Ferrari NV
MIL:RACE
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
304.4
453.2
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Ferrari NV
You don't have any saved screeners yet
Good day, and welcome to the Ferrari N.V. Full Year 2017 Results Conference Call. Today's conference is being recorded.
At this time, I'd like to turn the call over to your host today, Ms. Nicoletta Russo. Please go ahead, madam.
Thank you, Sarah, and welcome to everyone who's joining us. Today's call will be hosted by the group's Chairman and CEO, Sergio Marchionne; and Alessandro Gili, group's Chief Financial Officer.
All relevant materials are available in the Investors section of the Ferrari corporate website. And at the end of the presentation, we will be available to answer your questions.
Before we begin, let me remind you that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the safe harbor statement included on Page 2 of today's presentation, and the call will be governed by this language.
With that, I'd like to turn the call over to Mr. Marchionne.
Thanks very much. Just a couple of remarks to start off the presentation today and then I'll pass it on to Alessandro. He can take you through the details of 2017.
Broadly speaking, it's been a good year. I think we made all the numbers that we had targeted, I think, you saw from the headline that we actually overachieved our own ambitions. If you go back to the time of the IPO, we were targeting about EUR 1 billion in EBITDA a couple of years from now. We got there much earlier. We like the shape of the EBIT and EBITDA margins that we've been able to get for '17. It's an indication of the fact that we keep on improving the quality of the offering. I think it's reflected in the margin generation of the house. Cash is decent.
But I think more importantly, from my standpoint, which is really -- is what connects us to the second part of what we've announced today, is that the execution of the plan that we've outlined, at least numerically, in terms of objectives for 2022, continues to progress well. I think that this is -- we have entered a very interesting period in the development of Ferrari. I think the fact we have now embraced pretty openly the relevance of hybrid structures and the way in which we provide motion to our vehicles is something which is going to really distinguish the Ferrari of today from the Ferrari of tomorrow. And I think that we've got a phenomenal execution going on in the field. I feel comfortable that we're going to make -- and some of the stuff will be visible in 2019. So it's not as if we're talking about projects that will -- are so long-dated that they're associated with a long level of uncertainty. So I'm overall satisfied. I think that the house is firing on all cylinders, and so I'm happy. I think we are in a good place.
A couple of comments about the euro-dollar stuff that we've been watching. I made it clear before that I did not think, and I still don't think that euro, under the euro or any vagaries of the foreign exchange markets can impact the financial performance of Ferrari. So I think the house is unique enough and strong enough to be able to set its own pricing in euros. I think we will be respectful of commitments that we have made to our customers up to now, but I think that we need to condition our dealers and our customers to accept the fact that the vagaries of ForEx cannot be on the account of Ferrari. I don't like charts that show -- so these sorts of charts at the end that explain the variances in the base of ForEx. It makes a lot more sense when you're making 5 million cars, it doesn't make a lot of sense when you're making 9,000. We are a luxury good maker. I think that we have -- we're fortunate enough to sit on a waiting list for our products. I think we need to be able to have -- so again, the certainty of guaranteeing economic performance regardless of where our functional currency sits.
We made reference in our opening headlines and, I guess, somewhere in the body about the plan for 2022. It's pretty clear that we intend to double EBITDA on or before 2022. I think the important thing is to produce cash. I think we've made a commitment to bringing down our debt levels to 0 on or before 2021, obviously, subject to any repurchase activities that we may carry on, that may change that objective. But as of today, I think that we are targeting 2021 or earlier to go 0. It doesn't address the question as to whether it makes sense or not to repurchase shares. I think that issue, we've discussed certainly on other calls, and I've discussed it with some investors from time to time, if we are, and we are absolutely convinced that these numbers are doable. We certainly have the full backing of the board in going out there and making sure that we carry out an active buyback program that ensures that we preserve the highest value for the shareholders who intend to stay.
What is embedded in the EUR 2 billion number, and you notice that we have stayed away from making any reference to the number of cars that we intend to sell because it's really irrelevant. But what is important to us is that the EUR 2 billion reflects the highest EBIT and EBITDA margins that are available in the sector. So it's not spelled out in the press release, but the objective is to set standards for the sector with that number, and I think that's what we're striving to get done by 2022.
I owe you one more piece of information here, and this is coming as news to Nicoletta and to Alessandro, so I apologize for doing it. But we decided that we're going to move the Capital Markets Day to the third quarter of this year. I've been agonizing over this thing because bringing investors in to try and discuss models that I cannot show you and margins that I can't talk about is a pretty useless activity. So what we've decided to do is that we're going to bring you in, in the third quarter this year, preferably and hopefully in September. And there's a number of things that we're planning to do then, but I think the whole objective is for you to experience what it's like to be a Ferrari customer and to really being able to see the experience that our customers go through in coming into this house and becoming one of our customers.
We will have our new style center that's open by then. The atelier will be fully functional. We'll probably be launching a car when you come. And so we'll do that at the same time. And I think that you'll be able to experience the full flavor of Ferrari in terms of what we do on a daily basis. And then I think you need to draw your own conclusions about what the financial horsepower of this house is. I think 2017 is a good indication on how well it fires and I think we're going to see over the next 3 or 4 years what the true potential of this house is as we get to the EUR 2 billion mark.
So on that, happy now to pass it on to Alessandro to take you through the 2017 data.
Thank you, Mr. Marchionne. So good morning, and good afternoon to everyone. Just a few comments on Slide 3 to cover a few items. We have highlighted our engineering and design efforts where we were globally awarded with International Engine of the Year and with the Red Dot: Best of the Best for the second and third year, respectively. As you know, we've been celebrating our 70th anniversary. We took time to share these relevant milestones with all of our customers with various events all over the world. And the group is proposing a deed and distribution for the holders of common shares of EUR 0.71 per common share, corresponding to a total dividend distribution to shareholders of approximately EUR 134 million. And as a reminder, this is subject to the approval at the 2018 Shareholders Annual General Meeting.
On Page 4, we have highlighted some of the key elements of what will contribute to our performance for 2018. We've launched the 812 Superfast, our latest retail sports car, and the Ferrari Portofino, our latest V8 GT. And in addition, during the Finali Mondiali last year at the Mugello race track, we unveiled the nonregistered racing car FXX K Evo, which is a strictly limited edition.
From Page 5, we are going through the details of our 2017 financials. Our shipments reached 8,398 units, up 384 units or 4.8% versus prior year. Results were driven by a 25.1% increase in V12 models, thanks to the GTC4Lusso LaFerrari Aperta yet to finish its limited series run as well as the 812 Superfast that is approaching a global reach. V8 models were in line with prior year due to the California T phase outs, offset by the 488 family and the GTC4Lusso Turbo that posted a solid performance.
In terms of portfolio turnover, the California T and F12berlinetta are phased out as well as the F12tdf that finished its limited series run in 2017. The newly launched Ferrari Portofino will commence deliveries in Q2 2018. Group net revenues for 2017 were EUR 3,417 million, up 10% or 11.2% at constant currencies. Our adjusted EBITDA improved by 17.8%, reaching EUR 1,036 million and 30.3% margin, hitting the IPO target of EUR 1 billion adjusted EBITDA 2 years ahead. Adjusted EBIT for the group show the 22.7% increase, reaching EUR 775 million, with a margin expansion of 230 basis points or 22.7%.
Industrial free cash flow for 2017 was EUR 328 million, driven by strong adjusted EBITDA, partially offset by CapEx, tax payments and lack of contribution from advances of LaFerrari Aperta. Net industrial debt as of December 31 was reduced to EUR 473 million from EUR 653 million at December 31, 2016, thanks to positive industrial free cash flow generation partially offset by cash distribution of EUR 120 million.
Moving to shipments on Page 6. We had a solid performance of the 488 and the GTC4Lusso families as well as LaFerrari Aperta. The 812 Superfast is approaching its global reach. Shipments for the group were up 4.8%, where EMEA grew almost 4%, with Italy, France and U.K. growing at double digit pace, while Germany recorded mid-single-digit growth, thanks to the 488 and the GTC4Lusso families as well as the 812 Superfast.
Other European countries were up single digit, with Middle East was -- while Middle East was down due to reallocation triggered by tough market conditions. America showed a 4.6% increase and rest of Asia Pacific grew 12.3%. Combined deliveries in China, Hong Kong and Taiwan were flat due to the slowdown in Hong Kong as per Ferrari's decision to terminate the distributor in 2016 and the new dealership becoming fully operational in Q3 2017.
Moving on to Page 7. 2017 net revenues reached EUR 3.4 billion, up 10% versus prior year or 11.2% at constant currencies. Cars and spare parts revenues were up 12.7% or EUR 276 million, thanks to higher volumes and positive mix led by V12 range models as well as LaFerrari Aperta along with a greater contribution from our personalization programs and pricing increases. This was partially offset by the end of LaFerrari life cycle in 2016 as well as the nonregistered racing cars, FXX K, and the strictly limited edition, F60 America, completed their limited series run in 2016.
Engines revenues grew to EUR 373 million, thanks to strong sales on Maserati, more than offsetting the termination of the rental agreement with a Formula 1 racing team. Sponsorship, commercial and brand revenues were up EUR 6 million to EUR 494 million, thanks to higher sponsorship and brand-related revenues, partially offset by lower 2016 commercial revenues for championship ranking compared to 2015. Other revenues were down by EUR 5 million to EUR 94 million, mostly due to the deconsolidation of the European financial services business since November 2016.
Moving to Page 8. You can see the year-over-year changes in the main items of our adjusted EBIT. Volume was up EUR 67 million due to an increase of approximately 360 units, excluding LaFerrari and LaFerrari Aperta, thanks to the GTC4Lusso and the 488 families as well as the 812 Superfast together with positive contribution from our personalization programs. This was partially offset by the California T and the F12berlinetta phase out. Mix was positively impacted by LaFerrari Aperta, strong performance from product range models and pricing increases. This was partially offset by LaFerrari that completed its life cycle in 2016 as well as the nonregistered racing car, FXX K, and the strictly limited edition F60, completing its limited series run in 2016.
Industrial costs and R&D grew EUR 23 million, mainly due to higher R&D expenses to support product range and components innovation for hybrid technology. This was partially offset by lower spending in F1 activities and efficiencies on direct materials. SG&A costs were higher than prior year as they were impacted by charges in connection with the equity incentive plan, expenses related to our 70th anniversary celebrations and higher costs related to new directly operated stores. This was partially offset by the deconsolidation of the European Financial Services business since November 2016.
Foreign exchange, excluding hedges, had a negative impact mainly due to U.S. dollar, Great Britain pound, yen and Chinese renminbi depreciation versus the euro. Other decrease mainly due to lower 2016 championship ranking compared to 2015, the termination of the rental agreement with the Formula 1 racing team and the deconsolidation of the European Financial Services business. This was partially offset by positive contribution from Engines to Maserati. As a result of all of the above, full year 2017 adjusted EBIT was up 22.7% to EUR 775 million, adjusted EBIT margin expand by 230 basis points, reaching 22.7% or 22.1 without FX hedges, and adjusted EBITDA reached 30.3% margin or 29.8% without FX hedges.
On Page 9, you can see the industrial free cash flow for the year that was EUR 328 million driven by strong adjusted EBITDA of EUR 1 billion. This was partially offset by net change in working capital of EUR 61 million as a result of inventory and trade payables increase, driven by the projected volume growth in line with our 2018 production outlook. Tax payments include the 2016 tax balance as well as the 2017 tax advance payments and CapEx of EUR 387 million. Other was impacted by lack of contribution from advances of LaFerrari Aperta, partially offset by the Ferrari J50. Net industrial debt at December 31 reached EUR 473 million, thanks to the strong industrial free cash flow generation partially offset by cash distributions and dividend to our NCI for a total of EUR 121 million.
On Page 10, just a quick glance at our client relationship activities to provide you how we organize various events all over the world to celebrate our 70th anniversary with our customers. And on Page 11 and 12, we have provided an update for our other activities.
Moving to Page 13. We show our 2018 outlook as follows: shipments at over 9,000 units with a strong contribution from range models and new model launches; net revenues at over EUR 3.4 billion driven by strong volume, higher sponsorship and better F1 ranking revenues partially offset by lower LaFerrari Aperta, finishing its limited series run, and negative FX. Adjusted EBITDA, greater or equal to EUR 1.1 billion, thanks the positive contribution from range models, volume, sponsorship, better F1 ranking, lower industrial costs and R&D, partially offset by lower LaFerrari Aperta and negative FX.
Net industrial debt, lower than EUR 400 million, supported by positive industrial free cash flow generation, thanks to strong adjusted EBITDA, partially offset by CapEx taxes and dividend distributions to holders of common shares. Please note that we haven't included any Patent Box effect and opportunity for 2018. And capital expenditures at roughly EUR 550 million, increase is due to support the broadening and hybridization of our product range in line with the expected volume growth over the 2019-2022 period.
And lastly, and on the following page, after thorough reviewing its current portfolio and all of its product development initiatives, the group is targeting an adjusted EBITDA performance of EUR 2 billion and EUR 1.2 billion in industrial free cash flow no later than 2022 and to be net industrial debt free after dividend and capital distribution and including -- excluding share purchases no later than 2021.
With that, I'd like to turn over the call for -- to Mr. Marchionne for any final remarks.
No, we can go ahead to the Q&A session. Please go ahead. Thank you.
[Operator Instructions] Our first question today, from Monica Bosio of Banca IMI.
I was wondering if you can give us some indications about the pricing effect that we can assume for 2018? And if you can also update us on the personalization rate in 2017 and what we can expect going forward? Also on the back of the midterm guidance, should we expect an increase in personalization or a flat trend in comparison with the current state-of-the-art of the company?
I'm going to try and help Alessandro with this. I can't answer your question in detail. I'm going to give you some broad line suggestions as to what -- how we got to the EUR 2 billion. We're not doubling volumes, so we must be improving other mix of the industrialization of the plant. It is established policy of this house that we're trying to enrich the offering to the marketplace. And therefore, we're trying to improve our ability to extract margin from the businesses that we're currently carrying out. That's something that continues into the plan, and therefore, I would would've expect that -- I would have expect that, rationally or logically, as a consequence of what I said that personalization and pricing are both expected to improve over the midterm period. But that's just the way I look at it. You can draw your conclusion. The EUR 2 billion is unmovable.
We'll now move to our next question from John Murphy of Bank of America.
Just a first question, and I apologize to follow up on the midterm outlook. But I mean, as we think about this, I mean, doubling the volume between now and 2022 seems somewhat unrealistic, just given the way that you run the business. So I would imagine there'd be some acceleration of growth but not an extreme acceleration. I just want to make sure that's true. And then second also, are all these vehicles going to be...
I agree, John. And then?
Okay. And then also, I mean, are all these vehicles going to be produced within the footprint of the Maranello because it really takes advantage of the fast utilization in that plant.
Absolutely. It's staying right here. By the way, just so we're clear, we have a body shop, which has historically been off site, but it belongs to us. It's about 15 kilometers away from here, but it belongs to us. So there's no adjustment to the manufacturing footprint as such. There's improvements that we're making on the production lines, to debottleneck some parts of the operations. But fundamentally, we're adding shifts and just running the machine that we have today.
Okay. Then if I look at the EBITDA and the free cash flow and assume some level of taxes in the 25% range, plus or minus, we'll see how the Patent Box ends up, that kind of would indicate a CapEx number that's around about this EUR 500 million to EUR 600 million that you're talking about for 2018. So would it be a fair assessment to think that we are at this point reaching sort of a peaky level in CapEx and R&D investment for the development of the product range as we go forward.
Yes. I think you're looking at a couple of years of this kind of CapEx. I think we need to get over the hump until 2020. I think that's the number that we're fighting with. And I think, as I said, we have a lot of these discussions all the time about whether it's physically possible for us to spend that kind of money given the fact that we never have. But I think some of the things that we've taken on as part of the product portfolio, some of which, hopefully, will be visible when you come and visit in September and when you see the products being launched in '19, make you realize that we are really extending the technology bench and the reach of this house beyond anything which was traditionally done. And so I think it's feasible that we can end up spending a number of that caliber over the next couple of years, right. And I think it's required for us to meet the EUR 2 billion. I mean, there's not a single doubt in my mind that in the absence of the capital commitment, we will never ever be able to extract that kind of margin both in terms of percentage and absolute quantum that we have targeted for 2022.
Okay. And then also on the back of that, I mean the e-supercar that you guys have kind of alluded to or talked about, I mean, what is the time frame for a potential launch on that and does that sort of coincide with this EUR 2 billion target on EBITDA around 2021, 2022?
Okay. By the way, it's in the number. The target is -- I think we're expecting the vehicle some time in 20 -- the end of 2020, beginning of 2021. And it is material to the EUR 2 billion, but it's not -- if it isn't that, it will be another. I'm not sure. I don't think there's a single product which is solely responsible for the EUR 2 billion shift. I mean, it's a collection. And I think we'll talk about this when you come in September because that's really -- I think you need to look at that Ferrari experience. I mean, describing this deal over the phone and telling you on a piece of paper is not going to do it. You need to see it. I think you need to see in the context of a product launch. I think you need to see the impact that it has on our customers. The pricing power is exhibited by these launches. You need to see it. It is a unique environment. And I think our objective in this plan going forward till 2022 is to protect that base and enhance it. I think the marketplace will allow us to do it because I think the customer base, at least our relevant customer base, is actually much wider than we have historically thought, and it certainly is growing at a pretty rapid clip. So I -- it's not a volume issue for us. I think we need to execute well. Well, I think we have done well up to now, but I think we need to move it up a couple of notches in terms of intensity and reach.
Yes, I wholeheartedly agree. The experience of going to Maranello is definitely a sort of a homage or a -- to the past and the present. It's actually -- is a great experience. Maybe just one last quick [indiscernible] mundane question. How many have Apertas are left in 2018? And then I think there's a lot of concern out there in the market that mix is going to go incredibly negative in 2018, but there's a few more Apertas in some of the specials that you guys are -- or limited editions you guys are doing, it might not be as big a headwind as I think some are fearing. So how many Apertas are there and what about mix in the '18 guidance?
John, why are you worried about mix? No, I mean, I understand the question.
I'm not worried about mix. I mean, I think there's an opportunity, but I think there's a little bit of a concern in the market that with the Apertas being largely delivered, but it doesn't sound like that's the case. So how many Apertas are left to go?
Okay. By the way, there's a limited number of Apertas and that's -- which in them by themselves will not significantly change the physiognomy of the P&L or the margin. But it's interesting question that you're raising about the fact that when you've got supercars on the caliber of the Ferrari or the Aperta, you will end up getting twisted numbers in a period of time. And what happens is that you end up getting what I call an abnormal or anomalous margin generation coming out from that series. The strength of this house is that can actually modulate the introduction of those vehicles and it can balance it against the reduction on baseload, so it doesn't really affect if we go through these spikes. It performs sort of strangely because of these supercars. The plan that we're going to -- that we have put in place now will be in actionable in the next 3 or 4 years, is really designed to try and smooth out that -- those anomalies by making sure that we've got a steady flow of things that have got similar pricing power. We'll never be able to emulate the Aperta and LaFerrari as a steady-state condition because of the fact that otherwise, we're going to end up losing the uniqueness of the product on a cycle basis. But there's got to be enough. And we experienced this with the TDF, with the Tour de France when it came out. We experience this every time we've done a special version of the 458 and the 488. I would add the fact that if we can modulate and arrange the deck in such a way as to have a steady flow of these, we will not end up having this worrisome mix deterioration that you've made reference. I think it'll be all right. It's going to be different because the underlying mix of products will be different. It has to be, right? But not enough to -- not enough for us to change -- not enough to change direction on our progress on EBIT and EBITDA generation. It's just a different way of getting...
That was helpful.
Yes, go ahead.
I would just mention on Slide 17, I know the Enzo wasn't launched in this time frame, but it might be just helpful to show people that there was another supercar from -- I think it was '02 to '04, the Enzo. Just 1 product that's kind of missing from that chart that I think would be helpful [indiscernible] we can understand this [indiscernible].
Yes. The Enzo was a 2003 vehicle and then we launched LaFerrari in 2013, so it is sitting on a decade cycle. But that's the past. I think that we need to adapt to a new world. I don't know -- this is almost blasphemous, but I think that the technology shifts between the Enzo and LaFerrari and the next car that's coming, they're so wide that this whole notion I'm referring to in the supercars deployment, they really have to be time -- they have to be put in a time context because this stuff is moving too quickly. I mean, the performance -- and I think we should probably have this conversation in Geneva after we launch the next car. I think when you start seeing the statistics or what's getting revealed and when it gets revealed in Geneva, you'll realize that we're closing the gap between the supercars and street cars pretty quickly. So I -- it's a complicated issue. I think the important thing for us is to keep on making a mix of cars that keeps on improving on EBIT and EBITDA generation. It generates cash and keeps the trend of growth towards the EUR 2 billion unabated. That, to me is -- and it's not maneuvering stuff. It's just making sure that the portfolio retains that quality and never wavers on the objective. I mean, that's -- I can't have a bad year. I'm not like a bank, right? I mean, I can always blame it on the central banks. I cannot. I can't have a bad year.
We'll now move to our next question from Martino De Ambroggi from Equita.
I know you stated you are not doubling volumes. Anyway, focusing on volumes. This year, you are increasing volumes by 8%, which is an acceleration compared with the usual 4%, 5%. Am I right in thinking it is just a matter to offset the mix in ForEx, which would be negative this year, and the normal trend is the mid-single digit, or this could be taken as a reference point going forward?
Mr. Ambroggi, let me just repeat what I just -- I think I was maybe too articulate in what I said earlier. And I'm going to try and give you the street version of what I said. We're never going to produce a car and sell a car for which we don't have demand. The objective is to keep the growth in EBIT and EBITDA margins untouched and unwavering. And we will continue to mix the portfolio in such a way as to achieve the EUR 2 billion target on or before 2022. It's that simple.
Yes, the message is very clear, but...
Mr. Ambroggi, the only question you got to ask yourself is whether Alessandro and I are going to get confused with the order of priorities. I guarantee you that we've handled more complex issues than this one.
Okay. Looking at this picture in another way, you discussed in previous calls the target is 35%, 36% EBITDA margin. But if you are not doubling volumes and you signed EUR 2 billion EBITDA, it seems to me you will exceed this level.
Okay, I agree. By the way, Mr. Ambroggi, what I try to say -- and by the way, I mean, I will take all the responsibility for this if we fail. But what I did say initially is that the objective of Ferrari was to become standard setter in EBIT and EBITDA margin generation. We're not today. We know this.
Okay. And just 2...
We need to get it done.
Okay. And just 2 more follow-ups. One on Formula 1. I suppose your assumption is a steady state as the rules are today?
I'm sorry. I missed the question, Mr. Ambroggi.
Yes. The Formula 1, the revenue sharing agreement, I suppose, in your 2022 target are assumed as a steady-state as they are today.
I'm assuming that our position will not worsen.
Okay. And for ForEx, when do you believe clients and dealers will get your point on the sharing of the ForEx risk?
I'm willing to suffer a slight cold in 2018. I think in 2019, it becomes everybody else's pneumonia.
We now move to our next question, which comes from Ryan Brinkman of JPMorgan.
Just relative to that 2022 type outlook, can you provide maybe a bit of a framework in terms of what would need to occur to generate that the type of a strong results? So for example, even a big picture subdivision between maybe the volume contribution and the margin contribution would be helpful. And then in the past, I think you've alluded to an aspirational margin target of perhaps as much as 36%. Would it be correct to presume that generating EUR 2 billion of EBITDA would require hitting that type of a margin? And what are the biggest areas of opportunity to get to that kind of margin?
Yes. No, there's no doubt that in order for us to get to EUR 2 billion, we have to get to EBITDA margins and to have an excess of 36%. The real issue -- and we've been sort of vocal on this even on previous calls, we've tried -- I think one of the things that we realized in running this business is that there's a section of the luxury sports market that we have not addressed, and we haven't addressed it because our emphasis has been very, very much on pushing the limits of the performance curve. And so we have played very hard in both V8s [ and in the 12s ] in the space by chasing performance. There's a big portion of the market which has been unaccessible (sic) [ inaccessible ]or where people have been unwilling to enter because of the demand associating with performance vehicles. Some people feel uncomfortable in driving 800-horsepower machines, but it's something that is part of our DNA, which I think we need to be -- reopen and rekindle, which has to do with the combination of Italian style, not just in terms of design but in terms of interior finish and presentation and detail, which can live quite easily with high performance engines, which are not living an extreme life. There's nothing wrong with a 600-horsepower engine because it certainly gives you enough performance to try and enjoy the driving experience. That part of that equation of the customer base has been neglected. It's been neglected because we had a whole pot of growth to go chase on the performance side. We need to rekindle this, and I think that the -- and hopefully, you'll see when you come and see us in September is that we've been active not only in maintaining the leading edge on performance but also developing this other part of the portfolio, which although it uses the existing physical and architectural infrastructure of Ferrari, it's capable of declining itself in a way which doesn't scare people. And so the new Portofino that you've seen is a first indication, a first incarnation of that product portfolio. And first indications are good, the car's sold out for 2018. In broad terms, the GTC4Lusso was the first -- was another attempt at curing what was perhaps not so successful of a presentation as the FF was, but we're making progress. The next phase needs to be a lot more intense and I think it needs to be a lot more targeted at bringing in customers that have historically not been ours and certainly not in the last 10, 15 years. And the ability to present ourselves in that market, which is a lot larger buyers are more numerous, where I think the ability to distinguish itself on -- distinguish yourself on style, pricing, comfort and so on is much greater than it is in performance, is at the heart of the EUR 2 billion target. And I think you will see this -- you will see this piecemeal, you will see it in 2018 as we roll out, certainly not a full year of the Portofino, but certainly 3 quarters of the year where the Portofino will be active. I think you'll see it with the GTC4, which has now got both the Lusso and the 4x2 versions available for distribution. You will see it with the new car hopefully, that we'll launch in September when you come and see us. And you will see this implementation of the strategy a piece at the time because we'll be launching products to match the ambition. It will be visible in '19. It'll become more visible in '20 and '21 as we approach the sort of the final phase of the plan. It's been incredibly well-articulated on the inside because I think the marriage of technology and market presence needs to be understood, and it needs to be action. So we started to work with our dealers to learn how to deal with higher volumes than they've had, not excessively high volumes but excessive volumes, and with a customer base, which has historically not been in their milieu in the last 10 years. So I think we need -- we have done all of the sort of proprietary work to get us there. We're now in execution phase. And you start seeing these products being peeled off and coming off of the factory floor. You'll see these turn hopefully themselves into EBIT and EBITDA. The progress from where we are today to where we hope to be in 2022 is a combination of improved pricing and improved utilization of the asset base. And it's a combination of all the efforts that we're carrying out both on the sports car side and on this new and expanding area that we need to build on. I can't – and I don't want to give you any more details because I'm actually -- it's like decomposing the P&L for you, which I think we need to see actualized as we go through 2018 to '22 year-by-year.
That's fair. And my last question is just on your recent comment that Ferrari could offer its customers a battery electric vehicle, just like I think you've cleared up some misconceptions about what Ferrari utility vehicle might be like, how many doors it may have, et cetera. And understanding that it's early days, but is there anything that you can say now to clarify how Ferrari might approach in electric vehicle? For example, we know that you use to generate Ferrari-like acceleration, but how might you approach it from a sound perspective or a ride and handling perspective? If it's too early or not appropriate to comment, then maybe you could just talk about what attributes you think make a Ferrari, a Ferrari.
You mentioned enough for me not to be repetitive. This whole question of sound and fun to drive, the actual handling of the car are things which are absolutely crucial to a Ferrari. One of the things that you will notice, I mean, I've read some interesting analyst reports that suggest that now, that Tesla has done a car that does 0 to 60 miles an hour in 2.7 seconds, so there's no room for supercars. Well, I would challenge anybody who's driven an electric car to try and drive it the same way we drive at Ferrari and you'd recognize immediately that the handling characteristics of the car are totally different. So whenever Ferrari will express itself in a fully electric vehicle, it will do so by making sure that both sound and handling are reflective of Ferrari's heritage. The offering that's available on the marketplace falls substantially short of that target. And the only thing I did say, by the way, so we're clear, I did say if there is an electric supercar, it's going to be Ferrari that makes it.
We'll now move to our next question from Adam Jonas of Morgan Stanley.
This is Carmen Hundley on for Adam. Just a follow-up on that. If the decision were made to do a pure EV, how would that impact your -- either your 2018 CapEx guidance and/or your 2022 guidance?
It would not.
We'll now move to our next question from George Galliers of Evercore.
Just following on from some of the comments you made about appealing more to the luxury space. The GTC4Lusso T was an interesting launch for many Ferrari followers last year. Can you give any insight into how shipments and orders of that car have performed versus expectations? And are you attracting a new or different customer to Ferrari with this vehicle?
The answer is we are attracting customers that have traditionally not been our customers. And yes, we're making the numbers that we built into the case. Am I happy with that stuff? The answer is no. And the reason why we're not is because we knew when we launched the car that, that is not our area of expertise, our area of strength. So I think we've always -- I mean, although I can make the comment with a straight face that the Portofino is completely sold out, I think if you order a GTC4Lusso now, you'll get one in 2018, I guarantee you. I can't tell you which month, but you'll get it within the year. I'm not sure you're going to get one -- you're going to get a Portofino if you order it today. So I think that we've had varying degrees of success with our cars. We're spoiled by the fact that in the majority of cases, we tell you that the next 12 months are completely sold out. We're not completely sold out of all the non-sports cars that we make. And so we need to work at this really hard. But obviously, we're not whacking it properly. We need to get that right. And hopefully when you come and see us this September, we'll be able to convince you that we're on the right path to get that fixed.
Great. And then a slightly cheeky one regarding Formula 1. Clearly, you continued to have the engine agreement with Sauber who are now wearing the Alfa livery. As the boss of both Ferrari and FCA, can you shed any insights into whether there's anything in the supply contract would suggest that Alfa should help Ferrari out where requested, for example, by holding out one of your competitors? And is there anything in the F1 regulations which would make such an agreement illegal or not in the spirit of the rules?
The second question that you asked is a legal question and although when I was young and foolish, I was trained in law, I don't think I'm in a position to answer it. I think it would be morally offensive, whether it's illegal or not. I -- just to go back, what makes it interesting is that there's absolutely no ownership connection between Ferrari and FCA, other than through a common shareholder they have up on top to Exor. So I'm not sure that, that's enough to try and connect the 2 things. I happen to be involved in both. I'm going to stop, at the end of our 2018 will be my last year at FCA, so this problem will vanish since I will no longer be responsible for the FCA side. It's -- I'll tell you honestly, one of the things -- the best thing that I think that could happen in 2018 is to -- for Ferrari to perform up to its true potential and to take on the competition, and especially Mercedes with whom it has a love-hate relationship, which has now gone back about 4 or 5 years. But I think it would be great if we could see a proper fight between Mercedes and Ferrari. And I think the important thing for Sauber is -- I mean, they ranked last, last year. So I -- nobody has any illusions over the fact that they're going to win the championship in 2018. And if they do, it's genial. But I think any significant recovery from the last position that they've had will be helpful. I think it's our hope that with the engine that we've provided them for 2018, they'll be in a much better position to run. I think the drivers are great drivers. I think I'm looking forward to a great season, but I don't expect any collaboration beyond technical arguments between Ferrari and Sauber, none of them will happen. And I will not be involved at all in the management of the Alfa Romeo-Sauber team at all. I have nothing to do with them.
We'll now move to our next question from Giulio Pescatore of HSBC.
First one would be if you could quantify the negative FX impact that is currently reflected in your guidance for 2018. And the second one would be, your move to GT opens up to the Chinese market because those products are better fit for that market. So I was wondering what are your ambitions for growth in China and in Greater China in particular?
Let me deal with the Chinese issue first. I think that we have been careful about the Chinese market, because I think you're right that I am -- the extreme version -- the extreme incarnation of Ferrari may not be the right product to have in China. I think we're more hopeful that the development of the GT side will become more relevant in the Chinese market. I have no specific number in the EUR 2 billion that says that it is purely attributable to China. I think that the geographic distribution of Ferrari on its own will be able to guarantee us that we get EUR 2 billion if we get the product right. And that to me is the more important question. On the ForEx side, I don't know whether Alessandro wants to add anything.
I mean, it's something that's doing EUR 50 million to EUR 70 million.
We'll now move to our next question from Lello Della Ragione from Intermonte.
Just a quick follow-up on ForEx. I didn't get if you started to implement the new strategy in terms of pricing with the final customer already or you're approaching it.
We're beginning -- we started a dialogue. We've had interesting discussions with our dealers a couple of weeks ago, but it's not built into the numbers. And I think that EUR 50 million to EUR 70 million is embedded in the number. We're going to try and recover, if any, shortfall on ForEx as early as we can in '18, but I think it's a '19 or later phenomenon.
Okay. And the other question, in [indiscernible] is related more to the 2020 ambition that you had. I was just wondering since we've seen this with the utility vehicle first and now with the electric vehicle, if you have some kind of, let's say, taboo that Ferrari cannot make. So let's say you open -- you paved a way for utility vehicle, now we're hearing about an electric version, that is something might be -- with -- something with 6 cylinder rather than 8 or 12, that is something that you will not produce and you can say it right now and not change your mind on it.
No. We're producing everything we sell. I don't know whether that was your question. Are you asking me whether we're going joint venture something with somebody?
No, no, no. I'm just asking if you -- at this point in time, you can exclude, for instance, the production of a car with a smaller engine or you're open -- you stated clearly about the electric one, so I was wondering if you are willing to, as long as you maintain the Ferrari uniqueness, to explore even other paths that you've said in the past that you will never produce.
No, I think it's possible that we will downsize engines. It is quite possible without losing anything that relates to Ferrari.
We'll now move to our next question from Thomas Besson from Kepler Cheuvreux.
I have a couple of questions, please. First, I'd like to ask, sorry if it's candid, if it was always planned to dissociate the 2022 targets from the CMD, first? And second, whether it's fair to assume that 2018, 2019 should show a slightly slower rate of progress than the rate of progress you planned towards 2022. And has it been the case, for instance, in 2013, 2014 during the previous 5 years' plan?
I'm sorry, I'm trying to give you a proper answer to the first part of your question. If it was always my intention to...
I was surprised that you dissociated the targets for 2022 from CMD that was initially planned from Q2 and then postponed to September or if I had missed something that it was always planned? It was really a candid question.
No, and just let me just put your mind to rest. I'm not trying to dissociate anything from anything. I just -- if you're going to show up here in Q2 or Q1 of 2018 and you're going to ask me, how are you going to get to 2022 and make EUR 2 billion? I can't tell you about the cars. I cannot tell you about when I'm going to launch them. I can't tell you about volume. And I cannot tell you about the pricing of those vehicles because I can't tell you anything about the product that's not yet here. Even though I know it, I can't tell you. And so the real issue to me is how do I make you privy to this Ferrari world? How do I make you understand how this machine runs? And the only way I can do this is by putting you through -- by making the customer experience in connection with the launch of a new vehicle as visible as I can because now you've seen it all, right? You've seen what a customer sees, when he sees the vehicle when it's first launched. You see how the house handles their relationship, how we nurture that relationship through the ordering process, what it looks like to carry it through, why pricing sits, how we price for personalization, all that stuff that we do is designed to help you build a business model that allows you to understand how it is that we're going to end up exceeding a 36% EBITDA number. That's -- we're trying to be that clear because otherwise, if you get a very futile effort on your side to come here and listen -- for me to show you 4 slides that tell you all the sausage parts of my EUR 2 billion come from and you have no way of determining whether there's any substance at those sausage parts or not. I'm just trying to be helpful. If you have a better idea, I'm more than willing to listen.
No, I'm very happy to come back to Maranello. I think it was a great experience. Can I ask a second question, please?
Sure.
I was wondering what is your thinking today on the risk of losing your small car manufacturer status if you go beyond the 10,000 limits, which you are likely to do probably in 2020 or 2021?
I'm not because of the way in which the portfolio is developing with hybrids.
We'll now move to our next question from Philippe Houchois from Jefferies.
I just have a more kind of general question is, you continue to have a target of net cash and if I think about the valuation upside in your business, it's very much about growth, margin, return on invested capital and cash returns. And as you know, from the auto experience or other industries, the market doesn't take the net cash position. So is that kind of -- why don't you get rid of that net cash target and engage more the market in terms of more steady cash return to shareholders, which I think will be more attractive, unless I'm missing something and net cash position means something to you or to the business?
One, it means nothing to me, and that's -- let's take that issue off the table. But Philippe, the fault is mine. I think that we've indicated -- I think the note was very clear, I think the footnote was, that it exclude any type of capital repurchases. So the reason why we carved that out, I've always had this view, by the way, that I think we should never ever -- we should never announce our buyback programs and trade against the market because we're trading against ourselves. We have authority in place now to buy back shares. We have a phenomenal amount of support from the board to carry out those executions. And in fact, we buy back capital, and I guarantee you that we will not misuse that right. We will intervene and we will do the right thing from a capital standpoint because I wholeheartedly agree with you that the value of cash on this balance sheet is 0. I mean, it's just -- it's nonsensical. So we will get rid of it properly, but we'll get rid of it.
We'll now move to our next question from Michael Tyndall from Citi.
Just a couple from me. Mr. Marchionne, in the past, you spoke quite enthusiastically about the non-car business, and it would seem that the ambitions on that front have taken a bit of backseat over the last couple of years. Just wondering when you look to that 2022 target, has it been resurrected at all? Or is it still very much we're going to focus on cars and leave everything else to one side? And then the second question is...
No, go ahead.
The second question is just, I guess, it's follow on from Philippe's question. The dividend payout ratio went down in 2017, presumably that because you've got some serious investing to do. But as we look out to 2022 and that EUR 1.2 billion of free cash flow, do you have a stated ambition in terms of dividend payout as we roll through the plan?
I'm looking at Alessandro. I think that our public policy is 25 to 30, isn't it?
25 to 40.
25 to 40. So there's no way we're even in that -- we went to the lower end of the spectrum because exactly for the reason that you mentioned, because we got a heavy CapEx here and I got cheap, so we sit around the table and I think we're going to convince the board when we meet that we should only be paying this level of dividend, and hopefully, the shareholders will approve when it comes. But the commitment is to pay out 25 to 40. And if we go back to Philippe's remarks earlier, even on capital, we need to start using the cash balance and having no debt in a house that has got this type of steady cash generation is nonsense. And from a capital structure standpoint, we just -- we're ill structured. So we need to work on this, and buying back shares is a good way of doing it, dividend helps. But I think we need to sop up some capital from the marketplace and make everybody feel more comfortable with the capital structure. But the first question that you asked, I think, is interesting because I did make a big point in this and I continue to make a big point of this because if it is true that this is a true luxury good, then I think it needs to be able to find a way to express itself beyond cars. We have been very, very careful. I -- we are not in on this. I mean, John Elkann has helped a lot. We have spent quite a bit of time interfacing with other people who play in this area. Hopefully, when we get together in September, you'll start seeing the beginning of a business, which in its full articulated form, could be as -- it could be relevant and I think should be relevant. It is not in the numbers for 2022, which are very much car-driven. But the efforts have not stopped. And I think that you -- hopefully, you'll see the incarnation of Ferrari in non-car in a real way when you come and see us in September. So we'll have to wait till then.
Thank you. As we have no further questions, I'd like to turn the call back to Ms. Nicoletta Russo for any additional or closing remarks.
Thank you, everyone, for joining us today. The IR team will be soon available for any follow-up question you may have. Thank you.
Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.