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ECONOMY

12

WWW.

SAUDIGAZETTE

.COM.SA

WEDNESDAY 19 SEPTEMBER 2018

Ferrari plans 15 new models, SUV to drive earnings growth

flynas enters into

partnership with

Visa to drive loyalty

MARANELLO, Italy —

Fer-

rari plans to launch 15 new mod-

els, including hybrid cars, a utility

vehicle and more special editions

as part of its new chief executive’s

efforts to double core earnings by

2022.

The supercar maker shifted

to a guidance range for adjusted

core earnings of 1.8-2.0 billion eu-

ros ($2.1-2.3 billion) by 2022, rather

than the 2 billion figure set by late

Ferrari boss Sergio Marchionne.

But his successor sought to reas-

sure investors that the company

can maintain recent strong growth.

“This is an ambitious plan, but

a doable one based on a concrete,

detailed framework,” Louis Camil-

leri said on Tuesday at the com-

pany’s Maranello headquarters in

Italy.

Ferrari shares gained 0.6 per-

cent by 1330 GMT, recovering from

earlier losses. The stock slid more

than 8 percent on Aug. 1 when Ca-

milleri described Marchionne’s

targets as “aspirational”.

Marchionne’s sudden death in

July jolted investors who had ex-

pected the auto industry grandee

to remain at the wheel until 2021,

having more than doubled Ferrari’s

market value since taking it public

in 2015.

Camilleri and his team out-

lined a plan to show how a brand

known for its racing pedigree and

roaring combustion engines will

shift to making a utility vehicle and

hybrid cars and boost margins to

over 38 percent without sacrificing

exclusivity.

The company increased its div-

idend payout ratio and announced

a 1.5 billion-euro share buyback

plan.

Its marketing chief also prom-

ised a “significant increase in aver-

age retail price”.

With margins at 30 percent

now, strong pricing power and an

enviable customer waiting list, Ca-

milleri inherits a business firing on

all cylinders and is not expected

to stray far from his predecessor’s

RIYADH —

flynas, the Saudi

national air carrier and leading

low-cost airline in the Middle

East, announced the signing of

a strategic partnership with the

world’s digital payments leader,

Visa. The partnership comes in

line with flynas’ commitment

to enhance innovative solutions

through its loyalty program (nas-

miles).

Through this partnership, fly-

nas will build a unique and pow-

erful partnership that leverages

Visa’s global innovation leader-

ship, cutting-edge data analytics

capabilities, strong consulting

experience and best in class digi-

tal platforms to drive flynas con-

sumer loyalty.

Remarking on this partner-

ship, Osamah Alnuaiser, Direc-

tor of Loyalty Program in flynas,

said: “We always strive to ensure

that our valued passengers are

not only offered the best service,

but also are rewarded for their

travel with flynas. The nasmiles

loyalty program is a critical com-

ponent in flynas’ ability to offer

a superior and rewarding travel

experience to our passengers,

and we have just finalized our

strategic partnership with Visa to

further capitalize on and support

our continuous growth. We are

delighted to partner with Visa

to drive increased loyalty among

our passengers across the world

leveraging Visa’s digital assets

and global best practices.”

Ali Bailoun, General Man-

ager of KSA, Visa – said: “We are

delighted to work with flynas

on enhancing the airline’s loy-

alty program across the country.

Through our partnership, we will

develop a compelling customer

proposition that leverages the

global acceptance, security and

convenience of our market-lead-

ing digital payments solutions.

This partnership is a testament

to our endeavor to empower our

partners and provide our card-

holders with a seamless and en-

riched travel experience.”

The loyalty program (nas-

miles) is considered one of the

most rewarding airline frequent

flyer programs in the Middle

East, designed to reward pas-

sengers each time they fly with

flynas. Passengers can sign up

for nasmiles through the flynas

website or mobile application to

oversee all aspects of their mem-

bership. Members can earn and

redeem their SMILE Points when

purchasing flights, choosing the

best seat, purchasing excess bag-

gage and obtaining exclusive ac-

cess to selected airport lounges

across flynas network.

— SG

The new Ferrari 488 Pista during a presentation at the 88th International

Motor Show at Palexpo in Geneva, Switzerland last March 6, 2018. — Reuters

flynas builds a unique and powerful partnership that leverages Visa’s

global innovation leadership

come harder to balance.

A total of 3.6 billion euros will

be spent over the period to develop

new vehicles and shift towards hy-

brids, aiming to remain compliant

with gradually tougher emissions

regulations.

The company said hybrid ve-

hicles would make up around 60

percent of its product mix by the

end of the plan, while a smaller six-

cylinder engine would be added to

its lineup of internal combustion

engines.

At the time of the IPO, Mar-

chionne had promised to expand

Ferrari into other luxury categories

beyond cars, but the plan was put

on ice to focus on vehicles first. Ca-

milleri said that expansion was still

a “work in progress”.

Ferrari declined to give any

forecast for shipments other than

saying that more than half of those

would be sportscars.

This year’s deliveries are fore-

cast at over 9,000 vehicles.

At the event, Ferrari unveiled

the single-seater Monza SP1 and

two-seater Monza SP2, a pair

of open-topped, limited edition

sportscars, as part of a new seg-

ment dubbed “Icona” inspired by

past Ferraris but boasting the latest

technologies.

Ferrari ruled out a self-driving

model, but added that its much-de-

bated utility vehicle would come by

the end of the plan.

The vehicle, called “Puro-

sangue” (Thoroughbred), could

potentially lead to a substantial

growth in sales, analysts have said,

while ferrari expects the car to also

help lure the super rich in China.

Camilleri sought to sooth con-

cerns the vehicle could dilute fer-

rari’s exclusive status.

“As a die-hard ferrarista, I have

been a little skeptical when the con-

cept was first voiced at the board,”

the known Ferrari collector said.

“Having now seen the wonder-

ful design concept, the extraordi-

nary features ... I am a hugely enthu-

siastic supporter.”

—Reuters

script.

Marchionne had orchestrated

Ferrari’s spin-off from parent Fiat

Chrysler, positioned it as a luxury

brand rather than a carmaker, and

managed to do what few thought

possible: sail through a self-im-

posed production cap of 7,000 cars

a year without sacrificing pricing

power or its exclusive appeal.

Ferrari has clocked up years of

record earnings, helped by special

editions and a customization pro-

gram.

But it could prove tough to

maintain the company’s high valu-

ation as emissions rules tighten,

capital spending increases and the

diverging interests of investors, rac-

ing fans, owners and collectors be-

New fuel oil regulations

for shipping industry to

create winners and losers

DAMMAM –

The decision this

year of the International Maritime

Organization (IMO), a specialized

agency of the United Nations, to

introduce new rules aimed at re-

ducing the cap on the sulfur con-

tent of marine fuel has an impact

on the Gulf’s oil dynamics, the

Arab Petroleum Investments Cor-

poration (APICORP), the multilat-

eral development bank focused on

the energy sector, said in iits latest

research report published Tuesday,

Under the IMO ruling, begin-

ning 2020, shipowners will have

to comply with a new 0.5% cap on

the amount of sulfur inmarine fuel,

compared with the existing limit

of 3.5% that was enforced back in

2012. The immediate impact will

be on consumers of High Sulfur

Fuel Oil (HSFO), namely shippers,

but also on refineries that produce

large quantities of HSFO.

Ship-owners will face several

options: continue to use non-com-

pliant fuel oil and install scrubbers

that clean out exhaust fumes in-

cluding sulfur content, burn LNG

ormethanol, or use compliant fuels

such as Low Sulfur Fuel Oil (LSFO)

and marine gasoil. However, it is

unclear which of these options will

be the most cost effective, making

it difficult for ship-owners to take a

firm decision.

In the case of burning gas, the

availability of these fuels is re-

stricted to northern Europe, whilst

LNG bunkering has not developed

globally and the lack of infrastruc-

ture will restrict LNG-based power

to ships moving on standard and

short haul routes. Shippers con-

sidering a switch to LSFO will not

only have to factor in the higher

cost of the fuel, but supply restric-

tions in the short to medium term

will create uncertainty around

its availability in bunkering ports

around the world.

Even in the event that the glob-

al market is able to produce suf-

ficient quantities of the fuel, there

is no guarantee that machinery on

ships designed to run on high vis-

cosity/HSFO can switch to low vis-

cosity/LSFO. If they can’t, install-

ing scrubbers in ships is another

option; but the cost of retro-fitting

the necessary equipment may be

prohibitive, and is only a short

term solution, as it may not be able

to meet more stringent regulations

that me be introduced in the future.

The shipping industry’s choice

of option will directly impact the

supply/demand dynamics of the

Gulf’s oil industry, and the results

will be varied. In 2017, demand

for fuel oil averaged 7.5 million

barrels per day (mb/d) of which

3.5mb/d was HSFO, used mainly

in bunkering. Going forward, the

IMO regulations will reduce de-

mand for HSFO whilst demand

for both LSFO and marine diesel

will increase. Other things being

equal, the differential between

sour-sweet crudes, HSFO-LSFO

and distillate-HSFO could widen.

In the short term, the ability of the

global refining industry to produce

an estimated 8mb/d of compliant

bunker fuel for the world’s ships

by the IMO target of 2020 will be

tested. Depending on assump-

tions about scrubber uptake, the

resulting boost to demand for ma-

rine diesel alone is expected to be

around 2.1-2.5mb/d.

In the likely scenario that there

will be more reliance on LSFO and

marine diesel, the downstream

sector will create winners and

losers, with simple refineries at

most risk. Refineries that failed

to invest in cokers and other resi-

due destroying equipment needed

to contain HSFO production will

find it difficult to market the fuel.

On the other hand, more complex

refineries will benefit from higher

margins. In the highly competitive

refining market, this could pave the

way for further closures. In par-

ticular, Saudi Arabia could benefit

significantly if shippers choose to

switch to LSFO or marine diesel, as

it will be able to meet this demand

and increase exports. On the other

hand, if scrubbing is the preferred

route, there is enough demand

from the country’s power sector to

absorb its existing HSFO produc-

tion, and at a reduced cost.

Geared to producing more

diesel, the GCC will be in a good

position to adjust to the IMO rules,

with ample opportunities for the

likes of Saudi Arabia and Kuwait

to utilize excess HSFO in their re-

spective power sectors. The GCC

as a whole has embarked on many

initiatives across the oil value

chain that has helped them adapt

to global developments. Some of

these investments, such as addi-

tional refining capacity were built

with an eye to supplying a growth

in Asian demand for diesel driven

by China. But the decision taken by

the Chinese government to rebal-

ance the economy and shift away

from manufacturing and more

towards consumer goods and ser-

vices dampened the prospects for

diesel exports. Luckily, the timely

changes in IMO regulations have

provided the GCC with an alterna-

tive market for diesel exports.

For Iraq and Iran, on the other

hand, the picture is gloomy. Al-

ready struggling to meet domestic

demand, the damage to Iraq’s Beiji

refinery drastically reduced the

country’s capacity. In addition, the

refining sector as a whole is not as

sophisticated as those in the GCC,

and their ability to produce low

sulfur fuel is questionable. Worse,

with lower demand for HSFO, Iraq

will struggle to get rid of the fuel,

whilst the domestic power sector

is not large enough to absorb high-

er quantities of HSFO, especially

given that the majority of new

power generation will be gas-fired

plants. As for Iran, whilst fuel oil

consumption has been increasing

in the region driven predominantly

by Saudi Arabia, and demand in

the region more generally has been

relatively stable, only Iran is exhib-

iting a fall in fuel oil consumption,

declining from 382kb/d in 2014 to

214kb/d in 2017. This means that it

will struggle to find a market for

its excess HFSO, a situation made

worse by the re-imposition of US

sanctions; whilst its refining sector

is not sufficiently sophisticated to

produce LFSO, nor is there suffi-

cient demand from the power sec-

tor.

Mustafa Ansari, Senior Econo-

mist at APICORP, said: “The IMO

regulations will create winners

and losers across the industry. Un-

certainty around the availability

of LSFO, HSFO prices and scrub-

bing technology makes it difficult

for ship-owners to take a decision

on what outlet to adopt for IMO

compliance. What is more clear is

that demand for HSFO is likely to

decline, whilst demand for compli-

ant fuels such as marine diesel and

LSFO will increase. This means

that refineries that have the means

to reduce fuel oil production, or

that are geared to producing mid-

dle-distillates such as those across

the GCCwill benefit from the addi-

tional demand. By contrast, coun-

tries without this capability, and

with fewer alternative sources of

demand, such as Iran and Iraq, will

not be able to absorb excess sup-

plies of fuel oil.”

—SG

Global car sector to

continue sales growth

JEDDAH —

Despite tariffs, glob-

al auto sector will maintain stable

outlook with steady sales into 2019,

Moody’s said in its report re-

port, «Automotive manufacturing

-- Global, Modest growth in light

vehicle sales to continue into 2019

amid threat of US tariffs».

The outlook for the global au-

tomotive manufacturing industry

remains stable over the next 12 to

18 months, reflecting expectations

for steady demand across key re-

gions espite looming challenges,

Moody›s Investors Service said in

the report released on Tuesday.

«While global auto sales so

far this year support our full-year

2018 forecast, we see greater risks

emerging that could hurt sales

next year, including trade and tariff

disputes, rising interest rates and

higher fuel prices,» said Falk Frey,

a Moody›s Senior Vice President

and author of the report. «Steady

auto sales in China are a key driver

of our global forecast, but growth

will remain far more modest than

the double-digit percentage gains

seen as recently as 2016.»

Moody›s forecasts global light

vehicle sales to grow 1.5% this year

and 1.3% in 2019. Looking across

the regions, auto sales in China are

expected to grow 2% this year -

slowing from 3% in 2017 - and 2.5%

in 2019.

US light vehicles sales will

likely cool in the coming months.

Rising interest rates, higher vehicle

prices and the threat of tariffs on

auto imports are likely to make

consumers consider a used car or

delay buying a new one.

Although US light vehicle sales

are expected to fall by 1.2% in 2018

and 0.6% next year, they will re-

main strong relative to historical

levels and are on track to reach 16.9

million units this year.

Western European sales to

grow by 2% in 2018 before slow-

ing to 0.5% in 2019, while Japanese

sales growth is forecast to slow to

0.1% this year, before accelerating

to 1.3% next year. — SG