Ferrari N.V. — FY 2019 Form 20-F
Reporting period: Fiscal year ended December 31, 2019. The filing is an annual report, not a standalone fourth-quarter report; quarterly results are not clearly provided. Financial statements are audited and prepared under IFRS, in euros.
Business context and financial performance
Ferrari designs, manufactures and sells luxury performance cars, with related engines, sponsorship and brand activities, and financial services. It shipped 10,131 cars, up 9.5% from 9,251 in 2018.
| Metric | FY 2019 | FY 2018 | Change |
|---|---|---|---|
| Net revenues | €3,766.6m | €3,420.3m | +10.1% |
| EBIT | €917.4m | €826.5m | +11.0% |
| EBIT margin | 24.4% | 24.2% | +0.2 percentage points |
| Profit before taxes | €875.4m | €802.9m | +9.0% |
| Net profit | €698.7m | €786.6m | -11.2% |
| Basic / diluted EPS | €3.73 / €3.71 | €4.16 / €4.14 | Lower |
| EBITDA (non-GAAP) | €1,269m | €1,115m | +13.8% |
Revenue growth reflected higher car and spare-parts sales, personalization, shipments and favorable currency effects. Cars and spare parts rose 15.4% to €2,925.7m; sponsorship, commercial and brand revenue increased 6.4% to €538.2m. Engine revenue declined 30.3% to €198.3m, mainly because of lower Maserati engine sales. Cost of sales increased 11.2% to €1,805.3m, or 47.9% of revenue versus 47.4%; research and development expense, including amortization, was €699.2m.
Cash flow, debt and liquidity
- Cash from operating activities was €1,306m, compared with €934m in 2018. Capital expenditures were €706m, up from €639m.
- Free cash flow was €600m versus €295m; free cash flow from industrial activities was €675m versus €375m. Ferrari changed these non-GAAP definitions in 2019 and restated comparative periods.
- Cash and cash equivalents at year-end were €897.9m. Total available liquidity, including an undrawn €350m committed revolving facility, was €1,248m.
- Gross debt was €2,089.7m, including financial-services funding. Net debt was €1,192m; net industrial debt was €337m under Ferrari’s revised definition, compared with €370m restated for 2018.
- Debt included €788m of asset-backed securitizations and €1,185m of bonds and notes. Ferrari issued €300m of notes due 2029 and 2031 and repurchased €315m nominal amount of 2021 and 2023 bonds during 2019.
Material changes and unusual items
- Net profit fell despite revenue and EBIT growth, principally because 2018 included a substantial Patent Box tax benefit: €141m related to 2015–2017, plus the 2018 benefit. 2019 income tax expense was €176.7m versus €16.3m; the effective tax rate excluding IRAP was 17.0% versus negative 1.1%.
- Ferrari paid a €1.03-per-share dividend, approximately €193m, and repurchased shares for €386.7m. A €1.13-per-share dividend, approximately €210m, was proposed for shareholder approval in 2020.
- Capital expenditure and development investment continued to rise, supporting new models and hybrid technology. Capitalized development costs were €330m in 2019. IFRS 16 adoption added €60.5m of lease liabilities at year-end.
- The Takata airbag recall provision was €15.5m at year-end; the total warranty and recall provision was €107.8m. The auditor identified warranty and recall provisions as a critical audit matter. Ferrari reported an unqualified audit opinion and effective internal controls.
Outlook, commentary and risks
Ferrari described a strategy of controlled shipment growth while preserving brand exclusivity, and planned 15 new models during 2019–2022. It is expanding hybrid technology, including the SF90 Stradale, with shipments expected to begin in 2020. Management stated an intention to distribute 30% of annual net profit as dividends in coming years, subject to financial, strategic and other considerations. The filing does not provide a clear quantified FY 2020 earnings or revenue forecast.
The filing, signed February 18, 2020, warned that the COVID-19 outbreak could adversely affect demand, supply chains and operations, but its impact was uncertain and not quantified. Other significant risks include emissions rules and compliance costs, hybrid-technology execution, reliance on key suppliers and Maranello/Modena production facilities, foreign-exchange exposure, Maserati engine demand, luxury-market volatility, and potential brand dilution as volumes and lifestyle activities expand. Litigation and product-liability outcomes remain uncertain.
Investor verification points
- Confirm the proposed €1.13 dividend’s approval and payment, and subsequent share-repurchase activity.
- Review whether Patent Box benefits continue for 2020–2024 and how tax normalization affects earnings comparisons.
- Track the COVID-19 effects on production, deliveries, demand and supplier availability; this filing provides no quantified forecast.
- Assess the composition and sustainability of cash generation, including customer advances, financial-services cash flows and the increased capital investment.
- Monitor gross debt, securitization funding and the distinction between reported net debt and management-defined net industrial debt.
- Follow Maserati engine volumes, regulatory-credit requirements, warranty/recall costs and the execution of the announced new-model and hybrid pipeline.