This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk07: Good day and thank you for standing by. Welcome to the Ferrari 2020 Tiki 2 Results Call and Webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to slowly press star 1 and then 1 on your telephone. You will then hear an automated message advising that your hand is raised. Please note that today's conference is being recorded. I would now like to hand over to your speaker, Nicoletta Russo. Please go ahead.
spk00: Thank you and welcome to everyone who is joining us. Today we plan to cover the Group Q2 2022 operating results and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the Group CEO Mr. Benedetto Vigna and Group CFO Mr. Antonio Picapicon. All relevant materials are available in the investor section of the Ferrari corporate website and at the end of the presentation we will be available to answer your questions. Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risk 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. With that said, I'd like to turn the call over to Benedetto.
spk10: Thank you, Nicoletta. Thank you, everyone, for joining us today. It was a pleasure to meet many of you in person last june during our capital market day here in maranello but before talking about q2 record results let's recap the main points of our strategic plan for 22 26 we talked about our electrification journey the product strategy the industrial strategy financial target and our path to carbon neutrality by 2030. and I will address our commitment to preserve and protect our planet later in this speech. Now, let's start with our electrification journey. We are very well positioned to tackle the technological transition. Electrification represents for us a great opportunity to address customer needs and to continue to realize unique Ferraris. We are continuously advancing in our electrification journey. We started in 2009, 13 years ago, with our experience in Formula One. Then we transferred to our first hybrid model, LaFerrari, a supercar. And more recently, with the launch of four range hybrid models currently in our product portfolio, we extended successfully this technology to higher volume cars. Thanks to this expertise, you can brief really in all our laboratories, and additionally, fueled by our passion, dedication, and willingness to push the boundaries forward, we will unveil our first full electric model in 2025, a true Ferrari that will enrich our product range. It will contain several unique features And it will be a sport car, as every Ferrari, that offers a true Ferrari driving experience. We have also confirmed our product strategy. Based on a different Ferrari for different Ferraristi, a different Ferrari for different moments, it is built to preserve uniqueness while satisfying the different customer profiles. from more adrenaline-seeker pilots to more versatile sports car drivers. We have also committed to unveiling 15 new models from 2023 to 2026 to keep our product range up to the level where Ferrari has always been. This will also include the highly-awaited new supercar, a masterpiece of innovation, design and performance. we reiterated our industrial strategy. In doing so, we will continue to progress staying very focused and disciplined in terms of capital expenditures, adopting a make versus partnership approach. Indeed, we will focus on the key differentiating factors and we will invest on the strategic component that we deem relevant to continue to exceed our customers' expectations in terms of performance and driving trails. On this note, we will invest in our infrastructure, expanding our factory with a new paint shop and an e-building, where the most advanced technologies in the electrification field will be designed, developed and crafted. For what concerns partnership, as it was true in the past, we continue to tailor existing solutions that are available on the market and read them with our own eyes in a way that our cars continue to be unique and authentic. At the Capital Market Day, we also shared with you our financial targets. Built on a solid and comprehensive ground, we target a 9% compounded annual growth rate for our revenues, driven by a strong product pipeline. We have ambitious goals also for our lifestyle activities, where we target to double the 2026 sales compared to pre-pandemic levels, focusing on three things, luxury goods, experiential and collectibles. The business plan also entails an 11% compounded annual growth rate of ABDA and a very strong industrial free cash flow generation. We expect to double it versus what we generated over the past five years. Such solid financial profile allows us to keep investing for our future growth while increasing the shareholders' remuneration with a combination of dividends and share buyback. Dividend payout will be increased to 35% of adjusted net income and a €2 billion share repurchase programme already started. How will we make it? As highlighted at the Capital Market Day, all of this will be made possible thanks to the relentless work of all the women and men in Ferrari, the loyalty of our customers, and the teamwork with our partners, industrial, academic, and commercial. Moving now to today's agenda, let me review the second quarter and another quarter of records. whose strength led us to upgrade our 2022 guidance on all metrics. Number one, record revenues at 1.3 billion euro up 25% versus the prior years. Number two, record EBITDA at approximately 450 million euro. Number three, record EBIT at approximately €325 million. And number four, in Q2, we reached the new record in terms of net order intake, which is astonishing considering that in the quarters, the books were open only on three models of Ferraris. Roma, 296 GTB and 296 GTS, the one we announced last April. This strong trend is visible all over the world. No specific geographical pattern. On top of these four records, we have another three records we'd like to highlight. I'd like to start with our Guinness World Records title for the largest LED illuminated racetrack awarded for the lighting show at Tower Fiorano Racetrack. consisting of more than 1 million LED points and covering more than 110,000 square meters, and all of that was powered with green energy. Secondly, the lighting show concluded the first edition of the cavalcade Icona with the participation of 80 Ferrari Monza, both SP1 and SP2, coming from more than 20 nations. This event celebrated the 75th anniversary of our company. And last but not least, I also had the pleasure to attend the cavalcade Riviera in Monaco, which involved 144 Ferraris from over 30 nationalities, a record in the cavalcade history. Such overwhelming attendance is again testament to the unforgettable experiences that our customers are willing to share along with the pleasure and fun of driving that carry the Prancing Horse name around the globe. On the racing activities, we continue to fight at the top in the Formula One and FIA World Endurance Championship, where the team is working hard for our return in 2023 in the top class with our hypercar. Two fresh news from the last weekend. We unveiled the Ferrari 296 GT3, our latest V6 that represents the future of the Prancing Horse in GT racing. And we just won the 24 hours of Spa-Francorchamps Gold Cup with a team of four women. We also presented our journey towards carbon neutrality by 2030. This was a few weeks ago, and now we are moving from purpose to actions. Here, the four actions we already put in place. One, we have committed to set science-based targets in line with 1.5 Celsius degree pathway. Two, we have installed the new one megawatt solid oxide fuel cell plant at our Maranello facilities. It provides 5% of the energy required for Ferrari's production activities in Maranello, while reducing fuel consumption and emissions. Compared to combined heat and power cogeneration systems, gas requirements are cut by around 20%, with a significant energy saving. 3. We have begun the installation of a new photovoltaic system on the roofs of our Maranello factory buildings, further expanding our independent energy production and reducing our CO2 emissions. Once fully operational, the new solar installation will allow us to self-produce 1.7 GWh per year. We've started a partnership with ClimateSeed, an impact-driven company that is helping us support high-quality, innovative projects focusing on positive climate and social contribution. As a final remark, and looking at what's next, for sure September will be a key month for us with three important events. The Monza Grand Prix, where we will fight again at our home, the world premiere of the Puro Sangue and the third fashion show at the Milan Fashion Week. And now I will hand over to Antonio who will review the Q2 2022 results.
spk05: Thank you Benedetto and good morning or afternoon to everyone joining us today. Let's start on page 7 with the highlights of the second quarter. another very strong quarter with double digit growth and record level for shipments, revenues, EBITDA, and EBIT. Percentage margins were also in line with our expectations, mainly reflecting the already flagged development of product mix during the course of the year. Shipments were 3,455 units, up 28.7% compared to the prior year. Group net revenues were €1,291,000,000, up 24.9%. EBITDA reached €446 million, up 15.5% year-over-year, with an EBITDA margin of 34.6%, lower than last year, since those extraordinary highs were supported by the strong contribution of the Ferrari Monza. EBIT was 323 million euro, up 17.8%. Net profit came in at 251 million euro, up 21.6% versus prior year, resulting in a diluted EPS 0.36 euro compared to 1.11 euro in Q2 2021. The industrial free cash flow generation for the quarter was 79 million euro. As already anticipated and in line with the seasonal cadence, the strong operating cash flow of the quarter was partially flattened by tax payments. They were much higher than in Q2 2021, since commensurate the significantly improved income of 2021 compared to 2020. Turning to page 8, you can see the details of the Q2 shipments. The product portfolio in the quarter included seven internal combustion engine models and three hybrid models, including one ICE truck car. representing 83 and 17% of shipments respectively. In the quarter, we were continuing to serve an impressive order book across all our current range and delivery increase in the quarter were mainly driven by the Portofino M and the F8 family in line with programs. In the quarter, we also commenced the first deliveries of the 296 GTB, while the A12 Competizione was in ramp-up phase. As already flagged, the Ferrari Monza SP1 and SP2 reached the end of their limited series run in Q1. All geographic regions positively contributed in the quarter, particularly mainland China, Hong Kong, and Taiwan, stood out with double deliveries compared to prior year, reflecting the strength of the demand. On page 9, you can see the walk of our group net revenues growing 21% at cost and currency. Revenues from cars and spare parts were up 21% at cost and currency, driven by higher volumes along with the contribution from personalizations. Revenues from personalizations were higher than the prior year, sustained by volume at around 18% in proportion to revenues from cars and spare parts. Engines revenues were down 8% given the lower shipments to Maserati, whose contract is approaching the expiration in 2023. The increase in sponsorship, commercial and lifestyle, up more than 23% at cost and currency, was mainly attributable to the better prior year Formula One ranking and the contribution from lifestyle activities, which was partially offset by lower sponsorship. The other revenues increase was mainly related to other supporting activities. Currency, including translation and transaction impacts, as well as foreign currency edges, had a total positive contribution of 41 million euro, mostly related to the US dollar and the Chinese yuan. As we move to page 10, let me review the change in our EBIT bridge, explained by the following variances. Volume was positive for €90 million, reflecting the shipment increase. Mixed price variance, as expected and linked to product currents, was negative for €16 million, mainly due to the softer product mix related to the phase-out of the Ferrari Monza and the greater contribution of the Portofino M, partially offset by the positive contribution from personalizations. Industrial and R&D expenses grew €27 million in the quarter, mainly due to higher depreciation and amortization, cost inflation, and other one-off operating expenses net. SG&A were negative by €18 million, mainly reflecting communication and marketing activities and corporate events, as well as the support to the company's organization development. Other was negative for €9 million. It reflects the improved prior year Formula One ranking and higher contribution from lifestyle activities that were more than offset by lower sponsorship. reduced engine shipments to Maserati, higher costs related to the better Formula 1 in-season ranking assumption, and other miscellaneous expenses. The total net impact of currency was positive for €29 million. As a result of what I just mentioned, EBIT reached a record level of €323 million, up approximately 18% versus the prior year, with an EBIT margin of 25%. Turning to page 11, our industrial free cash flow generation of the quarter reflects the strong profitability which was flattened by €166 million of capital expenditure that are progressing in line with full year guidance, €162 million of cash interest and taxes, mainly reflecting The 2021 tax balance payment linked to the strong 2021 results and the first 2022 tax installment. And a small adverse impact of working capital and other, which was mainly related to the higher inventories in line with the projected volume growth for the year, partially upset by the collection of Daytona SP3 advances. In the quarter, the capitalization ratio of our development expenses was approximately 46%, slightly increased versus the prior year. Net industrial debt as of the end of June 22 was €387 million. The increase from the €136 million as of March 2022 is explained by the €250 million dividend distribution and approximately €80 million of share repurchases, more than offsetting the positive industrial free cash flow generation in the quarter. However, the overall strong net cash generation of the last 12 months improved the net industrial debt position by almost €160 million compared to June 2021. On page 12, we revise upward our 2022 guidance across all metrics. on the back of three main factors that add on to our initial assumptions for the year. First, a stronger business performance with regard to personalization. Second, a tailwind from foreign exchanges net of edges, mainly given the recent strengthening of the US dollar versus the euro. And third, notwithstanding the rising inflation in our cost base linked to the current environment that slightly softens our percentage margins. I obviously remind you that our guidance still relies on the assumption that trading conditions are not significantly affected by the current complex environment. To conclude, we are very pleased with this quarter of records, which are the result of the unabated passion of each and every one here in Ferrari, which demonstrated the robustness of our business model and the success of our product portfolio, and which let us look with great confidence the rest of the year and our further challenges to come.
spk00: We are now ready to open the Q&A session. Thank you.
spk07: Thank you. As a reminder, to ask a question, you will need to slowly press star 1 and then 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A roster. This will take a few moments. We are going to proceed with the first question. The first question comes from the line of Adam Jonas from Morgan Stanley. Please ask your question.
spk03: Thanks. Hello, everybody. Just a couple questions. First on FX, which is going to be more important over the next couple quarters given the continued weakness of the euro versus the foreign currency baskets. I was surprised with the conversion of the FX benefit to EBIT uh... versus how it helped revenues that help revenue forty nine million operating profit uh... thirty seven for about a seventy five percent kind of conversion of a little surprise given your what we what we seem to know about your hedging strategy where you would hedge you know, a pretty clear majority 12 months out and then kind of tailing off from there. So is that normal? Is that kind of impact on top line then following through to EBIT something that's continuing, or was it unusually high conversion this quarter?
spk05: Hi, Adam. Antonio speaking. Nothing unusual, actually. You should take into consideration that our foreign currency exposure is on revenues and net of cost, right? And when you look at the impact of foreign exchanges, you should look at the combined impact of what we have as foreign exchange edges beginning of our revenues or EBIT bridge, and the change in foreign exchange and effect hedges in the last quarter, which is the second before last column. So actually the impact on net revenues is 41, while the impact on the EBIT is 28, so 10 million. I'm not sure whether it's always of that size difference, but there is always because of what I mentioned before, meaning we are not just hedging revenues, but REVENUES NET OF COST. NOTHING HAS CHANGED IN TERMS OF OUR EDGING POLICY. WE KEEP ON RUNNING USUALLY ON A ROLLING BASE AND OBVIOUSLY THE IMPACT THAT YOU SEE ON OUR QUARTER IS THAT THE RESULT OF THE SPOT RATE THAT WE OBSERVE DURING THE MONTH NET OF THE EDGES THAT HAVE BEEN PUT IN PLACE IN THE PREVIOUS 12 MONTHS BASICALLY CUMULATED AND STRATIFIED. OKAY.
spk03: APPRECIATE IT. Thank you. It does. And just one follow-up, please. Ahead of the Puro Sangue launch, confirming that your first deliveries will be in this calendar year, this fiscal year, anything you want to call out that could get noisy with launches, with the launch or other costs related to the launch, any order of magnitude you wanted to point out that you've embedded in your guide for margin of safety? Thanks.
spk10: Ciao, Adam Benedetto speaking. So the program Puro Sangue is proceeding as planned. The deliveries will start next year, as we said also at the beginning of the year. And let's say both from business point of view and technical point of view, the program is well on track. So nothing out of what we are planning for. So we are very... We are very happy to see this finally at the world premiere, as I said, to show in world premiere in September. Thank you.
spk12: We are going to proceed with the next question.
spk08: The next question comes from the line of from EBS.
spk07: Please ask your question.
spk01: Hi, good afternoon. I have three questions, please. So my first one would be on the volume growth. Again, you reached a new record up 29%. And, of course, you already explained earlier in the year that it's because you have very long waiting lists, so you don't want people to have to wait for years. But, you know, then each quarter you keep telling us that it's a new record, a new record order intake. So this pace of production that we have seen so far this year, is this something that may persist for the rest of the year? So how should we think about the volume growth? That's the first question. My second question was on the pricing. Because last year, if I remember correctly, around July, you took a small 2% price increase to offset some of the inflation in the cost base. And of course, this year the inflation is higher. So I was wondering if you have done any similar action year to date and thirdly on the profitability team previously you were guiding to a year where we were going to see a stronger H1 and then getting progressively weaker due to the mix but now if we look at the performance in H1 your EBITDA margin was 35.1 and your new updated guide is for over 35% so it sort of implies that perhaps Q2 was actually the low point of the year and margins could improve in the second half. Any comment on this would be very helpful. Thank you.
spk10: So I will take the first two, Susi, and the last, Antonio, will reply. So the volume will grow. In H2, the volume will be lower than H1, and this, I would say, is a regular pattern, so nothing strange and, again, in line with our original plan. Number two, yes, we put in place some pricing increase, and they will be visible starting Q1 next year. And for the profitability comment, Antonio, you may explain the pattern that we are seeing.
spk05: Yes, Susi. I think certainly what we are looking at for the second half is an improvement, further improvement in terms of margins from personalizations. which is stronger than expected. Secondly, what I mentioned before, we already got the benefit from foreign exchange rates in the first half of the year, but the edges that we had in place were at a currency level that was worse compared to what we are heading to for the second half. In addition, Q2 has been impacted by small one-off operating expenses that overall, however, impacted it a bit. We do not expect to have them once again in the second half. So net-net, that's the reason why we are looking at the guidance in the direction I explained.
spk08: Okay, thanks. We are going to proceed with the next question. The next questions come from Julio Pescatore from Exxon BNP Paribas.
spk07: Please ask a question.
spk16: Hi, thanks for taking my question. The first one on China, I was very impressed with the level of deliveries in the market. Can you maybe elaborate on what drove the increase in the... Hi, thanks for taking my question. The first one on China, I was very impressed with the level of deliveries in the market. Can you maybe elaborate on what drove the increase in the region? The second question on the new GT car, those are always models that are very difficult to track, but anything you could share on pricing, timing of launch, and contribution to profit implied by the sale of this model would be super useful. And then the third one on energy risk, that's clearly on everybody's mind in the automotive sector. Do you have any way of quantifying the risk of potential energy rationing in Europe, given the concentration of production? And are you taking any measures to potentially offset any impact as we approach the winter? Thank you.
spk10: Okay. This is Julio. This is a good question about China. As we told also in the previous call, the we had a strong net order intake in in china today if you remember the chart of antonio was talking about in terms of shipment at 10 percent of overall versus the previous year was six percent yes we had a long a a big grow but this grow if you see in uh has been pretty much the same all over the places so as i said no particular specific geographical pattern here clearly you see bigger in percentage because in the previous year was was smaller then you asked about the pricing the gt3 if understood well the gt3 pricing yes okay so remember that the gt3 is a cash is for the the track is not a road cash so it's important For sure, it helps on the top line and on the bottom line of the company, but it's mostly meant to enhance the experience and to enrich the experience of our customers. And this is the cars. The GT3 is coming from the 296, the road car 296, and it will replace the one that is running today on the racetrack, the 488. As I said, we have to look at this car more in terms of reach and full experience we are providing to our customers. Talking about the energy risk, I would like Antonio to be more precise here.
spk05: Sure, Giulio. I think in the numbers that we reported, there is clearly an impact from energy cost inflation. We are not immune to that. Even if we try and be opportunistic and buy in advance what we are, depending on our needs for the future months, um obviously since we are in the market and we believe we are sufficiently agile we are reacting to what we see in terms of cost and therefore adjusting our offer even in terms of pricing going forward okay but i was more worried actually about the supply of energy are you taking any actions to potentially offset I'm sorry, I didn't get that. No, so far we haven't seen any specific concern in that respect. Okay.
spk12: We are going to proceed with the next question.
spk08: The next question comes from Fernando Michael Binetti from Credit Suisse.
spk07: Please ask your question.
spk02: Hey, guys. Congrats on a great quarter. Thanks for taking all our questions here. I guess, you know, as we look at the performance in this quarter, you know, the level of cars that you're producing, and it looks like you're on a run rate to produce 13,000 to 14,000 cars here. You've been very clear this year it would be high unit volumes and some mixed headwinds, and we've seen that in the numbers. We've had years like this that have transitioned from high-volume years into supercar years like the Aperta in the past, but we haven't seen units go negative after a year like this. And that makes some sense. You have capacity to build at this level. But as we look at next year, if you're producing at this rate and the mix of cars shifts positively as you roll out Daytona and even ProSign, I mean, do we expect lower volumes next year? And I guess the spirit of what I'm asking is your guidance this year now at the high end is 1.73. That's just 4% below the 1.8 to 2 billion euro target of EBITDA that we have for next year. So when we see you operating at these levels in 2Q, it's hard for us to understand how to crosswalk to a much slower EBITDA growth rate based on some of the out-year guidance that we have.
spk10: So, Michael, I think the key word I use at Capital Market Day was always – you know, uniqueness and, let's say, distinctive cars. What I can tell you is that the increase of volume that you see, 22 over 21, is not going to be the same increase of volume for the year to come. This does not depend. We will lower. It just means that the year-over-year growth will be slower than this year, 22 over 21. This is the answer to your question, if I understood well.
spk02: It is. I guess that begs the question. If we take some of this capacity you have to produce 3,450 units in a quarter, and if some of those weren't Portofino's but were instead Daytona's at 10 times the price, it makes it hard for us to understand the low end of the guidance next year based on what we have this year.
spk10: It's true, but you also have to consider that the cars are not all the same. I mean, this morning I was in the line with the team, and it's not the same amount of work time that you need to produce the same object, different objects, different cars. So there is some dependence also on what is the Ferrari the colleagues are working on. So you cannot take a couple eights and make an equation and say we will adjust to one variable. Okay.
spk02: I guess, you know, I guess you raised the year. I suspect a lot of it was on FX. You raised the year on EBIT. I guess with the majority of your costs are in euros, but the revenues from a broad basket currency that are largely favorable to the guidance, can you help me understand, you know, does EBIT, Did you tweak anything lower on the profitability for the underlying business, excluding currency for the year? And I know you have a very disciplined financial process when you have good visibility into your targets for the current year. Have you taken any actions to push any profitability out to next year to add a margin of safety at this point, given how favorable FX is?
spk05: Antonio, can you take it? Yeah, sure. No, I mean, obviously, we are basing our activity on planning, and planning depends on one end on our order book. And secondly, of course, our production capacity. And we plan carefully since we know we have at this time an order book that covers more than a year, longer than that. So what we are basically giving as a guidance is based on what we plan and the quality of the mix that we aim at producing. Okay. Thanks again. And of course, the other element of uncertainty that we do not usually know in advance is the level of the ancillary profitability, let me call it like this, meaning how much of personalization each car will carry on. That, as you see, is part of our revised guidance.
spk02: Okay. Okay. Thanks a lot, guys. I appreciate it.
spk08: We are going to proceed with the next question.
spk06: Good afternoon. Actually, most of my questions have been already answered, but just one left. Two months passed from the capital market day, and we had the chance to have a glimpse of the . I was wondering, I'm not sure if you can tell us, you can tell us if there is any country where Puro Sangue is receiving an higher than average interest. So any flavor on this would be appreciated. Thank you.
spk10: Thanks for your question, Monica. We see a well-spread, let me say, strong interest in Puro Sangue from owners of different countries. So as I said before, for the net order intake, I think we are not able to see any particular geographical pattern. So the Buro Sangre seems to be equally attractive for different owners, family members all over the globe.
spk06: Okay, and there is no, any difference, is there any difference in terms of gender, age, or whatever?
spk10: I can tell you, we looked at the age distribution and it pretty covers the same age distribution that we have in average for all the products, for all the cars that we sell. Thank you very much. So we don't see any sign that is any signal, let me say, that brings us to make a special conclusion for the time being. Maybe for the next call or two calls from now, we see some signal and we will be more than glad to share with you, Monica.
spk06: Thank you very much, Benedetto.
spk08: We are going to proceed with the next question. The next question comes from the line of George Callies from Goldman Sachs.
spk07: Please ask your question.
spk13: Hi, thank you everyone for taking my question. The first question I had was just on the Daytona and the production ramp. It seems that there are at least two cars, maybe a few more presently being used by the press and appearing in social media. Can you confirm, are these pre-production cars or are they part of the 599 total? And can you remind us when the first customer shipment is expected to begin? Secondly, just following on from Julio's questions around gas, can you remind us what percentage of the energy supply in Maranello comes from gas, and are there any activities such as paint shop that have a 100% dependability on gas? Finally, just with respect to Formula One, I understand championship points do still have implications for revenues, and per your own press release post-Hungary, You did describe in that press release the Hungarian performances disappointing. There have now been a few races where you haven't converted qualifying performance into race results. Are there any steps you can take at a management level to address this? Thank you.
spk10: So let's start from Daytona, okay? So Daytona, the shipment will start in Q1. The one that you see on social media, This is the pre-production. Some of those cars may be sold at a later stage. This is a usual process, but let me say the Daytona shipment will start next year. The second was about the percentage of energy that depends on gas. I would say that the biggest, let's say most of the energy is coming from gas because, don't forget, we have three generators, so we are feeding gas in it to create also the electricity that we need. What I can tell you that these years, we reduced a little bit the usage of, this year 22, we reduced the usage of gas in favor of electricity. And I can also tell you, proudly, that thanks to the innovation of the team all over the industrial operation, we have been able to reduce the energy, necessary energy per car by 3%, and we aim to continue to reduce this up to year-end by 5%. And then the last question about Formula One and the performances of the last weekend. As I said also to the Capital Market Day, Formula One, it's in our DNA. Formula One means for us that we have to pay attention to all the details. It's also a way that when there is, it's also a continuous occasion to learn and we keep fighting for the winning of the Formula One Championship.
spk13: Great. Good luck with it, and thank you. Thank you.
spk08: We are going to proceed with the next question. The next questions come from the line of Steven Reitman from SGCIB.
spk07: Please ask a question.
spk09: Yes, hello. Steven Reitman, Société Générale. I have three questions. First of all, you mentioned the record order book, so congratulations on that. Could you comment on whether you're seeing any cancellations and where they might be geographically regarding sort of like the competence of customers? Secondly, I know that obviously residual values, the resale of the cars is a responsibility of individual dealers, but obviously you track that very closely. Could you give us some insights into what's happening by region on residual values on Ferraris? And thirdly, on sponsorship, could you update us on how things are looking in terms of getting a main sponsor for the Formula One team, absent Mission Winner taking a more junior status on the sponsorship? Thank you very much.
spk10: Okay, Stephen. So, yes, record orders, net order intake, and also the cancellations are very, very low and nothing, let me say, out of the regular pattern. And we do not see also here, sorry if I repeat myself, we don't see any geographical patterns. We keep watching with a lot of attention, as you can imagine, all this data we keep analyzing, but we don't see any geographical pattern that we can share with you. Clearly, if there is any pattern, we would be more than glad to share in the next course, but today we don't see anything strange under the sun. The second was about the residual values. And also here for the residual values, consider that if you want to buy a Ferrari and you go in a dealer, you just can buy three of them, the Ferrari, the 296 GTB, 296 GTS. And this helps a lot to keep the residual values. In some cases, we see also a positive trend in the residual values. So this is... But we see also here, we see this as a constant all over the places for different models of our Ferrari. Number three was the sponsorship. I would define this year as the year where we have been diversifying a lot our sponsorship base. If you see also in our Formula One cars, you see a lot of different... companies different brands and this has been possible to new sponsor for example in the logistics like SIVA in the technology like Velas so the sponsorship trend you can refer to the chart that was showing Antonio before it was the chart number nine where basically you have seen also a positive trend so I would say that we see a strong interest from several partners to partner with us, both on the commercial and on technical side.
spk12: Thank you very much.
spk08: We are going to proceed with the next question.
spk07: The next questions come from the land of Charles from Redburn. Please ask your question.
spk15: Hi, thanks for taking my questions. So my first, on the stronger impact from personalization, are there any particular models driving that? Are you doing anything new to encourage people to spec up their vehicles at all? And maybe could you give us the percentage of revenues that personalization makes up? I think it was 17% in Q1, if I remember correctly. Secondly, on the order intake, as you mentioned, the records, despite only having the books open for three models, so I guess I was wondering, in a typical year, if you have seven or eight, GT and sports vehicles in the range, how many would you have the books open for in terms of order intake? And then thirdly, Benedetto, you mentioned the BEV in 2025. I know you guys, you won't want to talk about it too much. I'll give too many details away at this stage. But should we expect that to be a limited edition sort of hypercar or is that going to be part of the core sports car range? Thank you.
spk10: I start from the last one, and then I leave the first, Antonio, to you, the personalization. So I think, Charles, I fully understand your curiosity, and I would like to share and to satisfy it, but it's a little bit early. We are three years ahead. I am trying with the team some unique, authentic feature we want to put in the cars. Allow me to not be very specific in these answers. I'm asking, I'm telling you that really we want to make something unique and authentic, like I said during Capital Market Day, looking at all the dimension from the uniqueness of the way the people will drive the cars to the way the people will fill the cars. So this is about the electric car we will unveil in 2025. then it was a second second question about the net order intake no and it was specifically about the three models only i think that let me say i we started detail this evolution of net order intake over the past years and and i have to say really that this quarter record i think may depend from different things i think One key factor is over the years we enriched the experience, we enlarged the experience that we are able to provide to our owners, to our customer base, Ferrari owners. I mean, I've been attending these two cavalcade, Cavalcade Icona and Cavalcade Riviera, and really you see the way and how much they like the experience we are bringing to them. So apart from, let me say, the other external factors, if I have to pick one factor that is explaining this good NOI, net order intake is that the experience that we are able to provide, and this merit goes to all the colleagues that made this possible, it's something that explains this strong NOI, record NOI in Q2. For the personalization, Antonio, you may. Yes, Charles.
spk05: I mentioned the fact personalization in the quarter was approximately 18% of total revenues on cars and spare parts. And with respect to your question whether this is due to any specific model, the answer is no. As you've listened, this quarter is mainly a quarter of range cars, particularly strong on V8 models. And even on that, the personalization rate has been higher. So when looking forward, we are extrapolating on this basis based on what we see in our current order portfolio.
spk12: Okay. Thank you.
spk08: We are going to proceed with the next question.
spk07: The next questions come from the line of Tom Narayan from RBC. Please ask a question.
spk04: Hi, yes, Tom Narayan, RBC. Thanks for taking the question. Three, a follow-up on the nat gas rationing topic. Could you talk about supply chain vulnerability? So in the event there's less availability of plastics, for instance, you know, do you keep an inventory of components that might absorb this event or maybe are you buying ahead of this? Next, there appears to be an increasing interest in, you know, in Formula One in the U.S., partly thanks to a Netflix show. The U.S. is already a big market for you guys, but could you discuss any knock-on benefits this could have on your business, perhaps beyond just car sales? And then you did make some comments in the prepared commentary about preferring build versus buy. Regarding software, we have seen how this has been somewhat problematic with some big auto companies of late trying to do software in-house. Could you comment on your willingness to partner with software providers as opposed to perhaps trying to growing it by yourself? Thanks.
spk10: Thank you, Tom. I start from the last one, build versus buy. What I say, build versus partnership. I would like to say in this way. As I said also at Capital Market Day, we do not intend to do, for example, the FOS, the Ferrari operating system. We do not intend to put a lot of money, a lot of people on software where there are partners that we can work with to make something unique and authentic. Clearly, we have the competencies to make it unique. it let me say unique and also here there are different kind of softwares i would like to make a difference there is the performance software where we are very strong and if we are able to make the car that we make is because a lot of engineers here understand how to use component on the market with unique softwares that enhance the performances of the cars Now, when it comes instead to other softwares, well, there are two big classes, if you want. The software for autonomous drive, and this is something where, let me say in this way, big OEM have to put a lot of resources, and this is an advantage for us because we do not want an autonomous Ferrari. We don't want the PC or the microchip, let me say, to be pleased about riding a Ferrari. The second instead is more about user interface. Well, over there, we will leverage at the best also the things, the softwares, and we will customize in a way that is always unique and authentic. This is about, let me say, the softwares. and what we do internally and what we partner with other companies. Then it was the second question. Yes, Formula One is growing. The interest of Formula One in the US is growing a lot. We are doing pretty well in America. So you see that the shipments were more than 30% in Q2. We don't know if the signal is more correlation or causation between the two, but I can tell you that the two signals are pointing in the right direction. Strong interest in F1, strong interest from new customers in the US. Then the first one, the more operational one, on the supply chain. Here we experienced some minor readjustment of production. But we are proceeding as we planned at the beginning of the year. We factored in some, let me say, potential bottlenecks, but thanks to the support of the partners. Thanks also to the great job done by the supply chain and the manufacturing of the colleague here, we have been able to stick to the plan and to absorb in an agile way the problems that you may have in the daily operations.
spk12: Okay, thank you.
spk08: We are going to proceed with the next question.
spk07: The next questions come from the line of John Murphy from Bank of America. Please ask your question.
spk14: Good afternoon. I have two follow-up questions at this point. First, on the record order book, I'm just curious if you can give us sort of a length of time that you expect that or you predict that at. I mean, traditionally we thought around 18 months plus or minus, but it sounds like it's significantly longer than that. So are we at 24 months? Plus, and just curious how you're managing that order book. I mean, there's always a lot of demand for Ferraris. So obviously you make it traditionally very difficult to get on that order book. So what is loosening up here and how's that being managed? And then just the second question is on foreign exchange. I mean, obviously you're hedging in the capital markets and with banks, but is there an opportunity given the sophistication level of your customers potentially pass through some of these swings in foreign exchange with them directly as they enter the order book so that you might not be able to be charged so much by banks or have the fluctuation and be a lot more fluid?
spk10: So, John, I think the first one I can tell you that order book, what I can tell you is also what I said in the previous call is well beyond 2023. For the first question and the edging and FX, Antonio, you can comment.
spk05: Yes, John. Our partner and the ones we invoice to are the dealers. We already explored in the past the opportunity of using different models and pass on the foreign exchange risk to partners or even beyond that. But ultimately, I think we concluded the way we are proceeding currently is the most efficient one and certainly even the cleanest from all perspectives.
spk14: Antonio, can you tell us what the cost of hedging is for you?
spk05: The cost of hedging, you mean? Yes, it's the direct cost. Yeah, you can read in the financial charges line. I mean, you can see the difference between interest rate and cost of hedging.
spk14: Okay. All right.
spk05: Thank you very much. It's made on a rolling basis. Of course, it depends on interest rate differentials from time to time. Okay.
spk14: Thank you.
spk05: You're welcome.
spk08: Due to the time constraint, we will now end the question and answer session.
spk07: I would now like to hand back the call to Mr. Benedetto Vigna. Please go ahead for final remarks.
spk10: Thank you. Thank you all of you for your time today and also for all your interesting questions. The second quarter of 2022 clearly marks another set of strong results with double-digit growth and record levels for revenues and profitability. And such strong financial profiles allow us to look at 2022 and beyond with great confidence. Good afternoon, everyone. Good morning, and thanks again for your attention, and buone vacanze.
Disclaimer