Good day and welcome to the Ferrari N.V. 2016 First Quarter Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Nicoletta Russo, Head of Investor Relations. Please go ahead ma’am.

Thank you, Julia and good day to everyone on the call. There are two topics that we plan to cover today. First, the Group's first quarter 2016 financial results and then our commercial and brand initiatives. In light of these, the call is expected to last around 45 minutes. All relevant materials are available on the Ferrari Investor Relations website. Today's call will be hosted by the Group's Chairman and CEO, Sergio Marchionne and Mr. Alessandro Gili, Group Chief Financial Officer. At the end of the presentation, they 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 first quarter 2016 results presentation and the call will be governed by this language. With that I'd like to turn the call over to Mr. Marchionne.

Thanks very much. I am just going to keep my comments to limited number of remarks about the first quarter of this year. I think you’ve seen from the numbers that we have, as expected, delivered an incredibly strong quarter. The order books remained incredibly strong. We have been able to post results on a EBIT basis which are certainly at historical levels for Ferrari. Alessandro will explain to you the impact of hedging and what it’s had in terms of the results for the quarter. Although these margins appear to be marginally below what our best competitor in this industry has done historically that is Porsche. If you were to strip out the impact of the hedging policies that we’ve had in place for the first quarter of 2016, we would have been well in excess of the 20% mark. I think it’s an indication of the kind of profitability that we can expect for this business going forward. The product launches are going as expected. We saw that the successor to the FF in Geneva received – had been received incredibly well by our customers. I think the order book is beginning to build well. The will be in market by Q3 of this year. I think that the rest of the product portfolio is shaping up well. The order book, especially for the 488 and the convertible is quite long. We are well into 2017 now. We really have no bad news to report other than the fact that we remain hugely disappointed by the performance of the Scuderia, the race yesterday. I just think finished a meeting with the leadership team for the racing activities. I think that we have to renew our effort to make sure that we can reposition Ferrari properly. We have had 4 podiums in the first four races. Unfortunately we did not win any of the four races, and I think that we need to correct this pretty quickly. But on that basis, I give it to – I pass the call on to Alessandro. One more thing. We have, as indicated, during the road show and certainly at the end of the year, indicated that we wanted to get out the financial services business. It was something that we considered to be non-core. What we’ve announced today is the first step in the process of removing that leverage from our balance sheet. Hopefully we will have it brought home by the end of the year. The US position needs to be looked at quite carefully because of the fact that it’s a crucial piece of our business in the US. So we will come with a creative solution to that objective too. I think we are on track on everything that we have mentioned to you both on the road show and in terms of the year end results. So Alessandro, over to you.

Thank you, Mr. Marchionne. Good afternoon everyone and thank you for listening in the call. I am proud to present this result for Q1 2016. Our shipments grew to 1,882 units, showing an increase of 15%, all the regions up due to the strong start of the new models, the 488 GTB, the 488 Spider and the F12tdf and despite LaFerrari finishing its limited series run. Group net revenues reached €675 million, up 8.8%. Adjusted EBITDA reached €178 million with a margin increase of 110 basis points. Our net profit for the group was up 19% to €78 million and this is our best first quarter ever in the history of Ferrari. Our net industrial debt was slightly down from year end to €782 million and our industrial free cash flow generation for Q1 2016 was €28 million. As a result of the recently finalized bond issuance, we are now commenting net industrial debt and industrial free cash flow as our key financial metrics. We signed today a memorandum of understanding for FCA Bank to acquire a majority stake in Ferrari Financial Services AG which is a wholly owned subsidiary which provides retail and leasing services in certain European countries. Early this year, as Mr. Marchionne just said, we launched the GTC4Lusso which will replace the FF and finally that season – the racing season has just begun with 4 podiums that we’ve achieved so far in 2016, totaling 700 podiums throughout our racing history. And guidance has been revised upwards with shipments higher than 7900 units, including supercars, net revenues of approximately €3 billion, adjusted EBITDA higher or equal to €800 million, and net industrial debt lower to equal to €730 million. Moving to Page 4, we show our operating highlights for the first quarter of 2016. Our shipments…

Thanks, Alessandro. Before we begin our Q&A session, I like to hand over to Mr. Marchionne. And we are ready to start the Q&A session. Please, Julia. Go ahead. Thank you.

[Operator Instructions] We will now take our first question from John Murphy from Bank of America.

Good morning guys. Just a first question the CEO change. Sergio, I mean obviously this is something that was somewhat expected by a lot of folks. But it is a change. I'm curious as you take the other rein and really have full control here, what do you think you might change sort of on the product side, on the cost side and really how should we think about the change in the CEO reins here?

Look, I mean I was no one that pitched the Ferrari case on the road, it's not going to be a different case than the one that I presented to the markets at the end of last year. I remain as bullish on the prospects for this company as I was when I presented Ferrari to the markets. I remain to be even more so convinced of its upward potential. When you look at Q1 2016 and you look at adjusted EBIT performance, you realize that we're beginning just now to define the true potential on the passenger car side what the sounds [ph] can actually deliver. So I think as Alessandro mentioned, I mentioned the fact that the personalization efforts are beginning to pay off. It is representing a more relevant portion of the revenue and as you well know that's probably the most financially rewarding piece of the car offering. I think we need to continue to explore pockets of profitability throughout the business and see whether we can bring this car – to bring Ferrari to produce a big of an EBTIDA as quickly as we can. That remains my immediate objective.

And then just a second question, as we look at the volume outlook that you're giving it's greater than 7900, I mean if we hit 7900, that would mean that volume would be flat on a year over year basis in second, third and fourth quarter and that seems awful conservative given what you just put out in the first quarter and the opportunities there appear to be for anyone in the Americas. I mean, how should we think about volume through the remainder of the year because the guidance that you're giving us is really just indicating flat to up. I mean I would presume more up than flat. But it just seems like there's a lot of opportunities to go through the course of the year to be significantly above 7900.

I think the chances are there and I think we’re going to be -- you may have noticed from the way in which we were guiding that ,we're being cautious as we learn our reporting cycle here. I think as we keep on delivering quarters between now and the end of this year you may see a shift in those numbers as we see actual numbers come out. I think you’re going to have to bear with us until the end of the year, until we find our rhythm. I think it's -- there's a necessary level of caution associated with these forecasts and it's something that I think one has to keep in mind. We certainly do not want to disappoint and I think that the indications are that we may exceed all the targets we gave you. But I think we're going to wait until actual numbers come in.

Very understandable and then just lastly as we think about mix in the quarter, I mean it really wasn't that great an aggregate headwind. I mean can you just comment on the F12tdf deliveries, maybe more specifically in the quarter and what we should expect for the full year? I mean I know we're looking at 799 in total. But you think you'll get the bulk of those this year and that might even reverse the mix impact as you go through the course of the year?

No, I think we probably will not exhaust the whole pop in 2016. We delivered less than 20% of the volumes in Q1 of the number that we gave you. And you probably correctly pointed out that as being 799. I think we're going to pace those throughout the year and it's not a question of just pacing revenue. I think it's a question of being able to deliver the products out of the factory. I think most of them will be deliverable in 2016. There will be a hangover effect in 2017.

Thank you. Our next question comes from Martino De Ambroggi with Equita.

Martino from Equita. Focusing on free cash flow. I know you did not disclose the terms of the agreement, therefore have a financial business with the SCA Bank. But just to be sure the changing guidance is not related to this in terms of net debt, is not related to this transaction, first?

It's not.

And the second question is on free cash flow. Could you remind what is the one off impact for the taxes cash out this year? I remember last time we discussed more than 100 million but maybe today you have a more precise indication which is included in your guidance.

Yeah that's correct, Martino. We have been expecting down payments for taxes related to 2016 in the second part of the year for more than 100 million.

And regarding the EBIT guidance. If I understand correctly the main changer to your guidance is that related to volumes or there is any other issue that should be taken into account? And I remember forex was expected to be positive -- but mainly in the second half of the year, so it should come going forward?

With all due respect, I think that improvement in guidance is both in EBITDA and lowering debt. For the number that Alessandro mentioned, 100 million is already included in the net debt number at the end of 2016, the expected number. It includes the one off payments in taxes.

Yes, my question now was on the EBIT, so just to understand if it’s driven by higher volumes or there is some other element driving the improvement in profitability?

It’s both improved margins and higher volumes.

Forex was 50 million.

Yes, forex is unchanged compared to the guidance we provided at the beginning of the year.

Okay. Very last on merchandising strategy, any timetable for the disclosure of your strategy?

I think the press release makes reference to 2017, we can actually show what we intend to do with the non-car luxury end of the business. I think we will have to wait where we celebrate the 70th anniversary next year.

Thank you. We will now take our next question from Ryan Brinkman from JPMorgan.

Hi great, thanks for taking my question. Can you give some more color about the thinking behind the share repurchase authorization at the recent annual general meeting? I don't remember buybacks being discussed too much around the time of the IPO but rather a strong dividend payout. Was this response to the valuation of the shares in the market and how should we think about the cadence of any possible repurchases?

I think it's a healthy thing to have in terms of corporate authority. I think given what we've seen in the marketplace and the fact that we have seen some bizarre trading journey at the time of the spin out of SCA into unsuspecting shareholders who may not have wanted to be a long term shareholders of Ferrari. Had we had that authority in place I think we would have been able to act in a more intelligent fashion. There's no doubt that there was value arbitrage that was being left at the table -- on the table at the time of the spin and I think it was unfortunate that we were not able to act and I think it's good corporate authority to have, period, whether we use it or not. It really doesn't matter. I think the important thing is to have it. Just to go back to your comment about what I said during the road show. I think what we clearly stated that this was a cash generative business and as such dividend payouts and share repurchases were the easiest way in which we could deliver value to shareholders. One was not exclusive of the other and even dividend payouts as forecast during the road show will eventually still yield a business which is fundamentally un-levered. And in that situation the only thing you can do is go back in and buy shares.

Okay. And can you share what you plan to do with any proceeds from the sale of a stake in Ferrari Financial Services?

We reduced the financial debt to support the financing activities. It was zero impact on the net industrial debt.

Got it, and then just lastly you mentioned that your margin would have looked better relative to Porsche’s had it not been for the hedging? Is it possible to say what your EBIT margins or what your EBIT would have been without the hedging?

21%.

Thank you. We will now take our next question from Massimo Vecchio from Mediobanca.

Good afternoon everybody. First a clarification on the MoU with SCA Bank. You profess to the only European portfolio right? Is it correct.

That’s correct.

Second question on the business with Maserati regarding the engines. I believe you made no secret that this business has lower margins than car business and obviously there is a contract which is expiring in 2023, if I am not wrong. So I was trying to understand what would you do if the contract expired tomorrow, I mean which position are you with this production facility, what could you do with this spare capacity? And also sorry, how long before you have to decide what to do with this?

Look, I can give you an answer, sort of the FCA user of the engines. We have no intention of abandoning the relationship with Ferrari and Maserati, I think it's something that we have found incredibly helpful in terms of the marketing of the Maserati products on a global scale. And I don't know of a reason today that would suggest that those volumes would actually drop or they would deviate from forecast. The launch of the Maserati Levante is going to draw a substantial portion of the capacity that's been allocated by Ferrari to Maserati. And as much as on the full cost basis it does not provide equipment and margins for what we get from car making. It does provide a good level of absorption of fixed costs within the plant, I think it's something that's desirable and I think it's something that Ferrari will continue to nurture going forward.

Thank you. Our next question comes from Adam Jonas from Morgan Stanley.

Hey everybody. First one is kind of housekeeping. Did you disclose or can you give us an indication of how much movement capitalized development costs versus amortization of such costs impacted the margin in the quarter?

Of the €67 million of CapEx, almost €40 million are related to R&D in terms of capitalization component.

And then the second one for Sergio. Regarding Formula 1, it seems F1 and Ferrari are inextricably linked in that Formula 1 does not exist in its current form without Ferrari. And Ferrari does not exist in its current form at least without Formula 1 or at least in motor racing at its highest state of the art in whatever form or entity that may exist. And at a time when a lot of other global sports franchises are reaping huge benefits from global marketing endorsements, it seems F1 is – and I want to be polite here Sergio, it seems kind of at a crossroads where it might have a lot of room for you to improve. It seems you’re massively undershooting its commercial potential basically, if I want to be blunt on a global scale? And without getting too far down the rabbit hole of politics and leadership at the FIA and Formula 1, Sergio, can you explain the potential for Ferrari's role especially with your enhanced role at that organization to help recast the sport's image and strategy and how could this pay off not only for existing and untapped fan bases of Formula 1 but also for Ferrari shareholders and stakeholders as well? Sorry to be a bit verbose there but, thanks.

You actually were incredibly tactful and I'm going to try and give you a very tactful answer. Look, there has been a huge amount of work that has been done by – through Bernie Ecclestone to try to build the F1 into what it is today. And I think he's got years of experience that he has applied to the enterprise here. So I think we have all benefited from his leadership and his management. There is not a single doubt in my mind that Jean Todt over at the FIA has now provided a sort of good interface for the racing teams to begin to have a dialogue about the shaping of the sport going forward. I sit on the board of the FLM together with a couple of other racing teams. And we all have a very keen interest to make sure that we express the highest potential from this business. There are discussions that are going on within that environment now, how to best improve this business. We're going to be incredibly collaborative to try and make sure that we drive the bus in the same direction. And on this issue I have to agree that as competitive as we are, especially against Mercedes on the track, I think we – both Mercedes and ourselves see the proper development of that – or what they refer to as the circuits to be in everybody's best interest. It's a work in process. It is something which Ferrari needs to engage because it is as you said correctly it is at the heart of the brand. We will do everything we can to make sure that we explore the highest possible potential out of F1. And I tend to agree with you that I think that there is potential…

We will take our next question from Thomas Besson from Kepler Cheuvreux.

Thank you very much and have a few quick questions please. Could you give us some qualitative comments about the evolution of cars and spare parts revenues within these buckets please? Is there any uptick in the spare parts business or is it really the personalization element that has driven the year over year revenue that –

The increase in cars and spare parts is mainly driven by volume. There is a component of personalization which is an additional 1% compared to the historical 15% on our top line in terms of contribution from personalization.

1%. Thank you. Could you give us an indication on the tax rate for the full year please? You’re benefiting from a lower tax rate in Italy. What do you now expect for 2016?

Substantially in line with Q1.

And lastly, on the hedging, can you just be a bit more specific in terms of hedging cost for the quarter substantial and therefore substantial hedging benefits in going quarters, is that what we should expect the same positive impact on the full year bridge with the less cost in coming quarters, right?

The contribution from – the negative impact from the hedging in Q1 was approximately close to €30 million. And on the annual basis I think we provided last time the overall effect is close to €100 million but you need to consider that is already in our guidance in the second half of the year contribution from FX variance compared to prior year, around €50 million.

Thank you. We will now take our next question from Lello Della Ragione from Intermonte.

I have a couple of questions. The first one is on the free cash flow bridge and actually the net industrial bridge. I was wondering if you can comment on the other element the €45 million there, and on this point also, can you indicate that's what we should expect in terms of net working capital, since the effect of the down payments of LaFerrari will last for even the next quarter probably, and should we expect something in the same magnitude in the second and third quarter probably until the start of the GTC for down payment?

So just to take all the questions, so the overall change -- there are two changes, one in working capital which is partially driven by timing on our receivable side. And then in the other you see the component related to the down payments received for LaFerrari, there is a combination of two different elements, including the fact that we had lower CapEx payable in Q1 which is typical of our seasonality on CapEx. And on the other side, in terms of working capital, working capital typically is negative for us, therefore should be a contribution in terms of cash for the house. There was a timing component related to seasonality which I just mentioned. So we expect to have a positive contribution from working capital -- positive from a cash flow standpoint in next quarters.

Okay. I have also another one, it’s on SG&A. You mentioned seasonality in F1 and actually the rate was quite low compared to last year and even last first quarter 2015, should we expect this to o reverse in the second quarter or should we expect SG&A ratio below 10% as you posted in first quarter in terms of on sales?

The SG&A ratio should be substantially in line with an 11% on an annual basis. This is really timing because we had one less race compared to last year but this year actually we will have 21 races in total from an annual standpoint compared to the 20 we had last year.

And the last one actually on D&A, also we have a very low percentage on sales and I was wondering, okay, it's going down, you mentioned the D&A related to the model that you’re not producing any more but you’re starting the GTC4 soon. And I was wondering should we expect this level to continue until the second quarter and then come back around the 9.5%, 10% by year end or is it something that’s going down and will remain below 9% for the rest of the year?

D&A in total this year will be slightly lower than in prior year on an annual basis. Main reason is the 458 family phasing out, as well as it’s an effect driven by the fact that we don't have D&A on the LaFerrari side. So that's a combination of the two elements, so the percentage wise it should be slightly lower than last year.

Thank you. We will now take our next question George Galliers from Evercore.

Hi, thank you for taking my question. First question I had was just going back to the comments around hedging and your margins. The 20% to 21% seems a large step up from the 15% average margin we've seen for Ferrari over the last three years. Can you perhaps explain what that drive is behind this 500 basis point improvement, is it predominantly volume, is it special editions, personalization? Or is there another piece? For example, have you had negative hedging effects in your numbers for some time?

How about better management?

Okay. And any further details or –

It's good enough.

And then secondly, just when you give your outlook and guidance, I realize if you don't give details on future products. But when you give the outlook, does that include future models that may not be released or revealed to the press or investors but are within your internal plans in which you plan to build and announce in the future?

I don't know how to answer your question, because maybe you can give me a simple version of the question you just asked.

Say, for example, when you give your outlook today, if for example you are going to announce another special edition at some point during this year, does your outlook today include that announcement that will come at some point in the future? So if during the summer you announce a limited edition of five models that you're planning to build, in November would your outlook reflect back?

I think I understand your question. I’d point out two things. If you look at the guidance, the guidance has intentionally been structured as providing an equal to or greater than number. So it's by definition possible for us to improve on that performance, we're giving these numbers as minimum guidelines for the achievements expected for 2016. And secondly, we will not do anything through the guidance mechanism that would effectively break with commercial practice that Ferrari has had here in the last 70 years. And so to the extent that we will not have publicly announced a particular special version until a particular point in time in the product cycle or in the commercial activities of this group, we will not have updated guidance to reflect that. And we cannot do it because we cannot undo commercial practice to the financial disclosure as long as we're being consistently conservative in the guidance that we’re giving. And that is the approach that we're taking.

And then just very final question; can you just talk a little about the mix? Clearly the V8 sales were very strong with the 488 shipping very well. But when we look at the 12s and taking into consideration the fact that there are some F12tdfs in there. It looks like it’s been a significant step-down. Is that something we should expect to continue until the GTC4Lusso launch later in the year?

Well, the answer is yes. I mean fundamentally we've got both the FF that's coming out of production that's going to be replaced by the GTC4. That's not going to be available until Q3 and Q4 of this year. The F12, as Alessandro mentioned is now in its 5th year of commercialization. So it is by definition going to be a diminishing number as we go forward. Until the 12 lineup gets renewed and it's happening now first with the FF successor, you will see that number not be substantially different. It would improve in the second half of this year I expect. But until the new F12 gets launched or replaced before the F12 gets – is introduced, I think that, that mix will not drastically change. Having said this, I don’t think this is going to negatively impact margins.

Thank you. We will now take our next question from Gabriele Gambarova from Banca Akros.

Thanks for taking my question. One was on the mix. Alessandro, you cited the breakdown between V8 and V12 but I'm sorry I missed the figures [ph].

It’s 21% up for V8 and 6% down for V12.

So you're not providing an absolute number for this – how many cars?

We really aren't providing it.

And the last one was on Stratagem [ph]. From time to time there has been rumors about a new Ferrari, possibly a fifth model product line or something that might be, let's say, are more entry level, so possibly -- there have some rumors around it. So I wanted to know if –

If the rumors are true?

Yes.

If they were true there would not be rumors anymore because we would have announced it. So I really have nothing to add to that. I think when we make a decision as to what permanent changes will make to the portfolio, we will announce it accordingly. But based on what I know today there are no significant changes that are happening to the portfolio going forward. Other than what we've disclosed to the markets. End of Q&A

There are no further questions in the queue. I would now like to turn the call back to the speakers for any additional or closing remarks.

Thank you everyone for attending today's conference call. I'll be available for any follow-up questions you might have. Thank you.