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

Good morning. Thank you for waiting. Welcome to our earnings presentation of UltraPoor to present the results of the second quarter 23. There is also a time to use webcast that may be accessed through UltraPoor's website at ri.ultra.com.br and MCIQ platform. The presentation will be conducted by Mr. Rodrigo Pizzinatto, Ultra-Parts, Chief Financial and Investor Relations Officer. And then, the Q&A session will have also with us Mr. Marcus Woods, Ultra-Parts CEO, and the CEOs of the businesses, Mr. Stupajaro Bertalli, Decio Amaral, and Leonardo Linden. We would like to let you know that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After each of our remarks, there will be a question and answer question. At that time, those 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 also be available for seven days immediately after it is finished. Before proceeding, we would like to emphasize 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 Utropar management and on information currently available to the company. They involve 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 future results of UltraPAR and could cause results to differ materially from those expressed in such forward-looking statements. Now I would like to turn over to you, Mr. Rodrigo Pizzinatto. He is going to begin the conference. Please, Mr. Pizzinatto, you have the floor.

Good morning, everyone. It is a pleasure to be here once more to talk about UltraPars results. Starting on slide number two, I remind you that at this moment, both the earnings released in this presentation consider UltraPars data from continuing operations in 2023. As for 2022, the company's data is presented in the pro forma view, considering that some of continuing and discontinued operations as disclosed throughout last year, unless otherwise indicated. Moving now to slide number three with UltraPars consolidated results. As you can see in the chart in the upper left side, our recurring EBITDA from continuing operations total 933 million reais in the second quarter. and Lourdes de Souza. Participacoes S.A. »: Thank you. These effects were attenuated by lower net financial expenses despite the higher CDI mainly due to the positive one-off result of R$47 million in market-to-market of hedges in this second quarter of 23 compared to the negative one-off of R$272 million in the second quarter of 22. Our Board of Directors, as we have already informed, approved the payment of R$ 274 million in interim dividends, referring to the year 2023, equivalent to R$ 0.25 per share. Investments from continuing operations totaled R$ 385 million in this second quarter, 5% lower than that of the second quarter of 2022, mainly due to lower investments at Ultracargo and Ipiranga, S.A. »: We had an operating cash generation of R$898 million in the second quarter, compared to a generation of R$376 million in the same period of last year, resulting from lower investments in working capital on the back of few price reductions. The operating cash generation in this second quarter was R$1,199,000. S.A. »: Thank you very much. Thank you. and the rest of the generation, even if we consider the reduction of 301 million reais in the draft discount balance in this second quarter. Our leverage remained practically stable at 2.1 times net debt to EBITDA in June 23, on the back of the lower last 12-month EBITDA from continuing operations, despite the reduction in net debt that I've just mentioned. I'd like to point out that the numbers of our net debt do not include pending receivables of 1.1 billion reais Related to the sales of Occitano and Extra Farma. We raised 1 billion and 18 million reais in agribusiness receivable certificates at the cost of 104.8% of the CDI, of that 618 million in June and 400 million in July, which extends our debt profile at the yearly lowest cost for equivalent issuances in Brazil. We've included at the bottom of this slide a table with the total amount of draft discount and vendor lines, as well as pending receivables from the sales of Occitano and Extra Pharma, all lines highlighted in our balance sheet. And at the end of June 23, Adding the draft discount, vendor, and divestment of receivables would be R$8.8 billion, which is R$1,746,000,000 lower than the balance of June 22 one year ago. And moving now to the next slide, slide number five, to talk about another excellent quarter of UltraGas. The volume of LPG sold in the second quarter was 4% higher year over year, due to the 2% increase in the bottled segment on the back of greater market demand. The bulk segment, in turn, grew by 8%, with higher sales mainly to industries. Ultragas SG&E in the second quarter of 23 was 15% higher than that of the second quarter of 22 due to three main factors. The first refers to higher expenses with personnel, mainly collective bargaining agreements and variable compensation, in line with the progression of results and a larger headcount due to the recent acquisitions. The second factor is the higher expenses with freight resulting from higher sale volumes. Additionally, we also had higher expenses with sales commissions. The disposal of assets line totaled R$7 million in this second quarter as a result of the concentration of operating asset sales. With that, UltraGas EBITDA totaled R$405 million, 55% higher year over year. This growth is mainly explained by efficiency and productivity initiatives implemented in the last quarters, by higher sales volume with better mix, and by inflation pass-through despite higher expenses. For the current quarter, we expect UltraGas to maintain its good operating performance with seasonally stronger volumes. Moving now to slide 6 to talk about another great quarter of ultracarbon. The company's average installed capacity was 955,000 cubic meters in the second quarter of 23, stable in relation to the second quarter of 22. The cubic meter sold increased by 6% due to increased handling of fuels in Santos and Itaqui, mainly resulting from higher spot sales, especially diesel as a consequence of greater supply in the market, in addition to higher handling of chemicals in Aratu. Ultracargos Net Revenues were R$257 million in this second quarter, 19% higher year over year, as a result of higher cubic meters sold, the spot sales I've just mentioned, and higher tariffs. Combined costs and expenses were 14% higher than those of the second quarter of 2022, as a result of higher personnel expenses, mainly collective bargaining agreement and variable compensation, also in line with the progression of results. We also had higher expenses with advisory and consultancy services linked to expansion projects and maintenance costs. In the second quarter of 23, Ultracargo concluded the sale process of its stake in Unión Volpac at the Paranaguá Terminal, which resulted in a positive effect of R$8 million in the share of profit of subsidiaries, joint ventures, and associates alike. Otorcargos EBITDA with that totaled R$161 million in the quarter, a growth of 24% year-over-year due to higher capacity occupancy with profitability gains, higher tariffs, productivity and efficiency gains, and the share of profit of subsidiaries result I've just mentioned. EBITDA margin was 63% in this second quarter, 3 percentage points above that of the second quarter of 22. And for the third quarter, we expect Ultracargo to continue its good operating performance, with results similar to those of the previous quarters. And to conclude this presentation, moving now to slide 7, let's talk about the Piranga's results. Volume sold in the quarter remains stable compared to the second quarter of 22, with a 7% growth in the auto cycle, with greater share of gasoline to the detriment of ethanol in the product mix. On the other hand, diesel fell by 5%, mainly due to the strategy of lower sales to the spot market during the period. We ended the second quarter with a network of 6,281 service stations, 245 stations less than that of the and Lourdes de Souza. Thank you very much. with an average volume contribution of 43 cubic meters per month. Despite the reduction of the number of service stations, the net volume effect was positive, reinforcing our strategy of higher density and improves the standards of our service station network. In addition, we ended the quarter with 1,553 A.M. P.M. stores, with same-store sales growth of 13% year-over-year. Ipiranga's SG&A decreased by 5% in the quarter, mainly due to lower freight expenses, on the back of reduction in diesel prices and logistics optimization after the vehicle fleet reduction, partially offset by higher provision for doubtful accounts. The other operating results line totaled negative R$211 million in the quarter, compared to a negative R$130 million in the second quarter of 2022, mainly reflecting higher costs with Brazilian carbon tax credits and the constitution of extemporaneous tax credits in the second quarter of 2022. The disposal of assets line totaled R$31 million in the quarter, resulting from the sale of six real estate assets. Ipiranga's EBITDA, total R$479 million in the quarter, 43% lower than that of the second quarter of 2022. Recurring EBITDA was R$448 million in the quarter, 41% lower year over year. The lower EBITDA reflects two main factors. Margins pressured by fuel cost reductions throughout the quarter and consequent inventory losses. I remind you that in the second quarter of 22, we had fuel cost increases and inventory gains. The second factor was a worse commercial environment in the second quarter of 23 due to the oversupply of imported products and higher local production. For this third quarter, we expect seasonally higher volumes and a gradual recovery of profitability as the market normalizes. And with that, I now conclude my presentation. I appreciate your interest and attention, and now let's move to the Q&A session in which we are available to answer your questions. Thank you.

We're now going to open for questions. And this is only to investors and analysts. If you have a question, please press the star 1. If your question is answered, you may remove yourself from the queue by pressing star 2. Questions will be taken in the order they are received. We would like to ask you to pose your question, that when posing a question, you pick up your headset to provide optimum sound quality. Please hold while we look for questions. If you are following the conference calls, my web app is fixed on questions to the host The first question comes from Tiago Tearte of BTG Pack Club. Tiago, you have the floor. Hello. Good morning. Thank you for the opportunity. I have two questions focused on Ibranga and the first one I think it's alluded to the last sentence that Rodrigo pointed out about expectations for the third quarter. Gradual recovery of margins. What are the assumptions for the gradual recovery to happen in the second quarter? As you've pointed out, there was the impact of loss on inventory levels and the impact of the market which was and a higher demand than initially predicted. Considering these two drivers that have had a negative impact on the margins of the second quarter, I would like to hear you about how you've analyzing those drivers. Is there an expectation of a change in prices in recovery of inventory levels or do you expect the market not to have A higher offer and if yes, why? And a second question more in the long run, I remember the first talks of Marcos and Ricardo in a conference call in the past where we discussed the turnaround of Ipranga being an initial cluster, not hardware. So what our current position is In terms of recovering the software, the strategy, we've seen results with the disinvestment of some of the stations. They seem to be positive. What else is missing? Of course, considering what's under your control so that the value proposition of Ibranga keeps on improving concerning what we have observed in recent years. Thank you very much. Good morning, Thiago. This is Linden speaking. Thank you for your question. First, let's talk about expectations. We have better expectations for the third quarter. The second quarter was very challenging for the reasons that you've pointed out and Rodrigo shared them with us quite clearly. July was much better than June. Even though still slowly recovering and in June, the market was affected for the same reasons that had impacted the second quarter. But what we are observing and considering the variables you've pointed out, there is not going to be an impact on inventory losses. We do not expect to have price reductions quite to the opposite. There is also a volume recovery because of the problems of the market of having excessive offer, excessive product. Our network is operating better in terms of volume in the third quarter, and as a consequence, it improves margins. In the third quarter, we expect to have better results in the second. Software Against Hardware Perspective, as you pointed out, we are maintaining our four pillar plan. I'll say we have evolved significantly in some of them. In others, we are still working, it's a work in progress. For example, logistics, and this is no big news, you know what I'm talking about. But I am quite confident with what we've achieved, and the work in the second quarter shows that. We have managed to come up with different solutions even during trying conditions. Therefore, I think we are moving ahead, following the plan, and the results are quite positive to Ibranga. Even though that hasn't really completed our full cycle of recovery. That's great. Thank you very much for your answer. The next question comes from Leonardo Marconis of Bank of America. Good morning. Thank you for taking my questions. And I have two questions. Just a follow-up based on what Duarte has just asked. I would like to know more about Ipranga and the market. Could you please tell us about the availability of products in the market and how availability affects your strategy of commercialization for clients which are more exposed to the stock market? The second question concerns ultra gas I'd like to ask you to tell us more about oak. We've seen that oak segment has gained more and more relevance in terms of volume. Would you please elaborate on how the segment has impacted your margins and what are the competitive advantages of oak gas in this specific segment? Now, quick packing on Duarte's question, Linden said that July was much better than June. So June was a, was it a more challenging month or was it more positive to Ibranga within the second, the third quarter? Good morning. Your question about availability is very timely. Ibranga has no problem of product availability. Ibranga has no problem of supplying regular customers. And I don't anticipate anything that would say we eventually would get problems in supplying our regular customers. We keep on working in the spot market. And that's... Whiteleg and the branded ones, but the stock market is much more exposed to international prices because it's a marginal molecule, so to speak. There'll be occasions in which, unless the market has a pricing answer that justifies the international cost, it would be very difficult to develop a segment Brazil has just settling down in this model, and we are still actively involved in it, but understanding that it's a market that is more exposed to international prices. And once again, because this is a very important point, I cannot speak of all suppliers in Brazil, but concerning Ipiranga, there is no problem of supply, no problem of shortage of product. Now, considering the month of July, as I said, July was marginally better for Ibranga, but a very small improvement considering what we expect for the whole industry. We've been dealing with newer challenges and trying to come up with solutions that can offset Market Difficulties But said that, too long, it was marginally better compared to June and to May. Leonardo, this is Tabajara speaking on behalf of Outro Gas about our position in bulk. This is a long-term journey, you probably know, and for both segments, But focusing on both, I think there are two possibilities here, things that we've been focusing consistently. We want to be close to our customers. We want to understand and realize what their needs are. We've been launching new solutions for customers, and that has meant significant improvement. You've also aware of recent investments which have led to operational efficiency, things which are really relevant to us. And we want to expand, but with operational efficiency, quality of operation. It is a long-term process. There's still a lot to be done. But this is one of our focuses here, and we've been paying close attention to it. Great, thank you very much for your answers. The next question comes from Regis Cardoso of Predictions. Hello, good morning. I have some questions to Linden, but there is also a follow-up of this last topic. I'm trying to look towards the future. Linden, in your answer, you said that the sports market is a market which has prices based on international scheme. And my question is, what have you anticipated in terms of domestic supply considering this context where we can see that discrepancy of the price volatility and how it's incorporated by Petrobras? It is a market that's so short and it needs importation to supply some specific regions where there is less refining capacity, especially in the north and northeast of Brazil. So, Linden, tell us how you anticipate the supply in the future and how to get adapted to it. So, as a teaser, Does it make sense to keep on having your own stations with branded stations if that will mean excessive capacity considering your Petrobras podium? So this is the question. And about the disengagement of some of the stations, what the impact that it has had on volumes, do you use any metrics of A cubic meter sold per station, comparing that to new stations, just to understand really how many more stations would have to be sold for you to complete your strategy. Thank you. Good morning. Well, the progress is still the main supplier of Ipranga regardless of the circumstances. This is the partner that gives us really the confidence to supply that we need to operate and this is going to remain so. Petrobras does not supply the whole market. There is a deficit which means imports and Ipranga will keep on importing. We've got ready for that. We have our supply area ready to purchase from all over the world. We're going to do it competitively. And I really think that the Brazilian market, the Brazilian market pricing will get adjusted to the model in which you have Petrobras price and imported prices. Marginal molecules are more exposed to the spot volume. and this is how we have addressed it. And this is how the market will get settled. But whether we should keep on investing or not, well, interesting because investments of quality are always worth making because there is a natural turn in the network and you naturally make the placement. and just referring back to your point of the closure of stations. It's part of the process. Even though we are dealing with the long tail that we knew you had to close, it's part of our network activities. We are always going to make investments of quality, but as we said right from the beginning, our investments are really, we are raising the bar of the quality of investments and we S.T.A.M.I.T.A.T.A.T.A.R. Investing, provided that they are investments of quality. Otherwise, it would make no sense. I think I've answered all your questions, but if you want to hear anything else, please let me know. No, that's okay. Thank you very much. Great results, guys. The next question comes from NotLosingTales on UBS. Hello, good morning, thank you for taking the questions. The first one about capital allocation and diversification. The question may tell me past tense, but... and there is the whole know-how of all the causes, this kind of format or companies what we've been analyzing, is there still room for purchasing anything and a few others. Thank you very much. In hearing about the regulatory concerns about the regulations over the gas bottling and how are you dealing with the regulatory risk? And secondly, do you think that this margins levels would open the possibility of replacing sources, maybe going more into natural gas and price of fuels going down? Wouldn't be a risk of margin just to focus on the specific gas applications you have? Thank you for the questions. In terms of capital allocation, we've already told you the experience that we have today because this is the year that we Just put an end to the level of investments to go into further leverage and investments. The activity of M&A is constantly really gaining more momentum and considering possibilities. We believe in smaller acquisitions as you've pointed out. as accelerators of strategies of our both companies. Ipranga does it as well with its network of stations or let's say with terminals in other operations. Our strategy is just to do it, to speed up the portfolio but always analyzing and Dara Opportunities with greater volume. But there is nothing mapped so far. We really try to focus on enhancing our analysis and being constantly exposed to what's happening in the market. But 2023 is the year where we strengthen our operations, We are constantly talking about the volatility of the market, but we've been really expanding our operations. We are a much better company than we used to be two years ago. Really creating that critical mass that allows us to do other things, but we are still more focused on creating muscles rather than taking any major leads. Hope I have answered your question. Well, I think you made the question too out of us. First about the regulatory landscape. In our opinion, regulations here in Brazil are very modern, probably one of the most updated in the world. It's been in place for over 20 years. The freedom of choice for end consumers for specific cylinders and bottles and the resellers operation has a very competitive dynamic. We can see space in reducing some uses because LPG is not there yet because of regulatory limitations. Our expectation is to have that expanding further. and bringing us some additional potential to LPG. And we can get that with regulations that really makes us operate very safely. We have top quality products, and by doing that, companies can make investments, ultra gas invests significantly every year in acquisition and re-qualification of tanks and cylinders. Very appropriate operation, but always with room for Let's say improvement. When you talk about margins and sustainability, it takes us back to the previous question about the use of bulk and the bottled segment. And as we've told you in previous meetings, Ultragas, it's much closer to customers adding service levels to the product. It's not a company that sells only commodity. We bring innovation, new uses. and Elisabeth Moura. Thank you. It's very important in terms of resellers, closer relationship really with our customers. We observe the succession rates, the NPS of our customers. So we are going more from the commodity company to a service provision company and going into a diversification company also offering the products concerning energy. being building this platform of energy of the future. Still have got a lot to do, of course, but we've shown a very consistent progression in this area. Great. The next question by Georgina Kitt from Citibank. Hi. Good morning. Thank you for taking my questions. Follow up on Duarte's question. Please tell us more about the pillars, the four pillars of the turnaround of Ibaranga. Which one is the most developed? Which one is lagging behind? What are the difficulties you come across? And how long will it take for you to close all the doors, so to speak? I can see that investment in stations is very successful. I don't know if it's an ongoing process or whether we're going to