Enzo Ferrari, who founded the company, once said that “Ferrari above all is made of people”. After stepping in last year as CEO, I can only echo this, thanking the Ferrari team for everything that we achieved together and warmly welcoming Benedetto Vigna who succeeded me. Benedetto joins Ferrari from STMicroelectronics (“ST”), where he was President of its Analog, MEMS (Micro-electromechanical Systems) and Sensors Group, ST’s largest and most profitable operating business. His knowledge, gained from over 25 years working at the heart of the semiconductor industry that is rapidly transforming the automotive sector, will accelerate Ferrari’s ability to pioneer the application of next generation technologies.
As it continues on its journey, Ferrari will be working with LoveFrom, the creative collective led by Jony Ive (who has also joined the Exor Partners Council) and Marc Newson. Exor has announced a multi-year collaboration with LoveFrom and the first expression of this new partnership will bring together Ferrari’s legendary performance and excellence with LoveFrom’s unrivalled experience and creativity that has defined extraordinary world-changing products.
During my last Ferrari leadership meeting as CEO, I shared with my colleagues the existential moment that Hermès went through a century ago. The two grandsons of the founder, Thierry Hermès, did not see eye to eye on the way forward for the family business, which was then a global leader in luxury saddlery and accessories for carriages and horses. Émile-Maurice had returned from America where he had seen the rapid rise of the automobile, which was disrupting their market. He told his brother, Adolphe, that Hermès had to seek renewal and change. But, while Émile-Maurice wanted to embrace this challenge, Adolphe decided to sell his stake in the business to his brother. Émile-Maurice then began using the company’s leather goods skills to produce suitcases for automobiles and, in 1922, introduced handbags after his wife complained of not being able to find one to her liking. The company has since gone from strength to strength, while continuing to be owned and operated by its founding family – an inspiration to everyone who leads companies in transitioning markets.
Ferrari is not alone in operating in a rapidly changing world. Like Ferrari, Stellantis is committed to seeking renewal and change within a revolutionising industry. In 2021 alone, there were 11 sizable public listings of pure EV (electric vehicle) players. The top 10 most valuable pure EV companies, which together sold close to 1% of total vehicle units and a third of the electrified units, were worth over $1.5 trillion at year end, while the most valuable 10 traditional car companies, which sold most of the remaining 99% of units, were worth $1 trillion. Markets are clearly telling us where the future is going and Émile-Maurice is a great example for us to keep in mind.
Stellantis used its Electrification Day in July 2021 and its Software Day in December to outline its future direction. These two themes underpin Stellantis’ shift to become a sustainable mobility tech company. For example, its EV battery sourcing strategy plans to secure more than 130 gigawatt hours (GWh) of capacity by 2025 and more than 260 GWh by 2030. The EV battery and component needs will be met using five “gigafactories” in Europe and North America, together with additional supply contracts and partnerships. Software needs to work in harmony with electrification, so Stellantis has also mapped out how it will deploy next-generation tech platforms. These build on existing infrastructure to change how customers interact with its brands and cars, moving from 12 million monetizable connected cars globally to 34 million cars.
In its inaugural year, Stellantis responded to the changes in its industry by launching more than 10 new models across its portfolio of 14 storied brands. Alongside this, it showed strong growth in EV sales, with the star being the Fiat 500 Electric. Under the leadership of its CEO, Carlos Tavares, and with the support of his leadership team and associates representing 170 different nationalities, it delivered an incredibly strong year, along with integrating the new company and managing a global semiconductor shortage. The company delivered €152 billion in pro forma net revenues in 2021, an 11.8% pro forma adjusted operating income margin and a pro forma net profit of €13.4 billion.
In April 2021, we announced that we had entered into a consultation understanding with Peugeot 1810 aimed at strengthening the relations between the Agnelli and Peugeot families and to provide support for Stellantis and its long-term success. As founding families, we are proud of what has been achieved but even more excited about the future.
While 2021 represented an exciting year for several of our companies, others faced significant challenges. For Juventus the 2020/2021 season was turbulent both on and off the pitch. Like the rest of the sports and entertainment industry, the pandemic prevented fans from seeing their teams in action. In 2021, Juventus saw 50% of its games at the Allianz Stadium played behind closed doors with the remainder restricted by limited attendance mandates ranging between 1,000 attendees to 50% of capacity. This robbed the players of the energy that the crowd brings – something the former bianconeri player and Chairman Giampiero Boniperti, who sadly left us in 2021, knew well, observing that “there is no greater gift than the love of the supporters”.
Unfortunately, the pandemic hit Juventus just as it was beginning to realise its new plan to grow the business using the €300 million capital increase decided at the end of 2019. The combination of the loss of revenues and the global transfer market falling from $7.4 billion in 2019 to $4.9 billion in 2021, led to a difficult first half of the 2021/2022 season with Juventus closing with a loss of €119 million. In response to this, Juventus developed a new plan and launched a capital increase of €400 million that was approved in October 2021. These difficulties highlighted the structural weakness of the football industry in Italy and Europe. Andrea Agnelli, the Juventus Chairman, has, therefore, advocated for changes in the industry’s structure and governance to make it more equitable and sustainable for all those who love this sport.
On the pitch, the Serie A title eluded our men’s team, but the women’s team continued their domestic dominance with a 4th consecutive Scudetto. The men were able, however, to win the Italian Supercoppa in January before going on to take the Coppa Italia in May. As we have learned, when performance is lacking, change is required, which is why we have appointed a new Board, CEO, Sporting Director, Coach and players. We have also ensured the company has sufficient time and resources to get back to the top on and off the pitch, which is the greatest desire of its passionate supporters and shareholders.
Like Juventus, Welltec endured 12 months of market turmoil in 2021. In addition, in April of last year, the company also had to handle a management transition when its founder and CEO Jørgen Hallundbæk retired and passed the reins to the COO Peter Hansen. In June 2021, together with 7-Industries, we then raised our joint participation to 95% to support Welltec in the next stage of its growth. In September 2021, on the back of positive Q2 activity and improved market conditions, coupled with a $52 million capital injection (to which we and 7-Industries subscribed, bringing Exor’s total investment in Welltec to $231.5 million), Welltec refinanced its outstanding $340 million bond. Helped by an improvement in energy prices and activity, Welltec was able to end the year stronger than it started, delivering its first substantial net profit since 2014.
Despite the improving outlook, the company began 2022 with great sadness since it was marked by the loss of Welltec’s founder. Jørgen Hallundbæk transformed the way the oil and gas sector operates through his invention of the Well Tractor, a robot that displaced conventional solutions, enhancing recovery rates and lowering environmental risks. By introducing new ideas into a complex and conservative industry, he was able to build a global technology company that embodied his entrepreneurial spirit and innovative thinking.
After facing several difficult years, we believe Welltec is well positioned to benefit from the strong multi-year cyclical recovery that we expect in the oil and gas sector, with demand remaining broadly stable for the next couple of decades. To match this, and to counter the natural production decline rate of oil fields, the sector will need to increase spending substantially from current depressed levels. We therefore look forward to supporting Welltec as it continues to develop new, safer and more sustainable solutions for the energy industry.
ESG. At our 2019 Investor Day, we promised that we would define our approach to ESG both across our companies and within Exor itself. We continued to develop this thinking throughout the COVID-19 pandemic and were delighted to share it with you at our latest investor day in November 2021.
Exor’s purpose, as I have shared near the beginning of this letter, is “to build great companies” and we believe that acting in a responsible way is a fundamental part of being a great company. Being responsible means not only aligning with best practices but also identifying clear priorities, setting data-driven targets, and raising the bar over time with the goal of achieving industry ESG leadership. Our companies today are at different stages of this ESG journey. CNH Industrial, for example, is already regarded as an ESG leader while here at Exor we have just started our journey.
The approach to ESG that we described in November will apply both to Exor itself and to our companies. This framework was challenging to develop as we needed something that reflected the diversity of the companies within our portfolio, while still being meaningful and ambitious. It is framed in three parts – first foundational elements, then our passions and finally our communication approach.
The foundational elements are the essential starting conditions that we expect all our companies to put in place regardless of their industry or size. We have then identified one passion within each of the ESG pillars that we intend to pursue both at Exor and through our companies. Within the Environmental pillar our focus is emissions reduction; within the Social pillar our focus is using education to decrease inequalities and promote innovation; and within the Governance pillar we are focusing on increasing diversity & inclusion. These passions are all material and they derive from our history since they represent topics we have traditionally tackled either at Exor or within our companies.
When we presented this thinking to you in November, we described how we would communicate our progress on it against the UN’s Sustainable Development Goals. We also set out the ESG commitments we were making at Exor and the ones we will encourage our companies to make. Our initial progress on these commitments is described in our Sustainability Report, which also contains the first greenhouse gas inventory of our company covering all our Scope 1, 2 and 3 emissions. We are now examining how we can reduce Exor’s environmental impact before offsetting any remaining emissions to reach our goal of net zero emissions by 2025.
We have also made progress at Exor on our second passion – education – through our support to I4C (Innovation 4 Change), the innovation programme started in 2016 by Collège des Ingénieurs in collaboration with CERN Ideasquare. During this 5-month programme, the 60 young, talented and predominately STEM-based students develop innovative and scalable business ideas and solutions to help solve problems of social interest, with the ambition to generate a significant impact on the world in a medium-long term perspective. Each idea is launched by an industry partner who provides a challenge inspired by the United Nations Sustainable Development Goals (UN SDGs).