Good morning. Thank you for waiting. Welcome to our earnings presentation of Ultrapar to present the results of the Second Quarter 2023. There is also a simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br and MZiQ platform. The presentation will be conducted by Mr.

Rodrigo de Almeida Pizzinatto, Ultrapar's Chief Financial and Investor Relations Officer. And then for Q&A session, we'll have also with us Mr. Marcos Lutz, Ultrapar's CEO and the CEOs of the businesses, Mr. Tabajara Bertelli, Décio Amaral and Leonardo Linden.

We would like to let you know 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.

[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 also be available for seven days immediately after it's finished.

Before proceeding, we would like to emphasize that forward-looking statements are being made under the Safe Harbor of 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 turnover to you Mr. Rodrigo Pizzinatto. He is going to begin the conference.

Please Mr. Pizzinatto you have the floor..

Good morning, everyone. It is a pleasure to be here once more to talk about Ultrapar's results. Starting on slide number 2, I remind you that at this moment both the earnings release and this presentation consider Ultrapar's data from continuing operations in 2023.

As for 2022, the company's data is presented in the pro forma view considering the sum of continuing and discontinued operations as disclosed throughout last year unless otherwise indicated. Moving now to slide number 3 with Ultrapar's consolidated results.

As you can see in the chart in the upper left side, our recurring EBITDA from continuing operations totaled BRL933 million in the second quarter of 2023, 15% lower year-over-year due to the lower EBITDA of Ipiranga, partially offset by higher EBITDAs of Ultragaz and Ultracargo.

Ultrapar's net income was BRL239 million in the second quarter, 48% lower year-over-year due to the lower EBITDA from continuing operations, the capital gain of $289 million from the sale of Oxiteno in the second quarter of 2022 and the higher depreciation and amortization.

These effects were attenuated by lower net financial expenses despite the higher CDI, mainly due to the positive one-off result of BRL47 million in mark-to-market of hedges in this second quarter of 2023 compared to the negative one-off of BRL272 million in the second quarter of 2022.

Our Board of Directors as we have already informed approved the payment of BRL274 million in interim dividends referring to the year 2023, equivalent to BRL0.25 per share.

Investments from continuing operations totaled BRL385 million in this second quarter, 5% lower than that of the second quarter of 2022 mainly due to lower investments at Ultracargo and Ipiranga, partially offset by higher investments at Ultragaz.

We had an operating cash generation of BRL898 million in the second quarter compared to a generation of BRL376 million in the same period of last year, resulting from lower investments in working capital on the back of fuel price reductions.

The operating cash generation in this second quarter was BRL1,199 million if we exclude the reduction of BRL301 million in the draft discount balance. And moving now to slide 4 to talk about our liability management.

We ended the second quarter with a net debt of BRL8 billion, a reduction of BRL252 million compared to March 2023 due to the operating cash generation even if we consider the reduction of BRL301 million in the direct discount balance in the second quarter.

Our leverage remained practically stable at 2.1 times net debt-to-EBITDA in June 2023 on the back of the lower last 12 month EBITDA from continuing operations despite the reduction in net debt that I've just mentioned.

I'd like to point out that the numbers of our net debt do not include pending receivables of BRL1.1 billion related to the sales of Oxiteno and Extrafarma.

We raised BRL1,018 million in agribusiness receivable certificates at the cost of 104.8% of the CDI of that BRL 618 million in June and BRL 400 million in July which extends our debt profile at the yearly lowest cost for equivalent issuances in Brazil.

We've included at the bottom of this slide a table with the total amount of draft discount and vendor lines as well as pending receivables from the sales of Oxiteno and Extrafarma all lines highlighted in our balance sheet.

The net debt as of June 2023 adding the draft discount vendor and divestment of receivables would be BRL 8.8 billion which is BRL 1,746 million lower than the balance of June 2022 and one year ago. And moving now to the next slide number 5 to talk about another excellent quarter of Ultragaz.

The volume of LPG sold in the second quarter was 4% higher year-over-year, due to the 2% increase in the bottled segment on the back of greater market demand. The bulk segment in turn grew by 8% with higher sales, mainly to the two industries.

Ultragaz SG&A in the second quarter of 2023 was 15% higher than that of the second quarter of 2022, due to three main factors. The first refers to higher expenses with personnel mainly collective bargaining agreements and variable compensation in line with the progression of results and a larger headcount due to the recent acquisitions.

The second factor is the higher expenses with freight resulting from higher sale volumes. Additionally, we also had higher expenses with sales commissions. The disposal of assets line totaled BRL 7 million in this second quarter, as a result of the concentration of operating asset sales.

With that, Ultragaz EBITDA totaled BRL 405 million, 55% higher year-over-year. This growth is mainly explained by efficiency and productivity initiatives implemented in the last quarters, by higher sales volume with better mix and by inflation pass-through despite higher expenses.

For the current quarter we expect Ultragaz to maintain its good operating performance with seasonally stronger volumes. Moving now to Slide 6 to talk about another great quarter of Ultracargo. The company's average installed capacity was 955000 cubic meters in the second quarter of 2023 stable in relation to the second quarter of 2022.

The cubic meters sold increased by 6% due to increased handling of fuels in Santos and Itaqui, mainly resulting from higher spot sales, especially diesel as a consequence of greater supply in the market, in addition to higher handling of chemicals in Aratu.

Ultracargo's net revenues were BRL 257 million in this second quarter, 19% higher year-over-year, as a result of higher cubic meters sold the spot sales I've just mentioned and higher tariffs. Combined cost and expenses were 14% higher than those of the second quarter of 2022.

As a result of higher personnel expenses, mainly collective bargaining agreements and variable compensation also in line with the progression of results. We also had higher expenses with advisory and consultancy services linked to expansion projects and maintenance costs.

In the second quarter of 2023, Ultracargo concluded a sale process of its stake in Uniao Vopak at the Paranagua terminal which resulted in a positive effect of BRL 8 million in the share of profit of subsidiaries joint ventures and associates line.

Ultracargo's EBITDA with that totaled BRL 161 million in the quarter, a growth of 24% year-over-year due to higher capacity occupancy with profitability gains, higher tariffs, productivity and efficiency gains and the share of profit of subsidiaries result I've just mentioned.

EBITDA margin was 63% in the second quarter, three percentage points above that of the second quarter of 2022. And for the third quarter, we expect Ultracargo to continue its good operating performance with results similar to those of the previous quarters. And to conclude this presentation moving now to Slide 7 let's talk about Ipiranga's results.

Volumes sold in the quarter remained stable compared to the second quarter of 2022 with a 7% growth in the Otto cycle with greater share of gasoline to the detriment of ethanol in the product mix. On the other hand, diesel fell by 5%, mainly due to the strategy of lower sales to the spot market during the period.

We ended the second quarter with a network of 6,281 service stations, 245 stations less than that of March 2023 which is in line with our strategy of managing the legacy of low-potential service stations to review that should be concluded in this third quarter.

A total of 76 new service stations were added to their network with an average volume contribution of 366 cubic meters per month. On the other hand, 321 services stations were closed with an average volume contribution of 43 cubic meters per month.

Despite the reduction of the number of services stations, the net volume effect was positive, reinforcing our strategy of higher density and improve the standards of our service station network. In addition, we ended the quarter with 1,553 AmPm stores with same-store sales growth of 13% year-over-year.

Ipiranga's SG&A decreased by 5% in the quarter mainly due to lower freight expenses on the back of reduction in diesel prices and logistics optimization after the vehicle fleet reduction partially offset by higher provision for doubtful accounts.

The other operating results line totaled negative BRL 211 million in the quarter compared to a negative BRL 130 million in the second quarter of 2022 mainly reflecting higher costs with Brazilian carbon tax credits and the constitution of extemporaneous tax credits in the second quarter of 2022.

The disposal of assets line totaled BRL 31 million in the quarter resulting from the sale of six real estate assets. Ipiranga's EBITDA totaled BRL 479 million in the quarter, 43% lower than that of the second quarter of 2022. Recurring EBITDA was BRL 448 million in the quarter 41% lower year-over-year. The lower EBITDA reflects two main factors.

First, margins pressured by fuel cost reductions throughout the quarter and consequently inventory losses. I remind you that in the second quarter of 2022, we had few cost increases and inventory gains.

The second factor was the worst commercial environment in the second quarter of 2023, due to the oversupply of imported products and higher local production. For this third quarter, we expect seasonally higher volumes and then gradual recovery of profitability as the market normalizes. And with that I now conclude my presentation.

I appreciate your interest and attention. And now let's move to the Q&A session in which we are available to answer your questions. Thank you. .

[Operator Instructions] The first question comes from Thiago Duarte of BTG Pactual. Thiago, you have the floor..

Hello, good morning. Thank you for the opportunity. I have two questions focused on Ipiranga. And the first one, I think it's alluded to the last sentence that Rodrigo pointed out about expectations for the third quarter. Gradual recovery of margins.

What are the assumptions for the gradual recovery to happen in the second quarter? As you've pointed out, there was the impact of loss on inventory levels and the impact of the market, which had a higher demand than initially predicted.

Considering these two drivers that have had a negative impact on the margins of the second quarter, I would like to hear you about how you're analyzing those drivers? Is there an expectation of a change in prices in recovery of inventory levels, or do you expect the market not to have a higher offer? And if yes, why? And the second question more in the long run.

I remember the first thoughts of Marcos in – regarding conference call in the past, where we discussed the turnaround of Ipiranga being an issue software not hardware. So what our current position is in terms of recovering the software the start – the strategy. We've seen results with the disinvestments of some of stations. They seem to be positive.

What else is missing? Of course, considering what's under your control so that the value proposition of Ipiranga keeps on improving concerning what we have observed in recent years? Thank you very much..

Good morning, Thiago. This is Linden speaking. Thank you for your question. First, let's talk about expectations. We have better expectations for the third quarter. The second quarter was very challenging for the reasons that you've pointed out and Rodrigo shared them with us quite clearly. July was more better than June.

Even though still slowly recovering and in June, the market was affected for the same reasons that had impacted the second quarter. But what we are observing and considering the variables you've pointed out, there is not going to be an impact on inventory losses. We do not expect to have price reductions.

Quite to the opposite the market is pointing towards increases. There is also a volume recovery because of the problems of the market of the second – market of having an excessive offer excessive product. Our network is operating better in terms of volume in the third quarter and as a consequence improves margins.

In the third quarter, we expect to have better results than the second. Now concerning software against hardware perspective, as you pointed out, we are maintaining our four-pillar plan. I would say we have evolved significantly in some of them. In others we are still working – it's work in progress. For example logistics and this is no big news.

You know what I'm talking about. But I am quite confident with what we've achieved and the work in the second quarter shows that. We have managed to come up with business solutions even during dry conditions.

Therefore, I think, we are moving ahead following the plan and the results are quite positive to Ipiranga even though that hasn't really completed our full cycle of recovery. .

That's great. Thank you very much for your answer..

The next question comes from Leonardo Marcondes of Bank of America. .

Good morning. Thank you for taking my questions. And I have two questions. Just a follow-up based on what Duarte has just asked. First, I would like to know more about Ipiranga and the market.

Could you please tell us about the availability of products in the market? And how availability affects your strategy of commercialization for clients, which are more when it comes to the spot margin? The second question constraints Ultragaz. I'd like to ask you to tell us more about bulk.

We've seen this bulk segment has gained more and more relevance in terms of volume. Would you please elaborate on how this segment has impacted your margins, and what are the competitive advantages of Ultragaz in this specific segment? Now piggybacking on Duarte's question Linden said that July was marginally better than June.

So June, was it a more challenging month or was it more positive to Ipiranga within the second -- the third quarter?.

Good morning. Your questions about availability is very timely. Ipiranga has no problem of product availability. Ipiranga has no problem of supplying regular customers. And I don't anticipate anything that would say, we eventually would get problems in supplying our regular customers.

We keep on working in the spot market, and that's quite lagging the branded ones, but the spot market is much more exposed to international prices, because it's a marginal molecule so to speak.

There will be occasions in which unless the market has a pricing answer that justifies the international costs, it would be very difficult to develop a segment. Brazil has just settling down in this model and we are still actively involved in it but understanding that this is a market that is more exposed to international prices.

And once again, because this is a very important point, I cannot speak of all suppliers in Brazil, but concerning Ipiranga, there is no problem of supply. No problem of shortage of product. Now concerning the month of July, as I said, July was marginally better for Ipiranga.

But a very small improvement considering what we expect for the whole industry. We've been dealing with lot of challenges and trying to come up with solutions that can offset market difficulties. But said July was marginally better compared to June and to May. .

Hi Leonardo, this is Tabajara speaking on behalf of Ultragaz, about our position in bulk. This is a long-term journey, you probably know and for both segments. But focusing on bulk, I think, there are two possibilities here, things that we've been focusing consistently. We want to be close to our customers.

We want to understand and realize what their needs are. We've been launching new solutions for customers and that has meant significant improvement. You've also aware of recent investments, which have led to operational efficiency. Things which are really relevant to us, and we want to expand, but we've operational efficiency quality of operation.

This is a long-term process. There's still a lot to be done. But this is one of our focuses here, and we've been paying close attention to it. .

Great. Thank you very much for your answers..

The next question comes from Regis Cardoso of Credit Suisse..

Hello. Good morning. I have some questions to Linden, but there is also a follow-up of this last topic. Trying to look towards the future Linden in your answer you said that, the spot market is a market which has prices based on international scene.

And my question is what have you anticipated in terms of domestic supplies considering this context where we can see that discrepancy of the price volatility and how it's incorporated by Petrobras.

It is a market which is still short and it needs importation to supply some specific regions where there is less refining capacity especially in the North and Northeast of Brazil.

So Linden tell us, how you anticipate the supply in the future and how to get adapted to it? So is the teaser does it make sense to keep on having your own stations with branded stations, if that will mean excessive capacity considering your Petrobras quota. So this is the question.

And about the divestment of some of the stations what the impact that it has had on volumes? Do you use any metrics of cubic meter sold per station comparing that to new stations just to understand really how many more stations would have to be sold for you to complete your strategy? Thank you..

Good morning, Regis. Well, Petrobras is still the main supplier of Ipiranga, regardless of the circumstances. This is the partner that gives us really the confidence in supply that we need to operate and this is going to remain so. Petrobras does not supply the whole market.

There is a deficit which means imports and Ipiranga will keep on importing the product. We've got ready for that. We have our supply area ready to purchase from all over the world. We're going to do it competitively.

And I really think that the Brazilian market -- the Brazilian market pricing will get adjusted to the model in which you have Petrobras price and imported prices. Marginal molecules are more exposed to the spot volume and this is how we have addressed it. And this is how the market will get set out.

But whether we should keep on investing or not well interesting point because investments of quality are always worth making, because there is a natural churn in the network and you naturally make placements. And just referring back to your point of the closure of stations it's part of the process.

Even though, we are dealing with the long tail that we knew you had to close, it's part of our network activities.

We're always going to make investments of quality, but as we said right from the beginning our investments are really -- we are raising the bar of the quality of investments and we do that because we want to improve continuously our network. If we get the average of our stations in 2021, it was below 170 cubic meters.

The average today is over 220 cubic meters. That's the average of our current stations. So it means healthier business. Here, we have investments over 330 cubic meters, and some -- these investments are on average of 40 cubic meters. So yeah, it's worth investing, provided that they are investments of quality otherwise it would make no sense.

I think I've answered all your questions, but if you want to hear anything else please let me know. .

No. That's okay. Thank you very much. Great results, guys..

Next question comes from Matheus Enfeldt from UBS..

Hello, good morning. Thank you for taking the question. The first one about capital allocation and your expectations. Recently, I mean, as an expert and there is the whole know-how of Ultracargo.

This kind of format or companies, what we've been analyzing is there still room for purchasing anything larger or different diversification thinking about your process really more than anything specific. My second question about Ultragaz.

Margins are still impacting the results but it has been a consistent surprise to the market, but there are two points about maintenance of margins.

Thinking in the long-term much more than let's say 2024 in hearing about the regulatory concerns about the regulations over the gas bottling, and how are you dealing with the regulatory risk? And secondly, do you think that this margin levels would open the possibility of replacing sources maybe going more into natural gas, when price of fuel is going down, wouldn't be a risk of margin just to focus on this specific gas applications you have?.

Thank you for the questions. In terms of capital allocation, we've already told you, the experience that we have today because this is the year, that we just put an end to the level of investments to go into further leverage, an investments. The activity of M&A is constantly -- really gaining more momentum and considering possibilities.

We believe in smaller acquisitions as you've pointed out, as accelerators of strategies of our both companies.

Ipiranga does it as well with its network of stations or let's say, with terminals in other operations our strategy is just to do it, to speed up the portfolio, but always analyzing better opportunities with greater volume, but there is nothing mapped so far.

We really tried to focus on enhancing our analysis, and been constantly exposed to what's happening in the market. But 2023, is the year where we strengthened our operations. We are constantly talking about the volatility of the market, but we've been really expanding our operations. We are much better company than we used to be two years ago.

Really creating that critical mass, that allows us to do other things, but we are still more focused on creating muscles rather than taking any major leaps. Hope, I have answered your question. Well, I think you made two questions to Ultragaz. First, about the regulatory landscape.

In our opinion, regulations here in Brazil, are very modern probably one of the most updated in the world. It's been in place for over 20 years. It gives the freedom of choice for end consumers for specific cylinders and autos, and the resellers operation has a very competitive dynamic.

We can see space in reducing some users because LPG is not there, yet, because of regulatory limitations. Our expectation is to have that expanding further, bringing us some additional potential to LPG and we can get that with regulations that really makes us operate very safely. We have top-quality products.

And by doing that companies can make investments, Ultragaz invests significantly every year in acquisition and re-qualification of tanks and cylinders. Very appropriate operation, but always with room for let's say, improvement.

When you talk about margins and sustainability, it takes us back to the previous question about the use of bulk in the bottled segment and as we've told you in previous meetings, Ultragaz it's much closer to customers adding service levels to the product.

It's not a company that sells only commodity, we brings innovation, new uses, operational efficiency, which is an important differential for us taking us to different markets.

LPG in our operation has really evolved significantly because the end-to-end complete solution not only of the molecule has been highly considered, and it has helped us expand our relationship with the customers. It's very important, in terms of, resellers, closer relationship really with our customers.

We observe the succession rates, the NPS of our customers. So we are going more from a commodity company, to a service provision company and going into a diversification company also offering the products concerning energy.

We've been building this platform of energy of the future, still have got a lot to do of course, but we've shown a very consistent progression in this area..

The next question by Georgina [indiscernible] from Citibank. .

Hi, good morning. Thank you for taking my questions. Follow-up on Duarte's question.

Could you please tell us more about the pillars, the four pillars of the turnaround of Ipiranga, which one is the most developed? Which one is lagging behind? What are the difficulties you come across? And how long will it take for you to close all the doors so to speak? I can see that -- in stations and it's very successful.

I don't know if it's an ongoing process or whether we are going to come to a halt eventually? And secondly, concerning the CapEx against the guidance, it seems that it's somewhat lagging behind, do you expect any spillover or will you reach the guidance of the year in all different terms? Does Ultracargo seems to be the ones which is taking longer to use its CapEx? So, please -- these are my questions.

Thanks..

Good morning Georgina. Concerning disinvestment and the sales of our stations, we expect to finish this movement now in September, in this quarter; the bulk of it at least. Four pillars,[Indiscernible], this pillar is very important to us but in our -- this is something ongoing in our operation.

This is something that we have structured quite well, the pillar has been completed and now we are going to keep on finetuning our policies to have stable competitive position and policies which are in sync with the market. The pillar of trading has evolved significantly as well.

When we launched this pillar at first, we had no structure of trading at that time. Today, we have a very robust trading structure with a capacity to originate products wherever we are always adding value and it has contributed to reducing the issues we faced in the second quarter.

And similarly competitiveness now we're going to just keep on focusing that as a critical issue for us. The next pillar was the engagement has also experienced significant progression in the past 18 months. It has improved our relationship with the network at large.

Our processes and policies are much more consistent and this is very important for the network. We are closer to our resellers, which is something expected at Ipiranga. We've expanded the network. We have gained more space in our branded stations. It's a pillar to be maintained.

The pillar with which we are still working on is logistics and operations because it requires deeper changes of processes and this is not the first time I mentioned it.

I know I'm just being consistent with what was said in the past, but it's clear that by the end of the year, it would have -- we will have covered most of what we had intended to be our plan.

There are very significant progresses, but the rollout for all over Brazil, for all our distribution bases, it takes time because we are deeply reviewing processes. So, as I told you the part of selling the stations and disinvestments will be completed by September. Let's say we'll talk about CapEx.

Well, concerning CapEx and similarly to previous years, we just forecast and there is some seasonality of the investments in expansions and branded operations concentrating more on the second half of the year and this year is not going to be different because it's not a linear plan. .

That’s great. Thank you..

Thank you. If there are no further questions, I would like to hand it back to Mr. Rodrigo Pizzinatto for his closing remarks. .

Well, let me thank you all for your questions and for your interest. Let me remind you that the questions that were submitted through the webcast will be answered by our Investor Relations team. And on September 5th, we're going to have our Ultra Day and I hope to have you all there with us. Thank you all very much..

Thank you. The earnings release call of Ultrapar is completed now. Please hang up now. Thank you very much. Have a nice day..