Ferrari NV

MIL:RACE

Earnings Call Analysis

Optimism in Fertilizer Demand, Capital Plans

There is strong confidence in fertilizer demand from global markets, notably Brazil and India. Brazil's agricultural growth is reflected in its annual fertilizer import expectation of approximately 7.5 million tons of urea; demand remains robust through February. India’s demand is also sizeable, with 7 million tons expected due to local production under the Build and Buy India program. North American production maintains a $400-$500 cost advantage over Europe. Strategically, capital allocation includes a $3 billion share repurchase program, to be completed by the end of 2025, embodying a disciplined approach to buybacks and inorganic growth, with priorities such as the Waggaman acquisition and projects related to decarbonization and clean energy.

Global Urea Market Overview

The discussion highlighted urea's significant role as the most traded nitrogen fertilizer, with a global consumption of approximately 190 million tons and 56 million tons shipped internationally. Urea is widely used across all continents, making it a crucial benchmark for nitrogen values. Despite Europe's preference for ammonium nitrate and UAN (urea-ammonium nitrate), it still imports a significant amount of urea, primarily from North Africa, Nigeria, and the Middle East, amounting to 4-5 million tons annually. North American producers benefit from a substantial cost advantage in natural gas, which translates to cheaper urea production compared to Europe, with a cost differential ranging from $400 to $500.

Demand Expectations in Key Markets

The company expressed confidence in the robust demand for urea imports, especially in Brazil and India, despite some industry perceptions of softness in these markets. Brazil's agricultural expansion has been notable, leading to a dramatic increase in fertilizer demand from 16 million tons two decades ago to 44 million tons currently. The outlook for Brazil is a consistent import of around 700,000 tons of urea per month through February. India's domestic urea production has increased due to the government's push for local manufacturing, but import needs remain significant at around 7 million tons, making Brazil and India the top two urea importing countries, followed by North America.

Capital Allocation Strategy

The company conveyed a strategic approach to capital allocation, emphasizing opportunistic share buybacks and a commitment to maintaining its dividend. With a $3 billion share repurchase authorization extending until the end of 2025, they plan to complete the program, historically finishing such buybacks ahead of schedule. Additionally, the company remains open to inorganic growth opportunities and the pursuit of projects in areas like decarbonization and clean energy. The recent acquisition of Waggaman aligns with this strategy, although such opportunities are irregular and often represent significant financial commitments due to the high replacement cost of assets.

North American Market Sentiment and Inventory Levels

The company witnessed a positive shift in market sentiment and purchasing behavior. In contrast to the risk-off approach observed in 2022, where declining prices led to built-up inventories, current demand levels suggest a return to normalcy. The company observed increased product pull in North America and other importing countries like Turkey. With lower imports and a weaker November lineup for urea, the company projects that demand and pricing will lead to inventory replenishment throughout the first and second quarters of the upcoming year.

Earnings Call Transcript 2018-Q2

[Operator]

Good day, and welcome to the Ferrari N.V. 2018 Second Quarter Results Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Ms. Nicoletta Russo, Head of IR. Please go ahead.

[Nicoletta Russo, executive]

Thank you, Toni, and welcome to everyone who's joining us. Today's call will be hosted by the group's CEO, Louis Camilleri; and Antonio Piccon, group's CFO. 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, I'd like to turn the call over to Mr. Camilleri.

[Louis Camilleri, executive]

Thank you very much, Nicoletta. Good afternoon or good morning to everyone joining Antonio and me on our inaugural earnings call in what can only be described as difficult emotional circumstances.

We're all deeply saddened by the loss of Sergio Marchionne. He was a man of immense talent, blessed with a razor-sharp brain and unparallel level of energy and a generous heart, clearly, an inspirational and formidable leader for all those who had the privilege to work with and alongside him.

On a personal note, Sergio was a dear friend. Beyond our friendship, he sat on the Philip Morris International board, where he served as an exemplary Director for the last 10 years, and I sat on the Ferrari board since its ever-so-successful spin-off from the FCA group. This allowed us to be in frequent contact and gave us ample opportunity to discuss and debate our respective business strategies in a fast-moving world.

I can very humbly claim that we shared a deep mutual respect for each other, and I will pursue with vigor and discipline the ambitions the board, he and the entire team here had for this legendary and great company.

I've had the privilege of interacting with his management for close to 2 decades as a lead sponsor and customer, and more recently, board member. I can tell you that all I've seen to date has confirmed to me that we are blessed with a fabulously talented, committed and determined senior leadership team and organization at every level, all proud to be part of this company and all excited to bring it to ever greater heights with integrity and passion.

We have a product portfolio in place for the next few years that is quite frankly stunning from every perspective, one that truly gives me confidence in our future growth and expansion.

It is a true privilege to serve as Chief Executive of this jewel of a company, and I take this opportunity to thank our new Chairman, John Elkann, and the entire Ferrari board for entrusting me with this responsibility to lead our company to the next level while mindful of the opportunities and risks that we will confront going forward.

Rest assured that I will give my all in the best interest of all our stakeholders, our clients, colleagues, business partners and, of course, our shareholders.

I look forward to meeting you at our forthcoming Capital Market Days, when we will review the plans and initiatives we have in place to deliver our aspirations.

For now, we are pleased to report a very solid quarter and to confirm our previously disclosed projections for the year, underpinned by a very strong order book that takes us well into next year.

It is my pleasure to now hand over the call to Antonio, our Chief Financial Officer, with whom I have already established a great relationship and who will undoubtedly make an invaluable contribution to this great company as we move forward in the coming months and years. Antonio?

[Antonio Piccon, executive]

Thank you, Louis, for this kind introduction. Good afternoon to everyone, and thank you for listening in the call.

I'm also among the ones who owe to Sergio Marchionne for all that he taught to us, both as a CEO and as a man, during the incredible days of Fiat and FCA. The simple fact of being here today adds to the number of reasons why I'm grateful. His loss makes me feel even stronger, the personal determination and commitment to contribute to the further development of Ferrari at the level this company, all of its stakeholders, our colleagues and you, Louis, deserve. With that said, let me begin with Page 4.

Our shipment reached approximately 2.5K units, which is plus 5.6% versus prior year. Results were driven by a 22.6% increase in V12 models while the V8 ones grew 1%. 12 cylinders model's strong performance was led by the 812 Superfast, partially offset by the F12berlinetta phaseout as well as the F12tdf that completed its life cycle in 2017.

LaFerrari Aperta is also finishing its limited series run. 8 cylinder models were up versus prior year, mostly thanks to the 488 family, along with the first deliveries of the newly launched Ferrari Portofino expected to ramp up over the next quarters. This was partially offset by the California T that phased out.

Group net revenues for Q2 were EUR 906 million, down a few million but up 1.4% at constant currencies. Our adjusted EBITDA improved by 7%, reaching EUR 290 million and 31.9% margin. Adjusted EBIT for the group showed a 7.5% increase, reaching EUR 217 million quarterly record, with a margin expansion of 200 basis points to 23.9%. Industrial free cash flow for the quarter came in at EUR 93 million. Net industrial debt at the end of June after EUR 30 million of share buyback and EUR 136 million dividend distribution, reached EUR 472 million, substantially in line with the level of December 2017.

Moving to shipments on Page 5. The 812 Superfast as well the 488 and the GTC4Lusso family has performed solidly. Shipment for the group were up 5.6%. EMEA grew 7.2%, with Middle East rebounding. Americas showed a 6.6% increase, and combined deliveries in China, Hong Kong and Taiwan were up 26.4%. Rest of APAC decreased a few units due to timing of the newly launched Ferrari Portofino yet to arrive on the market.

Moving to Page 6 on group net revenues. We see how they decreased from EUR 920 million in Q2 to 906 million -- sorry, in Q2 2017 to EUR 906 million in Q2 '18, therefore, down EUR 14 million, but up 1.4% in constant currencies.

Cars and spare parts revenues totaling EUR 670 million were slightly positive, thanks to higher volumes already commented, as well as mix and price. This was partially offset by negative effects.

Engines revenues were EUR 80 million, posting a decrease in sales to Maserati due to lower engine volumes.

Sponsorship, commercial and brand were EUR 126 million, thanks to an increase in sponsorship and higher championship ranking, partially offset by lower sales generated by brand-related activities and by FX.

On Page 7, you can see the year-over-year changes in the main items for the adjusted EBIT. As mentioned, the latter was up 7.5% to EUR 217 million, with adjusted EBIT margin up 200 basis points and adjusted EBITDA reaching 23.9% margin.

Volume was up EUR 12 million, thanks to the 812 Superfast and the 488 and the GTC4Lusso family as well as first deliveries of the Ferrari Portofino.

Mix and price were positively impacted by strong performance of V12 models. Pricing increases together with the first deliveries of the strictly limited edition Ferrari J50. This was partially offset by lower sales of LaFerrari Aperta that is finishing its limited series run.

Industrial costs and R&D decreased EUR 2 million, mainly due to lower spending in F1 activities. SG&A costs were almost in line with prior year. And foreign exchange, including hedges, had a negative impact mainly due to the U.S. dollar, the yen and the British pound depreciation versus euro.

Other increased mainly due to higher sponsorship revenues and higher championship ranking, partially offset by lower sales to Maserati and brand-related activities.

Moving to Page 8. Industrial free cash flow for the quarter was EUR 93 million compared to EUR 92 million in Q2 2017, driven by strong adjusted EBITDA. This was partially offset by CapEx to support broadening and hybridization of our products, in line with expected volume growth over the 2019-2022 period.

In addition, during the second quarter, we paid taxes, which are lowered by the effect of the increased cap for deductions related to eligible research and development.

Net industrial debt at the end of June after the already mentioned share buyback and dividend reached EUR 472 million, substantially in line with year-end.

The last couple of slides finally show Formula 1 ranking as well as our client relationship activities.

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

[Nicoletta Russo, executive]

Thank you, Antonio. We are now ready to start the Q&A session. Please note that in consideration of our Capital Markets Day, today will focus on Q2 2018 and full year 2018 questions only. Thank you.

[Operator]

[Operator Instructions] We'll take our first question now from John Murphy of Bank of America.

[John Murphy, analyst]

We're very sorry to hear about Sergio and his passing, but it's also very good to hear about your determination being much higher now that he's gone, and that's a driving force. So that's a very good thing to hear for investors. Maybe the first question I have and, Nicoletta, I apologize, I'm going a little bit out of bounds here. But when we think about the targets for 2022 and when they were set and thought of, there are some people that believe that it was really -- something was written on the back of a napkin or an envelope by Sergio. But my understanding is these plans were formed at least a year ago, if not sort of hatched even further back. Is that a correct characterization? Or were they really just sort of Chairman's goals? It seems there are a lot more than that, and there's a lot more than his plan. Is that correct?

[Louis Camilleri, executive]

I would say -- this is Louis. I would say that, clearly, those targets were reviewed with the board. They were aspirational. And clearly, there were plans behind them. Now in the Capital Markets Day, we'll cross the Ts and dot the Is and tell you how we think we will get there. But we also have to disclose potential risks to that, but also significant opportunities that we see going forward.

[John Murphy, analyst]

Okay. Appreciate that. And then just a second question on the Superfast. It sounds like demand is obviously far outstripping expectations, and wait times for the Superfast are very high. We've heard rumors of 3 to 4 years in the U.K. Is that correct? And is there any way that you would ameliorate sort of that risk of losing customers in any way?

[Louis Camilleri, executive]

Clearly, the waiting lists are long, that's a good thing in a way. And we're stepping up production, we'll see. But clearly, I think having a very strong order book should give everyone confidence in our growth going forward.

[John Murphy, analyst]

Okay. And then just, lastly, Antonio, as you look at the second half of the year, there are some risks as the Portofino ramps up that mix might turn a little bit negative. But then there's also another swing factor, being FX, that might actually turn positive in your favor. How do you think those 2 forces will balance out in the second half of the year? And are there other big swing factors we should be thinking about as we march through the second half?

[Louis Camilleri, executive]

Well, I'll pass it on to Antonio. But I would say that while one can focus on currency and mix, the important thing is to look at the margin, and we anticipate continued increase in the margin versus prior year.

[Antonio Piccon, executive]

Thank you, Louis. John, I think the way we look at the guidance for the year, that mix should be substantially neutral compared to 2017. That means in the last quarter, [indiscernible] the comparison with the last quarter of 2017. In terms of the FX, we encompass the impact of what we have seen so far up to the end of June. The second half of the year should bring us to a range of negative impacts of the FX for the full year in the range of EUR 80 million to EUR 100 million, that I think has already been communicated in the past. And based on the visibility we have so far, there is no significant reason to change that view.

[John Murphy, analyst]

I'm sorry, just one last follow-up. The -- if we adjust the revenue and the EBITDA for the swings in ForEx or the headwinds in the second quarter, it appears that the EBITDA margin would be closer to 34.5%. And I'm just looking at Slides 6 and 7 and literally just backing out the year-over-year headwind from ForEx. Is that an incorrect calculation? It seems like the margins may have been a lot better than they are printed.

[Antonio Piccon, executive]

The sense that we have is that margins will not be significantly different because we have -- there are a number of items that are contributing to the average margin of this quarter and the previous one, including, of course, the positive mix and the -- and that is partly compensated by the FX impact. I do not expect that, at constant currency, this should bring to us significantly better margin. It's not to a level that may allow you to project much better for the rest of the year.

[Operator]

Our next question comes from Michael Binetti of Crédit Suisse.

[Michael Binetti, analyst]

Let me add my condolences on the loss of Sergio. He will be missed. And Louis, we're happy to see you taking the reign. Can I just ask you, and since you've already violated Nicoletta's request to stay away from the 2022. I think, literally, it won't be lost on you that quite a bit of the stock move lately has been related to some uncertainty, related to the changeover after Sergio has left. Is there -- we've talked a lot about what is a target of EUR 2 billion in EBITDA. Is that still where you think this brand can go at a high level through 2022? And I know we'll go through a lot of the details at the Analyst Day, but I do think it was important to ask that.

[Louis Camilleri, executive]

I understand your question, and I understand that there's been some pressure on the stock, given that everybody was shocked by Sergio's sudden and very unexpected disappearance. I don't want to skirt your question, but I do want to sort of reiterate that the targets are set. We will cover those in considerable detail in September. They're aspirational targets. We are looking at the plans in great detail now, and I'll be able to tell you with much more confidence in September, but I think I believe, although there are some risks out there, there are also opportunities. So that number is certainly an aspirational target, and we will do everything we can in terms of our plans to get there. Beyond that, I'm sorry, I can't tell you much.

[Michael Binetti, analyst]

Okay. And I guess maybe any initial observations you've had. And I know you haven't been in headquarters for long, but I know you know the brand well. Any initial observations on some of the things that the company has talked about, more in the near term, as far as investment levels related to some of the changes coming on over the next few years on the drive train. I know we'd spoken recently about a plan to convert to selling cars in euros globally to take FX risks off? Do you feel confident that what you see early on, that those kinds of strategies can still go forward in the more near term?

[Louis Camilleri, executive]

In terms of the product portfolio, I feel very confident. We have a great lineup coming up. In terms of euro pricing, this is a subject that's being sort of analyzed by -- for virtually every angle for the last 12 months. And I have to tell you, we've come to the conclusion that such an action, pricing in euros worldwide, would have adverse consequences on our clients, on our dealers and, generally, our market dynamics. So ultimately, it would be a negative adverse consequence on us. Having said that, I do recognize that currency affects our results and, clearly, affects the predictability of our results. All I can assure you is that we'll do everything we can going forward to offset or to mitigate the volatility of this component of our P&L, and I believe this house has considerable leaders to try to achieve that.

[Operator]

Our next question is from Adam Jonas of Morgan Stanley.

[Adam Jonas, analyst]

Louis and Antonio and team, again, I wanted to echo my condolences, and extremely sorry for your loss. And I want to thank you for your very kind words, Louis, at the beginning and you, Antonio, as well, for this great man, great human being we lost.

[Louis Camilleri, executive]

Thank you.

[Adam Jonas, analyst]

A couple of questions. A couple of questions, I do look forward to meeting you in the next month or in September, I should say. Louis, just a couple for you, and then one for Antonio. Sergio was, again, an incredible, incredible enigmatic leader and had the great, great quality, as you highlighted. We have a tall respect for that. I'm wondering, everyone does bring their own unique strengths and experiences to a CEO leadership role and just a high level, not violating the September CMD covenant. What high-level things do you envision doing differently or otherwise executing in a different way, if you could share?

[Louis Camilleri, executive]

Listen, everyone is different. I can tell you that Sergio and I shared the same ambitions for the company. I have a different style, but that's natural. That's -- none of us are the same. I think my record as CEO sort of speaks for itself in terms of my ability to manage complex and highly regulated industries. I think I'm a team builder, and Sergio had a lot of other things on his plate. I have a singular focus on Ferrari, and I will be here permanently. And I would hope that, that would make a difference.

[Adam Jonas, analyst]

Okay. That's great. Louis, another one for you. The -- I'm sorry if this comes across as strange, but some cities, very important, very wealthy cities where there are many Ferrari owners and repeat owners and multiple Ferrari owners, cities like London or communities like Hong Kong, those kinds of places, rent, are, according to the local governments, let's say, talking about an eventual and potential elimination of license plates for cars that have tailpipes. Now there's also -- without politicizing that or getting caught up in time horizons and things, just that contemplation is something that's interesting and, by our reckonings, I've been taking seriously at some point. Do you think a Ferrari that makes no internal combustion engine noise or would have, say, no tailpipe can be a Ferrari?

[Louis Camilleri, executive]

That's a very valid question.

[Adam Jonas, analyst]

That's why I asked it.

[Louis Camilleri, executive]

I -- listen, I'm speaking the history of Ferrari. I think I understand Ferrari's DNA, and I'm surrounded by a senior management team that certainly understands the importance of this brand equity. So Ferrari will always remain a Ferrari. And if I can quote to our founder, the next car will be better than the previous one. I think we have the technological skills and the know-how within the company that can respond to any regulatory issues that will arise. The one you mentioned, I think, is a longer-term one. And we can do it whilst they will remain a Ferrari, a unique exclusive car, one that's at the pinnacle of the automotive industry. So I'm pretty confident we can get there if necessary. But I think your question is a much longer-term one, I think there will be total chaos.

[Adam Jonas, analyst]

Okay. Understood, understood, Louis. Antonio, just one final one for you, on a kind of the remainder of the year horizon. The change in the sponsorship revenue and the championship ranking on the EBITDA bridge was significant. It strikes me as something that you should have a very good visibility and do -- in some part because there's a lagging nature to it and a bit more predictable nature. So with that in mind, could you provide a bit of either rest of year and a sense of what that delta could be in the remaining quarters?

[Antonio Piccon, executive]

Thank you, Adam. I think you are addressing the point of the other contributing to the EBIT claims and deposits for the quarter. The way we look at the rest of the year, the deposits that are coming from the first and second quarter would be absorbed in the third and the fourth. So we think of other as being rather neutral at year-end on a full year basis. And in terms of the ranking, do not forget that for the time being, we assumed to be ranked #1 in the championship. So that assumption I gave is based on that presumption.

[Louis Camilleri, executive]

And just to be clear that we really want to win this championship. And if we do because of the way the incentive programs are set up, that's a negative on the year, but clearly a positive into next year.

[Operator]

We will now take our next question from Martino De Ambroggi of Equita.

[Martino De Ambroggi, analyst]

I echo the condolence, obviously. And I agree with all that you commented on Sergio. The first question, as Nicoletta suggested, is on the quarterly results. On the EBIT bridge, looking at the price mix, EUR 8 million positive contribution, I suppose I assume that this is entirely priced, if not even more considering the mix, probably, was negative in this quarter. Am I right in taking this assumption?

[Antonio Piccon, executive]

Certainly, price is contributing. In terms of the overall impact of mix, it's rather -- if I take everything else out, it's rather neutral, I should say. So price is basically amounting close to the full amount of the positive price and mix.

[Martino De Ambroggi, analyst]

Okay. And this is the value we should expect for the rest of the year also for the second half?

[Antonio Piccon, executive]

As we said, on mix and price, we expect to be rather neutral as of year-end on a full year basis.

[Martino De Ambroggi, analyst]

Okay. Including prices. The second...

[Antonio Piccon, executive]

Quarter-by-quarter, when you look at that, particularly in 2018, you'll see the Ferrari Aperta contributing negatively. And instead, depending on the quarter, we might have the V12 models that are contributing positive in the mix initially, and then the strength to be slightly reduced with the reentering of the Portofino.

[Martino De Ambroggi, analyst]

Okay. And the other 2 questions are more long-term-related issues. For Louis, what's your personal view on the rule to retain the exclusivity of the brand, going forward, first question? And the second, what's your personal view on the Formula 1 ongoing negotiation? I know that it's still a long time before the expiry of the existing contract, but Sergio had a clear view showed in the past. I don't know if you have a different view.

[Louis Camilleri, executive]

Could you repeat your first question? I'm not sure I understood.

[Martino De Ambroggi, analyst]

Yes. About the basic rules to retain the exclusivity. So it means that, obviously, there's more or less single-digit growth going forward. I don't know if there is a threshold you consider or something that cannot be exceeded. What could happen after exceeding the 10,000 cars losing this more of vehicle producer status, and you will be obliged to pay some penalties in some regions. So just overview on the exclusivity.

[Louis Camilleri, executive]

Okay. As has been said before, we're very focused on revenues, less so on volumes. We will surpass the 10,000 threshold at some point. But I don't think that will adjust the effect of our brand equity and the exclusivity of the brand. That's something we're all very, very focused on. I view my job in part as being the guardian of that brand equity, and I can assure you that Ferrari will remain Ferrari. As to crossing the 10,000 threshold, I think, again, that's been debated at length and discussed in the past, and given the hybridization of the powertrains, we do not believe that that's an issue. And the hybrids are going to come and going to stay, longer term. So that's what I would say. In terms of the Formula 1, yes, there have been a number of discussions in terms of the next Concorde Agreement. I believe there's been some progress on the technical side. There's less progress on the budget caps and economics and the governance aspects. So I think Sergio and I saw eye-to-eye on Formula 1 going forward.

[Operator]

We will now take our next question from Thomas Besson of Kepler.

[Thomas Besson, analyst]

It's Thomas Besson, Kepler Cheuvreux. I have a few questions as well. I'll start with the impact you may see on the Chinese business, from the tax change and what your view is on the potential impact of overall tariffs on your business outside Europe.

[Louis Camilleri, executive]

Well, as you know, the tariffs were reduced, and I think the commercial team should be complimented as to how they handled that because others have suffered and we did actually very well within those conditions and prepared ourselves well for that decline in the tariffs. Obviously, the price has come down as it has across the board, but we see a pretty bright future in China, and we expect our business there to continue to grow.

[Thomas Besson, analyst]

Second question, you talked about the large order book and how good that is. Can you tell us what's your view of the optimal level of order book? Don't you think that 3, 4 years is too much, maybe 12, 18 months is the maximum you should have?

[Louis Camilleri, executive]

Well, I think I mentioned 3 and 4 years is long, but I don't think that that's across the board. It's for maybe 1 or 2 specific models and 1 or 2 specific geographies. So the way I look at it is that some of our models have about a 2-year waiting period between 18 months and 2 years, that's the general thing, and some of them are slightly less than 12 months. So I wouldn't look at the extreme of just 3 or 4 years. Those are rather exceptional, I think.

[Thomas Besson, analyst]

I have a last one, please, for you, Louis. You said, I think, 3 or 4 times in your initial comments that the 2022 targets were aspirational. Can you say whether that is the general expectation of Mr. Marchionne, having aspirational targets for FCA or Ferrari, meaning that their ambitions more than necessarily pure targets are there to motivate employees as much as investors, or whether you meant that this aspiration is probably something which is too ambitious to be achieved?

[Louis Camilleri, executive]

No, I didn't say that. I think I said that both Sergio and I had the same ambitions, and I would rather defer to the Capital Markets Day to give you the plans and initiatives we have in place that are being developed to ensure that we meet and deliver those targets.

[Operator]

Our next question comes from Monica Bosio of Banca IMI.

[Monica Bosio, analyst]

And before starting with the questions, let me express my deep sadness for the loss of Sergio. I join the company's sentiment in this moment. And coming back to the questions, I would like to know -- I would limit 2 housekeeping questions as we will meet in September. But the first one is on the level of personalization. If you can just indicate the current level of personalizations on cars. The second question is on the ForEx sector. Sorry to come back to this issue once again. But I've seen the impact on the first alpha has been in the range of EUR 70 million of which EUR 32 million, if I remember well, in the second quarter. I remember that the previous guidance was a total impact on the EBITDA between EUR 80 million and EUR 100 million. I was just wondering if you can confirm this target because I lost the previous answer. And the third question is on Maserati. I know it's -- maybe it's not the right moment to speak about this, but Maserati is going down. I'm just wondering if we should expect the same slowdown for the next quarters. And if you have a comment on Maserati as for the future, also on the back of the second quarter results of FCA.

[Antonio Piccon, executive]

Monica, in terms of the FX, I think I already answered before, meaning, we confirmed the guidance, EUR 80 million to EUR 100 million for the full year, okay? And with respect to Maserati, the volumes that we have seen so far reflected the volume reduction that they've reported. In terms of the rest of the year, we are talking about a change with respect to 2017. We're waiting to see what the final number they will require to us to produce. In terms of the impact on EBIT, in any event, given the take-or-pay nature of the agreement in place, we should not expect a material impact there.

[Monica Bosio, analyst]

Okay. Sorry. And another follow-up. Any news from the Patent Box?

[Antonio Piccon, executive]

Discussions are progressing, and we expect to be in a position to give better indication during the next quarter.

[Monica Bosio, analyst]

I'm sorry, and the personalization?

[Antonio Piccon, executive]

The question is, what do you mean by the level of personalization? Year-over-year, in Q2, they are rather neutral. There's no significant impact.

[Operator]

Our next question comes from Stephen Reitman of Societe Generale.

[Stephen Reitman, analyst]

Stephen Reitman, Societe Generale. I have 2 questions. You partially answered about LaFerrari Aperta, which has been on -- it's finishing its limited series for quite some time. I just want to get an idea of volume impact in the second quarter and the first half. And is this over now or will there still be some cars sold in the second half of this year? And also, if you could comment maybe on the impact of the J50. How Many of the integral, I think, 10 cars actually delivered in the second quarter? And my second question is about the role of the special hyper cars, the limited edition vehicles. Do you feel there is scope to increase the number of vehicles that form parts of your model range against your series cost, because, obviously, these have a very big impact on your overall margins.

[Antonio Piccon, executive]

Okay. First of all, in terms of the -- those models, we did not communicate in terms of units. We expect the LaFerrari Aperta, basically, to come to conclusion of its life cycle by the end of the year. And in terms of the J50, we expect to have some few units to be sold for the rest of the year and a few units we have sold even in Q1 and Q2. So the impact of the phaseout of the LaFerrari Aperta is partly compensating the positives that we have during the quarter on the mix, and it is why I answered before, saying that mix is rather neutral. In terms of what we expect, going forward, is that this is going to impact -- the phaseout of LaFerrari Aperta is going to impact negatively Q3 and Q4, and the ramp-up of the Portofino in that respect is not compensating fully. And that's reinforced the -- our expectation to have mix on a full year basis, neutral.

[Louis Camilleri, executive]

I would say we're very focused on the importance of hyper cars. It's been a sort of 10-year cycle. And whether we can shorten that cycle, it's something, clearly, that we have to look at carefully.

[Operator]

Our next question comes from Giulio Pescatore of HSBC.

[Giulio Pescatore, analyst]

The first one will be on the Pista. Can you give us an update on when the Pista will start shipping this year or perhaps next year? And what's sort of volumes are expecting for 2018 and 2019? And could the shipments of the Pista offset, to a certain extent, the negative mix into the last quarter when this model ramps up? So that's the first question.

[Antonio Piccon, executive]

The Pista is expected to be first introduced in Q3 and grow in Q4, ramping up. That is one of the positive contributor to the mix for the second half of the year. But I don't think we have communicated ever any volume targets for that.

[Giulio Pescatore, analyst]

Okay. Second question would be on the Engines segment. Could you perhaps elaborate a little bit more on the -- on how the -- this take-or-pay contract works so well in the breach? Would you see the payments coming from Maserati to compensate for the lower sales? Is that in the other line? Is that contributing to the strong other performance that we have seen in the first 2 quarters?

[Antonio Piccon, executive]

Yes. Sorry, the take-or-pay acts as a compensation for reduced fixed cost absorption, and the impact of that is going to be in the other.

[Giulio Pescatore, analyst]

Okay. And perhaps one last one. You mentioned that you don't expect to go ahead with moving the pricing to euro. But in the past, you had said quite clearly that there was no reason why that should not happen, given the strength of the brand. So maybe you can elaborate a little bit more on why you're taking this step back, why you're taking this decision to get things where they are at the moment.

[Louis Camilleri, executive]

Because after considerable study, we came to the conclusion that it would adversely affect market dynamics. And I can confirm to you that Sergio, in the very recent past, had strong reservations about it, too.

[Giulio Pescatore, analyst]

Is it a measure to protect dealers? Or it's more of a customer concern?

[Louis Camilleri, executive]

It's market dynamics. That includes everybody.

[Operator]

We'll now take our next question from Fei Teng of Berenberg.

[Fei Teng, analyst]

Firstly, I just want to echo everyone's comments on Mr. Marchionne. Our thoughts, of course, go to his family and friends, and all to you guys after the sad news. My first question would be to Louis. Happy to see you joining. Just going back to the topic of pricing. I mean, given that you've previously been in an industry that's also been driven, to a large degree, by pricing, I just wanted to get your thoughts on whether you think there are parallels that can be brought from tobacco into the luxury car industry in terms of things like managing prices and demand. And I guess, is there anything that you would tweak in what Ferrari does on pricing at the moment outside of offsetting currency?

[Louis Camilleri, executive]

Well, clearly, where I come from, we had quite a lot of pricing power, but it's sort of pales in comparison to the pricing power that this house has. I would say that my experience has been, in terms of pricing, is a close razor focus on price structures from the ex-factory price all the way down to the retail price. Tax structures, per se, duty structures are things that can be changed to our advantage, and that's something that I think I can bring to the table in terms of pricing going forward. I think that we will always have a delicate balance between price and mix and volume to achieve our margin and income objectives.

[Fei Teng, analyst]

And my next question would be on the Formula 1 business. I guess, first of all, would you be looking to stay as involved as Mr. Marchionne was in the governance of the sport? And I guess, more broadly, will there be ideas that you would like to bring to discussion that haven't been focused so far?

[Louis Camilleri, executive]

Well, in all humility, yes, I will be involved. I'm not sure that I can bring new ideas. I think that the focus has been on very much on slicing up the cake as it exists today, and I don't think enough focus has been given to increasing the size of the cake. So that's one aspect that I think I can bring value to.

[Fei Teng, analyst]

And in terms of the relationship with Philip Morris, are you happy with the existing relationship as it is in terms of sponsorship? Could there be scope for any changes that could benefit either side?

[Louis Camilleri, executive]

Well, we have a contract in place until 2020, and we've been -- Ferrari has had an agreement with Philip Morris for, I believe, it's now 45 years. It's a long-term relationship that I believe has been mutually beneficial and will continue to be.

[Fei Teng, analyst]

Any update on finding a replacement for Santander as a second sponsor?

[Louis Camilleri, executive]

I think that we've taken that over. When I say we, Philip Morris. So Santander has -- the impact of Santander has been more than offset by the Philip Morris sponsorship.

[Operator]

We'll now take our next question from George Galliers of Evercore.

[George Galliers-Pratt, analyst]

As others have said, our thoughts are with you. Just following up on the Formula 1 question. And I think you made it clear that you need to be more focused on increasing the size of the pie rather than how it's split. But in light of Force India being placed into administration last week, does it matter from Ferrari's perspective how many teams are competing in Formula 1? Or would you be comfortable that it was just yourself, the 2 other works team and Red Bull racing each weekend?.

[Louis Camilleri, executive]

No. I think that we want a number of teams out there. That's what makes Formula 1 what it is. It's unfortunate Force India fell into administration, as you say, and we'll see going forward. But clearly, there are other examples of teams that are doing extremely well, who don't necessarily have the kind of budgets that others may have. I think in principle, budget caps are probably a good thing, but the devil is in the details as to how those caps are determined and calculated.

[George Galliers-Pratt, analyst]

Okay. And then next question was just as we think about ramp-up of the Portofino. Just kind of looking at the California and then the orders you've seen in Portofino, are you seeing a step-up in personalization with the new vehicle versus what you saw historically with the California? And how does personalization on Portofino compare, for example, with the 488 or other vehicles in your model right now?

[Antonio Piccon, executive]

I think for the time being, we are projecting to have that in line, no major differences in terms of the amount of personalization, the size, the value, the personalization for such car compared to California as of now.

[Operator]

That concludes today's question-and-answer session. At this time, I will turn the conference back over to Nicoletta Russo for any additional or closing remarks.

[Nicoletta Russo, executive]

Thank you, Toni. Thank you, everyone, for joining us today. The Investor Relations team will be still available for any follow-up questions you may have. Thank you.