Ferrari Raises Full-Year Forecasts After Strong Quarter

Posted on November 8, 2016.

This article by Eric Sylvers was posted on the Wall Street Journal website

Higher volumes, price increases and cost reductions for Formula One team boost outlook

Marchionne says he's thrown as much as he'd like to at F1
Marchionne says he’s thrown as much money as he’d like to at F1

Ferrari NV reported a 20% jump in third-quarter profit Monday, enough to push the Italian luxury sports-car maker to boost its 2016 financial forecasts for the second time this year. Higher volumes, price increases and cost reductions for Ferrari’s Formula One racing team were behind the raised annual forecasts, said Chief Executive Sergio Marchionne.

Mr. Marchionne, who also is CEO of Fiat Chrysler Automobiles NV., appeared to rule out investing more in Formula One, saying, “I think I’ve thrown all the money I’d like to throw at that thing.”

Through the first nine months of the year, Ferrari shipped 6,074 cars, 8% more than in the comparative period last year. The company has raised prices by more than 1% this year as waiting lists to buy its cars have grown, the executive said on a call with analysts.

Net profit for the three months ended Sept. 30 rose to €113 million ($125 million) from €94 million in the comparative three months last year, as the company sold more of its higher-margin 12-cylinder cars. The quarter saw the first shipments of the LaFerrari Aperta, which costs around $2 million.

Special edition models like the convertible Aperta, which is replacing a hardtop version of the same car, have helped Ferrari increase revenue and profit since the run up to its initial share sale a year ago. But the company has become increasingly reliant on selling the special edition and other one-off models, according to some analysts. So far, there is ample demand for these cars. Ferrari sold all 200 Apertas before the first one had been shipped, with some loyal clients getting a call from the company to see if they wanted to buy.

Revenue in the third quarter climbed 8.3% to €783 million. While revenue from the sale of cars and spare parts was little changed, Ferrari almost doubled the revenue it derived from the sale of engines to Maserati and the renting of engines to Formula One race teams.

Ferrari forecast full-year gross operating profit at €850 million, up from a previous forecast of €800 million. While the increase is a relatively modest 6.3%, analysts cheered the move, as Ferrari is coming off record sales and profit in 2015. Mr. Marchionne said he remained “obsessed” with reaching €1 billion in gross operating profit, but wouldn’t indicate when that might be reached. He said he would give an outlook for 2017 when Ferrari reported fourth-quarter results.

Net industrial debt was €585 million at the end of September. Ferrari previously anticipated that would jump to €730 million by the end of the year, but on Monday trimmed that forecast to €700 million.

The company still projects full-year revenue at more than €3 billion and expects to ship a record 8,000 cars. The dividend payout on this year’s net profit will likely exceed the 30% the company paid on 2015 earnings, Mr. Marchionne said.

Ferrari shares rose 7% to $54.77 in recent New York Stock Exchange trading, taking the stock above the $52 price set for the initial share sale in October last year.

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