André Covre – CFO and IR Officer.

Frank McGann – Bank of America Merrill Lynch Christian Audi – Banco Santander.

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar’s 2Q14 Results Conference Call. There is also a simultaneous webcast that may be accessed through Ultrapar’s website at www.ultra.com.br/ri. Please feel free to flip through the slides during the conference call. Today with us, we have Mr.

André Covre, Chief Financial and 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. (Operator Instructions) 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 Ultrapar 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’ll turn the conference over to Mr.

Covre, who will present Ultrapar’s results in the quarter and discuss about perspectives. Mr. Covre, you may now begin the conference..

Good morning everyone. It’s a great pleasure to be here with you to discuss Ultrapar’s performance in the second quarter, which was another quarter of earnings growth. Here with me to help answering your questions, I have the executive officers of our businesses and Investor Relations team.

Before continuing, I’d like to draw your attention to Slide #2, where we highlight the criteria adopted in the preparation of the information in this presentation and the information that was disclosed. This slide also brings some information regarding the association with Extrafarma.

I’d like to start our discussion highlighting Ultrapar’s robust consolidated performance. The recent economic environment in Brazil was characterized by reducing expectations of GDP for 2014, according to the research published by the Central Bank, stable exchange rate and soaring interest rate.

Even in this increasingly challenging economic environment and with the negative one-off events that we had anticipated in our last conference call, in this quarter, we presented consolidated EBITDA of R$751 million and net earnings of R$201 million, both representing a 6% growth, compared to the second quarter of 2013, and in line with the expectations transmitted to you on the last conference call.

We have completed our 32nd consecutive quarter of annual EBITDA growth, reaching eight straight years of uninterrupted growth. And as you know certainly know, during these eight years we had a number of combinations of Brazilian GDP growth, exchange rates, interest rates, inflation, oil prices, international economic environment and etcetera.

And not to forget, between 2008 and 2009, we had the financial economic crisis. Our consistent earnings growth and the consequent cash generation has allowed the company to pay increasing dividends over time, and this time is not different.

A payment of R$390 million in dividends for the first half of the year was approved, amount that is approximately 10% higher than the dividends related to the earnings of the first half of last year, indicating our confidence that our good performance will continue. We also had the honor of receiving another important market recognition.

We ranked first in the Agência Estado awards as the most attractive company for shareholders in 2013, considering performance of the company, its governance and performance of the stock. Agência Estado is a renowned institution in Brazil, part of one of the most important newspapers in the country.

We are particularly pleased with the award, because this is our fourth consecutive year among the top 10 companies, attesting the consistencies of our company’s performance. Moving onto Slide 4. I’d like to comment in further detail the performance of our businesses starting with Ipiranga.

Consistently with prior periods, the volume growth was driven mainly by the increase in the light vehicle fleet, which positively influences gasoline and ethanol sales. As you can see in the top left chart, the average Brazilian vehicle fleet is estimated to be growing at 6% compared to 2013.

For this simulation, we assume that the 7% drop in car sales registered in the first half of the year will remain for the full year. Another factor that has boosted our growth is the expansion of Ipiranga’s service station network.

We have been investing in new service stations and conversion of unbranded service stations, and finished the second quarter with 6,824 stations, up 5% from late 2013.

These investments have allowed the company to grow above-the-market in the sales to gas stations, also known as the reseller segment, obtaining an improved sales mix with increasing share of the reseller segment, as shown in this chart on the top right.

From the marketing standpoint, we continued to move forward with our strategic differentiation to constant innovation in services and convenience, helping to increase the flow of customers at the service station, customer satisfaction and customer loyalty. This philosophy has been successfully developed to some marketing campaigns.

The most famous campaigns carries the slogan, Ask at the Ipiranga Service Station, which summarizes the value proposition to Ipiranga’s clients. With all of this, we had a 3% volume growth in the second quarter of the year, compared to the same period of last year, with a 7% increase in fuel for light vehicles and a 1% drop in diesel volumes.

I’d like to recall you that we anticipated in the last conference call that we should expect lower volume growth in this quarter, since we would have two working days less in the quarter. This effect is due to the Easter and another regional holiday, which in 2013 irrespectively in March and on a Sunday.

Those two working days represent a reducing effect on volume growth of approximately 3%. Another influencing factor we anticipated was the increase in marketing and advertising expenses mainly related to the soccer World Cup, taking advantage of large audience at events which strengthened our market position and our brand’s loyalty.

This effect responded to R$12 million higher advertising and marketing expenses in the quarter. EBITDA totaled R$521 million, up 9% from the second quarter of last year, as a result of the above mentioned factors.

We estimate that the effect of the two working days led to a reduction in EBITDA of about R$20 million in the quarter, corresponding to 3% for the volumes multiplied by our contribution margins of about 115 to 120 cubit liters.

If you were to add these R$20 million back and the R$12 million of additional advertising market campaigns, you would have had EBITDA of approximately R$550 million, a growth of 15% compared to the last quarter, which is also the trend for the third quarter. Now moving to Slide 5.

I’d like to try to clear up a recurrent question in our interactions with the market that I think is worth spanning a few minutes. The idea of this slide is to show how an eventual drop in sales of new vehicles has little influence on the fleet growth and consequently on the combined volumes of gasoline and ethanol.

The first chart on the left shows the strong correlation between the growth of the Otto Cycle volume and the expansion of the light vehicle fleet in Brazil. To eliminate the distortion caused by the difference of the energetic power between gasoline and ethanol, we converted the entire series of volumes into gasoline equivalent volume.

And the chart on the right, which shows the low penetration of vehicles in Brazil market when compared to countries at similar development stages, such as Argentina, Mexico and South Korea. This graph illustrates the continued growth potential of the light vehicle fleet in Brazil.

Finally, in the bottom table, we’d like to show and clarify some of the doubts that I mentioned.

And the key question is, that I am often asked is, how come Otto Cycle volume continues to grow while a number of licensed light vehicle falls? Well, taking the final fleet of 2013 as a reference, we simulated what would be the fleet growth if the number of new vehicles would fall.

We ended 2013 with 3.6 million new cars in the fleet of 30,000 million units. Scrapping was approximately 3.6% of the fleet. So if we take a case where new car sales would fall by 20%, we would have 2.9 million new cars.

Adding these 2.9 million cars to the final fleet of 2013 and deducting the same scrapping level of 3.6%, we would reach a final fleet of 38.5 million, which represents an average growth of 5% over the prior year.

Repeating the calculation for a 60% drop in car sales, in other words, in a situation where only 1.4 million cars would be sold as opposed to last year 3.6 million cars, we would still have a small growth of 0.2% in the final fleet and an average growth of the fleet of 3% in the year.

Therefore, it would be necessary that cumulative reduction of over 60% in car sales to see the fleet stop growing. This dynamic combined with our strategy of network expansion and differentiation with more convenience and services, collaborates to our confidence in Ipiranga’s continued growth. Moving to Oxiteno in Slide #6.

Specialty chemical sales in Brazil decreased by 3%, mainly due to the typical process of the inventory adjustment of our customers when the economy is reducing its level of growth, as evidenced by the research published by the Central Bank.

We saw reduction in almost all segments served by Oxiteno, except for home and personal care, which is characterized by its strong resilience.

Specialty chemical sales outside of Brazil were down by 10% due to the lower operating level in Venezuela since the beginning of 2014, as a result of the limitations in importing raw materials in the country, as we have already discussed with you last quarter.

Total glycol sales dropped by 25%, a significant percentage variation, but that is not uncommon for this product. As a commodity, glycols usually show high volatility in prices and demand.

This leads to variations in the attractiveness of its sales and the market conditions were more attractive in the first half of last year than first half of this year. The effect of a weaker real compared to the second quarter of last year was positive for Oxiteno.

On the other hand, the real to dollar rates remained stable during the second quarter of this year, while the real depreciated significantly during the second quarter of last year creating therefore a very positive effect for Oxiteno at that time, even the time lag between the FX rate implied in our revenues and the FX rate implied in our costs.

EBITDA reached R$98 million in the second half of the year, down 8% when compared to last year, mainly influenced by the destocking process in the Brazilian market and the raw material limitations in Venezuela. The EBITDA margin reached US$232 per ton.

Considering a stable exchange rate environment, the reduction in the operating level in Venezuela since the beginning of the year, and the effects of destocking in the value chain in Brazil, the trends for the third quarter is of an EBITDA in the same level of the one that we had in the second quarter. Now onto Ultragaz on Slide 7.

Just like the effect we had in Ipiranga, we saw in Ultragaz a reduction of two working days in volumes, adding to the lower demand in the industrial segment. Due to such effects, sales volume in the second quarter was 1% lower than last year.

These effects were partially offset by investment made to capture new customers, mainly on the residential condo and small and medium businesses, leading to an improved sales mix. We had another quarter where the initiatives to reduce expenses shown results in Ultragaz.

As you can see on the chart in the center of the page, Ultragaz operating expenses were down by 5%. On the other hand, as anticipated in the last conference call, we continue our requalification program with a bigger number of LPG bottles requalified in the quarter, which resulted in an additional cost of R$9 million.

Ultragaz EBITDA in the second quarter remains stable compared to the same period of previous year and totaled R$73 million. Such result is due to the scheduled requalification of LPG bottles, and the 1% decrease in sales volume and inflation effects, which where were offset by the commercial and expense reduction initiatives.

Excluding the estimated effect of R$9 million with the added requalification, Ultragaz EBITDA would have grown by 12% as compared to the second quarter of last year. And for this quarter, given that the vast majority of that problem is now finished, the trend is at growth at the same pace of the normalized EBITDA between second quarters.

Now let’s talk about Ultracargo, our business of liquid bulk storage on Slide #8. In this quarter Ultracargo’s average storage remains practically stable compared to the second quarter of 2013.

We have seen in this quarter the continuing growth in the consumption of fuel oil for thermoelectric plants and fuels for vehicles as a result of the growth in these segments. The growth was neutralized by lower handling of chemicals, which I also comment in relation to Oxiteno’s performance.

EBITDA reached R$43 million, a 2% increase compared to last year mainly, due to the improved mix of products handled, with increased turnover of products, partially offset by higher maintenance expenses in the quarter.

For the current quarter, the dynamic remains very similar, and therefore trend that the evolution of the second quarter repeats itself in the third quarter. Moving on now to Slide #9 to discuss our retail pharmacy business, Extrafarma.

During this first quarter of the year – I’m sorry, during the first half of the year, we reached the final stage of the integration of Extrafarma and continued the structuring of the company for a more accelerated growth, which has been absolute aligned with the plan that we have for the period of the acquisition.

Among the steps implemented since February, we highlight; first, the centralization in the corporate center of treasury, accounting, accounts payable, legal, insurance and audit.

Second, the establishment of a new organization structure with the creation of areas dedicated to the activities related to operations and expansions, to allow greater specialization and agility in the process of opening stores.

Third, the allocation of managers and analysts from Ultrapar and its businesses to Extrafarma in order to strengthen its team and facilitate the process of functional and cultural integration. Fourth, the implementation of BDA [ph] as the mechanism of alignment and incentive to also used for our businesses since the last decade.

Fifth, the implementation of a program or training in cultural integration for Extrafarma leaders, and particularly, store managers. Sixth, improvement in operating IT systems, resulting in enhanced productivity and controls.

And finally, we have advanced on the detailing of the working plans to enable accelerate drugstore opening from late 2014 onwards. With regards to operation, Extrafarma ended June with 203 stores in the North and Northeast regions in Brazil, a 13% increase or 23 stores, when compared to the end of the second quarter of 2013.

The increase of drugstores revenues with more than 12 months, or so-called same-store sales was 6% in the period, resulting in a 15% increase in total revenues, together with the growth from number of stores.

The good revenue growth of Extrafarma was partially offset by the World Cup events, since we had an increased number of holidays in the period, particularly in the locations where Extrafarma is focused. In the same comparison, the number of drugstore of Abrafarma’s associated companies increased by 9%.

Therefore our 13% comparing favorably to the 9% of industry, and the associated companies of Abrafarma has sales increasing by 11%, while ours increased by 15%. Due to the integration of Ultrapar and the structuring of Extrafarma for more accelerated growth, we had additional expenses of R$6 million in the quarter.

Extrafarma’s EBITDA in the second quarter totaled R$14 million, or R$21 million excluding the expenses with integration and structuring, a 5% increase compared to last year. Such growth is due to the increase in revenues, partially offset by three factors. First, the fact related to the World Cup.

Second, the greater number of stores opened less than one year ago and therefore still in maturing process. And third, above-inflation increase in unit personnel costs.

For the third quarter, we currently see an operating environment similar to the second quarter, which leads to an expectation of an EBITDA on a stand-alone basis without the additional expenses of the structuring and integration, in a similar level of that of the second quarter.

Moving to the final slide, I would like to share something with you that we expect for the future, how we look to our businesses beyond single quarter. We try to break down in this slide our businesses in two major groups. On the left, we list the main aspects of our business that have a more direct influence of the Brazilian GDP.

And on the right side, we list aspects where other drivers are more important. For example, at Ipiranga, nearly half of our volume corresponds to sales of diesel, which follows GDP growth of Brazil at a multiple of 1.7x.

On the other hand, the growth of other half consisting primarily gasoline and ethanol, is influenced by fleet growth as I showed you on the Slide 5 and has an outlook of continued growth irrespective of the behavior of the Brazilian GDP.

At Oxiteno, specialty chemicals in the Brazilian market, which represents 59% of our volumes have grown at a multiple of 1.8x GDP. At the other hand, we have other parts of our businesses where Brazil GDP is not a key factor. In Oxiteno, the exports, the international units and already known influence of the real and dollar exchange rates.

At Ultragaz, we have the volume stored in the bulk segments more directly linked to the Brazilian economic growth, since we basically serve commercial, service businesses and industrial. Again on the other hand, the volume of bottled LPGs is virtually inelastic to the volatility of the economy and it’s more influenced by the growth of the population.

At Ultracargo, good economic activity normally means an increasing handling of products. And in the case of weaker economic activity, the storage of products have a better performance. Finally, in our new retail pharmacy business. The main drivers of growth are very resilient.

The aging of population, an invertible phenomenon in Brazil in the next decades, influences the growth of medicine sales. The growing penetration of generic drugs also contributes to the growth of the pharmaceutical market, since it increases the access to medicines to relatively price reduction.

And additionally, the sale of home and personal care products increasingly common in pharmacies has grown independently of the evolution of the economy.

The combination of our businesses characteristics, the way we position and manage them, as well as our corporate governance, planning and execution capabilities and acquisitions, all have produced very consistent and positive results over the years. I mentioned we completed eight years of quarterly EBITDA growth.

Looking at a broader perspective, we have 62 quarters of annual comparison to our life as a public company since the IPO in ‘99. We had EBITDA growth in 52 out of the 62 quarters, having undergone significant market volatility, not only from economic growth, but also adverse conditions in exchange rates, unemployment, income and etcetera.

The combination of attributes and our track record allow us to look forward with optimism even in a more challenging macroeconomic environment. I conclude here what we had prepared for today. And now available for any possible questions you may have..

Thank you. The floor is now open for questions. (Operator Instructions) Please hold while we poll for questions. The first question comes from Frank McGann with Bank of America Merrill Lynch. Please go ahead..

Hi, good afternoon. Just two questions, if I may. One, just in terms of inflation. I was wondering how you see this influencing your business over the next year say, and in terms of cost and profitability and what – whether that’s having any material effect on you, and how you try to deal with that? And secondly, in terms of Extrafarma.

The outlook that you see for growth now say, versus when you purchased it. I’m not thinking over the next three quarters, I am just thinking over time, how are you seeing that business now compared to when you bought it.

And what is your strategy here or how are you thinking of the mix of business between stand-alone stores and putting stores in service stations?.

Thanks. I’m very pleased with your question. Thanks for joining us. On inflation, in the recent months, the inflation has been touching the limits of the upper boundary of inflation targets, and it’s therefore obviously a cause of concern. Inflation from our standpoint is never good.

And we deal with it over time, particularly because we have businesses, some of them that are retail in nature. And therefore any inflation needs to be reflected in our profitability projections. So there is always two ways to deal with it. The one is to get more efficient, and other one is to dealing adjusting prices.

We try to use both instruments to deal with it, and we have had meaningful inflation over the last several years and over the last our results have grown. On Extrafarma, we do not see a change in the characteristics of the market since we acquired Extrafarma. The outlook for growth remains the same. The attractiveness remains the same.

Consolidation remains a possibility. I’ll say, the other trend is that we are more enthusiastic about it, because we are now deep down into developing our plans and things have become very, very tangible, and starting on the fourth quarter ‘14 or next year, we’re going to start opening more stores..

Okay.

And in terms of just the mix of business between stand-alone stores and putting stores in service stations, any thoughts on that?.

We are in the midst of that. We don’t have a fixed percentage. I don’t think it will ever be a fixed percentage, because it will always be driven by the attractiveness of the location from a customer standpoint and availability of space. So it might be that in a certain city, we believe we should open, let’s say just for example, 10 drugstores.

And our sites are good for five, then we’re going to open five in our sites and five outside of our sites, but it might be in other city where that’s not five, that’s three or eight. So it will vary a lot depending on the location of our gas stations and our Ultragaz LPG shops..

Okay, great. Thank you very much..

The next question comes from Christian Audi with Santander. Please go ahead..

André, a couple of follow-ups. As you look out on the competitive level at the Extrafarma sector, can you talk about two things? One, how you see the competitive dynamics, particularly as it relates to foreign companies potentially entering the Brazilian markets. And secondly, what’s your stance from an M&A point of view.

Clearly as you’ve explained before 2014 is a preparatory year for the growth to come in the coming years, but if we were to see M&A activity this year, particularly among the larger players, is this something you want to look at, notwithstanding that you always maintain a very good capital discipline.

How is your appetite if M&A were to become more active in the shorter term, although I would think ideally you prefer that to happen later on?.

Well, we see the potential arrival of foreign companies in Brazil, on balance positive, creating a parallel what we had in the fuel markets, we do have today one major foreign company but we had in the past others. And we believe that that will foster a healthy competitive environment with reduction/decrease [ph] of informalities.

You are correct that in terms of M&A activities for us this year is not a priority, but we are actively monitoring anything that is happening in the market, and we will get involved with the typical financial discipline, as you mentioned, if is necessary and/or attractive..

Thanks. And the second question that I am looking broadly at all your businesses is, as you look at the second half of the year, correct me if I’m wrong, both from a seasonality point of view, it should be a stronger half, but also from a number of holidays or fewer days.

If you look at the second half of 2014 versus ‘13, should we have a more attractive dynamic in this respect as well?.

You’re right that typically the second half of the year has a bigger portion of EBITDA and profits of the year than the first half. And we don’t expect that to be different this year. I only highlight that in the case of Oxiteno, the exchange rate is moving in the exact opposite over last year.

We had a significant devaluation during the third quarter and we’re more or less stable, so that will affect the comparison for Oxiteno. But other than this, you are correct that the second half of the year carries a bigger portion of EBITDA and profits because of seasonality..

Thanks..

(Operator Instructions) Please hold again while we poll for questions. As there are no further questions, this concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. André Covre for any closing remarks..

I’d like to thank you for presence again. We’re pleased to publish the result in line with our expectations from a quarter that was anticipated to have certain one-off events that is now behind us and the trends in the businesses that we have are more clearly visible in the third quarter.

So we look forward to being with you again with the results in line with expectations we gave. Thank you very much..

Thank you. This concludes today’s Ultrapar’s 2Q14 results conference call. You may disconnect your lines at this time..