Andre Pires - Chief Financial and Investor Relations Officer.

Good morning, ladies and gentlemen. At this time we would like to welcome everyone to Ultrapar’s 2Q 2016 Results Conference Call. There is also a simultaneous webcast that will 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 that 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 here fore 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 Mr. Pires. Mr.

Pires, you may now begin the conference..

Thank you and good morning everyone. It’s a great pleasure to be here with you again. Today, we will discuss our performance in the second quarter of 2016. Some of my colleagues from our business divisions and their team are also here to help me answering your questions.

So starting with Slide #3, I would like to start our discussions today with an overview of the last three months. Starting with our numbers, we would like to highlight another quarter of EBITDA growth for Ultrapar. This is the 40th consecutive quarter of year-on-year growth.

Those 10 years of EBITDA growth reflect the soundness and the resilience of our business model and our team’s ability to overcome challenges and seize opportunities especially considering the challenging economic environment. Net revenues grew by 4% and our consolidated EBITDA by 19% both year-on-year.

Our net earnings were 11% driven by the EBITDA growth and impacted by the increase in our net financial expenses. We continue to deploy our CapEx plan and reached R$366 million of investments in the quarter and R$659 million in the first half of the year increasing our scale, enhancing our operations and focusing on our differentiation initiatives.

We know that our CapEx budget for the year is R$1.8 billion although the final number for the year could eventually be lower considering the effects of the exchange rate on Oxiteno investments. We have been growing our results and our investments on a year-on-year basis and our return on equity reached 19% maintaining a strong balance sheet.

Our net debt to EBITDA ratio reached 1.3 times by the end of the second quarter of 2016 in line with our historical levels. We also announced dividend payment of R$0.80 per share for the first semester.

This represents a 2.12% annualized dividend yield over the average share price in the first semester and a 58% payout ratio considering our earnings year-to-date. In addition to our quarterly results, we had recently announced two strategic moves in line with our focus on growth and value creation.

The first one was the acquisition of Alesat announced in June. We are very enthusiastic about the benefit it should bring to our shareholders, consumers and resellers.

A quick update on this transaction, 99% of the shareholders present at Ultrapar is shown in our shareholder’s meeting have last week approved the acquisition and 70% of Ultrapar capital was represented at the meeting. This was one of the prevalent conditions that we talk here.

The approval by the anti-trust agency CADE is another prevalent condition for the acquisition. We filed a notice with CADE and the transaction is now under review and through its approval, Ipiranga and Alesat remain as comparators converting their business as usual.

Another transaction we announced recently was the joint venture with Chevron encompassing the lubricant business of both companies. Ipiranga, who won 56% of the deal, this transaction expresses our continuous focus on generating value from our asset base.

The banners are well aligned above the growth potential of this market and the benefits of this transaction both are experienced companies in this sector that has quality asset and commercial rather than sales structures that complement each other. We are very excited of this transaction which is also subject to CADE approval.

Moving now to Slide #4 to discuss Ipiranga, Ipiranga volume was 8% lower than the second Q of 2015 repeating the downward movement of the last two quarters. Fewer sales volumes for light vehicles the Otto cycle fell 11% reflecting the deterioration in unemployment rate and disposable income.

Both factors have been prevailing over the average fleet growth estimated at 2% in 2016. Diesel volumes fell 5% year-on-year also reflecting the economic downturn. The company’s action was keen to mitigate the adverse effects of the economic crisis.

We continue to invest in the expansion and strengthening of our service station network which will accelerate in the second semester, typical of our annual investment cycles. In addition to the expansion of our service station network, we maintain our differentiation strategy based on innovation through product, services and convenience.

Since the second Q of 2015 Ipiranga has expanded am/pm the largest convenience store network in Brazil by 219 stores and now we are present in 27% of our service stations. We have 1,950 Ipiranga service stations with am/pm stores throughout the country. We also have the largest bakery network of the country with 542 units in place at 38% year-on-year.

We also highlight our 1486 Jet Oil franchises which show the 10% growth year-on-year. Our largest driven kilometer [indiscernible] is the largest in Brazil is a success story in the strategy of differentiation, designed by Ipiranga.

Today, this more than has close to 22 million participants, growing 15% year-on-year and has become a key relationship and loyalty platform for the company.

The constant innovation strategy based on services and convenience strengths our resellers especially at this difficult economic environment and contributors to greater customer loyalty and satisfaction.

This has led to a 25% EBITDA growth year-on-year reflecting the same trends seen in recent quarters, improving the movement in the domestic and foreign market of fuels.

Looking now for the current quarter and talking about our expectations, I would like to remind that they are not specific projections but rather trends, levels, or order of magnitude in the progression of our results. In Ipiranga, market trends and our current strategy are maintained.

Therefore, our expectation is an evolution similar to what we have seen in the second quarter in volume and EBITDA. Moving now to Oxiteno in Slide #5, total sales volume in Oxiteno dropped 5% year-on-year reflecting the economic downturn still present in the second quarter. Specialty chemicals volume fell 7% year-on-year.

Under the current scenario of falling specialty chemicals, volume in the domestic market Oxiteno has been increasing sales of commodities seeking better capacity utilization and cost dilution of the plants. This results in a 5% growth in glycol sales. In this quarter, the BLL [ph] was weaker than in the second Q of 2015 on average.

On the other hand it has moved in opposite directions, we saw a sharp real appreciation in 2016 versus depreciation in 2015. These ups and downs were positive for Oxiteno last year and negative in 2016 due to a mismatch in the exchange rate for revenues and cost which has an effect in overall margins.

In terms of raw materials, we experienced the same trend, cost fluctuations were favorable in 2015 especially for the ethylene and negative in 2016 mainly for palm kernel oil. Under the scenario Oxiteno’s EBITDA reached R$117 in the second Q 2016, a 42% decline year-on-year.

In the current quarter, we’ve seen a few signs of stabilization and recovery of the economy which led us to a more positive view regarding volumes since the comparison basis also becomes more favorable since the economic environment started to deteriorate from that point on in 2015.

However, the exchange rate levels and international prices of raw materials are expected to continue to impact our margins in the quarter. Now, moving to Ultragaz in Slide #6, Ultragaz sales volume grew by 4% over the second Q 2015.

In addition to the resilience in the bottled segment, we implemented commercial initiatives to have new retailers leading to 1% volume growth year-on-year. In the bulk segment we grew our volume by 10% compared to the second Q of 2015.

This performance is a result of investments made to capture new customers, especially industrial clients and small and medium businesses mitigating the negative impact of the economic downturn. In addition to capturing new customers and the sellers, Ultragaz extended initiatives towards differentiation and better offering of consumer convenience.

Some examples are innovation in order entry and payment system for LPG bottles such as Ultragaz Connect and Vale Ultragaz. In the bulk segment, we have deployed the prospecting and installation approach for bulk LPG that reduces this process time one third and called UltraPronto.

All those initiatives add quality and value to our customers and resellers.

In the second Q of 2016, Ultragaz EBITDA reached R$118 million an increase of 49% year-on-year, this result was achieved due to an increase in sales volume, commercial initiatives to capture new customers resellers and by a number of differentiation strategies as mentioned before.

Our expectation for the current quarter is a level of volumes and EBITDA similar to the previous quarters. Now let’s talk about our liquid bulk storage business Ultracargo moving to Slide #7.

We had a 9% improvement year-on-year in Ultracargo’s average storage mainly explained by the complete interruption of the Santos terminal in April 2015 while it remain only partially suspended in the second Q of 2016. This improvement was also due to increased handling of fuels in all terminals.

Excluding Santo’s operations Ultracargo’s average storage reported 5% increase year-on-year driven by increased volumes of fuels. Excluding Santo, Ultracargo’s EBITDA was R$26 million in the second Q of 2016 still compared with the second Q of 2015.

Consolidated EBITDA for second Q of 2016 was R$ 42 million, R$ 91 million above to the second Q of 2015 EBITDA mainly due to lower expenses related to the fire and to revenues from insurance advances received in this quarter.

In the second quarter, we had disposal [ph] income via cash advances from insurers in the amount of R$ 30 million as well as R$ 12 million of fire related expenses. For the current quarter, we should see similar performance for terminals excluding Santos.

For the Santos terminal, we will continue the second phase of the decommissioning process and insurance adjustment. Before moving to Ultrafarma, I would like to may an update on the Ultracargo operation in Santos. The commissioning process is ongoing including the removal of equipment and structure damage by the fire.

Throughout this process the final report determine the causes of the fire should be issued. Our expectation is that we should be ready to obtain the licenses to operate the terminal by the end of the year and to reaching operations in 2017. Moving now to Slide #8 to talk about our retail pharmacy business, Extrafarma.

Before going to the results, I would like to highlight an additional step for Extrafarma. In June, we officially launched our new brand reinforcing the attributes of trust and facility in the relationship with customers.

The new identity and the new store model are important part of the initiatives to provide customer convenience and better shopping experience. The new stores are being opened under this new concept and the existing stores will be remodeled to adapt to the new standard.

Ultrafarma ended the second Q of 2016 with 280 stores an increase of 46 stores compared to June 2015. 20 stores were open during this quarter and one store was closed showing a more accelerated expansion base. This new 7% increase in the number of stores quarter-on-quarter and 20% year-on-year.

Stores with more than three years of operation represent now 40% of our network. Ultrafarma revenues grew by 14% year-on-year especially due to a 24% increase in retail revenues, excluding mobile phone sales as a result of the increased average number of stores and the 15% growth in same store sales excluding mobile phones.

The improvement in retail pharmacy management standards and the annual price adjustment of medicine set by the pharmaceutical regulator contributed to top line growth despite the duration in the economic scenario that led to a 38% drop in mobile phone sales.

EBITDA reached R$12 million in the second Q 2016 37% growth year-on-year mainly due to a 24% growth in retail sales excluding mobile phone and to management standards improvements partially reduced by the largest share of maturing stores and its duration in the economy.

For the coming quarter, our expectation is an evolution similar to what we have seen in the second quarter in store openings and in EBITDA as well. Now moving to Slide #9 and before we finish our presentation I would like to bring forth some characteristics of our business which translate our move and long term expectations.

The economic conditions remain challenging but our business model which combines resilience and differentiation will continue to be one of the key factors to our growth. We have seen some signs of recovery in the volumes of our businesses which encourages our expectations of growth resuming in some segments.

Despite the economic recession in the last two years, we kept investing and we are confident in our business fundamentals. We have been passing through this crisis successfully and we are ready and stronger for the economic recovery.

On the left hand side of this Slide #9, we listed the main business lines or segments with a direct impact all of the Brazilian GDP accounting for approximately 50% of our revenues. On the right hand side, we listed the areas where the other factors are influenced.

The Brazilian economic performance has an impact on business segment and Ipiranga on domestic sales of Oxiteno and in bulk segment Ultragaz as well as the handling of chemicals of Ultracargo.

Our businesses are also impacted by other factors such as the expansion of light vehicle fleet in connection with the Otto cycle here as well Ipiranga and demographics reflecting in the aging of the population which is the main driver for the long term growth and resilience of the retail pharmacy business.

As the economy recovers, we believe we will capture the benefits of this growth given our organic investments and also from the recently announced transactions. With that, I conclude the presentation and I am available for any questions you might have. Thank you..

Operator:.

Okay, thank you everyone for your participation and we hope to see you again or to talk to you again with our third quarter results that will be reported in November. Thank you very much..

Thank you, this concludes today’s Ultrapar’s 2Q 2016 results conference call. You may now disconnect your lines at this time..