ANNUAL 2020 FINANCIAL REPORT 2020 ANNUAL FINANCIAL REPORT ANNUAL brembo.com brembo.com 4 ANNUAL FINANCIAL REPORT 2020 brembo.com 4 RELAZIONE FINANZIARIA ANNUALE 2020 This is a virtuous circle that unites humankind and nature Humankind with technology and the digital world. The path we have and technology chosen to help build a sustainable future. in total synergy 2 RELAZIONERELAZIONEANNUAL FINANZIARIA FINANZIARIA FINANCIAL ANNUALE ANNUALE REPORT 2020 2020 2020 This is a virtuous circle that unites humankind and nature Humankind with technology and the digital world. The path we have and technology chosen to help build a sustainable future. in total synergy 2 3 4 ANNUAL FINANCIAL REPORT 2020 Calling of the General Shareholders’ Meeting Calling of the General Shareholders’ Meeting The Shareholders are convened to the Ordinary and Extraordinary Shareholders’ Meeting to be held at the Company offices at Viale Europa 4 (Entry Gate 1), 24040 Stezzano (Bergamo) on22 April 2021 at 10:30a.m. (in single calling), to resolve on the following Agenda Ordinary Session 1. Presentation of the Financial Statements of Brembo S.p.A. 6.1 examination of Section I, drawn up pursuant to Article for the year ended 31 December 2020, with the Directors’ 123-ter, paragraph 3, of Legislative Decree No. 58 of Report on Operations, the Statutory Auditors’ Report, the 24 February 1998 (i.e., Remuneration policy for 2021). Independent Auditors’ Report and the Attestation of the Resolutions pursuant to Article 123-ter, paragraphs Manager in charge of the Company’s Financial Reports. 3-bis and 3-ter, of Legislative Decree No. 58 of 24 Relevant and ensuing resolutions. February 1998; 2. Allocation of profit for the year. Relevant and ensuing 6.2 examination of Section II, drawn up pursuant to Article resolutions. 123-ter, paragraph 4, of Legislative Decree No. 58 of 3. Presentation of the Consolidated Financial Statements of 24 February 1998 (i.e., remuneration paid in 2020). the Brembo Group for the year ended 31 December 2020, Resolutions pursuant to Article 123-ter, paragraph 6, with the Directors’ Report on Operations, the Statutory of Legislative Decree No. 58 of 24 February 1998. Auditors’ Report, the Independent Auditors’ Report and 7. Engagement of the independent auditing firm for the the Attestation of the Manager in charge of Company’s period 2022–2030 and determination of the associated Financial Reports. fees. Relevant and ensuing resolutions. 4. Presentation of the Consolidated Disclosure of Non- Financial Information of the Brembo Group for the year Extraordinary Session ended 31 December 2020, pursuant to Legislative Decree 1. Amendments to Articles 1 and 4 of Brembo S.p.A’s By-laws: No. 254 of 30 December 2016. 1.1 amendments to the purpose (Article 4); 5. Authorisation for the buy-back and disposal of own shares. 1.2 amendment to the company name (Article 1). Relevant and ensuing resolutions. Relevant and ensuing resolutions. 6. Report on the Remuneration Policy for 2021 and Remuneration Paid in 2020: Stezzano, 4 March 2021 On behalf of the Board of Directors The Chairman Alberto Bombassei In light of the continuation of the state of health emergency, in compliance with Article 106, paragraph 4, of Legislative Decree No. 18/2020 (converted into Law No. 27/2020 ), extended by Legislative Decree No. 183/2020), the so called “Decreto Milleproroghe” (converted into law No. 21/2021), shareholders’ attendance will take place solely through a proxy to the designated representative pursuant to Article 135-undecies of the TUF, i.e., Computershare S.p.A. Accordingly, individual shareholders will not allowed to attend in physical presence. The information in this notice may be updated, changed or supplemented in view of the current emergency situation relating to the Covid-19 epidemic and related measures adopted by the competent authorities from time to time. Any and all updates, changes or additions to the information in this notice will be promptly circulated according to the same means used to publish this notice. 5 Contents Letter from the Chairman 8 Brembo Purpose 10 Company Officers 12 Summary of Group Results 14 1. Directors’ Report on Operations 18 Brembo and the Market 18 Sales Breakdown by Geographical Area and Application 24 Brembo’s Consolidated Results 26 Group Structure 32 Brembo Worldwide 34 Performance of Brembo Companies 36 Investments 42 Research and Development 44 Risk Management Policy 50 Human Resources and Organisation 60 Environment, Safety and Health 62 Related Party Transactions 64 Further Information 65 Significant Events After 31 December 2020 69 Foreseeable Evolution 69 Corporate Governance and Ownership Structure Report 70 Consolidated Disclosure of Non-Financial Information (NFI) 70 Information About the Brembo S.p.A. Dividend Proposal 71 Brembo S.p.A. Stock Performance 72 6 ANNUAL FINANCIAL REPORT 2020 Contents 2. Palmares 2020 76 3. Consolidated Financial Statements 2020 84 Consolidated Financial Statements at 31 December 2020 84 Explanatory Notes to the Consolidated Financial Statements at 31 December 2020 92 Independent Auditors’ Report 158 Attestation of the Manager in Charge of the Company’s Financial Reports 163 4. Separate Financial Statements 2020 166 Financial Statements of Brembo S.p.A. at 31 December 2020 166 Statutory Auditors’ Report 178 Attestation of the Manager in Charge of the Company’s Financial Reports 192 7 Letter from the Chairman Letter from the Chairman Dear Shareholders, like-for-like exchange rate basis), whereas North America (USA, Canada and Mexico) rose by 3.5% (+9.8% on a We are living through an historic time that has placed severe like-for-like exchange rate basis). strain on every sector of the economy and industry. The climate of extreme uncertainty has faced us with new With regard to the market segments in which the Group challenges for our motivation, passion and willpower to operates, in the fourth quarter of 2020 car applications prevail. increased by 2.6%, motorbike applications by 6.4%, applications for commercial vehicles by 15.9% and racing Brembo’s solidity, organisation and ability to manage applications by 8.1%. sudden, unexpected changes came even more clearly to the fore in 2020. These results were made possible by the work done by all the Brembo Group’s personnel, who at 31 December We can be therefore rightly proud of the results that the 2020 numbered 11,039, up by 171 on the previous year. Company succeeded in obtaining during the year just ended, in which we felt the responsibility for swift, incisive I would like to highlight that, at such a critical time for action designed to safeguard the Group’s profitability even the industry and the entire world, Brembo decided to more acutely. formulate a new strategic vision and a new mission: becoming a Solution Provider, an objective that aims Careful, effective management of the Company allowed at increasingly close integration between products and Brembo to contain the negative impact of the pandemic services, in order to support our customers in rising to the and maintain its competitive positioning. challenges and grasping the opportunities presented by In 2020, Brembo Group’s net consolidated revenues a rapidly transforming automotive industry. amounted to €2,208.6 million, down by 14.8% compared In this new strategic vision, the sustainability of our products to the previous year, or by 13.3% on a like-for-like exchange and processes remains central, as outlined in further detail in rate basis. EBITDA for 2020 totalled €388.7 million (17.6% our Consolidated Disclosure of Non-Financial Information. of revenues), compared to €512.2 million for 2019 (19.9% Our desire to respond to the new mobility paradigm of revenues). EBIT was €181.1 million (8.2% of revenues), is leading us to design and manufacture increasingly after depreciation, amortisation and impairment losses of high-performance brake systems that also contribute €207.6 million. to reducing CO2 and fine particle emissions. This is the Our performance in the fourth quarter of 2020 was lens through which to view our acquisition of the Danish particularly encouraging. At the geographical level, most firm SBS Friction, which develops and manufactures of the markets in which we operate showed considerable brake pads for motorbikes using innovative, and eco- growth. Sales grew by 7.9% in Italy, 0.9% in Germany, and friendly sintered and organic materials. These are also the 1.3% in France, whereas the United Kingdom showed a principles that in the year just ended resulted in the launch 5.1% decline. As far as non-EU countries are concerned, of the Greentive® disc and Enesys® technology, solutions India rose by 22.1% (+34.0% on a like-for-like exchange that facilitate a decrease in consumption, increasing rate basis), China grew by 19.4% (+21.3% on a like-for-like general vehicle efficiency. In an automotive industry exchange rate basis), whereas Japan declined by -22.1% increasingly focused on electrification, development of the (-21.3% on a like-for-like exchange rate basis). South Brake-By-Wire electric brake also continues, representing America decreased by 21.1% (while growing 9.2% on a a true revolution for road vehicles, electric and otherwise. 8 ANNUAL FINANCIAL REPORT 2020 Letter from the Chairman In 2020 we reached a milestone we are also proud of: 500 wins in various races in over 45 years of participating in Motorsports, with 42 global titles bestowed on our drivers, builders and teams. These results prove the close ties between road and racing vehicles, between innovation and competitive success, which have always been part of Brembo’s DNA. In addition, there has been no shortage of important recognition of our work, which drives us to continue to pursue our goals and improve continuously.