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Ferrari NV (RACE) Q3 2022 Earnings Call Transcript

RACE Earnings Call - Final Transcript

Ferrari N.V. (NYSE: RACE) Q3 2022 earnings call dated Nov. 02, 2022

Corporate Participants:

Nicoletta Russo — Head of Investor Relations

Benedetto Vigna — Chief Executive Officer

Antonio Picca Piccon — Chief Financial Officer

Analysts:

Michael Binetti — Credit Suisse — Analyst

Giulio Pescatore — Exane BNP Paribas — Analyst

George Galliers — Goldman Sachs — Analyst

Adam Jonas — Morgan Stanley — Analyst

Stephen Reitman — Societe Generale — Analyst

Monica Bosio — Intesa San Paolo — Analyst

John Murphy — Bank of America Merrill Lynch — Analyst

Thomas Besson — Kepler Cheuvreux — Analyst

Philippe Houchois — Jefferies — Analyst

Tom Narayan — RBC — Analyst

Anthony Dick — Oddo Securities – ODDO BHF — Analyst

Presentation:

Operator

Good day, and thank you for standing by. Welcome to the Ferrari 2022 Q3 Results Conference Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Nicoletta Russo, Head of Investor Relations. Please go ahead.

Nicoletta Russo — Head of Investor Relations

Thank you, Sharon, and welcome to everyone who’s joining us.

Today we plan to cover the Group’s Q3 2022 operating results, and the duration of the call is expected to be around 60 minutes. Today’s call will be hosted by the Group CEO, Mr. Benedetto Vigna; and Group CFO, Mr. Antonio Picca Piccon. 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 said, I’d like to turn the call over to Benedetto.

Benedetto Vigna — Chief Executive Officer

Thank you, Nicoletta. Thank you everyone for joining us today. On behalf of everyone at Ferrari, I would like to begin this call by remembering with gratitude, Mauro Forghieri, who has passed away. He had such an important impact on Ferrari’s history and the motor racing. We will always remember his passion and determination that drove the evolution of our company over the years. With Mauro, we won no fewer than 11 F1 Drivers’ and Constructors’ Championship titles and five Endurance titles. Our thoughts and our prayers are with his family at this sad time.

And now, let’s go to the third quarter. The third quarter has been very, very strong with all key P&L metrics up double-digits versus last year. Revenues increased 19% with shipment up 16%. EBITDA and EBIT were up 17% and 11% respectively. And industrial free cash flow generation was very sound. The very robust financial results we present today are a further proof of the strength of our business. And this is why we revised upwards our 2022 guidance on all metrics.

The current macroeconomic scenario brings new challenge on a global scale. This is true for us and this is true for our partners. Indeed, to guarantee a smooth production, we are supporting our supply chain with tangible measures. Moreover, as we said in the last call, we have taken action on pricing to adequately react to cost inflation, focusing on the following three areas. One, price definition of new models. Two, personalization offering. And three, mid-single-digit price increase on selected models and markets.

Having said that, we continue to enjoy a very strong momentum with a remarkable order intake in the quarter, considering that our clients could order only a few motors. Such a positive trend is visible all over the world. Since the last time we spoke a quarter ago, four important events took place, receiving large enthusiasm from our clients. Firstly, the Purosangue World Premier; secondly, the Cavalcade Classiche; thirdly, Esperienza Ferrari; and lastly, several lifestyle initiatives.

Let’s start with the world premier of the Purosangue in Tuscany. We hosted 2,400 of our most loyal clients from all over the world at Teatro del Silenzio in Lajatico. We promised our clients something new unlike any other, a true sports car able to deliver the same driving thrills is our most extreme models. And we delivered exactly on that promise. The signing and engineering the Purosangue is an authentic four-door four-seater Ferrari sports car. There was no better reward for the entire team than to see clients wonder in front of the Purosangue. Their reception was hugely enthusiastic and they praised its performance, the design and driving thrills.

On performance first. They welcomed our most iconic and powerful V12 engine with a brand new configuration, which delivered 725 horsepowers. Moving to design, they were surprised to see the roominess onboard. Given the compact size, the driving position typical of a sport car, close to the floor and reclined. The welcome door solution, which enables easy ingress and egress. And the electrochromic glass roof that can be added during personalization of their vehicle.

Finally, yet importantly, the promise of impressive driving sales further enhanced by active suspension technology, which makes its debut on this model. We talked about this technology at the Capital Market Day. With all that said, I know you all are curious about how many orders we already have and how long the order book is. But you also know that we do not provide this kind of detail. Trust me, it is unlike any other. It is way above our most promising expectations.

And now after Purosangue, let’s talk about the second important event of the quarter, Cavalcade Classiche in the Dolomites, featuring 65 vintage Ferrari and their owners from all over the world. The cars paraded through the towns of Trentino Alto-Adige, embodying key moments in Ferrari’s 74-year history. This unique events is designed on one side to bring owners together to share authentic and memorable experiences. On the other, to create a single community united by its passion for Ferrari.

And now, the third event, Esperienza Ferrari. Based at the heart of the Fiorano racetrack where we created a unique and elegant space for our clients. Over five months, we hosted 1,250 clients, which more than 40% were new to Ferrari, and organized 2,500 test drives to let them feel the driving thrills unleashed by the 296 GTB. As I’ve told some of you, during our latest road show, this memorable experience is also open to our Ferrari people. And in fact, more than — as of today, more than 500 employees have so far enjoyed it, feeling even more connected to Ferrari.

And to conclude on the events held in Q3, after Purosangue, after Cavalcade Classiche and Esperienza Ferrari, let’s focus on the lifestyle pillar. We launched the first product of our partnership with Richard Mille, an ultra flat watch limited to 150 units, which embodies the shared values between both brands, combining deep engineering know-how with cutting-edge state-of-the-art innovation. At the Monza Grand Prix last September, special Jell-O Modena apparel and accessories collection was launched to celebrate our 75th anniversary. And this series of limited edition items in yellow sold-out in the online stores in a few hours.

And lastly, during the last fashion week in Milan, our lifestyle team showed on the Teatro Lirico stage the Spring-Summer ’23 fashion collection, receiving international place. This new collection centered around the theme of Dreams and was inspired by the timeless values that have turned the Ferrari Dream into reality.

And talking about dreams, let’s remember that the Ferrari Dream has its roots in racing. And so let’s recap together where we stand in the various categories in which we compete, the achievement we have delivered and the new opportunities ahead of us. Let’s start with the Formula 1. Last time when I was talking here, I said, we were fighting for the championship. While we have returned to be competitive in this year, we cannot be satisfied with this year’s results. Now we focus on the last races of the season and in preparing ourselves in the best way possible for the next one.

In Competizioni GT, we celebrated the 500th victory of the Ferrari 488 GT3, which makes this model the most successful Ferrari racing car ever, an extraordinary record and the precious legacy that will pass to the new Ferrari 296 GT3 due to make it struck the deal at the 24 hours of Daytona next January. Such success in Competizioni GT is coupled with the victory of Ferrari in the IMSA serious with both drivers and team wins.

Lastly, we hosted our Finali Mondiali at the Imola racetrack, this was just a few days ago. The feast of high-performance racing celebrated the final event of our Attivita Sportive GT together with our clients, fans and employees. 38,000 motor sport enthusiast gathered to share their passion which made this moment the perfect stage for the unveiling of the Ferrari Le Mans Hypercar. 499P is the name of this fantastic car. This new car marks Ferrari’s return to the FIA World Endurance Championship’s top-class from next season, exactly 50 years after we last fought for outright victory in that championship.

And now, it’s time to update you on our ESG actions that are very important in our plan. In our journey to reach carbon neutrality by 2030, we have already implemented the 1 megawatt fuel cell installation and the partnership with ClimateSeed announced at the Capital Market Day. But in addition to this, the team has been deploying three further initiatives during these months. Firstly, in line with our plans, we are installing additional new photovoltaic panels on the roof of the Maranello buildings, delivering a total power of approximately 1.5 megawatt by year end. This will be operational by the end of next quarter and then we’ll update you in the next call.

Secondly, we planted the first trees within our forestation initiative Bosco Ferrari Maranello. The first area of woodland spans six hectares out of overall 30 hectares to recreate an ecosystem with significant environmental benefits. And we are seeing increasing interest from many Italian municipalities to join this initiative. And this interest makes us very, very proud.

Thirdly, in addition to our plan shared at Capital Market Day, we are continuing to streamline our production processes and to identify actions to reduce the energy consumption and CO2 emissions. These efficiencies are possible thanks to the ideas, awareness and action of the Ferrari people. And here, I would like to give you a couple of examples. One, thanks to the adoption of new filters in our foundry, we are reducing our Scope 3 upstream carbon footprint by 1% and saving more than 250 tons of aluminum per year. No capex required, only brain power. Two, by recovering the heat dispersion in our engine testing process, we reduced the natural gas usage by approximately 2% of our yearly consumption.

Finally, let me highlight two important achievements related to our people and the next-generation. On one hand, we received the confirmation of the equal salary certificates in Italy and North America. This is a testament to our commitment to an inclusive work environment where the importance of merit is guaranteed to attract, retain and develop the talents that will accelerate Ferrari’s innovation in the future. On the other hand, we inaugurated the e.DO Learning Centre at the Fermi Corni’s IIS Education Institute in Modena. As you know, promoting education is a core part of Ferrari’s ethos and its relationship with the local community. The new laboratory, which aims to help students enter the world of science and technology is an investment in their future.

And now, I will hand over to Antonio to review in detail the Q3 2022 results.

Antonio Picca Piccon — Chief Financial Officer

Many thanks, Benedetto, and good morning or afternoon to everyone joining us today.

Let’s start on Page 7 with the highlights of the third quarter. Another very strong quarter indeed with double-digit growth on key metrics. Shipments were 3,188 units, up 16% versus prior year. Group net revenues were EUR1,250 million, up 19%. EBITDA reached EUR435 million, up 17% year-over-year with an EBITDA margin of 34.8%, lower than last year given the absence of the Ferrari Monza. EBIT was EUR299 million, up 11% with an EBIT margin of 23.9%. Percent and margins were in line with our expectations, mainly reflecting the product mix and DNA evolution. Net profit came in at EUR228 million, up 10% versus prior year, resulting in a diluted EPS of EUR1.23 compared to EUR1.11 in Q3 2021. The industrial free cash flow generation in the quarter was EUR219 million, which implies a cash inflow for the nine months close to EUR600 million, almost EUR100 million higher than last year.

Turning to Page 8, you can see the details of the Q3 shipments. The product portfolio in the quarter included seven internal combustion engine models and three hybrid models, representing 81% and 19% of shipments respectively. As mentioned by Benedetto, in the quarter, we were continuing to serve an impressive order book across all models. Deliveries increase were mainly driven by the 296 GTB, which was in the ramp-up phase along with the 812 Competizione. The Ferrari Portofino M and the F8 family continued to sustain deliveries growth, partially offset by lower contribution from the SF90 family. There were no Icona deliveries in the quarter as the Ferrari Monza phase-out in Q1 this year.

Geographic allocations were driven by product cadence. Mainland China, Hong Kong and Taiwan continued to post double-digit versus the prior year, reflecting the strength of the demand and representing approximately 14% of our total shipments in the quarter, 11% in the nine months. As a reminder, such strong performance in the region represents for us a positive in terms of absolute profitability, but it also implies a margin dilution linked to duties and consumption tax.

On Page 9, you can see the walk of our Group net revenues, growing 13% at constant currency. In Q3, we consolidated the trends already explained in the previous quarters. Cars and spare parts, driven by higher volumes and personalizations, with personalizations were at around 18% in proportion to revenues from cars and spare parts. Engines decreased due to Maserati. Such supply agreement is approaching its expiration in 2023. Sponsorship, commercial and brand reflected the better prior year Formula 1 ranking and the contribution from lifestyle activities led by retail sales and New Zealand visitors despite lower sponsorship. Currency had a positive impact, mostly related to the U.S. dollar and the Chinese yuan.

As we move to Page 10, let me review the change in our EBIT year-over-year, explained by the following variances. Volume, positive for EUR62 million, reflecting the shipments increase. Mix/price variance, negative for EUR26 million and mainly impacted by the lack of Icona and the softer range model mix, partially offset by the increased contribution from personalizations and country mix. As previously mentioned, the strong performance in China was supportive in absolute terms even though it contributed to soften our percentage margins.

Industrial and R&D expenses grew EUR34 million in the quarter, mainly due to higher depreciation and amortization and obviously cost inflation. SG&A were negative by EUR17 million, mainly reflecting communication, marketing and lifestyle activities. Other, finally, was slightly positive for EUR3 million, reflecting the improved prior year Formula 1 ranking and higher contribution from lifestyle activities, partially offset by lower sponsorships, reduced contribution from Maserati and other miscellaneous expenses. The total net impact of currency was positive EUR41 million.

Turning to Page 11. Our industrial free cash flow generation for the quarter reflected the strong profitability and a positive contribution from working capital and other, mainly related to the collection of the Daytona SP3 advances. This was partially offset by EUR198 million of capital expenditure that are progressing in line with our full year program of about EUR800 million. In the quarter, the capitalization ratio of our development expenses was approximately 45%, increased versus the prior year, also as a result of the capped research spending in Formula 1. Net industrial debt as of the end of September 2022 was EUR256 million, decreased by EUR130 million compared to June 2022, reflecting the solid industrial free cash flow generation net of the EUR85 million of share repurchases.

On Page 12, as already mentioned by Benedetto, we revised upward our 2022 guidance across all metrics, sustained by a continued strong business performance of personalizations and a tailwind from foreign exchange rates. Such improved targets encompass the assumptions of continuing cost inflation through our supply chain. And this is mostly visible in the EBITDA margin guidance, which for the short-term, is rather flattened by such increased costs.

To conclude, the results we have presented today, the robustness of our business model and the success of our product portfolio in the current trading conditions, continued to fuel our confidence for the remaining part of 2022, setting the ground of another great year and more to come.

Nicoletta Russo — Head of Investor Relations

Thank you, Antonio. Sharon, we are now ready to open the Q&A session. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We will now take our first question. And your first question comes from Michael Binetti from Credit Suisse. Please go ahead. Your line is open.

Michael Binetti — Credit Suisse — Analyst

Hey, guys. Congrats on a nice quarter. I know the macro is very tough. Let me ask you — I want to ask you today how you feel about the 2022 guidance for EUR1.82 billion of EBITDA you’re raising today. I want to ask you whether you think it’s conservative next year at this time? But I am curious, how you see revenues and profitability building next year across the business lines, maybe the cars business, how you see that contributing? How the P&L for the lifestyle businesses and the sport businesses will change as you bring back some of the core sponsors and expand into Le Mans, the lifestyle categories you mentioned, maybe some of the biggest incremental changes? And then, I guess longer term, I’m curious what are the bigger challenges you see today in getting the first electric Ferrari in 2025 up to the margin levels? Are they in line with the averages you enjoy across the rest of the fleet?

Benedetto Vigna — Chief Executive Officer

Thank you for the question, Mike. So let’s start from the first one. As Antonio said, and there’s a number of showing, we feel very much confident. And that’s the reason why we are increasing, number one, the guidance for this year and we are also very positive for the next year. This is thanks to the order book that we have, that is, let me say, spanning all the products we have as well as all the regions. So this is very — first important message.

Now, if you talk about the bigger challenge for electric car, I think, I would say, I would split the answer in two parts. If you’re talking about the product development, where we are, we are fully in line with our, let’s say, project development. So we are proceeding as per plan. And this is true, as I’ve said, on the technical side. But if I go to see on the profitability side, this is fully in line with our long-term view, mid-term view that we shared with you at Capital Market Day. This year, we made a lot of progress in optimizing on one side the architecture of the car, on the other side also, optimizing and strengthening our relation with some strategic suppliers.

Operator

Thank you. Are you finished, Michael?

Michael Binetti — Credit Suisse — Analyst

I am. Thank you.

Operator

Thank you. I will now go to the next question. And your next question comes from the line of Giulio Pescatore from BNP. Please go ahead. Your line is open.

Giulio Pescatore — Exane BNP Paribas — Analyst

Hi, everyone. Thanks for taking my questions. The first one on the Purosangue order book. I understand you’re not going to comment any more details on where the order book stands, but can you maybe share any color on the composition of this order intake? Is this achieving the goals you had in mind for this model? And anything you can share on that would be very interesting?

The second one on the order book. I noticed that you are now defining it as remarkable vessels records in pretty much any other presentation in the last few quarters. I don’t want to read too much into this, but is that a function of the availability of models? Is there anything else that you’re seeing a softening in order? Anything on that would be also helpful?

And then the last one on the 296 GTB. If you look at the number of hybrids you sold in the quarter, it was pretty much flat sequentially versus Q2. I was expecting maybe an increase because of the ramp-up of the 296. Are you just giving priority to other older models given the demand or is there any delay on the ramp-up of that particular model? Thank you.

Benedetto Vigna — Chief Executive Officer

Okay. I’ll start from the last one, Giulio, the 296, the hybrid and the split between ICE and hybrid. I would say that, so far, it has been always in the ratio 80-20. We expect this ratio to change. Consider that we will have also — we have already stronger order book when it comes to the GT despite the Spider — the 296 Spider. This is important. So if you want, your deduction is correct. We will have an increase of the hybrid shares in our models. So this is question number three.

The question number one, I go to the Purosangue to provide you a little bit more color. As I told you, we had almost 2,500 client visiting us in the — looking at the World Premiere in Tuscany. It has been very well received because of performance, because of the design, because also, some of them had the pleasure and opportunity to try the car. But I have to say that two things we told you at the Capital Market Day, let me say, we stick to that. Number one, we do not want to pass 20% of annual volume of these cars. And two, we are, let’s say, if you want, we are — the order backlog is such that it is fully satisfied. So you cannot come in our factory, but if you come in our factory, you see that we made enough space to accomplish and to realize our industrial plan for these natural aspirated V12 engine. So maybe what I can tell you is that the order we got on Purosangue are really unlike any others. If you want, a volume car in the sense that the order book is more seamless to the special car, to the limited edition car then to the bigger volume cars.

And then there was the last — the other question was the net order intake, the book. Clearly, today — I mean, we keep increasing continuously our order book. We expect a decrease in this speed also because we are sold-out on a lot of models. And we are focusing — I mean, today, if you go in a dealer, you can buy four model, more or less. You have the Roma, you have the Purosangue, you have two term ICE and two hybrid; 296 Spider to 296 GTB and then you have Purosangue and Roma. Clearly, we expect a slowdown in the build-up of the order book, but this is planned obviously.

The other point, we are asking our dealers to push more on the motion to enrich the customer experience through all other dimension that we can offer to our customers. So these are the little bit more color on the three questions you addressed me, Giulio.

Giulio Pescatore — Exane BNP Paribas — Analyst

Very clear. Thank you Very much.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of George Galliers from Goldman Sachs. Please go ahead. Your line is open.

George Galliers — Goldman Sachs — Analyst

Yes. Thanks very much for taking my question. Actually, the first question was just following on a little bit from Giulio’s question. It sounds like you don’t have any capacity constraints on the hybrid cars. So I just wanted to ask about the lower shipments of the SF90. Whilst you saw a positive contribution from all the models, like the F8, particularly as first deliveries of the SF90 Spider only commenced in 3Q last year, hence, full deliveries of that vehicle had been in progress for less than 12 months. Is this a temporary effect? Should we expect growth in SF90 at some point in coming quarters or are you actually seeing a bit of a wind down in terms of the SF90?

The second question I had was just on the 499P, which I think has got everyone with a keen interest in the auto industry and motor sport extremely excited. Is it reasonable to expect at some point a road car derived from this product? And just to revisit I think the introduction of the Icona series, I believe originally it was flagged as bridging the gap between the hypercars, which you typically only introduced at least once every 10 years. Could you see a hypercar and Icona model in production in tandem or would the intention still be that Icona bridges the gap between the hypercars? Thank you.

Benedetto Vigna — Chief Executive Officer

Okay. So we’ll start from the first one, George. One is the capacity constraint, you were saying. So I would like to say one thing. One of the key strengths of Ferrari is the ability to manage different model in production, also because, the line that we have are not fully automated, but there are people, human beings that are able to give flexibility and the agility to the production line. If you can hear, you clearly see that the same manufacturing line can manage ICE or hybrid or hybrid cars.

So what I can tell you is that, number one, we are producing as planned, there is no deviation. And here, complements go, first of all, to the team that is able to manage complicated supply chain. And two, also to our partner that are very much supportive. And other important message is that the agility of this line is thanks to the presence of people that with their passion and their dedication are able to make this line very, very agile and accommodate what are the clients’ needs. So this is very important.

When it comes to 499P, I’m glad you also liked the car. I can tell you that I was with a colleague, what was, Saturday evening. It is really nice car. It is a big step forward for us. I don’t want to comment about your question because, as you can imagine, our product strategy and what we intend to do is also part of our secret sauce. And I’m really sorry, I cannot disclose more detail. But I can tell you that as have seen in the past, Ferrari is very good in using all the things that are developed by the team. Thank you.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of Evan Silverberg from Morgan Stanley. Please go ahead. Your line is open.

Adam Jonas — Morgan Stanley — Analyst

Hi, it’s Adam Jonas everybody. Can you hear me?

Benedetto Vigna — Chief Executive Officer

We hear you, yeah.

Adam Jonas — Morgan Stanley — Analyst

Great. Benedetto, I just wanted to kind of reconcile. You said that the order book for Purosangue is fully satisfied, but you can still order it at a dealer. So I just want to confirm, it’s not quite sold-out officially, correct?

Benedetto Vigna — Chief Executive Officer

Adam, it’s a good deduction.

Adam Jonas — Morgan Stanley — Analyst

Thank you. Also, China 14% of total sales versus 9% last year, dilutive to margin accretive to dollars, euros or profit. Is that normal? What are your thoughts on what a normal level or steady-state level of China as a percentage once you kind of get some of your other launches flowing through Western markets?

Benedetto Vigna — Chief Executive Officer

Adam, as we said in the Capital Market Day, we believe the right number for us, especially in China, if you want, is between 11%, 10%, 11%.

Adam Jonas — Morgan Stanley — Analyst

10%, 11%. Great. Thanks so much. And just finally, if I can squeeze one more in and I’ll shut up. You talked about strategic partnerships as you kind of get closer to production of your first — pure EV in 2025. I know this call is too early for major milestones there, but would next year — by end of next year be too soon for you to disclose your battery cell partner or should we wait until beyond ’23 for that type of announcement? Thanks everybody.

Benedetto Vigna — Chief Executive Officer

Adam, you know that the battery, we are the supplier. The cell, we do not even disclose the cell supplier or cell maker also for 296 and SF90. I believe that this is an important part we want to keep for us. So what I can tell you and all the colleagues on the phone is that the development of the car is proceeding as planned. We did a big, big step forward in Q3. But unfortunately, we cannot tell you who is going to be the cell supplier.

Adam Jonas — Morgan Stanley — Analyst

Thanks, Benedetto.

Benedetto Vigna — Chief Executive Officer

Thank you, Adam.

Operator

Thank you. We will now take our next question. And your next question comes from the line of Stephen Reitman from Societe Generale. Please go ahead. Your line is open.

Stephen Reitman — Societe Generale — Analyst

Thank you, and good afternoon. I have two questions. First of all, I think it’s been said that it was a kind of set of unique circumstances that have led to the situation where you have very few vehicles that are available to sell because of delays with certain launches and other impacts from COVID on the delays. So you had a limited number — part of the vehicles to sell. When in your mind do you think we’ll be in a situation where your dealers will have a much wider range of vehicles to sell?

And secondly, could you comment on the trends in residual values? Obviously, I know that’s the responsibility of dealers to do that, but obviously, you monitor those — that situation quite closely as well. Thank you.

Benedetto Vigna — Chief Executive Officer

I’ll start from the second, Stephen. The trend on the residual value, we don’t see any change. We see some model appreciating. But we don’t see any change over there. And actually, we believe that the fact that, let’s say, the fact that a lot of models have sold-out, this will give — will be an opportunity for our dealers to focus also on the pre-owned business.

And then there was the — the first question was about the — yeah, I think look — it’s what we said in the Capital Market Day. We are planning to launch 15 models in these four years beyond the Purosangue. We are sticking to that. We may have some models more successful than others. But I think what I can tell you that we stick to our compass, that is 15 new models with the split, I told you on the Capital Market Day [Technical Issue] that in 2026, we will have the offering split between — we will have the three offerings, the ICE, the hybrid and electric as what we told you in the Capital Market Day. So there is no change.

And we had — actually, I can also give more color. Stephen, last week, we had the distribution — the dealer annual meeting here in Modena where we had 500 500 people visiting us. And let me say you, they are very supportive, very much engaged and they fully agree on our plan for the future in terms of new car launches. So there is very, very tight relation. And we are working very well with them and they with us.

Stephen Reitman — Societe Generale — Analyst

Thank you.

Benedetto Vigna — Chief Executive Officer

Thank you.

Operator

Thank you. We will go to our next question. And your next question comes from the line of Monica Bosio from Intesa San Paolo. Please go ahead. Your line is open.

Monica Bosio — Intesa San Paolo — Analyst

Good afternoon, everyone. I hope you can hear me. The first question is on Purosangue. The personalization rate on average is 18%, but I’m wondering if we can assume a much higher personalization rate for Purosangue may be in the range of 23%, 24%. Am I too aggressive on this side? And the second question is more strategic. Looking forward, would you see as reasonable an electric model with the same mission of the Purosangue? Just a statement from you. And very last is on — maybe it’s too early to ask, but do you have a breakdown — last breakdown of the customer profile by gender and age for the Purosangue? Thank you very much.

Benedetto Vigna — Chief Executive Officer

Thank you, Monica. So I’ll start from the Purosangue. Let me tell you one thing that the Purosangue has a lot of accessories, a lot of optional, a lot of opportunities for personalization because we have been enriching the offer — I mean, I mentioned just one that is very interesting is electrochromic glass roof. It’s very, very interesting. It’s very well appreciated. I believe that there could be opportunities to have higher personalization, but at the end of the story, it depends also what the clients and how much they want to personalize. So I would — allow me to say, I would be arrogant if I would guess what is the personalization rate of the clients. What I can tell you is that offer is pretty wide. And usually, as you’ve seen also in Q3 and the guidance in Q4 is also driven by a positive tailwind on the personalization.

Then when it comes to the, let me say, electric Purosangue. If you allow me to say in this way, the second question.

Monica Bosio — Intesa San Paolo — Analyst

Something similar, yes.

Benedetto Vigna — Chief Executive Officer

Yeah. As I said before to another colleague, the plan for the future is something that we are very secret of also because we believe that it constitutes a competitive advantage for us. So let me say in this way. We will use the technologies in a way keeping always in mind and putting always the client at the center and the driving thrills that we want to generate. So we have a plan, but I cannot disclose here. Sorry, Monica.

Monica Bosio — Intesa San Paolo — Analyst

Got it. I understand.

Benedetto Vigna — Chief Executive Officer

Another point is, the customer picture, yes, for sure, we have the customer — we know the customer of Purosangue. What I can tell you — without disclosing anything confidential, what I can tell you is that we have a strong acceptance either by, let me say, the collectors. What was — call it in the previous call, I think top VIP, and also by the new prospect. The reception of this model across different age, different region, different gender is very, very strong. So there is not a clear sign, a clear pattern. I can tell you that men and women, Asian, European, American, they all — a little bit older, a little younger, they all like this car, the Purosangue.

Monica Bosio — Intesa San Paolo — Analyst

Thank you very much, Benedetto. Very clear. Thank you.

Benedetto Vigna — Chief Executive Officer

Thank you.

Operator

Thank you. We will now take your next question. And your next question comes from the line of John Murphy, Bank of America. Please go ahead.

John Murphy — Bank of America Merrill Lynch — Analyst

Good afternoon. Just one — well, additional question on the Purosangue. I mean, you’ve mentioned that it could be as much as 20% of your volume and you would limit it there. If we look at the volumes that you put up this year in 2022, that would imply that you might be able to do 3,000 to 3,500 of the Purosangues go forward. I’m just curious, based on your order book right now and what you’re thinking, if that is a number you think is achievable? And if we were to think about something like that, that would equate to about four to five years of the volume growth that most people our expecting. So it seems like that that would be sort of a high number. Just curious, as you dimension, where that segment actually could be for you? I know you’re governing at a 20%, but is that something you think can happen more quickly or based on your order book may be it might take longer?

Benedetto Vigna — Chief Executive Officer

Thank you, Johnny. Maybe I misunderstood. You said that 3,500 per year?

John Murphy — Bank of America Merrill Lynch — Analyst

Yeah. Assuming you’re going to do about 13,000 units this year, I mean just grossing it up and just saying, if you’re going to do — if you’re limiting the Purosangue to 20%, you would add specifically 3,250 units to that base of 13,000 that would be Purosangues to get to 20% mix as Purosangue. I mean, basically how fast do you think you can get there or how slow you think you can get there? And how do you manage this based on the order book that you’re seeing right now?

Benedetto Vigna — Chief Executive Officer

Now the reason why I was asking is that, for me, 20% out of 13,000 is 2,600. That’s the reason why I wanted to check. So what I can say…

John Murphy — Bank of America Merrill Lynch — Analyst

But I would imagine it would be incremental, right? I mean, there wouldn’t be any new?

Benedetto Vigna — Chief Executive Officer

I’m not saying incremental. I’m saying that out of the total numbers, up to 20% of year, the volumes will be Purosangue. So let’s say if it is 13,000, it’s around 2,600. What I can tell you is that we are pretty close to our target. And let’s say, I think this is the most detailed information I can provide you together with the fact that the car really received strong acceptance, as I said before, by all people that attended, because we had customer traveling from all over the world. And let’s say, the acceptance has been very, very strong. A lot of enthusiasm.

They appreciated the performance, they appreciated the design, they appreciated also the driving and motion, because during those days, there was a very good idea of the marketing team of the commercial team. They offered the possibility to some customers that were selected on through a lottery to drive the car for around 40 kilometers. And I cannot share with you, but there are the videos of the people that are really crying for the motions that they can experience. So very strong acceptance because of the performance, the design and driving thrills. And we are very close to our target. And as I said, we stick to our plan to not pass the 20% threshold of our annual volumes, whatever they will be.

John Murphy — Bank of America Merrill Lynch — Analyst

We look forward to driving it. Just the second question a real quick. If we think about 2023, mix is going to be a major positive with the Daytona and the Purosangue. It sounds like pricing is a small positive for you right now and that’s likely to continue. Volume, presumably, will be up. Raws are easing. Other cost inflation might not be too bad. It sounds like your earnings may gap open next year. I think the consensus is for better than a 20% increase in EBIT. Is there any sort of major sort of headwinds that I might be missing or we should be thinking about or even positive factors we should think about besides those major ones for 2023?

Benedetto Vigna — Chief Executive Officer

I mean, the Capital Market Day was clear about the target also for next year. Clearly, we are paying close attention to the story of the inflation. And this is also the reason why we said those in the previous call, we are increasing prices for next year. But for the rest, I mean, we are proceeding as planned. And as in the past, we delivered on-premise — on our promises, we want also to continue to deliver on our promises. So this is our, I would say, daily commitment to the people here and obviously to all the shareholders.

John Murphy — Bank of America Merrill Lynch — Analyst

Great. Thank you very much.

Benedetto Vigna — Chief Executive Officer

Thank you.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of Thomas Besson from Kepler. Please go ahead. Your line is open.

Thomas Besson — Kepler Cheuvreux — Analyst

Thank you very much. It’s Thomas Besson with Kepler Cheuvreux. I’d like to first follow-up on John’s question if that’s okay. I know you never want to give the exact numbers, but when you said 20% of the volumes you may achieve, I think we probably need to think about the few years out. So does it include only the current capacities with the two shift of the existing production lines or does that include as well potential incremental capacities from EVs? So should we think about 2,500 or more, 3,000, 4,000 per annum for Purosangue? That’s the first question. Thank you.

Benedetto Vigna — Chief Executive Officer

No, no, as we said, I mean, we will not — there will not be a big change in our capacity. We want always to keep guaranteed exclusivity of all the cars we sell. Purosangue, as I said also in June when we met here in Maranello, it’s not the car that is meant to double the volume for us like it is in the strategic plan of other players in this field. For us, it’s a unique car, it’s a sports car, it’s a car unlike any other, for which we aim to have maximum 20% of the yearly volumes, because I believe — we believe that the exclusivity and uniqueness of our car goes also through this avenue. We don’t want to end up doubling the volume and, let’s say, putting a lot of capex also because, as I said, exclusivity and uniqueness are the key drivers of our product strategy and our, if you want, our daily compass, and that’s what we want to stick to.

Thomas Besson — Kepler Cheuvreux — Analyst

Thank you. Very clear. Second question on the forex. When we look at 2023, is it reasonable to expect another decent boost from forex given your hedging positioning or how has been — or is a bulk of the benefits from that bucket?

Benedetto Vigna — Chief Executive Officer

Okay. This is a good question for Antonio, because otherwise, he was silent. It’s good.

Antonio Picca Piccon — Chief Financial Officer

Thank you, Thomas, for keeping my intention alive. I think your question is, it depends of course. I mean, as you know, we hedge foreign exchange on a rolling basis. That means that we basically project on 2023 the trend of 2022. Whether this will be a positive or a negative, it pretty much depends on how the foreign exchange rate behave on a spot basis. All in all, we try and have approximately 70% of our total exposure hedged in advance declining over time. So we are basically projecting to 2023, as I’ve said before, the trend that we have witnessed in previous months. Then if the dollar goes to EUR1.10, obviously, we have a huge positive. If it goes to EUR1.80 — sorry, to EUR0.80, it’s going to be a negative. That is the sense of my answer. Hope it helps.

Thomas Besson — Kepler Cheuvreux — Analyst

Yes, very clear. Thanks.

Antonio Picca Piccon — Chief Financial Officer

Thanks.

Thomas Besson — Kepler Cheuvreux — Analyst

Just a very quick follow-up. Can you confirm the dates of deliveries for Purosangue and the [Indecipherable] you’d have the first deliveries?

Antonio Picca Piccon — Chief Financial Officer

Yeah, it’s Q2.

Thomas Besson — Kepler Cheuvreux — Analyst

Q2. Thank you very much.

Antonio Picca Piccon — Chief Financial Officer

Welcome.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of Philippe Houchois from Jefferies. Please go ahead. Your line is open.

Philippe Houchois — Jefferies — Analyst

Yes. Thank you, and good afternoon. I’ve got two questions. One is, I’m just following up on the question on the used [Phonetic] values. So if I understand right, you started your comments saying you’ve got remarkable order intake across models and that will probably more likely translate into better residual values rather than maybe the used market being more economically sensitive and people being kind of more shy about buying those cars. So my first question is, is there any way that Ferrari is directly leveraged to improvement in used values? What I mean by that is, are any agreements with dealers where there’s a bit of profit-sharing if they — they’re going to benefit the most I guess if there’s improvement in used values. And I’m just wondering, if in any way, you are geared to that gain in profit-sharing with dealers?

And my other question is — a lot of questions about Purosangue and 20% cap, etc. If I hear you right again, this car drives every bit as well as any Ferrari so you’re very proud of it. So this 20% cap is just arbitrary to — but there’s is no — for years there was a concern about SUVs might damage the brand, etc., but this is not at all the case. You’re just trying to keep the diversification of your product portfolio rather than lose card that might eventually kind of dominate some of your volume. Is that correct?

Benedetto Vigna — Chief Executive Officer

Okay. Philippe, I will start from the first one. When it comes to the pre-owned business, we have no profit-sharing. So there is no profit-sharing with our dealers. It’s their business. They manage in the way they want. And let me say, unique — what we have to do to help them is always to think about uniqueness, exclusivity of the model. So this is what we do.

When it comes to Purosangue, I think I would like to take this opportunity to remember that there are two orders that in Ferrari do not fit well. The Ferrari and utility. These are — I mean, SUV, and as I said, it is not an SUV or SUV because putting together the utility word with a Ferrari car, I think we all agree, is no sense. Now the story of our Purosangue, it is a new category, it’s unlike any others. It is pushing and is very well appreciated.

Well, we said the 20% because we believe that this is a car like the other car we have in our range, we will have — if you make the math, we will have four to — around four cars per year, four to five cars. So it’s around the 20%, the split of the cars that you put on the market. So that is not, I wouldn’t say, arbitrary. There is a rationale behind that is always meant to preserve the uniqueness and exclusivity because we consider Purosangue a car like the others we have in terms of volume split and unlike any other cars in that, say the category, if you want, from other competitors. It’s a unique car. And we want to preserve uniqueness and exclusivity. Maybe you can be — not utility, it can be uniqueness, Philippe. I will make a good one.

Philippe Houchois — Jefferies — Analyst

Yeah. Thank you very much.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of Tom Narayan from RBC. Please go ahead. Your line is open.

Tom Narayan — RBC — Analyst

Yes, Tom Narayan, RBC. Thanks for taking the questions. The first one is, on the guidance you guys have out there for 2023, I know that it does feel I think somewhat stale. And I think some investors may be just wondering if why may we haven’t withdrawn it or commented on it. I know usually only comment on the annual guidance in the full year call, but I was just curious if there was any commentary on the current ’23 guidance that you have out there?

And then the second question on Purosangue. Number of us on this call attended this Rolls Royce event and we were — I found it surprising to hear that a lot of customers for that brand really didn’t care as much for software or assisted-driving and those sorts of features and cared more about luxury aspects of the car and stuff like that. Just curious, if this is what you were hearing from your latest event from consumers looking at the Purosangue as well? Thank you.

Benedetto Vigna — Chief Executive Officer

I’ll start from the second one. If I understand well, Tom, how much is value to the software in this kind of car. I’d like to say that when you’re talking about the luxury cars — and this is through — you see me now, I am in this role since 14 months. It’s true that there are features that are may be important in mass-market cars, but are not at all important in luxury cars. I have had the pleasure to talk with many customers during this year. So what I can tell you that the software, the digital, the electronic in the car must be placed in the right value, because if you exaggerate, nobody will appreciate that value. So I do not comment specifically about Purosangue, but I can tell you that when you talk about luxury cars, well, it is a place where typical dimension that are important for the mass-market players, do not a sport in a meaning in this world.

When it comes to 2023 guidance, I think you understood well. We provided guidance for 2022. I can repeat what Antonio and myself said before that we — the business model is very robust. The order portfolio is very strong, is very robust. And then we feel confident about this year and next year, but we do not provide any specific guidance. Sorry, Tom.

Tom Narayan — RBC — Analyst

Okay, no problem. Thank you.

Benedetto Vigna — Chief Executive Officer

In addition to what we said at the Capital Market Day, of course.

Tom Narayan — RBC — Analyst

Understood.

Operator

Thank you. We will now go to our next question. And your next question comes from the line of Anthony Dick from Oddo. Please go ahead. Your line is open.

Anthony Dick — Oddo Securities – ODDO BHF — Analyst

Yes, hi. Thanks for taking my questions. I had a first one on the 2022 margin guidance. It seems in Q4 you’re going to have probably some positive product mix for the SF90, some positive [Indecipherable] mix, ramping up of the FX tailwind and also maybe few expenses with fewer events. Your Q4 EBITDA margin guidance is for very moderate increase in terms of margin. So I was just wondering if there were any particular headwinds to expect from the margins in Q4?

And then a second quick question on the topic of energy and energy supply. I understand that you use gas for your production in your factories and Italy is reliant quite heavily on Russian gas. So I just wondered if there were — if you’ve put in place any measures to significantly reduce your gas consumption or anything from contingency plans you had in case the country faced a gas shortage this winter or the next? Thank you.

Benedetto Vigna — Chief Executive Officer

Okay. So I think, Anthony, I’ll take the one on energy and I’ll let Antonio comment on the first one. So I would like to clarify a few things. Number one, we do not rely on Russian gas. Number two, we produce 80% — almost 80% of our energy is coming through three generators that we have in our factory. Number three, as I show you, we are working — we are increasing the share of electricity that we are generating in-house. And we are also reducing the energy waste through better efficiencies or let me say leveraging the ideas that the team has. If you remember, I was talking about reducing the gas consumption by 2%. That is a good number. That is being done by, let me say, putting the people around the table. So we are putting also some contingency plan in place, because in case there are some national, let me say, national direction, well, we will — we are here in Italy, we will stick to them. But we are putting contingency plan in place. And clearly, the stock that we have is also a way to manage this situation.

For the first one, I would like Antonio to comment.

Antonio Picca Piccon — Chief Financial Officer

Yeah. To your question on the implied margin for Q4, Anthony, I think these are in line with the nine months in terms of EBITDA, so 35% expected to be confirmed in the last quarter. In terms of the rationale, I think directionally you may think of the business being particularly strong in terms of personalizations in addition to what the range of models that we sell may provide. We have a positive from foreign exchange rates compared to the initial expectations for the year. And in terms of the negative, cost inflation is the only one I can think of. So all in all, I think we are in line with what we had expected since overall throughout the year.

Anthony Dick — Oddo Securities – ODDO BHF — Analyst

Okay. Thanks very much.

Antonio Picca Piccon — Chief Financial Officer

Thank you.

Operator

Thank you. I will now hand the call back to Benedetto Vigna. Please go ahead.

Benedetto Vigna — Chief Executive Officer

Thank you. Thanks all of you for your time today and also for all your useful questions. As you have heard a few minutes ago from myself and Antonio, we did what we said. We delivered on all what we promised. And we look with great confidence to Q4 and beyond.

Before closing, I also take the occasion to thank all the men, all the women of Ferrari in Maranello and all over the world that contribute daily to the success of our company. For the time being, very good afternoon everyone. Thanks again for your attention, and talk to you in a quarter. Bye, bye.

Operator

[Operator Closing Remarks]

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