Business context and reporting period
Ferrari N.V.’s audited Form 20-F reports the fiscal year ended December 31, 2018, with comparative annual results for 2017 and 2016. It is an IFRS annual report, not a standalone fourth-quarter report; the filing text does not provide clear Q4-only financial results. Ferrari designs and manufactures luxury performance cars in Italy and sells globally through authorized dealers. It shipped 9,251 cars in 2018, up from 8,398 in 2017.
Key financial metrics
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Net revenue | €3,420 million | €3,417 million |
| EBIT / EBIT margin | €826 million / 24.2% | €775 million / 22.7% |
| Profit before tax | €803 million | €746 million |
| Net profit | €787 million | €537 million |
| Adjusted EBITDA | €1,114 million | €1,036 million |
| Adjusted net profit | €645 million | €537 million |
| Basic EPS | €4.16 | €2.83 |
| Cash from operating activities | €934 million | €663 million |
| Free cash flow | €297 million | €284 million |
| Capital expenditure | €639 million | €392 million |
Cost of sales was €1,623 million, or 47.4% of revenue; the implied gross margin was 52.6%. Cash and cash equivalents were €794 million at year-end, versus €648 million. Total debt was €1,927 million, versus €1,806 million; net debt was €1,133 million, while management’s adjusted net industrial debt measure was €340 million. Total available liquidity, including an undrawn €500 million revolving facility, was €1,294 million. Total equity was €1,354 million.
Material changes versus the prior comparable period
- Revenue was essentially flat year over year, but increased 3.2% on a constant-currency basis. Car and spare-parts revenue rose 3.2% to €2,535 million, supported by shipments, personalization and pricing; engine revenue fell 23.8% to €284 million, mainly because of lower Maserati engine shipments.
- Shipments rose about 10.2% to 9,251 cars. EBIT increased 6.6%, and EBIT margin expanded 1.5 percentage points to 24.2%. Management cited positive volume and lower costs, partly offset by €92 million of negative currency impact and adverse product mix.
- Reported net profit increased 46.4%, but comparability is substantially affected by the Italian Patent Box tax benefit: €141 million relating to 2015–2017 and an estimated €61 million for 2018. Adjusted net profit, which excludes the €141 million prior-period benefit and other specified items, was €645 million.
- Operating cash flow increased, but capital expenditure rose sharply as Ferrari invested in product development, hybrid technology and production capacity. Free cash flow increased modestly.
Outlook, management commentary, risks and unusual items
- Ferrari plans 15 new models during 2019–2022, broader hybrid adoption, a new V6 engine family and the Purosangue, with Icona deliveries expected to begin in 2019. Management said capital expenditure was expected to increase further in 2019. The filing does not provide a clear numerical earnings or revenue forecast.
- The company intends to pay dividends of approximately 30% of annual net profit over time, subject to financial and strategic considerations. The board proposed a €1.03-per-share dividend, approximately €194 million, for shareholder approval in April 2019. Ferrari paid a €0.71-per-share dividend in 2018 and repurchased €100 million of shares during the year.
- The Patent Box agreement applies through fiscal 2019; the filing cautions that a similarly favorable regime may not continue thereafter. The substantial 2018 tax benefit is therefore an important non-recurring comparability item.
- Ferrari recorded a €25 million provision at year-end for the Takata airbag recall, within total provisions of €183 million. Litigation and other contingencies remain uncertain; management noted that some matters could require payments exceeding recorded accruals, although it did not expect such adjustments to materially affect consolidated financial position.
- Key risks include preserving brand exclusivity while growing shipments; demand and economic volatility; foreign-exchange exposure (with currency a significant 2018 EBIT headwind); reliance on Maserati for engine sales; single-source suppliers and production concentrated in Italy; hybrid-technology investment and execution; emissions and safety regulation; tariffs; and debt and financing-market access.
Most important facts for investors to verify
- Separate underlying earnings growth from the €202 million of total Patent Box benefits recognized for 2018, and assess the tax outlook after the current ruling expires.
- Track Maserati engine volumes and whether they continue to pressure revenue and production economics.
- Assess whether planned product launches and hybrid investment deliver expected pricing, margins and returns as capital expenditure rises.
- Review the composition and maturity of debt, financial-services receivables and securitization funding, and the distinction between net debt and net industrial debt.
- Monitor foreign-exchange effects, Takata recall costs, legal contingencies and evolving emissions, safety and trade requirements.