Ferrari NV (RACE) 2019 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by.

Welcome to today's Ferrari's 2019 First Quarter Results Conference Call.

I must advise you, this conference is being recorded today, the 7th of May 2019.

I would now like to hand the conference over to your speaker today, Ms. Nicoletta Russo, Head of Investor Relations.

Please go ahead.

Thank you, Sarah, and welcome to everyone who's joining us.

Today's call will be hosted by the group CEO, Louis Camilleri and group CFO, Antonio Picca Piccon.

All relevant materials are available in the Investors Section of the Ferrari corporate website and at the end of the presentation, we will be available to answer your questions.

Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on Page 2 of today's presentation, and the call will be governed by this language.

With that said, I'd like to turn the call over to Mr. Camilleri.

Good afternoon and good morning, everyone.

As evidenced by our release earlier today, we enjoyed a very strong quarter, which sets us up nicely to achieve our annual guidance that we disclosed earlier this year.

Our volume growth was particularly strong, driven primarily by the success of the Ferrari Portofino, consistent with the strong order book we hold.

While this quarter reflected a quarterly record in terms of volume, it was somewhat flattered by a previously disclosed acceleration in our shipments to China in anticipation of the new emission regulations that are being implemented in a somewhat inconsistent and uncertain manner by each individual province in China.

As we have flagged, our cash flow was exceedingly strong this quarter, reflecting in large part the EUR 170 million that we received as advance deposits on the orders for the Monza SP1 and SP2.

The first deliveries of these cars will take place in the fourth quarter, which will help us to achieve the positive mix we are targeting for the full year.

This year will witness the unveiling of 5 new models.

The first, the F8 Tributo, was presented at the Geneva Motor Show in March.

We are delighted with the reception it has received to date.

In fact, orders are very strong and compare favorably to the initial orders we captured on both the 458 and the 488.

The second model will be presented at the end of this month, with a world premiere held here in Maranello.

As we have stated previously, it will be a top-of-the-line hybrid with supercar performance and a true beauty.

We continue to work diligently to refine and finalize our brand diversification strategy.

The first step has been to define the categories in which we will participate, conscious of our rather unique dual identity as a racing team and a luxury brand.

As part of this step, we have started to exit categories that do not fit with our vision, and this is already visible from our numbers and will continue to be for a while.

Our ultimate objective is to grow the business over the long term in a disciplined manner while further enhancing our strong and vigorous brand equity.

As I mentioned previously, we will publicly outline our strategy on this specific topic when we present our third quarter results.

In terms of Formula 1, the first races clearly did not meet our ambitions, but we remain confident that we have all the necessary assets to be a credible contender to the championship.

The season ahead is a long one.

We have proven that we have a fast car, and we are actively focused on improving its overall balance and performance.

We have the privilege to have two great drivers and a great team principal.

Very importantly, we have a united, serene, determined and talented team, both on the track and in Maranello, who will give their all to finally fulfill their and our ambitions.

On that note, I'll pass it over to Antonio to take you through the details of our results.

Thank you, Louis, and good afternoon to everyone.

On Page 5, as Louis just said, Q1 '19 saw a solid set of results.

Our shipments increased by 482 units versus prior year, strongly supported by the Ferrari Portofino.

Group net revenues increased to EUR 940 million, that is by approximately EUR 110 million or above 13%.

Adjusted EBITDA reached EUR 311 million, improving by EUR 39 million or more than 14%.

EBITDA margin was 33.1%, up 30 basis points versus prior year and fully consistent with our 2019 guidance.

Such a result includes a EUR 4 million uplift from the first-time adoption of IFRS 16, the accounting principle on leasing.

Adjusted diluted EPS was up 21.8% to EUR 0.95, still benefiting from the Patent Box agreement signed last year.

Industrial free cash flow reached EUR 282 million, positively impacted by the collection of the advances on the Monza SP1 and SP2.

This led net industrial debt to EUR 192 million as of the end of March, which also reflects the cash impact of the share repurchases executed in Q1 and the one-off increase related to the first-time adoption of IFRS 16.

Let's turn to shipments on Page 6. Total shipments for the quarter increased by 22.7% versus prior year, supported by a 30.6% increase in V8 and a 4.1% increase in V12.

The V8 performance was led by robust deliveries for the Ferrari Portofino, partially offset by lower volume from the 488 family, with the 488 GTB and Spider approaching the end of their lifecycles, the 488 Pista ramping up and the 488 Pista Spider expected to commence shipments in Q2.

The 812 Superfast supported V12 deliveries.

Growth in shipments occurred across all regions.

EMEA grew 9.6%, Americas enjoyed a 26.5% increase, Rest of APAC was up 29.3%, while Mainland China, Hong Kong and Taiwan increased 79.2%.

The geographic mix shifted in favor of Mainland China, where deliveries were accelerated in advance of the early implementation of new emission regulations, as we commented.

Such an acceleration will imply comparatively lower volumes in H2.

Moving to Page 7 on group net revenues, we see how they increased by 11.1% at constant currency, that is at 2018 exchange rates, net of hedges.

Cars and spare parts revenues were up 18.3% at constant currency.

As discussed, the growth reflected higher volumes of the Ferrari Portofino, the 812 Superfast, as well as the ramp-up of the 488 Pista, partially offset by lower sales of LaFerrari Aperta and the 488 GTB as well as the 488 Spider, both in phase out.

Personalization programs also positively contributed, along with deliveries of the FXX K EVO.

The erosion of the engines revenues was EUR 19 million, down by 23.4% at constant currency in the quarter, reflecting lower shipments to Maserati.

Revenues from sponsorship, commercial and brand were decreasing by 1.2% at constant currency, due to lower revenues generated by other brand-related activities.

Currency, including translation and transaction impact as well as foreign currency hedges, had a positive impact of EUR 17 million, mainly U.S. dollar.

On Page 8, you can see the evolution in the main items of the adjusted EBIT.

Adjusted EBIT was up 10.7% at current currency to EUR 232 million, with adjusted EBIT margin of 24.7%.

At constant currency adjusted EBIT grew by 4.9%.

Volume was positive by EUR 60 million, thanks to shipments increase.

Mix/price was negative driven by mix, due to the combined impact of lower sales of LaFerrari Aperta, that finished its limited series run in 2018, and the strong increase of the Ferrari Portofino.

This was partially offset by deliveries of the FXX K EVO, along with personalization programs.

Just as a reminder, as we anticipated during our full year '18 call, we have moved the contribution from personalizations from volume into price/mix due to their intrinsic enrichment nature.

Industrial costs and R&D increased mainly due to higher depreciation and amortization of fixed assets, while future quarters will face increasing operational start-up costs as we introduce new additional models in our fleet.

Other decreased due to lower engine sales to Maserati as well as lower revenues from other brand related activities.

One-timers were in line with prior year.

The total net positive impact of currency was EUR 12 million for the quarter, clearly as the net result of more favorable market rates, mitigated by the hedges in place.

The change in adjusted EBITDA reflects the same considerations, in addition to the positive contribution from the adoption of IFRS 16.

By the way, a similar impact from new accounting principle can be expected for next quarters, and this has been fully encompassed in our guidance.

Moving to Page 9, industrial free cash flow for the quarter was EUR 282 million, driven by the strong adjusted EBITDA and the positive cash impact from the collection of the advances on the Ferrari Monza SP1 and SP2, EUR 170 million in Q1 2019.

This was partially offset by CapEx spending of EUR 135 million, expected to accelerate in the second part of the year to support the pipeline of new projects we are working on.

Net industrial debt at the end of March 2019, after EUR 51 million of share repurchases in the first quarter and including EUR 63 million of lease liabilities as per IFRS 16 first-time adoption, reached EUR 192 million.

The recently approved dividend distribution is not yet included and will impact Q2 2019 for approximately EUR 193 million.

Please note that from this quarter on, the definitions of both net industrial debt and industrial free cash flow have been refined to simplify the reading of the company's industrial performance.

On Page 10, we confirm the group's guidance for 2019, with net revenues above EUR 3.5 billion with total shipments around 10,000 units.

Adjusted EBITDA between EUR 1.2 billion and EUR 1.25 billion, driven by positive volume as well as mix.

Adjusted EBITDA provided in the guidance already includes the impact of IFRS 16 first-time adoption.

Adjusted EBIT between EUR 0.85 billion and EUR 0.9 billion.

Adjusted diluted EPS between EUR 3.5 and EUR 3.7, including the Patent Box benefit.

Roughly EUR 450 million of industrial free cash flow generation, unchanged with the new definition.

And as a reminder, the Patent Box will also benefit the cash generation by lowering tax cash out.

We did not consider any adjustment for the strengthening of the U.S. dollar.

First, because experience tells us not to bet on currency trends.

Second, because an active hedging policy now in place would anyway mitigate the impact, while providing better visibility longer term.

However, given the strength of the quarter, should the exchange rates stay at the current prevailing rates, we should be set up well to approach the high end of the range for both our adjusted EBITDA and adjusted EBIT.

With that, I'd like to turn the call over to Nicoletta.

Thank you, Antonio.

And we are now ready to start the Q&A session.

Please, Sarah.

(Operator Instructions) The first question is from the line of John Murphy from Bank of America.

Hi.

Good afternoon, everybody.

Just a first question on the timing of product unveils as we go through the course of the year.

It sounds like we will have a new product in the end of the month in addition to the Tributo.

It sounds like there is 3 more coming.

Just wondering what the timing of those other 3 unveils will be?

And then also if we should think about the Tributo and the new product coming at the end of May as combined the replacement for the 488?

Or will we see something else -- replacing the 488?

I am just trying to understand there what that actual replacement will be and when we will see it.

Hi John, the Tributo sort of is the successor of the 488.

The model that is coming in 3 weeks' time will be at the high end, and it will have a supercar performance.

When I say it is a high end, it will be above the 812 Superfast.

So it is not a 488 replacement per se.

With regard to the other 3 models, 2 will probably be presented in September, and the last one towards the end of the year.

Does that answer your question?

Okay.

Yes.

If I could kind of follow up on this product that is coming out at the end of this month.

It sounds like you are saying it is above the 812 Superfast.

But given the performance and maybe the price point, and I would kind of try to triangulate into that, it sounds like it will be a very attractive product for maybe consumers to trade up into, maybe out of the Tributo or whatever the -- or the 488 they previously owned.

So I mean how much of that do you think will happen?

Because it sounds like this is a sort of maybe one of the first products with a step function improvement in sort of a regular Ferrari, not the supercar or the hypercar.

I am just trying to understand that product positioning because it sounds like it is pretty important.

Well, I would ask you to be patient for 3 weeks and you will find out a lot more.

What I would add is that it will be very consistent with the strategy we outlined back in September, where we want to privilege revenue over volume.

So just wait and see what this thing is all about.

Okay.

We are looking forward to that.

Then just quickly on the cash on the Monza deposits.

There is EUR 170 million in the first quarter, but it sounds like there is more to come.

How much more is there to come?

And how should we think about the timing of that?

Because that was a big number.

Well, it depends on the precise deliveries we will have in the fourth quarter, but there is a bit more to come.

It is not huge.

As you know, they are all sold.

So the bulk, the real bulk of the deposits we have already received.

So that model has performed very well.

In fact, we have a lot of orders that can't be matched.

The interesting thing is that actually we had a number, quite a few customers, who wanted to buy both and we actually refused.

Can you translate any of those people into the next Icona vehicle?

Can you put them into the wait list for that?

We will see.

Okay.

Then just lastly on engine, which sounds like it is under pressure just because Maserati volumes are flagging.

What is the agreement there with Maserati?

And at what point and at what capacity utilization would you consider sort of cutting bait on that agreement?

And can you?

And what is sort of the term of that agreement?

Well, as you know, we have a contract.

And as you know, Maserati has announced that at the end of that contract they will not renew it.

So eventually, we will no longer supply engines to Maserati, which, actually, from our perspective, is actually a good thing both from a margin perspective, but also the fact that we can transfer a lot of the labor, that has been focused on the engines, to the car side of the business.

The next question is from the line of Michael Binetti from Credit Suisse.

Hey.

Good morning, everybody.

Thanks for taking our questions and congrats on a nice quarter.

Just a little bit of housekeeping so that we understand the year.

I think as we talked about how to look at 2019, you had originally told us that first quarter was planned to be the biggest mix headwind quarter of the year, lapping up LaAperta and then also the slowest growth quarter of the year.

Is that still the case and just to help us think about the cadence for the year for 2019?

Yes.

As you know -- as you saw, in the first quarter the mix was negative.

Actually, I thought the average price was pretty good given the lapping of the LaFerrari.

But as we have said before, the mix will improve as the year unfolds, particularly in the fourth quarter, driven by the Monza.

So overall, in the full year, we expect a positive mix.

Okay.

It seems like the fourth quarter is going to have a pretty -- I mean, will mix be positive by third quarter yet?

Or just because of what is falling out the baseline?

Or it seems like fourth quarter is going to have a relatively huge mix impact on the year?

It is driven predominantly by the fourth quarter, but I think mix improves as the year unfolds.

Okay.

Could you help us understand a little bit better the shift in China?

Is that -- I think you made some comment about 2Q related to China, but do you get back some of that volume in China in the second quarter?

Does that reversed?

And then I guess, would you help us think about the size of that impact in the first quarter on revenues and EBITDA and maybe how the China mix of business impacts corporate margins?

Does China skew higher than corporate on margin?

I think it is important to note that whilst we accelerated shipments, we are not increasing inventories, those deliveries to customers.

And in fact, those customers have to register the cars before the implementation of the emission regulations, that vary by province.

In fact, we anticipate that our inventories at the dealer network will be at a record low.

Beyond that, I am not sure I need to say anything on China.

The next question is from the line of Adam Jonas from Morgan Stanley.

Hi Louis, so just one, continuing on China.

China got up to 13% of unit volume in the quarter.

Can you remind us maybe a bit more steady-state, what you think the optimal or perhaps maximum proportion of mix should be derived from China for your company?

Well, as we have said, we believe that China is one of our great opportunities for growth.

It will take some time.

I think with the advent of our hybrid models and with the advent of the Purosangue, we will clearly be in a better position to exploit the opportunities that there are there in China.

We are working diligently to strengthen our dealer network with a singular focus on Ferrari.

And whilst it will take some time, we are confident that we will do well in China over time.

Okay.

And since you mentioned the Purosangue, it seems to me at least that your 2022 targets should be achievable without any help from the Purosangue.

And I say that because I know that in the details of the presentation, there was this -- the launch or ramp could be at the very end of the 2022 horizon.

But I just want to make sure the messaging is right that to achieve your 2022 targets, it is -- the Purosangue can help, but it doesn't appear to be make or break based on that model.

That model benefits are more beyond 2022.

Have I thought about that right, Louis?

Well, it is clearly in the numbers.

So it obviously more than helps.

I think it is part of the whole mix in terms of meeting those targets.

So I wouldn't venture to say that without it we would absolutely certainly make the target, but I think we are confident that we can make the target, and we can make it with the Purosangue.

Okay.

And then just finally, Louis, on EVs.

Can you tell us how you and the management team are looking at make-or-buy decisions with respect to key battery components, cells, software, pack, in terms of your room to collaborate with partners that have huge scale and a part of the product that maybe the consumer doesn't see?

Or does this have to be done within the house of Ferrari as you leverage your Formula 1 expertise in design and thermal and everything else?

I just -- I know I am throwing a lot at you there, but just -- can you give us a sense of what you buy in versus do in-house on those critical components going forward?

Well, clearly, we work with our privileged suppliers, but -- and it is something we are studing.

But ultimately, I think we are leaning towards make rather than buy to assure a competitive advantage in terms of the battery, the cells, et cetera.

The next question is from the line of Thomas Besson from Kepler Cheuvreux.

Thank you very much.

I have just 2 quick questions, please.

Can you talk about the evolution of your industrial organization as you ramp up volumes substantially with the increase of the Portofino?

I think 10 years ago, there was a decline in other volumes when the California was ramped up, this time around everything else is still going fine.

So it looks like you are going to cross 10,000 units this year.

Can you explain how you manage that within the plant?

Are you moving to a 2-shift organization already or are you managing to do that with the existing pattern?

And then the second question, I would just like you to remind us the potential consequence for the company if you cross 10,000 units this year in terms of various -- due to constraints or potential cost constraints?

Thank you.

As we have said, in terms of the assets, whilst we had a few investments that we already disclosed, the main focus has been on the labor force and training it.

And as I mentioned earlier, the reduction in the Maserati volumes, the engine volumes, has allowed us to shift some talented employees to the car side.

So net-net, we haven't increased dramatically.

And clearly, because of the assets we have, we will eventually move to full second shift.

With regard to the implications of crossing the 10,000 barrier, initially, the costs associated with that are really frankly not material.

The next question is from the line of Stephen Reitman from Societe Generale.

Yes.

Good afternoon.

I have 2 questions, please.

The first is on R&D capitalization.

The second is on personalization.

On R&D capitalization, it was quite notable that you have had a substantial reduction sequentially in your R&D capitalization rate from the sort of 44% level we have seen in the third and the fourth quarters, down to 30%.

So I would say that the quality of your EBIT result was better, measured that way.

Can we expect a seasonal pattern that there will be any increase as we go in the -- towards the -- further into this year, that we could see this capitalization ratio increase again?

My second question is about personalization.

And the question, to what extent does the personalization rate also align with your product launch cadence?

I would suspect that with your newer products, your ability to demand a higher degree of personalization as a way of securing you a place in the queue is greater.

Is that a factor?

Thank you.

Your assumption regarding R&D capitalization is correct.

It will increase as the year unfolds.

With regard to personalization, we were at about 18% in the first quarter, and we assume that the 18% will probably be the number for the full year.

We don't actually give people a higher slot because they have got higher personalization.

That is not the way it works.

My understanding was rather the dealers are quite adept at doing that.

And the personalization, you were saying -- you said that, that is now in the way you classify it, you switched it now a little bit.

So if you hadn't made that switch, would there be a substantially greater decline in the mix figure that you reported, the mix element?

Not really.

Because the personalization, in percentage terms, actually was pretty well flat quarter-to-quarter.

The next question is from the line of Philippe Houchois from Jefferies.

Thank you and good afternoon.

I have a few questions.

The first one I have is on -- you disclosed this time the share of specials in your total volume.

I don't think you did that last year.

What was the comparable number for Q1 '18, please?

The 18% that you show in...?

Good question because we are looking at the number.

Yes.

But as an outsider, for me, the measure of mix really is the average revenue per unit, and it is barely down in the first quarter.

And I was just wondering, the positive surprise compared to what I was looking for.

Is it because your transaction price on average on the Portofino was higher than I thought, higher because of optional equipment?

Or was it mostly because of the very high value of the FXX, for example, making up for the lower transaction prices on the Portofino?

I think the FXX K certainly helped as well as the 812 Superfast.

And I would add to that country mix as well was favorable.

Philippe on your first question -- sorry, on your first question.

This is Antonio speaking.

If you can hear, you can consider about 2% of the total in Q1 '18 were Special.

2%, all right.

Okay.

I get the difference there.

All Right.

And then I have one last question, it is kind of a -- just a novice question on Ferrari, but I am looking at historically, it took Ferrari about 3 years, if I remember, to deliver all the Apertas that were ordered.

And I am just wondering, you sold about 500 Monzas right away, but some of the deliveries will only happen in 4 years or so.

And I am just wondering, how do you choose the sequence of deliveries to customers?

And is basically the customer getting the car in year four, is getting the same car?

Or are you constantly improving the Monza?

Or will you constantly be improving the Monza?

So there is -- I wouldn't say -- it is kind of a bad choice of word, but a fresh product as opposed to a rather old product?

I am just wondering how you manage that.

If you can help me understand.

I think the premise of your question is it would take 4 years.

In fact, it won't take 4 years.

By the end of 2021, the Monza SP1 and SP2 will have been delivered.

Right.

But will it be technically the same car?

Or will it be improved?

Yes.

Or it will be technically the same car?

Exactly the same car.

And so, and how do you manage disappointment among your customers to be getting a car in year 3 as opposed to getting a car in year 1?

Well, that has been somewhat the issue that Ferrari has lived with for years.

It is something we are very mindful of in terms of balancing the order book, which I have to admit is incredibly strong at the moment and drives some of the volume that you see because we want to ensure that the waiting lists are not too long.

The biggest complaint we get come from customers is that the waiting list is too long on certain specific models.

And that is a very delicate balance that we try to achieve.

So we certainly don't want to increase the waiting list, but we have to retain the exclusivity of our brand as well.

And that is the balance we are very mindful of and that we try to ensure that we have right all along as the year unfolds.

The next question is from the line of Martino De Ambroggi from Equita.

Yeah.

Thank you.

Good morning, good afternoon, everybody.

The first question is on the bridge for the EBIT.

If I remember correctly, in your full year guidance, you assumed a ForEx neutral for the full year.

It was positive EUR 18 million, EUR 17 million in Q1.

And presumably, the dollar will help going forward.

So am I right in assuming that the guidance could be revised upwards updating the ForEx?

The first question.

And the second, on the guidance is still -- is on the R&D capitalization.

You mentioned that it will grow in the next quarters.

But what is the balance between R&D capitalized and amortized for the full year assumed in your guidance?

Okay.

I mean I don't want to come across as being overly cautious or prudent, but one quarter does not make a year.

We are still early in the year.

There is still a number of uncertainties on the macro front.

Currency is one of them.

Trade and tariff disputes appear to have returned to the fore.

And Brexit, the Brexit episode remains unresolved.

So as Antonio said, we feel pretty confident we will approach the high end of our range, and I think I would rather wait till the second quarter to have half a year behind us to give us an opportunity to reassess where we stand for the entire year.

But obviously, given the strength of this quarter, we feel pretty good about the year.

With regard to the R&D capitalization, I will pass it on to Antonio.

Yes.

You should assume not materially difference in terms of capitalization rate compared to last year.

In terms of balance between capitalized and the amortized?

Okay.

If I may, one more question on, more general question on the buyback.

In the press release, you mentioned that you continue to buy back shares also in Q2.

The EUR 1.5 billion buyback you presented in the business plan, will it go ahead regardless of the market price?

So the EUR 1.5 billion is written in stone whatever will happen?

That is a safe assumption.

The next question is from the line of Ryan Brinkman from JPMorgan.

Hi.

Thanks for taking my question.

I just wanted to check in.

You mentioned the tariffs briefly, but if you could comment on the regulatory environment, how you think that is going to unfold and the potential ability for Ferrari to obtain any exceptions from any tariffs that are imposed?

I am not sure we can get exemptions on tariffs.

But clearly, as we move to hybridization relative to combustible engines in certain markets, we do get tax benefits.

So we intend to clearly use those opportunities.

Okay.

Great.

And then with Ferrari being recognized as the world's strongest brand, it mentions in the slide deck.

What is your latest thought with regards to sponsorship, commercial and brand opportunity?

In some of the past calls, you have talked about wanting to move slowly and deliberately in order to get that right.

Are there any examples during the quarter of opportunities that were right for you or something that you were leaning toward?

As I think I mentioned in my earlier remarks, we are in the process of really cleaning up the portfolio.

So we are exiting some categories.

We have selected some categories that we want to exit but we have contracts and license agreements.

So we have to wait for those to expire.

And we have selected the categories that we wish to exploit going forward.

But I will tell you a lot more about that when we announce our third quarter, if that is fair.

Sure thing.

And then just lastly, are there any other brands, automobiles or otherwise beyond Maserati that Ferrari would be potentially interested in selling engines to?

The answer is a categoric no.

The next question is from the line of Adam Hull from MainFirst.

Hi.

Good afternoon.

Thanks for taking my question.

Two questions on the free cash flow side.

The first question is on Patent Box.

Do you expect any benefit on the cash flow in 2020?

And do you confirm, is it, I think, EUR 100 million benefit this year and I think you had EUR 120 million last year?

And then secondly on the CapEx.

Are you saying headwind skewed to H2?

I think it was EUR 135 million or so in Q1.

Just, could you give us as a guidance for the full year and a little bit of a feel for what the split there between R&D and the cash PP&E is?

And then finally, actually, a third question, if I could.

Just on the Maserati, on the engine, when does that physically end?

When will that be a sort of a zero for the sales of engines to Maserati?

Yes.

On your first question, I think, the Patent Box assumption, as of now, we assume the Patent Box benefit, according to the law of 5 years ago ,will end in 2019.

So the cash benefit will be this year and the following one, as a result.

The second question in respect of CapEx, I think, when we had the full year call, we said the guidance for the year is a total CapEx of EUR 750 million.

And in terms of ratio of R&D to total CapEx, you should see an increase compared to the previous year.

Just within that, sorry, and the EUR 750 million, the R&D out of that EUR 750 million, and how much will be cash PP&E, CapEx PP&E, CapEx?

Correct.

Out of EUR 750 million, we are assuming close to EUR 400 million of R&D and the rest to be PP&E.

Okay.

Great.

And just on that Patent Box.

Sorry.

Is there no cash flow benefit in 2020?

Sorry.

It just wasn't clear.

Because at the end you said that cash flow is...

No.

No, I am sorry.

Yes.

The last year of application of the Patent Box is 2019, according to the current legislation.

And for the cash benefit, last year of cash flow benefit is 2020.

So you said, I think, EUR 100 million cash benefit this year.

So what would you think, as it stands, the cash benefit in rough terms for 2020 might be...

No.

No, I am not commenting on the size of the benefit.

I am just telling you, the last year when we will record a benefit according to the current legislation is in 2020.

I think in terms of the dimension of this benefit, we haven't been public yet.

But it is not close to EUR 100 million.

Yes.

And then the Maserati, the timing of when that engine sales go to zero?

Well, we supply various engines, so it is very difficult to answer that question as to when it is actually going to zero.

But certainly, I would say by 2021-2022.

The next question is from the line of Giulio Pescatore from HSBC.

Hello.

Thank you for taking my question.

The first one is on market mix.

You mentioned you had a positive impact in the first quarter.

I was wondering if you could give us some help in understanding the magnitude of this positive impact?

Well, predominantly, the U.S. and China are driving the market mix.

But in terms of help on the actual mix number in the bridge, could you give us a sense of how big the benefit is?

No.

I wouldn't want to go there.

Okay.

Just a second question on volume.

Could we see volume growth turning negative by the end of the year as you ramp up models such as the Monza, which have a strong impact on mix?

No.

I don't think the volume is going to turn negative.

In fact, I know it won't turn negative.

Okay.

Just maybe one last one.

You mentioned that in the Capital Markets Day, that you started investing in a new HMI system.

When will we see the first fruit of this investment?

Will we have to wait until the Purosangue gets unveiled or can we see something earlier on?

You will see something in 3 weeks' time.

Thank you.

I would now like to hand the conference back to Nicoletta.

Thank you, everyone, for joining us today.

For any follow-up question you may have, a few minutes the IR team will be available.

Have a lovely day.

Bye-bye.

Thank you.

That does conclude the conference for today.

Thank you for participating, and you may now disconnect.