Q4 2022 Ferrari NV Earnings Call

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

[music].

Okay.

Yeah.

Good day, and thank you for standing by and welcome to the February 2022 full year 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 one on your telephone.

You will then have an automated message advising you of hundreds raised to withdraw your question. Please press star one on one again please be advised that today's conference is being recorded I would now like turn the conference over it you'll see it get today, Nicole that sort of is the head of IR. Please go ahead.

Thank you Sharon and welcome to everyone, who is joining US today, we plan to cover the group's full year 2022 operating results and 2023 guidance and the duration of the call is expected to be around 60 minutes.

Today's call will be all set by the group CEO .

And our group CFO , Mr. Anthony pick up pick on order I live onto my theater outside available in the investors section of the periodic off but at the 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 two 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 win at it though.

Good afternoon, and thank you everyone for joining us today.

In this call we will discuss in detail two things the result of the full year 'twenty two.

Priorities and guidance of 23.

It has been a year of celebration.

Kress and innovation for Ferrari and for this I would like to thank all the women and men of Ferrari for their outstanding work.

All our partners, who have helped us considerably during the past challenging years during which we had an opportunity to strengthen our relation with many of our suppliers.

And last but not least all our clients for their continuous trust in our brand.

During our 75th anniversary yes.

Among the many different moments a milestone that signal in our company's evolution I would like to highlight the following three.

Firstly.

We unveiled at the two exciting models.

The 296 GTS in April .

And if everybody put us angra in September .

This modest strengthen an already astonishing product range that the board meets and exceeds our customer demand for the <unk> performance and driving sales.

Secondly, we presented our strategic plan.

Was June for 'twenty to 'twenty, six setting transparent concrete measurable goal.

Thirdly, we outline our journey towards carbon neutrality.

In 2033 scientific and holistic approach.

We are clear on our overall carbon footprint and we have a defined roadmap moving forward.

From a financial perspective, we ended the 2022, we have a remarkable set of results.

Setting a new record across all metrics.

Five one.

Euro revenues.

Strong net profit at 939 million Euro.

More than 750 million euro or industrial free cash flow generation.

I will address first Reis, Inc.

Our origins lie than sports cars, where we have all of it and did the hand lifestyle, our new ventures.

To elevate our brand.

Let's start with the racing World too.

2022 was an important year for Ferrari in the racing activities.

We celebrated the memorable victories in the endurance championship and we unveiled two new racing cars.

The 296% <unk> III.

The successor of the most winning Ferrari in history, the 48 to eight the GTE three and the $4 99 P. Our new Lemon Hypercard signaling our return to the top tier of the FAA EWC in 2023 after 50 years.

101, we proved that our competitive edge improved during the last season.

And it was encouraging for us and the millions of fans to see our drivers taking more place places on the podium.

Clearly our goal is to achieve the ultimate price and the entire team together with Fred who recently joined US our working relentlessly in their direction.

In esports, we are engaging in three championship.

One in Europe and Israel.

We continue to lead the way in terms of a bridging the real world with the visible world how.

How we do it.

Well by having our own esports headquarters in Maranello, where our esports drivers shale programs and activities with our SKU. The Ria Ferrari driver Academy and this is this is one important way to engage the younger generations.

Now after all the racing activity, so, let's talk about our beautiful high performance and unique sports cash.

And let's focus on our future our order book.

We continue to enjoy strong demand across all regions.

We have an overall order portfolio continuing to be at an all time high and covering well into 2024.

Our sports Scott product portfolio continues to have a strong traction on all fronts with.

<unk>, the 286 family and put us and with driving the net order intake.

<unk> order intake has been extraordinarily high well beyond our expectations.

But the enthusiasm of our clients is expressed it also by their attendance level at all our events.

In fact in 2022, we had an unprecedented number of arrival.

Lions engagement experiences.

On the bread events side, we extended our Casa ferrario fatality in several global venues and in Australia. We have for the first time, our only vessel February concept.

On the dynamic events, we've entered the from our Cavalcade two hour engaging track activities.

One for all the finale Mon Valley, we have been Ebola in the last quarters, which was definitely a great success and brought more than 40000 fan altogether.

All of these client experiences out of the side to continue to fuel the passion and sense of belonging within the Ferrari family.

The amount of innovation in 2022, it's worth mentioning too.

The first edition of the Cavalcade Aikona Weaver, the participation of 80, Ferrari Monza <unk> and <unk>.

Coming from more than 20 nations.

And the first Ferrari GT two womens edition, we have 26 February start coming.

Coming together to take part in an exclusive a road trip any visa.

And now after the sportscast, let's talk about the lifestyle activities.

Yes, we are determined to keep on working to extend our heritage and values in the wider luxury indefinitely.

Four highlights worth mentioning for 2022.

One we continued our journey in brand elevation through two fashion shows we have a strong positive reviews from press and clients. Two we grew our assortment on <unk> major items such as the jumpsuit.

Traffic builders, such as Zelda modern collection launched at the monitor Grand Prix to celebrate the 75th anniversary.

Three.

We further consolidated our licensing agreements in line with our luxury positioning.

And last but not least we reached the record level of visitor at our museum welcoming more than 600000 guests in 2022.

As you can see.

Last year, we made many steps forward in racing sports cars and lifestyle and in 2022, we also detailed our commitment to reaching carbon neutrality by the end of this decade and we are also proud to have committed to set science based targets.

The focus is not only on the impact of driving our sports scores, but also in our entire supply chain and production facilities in the US we are working very closely with all our suppliers.

Yeah.

In 2022, we also completed several project in terms of our carbon neutrality.

From the new fuel cell plant and photovoltaic system at the Maranello to the main innovation indentified by our colleague such as the adoption of new filters in our foundry saving more than 250 tons of aluminum careers and the dispersion of recovery in our engine testing process.

All <unk>.

All these initiatives implemented in 2022 led to a reduction of approximately 5% of energy consumption per cash.

This is a remarkable result.

Really proud of the underlying debt no capex no capex was required only brain Bowers.

All the colleague.

All of these developments as well as the record result over the years has been possible. Thanks to the passion dedication of all the Ferrari people into rewarded their achievement.

In line with the company's strong performance indicators I am pleased to announce the yearly competitive award.

Up to nearly 13500 euro for our employees.

I'm also proud to share that for the fourth year in a row.

February confirmed itself as one of the best place to work thanks to career opportunities and welfare services, we offer to our employees.

We leave behind a year characterized by global tension geopolitical conflict supply chain issues and cost inflation.

We have our people clients and partners, we've been able to weather through these times. Thanks to the collaboration will progress continuous learning focus and confidence.

That sets us apart.

And now we are ready for 2023.

It will represent another significant step of our journey during which we will continue to execute our strategy with determination.

Fourth.

<unk> are the priorities for 2023.

We will compete at the top in the different racing championship.

We will continue to enhance our client experiences both on track and the road.

And reaching them with four new model launches.

We will broaden the lifestyle client base with a coherent and integrated offering of personal goods and unique experiences and we will further accelerate the innovation pace with a strong focus on electrification and HMA as proved by the four times I get a number of patents that we have.

<unk> in 2022 compared to 2021.

We look ahead at 2023 with enthusiasm.

Energy agility.

Confidence humility required in these challenging times.

Now I hand over to Antonio to review, the 2022 results and 2023 guidance.

Thank you Vanessa and good morning, or afternoon to everyone joining us today.

Let's start on page five with the full year 2022 highlights.

Showing a very strong year with double digit growth compared to 2021, and representing a solid foundation of the new business plan.

These record earnings.

Earnings exceeded our latest guidance, thanks to a better business performance.

Realizations and a tailwind from.

Foreign exchange rates also in the last part of the year.

Having said that I would like to highlight our most remarkable achievements.

EBITDA of $1 billion, and 773 million Euro and EBIT of $1 billion, and 227 million with margins aligned to guidance, reflecting product mix and the evolution of our DNA.

Net profit of 939 million, resulting in a diluted EPS of <unk> Europe and <unk>.

And in industrial free cash flow generation of 700.

58 million euros.

Turning to page six you can see the details of the 2022 shipments.

The product portfolio over the year included nine internal combustion engine models and three hybrid models, representing 78 and 22% of shipments respectively.

The deliveries increase was mainly driven by the Ferrari Portofino am and yes, that's 90 family as well as the 296, GCB and <unk> 12 competency on it which we're in the ramp up phase.

The deliveries of the iconic pillar were lower compared to the prior year. The Ferrari Monza phase out in Q1 and first few units. After Daytona is b III commenced in Q4.

All geographic regions grew compared to 2021 as we continue to serve an impressive order book across Automotives.

As customary for Ferrari.

Geographic allocation was deliberate and followed the pace of introduction of new models.

Particularly mainland China, Hong Kong, and Taiwan continued to post high double digit growth versus the prior year.

I, just remind you that the greater weight of the region is supportive in absolute value while dilutive in terms of percentage margins and this is more visible in the gross profit of Q4, when mainland China, Hong Kong, and Taiwan reached 14% of total shipments.

On page seven you can see the walk of our group net revenues growing 16% at constant currency.

As explained throughout the year.

Ranging cars and spare parts was driven by higher volumes and personalization.

Personalization, we're at around 18% in proportion to revenues from cars and spare parts.

Engines was negative in line with the reduction of supplies to Maserati, which will start 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 museums visitors despite lower sponsorship.

Currency had a positive impact mostly related to the us dollar and the Chinese Yuan.

Let's move on to page eight and review the change in our EBIT year over year explained by the following variances.

Volume positive four 261 million, reflecting the shipment increase of approximately 2000 units versus the prior year.

Mix and price variance negative for 16 million euro mainly impacted by lower deliveries of the Ferrari Monza SB, one and SB too.

Partially offset by the increased contribution from personalization country and range model mix.

Okay.

<unk> and R&D expenses grew $116 million during the year due to higher depreciation and amortization as well as direct and indirect cost inflation, mainly from energy and aluminum.

The latter became particularly visible in Q4, as we supported our supply chain.

SG&A were negative by 47 million euro, reflecting communication and marketing activities lifestyle and corporate events as well as our organizational development.

Finally, other was negative 49 million, mainly explained by the variance in contribution from racing activities and no recurring items as well as reduce engine shipments to Maserati.

This was partially offset by a better contribution from lifestyle activities.

That is a net impact of currency was positive for 119 million Euro.

<unk>.

Turning to page 19, nine apologies, our industrial free cash flow generation for the year reflects the strong profitability and a positive contribution from working capital and other mainly related to the collection of the data on <unk> competitive advantages.

This was partially offset by 806 million of capital expenditure in line with guidance.

In the year the capitalization ratio of our development expenses was 45% increase versus the prior year as we enter the development phase on a number of user models and perfect over the budget gap in Formula one.

Net industrial debt as of the end of December 'twenty, two was 207 million euro decreased by $90 million compared to December 21, reflecting the solid industrial free cash flow generation net of the share repurchase program and dividend payments.

Yes.

To conclude on page 10, we outlined the guidance for 'twenty regulatory which targets solid growth and consistent progress and profitability.

The main drivers are as following.

Mix will be extremely strong thanks to a very product portfolio full year contribution of variety they throw in our SB three and continuous positive effect from personalization.

Yeah.

Rice will positively contribute throughout the year in line with the mid single digit price increase communicated in Q3 to counterbalance the impact of the current cost inflation.

D&A will increase in line with the start of production of new models.

Revenues from raising and lifestyle activities will show a limited improvement.

And the industrial free cash flow generation will be sustained by our profitability, partially offset by capital expenditures and slightly higher than anti <unk>.

I 800 million Europe , and negative working capital in its broader meaning mainly due to a lower deposit on limited series models, along with the reversal of those already collected in the previous 18 months.

The tax rate for the year is expected to be around 22% that is higher than in 2022, mainly because of the introduction of new rules on the patent box regime.

The underlying assumption on the exchange rate of the U S. Dollar to the Euro is that it will fluctuate around 110, implying an overall neutral foreign exchange effect compared to 2022.

This foreign exchange assumption together with the net impact of price actions taken to offset energy and raw material cost increases explains most of the improvement in absolute terms between the 2023 guidance versus the previous EBITDA target of one eight to 2 billion Euro.

Percentage of profitability will be growing over the course of the year with Q1 currently expected to be the softest quarter, driven by the planned development of our product and country mix.

This is also linked to the allocation of deliveries to mainland China, Hong Kong and Taiwan designed to be Frontloaded.

Lastly cost inflation remains largely unknown unknown.

In this context, we are relentlessly executing the strategy, we outlined at the capital market day as committed and focused as ever.

<unk> to 'twenty three guidance represents another solid step on the trajectory for 2026.

With that said I'll turn the call over 'twenty correct.

Thank you Daniel Sharon we are now ready to take questions.

Thank you to ask a question you will need to press star one on your telephone and wait for you.

Name to be announced.

We will now take the first question.

One moment please.

And your first question comes from the line of Stephen Reitman from Society Generale. Please go ahead. Your line is open.

Yes. Thank you good afternoon apologize for the background noise.

Two questions. Please.

You commented that the order intake has been much higher than you had anticipated on the pure song way could.

Could you comment on if there any regional differences and particularly interested in the reaction in China, so that product.

And secondly, also on China itself, we sold the China took up the largest share of total sales quite a strong acceleration there.

We quoted the numbers Im looking at it seems that the growth was driven particularly by the VA.

The by the FAA attributes on I guess $2 GCB.

This already indicates an increasing desire.

Chinese customers also it's exciting to the to the <unk>.

Two seater sportscar concepts as well.

You've obviously been maybe an issue in the past.

Thank you.

Hi, Stefan I apologize, we had some problem with the audio can you kindly repeat your second question, we got the one who put us on great. Thank you.

Yes. After the first one yes on the sorry on China again looking at the growth of your sales in China in 2022, it could be days, where I'm seeing it looks like it was driven primarily by.

The USA and $2 six GCB rather than the roadmap.

I was just wondering do you think this indicates a growing acceptance of Chinese customers.

Two the two door to see to sports called concept, which has obviously been something that has held for a rig back in the past maybe in China. Thank you.

The first one was the acceptance of the traction for us and we're all over the region.

<unk>.

Are you able to say two things.

It has been.

The acceptance it has been.

Then what we were thinking and this is true across all the regions.

Okay. This is one important.

Message the second one coming to China.

Let's say.

The preference of Chinese clients toward our.

Our cash forecast I have to say that we don't see is patient faster because we see.

Clients interested in in our IC as well as in our hybrid consider also that we manage it deliberately.

The delivery of the of the cash for.

That region, but we don't see a clear pattern.

The selection of cash.

Thank you.

Thank you Susan.

Thank you.

We will now go to our next question.

One moment please.

And your next question comes from the line of Cc Tebaldi from UBS. Please go ahead. Your line is open.

Hi, good afternoon, and thank you for taking my question.

I hope so.

So on pricing.

On the guidance I was wondering.

So I thought that one off super strong yeah, a bit like <unk>.

Our transition year.

Multiple you prefer I look on the crane side.

I think what I'm trying to understand.

Because of that.

The growth.

Going forward can be somewhat linear or we could finance.

Again, we'll be we could have another transition year, where we could.

The compression on the margin.

So are you going to be able to comp this year.

Two questions Nick.

Yes, that's all.

We can take your view.

Secondly on pricing.

Can you talk us through the philosophy on how you decide.

I think it goes into a powerful element that the world.

Each car with a bit more expensive than the print.

The faster and with a higher margin contribution.

Pieces, where I used to have a mid single digit.

But when we look at if we think about the laws of supply and demand given.

Sunday Monday, Youre seeing it feels that maybe in your approach if needed and so I was interested to hear how you think about offsetting.

Hello.

And lastly, I'll start on that on the data.

Sort of.

And stating that we should expect over the next few years.

Is it going to be quite evenly distributed.

Lifecycle.

Thank you <unk> going to be like a heavier yesterday.

Thank you.

Thank you Susan I think in the third one and then the first and the second one will be.

Antonio So the third one Daytona we are starting is planted and you can.

I assume that is more or less evenly distributed.

The first and the second Antonio will comment more.

Hi, Susie.

2023 guidance compared to 2026, I think there are two elements that should be taken into consideration. The first one is that we already mentioned that the capital market day that the plan.

<unk> is frontloaded.

Which means basically you cannot assume a linear development, but is rather a jump at the beginning and then a smooth growth secondly, some of the assumptions that were outlined at the capital market day, obviously need to be updated once we get closer and closer and one of the first.

This is obviously the impact of pricing comp.

Compared to where we were at the capital market day, we had an adjustment in Q3 that we I think we're public about it.

Either one is the impact of foreign exchange rates I think we said at the capital market day, we had assumed $1 15 as the average U S dollar to Euro exchange rate and this one is based on 110.

So this set of assumptions of course will be revised from time to time, depending on how and where we go.

And the second question is on the.

Our pricing strategy.

I think on this we have been quite careful in defining it depending on the model and its distribution over time and obviously, we are we take care about the.

Demand in the order book that we have for the various models saw the price increases have been applied in Q3 have been applying differently to selected markets and models.

Okay.

If I may to the next question sorry, I kindly ask you to state clearly your question since we are having some audio problems. Thank you very much.

Thank you.

I will go to the next question.

One moment please.

And your next question comes from the line of Giulio Pescatore from BNP Exxon. Please go ahead. Your line is open.

Hi, Thanks for taking my question. The first one is a bit broader in general we'd probably we don't often think about the macro issue because you create your own demand in a way, but if you think about the creation of a concentration of wells in the last year that clearly has been a driver of demand for you.

I think youre uniquely placed to have a view on this topic. So I was wondering if you could share your thoughts on what we should expect and keep them for what well concentration as well and demand for the next years and what are you assuming in your target.

The second one I would like to go back on pricing you mentioned that.

Six targets have some assumption on pricing and you have taken pricing to offset cost, but am I right in assuming that even if costs go down I mean, I'm not going to be lowering your prices right.

It should be sticky for you just to comment on that and then last one for Antonio Please.

On the R&D expenses.

What if any Q4, because the number was very very low and how should we think about these cost for 2023.

I hope that's clear thank you.

Maybe Julio I'll start with the second and the third one.

The Delta from the last on the R&D expenses you are right.

There are two reasons one is that as we go more and more we enter more and more into the development phase of new model as we switch from fewer innovation expenses to development expenses, obviously, a different accounting treatment. So this may explain changes in the allocation of the hours and time by hour by hour engineers.

And obviously the fact that we are capped in terms of development.

Costs on the chassis in 2022 and also any impact because obviously you spend more at the very beginning of the year and rather less at the end.

The second before last so I think it was on pricing you're perfectly right and thanks for adding to my answer before because I spoke about pricing without obviously mentioned that pricing also has to take into account where costs are going I simply said inflation is unknown unknown.

Obviously, we made assumptions in that respect and on that basis, whether you're right or wrong, obviously, we try and be careful but we cannot predict where it will go and this is another element to be taken into account and that's why we do not have anything more in respect of <unk>.

Coming to the first question Julio as you said our view on the concentration of west in the World.

This is a trend that everyone can read.

<unk>.

On any on any newspapers, what I can tell you is that for US what is important is that.

We keep always unique.

And we keep always exclusivity for our cash I think that what our founder said, we want to sell the always one less in the market demand was through is through and it will be true.

So concentration is happening, yes, it's up to us and what we're willing to manage properly the demand to keep it exclusive.

Thank you.

Thank you.

We will now go to the next question.

And your next question comes from the line of Michael Binetti from Credit Suisse. Please go ahead. Your line is open.

Hey, guys. Thanks for taking our question wonderful end of the year guidance for 'twenty. Three obviously, just a couple of quick ones on the model.

How should we think about personalization versus 18% in 2022 as we look out. This year do you think about the mix of cars and I'm wondering does the guidance include getting the Keystone sponsored back in Formula one that exited.

It exited last year.

And then I guess, a bigger picture question as we think through the numbers. So the guidance is for EBITDA margins around 38%. This year I think the long term plans 38 to 40. Obviously this is the kind of year that has many many tailwind for profitability. Most importantly super car mix is always helpful.

Can you speak to what would be the upside case that would take margins from the level you just guide us to this year at 38 to the high end of that range at 40, what are some of the things that are incremental to the P&L. This year that would support that higher margin range from here.

So Michael.

Anthony will take this question.

Yeah.

Yes.

Personalization the way we model. It is basically we assume to have it as a rather constant.

Proportion to revenues you have seen over the last few years, we have been largely between 17 and 19% depending on the model. So the assumption, we are making and I think.

Mentioned the same at the capital market day.

And this is obviously mostly related to the development of the mix.

The price point, the lower the proportion of personalization to.

<unk> overall revenues so it depends on the mix basically but that is the assumption with respect to the development of margins.

The big jump it was already there in the original guidance and then development over time once again absent any consideration of any further consideration on additional price changes and cost changes is that this will drive our trajectory to what we mentioned.

And gave us a guidance through 2026.

So that mix.

Is really the driver there.

So in wholesale price okay.

The marketing sponsored for Formula one.

The market.

Or is that is there is that getting the Keystone sponsor back in Formula One that was missing last year is that included in this guidance at this time.

Yes.

We include Michael I'm, sorry, because we had.

Travels through here and actually the electronics is always a problem.

So we've got a fair to say you've got to pick that up.

Unfortunately, sometimes electronics you cannot rely on it no.

Yes.

Sponsorship.

We keep enlarging our sponsor base, we keep diversifying our sponsor.

Sponsor base.

You have seen that in the last in the last week, we announced that the new sponsors and all the plan and the guidance.

Antonio.

Our view is all coherent we've also what we see on the evolution of the sponsorship so all the pictures.

So the victory considering all the elements, including the sponsorship of evolution.

Thank you very much guys.

Thank you Michael.

Thank you.

We will now go to the next question.

Yes.

And your next question comes from the line of Thomas Besson from Kepler. Please go ahead. Your line is open.

Thank you very much.

Two questions I have two.

Two simple questions. Please.

Could you.

Understood.

Phase of ramp up for.

SB three.

Joseph.

You highlighted the mix would be.

The biggest driver for 'twenty screen to EPS, but I mean.

Can you give us.

Some direction on the.

Gross units per quarter.

Your indication that Q1.

So corso.

Largely linked with the fact that you would have a lower share office based reinsurer. So great for instance.

And the second question.

You've mentioned Forex.

Neutral.

Three versus a fairly decent boost in 'twenty two.

Is it too early or ready to make any assumptions for 'twenty for forex impact or can we already assume that it should be.

Negative.

Thank you very much.

Yeah.

I think the first one.

So the photos and where do you see is.

We are ramping up.

<unk>, we had an important milestone end of last year that we met the successfully so we are ramping up as.

Clearly this is the ramp up here, so we will be lower than 20% of the total volume production.

But we will and we will ramp up along the four quarters. So that's two to reach the right.

Production volume by the end of this year. So everything is on track and we are moving according to the plan.

Why don't you take the second one on your second question I think it's too early to say honestly.

<unk> is already.

Complex element when looking at one year for the foreign exchange rates, obviously, if you compare to the average assumption that we made on <unk> on the plan to 2026 in principle mathematically, yes, but reality will be a different thing and it's too early to say now.

Thank you. Thank you very much.

Thank you.

Thank you.

We will now go to the next question.

And your next question comes from the line of George <unk> from Goldman Sachs. Please go ahead. Your line is open.

Thank you for taking my questions.

The first two questions I just wanted to clarify a couple of points from earlier on the call earlier, you did mention that that data would be relatively evenly distributed can you just confirm is that sorry for 2023 and 2024 or does that also include 2025.

The second question was just on the specials.

3% of 2022 volumes equates to around 400 units.

Is that the right kind of level to think about this year as well or as you ramp the competition.

Should we expect that number to be higher.

And then the last question I had was just with respect to the other line.

2022.

Basically it was a negative and you did mentioned some nonrecurring items could you, perhaps just quantify how large the nonrecurring items was that.

And.

Any detail on what they relate to what would be much appreciated. Thank you.

George I will leave the last one the nonrecurring items two to Antonio I'll remind you that the other two relates to the product.

Yeah.

Just as important clarification, when we're talking about any new models going into production clearly there is a ramp up phase and then there is a stabilization. This is true for all the products. We do so in this years, we will ramp up these new costs and we will ever increase and then a stabilization.

Over the course of years when I talking about.

The distribution I talked about distribution.

In the <unk>.

Quarters, when the production is stabilized.

This is the year, where we ran the Daytona and also the same supply so just to.

To put a sanguine as your colleague asked it before.

For the nonrecurring items Antonio you can take it hi, George.

<unk>.

The nature of that firstly not forget this is a audience. So it means that the difference between the nonrecurring of this year and then archiving over the previous one last year, we had some positive nonrecurring mainly related if I remember correctly to the leads on some provisions in respect with previous recall campaigns access.

Provisions on that release of provisions in respect of bad debt that were previously accrued and this year, particularly in the last quarter has been our <unk>.

Cutting costs in respect of the organization of the company so.

All in all throughout the year I think it amounts to.

In terms of the difference.

Is a negative of $30 million year over year.

Yeah.

Understood. Thank you very much.

Thank you.

We will now go to the next question.

And your next question comes from the line of Adam Jonas from Morgan Stanley . Please go ahead. Your line is open.

Hi, guys. This is <unk> on for Adam.

Within your <unk>.

Industrial free cash flow outlook, you highlighted some negative working capital and rising Capex impact can you dimension out each of these for us so.

In terms of like how much capex.

And what's the order of magnitude on the working capital outflow.

Yes sure.

I've mentioned earlier on that capital expenditure for 2023 is targeted to be above 800 million slightly above the number so slightly higher compared to 2022 working capital irrespective.

Broader meaning that is including the out I mean.

The lower cash in coming from the fact that we had collected deposit in advance in 2022 is in the region of 100 million or so.

Great. Thank you for that and then as a follow up for the <unk> way you lost some cost.

<unk> in the prior year.

There will also be some ramp related costs. This year I presume. So it's not really clear whether the year over year impact on adjusted operating margins is going to be positive negative or neutral. So how should we think about the <unk> impact on margins for this for this year. Thanks.

I think this question about the PURA sanguine, what I would like to underline is that here in Ferrari the product development process is very robust.

Thanks to our.

Way, we quantify we validate.

The cash any new categories, we have.

When we go in production the product is very well tested and is mature so we do not.

Expect any any surprises in this direction.

I think this is one of the key asset of our company is the maturity and the stability of the product development process.

Alright, thank you so much.

Thank you.

We will now go to our next question.

Yes.

And your next question comes from the line of Martino de <unk> from <unk>. Please go ahead. Your line is open.

Thank you and good morning, good afternoon everybody.

On the guidance.

I know very well you did not provide any volume guidance, but.

Am I right in assuming volumes exit pollution.

Roughly similar to last year in 'twenty three.

Slightly up but plus the <unk>, considering daytona will offset.

Monzo.

And on the free cash flow you already answered Antonio on the networking capital could you speak to the input of dumped payments that you have underlying in your guidance and if it is kind of down payments will become.

Mainly recurring going forward or should we see.

Decline.

Standpoint.

And if I may very last.

On the single digit price increase.

Offsetting inflation, so roughly 200 million inflation, but you also mentioned during the call that the cost inflation is unknown. So I was wondering if you were referring to next years.

Also the current year.

And specifically I'd ask you if you have any comment on the cost of labor because we know.

The negotiations ongoing in Italy. So it takes probably time that you cannot talk about that.

Just understand.

What you can comment about it thank you.

I leave the second one is the most difficult one for Antonio.

No.

First the first one.

I understand.

Could you ask the team to understand.

What we will do exactly and I will do the same thing in your shoes.

Also you know you cannot do we cannot disclose exactly what we want to do by each specific model. So we have to wait to see the 12 months to see what we will do in 2023 and this direction.

The free cash flow and the other question I will leave to Antonio IV disappointing methane.

For a number of reasons first in terms of your question on working capital.

I can't give you the exact size of the negative outlook on the depth of it.

And going forward, our assumption, obviously depends on the mix that we are assuming year after year because as you know we collect the applebee's on strictly limited series.

So it very much depends on how many.

We will have for sale in each single year, and we start collecting in advance I said that the capital market day that I remember very clearly that I mentioned, the fact that over the plan period. This is going to be awash.

Yes, when we collect more and others, where we have.

The outflows, meaning less.

Collections that he could have been otherwise.

The second question I think was in respect of inflation I said, it's a known unknown obviously when we make.

Price adjustment, we'll look at the future, we try and look at the future and make our best guess based on the data points that we obviously have I mean.

So we have assumptions than reality.

Be different by definition.

In respect of labor costs, obviously, even there you made an assumption, but the negotiation around the new labor agreement is still ongoing so we will see what the final outcome is we made assumptions around.

The number which is what we currently think is more probable but I cannot be more specific on this.

Okay I can imagine thank you.

Thank you.

We will now go to the next question.

And then in place.

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.

First one has to do with the electrification of just curious if there was any.

Any updates post the June capital market stay, especially related to the new E building development and.

And with electrification, we get this question a lot, but just wondering how you would respond to.

What is Ferrari is kind of method of distinguishing itself.

With electrification.

Obviously, you can enhance the product, which love some color on that.

That it's ultimately has to do with exclusivity to the luxury retailer if <unk> was forced to not sell leather leather bags and other substrate people would still but there are many aspects regardless, but.

Just love to hear more on how Ferrari can use electrification to enhance its product offering and then the second question is just a quick one on capital return how do you think about capital return specifically as it relates to share buybacks. Thanks.

Okay. Thank you Tom I'll take the first two and the last one and Tony will comment.

Electrification you may remember that in June last year, we said that we will unveil our electric Ferrari record cash.

In 2025.

And what I can tell you that we are fully on track with our with the project.

The team did a lot of progress in the second half of the year and we work a lot year on many dimensions. When it comes to efficiency and this is for Stephen is of the of the car that they're going to use this.

These.

Say engine.

<unk> and <unk>.

We also said that we will do.

Do internally manufactured internally strategic component.

What does it mean and we will do internally in our E mailed Inc. By the way if you come here you would see it growing pretty fast I was there. This morning, we are a responsible of the infrastructures and it's growing like a mushroom.

This you can see.

In this building we will do.

Axel.

We will do the investors and we will also assembly the same.

Well to make our own battery.

So the building as the products.

Is proceeding as planned and are you able to say that.

This is.

Let's see the result, as I said also in my part of all the all the work of all the overall the team that is fully dedicated to this important project now.

Now.

When you're talking about.

Any technology what is important is not the technology.

The way you use the technology, India in February when we develop it.

The cash we always make them unique distinctive looking at three dimension. It assigns the performance and the driving trends what we are doing.

Constantly when we develop these electric cars, we keep in mind that we have to start from the client the client the centers and we have to start from the driving trailers. So when it comes to acceleration braking gearbox a sound all of these are they mention that we are developing it keep in mind during the affordable for electric.

Cash.

So the product strategy as well as the use of technology as well as all the infrastructures that we need to.

To produce well this is according to the plan and there is no surprise.

And we are able to say satisfied of where we are and we keep pushing.

Antonio.

With respect to the strategy and capital return for that we should get back to what I explained at the capital market day, meaning over the planned period. We have sold all of our cash generation has been largely deployed or returned to shareholders, 50% in the form of larger deals.

And 50%.

Approximately in terms of share buyback.

We also mentioned that depending on the evolution of the plan, we could have adjusted or confirmed the plan, but this is what we outlined in terms of targets for the next four years.

Yes.

Okay. Thank you.

Thank you.

We will now go to our next question.

And your next question comes from the line of <unk> from <unk>. Please go ahead. Your line is open.

Okay.

Hi, Thanks for taking my question apologies Anthony Your line is very quiet can you please speak up.

Yes can you hear me.

Your line is still very quiet.

Is it better now.

Perfect. Thank you.

Okay, sorry about that.

Yes. My first question was the transportation on the title III.

At the time of the release you can.

<unk> was quoted in the past.

Yes, Danny apologies.

We really have some problem and can you talk.

Talk a bit slower and make sure that you are.

She split all the words thank you.

Yes, Justin.

Okay.

Yeah.

Yes.

On the downside of SB three at the time of the release your commercial team was quoted in the press, saying that you've targeted in 2024 for the deliveries of the SB. Three I was just wondering if that was the time line that you still had demand.

And the second question was on the Formula one business.

I was just.

I'm wondering if you could provide more color on the outlook.

Top line and the bottom line for that business, because well sponsorship revenues obviously.

It's hard to predict but a nice you were expecting to sign.

Sponsorships and 2023.

With the increased revenues coming from the commercial rights and also reduce costs.

Interest and fees I'm, just wondering what kind of.

<unk> EBIT contribution we can expect over the coming years.

Thank you.

Antonio was not so much maybe I start from the secondly, if I got all.

Your question right with respect to the evolution of the revenues. We said, we expect 2023 to be very much in line with 2022. So no major changes there with respect to the development of the cost base.

On the chassis and the budget caps on the shelf as there have been some adjustments for inflation. So you may expect it isn't going to lead to higher expenses. There while what is frozen in terms of the development of the power units is just the development costs not the running costs okay.

So I.

I Wouldnt mentioned more than that but I think I can give you the.

Some some data points.

Next question, if I understand well Anthony was about the lifecycle.

Daytona.

We do not disclose these kind of detail but.

I mean, you can try to make a model based on the previous.

Lana, but.

You can as you can understand these are very important information that we like to two.

To keep you a little bit protected.

Okay. Thank you very much.

Thank you.

We will now go to our last question.

And your last question comes from the line of.

Daniel from Bernstein. Please go ahead your line is open.

Thanks for squeezing my question, that's kind of a strategic one more on the brand extension could.

Could you comment on how you think that the target groups for the luxury sports cars.

And then for the extension of luxury lifestyle products.

The other hand, how do they kind of overlap where how do they not overlap and kind of enhance each other.

Thanks.

Thank you for this question.

Daniel I think of that.

I mean during the capital market day, we said that we are operating with our luxury car. We are operating in a small small part of it is much bigger part in the luxury space.

Net.

On top of the bias we are talking about.

Part of that is remarkable.

The estimation, we exchange with you at the time was around 300 billion dollar and we see also according to the latest result that is growing so it's important for us that.

Since we believe a Ferrari is a way of living that goes beyond the spot gosh, well, we believe that four hour.

The elevation of our brand to also.

And larger.

The clients that we are addressing this is a very very important in this reason why.

We are very determinant of committed.

For this year to a larger customer base and also to announce and to offer new new new experience and also new.

New product. So this is very very important and this is one of important priority of 2023.

Right.

In that context, maybe what are you expecting from your dealers.

Do you envision kind of.

Format changes do they need to move more to city centers kind of whats the relationship of that lifestyle extension and kind of your traditional retail outlets how would you bring it up together.

I think if you look at the dealer and.

Let's see.

We put together the spot cash and the lifestyle when it makes sense to put them together in event experience that are going across all the brands.

This does not imply that we are always to put together the two dimension in every space, where we operate.

Okay. So clearly we aim to make the experience of our clients in our dealership more and more luxury.

This is one fact this does not mean that we will sell hats in the dealership.

Yes.

Yes.

Yeah.

Brian .

Thanks very much.

Thank you.

I will now hand back the conference to but is it safe for final remarks.

Thank you thanks to all of you for your time today and for your for your questions 2022 has been a year reach of events and achievements.

And sets a robust foundation for this year for 2023 and.

And we look at it with even greater enthusiasm energy and confidence humility.

I wish you all a good afternoon.

Thanks, a lot for your attention. Thank you so much.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.

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