UGP

Business Context and Reporting Period

Company: Ultrapar Holdings Inc. (Ultrapar Participações S.A.)
Reporting Period: Quarter and nine months ended September 30, 2024
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Business Overview: Ultrapar operates in energy, mobility, and logistics infrastructure through its main subsidiaries: Ipiranga (fuel distribution), Ultragaz (LPG distribution), Ultracargo (liquid bulk storage and logistics), and Hidrovias do Brasil (inland waterway logistics). The financial information is presented in Brazilian Reais (BRL) and has been reviewed by Deloitte Touche Tohmatsu.

Key Financial Metrics (Consolidated)

Liquidity and Debt (as of Sep 30, 2024):

• Cash and Cash Equivalents: BRL 3,855 million
• Gross Debt: BRL 13,848 million
• Net Debt: BRL 7,968 million
• Net Debt / Adjusted LTM EBITDA: 1.3x
• Net Debt-to-Equity Ratio: 51.91%

Material Changes vs. Prior Period

• Revenue Growth: Net revenue increased 9% in Q3 2024 compared to Q3 2023, driven by higher volumes and price pass-throughs in Ipiranga and Ultragaz.
• Profitability Decline: Recurring Adjusted EBITDA decreased 24% year-over-year in Q3 2024, primarily due to lower margins at Ipiranga compared to a record Q3 2023 and reduced inventory gains.
• Financial Result Improvement: Net financial expenses improved by 64% (BRL 192 million reduction) compared to Q3 2023, attributed to lower interest rates (CDI) and a one-off positive mark-to-market result of BRL 54 million.
• Cash Flow: Operating cash flow decreased 59% year-over-year in Q3 2024, impacted by a BRL 240 million reduction in draft discounts (reverse factoring) and higher working capital investment.
• Divestiture Proceeds: The company received the final installment of BRL 222 million from the sale of Extrafarma in August 2024.

Guidance, Outlook, and Management Commentary

• Strategic Acquisitions:
  • Witzler: Closed the acquisition of a 51.7% stake in Witzler Participações S.A. (energy trading) for BRL 104.5 million to expand Ultragaz's energy solutions.
  • Hidrovias: Increased stake to 39.98% in Hidrovias do Brasil S.A. and intends to exercise preemptive rights in a capital increase of up to BRL 1.5 billion.
  • Pão de Açúcar Stations: Signed agreement to acquire 49 service stations from the Pão de Açúcar Group for BRL 130 million.
• Debt Management: Ultragaz issued BRL 700 million in debentures at CDI + 0.7%, below the average cost of gross debt. Ultracargo contracted BRL 252 million in debt for expansion projects.
• Outlook: Management highlighted the continuity of good operating results despite sector irregularities. The company aims to optimize capital structure and improve return on invested capital through selective investments and working capital management.
• Risks: Exposure to commodity prices (diesel, gasoline), exchange rate fluctuations, and interest rate variations. The company utilizes hedging instruments to mitigate these risks.

Investor Verification Checklist

• EBITDA Quality: Verify the impact of non-recurring items and the specific drivers behind the 24% decline in Recurring Adjusted EBITDA at Ipiranga.
• Working Capital: Assess the sustainability of the reduction in draft discounts (reverse factoring) and its impact on future operating cash flows.
• Debt Profile: Review the maturity profile of the BRL 13.8 billion gross debt and the effectiveness of recent refinancing efforts in lowering the average cost of debt.
• Acquisition Integration: Monitor the integration and performance of the newly acquired Witzler stake and the progress of the Hidrovias capital increase.
• Dividend Policy: Confirm the payout ratio and future dividend expectations given the BRL 276 million interim dividend paid in August 2024.