André Pires – Chief Financial and Investor Relations Officer.

Frank McGann – Bank of America Merrill Lynch Luiz Carvalho – UBS.

Good morning ladies and gentlemen. At this time we would like to welcome everyone to Ultrapar’s First Quarter 2018 Results Conference Call. There is also a simultaneous webcast that may be accessed through Ultrapar’s website at ri.ultra.com.br, and MZiQ platform. Please feel free to flip through the slides during the conference call.

Today with us we have Mr. André Pires, 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 a 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. Pires. Mr. Pires, you may now begin the conference..

pre-operational expenditures in preparation for startup of the new plant in the USA and higher expenses with the stoppages at Camaçari, the latter having a R$ 15 million impact.

These two factors, added to the decline in sales volume, produced an EBITDA of R$ 51 million in the first quarter of 2018, 17% less when compared to the same quarter in 2017 in spite of the 3% depreciation in the Real against the dollar and unit prices in dollar also with a positive impact on EBITDA.

This comparison ignores the non-recurring effect of R$ 49 million in the first quarter of 2017 due to the reversal of the provision for excluding ICMS sales tax from the calculation of PIS and COFINS charges. Looking ahead to the second quarter of 2018, the trend is for volume growth both for specialty chemicals and commodities.

On EBITDA, the expected growth in volume and the recent devaluation of the Real against the dollar plus the expansion in unitary margins in U.S. dollar, should translate into an improvement in EBITDA for this quarter and consequently year-over-year growth.

For the year as a whole, we expect volumes to continue on a growth trajectory both due to the economic recovery and also the startup in operations at the new plant in the U.S. and scheduled for late for the second quarter of 2018. Moving on now to Ultragaz on Slide number 6.

First quarter of 2018 sales volume at Ultragaz fell 1% compared with the first quarter of 2017, reaching 410,000 tons. In the bottled segments, the sales performance was stable year-over-year, with 1% growth per business day.

In the bulk segment, sales volume was impacted by the programmed volume reduction of an industrial customer but partially offset by an improved performance in the industrial segment and condominiums. Ultragaz reported one more quarter in which initiatives for reducing expenditures had a beneficial effect on EBITDA.

This improved in the first quarter of 2018 by R$ 116 million or 3% compared with the first quarter of 2017, disregarding the CADE fine and despite lower sales volume. As we’ve already mentioned, there was a non-recurring effect from the payment of the fine of R$ 286 million following the rejection of the Liquigás acquisition.

Our expectation for the current quarter is for a positive evolution in volume. We continue to pursue actions for reducing expenditures so allowing a better year-on-year performance than in the first quarter, not considering, of course, the effect of the fine. Let’s go on now to talk about our liquid bulk storage business, Ultracargo in Slide number 7.

Ultracargo’s average storage area increased by 4% compared with the first quarter of 2017. This was due to an increased fuel and ethanol handling at the Itaqui and Santos port terminals, in the case of Santos reflecting the partial resumption in activities in June of 2017.

In the first quarter of 2018, Ultracargo’s EBITDA was R$ 41 million, an increase of 87% year-on-year due to greater average storage, again a reflection of partial resumption of activities at Santos, in addition to higher prices at the terminals.

Note that this comparison is affected by expenses of R$ 16 million in the first quarter of 2017 with the Santos incident. For the second quarter, the dynamics are very similar to the last quarters, with growth in bulk liquid handling and therefore confirming the tendency that the level of results this first quarter will be repeated in the second.

In this context, Ultracargo will focus its efforts on expanding capacity and using its position of leadership as a growth lever to achieve still more positive results for 2018. Moving on now to Slide number 8, let’s talk about our pharmaceuticals retailing business, Extrafarma.

Before going through Extrafarma results, I’d like to inform that André Covre, known by all of you, decided to step down from his position as Chief Executive Officer of Extrafarma and engage with new professional and personal projects.

Rodrigo Pizzinatto was chosen to assume his position, and he is also known by many of you as he has been in Ultrapar for nearly 20 years since his internship. In Ultrapar Rodrigo held executive positions in Corporate Planning, Investor Relations and M&A and, since 2014, he is the Commercial, Marketing and Logistics executive officer of Extrafarma.

André and Rodrigo will start a transition process in which they will cooperate to perform a natural handover, a feature of Ultra’s culture. Besides that, it is an internal succession. We’d like to thank André Covre for 15 years of great contributions and wish Rodrigo good luck.

Extrafarma recorded a 25% increase in the number of drugstores in its network, ending the quarter with 401 stores, a gross addition of 100 stores in the last 12 months. At the end of the quarter, 54% of the stores had been operating for less than three years compared with 45% in the first quarter of 2017.

This reflects the increasingly rapid expansion of the network, a notable event being the opening of the first drugstore in the state of Amazonas, the 13th state to have an Extrafarma.

First quarter gross revenue was 14% above the first quarter of 2017, with a 13% growth in retail sales resulting from a larger average number of stores and a more intensive pace of promotional activities.

It is important to mention that in addition to the strong comparison base of the first quarter of 2017 when sales growth was 36%, in the first quarter of 2018, Extrafarma’s gross revenue was also affected by slower growth in the market. On the same comparative basis, sales data published by Abrafarma rose by 6%.

Therefore, slower growth in sales and the larger number of maturing stores resulted in an EBITDA close to zero in the quarter. Excluding the effect of new stores, EBITDA reached R$ 11 million compared to an EBITDA of R$ 15 million excluding non-recurrent effects in the first quarter of 2017.

For the current quarter, we shall maintain our strategy of organic growth which depresses EBITDA in the short-term. However, we are forecasting a recovery for the second quarter results, returning towards – to the levels that were presented in the second quarter of 2017.

In this last slide, I would like to comment some aspects which convince us that we are on the right track so far for generating consistent value despite the challenges in July, which lie ahead. We begin operations at our Oxiteno plant in the USA at the end of the second quarter. This will benefit our margins over the year.

We shall also be finalizing the entry into operations of Iconic, our new lubricants company in partnership with Chevron, helping to boost Ipiranga’s results. In addition to this, we have also been working on other organic growth fronts.

At Ipiranga, we are expanding the network of service stations and franchises so that we maximize the strategy of differentiation through constant innovation in services and convenience, helping us increase client flow, satisfaction and loyalty.

It is important to mention that the addition of service stations, through organic investments in the previous year, was concentrated in the end of 2017 and, therefore, several stations are still in a pre-operating stage and should start to contribute positively to volumes as they become operational.

Meanwhile at Ultragaz, we have the opening of resellers and the capture of new clients, at Extrafarma, an expansion in the network of pharmacies and entry into new markets and at Ultracargo the expansion of its capacity. Regarding our investments, we continue to see good opportunities in our businesses.

It is important to mention that the limited amount – that the limit approved – the budget limit approved by the end of the year is based on macro economic assumptions that should be put to test during the year.

On that sense and considering the comments we have already made on the economic environment, we are slowing the pace of investments for 2018, seeking a balance between our continuous expansion, expected levels of returns and cash generation.

It is important to emphasize that despite lower results year-on-year, our investment sense of procurement and discipline in the use of capital gives us the confidence to continue growing.

We can also count on the prudent capacity of our teams to execute our business plans as well as a comfortable and solid financial position to strong operating cash generation during the year reducing debt, sequentially above our historic levels. With this, I come to the end of what we prepared for you today.

I would like to thank you for your attention and would any questions you might have. We can now begin the questions and answer session..

Thank you. The floor is now open for questions. [Operator Instructions] And our first question will come from Frank McGann of Bank of America Merrill Lynch..

one, just in terms of Ipiranga, I mean, the results came in relatively weak and you indicated that you expect some improvement as you go forward over the next several quarters, although perhaps a little bit lower than you might have expected before.

I was wondering if you could maybe provide a little bit more information on exactly what you’re seeing.

Specifically, as it relates to both the competitive environment, how you’re seeing key competitors respond, whether you are finding it more complicated to fit for a new franchising the agreements or those agreements would be coming a little bit economically less favorable for the company? And then, secondly just in terms of the investment program.

You indicated you are going to – you’re slowing at. How – what areas that we likely to most see that in? And Ipiranga, you – in the quarter, you did not open many, many stations.

So I was just wondering if perhaps that’s one area where you’re looking to see lower investments in 2018?.

Frank, thanks for the questions. With the first question talking about the expectations in terms of improvement for the next quarters, I think your comment is right.

Obviously we’ve – at least through the end of last year, we were not anticipating first quarter starting slower than – the first quarter started much slower than we expected effectively, and this obviously effects the overall results for the year. However, this is both for volumes and also on the competitive environment as well.

I mean, basically, what we saw in the first quarter was, let’s say, excess supply in terms of import of fuel, which came at levels of a – very lower levels of prices. And therefore, the whole markets had to go down in order to compete for this excess supply. We are seeing a reduced level of imports in the beginning of the second quarter.

So the percentage of imports in the market has been coming down. And the imports that are coming are coming are coming with less competitively – competitive than the work that’s put in the first quarter. So because of that, we are, yes, expecting improvement in terms of both volumes and margins from the second quarter on.

In fact, if we talk about April, specifically, we can already see volumes above April of next year, which indicates the recovery that we are seeing in the second quarter. So with that, what we basically mentioned, what I mentioned in the call is that we are expecting to see better results in the quarters to come for Ipiranga.

In terms of the competitive environment, we are not seeing more difficulties in terms of, for example, branding unbranded gas stations or converting unbranded gas stations. In fact, we believe the supply here has already improved because of the change in the competitive environment.

As many unbranded gas stations are more willing to be converted than before, how engaged competition to convert them, which has always been the case but we see an increase of supply, which should come through a large selectivity in terms of choosing the right ones and keeping the level of returns that we have.

In terms of the CapEx, our organic investments, the reduction there should be around 20% across the board. I think the exceptions might be Oxiteno because we are – we have, basically, to conclude the construction of our plant in Pasadena, and this plant should start to operate in the second quarter.

But the other businesses they have more are focused in terms of expansion type of CapEx, which we can slow down due to a relatively short cycle of investments for these businesses.

And a new item, which – normally we have a first quarter that tends to be weaker in terms of opening of gas stations than the other quarters, but this first quarter was weaker than the first quarter of last year. And this is an indication of the slower pace that we are considering.

So this CapEx adjustment should bring us back to the same levels of CapEx that we had in 2017 and should contribute to a more, let’s say, significant reduction in our leverage, and we have the objective to bring the leverage it was, let’s say, specifically higher than our average in this first quarter, the expectations to bring this leverage to the same levels that we had in average before.

So substantially, below two times, so that’s the idea..

Okay, I was just – would you, by any chance, have an estimate of how many stations you might be targeting this year now to add next to Ipiranga?.

No, not at this point. We don’t have a specific estimate in terms of number of gas stations. But again, in terms of CapEx, should not be very different than what we gave in 2017..

Okay, thank you very much..

The next question comes from Luiz Carvalho of UBS..

Thanks for taking the question. Just a – two questions from my side. Imports are not dropping as expected immediately since December and despite we saw some decrease when it compared to December levels as we had lots of, I would say, long-term ticks – contracts and also due to Petrobras renegotiation.

I think that they tried to go into some minimum utilization rate to the refinery.

So assuming that there is no, I’m going to say, import gain, inventory gain this quarter, what can you expect in terms of recurring margins looking forward, assuming, I would say, the volume growth that you forecast? And second question, just would like to follow up at what stage is the renegotiation contract with Petrobras and Ipiranga in terms of how this could impact your, how can I say, your dynamics with year two with the supply? Thank you..

Hi, Luiz. Well, talking about import level, I think it was very clear that imports started the year much stronger than anyone anticipated. They have slowed down a little bit in February and March, and we are seeing or expecting that it will continue to slow.

But again we do not see, as we’ve mentioned many times, that imports will disappear from the market. I think that the market will have a more competitive, a more even competitive environment, a more equilibrated competitive environment, this is the expectation.

In terms of recurring margin that EBITDA in Reais per cubic meter, as I mentioned before, it’s very difficult to predict. You can estimate that throughout 2017, imports gains should probably represented BRL 5 to BRL 7 per cubic meters throughout the year.

So obviously, this BRL 5 to BRL 7, probably, right? If the premium remains close to zero, it disappear. So that’s a good number for you to work on your models. Talking about negotiation, the supply contract with Petrobras, there is no news about that. This is, as far as we understand, is being discussed between the distributors and Petrobras.

I think that what Petrobras is trying to achieve, obviously, is good terms with their distributors. But we don’t see any significant change in the operational environment that could potentially, I would say, change the market dynamics significantly..

Okay, thank you..

[Operator Instructions] And this concludes – we do have a follow-up question from Frank McGann of Bank of America Merrill Lynch..

Just in Extrafarma, at different points in time, management has suggested that if the conditions were attractive, M&A could be a way for Extrafarma potentially to expand or expand more rapidly and add a lot more mass to the company.

I was just wondering what you’re thinking right now, given changes in the market? And it seems to be a little bit more difficult market, it’s more difficult to expand, if it’s – that might be an option for the company..

Frank, well, basically, I think we have mentioned many times that, let’s say, our strategy, our focus is organic growth. We understand that organic growth in terms of return on capital – return on investment – invested capital, ROIC, makes more sense than, let’s say, bolt-on acquisitions.

And bolt-on acquisitions have a lot of challenges in terms of combining many different management standards, many different ways of doing businesses that could be very difficult to integrate. So clearly, our focus is to grow organically. We don’t see, let’s say, much granular in doing a transformative M&A at this point in the case of Extrafarma.

So the focus is to grow organically. Obviously, it is part of our culture and part of our tradition, we will not simply close our eyes to investing in many opportunities if they appear. We don’t have any plans but we’re always going to look into it if there’s an opportunity that we can mitigate those risks of integration that I mentioned before.

But at this point, we don’t have a target and our objective is to continue to grow organically..

Okay, thank you very much..

This concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Pires for any closing remarks..

Okay. Well, thank you very much. Thanks for listening to the call, and hope to see you all again when we discuss our second quarter results. Thank you, and good afternoon..

Thank you. This concludes today’s Ultrapar First Quarter 2018 Results Conference Call. You may disconnect your lines at this time..