Ferrari N.V. Common Shares

Good day and thank you for standing by. Welcome to the Ferrari 2022 Q3 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. 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.

Please go ahead. Thank you, Sharon, and welcome to everyone who is joining us. Today, we plan to cover the Group Q3 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 the Group CFO, Mr. Antonio Picca Piccon. 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 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. With that said, I'd like to turn the call over to Benedetto.

Thank you Nicoletta. Thank you everyone for joining us today. On behalf of everyone at Ferrari, I would like to begin this call by remembering with gratitude Mauro Forghieri, who has passed away. He had such an important impact on Ferrari's history and on motor racing. We will always remember his passion and determination that drove the evolution of our company over the years. With Mauro, we won no fewer than 11 F1 Drivers and Constructors Championship Titles and 5 Endurance Titles. Our thoughts and our prayers are with this family at this sad time. And now let's go to the third quarter. The third quarter has been very, very strong. We've all kept P&L metrics up double digit versus last year. Revenues increased 19%. with shipment up 16%. EBITDA and EBIT were up 17% and 11% respectively. And industrial free cash flow generation was very sound. The very robust financial results we present today are a far more proof of the strength of our business and that's why we revise upward our 2022 guidance on all metrics. The current microeconomic scenario brings new challenges on a global scale. This is true for us and this is true for our partners. Indeed, to guarantee a smooth production, we are supporting our supply chain with tangible measures. Moreover, as we said in the last call, we have taken action on pricing to adequately react to cost inflation, focusing on the following three areas. 1. Price definition of new models 2. Personalization offering 3. Mid-single-digit price increase on selected models and markets Having said that, we continue to enjoy a very strong momentum with a remarkable order intake in the quarters, considering that our clients could order only a few models. Such a positive trend is visible all over the world. Since last time we spoke, a quarter ago, four important events took place, receiving large enthusiasm from our clients. Firstly, the Puro Sangue World Premieres. Secondly, the Cavalcade Classica. Thirdly, Esperienza Ferrari. And lastly, several lifestyle initiatives. Let's start with the world premiere of the Puro Sangue in Tuscany. We hosted 2,400 of our most loyal clients from all over the world at Teatro del Silencio in Laiatico. We promised our clients something new, unlike any others, a true sport car, able to deliver the same driving trails as our most extreme models. and we delivered exactly on that promise, designing and engineering the Puro Sangue as an authentic four-door, four-seaters Ferrari sports car. There was no better reward for the entire team than to see clients wander in front of the Puro Sangue. Their reception was hugely enthusiastic and they praised its performance, the design and driving trails. On performance first, they welcomed our most iconic and powerful V12 engine with a brand new configuration which delivered 725 horsepower. Moving to design, they were surprised to see the roominess on board, Given the compact size, the driving position typical of a sport car, close to the floor and reclined, the welcome door solution, which enables easy ingress and egress, and the electrochromic glass roof that can be added during personalization of their vehicle. Finally, yet importantly, the promise of impressive driving sales Farver & Hansard by the Active Suspension Technology, which makes its debut on this model. We talked about this technology, the FAST, at the Capital Market Day. With all that said, I know you all are curious about how many orders we already have and how long the order book is, but you also know that we do not provide this kind of detail. Trust me, it is unlike any others. It is way above our most promising expectations. And now, after Puro Sangue, let's talk about the second important event of the quarter, Cavalcade Classiche in the Dolomite, featuring 65 vintage Ferrari and their owners from all over the world. The cars paraded through the towns of Trentino Alto Adige, emboting key moments in Ferrari's 75-year history. This unique event is designed, on one side, to bring owners together to share authentic and memorable experiences, on the other, to create a single community united by its passion for Ferrari. And now, the third event, Esperienza Ferrari. Based at the heart of the Fiorano racetrack, where we created a unique and elegant space for our clients. Over five months, we hosted 1,250 clients, of which more than 40% were new to Ferrari and organized 2,500 test drives to let them feel the driving thrills unleashed by the 296 GTB. As I told some of you during our latest roadshow, this memorable experience is also open to our Ferrari people. And in fact, as of today, more than 500 employees have so far enjoyed it, feeling even more connected to Ferrari. And to conclude on the events held in Q3, after Puro Sangue, after Cavalcade Classiche and Esperienza Ferrari, let's focus on the lifestyle pillars. We launched the first product of our partnership with Richard Miller, an ultra-flat watch Limited 250 units, which embodies the shared values between both brands, combining deep engineering know-how with cutting-edge, state-of-the-art innovation. At the Monza Grand Prix last September, a special Giallo Modena apparel and accessories collection was launched to celebrate our 75th anniversary. and this series of limited edition items in yellow sold out in the online store in a few hours. And lastly, during the last Fashion Week in Milan, our lifestyle team showed on the Teatro Lirico stage the Spring-Summer 23 Fashion Collection, receiving international praise. This new collection centered around the theme of dreams and was inspired by the timeless values that have turned the Ferrari dream into reality. And talking about dreams, let's remember that the Ferrari dream has its roots in racing. And so let's recap together where we stand in the various categories in which we compete, the achievement we have delivered, and the new opportunities ahead of us. Let's start with Formula 1. Last time, when I was talking here, I said we were fighting for the championship. While we have returned to be competitive in these years, we cannot be satisfied with this year's results. Now, we focus on the last races of the season and in preparing ourselves in the best way possible for the next one. In Competizione GT we celebrated the 500th victory of the Ferrari 488 GT3, which makes this model the most successful Ferrari racing car ever. Thank you very much. We hosted our Finale Mondiali at the Imola Racetrack. This was just a few days ago. The feast of high-performance racing celebrated the final event of our Attività Sportive GT together with our clients, fans and employees. 38,000 Motorsport enthusiasts gathered to share their passion which made this moment the perfect stage for the unveiling of the Ferrari Le Mans hypercar. 499P is the name of this fantastic car. This new car marks Ferrari's return to the FIA World Endurance Championships Top class from next season, exactly 50 years after we last fought for outright victory in that championship. And now it's time to update you on our ESG actions that are very important in our plan. In our journey To reach carbon neutrality by 2030, we have already implemented the 1 MW fuel cell installation and the partnership with Climate Seed announced at the Capital Market Day. But in addition to this, the team has been deploying three further initiatives during these months. Firstly, in line with our plans, we are installing additional new photovoltaic panels on the roof of the Maranello buildings, Delivering a total power of approximately 1.5 MW by year-end. This will be operational by the end of next quarter and I will update you in the next call. Secondly, we planted the first trees within our forestation initiative Bosco Ferrari Maranello. The first area of woodland spans 6 hectares. Out of overall 30 hectares to recreate an ecosystem with significant environmental benefits. And we are seeing increasing interest from many Italian municipalities to join this initiative. And this interest makes us very, very proud. Thirdly, in addition to our plan shared at Capital Market Day, we are continuing to streamline our production processes and to identify actions to reduce the energy consumption and CO2 emissions. These efficiencies are possible thanks to the ideas, awareness, and action of the Ferrari people. And here I would like to give you a couple of examples. Thanks to the adoption of new filters in our foundry, we are reducing our scope 3 upstream carbon footprint by 1% and saving more than 250 tons of aluminum per year. No capex required, only brain power. Two, by recovering the heat dispersion in our engine testing process, we reduce the natural gas usage by approximately 2% of our yearly consumption. Finally, let me highlight two important achievements related to our people and the next generation. On one end, we received the confirmation of the Equal Salary Certificate in Italy and North America. This is a testament to our commitment to an inclusive work environment where the importance of merit is guaranteed to attract, retain, and develop the talents that will accelerate Ferrari's innovation in the future. On the other end, we inaugurated the E-Do Learning Center at the Fermo Corners Higher Education Institute in Modena. As you know, promoting education is a core part of Ferrari's ethos and its relationship with the local community. The new laboratory, which aims to help students enter the world of science and technology, is an investment in their futures. And now I will hand over to Antonio to review in detail the Q3 2022 result.

Many thanks, Benedetto. And good morning or afternoon to everyone joining us today. Let's start on page 7 with the highlights of the third quarter. Another very strong quarter indeed, with double-digit growth on key metrics. Shipments were 3,188 units, up 16% versus prior year. Group net revenues were 1,250,000,000 euros, up 19%. EBITDA reached 435 million euro, up 17% year over year, with an EBITDA margin of 34.8% lower than last year, given the absence of the Ferrari Monza. EBIT was 299 million euro, up 11%, with an EBIT margin of 23.9%. Percent and margins were in line with our expectations, mainly reflecting the product mix and DNA evolution. Net profit came in at €228 million, up 10% versus prior year, resulting in a diluted EPS of €1.23 compared to €1.11 in Q3 2021. The industrial free cash flow generation in the quarter was 219 million euro, which implies a cash inflow for the nine months close to 600 million euro, almost 100 million higher than last year. Turning to page eight, you can see the details of the Q3 shipment. The product portfolio in the quarter included seven internal combustion engine models and three hybrid models. representing 81% and 19% of shipments, respectively. As mentioned by Benedetto, in the quarter we were continuing to serve an impressive order book across all models. Deliveries increased were mainly driven by the 296 GTB, which was in the ramp-up phase, along with the A12 Competizione. The Ferrari Portofino M and the SF8 family continued to sustain deliveries growth, partially offset by lower contributions from the SF90 family. There were no Icona deliveries in the quarter, as the Ferrari Monza phased out in Q1 this year. Geographic allocations were driven by product cadence. Mainland China, Hong Kong and Taiwan continued to post a double-digit growth versus the prior year. reflecting the strength of the demand and representing approximately 14% of our total shipments in the quarter, 11 in the nine months. As a reminder, such a strong performance in the region represents for us a positive in terms of absolute profitability, but it also implies a margin dilution linked to duties and consumption tax. On page 9, you can see the walk of our group net revenues, growing 13% at cost and currency. In Q3, we consolidated the trends already explained in the previous quarters. Cars and spare parts, driven by higher volumes and personalizations, which personalizations were at around 18% in proportion to revenues from cars and spare parts. Engines decreased due to Maserati. Such supply agreement is approaching its expiration in 2023. Sponsorship commercial and brand reflected the better prior year Formula One ranking and the contribution from lifestyle activities led by retail sales and museum visitors, despite the lower sponsorship. Currency had a positive impact, mostly related to the U.S. dollar and the Chinese yuan. As we move to page 10, let me review the change in our EBIT year-over-year, explained by the following variances. Volume, positive for €62 million, reflecting the shipment increase. Mixed price variance, negative for €26 million, and mainly impacted by the lack of Icona and the softer range model mix, partially offset by the increased contribution from personalizations and country mix. As previously mentioned, the strong performance in China was supportive in absolute terms, even though it contributed to soften our percentage margins. Industrial and R&D expenses grew 34 million euro in the quarter, mainly due to higher depreciation and amortization and obviously cost inflation. SG&A were negative by 17 million euro, mainly reflecting communication, marketing and lifestyle activities. Other, finally, was slightly positive for €3 million, reflecting the improved private-year Formula 1 ranking and higher contribution from lifestyle activities, partially offset by lower sponsorships, reduced contribution from Maserati and other miscellaneous expenses. The total net impact of currency was positive for €41 million. Turning to page 11, our industrial free cash flow generation for the quarter reflects the strong profitability and a positive contribution from working capital and others, mainly related to the collection of the Daytona SP3 advances. This was partially offset by 198 million euros of capital expenditure that are progressing in line with our full-year programme of about 800 million euros. In the quarter, the capitalization ratio of our development expenses was approximately 45%, increased versus the prior year, also as a result of the cut research spending in Formula 1. Net industrial debt as of the end of September 2022 was €256 million, decreased by €130 million compared to June 2022, reflecting the solid industrial free cash flow generation net of the €85 million of share purchases. On page 12, as already mentioned by Benedetto, we revise upward our 2022 guidance across all metrics. Thank you very much. To conclude, the results we have presented today, the robustness of our business model and the success of our product portfolio in the current trading conditions continue to fuel our confidence for the remaining part of 2022, setting the ground of another great year and more to come.

Thank you, Antonio. Sharon, we are now ready to open the Q&A session. Thank you.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. Once again, star 1 and 1 to ask a question. We will now take our first question. Please stand by. And your first question comes from Michael Bonetti from Credit Suisse. Please go ahead. Your line is open.

Hey, guys. Congrats on a nice quarter. I know the macro is very tough. Let me ask you, I want to ask you today how you feel about the 2022 guidance for $1.82 billion. Even though you're raising today, I want to ask you whether you think it's conservative next year at this time. But I am curious how you see revenues and profitability building next year across the business lines, maybe the cars business. How you see that contributing, how the P&L for the lifestyle businesses and the sport businesses will change as you bring back some of the core sponsors and expand into Le Mans, the lifestyle categories that you mentioned, maybe some of the biggest incremental changes. And then I guess longer term, I'm curious, what are the bigger challenges you see today in getting the first electric Ferrari in 2025 up to the margin levels that are in line with the averages you enjoy across the rest of the fleet?

Thank you for the question, Mike. So, let's start from the first one. As Antonio said, and as the numbers are showing, we feel very much confident, and that's the reason why we are increasing, number one, the guidance for this year, and we are also very positive for the next year. This is thanks to the order book that we have, that is, let me say, spanning all the products we have, as well as all the regions. So this is very first important message. Now, if you talk about the bigger challenge for electric car, I think I would say would split the answer in two parts. If you talk about the product development where we are, we are fully in line with our, let's say, project development. So we are proceeding as per plan. And this is true, as I said, on the technical side, but if I go also to see on the profitability side, this is fully in line with our long-term view, mid-term view that we share with you at Capital Market Day. This year, we made a lot of progress in optimizing, on one side, the architecture of the cash, On the other side, also optimizing and strengthening our relation with some strategic suppliers.

Thank you. Are you finished, Michael?

I am, thank you.

Thank you. I will now go to the next question. Please stand by. And your next question comes from the line of Giulio Pescatori from BMP. Please go ahead. Your line is open.

Hi, everyone. Thanks for taking my question. The first one on the Puro Sangre order book, I understand you're not going to comment any more in details on where the order book stands, but can you maybe share any color on the composition of this order intake? Is this achieving the goals you had in mind for this model? Anything you can share on that would be very interesting. The second one on the order book, I noticed that you're now defining it as remarkable versus record in pretty much any other presentation in the last few quarters. I don't want to read too much into this, but is that a function of the availability of models? Is there anything else that you think a softening in order, anything on that would be also helpful? And then the last one on the 296 GTB, If you look at the number of hybrids you sold in the quarter, it was pretty much flat, sequentially, versus Q2. I was expecting maybe an increase because of the ramp-up of the 296. Are you just giving priority to other older models, given the demand, or is there any delay on the ramp-up of that particular model? Thank you.

Okay, I'll start from the last one, Giulio. The 296, the hybrid and the split between ICE and hybrids. I would say that so far it has been always in the ratio 80-20. We expect this ratio to change. Consider that we will have also, we have already a stronger order book when it comes to the GT, the Spider, the 296 Spider. This is important, so if you want your deduction is correct, we will have an increase of the hybrid shares. In our models. So this is question number three. The question number one, I go to the Puro Sangue, to provide a little bit more color. As I told you, we had almost 2,500 clients visiting us and looking at the world premieres in Tuscany. It has been very well received because of performance, because of the design, because also some of them had the pleasure and opportunity to try the cars. But I have to say that two things we told you at the Capital Market Day keep... Let me say, we stick to that. Number one, we do not want to pass 20% of annual volume of this cash. And two, we are, let's say... If you want, the order backlog is such that it is fully satisfied. So you cannot come in our factory, but if you come in our factory, you see that we made enough space to accomplish and to realize our industrial plan for this naturally aspirated V12 engine. So maybe what I can tell you is that the orders we got from Puro Sangue are really unlike any others. If you want high volume cars, in the sense that the order book is more similar to the special cars, to the limited edition cars, than to the bigger volume cars. And then there was the last, the other question was the net order intake, the book. Clearly, by today, I mean, we keep... Increasing continuously our order book. We expect a decrease in this speed also because we are sold out on a lot of models. And we are focusing, I mean, today if you go in a dealer, you can buy four models, more or less. You have the Roma, you have the Purosangue, you have two terms, ICE and two hybrid. 296 Spyder, 296 GTB. And then you have Purosangue and Roma. Clearly we expect a slowdown. Thank you very much. Thank you.

We will now go to our next question. One moment, please. And your next question comes from the line of George Galliers from Goldman Sachs. Please go ahead. Your line is open.

Yes. Thanks very much for taking my question. Actually, the first question was just following on a little bit from Julia's question. It sounds like you don't have any capacity constraints on the hybrid cars. So I just wanted to ask about the lower shipments of the SF90s. whilst you saw a positive contribution from older models like the F8, particularly as first deliveries of the SF90 Spyder only commenced in 3Q last year, hence full deliveries of that vehicle have been in progress for less than 12 months. Is this a temporary effect? Should we expect growth in SF90 at some point in coming quarters or are you actually seeing a bit of a wind down in terms of the SF90? The second question I had was just on the 499P, which I think has got everyone with a keen interest in the auto industry and motorsport extremely excited. Is it reasonable to expect at some point a road car derived from this product? And just to revisit, I think, the introduction of the Icona series, I believe originally it was flagged as bridging the gap between the hypercars, which you typically only introduce at least once every 10 years. Could you see a hypercar and Icona model in production in tandem? Or would the intention still be that Icona bridges the gap between the hypercars? Thank you.

Okay, so we start from the first one, George. One is the capacity constraint you were saying. So I would like to say one thing. One of the key strengths of Ferrari is is the ability to manage a different model in production, also because the line that we have are not fully automated, but there are people, human beings, that are able to give flexibility and agility to the production line. If you come here, you clearly see that the same manufacturing line can manage ICE or hybrid cars. So what I can tell you is that, number one, we are producing as planned, There is no deviation and here compliments go first of all to the team that is able to manage a complicated supply chain and two also to our partners that are very much supportive. Another important message is that the agility of this line is thanks to the presence of people that with their passion and their dedication are able to make this line very, very agile and accommodate What are the clients' needs? So this is very important. When it comes to 499P, I'm glad you also like the cash. I can tell you that I was with a colleague what was Saturday evening. It is really nice cash. It is a big step forward for us. I don't want to comment about your question because, as you can imagine, Thank you. Thank you.

We will now go to our next question. One moment, please. And your next question comes from the line of Evan Silverberg from Morgan Stanley. Please go ahead. Your line is open.

Hi, it's Adam Jonas, everybody. Can you hear me?

We hear you, yeah.

Great. Benedetto, I just wanted to kind of reconcile. You said that the order book for Purosangue is fully satisfied, but you can still order it at a dealer. So I just want to confirm it's not quite sold out officially, correct?

Adam, it's a good deduction.

Thank you. Also, China, 14% of total sales versus nine last year is dilutive to margin. Accretive to dollars, euros of profit, is that normal? What are your thoughts on what a normal level or steady state level of China as a percentage, once you kind of get some of your other launches flowing through to Western markets?

Adam, as we said in the Capital Market Day, we believe the right number for us, the exposure in China, if you want, is between 11%, 11%. 10-11%.

10-11%. Great. Thanks so much. And just finally, if I can squeeze one more in and I'll shut up. You talked about strategic partnerships as you kind of get closer to production of your first pure EV in 2025. I know this calls too early for major milestones there, but would next year, by end of next year, be Be too soon for you to disclose your battery cell partner or should we wait until beyond 23 for that type of announcement? Thanks, everybody.

Adam, you know that the battery, we are the suppliers. The cell, we do not even disclose the cell supplier, the cell maker also for 26 and the CF90. I believe that this is an important part we want to keep for us. So what I can tell you and all the colleagues on the phone is that the development of the cars is proceeding as planned and we need a big, big step forward in Q3. But unfortunately, we cannot tell you who is going to be the sales supplier. Thanks, Benedetto. Thank you, Adam.

Thank you. We will now take our next question. One moment, please. And your next question comes from the line of Stephen Reitman from Societe Generale. Please go ahead. Your line is open.

Thank you and good afternoon. I have two questions. First of all, I think it's been said that it was a kind of set of unique circumstances that have led to the situation where you have very few vehicles that are available to sell because of delays with certain launches and other impacts from COVID and other delays. So you had a limited number of palliative vehicles to sell. When in your mind do you think we'll be in a situation where your dealers will have a much wider range of vehicles to sell? And secondly, could you comment on the trends in residual values? Obviously, I know that's the responsibility of dealers to do that, but obviously you monitor that situation quite closely as well. Thank you.

I'll start for a second, Stefan. The trends on the residual value, we don't see any change. We see some model appreciating, but we don't see any change over there. And actually... We believe that the fact that a lot of models are sold out, this will be an opportunity for our dealers to focus also on the pre-owned business. And then there was the first question was about the... Yeah, I think, look, the... is what we said in Capital Market Day. We are planning to launch 15 models in these four years beyond the Puro Sangue. We are sticking to that. We may have some models more successful than others, but I think what I can tell you that we stick to our compass, that is 15 new models. We've displayed, I told you on the Capital Market Day, that means that in 2026 we will have the offering split between we will have the three offerings the ICE, the hybrid and the electric as per what we told you in the Capri Market Day so there is no change and we had actually I can also give more color Stefan last week we had the distribution the dealers annual meeting here in Modena where we had 500 people visiting us and let me say they are very supportive, very much engaged and they fully agree on our plan for the future in terms of new car launches. So there is very, very tight relation and we are working very well with them and they with us. Thank you. Thank you.

Thank you. We will go to our next question. One moment, please. And your next question comes from the line of Monica Bozzio from Intesa San Paolo. Please go ahead, your line is open.

Good afternoon, everyone. I hope you can hear me. The first question is on Kurosanwe. The personalization rate on average is 18%, but I'm wondering if we can assume a much higher personalization rate for Puro Sangue, maybe in the range of 23, 24. Am I too aggressive on this side? And the second question is more strategic. Looking forward, would you see as reasonable Thank you very much. Thank you, Monica. So I start from the Puro Sangue. Okay.

Let me tell you one thing that the Puro Sangue has a lot of accessories, a lot of optional, a lot of opportunities of personalization because we have been enriching the offers. I mentioned just one that is very interesting. It's an electrochromic glass roof. It's very, very interesting. It's very well appreciated. I believe that there could be opportunities to have higher personalization, but at the end of the story it depends also on what the clients and how much they want to personalize. So I would, allow me to say, I would be arrogant if I would guess what is the personalization rate of the clients. What I can tell you is that the offer is pretty wide. Okay. As you've seen also in Q3 and the guidance in Q4 is also driven by a positive tailwind on the personalization. Then when it comes to the, let me say, electric puro sangue, if I allow me to say in this way, the second question.

Something similar, yes.

Yeah, as I said before to another colleague, The plan for the future is something that we are very secret of also because we believe it constitutes a competitive advantage for us. So let me say in this way, we will use the technologies in a way keeping always in mind and putting always the client at the center and the driving trails that we want to generate. So we have a plan but I cannot disclose here.

Okay.

Sorry, Monica. Got it. I understand. The customer picture, yes, for sure, we have a customer. We know the customer of Porosangue. What I can tell you without disclosing anything confidential, what I can tell you is that we have a strong acceptance either by, let me say, the collectors, what was called in the previous call, I think, top VIPs, and also by the new prospect. The reception of this model across different age, different regions, different genders is very, very strong. So there is not a clear sign, a clear pattern. I can tell you that men and women, Asian, European, American, they're all a little bit older, a little bit younger, they all like this car, the Puro Sangue.

Thank you very much Benedetto, very clear. Thank you.

Thank you.

Thank you. We will now take your next question. One moment. And your next question comes from the line of John Murphy, Bank of America. Please go ahead.

Good afternoon. Just one additional question on the Parasangwa. I mean, you've mentioned that it could be as much as 20%. Thank you very much. are expecting, so it seems like that would be sort of a high number. I'm just curious, as you dimension where that segment actually could be for you, I know you're governing it at 20%, but is that something you think can happen more quickly, or based on your order book, maybe it might take longer?

Thank you, Johnny. Maybe I misunderstood. You said 3,500 per year?

So, assuming that you're going to... Yeah, assuming you're going to do about 13,000 units this year, I mean, just grossing it up and just saying, you know, if you're going to do, if you're limiting the Porosangua to 20%, you would add, you know, specifically 3,250, you know, units to that base of 13,000 that would be Porosanguas to get the 20% mix as Porosangua. I mean, basically, how fast do you think you could get there or how slow do you think you get there? And, I mean, and, you know, how do you manage this based on the order book that you're seeing right now?

No, the reason why I was asking is that for me, 20% out of 13,000 is 2,600. That's the reason why I wanted to check.

But I would imagine it would be incremental, right?

I'm not saying incremental. I'm saying that out of the total numbers, up to 20% of yearly volumes will be Puro Sangue. So let's say if it is 13,000, it's around 2,600. What I can tell you is that we are pretty close to our target. And let's say, I think this is the most detailed information I can provide you, together with the fact that the car really received a strong acceptance, as I said before, by all people that attended, because we had customers traveling from all over the world. and let's say the acceptance has been very, very strong. A lot of enthusiasm. They appreciate the performances. They appreciate the design. They appreciated also the driving emotion because during those days there was a very good idea of the marketing team, of the commercial team. They offered the possibility to some customers that were selected through a lottery to drive the car for around 40 kilometers And I cannot share with you, but there are the video of the people that are really crying for the emotions that they can experience. So, very strong acceptance because of performance design and driving trails. And we are very close to our target. And as I said, we stick to our plan to not pass the 20% threshold of our annual volumes, whatever they will be.

We look forward to driving it. Just a second question real quick. If we think about 2023, mix is going to be a major positive with the Daytona and the ProSangue. It sounds like pricing is a small positive for you right now and that's likely to continue. Volume presumably will be up. Raws are easing. Other cost inflation might not be too bad. It sounds like your earnings may gap open next year. I think the consensus is for better than a 20% increase in EBIT. Is there any sort of major sort of headwinds that I might be missing or we should be thinking about or even positive factors we should think about besides those major ones for 2023?

I mean, Capital Market Day was clear about the target also for next year. Clearly, we are paying close attention to the story of the inflation. And this is also the reason why we said those in the previous call, we are increasing prices for next year. Thank you very much. Thank you. Thank you.

We will now go to our next question. One moment, please. And your next question comes from the line of Thomas Besson from Kepler. Please go ahead. Your line is open.

Thank you very much. It's Thomas Besson from Kepler Show. I'd like to first follow up on John's question. Is that okay? I know you never want to give these exact numbers, but When you said 20% of the volumes you may achieve, I think we probably need to think about a few years out. So does that include only the current capacities with the two shifts of the existing production lines, or does that include as well potentially incremental capacities from DEVs? So should we think about 2,500 or more, 3,000, 4,000 units per annum for pure assembly? That's the first question. Thank you.

No, no, as we said, there will not be a big change in our capacity. We want always to keep and to guarantee the exclusivity of all the cars we sell. Purosangue, as I said also in June when we met here in Maranello, it's not a car that is meant to double the volume for us, like it is in the strategic plan of other players in this field. For us, it's a unique car, it's a sport car, it's a car unlike any others, for which we aim to have maximum 20% of the yearly volumes. Because I believe, we believe, that the exclusivity and uniqueness of our car goes also through this avenue. We don't want to end up doubling the volume and, let's say, putting a lot of capex. Also because, as I said, exclusivity and uniqueness are the key drivers of our product strategy and our, if you want, our daily compass. And that's what we want to stick to.

Thank you very much. Second question, on Forex, when we look at 2023, is it reasonable to expect another decent boost from Forex, given your hedging positioning, or have we seen already the bulk of the benefits from that bucket?

Okay, this is a good question for Antonio, because otherwise he was silent. It's good.

Thank you for keeping my attention alive. I think the question, it depends, of course. I mean, as you know, we edge foreign exchange on a rolling basis. That means that we basically project on 2023 the trend of 2022. Whether this will be a positive or a negative, it pretty much depends on how the foreign exchange rate behaves. On a spot basis. All in all, we try and have approximately 70% of our total exposure in advance, declining over time. So we are basically projecting to 2023, as I said before, the trend that we have witnessed in previous months. Then if the dollar goes to 1.10, obviously we have a huge positive. If it goes to 0.80, it's going to be a negative. That is the sense of my answer. Hope it helps.

Yes, thank you. Thanks. Just a very quick follow-up. Can you confirm the dates of first deliveries for Pure Songway and Daytona, please? The quarter you'll have the first deliveries? Yeah, it's Q2. Q2. Thank you very much. Welcome.

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Philip Hochoise from Jefferies. Please go ahead. Your line is open.

Yes, thank you, and good afternoon. I've got two questions. One is I'm just following up on the question on the used values. So if I understand right, You started your comment saying you've got a remarkable auto intake across models, and that will probably more likely translate into better regional values rather than maybe the used market being more economically sensitive and people being kind of more shy about buying those cars. So my final question is, is there any way that Ferrari is directly leveraged to improving used values What I mean by that is I need agreements with dealers where there's a bit of profit sharing. They're going to benefit the most, I guess, of this improvement in use values. And I'm just wondering if in any way you are geared to that gain in profit sharing with dealers. And my other question is a lot of questions about pure sanguine, 20% cap, et cetera. If I hear you right again, this car drives every bit as well as any Ferrari, so you're very proud of it. So this 20% cap is just arbitrary. For years there was a concern about SUVs might damage the brand, et cetera, but this is not at all the case. You're just trying to keep the diversification of your product portfolio rather than lose a car that might eventually dominate some of your volume. Is that correct?

Okay, Philip, I will start from the first one. When it comes to the pre-owned business, we have no profit sharing. So there is no profit sharing with our dealers. It's their business. They manage in the way they want. And let me say, what we have to do to help them is always to think about uniqueness and exclusivity of the model. So this is what we do. When it comes to Puro Sangue, I think I would like to take this opportunity to remember that there are two words that in Ferrari do not fit well. Ferrari and utility. These are, I mean, SUV and as I said, it's not an SUV or FUV because putting together the utility world with a Ferrari car, I think we all agree, it's no sense. Now, the story of our Puro Sangue, that is a new category, is unlike any others, that is pushing and is very well appreciated. Well, we said 20% because we believe that this is a car like the other cars we have in our range. We will have, if you make the math, we will have around 4 cars per year, 4 to 5 cars, so it's around 20%. Thank you very much. Thank you very much. Thank you. We will now go to our next question. One moment, please.

and your next question comes from the line of Tom Narayan from RBC. Please go ahead, your line is open.

Hi, yes, Tom Narayan, RBC. Thanks for taking the questions. The first one is, you know, on the guidance you guys have out there for 2023, I know that it does feel, I think, somewhat stale and I think some investors may be just wondering if Why maybe you haven't withdrawn it or commented on it? I know usually you only comment on the annual guidance in the full year call, but I was just curious if there was any commentary on the current 23 guidance that you have out there. And then the second question on Pure Songway, a number of us on this call attended this Rolls-Royce event, and I found it surprising to hear that a lot of customers for that brand really didn't care as much for software or assisted driving and those sorts of features and cared more about the luxury aspects of the car and stuff like that. Just curious if this is what you were hearing from your latest event from consumers looking at the Pura Sangue as well. Thank you.

I start from the second one. If I understand well, Tom, is how much is valued the software in this kind of cars. I'd like to say that when you talk about the luxury cars, and this is true, I have seen now, I am in this role since 14 months, it's true that there are features that are maybe important in mass market cars, but are not at all important in luxury cars. I have had the pleasure to talk with many customers during these years. So what I can tell you that... The software, the digital, the electronics in the cars must be placed in the right value, because if you exaggerate, nobody will appreciate that value. So I do not comment specifically about Puro Sangue, but I can tell you that when you talk about luxury cars, well, it is a place where typical dimensions that are important for the mass market players do not find a spot and a meaning in this world. When it comes to 2023 guidance, I think you understood well, we provide the guidance for 2022. I can repeat what Antonio myself said before, that we, the business model is very robust, the order portfolio is very strong, is very robust, and then we feel confident about this year and next year, but we do not provide any specific guidance. Sorry, Tom. Okay, no problem.

Thank you.

in addition to what we said at the Capital Market Day, of course. Yeah, yeah, understood.

Thank you. We will now go to our next question. One moment, please. And your next question comes from the line of Anthony Dick from Odo. Please go ahead. Your line is open.

Yes, hi. Thanks for taking my questions. I had a first one on the 2022 margin guidance. In season Q4, you can have probably some positive product mix for the SF90s, some positive geomix, ramping up at the FX tailwind, and also maybe fewer expenses with fewer events. Yet your Q4 EBITDA margin guidance is for a very moderate increase in terms of margins. So just wondering if there were any particular headwinds to expect on the margins in Q4. And then a second quick question on the topic of energy and energy supply. I understand that you use a lot of gas for your production in your factories, and Italy is reliant quite heavily on Russian gas. So I just wondered if you put in place any measures to significantly reduce your gas consumption or any contingency plans you had in case the country faced a gas shortage this winter or the next. Thank you.

Okay, so I take it, Antonio, I took the one on energy and I let Antonio comment on the first one. So I would like to clarify a few things. Number one, we do not rely on Russian gas. Number two, we produce 80%, almost 80% of our energy is coming through the three generators that we have in our factory. Number three, as I showed you, we are working, we are increasing the share of electricity that we are generating in-house. and we are also reducing the energy waste through better efficiencies or, let me say, leveraging the ideas that the team has. If you remember, I was talking about reducing the gas consumption by 2%. That is a good number that has been done by, let me say, putting the people around the table. So we are putting also some conditions in place Thank you very much. Thank you very much.

may think of the business being particularly strong in terms of personalization in addition to what the range of models that we sell may provide. We have a positive from foreign exchange rates compared to the initial expectations for the year. And in terms of the negative, the cost inflation is the only one I can think of. So all in all, I think we are in line with what we had expected since overall throughout the year.

Okay, thanks very much.

Thank you.

Thank you. I will now hand the call back to Benedetto Vigna. Please go ahead.

Thank you. Thanks to all of you for your time today and also for all your useful questions. As you have heard a few minutes ago from myself and Antonio, we did what we said. We delivered on all what we promised and we look with great confidence to Q4 and beyond. Before closing, I also take the occasion to thank all the men, all the women of Ferrari in Maranello and all over the world that contribute daily to the success of our company. For the time being, have a good afternoon, everyone. Thanks again for your attention and talk to you in a quarter. Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.