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Ferrari Reported a Strong First Quarter, but Postponed Its 2022 Profit Target

Ferrari (NYSE: RACE) said that its first-quarter profit rose 23% from a year ago, that its order book is at record levels despite the COVID-19 pandemic, and that it now expects its full-year results to hit the high end of its 2021 guidance.

But the company also said it is postponing its ambitious 2022 financial targets for a year because of its decision to reduce spending in the early stages of the pandemic.

How Ferrari performed in the first quarter

Ferrari records revenue for three business units, plus a catch-all category it calls "other." Here's a look at how each performed in the first quarter of 2021.

  • Cars and spare parts is Ferrari's name for its core automaking business. Revenue in this unit rose 9% from a year ago to 855 million euros on improvements in product mix. Sales of 8-cylinder models rose 8.1% on strong demand for the new F8 Tributo sports car, while sales of 12-cylinder models fell 19.6% as the company ramped up a new targa-top version of the 812 Superfast.
  • Ferrari noted that it was still ramping up production of its two newest models, the V8-powered Roma and the SF90 Stradale hybrid supercar, in the first quarter.
  • Engines is the business unit that manufactures engines for former corporate sibling Maserati (now part of Stellantis) and that rents racing engines to other Formula 1 racing teams. Revenue rose 38% to 45 million euros, mostly on the strength of higher shipments to Maserati.
  • Sponsorship, commercial and brand, which includes revenue from Ferrari's racing activities, as well as its licensed products and museum, generated 91 million euros of revenue in the first quarter, up from 89 million euros a year ago. A better outlook for this year's Formula 1 racing calendar (versus 2020, when several races were canceled amid the pandemic) improved revenue from Ferrari's racing sponsors, but that was mostly offset by reduced sponsorship fees due to the team's relatively poor finish in 2020.
  • Ferrari recorded "other" revenue of 20 million euros, down from 22 million euros in the first quarter of 2020.

High demand for the F8 Tributo sports car helped drive a profit gain in the first quarter. Image source: Ferrari.

To sum it up: Ferrari's road-car business is performing well, while things are looking up a bit for the company's racing efforts after a challenging 2020.

Ferrari noted that exchange-rate movements -- mostly the U.S. dollar versus the euro -- had a negative impact of 22 million euros on its revenue for the quarter.

About those 2022 financial targets

Back in 2018, Ferrari presented its plan to roughly double its profits by the end of 2022. At the time, the company said that it would boost revenue and margins by launching 15 new products, including some in market segments it hadn't previously contested. (The plan includes an SUV-like vehicle called the Purosangue, due next year.) Specifically, the company targeted an increase in adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) to between 1.8 billion and 2.0 billion euros per year, with an adjusted EBITDA margin of greater than 38%.

(For comparison, Ferrari generated adjusted EBITDA of about 1.14 billion euros in 2020, with a margin of 33%. "Adjusted" figures exclude one-time charges and credits.)

That's all still happening, but it'll happen in 2023 instead of 2022, the company said. Chairman John Elkann, who has been acting as Ferrari's CEO since the health-related departure of Louis Camilleri in December, said in a statement that the spending cuts that Ferrari put in place in the early days of the pandemic have led it to delay the goals.

An improved engine -- and a new driver, Carlos Sainz Jr. -- are helping Ferrari's Formula 1 racing team rebound from a difficult 2020. Image source: Ferrari.

Cash and debt

Ferrari had 980 million euros in cash and equivalents as of March 31, down from 1.36 billion euros at the end of 2020. Against that, it had 1.4 billion euros of debt attributable to its auto business, down from 1.9 billion euros as of the end of December.

In Ferrari-speak, its "net industrial debt" fell to 420 million euros at the end of the quarter from 543 million euros as of the end of 2020.

Ferrari maintained its upbeat 2021 guidance

Back in February, Ferrari said that auto investors should expect a strong rebound in 2021 from its pandemic-impacted results in 2020. Here's the specific guidance it gave for 2021 at the time:

  • Revenue of about 4.3 billion euros. (2020 result: 3.5 billion euros.)
  • Adjusted EBITDA between 1.45 billion euros and 1.5 billion euros. (2020 result: 1.14 billion euros.)
  • Adjusted EBITDA margin between 33.7% and 34.9%. (2020 result: 33%.)
  • Adjusted earnings per share between 4.00 euros and 4.20 euros. (2020 result: 2.88 euros.)

Ferrari maintained that outlook with its first-quarter earnings report, but said that it's now "confident" that it will reach the "top end of the 2021 guidance" ranges.

The raw numbers

Ferrari reports its financial results in euros. As of May 4, 1 euro = about $1.20.

Metric Q1 2021 Change vs. Q1 2020
Vehicles shipped 2,771 1%
Revenue 1.011 billion euros 8%
Adjusted EBITDA 376 million euros 19%
Adjusted EBITDA margin 37.2% 3.2 percentage points higher
Adjusted EBIT 266 million euros 21%
Adjusted EBIT margin 26.3% 2.7 percentage points higher
Net income 206 million euros 24%
Adjusted earnings per share 1.11 euros 23%

Data source: Ferrari N.V. "Adjusted" figures exclude one-time items and are provided to facilitate year-over-year comparisons; Ferrari had no one-time items in the first quarter of 2021.

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