BREMBO ANNUAL REPORT 2015 Designing Designing future our We give shape and meaning to our products guided by design and continuous innovation. Because beauty comes from within, when the right materials and suitable forms are used. Indeed, the carbon ceramic braking system for road vehicles earned Brembo the Golden Compass Award, the oldest but above all the most prestigious design prize worldwide. Italian creativity is recognised throughout the world for its high qualitative content, attention to detail and, last but not least, the beauty of the products it generates. So it is only natural that Brembo, an Italian company, was the first in its industry to also believe in the importance of brake system aesthetics. After years of commitment and passion spent reconciling performance and design in its products, an important acknowledgment also arrived from the United States: at last year’s American SEMA Show, the Brembo B-M8 caliper received the Best Engineered New Product Award, won due to its innovative features in engineering, technology and and design. BREMBO ANNUAL REPORT 2015 If it weren’t a brake it would be a sculpture worthy of any museum of modern art Illustration inspired by Victor Vasarely, Op Art. If it weren’t a brake it would be a sculpture worthy of any museum of modern art Reason of the Italian Association for the Industrial Design (ADI) when awarding the Golden Compass Award for the brake system, caliper and carbon ceramic brake disc. CALLING OF THE ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETINGS The Shareholders are convened to the Ordinary and Extraordinary Shareholders’ Meetings to be held at the Company offices at Viale Europa 2, 24040 Stezzano (Bergamo) on21 April 2016 at 10:30a.m. CET (first call) or, if necessary, on 22 April 2016, at the same place and time (second call), to resolve on the following AGENDA Ordinary Meeting 1. Presentation of the Financial Statements of Brembo S.p.A. for the year ended 31 December 2015, with the Directors’ Report on Operations, the Statutory Auditors’ Report, the Independent Auditors’ Report and the Attestation of the Manager in Charge of the Company’s Financial Reports. Ensuing resolutions. 2. Proposal for distribution of net income for the year. Ensuing resolutions. 3. Presentation of the Consolidated Financial Statements of the Brembo Group for the year ended 31 December 2015, with the Directors’ Report on Operations, the Statutory Auditors’ Report, the Independent Auditors’ Report and the Attestation of the Manager in Charge of Company’s Financial Reports. 4. Authorisation for the buy-back and disposal of own shares. Ensuing resolutions. 5. Presentation of the Remuneration Report of Brembo S.p.A. Resolutions pursuant to Article 123-ter of TUF. Extraordinary Meeting 1. Proposed amendments to the By-laws, with reference to Articles 4 (Purpose), 5 (Share capital), 10 (Calling), 10-bis (Addition of items to the agenda), 11 (Participation in and representation at General Shareholders’ Meetings), 13 (Quora and resolutions of the General Shareholders’ Meeting), 15 (Composition of the Board of Directors), 15-bis (Appointment of the members of the Board of Directors), 18 (Board meetings), 22 (Composition and appointment of the Board of Statutory Auditors) and addition of the new article 10-ter (Right to pose questions prior to the General Shareholders’ Meeting). Ensuing resolutions. Stezzano, 18 March 2016 On behalf of the Board of Directors The Chairman Alberto Bombassei 5 BREMBO ANNUAL REPORT 2015 CONTENTS LETTER FROM THE CHAIRMAN 8 Company Officers 10 Summary of Group Results 12 DIRECTORS’ REPORT ON OPERATIONS 15 Brembo and the Market 16 Sales Breakdown by Geographical Area and Application 22 Brembo’s Consolidated Results 24 Group Structure 30 Brembo Worldwide 32 Performance of Brembo Companies 34 Research and Development 40 Investments 45 Risk Management Policy 46 Human Resources and Organisation 54 Environment, Safety and Health 56 Related Party Transactions 58 Further Information 59 Significant Events After 31 December 2015 62 Foreseeable Evolution 62 Corporate Governance and Ownership Structure Report 64 Information About the Brembo S.p.A. Dividend Proposal 65 BREMBO S.P.A. STOCK PERFORMANCE 68 PALMARES 2015 71 6 CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2015 80 Consolidated Financial Statements at 31 December 2015 82 Explanatory Notes to the Consolidated Financial Statements at 31 December 2015 92 Statutory Auditors’ Report 154 Independent Auditors’ Report Pursuant to Articles 14 and 16 of Legislative Decree No. 39 of 27 January 2010 158 Attestation of the Consolidated Financial Statements Pursuant to Article 154-bis of Legislative Decree No. 58/98 160 SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2015 163 Separate Financial Statements of Brembo S.p.A. at 31 December 2015 164 Statutory Auditors’ Report 172 Attestation of the Separate Financial Statements Pursuant to Article 154-bis of Legislative Decree No. 58/98 180 7 BREMBO ANNUAL REPORT 2015 LETTER FROM THE CHAIRMAN Shareholders, a keen investment strategy in recent years, Italy finally started to emerge from recession in 2015, although establishing itself as a global player able to the signs of recovery, after the years of crisis following the collapse operate on worldwide markets. Today, the of Lehman Brothers in 2007, are still tentative, not just for the this Group employs nearly 10,000 people, including country, but for the world’s entire economic system. During the year, some hundreds new recruits, of whom 270 in emerging countries, and particularly Brazil, continued to slowdown, and Italy, and currently operates in 15 countries the Russian economy significantly weakened. Similarly, China, which on 3 continents through its manufacturing remains the country that mostly influences the world development, was and commercial sites. Apart from Italy, affected by the crisis: despite still experiencing, together with India, manufacturing plants are located in Germany, far higher growth rates than the western economies, the country is Poland, the United Kingdom, the Czech showing a slow but steady slowdown. By contrast, the United States Republic, the United States, Mexico, Brazil, confirmed that it has entered a phase of stable, albeit modest, growth, Argentina, China and India. An additional €154 whilst the euro countries, including Germany, have not yet rediscovered million was invested in 2015 alone, of which the necessary momentum for a genuine recovery able to free Europe more than €40 million in Italy, which continues from the quagmire in which it finds itself. to be one of the countries in which Brembo The car market, which generates three quarters of Brembo’s turnover, invests most in research and development recorded a 2% increase at global level, almost half the previous year’s and to maintain technologically cutting-edge figure but still positive, thanks primarily to China, Western Europe and plants. The remaining amount was invested the United States. The Chinese market confirmed itself as the world’s primarily in Central-North America, China, top car market, even though growth was more moderate (+5.3%) Poland and the Czech Republic. than in recent years. Western Europe consolidated the change of In North America, works are nearing com- direction started in 2014 and almost doubled the growth rate (+9%), pletion on the building of a cast-iron foundry with particularly high peaks in Italy and Spain, and with Germany in first in Michigan, close to the new Homer facilities, place in terms of sales volumes. Eastern European countries — apart which will begin operations in the first months from Russia, which fell by almost 36% — again reported double-digit of 2016, thus allowing Brembo to start a growth (+12.1%), though lower than in 2014. A positive trend continued vertical integration process of its production in the United States (+5.8%) whilst, with reference to the Company’s key capacity in the United States as well. In Mexico, markets, Brazil, Argentina and Japan reported a sharp decline. a new foundry and plant for aluminium caliper For Brembo 2015 was another highly positive year, confirming the processing and assembly were inaugurated in Group’s ability to continue on its path of growth and value creation, October 2015, to supply original equipment to albeit in a still turbolent world economic context. In the year, revenues — the major European, Asian and Central-North which have more than doubled in five years — exceeded €2,073 million, American manufacturers. up by 15% compared to 2014. Gross operating profit reached nearly In Eastern Europe, investments aimed at €360 million, increasing by 28.6%, whereas net profit was €184 million, increasing production capacity are still under- up by 42.5% compared to the previous year. At year-end, net debt way in the integrated industrial hubs in Dab- amounted to €160.7 million, improving by €109.7 million compared to rowa Górnicza (Poland) and Ostrava-Hrabová 31 December 2014. These figures show, amongst other things, how (Czech Republic), devoted respectively to Group profitability has grown significantly more than turnover. This the casting and processing of brake discs testifies to Brembo’s effective optimisation of its production processes. for cars and commercial vehicles, and the Contributing to these results are both the Italian and European casting, processing and assembly of brake business components and those in other key geographical areas, calipers and other aluminium components. such as the United States and China, where Brembo has developed A new investment plan was also launched 8 at the same time that will be developed from 2014 to 2017, for a total expenditure of approximately €34 million, aimed at starting up a new plant in Niepolomice (Poland) specialising in the processing of steel disc hats to be assembled onto the light discs manufactured at the Group’s plants located in Poland, China and the United States. In China, where Brembo has been successfully operating for many years through its own plants, an agreement was signed in September 2015 to acquire a majority stake in Asimco Meilian Braking System Co.