Ferrari NV

MIL:RACE

Earnings Call Transcript 2020-Q3

[Operator]

Ladies and gentlemen, thank you for standing by and welcome to the Ferrari Third Quarter 2020 Results Conference Call. [Operator Instructions]

I must advise you that this conference is being recorded today, Tuesday, the 3rd of November 2020.

And now I would like to hand the conference over to your speaker today, Nicoletta Russo. Please go ahead.

[Nicoletta Russo, executive]

Thank you, Martin, and welcome to everyone who's joining us. Today's call will be hosted by the group CEO, Louis Camilleri; and Group CFO, Antonio 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 Louis.

[Louis Camilleri, executive]

Thank you, Nicoletta, and welcome, everyone. We are pleased that you have joined us.

All in all, I would characterize our third quarter results as robust, particularly in terms of our income performance. As Antonio will describe shortly, our volume and top line performance was affected by the simultaneous impact of the end of the life cycle of certain models and the ramp-up of the new ones, particularly, the SF90 Stradale and the Ferrari Roma on our production planning. Hence, deliveries were affected by supply and certainly not demand. Absent any potential dislocation caused by the resurgence of the COVID-19 pandemic. We're now confident that we will meet the top end of our previously released guidance for the full year across all measures. This implies a very strong fourth quarter, reaching record quarterly levels in terms of absolute volumes, revenues and EBITDA. Solid proof that we are now running on all cylinders and have overcome the embryonic issues that we and our suppliers faced with the industrialization phase of the SF90 Stradale.

The key dynamics of our business model remain exceedingly strong. And the momentum I referred to back in August remains in place with a record order book, robust residuals and the low level of cancellations. Indeed, orders received this October exceeded the average pre-COVID first quarter monthly intake by some 30% and were essentially in line with the average that we received in the fourth quarter of last year, which witnessed several new models. This is testament to the success of the digital activities that were implemented. And much more recently, the very significant number of individual test drives that garnered record request and attendance levels.

Clearly, a key watch out is the effect of any further lockdowns. For example, today, in the United Kingdom, all showrooms have been closed. And therefore, some 81% of our dealers in Europe have now closed their showrooms, and that reflects 74% on a weighted basis. We also are somewhat concerned that the test drives and dynamic activities that we had planned may be somewhat curtailed or even aborted. The quarter witnessed the launch of the latest addition to our family of models, the Portofino M, M standing for Modificata, with a redesigned powertrain, a brand-new HP gearbox and numerous other design and technical upgrades. In keeping with the times, it is the first ever Ferrari to be previewed exclusively through vivid digital activities that have triggered very positive feedbacks to date.

We are pleased with the reception that the Ferrari Roma continues to generate across the world. I'll particularly note, today is the very strong orders emanating from China, Japan and Korea. The fact that it is attracting a higher percentage of new to Ferrari customers than the Ferrari Portofino, and the younger cohort, all is well for the future.

China, in particular, is exciting. Orders are currently running at 50% above the Portofino in the equivalent time span since their respective launch. We're also encouraged by the demographics of the SF90 Stradale. As in terms of its current order book, the new to Ferrari customers are the youngest across all the models that we offer. Whether or not this is related to the fact that this is our first range hybrid model remains to be determined, but it is certainly an exciting prospect.

This latter point, hybridization, allows me to segue to a matter that I know is of considerable interest to everyone on this call, namely carbon neutrality. As I have alluded to in recent calls and answer to direct questions on the matter, we have undertaken a significant company-wide exercise to determine our total carbon footprint. While many focus on carbon emissions alone, we firmly believe that this is only part of the equation, especially with regard to our products that, on average, only clock up very low annual mileage. We have studied the entire carbon footprint from cradle to grave, or more accurately, from the mine to the effective end of use across our entire activities, including Formula 1. This allows us to focus on the critical elements that compose our footprint, which in all honestly have led to some surprising findings, not least with regard to the impact of specialty metals and battery components on our overall footprint. It is my sincere hope that prior to the end of next year, we will be in a position to publish a third-party certified Ferrari carbon footprint and a clear plan to meet our ambitions to ultimately become carbon neutral through actions taken directly and indirectly. Although it represents a very small part of our footprint, this plan will also include Formula 1 as we work with all the interested parties on the power unit of the future, currently slated to come into vigor in 2026.

Before I hand over the call to Antonio, I need to correct the statement I made, just in case. 81% of our dealers are open, not shut, sorry about that.

So now I hand it over to Antonio, who will review our quarterly results and guidance for the full year.

[Antonio Piccon, executive]

Thank you, Louis, and good morning or afternoon to everyone who is joining us today. Starting on Page 4. The third quarter of 2020 witnessed the resilience of our core business leading to a very solid set of results across all metrics, which compares well with peers in the luxury domain. The core business, excluding Formula 1, brand-related activities and engines for Maserati performed in line with our plans, and our margins were enhanced by the full deployment of the cost containment measures adopted since last March. We also benefited from the improved forecast of F1 revenues received from the commercial rights holder, which nevertheless remained significantly down compared to last year.

Our shipments in the third quarter were 2,313 units, 6.5% less than in Q3 '19. Group net revenues were EUR 888 million, down 3% compared to prior year, outstripping our shipment variance, thanks to the deliveries of the Ferrari Monza SP1 and SP2, which enriched our mix.

EBITDA, and please note that in this quarter, all adjusting metrics coincide with the reported ones since there were no unusual items, came in at EUR 330 million, up 6.4%, with a robust margin of 37.2%. EBIT was EUR 222 million, essentially in line with prior year embedding higher D&A.

Net profit was EUR 171 million, slightly increased versus Q3 '19 and resulting in a diluted EPS of EUR 0.92 compared to EUR 0.90 of prior year.

Industrial free cash flow for the quarter was back into positive territory, totaling EUR 77 million.

Moving to Page 5. You can see the details of the third quarter 2020 shipments, which decreased 6.5%, driven by the guidance of the company's full year production plan, with some models gradually phase out and the new ones ramping up. I remind you that our full year production plan projects a recovery of 500 units out of the 2,000 lost following the 7-week production suspension due to the COVID-19 pandemic. This obviously assumes that our manufacturing plans will remain unaffected by measures that may be taken to combat the pandemic.

Going back to the deliveries of the quarter. The V8 models were down 12.8%, and on the other hand, the V12 were up 15.4%. And F8 Spider and the 812 GTS are in the ramp-p phase, reaching mainly EMEA, gradually offsetting the 488 Pista family and the Ferrari Portofino that arrived at the end of their life cycle. The Ferrari Monza continue to be delivered as originally scheduled.

As a consequence, quarterly shipments were affected by the deliberate geographic allocation driven by the phase-in pace of individual models resulting in EMEA increased by 12.7%; Americas declined by 34.7%; Mainland China, Hong Kong and Taiwan posed a decrease of 25.2%, also considering that the third quarter of 2019 was still somewhat flattened by the anticipation of our sales before the introduction of the new emission regulations, while deliveries to rest of APAC were in line with prior year.

I remind you that SF90 Stradale and Ferrari Roma will start the deliveries in Q4 2020. Actually, they started deliveries in Q4.

Finally, within the end of the year, we will unveil an additional new model, the 8 out of the 15 planned over our planned period 2018-2022.

Turning to Page 6. You can see here displayed the walk of our group net revenues for the third quarter of 2020. Revenues from cars and spare parts were up 2.4% at constant currency. Such growth in spite of the volume decline reflects the positive mix price, mainly thanks to the Ferrari Monza SP1 and SP2. This was partially offset by the phase out of the 488 Pista family, which, in turn, implies a lower contribution from personalization's from a volume perspective. Also, the personalization rate on cars and spare parts revenues were slightly lower than last year.

Engines revenues were substantially in line with prior year. Revenues from sponsorship, commercial and brand were down EUR 43 million, significantly impacted by the COVID-19 pandemic, resulting in a lower number Formula 1 races and corresponding lower revenue accrual as well as reduced in-store traffic and museums visitors. For the sake of clarity, our revenue accrual for F1 sponsorship and commercial was based on full year estimates updated in the third quarter and improved compared to the first half of 2020.

Currency, including translation and transaction impact as well as foreign currency hedges, had a minor positive contribution of EUR 2 million, mainly the U.S. dollar.

Moving to Page 7. Let me review the change in our EBIT, which was EUR 222 million, essentially in line with prior year, minus 2.1% or minus 4.1% at constant currency, with EBIT margin at 25%. The negative variance at constant currency remains mostly the COVID-19 impact on Formula 1, partially offset by the strength of the core business. More precisely, volume drove a negative variance of EUR 19 million due to reduced deliveries. Mix/price variance was positive for EUR 46 million, thanks to the Ferrari Monza SP1 and SP2, partially offset by the lower contribution from personalization programs due to the decrease of shipments and the gradual phase-out of the 488 Pista family.

Industrial costs, research and development costs decreased EUR 5 million due to the spending guidance, particularly in Formula 1 racing activities for the current season, partially compensated by higher depreciation and amortization as the production lines for the new models started being operated.

SG&A decreased EUR 18 million, reflecting fewer marketing initiatives as well as cost containment measures.

Other was down EUR 60 million due to the already mentioned COVID-19 impact on the F1 racing calendar as well as lower traffic for brand-related activities.

The total net positive impact of currency was EUR 5 million year-on-year.

Turning to Page 8. Industrial free cash flow for the quarter was EUR 77 million positive. The improvement in the quarter was essentially driven by the EBITDA growth, partially offset by the continuous investment to fuel our long-term product development with capital expenditures of EUR 158 million. And the adverse working capital impact due primarily to higher raw material and component inventories as well as the reversal of the Ferrari Monza SP1 and SP 2 advances already collected in 2019.

Net industrial debt as of the end of September was EUR 715 million compared to EUR 776 million as of June end. At the end of the third quarter 2020, total available liquidity, including undrawn committed credit line for EUR 700 million was EUR 1.879 billion, which compares with approximately EUR 1.250 billion as at last end of December.

Moving to Page 9. On the back of the third quarter results, we are revising our guidance to the top end of the range communicated in August, assuming trading conditions remain unaffected by further restrictions or impact from the COVID-19 pandemic that may have the pace of production and deliveries. Net revenues greater than EUR 3.4 billion to reflect a drop in deliveries of nearly 9% compared to 2019, the positively revised assumption on the F1 championship, the pace of restart of our brand activities and demand for engines coming from Maserati.

Adjusted EBITDA at approximately EUR 1.125 billion, with percentage margin of 32.5%. Adjusted EBIT close to EUR 700 million, targeting an EBIT margin of 20%, which reflects the higher D&A following the CapEx increase of most recent years. Adjusted diluted EPS of circa EUR 2.8 per share, assuming a 20% tax rate substantially in line 2019. Industrial free cash flow in the region of EUR 150 million, with capital expenditures of around EUR 750 million.

It goes without saying that we are not immune to what happens around us, and it may be assured that our top priority remains to protect our people. However, barring any restrictions that would inhibit our ability to keep operating diligently as we are currently doing, we believe we are well positioned to reach the targets that I've just outlined. Targets that we consider remarkable in such a disruptive year.

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

[Nicoletta Russo, executive]

Thank you, Antonio. Martin, we are now ready for the Q&A session. Thank you.

[Operator]

[Operator Instructions] And your first question today comes from the line of John Murphy of Bank of America.

[John Murphy, analyst]

I just want to ask a first question on product cadence because it doesn't seem like there's been any beat kits here whatsoever on product launches. So I'm just curious if you could confirm that. And if you can just remind us how the order book builds around new product launches because it seems like that's very, very important in the bulk building or the waitlist building?

[Louis Camilleri, executive]

Sorry, John. I'm not sure I understood your question. Product cadence relative to new models?

[John Murphy, analyst]

Yes. Given the disruption around COVID, has anything changed or been delayed on your product cadence or your product launch cadence?

[Louis Camilleri, executive]

In terms of actual launches, i.e., presentations, it hasn't really changed. As we said back in August, the COVID did disrupt our supply chain and the industrialization phase, particularly of the SF90. So that's been somewhat delayed relative to our beginning of the year plans. As you know, for COVID, we've also said on, at least two occasions, that we've been prudent in terms of our investments. And certain models going forward have been delayed by 3 months and others by 9 months. So nothing really very material. There have been delays, John. I don't know if that answers your question.

[John Murphy, analyst]

That does. And the correlation with those launches and the waitlist appears to be relatively high. So I'm just curious, it sounds like you're getting record orders for the waitlist. I'm just curious, has that changed anything with the waitlist, where it's either shrunk or maybe grown as people are willing to wait longer?

[Louis Camilleri, executive]

Well, the waitlist is obviously increased. And that's something that we will need to address, particularly on the models where we have rather ambitious plans in terms of attracting new to Ferrari customers. And I think those are somewhat vulnerable to very long waiting lists as opposed to normal customers who are acclimatized to a longer waiting list. But essentially, I think we enter '21 with a very strong order book. And as Antonio just mentioned, barring any dislocations because of the pandemic, we should have a pretty good year, obviously, off a weak base, but nevertheless, a pretty strong year.

[John Murphy, analyst]

Okay. That's helpful. And then a second question just around the EBITDA margins, it's hard enough to get. Excited when we see 37.2%. I think that's one of the highest, if not the highest, that you guys have ever printed, at least in -- we have public data. I'm just curious if you think about the puts and takes in the quarter and as we go forward, what would actually potentially not be repeatable either on cost containment or mix? Or is this something we could think about as a potential for the future on EBITDA margin?

[Louis Camilleri, executive]

Well, it's driven by a very strong performance in the core business, car business, where the EBITDA margin, I'm looking at Antonio, but I believe it was above 45% in terms of the core business. So that's driven a lot by mix and, particularly, by the Monza. As you know, in the fourth quarter, we will face a comparison where we had Monza last year. So that huge uplift won't be there. But it will still, nevertheless, be pretty strong because of the advent of SF90, the full ramp-up of the 812 GTS that is performing strongly. So we feel very good about the margin.

I think from the Maserati perspective, as that becomes lower, that obviously has a favorable impact on our margin because you can imagine that the margins on the Maserati engines are quite low. Brand margins are high. They're having a very difficult year for obvious circumstances. And hopefully, next year, we'll be able to really start implementing the plan that we had announced, I guess, this time last year.

[John Murphy, analyst]

Okay. That's very helpful. And then just lastly, when you talk about mix, you keep highlighting the positive mix from the Monza, which I certainly appreciate but when you look at the V12 versus the V8 mix with V12 is up 15.4%, V8's down 12.8% on unit shipments. Isn't that a significant driver of positive mix as well? And I'm just curious why you haven't sort of stated that as part of the positive mix?

[Louis Camilleri, executive]

Well, because for simple reason, the Portofino and the Pista are ending their life cycles and they're being replaced by the Roma and the Portofino M. So those will be coming up and being part of our volume. So that's why I didn't mention it.

[John Murphy, analyst]

Okay. But in the quarter itself, I mean, that was -- that was the most definitely...

[Louis Camilleri, executive]

Yes, in the quarter. Absolutely, but I thought you were looking more in terms of the future.

[John Murphy, analyst]

Yes. No, I'm just trying to understand because it seems like that simple -- not simple, but I mean that straightforward comparison of V12 versus V8 in the quarter was very, very strong. And obviously includes the Monza to some degree, but it wasn't highlighted as part of the significant driver or positive in the quarter as explicitly as the Monza. So I was just trying to understand if I was missing something there.

[Louis Camilleri, executive]

Well, because the margin on the Pista and Pista Spider, in particular, is pretty attractive. I think that's what you're missing in your equation.

[Operator]

Your next question today comes from the line of Adam Jonas of Morgan Stanley.

[Adam Jonas, analyst]

Louis, I got a bit of a longer-dated strategic question for you on EVs. So if I look at your COGS, cost of goods sold on a per unit basis, for Ferrari, we get close to EUR 150,000 per unit. And I'm thinking -- I am thinking roughly half of that, it could be related to the power unit the engine transmission, fuel delivery exhaust and all the supporting mechatronics and electronics. Now I'm thinking if this has transitioned hypothetically to 100% BEV power unit, including the battery, e-motors, charger inverters, et cetera, that it should be substantially less complex, less exquisite and lower variable cost per unit compared to today's icy powertrain. Could this create a very large cost efficiency opportunity for Ferrari, while still providing your customers with the highest performance experience that they would expect from a Ferrari? Please tell me, Louis here where I may be wrong with this logic?

[Louis Camilleri, executive]

I understand where you're going. I don't necessarily agree with you. I think that the way you said it, less complex and less exquisite is where you potentially derail because, in fact, to achieve the objectives you just mentioned, which is to retain the Ferrari DNA. The EV will actually be significantly more complex than you are assuming. And that's clearly something that we're working on. But just to have a standard EV and put the cavalinho on it is not what we're all about. So today, we come out with an EV, or what we call a BEV, it will be a pretty complex machine. And furthermore, there are a number of elements that we will have to put in, which are very costly. If I look at the SF90 Stradale and the cost aspects of the electric aspects of the hybridization and the electric axles and the front axle, those are pretty expensive considerations.

Having said that, over the longer term, and that's what we're talking about, you would hope that there would be cost savings. I'm not sure they would be as extravagant as you imply, but there should be cost savings longer-term as battery technologies improve as well. However, my own sense is that to sort of, say, 100% electric, that's pushing things. I really don't see Ferrari ever being at 100% EV. And certainly not in my lifetime will it reach even 50%.

[Adam Jonas, analyst]

That's great color. Just as a follow-up. I don't know, is Michael Leiters on the call today?

[Louis Camilleri, executive]

No, he isn't. But ask away.

[Adam Jonas, analyst]

You can do your best Michael Leiters' imitation. How's your German accent?

[Louis Camilleri, executive]

I can. I can. Very good.

[Adam Jonas, analyst]

Very good. Okay. Remind us, and I know you've addressed it before, but I imagine that this is evolving, particularly as other more internal combustion engine manufacturers move to EVs, not 100%, but maybe 50%. Remind us how Ferrari is thinking about the sound of a Ferrari without an exhaust system. And I didn't know if you had -- if you could maybe address how you addressed it on the SF90 Stradale, I might have missed it when it's in e-mode. Just to give us some things to think about because I think in your own materials, you mentioned sound is the essence, the sexuality, the passion, the whole spirit of the brand that starts with sound, and it's got a lot of investors' attention.

[Louis Camilleri, executive]

Yes. And that's one element that we are working on. Obviously, for competitive reasons, I'm not going to give you the details. But that's something that we are quite comfortable that we can achieve. And it's really the depth of the sound and the gradation of the sound that's key. But you're right, sound is, in terms of all the consumer research we have, is one of the key elements. And clearly, it is a big priority. We've done a lot of work on that, and we feel comfortable that, that is certainly one of the aspects that we can address.

[Operator]

Your next question today comes from the line of Susy Tibaldi of UBS.

[Susy Tibaldi, analyst]

So I have a few. So just one clarification because you are still planning to make up for these 500 units this year. So does it mean that you're still targeting minus 9% volume decrease for the full year, like you mentioned in the previous call?

[Louis Camilleri, executive]

That's correct.

[Susy Tibaldi, analyst]

Okay. So basically, it implies that in Q4, we're going to see quite strong double-digit growth in terms of volumes, which...

[Louis Camilleri, executive]

Correct.

[Susy Tibaldi, analyst]

I guess that's what implied. Okay. When it comes to the EBITDA margin, also that is implied in your guidance. As you mentioned, clearly Q3 was a little bit of an exceptionally strong level because of the Monza. But I was also wondering if by any chance there were any one-offs maybe within OpEx that drove such strong margin expansion? And what exactly is happening then in Q4 because the guidance is implying a margin construction of 200, 300 bps versus last year?

[Louis Camilleri, executive]

Yes. I think it was really driven by mix, as we said in the first question. And mix was very, very strong in Q3, and will continue to be pretty strong in Q4. So that's what's driving it. I don't think there's much I can add. There's no other one-timers in there that's distorting the picture in one way or another.

[Susy Tibaldi, analyst]

Okay. And when it comes to these lockdowns in Europe, which obviously we have very low visibility. If these lockdowns are just limited to a few markets, and you say there's 80% of dealerships are open. Are you able to sort of shuffle volumes within other countries in Europe? Because I suppose when it comes to Q4, and you will have the initial shipments of the Stradale and the Roma, typically, they will be directed to Europe. So if a large portion of Europe is closed, how would you react to that? Because, I guess, deliveries to U.S. or Asia, they usually come with at least 6 months lag. So how do you think that you can manage the situation in terms of lockdowns in Europe?

[Louis Camilleri, executive]

Well, it very much depends on the actual regulations. So the U.K., the showrooms are closed, but deliveries continue. So in terms of deliveries per se, as rules stand today, they can continue. The showrooms, however, have an impact on the ability to drive orders, obviously. But I think as long as rules stay the way they are in the U.K., probably has the most stringent at the moment, deliveries are possible.

Furthermore, as you noticed in Q3, Europe's volumes were actually pretty strong, potentially in anticipation of issues in Europe. And I would say that in the fourth quarter, we'll have stronger performances in other geographic areas. So we do have some flexibility in terms of logistics and the markets, which I think was the genesis of your question.

[Operator]

Your next question today comes from the line of Giulio Pescatore of Exane.

[Giulio Pescatore, analyst]

Just the first one, I mean as out of change since we're all dining together in your Maranello factory in 2018. So I'm just wondering if you are willing to reconfirm the 2022 targets? Or if there are any changes that you might have to make to those -- I mean targets on a headline basis, I guess, more than on a margin basis?

[Louis Camilleri, executive]

Well, Giulio, as you said, a lot of things have changed since 2018, not least of which has been very Sad and destructive COVID. And we're now seeing a resurgence, as you know. I think that it's a bit early to talk about 2022, other than to say that what I said earlier, in terms of our plans, we have delayed a number of models by 3 months and some by 9 months. So obviously, that has a longer-term impact going forward. But we still very much remained focused on the plan that was given, but some models will slip. Others will be delayed by a quarter or 2. But I mean next year, we should have a strong year, and I think that will form the base going forward. And we'll give you obviously more details relative to 2021 at our next call, which will be in February, at which point we'll have a much better sense of where the world stands in terms of this COVID, which regretfully does create a lot of uncertainty.

[Giulio Pescatore, analyst]

Okay. Very clear. Then the second question on your hybrid targets still about 2022, you had a 60% hybrid mix target by 2022. And I think you're planning also to have a full hybrid range of mid -- engine for cars by 2021. Are those targets still valid? And what does it mean for the [indiscernible]?

[Louis Camilleri, executive]

Well, again, we are pushing hybrid. The SF90 Stradale is obviously the first one. There will be others. Some may be slightly delayed, but we're talking 6 to 12 months. We're not talking 2 or 3 years, Giulio. But clearly, we want to address hybridization because we think it has huge benefits. But I think also that when you see the carbon footprint, people tend to just look at emissions. We look at the entire carbon footprint and a hybrid relative to an internal combustion engine, it's not necessarily that much more favorable. So it's something we're working on very carefully.

[Giulio Pescatore, analyst]

Yes. And I totally agree with you that people should be looking more at carbon footprint, but it doesn't seem to be the case, at least, when we look at regulatory decisions at a local level. For example, if you look at the French [ Malo ] scheme, that has basically been penalizing you with EUR 20,000 fine this year, going up to EUR 30,000 or EUR 40,000, EUR 50,000 in 2022. I mean, how are these penalties affecting you -- your sales into this market? And are you afraid of more countries kind of adopting a similar type of scheme because, of course, all of your cars, except for the 790 emit more than 200 grams of CO2?

[Louis Camilleri, executive]

Yes. You're right. They're adding, I guess, the sort of excise taxes. I think the whole car industry needs to really educate the regulators because to look at emissions and even then to look at just static emissions, I think, is wrong from a scientific perspective. And the car industry needs to do a much better job at explaining the entire carbon footprint. And I think they will do that going forward. We, Ferrari, have a role in that, and we obviously have to do our job. And I think as I said in my opening remarks, to come out with a detailed carbon footprint will form the basis to really start explaining the various aspects. Because if you take the V12 Ferrari that only run 3,000 kilometers a year, probably has less emissions than a very small car that runs every day.

[Operator]

Your next question today comes from the line of Monica Bosio of Intesa Sanpaolo.

[Monica Bosio, analyst]

It's Monica Bosio from Intesa Sanpaolo. The first one is on the personalization. Antonio told that they were a little bit lower on the quarter. Could you please quantify the level and reasonable projection for the full year and the next one? And the second is on the CapEx. Do you still confirm EUR 750 million of CapEx by year-end? And the second question is more general. Could we please come back to the statement regarding the enlargement of the customer base and the fact that there is a high penetration of younger people. I would like to have more color on this, maybe also a view in a 3 years' time, if it's possible.

[Antonio Piccon, executive]

Maybe I'll start first, Monica, on personalization, we are just a touch lower in percentage terms compared to last year, which was, if I remember correctly, above 20%. And in terms of capital expenditure, I said EUR 750 million more or less proximity at this stage.

What's your question in that respect? I'm sorry?

[Monica Bosio, analyst]

The question -- the second question was on the enlargement of the customer base. I heard in the initial statement that the penetration of your...

[Louis Camilleri, executive]

I got your question, Monica. Clearly, one of our important strategies going forward is to attract new customers and ideally younger customers and also to expand our gender balance, so to attract women as well, which today is still a very low proportion of our sales. I think we've made progress, as I mentioned in the opening remarks. And it is something we're very much focused on. So far, the numbers are moving in the right direction. And I think the various activities that are in place predominantly in terms of digital activities, but also all the test drives and generally the whole positioning of some of the models will attract new customers and hopefully, younger customers. Roma is one example. The SF90 has attracted young customers as well. As I said, that may be linked to hybridization, we will see. But it's something we're very focused on, and there has been progress. And I am confident that we will continue to progress. And I think if you look at our market shares worldwide in the segments in which we participate, we are gaining solid share points across most geographies. So that in itself, I think, is a good sign. Does that answer your question?

[Operator]

Our next question today comes from the line George Galliers of Goldman Sachs.

[George Galliers-Pratt, analyst]

First question I had was just with respect to the dealers being closed and you mentioned in the U.K. that you can actually still deliver cars. Based on the last lockdown, do you find that your customers are happy to take delivery or indeed want to take delivery without having the full showroom experience? Or in general, is the showroom experience part of the excitement and the thrill of collecting your brand-new Ferrari? The second question I had was just on the catch-up of the 2,000 units lost this year. Obviously, you've referenced the 500. But in theory, and this is really hypothetical, not asking if you will do. But in theory, if you wanted to catch up the remaining 1,500 all in 2021, are there any capacity issues that would prevent you from doing so? Or is that something you could manage with incremental shift or change in shift patterns?

[Louis Camilleri, executive]

Thank you, George. I think our customers would rather have delivery than to wait. I think the whole showroom experience, certainly, part of it is the delivery, but I think the real excitement is the order and all the elements of personalization choosing the colors and all the various elements. I think the showrooms from that perspective are really part of the whole thrill of purchasing of Ferrari. I think that most people want the car is in the dealer, they want to see it and they want to enjoy it and drive it. So certainly, nobody is complaining about the fact that they're getting a delivery without seeing it in the showroom. The showroom is more to get the thrill of the order and to trigger the orders. So the concern there is relative to orders going forward rather than deliveries.

I don't know if that addresses one of your questions. It's always difficult to talk about hypotheticals because we are -- there are capacity constraints. And we will focus our volume very much based on the waiting list, the mix of products on that waiting list mix in terms of both models and geography. So I don't think I could really answer in terms of total capacity. I think in terms of total capacity utilization, if there was a constraint, its people and the time it takes to train them, especially with regard to new models, especially with things that are very complex like the SF90, which has 2,000 new components. So putting those on the production line takes a bit of time to ramp it up to full capacity. That's just one example.

[George Galliers-Pratt, analyst]

Great. And if I may just slip in one quick final one. Obviously, Sebastian is leaving you at the end of this season. And I just wanted to ask, as a 4x world champion, presumably, he was being very well remunerated. Will that be a saving that will flow through your P&L next year, assuming that he was remunerated largely by Ferrari rather than by sponsors?

[Louis Camilleri, executive]

I think that's a fair assumption. And I think going back to the earlier question in terms of attracting youth to have 2 drivers like Charles and Carlos, I think that gives us added equity in terms of attracting young people. Having said that, Seb has done a phenomenal job for Ferrari in the past. And he will always be part of the family.

[Operator]

Our next question today comes from the line of Michael Binetti of Crédit Suisse.

[Michael Binetti, analyst]

Just a quick near-term one for the models, and then I had a follow-up. But on Slide 9, the D&A component in the third quarter, I guess, the EBITDA margin was up a lot, over 300 basis points. EBIT was only up 20. When we started the year, I think you noted a pretty meaningful step-up in D&A as a holdback to the margin guidance for the year as you started to develop -- or sorry, started to amortize a lot of the development of Stradale. I think earlier in the year, you thought that Stradale would start to ship in third quarter. I just -- I want to look ahead to the fourth quarter as you've now started to ship Stardale, do we see -- is that when you see a significant step-up in the D&A impact to the margins in fourth quarter? And I guess another way to ask that is last year, the mix was a significant positive, you pointed that out in the fourth quarter. Stradale, is that a -- could you just tell us, is that accretive to the gross margins and EBITDA margins in fourth quarter to the company?

[Antonio Piccon, executive]

Michael, Antonio speaking. I answer you on D&A. You should not see that as correlated to the numbers of cars that we sell, but more the time since the car is introduced, it goes to the P&L linearly from then on.

[Louis Camilleri, executive]

I wouldn't just -- I wouldn't also just ascribe the investments to the SF90. There's a whole slew of other things related to future technology innovation that will eventually find itself or themselves in models going forward. So it's not specific to one model per

Your second question was?

[Michael Binetti, analyst]

Just as we look -- I know you have a big mix tailwind on the EBIT bridge in the fourth quarter last year. As Stardale comes on, that seems like the biggest year-over-year change in the fleet in fourth quarter. Is that accretive to gross and EBITDA margin in the fourth quarter?

[Louis Camilleri, executive]

Stradale is accretive to the average. Yes.

[Michael Binetti, analyst]

Okay. I guess the really, longer term, so we have a pandemic that's obviously disrupted your path to the original 2022 plan. You talked about that a little earlier. But you also have a new concord agreement signed that gives you visibility on part of the business there through 2025. As you look at this, is it time for another Capital Markets Day? How are you thinking about keeping updated targets for the long term?

[Louis Camilleri, executive]

Well, it's something we've discussed internally as to when we'll have our next Capital Markets Day. The time will come for us to have one. Obviously, we can't have on now because we would like to have one, which is face-to-face. So news to come. But I guess we will have one in the not-too-distant future.

[Michael Binetti, analyst]

Okay. And then if I could ask you just one last one. I know you talked a little bit about electrification, but there's been some interviews from people at FIA that have noted a Formula 1 shift towards synthetic fuels and biofuels as an answer to some of the environmental concerns coming up. And there's even been some that have mentioned that they expect Ferrari will be co-investing in those initiatives. I know you have one eye on electrification, but is -- where do you see biofuel, synthetic fuels as part of the answer for the ESG initiatives that you talked about earlier as you look over the longer term?

[Louis Camilleri, executive]

I think they potentially have a big role to play, particularly in terms of biofuels as opposed to synthetic fuels. But clearly, they have a role to play big time. It will probably start with Formula 1. It provides now as of 2023, it has to have a 10% -- sorry, 2022, it has to have a 10% biofuel percentage, which is the start of -- the FIA obviously wants to increase that. As I mentioned, there's a new power unit that has to come into vigor as of 2026. So defining that power unit is going to have to be done in the very near future. Once that's defined, we'll be able to figure out what the components will be, and particularly with regard to the fuels.

[Operator]

Our next question today comes from the line of Thomas Besson of Kepler Cheuvreux.

[Thomas Besson, analyst]

I have two very quick ones, please. First, on the mix, would you mind giving us the number of Monza deliveries in Q3 and tell us if it was the biggest quarter yet or if you've done better before? And second, on your small engine business, it was annually strong compared with what we've seen in Q1, Q2. Could you explain why and what we should expect in 2021, specifically for the majority part? Is there still going to be any business left? And/or whether it's linked with Formula 1 that has seen eventually a pickup here?

[Louis Camilleri, executive]

In terms of Monza, it was approximately 50 units in the third quarter, year-to-date, 120. And in terms of Maserati, it's really a reflection of the orders we received. We anticipate that next year, the volumes will decline.

[Operator]

And your next question today comes from the line of Stephen Reitman of Societe Generale.

[Stephen Reitman, analyst]

I have 2 questions, please. First of all, I was intrigued by your comment about the high -- the increase in orders you've seen on the Roma compared to the Portofino in China because clearly, China has not been the market for the 2 seaters, but do you think that you're seeing potentially a way to crack that market even before you launch the Purosangue? And my second question is about the SF90 Stradale, the Assetto Fiorano option, are you limited and a more percentage of sales, would you to be able supply with that option? And what has the demand been for that? Because obviously, it's a significant rate in terms of cost, and I suppose as well as profitability.

[Louis Camilleri, executive]

Yes. We're very encouraged by the Roma up to now in China. We're very encouraged by the level of orders we're receiving. And the demographics. So that's a good sign. And yes, potentially, it could start the process of really penetrating the Chinese market in a more material manner than we've been able to. Obviously, the 2 plus 2 is an attractive combination. So that's one. The Assetto Fiorano, yes, generates a higher margin than the SF90. We've actually been very encouraged by the level of orders on the Assetto, significantly higher than we had expected. And it's running around 40% of total orders. We do not really have capacity constraints in terms of the asset of Assetto Fiorano. It takes time for our suppliers to gear up. But over time, we don't have capacity constraints on that one. It really is not an issue, I don't think.

[Stephen Reitman, analyst]

Does that count as personalization as well?

[Louis Camilleri, executive]

Correct.

[Operator]

There are no further questions at this time. Nicoletta, please go ahead.

[Nicoletta Russo, executive]

Thank you, everyone, for joining us today. The team will be soon available to answer all your follow-up questions. Thank you. Bye-bye.

[Louis Camilleri, executive]

Bye-bye, everyone. Thank you.

[Antonio Piccon, executive]

Bye-bye.

[Operator]

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