Ultrapar Participacoes Q1 2025 Earnings Results & Report

Ultrapar Participacoes EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.07
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 1 of last 4 quarters

Ultrapar Participacoes Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $33.05 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Ultrapar Participações S.A. is a Brazilian holding company with operations focused on energy, fuel distribution and logistics. Through its businesses, the company supplies fuels, liquefied petroleum gas (LPG) and related services to consumers, commercial customers and industrial clients.

Its principal businesses include Ipiranga, one of Brazil’s major fuel distribution companies, and Ultragaz, which distributes LPG for residential, commercial and industrial use. Ultrapar also owns Ultracargo, a provider of storage and handling services for liquid bulk products, including fuels, chemicals and other industrial materials.

Ultrapar’s operations are concentrated primarily in Brazil, with activities supported by distribution networks, terminals and storage infrastructure across key regions of the country. The company historically operated in the chemicals sector through Oxiteno, which was sold to Indorama Ventures in 2022, and in retail pharmacy through Extrafarma before its divestment in 2022.

Ultrapar Participacoes Q1 2025 Earnings Call Transcript

Key Takeaways

• Ultrapar reported a resilient Q1 2025 with recurring EBITDA of R$1.322 billion (-9% YoY excluding Hydrovias) and net income of R$502 million (-20% YoY including Hydrovias losses), supported by lower financial expenses.
• The company strengthened its position in Hydrovias by completing a R$1.2 billion capital increase (now holding >50% stake), selling its Cabotage operation for R$715 million, and setting a strategic agenda to boost operational and financial efficiency.
• Ultrapar raised R$1.4 billion in low-cost debt at an average cost of 101% of the CDI to finance capacity expansions and refinance existing liabilities, with leverage rising to 1.7× in Q1 due to dividends, share buybacks, and working-capital investments.
• Ipiranga achieved stable fuel volumes (-2% auto cycle, +1% diesel), ended Q1 with 5,847 service stations, delivered AM/PM same-store sales growth of 12%, and saw recurring EBITDA rise 6% YoY driven by higher inventory gains.
• Ultragaz sold 1% more LPG despite margin pressure from Petrobras auctions (Q1 EBITDA ‑2%) and expects marginally higher Q2 EBITDA, while Ultracargo posted 3% revenue growth and a 1% EBITDA increase to R$166 million on strong spot sales and new operations.

Presentation

[Operator]

Morning. Thank you for waiting. Please be welcome to our conference call, earnings release result of Ultrapar for the first quarter of 2025. Our presentation will be conducted by Rodrigo Pizzinatto, CEO of Ultrapar, and by Alexandre Palhares, CFO of Ultrapar. The Q&A session will also have Mr. Décio Amaral, current CEO of Ultracargo and recently announced as the new CEO of Hidrovias. We also have Mr. Leonardo Linden, CEO of Ipiranga, and Mr. Júlio Nogueira, CFO of Ultragaz. This conference is being recorded and will be accessed through the website ri.ultra.com.br. After the presentation, we are going to start our Q&A session, and further instructions will be sent to you later. We'd also like to let you know that this earnings release call will be conducted in Portuguese, and there is an option for simultaneous translation. Click Interpretation.

[Operator]

For those listening to the conference in English, there is the option of mute original audio. Our presentation will be shared in Portuguese, and there is going to be an English version to be downloaded from the website of the company and chat. Before moving on, we would like to clarify that forward-looking statements that may be made during this conference call with respect to business prospects, forecast, operational, and financial goals of Ultrapar are all based on beliefs and assumptions of the executive board of the company, as well as currently available information. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and assumptions as they relate to future events and therefore depend on circumstances which may or may not occur.

[Operator]

Investors should understand that general economic conditions, the market, and other operational factors may affect the future performance of Ultrapar and lead to results which may differ materially from those expressed in these forward-looking statements. We'd like now to hand it over to Mr. Rodrigo Pizzinatto, who will start the presentation. Please, Mr. Pizzinatto, you may start.

[Rodrigo Pizzinatto, CEO at Ultrapar]

Good morning, everyone. It is a pleasure to be here once more to talk about Ultrapar's results. Let's start with the main highlights of the quarter. We maintain Ultrapar's robustness and the continuity of good results despite the volatile scenario in the quarter. The fuel sector continued to be impacted by irregularities for tax evasion, such as not meeting the required biodiesel mix in diesel or B-14, and the increasing import on NAFTA to be sold as gasoline. On the other hand, there are two important milestones in the fight against illegal activities. Starting in April, a new law for compliance with carbon tax collection, CBIO, came into effect, with severe penalties for non-compliance. It has just started in May the single-phase taxation of hydrated ethanol for PIS/COFINS, which contributes to fairer competitive conditions as well as increases government tax collection.

[Rodrigo Pizzinatto, CEO at Ultrapar]

Regarding Hidrovias, I want to highlight the strong performance in the first quarter of 2025 due to improved navigability conditions and the advancements in the management and operation of the company's assets. We also made progress in Hidrovias' strategic agenda. In February, we signed an agreement for the sale of the cabotage operation in the amount of BRL 715 million, increasing its strategic focus and contributing to the reduction of financial leverage. We concluded the BRL 1.2 billion capital increase process, which will allow the continuity of its growth agenda, reduction in leverage, and generate value for shareholders. As a result of the capital increase, Ultrapar is now the controlling shareholder with more than 50% stake in the company. It signals the confidence in its value creation potential, as well as consolidates our role as a long-term strategic shareholder.

[Rodrigo Pizzinatto, CEO at Ultrapar]

At Ultrapar, we raised a total of BRL 1.4 billion in debt, with a low average cost equivalent to 101% of the CDI, with the continuity of financing capacity expansions with development banks. Finally, we concluded Ultrapar's planned leadership succession with Marcos Lutz as the new Chairman of the Board. In this process, I assumed the position of CEO of Ultrapar, and Alexandre Palhares assumed the CFO and Investor Relations position. Thank you very much for your attention. I will now take it over to Alexandre, who will detail the quarterly results.

[Alexandre Palhares, CFO at Ultrapar]

Thank you, Rodrigo. Good morning, everyone. It's a pleasure for me to be here for the first time presenting Ultrapar's results. Before starting, I would like to remind you of the reporting criteria and standards used in this presentation. Starting with Ultrapar, as you can see, recurring EBITDA totaled BRL 1,322 million in the first quarter of 2025, excluding the negative impact from the share of loss of Hidrovias in the amount of BRL 139 million, a result that reflects one of the worst drops in the history in the North and South Corridor. Considering this effect, the recurring EBITDA was 9% lower compared to the first quarter of 2024, totaling BRL 1,183 million. The net income for the quarter totaled BRL 502 million, excluding the negative impact from the share of loss of Hidrovias that I just mentioned.

[Alexandre Palhares, CFO at Ultrapar]

Considering this effect, we had a 20% drop year over year, which was partially offset by lower financial expenses. CapEx for the period totaled BRL 416 million in the first quarter this year, a 5% decrease compared to the first quarter last year, mainly due to the lower investments in branding of service stations at Ipiranga, partially offset by higher investments in Ultracargo. We had an operational cash generation of BRL 3 million in the first quarter this year, BRL 576 million higher than the first quarter 2024, mainly reflecting lower working capital investment and income tax paid. Moving to debt and leverage, as occurred seasonally, our leverage increased in the last quarter from 1.4 to 1.7 times due to the increase in net debt and lower EBITDA in the last 12 months, mainly due to the negative impact of the share of loss of Hidrovias that I already mentioned.

[Alexandre Palhares, CFO at Ultrapar]

The increase in net debt in the quarter is due to the payments of dividends and shares buybacks, totaling BRL 584 million, and the investments in working capital resulting from the higher level of working capital needs at Ipiranga, driven by the increase in fuel costs and the seasonal effect of suppliers at the beginning of the year. You can also see at the bottom of this slide a breakdown of the total amount of the draft discount and vendor. The net debt as of March 2025, including these two items, would be BRL 10,362 million, which is BRL 1,921 million higher than the balance in March 2024, mainly due to the receivables from the disinvestments in March 2024.

[Alexandre Palhares, CFO at Ultrapar]

Now, moving to Ipiranga, the volume sold in the quarter remained stable compared to the first quarter of 2024, with a 2% reduction in the auto cycle and a 1% increase in diesel, affected by the increase in the biodiesel irregularities, growth in NAFTA imports for gasoline, and the international prices under Petrobras prices that started in February. We ended this first quarter with a network of 5,847 service stations, 13 fewer than on December 2024. We inaugurated 45 service stations and closed 58 throughout the quarter. Furthermore, we ended the quarter with 1,447 AMPM stores, with the same store sales growth of 12% in the first quarter 2025. Ipiranga's SG&A increased by 80% compared to the first quarter last year due to higher personnel expenses, especially the collective bargaining agreement, as well as one-time expenses with the mobilization of the company's fleet.

[Alexandre Palhares, CFO at Ultrapar]

The line of order operating results totaled BRL 105 million negative in the quarter, an improvement of BRL 60 million compared to the first quarter last year as a result of lower expenses with decarbonization credits, given the lower price level. The line of results from disposal of assets totaled BRL 5 million, a reduction of BRL 31 million, mainly due to the lower sales of real estate assets. Ipiranga's recurring EBITDA totaled BRL 826 million in the quarter, 6% higher year over year. The higher EBITDA mainly reflects higher margins resulting from higher inventory gains in the first quarter 2025 due to the fuel price adjustments and the solution of irregularities in Amapá State after the tax benefit was revoked in April 2024. These effects were partially offset by the increase in irregularities, as previously mentioned.

[Alexandre Palhares, CFO at Ultrapar]

International prices under Petrobras prices starting February resulted in an oversupply of products in the market and higher expenses. We entered the second quarter with international prices under Petrobras prices, even after reductions of more than 12% in diesel costs resulting in inventory losses. We expect a similar profitability of the first quarter, excluding the effects of inventory gains and losses for both quarters. Now, moving to Ultragás results, the volume of LPG sold in the first quarter was 1% higher year over year due to the 2% increase in sales of bottled segments, mainly reflecting the higher market demand, while sales of bulk segment remained stable, impacted by lower one-off consumptions in the special gas segments.

[Alexandre Palhares, CFO at Ultrapar]

Ultragás SG&A in the first quarter 2025 was 17% higher than the first quarter 2024 due to higher personnel expenses, mainly due to business acquired and collective bargaining agreement, in addition to expenses of prospecting new business and a new marketing campaign. Ultragás EBITDA totaled BRL 393 million in the first quarter, 2% lower than the first quarter last year. This decrease is explained by the worse margins, mainly due to increasing costs resulting from LPG acquired from auctions held by Petrobras, worse sales mix, and higher expenses, partially offset by a greater contribution from new energies. For the second quarter, although LPG costs continue to be pressured by Petrobras auctions, we expect a recurring EBITDA marginally higher than the same quarter last year. Now, moving to Ultracargo to talk about another quarter of consistent results, the company's total capacity remained at 1.067 million cubic meters.

[Alexandre Palhares, CFO at Ultrapar]

The cubic meter sold decreased by 4% year over year, mainly due to lower fuel handling in Santos and Itaqui, partially offset by increasing handling in OPA and the export operations in Aratu. Ultracargo's net revenue was BRL 271 million in the first quarter, 3% higher than the first quarter last year due to higher export sales in Aratu and the start of operations in Opala, partially offset by lower volume of fuel handling. Combined costs and expenses were 5% higher than the first quarter last year due to the higher costs of materials and maintenance and the start of operations in Opala, partially offset by lower personnel expenses and expansion projects. Ultracargo's EBITDA totaled BRL 166 million in the first quarter.

[Alexandre Palhares, CFO at Ultrapar]

It's 1% higher than the first quarter 2024 due to the e-sport sales in Aratu and lower personnel expenses and expansion projects, partially offset by the lower cubic meter sold with handling of fuels. The EBITDA margin per stock capacity remained stable at R$ 52 per cubic meter compared to the first quarter of 2024. For the second quarter, we expect an EBITDA similar to that seen in the second quarter of 2024. I now conclude my presentation. Thank you for your attention. Let's now move on to the Q&A session to answer your questions. Thank you.

[Operator]

[Foreign language]

[Operator]

[Translator] We're going to start now our question and answer session for investors and analysts.

[Operator]

If you want to ask a question, please click "Reaction" and then click "Raise Your Hand." If your question is answered, you can leave the queue by lowering the hand. To ask a written question, please submit it through the Q&A icon. Tell us your name and company name. These questions are going to be answered later by our investor relations team. Please hold. The first question comes from Gabriel Barra of Citi. Please unmute your mic.

[Gabriel Barra, Director at Citi]

Hello, good morning. Palhares, Décio, thank you for taking my questions. The first question concerns Ultragás and what Palhares mentioned in his presentation. We have seen some changes in terms of regulation, some changes passed by the government, including reference prices fractioning. Petrobras has recently mentioned that they have been adopting different pricing for industrial and residential use in their auctions.

[Gabriel Barra, Director at Citi]

How would that impact LPG and what is flagging, what should be in our mind in terms of points of attention? Secondly, about Hidrovias, inevitably we have to ask you, congratulate you, of course, in your investments and now being able to control the company. Décio, the new CEO, when we consider investments, this is probably the business card, the flagship of this new step of the company. Something in this new era of the company. What are your plans from now on? What would be the main focus of you, Décio, as the company CEO? What are the main priorities of Ultra focusing on Hidrovias? What can we expect in terms of capital allocation, balance sheet? We would like to hear more from you. These are my two points. Thank you very much.

[Julio Nogueira, Planning and Management Director at Ultragaz]

Hi, Gabriel, this is Júlio speaking.

[Julio Nogueira, Planning and Management Director at Ultragaz]

Concerning our social program, Vale Gás and Gás para Todos, programs from the government that have been mentioned, nothing has been formally published yet. We are in favor of it, of course. We think it would be a very good way of employing resources. This is the kind of problem that can be appropriately addressed, taking the benefit to those who really need it. We are more than interested to support this program for its further development. In terms of regulation, the regulations that we have in Brazil serve as a reference throughout the world. It is modern. It provides an industry always working within the appropriate regulatory standards. We have been observing the whole process of reform. Regulatory reforms tend to be quite common in Brazil, and we have been actively involved in it.

[Julio Nogueira, Planning and Management Director at Ultragaz]

We hope that the changes that are implemented can improve the business as a whole. Bom dia, Gabriel. Good morning, Gabriel. Thank you very much for your questions. Now, concerning Hidrovias, much is already ongoing for the progression of the company. Now, Décio joining the company. Thanks to what had been done at Ultracargo, the same experience is going to be reproduced here, focused on operational efficiency, increasing the yields, administrative efficiency, leveraging what Ultra already has in our shared service unit and in the holding, and also financial efficiency and excellence. By reorganizing, we can have tax optimization and reduction of the cost of the debt, and at the same time, design the long-term development plan of the company. These are the two main points of attention for the upcoming years. Great. Thank you very much. Nossa próxima pergunta.

[Operator]

The next question comes from Monique Greco of Itaú.

[Operator]

Please unmute your mic. [Foreign language].

[Monique Greco, Head of Oil and Gas at Itaú]

Hello, good morning. Thank you for the opportunity to ask a question. I have two questions related to Ipiranga. The first one concerns the impact of open arbitration for exports and imports, considering the drop in gasoline prices, and Petrobras has taken some time to react. How has open arbitration been impacting the inventory prices and the margins of commercialization in the first quarter? Secondly, about ethanol single-phase taxation, Pizzinatto said that as of May 1, we had a valid single-phase taxation. What is your expectation about the effect of this implementation? Do you expect competitive gains being reflected in margins, volumes? I would like to understand more.

[Leonardo Linden, CEO at Ipiranga]

Hi, Monique. This is Leonardo Linden. Thank you for the question.

[Leonardo Linden, CEO at Ipiranga]

First, about Palhares mentioned in his introduction, since February, this arbitration has been open, and of course, it has an impact in the market. It is something consolidated in Brazil. If you analyze the lineup throughout the times and import amounts and what we can really forecast, we can see a robust channel for supplying the Brazilian market. As we have always mentioned, it changes somewhat the dynamics of the market. You start observing some segments in Brazil which are based on marginal molecule references, for example, TRR. This is how it is done. Petrobras, in turn, has taken frequent price adjustments initiatives, but not enough to put an end to price arbitration. I think this is going to be how the market is going to move from now on.

[Leonardo Linden, CEO at Ipiranga]

The market has a problem outside Petrobras, and in terms of supply, the price structure changes because we need additional supply. This is part of the game, really. I have not seen major changes compared to what we have been observing in recent years, and we have to constantly focus on providing the best profile of supplies, considering the effect it has in the market. Concerning the single-phase taxation, and it could not be different, really. We see it as a very positive thing. We have been in favor of it for ethanol for a while as a way to reduce the irregularity in the sector. We see it having a positive impact. Movements like that take some time to get accommodated, of course, but if everything we have planned happens, the market tends to be benefited because of its efficiency.

[Leonardo Linden, CEO at Ipiranga]

It is going; the single-phase taxation is going to bring advantage to those really who are the most prepared. Share is a consequence of this efficiency. And Ipiranga is very well positioned to keep on working as a very strong distributor of ethanol in a market that has less irregularity.

[Monique Greco, Head of Oil and Gas at Itaú]

Thank you, Linden.

[Operator]

The next question comes from Rodolfo Angele, J.P. Morgan. Rodolfo, your microphone is available. Please unmute.

[Rodolfo de Angele, Equity Research Analyst at J.P. Morgan]

Hello, good morning. I have a question about sourcing of gas at Ultragás. You've talked about the effect of the auctions. I'd like to hear what you anticipate. Is it going to be recurrent? Is it a one-off effect? Another thing that we've noticed in this quarter, we've opened arbitration, consumption of your working capital for the company. Looking ahead, how can you offset that? Prices will go down, so releasing working capital with the import.

[Rodolfo de Angele, Equity Research Analyst at J.P. Morgan]

Please tell us a little more about working capital of Ipiranga in terms of trend. These are my two questions. Thank you all very much.

[Julio Nogueira, Planning and Management Director at Ultragaz]

Hi, Rodolfo, this is Júlio speaking. Concerning Ultragás sourcing, the auction started in the end of 2024, in November, at limited volumes, and they got more and more prevalent as of January. What we've seen in April and the beginning of May indicates that it's getting stabilized, and we do believe it's going to represent 5%-10% of the total sourcing of Ultragás.

[Rodrigo Pizzinatto, CEO at Ultrapar]

Now, concerning our take on it, this is Rodrigo speaking. This is a sector where the margins are very tight. It's inevitable to adjust prices. We try to minimize any effects to our customers by enhancing efficiency. The effect was present in the first quarter, but it's going to be more regular as of the second quarter.

[Rodrigo Pizzinatto, CEO at Ultrapar]

Now, Rodolfo, in terms of capital use and cash use in Ipiranga, and I think this is probably clear to all of you, but there had been four effects. One, higher inventory because of a position that we set to use the single-phase taxation. There is a second effect, which is the lower payment terms from our suppliers because of less imported product in our profile and an increase in the product cost, which resulted from the price movement by Petrobras. At the same time, offsetting part of that, receivables were paid shorter at Ipiranga. We did take some of our cash in the first quarter, but we expect to pick up in the second quarter. Petrobras is offering prices higher than in the international market.

[Rodrigo Pizzinatto, CEO at Ultrapar]

What we can see in the second quarter are price reductions to try to be closer to it, but it is still more expensive than in the international market. The government is saying that Petrobras wants to offer the lowest price of fuel in the country. This is something that we expect to be corrected soon.

[Rodolfo de Angele, Equity Research Analyst at J.P. Morgan]

Thank you very much. That was very clear.

[Operator]

The next question comes from Matheus Enfeldt, UBS. Please unmute your mic.

[Matheus Enfeldt, Equity Research Associate Director at UBS]

Good morning. I would like to start by wishing all the best to Décio and Júlio in your new positions. If I did not get wrong calculations, I got a pro forma leverage of 2.0-2.2 times with Hidrovias. This is part of an EBITDA of Hidrovias with still under pressure. How is Ultra analyzing the ideal leverage and looking ahead?

[Matheus Enfeldt, Equity Research Associate Director at UBS]

Does it make sense to analyze a pro forma leverage consolidating Hidrovias, not impacting your capital allocation and the holding? What would be an ideal value to consider your numbers in the end of 2025 and throughout 2026? I would also like to ask about other investments. Today, there was big news about investments in TRR. What are you thinking about this specific segment? Do you want to go further in this value chain? If you can tell us about additional investments that you are planning to have. Thank you.

[Alexandre Palhares, CFO at Ultrapar]

[Translator] Good morning, Matheus. Thank you for your questions. Concerning leverage and the effect of Hidrovias, with the consolidation of Hidrovias, which is going to happen in the second half of the year, we are not going to have more of the share of loss, and we are going to consolidate the results of Hidrovias in all our numbers.

[Alexandre Palhares, CFO at Ultrapar]

is going to be the effect as of the second half of the year. In net debt, it will increase the net debt of Ultrapar by 0.3-0.4 times. As we have cash generation business, the unleverage will be quickly throughout the third quarter, where we traditionally generate more cash. As to TRR, nothing new. This is something that we did at Ultra Mobility. It is a relatively small movement in a sector where we see good partners, regional operation, which is being operated as it used to be before. Now, Matheus, about AmPm, the convenience stores, we can see a potential of growth in our retail business. There are 1,450 stores in nearly 6,000 service stations. We still see a lot of potential for growth. We want to incorporate into our business some brands that can add value to our franchising. For example, Krispy Kreme.

[Alexandre Palhares, CFO at Ultrapar]

For example, Krispy Kreme and other movements are part of this strategy of bringing to convenience stores products and brands that have high perceived value. Krispy Kreme was a possibility of learning more and more about retail, and we expect that these additional product lines will be available in our stores eventually.

[Matheus Enfeldt, Equity Research Associate Director at UBS]

Thank you very much.

[Operator]

Now, the next question. It comes from Vicente Falanga with Bradesco. Please unmute your mic.

[Vicente Falanga, Analyst at Bradesco]

Good morning, everyone. Thank you very much for the call. Thank you, Ultrapar team. I have one quick question here about informal practices. We've seen some formal players talking about tax solidarity in São Paulo. We'd like to know if you agree with that. Have you seen better margins in the state of São Paulo? At the same time, is there any counterpart, any compensation, so to speak, coming from other states?

[Vicente Falanga, Analyst at Bradesco]

Going from São Paulo to other states to try to offset taxes?

[Alexandre Palhares, CFO at Ultrapar]

[Translator] Yes, there are some important successful fronts. I'm going to talk about that and expand that to further topics. The new law of RenovaBio is a very important new law, also the single-phase taxation for ethanol as well. The special tax regimens in São Paulo are very important, and it brings this concept of taxation solidarity, so to speak. The market has to understand that, and this is, of course, going to reduce tax evasion and punish those that evade taxes. There is still a lot to do, of course. Brazil has been impacted by the market of NAFTA without taxation. We have to be aware that the laws and the changes have to be enforced, laws that had been included in our regulatory framework to improve the sector.

[Alexandre Palhares, CFO at Ultrapar]

The mixture of biodiesel, the price is going down, but there is still a problem. Not mixing is still interesting for those who want to fail to pay taxes. There are some states which are not part of the so-called CONFAS, which is like a committee that was created last year. Through that, we see those that did not join still evading taxes. Said it all, we can feel some advances. We've seen some progression, especially in states that are more active in the regulated market. We've seen benefits to all of those who participate in the supply chain, benefits to consumers, agents, resellers, distributors, to the government. São Paulo is a very good example of that. São Paulo State has been fighting irregularities in this industry and has achieved very important outcomes.

[Alexandre Palhares, CFO at Ultrapar]

From our part, we have to keep on working, supporting the initiatives, regulatory agents, so that we can have healthy, competitive markets. I am optimistic, but I am a careful optimist because processes have not developed as quickly as we expected. Those who work illegally, they are very creative. We have to be very careful and pay constant attention to whatever may come to hit us.

[Vicente Falanga, Analyst at Bradesco]

Thank you, Linden.

[Operator]

The next question comes from Rodrigo Almeida with Santander. Rodrigo, please unmute your mic.

[Rodrigo Almeida, VP of Equity Research at Santander]

Good morning. Let me go back to Hidrovias. [Foreign language]

[Rodrigo Almeida, VP of Equity Research at Santander]

[Translator] You have talked about the next steps in terms of your agenda in the company. What can we expect? However, in terms of synergy with Ultracargo, any operational synergies on the daily practices? Are you working towards that?

[Rodrigo Almeida, VP of Equity Research at Santander]

This is going to help us have more clarity of the explanation you have already provided.

[Rodrigo Almeida, VP of Equity Research at Santander]

[Translator] Good morning, Rodrigo. No relevant synergy with Ultracargo and Hidrovias at present. The greatest benefit is to have competent people at Ultracargo who can really dedicate. We are going to replace some of our head count. Now, Décio will be our main executive there. We also have a legal, our support counselor who had also worked at Hidrovias. Apart from that, we have no synergies identified so far. Thank you, General Counselor, I mean.

[Rodrigo Almeida, VP of Equity Research at Santander]

The next question comes from Bruno Amorim, Goldman Sachs. Please unmute your microphone.

[Bruno Amorim, VP of Equity Research at Goldman Sachs]

[Foreign language]

[Bruno Amorim, VP of Equity Research at Goldman Sachs]

Good morning, thank you for taking my question. Let me go back to the competition and the distribution of fuels.

[Bruno Amorim, VP of Equity Research at Goldman Sachs]

I do understand all the tax evasion prevention initiatives, but for the past two years, there had been continuous progression. For example, in diesel, smaller players, not the three large players, have been gaining market share consistently. There was diesel single-phase taxation, gasoline single-phase taxation, but the trend has not been reverted. I would like to hear from you whether you think it has happened because in addition to the favorable measures for formal players, some other measures were added. Linden said that they tend to be creative. Do you believe there are competitive players regardless of how they act? How do you see these smaller players which play by the book, right? Do you see healthy players who have been gaining share legally so that we can understand if the problem is just informal illegal practices or whether it is a competitive dynamics, right, that would impact the results?

[Bruno Amorim, VP of Equity Research at Goldman Sachs]

I know how informal businesses impact it all, but is there anything else in other words? Now, concerning Hidrovias, I know you are going to announce a more concrete plan ahead, but what can we expect? Is it an improved Hidrovias? Is it going to be more efficient in its operation, or are you planning to open new business lines? Is there anything else you can already share with us?

[Alexandre Palhares, CFO at Ultrapar]

[Translator] Hi, Bruno. Concerning market dynamics, I think there are the two points you've mentioned, both valid. There is informal practice, and there is a new dynamic of how markets are getting positioned, how the segments are getting positioned in terms of supply. The informal dynamic is what we've called. They are creative, they keep on doing, there are things to focus on. It used to be gasoline, now it's biodiesel.

[Alexandre Palhares, CFO at Ultrapar]

There has been progression, but there had also been some setbacks. However, it is all still impacting the distributors which act informally and irregularly. There is a new market dynamic at the same time. Just to reinforce what I have said, it is consolidated once there is a very long period of open arbitration, price arbitration, so markets have to be segmented. If we analyze, I am going to talk about Ipiranga, right? If you analyze the market share lost by Ipiranga, it is on the spot market and not contracted share. Spot market is exactly where we have the imports. There are some segments which are supported on spot supply, which is all based on imported product. It changes the dynamic, of course, and there are some regions more focused working on such platforms.

[Alexandre Palhares, CFO at Ultrapar]

Even if we considered, they are working accordingly, and they are surfing the wave for their own advantage. The supply market in Brazil is under transformation, and we have to make the right adjustments and model of our operation to focus the segments of main interest. There are the two issues: irregular practice and a new supply model in Brazil.

[Alexandre Palhares, CFO at Ultrapar]

[Translator] Good morning, Bruno, about Hidrovias. The company is great, the assets are wonderful. We expect to make the company even better, gaining efficiency with more productivity out of the assets and more capital discipline. At the same time, we are going to work with an expansion plan that we are going to focus on the north region where we have more possibility of growth of the company.

[Bruno Amorim, VP of Equity Research at Goldman Sachs]

That's great. Thank you very much.

[Operator]

The next question comes from Luiz Carvalho, BTG. Please unmute your mic.

[Luiz Carvalho, Director at BTG]

Hello. Good morning.

[Luiz Carvalho, Director at BTG]

Thank you for taking my questions. I have two questions here about Ipiranga and Hidrovias. Picking back on what you've said, Linden. If we observe the market share of the three main players in recent years, there has been a significant loss of share. It has led to increased margin. Do you think there is going to be a change in this trend? Even though it has been in spot market and less on contracted market, in the end of the day, it impacts the scales. You, of course, have to work to avoid losses of margin. Do you think the company market share is fair, is ideal, or do you expect to gain more share without losing margin? Secondly, asking about Hidrovias, I don't know if it is Pizzinatto or Décio who can answer that. Hidrovias has positively surprised the market in this quarter.

[Luiz Carvalho, Director at BTG]

First, do you think that this new level of operation is a level that we can expect for the next 12-18 months? Secondly, what is the kind of capital allocation that you are anticipating for the company? Open, have the IPO of the other three businesses. Would it make sense for Hidrovias? Would you plan to close the capital going to a no longer publicly traded company? What are you anticipating?

[Alexandre Palhares, CFO at Ultrapar]

[Translator] Let me start by answering about the share. The share is focused primarily on spot market. I do not like to consider it as a loss because we actively decided not to be part of the market within the size it has. It is a very low profitability market, so we decided we opt out.

[Alexandre Palhares, CFO at Ultrapar]

Of course, we want to have stronger and stronger positions, but as a consequence, the share is a consequence of good regulatory dynamic, better than what we currently have. What is in our power is to recover or to expand our businesses by enhancing efficiency. We have our initiatives to do that, efficiency to get better logistics. ERP is being revisited. We are constantly fine-tuning our profile of supplies, understanding the market dynamics. Our investments have been well thought to attract investments that add value to our supply chain. A lot of cost discipline always and support of Ipiranga to all applicable agencies to fight illegal market. I do not think the share is an objective. It is a consequence. We have to strike the best balance and then share increases. It is a result of our capacity to generate results and efficiency.

[Alexandre Palhares, CFO at Ultrapar]

Concerning Hidrovias, just to set the context, to set the background, the main driver of results of Hidrovias is the fact that we have a crop being now distributed. The peak of the company is on the second and third quarter of the year. There is an additional element, which is the hybrid element. Seasonality, rain, but it has improved the draft of Rio Paraguai. It has increased navigability even in periods of lower water availability. That is what we are observing. The main driver is always distribution of the crops and at the same time the water conditions and seasonality, the water in terms of river conditions, right? In terms of capital, we have no plans of closing the capital and start negotiating them outside the stock market.

[Luiz Carvalho, Director at BTG]

Great. Thank you very much.

[Operator]

Our question and answer session is finished now.

[Operator]

I'd like to hand it over to Alexandre Palhares for his closing remarks.

[Alexandre Palhares, CFO at Ultrapar]

Thank you very much for your time, your interest, and our investor relations team is at your availability for any follow-up questions. Thank you all very much. Our earnings release call is finished now. Thank you all very much for your participation. Have a great day.

Participants

Analysts

• Julio Nogueira, Planning and Management Director at Ultragaz
• Rodolfo de Angele, Equity Research Analyst at J.P. Morgan
• Alexandre Palhares, CFO at Ultrapar
• Rodrigo Almeida, VP of Equity Research at Santander
• Vicente Falanga, Analyst at Bradesco
• Leonardo Linden, CEO at Ipiranga
• Rodrigo Pizzinatto, CEO at Ultrapar
• Luiz Carvalho, Director at BTG
• Monique Greco, Head of Oil and Gas at Itaú
• Matheus Enfeldt, Equity Research Associate Director at UBS
• Gabriel Barra, Director at Citi
• Bruno Amorim, VP of Equity Research at Goldman Sachs