U.S. Markets open in 34 mins

Edited Transcript of UGPA3.SA earnings conference call or presentation 2-Aug-18 3:30pm GMT

Q2 2018 Ultrapar Participacoes SA Earnings Call

São Paulo Aug 14, 2018 (Thomson StreetEvents) -- Edited Transcript of Ultrapar Participacoes SA earnings conference call or presentation Thursday, August 2, 2018 at 3:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* André Pires de Oliveira Dias

Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board

================================================================================

Conference Call Participants

================================================================================

* Bruno Montanari

Morgan Stanley, Research Division - Equity Analyst

* Frank J. McGann

BofA Merrill Lynch, Research Division - MD

* Luiz Carvalho

UBS Investment Bank, Research Division - Director and Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar's Second Quarter 2018 Results Conference Call. There is also a simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br, and the MZiQ platform.

Please feel free to flip through the slides during the conference call. Today with us, we have Mr. André Pires, Chief Financial and Investor Relations Officer, together with other executives of Ultrapar. We would like to inform you that this event is being recorded. (Operator Instructions) A replay of this call will be available for 1 week. 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's 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 Ultrapar and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference over to Mr. Pires. Mr. Pires, you may begin the conference.

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [2]

--------------------------------------------------------------------------------

Thank you and good morning, everyone. It's a pleasure to be here with you to discuss Ultrapar's second quarter results and to give you some perspectives on the next quarters.

Here with me are the officers from our businesses as well as our Investor Relations team to help answering your questions. I'd like to start with an overview of the events since our last call, Slide #3. Earlier this week, on Tuesday night, we published a notice to the market regarding the operation called control margin. This is an investigation involving employees of share distribution companies including Ipiranga, in the state of (inaudible) state of Paraíba, whereas (inaudible) the facts in order to take the necessary and applicable measures.

Also on Tuesday, we were informed of a criminal complaint filed by the public prosecutor of Brasília against resellers and employees from the distribution companies, among which there are 2 former employees of Ipiranga for a list of criminal acts against the economic order. These matters have been conducted by our legal team and any update about these cases will be truly communicated to the market.

Talking about our results, the quarter began with a good prospect for business. In April, we observed an increase in fuel sales volume, particularly ethanol and diesel, would then both gradually decreasing. However, an increase of 18% in oil prices combined with a 17% devaluation of the real against the dollar were the triggers of a truck driver strike in May, which brought the country to a halt, impacted several sectors of the economy and causing huge losses to Brazil.

The country's logistics infrastructure is heavily dependent on road transportation, hence the strike affected almost all our businesses.

At Ipiranga during the stoppage, due to the blockage in our distribution basis, we had difficulties to deliver our products. They also impact in our other businesses, affecting the delivery of LPG at Ultragaz, specialty chemicals at Oxiteno and pharmaceutical products at Extrafarma.

On top of this, there was a significant reduction of BRL 0.46 per liter in the price of the diesel, which had an impact on margins during the period, given the accounting loss on inventories. During the presentation, I will point out the strike-related losses, which totaled about BRL 200 million, bringing BRL 100 million in the second quarter alone.

In Slide 3, you can see the graph showing

(technical difficulty)

for GDP deteriorating after the strike, jeopardizing the recovery in

(technical difficulty)

economy expected for the second half of 2018.

The data on fuel volumes for the country as a whole showed the impact caused by the strike on the fuel distribution market, our core target of the strike.

The graph in the top right-hand corner illustrates the intensity of the impact caused by the fuel terminals lockout, which prevented the fuel distribution. The magnitude of decline in volumes from May was enough to offset the accumulative growth up until April.

Notwithstanding, we reported net revenues of BRL 22.6 billion less than -- higher than the second quarter of 2017 and

(technical difficulty)

of BRL 718 million, a 6% decline compared with the second quarter of 2017.

The estimated impact of the strike on the second quarter results was BRL 189 million. If we exclude this effect, our adjusted EBITDA would have been BRL 907 million, 18% higher compared with the same period of last year, driven mainly by results from Oxiteno, Ultracargo and Ultragaz.

Net income came to BRL 241 million, 2% increase over the second quarter of 2017, equivalent to BRL 0.44 per shares.

In this quarter, the board approved the distribution of BRL 304 million in dividends for the first half of 2018, equivalent to BRL 0.56 per share, which corresponds to a payout ratio of 97% or 61%, if we consider net income excluding the fine related to the Liquigas acquisition.

Let's now move on to Slide #4 with the performance of our fuel distribution business, Ipiranga. Sales volume in the second quarter of 2018 reached 5,859,000 cubic meters, a 1% reduction compared with the second quarter of 2017. With a 7% drop in Otto cycle, and

(technical difficulty)

in diesel.

Both fuels were

(technical difficulty)

by the strike, due to the blockage of our distribution terminals. This resulted in an estimated impact of 4% in our sales volume. The strike effect was partially mitigated by the expansion of our service station network, and by higher sales to the large consumers.

It is worth mentioning that there was a positive trend at the beginning of the quarter according to the graph in the top right-hand corner of the slide, confirming our previous perspective for growth in volumes.

We ended the quarter with a 8,044 service stations, a net addition of 301 stations in relation to the second quarter of 2017.

During the period practically [BRL 2 million] transactions were (inaudible) of our tax saving, an increase of [150%] compared with the first quarter of 2018. While the average number of active participants rose 126% compared with the same quarter. The am/pm convenience store chain launched an exclusive line of desserts with its own brand and [an historic] premature. The am/pm stores are now installed at 31% of our service station network, while the number of bakeries and Beer Caves increased by 19% and 22%, respectively year-over-year.

Finally, of the economic visible targets of our loyalty programs -- program register a record penetration with the accumulation of 22% in points of all transactions that happens in the quarter, with the number of participants reaching 28 million people.

The finance of the growth was significantly affected by the strike, but very successful in their cost reduction in that the drivers produced a onetime loss of BRL 120 million on inventories in the quarter.

Lower sales had a major one-off costs (inaudible) in an additional operation, making an impact of BRL 4 million, given a negative effect of BRL 162 million (inaudible). On the other hand, Ipiranga (inaudible) second quarter of 2018 is currently expenses related to the consolidation of Iconic's results where they're stable comparable with the same period of last year, shown the results of increased focus on expenses going forward.

As a consequence, Ipiranga posted an adjusted EBITDA of BRL 402 million in the second quarter of 2018, a year-on-year reduction of 29%. If we exclude the impact from the strike, recurring adjusted EBITDA would have been practically flat year-on-year. Moving now at the current quarter, (inaudible) continues to be challenging, as a result of recent changes caused by the strike and the slower recovery of the economic environment.

These factors reduce the visibility regarding the future performance. Therefore, in the short term, we do not expect a significant evolution in our results, despite our recent improvement in market share.

Despite the short-term challenges, we continue to believe in the good fundamentals of the fuel distribution sector in Brazil. In this sense, we're adjusting our cost and expenses and focusing on productivity. In addition, we have been working on the optimization of working capital in order to improve the return on capital employed in our business.

We also continue to focus on improving the relationship with our resellers, prioritizing their first and start-up of operations at service stations already contracted.

We're more selective in our investments, seeking the best profitability in face of the current market conditions.

Moving onto Oxiteno in the Slide #5. Oxiteno's total sales volume in the second quarter of 2018 was 193,000 tons, a growth of 6% compared with the same period of last year, largely due to greater sales volume of commodities, which increased by 31%.

Specialty sales volume were up by 1%, again in relation to the same period last year, due to higher sales in the U.S., despite lower sales in the domestic market due to the strike.

During the strike, Oxiteno temporarily ceased operation at 4 production facilities in the Southeast regions in Brazil. Given the impossibility of delivering products, there is an estimated loss of 6,000 tons in volume.

(inaudible) EBITDA in the second quarter of 2018 was BRL 121 million, 90% higher than the second quarter of 2017, which should exclude nonrecurring effects in the second quarter of '17, and the impact of the strike. This positive performance reflects the higher sales volumes, as well as the 12% evaluation in the real against the U.S. dollar, and higher EBITDA margins in dollars.

The combination of these events more than compensated the impacts caused by the strike, estimated in BRL 13 million. The EBITDA margin during the quarter was $174 per ton. The new plants in the USA is in the process of -- to being commissioned and ready to begin operations.

This should help dilute cost and expenses during the second half of 2018. In addition, Oxiteno continues to focus on innovation

(technical difficulty)

new specialty chemicals on the market, notably

(technical difficulty)

of [holdings] and personal care. In addition, Ultrapar was recognized as one of the leaders in innovations of the (inaudible) by the newspaper Valor Econômico.

Oxiteno also stands out for its operational excellence and received the global award from Shell, as the best performing company in the use of catalyzers.

Looking to the quarters ahead, we can observe that the factors that had positively impacted Oxiteno's results remains unchanged, which makes us believe in the continuous expansion of Oxiteno's EBITDA. We recall that specially the third quarter is seasonally stronger in volumes.

Now moving onto Ultragaz in Slide #6. In the second quarter of 2018, volumes remained stable in relation to the second quarter of 2017. The bottle segment grew 1%, mainly due to the commercial initiatives, particularly in the Northeast and Midwest regions of the country.

This effect was neutralized by a 4% decrease in the bulk segment, which was the most affected by the strike, due to logistical difficulties in the distribution products -- in distributing products.

EBITDA at Ultragaz rose 23% in the period, reaching BRL 148 million, as a result of a management team committed to operational efficiency and low cost, beside the continuous focus on differentiation and innovation.

Examples of this reduction in freight costs with the migration of clients from (inaudible) types CIF to FOB. Additionally, marketing expenses and expenditures (inaudible). On the other side, the strike had an estimated impact on Ultragaz of BRL 10 million, due to the estimated loss of 7,000 tons in the volume in the bulk segment.

For the current quarter, we are expecting volumes to be similar to those in the same quarter of 2017.

For EBITDA, our perspective is for another quarter of growth, due to the results of commercial and cost management currently underway.

Now let's now go on to talk about our liquid bulk storage business in Slide #7.

Ultracargo's average storage area increased by 8% in the second quarter of 2017. This was due to the partial resumption of activities at the Santos terminal in June 2017, and the greater handling of ethanol at the Santos and Suape terminals.

In the quarter, Ultracargo's EBITDA was BRL 54 million, an increase of 108% year-over-year. (inaudible) average storage over the period (inaudible) at the terminals. In addition, we had some recurring effects both in the second quarter of '17 and second quarter of '18. If we exclude these effects, growth would have been 20% due to higher average storage and prices at the terminals, as already mentioned. For the third quarter, we expect similar levels of average storage in EBITDA in relation to the third quarter of 2017. In this context, I would remind you that the comparisons between third quarters will no longer include any significant effects related to the fire at the Santos terminal.

Let's go on to Slide #8, and let's talk about our pharmaceuticals business, Extrafarma.

Extrafarma recorded a [19%] increase in the number of drug stores. And ended the second quarter of 2018 with 406 stores. A gross addition of 86 stores over the past 12 months. At the end of the quarter, 54% of the stores have been operating for less than 3 years compared with 47% in the second quarter of 2017. This reflects the increasingly -- increasingly rapid expansion of our network.

Gross revenues increased 16% over the second quarter of '17 with 70% growth in retail sales, resulting from the larger average number of stores, the annual readjustment in pharmaceutical prices and the more intensive pace of promotional activity.

In June 2018, Extrafarma installed a new repayer system for improving productivity and better inventory management at the distribution centers and stores, in addition to provide a better shopping experience for our customers.

The implementation and stabilization phases of the new repayer system caused the truck driver strike, which impacted operations in (inaudible) blocking the receiving in delivery products, had an estimated impact of BRL 7 million on the results. Therefore, the margin number of maturing stores and the nonrecurring effects related to the implementation of the new retail system and the strike resulted in a negative EBITDA of BRL 7 million in the quarter.

Excluding the effect of the new stores and nonrecurring events, EBITDA would have been [BRL 110 million] in the second quarter of '18, when compared with an EBITDA of (inaudible) in the second quarter of 2017.

For the current quarter, we are projecting similar growth rate in revenues together with an impact on EBITDA, due to the network expansion and increased number of maturing stores as well as the one-off effects of the stabilization of the new system.

Going now to Slide #9. In this last slide, I would like to comment on some actions and initiatives we are taking in order to ensure the recovery and strengthening of the company, as well as mentioning our priorities for the second half of 2018 and 2019.

At (inaudible) despite the short-term challenges, we continue to believe in the good fundamentals of the sector. In this sense, our focus is on the commercial and operational management in line with the current market conditions. We are adjusting our cost and expenses, focusing on productivity.

In addition, we have been working on the optimization of working capital, with the objective of improving the return on capital employed in our business. We also continue to focus on improving our relationship with our sellers, prioritizing the support and customer service, maintaining our strategy of differentiation and the organization of services and

(technical difficulty)

at the service stations.

Ipiranga has a

[Audio Gap]

platform of convenience businesses for [facilitating] consumers' daily routine and mobility.

At Oxiteno, as already mentioned, we will initiate the production at the new plant in the U.S., contributing to the improvement of profitability. As you know, since last year, we have been working on the commercial front through premarketing to accelerate the plant ramp-up phase, close in the first half of 2018, and then annually.

Our value represents around 30% of the [plant] capacity. Again, the recent devaluation of the real

(technical difficulty)

to the returns from this business.

At Ultragaz and Ultracargo, our intention is to maintain the focus on operational efficiency, while at Extrafarma, we are strengthening the businesses foundations for growth with the implementation of the new retail system.

On CapEx, we have been more selective in decisions we make on investments (inaudible) the discipline in the allocation of capital, (inaudible) better returns.

Prior to this, we have been working on some initiatives to reduce working capital and increase control of cost and expenses in an effort to strengthen our cash generation.

We have resilient businesses and positions of leadership in the market in which we operate. We are confident that we are taking the necessary steps to return to growth pace of our results, always looking to improve generational value for our shareholders.

With this, I conclude what we have prepared for you today. I'd like to thank you all for the attention and would welcome any questions you may have. We can now begin the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from Bruno Montanari with Morgan Stanley.

--------------------------------------------------------------------------------

Bruno Montanari, Morgan Stanley, Research Division - Equity Analyst [2]

--------------------------------------------------------------------------------

Andre, I just want to double check something, you mentioned, you -- if I understood correctly, that you do not expect major improvement in margins at Ipiranga despite gaining market share. Just wanted to understand this, this is a result of Ipiranga, perhaps, bring the margins with existing customers? Or is this a changing mix more towards the clients and the TRRs? And also, could you give us an idea of what is the margin distinction between retail and large clients on a percentage base or on a nominal base? That would be super helpful.

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [3]

--------------------------------------------------------------------------------

Bruno, basically -- thanks for the question. Basically, what we -- I mean, we are observing at this point is that the impact of the strike are still somewhat in the market, all right? So it's very difficult to have the right visibility to try to have a very correct expectation in terms of the evolution from now on. It's not a question about positioning in the market, it's a question that the market is under pressure, especially after the strike. As I mentioned in my call, we came into the second quarter with very, let's say, very positive impressions at the beginning of the quarter in terms of volume and in terms of margins. And obviously, the strike create a big impact on the quarter. So when we came out of the quarter with -- let's say, we had different scenarios in terms of competition and difference scenarios in terms of margins as well. So that's why we don't see much evolution in the short term at this point, right. Obviously, we're going to work towards a normalization of debt, as the impact of the strike starts to dissipate. We have to take into consideration, obviously, that the price of diesel is too frozen at the refinery, so this is something that has an impact in the market. As for the mix, no major change in the mix. Basically, you saw very good volumes for Ipiranga especially in the B2B side. This is due to, let's say, the efforts we have been making to maintain some of the customers we've somewhat lost in the last couple of years, especially during a period where you had a very tough competitive environment for diesel because of imports. As you know, most part of the imports came more for diesel than gasoline, and therefore, on the B2B side, which is more diesel, the competition was tougher. And last but not least, the difference between a B2B customer -- or, for example, the margins, or the B2B margins versus the margins in the retail is around 40%, but this is the same historical level that we have been observing over the years.

--------------------------------------------------------------------------------

Bruno Montanari, Morgan Stanley, Research Division - Equity Analyst [4]

--------------------------------------------------------------------------------

All right. And just a quick follow-up. When you mentioned still intense competition, I understand that imports are no longer coming or are not coming at the same level of margin into they were before. So is the competition between the well-established players? Or is the competition still with the white flags?

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [5]

--------------------------------------------------------------------------------

No, imports are not -- currently are not -- at least they're not coming on our relevant way to the market. The competition, this is a very competitive market, so it's within everybody, and especially when you have in the case of diesel, a price that is somewhat frozen, the competition remains and the market becomes more rational, let's put it like that.

--------------------------------------------------------------------------------

Operator [6]

--------------------------------------------------------------------------------

The next question comes from Frank McGann with Bank of America Merrill Lynch.

--------------------------------------------------------------------------------

Frank J. McGann, BofA Merrill Lynch, Research Division - MD [7]

--------------------------------------------------------------------------------

Yes, if I could follow up on that question, I think, Ipiranga is probably the area where the most focus should be probably. In terms of the competitiveness of the market, I mean, it's been competitive like you said for a long time. It seems to be coming more competitive and I don't know if that's because of the franchisees are demanding more from you than before and perhaps from other players as well? Is it because there's just more fluidity in the market, it's perhaps a more -- in some way a more open market because imports can be a competitive threat? And maybe perhaps you could discuss that a bit. And then secondly, when you say not -- results are going to stay -- continue to be impacted, are we talking about results staying, more or less, to the reported numbers for the second quarter, in line with that level or maybe a little bit better? Or are we talking about the adjusted number, taking out the strike effects of -- and thinking that the results will stay at that higher level?

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [8]

--------------------------------------------------------------------------------

Well, thank you, Frank, thanks for your question. The market -- I mean the competition of the market is very much related to the fact that, one, you have a frozen price at the refinery gate, which makes it difficult to expand margins on that particular situation, and two, a market where what we had seen over the years is more challenging economic scenarios with less opportunity to grow volumes, and also, in a sense, lower disposable incomes. So it becomes more competitive because the volumes are not there. I think that's, let's say, a very quick summary about what we do see. In terms of the evolution of margins and volumes, I mean, it's difficult to say, I would like to be so precise in terms of how we're comparing to, but basically, when I say evolution is improving from now on is what I'm trying to say, this is more challenging, but again, the visibility is very low. And although the strike has ended more than a month ago, I think the impacts of the strike are somewhat still there. So it's going to take some time to dissipate even though the economic activity as you probably been observing, the economics activity hasn't been come back to normal after the strike, I mean, there was a big -- this was a big dent in the expected recovery of the economy in Brazil. But certainly that is important on that front to mention when we talk about the way the market is structured right now is what we are doing in terms of focusing the treatment of our capital allocation and improving our return on invested capital. I mean, I talked about on the speech, we've been very selective on our CapEx approach but not only that, optimizing our working capital in others area of focus that we are doing, and last but not least, we are accelerating the inauguration of gas stations that had already been contracted by Ipiranga, especially over the last quarter -- the last quarter of 2017, which, let's say, we already contracted, already signed but this is one of the reasons we're not operational. So we are speeding up this process right after we think about that and bear in mind that those are investments that have already been expensed, have already been done. So basically this should contribute towards the end of the year for better volumes for us. And also should in a way keep our focus on maintaining our leadership position in terms of market share.

--------------------------------------------------------------------------------

Frank J. McGann, BofA Merrill Lynch, Research Division - MD [9]

--------------------------------------------------------------------------------

Okay. And in terms of like the third quarter, I know it's early to target a EBITDA number, but are you thinking it's going to be closer to the reported number of BRL 402 million that you had in the second quarter this year? Or could we see a recovery back closer to the first quarter levels and then stabilize there?

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [10]

--------------------------------------------------------------------------------

Frank, I'll leave you to that. I mean, it's -- I mean, I cannot give you a more precise estimate at this point.

--------------------------------------------------------------------------------

Operator [11]

--------------------------------------------------------------------------------

(Operator Instructions) The next question comes from Luiz Carvalho with UBS.

--------------------------------------------------------------------------------

Luiz Carvalho, UBS Investment Bank, Research Division - Director and Analyst [12]

--------------------------------------------------------------------------------

Just quick -- 2 quick follow-ups. The first one, a follow-up on a previous question regarding imports. Just checking, did you have any impact or any gain from imports during the second quarter? And the second question is more about the leverage. You mentioned in the Portuguese call that, I mean, the current leverage close to 2.6x, 2.5x, I know that at the beginning it's not that comfortable, and of course, that we do see some, I will say, nonrecurring impact from that front. But how do you see the (inaudible) with let's say, a lower CapEx? And potentially also lower cash generation, the leverage coming down over the next couple quarters? Do you have any, I want to say, mid-targets or mid next year, late this year in terms of leverage?

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [13]

--------------------------------------------------------------------------------

For the first question related to import gains, this was negligible. I mean, the number was very small in the second quarter. So completely negligible. Now in terms of -- can you repeat the second question again? It was about leverage.

--------------------------------------------------------------------------------

Luiz Carvalho, UBS Investment Bank, Research Division - Director and Analyst [14]

--------------------------------------------------------------------------------

Yes, sure, in terms of leverage, I mean, you mentioned during the Portuguese call that the current net debt-to-EBITDA leverage was not comfortable or not where the company wants to be, right? And -- I mean, you mentioned that while your nonrecurring CapEx, as you announced earlier this year, however the cash generation also could be lower, right? So the EBITDA could be lower. So how do you see the deleveraging process bringing the leverage back to, I don't know, 1.5x, 2x, over the next quarters? Do you think that -- do you have any internal target, that you can share with us?

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [15]

--------------------------------------------------------------------------------

Thanks. Basically, all of measures that we have been taking in order to bring back this number, we don't have a target, but basically that -- our objective is to be between 1.5x and 2x net debt-to-EBITDA. And then basically, I think the main and most efficient through is the most likely then on our CapEx process. As I mentioned in the call -- the call in Portuguese, not only being selected but also using other methods of bringing businesses to them especially, for example, looking at a more, let's say, earn outside of bonuses for resellers rather than the sign-up bonuses, which have been the norm for Ipiranga. Using third-party balance sheet is a way of financing, for example, our resellers. And therefore, working both on the CapEx and in working capital as well, as a mean to improve our operating cash flow generation, and therefore, consequently, reduce our leverage. Obviously, there is an expectation in the next 12 months of a better EBITDA than in the last 12 months, because in the end, we had some important impact especially if you take into consideration the time period for the loan acquisition of Liquigas. But all in all, I mean, our focus is on the selectivity of investments and using other methods of investments and optimizing working capital in order to improve our generation of operating cash flow.

--------------------------------------------------------------------------------

Operator [16]

--------------------------------------------------------------------------------

This concludes the question-and-answer session. At this time, I'd like to turn the floor back to Mr. Pires for any closing remarks.

--------------------------------------------------------------------------------

André Pires de Oliveira Dias, Ultrapar Participações S.A. - Chief Financial & IR Officer and Member of Executive Board [17]

--------------------------------------------------------------------------------

Well, thanks, everybody. Thanks for your attention and participating in our call. As always, our IR team is available to answer all the questions you might have. And I hope to see everybody again on our next call for the third quarter results. Thank you very much and have a good afternoon. Bye-bye.

--------------------------------------------------------------------------------

Operator [18]

--------------------------------------------------------------------------------

Thank you. This concludes today's Ultrapar Second Quarter 2018 Results Conference Call. You may disconnect your lines at this time.