19/03/2018

Fras-le experiences largest expansion of its history in 2017

For Fras-le, 2017 was a year marked by growth, expansion and consolidation of its presence in various markets. "We faced the crisis with modern management systems and believed in the power of sharing to grow," said Sérgio Carvalho, CEO of Fras-le, which experienced its largest expansion in the international market in its 60-year history. He is referring to the acquisitions involving three companies from Argentina and Uruguay: Armetal, Farloc and Fanacif. In India, ASK Fras-le Friction was created to supply the markets of India, Bangladesh, Nepal and Sri Lanka, in addition to exports to other countries. The unit in China was doubled in size and a sales office and distribution center were set up in Colombia. 
 
Expansion also occurred in Brazil ,where Fras-le formalized a partnership with the American multinational firm Federal Mogul, which resulted in Jurid do Brasil, in Sorocaba (SP), for manufacturing and distributing Premium brake products to manufacturers of vehicles with original equipment and after-sales customers in light vehicle markets in Brazil and all of South America. The impact of these initiatives should be reflected more fully in this year’s performance.
 
In 2017, the volume of consolidated sales of friction materials grew 9.4% in relation to 2016, through the sale of 86.9 million units, mainly brake linings and pads for commercial vehicles, as well as brake shoe references. In the brake-related product groups, the portfolio of hydraulic cylinders and other products excelled, with 40% growth in 2017, compared to last year. As a result, consolidated net income totaled BRL 832.8 million, corresponding to an increase of 2.5% over performance in 2016 (BRL 812.7 million). It would have been higher had it not been for currency exchange-related factors and the economic situation in some of the countries where the Company operates. 
 
Exports from Brazil totaled USD 74.2 million in 2017, which represented a 6.8% drop year-on-year. NAFTA, on the whole, was able to recover its performance in 2017, which reflects important measures taken in the U.S. market, mainly the winning of new commercial partners and the evolution in sales in Mexico. Sales to Argentina improved in the last months of the year, but for certain countries in South America and for the European and African continents, they were lower. 
 
Sales revenue in the foreign market totaled USD 129.5 million, corresponding to an increase of 2.1% over 2016, reflecting higher volumes of sales in the units from the United States and China, in addition to part of the sales from the companies recently acquired in Argentina and Uruguay. Of the total sales revenue from the foreign market in 2017, USD 55.3 million (after eliminating intercompany sales) was from controlled units.
  
Net profit in 2017, harmed by the effects of a lower average exchange rate for exports and due to hedge accounting, dropped 6.4% compared to the previous year, totaling BRL 217.2 million, whereas the gross margin for 2017 was 26.1%, equivalent to a decrease of 2.4 percentage points in relation to 2016. 
 
Consolidated EBITDA, which was BRL 106.4 million in 2017, fell 14% year-on-year. The EBITDA margin was 12.8% in the year, representing a reduction of 2.4 percentage points compared to 2016. Besides the impact of hedge accounting and the exchange rate, it should be emphasized that EBITDA in 2017 reflects impairment expenses which occurred in the Fras-le subsidiary in the Unites States, in addition to expenses related to the acquisitions and new businesses.
 
"The cycle of acquisitions and new partnerships is not over. The goal is to continue along the path of global expansion and increasing the product portfolio without losing focus on the business," announces Sérgio Carvalho.
 
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