Ferrari NV (RACE) 2023 Q1 法說會逐字稿

Good day and thank you for standing by. Welcome to the Ferrari 2023 Q1 Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

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

Thank you, Sandra and welcome to everyone who's joining us. Today, we plan to cover the group's Q1 2023 operating results and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group's CEO, Mr. Benedetto Vigna; and group's CFO, Mr. 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 Benedetto.

Grazie, Nicoletta. Thank you, everyone, for joining us today. I would like to start by thanking all the women and men at Ferrari for their passion and dedication, which has been essential in navigating the first months of this year. Without the tireless effort of all of them, from first to last, the strong results we present today wouldn't have been possible, I have no doubt.

The current technology transition is creating a continuously evolving landscape. From my experience and having managed some technology transformations in the past, I have learned that being agile and nimble is key to success. These two qualities underpin our strategic plan and the progress we are making are perfectly on track with respect to what we presented at the Capital Markets Day almost one year ago.

In particular, I would like to comment on two elements extremely important for our future growth: the building -- the e-building and our differentiated product offering. Let's start with the e-building. It grows taller and taller every day we come to office. This will be the home of our internally developed strategic electric components and it will grant us a higher degree of production flexibility for our hybrid and full electric models.

And now the differentiated product offering. Today, it includes ICE and hybrids, whose deliveries' weight doubled in the quarter, reaching 35%. Moreover, in line with plans, we will soon add to the family our full electric model, tailored to address our current client needs. As we have done throughout our history, we will exploit new technologies to the utmost to enhance our sport cars' driving thrills. And we will do it in our own distinctly uncompromising way.

We want to give our clients greater freedom to choose the right type of powertrain, so we welcome the commitment at European Union level to allow the adoption of e-fuels. We believe that ICE still has an important role to play also in a carbon-neutral world. And together with our partners, we are studying and evaluating solutions that will contribute to decreasing CO2 emissions.

As Ferrari, moreover, we have a unique advantage because in 2026, our Formula 1 cars will begin to use 100% sustainable fuel. And this means that we will continue to develop technologies on track and later move them to road. E-fuels can already power our current internal combustion engines. While the production of e-fuels will receive a boost from the recent European Union decision, I see many questions and doubts about their costs and availability.

Although I can understand this question, I'm a firm believer in the power of technology innovation. I have learned from experience how initial difficulties in a new technology can be overcome as you learn how to optimize the process. This will be true for both electrification and e-fuels. We will, therefore, continue to execute our product strategy detailed during the Capital Markets Day with the highest determination.

As we move towards our objective to reach carbon neutrality by the end of this decade, we also want to play our part in setting an example and inspiring wider change in the energy landscape. While we continue tirelessly to improve the efficiency of our manufacturing processes and increase the share of solar energy use, we work also beyond the walls of our plant. As such, we recently announced the creation of a photovoltaic plant serving the newly created Renewable Energy Community of Fiorano and Maranello, which is the first one in Italy ever promoted and supported by a company for the benefit of its local territory. It will bring a positive environmental and social economic impacts:

Firstly, sharing zero-mile renewable energy reduces CO2 emissions and thus, we can avoid energy losses during the distribution.

Secondly, the energy community will grant tangible savings in energy bills for its members, being citizens, institutions, commercial activities and factories.

And the Renewable Energy Community initiative is complemented with the introduction of fossil-free, Hydro-treated Vegetable Oil on the tracks of our most relevant logistic partners in Europe, substituting the use of diesel and abating up to 80% in the CO2 emissions.

Now let's talk about our strong first quarter results that I'm sure you have already noticed on the projected chart. I'm very pleased to highlight the following 3 key data: revenues at EUR 1.4 billion, up 20.5% versus the prior year; adjusted EBITDA at nearly EUR 540 million with a 37.6% margin; industrial free cash flow generation at approximately EUR 270 million.

Our order book already extends into 2025 on the back of a continuously strong demand. We have just opened the order collection for the newly launched Ferrari Roma Spider. And today, we are also pleased to announce the long-awaited reopening for the Purosangue with deliveries due in 2026.

Further testament to the strength of demand for our cars is the continued dynamism of the Ferrari pre-owned market, which translates into sound residual values.

The enthusiasm of our clients is also expressed by their attendance level at all our events. In March, the Ferrari Cavalcade attracted over 80 Ferrari vehicles and their owners on a 1,000-kilometer adventure through Morocco, culminating in the unveiling of the Ferrari Roma Spider. This latest model from Maranello is a timelessly elegant high-performance car with a contemporary take on the chic, pleasure-seeking Italian lifestyle of the '50s and '60s. What makes it so striking is the adoption of a soft top, a solution making a welcome return to the Prancing Horse range on a front-engined car, 54 years after the launch of the 365 GTS4 in 1969 that many of us have seen several times in the Miami Vice TV series.

I'm also proud to state that Ferrari has won 3 prestigious awards:

The first one related to Purosangue. It has been named the Red Dot: Best of the Best in the Product Design category.

The second for Ferrari Vision Gran Turismo voted the Red Dot: Best of the Best in the Innovative Products category.

And the third one is the Red Dot for the 296 GTS, Maranello's first spider powered by a plug-in hybrid V6 engine.

And what about motorsport? The racing year has just begun with mixed results so far. 2023 will be the Formula 1 longest-ever season. And, as we did in the first 4 races, we will continue to fight race by race with ambition and humility. Attention to details, focus and continuous learning will be key as the season unfolds.

In October 2022, we unveiled the 499P, our Le Mans Hypercar. And this March at the 1,000 Miles of Sebring, it led Ferrari's return after 50 years to the top class of the FIA World Endurance Championship. The three podiums we won in Sebring, Portimão and Spa-Francorchamps are confirming we are competitive. And with humility, we will continue to learn race by race. We all eagerly await our return to Le Mans in June, a milestone for endurance racing and an experience we will share with our clients and our fans. But before leaving motorsport, I would like to remember that Spa-Francorchamps has been a special race for us because the Ferrari team that won with our 488 GTE was composed by two men and one woman. Lilou joined us a few months ago and it has been the first time in FIA World Endurance Championship that a woman won a race. And this, together with our Equal Salary Certification and the Girls on Track program, underlines our strong commitment on the diversity and inclusion side.

2022 was important for the increased expression of our brand into lifestyle, which we are continuing to nurture with the fourth fashion show that took place in February during the Milan Fashion Week. It generated strong and positive coverage from press and key opinion leaders.

I like also to underline the incredible reception of the brand-new exhibition, "Game Changers", that is on display since February 18 at the Museo Enzo Ferrari here in Modena that, together with the one in Maranello, registered record level of visitor attendance in the first quarter, more than 100,000 people, more than 1,000 people per day.

Also, our thematic parks are experiencing record levels of visitor attendance sustained by the introduction in January of "Mission Ferrari", the world's most immersive mega-coaster and the last addition to the Ferrari World Abu Dhabi.

Before handing over to Antonio to review Q1 2023 earnings in all the detail, I like to conclude saying that these first months of 2023 have been another significant step on a journey during which we will continue to execute our strategy with commitment, focus and determination.

Antonio, please, the stage is yours.

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

Starting on Page 4, we show the highlights of the first quarter results, which represent a very strong start to the year, with revenues up more than 20% versus the prior year and adjusted EBIT, adjusted EBITDA, adjusted diluted EPS growing more than 25%. In particular, revenues came in at EUR 1.429 billion; adjusted EBITDA at EUR 537 million; and adjusted EBIT at EUR 385 million, with remarkable percentage margins at 37.6% and 26.9%, respectively. Adjusted net profit at EUR 297 million with an adjusted net profit margin of 21%. And finally, strong industrial free cash flow generation of EUR 269 million, slightly lower compared to the prior year, which was sustained by the advances collected on the Daytona SP3 and the 812 Competizione A.

Turning to Page 5, you can see the details of the Q1 '23 shipments, which were up 9.7% compared to the prior year. The increase was mainly driven by the Ferrari Portofino M, the 296 GTB and the 812 Competizione. In the quarter, we commenced the deliveries of the 296 GTS and the 812 Competizione A, while the F8 Tributo reached the end of its lifecycle. The Daytona SP3 was in a ramp-up in the quarter, with lower deliveries compared to the Monza SP1 and SP2 last year.

As already highlighted by Benedetto, you see that in Q1, we doubled the hybrid versus last year, reaching 35% of total deliveries, as we roll out the allocation of our 4 hybrid models.

As customary, the geographical allocation was deliberate and reflected the pace of introduction of new models. As such, Americas and Mainland China, Hong Kong and Taiwan posted double-digit growth versus the prior year.

On Page 6, you can see the walk of our group net revenues, growing 18% at constant currency. The growth in cars and spare parts was driven by higher volumes, a richer product and country mix, a strong contribution from personalization, as well as the price increase on selected models and markets that we communicated last year.

Personalizations were widely spread among the portfolio and stood at 18% in proportion to revenues from cars and spare parts.

Sponsorship, commercial and brand reflected the better prior year Formula 1 ranking and the contribution from lifestyle activities, mainly led by museums' visitors and retail.

Engines revenues declined in line with the reduction of supplies to Maserati, as the supply agreement gets closer to its maturity.

Currency had a positive impact, mainly following the U.S. dollar dynamic.

Moving to Page 7. The change in adjusted EBIT bridge is explained by the following variances. First, volume, positive for EUR 28 million, reflecting the shipments increase versus the prior year. Mix and price, strongly positive for EUR 85 million driven by higher personalizations, whose contribution exceeded our projections. The richer product mix compared to the prior year, led by the 812 Competizione and the SF90 families, as well as the decreased wait of the F8 family. Positive country mix in absolute terms, sustained by Americas and Mainland China, Hong Kong and Taiwan, as well as the already mentioned price increases.

Industrial and R&D expenses grew EUR 47 million, mainly due to higher depreciation and amortization and raw material cost inflation, which is visible. The latter, together with the larger share of shipments to China, is containing our percentage gross margin, which anyway remains slightly above 50%.

SG&A were negative by EUR 22 million, reflecting marketing and lifestyle activities, obviously centered around the Roma Spider unveiling in Marrakesh and the fashion show in Milan, as well as our organizational development.

Other, was almost in line, mainly reflecting the better prior year Formula 1 ranking and the higher contribution from lifestyle activities.

The total net impact of currency was positive for EUR 28 million.

Turning to Page 8. Our industrial free cash flow generation for the quarter was strong at EUR 269 million, reflecting the increased profitability, partially offset by a negative change in working capital, provisions and other, mainly linked to the increased inventory value, both in relation to the running volumes and the richer product mix. Our inventories will remain high throughout the year, also to preserve our agility in a context where the fluidity of the supply chain is not yet fully restored.

Capital expenditures for EUR 150 million, in line with our product and infrastructure development and consistent with the full year guidance to end up higher compared to last year, up to EUR 850 million.

In the quarter, the capitalization ratio of our development expenses was 43%, increased versus the prior year as we entered the development phase on a number of future models and per effect of the budget caps imposed on the spending in Formula 1.

Net industrial debt at the end of March was EUR 53 million, decreased compared to December 2022, reflecting the solid industrial free cash flow generation, net of the share repurchase program.

It is also worth mentioning that during the quarter, we completed the refinancing through new bank loans of the bond maturing for EUR 390 million. And this has allowed us to successfully diversify sources and tenors while keeping a stable and safe level of total liquidity.

To conclude on Page 9, we confirm the 2023 guidance, which targets solid growth and consistent progress in profitability.

Looking at the development of the year, as we see it today, we directionally expect a strong Q2, followed by a softer tail in H2 and particularly Q4, in line with our planned product cadence.

In essence, and to conclude, we keep on executing flawlessly according to our strategy, thanks to the passion and enthusiasm of everyone here in Ferrari and with all of our partners.

With that said, I turn the call over to Nicoletta.

Thank you, Antonio. Sandra, we are now ready to open for Q&A.

(Operator Instructions) We will now take the first question. It comes from the line of Susy Tibaldi from UBS.

Good afternoon. Thanks for taking my questions and congratulations for another strong quarter. The first question on, just go back to something you just mentioned. If I heard correctly, you said that you expect now H2 to be a bit weaker and especially Q4. I think previously, you were flagging that this year was going to be a little bit more H2-weighted. So can you just explain like what has changed? Because if we look at the mix progression, Q1 definitely was weaker than what we should be expecting for the rest of the year because you're going to have a ramp-up in Daytona, in the Competizione, in the specials and some of the higher-value cars. So can you explain the moving parts there?

And then, my second question on the Purosangue: super impressive that you are already taking orders for 2026. And I was wondering if you can share a bit more qualitative comments from your customers and also whether you are seeing demand from customers also for a hybrid version. Thank you.

Susy, ciao. I'll take care of the second question on the Purosangue and the first one, Antonio will come back to you. So the Purosangue, we decided to reopen orders starting 2026 because we see that, let's say, there was, as we told you last time, there was a collection of expression of interest from many customers.

At the beginning, when we launched the car, we were not expecting such strong, let's say, reaction from the clients. So we had to put a little bit of stop to organize ourselves so that we could reopen properly. So there is no change in our strategy to keep this Purosangue at always lower at 20% of our annual volume. This is very, very important to underline.

What we see is that the clients are positively surprised because it's a really unique car that gives you the feeling, that people start to try it, gives the feeling of a sport car with the roominess that usually a sport car is not able to provide because it's smaller. So this is the decision we took and we wanted to share with you and the rest of the world today because I think it's very important. And if you want, also make us a little bit proud to make something that is highly appreciated by our client.

For the first one, H1, H2 relative weight, I leave it to Antonio, that he can explain.

Thank you Benedetto, and Susy for the question. I think that probably -- I was a bit imprecise back in the call of February because I said that margins would have improved during the course of the year, which is correct, actually. Nothing changed compared to that. It's simply that I forgot to mention at the time that Q2 would have been the strongest quarter as we see it today. And then, of course, there are refinements of allocation by country and by product - depending throughout the various months. So there is nothing more than a better visibility or more precise planning of our product delivery during the course of the year.

Okay. Understood. Very clear. But when it comes to the mix, is it fair to assume that Q1 was, let's say, the weakest, the softest quarter of the year in terms of mix, if we just think about the phasing of the models that are coming? So we've got the Daytona. You've got the specials and you have lower weight of F8. So in theory, the mix from here should improve.

Yes, you're right. That's definitely what we see today.

Okay, thanks.

We will now take the next question. It comes from the line of Giulio Pescatore from BNP Paribas Exane.

Thanks for taking my question. Good afternoon everybody. So the first one, just I need to follow up on the guidance because it's just not clear in my head. So you had a first quarter margin, especially on the EBIT level, way above the guidance, almost 100 bps above the guidance. And now saying that Q2 will be better, I understand that there will be maybe a slowdown in Q3, in Q4, even though it's not really clear in my head why that would be the case given the Daytona and Purosangue. So I'm just trying to connect all the dots here. What am I missing? Why is 26% EBIT margin is still the right target for this year?

Then, sorry, the second question on the cash buybacks. You're very close to being a net cash position. I think in the past, you clearly said that you don't want to be in a net cash position. Why not stepping up the buyback? Should we expect you to be more focused on the buyback program going forward given that cash flow should also accelerate in the second part of the year?

And then, the last question. I remember in the past, having too long waiting list could weight on your customer demand because some customers are not willing to wait 3 years to 2 years plus to receive delivery of the cars. So is there an issue? At what point does it become an issue? And if it does, will you be forced to accelerate the phasing of deliveries compared to your initial plan?

Giulio, Benedetto taking the question and then I leave the first to Antonio. The waiting list, clearly, if we say we reopen the order in '26, is because there is a strong interest. And I can tell you that there is no trend in order cancellations that we see from the customers, okay? I can share you with these things, yesterday was having a dinner. There was a guy that was 58 years old and he is planning for making himself a gift when he turns 60. So it's perfectly in line with our plan to reopen the order. So we don't see client, let me say, canceling the orders because of the time. They are considering it already. So this is the question about waiting list. And for the other 2 questions, I hand over to Antonio.

Thank you, Giulio and I'll try and help you connect the dots, if possible, on the first question. First, there is not just the sports cars pillar. So when looking at the - let me call - intra-quarter seasonality, you also need to take into account the unfolding of the expenses of the other businesses, which is basically what we have, R&D OpEx, that's an element, obviously, in driving the profitability in each single quarter.

And then there are other elements. When you look at the development of the EBIT margin, you need to take into account also the development of depreciation and amortization, which is not linear over the course of the year but starts and unfolds as we we start producing the model that we then deliver. So that explains this very strong Q1 EBIT margin compared to the guidance for the full year. And I think the comment I made before may help explaining why Q2 is so strong. We see it strong, relatively-stronger, in relative terms.

The second question with respect to cash and the fact that we might end up being net debt positive. And I would say, certainly at the Capital Markets Day, we clearly communicated to have a program, a buyback program of EUR 2 billion that will have been executed in line with the generation of cash. We have an initial tranche that we are going to complete soon. And then obviously, as the time unfolds, we'll define what to do next. Hope this helps.

Yes, it does, thank you. So if I can just follow up on the initial question on waiting list and orders. If I remember correctly, at the time of the CMD, one of the assumptions you made in the targets for 2026 was that demand was going to normalize. Based on what we're seeing today, is that still a fair assumption?

Yes. I think we don't see any big variation, either in terms of execution and in terms of assumptions we made for the Capital Markets Day.

Okay, thank you.

We will now take the next question. It comes from the line of Stephen Reitman from Societe Generale.

Yes, good afternoon, thank you for taking my question. Again, on the first quarter, obviously, the very strong print you made on the EBIT margin. Obviously, we were kind of like guided towards this would be a weak quarter from a sort of mix perspective. But obviously, you started now selling the 296 GTS, so -- which has got a substantial price increase over the F8 Spider, which it replaces. So are we beginning to see now an impact of your moves on increasing prices on your serial cars? And I think you started this with 296 GTB. And obviously, the Roma Spider, significantly more expensive than the Portofino M that it replaced as well.

And secondly, this question is also about the mix because I thought that looking at your geographic mix, it wasn't particularly helpful having China, being such a big growth part of that because, obviously, we know that it's high revenue but when we take into account the taxes, I understand that the contribution it makes to the overall group margin is negative or is a headwind. So if you can comment on that, please.

Antonio will take it.

Sure, Stephen. As I think I already commented in the past, we don't look at the margin on each single model but rather at how these models are priced in their own positioning. And obviously, we try and adjust prices on models that are newly introduced or, anyway, well in advance to the time of delivery to our clients. So it is a gradual move, this one. And then we should not disregard the fact that even the cost base is changing from time to time. Inflation has not come to an end anyway. We see it visible on our margins, that's an element of attention also for the rest of the year. So the guidance is also predicated upon this assumption.

The other question was, I think, in respect of Mix - Yes - I'm sorry - The stronger mix helping on EBIT margin and China not visible. The fact is that the positive element that I mentioned in my comments before is that actually, personalizations came in much better than we would have expected. And this almost entirely offset the negative impact of China on our percentage margin. So, when you look at the absolute margins China is positively contributing, as I mentioned a number of times, this is not the case when we come and look at the percentage margin but the negative impact in the quarter has been offset by the level of personalizations and the margins we earn on that.

This has been extremely important, Stephen. This is a part of the personalization. It's been really very, very important. We see this trend that helped us a lot.

Thank you. And you can expect another big pickup as well when you have your new paint shop, when you have your new paint line as well?

Yes, that's true. That's also what we said when we met. When we talk about personalizations, we're talking about painting. That is something that you do in the last step of the manufacturing. You're talking about rims. You're talking about the trims in the car. So this is very, very important. And we care a lot about personalizations because it's a way to make the Ferrari more and more personal. And in our luxury industry, this is key. It's key for the experience we deliver to the client. It is also key to make this car more and more unique and, let's say, to deliver the unique experience that the client are looking for.

We will now take the next question. It comes from the line of Martino De Ambroggi from Equita.

Thank you, good afternoon everybody. One more question on the Purosangue. You reopened the orders for the strong demand. Does it mean you could revise the volume guidance of up to 20% of total volumes maybe not in the short term but in the long term?

And on the first quarter, could you tell us the number of Daytona you delivered? And what should we expect for the ramp-up of the Purosangue in the next few quarters?

And if I may, very last on the mix effect. Because it's a mix of region, products, personalizations, prices, could you roughly split the price/mix contribution very, very roughly?

Okay, Martino, Benedetto. So thanks for this question. Let's start from the Purosangue. So we are starting, let me say, to deliver in next quarter. Clearly, there is a ramp-up phase. We will keep growing quarter-over-quarter, more or less at a ratio of 2 quarter-over-quarter. This is the volumes that we will keep delivering in terms of increase.

We do not plan to extend the life of the car versus what was originally planned. This reopening of the order was done because as I said we were caught by a positive surprise for this strong interest. So we wanted to make sure that everything, we want to put a little bit of the situation, if you want, under more control, from an industrial point of view. So there is no extension, not at all. This is the first question.

The second was about Daytona. Well, we delivered 30 Daytona. The third one that you are asking, the split between the geography, the product. I understand your curiosity. I would do the same question. But I would also understand if you would not reply to me with the exact split. What I can tell you is, what I said to Stephen and also Antonio said, we see a positive trend in the personalizations increase. I think this is in line with the trend also we see in other luxury industries, that our client want to have more and more a personal-rich car.

I mean, already, our Ferrari were pretty much, if you want, each Ferrari is different from others. But, now they are becoming even more different, if you want. And this is something that we experienced positively in the last 2 months of the quarter.

And if I may, do not disregard the fact that keeping OpEx, meaning selling and general expenses, and R&D expenses at a growth level, which is lower than revenues, obviously adds to the quality of the margins, finally. So we're very careful on these aspects.

Okay. Customization was 18% last year. So in Q1 was how much?

So personalization I think last year was 17%, right? Yes, 17%. Its 18% this year.

Okay, thank you.

We will now take the next question. It comes from the line of Monica Bosio from Intesa Sanpaolo.

Thank you and good afternoon everyone. Once again, on the personalizations, just a curiosity, on which models did you see the higher requests in personalizations? And should we assume that the personalizations rate trend of the first quarter will keep growing over the next quarter? I'm asking this along with another question. It's on the different evolution in the deliveries to China. Do you expect a different evolution across the year or the deliveries will be equally distributed across the different quarters in China?

And another question is on the cost.

I read on the press release that the company is running the renegotiation on the labor cost. I was wondering if you would just can quantify if we have some increases over this year and the next one.

And last question is more general, on the batteries. In 2025, the company will launch the electrified Ferrari. Can you share with us your view on the different materials of the batteries, if you are evaluating any solutions that look more suitable for Ferrari than others? Any insight would be useful. Thank you very much.

Thank you, Monica, for your question. There are 4 questions. I will take the first and the last. I will leave Antonio to elaborate a little bit more...

On China and labour costs.

Okay. So let's start from the last one so that it's fresher. The story of the battery. The battery, the chemical element, if you want, that we are using more or less are the same, is the chemistry that is a little bit more specific to our needs. And what I can tell you that there are two dimensions that we are following to optimize our batteries. One is the energy density. Another one is the power density. So we don't have a single chemistry. We have different kind of chemistry, a little bit more tailored for our needs, considering the two vectors of energy and power. And as I said at the beginning, we are on track with our plan that we shared with you the 16th June last year.

The first question, which is the trend you see, we don't see any specific trend by model. We don't have also any specific trend by countries. It's - let's say - really, it's very much personal. Like I was telling you, our clients are making more and more personal, the Ferrari, the one they want to drive and the one they want to live. So this is the answer to your question.

For the China split and the labor cost, Antonio can be a little bit more specific on this.

Yes. Hi Monica, on China, our deliveries to China, Hong Kong and Shanghai, our deliveries in the course of the year are more or less 10% -- a bit less than 10% of total deliveries. And in terms of distribution by quarter, the first and the third quarter are the ones that currently are a bit more loaded than the other two. Don't take it for granted because we may have slight changes in the allocation but it's more or less directionally how this should develop over the course of the year.

And the last one is labor cost. We are not engaged. Actually we completed the negotiation. So it's an 11% increase on a cumulative basis over 2023 and 2024, which is impacting this year in the region of 6%. And this obviously is in the numbers.

We will now take the next question. It comes from the line of Thomas Besson from Kepler Cheuvreux.

It's Thomas from Kepler Cheuvreux. I have a few questions as well. Is it possible for you to confirm over how many quarters you plan to deliver the Daytona to your lucky customers? That will be the first question, or broadly, say it differently, how many units we should expect per quarter in '23, '24?

Second question, there was a bigger tailwind from ForEx that I was expecting in the first quarter. Is it still the main scenario to have something broadly neutral for the year or do you think we should now see a positive ForEx boost in '23?

And lastly, you mentioned e-fuels as a positive element for you over the mid-term as it gives a huge opportunity to offer various kinds of powertrain solutions to your customers in the midterm. Could you share with us what is the initial thinking about the long-term proportion of a vehicle that could stay with that kind of powertrain in 15, 20 years' time or is it still way too early to discuss that?

Okay. Okay, Thomas. So the first one, the number of Daytona per quarter will be more or less between 30 and 40. I think the third one, the FX, Antonio will elaborate. The third one is about the e-fuel. Well, last year before our Capital Markets Day, we thought extensively on this point because we believed already at the time that the ICE can deliver still a lot of things. I mean there is a lot of way to go. So that's the reason why we said if you remember that in 2026 and 2030, we were always having in mind and we shared our plan, what is our offering in terms of ICE. The recent decision of European Union about e-fuel is very much welcomed by us. If you want, it's a confirmation of the goodness of the strategy that we shared with you last year.

So we have no change. We have no change. The reason why last year, we presented that split between the different propulsion was because based on our experience, let's say, the transition, the technology transition, especially when they touch the energy side are not digital. It's not something that can come from one day to another. It takes time. So we are really very -- we welcomed a lot the decision of e-fuel because this is a further substantiation of our strategy.

Antonio, about the FX.

Yes. On the FX, Thomas, I think, obviously take it with the benefit of all of us living in a world of significant financial volatility. If the spot rate of U.S. dollar to Euro remains more or less where we are today, we expect this to have more or less a neutral impact year-over-year. Obviously, it depends. If the Euro strength becomes much stronger, this could be an assumption to be reviewed.

We will now take the next question. It comes from the line of Adam Jonas from Morgan Stanley.

This is Mathias here on behalf of Adam. So China, Hong Kong and Taiwan is 11% of deliveries this quarter. And we know that you got to do some front-loading of that in the region but just curious how you see this heading into 2025 based on your forward book. Thanks.

May I take this one?

Yeah, go.

Okay. On China, I think this quarter has been rather front-loaded, meaning that we had a chunk of deliveries to China, which has been comparatively higher, within, let me say, sort of target for the year of about 10% of total deliveries to that region. When looking at the future years, I think we stated already at the Capital Markets Day that we expect our shares of deliveries to China to not exceed significantly the 10% mark.

So it's a quarter that is fully in line with our strategy. Yes.

Thank you so much.

We will now take the next question. It comes from John Murphy from Bank of America.

This is actually John Babcock on the line for John Murphy. Just one question. Could you talk about the opportunity you have to take up price on your vehicles?

Opportunity to take?

Take up prices.

Look, it's a good question. As we said throughout the year and last year and what we are doing now, we said that we were going to increase mid-single digit selected models and that's what we are doing. So we saw this opportunity and we are using it. So I think it's also important that we value properly what we are offering to our client and they fully understand it.

We will now take the next question. It comes from the line of Tom Narayan from RBC CM.

Yes. Tom Narayan, RBC. Thanks for taking the questions. So hybrids were 35% of shipments in Q1. Curious if you could talk about the demographics of these customers, age or are they new to the brand? Just curious if there's any read-throughs as we can think about your electrification path ahead.

And then just a quick follow-up on the Purosangue relaunch in 2026. Could the pricing be raised? I know the initial pricing, given the strong demand, it would suggest you could raise it. Just curious if the pricing could be raised.

And then lastly, a follow-up on e-fuels. One hurdle potentially for e-fuels is infrastructure needed, right, for fueling, et cetera. Curious if you could share any comments on how you think that might develop. I know that the EU or governments are definitely supportive of it, but certainly would require an investment there.

Okay. So Tom, thank you for your question. Let's start from the demographics of the hybrid. This is something that we are looking carefully because we are also interested to understand what's happening. And I can tell you that any quarter, we have a look at these numbers and we don't see there a specific pattern. So we have, if you want, we have the same client that is buying the hybrid and ICE. We have a client that entered the Ferrari world through the hybrid and then they buy the ICE or vice versa. And also, if you see the pattern across the continents or across the, let's say, the age, we don't see really a pattern. So this is a very interesting question that we are always making ourselves.

We wanted to report in this quarter this important target. Basically 35% of them are hybrid. We also checked the average age of the clients that buy hybrid - the red or the yellow in the chart that Antonio was presenting- there is no difference. So this is the first question.

The second question is, the Purosangue, today we said that we are reopening with deliveries in 2026. Usually, we do not comment about the price increases so long in the time. You can make your own assumption but we do not want to discuss specifically on this point.

The last one, maybe I misunderstood your question, but the e-fuel, it's something that can fit in our engines as it is. We are already doing a test with different kinds of fuels that are not fossil derived. The infrastructure is the same. Clearly, you have to produce it. So you have to combine the CO2 of the atmosphere with hydrogen coming from the water. But infrastructure is the same.

An area where we are working a lot, together with our partners, is to make sure that in case there is a clear mandate to recognize the e-fuel, because you need to feed that e-fuel in the car, where we need to work and we are working already with partners to make sure that the e-fuel is properly recognized versus the fossil fuel. There is no really no modification required in the infrastructure.

Yes. I guess I wasn't referring to your infrastructure, but more of the fueling infrastructure, petrol stations, et cetera.

It's the same, Tom. I mean clearly, in the production of the fuel, there is a difference because you don't have to dig a hole in the earth to take the oil but you have to, let's say, like fertilizers, you have to take the CO2 from the atmosphere. But there is no difference in the distribution network.

Okay, got it. Thank you.

We will now take the next question. It comes from the line of Anthony Dick from ODDO BHF.

Congrats on the great results. Just a couple of follow-ups on my side. Firstly, on the Daytona. Could you actually give us the number of Daytona that was delivered in Q1 like you did previously for the Monzas? Also when you talked about the ramp-up of between 30 to 40 units, is that sort of the maximum capacity that you can produce? Or is that just the way that you want to sequence these deliveries?

And then a second question, follow-up on the personalizations rates. Again, as we should see a ramp-up in Daytona deliveries, do you expect to maintain that 18% personalization considering the much higher ASP on these cars?

Okay. So Anthony, the first question, Daytona we delivered in Q1, we said before, is 30. We keep staying in the quarter around 30-40. Let's say, consider in our case, the line is pretty much flexible. And this is flexible either in terms of equipment that you need to produce the cars but also in terms of ability of our employees to manage different kinds of steps. So there is no relation with maximum capacity.

And the last point, the personalizations rate. Maybe here, I can provide a little bit more color that will help you and the previous colleague that made this question. One big change we did in the personalizations rate is that we enriched the carbon look components that are available to our clients. So if you want, there are more options available for our client that are carbon look. And usually, if you want, the carbon look components are more expensive than the others. But these are the three ,I think, we addressed all of them, the three question you gave us.

Thank you very much.

We will now take the last question. It comes from Gianluca Bertuzzo from Intermonte SIM.

Hi everybody and thank you for taking my question. I want to jump back on the price/mix. On a full year basis, do you expect mix or price to be the biggest contributor in terms of growth for the average selling price?

And a second one on the Daytona. I don't want to anticipate too much but do you expect there will be a time lag between the current Daytona and the next one, as it was the case between the SP1 and the SP3 or it will be a smoother transition?

Okay. This is the last question. So we split 50-50 between me and Antonio. So Antonio will take the price and mix.

Price/mix, the answer is mix.

So you were very fast. The Daytona, no, look, I understand that you want to have all the possible details. So as we said, 30 in Q1, 30, 40 more or less in the next quarters. And we are planning this production according, let me say, to what is also the -- which are the needs of the clients also in terms of personalization, okay? Because there are a lot of carbon look components that are very important in this car model.

And if your question was for the period after Daytona, please wait and you will know.

Secrecy is important, Gianluca. Desirability is very important.

Of course. And very last one, if I may. What is your assumption in terms of cost inflation for this year?

I'll take this one. It's difficult to mention percentage wise. Anyway, I would say high single digit, but it's really a mix of components. Last year, we have seen energy and metals. At the beginning of the year, nowadays, these two components are not anymore the most relevant. Inflation is going through a number of commodities and products and components. And on top of that, labor cost is adjusting. So that's an assumption. We'll see.

Last year, we saw more on energy side and it is easing down, down now. While this year, we see suppliers suffering a little bit more on the labor cost impact. That obviously has a delay of 1 year.

Thank you very much, Benedetto. Thank you very much, Antonio.

Thank you. I would like to hand back over to Benedetto Vigna for closing remarks.

Thank you all. Thank you for the time you spent with us today. And also, thank you for your interesting questions. The first quarter of 2023 represents really another strong start to a very robust year. And we look ahead with, I think it's clear from the question and the answer, we look ahead with enthusiasm, energy, agility and also the confident humility that I think is always required when you are in challenging times.

And having said this, I wish all of you a good afternoon and thanks a lot for your time, for your questions and for your attention and meet you in a quarter time. Thanks.

That does conclude our conference for today. Thank you for participating. You may now disconnect.