The Formula One shutdown due to the Coronavirus pandemic has hit the Ferrari brand in the “harshest manner”, as the lack of F1 activity has heavily hit the company’s sponsorship and commercial revenues that it revealed in its Q1 earnings.
In the updated financial guidance issued by Ferrari last week, it was revealed that the team could lose almost €1 Billion in revenue for the 2020 year that was previously anticipated, and given the lack of F1 action has “undoubtedly” contributed the most to this reduction in guidance going forward.
The changes in this years F1 season has hit the company hard. There has not been a single race thus far in 2020, and if F1 goes ahead with its plans to start the season in July at the Red Bull Ring in Austria, it will do so behind closed doors.
The revised guidance issued by Ferrari revealed there was “uncertainty” in regards to the number of actual races that would go ahead in the 2020 season, and this has heavily contributed to a €39 Million drop in sponsorship, commercial and brand revenues during the first quarter of 2020.
“A significant reduction in Formula 1 revenues reflecting the lower number of races estimated to take place during the 2020 season, with many races expected to be held without fans present.” The Ferrari Q1 2020 Financial Results report read.
“The start of the 2020 Formula 1 World Championship has been postponed and there is uncertainty regarding the number and format of Grand Prix races that will take place in 2020, impacting our sponsorship and commercial revenues as we have accrued revenues in the first quarter based on the estimated number of races that will take place for the 2020 season, which is expected to be significantly less than the 2019 season.”
Ferrari CEO Louis C. Camilleri was vocal about how the F1 shutdown has negatively impacted Ferrari’s revenue for 2020, however he believes most of the damage has already been done and the cost caps planned by F1 will help ease the pain next year.
“Formula 1 is undoubtedly the activity that will adversely affect our results in 2020 in the harshest manner,” said Louis C. Camilleri during Ferrari’s earnings call.
“As you know, the original calendar provided for 22 races.
“The FIA and the Formula 1 group now predicts a maximum of 18 races with many without fans.
“This clearly implies a drastic reduction in the revenues that are generated by the commercial rights holder as well as sponsorship fees, our 2 primary sources of revenue.
“To mitigate this impact, at least partially, the entry into force of the new technical regulations that were originally scheduled for 2021 have now been postponed to 2022.
“Furthermore, there has been significant progress on numerous measures to freeze various components and, hence, reduce costs going forward as well as substantial progress on a cost ceiling and its perimeter effective as of 2021, which will hopefully be put to bed in the near future. It remains our hope that such ceiling will render Formula 1 more economically sustainable for all participants while ensuring that it remains the premier racing championship globally and the source of significant advances in automotive, innovation and technology.”