Brembo S.p.A. Business Report FY2008

Business Highlights

Financial Overview (in million euros)
FY2008 FY2007 Rate of change
Overall Sales 1,060.8 919.9



-The Company recorded strong growth in the first half of 2008 as a result of acquisitions as well as an expansion of its existing business. During the second half of the year and especially in the fourth quarter, the consequences of the international financial crisis that began in the summer 2007 impacted the Group's markets of operation, resulting in a significant decrease in the demand for car and commercial vehicle applications. Most automotive manufacturers planned long periods of idleness around the Christmas holidays. The Company decided to deal with the difficult economic situation by adopting extraordinary measures aimed at adjusting production levels to meet demand. These measures included reducing staff at the Group's facilities in Italy and its companies abroad. In Italy, the Company also drew on the ordinary redundancy fund.

Car Application Segment
-The Company recorded sales of car application of 660,806 thousand Euros in 2008, representing 61.8% of total consolidated gross revenues, up 15.9% on 2007. As for the primary markets in which the Company operates within this segment, sales dropped sharply in Spain (-28.1%), the United Kingdom (-11.3%) and Italy (-13.5%). Sales in Germany and France, which had continued to grow in the first few months of the year, notwithstanding the decrease registered in the last quarter, are stable. Eastern Europe recorded a combined increase of approximately 8% during the year. The US market continued its downward trend in 2008, falling 18%. The Japanese market also decreased 4.4%. The markets of Brazil and Argentina ended the year with total year-on-year growth of 14.2%, although they showed their first signs of weakness in the wake of the crisis affecting mature markets in the fourth quarter of 2008.

Commercial and Light Commercial Vehicle Applications segment
-In 2008, gross sales of commercial and industrial vehicle applications amounted to 177,772 thousand Euros, up 8.3% compared to 2007. As for the major markets in which the Company operates within this segment, sales decreased significantly in Spain (-29.4%) and slightly in Italy (-3.7%). The German market remained stable compared to 2007, while France and the UK grew (+9.6% and 13.1%, respectively).

-Under the agreement announced on Feb. 4, 2008, Brembo China purchases from Nanjing Automobile (Group) Corp. (NAC) a 42.25% stake in Nanjing Yuejin Automotive Brake System Co. Ltd. (NYABS), at a price of approximately USD 5.9 million. NYABS is a JV Company between Brembo S.p.A. and NAC. NYABS plant (23,000 m2) is located in Nanjing and employs 270 people. (From a press release on Feb. 4, 2008)

-The Company signed an agreement with Daimler for acquiring 50% of Brembo Ceramic Brake Systems S.p.A (BCBS), until now a 50-50 joint venture. The agreed upon price is equal to 9 million Euros. BCBS manufactures carbon ceramic brake disks for Ferrari, Mercedes-Mc Laren, Aston Martin and Corvette, and should close the current year with sales of about 27 million Euros. The Company has also approved new investments for over 10 million Euros in order to double its production capacity. (From a press release on Sep. 23, 2008)


R&D Expenditure
-A total of 9% of the Company's staff works in R&D, and over 5% of the Company's turnover is invested in this sector of activity.

R&D Structure
-The Company's R&D center was transferred to the Science and Technology Park "Kilometro Rosso" in Stezzano (Bergamo). In the end of December 2006, the new Brembo R&D Center was already operational, and involved both mechatronics and sensortronic sciences. The R&D Centre also houses the laboratories of Brembo Ceramic Brake Systems, a joint-venture set up between Brembo and Daimler for the development and manufacture of ceramic brake discs, installed on the most exclusive sports car models.

R&D Topics in FY2008
-In the disc area, research and development activities are assigned to the Disc Technology Unit, which belongs to the Brake Disc Division and is currently managing various strategic projects. Five of these are application development projects, each of which is for a different European or US car manufacturer. The projects involve a new disc concept ("co-cast" disc) developed by the Company that went into standard production in 2007 for a first Italian customer. The new type of disc combines the Company's expertise in cast-iron and cast aluminum to obtain a product that has high braking performance (thanks to the cast-iron braking surface) and is lightweight (thanks to the introduction of the aluminum hat). To constantly improve comfort, research on the parameters that influence the acoustic performance of brake discs, and, in particular, the search for new alloys capable or reducing or eliminating the "whistling" effect, continues.

-In the systems area, development work on the mechatronic projects involving electric parking brake systems continued according to plan. The projects relate to electromechanical braking systems with an electric button control managed by a control unit that converts the driver's request into a braking force applied to the brakes. The research projects were presented to various customers during 2008, and a separate development project was started for a customer who was particularly interested in this type of application for commercial vehicles. However, the above-mentioned first application project was held back at the end of 2008, as declining commercial vehicle sales forced the customer to revise its product development plans. As regards the parking brake system proposed for cars, no separate project has been initiated at present. Customers have, however, expressed interest in the proposal and, judging by the contacts made thus far, it is likely that requests to develop the system will be received in 2009. Both projects are being implemented with the collaboration of "non-traditional" development partners, and, in the coming years, will result in an evolution of the R&D structure.

Investment Activities

-The Company invested mainly for increasing its production capacity to meet rising demand, especially in the car sector. In addition to the investments in plant, the Curno (Bergamo) facility was expanded for an expenditure of approximately 3,021 thousand Euros. The subsidiaries Brembo Spolka Zo.o. and Brembo Poland Spolka Zo.o. made further significant investments aiming at increasing production capacity for the total amount of 3,379 thousand Euros and 7,012 thousand Euros, respectively, in addition to the investment of 4,339 thousand Euros by Brembo do Brasil Ltda.