Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Ultrapar's First Quarter 2022 Results Conference Call. There is also a simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br and MZiQ platform. Please feel free to flip through the slides during the conference call. The presentation will be conducted by Mr. Rodrigo Pizzinatto, Ultrapar's Chief Financial and Investor Relations Officer. And in the Q&A session, we will have the presence of Mr. Marcos Lutz as well Ultrapar's Chief Executive Officer. We would like to inform you that this event is being recorded and all participants will be in a 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. [Operator Instructions] A replay of this call will be available for seven days. Before proceeding let me mention that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapar management and on information currently available to the company. 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. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of the Ultrapar and could call results to differ materially from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Rodrigo Pizzinatto. Mr. Rodrigo, you may now begin the conference.

Good morning, everyone. It's a pleasure to be here once more to talk about Ultrapar's results. We're starting off with Slide 2. I want to highlight two important topics on the earnings report. The first one, I already mentioned on our last conference call, related to our divestments. Due to the signing of the sale agreements of Extrafarma and Oxiteno, we have classified these companies assets and liabilities held for sale in December 2021 as discontinued operations. Our financial statements reflect this classification. However, to better enable comparison with previous periods, both the earnings release and this presentation consider the company's pro forma consolidated information that is Ultrapar's data also comprised Oxiteno and Extrafarma's results adopting the same concept that we have been reporting. The second topic relates to two adjustments we have incorporated in our recurring EBITDA from this quarter going forward. One adjustment is the exclusion of results from disposal of assets of Ipiranga from the EBITDA for a better comparison of the company's operating performance with competitors. It is important to highlight that despite the fact that disposal of assets is not our core business. It is something we managed very closely given that we still have a relevant talk of real estate assets to demobilize. This means that there is quite a lot of value in cash to be generated and there will be a recurrence in this line over the next quarters as we move forward with the sale of these assets. The other adjustment is the exclusion of extemporaneous tax credits from EBITDA, which have already been highlighting in the results explanations to provide a better understanding of the recurring performance of the businesses and their compatibility with competitors. These credits will be monetized in due course by compensation of payable taxes. Well, now…

[Operator Instructions] Our first question from Luiz Carvalho, UBS.

Good morning, and thank you for taking my question. I have to one about Ipiranga. I want to understand the recurrence of the gross margin. We believe that second quarter, this quarter has been robust. And what do you expect from changes in the company? And what can you say about volume? My second question is regarding capital. You’ve sold Oxiteno by the end of April. Then on second Q you will have a result without Oxiteno with and you will have the cash of the sale of Oxiteno. I would just like to you to elaborate on these things. Thank you very much.

Good morning, Luiz. Thank you for your questions. We had difficulties in hearing your audio. Your – if I understood correctly, was the margin – the gross margin from Ipiranga and the second question would be Oxiteno’s capital allocation. Was it more or less what you asked?

Yes.

I will start by capital allocation. We have a cash entry due to the payment – first payment of Oxiteno sale. And we announced bond buyback program R$1.300 billion we received R$600 million that were used to buyback the bonds, because this is the highest outstanding debt. That is the highest transfer that is CDA. Now we have 110 CD. We use part of these funds to reduce our most expensive debt. And the other part is to for our cash because we have the maturity of debts that are coming close now. So now, we are working with our indebtedness to reduce the transfer cost. Now regarding recurrent margins, they are recurrent and there are more structural commercial margins. Although during Q1, we observed a lot of volatility in volume and ended prices. Today, as we have mentioned, we have a pricing area that is correctly structured and can capture. These variations and correctly price point by point where things should be done. So we must observe the quarter with attention, but during the past six months, we’ve seen an operational improvement in the commercial margin. So I am very comfortable to say that we are doing what I said in the past is to come closer to the sector peers. And we will continue doing this throughout the year. Thank you very much.

Our next question Thiago Duarte, BTG Pactual Bank.

Thank you for taking my question and good afternoon. I would like you to elaborate two things about Ipiranga. Number one, we’ve seen a significant gain in liquid due to your – in net, in your gas stations, I believe that this is not your main focus. You are focused on average and you’ve showed important figures in your presentation, but this is the bad addition in a number of years when we see the first quarter of the year. So I would like to know how you see the scenario for flags, because as we’ve seen in the fuel market, there is a great domestic disparity vis-à-vis, the parody. We believe that Ipiranga and the other banners present a guarantee that they will guarantee supply. And this is very favorable for your banner. So I would like to know if you have verified this, and what will this mean to you in terms of base growth in average gallon sold. And number two, going back to Marcos answer regarding the margin recurrence. Recurrence, I would like to know that if when you see this margin from Q1, do you consider this margin, especially when we talk about the gain of stock, because the difference in price is that we’ve seen throughout the quarter. Although Marco’s your past answer suggests this, I would like to know that if the starting point of the quarter makes sense of like in terms of replenishment margin.

Well, number one, our focus is, yes, is good relationship with resellers. And there is a side effect is that it’s increase of number of gas stations with quality. We have gas stations of high volume and quality and certain resiliency. So the team’s interpretation is vary, that is close to the reseller and that communicates with them and approaches them correctly. Is that as a matter of fact, we have a natural market share in the reseller that is above the market share of reseller. So we will increase our banners vis-à-vis, the churn. I believe that we will continue seeing this effect, we have a quality pipeline. And therefore, we have a structural space in addition to this. There was the distortion at the Brazilian market that is being corrected. There were many uncontracted players in the – on the supply side, and they had commitments in the sales area. So when you have a more at market where everybody has to go after their products and everything that we have contracted, as Ipiranga we have the purchase contracted. The differences in the spot, when you have short periods, like we saw at the end of February and March, as a matter of fact, who is contracted, has a structural advantage vis-à-vis, who doesn’t have contract. So I believe that this has many people are valuing a long-term contract relationship that provides you more efficiency to have a chain. And whoever supplies can contract ships and receive the supply to deliver. We’ve done all of this with quality. This has been part – this is why we have a sound result on Q1. We had risks during Q1 and I believe that we came out with a lot of competency. On the second side of your question regarding the margin recurrence, well, there’s a gain of stock. We do know the negative is that we had an increase of working capital that you can see in the reported figures. And this in a certain way at a given moment may drop. But we know that when it drops, we have a parachute effect. But the effect here is that we correctly pride throughout the curves, upwards and downwards. That was a moment of volatility. And our pricing area was very accurate, consistent and extremely transparent with the resellers so that everybody could understood what was happening. So they could weather through this quarter. These results are results that we have gained, stock is part of the gas station business. If I could strengthen a message, our focus is in gaining gallon edge of the network. And during Ultra Day, we have 10, 15 and we are focused on improving or closing. And although we are working with new banners, we are analyzing the banners that do not provide us good profit.

It is clear. Thank you very much.

Our next question is Vicente Falanga with Bradesco BBI.

I have two questions. Rodrigo, as you mentioned at the beginning of the presentation, if you could – what is the tax effect of the payment of regarding the sale of assets? And my second question would be the Ultra gas margin that was significant because there was a transfer of GLP. And I would like to know. How is your out – your resourcing outside of the Petrobras system and if you could talk about the margins.

Good morning, Vicente. Thank you for your question. Regarding interest rate on capital, this was the first time that we declared this because Ultrapar as a holding did not have tax gain and the expenses of interest rate over capital is deductible. And for the first time we’ve had a relevant gain in the holding after selling Oxiteno, and we analyze how we could balance all of this. The minimum mandatory dividend for 2022 with the tax optimization of the tax gain, this is why we did cleared R$450 million of interest rate over our own capital. And regarding taxes, regarding Oxiteno sale, when we held the call selling that we – saying that we were selling Oxiteno, we expected a disbursement of $70 million, and we are still analyzing and seeing the strategy. But I can say in advance that from that amount with the use of credits and loss and the interest over capital, we advanced disbursement volume below $20 million. Now regarding your second question, regarding the Ultragaz margin, Ultragaz has a margin similar to Q4, therefore it is maintaining the profitability presented last quarter and the prospects continue positive. This is a result of the improvement of market condition in the increase in productivity that Ultragaz achieved that we mentioned on Ultra day and sourcing that was mentioned sourcing well benefit throughout this year with gradual effects. But the effect on Q1 was very in significant on the result and on our working capital.

Perfect. Thank you very much, Rodrigo.

Our next question Bruno Montanari from Morgan Stanley.

Good afternoon. Thank you for taking my question. One regarding Ipiranga in terms of imports. Ipiranga was less active in imports on Q1, I would like to know how the sourcing strategy is evolving for imports and maybe the pace to increase imports throughout the second semester of the year. My second question regarding working capital, it is difficult to calculate. If we – if prices remain stable, how much of the investment on working capital could be reinvested in the business in the next quarters and a third quarter? Just to confirm something now the cash entry of Oxiteno, has there been another adjustment regarding closing adjustments we’ve seen some intercompany operations before the closing of this operation, just to make sure that we have the right numbers in terms of cash entry.

The first two questions are easy to answer. One, we weren’t less active than the other players proportionally, our import activities were the same – if prices continue stable, well working capital remains stable. It doesn’t go up. Doesn’t go down. Maybe the prices go down. It goes down. If the price goes up, it goes up. So this is a mathematical answer straight to the point. Bruno, as you stated, we started settling some intercompany that’s between Oxiteno and other companies of the group, this is the effect when you compare continuous operation with this continued operation. So, we have the head counting with Oxiteno that was two hedge the part of the bond that we have in dollar with the sale of Oxiteno, we no longer have the hedge account of our bond and our debt is a 100% hedged in reais because we no longer have close in dollars because of the sale of Oxiteno.

Thank you. Our next question Christian Audi, Santander.

Thank you. I have two questions. One, going back to capital allocation, how will you prioritize? I know you talked about the improvement of the debt cost, CapEx, dividend payout, and potential M&A. If you see an opportunities of participating in the energetic process, what is more important for you? What are you prioritizing amongst these four points where you could invest your cash talking about leverage? Now, once Oxiteno’s funds come in and all this cash comes into the company, could you give us what net debt EBITDA ratio you will have?

I'm going to start talking about our leverage position and Marcos will talk about capital allocation regarding our debt. If we include in 2022, what is coming out from the funds received after selling Oxiteno, they declared dividends and half of the value of the [indiscernible] we will reduce our debt at one time. And I am not including the second payment of Oxiteno. We have $150 million paid in 2024, and the other payments will be in the other two years, what we will receive this year, net of these declared interest rate over capital. I believe that our net debt will drop one time net debt over EBITDA.

Now capital allocation. This present moment is timely moment to reduce our leverage, and we are doing this and we are reprogram our liabilities. And as a matter of fact, we will reduce our costs and the net debt outstanding. This is our priority. This is not a moment of being above three times, net debt over EBITDA number one. Now the rest is a matter of capital allocation because of return rates. We will be disciplined when we allocate capital, we will analyze our non-organic opportunities. As I said, during Ultra day, we will analyze small things in a first moment, but what we are going to do is to be disciplined when we allocate capital and the profit has to be according to the risk that is assumed in this operations what I can promise is that we will have strong allocation discipline. I can't promise a target because we have to see what's going to happen with the Russians as well.

And what about dividends?

One thing depends on the other. The dividend in practice is the surplus capital that I don't invest organically or inorganically, it's a matter of math, it's the surpluses.

Our next question Citibank, Gabriel Barra.

Could you hear – can you hear me? Most questions have been posted. Just two points; one Extrafarma, there was, you talked about the anti-trust agency in the material fact, and what are the next steps of the company regarding the closing of the sale and something that drew my attention during the Ultra Day was the backlog that you have gas stations or Ipiranga gas station. Could you talk about what do you have within the network that has to be improved? And what is the timeline to do this? I would just like to understand how will you improve these gas stations that are contaminating this margin, because the margin is lower than the company's margins?

Thank you, Gabriel, for your questions. Starting by Extrafarma, I believe that you saw the decision of the anti-trust agency and aid municipalities were pointed out. Now this process rig is in the court of the anti-trust agency, and it's difficult to know how long it will take the court to rule – to give us a ruling, but this will be between June and September. That is the limit time to conclude this process. So this is the bed estimate, if it's so quick trial in June or September that is the limit date. Now the closing of gas station, now 15% of the network has profit has profit levels below what we expect. We believe that we will – network will be closed in one or two years, or they will go back to profit levels as we're going out of a pandemic and volumes are more normal. And we're accelerating the process of the type of – of the assessment of the network and what kind of network we want. We have to remind you that there is always – there is always a certain churn level in these, in our network.

Our next question Bruno Amorim, Goldman Sachs.

I have two questions. Two [indiscernible] Ipiranga regarding your suppliers. Rodrigo, talked about the last year, the price of fuel they increased – that increased this line, but when we see the amount, well suppliers this tripled since the beginning of 2020, Ipiranga that was an increase higher than the price of fuels. I want to understand what is Ipiranga's financing strategy. If you increase the percentage, of that comes through suppliers. If there are other financing alternatives, and if in the future part of this increase in the suppliers, it comes, goes away. Is there, if you will improve the commercial conditions with your traders, this is good. But many times this represents a cost, which is reflected on the price and the price of fuels due. And my second question, that would be I want to know, you can tell us what the gain of stock is Ipiranga for per cubic meter and the CBio impact on Q1. And what do you expect in the upcoming quarters?

Well, good morning, Bruno. Thank you for your questions. You are asking about, you are talking about our partner suppliers. Well, this math, this number increased in the past two years. The marginal cost is a cost close to our debt marginal cost. Therefore, there is not a high transfer cost and we use these lines thinking about the optimization of cash flow. If you have a short term need, this debt makes more sense than having a long term debt. And this will – this is part of our debt management, and we always see it from the economic point of view, because we can have a long term debt. If it has a more attractive cost, we can reduce this line throughout the time and to increase the long term debt, if it makes sense but we have to see, if its short term long term.

The second question about inventory your stock gain?

Well, we gain there was a gain of stock during the first quarter. There was a loss in imports. This is part of the day-by-day in the business, nothing different from what we've seen in the past quarter and based and practically the same as Q1 last year.

And regarding CBios, any estimates how much you will spend per cubic meter vis-à-vis what was observed during Q1?

Bruno, we will follow our fair share of the CBio purchase and the price of the market will be reflected on the result. It's very difficult to predict this because the cost of CBios is transferred to our products and it is reflected on the company's margin. Thank you.

Thank you. As we have no further questions, I will give the floor to Rodrigo Pizzinatto for his final comments. Mr. Rodrigo, you can continue with your final remarks.

So thank you for your attention and then for your questions. The questions that we weren't able to answer will be answered by our IR Department. I thank all of you and see you on our next call.

Thank you. The Ultrapar earnings results conference call has come to an end. Please disconnect your lines. Thank you very much.