Ultrapar Participações S.A. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Strong operational cash flow generation despite BRL 900 million reduction in draft discount due to IOF tax burden, driven by disciplined working capital management.
• Hidrovias consolidated since May shows strong results, with reduction in net debt and cost of debt, demonstrating value creation potential.
• Ipiranga recognized BRL 677 million in extraordinary tax credits, faced fuel sector illegalities but had advances in hydrated ethanol taxation and Sao Paulo's tax solidarity principle.
• Ultracargo completed Opla's railway branch and started operations in Palmeirante, expanding agribusiness exposure.
• Raised BRL 1 billion at Ipiranga, completed 25 million share buyback, and will pay BRL 326 million in interim dividends.
• Concerns about ANP's LPG regulation proposal endangering population safety and investments in LPG bottles, as seen in other countries without brand respect.

Segment Performance

• Ipiranga: Volume sold 2% lower y-o-y (3% reduction in diesel due to biodiesel irregularities and import parity; 1% decrease in auto cycle). Recognized BRL 677 million in extraordinary tax credits. Recurring EBITDA for the quarter was BRL 678 million, a 13% decrease from the previous year. EBITDA totaled BRL 1.199 billion.
• Ultragaz: LPG volume 1% lower y-o-y (2% decrease in bottle segment, bulk volume stable). Recurring adjusted EBITDA was BRL 442 million, 11% higher than the same period last year.
• Ultracargo: EBITDA totaled BRL 141 million, 15% lower than the same period last year due to lower cubic meters sold and initial costs of Opla's railway branch expansion.
• Hidrovias: Total volume 10% higher y-o-y. Recurring adjusted EBITDA was BRL 348 million, a 39% increase from the second quarter last year. Consolidated into Ultrapar's results, recurring EBITDA was BRL 276 million.

Guidance

• Hidrovias expects continued strong results in Q3 with significant increase in recurring EBITDA compared to Q3 last year.
• Ultragaz expects seasonally stronger volumes in Q3 with recurring EBITDA slightly above Q3 last year, boosted by new energy performance.
• Ultracargo expects EBITDA in line with Q2 levels.
• Ipiranga anticipates seasonally stronger volumes in Q3 with profitability above first half of 2025.

Risks

• Illegalities in the fuel sector including irregular naphtha import as gasoline and non-compliance with biodiesel blend in diesel.
• ANP's proposed LPG regulation change endangering population safety and investments in LPG bottles.
• Impact of general economic conditions and market factors on future financial performance, differing from forward-looking statements.

Q: About margins, regulation, and working capital.

A: Leonardo Linden and others discussed the impact of single-phase taxation, ANP's LPG regulation, and IOF tax effect on working capital.

Q: About LPG regulation exchange and legal efforts.

A: Rodrigo Pizzinatto and Tabajara Bertelli talked about prehearing inputs against LPG regulation changes and legal initiatives to clarify bio credits.

Q: About leverage, investments, and new energies.

A: Rodrigo Pizzinatto and Tabajara Bertelli discussed leverage targets, expansion plans, and new energy share in EBITDA.

Q: About EBITDA margin and Hidrovias consolidation.

A: Alexandre Palhares and Rodrigo Pizzinatto addressed EBITDA margin and Hidrovias cost reduction impact.

Q: About Ipiranga's priority and ROIC.

A: Rodrigo Pizzinatto talked about selective investments and ROIC expectations.

Q: About Ultracargo's expansion and capital allocation.

A: Fulvius Tomelin and Rodrigo Pizzinatto discussed Ultracargo's expansion projects and capital allocation plans based on leverage targets.