CRIF Ratings has affirmed Ferrari’s long-term issuer rating at “BBB+/Stable”

CRIF Ratings (‘Agency’) has affirmed Ferrari S.p.A.’s (‘Ferrari’) Long-Term Issuer Rating at “BBB+”. The outlook remains “Stable”.

Ferrari is a leading manufacturer of luxury performance cars, with 9,251 cars sold and consolidated revenues of EUR 3.4bn in FY18. The rating analysis has been performed on Ferrari’s consolidated perimeter (‘Group’), including the parent company Ferrari NV (‘FNV’). The rating has been assigned by CRIF Ratings on an unsolicited basis, without participation of the rated entity and relying only on publicly available information.

The affirmation of the rating reflects Ferrari’s sound operating performance and cash flow generation, which supported the Group’s conservative financial profile. In FY18, the net debt to EBITDA ratio edged down to 1.0x from 1.1x in FY17 and to 0.6x from 0.7x on an adjusted basis. Moreover, the Group further strengthened its gearing (net debt/equity down to 0.8x FY18 from 1.5x in FY17) and liquidity profile.

In the Agency’s view, Ferrari will comfortably cover the debt maturities over the 2019-2020 period (EUR 502m in sum) thanks to available liquidity sources of approx. EUR 1.3bn at YE18 (including the undrawn EUR 500m Revolving Credit Facility, due in November 2020) and the expected positive free cash flow (‘FCF’) generation, above EUR 200m per year after dividends.

A moderate refinancing risk could materialize in 2021, when the scheduled debt reimbursements will total approx. EUR 840m. These will be mainly related to the EUR 700m bond maturing in January 2021 as well as EUR 143m related to the revolving securitization programs (self-liquidating debt). Nevertheless, CRIF Ratings expects the Group to comfortably manage the refinancing risk, thanks also to its sound track-record in tapping the capital markets.

The Stable outlook reflects CRIF Ratings’ expectations that Ferrari will maintain its credit metrics consistent with the assigned rating class over the next 24 months, despite the announcement of the dividend payout ratio increase to 30% as well as the EUR 1.5bn share repurchase program in 2019-2022. Given the expected FCF generation, the latter is not envisaged to significantly alter Ferrari’s financial flexibility.

Rating Sensitivities

Positive Triggers – Future events that may positively affect Ferrari’s rating include the following:

  • Net Cash Position on an adjusted basis (as defined below by CRIF Ratings)

Negative Triggers – Future events that may, individually or collectively, negatively affect Ferrari’s rating include the following:

  • EBITDA margin < 25% on a sustained basis
  • Net debt/EBITDA > 2.0x
  • Adjusted net debt/EBITDA > 1.0x

CRIF Ratings adjustments at YE18 include: i. partial deduction of the funded self-liquidating financial receivables portfolio (EUR 793m) from net debt by applying a 20% haircut; ii. exclusion of EBITDA contribution from captive finance activity; and iii. exclusion of cash subject to transfer or use restrictions (EUR 78m held in the Chinese subsidiary and EUR 27m in connection with the securitization program). As a result of the above, the adjusted net debt to EBITDA ratio at YE18 was 0.6x.

Company Profile and Recent Events

Ferrari was founded in 1939 by Enzo Ferrari out of Alfa Romeo’s race division and built the first car in 1940. That said, Ferrari’s inception as car manufacturer is usually recognized in 1947, when the company completed its first Ferrari-badged production at its Maranello (Italy) facility, which is still active today. In 1960, Ferrari was restructured as public corporation and in 1969, FIAT acquired 50% of the company’s shares. In the late 1980s, FIAT raised its stake up to 90%, leaving the remaining 10% in the hands of the founder’s son, Piero Ferrari. In October 2014, FIAT Chrysler Automobiles N.V. (FCA) announced its intentions to separate Ferrari S.p.A. from FCA. The spin off has completed through a series of transactions between September 2015 and January 2016, establishing Ferrari N.V. (FNV), a company incorporated in the Netherlands.

The entire share capital of Ferrari S.p.A. is owned by Ferrari N.V. and following the spin-off, the main shareholders of FNV include the investment holding Exor N.V. (with a 23.7% stake) and Piero Ferrari (also Vice Chairman of the company) with a 10.1% stake. The remaining 66.2% of shares are free floating on the equity markets. Ferrari N.V. is listed on both the New York Stock Exchange (NYSE) and on the Mercato Telematico Azionario (MTA) managed by Borsa Italiana. As of 11 April 2019, the company’s market capitalization amounted to approx. EUR 25.8bn. The stock price trend performed better than all the relevant and comparable share index over the last three years.

The prestige and appeal of the Ferrari brand is strongly associated with Scuderia Ferrari, which is its racing team in the Formula One World Championship. Ferrari is the only team that has competed in the Formula One Championship continuously since its inception in 1950. It has won 235 Grand Prix and is the most successful racing team, holding 16 Constructors’ Championships and having produced the most winning drivers (15).

On September 18, 2018, the Group announced a dividend payout ratio increase to 30% and EUR 1.5bn share repurchases over the 2019-2022 period.

On February 26, 2019, the Board of Directors of Ferrari N.V. recommended to the Company’s shareholders to declare a dividend of EUR 1.03 per common share, totaling approximately EUR 194m.

 

For further information please refer to the Rating Update

 

Regulatory and legal disclosures

Information to be provided pursuant to Regulation (EC) No. 1060/2009 on Credit Rating Agencies and subsequent amendments

Credit Rating Type

The rating was not solicited by the Rated Entity or by a Related Third Party, and so CRIF Ratings did not receive any payment. The Rated Entity or Related Third Party did not participate in the rating process and CRIF Ratings did not have access to the internal documents of the Rated Entity or Related Third Party.

Responsibility

CRIF Ratings S.r.l. with registered office at Via M. Fantin 1/3, 40131 Bologna (Italy)

 

Lead Rating Analyst: Christian De Rose, Associate.

Responsible for rating approval: Simone Mirani, Rating Committee Chairperson

Rating history

Date of first issue 11/05/2016

Date of last update 12/04/2019

List of rating actions (https://www.crifratings.com/en/rating-list/ferrari-spa/ )

Methodology, rating category and historic default rates

Methodological information used for the rating, including the meaning of the each rating category and default definition, is available in the Corporate Rating Methodology document updated on the 12 June 2018 (https://www.crifratings.com/en/methodology/). Information concerning historic default rates and their interpretation can be consulted on the CEREP website (https://cerep.esma.europa.eu/). CRIF Ratings states that the outlook indicates the most probable direction of the rating over a time period of 12-24 months.

Disclosure of the rating to the Rated Entity prior to publication

Before publication, the Rated Entity was provided with the opportunity to examine the rating and rating drivers, including the main assumptions on which the rating and the outlook are based. The Rated Entity was given at least 24 hours – one full working day - to report any factual errors or appeal against the rating decision, providing additional new information in support of the assessment. Following the disclosure, the rating and the outlook were not amended.

Conflicts of Interest

The rating action issued by CRIF Ratings was performed independently. On the basis of its procedures, CRIF Ratings has not identified any conflicts of interest. The analysts, members of the rating committee involved in the process, CRIF Ratings shareholders and those who are able to exercise a significant influence on the economic activities of the agency do not have any conflicts of interest in relation to the Rated Entity or Related Third Party. If in the future a potential conflict of interest is identified in relation to the persons reported above, CRIF Ratings will provide the appropriate information and if necessary will withdraw the rating.

Information sources used

Consolidated financial statements of the Parent Company, other public information available on the Rated Entity’s website, other public sources.

 

CRIF Ratings considers satisfactory the quality of the available information on the Rated Entity. However, CRIF Ratings is not responsible for the accuracy of this information and does not carry out any auditing activities on the information examined.

Other services provided by CRIF Ratings to the Rated Entity

The Rated Entity did not receive other services from CRIF Ratings.

 

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Disclaimer

The rating is an independent opinion provided by CRIF Ratings S.r.l. (‘CRIF Ratings’) on the creditworthiness of the Rated Entity and does not necessarily predict future results. Rating reports, rating actions and other relevant information are provided on an ‘as is’ basis, without any guarantee of any type. CRIF Ratings adopts all necessary measures to issue ratings based on information that it considers to be complete and reliable. However, CRIF Ratings is not responsible for the accuracy of the information used to assign the rating or perform the rating actions, and does not carry out any auditing activities on this information. The rating actions are carried out on the basis of methodological guidelines defined by CRIF Ratings. CRIF Ratings reserves the right to update or withdraw the ratings at any time, in accordance with internal methodologies and processes. The rating does constitute a recommendation to buy, sell or keep securities or other financial instruments issued by the Rated Entity. The ratings issued by CRIF Ratings are not a substitute for exercising independent judgment and for the personal assessments that must be performed by any third party. Under no circumstances shall CRIF Ratings, its employees, officers, directors and persons involved in its rating activities be liable to any party for any direct or indirect, consequential or incidental damage and/or costs arising from or in connection with the use of ratings or credit opinions issued by CRIF Ratings.