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CEO: Ferrari expects less-favorable H2'19 from currencies, China volume drop

Ferrari NV's CEO said an expected less-favorable second half of 2019 prompted the automaker to confirm rather than raise its full-year guidance after second-quarter results surpassed expectations.

Ferrari's Louis Camilleri said the retirement of certain models, changes in currency, decreased volumes in China and increased investments contributed to the decision.

The Italian automaker, which released its second-quarter earnings Aug. 2, confirmed that it expects full-year 2019 earnings to exceed €3.5 billion in revenue, with an adjusted EBIT of €850 million to €900 million and adjusted diluted EPS of €3.50 to €3.70. Ferrari shares dropped 2.5% in midday trading on the New York Stock Exchange on Aug. 2 to $158.98, despite second-quarter results that beat the year-ago period and analyst expectations.

Camilleri told analysts during Ferrari's earnings call that some volume will be lost from models that will be retired this year.

"In the second half [of 2019], there is the end of the life cycle of certain models, particularly the 488 GTB and 488 Spider, and clearly we're seeing toward the end of the GTC4Lusso and GTC4Lusso T," the CEO said. "So that's something you need to take account of."

In the second quarter, currency — including translation and transaction impacts along with foreign currency hedges — had a positive impact of €17 million for the company, but Camilleri said that might not last.

"In terms of currency, as things stand today, we are probably going to get less of a favorable impact than we did in the first half," he said.

Camilleri said uncertainty surrounding whether the U.K. will leave the EU with or without a deal also is a cause for concern.

"I personally am less worried about tariffs because of various things that can be done on that front," the CEO said. "But I am more worried about what's happening to [the British pound] sterling. So that the remains a bit of a watch out."

In China, Ferrari posted higher volumes in the quarter as the automaker accelerated deliveries ahead of the trade and regulatory issues involving the country, including its new emissions standards, Camilleri said. These volumes, however, could level out in the second half of the year.

Costs will also increase in the second half as Ferrari ramps up investment related to three new models it will launch, Camilleri said, adding that the company is boosting expenditures in Formula One racing, as well. Camilleri did not offer specific amounts that the company is spending on either initiative.

Ferrari's margins should improve in 2020 from the Monza, with deliveries beginning in the fourth quarter of 2019, and the SF90 Stradale, Ferrari's first plug-in hybrid supercar.

The SF90 Stradale is the company's second hybrid model, but Camilleri said details about all-electric vehicles will not be unveiled until at least 2022. The CEO said he has doubts about the ease and quickness of broad electric vehicle adoption that the global auto industry has predicted.

"We feel that some of the predictions on the advent of electric cars are somewhat ambitious," he said, adding that he thinks it will take much longer to ensure appropriate recharging speeds and build charging infrastructure.

"So our sense is it is actually going to take longer than most people think," Camilleri added.

The automaker is looking at its electrification strategy very carefully as it aims to retain its competitive edge in the electric vehicle space the same way it did with traditional engines, the CEO said.

"So let me assure you that there are a lot of resources behind that."