Ferrari NV (RACE) 2016 Q1 法說會逐字稿

Good day and welcome to the Ferrari NV 2016 first-quarter results conference call.

Today's conference is being recorded.

At this time I'd like to turn the conference over to Miss Nicoletta Russo, head of Investor Relations.

Please go ahead, ma'am.

Thank you, Julia, and good day to everyone on the call.

There are two topics that we plan to cover today.

First, the group first-quarter 2016 financial results and then our commercial and brand initiatives.

In light of this the call is expected to last around 45 minutes.

All relevant materials are available on the Ferrari investor relations website.

Today's call will be hosted by the Group's Chairman and CEO Sergio Marchionne and Mr. Alessandro Gili, Group Chief Financial Officer.

At the end of the presentation they will be available to answer your questions.

Before we begin let me remind you that any forward-looking statement we might make during today's call are subject to the risk and uncertainties mentioned in the Safe Harbor statement included on page 2 of today's first-quarter 2016 results presentation.

And the call will be governed by this language.

With that I'd like to turn the call over to Mr. Marchionne.

Thanks very much.

I'm just going to keep my comments to a limited number of remarks about the first quarter of this year.

I think you've seen from the numbers that we have as expected delivered an incredibly strong quarter.

The order books remain incredibly strong.

We have been able to post results on an EBIT basis which are certainly at historical levels for Ferrari.

Alessandro will explain to you the impact of hedging and what it's had in terms of the results for the quarter.

Although these margins appear to be marginally below what our best competitor in this industry has done historically.

That is Porsche.

If you were to strip out the impact of the hedging policies that we have had in place for the first quarter of 2016 we would have been well in excess of the 20% mark.

I think it's an indication of the kind of profitability that we can expect for this business going forward.

The product launches are going as expected.

We've shown the success to the FF in Geneva received have been received incredibly well by our customers and I think that the order book is beginning to build well.

The car will be in-market by Q3 of this year.

I think that the rest of the product portfolio is shaping up well.

The order book especially for the 488 and the convertible is quite long.

We're well into 2017 now.

We really have no bad news to report other than the fact that we remain hugely disappointed by the performance of the Scuderia at the race yesterday.

I just finished a meeting with the leadership team for the racing activities.

I think that we have to renew our effort to make sure that we can reposition Ferrari properly.

We have had four podiums in the first four races.

Unfortunately, we did not win any of the four races and I think that we need to correct this put a quickly.

On that basis I pass the call on to Alessandro.

One more thing.

We have as indicated during the roadshow and certainly at the end of the year have indicated that we wanted to get out of the financial services business.

It was something that we consider to be noncore.

What we've announced today is the first step in the process of removing that leverage from our balance sheet.

Hopefully we'll have it brought home by the end of the year.

The US position needs to be looked at quite carefully because of the fact that it's a crucial piece of our business in the US.

And so we'll come up with a creative solution to that objective, too.

But I think we're on track on everything that we've mentioned to you both on the roadshow and in terms of the year-end results.

So Alessandro, over to you.

Thank you Mr. Marchionne.

Good afternoon everyone and thank you for listening in the call.

I'm proud to present these results for Q1 2016.

Our shipments grew to 1,882 units, showing an increase of 15%.

All regions up due to the strong start of the new models: the 488 GTB, the 488 Spider and the F12tdf and despite LaFerrari finishing its limited series run group.

Net revenues reached EUR675 million, up 8.8%.

Adjusted EBITDA reached EUR178 million with a margin increase of 110 basis points.

Our net profit for the group was up 19% to EUR78 million and this is the best first quarter ever in the history of Ferrari.

Our net industrial that was slightly down from year-end to EUR782 million and our industrial free cash flow generation for Q1 2016 was EUR28 million.

As a result of the recently finalized bond issuance we are now commenting that industrial debt and industrial free cash flow as our key financial metrics.

We signed today a memorandum of understanding for FCA Bank to acquire a majority stake of Ferrari Financial Services AG which is a wholly-owned subsidiary which provides retail and leasing financial services in certain European countries.

Early this year as Mr. Marchionne just said we launched the GTC4Lusso which will replace the FF.

And finally, the racing season has just begun with four podiums that we've achieved so far in 2016, totaling 700 podiums throughout our racing history.

And guidance has been revised upwards with shipments higher than 7,900 units including supercars, net revenues of approximately EUR3 billion, adjusted EBITDA higher or equal to EUR800 million and net industrial debt lower or equal to EUR730 million.

Moving to page 4, we show our operating highlights for the first quarter of 2016.

Our shipments reached 1,882 unit, showing an increase of 15% led by V8 models which were up 21% thanks to the success of the two newly launched models: the 488 GTB and the 488 Spider.

On the other hand V12 models were down 6% due to the phaseout of the FF, the completion of the lifecycle of the F12 Berlinetta now in its fifth year of commercialization and LaFerrari finishing its limited series run.

This was partially offset by the new F12tdf.

We remind you that the recently presented GTC4Lusso will commence distribution in the second half of the year.

Net revenues were up 8.8% mainly due to cars and spare parts that boasted an increase of 12% driven by volume partially offset by mix and the negative contribution of engines down 10%.

Our adjusted EBITDA improved by 11% topping EUR178 million and the result was primarily driven by higher volumes.

Adjusted EBIT for the group showed a robust 21% increase reaching EUR121 million, resulting in 190 basis points growth margin growth.

The adjusted EBIT improvement benefited from various variables which we will comment later.

Q1 2016 industrial free cash flow generation was primarily driven by EBITDA, partially offset by CapEx and negative change in working capital mainly due to less down payments received for LaFerrari.

Q1 2015 industrial free cash flow included a EUR44 million one-time cash inflow related to a partial reimbursement of the financing of the Maserati inventory in China.

Excluding that one-time industrial free cash flow would have been in Q1 2015 minus EUR9 million.

Net industrial debt as of March 31 was reduced to EUR782 million primarily due to industrial free cash flow generation.

If we move to the next page on page 5, in terms of geographical distribution we achieved year-on-year growth in all regions, proving our robust business model.

EMEA, greater China and rest of Asia-Pacific enjoy double-digit growth mainly thanks to our new models: the 488 GTB, 488 Spider and the F12tdf.

Americas was up single digit due to the 488 Spider and the F12 just arrived to the market.

As a reminder, we are now phasing out the FF and we will introduce the GTC4Lusso in the second half of the year.

At the end of March the region Americas which represent 28% of total shipments was up 2%, USA performance was primarily driven by the 488 GTB and California T offsetting the F12 Berlinetta at its fifth year of commercialization and LaFerrari completing its limited series run.

The F12tdf just arrived in the market contributing for a few units in Q1 2016 and in Q1 2016 we began also shipping the F6, the America strictly limited edition.

EMEA representing 51% of total shipments increased by 24%.

UK, our largest market in EMEA, had a 4% increase in shipments supported by California T and the newly launched 488 family and the F12tdf.

Stronger performance was reported in Italy plus 75%, in Germany plus 74% and other Europe and Africa for 35% thanks to the 488 family and the F12tdf.

Greater China, 8% of our total shipments increased by 16%.

China mainland shipments grew by 67% thanks to the success of the 488 GTB.

Hong Kong and Taiwan shipments dropped by a few units mainly due to the phaseout of the 458 family which was only partially offset by the 488 family.

Shipments are planned to increase in the following quarters.

The rest of Asia-Pacific representing 13% of our total shipments increased by 14%.

Australia shipments were up by 14% driven by the 488 GTB which more than compensated the phaseout of the 458 family.

Japan recorded a slight reduction of 3% mainly due to the 488 Spider and the F12tdf that were not yet arrived in the market.

Other Asia-Pacific increase double digit driven by V8 models.

Moving on to the next page, we comment our net revenues.

Net revenues reached EUR675 million, up 8.8% versus Q1 last year mainly due to higher volumes.

At constant currencies net revenues would have increased by 8.4%.

Let me highlight that during the first quarter of 2016 we benefited from deliveries of the 488 GTB which completed its distribution rollout and shipments of 488 Spider and F12 Tour de France.

Cars and spare parts revenues of the EUR52 million increased from cars and spare parts, EMEA showed an increase of 27% mostly related to higher volumes of the 488 GTB, the 488 Spider and the F12tdf.

Greater China was up 39% due to volume increase of 488 GTB in China mainland and rest of Asia-Pacific up 8% due to higher shipments of V8 models, partially offset by Americas down 11.5% due to lower sales of LaFerrari completing its limited series run and the 488 Spider and the F12tdf just arrived in the market contributing for a few units in Q1 2016.

The proportion of V12 models shipped went from 19% for Q1 2015 to 16% for Q1 2016 and was primarily driven by a 48% decrease in shipments of the F12 Berlinetta at its fifth year of commercialization.

Shipments of V8 models increased as a result of completing the distribution rollout of the 488 GTB in other markets, the introduction of the 488 Spider to other countries as well as the contribution of California T partially offset by decreases in shipments of the 458 family which has been phased out.

Engine net revenues generated EUR57 million for Q1 2016, a decrease of EUR7 million compared to prior quarter in 2015, 10% from EUR64 million for Q1 2015.

The EUR7 million decrease was almost totally attributable to a decrease in net revenues generated by a 38% a decrease in the volume of engines sold to Maserati despite higher rental revenues from our Formula One teams.

Sponsorship commercial and brand net revenues reached EUR118 million for Q1 2016, an increase of EUR9 million or 8% from EUR109 million for Q1 2015, mainly due to better championship ranking in 2015 versus 2014.

And other net revenues was flat at EUR19 million.

Moving to page 7, you can see the year-over-year changes in adjusted EBIT main items.

Volumes were up EUR25 million thanks to an increase of approximately 260 cars excluding LaFerrari, mainly due to the newly launched 488 GTB, the 488 Spider and the F12tdf.

Increased positive margin contribution from personalization also contributed to the volume component.

Mix was negatively impacted by higher V8 versus V12 models, lower sales of LaFerrari partially offset by higher sales of special car FXX K and the first deliveries of the F60 America.

Industrial cost and R&D substantially unchanged to minus EUR1 million attributable to higher spending on F1 racing activity, partially offset by lower D&A for the 458 family and industrial cost savings.

Lower SG&A costs of EUR2 million mainly due to timing effect of the 2016 Formula One racing season versus last year.

Neutral impact of transaction exchange rates net of hedging and other was up EUR3 million due to other supporting activities contributing to the adjusted EBIT.

Moving on to the next page on page 8, we comment on net industrial debt at the end of March 2016 was EUR782 million, down from EUR797 million at the end of 2015 due to industrial free cash flow generation of EUR28 million partially offset by debt issuance cost and debt discount on our recent admission of the bond.

The positive industrial free cash flow generation was primarily driven by EBITDA, partially offset by CapEx and negative change in working capital mainly due to less down payments received for LaFerrari.

Q1 2015 industrial free cash flow included a EUR44 million one-time cash inflow related to a partial reimbursement by Maserati of its inventory in China.

Excluding that one-time in Q1 2015 industrial free cash flow would have been minus EUR9 million.

Net CapEx at EUR67 million was driven by our investment to sustain the product offering.

Moving on to the next page, we comment the memorandum of understanding which was signed today between Ferrari Financial Services S.p.

A. and FCA Bank.

We have signed the MOU for FCA Bank to acquire a majority stake of Ferrari Financial Services AG, a wholly-owned subsidiary of FFS S.p.

A. Ferrari Financial Services S.p.

A. and FCA Bank will continue the operation of FFS AG as a joint venture partner supporting the sales of Ferrari cars in certain European countries by offering innovative vehicle financing solutions to Ferrari customers.

Moving on to the next page, the GTC4Lusso was unveiled at the recent Geneva Motor Show.

The new Ferrari GTC4Lusso is the latest interpretation of the four-seater concept which combines extraordinary technology and performance in all driving conditions with sporty elegance and luxurious comfort for driver and passengers alike.

We've been very active on a global basis with our Corse Clienti as you can see on slide 12.

As previously announced, we've signed a nonbinding memorandum of understanding -- and we are on page 13 -- a memorandum of understanding for the licensing of the design, construction and operation of a new Ferrari theme park to be located in one of the primary cities in mainland China.

As indicated during the IPO process, Ferrari is aggressively exploring the luxury goods space that extends beyond luxury sports cars while nurturing and expanding the Scuderia Ferrari merchandising concept which is inextricably linked to its racing activities in Formula One.

It is expected that the first evidence of this development, the Ferrari-branded goods akin to its luxury sports car offering, would be accessible to potential customers in 2017 when the Company celebrates its 70th anniversary.

And moving to page 14, we outline our power 2016 revised outlook.

All metrics revised upwards, shipments higher than 7,900 units including supercars.

Previously we had mentioned in the initial guidance approximately 7,900.

Net revenues approximately EUR3 billion.

We had prior EUR2.9 billion.

Adjusted EBITDA higher or equal to EUR800 million.

Previously was EUR770 million.

And net industrial debt lower or equal to EUR730 million while previously we had lower than EUR750 million.

And with that said I hand over to Nicoletta.

Thank you, Alessandro.

Before we begin our Q&A session I'd like to hand over to Mr. Marchionne.

Okay we are ready to start the Q&A session please, Julia, go ahead.

(Operator Instructions) John Murphy, Bank of America.

Good morning, guys.

Just a first question on this CEO change.

Sergio, I mean obviously this is something that was somewhat expected by a lot of folks but it is a change.

And I'm curious if you take the other rein and really have full control here, what do you think you might change on the product side, on the cost side and really how should we think about the change in the CEO reins here?

Look, I was the one that pitched the Ferrari case on the road.

That's not going to be a different case than the one that I presented to the capital markets at the end of last year.

I remain as bullish on this prospect -- on prospects of this Company as I was when I presented Ferrari to the markets.

I remain even more so convinced of its upward potential.

When you look at Q1 2016 and you look at the adjusted EBIT performance of this house you realize that we're beginning just now to define the true potential on the passenger car side of what this house can actually deliver.

So I think, Alessandro mentioned, I'm not sure that he mentioned the fact that the personalization efforts are beginning to pay off.

It is representing a more relevant portion of the revenue and as you well know that's probably the most financial rewarding piece of the car offering.

I think we need to continue to explore pockets of profitability throughout the business and see whether we can bring this car, bring Ferrari to produce EUR1 billion in EBITDA as quickly as we can.

That remains my immediate objective.

Okay, and then just a second question as we look at the volume outlook that you're giving, it's greater than 7,900.

If we hit 7,900 that would mean that volume would be flat on a year-over-year basis in the second, third and fourth quarter and that seems awful conservative given what you've just put up in the first quarter and the opportunities that appear to be in front of you in the Americas.

I mean how should we think about buying through the remainder of the year?

Because the guidance that you're giving us is really just indicating flat to up.

I would presume more up than flat but it just seems like there's a lot of opportunity as we go through the course of the year to be significantly above 7,900.

I think the chances are there.

I think you may have noticed from the way in which we're guiding that we're being cautious as we learn our reporting cycle here.

I think as we keep on delivering quarters between now and the end of this year I think you may see a shift in those numbers as we see actual numbers come out.

I think you are going to have to bear with us until the end of the year until we find our rhythm.

I think there is a necessary level of caution associated with these forecasts and it's something that I think one ought to keep in mind.

We certainly do not want to disappoint and I think that the indications are that we may exceed all the targets we gave you.

But I think we're going to wait until actual numbers come in.

Very understandable.

Then just lastly, as we think about mix in the quarter, I mean it really wasn't that great an aggregate headwind.

Can you just comment on the F12tdf deliveries, maybe more specifically in the quarter and what we should expect for the full year?

I know we're looking at 799 in total, but do you think you'll get the bulk of those this year and that might even reverse the mix impact as we go through the course of the year?

No, I think we'll probably will not exhaust the whole pop in 2016.

We delivered less than 20% of the volumes in Q1 of the number that we gave you that you properly, correctly pointed out as being 799.

I think we're going to pace those throughout the year.

And it's not a question of just pacing revenue, I think it's a question of being able to deliver the products out of the factory.

I think that most of them will be delivered within 2016.

There will be a hangover effect in 2017.

Okay great.

Thank you very much.

Martino De Ambroggi, Equita.

Yes, good morning, good afternoon everybody.

Martino from Equita.

Focusing on free cash flow, I know you did not disclose the terms of the agreement for the financial business with FCA Bank.

But just to be sure the change in guidance is not related to this, in terms of net debt is not related to this transaction first.

No, it's not.

Okay, perfect.

And the second question is on free cash flow.

Could you remind us what is the one-off impact for the taxes cash out this year?

I remember last time we discussed more than EUR100 million but maybe today you have a more precise indication which is included in your guidance.

Yes, that's correct, Martino.

We have expecting a down payment for taxes relate to 2016 in the second part of the year for more than EUR100 million.

Okay.

And regarding the EBIT guidance, if I understand correctly the main change to your guidance is related to volumes or there is any other issue that should be taken into account?

And I remember ForEx was expected to be positive by EUR50 million but mainly in the second half of the year, so it should come going forward.

With all due respect, I think that the improvement in guidance is both an EBITDA and lowering debt.

But the number that Alessandro mentioned, EUR100 million is already included in the net debt number at the end of 2016, the expected number.

It includes the one-off payment in taxes.

Yes, yes, my question now was on the EBIT.

So just to understand if it's it driven by higher volumes or there is some other element driving the improvement in profitability?

It's both improved margins and higher volumes.

Okay.

ForEx, though, was at EUR50 million?

Yes, ForEx is unchanged compared to the guidance we provided at the beginning of the year.

Okay.

Very last one, merchandising strategy, any timetable for the disclosure of your strategy?

I think the press release makes reference to 2017.

We can actually show what we intend to do with a non-car luxury end of the business.

I think we'll have it to wait while we celebrate the 70th anniversary next year.

Okay, thank you.

Ryan Brinkman, JPMorgan.

Hi, great, thanks for taking my question.

Can you give some more color about the thinking behind the share repurchase authorization at the recent annual general meeting?

I don't remember buyback being discussed too much around the time of the IPO but rather a strong dividend payout.

Was this in response to the valuation of the shares in the market and how should we think about the cadence of any possible repurchases?

I think it's a healthy thing to have in terms of corporate authority.

I think given what we've seen in the marketplace and the fact that we have seen some bizarre trading certainly at the time of the spin out of SCA into unsuspecting shareholders will mean now they wanted to be long-term shareholders of Ferrari.

Had we had that authority in place I think we would have been able to act in a more intelligent fashion.

There is no doubt that there was value arbitrage that was being left at the table, on the table at the time of the spin.

And I think it was unfortunate we were not able to act and I think it's good corporate authority to have period.

Whether we use it or not it really doesn't matter.

I think the important thing is to have it.

Just go back to your comment about what I said during the roadshow, I think what we clearly stated that this was a cash-generative business and as such dividend payouts and share repurchases were the easiest way in which we could deliver value to shareholders.

One was not exclusive of the other and even dividend payouts as forecast during the roadshow will eventually still yield a business which is fundamentally unlevered.

In that situation the only thing you can do is go back in and buy shares.

Okay, and can you share what you plan to do with any proceeds from the sale of a stake in Ferrari Financial Services?

Reduce the financial debt to support the financing activities.

You'll have zero impact on the net industrial debt.

Got it.

Then just lastly, you mentioned that your margin would have looked better relative to Porsche's had it not been for the hedging.

Is it possible to say what your EBIT margin or what your EBIT would have been without the hedging?

21%.

Fantastic.

Thanks a lot.

Massimo Vecchio, Mediobanca.

Good afternoon everybody.

First, a clarification on the MOU with FCA Bank, it refers only to the European portfolio, right, is it correct?

That's correct.

Okay, second question on the business with Maserati regarding the engines, I believe you made no secret that this business has lower margins than the car business and obviously there is a contract which is expiring in 2023, if I'm not wrong.

So I was trying to understand what would you do if this contract would expire tomorrow.

Which position are you with this production facility, what could you do with this spare capacity, and also, sorry, how long before you have to decide what to do with this?

I can give you an answer as sort of the FCA user of the engines.

We have no intention of abandoning the relationship with Ferrari out of Maserati.

I think it's something that we have found incredibly helpful in terms of the marketing of the Maserati products on a global scale.

And I don't know of a reason today that would suggest that those volumes would actually drop or they would deviate from forecast.

The launch of the Maserati Levante is going to draw a substantial portion of the capacity that's been allocated by Ferrari to Maserati.

And as much as on a full cost basis it does not provide the equivalent margins for all we get from car making.

It does provide a good level of absorption of fixed cost within the plant.

I think it's something that's desirable and I think it's something that Ferrari will continue to nurture going forward.

All right.

Thank you very much.

Adam Jonas, Morgan Stanley.

Hey everybody, the first one is kind of housekeeping.

Did you disclose or can you give us an indication of how much movement in capitalized development cost versus amortization of such costs impacted the margin in the quarter?

Of the EUR67 million of CapEx, almost EUR40 million are related to R&D in terms of capitalization component.

Okay, thanks.

And the second one for Sergio, regarding Formula One, it seems F1 and Ferrari are inextricably linked in that Formula One does not exist in its current form without Ferrari and Ferrari does not exist in its current form at least without Formula One or at least in motor racing at its highest state-of-the-art in whatever form or entity that might exist, yet at the time when a lot of other global sports franchises are reaping huge benefits in global marketing and endorsements it seems that F1 is, and I want to be polite here, Sergio, it seems kind of at a crossroads where it might have a lot of room to improve.

It seems to be massively undershooting its commercial potential, basically, if I want to be blunt on a global scale.

And without getting too far down the rabbit hole of politics and leadership at the FIA and Formula One, Sergio, can you explain the potential for Ferrari's role, especially with your enhanced role at that organization, to help recast the sports image and strategy?

And how could this payoff not only for existing and untapped fan bases of Formula One but also for Ferrari shareholders and stakeholders as well?

Sorry to be verbose there but thanks.

You actually were incredibly tactful and I'm going to try and give you a very tactful answer.

Look, there's been a huge amount of work that's been done by FOM through Bernie Ecclestone to try and build F1 into what it is today.

And I think he's got years of experience that he's applied to the enterprise here.

So I think we have all benefited from his leadership and his management.

There is not a single doubt in my mind that Jean Todt over at the FIA has now provided a good interface for the racing teams to begin to have a dialogue about the shaping of the sport going forward.

I sit on the board of FOM together with a couple of other racing teams.

We have very keen interest to make sure that we express the highest potential from this business.

There are discussions that are going on within that environment now how to best improve this business.

We're going to be incredibly collaborative to try and make sure that we drive the bus in the same direction.

And on this issue I have to agree that as competitive as we are, especially against Mercedes on the track, I think we both Mercedes and ourselves see the proper development of that of what they refer to as the circus to be in everybody's best interest.

It's a work in process.

It is something which Ferrari needs to engage because it is, as you said correctly it is at the heart of the brand.

We will do everything we can to make sure that we explore the highest possible potential out of F1.

And I tend to agree with you that I think that there is potential that is yet unexploited and it's not expressed and I think it will benefit everybody at the table including the holders of the commercial rights of Formula One.

So the only thing I can tell you, Adam, is stay tuned.

This is a work in process, it will develop over the next little while.

I think the last decision that was made by the F1 commission following a pretty lengthy discussion of the strategy at the strategy group in terms of the changes for the 2017 regulation, especially two things: one the stabilization of the engine rules out to 2020 and the commitment by the engine providers, the four racing teams that have engine supply capability, the obligation to provide engines to other participants in the Formula One circuit will provide the right level of stability in terms of the number of teams that will race.

It's designed to bring down the cost of execution.

We have also agreed a number of changes to the body style besides the tires that will be used in 2017 and hopefully will become a permanent element in the racing schemes going forward up until 2020.

And so consistent with what I've said, both on the roadshow and on other calls, we do expect the cost of F1 compliance, our cost to come down between now and 2018 and 2019.

But the biggest issue to me is to make sure that this Board achieves the highest level of market acceptance and recognition that it can and we're a long way from that objective today.

Thank you, Sergio.

Thomas Besson, Kepler Cheuvreux.

Thank you very much.

I have a few quick questions please.

Could you give us some qualitative comments about the evolution of cars and spare parts revenues within this buckets, please?

Is there any uptick in the spare part business or is it really the personalization element that has driven the overall revenue there?

The over increase in cars and spare parts is mainly driven by volume.

There is a component on personalization which is an additional 1% compared to the historical 15% on our top line in terms of contribution from personalization.

1%, okay, thank you.

Could you give us an indication on the tax rate for the full year, please?

You are benefiting from a lower tax rate in Italy, what do you now expect for 2016?

Substantially in line with Q1.

Great, and lastly on the hedging, can you just be a bit more specific in terms of hedging cost for the quarter substantial and therefore substantial hedging benefits in coming quarters, is that what we should expect?

The same positive impact on the full-year bridge with less cost in coming quarters, right?

The contribution from actually the negative impact on the hedging, from the hedging in Q1 was approximately close to EUR30 million.

And on the annual basis I think we provided last time the overall effect is close to EUR100 million.

But you need to consider there is already in our guidance in the second half of the year a contribution from FX variance compared to prior year of around EUR50 million.

Very clear.

Thank you very much.

Lello Della Ragione, Intermonte.

Hi, good afternoon.

I have a couple of questions.

The first one is on the free cash flow bridge and actually the net industrial bridge.

I was wondering if you can comment on the other element, the EUR45 million there?

And if on this point also can you indicate what we should expect in terms of net working capital since the effect of the down payments for LaFerrari would last for even the next quarter probably?

And should we expect something in the same magnitude going in the second and third quarter probably until the start of the GTC4 down payment?

So just to take all the questions, so the overall change there are two changes, one in working capital which is partially driven by timing on our receivable side and then in the other you see the component related to the down payments received for LaFerrari.

So it's a combination of two different elements including the fact that we had lower CapEx payable in Q1 which is typical of our seasonality on CapEx.

And on the other side in terms of working capital, working capital typically is negative for us, therefore should be contribution in terms of cash for the house.

There is a timing component related to seasonality which I just mentioned.

So we expect to have a positive contribution from working capital -- sorry, positive from a cash flow standpoint in next quarters.

Okay.

I have also another one is on SG&A.

You mentioned seasonality in F1 and actually the rate was quite low compared to last year and even first-quarter 2015.

Should we expect this to reverse in the second quarter or should we expect an SG&A ratio below 10% as you posted in first quarter in terms on sales?

The SG&A ratio should be substantially in-line with an 11% on an annual basis.

This is really timing because we had one less race compared to last year.

But this year actually we will have 21 races in total from an annual standpoint compared to the 20 we had last year.

And the last one actually, on D&A also we had very low percentage on sales and I was wondering, okay, it's going down, you mentioned the D&A related to the model that you're not producing any more but you are starting the GTC4 soon.

And I was wondering should we expect this level to continue until the second quarter and then come back around the 9.5%, 10% by year-end, or is it something is going down and will remain below 9% for the rest of the year?

D&A in total this year will be slightly lower than in prior year on an annual basis.

The main reason is the 458 family phasing out as well as an effect driven by the fact that we don't have the D&A on the LaFerrari side.

So that's the combination of the two elements, so percentage wise it should be slightly lower than last year.

Okay, thank you.

George Galliers, Evercore.

Hi, thank you for taking my question.

First question I had was just going back to the comments around hedging and your margins.

The 20% to 21% seems a large step up from the 15% average margin we've seen for Ferrari over the last three years.

Can you perhaps explain what the drivers behind the 500 basis points improvement is?

Is it predominantly volume, is it special editions, personalization or is there another piece?

For example have you had negative hedging effects in your numbers for some time?

How about better management?

Okay, any further details?

That's good enough, isn't it?

Okay.

And then secondly, just when you give your outlook and guidance, I realize you don't give details on future products but when you give the outlook, does it include future models that may not have been released or revealed to the press or investors but are within your internal plans and which you plan to build and announce in the future?

I don't know how to answer your question because maybe you can give me a simple version of the question you just asked.

Say for example, when you give your outlook today, if for example you were going to announce another special edition at some point during this year, does your outlook today include that announcement that will come at some point in the future?

So if during the summer you announce a limited edition of five models that you're planning to build in November does your outlook reflect that?

I think I understand your question now.

I point out two things.

If you look at the guidance, the guidance has intentionally been structured as providing an equal to or greater than number.

So it's by definition possible for us to improve on that performance.

We're giving these numbers as minimum guidelines for the achievements expected for 2016.

And secondly, we will not do anything through the guidance mechanism that would effectively break with commercial practice that Ferrari has had here in the last 70 years.

So to the extent that we will not have a publicly announced a particular special version.

Until a particular point in time in the product cycle or in the commercial activities of this group we will not have updated guidance to reflect that.

And we cannot do it because we cannot undo commercial practice for the financial disclosure as long as we're being consistently conservative in the guidance that we're giving.

And that is the approach that we're taking.

Okay, thank you.

Then just very final question, can you just talk a little about the mix?

Clearly the V8 sales were very strong with the 488 shipping very well.

But when we look at the 12 cylinder taking into consideration the fact that there are some F12tdfs in there it looks like you've seen a significant step down.

Is that something we should expect to continue until the GTC4Lusso is launched later in the year?

Well, the answer is yes.

I mean fundamentally we've got both the FF that's coming off production that's going to be replaced by the GTC4.

That's not going to be available until Q3 and Q4 this year.

The F12 as Alessandro mentioned is now in its fifth year of commercialization.

So it's by definition going to be in diminishing numbers as we go forward.

Until the 12 line gets renewed, and it's happening now first with the FF successor, you will see that number not be substantially different.

It will improve in the second half of this year I expect.

But until the new F12 gets launched or a replacement for the F12 gets is introduced I think that that mix will not drastically change.

Having said this I don't think it's going to negatively impact margins.

Great, thank you very much.

Gabriele Gambarova, Banca Akros.

Yes, thank you.

Thanks for taking my question.

One was on the mix.

Alessandro, you cited the breakdown between V8 and V12 but I'm sorry I missed it.

And the second -- sorry?

I said 21% up for V8 and 6% down for V12.

So you are not providing an absolute number for these how many cars?

We typically aren't providing it.

Okay.

And the last one was on strategy.

I mean there are from time to time there has been rumors about a new Ferrari model, possibly a fifth model in your product line, something that might be let's say more entry-level.

So possibility six, there have been some rumors around, so I wanted to know if (multiple speakers)

If the rumors are true?

Yes.

If they were true they would not be rumors anymore because we would have announced it.

So I really have nothing to do that.

I think when we make a decision as to what permanent changes we'll make to the portfolio we will announce it accordingly.

But as based on what I know today there are no significant changes that are happening to the portfolio going forward other than what we've disclosed to the markets.

Okay, thanks Sergio.

Thanks.

There are no further questions in the queue.

I would now like to turn the call back to the speakers for any additional or closing remarks.

Thank you everyone for attending today's conference call.

I'll be available for any follow-up question you might have.

Thank you.

Thank you.

That will conclude today's conference call.

Thank you for your participation.

Ladies and gentlemen, you may now disconnect.