FRAS3

Fras-le S.A., which currently uses the global institutional brand Frasle Mobility and has its common shares traded on B3 under the ticker FRAS3, is a company founded on February 22, 1954, in Caxias do Sul (RS). Originally incorporated as Indústria Francisco Stedile & Cia., it began its activities producing auto parts under the Fras-le brand. Over more than seven decades, it has gone through important milestones, such as its IPO in 1971—being one of the first companies in the automotive sector on the Brazilian stock exchange—the establishment of a research and development center in the 1970s, and a continuous process of national and international expansion. In 1996, its controlling interest was acquired by Randoncorp S.A., at which point the company became part of a conglomerate focused on cargo transportation solutions, strengthening its presence in the automotive supply chain.

Fras-le’s business model is centered on the development, production, commercialization, and import of auto components, focusing on brake, suspension, steering, and powertrain systems. The company presents itself as a house of brands, that is, an ecosystem in which several independent brands belong to the same organization and are managed in an integrated way to offer complete “under car” solutions (for the underside of vehicles). Its main activities involve friction materials for braking systems, such as brake linings and pads, in addition to a range of other components, including brake cylinders, constant-velocity joints (CV joints), wheel hubs, ring and pinion sets, driveshaft components, universal joints, motorcycle parts, and products based on automotive resins and polymers.

Fras-le’s operations are organized into two main operating segments: aftermarket (replacement) and OEMs (Original Equipment Manufacturing). The aftermarket segment is predominant and accounted for approximately 91% of net operating revenue in the quarter ended March 31, 2025, as well as more than 88% of revenue in 2022, 2023, and 2024. This segment encompasses friction materials, brake components, suspension, and powertrain parts intended for the maintenance of the active vehicle fleet, serving large national distributors, regional customers, insurance companies, and auto parts retailers. The OEM segment, in turn, accounts for about 9% of revenue and focuses on supplying friction materials and brake and suspension components directly to vehicle manufacturers, being essential for placing the company’s products on the original equipment line of vehicles.

The company has built a diversified portfolio through organic growth and acquisitions. Among the key moves are the acquisition of Lonaflex; international expansion with Fras-le North America Inc., Fras-le Argentina, and Fras-le Andina in the 1980s and 1990s; the creation of bases in Europe, Mexico, and China in 2008; and the acquisition of Haldex’s brake pad business in Alabama (USA). In Brazil, companies such as Freios Controil Ltda. and Jurid do Brasil Sistemas Automotivos Ltda. were incorporated. In 2018, Jofund S.A., which operates in auto parts under the Fremax brand, became part of the group, followed by the acquisition of Nakata Automotiva S.A. in 2020, strengthening its presence in suspension, steering, and transmission components. In 2025, the purchase of the aftermarket division of the KUO group in Mexico, renamed Dacomsa, added manufacturing units for friction materials, engine components, transmission and powertrain parts, consolidating Frasle Mobility’s presence in the aftermarket in Brazil, Mexico, and Argentina.

Fras-le has a broad international geographic footprint, with subsidiaries and operations in several countries. In addition to its headquarters in Caxias do Sul, the company operates in Argentina (Fras-le Argentina, Farloc, Armetal, and the Garín Operations Center, which centralizes logistics, distribution, and administrative areas), Uruguay (Fanacif, currently a commercial office after the shutdown of manufacturing operations in 2024), the United States (Fras-le North America, with a brake pad plant and a sales office in Michigan), Chile (Fras-le Andina), Mexico (Fras-le México and, more recently, Dacomsa), China (Fras-le Friction Material in Pinghu and the trading company Jiaxing Bafu), Germany and the Netherlands (Fras-le Europe and distribution centers), and a sales office and distribution center in Colombia, with coverage extended to Peru, Ecuador, and Central America. In Europe, after the acquisition of AML Juratek Limited, the company began operating with five units, including an office in Germany and distribution centers in the Netherlands, England, and Northern Ireland. In 2024, 60.6% of net operating revenue was generated in the Brazilian domestic market, highlighting the significant contribution of exports and overseas operations as well.

From a technological and industrial standpoint, Fras-le places strong emphasis on research and development of friction and non-friction materials. The R&D center in Caxias do Sul brings together more than 100 professionals, including chemists, engineers, and technicians, and features chemical, physical, and pilot laboratories responsible for formulating friction materials with different combinations of fibers, binders, friction modifiers, lubricants, and mineral fillers. The company also uses the Randon Technology Center (CTR), which operates 20 test tracks of various types of terrain, totaling around 15 km, where 840 tests were conducted in 2024, with 22,000 hours recorded. These resources support product development in partnership with OEMs and help position the company as the leading supplier of friction materials for drum brakes in Brazil.

Fras-le’s diversification goes beyond friction materials, with Nakata standing out as its subsidiary focused on suspension, steering, transmission, metal-rubber, and motorcycle parts. Nakata combines in-house manufacturing of shock absorbers, using its own technology and co-manufacturing partners, with its own laboratories for durability, corrosion, tensile, and strength testing. It adopts a structured product development methodology oriented to the active vehicle fleet and aftermarket needs, covering everything from feasibility analysis to post-launch monitoring. Historically, it was a pioneer in Brazil in using gas-pressurized shock absorbers with nitrogen (Nakata HG), a technology aimed at improving drivability and the service life of the suspension system. This set of capabilities reinforces Frasle Mobility’s value proposition as an integrated platform of solutions for brake, steering, suspension, and powertrain systems, with a robust distribution model that aims to be a “one-stop shop” for different customer profiles.

In commercial relations, the company serves both OEMs and the global aftermarket. Fras-le believes it has established relationships with major passenger and commercial vehicle manufacturers in Brazil and abroad, such as MAN, Ford, Volkswagen, DAF, Iveco, Renault, Honda, Mitsubishi, General Motors, Mercedes-Benz, Scania, and Volvo, directly or through tier-1 suppliers. These ties contribute to the acceptance of its products in the aftermarket, where the company works with large distributors and auto parts retailers. In 2024, the Comolatti Group (Companhia Brasileira de Distribuição Automotiva S.A.) accounted for 10.3% of total revenue, entirely in the aftermarket segment, underscoring the importance of large distributors in revenue generation. In the quarter ended March 2025, no single customer accounted for more than 10% of sales, indicating some level of customer base diversification.

From a regulatory and ESG standpoint, Fras-le states that its activities in Brazil do not require special authorizations beyond those normally required for potentially polluting activities, and affirms it maintains all necessary licenses in force as of the reference date of the filing. The document extensively highlights the legal framework for environmental liability in Brazil, addressing the so-called triple liability (civil, administrative, and criminal) for environmental damage, joint and several liability among liable parties, the possibility of piercing the corporate veil, and the non-applicability of statutes of limitations to civil obligations to repair environmental damage. By laying out this context, the company signals the importance of environmental compliance in its industrial operations and in contracting third parties, even though it does not detail specific sustainability targets. In parallel, technological initiatives such as the structural component line based on composite materials, launched in 2021 as Fras-le Smart Composites and evolved in 2023 into the Composs brand, are described as aimed at reducing the weight of vehicle components and consequently lowering pollutant gas emissions, integrating with the group’s narrative of innovation and efficiency.

Fras-le’s recent trajectory also includes moves in the capital markets that are relevant for those tracking FRAS3 on B3. After the re-IPO in 2016, which marked its return to the capital markets, the company carried out a follow-on equity offering in 2022 amounting to R$ 629.4 million. The proceeds were allocated to business expansion, investments in products and technologies, expansion of production units, and reinforcement of working capital. With annual net operating revenue above R$ 5 billion in 2024 and gross and EBITDA margins historically around 30% and high-teens, respectively, according to data presented in the filing, Fras-le has consolidated itself as one of the leading auto parts companies focused on friction materials and “under car” systems in Latin America, combining a production base in Brazil with an international presence and strong exposure to the automotive aftermarket.

For retail investors analyzing FRAS3, Fras-le presents the profile of an industrial company focused on the automotive supply chain, with predominant exposure to the aftermarket, a significant export base, and presence in multiple geographies. Its inclusion in a larger conglomerate, Randoncorp, expands access to technological resources such as the CTR and strengthens its positioning with OEMs and global distributors. At the same time, the company operates in an environment subject to the environmental responsibilities typical of industrial processes that are intensive in chemical and metallurgical transformation, which requires ongoing management of regulatory and operational risks. The recent evolution of the brand to Frasle Mobility and its role as a house of brands reinforce the strategy of consolidating an ecosystem of solutions under multiple brands, especially in the main automotive aftermarket regions of Latin America.