Ferrari's Net Income Doubles on Cost Cuts and Pricing Gains

Ferrari N.V. (NYSE: RACE) said on February 2 that its adjusted core earnings rose 38%, to 251 million euros ($270.7 million), in the fourth quarter on a strong year-over-year increase in revenue.That was ahead of the 225 million euro result expected by Wall Street analysts polled by Thomson Reuters. The Italian supercar maker's shares jumped 4% after the news was announced.

Deliveries of the $2 million-plus LaFerrari Aperta hypercar helped boost Ferrari's fourth-quarter earnings. Image source: Ferrari N.V.

Ferrari earnings: The raw numbers

All financial numbers are shown in millions of euros. As of February 2, one euro = $1.08 U.S. dollar.

Metric Q4 2016 Change vs. Q4 15 Full-year 2016 Change vs. 2015
Vehicles shipped 1,940 (4)% 8,014 5%
Revenue 836 12% 2,854 9%
EBIDTA 224 42% 719 17%
Adjusted EBIDTA 251 38% 748 18%
Net income 112 103% 290 38%

Data source: Ferrari N.V. "Adjusted EBIDTA" excludes costs related to the Takata airbag recall and to Ferrari's separation from Fiat Chrysler Automobiles and initial public offering.

Ferrari's "net industrial debt," its debt in excess of its cash balance and receivables, totaled 653 million euros at the end of 2016, down from 797 million euros at the end of 2015.

What happened at Ferrari during the quarter

Despite a year-over-year drop in the total number of vehicles shipped, Ferrari's revenue rose 12% in the fourth quarter from a year ago. That gain was powered primarily by a big jump in revenue from engines built by Ferrari for racing teams and for former corporate parent Fiat Chrysler Automobiles' (NYSE: FCAU) luxury Maserati brand.

Ferrari's GTC4Lusso. Image source: Ferrari N.V.

Strong sales of Ferrari's more-profitable 12-cylinder models, particularly the GTC4Lusso and the limited-run (and extremely exclusive) LaFerrari Aperta, a hybrid convertible supercar, also helped, as did a jump in sponsorship revenue from Ferrari's racing activities.

What Ferrari's CEO had to say

Noting that Ferrari's adjusted earnings before interest, depreciation, taxes, and amortization (EBIDTA) margin was a whopping 30% for the fourth quarter, up from 24.3% in the year-ago period, CEO Sergio Marchionne attributed the profitability gain to a couple of factors.

Marchionne said that Ferrari has a number of new limited-production products in the works that should keep profitability strong. But, he said, a Ferrari SUV isn't in the cards.

Looking ahead: Ferrari's guidance for 2017

Assuming that exchange rates stay roughly constant, Ferrari expects the following performance for the full year in 2017:

  • Shipments of about 8,400 vehicles, including limited-run supercars.
  • Net revenue above 3.3 billion euros.
  • Adjusted EBIDTA of more than 950 million euros.
  • Net industrial debt of about 500 million at the end of the year.

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