Ferrari - Q4 2023
February 1, 2024
Transcript
Operator (participant)
Good day, and thank you for standing by. Welcome to the Ferrari 2023 full year results conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Nicoletta Russo, Head of Investor Relations. Please go ahead.
Nicoletta Russo (Head of Investor Relations)
Thank you, and welcome to everyone who is joining us. Today, we plan to cover the group's full year 2023 operating results and 2024 guidance, 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 investor 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 (CEO)
Grazie, Nicoletta, and thank you everyone for joining us today. 2023 will be remembered as a year in which we accomplished many achievements, and we strengthened our brand across each of its three souls: racing, sports cars, and lifestyle. For this, I would like to thank all the women and men of Ferrari for their outstanding work, all our clients for their continuous trust in our brand, and all our partners, suppliers, dealers, and sponsors, with whom we have continued to strengthen our relations. Among the many achievements realized in 2023, I'd like to mention three. The first, the historic victory at Le Mans. The second is the five new model launches, further enriching our beautiful product offering, together with a variety of new clients' engagement experiences.
Last but not least, the new iconic bag, the Maranello Clutch, that stands out to the cooperation between colleagues in Maranello, belongs to sports car team, and those in Milan of our lifestyle department. These achievements are reflected in our record full-year financial results across all metrics. Let's start reviewing together a few key numbers for year 2023. Revenues were at approximately EUR 6 billion. EBITDA at EUR 2.28 billion, with record yearly EBITDA margin of 38.2%. Net profit, first in our history, well over EUR 1.1 billion threshold, with a remarkable net profit margin of 21%, and industrial free cash flow generation of approximately EUR 930 million, of which about EUR 800 million distributed to shareholders between dividends and share buyback. Now, after the numbers, let's deep dive into our racing activities.
Winning the 24 Hours of Le Mans was an unforgettable day for our history. I was there. I will never forget June 11 afternoon, because it saw our victorious return to the top class of the World Endurance Championship on the centenary of this legendary 24-hour race. The Ferrari 499P win was a true team effort. Every area of our company worked together to contribute to our Hypercar success, and I'm really proud of everyone. As we say, we are, and we act as one Ferrari. In Formula 1, we fought till the very last race, even though the last season has been a difficult one, often short on satisfaction. We know we must continue to work tirelessly to return to the level that our tifosi rightly expect of us, and we look forward to it.
The continuous will to progress and strive for excellence in racing and everything we do testify our effort and our willingness to always push the boundaries of technology and innovation audaciously. And this leads me to the achievements we reached in our sports cars. In 2023, we unveiled five new models out of the 15 models announced at 2022 Capital Markets Day. Three models for the road: Roma Spider, the SF90 XX Stradale, and the SF90 XX Spider. They all raised the bar of technology and design still further to meet and exceed the desires of our clients. And two models for the track. During the Finali Mondiali at the Mugello Circuit last quarter, we unveiled the 296 Challenge and the 499P Modificata, both of which will set new benchmarks in track driving thrills of our most passionate racing clients. Consistently and coherently-...
We follow our strategy of different Ferrari for different moments, and different Ferrari for different Ferraristi. This year, we continued to engage with our clients with many experience on the road and on the track. I refer to unique and truly engaging location, such as the Finali Mondiali, our Cavalcades, the Legacy Tour, our legacy tours, to mention just a few of them. These are all experiences which continue to bond our community even further, and evoke a true sense of belonging. These exclusive events enable our clients, our tifosi, and enthusiasts to interact with the brand and live experiences together. 2023 has been a year of learning for our lifestyle activities, which have shown positive indicators, among which improved retail performances, successful activation in conjunction, and this is really key, in conjunction with racing and brand events and record museums visitors.
In fact, 740,000 brand lovers visited our museums in Maranello and Modena in the years, almost 20% more people than one year ago, confirming the strength of the brand and the passion of our community. Throughout all the years, throughout 2023, we have also done relevant progress in our carbon neutrality journey. Indeed, we reduced our Scope 1 and Scope 2 emissions by 7% in 2023, and by 16% versus 2021. We built our first prototype engine from recycled aluminum. We also installed solar panels, providing an extra 2.4 MW peak power compared to last year. An additional 1 MW peak power will become available in the coming months from the renewable energy community, the first-ever energy community in Italy to be backed by an industrial company for the benefit of its local area.
This is only one demonstration of the moral obligation we feel to give back to local community. All of these developments, as well as the record result, has been possible, thanks to the passion and dedication of all my colleagues. Toward the achievement, in line with the company's strong performance indicators, I am pleased to announce the yearly competitive award of up to nearly EUR 13,500 for all our employees. We are also proud to mention the additional four welfare initiatives that we have announced at the last November thirteenth. A broad-based share ownership plan for our 5,000-plus employees, the extension of health checkups, the parenting support, as well as the 260 new hires. On top, we have also received the Equal Salary Certification on a global level for the first time.
A result we can all be proud of. 2023 was characterized by global tensions, geopolitical conflicts, supply chain disruption, and cost inflation, all challenges we have learned a lot from. Our flexibility, our agility, together with the constant support of our clients and partners, allow us to look at 2024 with confidence. Such confidence also derives from the positive momentum that we continue to experience. Notwithstanding the current challenging macroeconomic environment, the vitality of our business is once again confirmed by the order book on current models, which remain strong across all geographies and covers the entire 2025. During last months, I've been visiting several dealerships in Europe, USA, in different countries in Asia, and I can tell you that the traction of our brand is really strong. You can really breathe it.
When you meet our clients into the dealership, and you see how they interact with our dealers, you can easily understand the strong attachment to our brands. Our dealerships are a great point of aggregation for our clients, and events organized by our dealers help to give a boost to the spontaneous aggregation of our loyal clients. The residual values remain sound, with different dynamics in the region and normalizing from the peaks registered in the post-pandemic period, when a lack of new product boosted them. The visibility granted by the order book give us the confidence to look at the future, but at the same time, we need to keep always four wheels on the ground. Confident humility and will to progress have been, are, and will be our North Star during the execution of our business plan.
Following an initial phase of our business plan, characterized by revenues and profitability expansion, in 2024, we continue to grow our top line, while consolidating percentage margins, which we expect to further expand toward the end of the current business plan. The record result of 2023, the exceptional visibility on our order book, and extraordinary performance of our business, allow us to look at the high end of the 2026 target with stronger confidence. But beyond the cold numbers, what to expect in 2024 from us?... In racing, our DNA, we will compete at the top in Formula One and endurance. We have recently confirmed the World Endurance Championship team, and in Formula One, we have reinforced the technical team and expanded the manufacturing area, which is already up and running.
During the last weekend, we won the 24 Hours of Daytona in GTD Pro class with our 296 GT3 cars. Definitely a great start to the 296 careers. On top, we have just announced that we are expanding our presence in the racing world with intention of setting records also by racing on the seas of the entire world. In sports cars, we will inaugurate the building in June, exactly two years later than the last Capital Markets Day. We will further enrich the product offering with three new model launches, and we will continue to enhance our client experiences, both on track and on road, not only, not only on brand-new cars, but also taking care of Ferraristi owning pre-owned models with tailored events. In our history, we crafted about 150 different models of Ferrari, and for us, they are all equally important.
They are all our kids. In lifestyle, in 2024, will be the year of progress, with an array of activities designed to build the scale while elevating and expanding visibility. Among our priorities, we continue to focus on our carbon neutrality journey, which is further boosted by the ultimate goal to shut down the three generators within the next 18 months. We look ahead at 2024 with energy, agility, and confident humility, but above all, with enthusiasm for the new exciting challenges in front of us. Now, I hand over to Antonio to review the 2023 results and 2024 guidance.
Antonio Picca Piccon (Former CFO)
Thank you, Benedetto, and good morning or afternoon to everyone joining us today. Starting on page 7, we present the highlights of the results for the entire 2024. As Benedetto just mentioned, 2023 was another record year for our company, with all financial metrics once again growing double digits and with a significant margin expansion of 3 percentage points at the EBIT level, and even more at the EBITDA level. Even if our four-year plan from the last Capital Markets Day is rather front-loaded by design, such results went beyond exceeding expectations, considering the modest shipments increase and inflation headwind affecting our input costs. A visible real-life application of the obsession to privilege value upon volume and to control allocations to promote exclusivity. Let's dive into the details to try and shed some light on our path forward.
Our strong business performance in 2023 was sustained by three main factors: a rich product mix, per se, further emphasized by a surprisingly strong personalization uptick, coupled with a favorable country mix. These led to revenues up 17%, adjusted EBITDA growing roughly 28.5%, that is EUR 500 million, with a very solid margin standing at 38.2%. Adjusted EBIT up approximately 32%, with a yearly record, 27.1% margin. Net profit of EUR 1,260 million, leading to an adjusted diluted earnings per share of EUR 6.9 from less than 5.1 last year. Of particular note is the industrial free cash flow generation, which reached EUR 932 million. Moving to page eight, you can see the details of the full year shipment.
In the year, deliveries increased less than 450 units after two post-pandemic years of strong double-digit increase. As usual, geographies reflect our choices of volume and product allocation in the different markets. EMEA and the Americas were up versus prior year, representing more than 70% of our total shipments. Plus APAC was almost flat at 17%, and Mainland China, Hong Kong, and Taiwan reduced their share by a few tenths of units to 11%, in line with our long-term targets for this area, considering its relative use and evident dilutive impact on our percentage margins. Shifting to the product, the most significant change in the year was the doubling of the ideal share to 44% of the total volumes, underpinned by the growth of the SF90 and 296 family.
The highly anticipated Purosangue ramped up during the second half of the year to finally reach its cruising altitude in 2024. The Roma Spider, which was unveiled in the first quarter, already commenced delivery in the last quarter of 2023. Special series represented by the 812 Competizione family increased compared to one year ago, thanks to the deliveries of the Aperta version, while Daytona SP3 shipments continued according to our plan, between 30 and 40 units per quarter. Lastly, in the year, the F8 family concluded its life cycle, with the Portofino M also approaching its end. On page 9, you can see the net revenues bridge, showing a robust 17% growth versus prior year, also at constant currency. The increase in cars and spare parts was evidently the main contributor, driven by the richer mix, personalizations, pricing, and slightly higher volumes.
Price increases during the year were differentiated by product and geography, in accordance with the decisions taken in the second half of 2022, to protect our margin from the surge of inflation. Personalizations continued to strengthen, and in the last quarter, we witnessed a consolidation of the trend registered in the first nine months. In 2023, personalization stood at approximately 19% in proportion to revenues from cars and spare parts, mainly driven by paint, liveries, and the use of carbon. Sponsorship, commercial, and brand reflected higher sponsorships, including Formula 1 and World Endurance Championship racing activities, higher Formula 1 commercial revenues, and the better ranking achieved in 2022 compared to 2021, as well as the growing contribution from lifestyle activities. Engines revenues declined in line with the reduction of supplies to Maserati, whose contract expired at the end of 2023.
Therefore, from the first quarter 2024 onward, any residual contribution from the sales of engines to third parties, whether for sport cars or racing, will be reported in the bar named Other. Currency had a small negative net impact, mainly reflecting the opposite dynamics of the US dollar, Japanese yen, and Chinese yuan. Moving to page 10, the change in adjusted EBIT is explained by the following variances: volume, positive, and reflecting the limited increase in shipments. Mix and price, also positive and very strong for EUR 461 million, thanks to very favorable product mix, sustained by the Daytona SP3, the 812 and the SF90 families. Country mix, driven by the Americas and Mainland China, Hong Kong, and Taiwan, despite the small decrease in deliveries in the year, and to the increased contribution from personalization and pricing.
Industrial and R&D expenses grew EUR 166 million, mainly due to higher depreciation and amortization, cost inflation, and higher Formula 1 expenses. SG&A was negative for EUR 43 million, mainly reflecting the continuous development of the company's digital infrastructure and organization. In addition, we kept on adding resources to enhance our brand investment, which encompass all our marketing, lifestyle, and other initiatives designed to enhance the brand recognition among clients. Other was positive for EUR 81 million, combining higher Formula 1 commercial revenues, as well as better ranking in 2022 versus 2021, new sponsorships, higher contribution from lifestyle activities, and certain releases of provisions already discussed during the year. The total net impact of currency was positive for EUR 15 million. With the positive net support of these variances, we reached the yearly records of EBITDA and EBIT margins that we commend.
Turning to page 11, our Industrial Free Cash Flow generation was remarkable in the year, reaching EUR 932 million, reflecting the increased profitability, partially offset by financial charges and taxes, and most of all, capital expenditure for EUR 869 million, increasing in line with the pace of development of our products and infrastructure. We already flagged significant increase in the working capital, which reflect both the inventory expansion built to protect our delivery plans and the enriched product mix. Net industrial debt at the end of December improved below the EUR 100 million mark, reflecting the robust Industrial Free Cash Flow generation, partially offset by our initiatives to reward shareholders. Dividends and buyback were worth approximately EUR 800 million altogether, implying a distribution of roughly 85% of the Industrial Free Cash Flow generation. Finally, let's move to page 12.
Building upon the visibility we enjoy, we outlined the guidance for 2024 as a further solid step towards our targets for the years to come. Let me explain the drivers sustained in 2024, along the growth trajectory that we have designed. From sports car product and country mix will be positive and much more relevant volume, once again, with an increased contribution from the Daytona SP3 and a constant personalization rate. Commercial revenues from racing in Formula 1 will be affected by the lower ranking achieved in 2023 compared to 2022, despite a higher number of races in the 2024 calendar. Lifestyle activities will continue to increase the support, the top line, while investing a larger share of resources to speed up the pace of development.
Cost inflation is expected to proceed through the supply chain, and SG&A will increase in line with revenues due to continuing brand investment and digital development. The above will contribute to the further profitability expansion, while we expect inflation, brand, and infrastructural expense, as well as increased Formula 1 spending due to the higher budget caps, to flatten our percentage margin in line with 2023. The Industrial Free Cash Flow generation will be sustained by our profitability, partially offset by capital expenditure of approximately EUR 950 million, as many projects will enter in their advanced stage of development. I see a negative change in working capital in its broader meaning, mainly due to lower net advances collected from clients and increased tax payments proportional to the growth of our income in 2023.
The underlying assumption on the US dollar exchange rate is that it will fluctuate around 1.1, implying a negative effect impact compared to 2023, including hedges. That said, we are obviously conscious of the stronger business performance recorded so far, despite the higher cost inflation. Such performance has been driven by the product mix, which will remain rich over the business plan, and then this has been further enhanced by both the actions on pricing and the exceptional demand for personalization. For sure, we continue to stay focused on pricing and product enrichment, and reassured by the visibility granted by our order book, we affirm the confidence into the high end of our 2026 targets, as Benedetto just said. I thank you for your attention, and I now turn the call over to Nicoletta.
Benedetto Vigna (CEO)
Thank you, Antonio. We are now ready to open the Q&A session.
Operator (participant)
Thank you. As a reminder, to ask a question, please press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Once again, please press star one and one on your telephone and wait for your name to be announced. Thank you. We are now going to proceed with our first question. The question comes from the line of John Murphy from Bank of America Securities. Please ask your question. Your line is open.
John Babcock (Vice President, Equity Research Analyst)
Hey, good morning. This is John Babcock, actually on the line for John Murphy. Just quickly, you talked about doubling the hybrid share from 2022 to 2023, you know, from 22% of shipments to 44%. Out of curiosity, do hybrids tend to be favorable for mix? And then also, can you talk about what the customer reception has been to hybrid engines, and if this is something they're asking for?
Antonio Picca Piccon (Former CFO)
Okay, I will comment about this. Yes, it's true, we doubled our share of hybrid. This testifies that we are able, in Ferrari, to use the technology in a way that is unique. Coming back to the specific question, I would say that two points. Number one, the profile of the customer using this technology is not as, not so much different from the one using the thermal traditional cars. And number two, profit-wise, they are within the same ballpark as all the other cars. For us, each car is a business initiative, and all of them have to deliver according to our standards.
John Babcock (Vice President, Equity Research Analyst)
Okay, appreciate that. And then also, just given what's going on in the Red Sea, could you just quickly discuss if this is creating any challenges for Ferrari?
Antonio Picca Piccon (Former CFO)
The challenge, the Red Sea, is basically we don't see it at all. We double-checked with our suppliers. There is nothing that is impacting us, so no impact on our production or delivery of cars.
John Babcock (Vice President, Equity Research Analyst)
Okay, that's great to hear. All right. That's all I have for now. Thank you.
Operator (participant)
Thank you. We are now going to proceed with our next question. The question's come from the line of Michael Binetti from Evercore ISI. Please ask your question. Your line is open.
Michael Binetti (Managing Director, Retail & Digital Commerce Equity Research)
Hey, guys. Congrats on finishing up a terrific year. Thanks for taking our questions here. I guess, first off, Antonio, could you give a little context around the guidance for free cash flow lower this year? Is there, I'm wondering if there's an acceleration in some of the development spend and any, maybe any delta in the deposits for supercars included in the free cash flow outlook or excluded? And then on personalization, maybe just a little bit on the strategy there going forward after a really good year on personalization last year. Is there an opportunity to take some pricing to help offset some of the cost increases that you're seeing across the business there?
Benedetto Vigna (CEO)
Hi, Michael. I think it's number one, yes, great question. Antonio will elaborate. So yes, the personalization, I mean, we are a luxury company, which we have to bet personalization is an important vector of growth for us, and it offers also an opportunity for pricing up. And we started this year to review the price up in the mid-digit area. So percentage is important, yes, two, we are going to touch the price for this important dimension. The free cash flow-
Antonio Picca Piccon (Former CFO)
Yeah, I'll try and explain the three reasons. The first is clerical, we're just paying more taxes. The second one is we are spending more on CapEx, and under than 50 is what we have in mind for the year, and this is just because we have products that are now very close to the launch, and number of products. The third is the deposit cycle. This is just signing basically. There are- I mean, we collected over quite a bit in 2022 and 2023. We have kind of net reversal, and in addition, some new advances collecting in 2024. But the negative, the impact overall is negative. Modestly negative.
Michael Binetti (Managing Director, Retail & Digital Commerce Equity Research)
Okay. Okay. And I guess if I could squeeze one more in, you know, with the, I guess, with the e-building still on track for mid-year. Benedetto, can you tell us how we, what we'll see early on, as far as you guys start to commercialize that? And what, what are some of the first things we'll see from outside the company as you guys start to look to commercialize that?
Benedetto Vigna (CEO)
This morning, me and Antonio were in the e-building. So we are on track. It will be up and running starting this June, and this will be the place where we will assemble not only electric cars. Electric cars, as you know, will be ready, and we are on track for Q4 2025. So also on the electrification journey, we are fully on track with our plan.
Michael Binetti (Managing Director, Retail & Digital Commerce Equity Research)
Thank you. Thanks again. Great to hear, guys.
Benedetto Vigna (CEO)
Thank you, Michael.
Operator (participant)
Thank you. We are now going to proceed with our next question. The question's come from the line of Susy Tibaldi from UBS. Please ask your question.
Susy Tibaldi (Equity Research Analyst)
Hello, good afternoon. I have three. I'll ask one at a time. So first one, on the demand. Within the luxury sector, we are seeing some softening of demand, but it appears at the higher end, exposed to the wealthier cohort is still doing extremely well. And it seems also from your opening remarks that, based on residual value, some feedback from dealers, you're not really seeing anything. But just to double check, is the economic picture at the moment having any impact at all on the Ferrari customer? Is there any comment, any additional color you can provide?
Benedetto Vigna (CEO)
Look, as we said in the call, myself and also Antonio, the demand out of the book is pretty strong. It goes well into 2025, till the end of 2025, and even in some cases, even more. We do not see any negative signal, particular negative signal on this topic. We keep, let's say, doing as the planned. Clearly, there is not in our client base, there is not an impact in any kind of respect. So-
Susy Tibaldi (Equity Research Analyst)
Thanks. And-
Benedetto Vigna (CEO)
If you want, if you want also to read a little bit more color, we had the dealer annual meeting end of November. We have been visiting several dealership in USA, in Asia, in different countries, in Europe, and there is really a strong traction toward our brand.
Susy Tibaldi (Equity Research Analyst)
Thanks. On the margin guidance for 2024, which basically implies flattish margin, I wanted to understand if your core cars and spare parts business is also seeing flattish margins, or perhaps that core business is seeing some underlying improvement, but then is offset by the dilution of some of the other segments where you are choosing to invest a little bit more? So it'll be quite interesting to understand the dynamics in your various segments.
Antonio Picca Piccon (Former CFO)
That's in fact, the explanation, Susy. I try and explain it. So product mix and personalization are obviously, but we expect the cost base below that to impact us and to flatten the margin. If we wish, within the cost of goods sold, is just the budget cap on, on which is growing on the F1 racing activities that is growing year after year, and that's biting on the, in the upper side of the P&L.
Susy Tibaldi (Equity Research Analyst)
Okay. And last question. For 2024, when we think about the phasing, is it fair to assume that the year is going to be a little bit more front-end loaded, given the mixed evolution, or is it going to be quite similar quarter-over-quarter?
Antonio Picca Piccon (Former CFO)
I don't see a significant difference yet, and that there might be nuances, but not significant change, no significant change. Usually Q4 remains slightly softer, particularly in terms of volume allocations, but as of now, nothing to flag.
Susy Tibaldi (Equity Research Analyst)
Okay, thank you.
Antonio Picca Piccon (Former CFO)
That's it. I said the fourth quarter, not quarter, the first. Sorry.
Operator (participant)
Thank you. We are now going to proceed with our next question. The question's come from the line of Stephen Reitman from Societe Generale. Please ask your question.
Stephen Reitman (Equity Analyst, European Autos)
Yes, good afternoon. Again, congratulations for the very strong result. Also, congratulate you also on the quality of the result, and we certainly noticed that. The positive impact from R&D capitalization was considerably lower in 2023 than in 2022 or 2021, so points to the higher quality there as well, I think. Question, you mentioned about the Purosangue has now gotten to a cruising speed in terms of production. Does that suggest that we are on track to see that reach the 20% of the sort of annual sales? Because it looks like in 2023 it was only in the hundreds, so that would be a considerable ramp up. And if you'd comment on what the personalization level is looking like.
I imagine that people are paying a lot of money in terms of personalizations, in order to secure bill slots as well for these, in terms of to make their orders attractive. And secondly, if you could comment on China. You did mention that you are, strategically looking at that market in terms of also, managing in terms of the margin implication on sales in China. But, I think there was an expectation that sales were going to maybe increase a little bit in fourth quarter, because they'd be deferred in from the third quarter in 2023, but we actually saw quite a big drop in 2020, in the fourth quarter. So I'm just wondering if you could say, are there any issues about the, the sort of like, the demand in that market as well? Thank you.
Benedetto Vigna (CEO)
Thank you, Stephen. Thank you also for the congratulations that we will pass to all the team that made it possible. Coming back to the story of Purosangue, in 2023, we shipped a few hundred Purosangue. In 2024, we will be at a cruising speed that is 20% of the total. So basically, I mean, your assumption, your calculation are pretty in line with what with our plan. The personalization, but if I may, Benedetto, just to complete on that, I wouldn't focus on 20% of each single year. We said 20% of the yearly sales on average, when we communicated around the Capital Markets Day. So then take us, I mean, mathematically, even if Benedetto is a mathematician. Yes. We are not that much. Physicists.
No, look, the story of Purosangue, the personalization, Stephen, clearly the Purosangue offers a lot of degree of the personalization. We see client that are looking at the rims, the deliveries, the painting, the roof, so there are some opportunities over there. And last year we have been working a lot to strengthen our supply chain for all the personalization that the car is offering to the client. The second question was about China. Well, China, for us, I would like to say that there are three words about China. The number one for us is a young market. Young market is, it means that the client... Let's say, the number of cars that we shipped to this market is not so many.
To me, the market is very young, we have to let it grow with the right speed to avoid, let me say, indigestion. Indigestion, okay? The second, it's a niche market still, because, if you make the math, we are talking about, you know, 1,200 cars, it is written in the chart. We have this slightly decrease this year, but we are talking about a decrease in the range of few tens of units, that since the market is small, it may look, you know, a few percent over there. And then the number three, we said since the beginning that we will keep China, let's say, around 10%, because we believe... Because it is not margin accretive.
But again, it's important that in each country, as our history testifies, we let grow the attachment to the brand with the right speed. Because if you grow too fast, the clients don't get used to what is Ferrari. This is what we have done in other countries, and this is what we intend to do also in China.
Stephen Reitman (Equity Analyst, European Autos)
Thank you.
Benedetto Vigna (CEO)
Thank you.
Operator (participant)
Thank you. We are now going to proceed with our next question. The question come from the line of Tom Narayan from RBC Capital Markets. Please ask your question.
Tom Narayan (Lead Equity Analyst, Global Autos)
Yeah, thanks for taking the question. Question on the, you know, the strong plug-in hybrid performance. Just curious if you could extrapolate that for the eventual BEVs, full electrics you plan to sell. Is there really a translation there to say that, you know, consumer demand for the plug-in hybrids could potentially mean that, you know, this cohort would be interested in, in full electrics? Or are those buying the plug-in hybrids just, you know, just across the board, similar to your existing portfolio of customers?
Benedetto Vigna (CEO)
Look, we posed ourselves many times this question. We've been talking to our client directly and indirectly, I mean, through the dealers. I don't think there is any extrapolation possible in this respect. I believe that we will have clients that will only take the red car, the ICE. We'll have client that will take ICE and hybrid, as today. We will have client that will get in our family only because we have the electric cars.
So I believe that, you know, we see very often the answer is that, "You know, I need electric cars because I need to go in places that will not be allowed by regulation." So I think any combination of these three colors, the red, the blue, and the green, is gonna be possible, and I don't think that the hybrid cars is an extrapolation. The only thing we take as a lesson is that also... I mean, looking at what happened in 2023, that if... There is always a way to use the technology in a unique way, in the Ferrari way, that also client skeptical at the beginning of hybrid, turn to the hybrid. This is the point.
I remember once I had a breakfast with a client that was skeptical about the hybrid, and then he went to try it, and he bought the hybrid, and this is pretty common. So this is a confirmation that our strategy to keep alive the three colors, the red, the blue, and the green, is the right one.
Tom Narayan (Lead Equity Analyst, Global Autos)
Okay, thank you. And a follow-up, you know, with obviously everyone really interested in your guys' electrification journey, that will happen. Just curious if we can expect capital markets events for investors and for ourselves as well, coming up this year, potentially, or next year?
Benedetto Vigna (CEO)
This year for sure not. We are working for next year, but not for sure for this year. Only one point, the electrification journey, not will happening, is already started to happen since a while. So this is important. This is a key message we passed on the Capital Markets Day two years ago. We are already on the electrification journey since a few years.
Tom Narayan (Lead Equity Analyst, Global Autos)
Understood. Thank you.
Benedetto Vigna (CEO)
Thank you.
Operator (participant)
Thank you. We are now going to proceed with our next question. The questions come from the line of Thomas Besson from Kepler Cheuvreux. Please ask your question. Hello, Thomas, your line is open. Please ask your question. Hello, Mr. Besson, your line is open. If you can hear us, your line is open. We are now going to proceed with our next question. The questions come from the line of Henning Cosman from Barclays. Please ask your question.
Henning Cosman (European Head of Automotive Research)
Yeah. Hi, good afternoon. Thank you very much for taking the question. Interesting that you're emphasizing price and personalization so much. I'm not sure I understood you correctly, Benedetto. Did you say you would raise price in the mid-single-digit % range on personalization specifically? If you could just confirm that. And, if you would, also-
Benedetto Vigna (CEO)
Confirm.
Henning Cosman (European Head of Automotive Research)
Yeah.
Benedetto Vigna (CEO)
Yes.
Henning Cosman (European Head of Automotive Research)
Great. And on pricing in general, are you willing to make some comments there? I think we recently talked a bit about the commercial opportunities on pricing in general, not just on the personalization. I know there's always the balance, of course, not upsetting your loyal customers who've been waiting for so long, but then again, you have opportunities because the order book is so long already and you're virtually sold out. If you could update us on the commercial pricing opportunities there. And then, second question on personalization. If I understood Antonio correctly, the exit rate of 2023 was 19%. If I'm not mistaken, you're guiding 18% for 2024.
You typically have 3 months of visibility, so I was just wondering how it's trending into Q1, where I believe you have some degree of visibility already. Is it in line with the 18, or is it still on the level of the exit rate, if that's not too precise? And then finally, third question on the Daytona, Antonio, confirmed again in the opening remarks, 30-40 per quarter. I believe you've sold around 150 so far out of the 600. So that would imply you still have 12 more quarters to sell worth of Daytonas. That seems pretty long. So I'm wondering if you would accelerate the Daytona volumes at some point so that it doesn't become such a long life cycle. Thank you very much.
Benedetto Vigna (CEO)
Thank you. I, personalization Daytona for Antonio, I take the, ASP. So as I told you, the answer to the first question, yes, it's confirmed. We increased the price of the personalization exactly like you understood. When it comes to the price of the cars, don't forget that last year, through all the year, we've been increasing the price, and it's also important, it's also important that we consider that on the other side, there is a client that has been, let me say, looking at Ferrari, and we have to behave properly when it comes to the pricing increase. You're really executed, and we have to be respectful of our clients. While for personalization in Daytona, Antonio, you can-
Antonio Picca Piccon (Former CFO)
Sure. On personalization, you got me right. Meaning in 2023, we are almost at 19%, and 2024 is based on an assumption that we'll maintain more rest that rate. Visibility as of now is in that direction. And the last question, Daytona, yes, you're right. We expect to grow there, to move from 30-40 to approximately 60 per quarter next year.
Henning Cosman (European Head of Automotive Research)
Very good. Thank you so much.
Antonio Picca Piccon (Former CFO)
You're welcome.
Operator (participant)
Thank you. We are now going to proceed with our next question. The questions come from the line of Monica Bosio from Intesa Sanpaolo. Please ask a question.
Tom Narayan (Lead Equity Analyst, Global Autos)
Good afternoon. I hope you can hear me, and thanks for taking my question. The first one is on the EBITDA margin that you guided,
Monica Bosio (Head of Equity Research)
... flat FCF for 2024. I understood that it is due to a cost base related to the production of more complex product. I can imagine that there is also a weight of the cost of labor. So I'm just wondering if you can give us some indication, what is the weight of the cost of labor on this flattish guidance? Any hints could be useful for us. The second question is on the lifestyle. In the preliminary remarks, Benedetto anticipated that you're expecting an increase in lifestyle revenues. Can you please help us to figure out growth rate for 2024? And third question is on the advances from SF90 XX and the Spider.
I remember that in the last call you said that you are going to collect advances on the car. I'm wondering if you can give us any indication on the amount and on the timeframe across the year. Thank you very much.
Benedetto Vigna (CEO)
Thanks, Monica. Antonio will take one and three, and then I will reply to your number two.
Antonio Picca Piccon (Former CFO)
Yeah, apologies, I thought you, you switched out. Anyway, on, on maybe the margin, it's not just the higher cost base actual or, or related to better... It's not related to the additional complexity of the production. I mentioned basically three elements. One, cost inflation. Cost inflation is still there. It includes cost of labor. We have an agreement in place with trade unions for an increase year-over-year of 4%, which is embedded in these assumptions. But even components, and generally speaking, is the supply chain that is still embedded in, in current pricing, the impact of the inflation that has been going through the economy in the last 12 months. So that is an element, it's not the complexity. The second one are expenses for brand development, including lifestyle.
Of course, we are investing to grow the business, and also our digital infrastructure. We are growing, and we need to grow even in that respect, including a significant rejuvenation of what we currently use. And the last element, which is biting both, cost of goods sold and R&D expense to the P&L, are the expenses for the Formula One. Since the budget cap, which was originally meant to decrease over time, is actually growing, since it has been agreed among the various teams to index spending to inflation, so year-over-year is going to have a negative impact. Okay?
Monica Bosio (Head of Equity Research)
Okay.
Antonio Picca Piccon (Former CFO)
And in terms of your last question on the advances on the SF90, yes, we are collecting. We do not disclose yet which are the targets. I just said year-over-year, take into consideration that the difference will be negative. So 2024, smaller than 2023.
Monica Bosio (Head of Equity Research)
Okay.
Benedetto Vigna (CEO)
So, Monica, for the lifestyle, let's say 2023, three important things. Number one, we improved the retail performances because there is more traction toward our collection. Two, we saw there is a strong, I mean, a strong, a successful activation when you have event in conjunction with our racing and brand event. And three, we had a record museum visitors, around 750,000. Is a lot. In 2024, if I have to define it, I define it as a year of progress, because we have a list of activities that are aiming to build the scale and also to expand the network and, like we say, our network, while, if you want, we elevate the, the visibility of our brand.
So it's a year where we are aiming to grow as well, and also in this respect, we are in line with what we declared in June 2022, with our target to double this activity, the revenues of this activity by 2026.
Monica Bosio (Head of Equity Research)
Okay. Thank you, Benedetto.
Antonio Picca Piccon (Former CFO)
Thank you.
Monica Bosio (Head of Equity Research)
Very helpful. If I can add just a follow-up on the country mix. You said that the country mix will keep positive in 2024. I'm just wondering if it will be similar to the one seen in full year 2023.
Antonio Picca Piccon (Former CFO)
Yeah, I'd say as of now, I wouldn't consider country mix being an additional positive in 2024.
Monica Bosio (Head of Equity Research)
Okay. Thank you very much.
Antonio Picca Piccon (Former CFO)
More or less, more or less like now.
Monica Bosio (Head of Equity Research)
Thank you. Thank you.
Antonio Picca Piccon (Former CFO)
Gotcha.
Operator (participant)
Thank you. We are now going to proceed with our next question. The question's come from the line of George Galliers from Goldman Sachs. Please ask your question.
George Galliers (Head of European Automotive Investment Research)
Yeah, good afternoon, and thank you for taking my questions. Obviously, one of the standouts of 2023 was the very strong price mix, and we look at your five-year plan, you were targeting around a EUR 700 million improvement in EBIT from price mix by 2026. We're only two years into the plan, and you've delivered close to 65% of that target.... obviously, on this call, you've been mentioning new initiatives around personalization and pricing, and there are clearly still several important new launches to come. So is it fair to say there is a decent amount of upside to that original EUR 700 million euros that you flagged back at the CMD? The second question was also relating to something you talked about at the CMD, which was how you were going to leverage partnerships to co-develop best-in-class solutions with respect to electrification.
I was wondering if you could give us some insights into how those partnerships have evolved. Have there been any unanticipated challenges, and conversely, have there been any areas where your partners have really surprised you positively? And if yes, would you be able to give us any small examples or snippets? Thank you.
Benedetto Vigna (CEO)
Thank you, George. I think the second one, the first one, I will ask the Antonio to reply. So you remember very well, during Capital Markets Day, we clearly said we leverage the partnership for electrification, but also for other technologies, because don't forget that we are making luxury cars, and there is much more than simple electrification. We are doing a lot of innovation also on the hybrid cars, on thermal cars. So having said that, we are having a positive surprise on the willingness of the partners to work with us. We have partners in different places, going from new generation materials to new generation, let me say, advanced electronics to advanced display. And we are having...
As I said, we are very positively surprised by all our partners, and we are working with partners in Asia, in USA, and also in Europe. I can mention the one that we publicly released in the eleventh of April was with Samsung for the next generation cars. But there is another one I cannot mention. I can tell you that we are working also on the way material, important for the cars, are realized, because, as we said multiple times, carbon, the sustainability for us is important. We want to be carbon neutral by end of this decade, and we realize that to achieve our goal, to go, to proceed along our way, we need to work with partners that are also involved in the material preparation. So very positive surprise across the globe.
Very happy, both, because I have regular meetings with them. We are happy on our side. They are also happy on their side. So Antonio, you for the-
Antonio Picca Piccon (Former CFO)
Sure. Your strong price mix. I mean, if we compare with our assumption at the Capital Market Day, you are right, we've been doing better. I think we've flagged a number of times this year that personalization particularly surprised us in terms of their strength. However, it's fair to say that even the cost base has been much higher than we would have expected. The positive, of course, is the fact that the improvement from personalization pricing has been such that allowed us to more than offset the impact of inflation. Now, if we look forward, is there an opportunity for an upside on personalization? If the trend continued the way we have seen, potentially, yes, in terms of revenues. Whether this will flow through the P&L, it will very much depend on what happens to the cost base.
Exactly, parallel with what happened in 2023.
George Galliers (Head of European Automotive Investment Research)
Great, thank you.
Benedetto Vigna (CEO)
Welcome.
Operator (participant)
Thank you. Due to time constraint and to keep the conference within the hour, we now end the question and answer session. I will now hand back to Mr. Benedetto Vigna, CEO, for closing remarks. Thank you.
Benedetto Vigna (CEO)
Thank you. Thanks, thanks all of you for your time today, and also for your, for your questions. The strong 2023 result, basically, and are the result of our strong brand desirability, and also the confidence that we are having on this year and forward, is thanks to the traction that our product have with all our clients. I wish you a good afternoon, and I thank you, together with all the Ferrari team here, for, for your attention and for your interest in our brand. Thank you so much.
Operator (participant)
Thank you, ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you, and have a good day!