How did Ferrari's R&D expenses impact profitability in 2024?

Ferrari's R&D expenses, totaling $254.63 million in the fourth quarter of 2024, had a significant impact on the company's profitability for the year.

1. **Innovation and Growth**: The increase in R&D capitalization was linked to consistent innovation spending and is expected to grow. This indicates that Ferrari is investing heavily in research and development to maintain its competitive edge in the luxury sports car market.
2. **Profitability Impact**: Despite the high R&D expenses, Ferrari maintained strong profitability margins. The company's operating margin was 28.29%, the gross margin was 50.13%, and the net margin was 22.85% as of December 31, 2024. This suggests that Ferrari is managing its expenses effectively and generating substantial profits despite the high R&D spending.

|code|Ticker|Name|Date|Gross Profit Margin|Operating Profit Margin|Net Profit Margin|market_code|
|---|---|---|---|---|---|---|---|
|RACE|RACE.N|Ferrari|2024 Q1|50.6741|27.783664188904783|22.2269|169|
|RACE|RACE.N|Ferrari|2024 Q2|50.3079|28.84491950709318|23.2202|169|
|RACE|RACE.N|Ferrari|2024 Q3|50.1072|28.6707263342958|23.0799|169|
|RACE|RACE.N|Ferrari|2024 Q4|50.1326|28.291896496875385|22.8544|169|

3. **Return on Assets (ROA) and Return on Equity (ROE)**: Ferrari's ROA was 21.51% and the ROE was 46.15% as of December 31, 2024. These high returns on equity and assets indicate that Ferrari's R&D investments are contributing to strong profitability and financial health.

|code|Ticker|Name|Date|ROA|ROE(Average)|market_code|
|---|---|---|---|---|---|---|
|RACE|RACE.N|Ferrari|2024 Q1|5.2946|11.0923|169|
|RACE|RACE.N|Ferrari|2024 Q2|11.2533|24.7856|169|
|RACE|RACE.N|Ferrari|2024 Q3|16.664|35.5639|169|
|RACE|RACE.N|Ferrari|2024 Q4|21.5147|46.1536|169|

4. **Cash Flow and Outlook**: Ferrari reported strong industrial free cash flow of over EUR 360 million, despite the R&D investments. The company remains optimistic about meeting its 2024 guidance, supported by strong market demand and a robust order book.

In conclusion, Ferrari's R&D expenses had a significant impact on the company's profitability in 2024, but the company managed to maintain strong profitability margins and financial health. The high R&D spending is a strategic investment in innovation and growth, which is contributing to Ferrari's strong financial performance.