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Ferrari Profit Rises 29% and Margins Soar on Big V12 Sales

Italian supercar maker Ferrari (NYSE: RACE) said its second-quarter adjusted pre-tax profit rose 29%, to 202 million euros ($239.6 million), on strong sales of higher-profit V12-powered models. 

Ferrari earnings: The raw numbers

All financial numbers are in euros. As of August 2, 1 euro equaled about $1.19.

Metric Q2 2017 Change From Q2 2016
Revenue 920 million 14%
Shipments 2,332 5%
Adjusted EBITDA 270 million 24%
Adjusted EBIT 202 million 29%
Adjusted EBIT margin 21.9% 2.6 percentage points
Net profit 136 million 30%

Data source: Ferrari N.V. "Adjusted" figures exclude the effects of one-time items. There were none in the second quarter of 2017.

Metric As of June 30, 2017 As of December 31, 2016
Gross debt 1.755 billion  1.848 billion
Available liquidity 923 million 958 million 
Net industrial debt 627 million 653 million

Data source: Ferrari N.V. "Net industrial debt" is Ferrari's debt, minus its financial-services unit's portfolio of funded receivables and cash on hand.

The order book is already full through the end of 2018 for Ferrari's latest model, the V12-powered 812 Superfast. A 36% increase in sales of V12 models from a year ago helped boost Ferrari's profit margin in the second quarter. Image source: Ferrari N.V.

Ferrari's business is hitting on all cylinders

Ferrari has three principal sources of revenue. The sales of its iconic sports cars and spare parts generates the majority, but it also realizes revenue from the sale of engines to other automakers (notably Maserati) and racing teams, and from sponsorship and related commercial activities related to its Formula 1 racing team, Scuderia Ferrari. 

All three lines of business performed well in the second quarter. 

  • Cars and spare parts generated 669 million in revenue, up 13.6% from the second quarter of 2016. Higher sales volumes, price increases, an improved "mix" (more V12-powered cars), and increased sales of its personalization programs all helped.
  • Ferrari's sales rose in most parts of the world, with the exception of Hong Kong, an important market. Ferrari is in the process of changing its Hong Kong distribution and expects its new dealership to be operational by the end of the third quarter. 
  • Ferrari noted that it has just launched its new 812 Superfast model. The new V12-powered two-seater starts at about $308,000 in the U.S., but you'll have trouble getting one: The waiting list already runs beyond the end of 2018. 
  • Engines generated 101 million euros in revenue, up 42% from a year ago, reflecting dramatically higher sales volumes at Fiat Chrysler Automobiles' (NYSE: FCAU) Maserati brand, for which Ferrari supplies engines.
  • Sponsorship, commercial, and brand revenue generated 124 million euros in revenue, up 6% from a year ago. Higher racing sponsorship sales were partially offset by the Scuderia Ferrari team's lower ranking in the 2016 Formula 1 results versus its rank in the prior year. 
  • About halfway through the 2017 Formula 1 season, Scuderia Ferrari currently stands second in the important Constructor's Championship, behind Mercedes-Benz. Ferrari driver Sebastian Vettel leads the Drivers' Championship points race; his teammate Kimi Raikkonen is in fifth place. 
  • Ferrari's catch-all "other revenue" fell 24% to 26 million euros, a result of the decision to de-consolidate Ferrari's European financial-services business in the fourth quarter of last year. 

Ferrari's exceptionally robust EBIT margin of 21.9% builds on its strong first-quarter result and is a 260 basis-point improvement from a year ago. 

Ferrari's Formula 1 racing team, known as Scuderia Ferrari, is having a strong 2017 season. Drivers Sebastian Vettel (number 5) and Kimi Raikkonen (number 7) took first and second place in last weekend's Hungarian Grand Prix. Image source: Ferrari N.V.

Looking ahead: Ferrari maintained its full-year guidance

Ferrari still expects good growth in 2017. In line with its previous guidance, it still expects to improve on its very good 2016 results:

  • Shipments of about 8,400 vehicles (2016 result: 8,014).
  • Net revenue greater than 3.3 billion euros (2016: 2.85 billion euros).
  • Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) greater than 950 million euros (2016: 748 million euros).
  • Net industrial debt to fall to about 500 million euros (as of the end of 2016: 653 million euros).

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John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.