Ferrari NV

MIL:RACE

Earnings Call Transcript 2022-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Ferrari 2022 Q3 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead.

[Nicoletta Russo, executive]

Thank you, Sharon, and welcome to everyone who is joining us. Today, we plan to cover the group's Q3 2022 operating results, and the duration of the call is expected to be around 60 minutes. Today's call will be hosted by the group CEO, Mr. Benedetto Vigna and the Group CFO, Mr. 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 Benedetto.

[Benedetto Vigna, executive]

Thank you, Nicoletta. Thank you, everyone, for joining us today. On behalf of everyone at Ferrari, I would like to begin this call by remembering with gratitude Mauro Forghieri who has passed away. He had such an important impact on Ferrari's history and the motor racing. We will always remember his passion and determination that drove the evolution of our company over the years. With Mauro, we won no fewer than 11 F1 drivers and constructors championship titles and 5 endurance titles. Our thoughts and our prayers are with his family at this sad time.

And now let's go to the third quarter. The third quarter has been very, very strong with all key P&L metrics up double digits versus last year. Revenues increased 19% with shipment up 16%. EBITDA and EBIT were up 17% and 11%, respectively. And industrial free cash flow generation was very sound. The very robust financial result we present today are further proof of the strength of our business, and that's why we revised upward our 2022 guidance on all metrics.

The current macroeconomic scenario brings new challenge on a global scale. This is true for us, and this is true for our partners. Indeed, to guarantee as move production, we are supporting our supply chain with tangible measures. Moreover, as we said in the last call, we have taken action on pricing to adequately react to cost inflation, focusing on the following 3 areas: one, price definition of new models; two, personalization offering; and three, mid-single-digit price increase on selected models and markets.

Having said that, we continue to enjoy a very strong momentum with a remarkable order intake in the quarter, considering that our clients could order only a few models. Such a positive trend is visible all over the world. Since last time we spoke a quarter ago, 4 important events took place, receiving large enthusiasm from our clients. Firstly, the Purosangue world premier; secondly, the Cavalcade Classiche; thirdly, Esperienza Ferrari; and lastly, several lifestyle initiatives.

Let's start with the world premiere of the Purosangue in Tuscany. We hosted 2,400 of our most loyal clients from all over the world at Teatro del Silenzio in Lajatico. We promised our clients something new, unlike any others, a true sport car able to deliver the same driving trials as our most extreme models, and we delivered exactly on that promise, designing and engineering the Purosangue is an authentic, 4 doors, 4 seaters Ferrari sports car. There was no better reward for the entire team than to see clients wonder in front of the Purosangue. Their reception was hugely enthusiastic, and they praised its performance, the design and driving trials.

On performance first. They welcomed our most iconic and powerful V12 engine with a brand new configuration, which delivered 725 horsepower. Moving to design, they were surprised to see: the roominess on board, given the compact size; the driving position typical of a sport car, close to the floor and reclined; the welcome door solution, which enables easy ingress and egress; and the electrochromic glass roof that can be added during personalization of their vehicle.

Finally, yet importantly, the promise of impressive driving trials further enhanced by the active suspension technology, which makes its debut on this model. We talked about this technology, the fast at the Capital Market Day. With all that said, I know you all are curious about how many orders we already have and how long the order book is. But you also know that we do not provide this kind of detail. Trust me, it is unlike any other. It is way above our most promising expectations.

And now after Purosangue, let's talk about the second important event of the quarter, Cavalcade Classic in the dolomite, featuring 65 vintage Ferrari and their owners from all over the world. The cars paraded through the towns of Trentino Alto-Adige and boding key moments in Ferrari's 75-year history. This unique event is designed on one side to bring owners together to share authentic and memorable experiences, on the other, to create a single community united by its passion for Ferrari.

And now the third event, Esperienza Ferrari, based at the heart of the Fiorano racetrack where we created a unique and elegant space for our clients. Over 5 months, we hosted 1,250 clients, of which more than 40% were new to Ferrari and organized 2,500 test drives to let them feel the driving trials unleashed by the 296 GTB. As I told some of you during our latest road show, this memorable experience is also open to our Ferrari people. And in fact, more than -- as of today, more than 500 employee have so far enjoyed it, feeling even more connected to Ferrari.

And to conclude on the events held in Q3 after Purosangue; after Cavalcade Classic and Esperienza Ferrari , let's focus on the lifestyle pillar. We launched the first product of our partnership with Richard Mille, an ultra-flat watch limited to 250 units, which embodies the shared values between both brands, combining deep engineering know-how with cutting-edge, state-of-the-art innovation. At the Monte Grand Prix, last September, a special Giallo Modena apparel and accessories collection was launched to celebrate our 75th anniversary, and this series of limited edition items in yellow sold out in the online stores in a few hours.

And lastly, during the last fashion week in Milan, our lifestyle team showed on the Teatro Lirico stage, the Spring/Summer '23 fashion collection, receiving international praise. This new collection centered around the theme of dreams and was inspired by the timeless values that have turned the Ferrari dream into reality. And talking about dreams, let's remember that the Ferrari dream has its roots in racing. And so let's recap together where we stand in the various categories in which we compete, the achievement we have delivered and the new opportunities ahead of us.

Let's start with Formula 1. Last time, when I was talking here, I said we were fighting for the championship. While we have returned to be competitive, in this year, we cannot be satisfied with this year's results. Now we focus on the last races of the season and in preparing ourselves in the best way possible for the next one. In Competizione GT we celebrated the 500th victory of the Ferrari 488 GT3, which makes this model the most successful Ferrari racing car ever, an extraordinary record and the previous legacy that will pass to the new Ferrari 296 GT3 due to make its track debut at the 24 hours of the Daytona next January.

Such success in Competizione GT is coupled with the victory of Ferrari in the IMSA series with both driver and team wins. Lastly, we hosted our Finali Mondiali at the Imola racetrack. This was just a few days ago. The feast of high-performance racing celebrated the final event of our Attività Sportive GT together with our clients, fans and employees. 38,000 motor sport enthusiasts gathered to share their passion, which made this moment the perfect stage for the unveiling of the Ferrari Le Mans Hypercar. 499P is the name of this fantastic car. These new cars marks Ferrari's return to the FIA World Endurance championships top class from next season, exactly 50 years after we last fought for outright victory in that championship.

And now it's time to update you on our ESG action that are very important in our plan. In our journey to reach carbon neutrality by 2030, we have already implemented the 1 megawatt fuel cell installation and the partnership with ClimateSeed announced at the Capital Market Day. But in addition to this, the team has been deploying 3 further initiatives during this month.

Firstly, in line with our plans, we are installing additional new photovoltaic panels on the roof of the Maranello buildings, delivering a total power of approximately 1.5 megawatt by year-end. This will be operational by the end of next quarter, and I will update you in the next call. Secondly, we planted the first trees within our forestation initiative, Bosco Ferrari in Maranello. The first area of woodland spans 6 hectares out of overall 30 hectares to recreate an ecosystem with significant environmental benefits, and we are seeing increasing interest from many Italian municipalities to join this initiative, and this interest makes us very, very proud.

Thirdly, in addition to our plan shared at the Capital Market Day, we are continuing to streamline our production processes and to identify actions to reduce the energy consumption and CO2 emissions. These efficiencies are possible, thanks to the ideas, awareness and action of the Ferrari people. And here, I would like to give you a couple of examples.

One, thanks to adoption of new filters in our foundry, we are reducing our scope 3 upstream carbon footprint by 1% and saving more than 250 tons of aluminum per year. No CapEx required, only brain power. Two, by recovering the heat dispersion in our engine testing process, we reduced the natural gas usage by approximately 2% of our yearly consumption. Finally, let me highlight 2 important achievements related to our people and the next generation.

On one end, we received the confirmation of the equal salary certificate in Italy and North America. This is a testament to our commitment to an inclusive work environment where the importance of merit is guaranteed to attract, retain and develop the talents that will accelerate Ferrari's innovation in the future. On the other hand, we inaugurated the e.DO learning center at the Fermo Corni higher education institute in Modena. As you know, promoting education is a core part of Ferrari's ethos, and its relationship with the local community. The new laboratory, which aims to help students enter the world of science and technology is an investment in their futures.

And now I will hand over to Antonio to review in detail the Q3 2022 result.

[Antonio Piccon, executive]

Many thanks, Benedetto, and good morning or afternoon to everyone joining us today.

Let's start on Page 7 with the highlights of the third quarter. Another very strong quarter, indeed, with double-digit growth on key metrics. Shipments were 3,188 units, up 16% versus prior year. Group net revenues were EUR 1.250 billion, up 19%. EBITDA reached EUR 435 million, up 17% year-over-year with an EBITDA margin of 34.8%, lower than last year, given the absence of the Ferrari Monza. EBIT was EUR 299 million, up 11% with an EBIT margin of 23.9%. Percentage margins were in line with our expectations, mainly reflecting the product mix and D&A evolution.

Net profit came in at EUR 228 million, up 10% versus prior year, resulting in a diluted EPS of EUR 1.23 compared to EUR 1.11 in Q3 2021. The industrial free cash flow generation in the quarter was EUR 219 million, which implies a cash inflow for the 9 months close to EUR 600 million, almost EUR 100 million higher than last year.

Turning to Page 8, you can see the details of the Q3 shipment. The product portfolio in the quarter included 7 internal combustion engine models and 3 hybrid models, representing 81% and 19% of shipments, respectively. As mentioned by Benedetto, in the quarter, we were continuing to serve an impressive order book across all models. Deliveries increase were mainly driven by the 296 GTB which was in the ramp-up phase along with the 812 Competizione. The Ferrari Portofino M and F8 family continue to sustain deliveries' growth partially offset by lower contribution from the SF90 family. There were no Icona deliveries in the quarter as the Ferrari Monza phased out in Q1 this year.

Geographic allocations were driven by product cadence. Mainland China, Hong Kong and Taiwan continued to post a double-digit growth versus the prior year, reflecting the strength of the demand and representing approximately 14% of our total shipments in the quarter, 11% in the 9 months. As a reminder, such a strong performance in the region represents for us a positive in terms of absolute profitability, but it also implies a margin dilution linked to duties and consumption tax.

On Page 9, you can see the walk of our group net revenues, growing 13% at constant currency. In Q3, we consolidated the trends already explained in the previous quarters. Cars and spare parts, driven by higher volumes and personalization, with personalization were at around 18% in proportion to revenues from cars and spare parts. Engines decreased due to Maserati. Such supply agreement is approaching its aspiration in 2023. Sponsorship, commercial and brand reflected the better prior year Formula 1 ranking and the contribution from lifestyle activities led by retail sales and museums visitors despite lower sponsorship. Currency had a positive impact mostly related to the U.S. dollar and the Chinese yuan.

As we move to Page 10, let me review the change in our EBIT year-over-year, explained by the following variances. Volume, positive EUR 62 million, reflecting the shipment increase; mix/price variance negative for EUR 26 million, and mainly impacted by the lack of Icona and the softer range model mix, partially offset by the increased contribution from personalizations and country mix. As previously mentioned, the strong performance in China was supportive in absolute terms, even though it contributed to soften our percentage margins.

Industrial and R&D expenses grew EUR 34 million in the quarter, mainly due to higher depreciation and amortization and obviously, cost inflation. SG&A were negative by EUR 17 million, mainly reflecting communication, marketing and lifestyle activities. Other, finally, was slightly positive for EUR 3 million reflecting the improved prior year Formula 1 ranking and higher contribution from lifestyle activities, partially offset by lower sponsorships, reduced contribution from Maserati and other miscellaneous expenses. The total net impact of currency was positive EUR 41 million.

Turning to Page 11. Our industrial free cash flow generation for the quarter reflected the strong profitability and a positive contribution from working capital and other, mainly related to the collection of the Daytona SP3 advances. This was partially offset by EUR 198 million of capital expenditure, that are progressing in line with our full year programs of about EUR 800 million. In the quarter, the capitalization ratio of our development expenses was approximately 45%, increased versus the prior year, also as a result of the capped research spending in Formula 1. Net industrial debt as of the end of September 2022 was EUR 256 million, decreased by EUR 130 million compared to June 2022, reflecting the solid industrial free cash flow generation, net of the EUR 85 million of share repurchases.

On Page 12, as already mentioned by Benedetto, we revised upward our 2022 guidance across all metrics, sustained by a continued strong business performance of personalizations and a tailwind from foreign exchange rates. Such improved targets encompass the assumptions of continuing cost inflation through our supply chain, and this is mostly visible in the EBITDA margin guidance, which for the short term, is rather flattened by such increased costs. To conclude, the results we have presented today, the robustness of our business model and the success of our product portfolio in the current trading conditions, continue to fuel our confidence for the remaining part of 2022, setting the ground of another great year and more to come.

[Nicoletta Russo, executive]

Thank you, Antonio. Sharon, we are now ready to open the Q&A session. Thank you.

[Operator]

[Operator Instructions] Your first question comes from Michael Binetti from Credit Suisse.

[Michael Binetti, analyst]

Congrats on a nice quarter. I know the macro is very tough. Let me ask you -- I want to ask you today how you feel about the 2022 guidance for EUR 1.8 billion to 2 billion of EBITDA. Even though you're raising today, I want to ask you whether you think it's conservative next year at this time, but I am curious how you see revenues and profitability building next year across the business lines? Maybe the cars business, how you see that contributing, how the P&L or the lifestyle businesses and the sport business will change as you bring back some of the core sponsors and expand into Le Mans, the lifestyle categories that you mentioned, maybe some of the biggest incremental changes? And then I guess longer term, I'm curious, what are the bigger challenges you see today and getting the first electric Ferrari in 2025 up to the margin levels that are in line with the averages you enjoy across the rest of the fleet?

[Benedetto Vigna, executive]

Thank you for the question, Mike. So let's start from the first one. As Antonio said, and these number are showing, we feel very much confident and that's the reason why we are increasing, number one, the confident -- the guidance for this year, and we are also very positive for the next year. This is thanks to the order book that we have that is, let me say, spanning all the products we have as well as all the regions. So this is a very first important message.

Now if you talk about the bigger challenge for electric car, I think I would say, I would split the answer in 2 parts. If we talk about the product development where we are, we are fully in line with our, let's say, project development. So we are proceeding as per plan. And this is true, as I said, on the technical side, but if I go to see on the profitability side, this is fully in line with our long-term view, midterm view that we shared with you at Capital Market Day. This year, we made a lot of progress in optimizing on 1 side, the architecture of the cars. On the other side, also optimizing and strengthening our relation with some strategic suppliers.

[Operator]

And your next question comes from the line of Giulio Pescatore from BNP.

[Giulio Pescatore, analyst]

The first one on the [indiscernible]. I understand you're not going to comment any more in details on where the order book stand, but can you maybe share any color on the composition of the order intake? Is this achieving the goal you had in mind for this model? Anything you can share on that would be very interesting.

The second 1 on the order book. I noticed that you're now defining it as remarkable vessels record in pretty much any other presentation in the last few quarters. I don't want to read too much into this, but is that a function of the availability of models? Is there anything else are you seeing a softening in order? Anything on that would be also helpful. And then the last 1 on the 296 GTB. If you look at the number of hybrids you sold in the quarter, it was pretty much flat sequentially versus Q2. I was expecting maybe an increase because of the ramp-up of the 296. Are you just giving priority to other older models given the demand? Or is there any delay on the ramp-up of that particular model?

[Benedetto Vigna, executive]

Okay. I'll start from the last one, Giulio. The 296, the hybrid and the split between ICE and hybrid, I would say that so far, it has been always in the ratio 80-20. We expect this ratio to change. Consider that we will have also -- we have already a stronger order book when it comes to the GT, the Spyder, the 296 Spyder. This is important. So if you want, your reduction is correct. We will have an increase of the hybrid shares in our models. So this is question number three.

The question number one, I go to Purosangue to provide you a little bit more color. As I told you, we had almost 2,500 clients visiting us and looking at the world premiere in Tuscany. It has been very well received because of performance, because of the design, because also some of them added a place or an opportunity to try the cars. But I have to say that -- 2 things we told you at the Capital Market Day, keep -- let me say, we stick to that. So number one, we do not want to pass 20% of annual volume of this car; and two, we are, let's say, if you want, we are -- the order backlog is such that it is fully satisfied. So you cannot come in our factory. But if you come in our factory, you see that we made enough space to accomplish and to realize our industrial plan for this natural-aspirated V12 engine.

So maybe what I can tell you is that the order we got in Purosangue are really unlike any others. If you want a volume car in the sense that the order book is more similar to the special cars, to the limited edition cars than to the bigger volume cars. And then there was the last -- the other question was the net order intake, the book. Clearly, by today, I mean we keep increasing continuously our order book. We expect a decrease in this speed also because we are sold out on a lot of model, and we are focusing -- I mean, today, if you go in a dealer, you can buy a 4 model, more or less. You have the room, you go Purosangue. We have 2 term ICE and 2 hybrid, 96 Spyder, 96 GTB, and then Purosangue Roma. Clearly, we expect a slowdown in the buildup of the order book, but this is planned, obviously. The other point, we are asking our dealers to push more on the motion to enrich the customer experience through all other dimensions that we can offer to our customers. So these are the -- a little bit more color on the 3 questions you addressed to me, Giulio.

[Operator]

And your next question comes from the line of George Galliers from Goldman Sachs.

[George Galliers-Pratt, analyst]

Actually, the first question was just following on a little bit from Giulio's question. It sounds like you don't have any capacity constraints on the hybrid cars. So I just wanted to ask about the lower shipments of the SF90 whilst you saw a positive contribution from older models like the F8, particularly as first deliveries of the SF90 Spyder only commenced in 3Q last year, hence, full deliveries of that vehicle have been in progress for less than 12 months. Is this a temporary effect? Should we expect growth in SF90 at some point in coming quarters? Or are you actually seeing a bit of a wind down in terms of the SF90?

The second question I had was just on the 499P, which I think has got everyone with a keen interest in the auto industry and Motorsport extremely excited. Is it reasonable to expect at some point a road car derived from this product? And just to revisit, I think the introduction of the Icona series, I believe originally, it was flagged as bridging the gap between the hyper cars, which you typically only introduce at least once every 10 years. Could you see a hypercar and Icona model in production in tandem? Or would the intention still be that Icona bridges the gap between the hyper cars?

[Benedetto Vigna, executive]

Okay. So we start from the first one, George. One is the capacity constraint you were saying. So I would like to say one thing. One of the key strength of Ferrari is the ability to manage different model in production also because the line that we ever not fully automated, but there are people, human beings that are able to give flexibility and the agility to the production line. If you came here, you clearly see that the same manufacturing line can manage ICE or hybrid cars.

So what I can tell you is that, number one, we are producing as planned. There is no deviation. And the other complements go, first of all, to the team that is able to manage complicated supply chain; and two, also to our partners that are very much supportive. And other important message is that the agility of this line is thanks to the presence of people that with their passion and their dedication are able to make this line very, very agile and accommodate what are the clients' needs. So this is very important.

When it comes to 499P, I'm glad you also like the car. I can tell you that I was with the colleague, what was Saturday evening. It is really nice car. It is a big step forward for us. We -- I don't want to comment about your question because as you can imagine, our product strategy and what we intend to do is also part of our secret sauce. And I'm really -- sorry, I cannot discuss more detail. But I can tell you that, as you have seen in the past, Ferrari is very good in using all the things that are developed by the team.

[Operator]

And your next question comes from the line of Evan Silverberg from Morgan Stanley.

[Adam Jonas, analyst]

It's Adam Jonas. Everybody, can you hear me?

[Benedetto Vigna, executive]

We hear you, yes.

[Adam Jonas, analyst]

Great. Benedetto, I just wanted to kind of reconcile, you said that the order book for Purosangue is fully satisfied, but you can still order it at a dealer. So I just want to confirm it's not quite sold out officially, correct?

[Benedetto Vigna, executive]

Adam, it's a good deduction.

[Adam Jonas, analyst]

Also, China, 14% of total sales versus 9% last year, dilutive to margin, accretive to dollars, euros of profit. Is that normal that -- what are your thoughts on what a normal level or steady-state level of China as a percentage, once you kind of get some of your other launches flowing through to Western markets?

[Benedetto Vigna, executive]

Adam, as we said in the Capital Market Day, we believe the right number for us specially in China, if you want, is between 11% -- 10%, 11%.

[Adam Jonas, analyst]

10%, 11%? Great. And just finally, if I can squeeze one more in, and I'll shut up. You talked about strategic partnerships as you kind of get closer to production of your first pure EV in 2025. I know this call is too early for major milestones there. But would next year, by end of next year, be too soon for you to disclose your battery cell partner? Or should we wait until beyond '23 for that type of announcement?

[Benedetto Vigna, executive]

Adam, you know that the battery, we are the supplier. The cell, we do not even disclose the cell supplier, cell maker also for 26 and the SF90. I believe that this is an important part we want to keep for us. So what I can tell you and all the colleagues on the phone is that the development of the cars is proceeding as planned, and we did a big, big step forward in Q3. But unfortunately, we cannot tell you who is going to be the cell supplier.

[Operator]

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

[Stephen Reitman, analyst]

I have 2 questions. First of all, I think it's been said that it was a kind of set of unique circumstances that have led to the situation where you have very few vehicles that are available to sell because of delays with certain launches and other impacts from COVID and other delays. So you had a limited number of part of the vehicles to sell. When in your mind, do you think we'll be in a situation where your dealers will have a much wider range of vehicles to sell? And secondly, could you comment on the trends in residual values? Obviously, I know that's the responsibility of dealers to do that. But obviously, you monitor those -- that situation quite closely as well.

[Benedetto Vigna, executive]

I start from the second, Stephen. The trend on residual value, we don't see any change. We see some model appreciating, but we don't see any change over there. And actually, we believe that the fact that let's say, the fact that a lot of models are sold out, this will give -- will be an opportunity for our dealer to focus also on the preowned business. And then there was -- the first question was about the...

[Antonio Piccon, executive]

When the dealers [indiscernible].

[Benedetto Vigna, executive]

Yes. I think, look, the -- is what we said in Capital Market Day. We are planning to launch 15 models in these 4 year beyond the Purosangue. We are sticking to that. We may have some model more successful than others. But I think what I can tell you that we stick to our compass that is 15 new models with the split I told you on the Capital Market day. It means that in 2026, we will have the offering split between the -- we will have the 3 offerings, the ICE, the hybrid and electric as per what we told you in the Capital Market Day. So there is no change. And we had -- actually, I can also give more color, Stephen. Last week, we had the distribution, the dealer annual meeting here in Modena, where we had 500 people visiting us. And the -- let me say, they are very supportive, very much engaged, and they fully agree on our plan for the future in terms of new car launches. So there is very, very tight relation, and we are working very well with them and they with us.

[Operator]

And your next question comes from the line of Monica Bosio from Intesa Sanpaolo.

[Monica Bosio, analyst]

I hope you can hear me. The first question is on Purosangue. The personalization rate, on average, is 18%. But I'm wondering if we can assume a much higher personalization rate for Purosangue maybe in the range of 23%, 24%. Am I too aggressive on this side?

And the second question is more strategic. Looking forward, when you see as reasonable an electric model with the same mission of the Purosangue, just a statement from you. And the very last is on -- maybe it's too early to ask, but do you have a breakdown, rough breakdown of the customer profile by gender and age for the Purosangue?

[Benedetto Vigna, executive]

Thank you, Monica. So I start from the Purosangue. Okay. Let me tell you one thing that the Purosangue has a lot of accessories, a lot of optional, a lot of opportunities of personalization because we have been reaching the offer. I mean, we -- I mentioned just 1 that is very interesting is electrochromic glass roof. It's very, very interesting. It's very well appreciated. I believe that there could be opportunities to have aggregate personalization. But at the end of the story, it depends also what the clients and how much they want to personalize. So I would -- allow me to say, I would be arrogant if I would guess what is the personalization rate of the clients. What I can tell you is that offer is pretty wide. And usually, as you've seen also in Q3 and the guidance in Q4 is also driven by a positive tailwind on the personalization. Then when it comes to the let me say, electric Purosangue, if I -- allow me to say in this way, the second question?

[Monica Bosio, analyst]

Something similar, yes.

[Benedetto Vigna, executive]

Yes, as I said before to another colleague, the plan for the future is something that we are very secret of, also because we believe it constitutes a competitive advantage for us. So let me say in this way, we will use the technologies in a way, keeping always in mind the -- putting always the client the center and the driving trials that we want to generate. So we have a plan, but I cannot disclose here. Sorry, Monica, the point is the customer picture, yes, for sure, we have a customer -- we know the customer of Purosangue. What I can tell you without disclosing anything confidential. What I can tell you is that we have a strong acceptance, either by, let me say, the collectors, what was called in the previous call, I think [ top in VIP ], and also by the new prospects. The reception of this model across different age, different region, different genders is very, very strong. So there is not a clear sign and a clear pattern. I can tell you that many women, Asian, European and American, they all a little bit older, a little bit younger, they all like this car, the Purosangue.

[Operator]

And your next question comes from the line of John Murphy, Bank of America.

[John Murphy, analyst]

Just one additional question on the Purosangue. I mean, you've mentioned that it could be as much as 20% of your volume and you would limit it there. If we look at the volumes that you put up this year in 2022, that would imply that you might be able to do 3,000 to 3,500 of the Purosangue's go forward. I'm just curious, based on your order book right now and what you're thinking, if that is a number you think is achievable and if we were to think about something like that, that would equate to about 4 to 5 years of the volume growth that most people are expecting. So it seems like that, that would be sort of a high number. Just curious, as you dimension where that segment actually could be for you? I know you're governing in a 20%, but is that something you think can happen more quickly? Or based on your order book, maybe it might take longer?

[Benedetto Vigna, executive]

Thank you, Johnny. Maybe I misunderstood, you said that 3,500 per year?

[John Murphy, analyst]

So yes, assuming you're going to do about 13,000 units this year, I mean, just grossing it up and just saying, if you're going to do -- if you're limiting the Purosangue to 20%, you would add specifically 3,250 units to that base of 13,000 that would be Purosangue to get to 20% mix at Purosangue. I mean basically, how fast do you think you can get there or how slow do you think to get there? And I mean -- and how do you manage this based on the order book that you're seeing right now?

[Benedetto Vigna, executive]

No, the reason why I was asking is that for me, 20% of the 13,000, is 2,600, the reason why I wanted to check. So what I can tell you...

[John Murphy, analyst]

But I would imagine it'd be incremental, right? I mean there wouldn't be any...

[Benedetto Vigna, executive]

I'm not saying incremental. I'm saying that out of the total number, up to 20% of yearly volumes will be Purosangue. So let's say, if it is 13,000, it's around 2,600. What I can tell you is that we are pretty close to our target. And let's say, I think this is the most, let's say, the most detailed information I can provide you, together with the fact that the car really received strong acceptance, as I said before, by all people that attended because we had a customer traveling from all over the world. And let's say that the acceptance has been very, very strong, a lot enthusiasm. They appreciate the performance, they appreciate the design. They appreciate also the driving emotion because during those days, there was a very good idea of the marketing team -- of the commercial team, they offer the possibility to some customers that were selected on -- through a lottery to drive the cars for around 40 kilometers. And I cannot share with you, but there are the video of the people that are really crying for the emotions that they can experience. So very strong acceptance because of the performance, design and driving trials, and we are very close to our target. And as I said, we stick to our plan to not pass the 20% threshold of our annual volumes, whatever they will be.

[John Murphy, analyst]

We look forward to driving it. Just a second question real quick. If we think about 2023, mix is going to be a major positive with the Daytona and the Purosangue, it sounds like pricing is a small positive for you right now, and that's likely to continue. Volume presumably will be up. Raws are easing, other cost inflation might not be too bad. It sounds like your earnings may gap open next year. I think the consensus is for better than a 20% increase in EBIT. Is there any sort of major sort of headwinds that I might be missing or we should be thinking about or even positive factors we should think about besides those major ones for 2023?

[Benedetto Vigna, executive]

I mean, the Capital Market Day was clear about the target also for next year. Clearly, we are paying close attention to the story of the inflation, and this is also the reason why we said those in the previous call, we are increasing prices for next year. But for the rest, I mean, we are proceeding yearly as planned. And as in the past, we delivered on premise -- on our promises, we want also to continue to deliver on our promises. So this is our, I would say, daily commitment to the people here and obviously, to all the shareholders.

[Operator]

And your next question comes from the line of Thomas Besson from Kepler.

[Thomas Besson, analyst]

It's Thomas Besson, Kepler Cheuvreux. I'd like to first follow up on John's question if that's okay. I know you never want to give the exact numbers, but when you say 20% of the volumes [emerge], I think we probably need to think about a few years out. So does that -- does it include only the current capacities with the 2 shifts of the existing production lines? Or does that include as well potential incremental capacities from BDs? So should we think about 2,500 or more 3,000, 4,000 units per annum for Purosangue? That's the first question.

[Benedetto Vigna, executive]

No, no. We -- as we said, I mean, we will not -- there will not be a big change in our capacity. We want always to keep to guarantee, the exclusivity of all the car we sell, Purosangue, as I said, also in June when we met here in Maranello. It's not a car that is meant to double the volume for us like it is in the strategic plan of other players in this field. For us, it's a unique car. It's a sport car, it's a car unlike any others for which we aim to have a maximum 20% of the yearly volumes because I believe -- we believe that exclusivity and uniqueness of our car goes also through this avenue. We don't want to end up doubling the volume and, let's say, putting a lot of CapEx also because, as I said, exclusivity and uniqueness are the key drivers of our product strategy and our -- if you want, our daily compass, and that's what we want to speak to.

[Thomas Besson, analyst]

Second question on ForEx. When we look at 2023, is it reasonable to expect another decent boost from ForEx given your hedging positioning? Or have we seen already the bulk of the benefits from that bucket?

[Benedetto Vigna, executive]

Okay. This is a good question for Antonio, because otherwise, he was silent. So it's good. Thank you, also Thomas, for keeping my attention alive.

[Antonio Piccon, executive]

I think the question, it really depends, of course. I mean we hedge foreign exchange on a rolling basis. That means that we basically project on 2023 the trend of 2022. Whether this will be a positive or a negative, it pretty much depends on how the foreign exchange rates behave on a spot basis. All in all, we try and have approximately 70% of our total exposure hedged in advance declining over time. So we are basically projecting to 2023. As I said before, the trend that we have witnessed in previous months. Then if the dollar goes to $1.10, obviously, we have a huge positive. If it goes to $1.80 -- sorry, to $0.80, it's going to be a negative. That is the sense of my answer. I hope it helps.

[Thomas Besson, analyst]

Just a very quick follow up. Can you confirm the dates of soft deliveries for Purosangue and Daytona please? The quarter you'll have the first deliveries?

[Benedetto Vigna, executive]

Yes, its Q2.

[Operator]

And your next question comes from the line are Philippe Houchois from Jefferies.

[Philippe Houchois, analyst]

I've got 2 questions. One is, I'm just following up on the question on the used values. So if I understand right, you started your comments saying you've got a remarkable order intake across models, and that will probably more likely translate into better residual values rather than maybe the used market being more economically sensitive and people being kind of more shy about buying those cars.

So my first question is, is there any way that Ferrari is directly leveraged to improvement in user values? What I mean by is any agreements with dealers where there's a bit of profit sharing if they're going to benefit the most, I guess, of this improvement in used values. And I'm just wondering if in any way you are geared to that gain in profit sharing with dealers.

And my other question is a lot of questions about Purosangue and 20% cap, et cetera. If I hear you right, again is this car drives every bit as well as any Ferrari, so you're very proud of it. So this 20% cap is just arbitrary to -- but there's no -- because for years, it was concern about SUVs might damage the brand, et cetera, but this is not at all the case. You're just trying to keep the diversification of your product portfolio rather than lose a car that might eventually dominate some of your volume. Is that correct?

[Benedetto Vigna, executive]

Okay, Philippe. I will start from the first one. When it comes to the preowned business, we have no profit sharing okay? So there is no process sharing with our dealers. It's their business, they manage in the way they want. And let me say, unique and -- what we have to do to help them is always to think about uniqueness exclusivity of the model. So this is what we do.

When it comes to Purosangue, I think I would like to take this opportunity to remember that there are 2 orders that in Ferrari do not fit well, the Ferrari and utility, these are, I mean, SUV, and as I said, it's not an SUV or FUV because putting together the utility work with Ferrari car, I think we all agree is no sense. Now the story of our Purosangue is a new category. It's unlike any others that is pushing and is very well appreciated, where we said the 20% because we believe that this is a car like the other car we have in our range, we will have -- if you make the math, we will have 4 to -- around 4 cars per year, 4 to 5 cars, so it's around 20%, the split of the cars that you put on the market. So that is not, I would say, arbitrary. There is a rationale behind that is always meant to preserve the uniqueness and exclusivity because we consider Purosangue a car like the others we have in terms of volume split and unlike any other cars in that [ pseudo ] category, if you want, from other competitors. It's a unique car, and we want to preserve uniqueness and exclusivity. Maybe you can be not utility, it can be uniqueness. Yes. I will make a good one.

[Operator]

And your next question comes from the line of Tom Narayan from RBC.

[Gautam Narayan, analyst]

Tom Narayan, RBC. The first one is on the guidance you guys have out there for 2023. I know that's -- it does feel, I think, somewhat [ still ]. And I think some investors may be just wondering if -- why maybe you haven't withdrawn it or commented on it. I know usually you only comment on the annual guidance in the full year call, but I was just curious if there was any commentary on the current Q3 guidance that you have out there.

And then the second question on Purosangue. A number of us on this call attended this Rolls-Royce event, and we were -- I found it surprising to hear that a lot of customers for that brand really didn't care as much for software or assisted driving in those sorts of features and cared more about luxury aspects of the car and stuff like that. Just curious if this is what you were hearing from your latest event from consumers looking at the Purosangue as well?

[Benedetto Vigna, executive]

I start from the second one. If I understand well, Tom, is how much is valued the software in this kind of car. I'd like to say that when you talk about the luxury cars, and this is true, we have seen now, I am in this role since 14 months, it's true that there are features that are maybe important in mass market cars but are not at all important in luxury cars. You have had the pleasure to talk with many customers during this year. So what I can tell you that the software, the digital, the electronics in the cars must be placed in the right value because if you exaggerate, nobody will appreciate that value.

So I do not comment specific about Purosangue, but I can tell you that when you talk about luxury cars, well, it is a place where typical dimension that are important for the mass market players do not find the spot and meaning in this world. When it comes to 2023 guidance, I think you understood well, we provide the guidance for 2022. I can repeat what Antonio and myself said before that we -- the business model is very robust. The order portfolio is very strong, is very robust. And then we feel confident about this year and next year, but we do not provide any specific guidance. Sorry, Tom.

[Antonio Piccon, executive]

In addition to what we said at the Capital Market Day, of course.

[Operator]

And your next question comes from the line of Anthony Dick from ODDO.

[Anthony Dick, analyst]

I had a first one on the 2022 margin guidance. It seems in Q4, you're going to have probably some positive product mix with the SF90s, some positive mix ramping up of the FX tailwind and also maybe fewer expenses with fewer events. Yet your Q4 EBITDA margin guidance is for a very moderate increase in terms of margins. So I was just wondering if there were any particular headwinds to expect from the margins in Q4?

And then a second quick question on the topic of energy and energy supply. I understand that you use a lot of gas for your production in your factories and Italy is reliant quite heavily on Russian gas. So I just wondered if there were -- you put in place any measures to significantly reduce your gas consumption or any contingency plans you had in case the country faced a gas shortage this winter or the next.

[Benedetto Vigna, executive]

Okay. So I take it, Anthony, I'll take the one on energy, and I'll let Antonio comment on the first one. So I would like to clarify a few things. Number one, we do not rely on Russian gas. Number two, we produce 80% -- almost 80% of our energy is coming through the 3 generators that we have in our factory. Number three, as I show you, we are working -- we are increasing the share of electricity that we are generating in house, and we are also reducing the energy waste through better efficiencies or, let me say, leveraging the ideas that the team has.

If you remember, I was talking about reducing the gas consumption by 2%, that is a good number, that has been done by, let me say, putting the people around the table. So we are putting also some contingency plan in place because in case there are some national, let me say, national direction, well, we will -- we are here in Italy, we will stick to them. But we are putting contingency plan in place. And clearly, the stock that we have is also a way to manage this situation. For the first one, I would like Antonio to comment.

[Antonio Piccon, executive]

Yes, to your question on the implied margin for Q4, Anthony, I think these are in line with the 9 months in terms of EBITDA, so 35% expected to be confirmed in the last quarter. In terms of the rationale, I think the directionally you may think of the business being particularly strong in terms of personalization, in addition to what the range of models that we sell may provide. We have a positive from foreign exchange rates compared to the initial expectations for the year. And in terms of the negative, the cost inflation is the only one I can think of. So all in all, I think we are in line with what we had expected since overall throughout the year.

[Operator]

I will now hand the call back to Benedetto Vigna. Please go ahead.

[Benedetto Vigna, executive]

Thank you. Thanks to all of you for your time today and also for all your useful questions. As you have heard a few minutes ago from myself and Antonio, we did what we said. We delivered on all what we promised, and we look with great confidence to Q4 and beyond. Before closing, I also take the occasion to thank all the men, all the women, The Ferrari, in Maranello and all over the World that contribute daily to the success of our company. For the time being, good afternoon, everyone. Thanks again for your attention and talk to you in a quarter. Bye-bye.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.