Q2 2024 Ultrapar Participações SA Earnings Call
And Mr. Leonardo Linden.
Speaker Change: And the CFO of ultra cargo mission unrest I am.
Speaker Change: Andres Zaia Andres Zaia, Marcos Lutz,
Speaker Change: We would like to inform you that this event is being recorded and all participants will be in 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.
Speaker Change: We remind you that questions will be answered during the Q&A session and may be posted in advance in the webcast.
Speaker Change: A replay of this call will be available.
Speaker Change: for seven days immediately after we finish. Before proceeding, we would like to clarify that forward-looking statements are being made under the State Harbor of the Securities Litigation Reform Act of 1996.
Speaker Change: Forward-looking statements are based on the beliefs and assumptions of Ultrapar management and on the information currently available to the company.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: I would like now to turn the conference over to Mr. Rodrigo Pizzinatto.
Rodrigo Pizzinatto: He is going to begin the conference now.
Speaker Change: Mr. Pizzinatto, you can start.
Rodrigo Pizzinatto: Good morning, everyone. It is a pleasure to be here once more to talk about Ultrapar's results.
Speaker Change: And before we begin, I want to draw your attention to the reporting criteria and standards presented on slide number two.
Speaker Change: And moving on to slide number 3, as you can see in the chart in the upper left side, our recurring EBITDA totaled R$1,282,000,000 in the second quarter of 2014, 37% higher than that of the second quarter of 2013.
Speaker Change: May lead you to the higher EBWP Ranga Eurovery. As you can also see, the accumulated EBWP for 2024 is to be led in 588 million reais.
Speaker Change: 32% higher year over year. Ultrapar's net income in the quarter was R$ 491 million, a growth of 106% year over year due to the EBITDA growth I just mentioned and lower net financial expenses. I highlight that the share of profit of Hidrovias did not contribute to Ultrapar's net income in the second quarter of 2024, which reoccurred on the third quarter onwards with a two-month lag. The accumulated net income for 2024 is R$ 947 million, 85% higher than that of 2023. Our board of directors
Speaker Change: As we have already disclosed, I approved the payment of R$276 million in interim dividends for the first half of 2024, equivalent to R$0.25 per share. Our investments totaled R$479 million in the second quarter of 2024, 24% above that of the second quarter of 2023, mainly due to higher investments in ultra cargo and lower investments in epidemics. I highlight that these investments do not consider the acquisition of the significant excess taken in droves and receipts from divestments. We had an operating cash generation of R$1,298,000,000 in the second quarter of 2024, R$400,000,000 higher than that of the second quarter of 2023.
Speaker Change: Many due to higher EBITDA, lower working capital investment, and higher draft discount in the second quarter of 2024. And moving now to slide 4 to talk about our liability management. We ended the second quarter with a net debt of R$7,700,000,000.
Speaker Change: a reduction of R$123 million compared to March 24. The decrease in the net debt is mainly due to the operating cash generation of the period and the receipt of the last installment of the Occitano sale of R$755 million. These cash inflows were partially offset by the acquisition of a stake in Indrovias for R$1,293,000,000, reclassified to the investment line. Our leverage decreased from 1.3 times in March 24.
Speaker Change: to 1.2 times net debt to EBITDA in June 24, due to higher EBITDA of the last 12 months and lower net debt, as I just mentioned. I point out that the figures of the net debt for the second quarter of 24 still do not include the receipt of the last installment of the extra pharma sale, amounting to R$222 million, which occurred in early August . As you can also see in the table at the bottom of this slide, the net debt in June 24 added to direct discount, vendor and receivables from the extra pharma divestment is R$9,256,000,000, for R$176,000,000 higher than that of 2023. And moving now to the next slide, slide number five, to talk about UltraGas.
Speaker Change: The volume of LPG sold in the second quarter was 1% lower year over year due to the 2% reduction in the bottled segment, mainly reflecting the continued competitive environment, as well as a milder winter compared to the previous year. Boca LPG remained stable, also affected by the milder winter.
Speaker Change: UltraGaz SG&A in the second quarter of 2014 was 4% lower than that in the second quarter of 2013 due to initiatives to increase operational efficiency and lower expenses with sales commissions and personnel. UltraGaz EBITDA was for R$114 million in the second quarter of 2014, which includes a non-recurring effect.
Speaker Change: of 17 million Reis.
Speaker Change: related to the reduction of the earner payable from the acquisition of Estela due to the exit of a partner. The recurring EBITDA totaled to R$397 million in the quarter, 2% lower than that of the second quarter of 2023. This decrease is explained by the lower sales volume and a more competitive environment in the bottle segment. And for this third quarter, we expect a seasonally stronger volume compared to the second quarter with EBITDA at a similar level to that of the third quarter of 2023. And moving now to slide six.
Speaker Change: to talk about another good result of Ultracargo. The company's average stock capacity of 1,067,000 cubic meters is 12% above that of the second quarter of 23 due to Opla, Vila do Conde, and Rondonópolis terminals. The cubic meter sold grew 19% year over year, mainly due to the start of operations of Opla and Rondonópolis and greater fuel handling at Vila do Conde, attenuated by lower spot fuel handling at Santos and Itaqui. Ultracargo's net revenues were R$264 million in the second quarter of 24, 2% higher than that of the second quarter of 23, as a result of the higher cubic meter sold despite lower spot sales. Combined costs and expenses.
Speaker Change: were 1% above that of the second quarter of 23 due to higher depreciation costs in line with capacity additions.
Speaker Change: Partially offset by lower personnel expenses. Ultracargos EBITDA totaled R$165 million in the quarter, a 3% growth year over year.
Speaker Change: due to greater capacity occupancy with profitability gains, lower expenses.
Speaker Change: and Productivity and Efficiency Gains despite lower spot sales and the R$8 million gains we had from the sale of UltraCargo's stake in União Lopac in the second quarter of 2023. EBITDA margin was 63% in the second quarter of 2024, in line to that of the second quarter of 2023. And for the third quarter, we expect UltraCargo to continue its good results with EBITDA levels similar to those seen in recent quarters.
Speaker Change: And to conclude this presentation, moving now to slide number 7, let's talk about IPIRANGA's results. The volume sold by IPIRANGA in the second quarter grew 4% over the second quarter of 2023, with a 5% growth in diesel.
Speaker Change: and a 3% growth in the Otto cycle.
Speaker Change: Driven by a greater share of ethanol over gasoline in the product mix. We ended the second quarter of 2024 with a net work of 5,876 service stations. Five less.
Speaker Change: We added 79 service stations and closed 84 throughout the quarter. And this level of closures reflects stricter contract compliance.
Speaker Change: I remind you that the number of stations is not the main driver for volume growth as observed in recent quarters.
Speaker Change: Furthermore, we ended the quarter with 1,506 AM-PM stores, with same-store sales growth of 7%. Ipiranga's SG&A increased by 30% compared to the second quarter of 2023 due to higher personnel expenses, mainly a larger headcount and collective bargaining agreement, depreciation, freight costs due to higher sales volume, and one-off expenses with the office relocation in Rio and São Paulo. The line of other operating results totaled a negative R$109 million in the quarter, an improvement of R$100 million year-over-year as a result of lower expenses with carbon tax credit. The line of results from disposal of assets totaled R$36 million.
Speaker Change: as a consequence of the sale of real estate assets, especially the San Cristobal Building in Rio de Janeiro. Epiranga's EBITDA was R$ 817 million in the quarter.
Speaker Change: Recurring EBITDA totaled R$781 million, 80% higher year-over-year.
Speaker Change: The higher EBITDA reflects better margins, mainly due to competition environment normalization and inventory gains in the second quarter of 2024, despite higher expenses and irregularities in the market.
Speaker Change: These irregularities...
Speaker Change: are mainly due to the tax benefit in the state of Amapá, which was revoked in April , and increased NAFTA imports, which enters the country as a raw material for the chemical industry with a lower tax burden, but end up also being used to produce gasoline without full tax collection.
Speaker Change: We ended the quarter with a recurring unit EBITDA for the last 12 months of R$177 per cubic meter, 137% higher year-over-year, mainly driven by the results of the second half of 2023. And in this third quarter, we had few price increases in July , with consequent inventory gains. We are also seeing a normalization of inventory levels in the sector, which began at the end of the last quarter.
Speaker Change: Therefore, we expect a profitability similar to that of the year 2023.
Speaker Change: Very well, I now conclude my presentation. Let's now move on to the Q&A session to answer any questions you may have. Thank you very much for your attention.
Speaker Change: We are going to start now the Q&A session for investors and analysts.
Speaker Change: to ask a question.
Speaker Change: Please raise your hand.
Speaker Change: The first question comes from Gabriel Barra of City.
Speaker Change: Please unmute.
Gabriel Barra: Hello, thank you for taking my questions.
Speaker Change: I'm going to focus on Ibranga and I'll try to understand your opinion on three points. First, analyzing the results, it seems there is an effect on FG&A.
Speaker Change: A non-recurring effect in the quarter, the change of the office in Rio.
Speaker Change: It would be interesting.
Speaker Change: I don't know to what extent you can share with us, but we would like to understand the impact of this non-recurrent effect in the quarter, thinking about a margin and trying to exclude it because it seems to be irrelevant, effecting the quarter.
Speaker Change: Pizzinatto pointed out that we've seen the industry focused on that.
Speaker Change: There are a number of negative effects in the quarter.
Pizzinatto: For a time it has improved, but still something that is hard and has to be done for the margins to get better.
Speaker Change: and for the whole future of your business.
Speaker Change: The second thing that I'd like to understand from you is to what extent you can quantify the impact, not only the issue in a MAPA, but also NAFTA.
Speaker Change: Sibiu, which has also been discussed.
Speaker Change: Constant
Speaker Change: Debtors. So I'd like to hear the impact about that in the quarter and what we can expect for the next quarter. And thirdly, Pizzinatto has somewhat addressed that the second half of the year seems to be much better for the industry.
Speaker Change: Do you share the same opinion? I would like to know to what extent really it's going to be better.
Speaker Change: and also the sustainability of the improvement that you expect coming. These are my three points. Thank you.
Speaker Change: Hi Claubiel, this is Leonardo Linden. Good morning. Thank you for the questions.
Speaker Change: Concerning SG&A and the offices, yes, they had an impact this month.
Speaker Change: We had a plan, for a while, of changing the office in Rio.
Speaker Change: High Cost of Maintenance
Speaker Change: Some impacts on infrastructure.
Speaker Change: We've already had mapped the place to move in Rio, but we still haven't had the opportunity to have the transaction as we wanted.
Speaker Change: We had a transaction with an entrepreneur and we carried on with our plan to move our office in Rio.
Speaker Change: At the same time, we had to have a rebuilding.
Speaker Change: Just really streamlining the office and the same has been done here in Sao Paulo for our office in Sao Paulo.
Speaker Change: We don't expect to have any relevant impact in the third quarter concerning that, but yes, expenses that were impacted in the second quarter.
Speaker Change: 7 to 8 BRL per cubic meter of impact in our FG&A. Now, concerning your second point, negative effect of the market, in the second quarter, we've observed the effect.
Speaker Change: and part of them because of the issues from AMAPA.
Speaker Change: It was revoked in the end of April , but that's not the only fact. We also, we are operating in a market that has a number of irregularities.
Speaker Change: There are distributors.
Speaker Change: which do not meet the Argos of Sibiu and there are orders against them. There is the issue of tax and non-specification of products as Rodrigo pointed out.
Speaker Change: There are a number of market irregularities and we've been handling them the best as we can.
Speaker Change: But we've seen in this quarter some important actions.
Speaker Change: And even here, I've always been highly critical about it.
Speaker Change: As a society, we should take a stance, and this quarter, the end of the quarter, it was quite important to see.
Speaker Change: and he really
Speaker Change: making a number of actions towards that in attacking.
Speaker Change: Some distortion factors of good competitive environment.
Speaker Change: ICL, the media, I had the impression that the media has really embraced the topic and has been talking about it extensively. So these are all positive indications, something that really...
Speaker Change: Makes us feel somewhat more, I mean, relaxed, it's far from being solved, of course, but it is something that at least
Speaker Change: gives us a better outlook.
Speaker Change: These numbers have been known. They are part of different studies. As a society, there is 30 billion BRL losses from such irregularities, and it's all with the government, right?
Speaker Change: Therefore, we should really keep on fighting the regular market so that we have healthier competitive markets.
Speaker Change: Healthier markets would also contribute to better businesses.
Speaker Change: Now, concerning the second half of the year,
Speaker Change: Inventory levels of the market will probably be more normalized.
Speaker Change: It seems that we are not going to have the level of oversupply, especially for diesel.
Speaker Change: The market will be more balanced, I believe, which doesn't mean there is going to be a product shortage. Just a well-balanced market and we have a very positive perspective concerning the next quarter.
Speaker Change: Great, thank you very much.
Speaker Change: The next question comes from Monique Grego, Itaú.
Speaker Change: Please unmute your mic.
Speaker Change: Ms. Greco, we cannot hear you.
Monique Grego: I have two questions from our side.
Speaker Change: I'd like to ask Linden about Ibranga, thinking about the second half.
Speaker Change: Which was your last answer? Can you share with us?
Speaker Change: What you expect in terms of market share, we've been observing the data on a monthly basis, and we've seen in recent months some reduction of share in retail and B2B.
Speaker Change: Could you please share with us what you expect for the second half of the year?
Tabajara: Secondly, it's a question to Tabajara about Outragas, could you please share with us
Tabajara: The integration with SVH.
Tabajara: S.H.
Zee: Zee, anything to share with us?
Speaker Change: How long would it take to have the full integration and then start benefiting from Synergys?
Speaker Change: Hi, Monique. Thank you for the question.
Linden: Linden speaking
Tony Markett: and Tony Markett, Chair.
Speaker Change: The market has somewhat different characteristics from what it used to be.
Linden: And we can see more volatility in the share than we used to see in the past because the spot market is much more volatile.
Speaker Change: especially for a company such as IP Ranga.
Speaker Change: What do I anticipate for the third quarter and the second half? I'll see a share.
Linden: In our branded network, which will be in a contracted area, will be really stable because we have constant volume. And I think the third quarter...
Linden: will have probably lower volatility because of fewer irregularities.
Speaker Change: So, we hope in the spot market, but the spot market will always be a business of opportunity for those selling with those buying, if you have the right condition at the right time, we just benefit from it. If not...
Speaker Change: It's not the end of the world. Our priority will always be our own network.
Speaker Change: We don't see any different perspective in the Brendan network, and we always work to capture good businesses that would impact our share in the spot market as well.
Tabajara: Thank you for the question, Tabajara speaking.
Speaker Change: The Operational Consortium with SHV.
Speaker Change: We have planned a very important part of the integration, phase one of the integration, quite relevant in the total context of the project.
Speaker Change: We have met what we had planned with the expected moves and changes. It has all been implemented, but it's a very relevant portion of the project.
Speaker Change: In the quarter, we haven't had any significant capture because it's the process of implementation as planned.
Speaker Change: For the 3rd and 4th quarter, we are going to have some marginal changes.
Speaker Change: Capture, as we've explained in the past, and then going to the next step, it will take a couple of months.
Speaker Change: Efficiency.
Linden: There was the challenge of implementation, but fortunately, we've covered this step and it's all fully implemented. We are gradually moving ahead very satisfactorily.
Speaker Change: Great, thank you very much.
Speaker Change: The next question comes from Luiz Carvalho, UBS.
Speaker Change: Please unmute yourself.
Speaker Change: Hello.
Luiz Carvalho: Thank you for taking my questions.
Luiz Carvalho: Great results. Kudos to you. I have two questions and then I'll go back to a point that I always emphasize. Capital allocation.
Speaker Change: You have the leverage, which is very comfortable, close to one time, even after acquisition of Hydrovias.
Speaker Change: What can we expect in terms of priorities?
Speaker Change: Anything of acquisition ahead? Expansion of your CAPEX plan? Any perspective of
Speaker Change: Sharing, Extraordinary Dividend, Speeding Up IBAC, etc.
Speaker Change: Despite the fact that your three businesses are equally important to the company,
Speaker Change: Part of Ultrapar's thesis.
Speaker Change: is based on capital allocation strategy and you've made very important action involving Hydrovias.
Speaker Change: Can you please tell us more about this investment, because I would like to know about your first impressions. What are the opportunities ahead? Now you have nearly 40% of the company ownership. What can we expect?
Speaker Change: in terms of Ultrapar's action in Idruvias as its main shareholder.
Speaker Change: Hi Luiz, thank you for the question.
Speaker Change: I'm going to repeat what we have been saying. Capital allocation is a result of discipline. This is what we do.
Linden: This is something that we always will have as our mantra. In terms of Hydrovia,
Speaker Change: is a publicly traded company.
Speaker Change: which will have its own conference call for earnings release and I cannot anticipate any privileged information before the company shares its own results. But we see the business as an opportunity. We hold 40%.
Linden: Shares.
Linden: We can see a number of interesting opportunities, and we really think that as shareholders,
Linden: We will.
Linden: Bring some long term logic which will be very beneficial to the company.
Speaker Change: We wouldn't be able to say anything more than that because it's a publicly traded company and of course, well, Rodrigo and myself, Marcos, we are board members and of course we cannot share any other information.
Linden: Building upon that, we are going to have on September 6th, our Ultra Day, Investors' Day, and the review is going to be there. That's going to help us align the expectations for the year.
Speaker Change: Great. Thank you very much. I appreciate it.
Speaker Change: The next question comes from Rodolfo Angele.
Rodolfo Angeli: J.P. Morgan
Speaker Change: You can unmute yourself.
Rodolfo Angeli: Good morning. Thank you for taking my question, and I have two quick questions.
Speaker Change: from SUNY, Nipuranga.
Speaker Change: It's clear that we are talking about
Speaker Change: A second half here, which...
Speaker Change: How has the expectation of being quite good to the company? In terms of management agenda,
Speaker Change: It seems that you are running smoothly.
Speaker Change: You've closed some service stations, so what are the next steps from a strategic perspective? What would we expect? What is in the management's agenda for the future?
Speaker Change: I'd also like to hear you about Ultragas.
Speaker Change: There was a minor decrease.
Speaker Change: Concerning
Speaker Change: Margins, Epida Paton, Marcos Lutz, Rodolfo Angele,
Speaker Change: What is your outlook? How are you anticipating the business environment for UltraGas in the next half year and also looking ahead into next year? Thank you.
Speaker Change: Hi Rodolfo, thank you for the question.
Speaker Change: In terms of agenda, we don't have anything different from what I've been constantly repeating to you as our priorities.
Rodolfo Angeli: We always focus on the capacity to generate products, to operate competitively, to understand the best positions within the scope of what we do in trade and supply.
Speaker Change: There is an important topic of logistics, which is one of the most important priorities of the company because of the potential of value to unlock in this business, which is going to impact SG&A. There is the topic of competitiveness. It's something that we should never lose track of. It is.
Speaker Change: Management, which is very close to what's going on in the market.
Rodolfo Angeli: And we also have our agenda of engagement, the brand, in-house, outdoors, and we've been doing that for a while.
Rodolfo Angeli: For upcoming months,
Rodolfo Angeli: We will focus on improving logistics, some transformational changes to IPRANGO. We're going to keep on doing it. And also...
Rodolfo Angeli: RIT changes, it's a longer project which requires our attention, another major opportunity to generate value.
Rodolfo Angeli: I guess that's it in a nutshell. Something that we've been doing and working quite well.
Rodolfo Angeli: Rodolfo, building up on your question about ultra-gas...
Rodolfo Angeli: We are still focusing on operational excellence.
Speaker Change: We've just talked about the operational consortium, improving operational efficiency. It's a quarter that we have really evolved in our agenda with resellers, qualification of the resellers.
Speaker Change: Sizing the volume of network we want with being really developing our long term agenda with our main purpose. In this specific quarter, there were two effects which were highlighted
Rodolfo Angeli: One, which resulted from the competitive market in some specific segments,
Speaker Change: Still had a lower effect and also the fact of the weather conditions, especially in the second quarter, which has really impact the results of the quarter.
Speaker Change: but very similar to what had happened last year.
Speaker Change: The next question comes from Pedro Soares, BTG.
Speaker Change: Good morning.
Speaker Change: I have two questions.
Speaker Change: Follow-up questions actually. One for Ipranga, I think Linden and Pizzinatto emphasized the topic about inventory levels. But Linden...
Speaker Change: Would you tell us more?
Speaker Change: about
Speaker Change: The Inventory
Speaker Change: and the last call in May.
Speaker Change: We were all aware of the difficulties resulting from the volumes from Amapá, which end up creating this oversupply.
Speaker Change: And he thinks that now in the end of the second quarter, the inventory levels...
Speaker Change: were still not at the levels that you had anticipated as being the most appropriate ones for a good balance.
Speaker Change: Have there anything else that would be worth mentioning, something that has impacted your natural competitive dynamics, excluding, of course, artificial effects? If you could please tell us more about that, we'd appreciate it.
Speaker Change: A second follow-up about Ultragas, now thinking about BROIC,
Speaker Change: R.O.Y.C. ROYC levels are...
Speaker Change: still very high and above historical levels.
Speaker Change: And it's clear that the strategy that you've adopted in recent years.
Speaker Change: are going to be translated into marginal capex, which would tend to be lower.
Speaker Change: As you are at much higher levels than what we would expect for cost of capital, integration, do you still think the ROIC will keep on, will increase, or do you think that you are at a level that would...
Speaker Change: make you get break even to some extent. Thank you.
Speaker Change: Thank you for the question, Pedro. Concerning inventory levels in the second quarter and the dynamic we've observed, second quarter was very volatile in terms of arbitration.
Speaker Change: Closed, open, open again.
Speaker Change: It has maintained the import flow coming into Brazil. If you stop and analyze the second quarter, we had the second highest level of imports for the past two years.
Speaker Change: It has maintained the market with full supply.
Speaker Change: plus what had happened in the first quarter of high inventory levels.
Speaker Change: Use the benefits of changing costs.
Speaker Change: So it's a quota which was fully supplied.
Speaker Change: and
Speaker Change: From now on, we expect to have better balance with a reduction of two to four days or two to three day inventory in the market.
Speaker Change: Nothing that's going to cause any shortage, but it's going to bring some normality to the market.
Speaker Change: And this is positive.
Speaker Change: for the dynamics.
Speaker Change: Concerning your question to Ultragas,
Speaker Change: build up on what I've said in the previous question. We have an agenda of operational excellence.
Speaker Change: of delivering greater value to clients, increasing capillarity.
Speaker Change: with proportionally low associated cost.
Speaker Change: something that we've been noticing throughout the years. We have a structuring agenda in the long term
Speaker Change: Some recent projects are part of this planning, but this is a long-term view.
Speaker Change: with some marginal changes from now on.
Speaker Change: All focusing on expanding the offers to our clients with added value and bringing
Speaker Change: more synergies that we've developed. This is what we've designed. Of course, there is a challenge of keep on progressing, but this is what we anticipate.
Speaker Change: Great. Thank you, Linden and Tabajara.
Speaker Change: The next question comes from Bruno Montanari, Morgan Stanley .
Speaker Change: Pizzin' mute your mic.
Bruno Montanari: Good morning. Thank you for taking my questions. I have some follow-ups. First, at Ultragas.
Bruno Montanari: You've mentioned a more competitive market.
Bruno Montanari: How is the competition happening? Is it price? Is it volume? Payment terms?
Speaker Change: Secondly, and Hydrovias, I understand you cannot talk much about strategy because it's a publicly listed company, but in terms of Ultra,
Speaker Change: In your business, where can you see potential synergies or complementarities with the existing portfolio?
Speaker Change: And finally...
Speaker Change: Ine Brunga
Speaker Change: We would like to hear about you once again, because it seems that the CBOs, it seems that nobody is complying with them. There are a number of court orders, injunctions, the revealed number of CBIOs to be purchased.
Speaker Change: What is the company's take on the current mechanism and the sustainability in the short-term, and what would be a solution balancing the market in a fair way?
Bruno Montanari: Now Bruno, I'll start asking, answering about ultra-gas. These are short-term movements.
Bruno Montanari: and
Bruno Montanari: That seemed to respond better to conditions.
Bruno Montanari: And we can see that...
Bruno Montanari: No big news for all of us who have been in the market for a while. And they tend to be short-lived, right, because they are not sustainable.
Speaker Change: And in the meantime, we reinforce what we believe to be our strategy, which is to have really a special
Speaker Change: Interaction with our clients to deal with all of that, always maintaining our long-term strategic agenda.
Speaker Change: and we always anticipate a better perspective in the future.
Speaker Change: Now concerning Hidroviaz, Marcos speaking of the main synergy,
Speaker Change: as a synergy of knowledge.
Speaker Change: We really think that...
Speaker Change: Hydrovias
Speaker Change: and the existing knowledge they have.
Speaker Change: Plus, the logistics of HIPRANGA.
Speaker Change: The knowledge we have in the terminal operations of Ultracargo together
Speaker Change: We can create a very efficient or more efficient system in the mid and long term to have logistics.
Speaker Change: of Agribusiness in the North of Brazil.
Speaker Change: But it's a very preliminary, of course.
Speaker Change: I understand you have to prepare your reports all the time.
Speaker Change: In the next quarter, we will try to go more into concrete actions.
Speaker Change: something that would be announced by Hidrovia and they are going to have their own communication as any publicly leased company. We are fully aligned with that. We think it was the right step to be taken and
Speaker Change: Thanks to the knowledge we have of our three businesses.
Speaker Change: In combination, we can really have very good knowledge and information to develop a unique plan for the market.
Speaker Change: but the turn core of Heterovea.
Speaker Change: is
Speaker Change: to move range.
Speaker Change: which is a market that we want to be more exposed to. Throughout time we believe there is going to be an increase in demand and there will be the need of existing and additional infrastructure to meet the needs.
Bruno Montanari: Bruno, I always like to emphasize that IBRANGA supports the program of carbon credits, the carbon credits market, CBUs, but
Bruno Montanari: If there are 150 distributors in the country, out of which 60 do not meet, some of them have never met their requirements, so it seems that the program needs adjustments in its own foundation. It's not normal, right?
Bruno Montanari: Thank you.
Speaker Change: I'm not speaking about court orders, I'm talking about distributors who do not meet their goals. We know it's hard for regulators to be efficient in punishing these distributors.
Speaker Change: You said that normal is not complying. We disagree. Everyone should comply with it. Everyone should follow requirements.
Speaker Change: failing to comply, it's an abnormality that should be corrected.
Speaker Change: This is our position, not only of Viparanga, this is something that all companies that meet the requirements of the program and advocate it, really don't agree with that way that things are doing. We want things to operate smoothly.
Speaker Change: In our opinion, unless it get adjusted, the program will be extinct.
Speaker Change: This is a concern of ours in the short term in terms of competitiveness, but in the long term, unless things change, the problem will come to an end. There will be a problem in which large distributors will stop doing it.
Speaker Change: because we need a rule that will be followed by everyone. If there is a rule in which you fail to comply and you have no punishment, well, it's doomed to end, right?
Speaker Change: as Ibranga, and as Ochoa is speaking.
UA: As the CEO of ULTRA, we really believe
Speaker Change: Yes, there is a concern in the short term, but we expect things to get better in the mid and long term. We hope the program can be adjusted so that it can keep on having more people complying with the rules and having better fuel in the country.
Speaker Change: The next question comes from Leonardo Marcondes.
Leonardo Marcondes: Bank of America
Speaker Change: Leonardo, please.
Leonardo Marcondes: Good morning. Thanks for taking my question. It's one question and two quick follow-ups.
Leonardo Marcondes: The first question is about Ultracargo.
Speaker Change: Results were somewhat affected by lower volumes in the spot market.
Speaker Change: Could you please tell us a bit more about the dynamics and what we can expect for the company in the second half of the year?
Barra: My first follow-up is about an answer that Linden gave to Barra. You said that the work of NP, the gas agency, has been important in fighting against irregularities.
Barra: Do you see, really, the staff working and engaged to impact your businesses at Inpranga and other business lines?
Speaker Change: Capital Allocation. Marcos has just said that the area of grains is something that you would like to be more exposed to.
Speaker Change: Do you think that it would make sense to have ULTRA acting in other areas in addition to logistics? That's it. Thank you.
Speaker Change: Thank you for the question. This is Andrea Zahia.
Speaker Change: Import, as Linden pointed out, the second
Speaker Change: Quater. Arbitration varied a lot. There was great variability.
Speaker Change: and it generates an impact in the whole chain. At the same time, the demand for imports in Brazil is structural.
Speaker Change: It was a difficult quarter.
Speaker Change: And the turnover of terminals was impacted. It was a one-off effect. As we expect a gradual normalization of inventory levels for the second half,
Speaker Change: We expect...
Speaker Change: to keep on having spot opportunities as we've had in previous quarters.
Speaker Change: Now, concerning the National Agency of Petroleum and Gas,
Speaker Change: You were probably referring to some investigations that are ongoing and we've been reading in the media. I cannot say anything about that, actually.
Speaker Change: But let me use your question to reinforce our support to the National Agency of Gas and Petroleum, ANP, dealing with cases internally or externally. What the agency has been doing throughout the years is really important for our industry.
Speaker Change: And we really compliment them on the work and we hope the regulator can keep on working to maintain the balance of the area. Because this is not good to IPRANGA, this is good to the country and to the industry at large.
Speaker Change: Marcos is speaking. In terms of capital allocation, we are always going to be rational. There is nothing in our pipeline
Speaker Change: Involving grains in the pure sense of it.
Speaker Change: But..
Speaker Change: We haven't mapped any opportunity either. It would be totally fine to analyze things like that, but always with discipline.
Speaker Change: Always expecting to have a return rate on projects which are far from what we do today, right? Which would require additional efforts. Great. Linden, if I may.
Linden: I was really alluding to a potential strike of the staff of the National Agency and whether you think it would impact Ipranga.
Linden: Not only about the control over the quality of fuel.
Linden: Not really, not really, I don't anticipate anything along those lines, Linden answers.
Speaker Change: Great! Thank you very much.
Speaker Change: The next question comes...
Regis Cardoso: From Regis Cardoso, EXPE.
Speaker Change: Please unmute your mic.
Regis Cardoso: I have a specific question about results we've seen in the cash flow.
Regis Cardoso: Part of tax credits. There was a buildup of credit tax. Could you please tell us about the origin?
Speaker Change: Is it a credit of ICMS, PIS, COFINS?
Speaker Change: How well can you monetize that, et cetera?
Linden: Another question to Linden. I would like to understand your take...
Linden: on anticipated branding of the service stations or not, and what the market...
Linden: has preferred in terms of model.
Speaker Change: I don't know what are the differences among different players. And finally, concerning
Speaker Change: Imports and Inventory Levels.
Speaker Change: In recent years, since last week, there have been a significant decrease in the price of Petrobras. So they seem to be more aligned.
Speaker Change: And it would open opportunities, especially for those who are importing it from Russia, especially diesel.
Speaker Change: So let me hear your initial impression about that is oil gas really maintain the levels that it has shown so far. Do you think that it's going to impact the market or not?
Speaker Change: Rodrigo speaking, I'm going to talk about cash flow.
Speaker Change: in the quarter.
Speaker Change: There were fewer credits because...
Linden: of the reserve we had of the carbon credits.
Speaker Change: So there were fewer credits in this quarter, not very different, anything but that.
Linden: The credit that we have, we have expectations to monetize them within five years. All credits that we have launched in our balance expect to be monetized within the next five years.
Regis Cardoso: Regis, concerning anticipated or post-anticipated business differ, and there are different conditions, sometimes there are different lines of granting that make sense. I like the model of not anticipating it, doing it post.
Regis: So because it gives better alignment between distributor and reseller, adjusting objectives, creating a commitment with results in the bottom line.
Speaker Change: But we have both options, and we decide on a case-to-case basis.
Speaker Change: That's just the supply and demand.
Speaker Change: This is the dynamic we have been having since the import business got more relevant.
Speaker Change: to us. International prices vary, windows open and close. We have to be prepared to really benefit from opportunities. The second half of the year will be
Speaker Change: where we are going to a period of normalized inventory levels and I don't expect drastic changes really.
Speaker Change: Great, thank you all very much.
Linden: The next question comes from Gustavo Sarica, Bradesco.
Gustavo Sarica: Thank you for taking my questions. Two quick questions. First, a follow-up. When you said, when you started saying that the margin for the third quarter would probably resume levels as last year's.
Gustavo Sarica: Do we expect it to be 150, 160, which was the recurring level of 2023? Second question about ultra-gas.
Linden: Would you please tell us more about margins in the second quarter? We've heard other players in the industry.
Linden: that
Speaker Change: They had some difficulties to pass through ICMS, the taxes, and it was equalized in the second quarter. And is it possible now to just pass through to really increase somewhat the price because of the high prices of the molecule?
Speaker Change: I'll be brief so that Tabajara can answer. First question, yes.
Tabajara: Good. Yes.
Linden: yeah
Speaker Change: Concerning the trajectory of margins and prices, and what you've talked about ICMS tax, in February ,
Tabajara: And this was one of the factors in the market at that time. In our case, it's different. We can normally.
Tabajara: Just adjust prices accordingly.
Linden: I think the market has had time to absorb and get adapted to the levels that we currently have.
Linden: This has been well adjusted.
Linden: And this is why we have better perspectives for the second half of the year.
Linden: Great.
Speaker Change: A quick follow-up.
Speaker Change: about the comments of SG&A.
Speaker Change: I don't know whether the 7.8 Rios per cubic meter was the negative impact of the quota or whether we would...
Speaker Change: really have that improvement with the change in office.
Speaker Change: No, it was a negative impact. This was a provision that we made for expenses in future quarters. It was one-off effect, non-recurring effect just in the second quarter.
Speaker Change: Thank you.
Linden: If there are no further questions, I would like now to hand it over to Rodrigo Pizzinatto for his closing remarks.
Mr. Pizzinatto: Mr. Pizzinatto, please?
Rodrigo Pizzinatto: Thank you all very much for your questions, for your interest. Questions who were sent through the webcast will be answered by our Investor Relations team. And on September 6th, we are going to have Ultra Day. Hope to see you all there. Thank you all very much. Have a great day.
Rodrigo Pizzinatto: The conference call of earnings release of Ultrapar is completed now, closed. Thank you very much, have a nice day.
Rodrigo Pizzinatto: Please Like, Share and Subscribe
Speaker Change: Subscribe to our channel for more videos on Cisco training with GNS3!
Speaker Change: oh pret