Ultrapar Participaçoes SA Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Recurring EBITDA in Q3 '24 totaled BRL1.506 billion, 24% lower y-o-y; accumulated EBITDA '24 BRL4.93 billion, 4% higher y-o-y.
• Net income Q3 '24 BRL698 million, 22% lower y-o-y; YTD net income BRL1.645 billion, 17% higher.
• Operating cash flow Q3 '24 BRL780 million, 59% lower y-o-y due to lower EBITDA and higher working capital investments.
• Net debt ended Q3 at BRL7.968 billion, up BRL268 million from June; leverage went to 1.3x from 1.2x.
• Investments in Q3 '24 totaled BRL519 million, 37% higher y-o-y, mainly driven by Ipiranga.

Segment Performance

• Ipiranga: Third quarter sales volume grew 4% y-o-y. Auto cycle up 5% (boosted by ethanol share in product mix), diesel up 2%. Network had 5,871 service stations (5 less than June '24). 1,478 AmPm stores with 7% same-store sales growth. EBITDA BRL967 million, recurring EBITDA BRL936 million (34% lower y-o-y). SG&A down 4% y-o-y but offset by other expenses.
• Ultragaz: LPG volume up 4% y-o-y (bulk LPG up 7%, bottled LPG up 2%). EBITDA BRL448 million (1% lower y-o-y) due to higher expenses like personnel and freight costs.
• Ultracargo: Average static capacity 1,067,000 cubic meters (+1% y-o-y). Net revenues BRL266 million (+1% y-o-y). EBITDA BRL168 million (3% lower y-o-y) due to lower spot sales.

Guidance

• Ipiranga expects to maintain strength in Q4 despite market conditions.
• Ultragaz expects higher EBITDA in Q4 with contribution from new energy segment.
• Ultracargo expects EBITDA similar to recent quarters.
• CapEx for 2024 expected to be below initial plan with some carryover to 2025.

Risks

• General economic, industry, and operating factors could affect results.
• Illegal practices in energy sector (e.g., biodiesel mixing, tax evasion) impact competition and margins.
• Fluctuations in fuel prices, import volumes, and working capital movements pose risks.

Question and Answer

Q: About Ipiranga's margin expectations and future dynamics; impact of diesel imports on competition and Ultracargo.

A: Leonardo Linden mentioned improvement in the third quarter due to fight against illegal practices, but diesel competition remains. Decio Amaral said lower spot imports may not significantly impact Ultracargo as they are positioned in key regions.

Q: CapEx underperformance and regulatory adjustments for Ultragaz.

A: Unidentified Company Representative said CapEx expected to be below initial plan with carryover to 2025. Tabajara Bertelli discussed regulatory progress and importance of security in oil and gas regulation.

Q: Initiatives against illegal practices and contribution to Hidrovias do Brasil.

A: Marcos Lutz mentioned ongoing efforts to fight illegal practices in ethanol and biodiesel. Ultracargo can support Hidrovias in projects like Arco Norte.

Q: Ultragaz's new energy segment contribution.

A: Tabajara Bertelli said new energy sources like biomethane and electricity are expected to contribute 3%-5% to EBITDA, with increased focus in Q4 and beyond.

Q: Working capital release in Q4 and Brazil's economic/political impact on investments.

A: Rodrigo Pizzinatto expects working capital recovery in Q4. Marcos Lutz said no radical changes anticipated in Brazil's economy/politics affecting Ultrapar's investments.

Q: Service station network strategy.

A: Tabajara Bertelli stated business as usual with selective investments and closing unviable stations, with station numbers now accurate.