The year of 2019 ended with positive numbers for Fras-le. Even in the midst of the challenging scenario, mainly due to Argentina's prolonged recession and the trade dispute between the United States and China, the company recorded total gross revenue of R$ 2,009.1 billion, an increase of 19.5% compared to 2018. In line with this growth, net revenue is 19.7% higher than the previous year, totaling R$ 1,365.5 billion. In the same period, the company posted gross profit of R$ 349.7 million; a growth of 15.2% compared to 2018 and reached EBITDA of R$ 175.2 million.
Fras-le's positive performance was boosted by strength in sales, as even with the challenges presented at the beginning of the year, the company partially recovered the gap and sales volumes ended the period performing better compared to 2018. In addition, the company carried out actions to reduce working capital, which contributed to strengthen the company's cash flow and to adjust the indicators to the regular course of the business. The period was also consolidated by the company Fremax, acquired by Fras-le in October 2018, which went through a successful integration process, generating positive results throughout 2019.
According to the CEO of Fras-le, Sergio Carvalho, 2019 was one of the most challenging years in the company's trajectory, which had to face the economic difficulties of Argentina, the second largest market in South America for the company; the income impact of the United States and China trade war; in addition to the highly competitive global environment. "To go through this scenario, we were extremely fast and strategic. We invested in innovation, expanded our portfolio and reinvented ourselves to be ahead of market and world changes. We can say today that Fras-le is prepared for its sustainable growth", points out Carvalho.
The proof was the announcement of the largest M&A (Mergers and Acquisitions) movement in the company's history in December 2019, with the acquisition of Nakata, a company that manufactures and commercializes components for the vehicle replacement market. "This movement reinforces our positioning among the main suppliers of the independent replacement market in Brazil," Carvalho said. The transaction awaits approval by the Extraordinary General Meeting of Shareholders of Fras-le, the Administrative Council of Economic Defense (Cade), as well as by the other competition defense bodies in other jurisdictions.
Regarding the results presented by the company in the fourth quarter of 2019, total gross revenue, without eliminations, was R$ 564.4 million, 12.3% higher than the same period in 2018. Net revenue reached R$ 370.8 million, 5.6% higher than the fourth quarter of 2018, and gross profit recorded R$ 103.1 million, 16.7% higher than the same period in 2018. Ebitda increased 91.3% compared to the fourth quarter of 2018, recording R$ 61.1 million, part of which was contemplated by non-recurring effects. Both in the annual and quarterly sum, the net result was affected by accounting adjustments in Argentina, exchange variation and other metrics of equity equivalents of the company's subsidiaries, mostly with no cash flow effect.
Exports from Brazil accounted for US$ 89.3 million in 2019, representing an increase of 5.9% compared to 2018. Total foreign market revenue, which corresponds to exports from Brazil, added to what foreign operations sell, reached US$ 174.9 million in 2019, recording an increase of 7.3% compared to the previous year. Part of this growth, corresponding to US$ 16.8 million, is equivalent to Fremax's sales in 2019, through Brazil’s exports plus sales of the managed operations.
In 2019, investments totaled R$ 83.2 million. The main ones were R$ 32.2 million in the Fras-le unit in Caxias do Sul, for machinery, equipment, tools and molds and NR-12 and R$ 22.8 million at Fremax, most of which were destined for the acquisition of new machinery and equipment to expand the foundry capacity. In relation to the other subsidiaries, the main disbursements are also related to machinery and equipment by the Asia operation, which accounted for R$ 14.6 million and the operations of India and the United States, each with approximately R$ 3.4 million.
Research and innovation
With the innovation present since its foundation, Fras-le has become a global reference in high-performance friction materials and innovative products. The company invests in more modern and sustainable technology development projects, which allow us to compete in new markets and business niches. In 2019, investments in product and development reached between 1 and 2% of the company's net revenue.