Record quarter EBIT...on the way to another great year

Publication date: 
01 Aug 2018
  • Total shipments of 2,463 units, up 131 units (+5.6%)
  • Net revenues at Euro 906 million, decreased a few million, but up 1.4% at constant currencies
  • Adj. EBITDA(1) of Euro 290 million, up 7.0%, with margin at 31.9%
  • Adj. EBIT(1) of Euro 217 million, up 7.5%, with 200 bps margin increase to 23.9%
  • Net profit of Euro 160 million, up 18.1%
  • Net industrial debt(1) at Euro 472 million (Euro 442 million excluding share buyback)
  • 2018 Outlook confirmed
  • Capital Markets Day on September 17 and 18, 2018 dedicated to plans in place to meet the 2022 Mid-Term targets
For the six months ended June 30(In Euro million unless otherwise stated)For the three months ended June 30
20182017Change 20182017Change
4,591 4,335 256 6% Shipments (in units) 2,463 2,332 131 6%
1,737 1,741 (4) (0.3%) Net revenues 906 920 (14) (1.6%)
563 512 51 10% EBITDA(1) 291 270 21 8%
562 512 50 10% Adjusted EBITDA(1) 290 270 20 7%
428 379 49 13% EBIT 218 202 16 8%
427 379 48 13% Adjusted EBIT(1) 217 202 15 7%
309 260 49 19% Net profit 160 136 24 18%
308 260 48 18% Adjusted net profit(1) 159 136 23 17%
1.63 1.37 0.26 19% Basic earnings per share (in Euro) 0.85 0.72 0.13 18%
1.62 1.37 0.25 18% Diluted earnings per share (in Euro) 0.85 0.72 0.13 18%
1.63 1.37 0.26 19% Adjusted basic earnings per share 0.84 0.72 0.12 17%
(in Euro)(1)
1.62 1.37 0.25 18% Adjusted diluted earnings per share 0.84 0.72 0.12 17%

Jun. 30, 2018Dec. 31, 2017Change(Euro million)Jun. 30, 2018Mar. 31, 2018Change
(472) (473) 1 Net industrial debt(1) (472) (413) (59)

We deplore the loss of Sergio Marchionne and our thoughts are with his loved ones. The Company remains committed to pursuing the values he embodied and achieving his vision with unabated determination, ambition and passion, in line with Enzo Ferrari’s legacy.

Maranello (Italy), August 1, 2018 – Ferrari N.V. (NYSE/MTA: RACE) (“Ferrari” or the “Company”) today announces its consolidated preliminary results(2) for the second quarter and six months ended June 30, 2018.

Shipments(3)

For the six months ended June 30 Shipments (units) For the three months ended June 30
2018 2017 Change  2018 2017 Change
2,176 2,035 141 7% EMEA 1,073 1,001 72 7%
1,419 1,342 77 6% Americas 850 797 53 7%
360 301 59 20% China, Hong Kong and Taiwan, on a combined basis 177 140 37 26%
636 657 (21) (3%) Rest of APAC 363 394 (31) (8%)
4,591 4,335 256 6% Total Shipments 2,463 2,332 131 6%

Shipments totaled 2,463 units in Q2 2018, up 131 units or +5.6% vs. prior year. This achievement was driven by a 22.6% increase in sales of our 12 cylinder models (V12), while the 8 cylinder models (V8) grew 1.0%. The V12 strong performance was mainly led by the 812 Superfast. This was partially offset by the F12berlinetta phase-out, the F12tdf that completed its lifecycle in 2017, as well as lower sales of LaFerrari Aperta that is finishing its limited series run. V8 performance was supported mostly by the 488 family. The first few deliveries of the newly launched Ferrari Portofino partially offset the California T phase-out.

EMEA(3) grew 7.2%, with Middle East rebounding. Americas(3) increased by 6.6%, China, Hong Kong and Taiwan(3), on a combined basis, were up 26.4% while Rest of APAC(3) decreased a few units due to timing of the newly launched Ferrari Portofino yet to arrive on the market.

Total net revenues

For the six months ended
June 30
(Euro million) For the three months ended
June 30
2018 2017 Change   2018 2017 Change
1,282 1,250 32 3% Cars and spare parts (4) 670 669 1 0.2%
157 204 (47) (23%) Engines (5) 80 101 (21) (20%)
252 246 6 2% Sponsorship, commercial and brand (6) 127 124 3 2%
46 41 5 15% Other (7) 29 26 3 6%
1,737 1,741 (4) (0.3%) Total net revenues 906 920 (14) (1.6%)

Net revenues for Q2 2018 decreased a few Euro million at current currencies to Euro 906 million, but was up 1.4% at constant currencies. Revenues in Cars and spare parts(4) (Euro 670 million, +0.2%) were slightly positive versus prior year, supported by higher volumes led by the 812 Superfast, the 488 and the GTC4Lusso families as well as the first deliveries of the newly launched Ferrari Portofino. Mix was positive thanks to V12 models, pricing along with the first deliveries of the strictly limited edition Ferrari J50. This was partially offset by the California T and F12berlinetta phase-out, the F12tdf that completed its lifecycle in 2017 as well as lower sales of LaFerrari Aperta that is finishing its limited series run and negative FX. Engines(5) revenues (Euro 80 million, -20.2%) posted a decrease in sales to Maserati due to lower engine volumes. Sponsorship, commercial and brand(6) revenues (Euro 127 million, +2.1%) were up Euro 3 million thanks to an increase in sponsorship and higher 2017 championship ranking compared to 2016, partially offset by lower sales generated by brand related activities and FX.

Adjusted EBITDA(1) and Adjusted EBIT(1)

For the six months ended June 30 (Euro million) For the three months ended June 30
2018 2017 Change  2018 2017 Change
562 512 50 10% Adjusted EBITDA(1) 290 270 20 7%
32.3% 29.4% +290bps   Adjusted EBITDA margin 31.9% 29.4% +250bps  
427 379 48 13% Adjusted EBIT(1) 217 202 15 7%
24.6% 21.8% +280bps   Adjusted EBIT margin 23.9% 21.9% +200bps  

Q2 2018 Adjusted EBIT(1) was Euro 217 million, up Euro 15 million (+7.5%) vs. prior year. This was a result of higher volumes (Euro 12 million) thanks to the 812 Superfast, the 488 and the GTC4Lusso families together with the first deliveries of the Ferrari Portofino. Mix / price was positively impacted (Euro 8 million) by strong performance from V12 models and pricing increases along with the first deliveries of the strictly limited edition Ferrari J50. This was partially offset by lower sales of LaFerrari Aperta that is finishing its limited series run. Research and development costs / industrial costs slightly decreased (Euro 2 million), mainly due to lower spending in F1 activities. FX, including hedges, negatively impacted (Euro 32 million) mainly due to USD, JPY and GBP depreciation versus Euro. Other increased (Euro 26 million) mainly due to higher sponsorship revenues and higher 2017 championship ranking compared to 2016, partially offset by lower sales to Maserati and brand related activities.

The tax rate in the quarter was reduced mostly due to the effect of increased cap for deductions related to eligible research and development costs, as well as increased depreciations of fixed assets in accordance with the Italian tax legislation.

As a result of the items described above, net profit for Q2 2018 was Euro 160 million, up Euro 24 million (+18.1%).

Industrial free cash flow(1) for the three months ended June 30, 2018 was Euro 93 million, driven by strong adjusted EBITDA(1). This was partially offset by 2017 tax balance and 2018 first tax advance payments, which were lowered by the effect of increased cap for deductions related to eligible research and development costs, as well as capex of Euro 127 million to support broadening and hybridization of our product range in line with the expected volume growth over the 2019-2022 period.

Net industrial debt(1) at June 30, 2018 – after Euro 30 million of share buyback and Euro 136 million dividend distribution (including Euro 2 million dividends to NCI) – reached Euro 472 million substantially in line with Euro 473 million at December 31, 2017.

2018 Outlook confirmed

The Group is expecting the following performance in 2018:

  • Shipments: > 9,000 including supercars
  • Net revenues: > Euro 3.4 billion
  • Adjusted EBITDA: ≥ Euro 1.1 billion
  • Net industrial debt: < Euro 400 million, including a dividend distribution to the holders of common shares and excluding potential share repurchases
  • Capital Expenditures: ~ Euro 550 million

 

Capital Markets Day
The Management will outline the plans and initiatives in place to achieve the 2022 Mid-Term targets previously announced by the Company at its Capital Markets Day in Maranello on September 17 and 18, 2018.

 

Formula 1
Scuderia Ferrari fights at the top for the 2018 season and the results are: 15 podiums in 12 races, with Sebastian Vettel winning 4 races so far.

 

The 3.9-litre V8 takes the “International Engine of the Year Award”
The latest iteration of Ferrari’s turbo-charged V8 that equips, in various forms, all Ferrari’s V8-engined cars, has been nominated the best engine in the world for the third year running in the 2018 International Engine of the Year Awards. Additionally Ferrari’s turbo-charged V8 was voted the best engine of the last 20 years.

Ferrari takes the “Red Dot: Best of the Best” design award for the fourth year running
For the fourth year running, Ferrari has taken the “Red Dot: Best of the Best” award for the ground-breaking design of the newly launched Ferrari Portofino. The jury of international designers also assigned two Red Dot awards for outstanding design quality to Ferrari for the 812 Superfast and the FXX K EVO.

 

Subsequent Events

On July 21, 2018 the Board of Directors of Ferrari N.V. learned with deep sadness that the Chairman and Chief Executive Officer Sergio Marchionne would be unable to return to work. Consequently the Board of Directors of Ferrari N.V. named John Elkann as non-executive Chairman and resolved to propose to the shareholders to appoint Louis C. Camilleri as Executive Director and Chief Executive Officer of the Company, at a shareholders’ meeting to be called. Pending confirmation at the shareholders’ meeting, the Board of Directors has provided Louis C. Camilleri with full powers to ensure continuity of Ferrari’s operations.

On July 25, 2018 the Board of Directors learned with deep sadness that Sergio Marchionne had passed away. The Board and the Company expressed their gratitude for the extraordinary contribution he had made in recent years at the helm of Ferrari.

On July 27, 2018 the Company announced that it had published the agenda and the explanatory notes for an Extraordinary General Meeting of Shareholders, which will take place on September 7, 2018 in Amsterdam, for the appointment of Louis C. Camilleri as proposed by the Board of Directors of Ferrari N.V. on July 21, 2018.


Non-GAAP financial measures

Operations are monitored through the use of various Non-GAAP financial measures that may not be comparable to other similarly titled measures of other companies.

Accordingly, investors and analysts should exercise appropriate caution in comparing these supplemental financial measures to similarly titled financial measures reported by other companies.

We believe that these supplemental financial measures provide comparable measures of financial performance which then facilitate management’s ability to identify operational trends, as well as make decisions regarding future spending, resource allocations and other operational decisions.

Certain totals in the tables included in this document may not add due to rounding.

EBITDA is defined as net profit before income tax expense, net financial expenses and depreciation and amortization.

Adjusted EBITDA is defined as EBITDA as adjusted for income and costs, which are significant in nature, but expected to occur infrequently.

For the six months ended June 30(Euro million)For the three months ended June 30
20182017Change 20182017Change
309 260 49 Net profit 160 136 24
110 102 8 Income tax expense 53 53 -
9 17 (8) Net financial expenses / (income) 5 13 (8)
135 133 2 Amortization and depreciation 73 68 5
563 512 51 EBITDA 291 270 21

For the six months ended June 30 (Euro million) For the three months ended June 30
2018 2017 Change  2018 2017 Change
563 512 51 EBITDA 291 270 21
(1) - (1) Release of charges related to Takata airbag
 inflator recalls
(1) - (1)
562 512 50 Adjusted EBITDA 290 270 20

Adjusted Earnings Before Interest and Taxes (“Adjusted EBIT”) represents EBIT as adjusted for income and costs, which are significant in nature, but expected to occur infrequently.

For the six months ended June 30(Euro million)For the three months ended June 30
20182017Change 20182017Change
428 379 49 EBIT 218 202 16
(1) - (1) Release of charges related to Takata airbag (1) - (1)
inflator recalls
427 379 48 Adjusted EBIT 217 202 15

Adjusted net profit represents net profit as adjusted for income and costs, which are significant in nature, but expected to occur infrequently.

For the six months ended June 30(Euro million)For the three months ended June 30
20182017Change 20182017Change
309 260 49 Net profit 160 136 24
(1) - (1) Release of charges related to Takata airbag (1) - (1)
inflator recalls (net of tax effect)
308 260 48 Adjusted net profit 159 136 23

Adjusted EPS represents EPS as adjusted for income and costs, which are significant in nature, but expected to occur infrequently

For the six months ended June 30(Euro per common share)For the three months ended June 30
20182017Change 20182017Change
1.63 1.37 0.26 Basic EPS 0.85 0.72 0.13
(0.01) - (0.01) Release of charges related to Takata airbag (0.01) - (0.01)
 inflator recalls (net of tax effect)
1.63 1.37 0.26 Adjusted basic EPS 0.84 0.72 0.12
1.62 1.37 0.25 Diluted EPS 0.85 0.72 0.13
(0.01) - (0.01) Release of charges related to Takata airbag (0.01) - (0.01)
 inflator recalls (net of tax effect)
1.62 1.37 0.25 Adjusted diluted EPS 0.84 0.72 0.12

Basic and diluted EPS

For the six months ended June 30(Euro million, unless otherwise stated)For the three months ended June 30
20182017Change 20182017Change
308 260 48 Net profit attributable to the owners of the Company 160 136 24
188,745 188,949   Weighted average number of common shares (thousand) 188,646 188,953  
1.63 1.37 0.26 Basic EPS (in Euro) 0.85 0.72 0.13
189,551 189,759   Weighted average number of common shares for diluted earnings per common share (thousand) 189,451 189,759  
1.62 1.37 0.25 Diluted EPS (in Euro) 0.85 0.72 0.13

Net Industrial Debt is defined as total Net Debt excluding the funded portion of the self-liquidating financial receivables portfolio, is the primary measure to analyze our financial leverage and capital structure, and is one of the key indicators used to measure our financial position.

(Euro million)Jun. 30, 2018Mar. 31, 2017Dec. 31, 2017
Net Industrial debt (472) (413) (473)
Funded portion of the self-liquidating financial receivables portfolio 731 666 685
Net debt (1,203) (1,079) (1,158)
Cash and cash equivalents 650 743 648
Gross debt (1,853) (1,822) (1,806)

Free Cash Flow and Free Cash Flow from Industrial Activities are two of management’s primary key performance indicators to measure the Group’s performance. Free Cash Flow is defined as net cash generated from operations less cash flows used in investing activities. Free Cash Flow from Industrial Activities is defined as Free Cash Flow adjusted for the change in the self-liquidating financial receivables portfolio.

For the six months ended June 30(Euro million)For the three months ended June 30
2018201720182017
386 288 Cash flow from operating activities 176 138
(248) (154) Cash flows used in investing activities(8) (127) (82)
138 134 Free Cash Flow 49 56
50 34 Change in the self-liquidating financial receivables portfolio 44 36
188 168 Free Cash Flow from Industrial Activities(9) 93 92


On August 1, 2018, at 5 p.m. CEST, management will hold a conference call to present the Q2 2018 to financial analysts and institutional investors. The call can be followed live and a recording will subsequently be available on the Group website http://corporate.ferrari.com/en/investors. The supporting document will be made available on the website prior to the call.

1 Refer to specific note on Non-GAAP financial measures

2 These results have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and IFRS as endorsed by the European Union

3 EMEA includes: Italy, UK, Germany, Switzerland, France, Middle East (includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman and Kuwait) and Rest of EMEA (includes Africa and the other European markets not separately identified); Americas includes: United States of America, Canada, Mexico, the Caribbean and Central and South America; China, Hong Kong and Taiwan includes, on a combined basis: China, Hong Kong and Taiwan; Rest of APAC mainly includes: Japan, Australia, Singapore, Indonesia, South Korea, Thailand and Malaysia

4 Includes the net revenues generated from shipments of our cars, including any personalization revenue generated on these cars and sales of spare parts

5 Includes the net revenues generated from the sale of engines to Maserati for use in their cars, and the revenues generated from the rental of engines to other Formula 1 racing teams

6 Includes the net revenues earned by our Formula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues and net revenues generated through the Ferrari brand, including merchandising, licensing and royalty income

7 Primarily includes interest income generated by our financial services activities and net revenues from the management of the Mugello racetrack

8 Cash flow used in investing activities for the six months ended June 30, 2017 excludes proceeds from exercising the Delta Topco option of Euro 8 million

9 Free cash flow from industrial activities for the three and six months ended June 30, 2018 includes Euro 5 million of quick refund to shareholders due to eligibility for withholding exemption. Free cash flow from industrial activities for the three and six months ended June 30, 2017 includes Euro 5 million of quick refund to shareholders due to eligibility for withholding exemption.