Andre Pires - CFO.

Frank McGann - Bank of America Merrill Lynch Andre Natal - Credit Suisse.

Good morning, ladies and gentlemen. At this time we would like to welcome everyone to Ultrapar's First Quarter 2016 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.

Andre Pires, Chief Financial and Investor Relations Officer, together with other executives of Ultrapar. We would like 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 question-and-answer 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'd like to turn the conference call over to Pires. Mr.

Pires, please begin your conference..

Thank you. Good afternoon everyone. It’s a great pleasure to be here with you to discuss Ultrapar's performance in the first quarter of 2016. Here with me to help answering your questions, I have my colleagues from our businesses and Investor Relations team.

Starting with slide number 3, I would like to start our presentation by an overview of the quarter which was once again very positive, improved the resilience of our multi-business model even in an increasingly challenging environment.

The decline in GDP which has been causing an unemployment rise and net income to decrease while inflation rates remains steadily high, demanded our management team intense dedication to act against the negative effects.

In this scenario, Ultrapar’s net revenues amounted to R$20 million in the first quarter of 2016, growing by 12% over the first quarter of '16. Consolidated EBITDA grew by 7% in the same comparison basis to R$1.1 billion. Net earnings remained stable on a year-on-year basis, mainly as a result of higher interest rates and net debt.

We maintained our CapEx plan reaching R$292 million in the quarter, concentrating our initiatives towards diversification of our products and services providing greater customer convenience, and satisfaction and increasing our scale.

We plan to invest R$1.8 billion this year enforcing our confidence in strengthening the company to projects that are ready to our shareholders. We have been growing EBITDA by 39 quarters in a row on a year-on-year basis.

This consistent growth that was followed by a return equity of 19% and the maintenance of a strong balance sheet, a key characteristic that has been present for many years. The net debt to EBITDA ratio remained within its historical levels at 1.5 times.

It is important to highlight that due to the seasonality of our businesses, the working capital needs in the first quarter are normally strong. Moving on now to slide number 4, we will comment in more details the performance of our businesses, starting with Ipiranga.

Ipiranga's volume in the first quarter of 2016 was 2% lower than the first quarter of '15 following the same trends in the fourth quarter in 2015.

Sales volumes for light vehicles fell 5% influenced by the sharp deterioration in the unemployment rates which reached 11% in the first quarter of 2016, compared to 8% in the same period of the previous year. Disposable income also worsened, decreasing 3% near term since January 2015.

The adverse environment which combined rising unemployment rates with increasing prices for fuel had a stronger influence than the fleet growth on Otto cycle sales volume. The average fleet growth is estimated at around 2% for this year. Diesel volumes fell 1% compared to the first quarter of 2015, also as a result of the deterioration of the economy.

Even with the challenging economic scenario, Ipiranga is still reaping the benefits from its investments calculating in their spending and strengthening its network, as well as from strategy of differentiation.

In addition, cost of innovation and services and convenience was customer satisfaction and loyalty helps to increase the flow at the service station. In order to keep strengthening the company and mitigating the effect of the current challenging economic scenario, Ipiranga continued focusing on the expansion of its services station network.

By the end of March 2016, Ipiranga had 7,241 service stations, a 3% growth over March 2015. We have been investing in converging and branded service station and opening new ones, focusing on the Midwest, Northeast, and north of Brazil regions. It has a larger growth potential due to the lower penetration of vehicles.

In addition, we’ve added 204 new am/pm stores which are now present in 27% of Ipiranga service station including the offer of service to our customers. On the net earnings side, it is worth mentioning that we have one-off effect throughout the quarter.

Performance in the first quarter of '15 benefited from the combined effect of the temporary inventory gains and a concentration of sale assets amounting to R$89 million.

In addition, in the first quarter of '15, the dynamics of served in the domestic and international field market created an opportunity to import products which brought gains of R$42 million last year. In the first quarter of '16, these opportunities were also present bringing equivalent gains to those fields in the first quarter of 2015.

The EBITDA net of these one-off effect grew by 40% compared to the first quarter of 2015, following the same trend observed in recent quarters reflecting the strategy of constant innovation and convenience in service station. Including the non-recurring effect the reported EBITDA reached R$712 million stable on a year-on-year basis.

Looking now for the current quarter and talking about expectations. I'd like to highlight that they are not specific projections, but rather trends, levels or order of magnitude of the progression in our results. Ipiranga case, the trends and the economic environment in front to last two quarters do not change and should remain for the second quarter.

Therefore our expectations for the current quarter is of a similar growth volume in EBITDA compared to the last few quarters. Now moving on to Oxiteno on number slide 5. Total sales volume at Oxiteno grew by 4% over the first quarter of 2015.

The evolution was concentrated in the glycol segment each as the commodity occasionally offers good opportunities to offset the effect of a more challenging economic scenario by contributing to fixed costs dilution.

Sales volume of specialty chemical fell 6% compared to the first quarter of 2015, increased mainly by the strong contraction of the Brazilian economy which was partially compensated by the growth in exports. The 75% growth in glycol sales is a significant percentage change which is not been usual indicated this commodity as it mentioned before.

Such increase is driven mainly by more attractive raw material prices as a result of a 36% average oil price swap on a year-on-year basis.

The decision to produce more commodities in the current scenario reinforces our strategy to seek better capacity utilization rate and cost dilution of the plants while specialty chemicals sales in Brazil are weak by the weak performance of the economy. The 37% depreciation of the Real against the U.S.

dollar contributed to a very positive results progression of our Oxiteno together with the overall sales volume growth. These effects were partially offset by a larger share of commodity in the sales mix resulting in R$198 million of EBITDA a 37% growth over the first quarter of 2015.

For the current quarter we expect that the challenging economic scenario should continue to increase sales volume and the sales mix this increasing participation of commodities driving average margins. Additionally it is important to highlight that the volatility of the effects normally impacts Oxiteno. Moving now to Ultragaz on slide number 6.

In the first quarter of 2016 Ultragaz volume grew by 1% over the first quarter of 2015. In the segment which is usually very good driven challenging scenarios, our volume grew by 1% due to the commercial initiatives to have a new retailers. In the bulk segment we reported a performance similar to that in the first quarter of 2015.

In that segment we outperformed the market due to initiatives to capture new customers mainly in medium and small medium businesses segment and also to initiatives towards semi virtual clients mitigating the negative effects of the economic slowdown.

In the first quarter of 2016 Ultragaz EBITDA reached R$109 a 50% increase over the first quarter of 2015. This achievement in a result of the initiatives to increase to offer of convenience and satisfaction for its customers and the addition of new clients plus the culture of strict control fixed costs.

For the current quarter even in this challenging market economic environment, we expect results at similar levels to those presented in the last few quarters due to the resilient nature of the Ultragaz businesses and its unborn commercial initiatives. Now, let’s talk about our liquid bulk storage business Ultragaz, moving on to slide number 7.

Ultragaz average bulk excluding terms of operation increased by 6% compared to the first quarter of 2015 mainly due to the stronger volume of fuel handling, while the handling of chemicals declined reflecting the weak economic activities.

Ultragaz's total average storage decreased by 13% basically explained by the partial interruption of the Santos terminal due to fire that occurred in April of last year. In the first quarter of 2016 Ultragaz EBITDA excluding Santos operations reached R$26 million in line with the first quarter of 2015 and we also exclude Santos.

The reported EBITDA reached R$33 million in the first quarter of 2016, a 33% reduction compared to the first quarter of 2015 mainly due to the partial interruption of the Santos terminal and file related expenses which was partially offset by insurance reimbursements.

Throughout the first quarter we had R$30 million of revenue from insurance reimbursements which were related to certain containment and recovery expenses incurred in 2015.

We also had expenses from a finding the amount of $60 million paid to the Sao Paulo’s business government authority and had an additional R$8 million of extensive related to the second phase of the commissioning process. For the current quarter the trend recently observed for the terminals excluding Santos dealings.

Regarding Santos we should continue to report expenses related for the second phase of the commissioning process and revenues from insurance at the same level we reported in the first quarter. Before moving to Extrafarma, I’d like to make a brief update about Ultracargo's operation in Santos.

In February Ultracargo paying approvals by the authorities and acquired the second phase of the decommissioning plan which consist moving the equipment and stretches then a vital fire. We expect to conclude the sales by August. During this work, experts of the common logistics institute will conclude the reported gathering the causes of the accident.

We expect the recovery work of the damage area to take place during the second semester. Terminals will be ready for operation licensing by the end of this year. Moving now to slide number 8 to discuss our retail pharmacy business Extrafarma.

Extrafarma ended the first quarter of 2016, with 261 stores, an increase of 35 drugs stores compared to March 2015, 7 stores we will open during the quarter. In April continuing the process of capturing synergies among on other business - Extrafarma open its first drugstore in Ultragaz reseller in Fortaleza, State of Ceara.

Extrafarma's revenues increased by 10% compared with the first quarter of 2015 mainly due to the 16% increase in the retail revenue excluding mobile phones resulting from the growth in average number of drugstores and the 12% increase in same-store sales despite the deterioration of the economic scenario and the decline of the real disposable income.

In the first quarter of 2016, Extrafarma EBITDA reached R$5 million, a slight increase compared to the first quarter of '15 mainly due to the increase in revenues, text mobile phones and initiatives to include the management standard in the retailer pharmacy network.

These results was achieved despite the duration of the economic scenario and a high share of new drugstores still in the maturing process. After a seasonally weaker first quarter, we are working with an estimated level of 20 new stores for the second quarter which allows us to keep on track to open from 60 to 80 stores this year.

The accelerated stores opening phase with the objective to gain market share from the pending drugstores continues to influence results since review maturing drugstores tends to impact on our EBITDA.

Now on slide number 9 to talk about our priorities and perspectives and to conclude our presentation I’d like to reaffirm that priorities of our businesses which have been pursuing ways to continue growing even in more challenging scenario.

Ultrapar's growth has been supported by our investments which places in a solid position to see market opportunities offered by the current economic environment. We also prepare and strengthen that for the return of the economic growth.

It is necessary to continue following our market needs and keep the sense of opportunity in the analytical desk and the capital discipline that brought us here.

In the beginning of this year, there were demonstration of our teams capacity to react to difficulties in challenge market economic environment and we should continue in this test to report one more year growth in 2016. With that I conclude my part of the presentation. I now open for the Q&A session..

[Operator Instructions] Our first question today comes from Frank McGann from Bank of America Merrill Lynch. Please go ahead with your question..

Hello good afternoon. Just a couple questions if I could. One, in terms of Ultragaz, the results were quite strong and that's on top of what was a fairly strong quarter in the prior year.

I was wondering if you could give, maybe a few more details on the commercial initiatives and how that enables you to get what looks like very, very strong leverage from additional sales. Secondly, with the potential economic recovery at some point, timing I guess, remains to be seen.

Where do you think you're going to have the most leverage and how are you preparing for what could be a pick up at some point over the next one to two years..

Hi Frank, thanks for the question. The first one regarding Ultragaz commercial initiatives, I think in many segments I think Ultragaz has been very successful in a way compensating or mitigating a declining market by being able to capture new customers in these segments.

If we look at the bottled segment, is basically the focus on opening new resellers or looking for new sellers throughout the country.

But more specifically in the bulk segment that has a more - I would say strong correlation with economic activity, Ultragaz has been very successful in penetrating into small and medium businesses which in a way to set for last scenario like that as opposed to let’s say large industrial clients.

And even large industrial clients, some innovative applications that Ultragaz has been able to develop kind of created for Ultragaz and new entrants in market that were before eventually only available for natural gas.

So some technology that has been implemented as well, there has been in a way allowing Ultragaz to compensate for very weak - let’s say market for the bulk segment.

And as for the potential economic recovery and you know like an - is very difficult for us to predict but we believe that the fact that we had a strong balance sheet and the fact that we’re always looking at opportunities, will allow us to be prepare and ready – it's not a question of each of trends the economy starts to look over.

And I think pretty much you know segment that we are specifically, segments are linked to the Brazilian GDP.

So we can talk about Ipiranga, we talk about Ultragaz which we just mentioned already and Extrafarma as well, segment were linked to the consumption and we believe that we are very well positioned, when the economy starts to recover on those two businesses - on the other businesses as well but those are the ones that have a more, I would say strong correlation with the market consumption.

Oxiteno business this correlation but there is other let’s say variables like the foreign exchange rate, like commodity prices, so there are more - I would say more indicators for Oxiteno as opposed to the other three that are more linked to the overall economic activity and Ultracargo as well would benefit from the recovery in the economic activity..

And in terms of demand, are you seeing any changes in terms of the second quarter for a better for worse, are they continuing more or less in the same level in terms of demand in Ipiranga, demand in some of those segments..

They are more or less at the same level, Frank. I think the other expectations I went through start to improve is from now on, when we look at what we’ve been seeing today as compared to the first quarter - compare as well to the fourth quarter of 2015, we are pretty much the same levels..

Okay.

And I could just, one more, in terms of Santos, what you're expecting in terms of potential insurance recovery over the next several quarters if any? And when you get to restarting up the facility there, how much incremental volumes would that imply and what will be the comparison of where you expect to be in terms of capacity there versus where you were prior to the fire?.

If you look at our balance sheet, there has been an increase in our asset and also increase in our liabilities which pretty much in the same magnitude.

I think it’s R$140 for the assets, R$110 in the liabilities which in a way is already a testament of expectation that we have in terms of our obligation or our obligations from now on and expectations that we have regarding the receivables of insurance from now on. So 140 million of, let’s say, assets and 110 million of obligations from here on.

So this is something that we expect that it has already been included in our balance sheet. As for, let’s say, the service terminal, once we conclude then we have all the final authorization from - let’s all the authorities, and we start - let’s say remodeling the new building, the portion of terminal that is still interrupted.

We believe that we should start operating there by the beginning of 2017. The trend - and then probably we will be with a capacity close to 95% of the capacity that we had before the fire. So there is a portion of this capacity that probably will not come back in line..

Okay, great. Thank you very much..

Our next question comes from Andre Natal from Credit Suisse. Please go ahead with your question..

Hi guys. Thank you for taking our questions again, while you just mentioned about GDP, I just wanted to go back to that bit if I may, a little bit more specific on diesel.

We've seen this in the last five years or so prior to 2015, of course, with seeing diesel consumption actually increasing above GDP growth rates instead of the more long historical trend that had been, prior to that GDP actually grew pretty much in line with diesel consumption growth.

So of course, this recent increase might have been boosted by in Santos to truck fleet expansion and also boost in agriculture production, especially in the Midwest region where you basically trying to focus now.

But looking ahead, I wanted to know, I was wondering how do you guys think about it, when you do your longer-term investment plans and things like this, how do you guys think about the long-term prospects of diesel consumption growing forward assuming the country at some point in the future will resume growth.

How do you think about diesel consumption growing, is it, do you expect it to keep it in line with GDP or do you see it a period of accommodation in which basically a diesel could grow lower at lower rate than GDP for a while how do you - how should I think about it.

And just connected to this one, there are investments expected to happen in the Midwest region to increase capacity of existing railroads and this might capture a bigger share of transport of crop especially soy and corn towards the southeast ports.

So I just wanted to know how do you - if this is something you guys are following very closely and if you have any ability to give us a hint of how relevant this might be to diesel volumes in coming years. And then the other one if I may is concerning the branding strategy that you have in the North, Northeast and Midwest regions.

The strategy we've seen, although there is very limited reliable data about the exact number of stations especially for white flags. But with based on what we have, we have basically seen that your sales per service station has actually been decreasing for the last five years a bit.

I know this is not a particular objective you have in terms of the volumes per station.

But I just wanted to understand if this does result is basically a consequence of your strategy of branding stations that's basically have a lower volume than Ipiranga's average stations in the region and if this might revert at some point in the future when after branding these service stations start to sell more as a consequence of the branding process.

Thank you..

Andre, let me try to address your points here. Starting with diesel, basically we continue to have the conviction that the correlation that we have for diesel volumes related to GDP growth.

Obviously you have some specific effects in the short term that normally doesn’t follow the trend, but over the long term this is what we should continue to absorb.

We think the first quarter of 2016 we outperformed the market in general, because we don't sell thermal\electric plants and as you know the thermal\electric plants has shut down most of them, they are not operating due to the fact that the demand is relatively low and ideologically has been a very - at least for the short term.

But if you exclude those one-off effects, the trend over the future continues to be a correlation towards GDP's growth.

As for the branding strategy and if I understood correctly your point, sometimes if you look at the comparison which would be similar to same-store sales you could see eventually some volumes specially more recently dropping, and the reason for that is on the expression of our natural gas like that, when you add a new service station, when you grant some branded service station, you take some time there is ramp up for this volume to start and might grow in towards and more spending level for given.

And even when you open a new one, there is a ramp up phase for that. So it is in a way of consequence of expansion strategy that we have been adding. I believe in the more shorter term, there is the impact of the overall economic activity. But the strategy branded service stations remain especially its possible in the Northeast part and Midwest.

It's important to remember that if you take – the branded service stations they represent around 25% of the market. So there is few large opportunity for us and for others as well to grow and get this piece of the market..

Very clear. Thank you so much..

Ladies and gentlemen this concludes today's question-and-answer section. At this time, I would like to turn the floor back over to Mr. Pires for any closing remarks..

Thank you, thank you everyone. Thanks for participating in the call and I hope to see you all again back during our call for the second quarter of 2016 in August. Thank you very much..

Thank you. This concludes today's Ultrapar's first quarter 2016 results conference call. You may now disconnect your lines at this time..