Ultrapar Participacoes S.A. (New) American Depositary Shares (Each representing one Common Share)

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to UltraPars' fourth quarter 2020 results conference call. There is also a simultaneous webcast that may be accessed through UltraPars' website at ri.ultra.com.br and EZIQ platform. Please feel free to flip through the slides during the conference call. Today with us we have Mr. Federico Corrado, Chief Executive Officer, and Mr. Rodrigo Pizzinatto, Chief Financial Investor Relations Officer together with other executives of UltraPAR. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After UltraPAR's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. We remind you that questions which will be answered during the Q&A session may be posted in advance in the webcast. A replay of this call will be available for one week. Before proceeding, let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapower Management and on information currently available to the company. They aim for risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the results of UltraPAR in the future and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Curado. Mr. Curado, you may now begin the conference.

Good morning and welcome to our conference. Thank you for your participation. And let me kick off saying that our fourth quarter was consistent with what we had projected and it consolidated a very good year for Ultrapar despite the effects of the pandemic on our businesses. Let me also first of all to highlight the competence and the dedication of our teams and our companies in managing their operations during the crisis And this is both from the point of view of the safety of our people, but also the continuity of our operations. We did not have any interruption whatsoever, so we were able to keep a high level of service to our customers and our consumers. Well, the lockdown and the mobility restrictions had a particularly negative effect on Ipiranga's revenues, also in the extra farmer revenues. But Ultrapar as a whole managed to exceed R$ 2.1 billion of cash generation after investments and this is a historic, this is an all-time record for the company, even more relevant taking into account the challenges of last year. Three of our businesses, Ultragas, Ultracargo and Occitano individually also had all-time record results. and also Extra Pharma achieved its best performance in the recent several years, including for the first time since we acquired the company, a cash break-even last year. Very solid results. So all of that led to an increase of 20 basis points in Nutrapar's EBITDA margin, Measured as a percentage of revenues from 19 to 2020. We also saw our net income grow approaching 930 million reais, which represents a 17% increase compared to 2019. And this is already an apples and apples to apples comparison. So, in other words, we are excluding here The effects of the impairment that we had in 2019. So, on a comparable basis, a 17% increase in our net profit. Also to remark, the liability management we performed during the year. We extended the average term of our debt, a small reduction in the cost as well, but also importantly, we negotiated the elimination of the covenants in our debt. We had about 17% of our debt with some sort of covenants, and they are no longer, so we have a totally covenant-free debt at this stage. These cash management efforts allow us to keep the leverage of our debt unchanged throughout the year, despite of keeping a high level of investment of 1.5 billion last year, and also maintain a good level of dividend. Distribution. Well, from the point of view of the strategic agenda, 2020 was also an important year for us. Consolidated the vision of prioritizing our capital location in the downstream oil and gas sector in Brazil. And why that? Because this is where the Ultra Group has an important presence and greater potential for adding value. Of course, a very relevant step towards that end was the progress in the acquisition process of Refap, the Petrobras refinery in the south of Brazil, in which, of course, we still have a long process of contract negotiation. and also the need to confirm that the conditions to assure a free and competitive market remain valid. But at the end of the day, we remain convinced of the benefits that the opening of the refining sector will bring to the dynamics and competitiveness of the market and ultimately also to the benefit of the consumers. Well, looking to the future, 2021 We'll be an important year in our trajectory. On one hand, we anticipated continuous recovery of economic activity in Brazil, despite, of course, the challenges associated with the vaccination and the controlled pandemic. But we see ultrapower having an important increase in its results, and this is based on improvement in the various businesses, but especially in Ipiranga, which was the most, as I already mentioned, and the most affected business by the pandemic. On the strategic side, we also expect to advance in consolidating the vision of a more focused business portfolio, more focused on our competencies, and as we do that, consequently, we have a higher chance to contribute more effectively to the long-term creation of value for our shareholders and stakeholders. I also like to mention another priority which we have been focusing the last few years which is our ESG agenda. That agenda will gain the reinforcement of a new senior position that we are creating. It's a position in the executive committee reporting directly to me and it will be led by Valeria Militelli Valera is a recognized professional with great competence and experience and will be of great help for us. Valera will join us in March. And throughout 2021, we plan to consolidate an objective and transparent ESG agenda for the next decades. So that agenda will include the definition and disclosure of specific targets for continuous monitoring of our performance on those topics. So that's the main Objective for 2021 as far as CSG. And before passing the floor to Rodrigo, I would like to close with the synthesis that one, 2020 was a very solid year for UltraPAR especially in light of the challenges created by the pandemic and our optimistic view about 2021 where we see evolutions both on the operational side but also on the strategic agenda. So, I appreciate your attention. Thanks again for participating. I'll be available at the end for the Q&A session. Thank you.

Good morning, good afternoon, everyone. It's very good to be here again to talk about UltraPress results. And just before starting, I would like to mention a point regarding the report of our results. In 2020 and 2019, we had some non-recurring impacts that affected our results. that over the year we highlighted in our releases. You see in our explanations that we have excluded some of these non-recurring effects, both positive and negative, so that we can analyze the recurring operational performance of our businesses and Ultraport. Very well. Beginning with UltraPars consolidated results in slide number four, our EBITDA was 949 million reais in the fourth quarter of 2020, a growth of 163% over the same period of 2019. Here, I should point out that in the fourth quarter of 19, we had impairment of 593 million reais of goodwill at Extra Forma and a write-off of 14 million reais of Occitano and Dina assets, while in the fourth quarter of 20, there was 85 million reais in non-recurring tax credits for Occitano. Excluding these non-recurring effects, there was a reduction of 11% of our EBITDA in 2020 due to lower EBITDAs at Ipiranga and UltraGas despite the results growth in Occitane UltraCargo and ExtraPharm. First quarter results for UltraPAR were in line with what we had indicated in the last conference call of our third quarter results. Some businesses were a bit above and others a bit below. Looking now at the results for the whole year of 2020, our EBITDA reached R$3,479,000,000, a growth of 24% compared with that of the previous year. Excluding the no recurring effects mentioned in the full notes for both years, we had a 5% lower EBITDA due to the decline in results at Ipiranga that was severely affected by the pandemic. But for the most part, compensated by strong results in Occitano, in UltraGas, UltraCargo, and ExtraFarma, what reinforces the resilience of our business portfolio. Moving now to the net income chart, We reported a profit of 132 million reais in the first quarter of 20, an increase of 699 million reais compared to the fourth quarter of 19. This was due to the improved financial result and the negative impact of the impairment at Extra Pharma in the fourth quarter of 19. Net income for the year of 2020 reached R$ 928 million, a growth of 130% compared with the preceding year, and for the same reasons I just mentioned and the higher reported results. As we have already announced, our Board of Directors has approved the payment of R$ 480 million in dividends for the year of 2020, equivalent to 44 cents per share which represents 52% of the net income for 2020 and a dividend yield of 2.4%. Even with the adverse scenario we had in 2020, we reported record operational cash generation after investments, reaching the mark of R$2.1 billion, 29% higher than the preceding year. This was achieved thanks to the enhancement of our working capital management and to lower investments without affecting our expansion potential. Our cash generation is an indicative of our commitment to financial discipline and soundness and indicative of the resilience of our businesses. And moving now to slide number five to talk about developments in our liability management. Our strong cash generation allowed us to end the year of 2020 with a leverage ratio of three times as measured by net debt to EBITDA. One more sequential reduction in leverage as you can see in the chart. It is also worth pointing out that from the first quarter of 2020, we have been including leases payable in the net debt and the following the implementation of IFRS 16. This inclusion contributed to the increase in leverage even though these leases are not financial debts. In the fourth quarter of 2020, we anticipated the payment of some of our debt, whose effects you can see in the graph in the bottom right, leading to lower levels of cash and gross debt. This anticipation is part of our active management approach for reducing debt-carrying costs. And now moving Moving on to slide number 6 to talk about Ultragas. The first quarter sales volume was 1% lower year on year despite the growth of 4% in the bulk segment due to a reduction of 4% in the bottle segment as a consequence of lower sales in the Southeast region. In the bulk segment, we reported growth in sales volume to the industry segment offset by lower demand from the commercial and services segments Both still much affected by the pandemic. In 2020 sales volume was 2% higher than in 2019 due to growth in the bottle segment in the first half of 2020 benefited by the greater social isolation in that period. As G&A expenses at UltraGas increased 4% in relation to the same quarter in 2019, and the other hand, we were able to implement reductions for several lines through initiatives for controlling and optimizing expenses Resulting in a decrease of 3% in SG&A when compared with 2019. EBITDA Ultra Gas was 154 million in the quarter, an 8% reduction compared with the same quarter of 2019 due to lower sales volume, higher maintenance costs due to a concentration of stain catch requalification in the first quarter. of 2020 and higher SG&A. In 2020 as a whole, UltraGas EBITDA reached a record level of R$729 million, a strong year-on-year growth of 24%. This result was driven by higher sales volume, mainly a function of greater social isolation in the second quarter of 2020, as I mentioned, as well as greater operational efficiency and reduction We expect to have a similar profitability to that of the first quarter of 2020. Let's now move to Ultracargo in slide number 7. As you can see in the left-hand chart, average capacity in the year reached 832,000 cubic meters, a growth of 12% compared to 2019, on the back of the capacity expansion in the Itaqui and Santos terminals since 2019. When we compared the fourth quarters of each year, there was a growth of 3%. In 2020 as a whole, the cubic meter sold was 14% higher in relation to the preceding year, mainly the result of capacity expansions as Santos and Itakiya just mentioned, as well as the greater efficiency in the utilization of existing tank edge capacity. Net revenue at the Chicago amounted to R$166 million in the fourth quarter, 9% higher than that of the fourth quarter of 2019. to the Decapata Expansions, greater number of spot operations and improved efficiency in the use of existing tankage, as well as new contracts and contractual readjustments. And for the full year, net revenue at Ultracargo reached 644 million reais, 19% higher than 2019, for the same reasons that influenced the results for the first quarter of 2020. Combined costs and expenses fell 7% in the quarter, mainly due to one-off expenses arising from the startup of the expansion of Santos and Itaqui terminals and from payroll indemnities, both occurring in the fourth quarter of 2019. It's worth mentioning that, as seen in the last few quarters, costs and expenses per cubic meter or so posted a reduction of 11% year-on-year, a notable gain in terminal productivity. And with that, Tutor Cargo's EBITDA was R$77 million in the quarter, 43% higher than that in the first quarter of 2019, due to higher sales revenue and productivity gains. Ultracargo reached a record EBITDA result of 337 million reais in 2020, 41% higher than that in 2019, excluding the extraordinary effects mentioned in this slide. The company's EBITDA margin in 2020 reached 52%. This growth illustrates the benefits of leverage on results from capacity expansions and efficiency gains at our terminals. And for this first quarter, we expect a result close to that of the first quarter of 2020. Now, moving to the next slide, number eight, to talk about one more great quarter at Alcoceteno. Specialty chemical sales volume in the first quarter were seasonally very strong, with year-on-year growth of 21%, thanks to higher sales across the board in all segments in Brazil. Most notably in home and personal care, craft solutions and coating segments. Sales were also high in the United States operations with an 18% increase over 2019, result of the continuing ramp up, although still partially impacted by the pandemic. Commodities volume sales were flat year on year. and for the year 2020 as a whole, sales volume was 3% higher than that in 2019. SG&A expenses rose by 16% in the quarter, to do currency variation at our international units, higher logistics expenses due to increased sales volume, and higher expenses with variable compensation in line with results growth. Occitano's first quarter EBITDA amounted to R$262 million, on the back of extraordinary Pisco Fin tax credits worth R$85 million. We should also remember that in the first quarter of 2019, we had the sale of Occitenos Operations in Venezuela with a 14 million asset write-off. If we exclude these non-recurring effects, Occitenos EBITDA was R$177 million, a growth of 150% in recurring EBITDA compared with the first quarter of 2019. On the back of higher sales volume, the continuing ramp-up of operations in the United States and the devaluation of the real. In 2020 as a whole, Occitane was our third business to report record results, with a reporting EBITDA of R$ 785 million, 254% better than that of 2019, excluding no recurring effects. EBITDA was R$ 629 million, 167% higher than the previous year. We forecast continued growth and good results at Occitano for the first quarter of 2021, with recurring EBITDA levels above that of the fourth quarter of 2020, despite lower sales volume outlook. And moving now onto slide 9 to talk a little about Ipiranga, Sales volume in the first quarter fell 5% year on year, a direct result of the pandemic that significantly impacted fuel consumption in Brazil. As you can see from the chart, the auto cycle segment was the most affected, with a 9% decline due to restrictions imposed and reduced car use. Diesel sales were less impacted with a reduction of 2%. The chart on the right-hand side shows the trend in fuel consumption since the start of the year. You can see a gradual recovery in volume as a consequence of improving vehicle traffic. For the year 2020, consolidated volumes reported a decrease of 9%, with a 14% drop in auto cycle and a 3% decrease in diesel. We ended the year with a network of 7,107 service stations, 17% more than at the end of the previous year. and an unfavorable fuel impropriety and lower cost increases in oil derivatives in the fourth quarter of 2020 makes a comparison with the fourth quarter more difficult. SG&A expenses continued to contribute to minimizing the effects of lower volumes and margins with a reduction of 10% compared with the fourth quarter of 2019 mainly on the back of initiatives implemented for optimizing and controlling expenses as well as lower expenses with doubtful accounts and freight in line with lower sales volume. In the year as a whole, SG&A fell 15% in relation to 2019. The other operating results line for the fourth quarter of 2020 was down R$54 million compared with the same period of the previous year. This difference is mainly due to the provisioning of decarbonization taxes, the CBIO, worth 58 million reais in the fourth quarter of 2020 in order to meet the targets for the year. On the other hand, Ipiranga sold real estate worth a total of 47 million in the first quarter of 20, part of the efforts to improve the company's capital efficiency through eventual sale of assets where the return to capital employed is inadequate. As a result, Ipiranga's first quarter EBITDA amounted to R$487 million, 30% down year-on-year, the result of lower sales volume, lower margins, and a reduced result from other operating results, partially offset by a decrease in SG&A and higher results from the sales of assets. For the year 2020 as a whole, EBITDA was R$1,712,000,000, 31% down on 2019, in spite of a 15% reduction in SG&A, mainly due to three factors, lower sales volume, Nero Margin Special Indicator of Ethanol and Negative Effect in the Year for Fuel Price Volatility and the Provisioning of the Carbonization Taxes. Looking ahead to the first quarter of 2021, we expect a continuing recovery in volumes with results similar to that of the first quarter of 2020. And now moving to slide number 10 to talk about extra pharma, we ended 2020 with 405 stores, 3% lower than 2019, reflecting a more rigorous approach to non-performing stores and greater selectivity and extension. It is also worth noting that 25% of the stores are still at the ramp-up phase. Gross revenues at Extra Pharma were R$548 million, 4% above that of the first quarter of 2019, despite a net worth 3% smaller. on the back of 6% growth in same-store sales, one of the highlights of the quarter. This growth was driven by improved results from promotional initiatives, particularly the implementation of the personalized promotional coupon for the entire network, and higher Black Friday sales as well. I would add to that the effect of the annual readjustment in medicine prices and stronger sales through the digital channels. For 2020 full year, gross revenue at Extra Pharma was R$2,106,000,000, 3% lower than the preceding year. SG&A expenses fell 11% year-on-year in the fourth quarter, reflecting the smaller network, productivity gains, and logistics optimization expenses contingencies. In the full year, SG&A expenses also fell 11% compared with the full year of 2019 for the same reasons I just explained. Other operating results improved R$7 million in the fourth quarter as a result of tax credit write-offs in the fourth quarter of 2019. I remind you that in the first quarter of 2019, there was a goodwill impairment in the amount of R$593 million from the acquisition of Extra Pharma with no cash effect. And to conclude, Extra Pharma posted an EBITDA of R$34 million in the quarter, a quarterly record. This is R$44 million better than that in the fourth quarter of 2019, excluding the effect of the impairment in that year. In 2020 full year, Extra Pharma reached an EBITDA of R$84 million, three times more than that of the preceding year, again excluding the impact of the impairment. This growth is the result of the network ramp-up, improved profitability, and the process of closing underperforming stores, as well as initiatives for improving productivity and reducing expenses. For the current first quarter, we expect to see continued growth in results year on year, but at a lower level than that observed recently. And now on slide number 11 to talk about our guidance for the year. Last night, we announced our EBITDA forecast for 2021 for Ultraport and each of our businesses. The macroeconomic outlook continues volatile and uncertain, and the macroeconomic assumptions we used are shown in the chart on the right. You should note that we are not contemplating an additional impact from the pandemic. Given this scenario, we are forecasting a consolidated EBITDA for UltraPAR between R$3.8 billion and R$4.65 billion, an important growth in results over 2020, on the back of recovering results in Ipiranga, the business most affected by the pandemic, and projected growth in Occitano, in UltraCargo, and in ExtraFarma. Now, talking quickly about the forecast for each business, At Ipiranga, we expect to gradually recover volumes and profitability throughout this year. At Occitano, we expect another year of strong growth and record results, serving segments with good growth prospects despite the pandemic, such as home and personal care and crop solutions, also helped by favorable exchange rates. Here, I would point out that we do not intend to contract the zero-cost quarter structure for 2021 following the review of our hedging policy by our Board of Directors at the end of last year. At UltraGas, we believe it is unlikely there will be results growth over 2020. Considering the positive effects we had last year, meaning the second quarter of 2020, with a spike in LPG consumption during the period when social isolation measures were being observed most diligently, although we expect significantly better results than that of 2019. For ultra-cargo, with the expansion in tankage capacity and gains in efficiency and productivity, we expect growth to reach a new level of results. I would also point out the significant expansion underway at the new Vila do Conde terminal and the expansion at the Itaqui terminal, which combined will add 156,000 cubic meters to capacity between the end of this year and the beginning of 2022. This will result in about 20% growth in tankage, with productivity and scale gains as the new capacity becomes operational. At Extra Pharma, we also project a higher level of results and strong growth year on year. On the back of the initiatives already implemented for improving network management as well as of greater logistical and operational efficiency. Please note that these projections do not include eventual acquisitions and divestments. And before closing my presentation, I would also like to draw your attention to slide number 12 to our IR agenda for 2021. This year, we will start a series of specific events for the analyst and investor community. Each event will take about one hour with the objective to increase exposure to our strategy results and perspectives, as well as to our executives. We are starting this series with UltraCargo on March 25th. We are also planning specific events on AMPM, convenience stores, Abastece Aí, Dieta, ESG as a theme and among others for the year. We shall be sending out invitations as the events are confirmed. We are also planning more international events during the course of 2021 for similar reasons. and our traditional Ultra Day, more or less based on the same model we did in 2020, will be held in May this year. The dates of our Annual General Shareholders Meeting, now in April, whose management proposal will be available in mid-March next month, and the quarterly releases are also shown in this slide. I hope that the greater interaction and exposure of the company will allow both our executives as well as our strategy and perspectives to become better known and understood. I appreciate your interest and attention today and now we can begin our Q&A session. I thank you.