 | 25.3% | 23,933 | 3.9% |
| Other countries | 12,315 | 0.5% | 19,015 | 0.7% | (6,700) | -35.2% |
| Total | 2,640,011 | 100.0% | 2,463,620 | 100.0% | 176,391 | 7.2% |
| (euro thousand) | 31.12.2018 | % | 31.12.2017 | % | Change | % |
|---|---|---|---|---|---|---|
| Passenger Car | 2,018,391 | 76.5% | 1,890,990 | 76.8% | 127,401 | 6.7% |
| Motorbike | 248,940 | 9.4% | 226,858 | 9.2% | 22,082 | 9.7% |
| Commercial Vehicle | 255,191 | 9.7% | 226,134 | 9.2% | 29,057 | 12.8% |
| Racing | 116,696 | 4.4% | 119,254 | 4.8% | (2,558) | -2.1% |
| Miscellaneous | 793 | 0.0% | 384 | 0.0% | 409 | 106.5% |
| Total | 2,640,011 | 100.0% | 2,463,620 | 100.0% | 176,391 | 7.2% |
Sales breakdown by geographical area (percentage)
Sales breakdown by application (percentage)
| (euro thousand) | 31.12.2018 | 31.12.2017 | Change | % |
|---|---|---|---|---|
| Revenue from contracts with customers | 2,640,011 | 2,463,620 | 176,391 | 7.2% |
| Cost of sales, operating costs and other net charges/income* | (1,690,010) | (1,560,843) | (129,167) | 8.3% |
| Income (expense) from non-financial investments | 16,190 | 13,236 | 2,954 | 22.3% |
| Personnel expenses | (465,306) | (436,050) | (29,256) | 6.7% |
| GROSS OPERATING INCOME | 500,885 | 479,963 | 20,922 | 4.4% |
| % on revenue from contracts with customers | 19.0% | 19.5% | ||
| Depreciation, amortisation and impairment losses | (155,821) | (133,701) | (22,120) | 16.5% |
| NET OPERATING INCOME | 345,064 | 346,262 | (1,198) | -0.3% |
| % on revenue from contracts with customers | 13.1% | 14.1% | ||
| Net interest income (expense) and interest income (expense) | ||||
| from investments | (19,707) | (10,725) | (8,982) | 83.7% |
| RESULT BEFORE TAXES | 325,357 | 335,537 | (10,180) | -3.0% |
| % on revenue from contracts with customers | 12.3% | 13.6% | ||
| Taxes | (83,881) | (67,637) | (16,244) | 24.0% |
| RESULT BEFORE MINORITY INTERESTS | 241,476 | 267,900 | (26,424) | -9.9% |
| % on revenue from contracts with customers | 9.1% | 10.9% | ||
| Minority interests | (3,127) | (4,472) | 1,345 | -30.1% |
| NET RESULT | 238,349 | 263,428 | (25,079) | -9.5% |
| % on revenue from contracts with customers | 9.0% | 10.7% | ||
| Basic and diluted earnings per share (euro) | 0.73 | 0.81 |
* 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".
Confirming the sales uptrend also for 2018, the Group recorded a positive sales performance. Net sales in 2018 amounted to €2,640,011 thousand, up 7.2% compared to the previous year.
Nearly all applications contributed to revenue growth. Car applications, which accounted for 76.5% of Group's sales, closed the reporting period with a 6.7% increase. A very positive performance was also reported by the applications for commercial vehicles (+12.8%), followed by the motorbike segment (+9.7%), whereas the racing segment declined by 2.1%.
At the geographical level, and with specific reference to Europe, Germany recorded a 5.3% increase compared to 2017. France and the United Kingdom reported growth (+34.4% and +7.9%, respectively), whereas Italy declined by 3.2%. In North America (USA, Mexico and Canada), sales rose by +3.9%, whereas South America showed an 11.4% decrease. In the Far East, Brembo recorded a positive performance in China (+12.0%) and India (+17.7%), whereas Japan declined by 7.4% compared to the previous year.
In 2018, the cost of sales and other net operating costs amounted to €1,690,010 thousand, with a ratio of 64.0% to sales, in line with the 63.4% figure for the previous year. Within this item, costs for capitalised internal works included in intangible assets amounted to €25,339 thousand compared to €24,219 thousand for 2017.
Income (expense) from non-financial investments amounted to €16,190 thousand and was attributable to the effects of valuing the investment in the BSCCB Group using the equity method (€13,236 thousand in 2017).
Personnel expenses for 2018 amounted to €465,306 thousand, with a 17.6% ratio to sales, in line with the previous year (17.7%). At 31 December 2018, workforce numbered 10,634 (9,837 at 31 December 2017). The increase in the Group's workforce (+797 people) was attributable to the need to manage the increased level of production, the full operational phase entered by the more recent plants, the inauguration of new production hubs and the upgrade of those already existing.
Gross operating income for 2018 was €500,885 thousand compared to €479,963 thousand in the previous year, with a ratio to sales of 19.0% (19.5% in 2017).
Net operating income amounted to €345,064 thousand (13.1% of sales), compared to €346,262 thousand (14.1% of sales) in 2017, after depreciation, amortisation and impairment losses of property, plant and equipment and intangible assets of €155,821 thousand, compared to depreciation, amortisation and impairment losses amounting to €133,701 thousand in 2017.
Net interest expense amounted to €19,941 thousand (€10,913 thousand in 2017) and consisted of net exchange losses of €6,202 thousand (net exchange losses of €1,596 thousand in 2017) and other net interest expense of €13,739 thousand (€9,317 thousand in 2017).
Net interest income from investments amounted to €234 thousand (€188 thousand in 2017) and was mainly attributable to the effects of valuing investments in associates using the equity method.
Result before taxes was positive at €325,357 thousand, down by 3.0% compared to €335,537 thousand for the previous year. Estimated taxation amounted to €83,881 thousand, with a tax rate of 25.8% compared to 20.2% for 2017.
The Group's net result was €238,349 thousand, down 9.5% compared to €263,428 thousand for the previous year.
| (euro thousand) | 31.12.2018 | 31.12.2017 | Change |
|---|---|---|---|
| Property, plant and equipment | 1,041,442 | 933,774 | 107,668 |
| Intangible assets | 209,139 | 194,585 | 14,554 |
| Net financial assets | 47,754 | 41,069 | 6,685 |
| Other receivables and non-current liabilities | 62,597 | 41,723 | 20,874 |
| (a) Fixed capital | 1,360,932 | 1,211,151 | 149,781 |
| 12.4% | |||
| Inventories | 342,037 | 311,116 | 30,921 |
| Trade receivables | 407,414 | 375,719 | 31,695 |
| Other receivables and current assets | 72,132 | 80,455 | (8,323) |
| Current liabilities | (736,932) | (601,050) | (135,882) |
| Provisions / deferred taxes | (52,709) | (66,573) | 13,864 |
| (b) Net working capital | 31,942 | 99,667 | (67,725) |
| 68.0% | |||
| (c) NET INVESTED CAPITAL (a)+(b) | 1,392,874 | 1,310,818 | 82,056 |
| 6.3% | |||
| (d) Equity | 1,228,822 | 1,064,437 | 164,385 |
| (e) Employees' leaving entitlement and other personnel provisions | 27,141 | 27,784 | (643) |
| Medium/long-term financial debt | 207,444 | 321,658 | (114,214) |
| Short-term net financial debt | (70,533) | (103,061) | 32,528 |
| (f) Net financial debt | 136,911 | 218,597 | (81,686) |
| 37.4% | |||
| (g) COVERAGE (d)+(e)+(f) | 1,392,874 | 1,310,818 | 82,056 |
| 6.3% |
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 2018 amounted to €1,392,874 thousand, up by €82,056 thousand compared to €1,310,818 thousand at 31 December 2017.
Net financial debt for 2018 amounted to €136,911 thousand compared to €218,597 thousand at 31 December 2017. Net financial debt decreased by €81,686 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.
24 Hours of Le Mans 2018
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| NET FINANCIAL POSITION AT BEGINNING OF YEAR (*) | (218,597) | (195,677) |
| Net operating income | 345,064 | 346,262 |
| Depreciation, amortisation and impairment losses | 155,821 | 133,701 |
| Gross operating income | 500,885 | 479,963 |
| Investments in property, plant and equipment | (250,447) | (326,658) |
| Investments in intangible assets | (37,291) | (34,026) |
| Investments in financial assets | (1,350) | 0 |
| Disposals | 2,163 | 4,444 |
| Net investments | (286,925) | (356,240) |
| Change in inventories | (27,311) | (31,154) |
| Change in trade receivables | (30,666) | (16,702) |
| Change in trade payables | 96,347 | 41,860 |
| Change in other liabilities | 6,270 | 16,087 |
| Change in receivables from others and other assets | 6,881 | (15,671) |
| Translation reserve not allocated to specific items | 2,162 | (11,009) |
| Change in working capital | 53,683 | (16,589) |
| Change in provisions for employee benefits and other provisions | (4,975) | 8,801 |
| Operating cash flows | 262,668 | 115,935 |
| Interest income and expense | (19,384) | (10,302) |
| Current taxes paid | (77,602) | (70,336) |
| Dividend paid in the year to minority shareholders | (800) | 0 |
| Interest (income)/expense from investments, net of dividends received | (5,110) | (7,196) |
| Dividends paid in the year | (71,541) | (65,037) |
| Net cash flows | 88,231 | (36,936) |
| Effect of translation differences on net financial position | (6,545) | 14,016 |
| NET FINANCIAL POSITION AT END OF YEAR (*) | (136,911) | (218,597) |
(*) 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 maintains that:
A neurotransmitter also known as epinephrine. Adrenaline is what keeps us going. Both those of us who design our brake systems. And those of us who use them.
Formula 3 Championship 2018
| 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 Mexico S.A. De C.V. |
| 100% | Brembo Deutschland GmbH Leinfelden-Echterdingen - Germany |
100% | Brembo Nanjing Brake Systems Co. Ltd. Nanjing - China |
99.99% | 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 |
|
| 100% | Brembo Russia Llc. Moscow Russia |
60% 66% |
Components Co. Ltd. Nanjing - China Brembo Huilian |
||
| 100% | La.Cam (Lavorazioni Camune) S.r.l. Stezzano - Italy |
(Langfang) Brake Systems Co. Ltd. Langfang - China |
|||
| 68% | Corporacion Upwards 98 S.A. Zaragoza - Spain |
1.20% | Fuji Co. 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% | Petroceramics S.p.A. Milan Italy |
||||
| 10% | International Sport Automobile S.A.R.L. Levallois Perret - France |
||||
| 3.29% | E-Novia S.p.A. Milan Italy |
This table complies with Article 125 | of Consob Resolution No. 11971 dated 14 May 1999. |
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. |
|
| Brembo North America Inc. | |
| Corporacion Upwards 98 S.A. | |
| Brembo Mexico S.A. de C.V. | |
| Brembo do Brasil Ltda. | |
| Brembo Argentina S.A. | |
Production sites Commercial sites Research & Development centres
Those who choose our discs and Calipers know. It is thanks to performance that beauty becomes a value. Pure and without compromise.
Ferrari Challenge Championship 2018
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.
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 2018 closed with net sales amounting to €961,679 thousand, up 7.0% compared to €899,126 thousand in 2017. The item "Other revenues and income" amounted to €54,988 thousand in 2018 compared to €46,139 thousand in 2017, whereas capitalised development costs for the year totalled €21,325 thousand.
Gross operating income went from €144,267 thousand (16.0%
of sales) in 2017 to €181,251 thousand (18.8% of sales) in 2018, whereas net operating income, after depreciation, amortisation and impairment losses of property, plant, equipment and intangible assets amounting to €46,720 thousand, closed at €134,531 thousand compared to €105,126 thousand for the previous year.
Net interest expense from financing activities amounted to €6,634 thousand compared to €2,755 thousand for 2017. Income from investments amounted to €46,024 thousand and was mainly attributable to the distribution of dividends by some subsidiaries.
In the reporting year, net income amounted to €114,106 thousand, compared to €149,484 thousand in 2017.
At 31 December 2018, workforce numbered 3,181, increasing by 106 compared to 3,075 at the end of 2017.
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 50,577 thousand (€57,165 thousand) in 2018, compared to GBP 51,960 thousand (€59,305 thousand) in 2017. In the reporting year, net income amounted to GBP 4,701 thousand (€5,314 thousand), compared to GBP 5,158 thousand (€5,887 thousand) in 2017.
At 31 December 2018, workforce numbered 140, eight more than at the end of 2017.
Buenos Aires (Argentina)
In 2011, Brembo acquired a 75% stake in the company based in Buenos Aires. Under the agreement, Brembo exercised an option right on the remaining 25% in 2013; therefore, the company is currently fully owned by the Brembo Group.
Net sales for the reporting year amounted to ARS 449,470 thousand (€13,658 thousand), with a net loss of ARS 109,556 thousand (€3,329 thousand). In 2017, net sales amounted to
ARS 387,023 thousand (€20,698 thousand) and net loss to ARS 66,110 thousand (€3,536 thousand).
At 31 December 2018, workforce numbered 87, 18 fewer than at 31 December 2017.
It should be noted that Argentina was classified as a hyperinflationary economy with effect from 1 July 2018. The Group has estimated the impact of the adjustment of carrying amounts in accordance with the applicable accounting standard: the subsidiary had total assets of €4.7 million at 31 December 2018 and the main line items are property, plant and equipment, trade receivables, inventory and trade payables. The total effect of the adjustment of property, plant and equipment was estimated at €1.3 million, whereas working capital items did not undergo material changes since they were already carried at near their current values. Given the entirely negligible effects on the Brembo Group's Consolidated Financial Statements (€1,041.4 million), the standard IAS 29 – Financial Reporting in Hyperinflationary Economies was not applied. The Group will periodically assess the possible future application of the Standard on the basis of the materiality of the effects of adjustment.
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 2018, net sales totalled INR 7,868,762 thousand (€97,473 thousand), with a net income of INR 735,152 thousand (€9,107 thousand). In 2017, net sales amounted to INR 5,947,766 thousand (€80,924 thousand), with a net income of INR 525,242 thousand (€7,146 thousand).
At 31 December 2018, workforce numbered 336, compared to 303 at 31 December 2017.
Ostrava-Hrabová (Czech Republic)
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 2018, net sales amounted to CZK 7,507,481 thousand (€292,767 thousand) compared to CZK 7,612,030 thousand (€289,132 thousand) in 2017, closing the year with a net income of CZK 10,117 thousand (€395 thousand) compared to a net income of CZK 275,725 thousand (€10,473 thousand) in 2017. At 31 December 2018, workforce numbered 980, unaltered from 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 2018, net sales amounted to €1,975 thousand (€1,898 thousand for 2017), with a net income of €501 thousand (€378 thousand for 2017).
At 31 December 2018, workforce numbered eight, increasing by one compared to the same date of the previous year.
Betim (Brazil)
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 2018 amounted to BRL 181,506 thousand (€42,125 thousand), with a net income of BRL 3,843 thousand (€892 thousand). In 2017, net sales amounted to BRL 153,481 thousand (€42,585 thousand), with a net loss of BRL 12,417 thousand (€3,445 thousand).
At 31 December 2018, workforce numbered 232, compared to 227 at the same date of the previous year.
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 612,809 thousand (€78,491 thousand) in 2018, compared to CNY 604,968 thousand (€79,325 thousand) in 2017. In the reporting year, net income amounted to CNY 67,979 thousand (€8,707 thousand), compared to CNY 96,628 thousand (€12,670 thousand) in 2017.
At 31 December 2018, workforce numbered 670, increasing by one compared to the end of 2017.
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 697,899 thousand (€5,352 thousand) in 2018, compared to JPY 634,566 thousand (€5,010 thousand) in 2017. Net income for the reporting year was JPY 95,894 thousand (€735 thousand), compared to JPY 94,513 thousand in 2017 (€746 thousand).
At 31 December 2018, workforce numbered 18, unchanged compared to the figure at the end of 2017.
Activities: 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 2018, net sales amounted to USD 220,460 thousand (€186,595 thousand), with a net income for the year of USD 3,684 thousand (€3,118 thousand).
In 2017, net sales amounted to USD 169,627 thousand (€150,208 thousand), with a net income of USD 6,646 thousand (€5,885 thousand).
At 31 December 2018, workforce numbered 957, compared to 719 at the end of 2017.
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 2018, net sales amounted to CNY 579,540 thousand (€74,230 thousand), with a net loss of CNY 22,043 thousand (€2,823 thousand). In 2017, net loss was CNY 38,604 thousand (€5,062 thousand).
At 31 December 2018, workforce numbered 303, compared to 138 in 2017.
Activities: development, casting, production and sale of OEM brake discs for cars and braking systems for cars and commercial vehicles.
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 2018, net sales amounted to CNY 1,241,966 thousand (€159,077 thousand) and net income was CNY 81,793 thousand (€10,476 thousand); in 2017, net sales amounted to CNY 1,368,290 thousand (€179,414 thousand) and net income was CNY 91,342 thousand (€11,977 thousand).
Workforce numbered 632 at 31 December 2018, compared to 588 at the end of 2017.
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. In 2010, a Research and Development Centre was opened at the facility in Plymouth (Michigan) to develop and market new solutions in terms of materials and designs for the U.S. market.
Net sales for 2018 amounted to USD 490,484 thousand (€415,140 thousand) compared to net sales amounting to USD 476,694 thousand (€422,121 thousand) for the previous year. Net income was USD 50,134 thousand (€42,433 thousand) at 31 December 2018, compared to net income of USD 46,503 thousand (€41,180 thousand) for 2017.
At the end of the year, workforce numbered 723, a decrease of one compared to the end of 2017.
Brembo Poland Spolka Zo.o.
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 Częstochowa 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 Niepołomice 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 2,137,006 thousand (€501,577 thousand) in 2018, compared to PLN 1,835,490 thousand (€431,240 thousand) in 2017. Net income at 31 December 2018 was PLN 335,532 thousand (€78,753 thousand), compared to a net income of PLN 390,644 thousand (€91,780 thousand) for the previous year.
At the end of the year, workforce numbered 2,085, compared to 1,866 at the end of 2017.
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.
In the year, the company reported net sales amounting to RUB 50,151 thousand (€677 thousand) compared to RUB 38,377 thousand (€582 thousand) in 2017; net income was RUB 19,219 thousand (€260 thousand) compared to RUB 15,481 thousand (€235 thousand) at 31 December 2017.
At the end of the year, workforce numbered three, one more compared to the end of 2017.
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 9,423 thousand (€919 thousand), with a net income of SEK 4,566 thousand (€445 thousand), compared to net sales of SEK 3,487 thousand (€362 thousand) and net loss of SEK 1,412 thousand (€147 thousand) for 2017.
At 31 December 2018, workforce numbered one, unchanged compared to the same date of the previous year.
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 2018 amounted to €29,843 thousand, compared to €29,421 thousand in 2017. Net income was €2,422 thousand, compared to €2,389 thousand in 2017.
Workforce numbered 71 at 31 December 2018, compared to 73 at the end of 2017.
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 2018, net sales, which were mainly to Brembo Group companies, amounted to €44,209 thousand compared to €41,766 thousand in 2017. Net income for 2018 was €1,414 thousand, compared to a net income of €2,348 thousand at the end of 2017.
At 31 December 2018, workforce numbered 180, compared to 183 for the previous year.
Qingdao (China)
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 2018 amounted to CNY 275,267 thousand (€35,257 thousand), compared to CNY 258,178 thousand (€33,853 thousand) for the previous year. Net income for the year was CNY 10,627 thousand (€1,361 thousand), up compared to CNY 9,997 thousand (€1,311 thousand) for 2017. Workforce numbered 27 at 31 December 2018, unchanged compared to the same date of 2017.
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 2018 were €55,888 thousand, compared to €52,844 thousand at 31 December 2017. Net income for the year was €24,079 thousand, compared to net income of €23,461 thousand for 2017.
Workforce numbered 144 at 31 December 2018, eight more than at the end of 2017.
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 2018 amounted to €133,606 thousand, up compared to €109,484 thousand for the previous year. At 31 December 2018, net income totalled €22,973 thousand, compared to a net income of €17,829 thousand for the previous year.
At 31 December 2018, workforce numbered 398, compared to 347 at the end of 2017.
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 2018 amounted to €2,664 thousand, with a net income of €1,080 thousand. In 2017, net sales were €2,426 thousand and net income amounted to €885 thousand.
In 2018, Brembo's investment management policy continued to develop along the lines that have been followed until today, aiming to strengthen the Group's presence both in Italy and, above all, internationally. The most significant investments were concentrated in Italy (30.0%), Poland (27.8%), North America (19.1%) and China (15.2%).
In Italy, on 13 February 2018 Chairman Alberto Bombassei laid the first brick of the building in Curno that will house the new Carbon Factory. The new building has been designed in view of progressively verticalising — within a single production facility adjacent to Brembo's current hub — the entire development, processing and production process for raw components used in carbon-fibre discs and pads for racing applications. Brembo's Carbon Factory will produce semi-finished carboncarbon discs and pads — to be distinguished from the carbonceramic discs intended for high-performance street vehicles manufactured in Stezzano (Italy) and Germany — for equipping the cars and motorbikes used by the racing teams in all major motor competitions, starting with F1 and MotoGP. 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. Construction work was completed in 2018 and full operation is expected to be reached by the end of 2019.
Other investments in Italy were directed primarily at purchases of plant, machinery and equipment to increase the production automation level, as well as €21,325 thousand spent on development costs.
As part of its strategy of consolidation and development at the global level, Brembo continued to invest in North America, its preferred industrial hub for expanding on the North American market. In Escobedo (Mexico), in an area adjoining the new plant for processing and assembling brake calipers, construction work for another cast-iron foundry was completed; it extends over 25,000 square metres and, when fully operational, it will have a casting capacity of approximately 100,000 tonnes a year. The products manufactured in the new plant are destined to leading European, American and Asian OEMs with production plants in Mexico.
Again as part of its international expansion strategy, in 2018 Brembo completed the investment plan worth about €100 million launched in 2016 and aimed to build a new aluminium caliper production complex in Nanjing, China, close to the existing plant. The new production hub, which will be cuttingedge in terms of process integration and automation, covers about 40,000 square metres; once fully operational, it will have a casting capacity of more than 15 thousand tonnes and a production capacity of more than 2 million pieces a year, including calipers and spindles. The products manufactured in the new plant are destined to leading European, American and Asian OEMs with production plants in China.
In Eastern Europe, Brembo completed its plan to expand the production hub in Dąbrowa Górnicza (Poland), launched in 2016. This plan calls for the construction of a third foundry line and new mechanical processing lines extending over an indoor area of additional 22,000 square metres. This new facility, which will entail an increase in casting capacity of 100,000 tonnes a year once fully operational, produces both "grey" cast iron (used for brake discs) and "spheroidal" cast iron (used for calipers intended for light commercial vehicles), in response to the constant increase in demand for brake discs and floating calipers in Europe.
Group's total investments undertaken in 2018 at all operations amounted to €287,737 thousand, of which €250,447 thousand was invested in property, plant and equipment and €37,290 thousand in intangible assets.
Lines and forms capable of creating a unique, unmistakable style. For us, design always means innovation.
MotoGP brake system 2018
The developments in transport vehicles inform Brembo's R&D activity, which has always focused on designing the best brake system for the vehicles of tomorrow. The main themes of today's vehicle trends are the switch to electric, autonomous driving capability, reduced emissions and environmental impact, connectivity and overall affordability. Each component of the brake system — from calipers to discs, from pads to suspensions, all the way to control units — complements the others in the optimisation of the braking function, which Brembo constantly seeks to perfect, not only in terms of pure performance, but also of comfort, duration, aesthetics and environmental sustainability.
Since 2000, 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 years.
Since the market requires constantly shorter time to market, the Group is also strongly committed to implementing cuttingedge 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, North America, China, India and Poland.
In 2018, R&D activities mainly focused on the following aspects.
With regard to cast-iron discs, the simulation method was consolidated, so as to be able to identify more accurate parameters capable of improving the comfort level offered by a brake system, as early as the design phase. This methodology is now used in all new development projects, providing access to a database that can be used to refine calculation results even further.
Cooperation with various entities also continued in investigating simulation methods tied to system comfort and disc fluiddynamics, with a focus on air flow within the entire wheel-side unit.
At the same time, studies were continued in partnership with European universities and research centres to constantly optimise cast-iron disc products and processes, resulting in improvements that will be incorporated into normal application development for the world's major vehicle manufacturers.
According to precise guidelines applied throughout the automotive sector and all of Brembo's development activities, considerable attention is 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).
Work on discs for heavy commercial vehicles — an application segment which is of particular interest to Brembo — continued with a focus on improving performance. Development activities therefore intensified with customers, also outside Europe, to be finalized by 2019 with the acquisition of further market shares. In car applications, after having worked with a major German customer to develop the concept for the light brake disc currently installed in its entire platform of core vehicles, Brembo was also selected as the supplier of brake discs for the entire next generation of vehicles within this platform. Application studies are still underway and will be completed in the next two-year period.
Thanks to the introduction of the light discs, a reduction in weight of up to 15% compared to a traditional discs is now guaranteed by combining two different materials (cast iron for the braking ring and a thin steel laminate for the disc hat). This solution has also been successfully tested by other important manufacturers and will begin to be used in some of their new models already this year.
Brembo also forged ahead its activity dedicated to product and process optimisation for co-cast discs aimed at improving thermal-mechanical and fluid-dynamic performance, reducing mass and applying new innovative aesthetic solutions. Following the completion of Brembo's concept approval phase for this
solution, the new disc was presented to potential clients in view of the development of future applications.
In addition, work proceeded on researching, developing and testing unconventional solutions — also resulting in the filing of several patent applications — to be applied to cast-iron brake discs or the next generation of "light" discs, with a focus on the study of shapes, materials, technologies and surface treatments capable of meeting the needs of the next generation of electric vehicles and conquering new segments of the market.
These new solutions, which aim to reduce environmental impact (lower emissions of CO2, fine particulates and wheel dust) and improve aesthetics and corrosion resistance, have met with strong interest among Brembo's main clients, with whom the first application studies were started throughout 2018.
In the reporting year, the Technical Development Centres at the Group's U.S. and Chinese facilities also continued to undergo constant upgrade, thus allowing Brembo to acquire valuable orders within local markets and increasingly act as a strategic supplier of brake discs to major global players.
The plan to create motorbike discs made from composite material for on-road use continued, involving the definition of usage limits and perfecting mechanical processing. New braking ring sizes were defined and new samples are being prepared. The specific friction material remains to be developed. This process will be planned taking account of the availability of braking rings in their final sizes.
Application projects for the new mid-range master cylinder are in the prototype preparation stage. A specific design that combines the brake cylinder and clutch was created and approved by the main client. Prototype testing is expected to begin in the first half of 2019.
Testing of the prototypes for rear master cylinder with integrated microswitch was successfully completed. The concept has been validated and is ready to be presented to clients for specific developments.
Planning of prototypes for Brembo Brake India's new range of calipers is currently under way. The prototyping process will pursue the twofold aim of technically validating products and making the components available for presenting the new design to clients. Production of the new disc CBS/disc application was started for an Indian client, whereas the development phase of the H-CBS actuator for the drum/disc in a scooter configuration was postponed to the first-half of 2019.
The first phase of testing of new disc materials designed to reduce weight was completed and bench testing yielded positive results. Braking ring sizes are also being defined for the second phase of the prototyping and testing process.
Development work on the hat/braking ring configuration for the new low-vibration brake disc concept was postponed to the first half of 2019.
A new entry-level caliper design is currently undergoing vehicle testing. Main tests are expected to be completed in the first half of 2019.
Preparation of the Brake by Wire Moto demonstrator continued according to plan.
A new friction material technology for motorbike applications is being evaluated. Prototypes are available and will undergo bench testing in the first half of 2019.
A new version of the feeling setting for off-road motorbike cylinder levers was configured: prototypes will be available in the first half of 2019.
The new dynamometer test bench at Brembo Brake India is fully operational.
Development of the innovative brake concept for highperformance motorbikes, currently suspended due to overlap with other projects, will need to be replanned.
Regarding the racing world, the Carbon/Carbon brake system for racing applications project (F1, LMP1 – Le Mans Prototype 1, IRL – Indy Racing League, and Super-Formula) includes three distinct areas, whose activities were further ongoing throughout 2018 and will continue in the years to come:
Attention is also beginning to be shifted to the changes that will be introduced to the F1 championships. Important rule changes (starting with larger wheel rims) that will have a significant impact on the brake system are planned beginning in 2021.
Specific projects involving a F1 client are in progress, extending to all components of the brake system. The 2019 systems are being defined also with another F1 client, including development of a new brake-by-wire system even more integrated than the current one. The brake system currently consists of two separate master cylinders (and/or in some cases of a tandem cylinder) and a brake-by-wire actuator. The new system integrates the tandem master cylinder and the rear BBW system into a single structure, with a considerable reduction in weight. This will be the base technological solution for an important F1 team.
A new brake caliper concept will also be introduced to the vehicles of three F1 teams for use in races in 2019. The new caliper, which provides very high braking efficiency, is equipped with devices capable of significantly reducing residual torque generated by the braking system to almost half of the previous year.
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 same calculation within the customer wheel unit — in other words, mechanical and thermal calculations with computational fluid dynamics (CFD) solutions.
In the MotoGP class of motorbike applications, new systems are now available to all clients, including a new brake caliper, used only by few teams until mid-2018. This caliper ensures amplified force, and has an anti-drag system and a valve that reduces piston knock-off in the event of wobble.
In the superbike category, a new caliper with amplified force and anti-drag system made its competition début. Instead of a carbon/carbon structure, it uses a steel disc and traditional pads. In the coming months it will be assessed how best to adapt this caliper concept to applications for on-road replacement parts.
At OE development level, mention should be made of another work carried out with AP Racing on road systems dedicated to OE customers with strong sporting features. The work started with the dimensioning and thermal simulation of the system (in the same ways as with racing cars) and ended with Brembo's new Carbo-Ceramic disc (CCMR) entering into production. The first discs from this new project were approved in early 2018 by the development team and the client, which confirmed the SOP (start of production) in the second half of 2018. The new vehicle to be equipped with this new carbon-ceramic system is the McLaren P15, also known as the McLaren Senna, which has already entered production.
Brembo also continued its valuable partnership with several Italian universities, including the Milan Polytechnic and the University of Padua, in pursuit of important goals in various areas of technical development.
Brembo has been certified by the EASA as a qualified developer and designer of complete brake systems and by the Italian Civil Aviation Authority (ENAC) to produce front and rear wheels.
As part of these efforts, Brembo renewed its participation in the CS2 project (financed by Clean Sky 2) and is managing the ongoing orders on the basis of its agreements with clients. Since several projects acquired were postponed by clients during the year, Brembo is assessing all appropriate actions to ensure that the aeronautical project does not dilute the Group's results.
Due to the extensive experience it has gained over the years, Brembo Friction may now be considered a well-established, stable reality, focused on continuous improvement. Friction materials – increasingly flexible and designed to meet individual clients' various needs – represent a specific, reactive response made possible by the synergistic efforts by the Research and Development Department and all of Brembo's other Departments. High-performance brake pads designed for applications involving the use of cast-iron and carbon-ceramic discs are now developed using increasingly sophisticated techniques.
In the OE market, many of the most demanding automotive firms have chosen Brembo Friction for its high-end applications, reaffirming their confidence in Brembo pads — a proof that commitment and attention for the product lead to excellent results.
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 — can now benefit from Brembo's know-how on Cu-free materials, i.e., copper-free friction materials.
The ongoing innovative drive has made it possible to develop specific friction materials for pairing with very light discs with very high thermal and mechanical resistance: this is the case of the German market, which demands Cu-free materials for carbon-ceramic discs coated with Si-SiC (silicon-silicon carbide).
To meet these increasingly stringent needs, in early 2018 a statistical model (DOE) was introduced to identify the main categories of materials on which to concentrate with the aim of optimising the friction material's chemical and physical properties and thus of obtaining the best response in terms of performance and comfort.
The development of environmentally friendly friction materials, with an increasingly lower environmental impact (for example,
reduced emissions of greenhouse gases such as CO2), reflects the ever growing environmental focus of global research.
This particular focus on the environment is the source of projects such as COBRA and LIBRA. Born of an important partnership between Italcementi, Istituto Mario Negri and the consulting firm PNO Italia, the COBRA project (part of the European Life+ programme) concluded after completing its objective of developing a technology capable of replacing the phenolic binders, typically used in friction materials, with innovative cement-based components. During the development of this project, materials equivalent to those traditionally used were successfully formulated to meet the performance requirements imposed by racing applications — notoriously stringent in the area of friction materials. Exceeding the goals set by the European ECE Regulation 90 represented a significant technical result that confirms the validity of this new class of materials. Major car and motorbike brands are currently considering whether to adopt COBRA pads for their applications in the development stage. Brembo already has a press based on adhoc technology for producing these pads, enabling it to meet potential demand from clients on a pre-industrial prototyping scale. The current pre-engineering phase will be followed by synergistic work with individual clients to meet their specific demands, in view of further process optimisation, with the aim of ensuring the product offers optimal performance and comfort. From the perspective of the environmental footprint, the introduction of a cement binder proved a decisive step towards a potential reduction of volatile organic compound (VOC) emissions, as effectively shown in laboratory testing.
The LIBRA project was launched in 2015 with the aim of eliminating steel backing plates from brake pads, replacing it with a high-performance composite material. The advantages are clear: from a lighter weight for the individual piece (and the resulting decrease in weight of the brake system) to a reduction of the time needed to produce each pad. As soon as the end of the first year of research and development, results were very positive and confirmed the project's validity in terms of competitiveness and innovation. In 2017, a U.S. automotive giant requested the use of parking pads with backing plates made from a composite material, a further sign of the important, innovative nature of the LIBRA project's revolutionary technology. The first OTOP (Off Tool Off Process) production lots have been delivered to the client, therefore closing the product development phase. The automatic press to be used for mass production, expected to occur in 2019, was installed at the end of 2018.
In early 2018 — following the excellent results achieved in the previous LowBraSys and Rebrake projects — the Ecopad project was launched in collaboration with the University of Trento and KTH of Stockholm. This new project seeks to produce pads using the new Cu-free materials capable of maintaining excellent performance along with certified reduced emissions.
With reference to the Car and Commercial Vehicle Division, the goal of using the braking system to help reduce vehicle consumption and resultant CO2 emissions and particulates is being pursued through the development of new solutions. In detail, the use of methodologies to minimise caliper mass for the same performance, the improvement of caliper functionality by defining new characteristics for the pairing of seal and piston and optimisation of a new-concept pad sliding system continue to feature among the main areas of development. An application development is also in progress and may conclude by first half of 2019, with the award of a share of business relating to a fully electric vehicle platform created by a major German manufacturer.
The product and process improvement work is constantly ongoing in the same way as the search for solutions to reduce mass, increase performance and improve styling. In this regard, in addition to other activities, application development is also in progress for a new caliper, specifically designed for high-performance cars, with the goal of considerably reducing track operating temperatures, and thus of increasing system performance. This new caliper is expected to enter into production in the third quarter of 2019.
The conquest of new market segments is being pursued also through the study of new types of brake caliper. A first new caliper type entered into mass production in late 2018 with a major German client, whereas a second type has reached and successfully completed the concept approval phase.
In 2016, Brembo had started the small-series production of a caliper produced using thixotropic aluminium alloys, i.e., at a lower temperature than casting. This process, for which Brembo has filed a patent application, is known as "BSSM" (Brembo Semi-Solid Metal casting) and offers a reduction in weight of 5 to 10%, depending on caliper geometry, without any decrease in performance. Concept approval is currently underway, whereas start of production for the first vehicles will take place in late 2022.
Brembo's first mechatronic products, namely various configurations of electric parking brakes, already approved in-house both for cars and commercial vehicles, are being promoted with Brembo's customers.
In detail, Brembo has been selected by a major U.S. customer to supply a caliper with integrated electric parking brake for electric vehicles.
In commercial vehicle applications, Brembo has developed, and continues to develop, mechatronic parking solutions for vehicles up to 7.5 tonnes. The SOP for these vehicles is expected in mid- 2019.
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. Brake-by-wire systems, which Brembo has long been studying, have now reached a high level of performance and functionality. The industrialisation and planning phase for the start of production has begun and could be realised as soon as several customers confirm their interest at a contractual level. The ongoing evolution of simulation methodologies is focused on aspects linked to brake system comfort and caliper functionality. Brembo's current objective is to develop the simulation capacity for the latest brake system component not yet simulated: friction material. From this standpoint, the ability to rely on the Brembo Friction project represents a strength for the Group, which can position itself as a supplier of 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 the car's pedal feel.
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 traction 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 highlevel autonomous driving capability.
Furthermore, developments involving intelligent system integration continued, particularly with electric-drive systems and the associated next-generation architecture. In this area, it was important for Brembo to participate in the EU-Live project, which was carried out by a European consortium and funded by the Horizon 2020 project, completed in 2018. Brembo's role in this project consisted of designing and realising the integration of the brake into an oscillating arm, with an electric-drive motor, intended for a four-wheel vehicle specifically designed for future urban mobility.
Mechatronics and system integration entail the development of new components for Brembo's products, including sensors, mechanisms and electric motors. 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.
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.
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 — will continue until March 2019. This project's theme is key to the sustainability of Brembo's products.
It is a creed, a mission. Innovating. Without ever stopping. It is an inescapable part of our DNA.
Formula E Championship 2018-2019
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 has 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 identified1 the other main corporate committees/functions relevant for risk management purposes, by defining their respective duties and responsibilities within the ICRMS scope. More specifically:
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
1 In this regard, see the following documents published on Brembo's website in Investor Relations/Corporate Governance/Principles and Codes section: Corporate Governance Manual, Organisation, Management and Control Model, the Brembo Group's Reference Layout for preparing accounting documents, Guidelines for the Risk Control and Management System.
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 Control, Risks & 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. On an annual basis at least, 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.
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 Luxury and Premium segments of the automotive sector and, in terms of geography, generates most of its sales from mature markets (Europe, North America and Japan). In order to mitigate 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 mid-premium 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.
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 and aspects affecting individual development, inclusion and celebration of diversity are fundamental issues for the Group, and 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, international economic conditions, 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).
With reference to the risk of operational downtime at production facilities and continuity of operation, the company reinforced its risk mitigation process, through the planning of loss prevention engineering on the basis of U.S. NFPA (National Fire Protection Association) standards. 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 functional departments of Business Units and 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 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:
• different regulations for each country, based on different legal systems, often presenting complexities and interpretative challenges;
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:
preventing the commission of offences;
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 recognition of the appropriate checks or impairment losses in connection with 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 the 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 partially reduce this risk, the Group has entered into several medium/long-term fixed rate loan agreements accounting for approximately 43% 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 2018, no specific hedging transactions were undertaken. However, it should be recalled that existing contracts with major customers provide for automatic periodic adjustment on the basis of 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 significantly decrease the company's exposure, especially with regard to possible damages arising from the manufacturing and sale of its products. This has been achieved through risk management, aimed at identifying and analysing the most critical areas, such as the risks associated with countries whose laws are particularly detrimental for manufacturers of consumer goods.
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 an 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 our genetic make-up, sensitivity and intuition become the ability to listen to others. Symbiosis and a unique ability to fully enter the mindsets of others.
Formula 1 Championship 2018
In 2018, Brembo implemented the necessary organisational changes in accordance with the market situation, evolution of the business, ongoing innovation and growth.
In light of the increasingly international dimension of its business structure, and with the aim of reinforcing and structuring its various logistical processes through their integration and optimisation, at the central level the Systems Division created its own Logistics Department, which reports directly to the Division's Chief Operating Officer and Chief Manufacturing Officer. With this division, in light of the growing complexity of innovation within the market scenario, the role of Advanced Projects Planning Manager was also created with the mission of further reinforcing the organisational structures responsible for implementing company strategies relating to Advanced Projects (i.e., projects that introduce innovative technical solutions based on new technological processes). In the case of the Discs Division, a revision of the European platforms was launched with the aim of achieving greater efficacy in developing increasingly complex projects. In the second half of the year, the Performance Group also consolidated its organisation with regard to managing product development processes, adopting an approach with project management as its focal point and introducing platforms that guide these processes. The Performance Group also revised its organizational structure in its Technical and Innovation area, combining the Innovation and R&D and Brembo Performance Technical Department functions into a single area with the aim of improving the coverage and efficacy of the relevant processes, in accordance with its new organisation based on project management.
In the various Group companies, at Brembo North America new plant managers were appointed at the cast-iron foundries in the United States and Mexico. In China, the country HR Department — which is responsible for managing the human resources of all Chinese companies based in the country — was reinforced, and, again in China, the new Country HSE Director and the new China Country Quality Director also joined the Group during the year. Lastly, in Europe, a new Managing Director was appointed at AP Racing.
In 2018, training was focused on designing, planning and
holding courses aimed at providing Group personnel with the skills and knowledge they need to be increasingly capable of anticipating industry's requests, market trends and the organisation's needs.
Within the training and development catalogue, numerous skills were addressed in a series of new courses: change management, systems thinking, celebration of individual diversity and the Enterprise Leadership model, which after being implemented for the first line of management, the HR professional family and new executives, is now also being extended to middle management.
Ongoing courses include Knowledge Management, designed to offer our professionals and managers — identified as having critical knowledge — the tools they need to become in-house trainers, and Finance for Non-finance People, which is structured on three levels. These two courses continue to represent a key element of the global training catalogue.
The most important project — from both a qualitative and a quantitative standpoint — is the Hub for LifeLong Learning launched in Italy. Created in response to contractual training obligations in the mechanical engineering sector, in 2018 the Hub provided classroom sessions for all personnel on corporate content and subjects relating to Industry 4.0, for a total of 12 hours. This formula is based in large part on ongoing training as a strategic tool for the Company and its People. The planning of the 2019 Hub, which will have the same impact, will represent the natural continuation of the programme just concluded.
The Manufacturing Academy — a full-fledged company manufacturing training school — is among the technicalspecialist training projects that continue to meet with interest and draw people from all around the world into the classroom. The Academy offers a wide array of workshops revolving around the Digital Factory, constantly updated to cover new technologies and knowledge. Run by in-house trainers and supported by the expertise of university professors, with the aim of ensuring that the Group enjoys a productive exchange with the research community, the Academy has already been launched in Poland, the Czech Republic and China. Considerable training in Industry 4.0 skills, both from the catalogue and of an ad-hoc nature, was provided in 2018. The pilot course for the Brembo Production Development System was managed by internal teachers certified by the Brembo Academy — the entity responsible for in-house training at the Company — with the aim of explaining and spreading Brembo's method for managing R&D projects, with a specific focus on mechatronic projects.
The two e-learning training projects for the Group's resources are the Code of Ethics and Data Classification and Projection — projects that have met with a positive response. At the end of 2018, another new, totally customised e-learning course was launched on the subject of data protection under the new GDPR rules.
2018 also saw the achievement of the goal of transitioning to ISO 9001-2015, which allows the Brembo Academy to certify its training offerings. This fundamental step recently allowed the Company to obtain accreditation for its training services from the Region of Lombardy.
Within the larger framework of the consolidated Talent Management System, worth of mention is also the further increase in the spread of the individual performance management system, the Brembo Yearly Interview, which covered 74% of Brembo's global population in 2018 (73% in 2017), in addition to the consolidation of the Performance Management and Succession Planning tools and processes.
Finally, the first half of 2018 also marked the conclusion of the periodic Engagement Survey directed at the entire Brembo Group. Launched in December 2017, its results were excellent in terms of both the response rate of 74.15% (69.10% in the previous 2014 edition) and the engagement index, which reached 77.40% (76.23% in 2014).
brembo Manufacturing Academy
R&D Academy
Over 240,000 training hours worldwide (source: 2018 GRI)
Brembo's commitment to environmental sustainability and safety continues to be an increasingly strategic and essential factor for developing the Group's business.
In 2018, Brembo began to implement the programme inspired by the internally designed environmental sustainability process involving initiatives in various areas, each of which was developed to integrate environmental objectives into the Group's business model.
This process seeks above all to raise awareness among all Brembo's People of the consequences of decisions and actions in pursuit of the Group's environmental goals. With a view to strengthening this awareness, a specific training programme designed during the reporting year will be launched in 2019.
The new Environmental Management and Energy System successfully completed certification by a third-party authority, which issued a consolidated Group certificate referring to all plants.
The new management system introduces requirements common to all plants, focused on preventing risks of an environmental nature — including those relating to climate change and water management — moving past the concept of compliance with the requirements of local legislation, which nonetheless remains a fundamental element to ensure at all sites. The system also seeks to involve the entire supply chain in the process of preventing risks and reducing environmental impacts.
Within the framework of the decarbonisation of production processes, in 2018 Brembo's plants developed improvement projects capable of reducing CO2 by 1.7%.
In order to support the identification of areas with margins for improvement, an energy monitoring platform capable of providing real-time and past consumption data for all plants was introduced. Alongside the progressive introduction of renewable energy into its mix of sources, which brought the share of renewables to 20% in 2018, Brembo reduced its CO2
emissions by 7% overall compared with 2015, in line with the process of achieving a 19% reduction in CO2 by 2025 compared with 2015 levels.
In the management of water risk, Brembo is committed to developing and implementing measures aimed at minimising water consumption in its production processes.
In 2018, Brembo achieved its best result of all time in terms of the severity and frequency of accidents in proportion to the number of employees. This result, achieved across all plants and divisions, was facilitated by a series of initiatives at both the local and Group level.
The certification audit process for the Management System continued in 2018, carried out by a single third-party company, with the aim of ensuring uniformity of application of the System and the use of a single evaluation approach.
Since Brembo believes that the compliance of all its facilities with local legislation must represent a fundamental principle, a single, independent third-party entity was also appointed in this case to conduct audits with annual frequency. All the findings of the third-party audit (of a legislative and systemic nature) were monitored by Corporate Health & Safety function.
All the points of attention identified in the course of such audits (non-compliance or simple observations) were developed into plans and actions for improvement at the various plants.
Each facility designed and implemented specific improvement plans aimed at achieving the targets set in terms of safety KPIs (severity index and frequency index).
In particular, the target-setting system includes:
Annual accident severity index targets are set at the level of the production facility, Operations Department, Division or Business Unit and Group. The target of zero accidents resulting in total or event partial permanent disability was also added in 2018. These targets are revised annually, on the basis of the results achieved in previous years, with the aim of constantly improving H&S performance.
The accident frequency index KPI, which will be included in the targets for 2019, was also monitored in 2018.
Each plant then sets its own specific targets on the basis of its performance in the previous year, feedback from the risk assessment process and the targets set at the Group level. These specific targets are periodically monitored as part of the review by Plant Management.
Several important, centrally planned initiatives common to all facilities were also carried out in parallel:
The communication campaign began in earnest with signs posted in the various departments aimed at disseminating the safety principles identified by the plants in question.
The campaign, which focused on Brembo People, features six key safety principles, identified as priorities by all countries in internal workshops.
Another preventive tool on which Brembo focused its efforts in 2018 is the spread of the best practices that have been successfully tested by one of the Group's facilities.
The plant that has come up with and implemented an idea that resulted in heightened safety levels shares its insight through the company Intranet. The other facilities analyse the suggestion, and assess and plan how to implement the proposed improvement.
After being assessed by an ad-hoc committee, some of these best practices may become new Brembo safety standards, and their implementation may thus become mandatory at all Group plants.
In 2018, Brembo identified the "Ten Life-Saving Behaviours" based on a series of workshops organised in all geographical areas where Brembo has its plants, with the participation of the entire company organisation.
This process resulted in a list of ten safety principles that direct personnel and all visitors to Brembo facilities must adopt to ensure increasingly safe work environments. Practising all Ten Life-Saving Behaviours will also support the spread of a stronger safety culture.
In general, the following are held:
An initiative was launched to improve the specific safety conditions of cast-iron foundries. This initiative entailed a dedicated workshop involving representatives from all foundries from the HSE, maintenance and technology areas, during which the main areas with room for further improvement were identified and analysed in order to raise safety levels at all cast-iron foundries worldwide: the intrinsic safety of systems and processes, behaviour-based safety (LOTO) and safety in respect of specific risks (confined spaces).
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 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 Audit & Risk Committee, which also acts as Related Party Transactions Committee since it meets the requirements set out by the abovementioned regulations. The procedure aims to ensure the full transparency and propriety of Related Party Transactions and has been published in the Corporate Governance section of the Company's website.
In 2013, on the basis of a favourable opinion from the Audit & Risk Committee, the Board of Directors unanimously resolved not to proceed with amendments to the Related Party Procedure of Brembo S.p.A., partly in light of the efficacy shown in applied practice and partly because it had already been revised in previous years. The Board thus deemed already adopted both the contents of the Recommendation and the wishes expressed by Consob regarding the first revision of the procedure. The update to the Related Party Transactions Procedure incorporating the changes relating solely to organisational matters pertaining to the Company's Administration and Finance Department was approved by resolution of the Board of Directors of 10 May 2016, and with the favourable, unanimous opinion of the Audit & Risk Committee.
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 General Shareholders' Meeting of the Parent Brembo S.p.A. held on 20 April 2018 approved the Financial Statements for the financial year ended 31 December 2017, allocating the net income for the year amounting to €149,484 thousand as follows:
The General Shareholders' Meeting held on 20 April 2018 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 8,735,000 own shares already held (2.616% of share capital), represents 5.012% of the Company's share capital. Own shares shall be purchased and sold 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 2018.
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.
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.
Brembo Group believes that its current administrative,
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 reveals that the Group's Equity at 31 December 2018 was €676,813 thousand higher than the figure reported in the Brembo S.p.A. Financial Statements. Consolidated Net Result for the year, amounting to €238,349 thousand, was €124,243 thousand higher than that of Brembo S.p.A.
| (euro thousand) | Net income 2018 |
Equity at 31.12.2018 |
Net income 2017 |
Equity at 31.12.2017 |
|---|---|---|---|---|
| Brembo S.p.A. | 114,106 | 522,267 | 149,484 | 479,616 |
| Consolidation adjustments: | ||||
| Equity of consolidated companies and allocation of their result | 158,369 | 999,862 | 180,296 | 879,656 |
| Goodwill and other allocated surplus | 0 | 50,599 | 0 | 51,278 |
| Elimination of intra-Group dividends | (42,075) | 0 | (72,330) | 0 |
| Book value of consolidated shareholdings | 0 | (401,448) | (53) | (392,789) |
| Valuation of shareholdings in associate companies/ JVs measured using the equity method |
5,326 | 16,226 | 7,373 | 10,963 |
| Elimination of intra-Group income | (434) | (6,073) | 617 | (5,491) |
| Other consolidation adjustments | 6,184 | 47,389 | 2,513 | 41,204 |
| Equity and result for the year attributable to minority interests | (3,127) | (29,742) | (4,472) | (27,625) |
| Total consolidation adjustments | 124,243 | 676,813 | 113,944 | 557,196 |
| GROUP CONSOLIDATED EQUITY AND RESULT | 238,349 | 1,199,080 | 263,428 | 1,036,812 |
In a complex market scenario, Brembo believes that it may confirm volumes and profitability consistent with those achieved in the year for which the Financial Statements have just been approved.
The unshakable certainty of being able to rely blindly on someone. In the daily flow and when you need to go further. Much further.
Ferrari Challenge Championship 2018
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 2018 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 and Presentations section).
To conclude the description of the performance of the Brembo Group for the year ended 31 December 2018, 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
Stezzano, 4 March 2019
On behalf of the Board of Directors The Executive Deputy Chairman Matteo Tiraboschi
Brembo S.p.A.'s net income amounting to €114,106,469.15, as follows:
After several years of significant growth in stock value, the Brembo stock closed 2018 at €8.89, down 29.8% compared to year-start.
The stock reached a high for the period of €13.60 on 22 May and a low of €8.84 on 27 December 2018.
During the same period, the FTSE MIB index (to which Brembo has belonged since 2 January 2017) and the BBG EMEA Automobiles Parts index dropped by 16.2% and 33.9%, respectively.
In 2018, the intensification of international trade tensions had an adverse impact on global trade, business confidence levels and manufacturing activity, particularly in the automotive sector. This was reflected in Brembo's stock performance, above all in the second half of the year.
However, the value of the Brembo stock has started to grow again compared to 31 December 2018, rising to €10.32 on 25 January 2019.
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| 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) | 408,160,135 | 330,131,986 |
| Net income for the year (euro) | 114,106,469 | 149,484,042 |
| Trading price (euro) | ||
| Minimum | 8.84 | 11.83 |
| Maximum | 13.60 | 15.10 |
| Year end | 8.89 | 12.67 |
| Market capitalisation (euro million) | ||
| Minimum | 2,952 | 3,950 |
| Maximum | 4,541 | 5,042 |
| Year end | 2,969 | 4,231 |
| Gross dividend per share | 0.22 (*) | 0.22 |
An overview of stock performance of Brembo S.p.A. is given below, compared with that of the previous year.
(*) To be approved by the Shareholders' Meeting convened on 18 April 2019.
Further information and updates regarding stock performance and recent corporate information are provided on Brembo's website at www.brembo.com – Investors section Investor Relations Manager: Laura Panseri
MotoGP brake system 2018 Championship
"Open wheels" Championships
| Lewis Hamilton |
|---|
| Mercedes AMG Petronas Motorsport |
| GP2/Formula 2 (calipers and master cylinders) |
| George Russell |
| Carlin Motorsport |
| Anthoine Hubert |
| ART Grand Prix |
| Mick Schumacher |
| Prema Theodore Racing |
| Naoki Yamamoto |
| Team Kondoˉ Racing/Dallara - Toyota |
"Covered wheels" Championships
| LMP1 | Sébastien Buemi, Kazuki Nakajima, Fernando Alonso - Toyota Gazoo Racing |
|---|---|
| LMP2 | Nicolas Lapierre, Pierre Thiriet, André Negrão - Signatech Alpine Matmut |
| GT PRO | Michael Christensen, Kévin Estre, Laurens Vanthoor - Porsche GT Team |
| GT AM | Matt Campbell, Christian Ried, Julien Andlauer - Dempsey Proton Racing Porsche 911 RSR |
| Blancpain GT Series | |
| Drivers' Championship | Raffaele Marciello |
| Constructors' Championship | AKKA ASP Mercedes GT |
| Class Prototype | Eric Curran, Felipe Nasr - | |
|---|---|---|
| Cadillac, Whelen Engineering Racing | ||
| Class Prototype Challenge | Kris Wright - Extreme Speed Motorsports | |
| Class GTLM | Jan Magnussen, Antonio Garcia - Corvette Racing | |
| Class GT Daytona | Bryan Sellers, Madison Snow - Paul Miller Racing | |
| Pirelli World Challenge GT Series | ||
| GT SprintX Champions | Toni Vilander, Miguel Molina - R. Ferri Motorsports | |
| GTS | James Sofronas - GMG Racing | |
| SCORE International Overall & Trophy Truck Class | ||
| Drivers' Championship | Rob MacCachren - Ford F150 Trophy Truck | |
| SCORE International Tecate SCORE Baja 1000 | ||
| Drivers' Championship | Cameron Steele - Desert Assasins team |
Rally Championships
| WRC | |
|---|---|
| Drivers' Championship | Sebastian Ogier, Julien Ingrassia - Ford RS Msport |
| WRC2 | |
| Drivers' Championship | Jan Kopecký - Skoda Fabia R5 |
| Constructor's Championship | Skoda Motorsport |
| WTCR | |
| Drivers' Championship | Gabriele Tarquini - BRC Racing Team |
| Constructors' Championship | MRacing - YMR Team |
Motorbike Championship
SBK World Championships
| MotoGP | |
|---|---|
| Riders' Championship | Marc Marquez - #93 Repsol Honda Team |
| Constructors' Championship | Repsol Honda Team |
| Moto2 | |
| Riders' Championship | Francesco Bagnaia - #42 Sky Racing Team VR 46 |
| Constructors' Championship | Kalex |
| Moto3 | |
| Riders' Championship | Jorge Martín - #88 Gresini Racing Team |
| Constructors' Championship | Gresini Racing Team |
| Riders' Championship | Jonathan Rea - #33 Kawasaki Racing Team |
|---|---|
| Constructors' Championship | Kawasaki |
| World Superstock 1000 | |
| Riders' Championship | Markus Reiterberger - BMW S1000RR |
| SuperSport 600 | |
| Riders' Championship | Sandro Cortese - Yamaha YZF-R6 |
| SuperSport 300 | |
| Riders' Championship | Ana Carrasco - Kawasaki ParkinGO Team |
| MotoAmerica Superbike | |
| Riders' Championship | Cameron Beaubier - Yamaha YZF-R6 |
Off-road Championship
| Motocross | |
|---|---|
| MXGP | Jeffrey Herlings - Red Bull KTM Factory Racing |
| MX2 | Jorge Prado - Red Bull KTM Factory Racing |
| Trial | |
| Trial and X-Trial | Toni Bou - Montesa - HRC |
| Rally Raid | |
| Dakar | Matthias Walkner - Red Bull KTM Factory Racing |
World SBK championships
| World Superbike | ||
|---|---|---|
| Riders' Championship | Jonathan Rea - Kawasaki Racing Team | |
| FIM EWC | ||
| Riders' Championship | Freddy Foray, Josh Hook, Alan Techer | |
| Constructors' Championship | TSR Honda France |
"Open wheels" Championships
| Formula 1 (clutches) | |
|---|---|
| Drivers' Championship | Lewis Hamilton |
| Constructors' Championship | Mercedes AMG Petronas Motorsport |
| Indycar (clutches) | |
| Drivers' Championship | Scott Dixon |
| Constructors' Championship | Chip Ganassi Racing |
| Indy 500 (clutches) | |
| Drivers' Championship | Will Power |
| Constructors' Championship | Penske Racing |
| European F3 Championship (clutches) | |
| Drivers' Championship | Mick Schumacher |
| Constructors' Championship | Prema Theodore Racing |
| NASCAR (no clutches) | |
| NASCAR Monster Energy Series | |
| Drivers' Championship | Joey Logano |
| Constructors' Championship | Penske Racing |
| Xfiniti Series | |
| Drivers' Championship | Tyler Reddick |
| Constructors' Championship | JR Motorsport |
"Covered wheels" Championships
| LMP1 (clutches) | Sébastien Buemi, Kazuki Nakajima, Fernando Alonso - Toyota Gazoo Racing |
|---|---|
| LMP2 | Nicolas Lapierre, Pierre Thiriet, André Negrão - Signatech Alpine Matmut |
| GT PRO (no clutches) | Michael Christensen, Kévin Estre, Laurens Vanthoor - Porsche GT Team |
| IMSA | |
| GTLM Class | Jan Magnussen, Antonio Garcia - Corvette Racing - C7R |
| ELMS | |
| LMP2 (no clutches) | Roman Rusinov, Andrea Pizzitola, Jean-Eric Vergne - G Drive Racing - Oreca 07 - Gibson |
| Blancpain GT Series | |
| Endurance | |
| Drivers' Championship | Yelmer Buurman, Maro Engel, Luca Stolz, Christian Engelhart |
| Constructors' Championship | Black Falcon - Mercedes AMG GT3 |
| Overall (endurance and sprint) | |
| Drivers' Championship | Raffaele Marciello |
| Constructors' Championship | AKKA ASP - Mercedes AMG GT3 |
| Touring Car | |
| British | |
| Drivers' Championship | Colin Turkington - Team BMW |
| Constructors' Championship | Team BMW |
| DTM | |
| Drivers' Championship (no clutches) Gary Paffett - Team HWA | |
| Australian V8 Supercar | |
| Drivers' Championship | Scott Mclaughlin - Shell V-Power - Ford Falcon |
| Constructors' Championship | Red Bull Holden Racing Team - Holden Commodore |
| WTCR (clutches) | |
| Drivers' Championship | Gabriele Tarquini - BRC Racing Team |
| Constructors' Championship | MRacing - YMR Team |
| European TCR | |
|---|---|
| Drivers' Championship | Mikel Azcona |
| Constructors' Championship | PCR Sport - Seat |
| UK TCR | |
| Drivers' Championship | Daniel Lloyd |
| Constructors' Championship | West Coast Racing - VW |
| Japanese Super GT | |
| Class 500 (no clutches) | |
| Drivers' Championship | Jenson Button, Naoki Yamamoto |
| Constructors' Championship | Raybrig NSX - GT |
| Class 300 | |
| Drivers' Championship | Haruki Kurosawa, Naoya Gamou |
| Constructors' Championship | K2, R&D Leon Racing - CVSTOS AMG |
Rally
Championships
| WRC (clutches) | |
|---|---|
| Drivers' Championship | Sebastian Ogier, Julien Ingrassia - Ford RS Msport |
| FIA Rally Raid | |
| Drivers' Championship | Kuba Przygoński - Attiyah-Mini All4 Racing X-Raid |
Formula E brake system 2018-2019 Championship
| of which with | of which with | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Notes | 31.12.2018 | related parties | 31.12.2017 | related parties | Change |
| NON-CURRENT ASSETS | ||||||
| Property, plant, equipment and other equipment | 1 | 1,041,442 | 933,774 | 107,668 | ||
| Development costs | 2 | 73,304 | 61,323 | 11,981 | ||
| Goodwill and other indefinite useful life assets | 2 | 82,722 | 82,837 | (115) | ||
| Other intangible assets | 2 | 53,113 | 50,425 | 2,688 | ||
| Shareholdings valued using the equity method | 3 | 39,564 | 34,300 | 5,264 | ||
| Other financial assets (including investments in other companies and derivatives) |
4 | 8,190 | 5,675 | 6,769 | 5,659 | 1,421 |
| Receivables and other non-current assets | 5 | 2,981 | 3,832 | (851) | ||
| Deferred tax assets | 6 | 62,711 | 57,818 | 4,893 | ||
| TOTAL NON-CURRENT ASSETS | 1,364,027 | 1,231,078 | 132,949 | |||
| CURRENT ASSETS | ||||||
| Inventories | 7 | 342,037 | 9 | 311,116 | 9 | 30,921 |
| Trade receivables | 8 | 407,414 | 1,970 | 375,719 | 1,371 | 31,695 |
| Other receivables and current assets | 9 | 72,132 | 10 | 80,455 | 3 | (8,323) |
| Current financial assets and derivatives | 10 | 307 | 296 | 11 | ||
| Cash and cash equivalents | 11 | 345,117 | 300,830 | 44,287 | ||
| TOTAL CURRENT ASSETS | 1,167,007 | 1,068,416 | 98,591 | |||
| TOTAL ASSETS | 2,531,034 | 2,299,494 | 231,540 |
| of which with | of which with | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Notes | 31.12.2018 | related parties | 31.12.2017 | related parties | Change |
| GROUP EQUITY | ||||||
| Share capital | 12 | 34,728 | 34,728 | 0 | ||
| Other reserves | 12 | 108,784 | 112,838 | (4,054) | ||
| Retained earnings/(losses) | 12 | 817,219 | 625,818 | 191,401 | ||
| Net result for the year | 12 | 238,349 | 263,428 | (25,079) | ||
| TOTAL GROUP EQUITY | 1,199,080 | 1,036,812 | 162,268 | |||
| TOTAL MINORITY INTERESTS | 29,742 | 27,625 | 2,117 | |||
| TOTAL EQUITY | 1,228,822 | 1,064,437 | 164,385 | |||
| NON-CURRENT LIABILITIES | ||||||
| Non-current payables to banks | 13 | 205,872 | 319,314 | (113,442) | ||
| Other non-current financial payables and derivatives | 13 | 1,572 | 2,344 | (772) | ||
| Other non-current liabilities | 14 | 3,095 | 19,927 | 5,915 | (16,832) | |
| Non-current provisions | 15 | 15,500 | 39,613 | (24,113) | ||
| Provisions for employee benefits | 16 | 27,141 | 4,445 | 27,784 | 3,697 | (643) |
| Deferred tax liabilities | 6 | 23,705 | 24,716 | (1,011) | ||
| TOTAL NON-CURRENT LIABILITIES | 276,885 | 433,698 | (156,813) | |||
| CURRENT LIABILITIES | ||||||
| Current payables to banks | 13 | 273,328 | 194,220 | 79,108 | ||
| Other current financial payables and derivatives | 13 | 1,563 | 3,845 | (2,282) | ||
| Trade payables | 17 | 566,737 | 28,201 | 470,390 | 9,859 | 96,347 |
| Tax payables | 18 | 6,003 | 9,719 | (3,716) | ||
| Current provisions | 15 | 13,504 | 2,244 | 11,260 | ||
| Other current payables | 19 | 164,192 | 12,209 | 120,941 | 3,164 | 43,251 |
| TOTAL CURRENT LIABILITIES | 1,025,327 | 801,359 | 223,968 | |||
| TOTAL LIABILITIES | 1,302,212 | 1,235,057 | 67,155 | |||
| TOTAL EQUITY AND LIABILITIES | 2,531,034 | 2,299,494 | 231,540 |
| (euro thousand) | Notes | 31.12.2018 | of which with related parties |
31.12.2017 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| Revenue from contracts with customers | 20 | 2,640,011 | 471 | 2,463,620 | 5,208 | 176,391 |
| Other revenues and income | 21 | 34,607 | 3,611 | 24,150 | 3,294 | 10,457 |
| Costs for capitalised internal works | 22 | 25,339 | 24,219 | 1,120 | ||
| Raw materials, consumables and goods | 23 | (1,262,994) | (93,974) | (1,177,255) | (71,019) | (85,739) |
| Income (expense) from non-financial investments | 24 | 16,190 | 13,236 | 2,954 | ||
| Other operating costs | 25 | (486,962) | (8,271) | (431,957) | (6,144) | (55,005) |
| Personnel expenses | 26 | (465,306) | (8,496) | (436,050) | (8,894) | (29,256) |
| GROSS OPERATING INCOME | 500,885 | 479,963 | 20,922 | |||
| Depreciation, amortisation and impairment losses | 27 | (155,821) | (133,701) | (22,120) | ||
| NET OPERATING INCOME | 345,064 | 346,262 | (1,198) | |||
| Interest income | 28 | 57,963 | 46,307 | 11,656 | ||
| Interest expense | 28 | (77,904) | (57,220) | (20,684) | ||
| Net interest income (expense) | 28 | (19,941) | 38 | (10,913) | (255) | (9,028) |
| Interest income (expense) from investments | 29 | 234 | 188 | 46 | ||
| RESULT BEFORE TAXES | 325,357 | 335,537 | (10,180) | |||
| Taxes | 30 | (83,881) | (67,637) | (16,244) | ||
| RESULT BEFORE MINORITY INTERESTS | 241,476 | 267,900 | (26,424) | |||
| Minority interests | (3,127) | (4,472) | 1,345 | |||
| NET RESULT FOR THE YEAR | 238,349 | 263,428 | (25,079) | |||
| BASIC/DILUTED EARNINGS PER SHARE (euro) | 31 | 0.73 | 0.81 |
| (euro thousand) | 31.12.2018 | 31.12.2017 | Change |
|---|---|---|---|
| RESULT BEFORE MINORITY INTERESTS | 241,476 | 267,900 | (26,424) |
| 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 | (494) | 3,672 | (4,166) |
| Tax effect | 70 | (662) | 732 |
| Effect of actuarial income/(loss) on defined benefit plans, for companies valued using the equity method |
(62) | (42) | (20) |
| Total other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year |
(486) | 2,968 | (3,454) |
| Other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year: |
|||
| Change in translation adjustment reserve | (4,264) | (23,704) | 19,440 |
| Total other comprehensive income/(losses) that will be subsequently reclassified to income/(loss) for the year |
(4,264) | (23,704) | 19,440 |
| COMPREHENSIVE RESULT FOR THE YEAR | 236,726 | 247,164 | (10,438) |
| Of which attributable to: | |||
| - Minority Interests | 2,917 | 3,228 | (311) |
| - the Group | 233,809 | 243,936 | (10,127) |
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (*) | 155,973 | 63,929 |
| Result before taxes | 325,357 | 335,537 |
| Depreciation, amortisation/impairment losses | 155,821 | 133,701 |
| Capital gains/losses | (3,319) | (968) |
| Income/expense from investments, net of dividends received | (5,326) | (7,373) |
| Financial portion of provisions for defined benefits and payables for personnel | 539 | 600 |
| Long-term provisions for employee benefits | 2,628 | 2,194 |
| Other provisions net of utilisations | (3,315) | 10,776 |
| Cash flows generated by operating activities | 472,385 | 474,467 |
| Current taxes paid | (77,602) | (70,336) |
| Uses of long-term provisions for employee benefits | (4,288) | (4,169) |
| (Increase) reduction in current assets: | ||
| inventories | (27,311) | (31,154) |
| financial assets | (55) | 101 |
| trade receivables | (30,666) | (16,702) |
| receivables from others and other assets | 6,925 | (15,723) |
| Increase (reduction) in current liabilities: | ||
| trade payables | 96,347 | 41,860 |
| payables to others and other liabilities | 9,225 | 17,099 |
| Translation differences on current assets | 2,630 | (11,663) |
| Net cash flows from/(for) operating activities | 447,590 | 383,780 |
| (euro thousand) 31.12.2018 |
31.12.2017 |
|---|---|
| Investments in: | |
| intangible assets (37,291) |
(34,026) |
| property, plant and equipment (250,447) |
(326,658) |
| financial assets (shareholdings) (1,350) |
0 |
| Price for disposal or reimbursement value of fixed assets 5,482 |
5,412 |
| Net cash flows from/(for) investing activities (283,606) |
(355,272) |
| Dividends paid in the year (71,541) |
(65,037) |
| Dividend paid to minority shareholders in the year (800) |
0 |
| Change in fair value of derivatives 814 |
556 |
| Loans and financing granted by banks and other financial institutions in the year 7,864 |
210,251 |
| Repayment of long-term loans and other financing (56,555) |
(93,578) |
| Net cash flows from/(for) financing activities (120,218) |
52,192 |
| Total cash flows 43,766 |
80,700 |
| Translation differences on cash and cash equivalents (3,868) |
11,344 |
| CASH AND CASH EQUIVALENTS AT END OF YEAR (*) 195,871 |
155,973 |
(*) See Note 11 of the Explanatory Notes to the Consolidated Financial Statements for a reconciliation with financial statements data.
| Other reserves | ||||
|---|---|---|---|---|
| (euro thousand) | Share capital | Reserves | Treasury shares |
Retained earnings (losses) |
| Balance at 1 January 2017 | 34,728 | 149,195 | (13,476) | 446,834 |
| Allocation of profit for the previous year | 175,595 | |||
| Payment of dividends | ||||
| Reclassification | (421) | 421 | ||
| Components of comprehensive income: | ||||
| Effect of actuarial income/(loss) on defined benefit plans | 3,010 | |||
| Effect of actuarial income/(loss) on defined benefit plans, for companies valued using the equity method |
(42) | |||
| Change in translation adjustment reserve | (22,460) | |||
| Net result for the year | ||||
| Balance at 1 January 2018 | 34,728 | 126,314 | (13,476) | 625,818 |
| Allocation of profit for the previous year | 191,887 | |||
| Payment of dividends | ||||
| Components of comprehensive income: | ||||
| Effect of actuarial income/(loss) on defined benefit plans | (424) | |||
| Effect of actuarial income/(loss) on defined benefit plans, for companies valued using the equity method |
(62) | |||
| Change in translation adjustment reserve | (4,054) | |||
| Net result for the year | ||||
| Balance at 31 December 2018 | 34,728 | 122,260 | (13,476) | 817,219 |
| Equity | Equity of Minority Interests |
Share capital and reserves of Minority Interests |
Result of Minority Interests |
Group equity | Net result for the year |
|---|---|---|---|---|---|
| 882,310 | 24,397 | 22,034 | 2,363 | 857,913 | 240,632 |
| 0 | 0 | 2,363 | (2,363) | 0 | (175,595) |
| (65,037) | 0 | (65,037) | (65,037) | ||
| 0 | 0 | 0 | |||
| 3,010 | 0 | 3,010 | |||
| (42) | 0 | (42) | |||
| (23,704) | (1,244) | (1,244) | (22,460) | ||
| 267,900 | 4,472 | 4,472 | 263,428 | 263,428 | |
| 1,064,437 | 27,625 | 23,153 | 4,472 | 1,036,812 | 263,428 |
| 0 | 0 | 4,472 | (4,472) | 0 | (191,887) |
| (72,341) | (800) | (800) | (71,541) | (71,541) | |
| (424) | 0 | (424) | |||
| (62) | 0 | (62) | |||
| (4,264) | (210) | (210) | (4,054) | ||
| 241,476 | 3,127 | 3,127 | 238,349 | 238,349 | |
| 1,228,822 | 29,742 | 26,615 | 3,127 | 1,199,080 | 238,349 |
Constantly in search of new challenges. Performance harnessed for racing. To reach our limits. And overcome them.
MotoGP Championship 2018
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), Argentina (Buenos Aires), 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 2018 have been prepared in accordance with the provisions of European Regulation No. 1606/2002 and the IFRS effective at 31 December 2018, 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 4 March 2019, 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 2018, 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, inventory obsolescence, useful lives of certain assets, the recognition 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 2018 and endorsed by the European Union.
The Group applied IFRS 15 and IFRS 9 for the first time. The impact and nature of the changes occurred following the adoption of these new accounting standards are illustrated below. Several other amendments and interpretations were applied for the first time in 2018, but they did not have any impact on the Group's Consolidated Financial Statements.
In July 2015, the IASB issued the final version of IFRS 9 – Financial Instruments which supersedes IAS 39 – Financial Instruments: Recognition and Measurement, and all previous versions of IFRS 9. IFRS 9 combines all aspects relating to financial instrument reporting: classification and measurement, impairment and hedge accounting. The standard is effective for the annual periods starting on 1 January 2018. With the exception of hedge accounting (which applies, except for a few cases, prospectively), the principle has to be applied retrospectively, but it is not mandatory to provide comparative information. The Group adopted the new standard from the date it entered into force.
The application of the classification and valuation requirements specified in IFRS 9 had no significant impacts on the Group's financial statements. Other financial assets, as well as trade receivables, are held for collection on the contractual due dates and are expected to generate cash flows consisting solely of capital and interest receipts. The Group will therefore continue to measure them in accordance with IFRS 9.
IFRS 9 requires the Group to record expected impairment losses for all its own obligations, loans and trade receivables, on an annual basis or based on the residual term. The Group, which adopts the simplified approach, had no significant impacts on its equity given that its trade receivables are largely due from counterparties with a high credit rating (leading car manufacturers). With particular reference to these receivables, the Group confirms its policy regarding the provision for bad debts since the criterion applied adequately incorporates the expected credit losses. It should also be noted that the Group makes use of an internal rating system to evaluate certain suitably identified counterparties. This system analyses the last three financial statements available adding in predictive default indices.
The Group maintains that all existing hedges currently designated as effective hedges will continue to qualify for hedge accounting in accordance with IFRS 9. Given that IFRS 9 does not alter the general principle whereby an entity recognises effective hedges, the Group had no significant impacts from application of the standard. The Group assessed in detail the possible changes regarding the reporting of the time value of options, forward points and difference between the interest rates for two currencies. In its financial statements, the Company valued all the instruments at fair value; as a result, the gains and losses arising from the fair value measurement are immediately recognised in the Statement of Income. The Group uses derivatives to hedge against the exchange risk and, where applicable, the interest rate risk. If the Company decides to designate a new hedge accounting derivative, this will be disclosed in the financial statements, designating the hedge as effective.
IFRS 15 was issued in May 2014 and introduces a new five-step model that applies, with limited exceptions, to all revenue from contracts with customers. IFRS 15 provides for revenue to be measured for an amount that reflects the consideration to which the entity claims entitlement in exchange for transferring the goods or services to the customer. The new standard, which replaced all the current requirements set out in IFRS standards on revenue recognition, was adopted by the Group starting on 1 January 2018, with modified retrospective application. The process of assessing the effects of the new Standard led to the identification of the following general contract categories: sale of brake systems, equipment, study and design activities, and royalties.
The application of the new Standard had no impacts on contracts with customers in which the sale of the brake system is the sole obligation ("at a point in time"), since revenue will be recognised when control of the asset is transferred to the customer, which generally coincides with the moment of delivery (the warranties set out in the contracts are also general and not extended and, as a result, the Group expects that they will continue to be accounted for in accordance with IAS 37). The Group's order backlog also includes supply contracts, nomination letters and supply orders for brake systems that, according to commercial practice and the typical nature of the sector, effectively qualify as contracts in which the obligation is resolved over time: in this case, the Group applies the "right to invoice" expedient in calculating the portion of the contractual obligation satisfied as at the date concerned and the related revenues to be recognised in the Statement of Income.
The Group supplies equipment sold separately from the brake systems; this becomes the full property of the customer, which acquires control over it and the capacity to use it, at the time it is delivered and invoiced.
The Group recognises revenue from its own customers for contributions to development activities of brake systems that mirror the characteristics required by the customer itself. The services requested by the customer may regard primary product development, in which case the revenue is suspended until the development process is completed and then is recognised over the useful life of the product to which the contribution refers (the time horizon is estimated at an average of five years), or the customer may request only development following primary development, in which case the revenue is recognised when control (along with the risks/rewards) is transferred to the customer, i.e., upon invoicing to the customer.
Royalties are invoiced in accordance with contractual conditions and the related revenue is recognised on an accrual basis.
According to the Group's analyses of this type of contract, the application of the Standard had no material impact on the Group's equity at 31 December 2017 and 31 December 2018.
Illustrated below are accounting standards and interpretations already issued but not yet in force as at the date these Consolidated Financial Statements were prepared. The company intends to adopt these standards and interpretations, where applicable, on the date they will enter into force.
IFRS 16 was published in January 2016 and replaces IAS 17, IFRIC 4, SIC-15 and SIC-27. IFRS 16 defines the principles for recognising, measuring, presenting and reporting leasing contracts. It requires lessees to recognise all leasing 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 standard provides for two exemptions for lessees' recognition of leasing contracts: low-value assets (e.g., personal computers) and short-term leasing contracts (e.g., lease terms of 12 months or less). On the leasing contract start date, the lessee will recognise a liability for payments of rental fees specified in the leasing contract and an asset representing the right to use the underlying asset for the period of the contract. Lessees will have to recognise separately the interest paid on the leasing liability and amortisation of the right to use the asset. Lessees will also have to re-measure the leasing liability when certain events happen (e.g., a change in leasing contract conditions, a change in future lease payments caused by a change in an index or rate used to determine those payments). The lessee will generally recognise the re-measured amount of the leasing liability as an adjustment to the right to use the asset. The reporting system provided for in IFRS 16 will remain substantially unchanged for lessors who will continue to classify all leases using the same classification principle as in IAS 17, distinguishing operating leases and finance leases.
IFRS 16 entered into force for years starting 1 January 2019 or thereafter with full retrospective or modified application. Early adoption is allowed, but not before the entity has adopted IFRS 15. The Group plans to apply the new standard from the mandatory effective date, using the modified retrospective method, option B, without restating contracts already in place at 1 January 2019 and not applying the standard to low-value and short-term assets.
The Group has carried out a detailed analysis of the impacts of IFRS 16: the effect from the application of the new Standard on Net Invested Capital and Net Financial Position (net present value of future rental fees) amounts to €178,754 thousand. This value differs from the operating lease value indicated in note 13 of the Explanatory Notes (€231,820 thousand) due to the discounting of future flows (applying an average weighted discount rate of 2.82%, using the "incremental borrowing" criterion), as well as of the service component not covered by this standard, and that of low value and short-term leases.
| The related reconciliation is shown below: | |||
|---|---|---|---|
| -------------------------------------------- | -- | -- | -- |
| Operating leases as at 31 December 2018 | 231,820 |
|---|---|
| Short-term leases | (3,122) |
| Low-value leases | (11,819) |
| Service component | (2,743) |
| Undiscounted leases as at 1 January 2019 | 214,136 |
| Impact resulting from discounting as per IFRS16 | (35,382) |
| Discounted leases as at 1 January 2019 (IFRS16) | 178,754 |
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24 Hours of Le Mans 2018
Other standards or amendments are summarised in the following table:
| Description | Endorsed at the reporting date |
Expected date of entry into force |
|---|---|---|
| Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets Between an Investor and its Associate or Joint Venture (issued in September 2014) |
NO | not defined |
| Annual Improvements to IFRS Standards 2015-2017 Cycle (issued in December 2017) |
NO | 1 January 2019 |
| IAS 28: Long-term Interests in Associates and Joint Ventures | YES | 1 January 2019 |
| IFRS 9: Prepayment Features with Negative Compensation | YES | 1 January 2019 |
| IAS 19: Plan Amendment, Curtailment or Settlement | YES | 1 January 2019 |
| IFRIC 23: Uncertainty over Income Tax Treatments (issued in June 2017) | YES | 1 January 2019 |
| Amendments to References to the Conceptual Framework in IFRS Standards (issued in March 2018) |
YES | 1 January 2020 |
| Amendment to IFRS 3: Business Combinations (issued in October 2018) | NO | 1 January 2020 |
| Amendments to IAS 1 and IAS 8: Definition of Material (issued in October 2018) | NO | 1 January 2020 |
| IFRS 17: Insurance Contracts (issued in May 2017) | NO | 1 January 2021 |
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 2018, 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 consolidation area were performed in 2018.
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 additional 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 Other 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.
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 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 | 31.12.2018 | 2018 average | 31.12.2017 | 2017 average |
|---|---|---|---|---|
| U.S. Dollar | 1.145000 | 1.181490 | 1.199300 | 1.129283 |
| Japanese Yen | 125.850000 | 130.409562 | 135.010000 | 126.654565 |
| Swedish Krona | 10.254800 | 10.256743 | 9.843800 | 9.636873 |
| Polish Zloty | 4.301400 | 4.260575 | 4.177000 | 4.256310 |
| Czech Koruna | 25.724000 | 25.643155 | 25.535000 | 26.327176 |
| Mexican Peso | 22.492100 | 22.716019 | 23.661200 | 21.327801 |
| Pound Sterling | 0.894530 | 0.884747 | 0.887230 | 0.876145 |
| Brazil Real | 4.444000 | 4.308730 | 3.972900 | 3.604102 |
| Indian Rupee | 79.729800 | 80.727734 | 76.605500 | 73.498019 |
| Argentine Peso | 43.159300 | 32.908882 | 22.931000 | 18.698455 |
| Chinese Renminbi | 7.875100 | 7.807350 | 7.804400 | 7.626438 |
| Russian Rouble | 79.715300 | 74.055072 | 69.392000 | 65.887664 |
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.
Assets held under finance leases (where the Group assumes substantially all the risks and rewards of ownership) are recognised and recorded at the inception of the lease under property, plant and equipment at the lower of fair value of the leased asset or the present value of the lease payments. The corresponding liability to the lessor is recorded under financial debt. The methods used to calculate depreciation and the subsequent valuation of the asset are consistent with those used for directly owned assets. Finance leases where the lessor retains substantially all the risks and rewards incident to ownership are classified as operating leases. Lease payments are recognised in the Statement of Income on a straight-line basis over the lease term.
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.
Provisions for product warranty costs are recognised when products are sold. Initial recognition is based on historical experience. The initial estimate of the costs of warranty work is reviewed annually.
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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 reacquired are recognised at cost and are deducted from equity. No gain or loss is recognised in profit or loss 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 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.
Equity investments in other entities are measured at fair value; when the fair value cannot be reliably determined, equity investments are measured at cost adjusted for impairment.
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.
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 included among interest expense in the Statement of Income, on the basis of their classification.
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)".
A financial liability is derecognised when the obligation underlying the liability is extinguished, cancelled or discharged.
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.
Revenues from contracts with customers are 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.
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.
Based on the IFRS8 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 2018 who accounted for over 10% of consolidated net revenues. None of the single car manufacturers comprising such groups exceeded this limit.
The following table shows segment information on sales of goods and services and results at 31 December 2018 and 31 December 2017:
| Total | Discs/Systems/Motorbikes | After Market / Performance Group |
Interdivision | Non-segment data | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 |
| Sales | 2,678,684 | 2,483,639 | 2,325,955 | 2,149,471 | 354,231 | 335,100 | (3,002) | (3,042) | 1,500 | 2,110 |
| Allowances and discounts |
(31,749) | (26,519) | (2,733) | (465) | (29,012) | (26,056) | 0 | 0 | (4) | 2 |
| Net sales | 2,646,935 | 2,457,120 | 2,323,222 | 2,149,006 | 325,219 | 309,044 | (3,002) | (3,042) | 1,496 | 2,112 |
| Transport costs | 24,153 | 23,814 | 18,470 | 18,889 | 5,680 | 4,925 | 0 | 0 | 3 | 0 |
| Variable production costs |
1,662,987 | 1,528,758 | 1,457,780 | 1,330,182 | 204,876 | 199,331 | (3,002) | (3,042) | 3,333 | 2,287 |
| Contribution margin | 959,795 | 904,548 | 846,972 | 799,935 | 114,663 | 104,788 | 0 | 0 | (1,840) | (175) |
| Fixed production costs | 364,861 | 333,766 | 344,449 | 316,182 | 18,876 | 16,957 | 0 | 0 | 1,536 | 627 |
| Production gross operating income |
594,934 | 570,782 | 502,523 | 483,753 | 95,787 | 87,831 | 0 | 0 | (3,376) | (802) |
| BU personnel costs | 172,858 | 154,322 | 109,134 | 100,235 | 47,647 | 41,045 | 0 | 0 | 16,077 | 13,042 |
| BU gross operating income |
422,076 | 416,460 | 393,389 | 383,518 | 48,140 | 46,786 | 0 | 0 | (19,453) | (13,844) |
| Costs for Central Functions |
93,735 | 94,878 | 69,844 | 68,034 | 11,707 | 10,615 | 0 | 0 | 12,184 | 16,229 |
| OPERATING INCOME (LOSS) |
328,341 | 321,582 | 323,545 | 315,484 | 36,433 | 36,171 | 0 | 0 | (31,637) | (30,073) |
| Extraordinary costs and revenues |
19,864 | 18,664 | 0 | 0 | 0 | 0 | 0 | 0 | 19,864 | 18,664 |
| Financial costs and revenues |
(20,772) | (12,026) | 0 | 0 | 0 | 0 | 0 | 0 | (20,772) | (12,026) |
| Income (expense) from investments |
16,406 | 13,413 | 0 | 0 | 0 | 0 | 0 | 0 | 16,406 | 13,413 |
| Non-operating costs and revenues |
(18,482) | (6,096) | 0 | 0 | 0 | 0 | 0 | 0 | (18,482) | (6,096) |
| Result before taxes | 325,357 | 335,537 | 323,545 | 315,484 | 36,433 | 36,171 | 0 | 0 | (34,621) | (16,118) |
| Taxes | (83,881) | (67,637) | 0 | 0 | 0 | 0 | 0 | 0 | (83,881) | (67,637) |
| Result before minority interests |
241,476 | 267,900 | 323,545 | 315,484 | 36,433 | 36,171 | 0 | 0 | (118,502) | (83,755) |
| Minority interests | (3,127) | (4,472) | 0 | 0 | 0 | 0 | 0 | 0 | (3,127) | (4,472) |
| NET RESULT | 238,349 | 263,428 | 323,545 | 315,484 | 36,433 | 36,171 | 0 | 0 | (121,629) | (88,227) |
A reconciliation between the annual Consolidated Financial Statements and the above information is provided below:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| REVENUE FROM CONTRACTS WITH CUSTOMERS | 2,640,011 | 2,463,620 |
| Scrap sales (in the segment report they are subtracted from "Variable production costs") |
(17,577) | (15,668) |
| Differences between internal and statutory reports relating to developments activities |
18,151 | 5,761 |
| Capital gains on sale of equipment (in the Consolidated Financial Statements they are included in "Other revenues and income") |
3,807 | 1,549 |
| Effect of adjustment of transactions among consolidated companies | 138 | 184 |
| Miscellaneous recharges (in the Consolidated Financial Statements they are included in "Other revenues and income") |
2,149 | 3,070 |
| Other | 256 | (1,396) |
| NET SALES | 2,646,935 | 2,457,120 |
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| NET OPERATING INCOME | 345,064 | 346,262 |
| Differences between internal and statutory reports relating to developments activities |
6,460 | (6,688) |
| Other differences between internal and statutory reports | (264) | 92 |
| Income (expense) from non-financial investments | (16,190) | (13,236) |
| Claim compensation and subsidies | (7,648) | (6,539) |
| Capital gains/losses on disposal of assets (in the segment report they are included in "Non-operating costs and revenues") |
(364) | 202 |
| Different classification of banking expenses (in the segment report they are included in "Financial costs and revenues") |
850 | 1,123 |
| Other | 433 | 366 |
| OPERATING RESULT | 328,341 | 321,582 |
The breakdown of Group sales by geographic area of destination and by application is provided in the Directors' Report on Operations.
| Total | Discs/Systems/Motorbikes | After Market / Performance Group |
Interdivision | Non-segment data | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 |
| Property, plant and equipment |
1,041,442 | 933,774 | 980,727 | 888,880 | 38,927 | 30,834 | 5 | 5 | 21,783 | 14,055 |
| Intangible assets | 135,835 | 133,262 | 111,952 | 109,938 | 17,988 | 18,629 | 0 | 0 | 5,895 | 4,695 |
| Financial assets and other non-current assets/liabilities |
71,060 | 48,641 | 0 | 0 | 0 | 0 | 0 | 0 | 71,060 | 48,641 |
| (a) Total fixed assets | 1,248,337 | 1,115,677 | 1,092,679 | 998,818 | 56,915 | 49,463 | 5 | 5 | 98,738 | 67,391 |
| Inventories | 341,797 | 311,096 | 255,337 | 231,351 | 86,460 | 79,745 | 0 | 0 | 0 | 0 |
| Current assets | 483,653 | 459,221 | 363,674 | 346,095 | 53,081 | 49,594 | (15,152) | (50,801) | 82,050 | 114,333 |
| Current liabilities | (740,799) | (604,227) | (503,325) | (483,005) | (89,245) | (69,311) | 15,152 | 50,801 | (163,381) | (102,712) |
| Provisions for contingencies and charges and other provisions |
(41,982) | (53,844) | 0 | 0 | 0 | 0 | 0 | 0 | (41,982) | (53,844) |
| (b) Net working capital | 42,669 | 112,246 | 115,686 | 94,441 | 50,296 | 60,028 | 0 | 0 | (123,313) | (42,223) |
| NET INVESTED OPERATING CAPITAL (a+b) 1,291,006 |
1,227,923 | 1,208,365 1,093,259 | 107,211 | 109,491 | 5 | 5 | (24,575) | 25,168 | ||
| Extraordinary components | 101,868 | 82,895 | 53 | 53 | 0 | 0 | (4) | 17,762 | 101,819 | 65,080 |
| NET INVESTED CAPITAL | 1,392,874 | 1,310,818 | 1,208,418 1,093,312 | 107,211 | 109,491 | 1 | 17,767 | 77,244 | 90,248 | |
| Group equity | 1,199,080 | 1,036,812 | 0 | 0 | 0 | 0 | 0 | 0 | 1,199,080 1,036,812 | |
| Minority interests | 29,742 | 27,625 | 0 | 0 | 0 | 0 | 0 | 0 | 29,742 | 27,625 |
| (d) Equity | 1,228,822 | 1,064,437 | 0 | 0 | 0 | 0 | 0 | 0 | 1,228,822 1,064,437 | |
| (e) Provisions for employee benefits |
27,141 | 27,784 | 0 | 0 | 0 | 0 | 0 | 0 | 27,141 | 27,784 |
| Medium/long-term financial debt |
207,444 | 321,658 | 0 | 0 | 0 | 0 | 0 | 0 | 207,444 | 321,658 |
| Short-term financial debt | (70,533) | (103,061) | 0 | 0 | 0 | 0 | 0 | 0 | (70,533) | (103,061) |
| (f) Net financial debt | 136,911 | 218,597 | 0 | 0 | 0 | 0 | 0 | 0 | 136,911 | 218,597 |
| (g) COVERAGE (d)+(e)+(f) | 1,392,874 | 1,310,818 | 0 | 0 | 0 | 0 | 0 | 0 | 1,392,874 1,310,818 |
Statement of Financial Position data at 31 December 2018 and 31 December 2017 are provided in the tables below:
The following should be noted in regard to the non-segment data:
Victories on every track. Applause and trophies. This is the tangible aspect of performance. And a list of titles that grows year after year, day after day.
Formula 1 Championship 2018
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 primarily entered into fixed-rate financing contracts. 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 2018 and 31 December 2017, with other variables held constant. The potential impacts were calculated on the variable-rate financial liabilities at 31 December 2018. The aforementioned change in interest rates would result in a higher (or lower) annual net pre-tax expense of approximately €879 thousand (€1,500 thousand at 31 December 2017), 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 2017 and 2018, 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 2017 and 2018 to measure exchange rate volatility.
| 31.12.2018 | 31.12.2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| (euro thousand) | Change % | Effect of increase exchange rate |
Effect of decrease exchange rate |
Change % | Effect of increase exchange rate |
Effect of decrease exchange rate |
||
| EUR/CNY | 1.88% | (38.3) | 39.7 | 2.84% | 0.2 | (0.2) | ||
| EUR/GBP | 1.02% | 0.2 | (0.2) | 2.31% | 2.4 | (2.5) | ||
| EUR/JPY | 1.86% | 38.4 | (39.9) | 4.24% | 16.4 | (17.9) | ||
| EUR/PLN | 1.41% | 5.7 | (5.9) | 1.19% | (32.2) | 33.0 | ||
| EUR/SEK | 1.98% | 6.3 | (6.6) | 1.50% | (6.8) | 7.0 | ||
| EUR/USD | 3.11% | (21.8) | 23.2 | 4.53% | (7.3) | 7.9 | ||
| EUR/INR | 2.54% | 0.0 | 0.0 | 3.56% | 0.5 | (0.6) | ||
| EUR/CZK | 0.85% | 0.5 | (0.5) | 2.02% | 0.1 | (0.1) | ||
| EUR/CHF | 1.73% | 0.0 | 0.0 | 3.49% | 6.1 | (6.5) | ||
| EUR/RUB | 4.14% | 8.5 | (9.3) | 3.47% | 0.0 | 0.0 | ||
| PLN/CNY | 2.31% | 12.9 | (13.5) | 3.57% | 0.4 | (0.4) | ||
| PLN/EUR | 1.42% | (535.4) | 550.8 | 1.18% | (150.6) | 154.2 | ||
| PLN/GBP | 1.53% | 0.1 | (0.1) | 2.75% | (1.3) | 1.4 | ||
| PLN/JPY | 3.11% | 1.2 | (1.3) | 4.74% | 0.1 | (0.1) | ||
| PLN/USD | 4.42% | (19.7) | 21.5 | 5.14% | 84.9 | (94.1) | ||
| PLN/CZK | 0.81% | 0.0 | 0.0 | 1.71% | 0.3 | (0.3) | ||
| PLN/CHF | 2.75% | 7.4 | (7.8) | 4.06% | 199.2 | (216.0) | ||
| GBP/EUR | 1.02% | 13.2 | (13.5) | 2.30% | 2.7 | (2.8) | ||
| GBP/USD | 3.62% | 5.3 | (5.7) | 2.92% | 2.7 | (2.8) | ||
| GBP/AUD | 1.82% | (1.2) | 1.2 | 2.80% | 0.7 | (0.7) | ||
| USD/CNY | 3.90% | (1.9) | 2.0 | 1.92% | (2.7) | 2.8 | ||
| USD/EUR | 3.08% | (71.3) | 75.8 | 4.58% | (116.3) | 127.4 | ||
| USD/MXN | 3.55% | 61.7 | (66.2) | 5.58% | 17.3 | (19.3) | ||
| BRL/EUR | 5.74% | 20.6 | (23.2) | 5.68% | 38.8 | (43.5) | ||
| BRL/JPY | 7.01% | 0.6 | (0.7) | 2.46% | 0.0 | 0.0 | ||
| BRL/USD | 8.21% | (22.8) | 26.9 | 2.23% | (2.2) | 2.3 | ||
| JPY/EUR | 1.84% | 2.7 | (2.8) | 4.27% | 3.2 | (3.5) | ||
| JPY/USD | 2.10% | 0.4 | (0.4) | 1.58% | 0.7 | (0.7) | ||
| CNY/EUR | 1.91% | 132.4 | (137.5) | 2.88% | 209.9 | (222.4) | ||
| CNY/JPY | 2.49% | 0.0 | 0.0 | 2.14% | (0.1) | 0.1 | ||
| CNY/USD | 3.91% | (52.7) | 57.0 | 1.93% | (107.9) | 112.1 | ||
| INR/EUR | 2.50% | (0.4) | 0.4 | 3.58% | (9.4) | 10.1 | ||
| INR/JPY | 3.48% | 34.9 | (37.4) | 1.48% | 8.8 | (9.1) | ||
| INR/USD | 4.67% | (6.6) | 7.3 | 1.87% | 9.6 | (10.0) | ||
| CZK/EUR | 0.85% | 57.2 | (58.2) | 2.02% | 197.2 | (205.3) | ||
| CZK/GBP | 1.14% | (0.3) | 0.3 | 3.98% | (3.9) | 4.2 | ||
| CZK/PLN | 0.81% | 2.5 | (2.6) | 1.70% | 6.4 | (6.6) | ||
| CZK/USD | 3.89% | (15.9) | 17.2 | 6.40% | 20.1 | (22.8) | ||
| ARS/BRL | 19.15% | 116.0 | (171.0) | 5.08% | 38.6 | (42.7) | ||
| ARS/EUR | 23.31% | 135.6 | (218.1) | 9.79% | 70.8 | (86.2) | ||
| ARS/USD | 26.05% | 58.3 | (99.3) | 5.40% | 2.7 | (3.0) |
The Group is exposed to changes in prices of main raw materials and commodities. In 2018, no specific hedging transactions were undertaken. However, it should be recalled that existing contracts with major customers provide for automatic periodic adjustment on the basis of 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.
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 2018 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 | 149,246 | 149,246 | 149,246 | 0 | 0 |
| Payables to banks (loans and bonds) | 329,954 | 338,017 | 128,025 | 209,992 | 0 |
| Payables to other financial institutions | 2,227 | 2,252 | 692 | 1,530 | 30 |
| Finance leases | 94 | 94 | 76 | 18 | 0 |
| Trade and other payables | 587,470 | 587,470 | 587,470 | 0 | 0 |
| Derivative financial liabilities | |||||
| Derivatives | 814 | 814 | 814 | 0 | 0 |
| Total | 1,069,805 | 1,077,893 | 866,323 | 211,540 | 30 |
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 2018 the Group had complied with the covenants in question by a considerable margin. It is not expected that the entry into force of the new standard IFRS 16 with effect from 1 January 2019, as described in further detail in the section of these Notes Changes in accounting standards and disclosures, will result in breach of these covenants.
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 2018, unused bank credit facilities were 75% (a total of €596 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:
| 31.12.2018 | 31.12.2017 | ||||||
|---|---|---|---|---|---|---|---|
| (euro thousand) | Level 1 | Level 2 | Level 1 | Level 2 | Level 3 | ||
| Financial assets (liabilities) measured at fair value | |||||||
| Forward contracts denominated in foreign currency | 0 | (814) | 0 | 0 | 0 | 0 | |
| Total financial assets (liabilities) measured at fair value | 0 | (814) | 0 | 0 | 0 | 0 | |
| Assets (liabilities) for which fair value is indicated | |||||||
| Current and non-current payables to banks | 0 | (320,669) | 0 | 0 | (363,458) | 0 | |
| Other current and non-current financial liabilities | 0 | (2,193) | 0 | 0 | (2,740) | 0 | |
| Total assets (liabilities) for which fair value is indicated | 0 | (322,862) | 0 | 0 | (366,198) | 0 |
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) | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | |
| Available-for-sale financial assets | 1,657 | 307 | 1,657 | 307 | |
| Loans, receivables and financial liabilities valued at amortised costs: |
|||||
| Current and non-current financial assets (excluding derivatives) |
6,840 | 6,758 | 6,840 | 6,758 | |
| Trade receivables | 407,414 | 375,719 | 407,414 | 375,719 | |
| Loans and receivables | 51,410 | 62,171 | 51,410 | 62,171 | |
| Cash and cash equivalents | 345,117 | 300,830 | 345,117 | 300,830 | |
| Current and non-current payables to banks | (479,200) | (513,534) | (484,246) | (519,524) | |
| Other current and non-current financial liabilities | (2,321) | (6,189) | (2,321) | (6,189) | |
| Trade payables | (566,737) | (470,390) | (566,737) | (470,390) | |
| Other current liabilities | (164,192) | (120,941) | (164,192) | (120,941) | |
| Other non-current liabilities | (3,095) | (19,927) | (3,095) | (19,927) | |
| Derivatives | (814) | 0 | (814) | 0 | |
| Total | (403,921) | (385,196) | (408,967) | (391,186) |
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 2018, except for the dividend distribution.
Information pertaining to the fees paid to Directors, Statutory Auditors and General Manager (position held by
the Chief Executive Officer) of Brembo S.p.A. and of other Group companies and additional information required is reported below:
| 31.12.2018 | 31.12.2017 | |||||
|---|---|---|---|---|---|---|
| (euro thousand) | Directors | Auditors | Directors | Auditors | ||
| Emoluments for the office held | 2,090 | 196 | 2,120 | 203 | ||
| Participation in committees and specific tasks | 155 | 0 | 167 | 0 | ||
| Salaries and other incentives | 6,627 | 0 | 6,835 | 0 |
The item "Salaries and other incentives" includes the estimate of the cost of the 2016-2018 plan reserved for the company's top managers and accrued in 2018, 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:
| 31.12.2018 | 31.12.2017 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Related Parties | |||||||||||
| Carrying value |
Total | Other* | Joint ventures |
Associates | % | Carrying value |
Total | Other* | Joint ventures |
Associates | % |
| 8,190 | 5,675 | 0 | 0 | 5,675 | 69.3% | 6,769 | 5,659 | 0 | 0 | 5,659 | 83.6% |
| 342,037 | 9 | 0 | 9 | 0 | 0.0% | 311,116 | 9 | 0 | 9 | 0 | 0.0% |
| 407,414 | 1,970 | 6 | 1,891 | 73 | 0.5% | 375,719 | 1,371 | 13 | 1,290 | 68 | 0.4% |
| 72,132 | 10 | 10 | 0 | 0 | 0.0% | 80,455 | 3 | 3 | 0 | 0 | 0.0% |
| (3,095) | 0 | 0 | 0 | 0 | 0.0% | (19,927) | (5,915) | (5,915) | 0 | 0 | 29.7% |
| (27,141) | (4,445) | (4,445) | 0 | 0 | 16.4% | (27,784) | (3,697) | (3,697) | 0 | 0 | 13.3% |
| (566,737) | (28,201) | (4,291) | (23,592) | (318) | 5.0% | (470,390) | (9,859) | (4,740) | (4,626) | (493) | 2.1% |
| (164,192) | (12,209) | (12,082) | (127) | 0 | 7.4% | (120,941) | (3,164) | (3,037) | (127) | 0 | 2.6% |
| Related Parties |
| 31.12.2018 | 31.12.2017 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Related Parties | Related Parties | ||||||||||||
| Statement of Income | b) Weight of transactions or positions with related parties on items of the |
Carrying value |
Total | Other* | Joint ventures |
Associates | % | Carrying value |
Total | Other* | Joint ventures |
Associates | % |
| Revenue from contracts with | |||||||||||||
| customers | 2,640,011 | 471 | 1 | 465 | 5 | 0.0% | 2,463,620 | 5,208 | 4,616 | 587 | 5 | 0.2% | |
| Other revenues and income | 34,607 | 3,611 | 20 | 3,420 | 171 | 10.4% | 24,150 | 3,294 | 38 | 3,090 | 166 | 13.6% | |
| Raw materials, consumables and goods |
(1,262,994) | (93,974) | (233) | (93,342) | (399) | 7.4% | (1,177,255) | (71,019) | (39) | (70,427) | (553) | 6.0% | |
| Other operating costs | (486,962) | (8,271) | (6,323) | (830) | (1,118) | 1.7% | (431,957) | (6,144) | (4,858) | (355) | (931) | 1.4% | |
| Personnel expenses | (465,306) | (8,496) | (8,495) | (1) | 0 | 1.8% | (436,050) | (8,894) | (8,894) | 0 | 0 | 2.0% | |
| Net interest income (expense) | (19,941) | 38 | 22 | 0 | 16 | -0.2% | (10,913) | (255) | (260) | 0 | 5 | 2.3% |
* 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) Automobile Components Co. Ltd., Qingdao Brembo Trading Co. Ltd. and Brembo Huilian (Langfang) Brake Systems Co. Ltd. (formerly Asimco) 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 section 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 L.L.C. | Moscow | Russia | Rub | 1,250,000 | 100% Brembo S.p.A. | |
| 98.62% Brembo S.p.A. | ||||||
| Brembo Argentina S.A. | Buenos Aires | Argentina | Ars | 62,802,000 | 1.38% Brembo do Brasil Ltda. | |
| 49% Brembo S.p.A. | ||||||
| Brembo Mexico S.A. de C.V. | Apodaca | Mexico | Usd | 20,428,836 | 51% Brembo North America Inc. | |
| Brembo (Nanjing) Automobile Components | 60% Brembo S.p.A. | |||||
| Co. Ltd. | Nanjing | China | Cny | 235,194,060 | 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. | ||
| Corporacion 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. |
| 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) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Independent Auditors' fees for the provision of audit services: | ||
| - to the Parent Brembo S.p.A. | 240 | 225 |
| - to the subsidiaries (services provided by the network) | 401 | 414 |
| Independent Auditors' fees for the provision of auditing services for issuing attestation: |
||
| - to the Parent Brembo S.p.A. | 56 | 56 |
| - to the subsidiaries (services provided by the network) | 5 | 0 |
| Fees of entities belonging to the Independent Auditors' network for the provision of services: |
||
| - other services rendered to subsidiaries | 5 | 6 |
The Group had no commitments at the closing date of the 2018 Financial Statements.
Pursuant to Consob Notice No. 6064293 dated 28 July 2006, it is hereby specified that during 2018 the company did not carry out any atypical and/or unusual transactions, as defined by the said Notice.
In the 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:
– subsidies, grants and economic advantages of all kinds the benefits of which are accessible to all undertakings that meet certain conditions on the basis of predetermined general criteria (for example, measures provided for in ministerial decrees aimed at specific sectors of industry and intended to finance activities relating to research and development projects);
In light of the above, the Group has analysed its situation and decided to disclose the sums it received by way of grants disbursed by the following in 2018 in this section:
No significant events occurred after the end of 2018 and up to 4 March 2019.
The changes in property, plant and equipment are shown in the table below and described in this section.
| Plant and | Industrial and commercial |
Other | Assets in course of construction and payments |
||||
|---|---|---|---|---|---|---|---|
| (euro thousand) | Land | Buildings | machinery | equipment | assets | on account | Total |
| Historical cost | 27,730 | 285,872 | 977,772 | 192,684 | 43,304 | 75,117 | 1,602,479 |
| Accumulated depreciation | 0 | (82,799) | (572,277) | (162,600) | (34,815) | 0 | (852,491) |
| Write-down provision | 0 | (351) | (2,428) | 0 | 0 | (277) | (3,056) |
| Balance at 1 January 2017 | 27,730 | 202,722 | 403,067 | 30,084 | 8,489 | 74,840 | 746,932 |
| Changes: | |||||||
| Translation differences | (515) | (7,329) | (11,506) | 26 | (321) | (2,857) | (22,502) |
| Reclassification | 0 | 2,752 | 45,520 | 3,372 | 4,965 | (56,854) | (245) |
| Acquisitions | 3,496 | 8,435 | 81,599 | 18,305 | 3,465 | 211,358 | 326,658 |
| Disposals | 0 | (25) | (3,841) | (768) | 388 | 0 | (4,246) |
| Depreciation | 0 | (12,850) | (81,928) | (14,369) | (3,262) | 0 | (112,409) |
| Impairment losses | 0 | (344) | 17 | 5 | 0 | (92) | (414) |
| Total changes | 2,981 | (9,361) | 29,861 | 6,571 | 5,235 | 151,555 | 186,842 |
| Historical cost | 30,711 | 289,384 | 1,065,152 | 211,914 | 49,006 | 226,781 | 1,872,948 |
| Accumulated depreciation | 0 | (95,446) | (630,358) | (175,259) | (35,282) | 0 | (936,345) |
| Write-down provision | 0 | (577) | (1,866) | 0 | 0 | (386) | (2,829) |
| Balance at 1 January 2018 | 30,711 | 193,361 | 432,928 | 36,655 | 13,724 | 226,395 | 933,774 |
| Changes: | |||||||
| Translation differences | 308 | 1,182 | (1,194) | (257) | (74) | 847 | 812 |
| Reclassification | 0 | 81,362 | 92,084 | 4,576 | 6,873 | (194,108) | (9,213) |
| Acquisitions | 282 | 27,929 | 120,745 | 17,899 | 8,206 | 75,386 | 250,447 |
| Disposals | 0 | (4) | (1,029) | (768) | (238) | (99) | (2,138) |
| Depreciation | 0 | (15,122) | (96,259) | (16,657) | (4,202) | 0 | (132,240) |
| Total changes | 590 | 95,347 | 114,347 | 4,793 | 10,565 | (117,974) | 107,668 |
| Historical cost | 31,301 | 398,384 | 1,261,071 | 227,951 | 63,210 | 108,796 | 2,090,713 |
| Accumulated depreciation | 0 | (109,663) | (711,554) | (186,503) | (38,921) | 0 | (1,046,641) |
| Write-down provision | 0 | (13) | (2,242) | 0 | 0 | (375) | (2,630) |
| Balance at 31 December 2018 | 31,301 | 288,708 | 547,275 | 41,448 | 24,289 | 108,421 | 1,041,442 |
In 2018, investments were made in tangible fixed assets amounting to €250,447 thousand, including €75,386 thousand on fixed assets in course of construction.
As already noted in the Report on Operations, the Group continued its international development programme. This involved significant investments in Italy, North America, Poland, and China.
Net disposals amounted to €2,138 thousand and refer to the normal cycle of machinery replacement, as it becomes unusable in production processes.
Total depreciation charges for 2018 amounted to €132,240 thousand (€112,409 thousand in 2017).
As stated in the Report on Operations, it bears recalling that the effects of the application of IAS 29 – Financial Reporting in Hyperinflationary Economies on the Argentine subsidiary's fixed assets are to be considered immaterial to the Brembo Group. Accordingly, the value of the assets of Brembo Argentina S.A. carried in the consolidated financial statements does not reflect the revaluation of the assets concerned.
The following is a breakdown by category of the net carrying value of owned assets and assets held under finance lease:
| 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|
| (euro thousand) | Leased | Not leased | Leased | Not leased |
| Land | 0 | 31,301 | 0 | 30,711 |
| Buildings | 0 | 288,708 | 0 | 193,361 |
| Plant and machinery | 0 | 547,275 | 0 | 432,928 |
| Industrial and commercial equipment | 0 | 41,448 | 0 | 36,655 |
| Other assets | 1,919 | 22,370 | 547 | 13,177 |
| Assets in course of construction and payments on account | 0 | 108,421 | 0 | 226,395 |
| Total | 1,919 | 1,039,523 | 547 | 933,227 |
Changes in intangible assets 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 | 137,593 | 99,560 | 1,429 | 100,989 | 31,267 | 116,557 | 147,824 | 386,406 |
| Accumulated amortisation | (87,881) | 0 | 0 | 0 | (27,403) | (67,859) | (95,262) | (183,143) |
| Write-down provision | (388) | (12,106) | (3) | (12,109) | (503) | 0 | (503) | (13,000) |
| Balance at 1 January 2017 | 49,324 | 87,454 | 1,426 | 88,880 | 3,361 | 48,698 | 52,059 | 190,263 |
| Changes: | ||||||||
| Translation differences | (264) | (6,019) | (24) | (6,043) | 17 | (2,435) | (2,418) | (8,725) |
| Reclassification | 0 | 0 | 0 | 0 | 147 | (50) | 97 | 97 |
| Acquisitions | 24,033 | 0 | 0 | 0 | 2,741 | 7,252 | 9,993 | 34,026 |
| Disposals | 0 | 0 | 0 | 0 | (24) | (174) | (198) | (198) |
| Amortisation | (10,482) | 0 | 0 | 0 | (1,128) | (7,981) | (9,109) | (19,591) |
| Impairment losses | (1,288) | 0 | 0 | 0 | 1 | 0 | 1 | (1,287) |
| Total changes | 11,999 | (6,019) | (24) | (6,043) | 1,754 | (3,388) | (1,634) | 4,322 |
| Historical cost | 159,845 | 93,118 | 1,404 | 94,522 | 34,167 | 120,134 | 154,301 | 408,668 |
| Accumulated amortisation | (98,134) | 0 | 0 | 0 | (28,550) | (74,824) | (103,374) | (201,508) |
| Write-down provision | (388) | (11,683) | (2) | (11,685) | (502) | 0 | (502) | (12,575) |
| Balance at 1 January 2018 | 61,323 | 81,435 | 1,402 | 82,837 | 5,115 | 45,310 | 50,425 | 194,585 |
| Changes: | ||||||||
| Translation differences | 162 | (111) | (4) | (115) | (11) | (228) | (239) | (192) |
| Reclassification | 0 | 0 | 0 | 0 | 29 | 1,032 | 1,061 | 1,061 |
| Acquisitions | 25,467 | 0 | 0 | 0 | 4,910 | 6,914 | 11,824 | 37,291 |
| Disposals | 0 | 0 | 0 | 0 | (25) | 0 | (25) | (25) |
| Amortisation | (10,323) | 0 | 0 | 0 | (1,249) | (8,097) | (9,346) | (19,669) |
| Impairment losses | (3,325) | 0 | 0 | 0 | (587) | 0 | (587) | (3,912) |
| Total changes | 11,981 | (111) | (4) | (115) | 3,067 | (379) | 2,688 | 14,554 |
| 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 31 December 2018 | 73,304 | 81,324 | 1,398 | 82,722 | 8,182 | 44,931 | 53,113 | 209,139 |
It is the cornerstone of research and innovation. Without safety, even performance would lose its way.
MXGP Motocross Championship 2018
The item "Development costs" includes costs for development, internal and external, for a gross historical cost of €182,299 thousand. During the reporting year, this item changed due to higher costs incurred in 2018 for development orders received both during the year and in previous years, for which additional development costs were incurred; amortisation amounting to €10,323 thousand was recognised for development costs associated with products that have already entered production.
The gross amount includes development activities for projects underway totalling €39,988 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 €25,339 thousand (€24,219 thousand in 2017).
Impairment losses totalled €3,325 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.
The item "Goodwill" arose from the following business combinations:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Discs - Systems - Motorbikes: | ||
| Brembo North America Inc. (Hayes Lemmerz) | 14,907 | 14,233 |
| Brembo Mexico S.A. de C.V. (Hayes Lemmerz) | 907 | 866 |
| Brembo Nanjing Brake Systems Co. Ltd. | 889 | 897 |
| Brembo Brake India Pvt. Ltd. | 8,259 | 8,596 |
| Brembo Huilian (Langfang) Brake Systems Co. Ltd. | 42,751 | 43,138 |
| After Market – Performance Group: | ||
| Corporacion Upwards'98 (Frenco S.A.) | 2,006 | 2,006 |
| Ap Racing Ltd. | 11,605 | 11,699 |
| Total | 81,324 | 81,435 |
The change compared to 31 December 2017 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 other cash-generating units relate to the discount rate and growth rate. Specifically, calculations used cash-flow projections for the 2019-2021 period covered by the 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 2017), on a case by case basis. The Group's discount rate (Group WACC) used was 8.54% (8.0% in 2017), which reflected the current market assessments of the time value of money and the risks specific to the asset in question. 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 8.54% to 9.04% 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.
In the event of a sales volume decrease that, depending on the CGU reference market, has been estimated in the range from -5% to -20%, no previously unimpaired goodwill would have become impaired.
The changes in the WACC, growth rate and sales volumes 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 Corporacion Upwards '98 S.A., and for the remaining part, amounting to €368 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 €11,824 thousand and refer for €4,910 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:
| Write-ups/ | |||||
|---|---|---|---|---|---|
| (euro thousand) | 31.12.2017 | Write-downs | Dividends | Other changes | 31.12.2018 |
| Brembo Group SGL Carbon Ceramic Brakes | 33,701 | 16,190 | (11,000) | (62) | 38,829 |
| Petroceramics S.p.A. | 599 | 216 | (80) | 0 | 735 |
| Total | 34,300 | 16,406 | (11,080) | (62) | 39,564 |
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) | 31.12.2018 | 31.12.2017 |
| Revenue from contracts with customers | 182,114 | 156,863 |
| Other revenues and income | 2,292 | 2,026 |
| Costs for capitalised internal works | 106 | 0 |
| Raw materials, consumables and goods | (55,105) | (49,106) |
| Other operating costs | (39,106) | (34,359) |
| Personnel expenses | (40,354) | (34,221) |
| GROSS OPERATING INCOME | 49,947 | 41,203 |
| Depreciation, amortisation and impairment losses | (5,880) | (4,692) |
| NET OPERATING INCOME | 44,067 | 36,511 |
| Net interest income (expense) | (114) | (68) |
| RESULT BEFORE TAXES | 43,953 | 36,443 |
| Taxes | (11,893) | (10,165) |
| NET RESULT FOR THE YEAR | 32,060 | 26,277 |
| % ownership | 50% | 50% |
| Other consolidation adjustments | 160 | 97 |
| GROUP NET RESULT | 16,190 | 13,236 |
| Property, plant, equipment and other equipment | 46,818 | 38,147 |
| Development costs | 106 | 0 |
| Other intangible assets | 413 | 327 |
| Other financial assets (including investments in other companies and derivatives) | 131 | 131 |
| Deferred tax assets | 2,317 | 2,551 |
| TOTAL NON-CURRENT ASSETS | 49,785 | 41,156 |
| Inventories | 20,845 | 17,837 |
| Trade receivables | 29,337 | 10,868 |
| Other receivables and current assets | 5,941 | 5,098 |
| Cash and cash equivalents | 12,513 | 31,192 |
| TOTAL CURRENT ASSETS | 68,636 | 64,995 |
| TOTAL ASSETS | 118,421 | 106,151 |
| Share capital | 4,000 | 4,000 |
| Other reserves | 21,883 | 20,422 |
| Retained earnings/(losses) | 18,411 | 15,719 |
| Net result for the year | 32,060 | 26,277 |
| TOTAL EQUITY | 76,354 | 66,418 |
| Other non-current liabilities | 850 | 671 |
| Non-current provisions | 3,883 | 2,759 |
| Provisions for employee benefits | 3,917 | 3,600 |
| TOTAL NON-CURRENT LIABILITIES | 8,650 | 7,030 |
| Brembo Group SGL Carbon Ceramic Brakes | |||
|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | |
| Current payables to banks | 1,014 | 1 | |
| Trade payables | 20,206 | 20,867 | |
| Tax payables | 4,109 | 5,736 | |
| Other current payables | 8,088 | 6,099 | |
| TOTAL CURRENT LIABILITIES | 33,417 | 32,703 | |
| TOTAL LIABILITIES | 42,067 | 39,733 | |
| TOTAL EQUITY AND LIABILITIES | 118,421 | 106,151 | |
| % ownership | 50% | 50% | |
| Goodwill | 1,033 | 1,033 | |
| Other consolidation adjustments | (381) | (541) | |
| CARRYING VALUE OF GROUP SHAREHOLDING | 38,829 | 33,701 |
| Petroceramics S.p.A. | |||
|---|---|---|---|
| 31.12.2018 | 31.12.2017 | ||
| Revenue from contracts with customers | 2,664 | 2,426 | |
| NET RESULT FOR THE YEAR | 1,080 | 885 | |
| % ownership | 20% | 20% | |
| GROUP NET RESULT | 216 | 177 | |
| Total current assets | 3,748 | 3,320 | |
| Total non-current assets | 588 | 577 | |
| Total current liabilities | 477 | 745 | |
| Total non-current liabilities | 184 | 156 | |
| TOTAL EQUITY | 3,675 | 2,996 | |
| % ownership | 20% | 20% | |
| CARRYING VALUE OF GROUP SHAREHOLDING | 735 | 599 |
This item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Shareholdings in other companies | 1,657 | 307 |
| Receivables from associates | 5,676 | 5,659 |
| Other | 857 | 803 |
| Total | 8,190 | 6,769 |
The item "Shareholdings in other companies" mainly includes the 10% interest in International Sport Automobile S.a.r.l., the 1.20% interest in Fuji Co., and the 3.29% interest in E-novia S.p.A. (2.38% at 31 December 2017), to which the €1,350 thousand increase refers due to the subscription of a capital increase).
The item "Receivables from associates" includes the receivable deriving from the loan granted by Brembo S.p.A. 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 €5,676 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. According to this agreement, the residual portion of this loan is to be paid following the sale to third parties of the property owned by Innova Tecnologie S.r.l. in liquidazione in an amount equal to the company's net assets at the end of the liquidation procedure, without prejudice to the majority shareholder's liability for any deficit up to the maximum amount already agreed between the parties. Including the receivable among "Non-current assets", it is however deemed that there are no elements hindering the recovery of the residual value.
"Other" includes interest-free security deposits for utilities and car rental agreements.
This item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Receivables from others | 2,886 | 3,762 |
| Income tax receivables | 61 | 37 |
| Non-income tax receivables | 34 | 33 |
| Total | 2,981 | 3,832 |
The item "Receivables from others" includes the amount related to contributions towards a client for the acquisition of a ten-year exclusive supply arrangement, which was released to the Statement of Income in accordance with the supply schedule for the client, which began in late 2014.
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) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Deferred tax assets | 62,711 | 57,818 |
| Deferred tax liabilities | (23,705) | (24,716) |
| Total | 39,006 | 33,102 |
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.
Movements for the year are reported in the following table:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Balance at beginning of year | 33,102 | 26,069 |
| Deferred tax liabilities generated | (401) | (7,935) |
| Deferred tax assets generated | 18,954 | 20,359 |
| Use of deferred tax assets and liabilities | (12,023) | (7,475) |
| Exchange rate fluctuations | (696) | 2,746 |
| Other movements | 70 | (662) |
| Balance at end of year | 39,006 | 33,102 |
| Assets | Liabilities | Net | |||||
|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | 31.12.2018 | 31.12.2017 | |
| Property, plant, equipment and other equipment | 15,064 | 12,776 | 22,234 | 20,982 | (7,170) | (8,206) | |
| Development costs | 28 | 28 | 0 | 0 | 28 | 28 | |
| Other intangible assets | 67 | 67 | 6,715 | 7,283 | (6,648) | (7,216) | |
| Other financial assets | 829 | 2,070 | 76 | 0 | 753 | 2,070 | |
| Trade receivables | 5,667 | 5,181 | 21 | 36 | 5,646 | 5,145 | |
| Inventories | 10,245 | 10,683 | 49 | 0 | 10,196 | 10,683 | |
| Other receivables and current assets | 619 | 950 | 0 | 63 | 619 | 887 | |
| Financial liabilities | 0 | 3 | 0 | 0 | 0 | 3 | |
| Other financial liabilities | 498 | 170 | 11 | 0 | 487 | 170 | |
| Provisions | 3,244 | 6,213 | 0 | 0 | 3,244 | 6,213 | |
| Provisions for employee benefits | 10,283 | 8,132 | 1,195 | 1,192 | 9,088 | 6,940 | |
| Trade payables | 166 | 222 | 0 | 0 | 166 | 222 | |
| Cash and cash equivalents | 160 | 11 | 0 | 0 | 160 | 11 | |
| Other liabilities | 15,719 | 9,451 | 1,772 | 1,787 | 13,947 | 7,664 | |
| Other | 7,847 | 9,818 | 1,376 | 1,370 | 6,471 | 8,448 | |
| Tax losses | 2,019 | 40 | 0 | 0 | 2,019 | 40 | |
| Compensation balance between deferred tax assets and liabilities |
(9,744) | (7,997) | (9,744) | (7,997) | 0 | 0 | |
| Total | 62,711 | 57,818 | 23,705 | 24,716 | 39,006 | 33,102 |
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 2018, the company had used all the existing credit at 31 December 2017 besides the credit accrued in 2018.
Brembo Czech Sro. has two tax incentive plans, one of CZK 132.6 million (expiring in 2021) 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.
The company Brembo (Nanjing) Automobile Components Co. Ltd. recognised deferred tax assets on their losses for the current and previous years for a total of €2,019 thousand, basing their assessment of the satisfaction of requirements for future recoverability of such assets on updated strategic plans.
It must be pointed out that:
• at 31 December 2018, the temporary differences between the parent's share of the net assets of the subsidiary, associate or investee company, including the book value of goodwill, and the value of the investment or shareholding (cost) (as indicated in §38 of IAS 12) amounted to €587 million and were considered to be permanently reinvested, since these provisions are used to fund current transactions and future business growth in those countries in which the same subsidiary resides; as a result, no deferred tax liability was recognised on the taxable portion of such differences.
A breakdown of net inventories, which are stated net of the inventory write-down provision, is shown below:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Raw materials | 143,184 | 131,668 |
| Work in progress | 68,501 | 63,419 |
| Finished products | 105,991 | 93,587 |
| Goods in transit | 24,361 | 22,442 |
| Total | 342,037 | 311,116 |
The change reported was due to the increase in the Group's business volumes.
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) | 31.12.2017 | Provisions | Use/Release | Exchange rate fluctuations |
Reclassification | 31.12.2018 |
|---|---|---|---|---|---|---|
| Inventory write-down provision | 44,882 | 7,182 | (10,071) | (178) | (543) | 41,272 |
At 31 December 2018, the balance of trade receivables compared to the previous year was as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Accounts receivable from customers | 405,450 | 374,361 |
| Receivables from associates and joint ventures | 1,964 | 1,358 |
| Total | 407,414 | 375,719 |
The increase in trade receivables is related to the growth in business volumes.
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 €4,269 thousand. Movements in the provision for bad debts are shown below:
| (euro thousand) | 31.12.2017 | Provisions | Use/Release | Exchange rate fluctuations |
31.12.2018 |
|---|---|---|---|---|---|
| Provision for bad debts | 5,298 | 653 | (1,668) | (14) | 4,269 |
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.
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Listed clients | 305,088 | 295,987 |
| Unlisted clients | 106,595 | 85,030 |
| Total | 411,683 | 381,017 |
The following table provides details on trade receivables that have not been adjusted for impairment, broken down by maturity.
| (euro thousand) | 31.12.2018 | Write-down 2018 | 31.12.2017 | Write-down 2017 |
|---|---|---|---|---|
| Current | 285,848 | 0 | 281,483 | 0 |
| Expired up to 30 days | 2,585 | 0 | 2,808 | 0 |
| Expired by 30 to 60 days | 11,382 | 0 | 6,779 | 0 |
| Expired by over 60 days | 5,273 | 1,478 | 4,917 | 1,272 |
| Total | 305,088 | 1,478 | 295,987 | 1,272 |
| % Ratio of expired receivables not written down to total exposure |
5.8% | 4.5% | ||
| Total expired receivables, not written down | 17,762 | 13,232 |
| (euro thousand) | 31.12.2018 | Write-down 2018 | 31.12.2017 | Write-down 2017 |
|---|---|---|---|---|
| Current | 97,388 | 0 | 74,961 | 0 |
| Expired up to 30 days | 2,726 | 0 | 1,664 | 0 |
| Expired by 30 to 60 days | 1,848 | 0 | 2,053 | 0 |
| Expired by over 60 days | 4,633 | 2,791 | 6,352 | 4,026 |
| Total | 106,595 | 2,791 | 85,030 | 4,026 |
| % Ratio of expired receivables not written down to total exposure |
6.0% | 7.1% | ||
| Total expired receivables, not written down | 6,416 | 6,043 |
Expired receivables from listed clients mainly refer to leading car manufacturers, and almost all the related repayment plans were defined at the beginning of 2019.
With regard to the portion of expired receivables from unlisted clients, most of this amount has already been collected in the first months of 2019.
This item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Income tax receivables | 23,642 | 22,079 |
| Non-income tax receivables | 27,281 | 26,493 |
| Other receivables | 21,209 | 31,883 |
| Total | 72,132 | 80,455 |
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 €4,948 thousand, beside the €7,009 thousand R&D tax credit calculated pursuant to Ministerial Decree dated 27 May 2015.
The item "Non-income tax receivables" includes mainly VAT receivables of the subsidiaries located in Poland and China associated with the significant purchases for the investments made in the reporting year.
"Other receivables" include receivables from insurance companies related to insurance refund claims underway at the reporting date, advances paid to suppliers for goods and services, and other accrued income. The decrease compared to 31 December 2017 is chiefly attributable to the collection of insurance refund claims recognised in the previous year.
This item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Security deposits | 303 | 294 |
| Other receivables | 4 | 2 |
| Total | 307 | 296 |
We are one big team. We owe every milestone reached to the people who make up our team and their unique qualities.
Formula 1 Championship 2018
Cash and cash equivalents include:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Bank and postal accounts | 344,985 | 300,664 |
| Cash-in-hand and cash equivalents | 132 | 166 |
| Total cash and cash equivalents | 345,117 | 300,830 |
| Payables to banks: overdrafts and foreign currency advances | (149,246) | (144,857) |
| Cash and cash equivalents from the Statement of Cash Flows | 195,871 | 155,973 |
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.
It should be noted that, with regard to the amount recognised in the Statement of Cash Flows, interest paid in the year totalled €14,867 thousand (€10,587 thousand in 2017).
Group consolidated equity at 31 December 2018 increased by €162,268 thousand compared to 31 December 2017. Movements are given in the relevant statement.
The Parent's subscribed and paid up share capital amounted to €34,728 thousand at 31 December 2018. 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 2018 and 31 December 2017:
| (No. of shares) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Ordinary shares issued | 333,922,250 | 333,922,250 |
| Own shares | (8,735,000) | (8,735,000) |
| Total shares outstanding | 325,187,250 | 325,187,250 |
As part of Brembo's buy-back plan, in 2018 the Company neither purchased nor sold own shares.
The General Shareholders' Meeting of the Parent, Brembo S.p.A., held on 20 April 2018 approved the Financial Statements for the financial year ended 31 December 2017, allocating the net income for the year amounting to €149,484 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:
| 31.12.2018 | 31.12.2017 | ||||||
|---|---|---|---|---|---|---|---|
| (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 | 149,246 | 0 | 149,246 | 144,857 | 0 | 144,857 | |
| - loans | 124,082 | 205,872 | 329,954 | 49,363 | 319,314 | 368,677 | |
| Total | 273,328 | 205,872 | 479,200 | 194,220 | 319,314 | 513,534 | |
| Other financial liabilities: | |||||||
| Payables to other financial institutions | 749 | 1,572 | 2,321 | 3,845 | 2,344 | 6,189 | |
| Derivatives | 814 | 0 | 814 | 0 | 0 | 0 | |
| Total | 1,563 | 1,572 | 3,135 | 3,845 | 2,344 | 6,189 |
The following table provides details on loans and amounts due to other financial institutions:
| (euro thousand) | Original amount |
Amount at 31.12.2017 |
Amount at 31.12.2018 |
Portion due within one year |
Portion due between 1 and 5 years |
Portion due after 5 years |
|---|---|---|---|---|---|---|
| Payables to banks: | ||||||
| BNL loan (€50 million) | 50,000 | 28,529 | 14,275 | 14,275 | 0 | 0 |
| Banca Popolare di Sondrio loan (€75 million) | 75,000 | 74,945 | 74,965 | 18,733 | 56,232 | 0 |
| BNL loan (€80 million) | 80,000 | 79,879 | 79,927 | 25,002 | 54,925 | 0 |
| Mediobanca loan (€130 million) | 130,000 | 104,799 | 84,893 | 39,930 | 44,963 | 0 |
| Unicredit NY loan (USD 40.3 million) | 37,101 | 11,209 | 0 | 0 | 0 | 0 |
| UBI loan (USD 35 million) | 29,835 | 29,120 | 30,525 | 10,189 | 20,336 | 0 |
| Banamex loan (USD 30 million) | 25,778 | 24,955 | 26,162 | 4,367 | 21,795 | 0 |
| EIB loan (€30 million, New Foundry Project) | 30,000 | 15,241 | 11,431 | 3,810 | 7,621 | 0 |
| Citi Nanjing loan (RMB 200 million) | 26,684 | 0 | 7,776 | 7,776 | 0 | 0 |
| Total payables to banks | 484,398 | 368,677 | 329,954 | 124,082 | 205,872 | 0 |
| Payables to other financial institutions: | ||||||
| Finlombarda MIUR loan | 275 | 101 | 35 | 35 | 0 | 0 |
| MIUR BBW loan | 2,443 | 903 | 553 | 365 | 188 | 0 |
| Soft loan as per Ministerial Decree 28905 | 845 | 845 | 0 | 0 | 0 | 0 |
| Libra loan | 1,312 | 0 | 86 | 11 | 46 | 29 |
| Ministerio Industria España | 3,237 | 1,735 | 1,553 | 262 | 1,291 | 0 |
| Langfang municipality loan | 7,558 | 2,435 | 0 | 0 | 0 | 0 |
| Payables for leases | 207 | 170 | 94 | 76 | 18 | 0 |
| Total payables to other financial institutions | 15,877 | 6,189 | 2,321 | 749 | 1,543 | 29 |
| Total | 500,275 | 374,866 | 332,275 | 124,831 | 207,415 | 29 |
Among the major transactions finalised in the first half of 2018, mention should be made that Brembo (Nanjing) Automobile Components Co. Ltd. finalised a medium-term loan with Citibank (China) Co. Ltd. Nanjing Branch in the amount of RMB 200 million, whereas Brembo S.p.A. secured a medium-term credit facility of €100 million from BNL that had not yet been drawn down at 31 December 2018.
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 2018, there was no financial debt secured by collateral.
| 31.12.2018 | ||||||
|---|---|---|---|---|---|---|
| (euro thousand) | Fixed rate | Variable rate | Total | Fixed rate | Variable rate | Total |
| Euro | 209,691 | 58,047 | 267,738 | 223,315 | 83,691 | 307,006 |
| US Dollar | 0 | 56,687 | 56,687 | 0 | 65,284 | 65,284 |
| Polish Zloty | 74 | 0 | 74 | 141 | 0 | 141 |
| Chinese Renmimbi | 0 | 7,776 | 7,776 | 2,435 | 0 | 2,435 |
| Total | 209,765 | 122,510 | 332,275 | 225,891 | 148,975 | 374,866 |
The following table shows the structure of debt towards other lenders and loans, broken down by annual interest rate and currency:
The average variable rate applicable to the Group's debt is 2.54% and the average fixed rate is 0.64%.
The following table provides a breakdown of the Group's debt from financial leases. Instalments are given by principal and interest due.
| 31.12.2018 | 31.12.2017 | ||||||
|---|---|---|---|---|---|---|---|
| (euro thousand) | Instalment | Interest | Principal | Instalment | Interest | Principal | |
| Within 1 year | 77 | 1 | 76 | 78 | 4 | 74 | |
| Between 1 and 5 years | 18 | 0 | 18 | 98 | 2 | 96 | |
| Beyond 5 years | 0 | 0 | 0 | 0 | 0 | 0 | |
| Total | 95 | 1 | 94 | 176 | 6 | 170 |
The Group has outstanding commercial lease agreements for several of its production facilities and its headquarters. The company has concluded that all significant risks and rewards typical of the ownership of the assets have not been transferred to the Group on the basis of the contractual terms and conditions (e.g., the contractual terms do not cover most of the economic life of the commercial property, or the present value of the minimum lease instalment does not essentially correspond to the fair value of the asset). It follows that these contracts were accounted for as operating leases according to the current version of IAS 17.
The following table provides a breakdown of operating lease instalments:
| 123,247 | 85,311 | |
|---|---|---|
| Beyond 5 years | ||
| Between 1 and 5 years | 79,437 | 77,109 |
| Within 1 year | 29,136 | 26,613 |
| (euro thousand) | 31.12.2018 | 31.12.2017 |
The Group has carried out a detailed analysis of the impacts that the application of IFRS16 will have, with effect from 1 January 2019, on Net Invested Capital and Net Financial Position (present net value of future rental fees). This value, amounting to €178,754 thousand, differs from the value of operating leases indicated in the table shown above due to the discounting of future flows (applying an average weighted discount rate of 2.82%, using the "incremental borrowing" criterion), as well as the discounting of the service component not covered by this standard and of low value and short-term leases, as shown in the table below:
| Operating leases at 31 December 2018 | 231,820 |
|---|---|
| Short-term leases | (3,122) |
| Low-value leases | (11,819) |
| Service component | (2,743) |
| Undiscounted leases at 1 January 2019 | 214,136 |
| Impact resulting from discounting as per IFRS 16 | (35,382) |
| Discounted leases at 1 January 2019 (IFRS 16) | 178,754 |
The following table shows the breakdown of the net financial position at 31 December 2018 (€136,911 thousand) and at 31 December 2017 (€218,597 thousand) based on the layout prescribed by Consob Communication No. 6064293 of 28 July 2006.
| (euro thousand) | 31.12.2018 | 31.12.2017 | |||
|---|---|---|---|---|---|
| A | Cash | 132 | 166 | ||
| B | Other cash equivalents | 344,985 | 300,664 | ||
| C | Derivatives and securities held for trading | 0 | 0 | ||
| D | LIQUIDITY (A+B+C) | 345,117 | 300,830 | ||
| E | Current financial receivables | 307 | 296 | ||
| F | Current payables to banks | 149,246 | 144,857 | ||
| G | Current portion of non-current debt | 124,082 | 49,363 | ||
| H | Other current financial debts and derivatives | 1,563 | 3,845 | ||
| I | CURRENT FINANCIAL DEBT (F+G+H) | 274,891 | 198,065 | ||
| J | NET CURRENT FINANCIAL DEBT (I–E–D) | (70,533) | (103,061) | ||
| K | Non-current payables to banks | 205,872 | 319,314 | ||
| L | Bonds issued | 0 | 0 | ||
| M | Other non-current financial debts and derivatives | 1,572 | 2,344 | ||
| N | NON-CURRENT FINANCIAL DEBT (K+L+M) | 207,444 | 321,658 | ||
| O | NET FINANCIAL DEBT (J+N) | 136,911 | 218,597 |
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 Report on Operations.
This item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Social security payables | 0 | 3,402 |
| Payables to employees | 1,380 | 15,449 |
| Other payables | 1,715 | 1,076 |
| Total | 3,095 | 19,927 |
The changes in the items "Payables to employees", "Social security payables" and "Other payables" primarily consisted of the reclassification to "Other current liabilities" of the liability associated with the 2016-2018 threeyear incentive plan reserved for top managers, to be settled in 2019.
This item is broken down as follows:
| (euro thousand) | 31.12.2017 | Provisions | Use/Release | Exchange rate fluctuations |
Other | 31.12.2018 |
|---|---|---|---|---|---|---|
| Provisions for contingencies | ||||||
| and charges | 11,881 | 11,873 | (6,446) | (146) | 23 | 17,185 |
| Provision for product | ||||||
| warranties | 29,976 | 4,212 | (12,472) | (39) | (9,858) | 11,819 |
| Total | 41,857 | 16,085 | (18,918) | (185) | (9,835) | 29,004 |
| of which short-term | 2,244 | 13,504 |
Provisions totalled €29,004 thousand, including provision for product 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.
The item "Other" relates to the reduction of the obligation for risks covered by insurance policies recognised in the previous year as counter-entry to the item "Other receivables and current assets".
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) | 31.12.2017 | Provisions | Use/Release | Interest expense |
Exchange rate fluctuations |
Other | 31.12.2018 |
|---|---|---|---|---|---|---|---|
| Employees' leaving entitlement | 20,096 | 0 | (1,220) | 343 | 0 | (115) | 19,104 |
| Defined benefit plans and other long-term benefits |
5,322 | 684 | (689) | 196 | 6 | 609 | 6,128 |
| Defined contribution plans | 2,366 | 1,944 | (2,379) | 0 | (22) | 0 | 1,909 |
| Total | 27,784 | 2,628 | (4,288) | 539 | (16) | 494 | 27,141 |
Liabilities at 31 December 2018 are given in the table below:
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
Brembo Japan plan |
||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 | 31.12.2017 | |||||
| A Change in defined benefit obligation |
||||||||||||
| 1. Defined benefit obligation at the end of prior year |
20,096 | 21,546 | 35,314 | 37,581 | 800 | 648 | 873 | 749 | 244 | 302 | ||
| 2. Service cost: | ||||||||||||
| Current service cost | 0 | 0 | 0 | 0 | 163 | 144 | 109 | 106 | 3 | 2 | ||
| Past service cost | 0 | 0 | 426 | 0 | (17) | 0 | 0 | 0 | 0 | 0 | ||
| 3. Interest expense | 343 | 315 | 863 | 981 | 67 | 54 | 60 | 48 | 1 | 2 | ||
| 4. Cash flows: | ||||||||||||
| Benefit payments from plan | 0 | 0 | (1,651) | (761) | 0 | 0 | (1) | (11) | 0 | 0 | ||
| Benefit payments from employer |
(1,220) | (1,154) | 0 | 0 | (20) | (17) | (11) | (6) | (23) | (37) | ||
| Other significant events: | ||||||||||||
| 6. Remeasurements: | ||||||||||||
| Effects of changes in demographic assumptions |
0 | 0 | (211) | (661) | (72) | 0 | 0 | 0 | 0 | 0 | ||
| Effects of changes in financial assumptions |
(115) | (611) | (2,301) | 7 | (100) | 26 | 0 | (33) | 0 | 0 | ||
| Effects of experience adjustments (changes occurred since the previous measurement not in line with assumptions) |
0 | 0 | 635 | (530) | 54 | 19 | 33 | 76 | 0 | 0 | ||
| 7. Effect of changes in foreign exchange rates |
0 | 0 | (264) | (1,303) | 41 | (74) | (32) | (56) | 17 | (25) | ||
| 8. Defined benefit obligations at end of year |
19,104 | 20,096 | 32,811 | 35,314 | 916 | 800 | 1,031 | 873 | 242 | 244 | ||
| B. Change in fair value of plan assets |
||||||||||||
| 1. Fair value of plan assets at the end of prior year |
0 | 0 | 31,663 | 30,229 | 0 | 0 | 203 | 167 | 0 | 0 | ||
| 2. Financial income | 0 | 0 | 780 | 795 | 0 | 0 | 15 | 11 | 0 | 0 | ||
| 3. Cash flows: | ||||||||||||
| Total employer contributions: |
||||||||||||
| - employer contributions | 0 | 0 | 575 | 556 | 0 | 0 | 77 | 45 | 0 | 0 | ||
| - employer direct benefit payments |
1,221 | 1,155 | 0 | 0 | 20 | 17 | 11 | 6 | 0 | 0 | ||
| Benefit payments from plan | 0 | 0 | (1,651) | (761) | 0 | 0 | (1) | (11) | 0 | 0 | ||
| Benefit payments from employer |
(1,221) | (1,155) | 0 | 0 | (20) | (17) | (11) | (6) | 0 | 0 | ||
| Taxes on plan assets | 0 | 0 | 0 | 0 | 0 | 0 | (2) | (1) | 0 | 0 | ||
| 5. Remeasurements: | ||||||||||||
| Return on plan assets (excluding interest income) |
0 | 0 | (2,553) | 1,933 | 0 | 0 | 0 | 5 | 0 | 0 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
Brembo Japan plan |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 | 31.12.2017 | |||
| 6. Effect of changes in foreign exchange rates |
0 | 0 | (227) | (1,089) | 0 | 0 | (7) | (13) | 0 | 0 |
| 7. Fair value of plan assets at end of period |
0 | 0 | 28,587 | 31,663 | 0 | 0 | 285 | 203 | 0 | 0 |
| E. Amounts recognised in the Statement of Financial Position |
||||||||||
| 1. Defined benefit obligation | 19,104 | 20,096 | 32,811 | 35,314 | 916 | 800 | 1,031 | 873 | 242 | 244 |
| 2. Fair value of plan assets | 0 | 0 | 28,587 | 31,663 | 0 | 0 | 285 | 203 | 0 | 0 |
| 3. Funded status | 19,104 | 20,096 | 4,224 | 3,651 | 916 | 800 | 746 | 670 | 242 | 244 |
| 5. Net liability (asset) | 19,104 | 20,096 | 4,224 | 3,651 | 916 | 800 | 746 | 670 | 242 | 244 |
| F. Components of defined benefit cost |
||||||||||
| 1. Service cost: | ||||||||||
| Current service cost | 0 | 0 | 0 | 0 | 163 | 144 | 109 | 106 | 3 | 2 |
| Past service cost | 0 | 0 | 426 | 0 | (17) | 0 | 0 | 0 | 0 | 0 |
| Total service costs | 0 | 0 | 426 | 0 | 146 | 144 | 109 | 106 | 3 | 2 |
| 2. Net interest expense: | ||||||||||
| Interest expense on defined benefit plans |
343 | 315 | 863 | 981 | 67 | 54 | 60 | 48 | 1 | 2 |
| Interest (income) on plan assets |
0 | 0 | (780) | (795) | 0 | 0 | (15) | (11) | 0 | 0 |
| Total net interest expense | 343 | 315 | 83 | 186 | 67 | 54 | 45 | 37 | 1 | 2 |
| 3. Remeasurement on other long-term benefits |
0 | 0 | 0 | 0 | 0 | 0 | 17 | 25 | 0 | 0 |
| 5. Defined benefit cost included in P&L |
343 | 315 | 509 | 186 | 213 | 198 | 171 | 168 | 4 | 4 |
| 6. Remeasurements (recognised in Other Comprehensive Income): |
||||||||||
| Effects of changes in demographic assumptions |
0 | 0 | (211) | (661) | (72) | 0 | 0 | 0 | 0 | 0 |
| Effects of changes in financial assumptions |
(115) | (611) | (2,301) | 7 | (100) | 26 | 0 | (16) | 0 | 0 |
| Effects of experience adjustments (changes occurred since the previous measurement not in line with assumptions) |
0 | 0 | 635 | (530) | 54 | 19 | 16 | 35 | 0 | 0 |
| Return on plan assets (excluding interest income) |
0 | 0 | 2,553 | (1,933) | 0 | 0 | 2 | (3) | 0 | 0 |
| Total remeasurements included in OCI |
(115) | (611) | 676 | (3,117) | (118) | 45 | 18 | 16 | 0 | 0 |
| 7. Total defined benefit cost recognised in P&L and OCI |
228 | (296) | 1,185 | (2,931) | 95 | 243 | 189 | 184 | 4 | 4 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
Brembo Japan plan |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 | 31.12.2017 | |||
| G. Net defined benefit liability (asset) reconciliation |
||||||||||
| 1. Net defined benefit liability (asset) |
20,096 | 21,546 | 3,651 | 7,352 | 800 | 648 | 670 | 582 | 244 | 302 |
| 2. Defined benefit cost included in P&L |
343 | 315 | 509 | 186 | 213 | 198 | 171 | 168 | 4 | 4 |
| 3. Total remeasurements included in OCI |
(115) | (611) | 676 | (3,117) | (118) | 45 | 18 | 16 | 0 | 0 |
| 4. Other significant events: | ||||||||||
| 5. Cash flows: | ||||||||||
| Employer contributions | 0 | 0 | (575) | (556) | 0 | 0 | (77) | (45) | 0 | 0 |
| Employer direct benefit payments |
(1,220) | (1,154) | 0 | 0 | (20) | (17) | (11) | (6) | (23) | (37) |
| 7. Effect of changes in foreign exchange rates |
0 | 0 | (37) | (214) | 41 | (74) | (25) | (43) | 17 | (25) |
| 8. Net defined benefit liability (asset) at the end of year |
19,104 | 20,096 | 4,224 | 3,651 | 916 | 800 | 746 | 672 | 242 | 244 |
| H. Defined benefit obligation | ||||||||||
| 1. Defined benefit obligation by participant status |
||||||||||
| Actives | 19,104 | 20,096 | 0 | 0 | 916 | 800 | 1,032 | 875 | 0 | 0 |
| Vested deferred | 0 | 0 | 18,727 | 21,045 | 0 | 0 | 0 | 0 | 0 | 0 |
| Retirees | 0 | 0 | 14,084 | 14,268 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 19,104 | 20,096 | 32,811 | 35,313 | 916 | 800 | 1,032 | 875 | 0 | 0 |
| I. Plan assets | ||||||||||
| 1. Fair value of plan assets | ||||||||||
| Cash and cash equivalents | 0 | 0 | 8 | 8 | 0 | 0 | 0 | 0 | 0 | 0 |
| Equity instruments | 0 | 0 | 10,154 | 19,401 | 0 | 0 | 0 | 0 | 0 | 0 |
| Debt instruments | 0 | 0 | 4,286 | 12,255 | 0 | 0 | 0 | 0 | 0 | 0 |
| Derivatives | 0 | 0 | 8,502 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Investment funds | 0 | 0 | 5,639 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Assets held by insurance company |
0 | 0 | 0 | 0 | 0 | 0 | 286 | 203 | 0 | 0 |
| Total | 0 | 0 | 28,589 | 31,664 | 0 | 0 | 286 | 203 | 0 | 0 |
| 2. Fair value of assets that have quoted market prices |
||||||||||
| Cash and cash equivalents | 0 | 0 | 8 | 8 | 0 | 0 | 0 | 0 | 0 | 0 |
| Equity instruments | 0 | 0 | 10,154 | 19,401 | 0 | 0 | 0 | 0 | 0 | 0 |
| Debt instruments | 0 | 0 | 4,286 | 12,255 | 0 | 0 | 0 | 0 | 0 | 0 |
| Derivatives | 0 | 0 | 8,502 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Investment funds | 0 | 0 | 5,639 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 0 | 0 | 28,589 | 31,664 | 0 | 0 | 0 | 0 | 0 | 0 |
| Unfunded Plan (Employee's leaving entitlement) |
Funded Plan (Ap Racing plan) |
Brembo México plan |
Brembo Brake India plan |
Brembo Japan plan |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (euro thousand) | 31.12.2018 | 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 31.12.2017 | 31.12.2018 | 31.12.2017 | ||||
| J. Significant actuarial assumptions |
|||||||||||
| Weighted-average assumptions to determine benefit obligations |
|||||||||||
| 1. Discount rate | 1.80% | 1.75% | 2.80% | 2.50% | 9.00% | 8.00% | 7.50% | 7.50% | 0.50% | 0.60% | |
| 2. Rate of salary increase | 0.00% | 0.00% | N/A | N/A | 4.50% | 4.50% | 9.50% | 9.50% | N/A | N/A | |
| 3. Rate of price inflation | 0.00% | 0.00% | 3.20% | 3.30% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | |
| 4. Rate of expected salary increases |
1.50% | 1.50% | 3.40% | 3.30% | 3.50% | 3.50% | 0.00% | 0.00% | 2.50% | 2.50% | |
| Weighted-average assumptions to determine defined benefit cost |
|||||||||||
| 1. Discount rate | 1.75% | 1.50% | 2.50% | 2.70% | 8.00% | 8.25% | 7.50% | 6.90% | N/A | N/A | |
| 2. Rate of salary increase | 0.00% | 0.00% | N/A | N/A | 4.50% | 4.50% | 9.50% | 9.50% | N/A | N/A | |
| 3. Rate of price inflation | 0.00% | 0.00% | 3.30% | 3.50% | 0.00% | 0.00% | 0.00% | 0.00% | N/A | N/A | |
| 4. Rate of expected salary increases |
1.50% | 1.50% | 3.30% | 3.50% | 3.50% | 3.50% | 0.00% | 0.00% | N/A | N/A |
By applying a uniform change in the discount rate by ± 25 basis points, the consolidated liabilities would have been respectively lower/higher by approximately €2.2 million compared to the base liabilities value of €54.1 million.
The average duration of the plans is 16.40 years.
At 31 December 2018, trade payables were as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Trade payables | 542,827 | 465,271 |
| Payables to associates and joint ventures | 23,910 | 5,119 |
| Total | 566,737 | 470,390 |
The increase in this item related to the increase in investments and the expansion of the normal operating activities in the reporting year.
This item reflects the net amount due for the current taxes of the Group's companies.
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Tax payables | 6,003 | 9,719 |
Other current payables at 31 December 2018 are given in the table below:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Tax payables other than current taxes | 9,940 | 11,646 |
| Social security payables | 24,724 | 17,893 |
| Payables to employees | 71,101 | 48,369 |
| Other payables | 58,427 | 43,033 |
| Total | 164,192 | 120,941 |
The items "Payables to employees", "Social security payables" and "Other payables" include the reclassification from "Other non-current liabilities" of the liability for the 2016-2018 three-year incentive plan reserved for top managers, to be settled in 2019.
"Other payables" also include deferred income in the form of a public grant received by Brembo Poland Spolka Zo.o. released to the Statement of Income in accordance with the related amortisation plans to which it refers, in addition to deferred income amounting to €18,151 thousand (€5,761 thousand in 2017) in the form of grants 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.
Small suppliers or big partners. It makes no difference. Those who work with us share our determination to excel and our passion.
MotoGP Championship brake system 2018
As illustrated in section "Basis of Preparation and Presentation", the Group has applied the new IFRS 15 to the contracts that had not yet been completed as at 1 January 2018, using the modified retrospective method. Since the application of the new Standard had no impact on the Group's equity at 31 December 2017, the disclosure of disaggregated revenue is given here below, compared with data of the previous year, when IAS 18 was applied.
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Revenue from sales of brake systems | 2,598,590 | 2,418,016 |
| Revenue from equipment | 24,888 | 28,001 |
| Revenue from study and design activities | 15,379 | 16,486 |
| Revenue from royalties | 1,154 | 1,117 |
| Total | 2,640,011 | 2,463,620 |
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) | 31.12.2018 | 31.12.2017 | |||
| Miscellaneous recharges | 5,616 | 6,193 | |||
| Gains on disposal of assets | 4,718 | 2,810 | |||
| Miscellaneous grants | 13,130 | 8,749 | |||
| Other revenues | 11,143 | 6,398 | |||
| Total | 34,607 | 24,150 |
The item "Miscellaneous grants" includes grants in the amount of €2,216 thousand issued by the State of Michigan to the subsidiary Brembo North America Inc. aimed at hiring resources for the new cast-iron foundry, as well as grants for research and development projects amounting to €1,939 thousand and a tax credit for research and development investment of €7,009 thousand, as already discussed in Note 9.
This item refers to the capitalisation of development costs incurred during the year, amounting to €25,339 thousand (€24,219 thousand in 2017).
The item is broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Purchase of raw materials, semi-finished and finished products | 1,146,629 | 1,070,192 |
| Purchase of consumables | 116,365 | 107,063 |
| Total | 1,262,994 | 1,177,255 |
Income (expense) from non-financial investments amounted to €16,190 thousand and is attributable to the effects of valuing the investment in the BSCCB Group using the equity method (€13,236 thousand in 2017).
These costs are broken down as follows:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Transports | 68,000 | 59,563 |
| Maintenance, repairs and utilities | 145,640 | 120,969 |
| Contracted work | 88,062 | 84,986 |
| Rent | 45,296 | 40,227 |
| Other operating costs | 139,964 | 126,212 |
| Total | 486,962 | 431,957 |
This item 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) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Wages and salaries | 325,513 | 310,539 |
| Social security contributions | 73,734 | 65,446 |
| Employees' leaving entitlement and other personnel provisions | 12,462 | 11,685 |
| Other costs | 53,597 | 48,380 |
| Total | 465,306 | 436,050 |
| Managers | White-collar | Blue-collars | Total | |
|---|---|---|---|---|
| 2018 average | 138 | 3,012 | 7,235 | 10,385 |
| 2017 average | 131 | 2,825 | 6,524 | 9,480 |
| Change | 7 | 187 | 711 | 905 |
| Total at 31 December 2018 | 139 | 3,114 | 7,381 | 10,634 |
| Total at 31 December 2017 | 135 | 2,897 | 6,805 | 9,837 |
The average number and the year-end number of Group employees by category were as follows:
Workforce increased by 797, as a result of the recruitment activities in Italy, North America, China and Eastern Europe to sustain the Group's growth.
Change 4 217 576 797
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Amortisation of intangible assets: | ||
| Development costs | 10,323 | 10,482 |
| Industrial patents and rights for original work | 941 | 872 |
| Licences, trademarks and similar rights | 308 | 256 |
| Other intangible assets | 8,097 | 7,981 |
| Total | 19,669 | 19,591 |
| Depreciation of property, plant and equipment: | ||
| Buildings | 15,122 | 12,850 |
| Plant and machinery | 96,259 | 81,928 |
| Industrial and commercial equipment | 16,657 | 14,369 |
| Other property, plant and equipment | 4,042 | 3,172 |
| Other leased property, plant and equipment | 160 | 90 |
| Total | 132,240 | 112,409 |
| Impairment losses: | ||
| Property, plant and equipment | 0 | 414 |
| Intangible assets | 3,912 | 1,287 |
| Total | 3,912 | 1,701 |
| TOTAL AMORTISATION, DEPRECIATION AND IMPAIRMENT LOSSES | 155,821 | 133,701 |
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) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Exchange rate gains | 55,467 | 43,145 |
| Interest income from employee's leaving entitlement and other personnel provisions | 795 | 795 |
| Interest income | 1,701 | 2,367 |
| Total interest income | 57,963 | 46,307 |
| Exchange rate losses | (61,669) | (44,741) |
| Interest expense from employees' leaving entitlement and other personnel provisions | (1,334) | (1,395) |
| Interest expense | (14,901) | (11,084) |
| Total interest expense | (77,904) | (57,220) |
| TOTAL NET INTEREST INCOME (EXPENSE) | (19,941) | (10,913) |
Interest expense includes the sum of €4,091 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) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Current taxes | 76,997 | 69,215 |
| Deferred tax (assets) and liabilities | (6,530) | (4,949) |
| Prior years' taxes and other tax payables | 13,414 | 3,371 |
| Total | 83,881 | 67,637 |
The following is a reconciliation of theoretical and actual tax burden:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Theoretical income taxes | 69,715 | 76,354 |
| Prior years' taxes and other differences | 17,320 | 5,191 |
| Tax incentive effects | (10,552) | (11,759) |
| DTL adjustment effect | 0 | (9,941) |
| Unallocated DTA effect | (659) | 2,720 |
| Current and deferred taxes (excluding IRAP) | 75,824 | 62,565 |
| Current and deferred IRAP | 8,057 | 5,072 |
| Total | 83,881 | 67,637 |
The Group's actual tax rate is 25.8%, compared with a theoretical tax rate of 23.9% (at 31 December 2017: actual tax rate was 20.2%; theoretical tax rate was 24.3%)
In 2017, Brembo S.p.A. was subject to a tax audit relating to direct taxes and VAT by the Italian Revenue Agency for the years 2012, 2013 and 2014.
Following this audit, on 19 December 2017 an assessment notice was served for the year 2012, setting out irregularities relating to the transfer prices applied to intra-group transactions towards foreign subsidiaries, all of which operating in countries with ordinary tax regimes with which agreements against double taxation are in force. The same irregularities are included in the allegations relating to 2013 and 2014.
While the company is confident that it was always compliant and in good faith, in view of the high level of subjectivity involved in determining transfer prices, as in all evaluation processes, and given the uncertainty inherent in a potential tax dispute and the timescales for completing the amicable procedures for eliminating double taxation under international treaties, has decided to reach a settlement for tax year 2012 and to accept the invitation to appear for the year 2013. The total charge for the Group, inclusive of provisions for subsequent years, but net of a partial positive unilateral adjustment for the same tax periods by the foreign tax authority concerned, was €15,631 thousand.
Basic earnings per share were €0.73 at 31 December 2018 (€0.81 at December 2017), 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 2018, amounting to 325,187,250 (2017: 325,187,250). Diluted earnings per share are identical to basic earnings per share inasmuch as no diluting transactions were undertaken.
Stezzano, 4 March 2019
On behalf of the Board of Directors Executive Deputy Chairman Matteo Tiraboschi
Absolute dedication and far-sightedness, know-how and intuition. Yet it would all be pointless and unrewarding without passion.
MotoGP Championship 2018
4 March 2019
Matteo Tiraboschi Andrea Pazzi
Executive Deputy Chairman Manager in Charge of the Company's Financial Reports
24 Hours of Le Mans brake system 2018 WEC
| of which with | of which with | |||||
|---|---|---|---|---|---|---|
| (euro) | Notes | 31.12.2018 | related parties | 31.12.2017 | related parties | Change |
| NON-CURRENT ASSETS | ||||||
| Property, plant, equipment and other equipment | 1 | 184,903,798 | 163,036,629 | 21,867,169 | ||
| Development costs | 2 | 66,030,656 | 57,010,631 | 9,020,025 | ||
| Other intangible assets | 2 | 21,490,612 | 17,106,794 | 4,383,818 | ||
| Shareholdings | 3 | 353,801,527 | 352,340,132 | 1,461,395 | ||
| Other financial assets (including investments in other | ||||||
| companies and derivatives) | 4 | 7,344,635 | 5,674,980 | 5,979,045 | 5,659,390 | 1,365,590 |
| Receivables and other non-current assets | 5 | 95,151 | 70,450 | 24,701 | ||
| Deferred tax assets | 6 | 15,722,119 | 16,524,930 | (802,811) | ||
| TOTAL NON-CURRENT ASSETS | 649,388,498 | 612,068,611 | 37,319,887 | |||
| CURRENT ASSETS | ||||||
| Inventories | 7 | 121,964,714 | 112,752,076 | 9,212,638 | ||
| Trade receivables | 8 | 220,923,957 | 99,336,716 | 178,616,933 | 65,725,277 | 42,307,024 |
| Other receivables and current assets | 9 | 26,875,368 | 10,328 | 38,664,172 | 3,046 | (11,788,804) |
| Current financial assets and derivatives | 10 | 40,395,848 | 40,331,293 | 14,566,561 | 14,502,005 | 25,829,287 |
| Cash and cash equivalents | 11 | 174,530,546 | 159,801,961 | 14,728,585 | ||
| TOTAL CURRENT ASSETS | 584,690,433 | 504,401,703 | 80,288,730 | |||
| TOTAL ASSETS | 1,234,078,931 | 1,116,470,314 | 117,608,617 |
| (euro) | Notes | 31.12.2018 | of which with related parties |
31.12.2017 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| EQUITY | ||||||
| Share capital | 12 | 34,727,914 | 34,727,914 | 0 | ||
| Other reserves | 12 | 130,320,422 | 130,320,422 | 0 | ||
| Retained earnings/(losses) | 12 | 243,111,799 | 165,083,650 | 78,028,149 | ||
| Net result | 12 | 114,106,469 | 149,484,042 | (35,377,573) | ||
| TOTAL EQUITY | 522,266,604 | 479,616,028 | 42,650,576 | |||
| NON-CURRENT LIABILITIES | ||||||
| Non-current payables to banks | 13 | 156,119,643 | 253,808,424 | (97,688,781) | ||
| Other non-current financial payables and derivatives | 13 | 262,691 | 776,303 | (513,612) | ||
| Other non-current liabilities | 14 | 0 | 15,350,744 | 5,914,669 | (15,350,744) | |
| Non-current provisions | 15 | 8,660,886 | 31,806,042 | (23,145,156) | ||
| Provisions for employee benefits | 16 | 18,673,520 | 221,073 | 19,663,803 | 47,267 | (990,283) |
| TOTAL NON-CURRENT LIABILITIES | 183,716,740 | 321,405,316 | (137,688,576) | |||
| CURRENT LIABILITIES | ||||||
| Current payables to banks | 13 | 103,095,976 | 46,007,831 | 57,088,145 | ||
| Other current financial payables and derivatives | 13 | 87,776,017 | 86,551,162 | 30,017,992 | 28,944,686 | 57,758,025 |
| Trade payables | 17 | 212,056,519 | 28,570,447 | 173,829,352 | 22,011,561 | 38,227,167 |
| Tax payables | 18 | 452,477 | 452,477 | |||
| Current provisions | 15 | 13,503,822 | 2,243,500 | 11,260,322 | ||
| Other current payables | 19 | 111,210,776 | 11,926,287 | 63,350,295 | 2,796,720 | 47,860,481 |
| TOTAL CURRENT LIABILITIES | 528,095,587 | 315,448,970 | 212,646,617 | |||
| TOTAL LIABILITIES | 711,812,327 | 636,854,286 | 74,958,041 | |||
| TOTAL EQUITY AND LIABILITIES | 1,234,078,931 | 1,116,470,314 | 117,608,617 |
| (euro) | Notes | 31.12.2018 | of which with related parties |
31.12.2017 | of which with related parties |
Change |
|---|---|---|---|---|---|---|
| Revenue from contracts with customers | 20 | 961,679,047 | 181,291,145 | 899,125,514 | 153,493,046 | 62,553,533 |
| Other revenues and income | 21 | 54,987,824 | 35,795,344 | 46,139,319 | 34,622,769 | 8,848,505 |
| Costs for capitalised internal works | 22 | 21,325,318 | 21,038,200 | 287,118 | ||
| Raw materials, consumables and goods | 23 | (417,933,987) | (107,045,020) | (407,224,279) | (100,610,649) | (10,709,708) |
| Other operating costs | 24 | (206,965,137) | (18,113,039) | (188,962,549) | (18,885,074) | (18,002,588) |
| Personnel expenses | 25 | (231,842,043) | (8,507,625) | (225,849,245) | (8,899,042) | (5,992,798) |
| GROSS OPERATING INCOME | 181,251,022 | 144,266,960 | 36,984,062 | |||
| Depreciation, amortisation and impairment losses | 26 | (46,720,080) | (39,141,379) | (7,578,701) | ||
| NET OPERATING INCOME | 134,530,942 | 105,125,581 | 29,405,361 | |||
| Interest income | 27 | 4,780,233 | 5,499,859 | (719,626) | ||
| Interest expense | 27 | (11,414,442) | (8,254,729) | (3,159,713) | ||
| Net interest income (expense) | 27 | (6,634,209) | 2,403,898 | (2,754,870) | 402,082 | (3,879,339) |
| Interest income (expense) from investments | 28 | 46,024,065 | 52,204,065 | 78,365,942 | 80,876,992 | (32,341,877) |
| RESULT BEFORE TAXES | 173,920,798 | 180,736,653 | (6,815,855) | |||
| Taxes | 29 | (59,814,329) | (31,252,611) | (28,561,718) | ||
| NET RESULT FOR THE YEAR | 114,106,469 | 149,484,042 | (35,377,573) |
| (euro) | 31.12.2018 | 31.12.2017 | Change |
|---|---|---|---|
| NET RESULT FOR THE YEAR | 114,106,469 | 149,484,042 | (35,377,573) |
| Other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year: |
|||
| Effect (actuarial income/loss) on defined benefit plans | 112,240 | 599,033 | (486,793) |
| Tax effect | (26,938) | (143,768) | 116,830 |
| Total other comprehensive income/(losses) that will not be subsequently reclassified to income/(loss) for the year |
85,302 | 455,265 | (369,963) |
| COMPREHENSIVE RESULT FOR THE YEAR | 114,191,771 | 149,939,307 | (35,747,536) |
| (euro) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR (*) | 148,138,167 | 7,133,046 |
| Result before taxes | 173,920,798 | 180,736,653 |
| Depreciation, amortisation/impairment losses | 46,720,080 | 39,141,379 |
| Capital gains/losses | (937,108) | 50,623 |
| Write-ups/Write-downs of shareholdings | 6,180,000 | 2,513,051 |
| Financial portion of provisions for payables for personnel | 335,520 | 308,355 |
| Other provisions net of utilisations | (8,191,897) | 14,697,294 |
| Cash flows generated by operating activities | 218,027,393 | 237,447,355 |
| Current taxes paid | (37,996,430) | (37,915,091) |
| Uses of long-term provisions for employee benefits | (1,213,563) | (1,120,991) |
| (Increase) reduction in current assets: | ||
| inventories | (6,862,665) | (8,617,293) |
| trade receivables and receivables from other Group companies | (42,224,391) | 6,306,406 |
| receivables from others and other assets | (1,371,332) | (5,601,806) |
| Increase (reduction) in current liabilities: | ||
| trade payables and payables to other Group companies | 38,227,167 | 14,423,370 |
| payables to others and other liabilities | 19,613,521 | 11,380,497 |
| Net cash flows from/(for) operating activities | 186,199,700 | 216,302,447 |
| (euro) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Investments in: | ||
| intangible assets | (32,741,144) | (30,633,697) |
| property, plant and equipment | (51,579,029) | (53,317,844) |
| financial assets (investments) | (8,991,395) | (24,624,304) |
| Price for disposal, or reimbursement value of fixed tangible and intangible assets | 2,789,290 | 442,213 |
| Price for disposal, or reimbursement value, of fixed assets | 0 | 5,651,314 |
| Net cash flows from/(for) investing activities | (90,522,278) | (102,482,318) |
| Dividends paid in the year | (71,541,195) | (65,037,450) |
| Loans to Group companies and amounts payable to companies participating in the centralised treasury system |
31,777,188 | 13,144,916 |
| Change in fair value valuation of derivatives | 814,397 | 556,312 |
| Loans and financing granted by banks and other financial institutions in the year | 91,741 | 155,844,560 |
| Repayment of long-term loans and other liabilities | (35,583,104) | (77,323,346) |
| Net cash flows from/(for) financing activities | (74,440,973) | 27,184,992 |
| Total cash flows | 21,236,449 | 141,005,121 |
| CASH AND CASH EQUIVALENTS AT END OF YEAR (*) | 169,374,616 | 148,138,167 |
(*) 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 2017 | 34,727,914 | 144,219,115 | (13,475,897) | 90,850,383 | 138,392,655 | 394,714,170 |
| Allocation of profit for the previous year | 73,355,205 | (73,355,205) | 0 | |||
| Payment of dividends | (65,037,450) | (65,037,450) | ||||
| Reclassification (*) | (422,796) | 422,796 | 0 | |||
| Rounding | 1 | 1 | ||||
| Components of comprehensive income: | ||||||
| Effect of actuarial income/(loss) on defined benefit plans |
455,265 | 455,265 | ||||
| Net result for the year | 149,484,042 | 149,484,042 | ||||
| Balance at 1 January 2018 | 34,727,914 | 143,796,319 | (13,475,897) | 165,083,650 | 149,484,042 | 479,616,028 |
| Allocation of profit for the previous year | 77,942,847 | (77,942,847) | 0 | |||
| Payment of dividends | (71,541,195) | (71,541,195) | ||||
| Components of comprehensive income: | ||||||
| Effect of actuarial income/(loss) on defined benefit plans |
85,302 | 85,302 | ||||
| Net result for the year | 114,106,469 | 114,106,469 | ||||
| Balance at 31 December 2018 | 34,727,914 | 143,796,319 | (13,475,897) | 243,111,799 | 114,106,469 | 522,266,604 |
(*) A portion of the restricted reserve Re. Article 6, paragraph 2, of Legislative Decree No. 38/2005 was reclassified under retained earnings, since it is no longer subject to non-distributability.
Words play with emotions and nuances. Yet cold, objective numbers only speak the truth. They tell the story of our growth.
Formula E Championship 2018-2019
In this Report, drafted pursuant to Article 153 of Legislative Decree No. 58 of 24 February 1998 (the Consolidated Law on Finance or "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 2018 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 recommended by the Italian National Board of Certified Accountants and Auditors (CNDCEC).
Firstly, we would like to recall that the Board of Statutory Auditors appointed on 20 April 2017 by the General Shareholders' Meeting of Brembo S.p.A. (hereinafter "Brembo") and in office for the three-year period 2017-2019, i.e., until the General Shareholders' Meeting called to approve the Financial Statements for the year ending 31 December 2019, 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 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 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 functioning), it is acknowledged that the Board of Statutory Auditors has delivered the Board of Directors its first specific report of this nature (which will be continue to be provided with annual frequency). Until now, in accordance with applicable
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 0.523 % of the share capital, overall).
legislation, the Board of Statutory Auditors' analyses of this kind were limited to 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 2018 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 extended its focus to the following elements of self-assessment: the ongoing professional development of its members, the conduct of meetings, participation frequency, duration and methods, time available, 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 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 governance committees formed in accordance with the Borsa Italiana Corporate Governance Code, fully adopted by Brembo (the Control, 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. 231/2001.
The Board of Statutory Auditors:
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:
The Board of Statutory Auditors and the Audit, Risks & Sustainability Committee and the Supervisory Committee also constantly and promptly exchanged information material to the performance of their respective tasks.
2 On 5 March 2018, the Board of Directors appointed Andrea Pazzi, already holding the position of Chief Administration and Finance Officer of Brembo S.p.A., Brembo's Manager in charge of the Company's financial reports, with effect for the purposes of the certification required in respect of the Company's separate and consolidated financial statements for the year ended 31 December 2017 and until the end of the current Board of Directors' term of office.
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.
in line with application practice. At the same time, the "threshold" for determining Low Value transactions was confirmed (€250,000.-) and the Significance Indices for the identification of Highly Significant Related Party Transactions based on the figures of the 2017 Consolidated Financial Statements approved by the General Shareholders' Meeting of 20 April 2018 were updated.
to which such regulations apply are the subsidiaries indicated by Brembo as being significant for the control system and financial reporting purposes.
The Board of Statutory Auditors was also informed of the main environmental, social and governance risk factors for 2018, identified on the basis of the update of the analysis conducted in 2017, in collaboration with a major consultancy firm, using evaluation criteria consistent with the Group's ERM model.
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-bis, paragraph 4, of TUF are consistent with the Company's Separate Financial Statements and Consolidated Financial Statements for the year ended 31 December 2018. On that same date, the Independent Auditors also provided the Company's Board of Statutory Auditors with the additional report required by Article 11 of Regulation (EU) No 537/2014 pursuant to Article 19 of
Legislative Decree No. 39/2010. As stated in the opinion on the Financial Statements, this report addresses certain matters, without contradicting the opinions in question. It bears mentioning here that, in addition to the significant matters identified as "key aspects of the audit" in the aforementioned reports on the Separate and Consolidated Financial Statements, in this report the Independent Auditors emphasise other significant, but not material risks, such as those relating to taxes, transfer pricing and the issue of revenue recognition. The report does not identify material deficiencies in the internal control system applicable to the financial reporting process of which the heads of governance activities need to be informed.
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.
A table summarising the tasks assigned to EY S.p.A. is set out below:
| (euro thousand) | 31.12.2018 | 31.12.2017 |
|---|---|---|
| Independent Auditors' fees for the provision of audit services: | ||
| – to the Parent Brembo S.p.A. | 240 | 225 |
| – to the subsidiaries (services provided by the network) | 401 | 414 |
| Independent Auditors' fees for the provision of auditing services for issuing attestation: |
||
| – to the Parent Brembo S.p.A. | 56 | 56 |
| – to the subsidiaries (services provided by the network) | 5 | 0 |
| Fees of entities belonging to the Independent Auditors' network for the provision of services: |
||
| — other services rendered to subsidiaries | 5 | 6 |
The Board of Statutory Auditors deemed the fees for such 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.
Having acknowledged the Financial Statements for the year ended 31 December 2018, 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' draft resolution 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.
Milan, 18 March 2019
Raffaella Pagani (Chairwoman)
Alfredo Malguzzi (Acting Auditor))
Mario Tagliaferri (Acting Auditor))
Our successes reinforce awareness of our resources and abilities. Looking towards the future is a pleasure.
Formula E Championship 2018-2019
4 March 2019
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: Poliedro Studio srl (Telgate, Bergamo) Typeset: Secograf (S. Giuliano Mil.) Translation: Koinè (Trieste)
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