Brembo open to new investment in Chinese joint venture as first-half profit beats forecast

MILAN: Brembo may consider expanding its investment in a recently announced joint venture in China with Gold Phoenix, its executive chairman told Reuters after the Italian brake maker reported a 13% rise in core profits in first semester.

Brembo announced this week and Gold Phoenix had agreed to form a 50/50 joint venture to build Brembo’s first full-scale factory in China dedicated entirely to the production of pads for the aftermarket, with an overall investment of approximately 35 million euros over the next three years.

Brembo’s Matteo Tiraboschi said the market was “potentially huge”.

“We may decide to invest more than what we have announced, and this JV may experience an acceleration compared to what we had initially imagined.”

In the first half of the year, Brembo’s earnings before interest, tax, depreciation and amortization (EBITDA) reached 305 million euros, helped by a 28% increase in sales and strong performances in all sectors.

Sales and EBITDA exceeded analyst consensus provided by Intesa Sanpaolo.

The company’s shares rose 6.6% after the earnings release and were up 3% at 1505 GMT.

However, the EBITDA margin slightly weakened to 17.5% from 19.9%, due to higher raw material costs.

“We are recovering some of the higher costs of raw materials, energy and logistics, which have increased enormously since the start of the year,” Tiraboschi said. “But they’re still going up, so we’re kind of behind.”

The company said its backlog remained strong and it expects a second half in line with the first half in terms of revenue and margins, barring extraordinary changes in the geopolitical situation, exchange rates and costs.

This means an annual target of around 3.5 billion euros in revenue and 600 million euros in EBITDA, Tiraboschi said.