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

The presentation will be conducted by Mr. Rodrigo Pessinato, Ultraspar's Chief Financial and Investor Relations Officer. And in the Q&A session, we'll have the presence of Mr. Marcus Lutz, Ultraspar. Thanks for waiting. Welcome to Ultraspar Third Quarter 24 Results Conference Call. There is also simultaneous webcast. that may be accessed through UltraPAR's website at ri.us, Mr. Tabajara Bertali, Mr. Dacio Amaral, and Mr. Leonardo Linden. 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, there will be a question and answer session. At that time, further instructions will be given. We remind you that participants of webcasts may be submitted their questions through the Q&A session, which may be posted in advance in the webcast. A replay of this call will be available immediately after it for seven days. Before proceeding, I would like to state 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 ultra-power 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 ultra-power. and could cause results to differ materially from those expressed in the such forward-looking statements. Now I'd like to turn the conference over to Mr. Rodrigo Pezzinato, who will start our conference. Mr. Pezzinato, you may begin.

Good morning, everyone. It is a pleasure to be here once more to talk about ultraparse results. And before I begin, I want to remind you of the reporting criteria and standards presented in slide two. And now moving on to slide number three, as you can see in the chart in the top left side, our recurring EBITDA totaled R$1,506,000,000 in the third quarter of 24, 24% lower than that of the third quarter of 23, mainly due to Ipiranga's lower EBITDA year over year. As you can also see that the accumulated EBITDA for 2024 is R$4,093,000,000, 4% higher than that of the previous period. Ultra-parts net income was R$698,000,000, 22% lower year-over-year due to the lower EBITDA I've just mentioned, partially offset by the lower net financial expenses. The net income year to date is R$1,645,000,000, 17% higher than the previous period. I want to highlight that the share of profits of Hidrovias was recorded with a two-month delay, contributed positively with R$9,000,000 in the third quarter of 2024. Investments in its turn total 519 million reais in the third quarter of 24, up 37% compared to that of the third quarter of 23, mainly driven by higher investments in Ipiranga. We had an operating cash flow generation of 780 million reais in the third quarter of 24. It would have been 1 billion and 20 million reais if we do not consider the reduction of 240 million reais in the draft discounted operations in the third quarter of 24. The cash flow generation was 59% lower than that of the third quarter of 23, mainly due to lower EBITDA and higher investments in working capital. And moving now to slide number four to talk about our liability management. We ended the third quarter with a net debt of R$7,968,000,000, an increase of R$268,000,000 compared to June 24. The increase in net debt quarter over quarter is mainly due to the reduction of R$240,000,000 on the draft discount balance in the quarter and the payment of R$276,000,000 in dividends in August. These effects were partially offset by the receipt of $222 million of the last installment of extra pharma sales. Our leverage went from 1.2 times in June 24 to 1.3 times in September 24 due to the lower LTM EBITDA and the higher net debt that I just mentioned. As you can also see in the table at the bottom of this slide, The net debt in September 24 added to the draft discounting vendor is R$9,470,000,000, R$1.8 billion higher than the balance in September of last year, mainly resulting from the acquisition of a shareholding stake in Hidrovias. Moving now to the next slide, number five, let's talk about the Ipiranga's results. Ipiranga sales volume in the third quarter grew 4% compared to the third quarter of 23, with a 5% growth in the auto cycle, boosted by a greater share of ethanol over gasoline in the product mix, and a 2% growth in diesel. We ended this quarter with a network of 5,871 service stations, five less than in June 24. We added 61 service stations and closed 66 throughout the quarter. This level of closures reflects stricter contract compliance. I remind you that the number of stations is not the main driver of volume growth, as observed in recent quarters. Furthermore, we ended the quarter with 1,478 AM-PM stores, with same-store sales growth of 7%. Ipiranga's SG&A was down 4% compared to the third quarter of 23 due to lower contingency expenses offset by higher provisions for DATFO accounts and higher personnel expenses, mostly collective bargaining agreements. The other operating results line totaled negative R$124 million in the quarter, an improvement of R$55 million year over year, a result of lower expenses with carbon tax credit. The line of results from disposal of assets totaled R$ 31 million, resulting from the sale of seven real estate assets. Ipiranga's EBITDA was R$ 967 million in the quarter. The recurring EBITDA totaled R$ 936 million, 34% lower year over year. We observed an improvement in the competitive environment in the third quarter compared to the second quarter of 24, with a reduction of sector irregularities. We also had inventory gains as a result of the gasoline price adjustment in July. And despite these effects, in the third quarter of 23, we had record margins at Ipiranga, benefiting from the combination of more relevant inventory gains, a more favorable import parity, and a normalized level of inventories in the industry. We have been operating in recent quarters with profitability above R$130 per cubic meter, despite the irregularities that have affected the entire sector. In this fourth quarter, with the market conditions we have observed, we expect to maintain this trend. And moving now to slide 6 to discuss UltraGas results. The volume of LPG sold in the third quarter was 4% higher year over year due to a 7% increase in sales of bulk LPG, mainly reflecting higher sales to industries. Sales of bottled LPG increased by 2%, driven by higher market demand. Ultragas SG&A in the third quarter of 24 was 1% higher than in the third quarter of 23 due to higher personnel expenses, mainly due to collective bargaining agreements, provisions for doubtful accounts, and freight costs in line with higher sales volume. These effects were compensated by initiatives to increase operational efficiency and lower expenses with sales commissions. Ultragas EBITDA was R$ 448 million in the third quarter of 24, 1% lower than that in the third quarter of 23. The higher sales volume and the more normalized commercial environment of the bottle segment were offset by higher freight costs and expenses. For the fourth quarter, despite seasonally lower volumes, we expect a higher EBITDA with greater contribution from Tragas New Energy segment. And finally, moving to slide 7, let's discuss UltraCargo's good results. The company's average static capacity of 1,067,000 cubic meters was 1% higher than that of the third quarter of 23 due to the addition of the Rondonopolis base. The cubic meter sold remained stable year over year. The start of operations in Rondonópolis and the higher handling in Nopla, Vila do Conde and Suape were offset by the lower spot sales at Santos, Itaqui and Aratu. Ultracargo's net revenues were R$ 266 million in the third quarter of 24, 1% higher than in the third quarter of 23, driven by better tariffs despite lower spot sales. Combined costs and expenses were 10% higher than that in the third quarter of 23 due to higher handling of the new terminals. Ultracargo's EBITDA totaled 168 million reais in the third quarter, 3% lower than in the third quarter of 23, mainly due to lower spot sales. The EBITDA margin was 63% in the third quarter of 24, two percentage points lower than that of the third quarter of 23. And for the fourth quarter, we expect an EBITDA similar to those seen in the last quarters. Very well. This concludes my presentation, and let's now move to the Q&A session to answer the questions you may have. Thank you very much for your attention.

We are going to start now the Q&A session for investors and analysts. The first question comes from Monique Greco from Itaú BBA. Monique, please unmute your microphone. Hello, good morning. Thank you for taking my questions. I'm going to ask one first question about Ipranga. Going back to what Pisinato has just said, about expectations of margins. We got into the second half of the year with an expectation of have a much better competitive dynamic, healthier increasing demand, normalization of inventory. Do you think that the improvement of this dynamic with volumes and so on has already been reflected in this adjustment of margins that you've made in this quarter? And when, Pisinato, you said you want to have the levels over 130, do you think that Do you still expect an improvement of this dynamic in upcoming quarters? Would we expect some improvement still being perceived in future margins? This is my first question. The second question combines Ipranga and Intracargo. What about import of diesel at the forefront? We've seen a smaller representativeness of independent importers in the total imported amount in the country. So I'd like to hear from Lyndon How do you see the impact of that in the competitive dynamic of distribution? And if I could also ask Desio, do you think that lower spot imports can impact Ultra Cargo's operation? Thank you. Hi, Monique. This is Lyndon speaking. First, concerning the dynamic of the third quarter, This fight against illegal practices has improved oil and ethanol. We had a 5% increase of volume over the second quarter this year. an improvement for regular gas and ethanol, but we've observed a competitive market for diesel on the highways and in spot market. The cost of diesel has been increasing, biodiesel and also imported diesel. It has applied pressure to the price at the stations, especially the highway stations had difficulty to adjust prices. So one thing offset the other, and this was somewhat what we observed in the third quarter. Now looking ahead, we believe that better legal practices will always be positive to the industry at large, and we hope that this is going to progress as is so that we can have better and better conditions. We still see competitiveness in diesel, especially in the highways and in spot market. I think this is the kind of balance that we've been observing in terms of supply. The market seems to be well balanced. It was a stable quarter. If you look during the three months of the quarter, you will see somewhat stable margins. There were no major oscillations or volatility. I think that this is something that's going to be repeated in the fourth quarter. Concerning imports, yes, there has been some decrease in imports, not significant really, just a minor drop. Changing these logics of product coming from the Gulf, from the East European countries, but The Brazilian market is structurally dependent on import, and this is going to keep happening. Maybe things will change somewhat in terms of where the gas comes from. Delcio speaking now. Thank you, Monique. If you compare this quarter with the same quarter last year, you are going to see a smaller spot volume in this quarter. The inventory levels increase somewhat. Our tanks are fuller. At Ultra Cargo, the product comes regardless of being capotage or imported. We are very well positioned in Vila do Conde, Itaqui, Swap. The product has to come into the tanks because we need to sell in these regions. Even if there is... a reduction of imports. Still, we are going to go into cabotage, and the market will just compensate. We are still investing in improvement of structural deficit, and this is why we've been investing in spot handling. There are going to be major opportunities of import and product cabotage. Thank you both. The next question comes from Pedro Gama, Citi. Mr. Gama, please unmute your microphone. Hello. Good morning. Thank you for taking my questions. The first question is about ultra gas. We've been hearing the market discussing about natural gas and LPG on the one side. We see that the social programs are encouraging the use of LPG, but... constantly discussing the margin of distribution of LPG in recent years. What is your opinion about these social programs and the effects they have on market? And how do you see LPG in competition with other products such as natural gas, ethanol, and other energy sources in the country? Second question about Linden and increased volumes at Ipranga. Last month, The first station of Texaco was open. What's the strategy for the brand in Brazil and how does it adjust with the whole strategy of Ipranga in the country? This is Tabajara speaking. I'm going to start with the question about UltraGas. The program gas to all, liquefied gas to all is a social program of the current federal administration. We've talked about the effect and impacting energy poverty rates. the government is really focusing on it. And this is something positive. We are going to support as much as possible, but there's still a lot to happen before we know how the program is going to evolve It will probably analyze the possibility of resellers use so that the benefit brought by LPG to the society can reach 100% of households in the country. Even though I have to say there is still a lot to be done. You've talked about competition in terms of energy sources. We can see more room now for applications of LPG. There are some limitations of LPG use in some specific applications. We expect the regulatory progress to really release and approve that. Especially in bulk, we've been seeing other uses and applications for LPG. And we are also getting ready for the use of other energy sources that the company has in its portfolio. So that we can really have a complete, let's say, reach of options. For LPG, we still see a very relevant opportunity of growth. So I think those are two potential positive elements for the industry. Now, Pedro, concerning volumes and Ipranga, the growth of volume in the second to third quarter of Ipranga has nothing to do with Texaco. We just opened one gas station, one service station on the fourth quarter. It's much more market thing. and our actions in our own network. Now concerning the brand tech cycle, what we've been doing here with the brand is introduce a different model of business in the country. We are going to have a strategy of regional exclusivity and they will have an exclusivity of the brand in a region that is going to be defined among the parties, and it's going to be a lighter model in terms of investments. We don't have any specific guidelines in terms of product from them, exactly because we are in a process of reproducing, understanding the model. We have a very good route to follow with Texaco. What you see in volume is from Nipuranga. And it's going to be more focused on Ipranga, which is our main sales outlet than Texaco. My question was really to understand your strategy. So that's very clear. Thank you very much. The next question comes from Matheus Enfield, UBS. Please unmute your microphone. Good morning, Rodrigo. Good morning, everyone. Kudos to the result. CapEx, it's been running below what we had expected and what had been announced in the beginning of the year in all your business units. I would like to understand why. Understand in further details to what extent this is going to impact 2025. Is there a gain of efficiency? projects that you haven't done because of higher interest rate, change in assumptions. Just to understand a bit more, because CapEx has underperformed, has been underperforming, knowing that it tends to be sped up in the fourth quarter. Now, building up on the previous question about ultra gas, what about the other proposals of regulatory adjustment plans? use of other brands, the end of the support, new uses. Could we maybe tell us more about the regulatory adjustments provided by the Brazilian Agency of Oil and Gas, ANP? Thank you, Matheus, for your question. The plan that we shared for 2024 of CAPEX use was not linear. we tend to accumulate it in the end of the year. And we expect to close it below what was initially planned because of some savings in our projects and because of some carryover to 2025. Let me now hand it over to Tabajara. Tabajara speaking. You see, Matheus, building up your questions about regulatory affairs, it's all part of one same package and the natural progression of regulation. We've already discussed about that in the past and we've always taken a very active role. We know a lot about the topic. We see the international reference and we tend to be highly regulated, it provides more safety, more competition. In such a large country, there is no fraud or illegal practice in products, which is a result of the operational security that agents have and clients have. So it's a very positive thing. High security and a highly competitive market. Other models that have economic rationale can always be analyzed, but it should always take to economic improvement of the system, making sure that we still maintain the same level of security of inspection without open room for illegal practices, because of course it always impacts safety and security. Nobody wants that. So I think that this security practices that we have are always very positive. This is what should prevail. I think this is the most, let's say, appropriate solution for the society at large. Thank you for your answers. Now, the next question comes from Pedro Suarez with BTG. Pedro, please unmute your mic. Good morning, everyone. I have two questions. First about working capital. There was quite a use of working capital. I would like to hear more about your expectations for the fourth quarter and also inventory levels. Can you tell us more about the dynamic of the quarter? Maybe there were some strategic actions, but... Was there anything else that resulted from the ethanol competitiveness in auto cycle, just giving more pressure to oil, gas? Is it something temporary? Should we expect more over demand for next quarters? And now another question about margins at Ipiranga. The level of 130 seems to be conservative, not only because of the results you've reached, but also because it's below what we observed in the first half of the year. Do you think that this is a level? that maintains expected return on investments being healthy levels and also allowing some market share gains? Or no, are you just being conservative as a management team? Thank you. Hi, Pedro. I'm going to answering about Ipranga. Lyndon is speaking and then Rodrigo can build up on it. Concerning turnover, I think there are four components involving Ipranga and the working capital. First, increased in volume, 5% increase in volume. Secondly, highest price of gas, of gasoline, and a strategy of anticipation of the buying of biofuel. We've seen an opportunity. And fourth option is a reduction of confirming that we had throughout the year half. Having a position in biofuel as well as the program confirming are just circumstantial situations that will be offset in the fourth quarter. Concerning margins, yes, we tend to be more conservative. We always say that we see margins over 150 per cubic meter. But we are being more conservative for this quarter and trying to understand the market demand. And it's not a share strategy. Let us make it very clear. Not a share strategy. Great. Thank you, Lyndon. The next question comes by Eduardo Muniz with Santander. Eduardo, please. The mic's on. Hello, good morning. Thank you for taking my questions. The first question is about the initiatives against illegal practices in the area of distribution. We've seen the focus of many of the players in the ecosystem. It's something getting stronger. And we've seen that some of the special regimens were just put to an end. What do you also expect to reach this year and the first quarter next year? What else do you expect to be approved to improve competitive market? And secondly, concerning Hidrovias do Brasil, What are the main points that UltraPART wants to contribute with Hidrovias do Brasil to really double the initiative of Arco Norte with the private use terminal? Is it something that you can lend to them as UltraCargo? What are the other options that you could give and some more information to us? Well, Eduardo, Yes, there is an improvement. I think there is still a lot to be done in terms of fighting against illegal practices. We've seen that things can really get better if we have appropriate fight against illegal practices. When we talk about tax evasion, we have to work with ethanol and monophagia. Ethanol is still a relevant problem. with irregular trading. There is also a law that would impose sanctions to those long time There is also the Renova bill, which is another legislation. There is a very important share of distributors that do not meet the goals of CRBOs. It really impacts producers and manufacturers because they could be investing in the production of biofuel and they are not. And finally, we expect to have a better control over not mixing biodiesel. For example, right now, where biodiesel costs more than seven per liter, a great difference to D100. And these are situations in which some mix may happen. So these are all open fronts of initiatives. I cannot tell you whether this is going to happen in this quarter, next quarter, or when exactly. But we've been having very interesting discussions led by a number of companies and always supported by the regulatory authorities as well. We have to evolve in this agenda. It's still a problem in our industry. In terms of Hidrovius do Brasil, we are part of the board and we believe the company is capable of running projects with quality. Ultracargo is developing four terminals simultaneously. It has a very good active track record. And, of course, it's a company that will provide support if considered to be necessary by HydroVias. But right now, we are thinking about long-term giving a support to the company in existing projects, which were still ongoing. waiting for approval by shareholders to execute. So we are very optimistic about the possibilities of expanding their installed capacity of the north ARCO area, ARCO Norte. In addition to what Marcos has just said, Hidrovias has a very good team dedicated to this topic, but we are also contributing with some people that were transferred to Hidrovias to be part of the initiative. Our project manager is someone highly experienced in conducting complex projects, and certainly it's someone who's going to help in this initiative. Now, combining our questions about illegal practices, and just to give you some dimension about that, if Ipiranga does not mix biodiesel in November and December alone, Ebrangal would be additional EBITDA of 1 billion BRLs because of the difference of prices of biodiesel and diesel. This is how much illegal practice affect the industry. And this is why we have to fight against that so that we can have fair competition. Okay. Thank you very much. If I can have a follow-up for Hydroviaz. Any expectations of approving some excess capital with HydroVias? No news so far. The management answers. Okay. Thank you very much. The next question comes by Leonardo Marcondes, Bank of America. Mr. Marcondes, please unmute your mic. Good morning. Thank you very much for taking my question. Most of them have been answered. I'm going to ask one about ultra gas. Pizzinato has just mentioned that you expect an increased share of coming from new energy sources. Could you please give us some more information about that, the dynamics of this new segment? And could you please tell us how much that contribution or that share would be? Well, Leonardo, based on what Rodrigo has said, when we started, this is a combination of our strategy We've had a very good evolution of our strategies in the long term, closer to our customers, in all the different segments that we operate, such as bulk. They have evolved a lot and they are probably going to evolve even more in the fourth quarter. That's what we expect. We can see the maturity of the investments we've made in other energy sources, biomethane and electricity. We've already talked about our expectations of three to 5% of EBITDA resulting from that, but they are not segregated operation. We've been really combining businesses to add more value to our clients. This is something that is becoming a reality and really impacting our result. This is probably going to be intensified in upcoming quarters. We have been offering a broader perspective and a broader range of products. So we expect that improvement in the fourth quarter and in upcoming quarters next year. Great. Thank you very much. The next question comes from Bruno Montanari, Morgan Stanley. Mr. Montanari, please unmute yourself. Thank you for taking my questions. Just a quick follow-up and one question. Going back to working capital, should we wait? Should we expect more working capital released in the fourth quarter? Is it going to be expressive? because of the investments you've made in previous quarters. And let me ask a question to you, Lutz. How do you anticipate the development in Brazil, thinking about economy, politics, US election, when making decisions about investments in existing businesses and also in new initiatives that you might have? Let me quickly answer about the working capital and then Lutz can answer the question. Yes, it would probably mean a recovery of working capital. Working capital movements are always significant up or down. We expect to regain a lot of what we've invested in the other quarters. Now, Lutz speaking, I don't expect any radical changes in the country. Anything that would be relevant to ultra-pars businesses. In terms of investments, we've made investments in Hidrovias, which is still going to go through a maturation. There are a number of upsides, a company with a great future. All the other three traditional business that we have have expansion projects. We've been allocating capital to them. We are still maintaining our position, which has deleveraged and always observing closely the economy. The U.S. election, well, I don't anticipate any impact on our strategy, at least for now. Great. Thank you very much. The next question comes from Elena Kelman with XP. Ms. Kelman, please unmute your mic. Hello. I have a quick question here. about your strategy of service stations. We've seen a movement, but I'd like to get your update on what do you expect to develop further this strategy of the network of service stations and the number of stations. Nothing is changing really compared to what we've been doing with the branded network. We make investments selectively. And we have a natural attrition of this kind of business. The main initiative of closing down some of the units is over. If you get the official numbers of A and B, a self-stated number of stations, you will see that they are very close. This is a sign of the accuracy of number of stations that we report. And from now on, business as usual. Make select investments and exclude or close stations that wouldn't make sense to be maintained. Great, thank you. Thank you. If there are no further questions, I would like to hand it over to Mr. Rodrigo Pizzinato for his closing remarks. Mr. Pizzinato, you have the floor. Thank you all very much for the questions. Any unanswered questions can be answered by the investor relations team, and I hope to see you in our next earnings release conference call. Thank you all very much. Thank you. The earnings release conference call of Ultra is closed now. Please disconnect now. Thank you very much. Have a great day.