Ferretti S.p.A. (F3T1.F) Earnings Call Transcript & Summary

Welcome to Ferretti Group's update call. To present this update today, we will have with us our Group CEO, Mr. Alberto Galassi; CFO, Mr. Marco Zammarchi; and CCO, Mr. Stefano De Vivo. [Operator Instructions] Mr. Galassi, the floor is yours.

[Foreign Language] Good evening, good afternoon, Alberto Galassi speaking. Thank you for being with us tonight, this afternoon in Italia. I'm pleased to share with you the results of this company, of the third quarter of the year, which are confirming that we are performing extremely well in a very complicated context globally and macro also for luxury. And I would say that we are a luxury, well, an example of a luxury, which is growing and growing quite well. So if you want to share the key data of the first 9 months takeaway. So the first 9 months of the year confirms the growth path of the group and EUR 875 million of order intake with a net revenues of the company of EUR 834 million, 10.4% growth year-on-year. A very important EBITDA result of EUR 125 million with a 17.7% growth year-on-year. Stunning order backlog of EUR 1.5 billion. Net cash in hands of EUR 288 million, and a growth stable continues and confirmed growth in EBITDA margin, which reached 15% with a growth of 100 basis points year-on-year. So if we move forward to the midterm guidance of the company that we gave. Well you can see that the trend is absolutely confirmed and it confirms that the execution of the plan that we presented to the investors in 2022 is absolutely happening and is happening very, very well. So our revenue , as I said in the first 8 months, are 10.4% higher than the previous year with EUR 8 billion. Adjusted EBITDA, you can see that in 9 months of operation, we nearly reached last year's successful number of EUR 125 million this year with the 15%, as I said, EBITDA margin. And our guidance was to get to a greater 18.5%. So we are perfectly in line, confirming that we will get there absolutely. Cash conversion is very important ratio the first 9 months confirmed 87.3%, which is in line with the guidance of greater than 85%. I forgot to say at the beginning that the revenue news are showing an organic growth of more than 10%, which is definitely in line with the guidance that we gave. So a bit of business highlights. What happened in this very busy 3 months of the company. We had a lot of commercial activities. As you know, for us, it's very important because the season of -- the most important boat shows and our private preview, which makes us completely different than our competitors because we have an event, which is a private boat show where we host all the clients we have from over the world. We greet them with something, which is more than showing representing a boat. We're offering them lifestyle. It took place and took place very successfully. So we would say that showing a bit of what is the season of the show, so you can see after that, the outcome and the harvesting out of that season. So I think we have, if I'm not mistaken, a video. [Presentation]

So what you've seen is what Mick Jagger described as the most important, the best rock band in the world, the Måneskin. They performed for us not because we paid a crazy budget, but because they love the idea of performing in Monaco in front on the water, the stage on the water with the changing room, there was a beautiful brand-new wallywhy here, a super premier wallywhy150. And in front of an incredible crowd with more than 26 boats, not for sale, that owners brought there to see the preview, together in this event, which makes us different than anybody else. So the boat show season has been very, very good. I personally attended all the boat shows in Europe. Stefano De Vivo, the Chief Commercial Officer went to the United States, one, the most important one in the U.S. in Fort Lauderdale. And I can give you 1 digit. If you can see that this company in the month October, only in the month of October, and we all know the macro situation in the world in the month of October, we had nearly EUR 200 million of orders that the company was able to secure after the season of the board show. One flavor from United States and an important sale that took place a few weeks ago -- actually, maybe last week, if I'm not mistaken, Stefano De Vivo will give you a highlight in a flash on the American market.

So we attended the Fort Lauderdale International Show, which is outside the scope of 3 months. But just to give you a flavor of how our order intake is going, after a very strong order intake in September, we kept on with a tendency and actually increased and went on to sell over EUR 200 million of order intake for the month of October, which is a very strong result, even stronger than the previous year. So to focus on our brands, we, as CRM, can announce that we have sold a 67-meter that was signed at the Fort Lauderdale International Boat Show and was part of this EUR 200 million order intake. Then we have Riva. We had a good unveiling.

Riva, there's been a beautiful unveiling of a ship that's never built before with this moving platforms in the stern related to Riva. The name says it by itself and we presented it in Monaco on 5 units already sold, interesting locations, UAE, Italy, Turkey, Spain, so the boat has not been presented in the United States yet. And it's been -- there's been an incredible welcoming for this one. Same thing is happening for what we developed for another important brand as important in terms of allure value and fame and positioning as Riva, which is wally. Stefan is the Managing Director of the brand and will introduce you the latest news on the wally planet.

So we introduced in Cannes, the wallypower50 as a project. The first one will be exposed at the Dusseldorf International Boat Show in January. And already 3 units of this yacht has been sold without having even seen the first one. The other great news is that we have presented the wallyrocket51 for the sailors and the sailing crowd of wally. This keeps on showing how much we're pushing on the brand and especially on the sailing in the greenest aspect that we can use when going and more sustainable when going sailing. And this is going to be a class of its own. It's going to be the February challenge. It's going to be the [ Corsini Rienti ]. It's basically going to be where our clients will be able to really fight it out, which is something that for a wally client has always been very important. But then we have also Ferretti yachts, which presented something very sustainable.

Ferretti never had the long-range vessel, never had a super sustainable fleet. This is a new range of models of Ferretti yacht that has never been built before. That's why we bought Ravenna. That's why we're speeding up the investment in Ravenna. That's why we are anticipating the CapEx expenses for Ravenna in order to fulfill the market request. The demand for this yacht has been incredible. I think more than 8, 9 units have been sold from the presentation. Globally, the first one in the Far East and Asia Pacific, and we were able to produce, to manufacture, to design and manufacture an incredible yacht, which with this new Ferretti is a trademark. Ferretti Sustainable Enhanced Architecture technology. So we have a combined mix between solar panels and energy bank. And to give you an example, this ship, the prototype sailed from Catolica in Adriatic coast, in the middle of the Adriatic coast in Italy to come for the preview and 4 days without using the generators. This is something that never happened in our industry, never happened, at least, in Ferretti Group. All the materials we have full focus on, 100% durable, natural and recycled solutions. So we're the first one using the lamellar teak from production offcuts who has an international certification by FSC; lower -- total lower energy consumption with the weight reduction. A lot of carbon fiber, a lot of new material and a fantastic high-efficiency hull, which provides an incredible comfort without mentioning the solution, as you can see, of the bow, where you can have an opening, a retractable roof. And at the end of the day, you end up using some part of the boat that you never used before. So to cut a long story short, for people who are not expert about yachting and boating, there is a new range of models that is entering to the market that's going to be manufactured in the new shipyard of Ravenna. And it's completely sold out. So thank God, we were able to hit the target. And the acceleration on Ravenna construction in order to produce the hull #1 -- sorry, the hull #2 at the end of this year. It's happening as we speak. And of course on sustainability, this, you're talking about the 90-footer but you can see what's happening in the large ships.

So we are concentrating on every size of our range. We've talked a lot in the past about the Riva El-Iseo electric, it's a 28-foot, 9-meter yacht. We've just told you about the INFYNITO 90, a 27-meter yacht. But we've also been working extensively with RINA, which is Italian certification body. And we've been working with a fuel cell technology company called Ballard in Canada. And we can say that we have the first platforms between 60 and 90 meters that are fully certified to be able to have a fuel cell technology on board. This means that, today, we are now able to go talk to clients about projects in these sizes with fuel cell technology, which are actually buildable. Because what you see around and other shipyards are talking about are still not certified. So the reality is that we have a project and we're ready to move along. And as we speak, the sales team is actually looking and talking to clients that are looking for this kind of solutions. If we move on to the financial results, I will start introducing the order backlog and the order intake before passing the word to Marco Zammarchi. If we look at the order backlog, you can see that if we take the first 9 months of '22 versus the first 9 months of '23, we had an increase of 6.6%. And from the beginning of the year, we've increased 13.6%. The order intake, you can see that the first 9 months of '23 have covered EUR 875 million. And this order backlog and order intake today cover over 60% of 2024 revenues and 19% of 2025 revenues. Also, if we add on top of this, what we told you at the beginning of this call, where we have sold over EUR 200 million of order intake at -- in October. This gives us a very good number to go and reach our targets and beat in 2022 by far. If we do the order backlog by segment. Here, you can see that the composite yachts are basically in line with the previous year, where we had, had a huge increase. So we are keeping with our strategy. We're not increasing our production of composite yachts at the moment. As you can see, the order backlog for the made-to-measure has increased 17.7%, while the one for super yachts has stayed constant at 2% increase. As a matter of fact, if we take the announcement of a 67-meter, you will see that in the last quarter, this will have a good increase of order backlog. I think over to you, Marco, for the net revenue.

So the revenues reflect the good order intake and together with the good condition of the marketplace for us. And so we present an increase of 10.4% in term of net revenues without preowned. Bringing the result to EUR 834 million versus the prior year of EUR 755 million. And if we move to the analysis by segment, we can see that the major contribution to this growth is coming from the super yacht because in this segment, we have -- now we are perceiving the contribution generated by the semi-serial, that is the extension of the superior to the next level. In fact, we increased by 33.4% the revenue generated by this segment. On top of that, also the other -- the segment Others is contributing because now we are taking benefit of the growth ramp in the revenue from the wally sailing segment. Because now wally is also present there, and we are generating revenue there. In terms of percentage, the biggest contribution is continuing to provide by composite yacht that is 44% of the total and made-to-measure that continue to provide 37% out of the total. In terms of distribution by geography, we can say that -- in the Americas, we have to record a decrease of minus 20.9%. And we have to say that after 2 years, like 2021 and 2022, that was over our expectation. Now we have a certain normalization on the other end, thanks to the increase of the region EMEA, in particular, in countries like Turkey or the Arabic country. We are more than offsetting this grower and also APAC is contributing with a growth of 77%. In total, APAC is 12%. And also a big contribution is coming from Super Yacht. Just to provide another value about the revenues, so we continue to have a utilization rate of our plant of over 95%. So we cannot continue to grow to this space. That's the reason why later on...

Marco if I may add, for Americas what we've seen in October and we're seeing in November that gap is going to be closed quite a bit compared to what we are seeing today. And this is going back to a normal market where the summer season is -- in Europe is actually a moment where not many boats are sold in the Americas.

And in terms instead of profitability, as illustrated before by Mr. Galassi, we are registering a growth of 17.7% in term of EBITDA with a total of EUR 125 million and the presentation of 15%, that is 100 basis points versus prior year. So we are confirming the guidance of growing in the midterm to 18.5% -- and as a reflection also the net profit is continuing to grow. And in this case, the growth is 13.6% and the total net profit of the first 9 months is EUR 62 million. That is the same amount generated by the full year in 2022. And this growth, again, is supported by the industrial scalability, the strategic positioning of our company in the most profitable segment. And thanks also, taking vantage of the pricing power generated by the solid backlog. In terms of CapEx, we have the total investment over the first 9 months is EUR 107 million, of which EUR 91 million is expansion because we not only -- we announced in March the acquisition of Ravenna. On top of that, we also increased the size of Ravenna because we have an agreement to increase the additional 30,000 square meters.

Just for a reference, Marco, sorry. 70,000 square meters is what we acquired in Ravenna that will become fully operational, starting operation at the end of this year, plus additional 30,000. So we are taking about 100, 000 square meters of potential of growth that we have in our facilities and they will enable us to give.

Yes, that bringing total an additional 30% of industrial capacity. So in order -- so we have anticipated as much as we can the CapEx cycle in order to answer quite promptly to the market demand.

This small short video that shows what it was, what it will be, what we have done. And it's quite impressive to see that what we have done so quickly because we acquired Ravenna in the month of April. And you can see how fast we're building up the area, how fast we are becoming operational. And the acquisition [ in San Vitale ].

The dry dock.

The dry dock which is going to be looked at on the right side, with how it is -- how it was, the dry dock is going to be ready. Again, we're very proud of this investment because the trend, and I want to highlight this again and again and again, despite the macro market condition, despite the luxury in general been hit by the macro, this company is continuously growing and continuously receiving confirmation of its stability, of its solidity, of how good is the strategy to grow. And what we were missing, it's basically its sites, sheds, space to grow in the most important segment for us, which is the made-to-measure, and in the new generation of yachts, which are represented by the low emission or sustainable also the INFYNITO range. Ravenna is answering exactly to these 2 points, driven by one thing only, the market demand.

So if we move to the net financial position. Our net financial position is still positive EUR 280 million -- and the we consume -- we invest the cash in order to increase the capacity of Ravenna and also to be ready to produce our yacht as soon as possible. So we try to accelerate as much as we can our CapEx. Another note about the net financial position, the net working capital that is decreased to minus 2.3%. It's just a temporary decrease because in order to be ready for the next year of deliveries, so we start to deliver, producing as much as we can, as we say our utilization rate of our plant is over 95%. And so it's a temporary decrease contraction of the net working capital. In fact, we expect by year-end to be again in the range of minus 5% or minus 10%. That is -- that we consider quite normal for our company.

So confirming that midterm guidance of the company, we are confirming it by facts. Basically, we're just confirming that we are executing our plan, executing it by the plan, executing by the expectation of our shareholders, our investors. So as I said, the first 9 months of 2023 gave us EUR 834 million of revenues, so more than the EUR 0.8 billion, with a 10.4% growth year-to-year. Technically, as you can see, confirming the execution in line with what we have promised. EUR 125 million on EBITDA with a 100% basis point growth, so 15% EBITDA margin. Confirming the guidance, cash conversion was 87.3% greater than 85%. And at the end, it's a solid company that is growing despite the general market weakness. It's a solid company in the luxury segment that continues to grow and makes it different than others. And there is no weakness. We confirmed what we told about the order intake of the month of October, even in the United States with a pickup and return on -- in the positive trend of the Americas. So I would say the only thing that I can add is the full commitment of this management to continue achieving the results that we promised. We are just trying to show you in a nutshell, as quick as possible, as effective as possible, the execution on what we promised in a difficult market -- sorry, macro scenario, which is definitely not hurting our positioning in the high end of the top luxury segment. So the presentation is finished. We are here to answer any questions that you may have, any deep dive. Myself and the team, and I want to -- we honestly want to remember and to thank nearly 1,800 people working in the companies, continues growing and given to the world what the world is saying and the market is saying today the best range of products in the industry.

[Operator Instructions] And our first question would be from Niccolò Storer from Kepler.