Ferrari Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 4, 2023

There are 13 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the February 2023 Q1 Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, Sandra, and welcome to everyone who is joining us. Today, we plan to cover the group's Q1 2023 operating results And the duration of the call is expected to be around 60 minutes. Today's call will be offset by the Group CEO, Mr. Benedetto Vina and Group CFO, Mr. Antonio Picca Piccon, all relevant materials are available in the Investors section of the Ferrari corporate website Any forward looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on Page 2 of today's presentation and the call will be governed by this language.

Speaker 1

With that said, I'd like to turn the call over to Benedetto.

Speaker 2

Good afternoon, Nicoletta. Thank you everyone for joining us today. I would like to start by thanking all the women and men at Ferrari for their passion and dedication, which have been essential in navigating The 1st months of this year. Without the tireless effort of all of them from first to last, The strong result we present today wouldn't have been possible. I have no doubt.

Speaker 2

The current technology transition It's creating a continuously evolving landscape. From my experience and having managed some technology transformation in the past, I have learned that being agile and nimble is key to success. These two qualities underpinned Our strategic plan and the progress we are making are perfectly on track with respect to what we presented At the Capital Market Day, almost 1 year ago. In particular, I would like to comment on 2 elements extremely important For our future growth, the building, the e building and our differentiated product offering. Let's start with the e building.

Speaker 2

It grows taller and taller every day we come to office. This will be the home of our internally developed strategic electric components and it will grant us A higher degree of production flexibility for our hybrid and full electric motors. And now the differentiated product offering. Today, it includes ICE And hybrids whose deliveries weight doubled in the quarter reaching 35%. Moreover, in line with plans, we will soon add to the family our full electric model Table to address our current client needs.

Speaker 2

As we have done throughout this our history, we will exploit new technologies To the utmost to enhance our sport cars driving sales. And we will do it in our own Distinctly and compromising ways. We want to give our clients greater freedom to choose The right type of powertrain. So we welcome the commitment at European Union level to allow the adoption of e fuels. We believe that IC still has an important role to play also in a carbon neutral world And together with our partners, we are studying and evaluating solutions that will contribute to decreasing CO2 emissions.

Speaker 2

At Ferrari, moreover, we have a unique advantage because in 2026, our Formula 1 cars We'll begin to use 100 percent sustainable fuel and this means that we will continue to develop technologies On track and later moved them to road. If you else can already power our Current internal combustion engines. While the production of e fuels will receive a boost from the recent European Union decision, I see many questions and doubts about their cost and availability. Although I can understand this question, I'm a firm believer in the power of technology innovation. I have learned from experience how initial difficulties in a new technology can be overcome As you learn how to optimize the process.

Speaker 2

This will be true for both electrification and e fuels. We will therefore continue to execute our product strategy detailed during the Capital Markets Day with the highest Determination. As we move towards our objective to reach carbon neutrality by end of this decade, We also want to play our part in setting an example and inspiring wider Change in energy landscape. While we continue tirelessly to improve the efficiency of our manufacturing processes And increase the share of solar energy use, we work also beyond the walls of our plant. As such, we recently announced the creation of a photovoltaic plant serving the newly created renewable energy community Over Furano and Maranello, which is the first one in Italy ever promoted and supported by a company for the benefit of its local territory.

Speaker 2

It will bring a positive environmental and socio economic impact. Firstly, Sharing 0 mile renewable energy reduces CO2 emission and thus we can avoid energy losses during the distribution. Secondly, the energy community will grant tangible saving in energy bills for its members Being a citizen, institution, commercial activities and factories. And the Renewable Energy Community Initiative is complemented with the introduction of fossil free hydrotreated vegetable oil On the tracks of our most relevant logistic partners in Europe, substituting the use of diesel And abating up to 80% the CO2 emissions. Now let's talk about our strong first quarter results That I'm sure you have already noticed on the projected chart.

Speaker 2

I'm very pleased to highlight the following three key data: Revenues at €1,400,000,000 up 20.5% versus the prior year Adjusted EBITDA is nearly €540,000,000 with a 37.6% margin Industrial free cash flow generation at approximately €270,000,000 Our order book already extends into 2025 on the back of a continuously strong demand. We have just opened the order collection for the newly launched Ferrari Roma Spiders. And today, We are also pleased to announce the long awaited reopening for the Purosangue with deliveries due in 2026. Far more testament to the strength of demand for our cars is the continued dynamism Of the Ferrari pre owned market, which translates into sound residual values. The enthusiasm of our clients is also expressed by their attendance level at all our events.

Speaker 2

In March, The Ferrari cavalcade attracted over 80 Ferrari vehicles in this on a 1,000 kilometer adventure Through Morocco, culminating in the unveiling of the Ferrari Roma Spiders. This latest model from Maranello It's a timelessly elegant high performance car with a contemporary take on the chic, pleasure seeking Italian lifestyle of the 50s and 60s, what makes it so striking is the adoption of a soft top, a solution Making a welcome return to the pricing horse range on a front engined car, 54 years After the launch of the 365 GTS 4 in 1969 that many of us As seen several times in the Miami Vice TV series, I'm also proud to state that Ferrari has won 3 prestigious awards. The first one related to Purosangue. It has been named the Red Dot Best of the best in the product design category. The second for Ferrari Vision Gran Turismo Voted the Red Dot Best of the Best in the Innovative Product category.

Speaker 2

And the third one is the Red Dot for the 296 GTS, Maranello's first Spider powered by a plug in hybrid V6 engine. And what about motorsports? The racing year has just begun with mixed results so far. 2023 will be the Formula 1 Longest ever season and as we did in the first four races, we will continue to fight race by race With ambition and humility, attention to details, focus and continuous learning will be key as the season unfolds. In October 22, we unveiled the 499P, our Lehman hypercars.

Speaker 2

In this March, at 1,000 miles of Sebring, it led the Ferrari's return after 50 years to the top class of the FIA World Endurance Championship. The 3 podiums we won in Sebring, Portimao, Espa Francorchamps are confirming we are Competitors and with humility, we will continue to learn place by race. We all eagerly await our return to Le Mans in June, A milestone for endurance racing and an experience we will share with our clients and our fans. But before leaving motorsport, I would like to remember that Spa Francorchamps has been a special race for us because The Ferrari team that won with our 4/88 GTE was composed by 2 men and 1 woman. Lilu joined us a few months ago, and it has been the first time in FIA world in the censorship That the women won a race.

Speaker 2

And this, together with our equal salary certification And the Girls on Track program underlines our strong commitment on the diversity and inclusion side. The 2022 was important for the increased expression of our brand, Intlifestyle, which we are Continuing to nurture with the 4th fashion show that took place in February during the Milan Fashion Week. It generated strong positive coverage from press and key opinion leaders. I'd like also to underline The incredible reception of the brand new exhibition, Game Changers, that is on display since February 2018 Etemusio Enso Ferrari here in Modena that together with the one in Maranello registered record level of visitor attendance in the Q1, More than 100,000 people, more than 1,000 people per day. Also, our Thematic Parks are experiencing record levels of visitor attendance sustained by the introduction in January For Mission Ferrari, the world's most immersive mega coasters and the last addition to the Ferrari World Abu Dhabi.

Speaker 2

Before handing over to Antonio to review Q1 2023 earnings in all the detail, I'd like to conclude saying that these 1st months of 2023 have been another significant step on a journey during which we will continue to execute our strategy with commitment, focus and determination. Antonio, please the stage is yours.

Speaker 3

Thank you, Benedetto, and good morning or afternoon to everyone joining us today. Starting on page 4, we show the highlights of the Q1 results, which represent a very strong start to the year With revenues up more than 20% versus the prior year and adjusted EBIT, adjusted EBITDA, adjusted diluted EPS Growing more than 25%. In particular, revenues came in at €1,429,000,000 Adjusted EBITDA at €537,000,000 and adjusted EBIT at €385,000,000 with remarkable percentage margins at 36%, 37.6% and 26.9%, respectively. Adjusted net profit at €297,000,000 with an adjusted net profit margin of 21%. And finally, strong industrial free cash flow, Rojanan, of €259,000,000 slightly lower compared to the prior year, Which was sustained by the advances collected on the Daytona ST3 and the A12 Competizione A.

Speaker 3

Turning to page 5, you can see the details of the Q1 2023 shipments, which were up 9.7% compared to the prior year. The increase was mainly driven by the Ferrari Portofino M, the 296GTB and the A12 Competizione. In the quarter, we commenced the deliveries of the 296 GTS and the A12 Competency on A, while the F8 Tributo reached the end of its lifecycle. The Daytona SP3 was in ramp up in the quarter With lower deliveries compared to the Monza SP1 and SP2 last year. As already highlighted by Benedet, So you see that in Q1 we doubled the hybrid versus last year reaching 35% of total deliveries as we rollout the allocation of our 4 Hybrid models.

Speaker 3

As customary, the geographical allocation was deliberate and reflected the pace of introduction of new models. As such, American and Mainland China, Hong Kong and Taiwan posted double digit growth versus the prior year. On page 6, you can see the work of our group net revenues growing 18% at constant currency. The growth in cars and spare parts was driven by higher volumes, a richer product and country mix, A strong contribution from personalization as well as the price increase on selected models and markets that we communicated last year. Personalizations were widely spread among the portfolio and stood at 18% in proportion to revenues from And spare parts.

Speaker 3

Sponsorship, Commercial and Brand reflected the better prior year Formula 1 ranking and the contribution from lifestyle activities mainly led by museums, visitors and retail. Engines revenues declined in line with the reduction of supplies to Maserati as the supply agreement gets closer to its maturity. Currency had a positive impact mainly following the U. S. Dollar dynamic.

Speaker 3

Moving to page 7. The change in adjusted EBIT bridge is explained by the following variances. First volume, positive for €28,000,000 reflecting the shipments increase versus the prior year. Mix and price, strongly positive for €85,000,000 driven by higher personalizations With contribution exceeded our projections, the richer product mix compared to the prior year led by the A12 Competizione And the FF90 families as well as the decreased weight of the F8 family. Positive country mix in absolute terms Sustained by Americas and Mainland China, Hong Kong and Taiwan as well as the already mentioned price increases.

Speaker 3

Industrial and R and D expenses grew €47,000,000 mainly due to higher depreciation and amortization And raw material cost inflation, which is visible. The latter, together with the larger share of shipments to China, It's containing our percentage gross margin, which anyway remains slightly above 50%. SG and A were negative by €22,000,000 reflecting marketing and lifestyle activities obviously centered around the Roma Spider and Deering in Marrakesh and the fashion show in Milan as well as our organizational development. Other was almost in line, mainly reflecting the better prior year Formula 1 rankings and the higher contribution from lifestyle activities. The overall net impact of currency was positive for €28,000,000 Turning to page 8, our industrial free cash flow generation for the quarter was strong at €269,000,000 Reflecting the increased profitability, partially offset by a negative change in working capital provisions and others, mainly linked to the increased inventory value both in relation to the run-in volumes and the richer product mix.

Speaker 3

Our inventories will remain high throughout the year also to preserve our agility in a context where the fluidity of the supply chain is not yet fully Sure. Capital expenditure for €150,000,000 in line with our product and infrastructure development And consistent with the full year guidance to end up higher compared to last year up to €850,000,000 In the quarter, the capitalization ratio of our development expenses was 43% increase versus the prior year As we enter the development phase on a number of future models and per effect of the budget caps imposed on the spending in Formula 1. Net industrial debt at the end of March was €53,000,000 decrease Compared to December 2022, reflecting the solid industrial free cash flow generation net of the share repurchase program. It is also worth mentioning that during the quarter, we completed the refinancing through new bank loans of the bond maturing for €390,000,000 And this allows to successfully diversify sources and tenors while keeping a stable and safe level of total liquidity. To conclude on page 9, we confirm the 2023 guidance, which targets solid growth and consistent progress in profitability.

Speaker 3

Looking at the development of the year, as we see it today, we directionally expect a strong Q2 followed by a softer tail in H2 and particularly Q4 in line with our planned product talents. In essence and to conclude, we keep on executing flawlessly according to our strategy, thanks to the passion and enthusiasm of everyone Here in Ferrari and with all of our partners. With that said, I turn the call over to Nicoletta.

Speaker 1

Thank you, Antonio. Sandra, we are now ready to open for Q and A.

Operator

Thank you. We will now take the first question. It comes from the line of Susie Tibaldi from UBS. Please go ahead. Your line is open.

Speaker 4

Good afternoon. The first question on just to go back to something you just mentioned. If I heard correctly, you said that you expect now H2 to be a bit weaker and especially Q4. I think previously you were flagging that this year was going to be a little bit more H2 weighted. So can you just explain Like what has changed?

Speaker 4

Because if we look at the mix progression, Q1 definitely was weaker than what we should be Expecting for the rest of the year because you're going to have a ramp up in Daytona, in the competition in the specials and some of the higher value cars. So Can you explain the moving parts there? And then my second question on the Purosangue, super impressive that you are already taking orders for 2026. I was wondering if you can share a bit more qualitative comments from your customers and also whether you are seeing Demand from customers also for a hybrid version? Thank you.

Speaker 2

I'll take care of the second question, the Porosango and the first one, Antonio will Back to you. So, the Purotanco, we decided to reopen the order starting in 2026 because we see that, Let's say there was as we told you last time, there was a collection of expression of interest from many customers. At the beginning, when we launched the cars, we were not expecting such strong, let's say, reaction From the clients, so we had to put a little bit of stop to organize ourselves so that we could reopen properly. So there is no change In our strategy to keep this Purosangue, it always lower at 20% of our annual volume. This is very, very important to underline.

Speaker 2

What we see is that the clients have are positively surprised because it's a really unique Cars that give you the feeling that people start to try it, give you the feeling of a sport car with the roominess that usually SportCar is not able to provide because it's smaller. So this is the decision we took and we wanted to share with you and the rest of the world today because I think it's very important. And if you want also make us a little bit proud to make something That is highly appreciated by our client. For the first one, H1, H2 relative weight, I leave it to Antonio, if you can explain.

Speaker 3

Thank you, Benedetto and Susie for the question. I think we probably I was a bit un precise back in the call of February because I said That margin would have improved during the course of the year, which is correct actually. Nothing changed compared to that. It's simply that I forgot to mention at the time that Q2 would have been the strongest As it is as we see it today. And then of course, there are refinements of allocation by country and by product depending throughout the various months.

Speaker 3

So There is nothing more than a better visibility or more precise planning of our product delivery during the course of the year.

Speaker 4

Okay. Understood. Very clear. But when it comes to the mix, is fair to assume that Q1 was, Let's say, the weakest quarter softest quarter of the year in terms of mix, if we just think about the phasing of the models that are coming. We've got the Daytona, you've got the Specials, and you have lower weight of F8.

Speaker 4

So in theory, the mix from here should improve?

Speaker 3

Yes, you're right. That's definitely what we see today.

Speaker 4

Okay. Thanks.

Operator

Thank you. We will now take the next question. It comes from the line of Giulio Scattore from BNP Paribas Exane. Please go ahead. Your line is open.

Speaker 5

Hi, thanks for taking my question and good afternoon everybody. So the first one, just I need to follow-up on the guidance because it's just not clear in my head. So you had a Q1 margin, especially on the EBIT level, way above The guidance, almost 100 bps above the guidance. And now saying that Q2 will be better, I understand that there will be maybe a slowdown in The Q4, even though it's not really clear in my head why that would be the case given that Daytona and Prosangue. So I'm just trying to Connect all the dots here, what am I missing?

Speaker 5

Why would why is 26% EBIT margin still the right target for this year? Then sorry, the second question on the cash buybacks. You're very close to being in a net cash position. I think in the past, You clearly said that you don't want to be in a net cash position. Why not stepping up the buyback?

Speaker 5

Should we expect you to be more focused on the buyback program going forward, Given that cash flow should also accelerate in the 2nd part of the year. And then the last question. I remember in the past having too long waiting list Could wait on your customer demand, right? Because some customers are not willing to wait 3 years to 2 years plus to receive delivery of the cars. So is that an issue?

Speaker 5

At what point does it become an issue? And if it does, will you be forced to accelerate The phasing of deliveries compared to your initial plan?

Speaker 2

Giulio Benedetto taking the question and then I'll give the first two to Antonio. The waiting list, clearly if we do if we say we reopen the order in 26 is because there is a strong interest And I can tell you that there is no trend in order cancellations that we see from the customer, okay. There are I can share you with these things. Yesterday I was having a dinner. There was a guy that was 58 years old and he is planning for making himself a gift when he turns 60.

Speaker 2

So it's perfectly in line with our plan to reopen the orders. So we don't see Client, let me say, canceling the orders because of the time. They are considering it already. So this is the question about the waiting list. And for the other two questions, I hand over to Antonio.

Speaker 3

Thank you, Giulio, and I'll try and help you connect the dots if On the first question, first, there is not just the sports car pillar. So when looking at our And Nicole, intra quarter seasonality, you also need to take into account the unfolding of the expenses of the other businesses, which is basically What we have the OpEx, R and D OpEx, that's an element obviously in driving the profitability in each single quarter. And then there are other elements. When you look at the development of the EBIT margin, you need to take into account also the development of depreciation and amortization, Which is not linear over the course of the year, but start and unfold as we present as we start producing the model that we then deliver. So that explains this very strong Q1 EBIT margin compared to the guidance for the full year.

Speaker 3

And I think the comment I made before may help explaining why Q2 is so strong. We see it strong relative stronger in relative terms. The second question with respect to cash and the fact that it might end up being net debt positive. I will think At the Capital Market Day, we clearly communicated that we have a program, a buyback program of €2,000,000,000 that is what has been executed in line with the generation of cash. We have an initial tranche that we are going to complete soon.

Speaker 3

And then obviously, as the time unfolds, we'll define what to do next. Bob, this helps.

Speaker 5

Yes, it does. Thank you.

Speaker 6

So if I can just follow-up on the

Speaker 5

initial question on waiting list and orders. If I remember correctly, at the time of the CMD, one of the assumptions you made in the target for 2026 was that demand was going to normalize. Based on what we're seeing today, is that still a fair assumption?

Speaker 2

Yes. I think we see this we don't see any Big variation either in terms of execution, either in terms of assumptions we made for the Capital Market Day.

Speaker 4

Okay. Thank you. Thank you.

Operator

We will now take the next question. It comes from the line of Stephen Reitman from Societe Generale. Please go ahead. Your line is open.

Speaker 6

Yes, good afternoon. Thank you for taking my question. Again, on the Q1, obviously, the very strong print you made on the EBIT margin. Obviously, we were let We were kind of like guided towards this would be a weak quarter from a sort of mix perspective. But obviously, you started now selling the 296 GTS, so Which has got a substantial price increase over the F8 Spider which replaces.

Speaker 6

So are we seeing now an impact of your moves on increasing prices on your Serial cars and I think you started this with a 296GTB and obviously the Roma Spider Significantly more expensive than the Portofino M, but it replaced as well. And secondly, just a question also about the mix because I thought that looking at your geographic mix, It wasn't particularly helpful having China being such a big growth part of that because obviously we know that it's high revenue, but when we take into account the taxes, Understand that the contribution it makes to the overall group margin is negative or is a headwind. So if you could comment on that, please?

Speaker 2

Antonio will take.

Speaker 3

Sure, Stephen. As I think I already commented in the past, We don't look at the margin on each single model, but rather without these models are pricing in their own position. And obviously, Try and adjust prices on models that are new introduced or anyway in advance way in advance to the time of delivery to our clients. So it is a gradual move this one. And then we should not disregard the fact that even the cost base It's changing from time to time.

Speaker 3

Inflation has not come to an end anyway. We see it visible. And by the way, in details of our margins, that's an element of attention also for the rest of the year. So the guidance is also predicated upon This assumption. The other question was I think in respect of sorry, Yes.

Speaker 3

I'm sorry. The stronger mix adding on EBIT margin and China not visible. The fact is the positive element that I mentioned in my comment before Yes, that actually personalization came in much better than we would have expected and this almost entirely offset the negative impact of China On our percentage margin. So while when you look at the absolute margins, China is positively contributing. As I mentioned a number of times, This is not the case when we come and look at the percentage margin, but the negative impact in the quarter has been offset By the level of personalization and the margins we are on that.

Speaker 2

This has been a simply important, Stefan. This is a part of the personalization. It's been really very, very important. We see this trend that helped us a lot.

Speaker 6

Thank you. And you can expect a big pickup as well when you have your new paint shop, when you have your new paint lineup as well.

Speaker 2

Yes, that's true. That's also what we said when we met. When we talk about personalization, we talk about painting. That is something that you do in the last step of the manufacturing. Talk about the rims, you talk about the trims in the car.

Speaker 2

So this is very, very important. And we care

Speaker 5

a lot about

Speaker 2

personalization because it's a way to make the Ferrari more and more personal. And in our luxury industry, This is key. It's key for the experience we deliver to the client. It is also key to make this car more and more unique. And let's say to deliver the unique experience that the clients are looking for.

Speaker 6

Thank you very much.

Operator

Thank you. We will now take the next question. It comes from the line of Martino D'Ambrogi from Equita. Please go ahead. Your line is open.

Speaker 7

Thank you. Good afternoon, everybody. One more question on the Purosangue. You reopened The orders for the strong demand, does it mean you could revise the volume guidance of up to 20% of total volumes, Maybe not in the short term, but in the long term. And on the Q1, Could you tell us the number of Daytonas you delivered?

Speaker 7

And what should we expect for the ramp up of the Purosangue in the next few quarters? And if I may, very last on the mix effect, because it's a mix of region, products, Personalization prices, could you roughly split the price mix contribution very, very roughly?

Speaker 2

Okay. Martino, Benedetto. So thanks for this question. Let's start from the Purosangue. So we are starting, let me say, to deliver in next quarters.

Speaker 2

Clearly, there is a ramp up phase. We will keep growing quarter over quarter more or less at ratio 2 quarter over quarter, this is the volumes that we will keep delivering in terms of increase. We do not Plan to extend the life of the cars versus what was originally planned. This reopening of the order was done because, As I said, we were caught by positive surprise for this strong interest. So we wanted To make sure that everything we want to put a little bit the situation if you want under more control from an industrial point of view.

Speaker 2

So there is no extension, not at all. This is the first question. The second was about Daytona. Well, we delivered the 3rd day Daytona. The third one that you are asking the split between the geography product, I understand your curiosity.

Speaker 2

I would do the same questions. But I would also understand if you would not reply to me with the exact split. What I can tell you Is what I said to Stefan and also Antonio said, the personal we see a positive trend in the personalization increase. I think this is in line with the trend also we see in other luxury industries that our client want to have more and more A personal rich car. I mean already our Ferrari were pretty much if you want Each Ferrari is different from others, but now they are becoming even more different if you want.

Speaker 2

And this is something that we experienced Positively, in the second in the last 2 months of the quarter.

Speaker 3

And if I may, do not disregard the fact that keeping OpEx, meaning selling and general expenses and R and D expenses at a growth level, Which is lower than revenues obviously adds to the quality of the margins finally. So we're very careful on these aspects.

Speaker 4

Okay.

Speaker 5

And customization was 18% last year.

Speaker 7

So in Q1 was how much?

Speaker 3

Pardon me? Personalization, I think, was 17%, right? Yes, 17% 18% this year.

Speaker 5

Okay. Thank you.

Speaker 4

Thank you.

Operator

We will now take the next question. It comes from the line of Monica Bossier from Intesa

Speaker 8

Thank you and good afternoon everyone. Once again on the personalization, Just a curiosity, on which model did you see the higher requests in personalization? And should we assume That the personalization rate trend of the Q4 will keep going over the next quarter. I'm asking this along with another question. It's on the different evolution in the deliveries to China.

Speaker 8

Do you expect a different evolution across the year or the deliveries will be Equally distributed across the different quarters in China. And another question is on the cost. I read on the press release that the company is running the renegotiation on the labor cost. I was wondering if you just can quantify if we have some increases over this year and the Next one. And the last question is more general on the batteries.

Speaker 8

In 2025, the company will launch the Refined Ferrari. Can you share with us your view on the different materials of the batteries? If you are evaluating Any solutions that look more suitable for Ferrari than others? And if any insights would be useful? Thank you very much.

Speaker 2

Thank you, Monica, for your questions. There are 4 questions. I will take the first and the last. I will leave Antonio, to elaborate a little bit more. Okay.

Speaker 2

So let's start from the last one, so that it's fresher. The story of the battery. The battery, the chemical element if you want that we are using more or less are the same is the chemistry This is a little bit more specific to our needs. And what I can tell you that there are 2 dimensions that we are Following to optimize our batteries, one is the energy density, another one is the power density. So we don't have a single chemistry.

Speaker 2

We have different kind of chemistry, a little bit more tailored for our needs, considering the 2 vectors Of Energy and Power. And as I said at the beginning, we are on track with our plan that we shared with you the 16 June last year. The first question, which is the trend you see, we don't see any specific trend by models. We don't have also any specific trends by countries. It's let's say, really it's very much personal.

Speaker 2

Like I was telling you, our clients are making more and more personal, the Ferrari, The one that they want to drive and the one they want to leave. So this is the question to the answer to the two questions. For the China split and the labor cost, Antonio can be a little bit more specific on this.

Speaker 3

Yes. Hi, Monica. On China, our deliveries China on convention, Guy. Our deliveries in the course of the year are more or less than a bit less than 10% of total deliveries. And in terms of distribution by quarter, the first and the third quarter are the ones that currently are a bit more loaded than the other 2.

Speaker 3

Don't take it for granted because we may have slight changes in the allocation, but it's more or less directionally This should develop over the course of the year. And the last one is other costs. We are not engaged, actually we completed the negotiations. So it's an 11% Increase on a cumulative basis over 2023 2024, which is impacting this year in the region of 6% and this obviously is in the numbers.

Operator

We will now take the next question. It comes from the line of Thomas Please go ahead. Your line is open.

Speaker 9

Thank you very much. It's Thomas with Kepler Cheuvreux. I have a few questions as well. Is it possible for you to confirm over how many questions you plan to deliver the data now to your lucky customers? That would be the first question or broadly say differently, how many units we should expect per quarter in 2023, 2024?

Speaker 9

2nd question, There was a bigger tailwind from ForEx that I was expecting in the Q1. Is it still the main scenario to have something Broadly neutral for the year or do you think we should now see a positive ForEx boost in 2023? And lastly, you mentioned the fuels as Positive elements for you over the midterm as it gives use the opportunity to offer various kinds of Portion Solutions to your customers in the midterm. Could you share with us what is the Initial thinking about the long term proportion of vehicles that could stay with that kind of Portfolio in mode in 15, 20 years' time? Or is it still way too early to discuss that?

Speaker 2

Okay, Thomas. So the first one, the number of debt on a per quarter will be more or less between 30 and 40. The second I think the third one, the FX Antonio will elaborate. The third one is about the fuel. Well, Last year before our Capital Market Day, we fought extensively on this point because We believed already at the time that ICE can deliver still a lot of things.

Speaker 2

Mean, there is a lot of way to go. So that's the reason why we said, if you remember, that in 20 6 and 2,030, we were always having in mind And we shared our plan, what is our offering in terms of ICE. The decision, the recent decision of European Union About eFuel is very much welcomed by us. If you want is a confirmation of the goodness of the strategy That we shared with you last year. So we have no change.

Speaker 2

We have the reason why last year we presented the debt A split between the different propulsion was because based on our experience, let's say, the transition, the technology transition, Especially when they touch the energy side are not digital. It's not something that can come from one day to another. It takes time. So we are very we welcomed a lot the decision of eFuel because This can is a further substantiation of our strategy. Antonio, about that.

Speaker 3

Yes. On the FX, Thomas, I think, obviously, take it with the benefit of all of us living in a world of significant financial volatility. If the spot rate of U. S. Dollar to euro remains more or less where we are today, we expect this Remaining to have a more or less a neutral impact year over year.

Speaker 3

Obviously, it depends if it goes if the euro It becomes much stronger. This could be an assumption to be reviewed.

Speaker 9

Thank you very much.

Operator

Thank you. We will now take the next question. It comes from the line of Adam Jonas from Morgan Stanley. Please go ahead. Your line is open.

Speaker 10

Hi, all. This is Matthias here on behalf of Adam. So China, Hong Kong and Taiwan hit 11% Deliveries this quarter. And we know that you guided to some front loading of that in the region, but just curious how you see this heading Into 2025 based on your forward book? Thanks.

Speaker 3

May I take this one? Yes, yes, Gogo. Okay. On China, I think this quarter has been rather front loaded, meaning we had a chunk of deliveries to China, which has been comparatively higher. Within, let me say, sort of target for the year of about 10% of total deliveries to that region.

Speaker 3

When looking at the future years, I think we stated already at the Capital Market Day That we expect our shares of deliveries to China to not exceed significantly the 10% mark.

Speaker 2

So it's a quarter that is fully in line with our strategy, yes. Great.

Speaker 10

Thank you so much.

Speaker 2

Thank you.

Operator

Thank you. We will now take the next question. It comes from the line of John Murphy from Bank of America. Please go ahead. Your line is open.

Speaker 5

Hi, this is actually John Babcock on the line for John Murphy. Just one question, could you talk about the opportunity you have to take up price on your vehicles?

Speaker 3

Opportunity to take up prices.

Speaker 2

Look, it's a good question. As we said through all the year and last year and what we are doing now, we said that we were going to increase Mid single digit selected model on and that's what we are doing. So we saw this opportunity and we are using it. So I think it's also important that we value properly what we are offering to our client and they fully understand it.

Speaker 6

Okay. Thank you.

Operator

Thank you. We will now take the next question. It comes from the line of Tom Narayan from RBCCM. Please go ahead. Your line is open.

Speaker 10

Hi. Yes, Tom Narayan, RBC. Thanks for taking the questions. So hybrids were 35% of shipments in Q1. Curious if you could talk about the demographics of these customers, age or specifically new to the brand.

Speaker 10

Just curious if there's any read throughs as we can think about your electrification path ahead. And then just a quick follow-up on the Pure Sunway relaunch in 2026. Could the pricing be Raised? I know the initial pricing, given the strong demand, it would suggest you could raise it. Just curious if the pricing Could be raised.

Speaker 10

And then lastly, a follow-up on eFuels. One hurdle potentially for eFuels is the infrastructure needed, Right, for fueling, etcetera. Curious if you could share any comments on how you think that might develop. I know that the EU's Governments are definitely supportive of it, but certainly would require an investment there. Thank you.

Speaker 2

Okay. So Tom, thank you for your question. Let's talk let's start from the demographics of the hybrid. This is something that we are looking carefully Because we are also interested to understand what's happening. And I can tell you that any quarter we have a look at these numbers and we don't see there a specific pattern.

Speaker 2

So we have, if you want, we have the same client that is buying the hybrid and IC. We have a client that entered the Ferrari world through the hybrid and then they buy the IC or vice versa. And also if you see the pattern across the continents or across the, That's an age. We don't see really a pattern. So this is a very interesting question that we are always making ourselves.

Speaker 2

We wanted to report in this quarter this important target, basically 35% of them are hybrid. We also checked the average age of the clients that buy hybrid or the red or the yellow in the chart that Antonio was presenting. There is no difference. So this is the first question. The second question is The Purosankoe, today we said that we are reopening with deliveries in 2026.

Speaker 2

Usually we do not Comment about the price increases so long in the time. You can make your own assumptions, but We do not want to discuss specific on this point. The last one, maybe I misunderstood your question, but the e fuel It's something that can fit in our engines as it is. We are already doing a test with different kind of Fuels that are not fossil derived. The infrastructure is the same.

Speaker 2

Clearly, you have to produce it. So you have to combine The CO2 of the atmosphere with hydrogen coming from the waters, but infrastructure is the same. An area where we are working a lot together our partners Is to make sure that in case, in case there is a clear mandate to recognize the e fuel Because you needed to feed the refuel and the cars where we need to work and we are working already with partner To make sure that the fuel is properly recognized versus the fossil fuel. This is there is no really no modification required in infrastructure.

Speaker 10

Yes. I guess I wasn't referring to your infrastructure, But more of the fueling infrastructure, petrol stations, etcetera.

Speaker 2

It's the same, Tom. There is an element. I mean, clear, In the production of the fuel, there is a difference because you don't have to dig a hole in the earth To take the oil, but you have to let's say, like fertilizers, you have to take the CO2 from the atmosphere. But there is no difference in the distribution network.

Speaker 10

Okay, got it. Thank you.

Speaker 2

Thank you.

Operator

Thank you. We will now take the next question. It comes from the line of Anthony Diak from ODDO BHF. Please go ahead. Your line is open.

Speaker 11

Yes. Hi. Thanks for taking my question and congrats for the great results. Just a couple of follow ups on my side. Firstly, on the Daytonas, Could you actually give us the number of Daytonas that was delivered in Q1 like you did previously for the Monza?

Speaker 11

And also when you talked about The ramp up of between 30 to 40 units, is that sort of the maximum capacity that you can produce? Or is that just the way that you want to sequence these Deliveries. And then a second question for the WAPONB personalization rates. Again, as we should see a ramp up in DAYTONA deliveries, Do you expect to maintain that 80% personalization considering the much higher ASP on these cards? Thank you.

Speaker 2

Okay. So Anthony, the first question, Daytona, we delivered in Q1, we said before is 30. We keep staying in the quarter around 30, 40. This is, let's say, considerate in our case, the line is pretty much And this is flexible either in terms of equipment that you need to produce the cash, but also in terms of ability of our Employees to manage different kind of steps. So there is no relation with maximum capacity.

Speaker 2

And the last point, The personalization rate, maybe here I can provide a little bit more color that will help you and the previous colleague that made this question. One big change we did in the personalization rate is that we enriched the carbon look components that are available to our clients. So if you want, there is there are more options available for our clients that are carbon look. And usually, If you want, the carbon loop components are more expensive than the others. But these are the 3, I think, I addressed all of them, the 3 questions you gave us.

Speaker 11

Yes, perfect. Thanks very much.

Speaker 2

Thank you.

Operator

Thank you. We will now take the last question. It comes from the line of Gianluca Bertuzzo from Intermonte SIM. Please go ahead. Your line is open.

Speaker 12

Hi, everybody, and thank you for taking my question. I want to jump back on the pricemix. On a full year basis, do you expect Mix or price to be the biggest contributor in terms of growth for the average selling price? And a second one on the Daytona. I don't want to anticipate too much, but do you expect There will be a time lag between the current Daytona and the next one As it is was the case with the between the SP1 and the SP3 or it will be a smoother transition?

Speaker 12

Thank you.

Speaker 2

Okay. This is the last question. So we split fifty-fifty between me and Okay. Okay. So Antonio will take the prices.

Speaker 2

So I think the answer is mixed.

Speaker 3

I'm sorry,

Speaker 2

you were very fast. No, I think look, we gave you I understand that you want To have all the possible detail. So as we said, 30 in Q1, 30, 40 more or less in the next quarters. And We are planning this production according, let me say, to what is also the Which are the needs of the clients also in terms of personalization, okay. Because there are a lot of carbon look Components that are very important in this car model.

Speaker 3

And if your question was for the period after Daytona, Please wait and you'll see.

Speaker 2

Secrecy is important, Gianluca. We have to the variability is very important. So we have to

Speaker 12

Of course. And very last one, if I may. What is your assumption in terms of cost inflation for this year? Thank you.

Speaker 3

I'll take this one. It's difficult to mention percentage wise. Anyway, I would say high single digit, But it's really a mix of components. Last year, we have seen energy and metals beginning of the year. Nowadays these two components are not anymore the most relevant.

Speaker 3

Inflation is going through a number of commodities And products and components. And on top of that, labor cost is adjusting. So that's an assumption we'll see. Last year,

Speaker 2

we saw more on energy side that is easing Down now, while this year we see suppliers suffering a little bit more on the labor cost impact. Net ops rate at the day of 1 year.

Speaker 12

Thank you very much, Benedetto. Thank you very much, Antonio.

Speaker 2

Thank you. Thank

Operator

you. I would like to hand back over to Benedetto Vindia for closing remarks.

Speaker 2

Thank you all. Thank you for the time you spent with us today and also thank you for your interest. The Q1 of 2023 Since really another strong start to a very robust year. And we look ahead with I think it's clear from The question and the answer. We look ahead with intuitive energy agility and also the confident humility That I think is always required when you are in challenging times.

Speaker 2

And having said this, I wish all of you a good afternoon And thanks a lot for your time, for your question and for your attention and meet you in a quarter time. Thanks.

Operator

That does conclude our conference for today. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Ferrari Q1 2023
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