Ferrari holds firm in world economic crisis

In a difficult economy, Ferrari seems to be holding its own. This according to the Italian luxury sports car maker at its board meeting to review the 2009 financial results. Across vertical industries the recurring theme has been a 20-35% reduction in revenues and that is no different in the luxury sports cart market:

Even though the luxury sports car market suffered an average reduction of 35% in 2009, Ferrari recorded only slightly lower results than in 2008, the most financially successful year in the Prancing Horse’s entire history. A total of 6,250 cars were delivered to end clients (-5%) with a confirmed growth in emerging countries and a controlled contraction in certain of our more mature markets. The sharply contracting market made Ferrari’s market share grow across the board with an average increase worldwide of 10 percentage points, garnering it leadership of the sports car segment.

Ferrari

While new Ferrari F1 driver Fernando Alonso gets settled in at the team, one can only assume his presence there will also help the motorsport division increase its marketing revenue stream as well. According to Ferrari their investment in brand activities has increased and Alonso can only help the cause:

The retail business grew by 22.5%, thanks in part to the opening of Ferrari Stores in strategic locations such as Regent Street, right in the very heart of London. The Ferrari Store development programme will pursue the plan to reach 60 stores worldwide by the end of 2011. On the licensing front, revenues increased by an average of 10.7%.

A further demonstration of the strength of the Ferrari brand came from Formula One. In what proved to be one of the most disappointing seasons ever, the Scuderia Ferrari Marlboro renewed numerous sponsorship contracts and signed a very important new five-year agreement with Banco Santander.

Ferrari’s internet activities in 2009 were dominated by the complete redesign and relaunch of the www.ferrari.com website which very rapidly accumulated the record figure of 200 million page views in nine months. All the new car launches and the major events were broadcast on the site, including the unveiling of the new Formula One single-seater, the F10 which was watched by over 3 million people. In January, the Japanese version of the site went live and a Chinese version will follow in the course of the year.

Some of the reduction in profits, I am completely guessing here, could be from capital expenditures in new energy technologies in order to be more ecologically sensitive. While the FIA talks about ir, it seems Ferrari has already done something about it:

The environment represents the other strategic area in which Ferrari in strongly investing. The new trigeneration system (the simultaneous production of power, heat and cooling from a single source) together with the photovoltaic plant enabled Ferrari to decrease CO2 emissions by 15% the, with the goal of reaching a decrease of 25-30% by the end of 2010. Through this ecological system, Ferrari is already almost completely autonomous for its energy requirements.

But what prevented Ferrari from experiencing an average 35% performance drop?

These results were reached thanks to the completion of the range and in particular with the extraordinary success of the Ferrari California for which 60% of the customers are new Ferraristi.

The most recent car, the 458 Italia, deliveries of which only just started, made no contribution to the 2009 figures, but it has already obtained exceptionally positive reviews and prestigious awards all around the world.

Thank you Ferrari California buyers. Percentages have a way of seeming impersonal so what does this mean in hard cash?

Consolidated revenues at the end of 2009 stood at 1,778 million euro (-7%) with an operating profit of 245 million euro, compared to 341 million euro last year. Ferrari recorded a ROS (Return on Sales) for 2009 of 13.8%. The variation of the operating result is due to the negative effects of volumes and product mix (both of which were extremely positive in 2008) as well as unfavourable exchange rates. The weakness of the US dollar has a major impact since over 30% of sales are made in this currency.

The reduction in margin and reduce value of the American dollar certainly played its role and while percentages seem relatively innocuous, a 100 million Euro reduction is still a lot of coin to miss. The key indicator here is the fact that Ferrari came off 2008 with their best year ever so the comparison might be better juxtaposed with an average of prior years performance.

Ferrari chairman Luca di Montezemolo said:

“Achieving these results in such a challenging economic climate is the best possible endorsement of the quality and the commitment of all the people of Ferrari and of our strategy focusing on innovation and exclusivity. Those guidelines will also allow us to tackle 2010: it will be a very difficult year and the first small signs of recovery will not come until next autumn.”

ferrari test

The reduction in revenue hasn’t stopped Ferrari from hiring Alonso (can’t be an inexpensive proposition), Fisichella (yet another test driver) and some interesting changes for the second test at Jerez starting today.

In the Scuderia’s garage the mechanics will set up the chassis 282, the second F10, to be used tomorrow and Thursday by Felipe Massa and on Friday and Saturday by Fernando Alonso. The car will have some aerodynamic update, but quite insignificant: the main part of the package should be available for the last test session on the “Circuit de Catalunya” near Barcelona, from 25 to 28 February.

New Chassis and aero parts already? That’s quick given only a week has passed. Ferrari do mention they are insignificant upgrades as they wouldn’t want us to think they needed them at all but why not try a couple little things out for the fun of it? Who, among us, can’t get excited about seeing our old friend Fisichella testing in the Ferrari car this week? I am sure he’s looking forward to it.

All of this to suggest that Ferrari have had a reduction in revenue, not on par with other similar industries, and that they are growing in certain key areas. Namely F1 and F1 related business. That bodes well for the Scuderia as long as they have built a good car because I think we can all assume drivers Felipe Massa and Fernando Alonso can drive them.

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