6-K
Table of Contents

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report Of Foreign Private Issuer

Pursuant To Rule 13a-16 Or 15d-16 Of

The Securities Exchange Act Of 1934

For the month of May, 2018

Commission File Number: 001-14950

ULTRAPAR HOLDINGS INC.

(Translation of Registrant’s Name into English)

 

 

Avenida Brigadeiro Luis Antonio, 1343, 9º Andar

São Paulo, SP, Brazil 01317-910

(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F             X            

  Form 40-F                           

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes                           

   No             X            

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes                           

   No             X            

 


Table of Contents

ULTRAPAR HOLDINGS INC.

TABLE OF CONTENTS

 

ITEM

    

1.

   Individual and Consolidated Interim Financial Information for the Three-Month Period Ended March 31, 2018 Report on Review of Interim Financial Information

2.

   1Q18 Earnings release

3.

   Board of Directors Minutes

 


Table of Contents

(Convenience Translation into English from

the Original Previously Issued in Portuguese)

Ultrapar Participações S.A.

Individual and Consolidated

Interim Financial Information

for the Three-Month Period

Ended March 31, 2018 and

Report on Review of Interim

Financial Information

KPMG Auditores Independentes

 

 

1


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Individual and Consolidated

Interim Financial Information

for the Three-Month Period Ended March 31, 2018

 

Table of Contents

 

Report on the Review of Quarterly Information

     3 – 4  

Balance Sheets

     5 – 6  

Income Statements

     7  

Statements of Comprehensive Income

     8  

Statements of Changes in Shareholders’ Equity

     9 – 10  

Statements of Cash Flows—Indirect Method

     11 – 12  

Statements of Value Added

     13  

Notes to the Interim Financial Information

     14 – 93  

 

 

2


Table of Contents

(Convenience Translation into English from the Original Previously Issued in Portuguese)

Report on the review of quarterly information—ITR

To the Shareholders, Directors and Management of

Ultrapar Participações S.A.

São Paulo, SP

Introduction

We have reviewed the accompanying individual and consolidated interim financial information of Ultrapar Participações S.A. (“Company”), comprised in the Quarterly Financial Information – ITR Form for the quarter ended March 31, 2018, which comprise the balance sheet as of March 31, 2018 and related statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the three-month period then ended, including the explanatory notes.

The Company’s Management is responsible for the preparation of the interim financial information in accordance with Technical Pronouncement CPC 21 (R1) Interim Financial Information and with International Standard IAS 34 –Interim Financial Reporting, issued by the International Accounting Standards Board – IASB, such as for the presentation of these information in a manner consistent with the standards issued by the Brazilian Securities Commission, applicable to the preparation of the Quarterly Financial Information – ITR. Our responsibility is to express a conclusion on these interim financial information based on our review.

Scope of the review

Our review was carried out in accordance with the Brazilian and international review standards for interim information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion on the interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, issued by the IASB applicable to the preparation of Quarterly Financial Information – ITR and presented in accordance with the standards issued by the Brazilian Securities Commission – CVM.

 

3


Table of Contents

Other matters

Interim statements of value added

The individual and consolidated statements of value added for the three-month period ended March 31, 2018, prepared under the responsibility of the Company’s management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company’s interim financial information. In order to form our conclusion, we evaluated whether these statements are reconciled to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 – Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added are not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.

São Paulo, May 2, 2018

KPMG Auditores Independentes

CRC 2SP014428/O-6

Original report in Portuguese signed by

Wagner Bottino

Accountant CRC 1SP196907/O-7

 

4


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Balance Sheets

as of March 31, 2018 and December 31, 2017

(In thousands of Brazilian Reais)

 

 

            Parent      Consolidated  

Assets

   Note      03/31/2018      12/31/2017      03/31/2018      12/31/2017  
                   Restated             Restated  

Current assets

              

Cash and cash equivalents

     4        681,401        93,174        4,667,629        5,002,004  

Financial investments and hedging instruments

     4        301,172        21,657        1,482,010        1,283,498  

Trade receivables and reseller financing, net

     5        —          —          4,351,254        4,147,894  

Inventories, net

     6        —          —          3,338,115        3,513,577  

Recoverable taxes, net

     7        35,273        33,070        899,053        881,584  

Dividends receivable

        10,860        27,930        11,240        11,137  

Other receivables

        2,217        2,404        84,727        44,025  

Prepaid expenses, net

     10        1,569        1,597        146,576        150,046  

Contractual assets with customers – exclusive rights, net

     11        —          —          456,811        456,213  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

        1,032,492        179,832        15,437,415        15,489,978  

Non-current assets

              

Financial investments and hedging instruments

     4        —          —          89,623        84,426  

Trade receivables and reseller financing, net

     5        —          —          347,575        329,991  

Related parties

     8.a        774,850        762,562        490        490  

Deferred income and social contribution taxes

     9.a        29,481        29,158        710,850        614,061  

Recoverable taxes, net

     7        48,685        48,685        325,493        313,242  

Escrow deposits

     21.a        —          148        830,317        822,660  

Indemnity asset – business combination

     21.c        —          —          202,352        202,352  

Other receivables

        —          —          2,350        7,918  

Prepaid expenses, net

     10        38        —          376,995        346,886  

Contractual assets with customers – exclusive rights, net

     11        —          —          1,037,115        1,046,147  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total long term assets

        853,054        840,553        3,923,160        3,768,173  

Investments

              

In subsidiaries

     12.a        8,861,788        9,268,261        —          —    

In joint-ventures

     12.a; 12.b      55,951        54,739        127,228        122,061  

In associates

     12.c        —          —          25,534        25,341  

Other

        —          —          2,792        2,792  

Property, plant, and equipment, net

     13        —          —          6,813,700        6,634,528  

Intangible assets, net

     14        246,163        246,163        2,218,877        2,162,638  
     

 

 

    

 

 

    

 

 

    

 

 

 
        9,163,902        9,569,163        9,188,131        8,947,360  

Total non-current assets

        10,016,956        10,409,716        13,111,291        12,715,533  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

        11,049,448        10,589,548        28,548,706        28,205,511  
     

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

5


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Balance Sheets

as of March 31, 2018 and December 31, 2017

(In thousands of Brazilian Reais)

 

 

            Parent     Consolidated  

Liabilities

   Note      03/31/2018     12/31/2017     03/31/2018     12/31/2017  
                  Restated           Restated  

Current liabilities

           

Loans and hedging instruments

     15        —         —         1,942,656       1,819,766  

Debentures

     15.g        5,879       817,654       944,959       1,681,199  

Finance leases

     15.i        —         —         2,743       2,710  

Trade payables

     16        111       461       1,859,790       2,155,498  

Salaries and related charges

     17        244       244       304,477       388,118  

Taxes payable

     18        469       343       221,697       221,529  

Dividends payable

     25.h        13,099       335,930       14,472       338,845  

Income and social contribution taxes payable

        —         —         58,504       86,836  

Post-employment benefits

     19.b        —         —         30,059       30,059  

Provision for asset retirement obligation

     20        —         —         4,439       4,799  

Provision for tax, civil, and labor risks

     21.a        —         —         57,437       64,550  

Trade payables – customers and third parties’ indemnification

     22        —         —         48,393       72,216  

Other payables

        —         7,439       126,770       125,150  

Deferred revenue

     23        —         —         18,779       18,413  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

        19,802       1,162,071       5,635,175       7,009,688  

Non-current liabilities

           

Loans and hedging instruments

     15        —         —         6,186,624       6,113,545  

Debentures

     15.g        1,722,258       —         5,658,179       3,927,569  

Finance leases

     15.i        —         —         45,150       45,805  

Related parties

     8.a        5,757       4,003       4,176       4,185  

Deferred income and social contribution taxes

     9.a        —         —         37,826       38,524  

Post-employment benefits

     19.b        —         —         213,705       207,464  

Provision for asset retirement obligation

     20        —         —         56,944       59,975  

Provision for tax, civil, and labor risks

     21.a; 21.c      989       982       865,967       861,246  

Deferred revenue

     23        —         —         13,370       12,896  

Subscription warrants – indemnification

     24        169,865       171,459       169,865       171,459  

Other payables

        —         —         196,266       162,834  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

        1,898,869       176,444       13,448,072       11,605,502  

Shareholders’ equity

           

Share capital

     25.a; 25.f        5,171,752       5,171,752       5,171,752       5,171,752  

Equity instrument granted

     25.b        1,149       536       1,149       536  

Capital reserve

     25.d        549,778       549,778       549,778       549,778  

Treasury shares

     25.c        (482,260     (482,260     (482,260     (482,260

Revaluation reserve on subsidiaries

     25.e        4,868       4,930       4,868       4,930  

Profit reserves

     25.f        3,629,851       3,629,851       3,629,851       3,629,851  

Retained earnings

        73,916       —         73,916       —    

Valuation adjustments

     25.g        148,058       159,643       148,058       159,643  

Cumulative translation adjustments

     25.g        33,665       53,061       33,665       53,061  

Additional dividends to the minimum

mandatory dividends

     25.h        —         163,742       —         163,742  
     

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity attributable to:

           

Shareholders of the Company

        9,130,777       9,251,033       9,130,777       9,251,033  

Non-controlling interests in subsidiaries

        —         —         334,682       339,288  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

        9,130,777       9,251,033       9,465,459       9,590,321  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

        11,049,448       10,589,548       28,548,706       28,205,511  
     

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

6


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Income Statements

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais, except earnings per share)

 

 

          Parent     Consolidated  
     Note    03/31/2018     03/31/2017     03/31/2018     03/31/2017  
                Restated           Restated  

Net revenue from sales and services

   26      —         —         20,751,122       18,544,570  

Cost of products and services sold

   27      —         —         (19,229,825     (16,987,475
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        —         —         1,521,297       1,557,095  

Operating income (expenses)

           

Selling and marketing

   27      —         —         (671,447     (597,150

General and administrative

   27      —         —         (372,568     (362,578

Gain (loss) on disposal of property, plant and equipment and intangibles

   28      —         —         (2,230     (6,353

Other operating income, net

   29      32       1       (262,723     56,335  
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before financial income (expenses) and share of profit of subsidiaries, joint ventures and associates

        32       1       212,329       647,349  

Financial income

   30      19,613       30,754       112,444       164,361  

Financial expenses

   30      (20,513     (36,965     (219,409     (285,536
     

 

 

   

 

 

   

 

 

   

 

 

 

Financial result, net

        (900     (6,211     (106,965     (121,175

Share of profit of subsidiaries, joint ventures and associates

   12      74,490       356,681       (2,981     6,428  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

        73,622       350,471       102,383       532,602  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

           

Current

   9.b; 9c      (89     (1,121     (122,063     (190,190

Deferred

   9.b      322       3,212       92,531       12,294  
     

 

 

   

 

 

   

 

 

   

 

 

 
        233       2,091       (29,532     (177,896

Net income for the period

        73,855       352,562       72,851       354,706  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

           

Shareholders of the Company

        73,855       352,562       73,855       352,562  

Non-controlling interests in subsidiaries

        —         —         (1,004     2,144  

Earnings per share (based on weighted average number of shares outstanding) – R$

           

Basic

   31      0.1363       0.6508       0.1363       0.6508  

Diluted

   31      0.1353       0.6461       0.1353       0.6461  

The accompanying notes are an integral part of the interim financial information.

 

7


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

            Parent     Consolidated  
     Note      03/31/2018     03/31/2017     03/31/2018     03/31/2017  
                  Restated           Restated  

Net income for the period attributable to shareholders of the Company

        73,855       352,562       73,855       352,562  

Net income for the period attributable to non-controlling interests in subsidiaries

        —         —         (1,004     2,144  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

        73,855       352,562       72,851       354,706  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that are subsequently reclassified to profit or loss:

           

Fair value adjustments of financial instruments of subsidiaries, net

     25.g        (11,972     48,362       (11,972     48,362  

Fair value adjustments of financial instruments of joint ventures, net

     25.g        686       594       686       594  

Cumulative translation adjustments, net of hedge of net investments in foreign operations and income and social contribution taxes

     25.g        (19,396     1,322       (19,396     1,322  

Items that are not subsequently reclassified to profit or loss:

           

Losses of post-employment benefits of subsidiaries, net

     25.g        (299     (24     (299     (24
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        42,874       402,816       41,870       404,960  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period attributable to shareholders of the Company

        42,874       402,816       42,874       402,816  

Total comprehensive income for the period attributable to non-controlling interest in subsidiaries

        —         —         (1,004     2,144  

The accompanying notes are an integral part of the interim financial information.

 

8


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Shareholders’ Equity

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

                                           Profit reserve                             Shareholders’ equity
attributable to:
       
     Note    Share
capital
     Equity
instrument
granted
     Capital
reserve
     Treasury
shares
    Revaluation
reserve on
subsidiaries
    Legal
reserve
     Investments
statutory
reserve
    Valuation
adjustments
    Cumulative
translation
adjustments
    Retained
earnings
    Additional
dividends
to the
minimum
mandatory
dividends
    Shareholders
of the
Company
    Non-controlling
interests in
subsidiaries
    Consolidated
shareholders’
equity
 

Balance as of December 31, 2017

        5,171,752        536        549,778        (482,260     4,930       629,144        3,130,935       159,643       53,061       —         163,742       9,381,261       339,571       9,720,832  

Effects of IFRS adoption

   2.y      —          —          —          —         —         —          (130,228     —         —         —         —         (130,228     (283     (130,511
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2018

        5,171,752        536        549,778        (482,260     4,930       629,144        3,000,707       159,643       53,061       —         163,742       9,251,033       339,288       9,590,321  

Net income for the period

        —          —          —          —         —         —          —         —         —         73,855       —         73,855       (1,004     72,851  

Other comprehensive income:

                                   

Fair value adjustments of available for sale, net of income taxes

   25.g      —          —          —          —         —         —          —         (11,286     —         —         —         (11,286     —         (11,286

Actuarial losses of post-employment benefits, net of income taxes

   25.g      —          —          —          —         —         —          —         (299     —         —         —         (299     —         (299

Currency translation of foreign subsidiaries, including the effect of net investments hedge

   25.g      —          —          —          —         —         —          —         —         (19,396     —         —         (19,396     —         (19,396
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          —          —         —         —          —         (11,585     (19,396     73,855       —         42,874       (1,004     41,870  

Equity instrument granted

   25.b      —          613        —          —         —         —          —         —         —         —         —         613       —         613  

Realization of revaluation reserve of subsidiaries

   25.e      —          —          —          —         (62     —          —         —         —         62       —         —         —         —    

Income and social contribution taxes on realization of revaluation reserve of subsidiaries

   25.e      —          —          —          —         —         —          —         —         —         (1     —         (1     —         (1

Additional dividends attributable to non-controlling interests

        —          —          —          —         —         —          —         —         —         —         —         —         (3,602     (3,602

Approval of additional dividends by the Shareholders’ Meeting

   25.h      —          —          —          —         —         —          —         —         —         —         (163,742     (163,742     —         (163,742
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2018

        5,171,752        1,149        549,778        (482,260     4,868       629,144        3,000,707       148,058       33,665       73,916       —         9,130,777       334,682       9,465,459  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

9


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Shareholders’ Equity

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

                                             Profit reserve                               Shareholders’ equity
attributable to:
       
     Note      Share
capital
     Equity
instrument
granted
     Capital
reserve
     Treasury
shares
    Revaluation
reserve on
subsidiaries
    Legal
reserve
     Investments
statutory
reserve
    Retention
of profits
     Valuation
adjustments
    Cumulative
translation
adjustments
     Retained
earnings
    Additional
dividends
to the
minimum
mandatory
dividends
    Shareholders
of the
Company
    Non-controlling
interests in
subsidiaries
    Consolidated
shareholders’
equity
 

Balance as of December 31, 2016

        3,838,686        —          552,038        (483,879     5,339       550,428        2,582,898       1,333,066        (23,987     7,519        —         165,515       8,527,623       30,935       8,558,558  

Effects of IFRS adoption

     2.y        —          —          —          —         —         —          (82.427 )      —          —         —          —         —         (82,427 )      (81 )      (82,508 ) 
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2017

        3,838,686        —          552,038        (483,879     5,339       550,428        2,500,471       1,333,066        (23,987     7,519        —         165,515       8,445,196       30,854       8,476,050  

Net income for the period

        —          —          —          —         —         —          —         —          —         —          352,562       —         352,562       2,144       354,706  

Other comprehensive income:

                                       

Fair value adjustments of available for sale, net of income taxes

     25.g        —          —          —          —         —         —          —         —          48,956       —          —         —         48,956       —         48,956  

Actuarial losses of post-employment benefits, net of income taxes

     25.g        —          —          —          —         —         —          —         —          (24     —          —         —         (24     —         (24

Currency translation of foreign subsidiaries, including the effect of net investments hedge

     25.g        —          —          —          —         —         —          —         —          —         1,322        —         —         1,322       —         1,322  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          —          —         —         —          —         —          48,932       1,322        352,562       —         402,816       2,144       404,960  

Sale of treasury shares

     25.c        —          —          3,114        3,685       —         —          —         —          —         —          —         —         6,799       —         6,799  

Realization of revaluation reserve of subsidiaries

     25.e        —          —          —          —         (62     —          —         —          —         —          62       —         —         —         —    

Income and social contribution taxes on realization of revaluation reserve of subsidiaries

     25.e        —          —          —          —         —         —          —         —          —         —          (10     —         (10     —         (10

Additional dividends attributable to non-controlling interests

        —          —          —          —         —         —          —         —          —         —          —         —         —         (94     (94

Approval of additional dividends by the Shareholders’ Meeting

     25.h        —          —          —          —         —         —          —         —          —         —          —         (165,515     (165,515     —         (165,515
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2017—Restated

        3,838,686        —          555,152        (480,194     5,277       550,428        2,500,471       1,333,066        24,945       8,841        352,614       —         8,689,286       32,904       8,722,190  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

10


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows – Indirect Method

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

            Parent     Consolidated  
     Note      03/31/2018     03/31/2017     03/31/2018     03/31/2017  
                  Restated           Restated  

Cash flows from operating activities

           

Net income for the period

        73,855       352,562       72,851       354,706  

Adjustments to reconcile net income to cash provided by operating activities

           

Share of loss (profit) of subsidiaries, joint ventures and associates

     12        (74,490     (356,681     2,981       (6,428

Amortization of contractual assets with customers – exclusive rights

     11        —         —         104,513       128,218  

Depreciation and amortization

     13;14        —         —         194,243       165,044  

PIS and COFINS credits on depreciation

     13;14        —         —         4,338       3,233  

Interest, monetary, and foreign exchange rate variations

        14,814       35,324       223,191       169,046  

Deferred income and social contribution taxes

     9.b        (322     (3,212     (92,531     (12,294

(Gain) loss on disposal of property, plant and equipment and intangibles

     28        —         —         2,230       6,353  

Estimated losses on doubtful accounts

        —         —         27,507       15,109  

Provision for losses in inventories

        —         —         (117     2,533  

Provision for post-employment benefits

        —         —         5,680       2,703  

Other provisions and adjustments

        —         —         (1,258     279  
     

 

 

   

 

 

   

 

 

   

 

 

 
        13,857       27,993       543,628       828,502  

(Increase) decrease in current assets

           

Trade receivables and reseller financing

     5        —         —         (230,867     (12,600

Inventories

     6        —         —         175,579       153,874  

Recoverable taxes

     7        (2,203     14,001       (13,640     (20,633

Dividends received from subsidiaries and joint-ventures

        468,743       451,445       —         —    

Insurance and other receivables

        187       1,570       (25,177     305,073  

Prepaid expenses

     10        28       (603     3,470       (29,167

Contractual assets with customers – exclusive rights

     11        —         —         (598     (4,527

Increase (decrease) in current liabilities

           

Trade payables

     16        (352     (121     (295,708     (514,315

Salaries and related charges

     17        —         1       (83,641     (75,826

Taxes payable

     18        126       (182     168       15,606  

Income and social contribution taxes

        —         —         6,016       169,422  

Post-employment benefits

     19.b        —         —         —         (1,295

Provision for tax, civil, and labor risks

     21.a        —         —         (7,113     (1,153

Insurance and other payables

        (7,439     —         (32,599     63,855  

Deferred revenue

     23        —         —         366       (124

(Increase) decrease in non-current assets

           

Trade receivables and reseller financing

     5        —         —         (17,584     (15,715

Recoverable taxes

     7        —         (17,064     (12,251     (30,571

Escrow deposits

        148       —         (7,657     (10,084

Other receivables

        —         —         5,568       1,629  

Prepaid expenses

     10        (38     —         (30,109     (47,544

Contractual assets with customers – exclusive rights

     11        —         —         385       5,853  

Increase (decrease) in non-current liabilities

           

Post-employment benefits

     19.b        —         —         263       652  

Provision for tax, civil, and labor risks

     21.a        7       (589     4,721       (89,432

Other payables

        —         —         33,432       (6,289

Deferred revenue

     23        —         —         474       272  

Payments of contractual assets with customers – exclusive rights

        —         —         (95,866     (146,038

Income and social contribution taxes paid

        —         —         (34,348     (285,017
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

        473,064       476,451       (113,088     254,408  
     

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

11


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows—Indirect Method

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

            Parent     Consolidated  
     Note      03/31/2018     03/31/2017     03/31/2018     03/31/2017  
                  Restated           Restated  

Cash flows from investing activities

           

Financial investments, net of redemptions

        (279,515     (50,664     (203,458     246,196  

Cash and cash equivalents of subsidiary acquired

     3.c        —         —         3,662       —    

Acquisition of property, plant, and equipment

     13        —         —         (284,453     (241,845

Acquisition of intangible assets

     14        —         —         (70,909     (32,902

Acquisiton of companies

     3.c        —         —         (100,000     —    

Capital increase in joint ventures

     12.b        —         —         (8,000     —    

Proceeds from disposal of property, plant and equipment and intangibles

     28        —         —         4,901       5,464  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

        (279,515     (50,664     (658,257     (23,087
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

           

Loans and debentures

           

Proceeds

     15        1,721,596       —         2,081,068       283,262  

Repayments

     15        (800,000     —         (1,074,003     (606,091

Interest paid

     15        (29,811     (55,576     (84,273     (153,281

Payments of financial lease

     15.i        —         —         (1,278     (1,297

Dividends paid

        (486,573     (470,728     (488,115     (470,752

Sale of treasury shares

     25.c        —         6,799       —         —    

Related parties

     8.a        (10,534     17,261       (9     —    
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        394,678       (502,244     433,390       (948,159
     

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents in foreign currency

        —         —         3,580       15,356  
     

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

        588,227       (76,457     (334,375     (701,482
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     4        93,174       127,944       5,002,004       4,274,158  

Cash and cash equivalents at the end of the period

     4        681,401       51,487       4,667,629       3,572,676  

The accompanying notes are an integral part of the interim financial information.

 

12


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Value Added

For the three-month period ended March 31, 2018 and 2017

(In thousands of Brazilian Reais, except percentages)

 

 

            Parent     Consolidated  
     Note      03/31/2018      %      03/31/2017     %     03/31/2018     %      03/31/2017     %  
                          Restated                        Restated        

Revenue

                      

Gross revenue from sales and services, except rents and royalties

     26        —             —           21,478,209          19,214,305    

Rebates, discounts, and returns

     26        —             —           (214,094        (222,375  

Estimated losses on doubtful accounts – allowance

        —             —           (29,796        (40,545  

Gain (loss) on disposal of property, plant and equipment and intangibles and other operating income, net

     28;29        —             —           (264,953        49,982    
     

 

 

       

 

 

     

 

 

      

 

 

   
        —             —           20,969,366          19,001,367    

Materials purchased from third parties

                      

Raw materials used

        —             —           (1,533,242        (1,206,038  

Cost of goods, products, and services sold

        —             —           (17,664,330        (15,704,100  

Third-party materials, energy, services, and others

        1,955           1,679         (282,012        (567,976  

Losses of assets

        —             —           (5,806        (4,145  
     

 

 

       

 

 

     

 

 

      

 

 

   
        1,955           1,679         (19,485,390        (17,482,259  

Gross value added

        1,955           1,679         1,483,976          1,519,108    
     

 

 

       

 

 

     

 

 

      

 

 

   

Deductions

                      

Depreciation and amortization

     13;14        —             —           (194,243        (165,044  

PIS and COFINS credits on depreciation

     13;14        —             —           (4,338        (3,233  
     

 

 

       

 

 

     

 

 

      

 

 

   
        —             —           (198,581        (168,277  

Net value added by the Company

        1,955           1,679         1,285,395          1,350,831    
     

 

 

       

 

 

     

 

 

      

 

 

   

Value added received in transfer

                      

Share of profit (loss) of subsidiaries, joint-ventures, and associates

     12        74,490           356,681         (2,981        6,428    

Rents and royalties

     26        —             —           37,079          36,352    

Financial income

     30        19,613           30,754         112,444          164,361    
     

 

 

       

 

 

     

 

 

      

 

 

   
        94,103           387,435         146,542          207,141    

Total value added available for distribution

        96,058           389,114         1,431,937          1,557,972    
     

 

 

       

 

 

     

 

 

      

 

 

   

Distribution of value added

                      

Labor and benefits

        1,604        2        1,409       —         526,352       37        458,180       29  

Taxes, fees, and contributions

        569        —          (2,001     (1     560,963       39        382,876       25  

Financial expenses and rents

        20,030        21        37,144       10       271,771       19        362,210       23  

Retained earnings

        73,855        77        352,562       91       72,851       5        354,706       23  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Value added distributed

        96,058        100        389,114       100       1,431,937       100        1,557,972       100  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

The accompanying notes are an integral part of the interim financial information.

 

13


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

1. Operations

Ultrapar Participações S.A. (“Ultrapar” or “Company”) is a publicly-traded company headquartered at the Brigadeiro Luis Antônio Avenue, 1343 in the city of Săo Paulo – SP, Brazil.

The Company engages in the investment of its own capital in services, commercial, and industrial activities, through the subscription or acquisition of shares of other companies. Through its subsidiaries, it operates in the segments of liquefied petroleum gas—LPG distribution (“Ultragaz”), fuel distribution and related businesses (“Ipiranga”), production and marketing of chemicals (“Oxiteno”), and storage services for liquid bulk (“Ultracargo”) and retail distribution of pharmaceutical, hygiene, beauty, and skincare products, through Imifarma Produtos Farmacêuticos e Cosméticos S.A. (“Extrafarma”). For further information about segments see Note 32.

 

2. Presentation of Interim Financial Information and Summary of Significant Accounting Policies

The Company’s individual and consolidated interim financial information were prepared in accordance with the International Accounting Standard (“IAS”) 34 – Interim Financial Reporting issued by the International Accounting Standards Board (“IASB”) and in accordance with the pronouncement CPC 21 (R1) issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Securities and Exchange Commission (“CVM”).

All relevant specific information of the interim financial information, and only this information, is being presented and correspond to that used by the Company’s and its subsidiaries’ Management.

The presentation currency of the Company’s individual and consolidated interim financial information is the Brazilian Real (“R$”), which is the Company’s functional currency.

The Company and its subsidiaries applied the accounting policies described below in a consistent manner for all periods presented in the individual and consolidated interim financial information.

 

a. Recognition of Income

Revenue of sales and services rendered is measured at the value of the consideration that the Company’s subsidiaries expect to be entitled to, net of sales returns, discounts, amortization of contractual assets with customers and other deductions, if applicable, being recognized as the entity fulfills its performance obligation.

At Ipiranga, the revenue from sales of fuels and lubricants is recognized when the products are delivered to gas stations and to large consumers. At Ultragaz, revenue from sales of LPG is recognized when the products are delivered to customers at home, to independent dealers and to industrial and commercial customers. At Extrafarma, the revenue from sales of pharmaceuticals is recognized when the products are delivered to end user customers in own drugstores and when the products are delivered to independent resellers. At Oxiteno, the revenue from sales of chemical products is recognized when the products are delivered to ndustrial customers, depending of the freight mode of delivery. At Ultracargo, the revenue provided from storage services is recognized as services are performed. The breakdown of revenue from sales and services is shown in Note 26.

Amortization of contractual assets with customers (see Notes 2.f and 11) for the exclusive rights in Ipiranga’s reseller service stations and the bonuses paid in performance obligation sales are recognized as a deduction of the sales revenue in the income statement according to the conditions established in the agreements which is reviewed as per the changes occurred in the agreements.

Deferred revenue from loyalty program is recognized in the income statement when the points are redeemed, on which occasion the costs incurred are also recognized in profit or loss. Deferred revenue of unredeemed points is also recognized in profit or loss when points expire. For more information, see Note 23 - Loyalty program.

The franchising upfront fee received by Ipiranga is deferred and recognized in profit or loss on the straight-line accrual basis throughout the terms of the agreements with the franchisees.

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b. Cash and Cash Equivalents

Includes cash, banks deposits, and short-term, highly-liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of change in value. See Note 4 for further details on cash and cash equivalents of the Company and its subsidiaries.

 

c. Financial Assets

The Company and its subsidiaries evaluated the classification and measurement of financial assets based on its business model of financial assets as follows:

 

  Amortized cost: financial assets held in order to collect contractual cash flows, solely principal and interest. The interest earned and the foreign currency exchange variation are recognized in profit or loss, and balances are stated at acquisition cost plus the interest earned, using the effective interest rate method. Financial investments in guarantee of loans are classified as amortized cost.

 

  Measured at fair value through other comprehensive income: financial assets that are acquired or originated for the purpose of collecting contractual cash flows or selling financial assets. The balances are stated at fair value, and the interest earned and the foreign currency exchange variation are recognized in profit or loss. Differences between fair value and initial amount of financial investments plus the interest earned are recognized in other comprehensive income in the “Valuation adjustments”. Accumulated gains and losses recognized in shareholders’ equity are reclassified to profit or loss at the time of their settlement. Substantially the financial investments in Bank Certificates of Deposit (“CDB”) and repurchase agreements are classified as measured at fair value through other comprehensive income.

 

  Measured at fair value through profit or loss: financial assets not classified as amortized cost or measured at fair value through other comprehensive income. The balances are stated at fair value and both the interest earned and the exchange variations and changes in fair value are recognized in the income statement. Investment funds and derivatives are classified as measured at fair value through profit or loss.

The Company and its subsidiaries use financial instruments for hedging purposes, applying the concepts described below:

 

  Hedge accounting—fair value hedge: financial instruments used to hedge exposure to changes in the fair value of an item, attributable to a particular risk, which can affect the entity’s profit or loss. In the initial designation of the fair value hedge, the relationship between the hedging instrument and the hedged item is documented, including the objectives of risk management, the strategy in conducting the transaction, and the methods to be used to evaluate its effectiveness. Once the fair value hedge has been qualified as effective, the hedge item is also measured at fair value. Gains and losses from hedge instruments and hedge items are recognized in profit or loss. The hedge accounting must be discontinued when the hedge becomes ineffective.

 

  Hedge accounting—cash flow hedge: financial instruments used to hedge the exposure to variability in cash flows that is attributable to a risk associated with an asset or liability or highly probable transaction or firm commitment that may affect the income statements. The portion of the gain or loss on the hedging instrument that is determined to be effective relating to the effects of exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as “Valuation adjustments” while the ineffective portion is recognized in profit or loss. Gains or losses on the hedging instrument relating to the effective portion of this hedge that had been recognized directly in accumulated other comprehensive income shall be recognized in profit or loss in the period in which the hedged item is recognized in profit or loss or as initial cost of non- financial assets, in the same line of the statement that the hedged item is recognized. The hedge accounting shall be discontinued when (i) the Company cancels the hedging relationship; (ii) the hedging instrument expires; and (iii) the hedging instrument no longer qualifies for hedge accounting. When hedge accounting is discontinued, gains and losses recognized in other comprehensive income in equity are reclassified to profit or loss in the period which the hedged item is recognized in profit or loss. If the transaction hedged is canceled or is not expected to occur, the cumulative gains and losses in other comprehensive income in equity shall be recognized immediately in profit or loss.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  Hedge accounting—hedge of net investments in foreign operation: financial instruments used to hedge exposure on net investments in foreign subsidiaries due to the fact that the local functional currency is different from the functional currency of the Company. The portion of the gain or loss on the hedging instrument that is determined to be effective, referring to the exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as cumulative translation adjustments, while the ineffective portion and the operating costs are recognized in profit or loss. The gain or loss on the hedging instrument that has been recognized directly in accumulated other comprehensive income shall be recognized in income upon disposal of the foreign operation.

For further detail on financial instruments of the Company and its subsidiaries, see Note 33.

 

d. Trade Receivables

Trade receivables are recognized at the amount invoiced of the counterparty that the Company subsidiaries are entitled. An allowance for estimated losses on doubtful accounts is recorded based on estimated losses and is set at an amount deemed by management to be sufficient to cover any probable loss on realization of trade receivables. The estimated losses take into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the useful life of the contract when the deterioration or improvement of the customers’ credit quality (see Notes 5 and 33—Customer Credit Risk).

 

e. Inventories

Inventories are stated at the lower of acquisition cost or net realizable value (see Note 6). The cost value of inventory is measured using the weighted average cost and includes the costs of acquisition and processing directly and indirectly related to the units produced based on the normal capacity of production. Estimates of net realizable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling expenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realizable values are below inventory costs, a provision corresponding to this difference is recognized. Provisions are also made for obsolescence of products, materials, or supplies that (i) do not meet its subsidiaries’ specifications, (ii) have exceeded their expiration date, or (iii) are considered slow-moving inventory. This classification is made by management with the support of its industrial and operations teams.

 

f. Contractual assets with customers – exclusive rights

Exclusive rights disbursements as provided in Ipiranga’s agreements with reseller service stations and major consumers are recognized as contractual assets when paid and amortized according to the conditions established in the agreements (see Note 2.a and 11).

 

g. Investments

Investments in subsidiaries are accounted for under the equity method of accounting in the individual interim financial information of the parent company (see Notes 3.b and 12). A subsidiary is an investee in which the investor is entitled to variable returns on investment and has the ability to interfere in its financial and operational activities. Usually the equity interest in a subsidiary is more than 50%.

Investments in associates and joint ventures are accounted for under the equity method of accounting in the individual and consolidated interim financial information (see Note 12). An associate is an investment, in which an investor has significant influence, that is, has the power to participate in the financial and operating decisions of the investee but does not exercise control. A joint venture is an investment in which the shareholders have the right to net assets on behalf of a joint control. Joint control is the agreement which establish that decisions about the relevant activities of the investee require the consent from the parties that share control.

Other investments are stated at acquisition cost less provision for losses, unless the loss is considered temporary.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

h. Property, Plant, and Equipment

Property, plant, and equipment is recognized at acquisition or construction cost, including financial charges incurred on property, plant, and equipment under construction, as well as maintenance costs resulting from scheduled plant outages and estimated costs to remove, to decommission, or to restore assets (see Notes 2.n and 20), less accumulated depreciation and, when applicable, less provision for losses (see Note 13).

Depreciation is calculated using the straight-line method, over the periods mentioned in Note 13, taking into account the estimated useful lives of the assets, which are reviewed annually.

Leasehold improvements are depreciated over the shorter of the lease contract term and useful life of the property.

 

i. Leases

 

  Finance Leases

Certain lease contracts transfer substantially all the risks and benefits associated with the ownership of an asset to the subsidiaries. These contracts are characterized as finance leases, and assets thereunder are capitalized at lease commencement at their fair value or, if lower, present value of the minimum lease payments under the contracts. The items recognized as assets are depreciated and amortized using the lower of the straight-line method over the lower of the useful lives applicable to each group of assets or the contract terms, as mentioned in Notes 13 and 14. Financial charges under the finance lease contracts are allocated to profit or loss over the lease contract term, based on the amortized cost and the effective interest rate method of the related lease obligation (see Note 15.i).

 

  Operating Leases

There are lease transactions where the risks and benefits associated with the ownership of the asset are not transferred and where there is no purchase option, or the purchase option at the end of the contract is equivalent to the market value of the leased asset. Payments made under an operating lease contract are recognized as cost or expense in the income statement on a straight-line basis over the term of the lease contract (see Note 34.c).

 

j. Intangible Assets

Intangible assets include assets acquired by the Company and its subsidiaries from third parties, according to the criteria below (see Note 14):

 

  Goodwill is shown as intangible assets corresponding to the positive difference between the amount paid or payable to the seller and the fair value of the identified assets and liabilities assumed of the acquired entity. Goodwill is tested annually for impairment. Goodwill is allocated to the business segments, which represent the lowest level that goodwill is monitored by the Company for impairment testing purposes (see Note 14.i).

 

  Other intangible assets acquired from third parties, such as software, technology, and commercial property rights, are measured at the total acquisition cost and amortized using straight-line method, over the periods mentioned in Note 14, taking into account their useful life, which is reviewed annually.

The Company and its subsidiaries have not recognized intangible assets that were generated internally. The Company and its subsidiaries have goodwill and brands acquired in business combinations, which are evaluated as intangible assets with indefinite useful life (see Note 14 items i and v).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

k. Other Assets

Other assets are stated at the lower of cost and realizable value, including, if applicable, interest earned, monetary changes and changes in exchange rates incurred or less a provision for loss and, if applicable, adjustment to present value.

 

l. Financial Liabilities

The Company and its subsidiaries’ financial liabilities include trade payables and other payables, loans, debentures, finance leases and derivative financial instruments. Financial liabilities are classified as “financial liabilities at fair value through profit or loss” or “financial liabilities at amortized cost”. The financial liabilities at fair value through profit or loss refer to derivative financial instruments, subscription warrants, and financial liabilities designated as hedged items in a fair value hedge relationship upon initial recognition (see Note 2.c – Fair Value Hedge). The financial liabilities at amortized cost are stated at the initial transaction amount plus related charges and net of amortization and transaction costs. The charges are recognized in profit or loss using the effective interest rate method.

Transaction costs incurred and directly attributable to the activities necessary for contracting loans or for issuing bonds, as well as premiums and discounts upon issuance of debentures and other debt, are allocated to the instrument and amortized to profit or loss over its term, using the effective interest rate method (see Note 15.j).

 

m. Income and Social Contribution Taxes on Income

Current and deferred income tax (“IRPJ”) and social contribution on net income tax (“CSLL”) are calculated based on their current rates, considering the value of tax incentives. Taxes are recognized based on the rates of IRPJ and CSLL provided for by the laws enacted on the last day of the interim financial information. The current rates in Brazil are 25% for income tax and 9% for social contribution on net income tax. For further details about recognition and realization of IRPJ and CSLL, see Note 9.

For purposes of disclosure, deferred tax assets were offset against the deferred tax liability, income tax and social contribution, in the same taxable entity and the same taxation authority.

 

n. Provision for Asset Retirement Obligation – Fuel Tanks

The Company and its subsidiaries have the legal obligation to remove Ipiranga’s underground fuel tanks located at Ipiranga-branded service stations after a certain period. The estimated cost of the obligation to remove these fuel tanks is recognized as a liability when the tanks are installed. The estimated cost is recognized in property, plant, and equipment and depreciated over the respective useful lives of the tanks. The amounts recognized as a liability are monetarily restated using the National Consumer Price Index (“IPCA”) until the respective tank is removed (see Note 20). An increase in the estimated cost of the obligation to remove the tanks could result in negative impact in future results. The estimated removal cost is reviewed and updated annually or when there is significant change in its amount and change in the estimated costs are recognized in income statements when they become known.

 

o. Provisions for Tax, Civil, and Labor Risks

A provision for tax, civil and labor risks is recognized for quantifiable risks, when the chance of loss is more-likely-than-not in the opinion of management and internal and external legal counsel, and the amounts are recognized based on the evaluation of the outcomes of the legal proceedings (see Note 21).

 

p. Post-Employment Benefits

Post-employment benefits granted and to be granted to employees, retirees, and pensioners are based on an actuarial calculation prepared by an independent actuary and reviewed by management, using the projected unit credit method (see Note 19.b). The actuarial gains and losses are recognized in cumulative other comprehensive income in the “Valuation adjustments” and presented in the statement of shareholders’ equity.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

q. Other Liabilities

Other liabilities are stated at known or measurable amounts plus, if applicable, related charges, monetary restatement, and changes in exchange rates incurred. When applicable, other liabilities are recognized at present value, based on interest rates that reflect the term, currency, and risk of each transaction.

 

r. Foreign Currency Transactions

Foreign currency transactions carried out by the Company or its subsidiaries are remeasured into their functional currency at the exchange rate prevailing at the date of each transaction. Outstanding monetary assets and liabilities of the Company and its subsidiaries are translated using the exchange rate at the date of the reporting period. The effect of the difference between those exchange rates is recognized in profit or loss until the conclusion of each transaction.

 

s. Basis for Translation of Interim Financial Information of Foreign Subsidiaries

Assets and liabilities of the foreign subsidiaries, denominated in currencies other than that of the Company (functional currency: Brazilian Real), which have administrative autonomy, are translated using the exchange rate at the end of the reporting period. Revenues and expenses are translated using the average exchange rate of each year and shareholders’ equity is translated at the historical exchange rate of each transaction affecting shareholders’ equity. Gains and losses resulting from changes in these foreign investments are directly recognized in shareholders’ equity in cumulative other comprehensive income in the “cumulative translation adjustments” and will be recognized in profit or loss if these investments are disposed of. The balance in cumulative other comprehensive income and presented in the shareholders’ equity as cumulative translation adjustments on March 31, 2018 was a gain of R$ 33,665 (gain of R$ 53,061 on December 31, 2017)—see Note 25.g—Cumulative Translation Adjustments.

The foreign subsidiaries with functional currency different from the Company and which have administrative autonomy are listed below:

 

Subsidiary

  

Functional currency

  

Location

Oxiteno México S.A. de C.V.

   Mexican Peso    Mexico

Oxiteno Servicios Corporativos S.A. de C.V.

   Mexican Peso    Mexico

Oxiteno Servicios Industriales de C.V.

   Mexican Peso    Mexico

Oxiteno USA LLC

   U.S. Dollar    United States

Oxiteno Uruguay S.A.(i)

   U.S. Dollar    Uruguay

Oxiteno Andina, C.A.(ii)

   Bolivar    Venezuela

 

(i) The subsidiary Oxiteno Uruguay S.A. (“Oxiteno Uruguay”) determined its functional currency as the U.S. dollar (“US$”), as its inventory sales, purchases of raw material inputs, and financing activities are performed substantially in this currency.
(ii) According the definition and general guidance of IAS 29, the characteristics of the economic environment of Venezuela indicate that this country is a hyperinflationary economy. As a result, the financial information of Oxiteno Andina, C.A. (“Oxiteno Andina”) was adjusted by the Venezuelan Consumer Price Index.

On January 26, 2018, the Venezuelan Central Bank issued Foreign Exchange Regulation No. 39, altering the Venezuelan foreign exchange markets and regulating the DICOM—Tipo de Cambio Complementario Flotante de Mercado Supplemental (Floating Market Exchange) as the legally recognized type of exchange rate, being the Bolivar traded at the variable exchange rate of 49,477.50 VEF/US$ for sale and 49,353.81 VEF/US$ for purchase as of March 31, 2018. The DICOM is applied to all unforeseen currency settlement transactions not expressly set forth in the Foreign Exchange Regulation, which transactions are processed through alternative currency markets.

Assets and liabilities of the other foreign subsidiaries, which do not have administrative autonomy, are considered an extension of the activities of their parent company and are translated using the exchange rate at the end of the reporting period. Gains and losses resulting from changes in these foreign investments are directly recognized as financial income or loss. The loss recognized in income for the three-month period ended March 31, 2018 amounted to R$ 334 (R$ 2,620 gain for the three-month period ended March 31, 2017).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

t. Use of Estimates, Assumptions and Judgments

The preparation of the interim financial information requires the use of estimates, assumptions, and judgments for the accounting of certain assets, liabilities, and income. Therefore, the Company’s and subsidiaries’ management use the best information available at the time of preparation of the interim financial information, as well as the experience of past and current events, also considering assumptions regarding future events. The interim financial information therefore include estimates, assumptions, and judgments related mainly to determining the fair value of financial instruments (Notes 2.c, 2.l, 4, 15 and 33), the determination of the estimated losses on doubtful accounts (Notes 2.d, 5 and 33), the determination of provisions for losses of inventories (Notes 2.e and 6), the determination of deferred income taxes amounts (Notes 2.m and 9), the determination of control in subsidiaries (Notes 2.f, 2.s, 3 and 12.a), the determination of joint control in joint venture (Notes 2.f, 12.a and 12.b), the determination of significant influence in associates (Notes 2.f and 12.c), the determination of exchange rate used to translation of Oxiteno Andina’ information (Note 2.s), the useful lives of property, plant, and equipment (Notes 2.h and 13), the useful lives of intangible assets, and the determination of the recoverable amount of goodwill (Notes 2.j and 14), provisions for assets retirement obligations (Notes 2.n and 20), provisions for tax, civil, and labor risks (Notes 2.o and 21), estimates for the preparation of actuarial reports (Notes 2.p and 19.b) and the determination of fair value of subscription warrants – indemnification (Notes 24 and 33). The actual result of the transactions and information may differ from their estimates.

 

u. Impairment of Assets

The Company and its subsidiaries review, every report period, the existence of any indication that an asset may be impaired and annually test intangible assets with undefined useful life. If there is an indication, the Company and its subsidiaries estimate the recoverable amount of the asset. Assets that cannot be evaluated individually are grouped in the smallest group of assets that generate cash flow from continuous use and that are largely independent of cash flows of other assets (cash generating units “CGU”). The recoverable amount of assets or CGUs corresponds to the greater of their fair value net of applicable direct selling costs and their value in use.

The fair value less costs of disposal is determined by the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, net of costs of removing the asset, and direct incremental costs to bring an asset into condition for its sale, legal costs, and taxes.

To assess the value in use, the Company and its subsidiaries consider the projections of future cash flows, trends, and outlooks, as well as the effects of obsolescence, demand, competition, and other economic factors. Such cash flows are discounted to their present values using the discount rate before tax that reflects market conditions for the period of impairment testing and the specific risks of the asset or CGU being evaluated. In cases where the expected discounted future cash flows are less than their carrying amount, an impairment loss is recognized for the amount by which the carrying value exceeds the fair value of these assets. Losses for impairment of assets are recognized in profit or loss. In case goodwill has been allocated to a CGU, the recognized losses are first allocated to reduce the corresponding goodwill. If the goodwill is not enough to absorb such losses, the surplus is allocated to the assets on a pro-rata basis. An impairment of goodwill cannot be reversed. For other assets, impairment losses may be reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if the impairment had not been recognized.

No impairment was recognized in the present period (see Note 14.i).

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

v.     Business Combination

A business combination is accounted applying the acquisition method. The cost of the acquisition is measured based on the consideration transferred and to be transferred, measured at fair value at the acquisition date. In a business combination, the assets acquired and liabilities assumed are measured in order to classify and allocate them accordingly to the contractual terms, economic circumstances and relevant conditions on the acquisition date. The non-controlling interest in the acquired is measured based on its interest in identifiable net assets acquired. Goodwill is measured as the excess of the consideration transferred and to be transferred over the fair value of net assets acquired (identifiable assets and liabilities assumed, net). After the initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing purposes, goodwill is allocated to the Company’s operating segments. When the cost of the acquisition is lower than the fair value of net assets acquired, a gain is recognized directly in the income statement. Costs related to the acquisition are recorded in the income statement when incurred.

 

w. Statements of Value Added

As required by Brazilian Corporate Law, the Company and its subsidiaries prepare the individual and consolidated statements of value added (“DVA”) according to CPC 09 – Statement of Value Added, as an integral part of the interim financial information as applicable to publicly-traded companies, and as supplemental information for the International Financial Reporting Standards (“IFRS”), which does not require the presentation of DVA.

 

x. Statements of Cash Flows Indirect Method

The Company and its subsidiaries prepared its individual and consolidated statements of cash flows in accordance with IAS 7 (CPC 03)—Cash Flow Statement. The Company and its subsidiaries present the interest paid on loans and debentures in financing activities. The Company and its subsidiaries present financial investments on a net basis of income and redemptions in the investment activities.

 

y. Adoption of the Pronouncements Issued by CPC and IASB

The following standards, amendments, and interpretations to IFRS were issued by the IASB which are effective as of January 1, 2018:

 

     Equivalent
CPC
   Effective
date

•   IFRS 9 – Financial instrument classification and measurement: includes new requirements for the classification and measurement of financial assets and liabilities, derecognition requirements, new impairment methodology for financial instruments, and new hedge accounting guidance.

   48    2018
     

•   IFRS 15 – Revenue from contracts with customers: establish the principles of nature, amount, timing and uncertainty of revenue and cash flow arising from a contract with a customer.

   47    2018

The Company and its subsidiaries disclosed the information to the impacts on the adoption of IFRS 9 (CPC 48) and 15 (CPC 47), in accordance with the new accounting practices introduced by the IASB and immaterial reclassifications and adjustments to the better presentation of the interim financial information: i) the sales revenue previously recognized at the issuance of the invoice, was adjusted to the time of the delivery of the products and ii) segregation of sales and purchase taxes between the sales revenue and the cost of products.

 

(1) IFRS 9 adoption (CPC 48)—Financial instruments

 

  a) Classification and measurement of financial instruments:

The Company and its subsidiaries evaluated the classification and measurement of financial instruments and, based on its business model, concluded that the target is achieved, receiving contractual cash flows and selling financial assets (hold for collect and sell). Accordingly, most part of the financial investments are classified as measured at fair value through other comprehensive income, except for funds that are classified as measured at fair value through profit or loss and financial investments given as collateral for loans that are classified as amortized cost (see Note 2.c).

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

    

12/31/2017

 
    

Classification as previously reported
according to IAS 39 / CPC 38

     New classification according to
IFRS 9 / CPC 48
 
    

Category

   Carrying value      Measured at fair
value through profit
or loss
     Measured at fair value
through other
comprehensive income
     Measured at
amortized cost
 

Financial assets:

              

Cash and cash equivalents

              

Cash and bank deposits

   Loans and receivables      147,926        —          —          147,926  

Financial investments in local currency

   Measured at fair value through profit or loss      4,821,605        —          4,821,605        —    

Financial investments in foreign currency

   Measured at fair value through profit or loss      32,473        32,473        —          —    

Financial investments:

              

Fixed-income securities and funds in local currency

   Available for sale      68,742        —          2,720        66,022  

Fixed-income securities and funds in local currency

   Measured at fair value through profit or loss      1,076,849        1,076,849        —          —    

Fixed-income securities and funds in local currency

   Held to maturity      7,449        —          —          7,449  

Fixed-income securities and funds in foreign currency

   Available for sale      129,131        —          129,131        —    

Currency and interest rate hedging instruments

   Measured at fair value through profit or loss      85,753        85,753        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

        6,396,928        1,195,075        4,953,456        221,397  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

  b) Estimated losses on doubtful accounts

The Company and its subsidiaries assessed the estimated credit losses on doubtful accounts on trade receivables, taking into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the useful life of the contract when the deterioration or improvement of customers’ credit quality (see Note 2.d).

 

  c) Derivative financial instruments

The Company and its subsidiaries have not identified impacts arising from this change keeping the permanence of the application of IAS 39.

 

(2) IFRS 15 adoption (CPC 47)—Revenue recognition from contracts with customers

The Company and its subsidiaries evaluated all the stages for the recognition of their revenues from contracts with customers and based on their diagnosis did not identify material measurement impacts resulting from the adoption of this standard (see Note 2.a).

In relation to the presentation in the income statement, the Company and its subsidiaries evaluated that certain expenses, allocated as selling and marketing until December 31, 2017, shall be better presented as a reduction of revenue, substantially in relation to the amortization expenses of exclusive contracts to operate Ipiranga service station.

The Company and its subsidiaries adopted retrospectively the impacts of the IFRS 9 and 15.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below summarizes the effects of the IFRS 9 (CPC 48) and 15 (CPC 47) adoption, reclassifications and immaterial adjustments:

 

Assets

   As previously
reported
     IFRS 9
adoption(1)
    IFRS 15
adoption(2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Current assets

           

Cash and cash equivalents

     5,002,004        —         —         —         5,002,004  

Financial investments and hedging instruments

     1,283,498        —         —         —         1,283,498  

Trade receivables and reseller financing, net

     4,337,118        (157,198     —         (32,026     4,147,894  

Inventories, net

     3,491,879        —         —         21,698       3,513,577  

Recoverable taxes, net

     881,584        —         —         —         881,584  

Dividends receivable

     11,137        —         —         —         11,137  

Other receivables

     44,025        —         —         —         44,025  

Prepaid expenses, net

     150,046        —         —         —         150,046  

Contractual assets with customers – exclusive rights, net

     —          —         456,213       —         456,213  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     15,201,291        (157,198     456,213       (10,328     15,489,978  

Non-current assets

           

Financial investments and hedging instruments

     84,426        —         —         —         84,426  

Trade receivables and reseller financing, net

     329,991        —         —         —         329,991  

Related parties

     490        —         —         —         490  

Deferred income and social contribution taxes

     545,611        53,447       12,150       2,853       614,061  

Recoverable taxes, net

     313,242        —         —         —         313,242  

Escrow deposits

     822,660        —         —         —         822,660  

Indemnity asset – business combination

     202,352        —         —         —         202,352  

Other receivables

     7,918        —         —           7,918  

Prepaid expenses, net

     346,886        —         —         —         346,886  

Contractual assets with customers – exclusive rights, net

     —          —         1,046,147       —         1,046,147  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total long term assets

     2,653,576        53,447       1,058,297       2,853       3,768,173  

Investments

           

In joint-ventures

     122,061        —         —           122,061  

In associates

     25,341        —         —         —         25,341  

Other

     2,792        —         —           2,792  

Property, plant, and equipment, net

     6,607,788        —         —         26,740       6,634,528  

Intangible assets, net

     3,727,473        —         (1,538,095     (26,740     2,162,638  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     10,485,455        —         (1,538,095     —         8,947,360  

Total non-current assets

     13,139,031        53,447       (479,798     2,853       12,715,533  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     28,340,322        (103,751     (23,585     (7,475     28,205,511  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

23


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

Liabilities

   As previously
reported
    IFRS 9
adoption (1)
    IFRS 15
adoption (2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Current liabilities

          

Loans and hedging instruments

     1,819,766       —         —         —         1,819,766  

Debentures

     1,681,199       —         —         —         1,681,199  

Finance leases

     2,710       —         —         —         2,710  

Trade payables

     2,155,498       —         —         —         2,155,498  

Salaries and related charges

     388,118       —         —         —         388,118  

Taxes payable

     225,829       —         —         (4,300     221,529  

Dividends payable

     338,845       —         —         —         338,845  

Income and social contribution taxes payable

     86,836       —         —         —         86,836  

Post-employment benefits

     30,059       —         —         —         30,059  

Provision for asset retirement obligation

     4,799       —         —         —         4,799  

Provision for tax, civil, and labor risks

     64,550       —         —         —         64,550  

Trade payables – customers and third parties’ indemnification

     72,216       —         —         —         72,216  

Other payables

     125,150       —         —         —         125,150  

Deferred revenue

     18,413       —         —         —         18,413  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     7,013,988       —         —         (4,300     7,009,688  

Non-current liabilities

          

Loans and hedging instruments

     6,113,545       —         —         —         6,113,545  

Debentures

     3,927,569       —         —         —         3,927,569  

Finance leases

     45,805       —         —         —         45,805  

Related parties

     4,185       —         —         —         4,185  

Deferred income and social contribution taxes

     38,524       —         —         —         38,524  

Post-employment benefits

     207,464       —         —         —         207,464  

Provision for asset retirement obligation

     59,975       —         —         —         59,975  

Provision for tax, civil, and labor risks

     861,246       —         —         —         861,246  

Deferred revenue

     12,896       —         —         —         12,896  

Subscription warrants – indemnification

     171,459       —         —         —         171,459  

Other payables

     162,834       —         —         —         162,834  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     11,605,502       —         —         —         11,605,502  

Shareholders’ equity

          

Share capital

     5,171,752       —         —         —         5,171,752  

Equity instrument granted

     536       —         —         —         536  

Capital reserve

     549,778       —         —         —         549,778  

Treasury shares

     (482,260     —         —         —         (482,260

Revaluation reserve on subsidiaries

     4,930       —         —         —         4,930  

Profit reserves

     3,760,079       (103,468     (23,585     (3,175     3,629,851  

Valuation adjustments

     159,643       —         —           159,643  

Cumulative translation adjustments

     53,061       —         —           53,061  

Additional dividends to the minimum mandatory dividends

     163,742       —         —           163,742  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity attributable to:

          

Shareholders of the Company

     9,381,261       (103,468     (23,585     (3,175     9,251,033  

Non-controlling interests in subsidiaries

     339,571       (283     —         —         339,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     9,720,832       (103,751     (23,585     (3,175     9,590,321  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

     28,340,322       (103,751     (23,585     (7,475     28,205,511  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

24


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

     As previously
reported
    IFRS 9
adoption(1)
    IFRS 15
adoption(2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Net revenue from sales and services

     18,727,888       —         (129,942     (53,376     18,544,570  

Cost of products and services sold

     (17,040,851     —         —         53,376       (16,987,475
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,687,037       —         (129,942     —         1,557,095  

Operating income (expenses)

          

Selling and marketing

     (703,339     (24,347     130,536       —         (597,150

General and administrative

     (362,578     —         —         —         (362,578

Gain (loss) on disposal of property, plant and equipment and intangibles

     (6,353     —         —         —         (6,353

Other operating income, net

     56,335       —         —         —         56,335  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income before financial income (expenses) and share of profit of joint ventures and associates

     671,102       (24,347     594       —         647,349  

Financial income

     164,361       —         —         —         164,361  

Financial expenses

     (285,536     —         —         —         (285,536
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial result, net

     (121,175     —         —         —         (121,175

Share of profit of joint ventures and associates

     6,428       —         —         —         6,428  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

     556,355       (24,347     594       —         532,602  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

          

Current

     (190,190     —         —         —         (190,190

Deferred

     4,173       8,278       (157     —         12,294  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (186,017     8,278       (157     —         (177,896

Net income for the period

     370,338       (16,069     437       —         354,706  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

          

Shareholders of the Company

     368,170       (16,069     461       —         352,562  

Non-controlling interests in subsidiaries

     2,168       —         (24     —         2,144  

Earnings per share (based on weighted average number of shares outstanding) – R$

          

Basic

     0.6796             0.6508  

Diluted

     0.6747             0.6461  

 

25


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

     As
previously
reported
    IFRS 9
adoption(1)
    IFRS 15
adoption(2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Cash flows from operating activities

          

Net income for the period

     370,338       (16,069     437       —         354,706  

Adjustments to reconcile net income to cash provided by operating activities

          

Share of loss (profit) of joint ventures and associates

     (6,428     —         —         —         (6,428

Amortization of contractual assets with customers – exclusive rights

     —         —         128,218       —         128,218  

Depreciation and amortization

     295,581       —         (130,537     —         165,044  

PIS and COFINS credits on depreciation

     3,233       —         —         —         3,233  

Asset retirement obligation

     (525     —         —         525       —    

Interest, monetary, and foreign exchange rate variations

     169,046       —         —         —         169,046  

Deferred income and social contribution taxes

     (4,173     (8,278     157       —         (12,294

(Gain) loss on disposal of property, plant and equipment and intangibles

     6,353       —         —         —         6,353  

Estimated losses on doubtful accounts

     —         —         —         15,109       15,109  

Provision for losses in inventories

     —         —         —         2,533       2,533  

Provision for post-employment benefits

     —         —         —         2,703       2,703  

Other provisions and adjustments

     279       —         —         —         279  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     833,704       (24,347     (1,725     20,870       828,502  

(Increase) decrease in current assets

          

Trade receivables and reseller financing

     (20,512     24,347       (1,326     (15,109     (12,600

Inventories

     156,047       —         —         (2,533     153,874  

Contractual assets with customers – exclusive rights

     —         —         (4,527     —         (4,527

Other current asset items

     255,273       —         —         —         255,273  

Increase (decrease) in current liabilities

          

Insurance and other payables

     64,380       —         —         (525     63,855  

Other current liabilities items

     (407,685     —         —         —         (407,685

(Increase) decrease in non-current assets

          

Contractual assets with customers – exclusive rights

     —         —         5,853       —         5,853  

Other non-current asset items

     (102,285     —         —         —         (102,285

Increase (decrease) in non-current liabilities

          

Post-employment benefits

     3,355       —         —         (2,703     652  

Other non-current liabilities items

     (95,449     —         —         —         (95,449

Payments of contractual assets with customers – exclusive rights

     —         —         (146,038     —         (146,038

Income and social contribution taxes paid

     (285,017     —         —         —         (285,017
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     402,171       —         (147,763     —         254,408  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

          

Acquisition of intangible assets

     (180,665     —         147,763       —         (32,902

Other investing activities items

     9,815       —         —         —         9,815  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (170,850     —         147,763       —         (23,087
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

     (948,159     —         —         —         (948,159
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents in foreign currency

     15,356       —         —         —         15,356  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Decrease in cash and cash equivalents

     (701,482     —         —         —         (701,482
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     4,274,158       —         —         —         4,274,158  

Cash and cash equivalents at the end of the period

     3,572,676       —         —         —         3,572,676  

 

26


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The following standards, amendments, and interpretations to IFRS were issued by the IASB are not effective as of March 31, 2018:

 

     Equivalent
CPC
   Effective
date

•   IFRS 16—Lease: requires lessees record, in the financial statements, a liability reflecting future payments of a lease and the right to use an asset for the lease contracts, except for certain short-term leases and low asset value contracts. The criteria for recognition and measurement of leases in the financial statements of lessors are substantially maintained.

   06 (R2)    2019

The Company and its subsidiaries are quantifying the potential effects of this pronouncement, and it is expected to have a relevant impact on the recognition of the right of use and debt related to lease contracts of the land and building of service stations, drugstores and stores due to the number of operating lease contracts of the subsidiaries (see Note 34.c).

 

z. Authorization for Issuance of the Interim Financial Information

These interim financial information were authorized for issue by the Board of Directors on May 2, 2018.

 

3. Principles of Consolidation, Investments in Subsidiaries and Acquisition

 

  a) Principles of Consolidation

In the preparation of the consolidated interim financial information the investments of one company in another, balances of asset and liability accounts, revenues transactions, costs and expenses were eliminated, as well as the effects of transactions conducted between the companies. Non-controlling interests in subsidiaries are presented within consolidated shareholders’ equity and net income.

Consolidation of a subsidiary begins when the parent company obtains direct or indirect control over a company and ceases when the parent company loses control of a company. Income and expenses of a subsidiary acquired are included in the consolidated income statement and other comprehensive income from the date the parent company gains the control. Income and expenses of a subsidiary, in which the parent company loses control, are included in the consolidated income statement and other comprehensive income until the date the parent company loses control.

When necessary, adjustments are made to the interim financial information of subsidiaries to bring their accounting policies into line with the Company’s accounting policies.

 

27


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  b) Investments in Subsidiaries

The consolidated interim financial information include the following direct and indirect subsidiaries:

 

               % interest in the share  
               03/31/2018      12/31/2017  
               Control      Control  
     Location    Segment    Direct
control
     Indirect
control
     Direct
control
     Indirect
control
 

Ipiranga Produtos de Petróleo S.A.

   Brazil    Ipiranga      100        —          100        —    

am/pm Comestíveis Ltda.

   Brazil    Ipiranga      —          100        —          100  

Centro de Conveniências Millennium Ltda.

   Brazil    Ipiranga      —          100        —          100  

Icorban—Correspondente Bancário Ltda.

   Brazil    Ipiranga      —          100        —          100  

Ipiranga Trading Limited

   Virgin Islands    Ipiranga      —          100        —          100  

Tropical Transportes Ipiranga Ltda.

   Brazil    Ipiranga      —          100        —          100  

Ipiranga Imobiliária Ltda.

   Brazil    Ipiranga      —          100        —          100  

Ipiranga Logística Ltda.

   Brazil    Ipiranga      —          100        —          100  

Oil Trading Importadora e Exportadora Ltda.

   Brazil    Ipiranga      —          100        —          100  

Chevron Brasil Lubrificantes S.A. (see Note 3.c)

   Brazil    Ipiranga      —          56        —          —    

Ipiranga Lubrificantes S.A. (see Note 3.c)

   Brazil    Ipiranga      —          100        —          100  

Integra Frotas Ltda.

   Brazil    Ipiranga      —          100        —          —    

Companhia Ultragaz S.A.

   Brazil    Ultragaz      —          99        —          99  

Ultragaz Comercial Ltda.

   Brazil    Ultragaz      —          100        —          —    

Bahiana Distribuidora de Gás Ltda.

   Brazil    Ultragaz      —          100        —          100  

Utingás Armazenadora S.A.

   Brazil    Ultragaz      —          57        —          57  

LPG International Inc.

   Cayman Islands    Ultragaz      —          100        —          100  

Imaven Imóveis Ltda.

   Brazil    Others      —          100        —          100  

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

   Brazil    Extrafarma      —          100        —          100  

Oxiteno S.A. Indústria e Comércio

   Brazil    Oxiteno      100        —          100        —    

Oxiteno Nordeste S.A. Indústria e Comércio

   Brazil    Oxiteno      —          99        —          99  

Oxiteno Argentina Sociedad de Responsabilidad Ltda.

   Argentina    Oxiteno      —          100        —          100  

Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.

   Brazil    Oxiteno      —          100        —          100  

Oxiteno Uruguay S.A.

   Uruguay    Oxiteno      —          100        —          100  

Oxiteno México S.A. de C.V.

   Mexico    Oxiteno      —          100        —          100  

Oxiteno Servicios Corporativos S.A. de C.V.

   Mexico    Oxiteno      —          100        —          100  

Oxiteno Servicios Industriales S.A. de C.V.

   Mexico    Oxiteno      —          100        —          100  

Oxiteno USA LLC

   United States    Oxiteno      —          100        —          100  

Global Petroleum Products Trading Corp.

   Virgin Islands    Oxiteno      —          100        —          100  

Oxiteno Andina, C.A.

   Venezuela    Oxiteno      —          100        —          100  

Oxiteno Europe SPRL

   Belgium    Oxiteno      —          100        —          100  

Oxiteno Colombia S.A.S

   Colombia    Oxiteno      —          100        —          100  

Oxiteno Shanghai LTD.

   China    Oxiteno      —          100        —          100  

Empresa Carioca de Produtos Químicos S.A.

   Brazil    Oxiteno      —          100        —          100  

Ultracargo—Operações Logísticas e Participações Ltda.

   Brazil    Ultracargo      100        —          100        —    

Terminal Químico de Aratu S.A. – Tequimar

   Brazil    Ultracargo      —          99        —          99  

TEAS – Terminal Exportador de Álcool de Santos Ltda. (see Note 3.d)

   Brazil    Ultracargo      —          100        —          —    

Ultrapar International S.A.

   Luxembourg    Others      100        —          100        —    

SERMA—Ass. dos usuários equip. proc. de dados

   Brazil    Others      —          100        —          100  

The percentages in the table above are rounded.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  c) Association with Chevron Brasil Lubrificantes S.A.

On August 4, 2016, the Company through its subsidiary Ipiranga Produtos de Petróleo S.A. (“IPP”) entered into an association agreement with Chevron Brasil Lubrificantes Ltda. (“Chevron”) to create a new company in the lubricants market. The association is formed by Ipiranga’s and Chevron’s lubricants operations in Brazil. On February, 2017, this transaction was approved without restrictions through an opinion issued by the General Superintendence (“SG”) of the Brazilian Antitrust Authority (“CADE”) and published in the Brazilian Federal Official Gazette. On December 1, 2017, the association was concluded, through the contribution of the subsidiary Ipiranga Lubrificantes S.A. (“IpiLubs”) to Chevron Brasil Lubrificantes S.A. (“CBLSA”) and consequently IPP obtained direct control of CBLSA. IPP and Chevron hold 56% and 44%, respectively, of the CBLSA.

The Company is measuring the open balance, fair value of assets and liabilities, and, consequently, the goodwill. The purchase price allocation is being determined and its conclusion is estimated for the fourth quarter of 2018. During the process of identification of assets and liabilities, intangible assets, which are not recognized in the acquired entity’s books, will also be taken into account. The Company, supported by a third party company specialized in valuations, estimated the temporary amount for the purchase price allocation and calculated the temporary goodwill in the amount of R$ 123,673. The temporary goodwill is based on the synergy between the lubricant operations of CBLSA and IpiLubs.

The table below summarizes the temporary assets acquired and liabilities assumed as of the acquisition date (December 1, 2017), subject to the customary final adjustments of purchase price allocation and calculation of goodwill:

 

Current assets

        Current liabilities     

Cash and cash equivalents

     73,316        Trade payables        33,453  

Trade receivables

     157,016        Salaries and related charges        18,251  

Inventories

     112,998        Taxes payable        20,089  

Recoverable taxes

     5,595        Other payables        28,743  

Other receivables

     15,497        
  

 

 

       

 

 

 
     364,422           100,536  

Non-current assets

        Non-current liabilities     

Related parties

     7,077        Provision for tax, civil, and labor risks        202,352  

Indemnity asset

     202,352        Deferred income and social contribution taxes        3,300  

Escrow deposits

     4,095        Post-employment benefits        44,478  

Other receivables

     5,257        

Property, plant, and equipment

     172,526        

Intangible assets

     9,944        
  

 

 

       

 

 

 
     401,251           250,130  
  

 

 

       

 

 

 

Total assets acquired

     765,673        Total liabilities assumed        350,666  
  

 

 

       

 

 

 

Temporary goodwill

     123,673        Participation of non-controlling interests        182,603  
  

 

 

       

 

 

 

Total assets acquired and temporary goodwill

     889,346        Temporary consideration transferred        356,077  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

The calculation of the provisional goodwill is shown below:

 

Temporary consideration transferred

     356,077  

Total assets acquired

     765,673  

Total liabilities assumed

     (350,666

Non-controlling interest

     (182,603
  

 

 

 

Temporary goodwill (see Note 14.i)

     123,673  
  

 

 

 

 

  d) TEAS – Terminal Exportador de Álcool de Santos Ltda. Acquisition

On January 30, 2018, the Company through its subsidiary Terminal Químico de Aratu S.A. – Tequimar (“Tequimar”) entered into a sale and purchase agreement for the acquisition of 100% of the quotas of TEAS Terminal Exportador de Álcool de Santos Ltda. (“TEAS”), owned by Raízen Energia S.A. and Raízen Araraquara Açúcar e Álcool Ltda., which had already been operated by the subsidiary Tequimar in the Port of Santos. The purchase price of the acquisition was R$102,880, subjected to adjustment of working capital and net indebtedness. On February 14, 2018, this transaction was approved without restrictions through an opinion issued by the SG of CADE. On March 2, 2018, CADE issued a certificate, attesting to the approval of the transaction. On March 29, 2018, the acquisition was concluded through the closing of the operation.

The table below summarizes the temporary assets acquired and liabilities assumed as of the acquisition date (March 29, 2018), subject to the customary final adjustments of purchase price allocation and calculation of goodwill:

 

Current assets

        Current liabilities     

Cash and cash equivalents

     3,662        Trade payables        14  
        

 

 

 

Recoverable taxes

     3,830           14  

Other receivables

     15,524        
  

 

 

       
     23,016        
  

 

 

       

Non-current assets

        

Deferred income and social contribution taxes

     1,054        

Escrow deposits

     72        

Property, plant, and equipment

     75,872        
  

 

 

       
     76,998        
  

 

 

       

 

 

 

Total assets acquired

     100,014        Total liabilities assumed        14  
  

 

 

       

 

 

 

Temporary goodwill

     6,240        
  

 

 

       

Total assets acquired and temporary goodwill

     106,254        Temporary consideration transferred        106,240  

 

The calculation of the provisional goodwill is shown below:

  

Temporary consideration transferred

     106,240  

Total assets acquired

     (100,014

Total liabilities assumed

     14  
  

 

 

 

Temporary goodwill (see Note 14.i)

     6,240  
  

 

 

 

For further details of property, plant, and equipment assets acquired, see Note 13.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  e) Unrealized Acquisition

On November 17, 2016, the Company through its subsidiary Companhia Ultragaz S.A. (“Cia Ultragaz”), entered into a sale and purchase agreement for the acquisition of 100% of the capital stock of Liquigás Distribuidora S.A (“Liquigás”). The total transaction amount is R$ 2,665 million and will be adjusted by the Interbank Certificate of Deposit (“CDI”), between the execution date and transaction closing date. The amount will still be subject to adjustments related to the variations in Liquigás’ working capital and net debt between December 31, 2015 and the closing date of the transaction. On January 23, 2017, the Extraordinary General Shareholders’ Meeting (“EGM”) of Ultrapar approved the transaction. The closing of the acquisition were subject to certain usual conditions precedent in transactions of similar nature, mainly the approval by CADE. On February 28, 2018, the Court of Appeals of CADE voted the transaction and despite all the efforts endeavored by the applicants throughout the analysis of the process and the negotiations conducted with the Court of Appeals decided to reject the transaction with the majority of votes. Due to non-compliance of one of the precedent conditions to the consummation of the transaction, Cia. Ultragaz paid a fine of R$ 286,160 in favor of Petróleo Brasileiro S.A. – Petrobras (“Petrobras”) on March 9, 2018 (see Note 29).

 

4. Cash and Cash Equivalents and Financial Investments

Cash equivalents and financial investments, excluding cash and bank deposits, are substantially represented by investments: (i) in Brazil, in certificates of deposit of first-rate financial institutions linked to the CDI, in repurchase agreement and in short term investments funds, whose portfolio comprised exclusively of Brazilian Federal Government bonds; (ii) outside Brazil, in certificates of deposit of first-rate financial institutions and in short term investments funds, whose portfolio comprised of Federal Government bonds; and (iii) in currency and interest rate hedging instruments.

The financial assets were classified in Note 33, based on business model of financial assets of the Company and its subsidiaries.

The balance of cash, cash equivalents and financial investments (consolidated) amounted to R$ 6,239,262 as of March 31, 2018 (R$ 6,369,928 as of December 31, 2017) and are distributed as follows:

 

    Cash and Cash Equivalents

Cash and cash equivalents are considered: (i) cash and bank deposits, and (ii) highly-liquid short-term investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of change in value.

 

     Parent      Consolidated  
     03/31/2018      12/31/2017      03/31/2018      12/31/2017  

Cash and bank deposits

           

In local currency

     301        143        101,897        73,128  

In foreign currency

     —          —          119,061        74,798  

Financial investments considered cash equivalents

           

In local currency

           

Fixed-income securities

     681,100        93,031        4,386,481        4,821,605  

In foreign currency

           

Fixed-income securities

     —          —          60,190        32,473  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     681,401        93,174        4,667,629        5,002,004  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

    Financial Investments

The financial investments of the Company and its subsidiaries, which are not classified as cash and cash equivalents, are distributed as follows:

 

     Parent      Consolidated  
     03/31/2018      12/31/2017      03/31/2018      12/31/2017  

Financial investments

           

In local currency

           

Fixed-income securities and funds

     301,172        21,657        1,202,174        1,153,040  

In foreign currency

           

Fixed-income securities and funds

     —          —          219,991        129,131  

Currency and interest rate hedging instruments (a)

     —          —          149,468        85,753  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total financial investments

     301,172        21,657        1,571,633        1,367,924  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     301,172        21,657        1,482,010        1,283,498  

Non-current

     —          —          89,623        84,426  

 

(a) Accumulated gains, net of income tax (see Note 33).

 

5. Trade Receivables and Reseller Financing (Consolidated)

The composition of trade receivables and reseller financing is as follows:

 

     03/31/2018     12/31/2017
Restated
 

Domestic customers

     4,235,950       4,025,726  

Reseller financing – Ipiranga (i)

     725,930       675,236  

Foreign customers

     217,701       229,701  

(-) Estimated losses on doubtful accounts

     (480,752     (452,778
  

 

 

   

 

 

 

Total

     4,698,829       4,477,885  
  

 

 

   

 

 

 

Current

     4,351,254       4,147,894  

Non-current

     347,575       329,991  

 

(i) Reseller financing is provided for renovation and upgrading of service stations, purchase of products, and development of the automotive fuels and lubricants distribution market.

The breakdown of trade receivables, gross of estimated losses on doubtful accounts, is as follows:

 

                   Past due  
     Total      Current      less than
30 days
     31-60
days
     61-90
days
     91-180
days
     more than
180 days
 

03/31/2018

     5,179,581        4,285,880        141,441        70,118        61,940        97,394        522,808  

03/31/2017

     4,930,663        4,070,523        200,939        46,491        48,197        87,812        476,701  

Movements in the estimated losses on doubtful accounts are as follows:

 

Balance as of December 31, 2017

     295,580  

IFRS 15 adoption

     157,198  
  

 

 

 

Balance as of December 31, 2017—Restated

     452,778  

Additions

     30,996  

Write-offs

     (3,022
  

 

 

 

Balance as of March 31, 2018

     480,752  
  

 

 

 

For further information about estimated losses on doubtful accounts see Note 33 – Customer credit risk.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

6. Inventories (Consolidated)

The composition of inventories is as follows:

 

     03/31/2018      12/31/2017
Restated
 
     Cost      Provision
for losses
    Net
balance
     Cost      Provision
for losses
    Net
balance
 

Fuels, lubricants and greases

     1,493,179        (3,117     1,490,062        1,626,449        (3,074     1,623,375  

Finished goods

     524,835        (22,084     502,751        500,223        (18,495     481,728  

Work in process

     2,704        —         2,704        1,637        —         1,637  

Raw materials

     404,872        (1,288     403,584        492,029        (1,835     490,194  

Liquefied petroleum gas (LPG)

     83,217        (5,761     77,456        102,748        (5,761     96,987  

Consumable materials and other items for resale

     140,860        (3,406     137,454        160,024        (5,380     154,644  

Pharmaceutical, hygiene, and beauty products

     484,585        (2,532     482,053        417,726        (2,447     415,279  

Purchase for future delivery(1)

     215,126        —         215,126        222,808        —         222,808  

Properties for resale

     27,032        (107     26,925        27,032        (107     26,925  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     3,376,410        (38,295     3,338,115        3,550,676        (37,099     3,513,577  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) Refers substantially to ethanol, biodiesel and advance of fuels.

Movements in the provision for losses are as follows:

 

Balance as of December 31, 2017

     37,099  

Additions to net realizable value adjustment

     4,571  

Reversals of obsolescence and other losses

     (3,375
  

 

 

 

Balance as of March 31, 2018

     38,295  
  

 

 

 

The breakdown of provisions for losses related to inventories is shown in the table below:

 

     03/31/2018      12/31/2017  

Net realizable value adjustment

     24,388        19,817  

Obsolescence and other losses

     13,907        17,282  
  

 

 

    

 

 

 

Total

     38,295        37,099  
  

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

7. Recoverable Taxes

Recoverable taxes are substantially represented by credits of Tax on Goods and Services (“ICMS”, the Brazilian VAT), Contribution for Social Security Financing (COFINS), Social Integration Program (PIS), Income Tax (IRPJ), and Social Contribution (CSLL).

 

     Parent      Consolidated  
     03/31/2018      12/31/2017      03/31/2018     12/31/2017  

ICMS

     —          —          611,164       580,630  

Provision for ICMS losses(1)

     —          —          (73,104     (72,076

PIS and COFINS

     —          —          306,865       348,333  

IRPJ and CSLL

     83,958        81,755        334,423       295,172  

Value-Added Tax (IVA) of foreign subsidiaries

     —          —          32,148       27,180  

Others

     —          —          13,050       15,587  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

     83,958        81,755        1,224,546       1,194,826  
  

 

 

    

 

 

    

 

 

   

 

 

 

Current

     35,273        33,070        899,053       881,584  

Non-current

     48,685        48,685        325,493       313,242  

 

(1) The provision for ICMS losses relates to tax credits that the subsidiaries believe will not be utilized or offset in the future based on its estimative, and its movements are as follows:

 

Balance as of December 31, 2017

     72,076  

Additions, write-offs and reversals, net

     1,028  
  

 

 

 

Balance as of March 31, 2018

     73,104  
  

 

 

 

 

8. Related Parties

 

a. Related Parties

 

    Parent Company

 

     Assets      Liabilities         
     Debentures(1)      Account
payable
     Financial
income(1)
 

Ipiranga Produtos de Petróleo S.A.

     774,850        —          14,009  

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

     —          5,757        —    
  

 

 

    

 

 

    

 

 

 

Total as of March 31, 2018

     774,850        5,757        14,009  
  

 

 

    

 

 

    

 

 

 

 

     Assets      Liabilities     

 

 
     Debentures(1)      Other
payables(2)
     Account
payable
     Financial
income(1)
 

Ipiranga Produtos de Petróleo S.A.

     762,562        —          —          27,208  

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

     —          —          4,003        —    

Oxiteno S.A. Indústria e Comércio

     —          3,086        —          —    

Companhia Ultragaz S.A.

     —          1,585        —          —    

Terminal Químico de Aratu S.A.—Tequimar

     —          2,768        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total as of December 31, 2017

     762,562        7,439        4,003     
  

 

 

    

 

 

    

 

 

    

Total as of March 31, 2017

              27,208  
           

 

 

 

 

(1) In March 2016, the subsidiary IPP made its second private offering in one single series of 75 debentures at face value of R$ 10,000,000.00 (ten million Brazilian Reais) each, nonconvertible into shares and unsecured. The Company subscribed the total debentures with maturity on March 31, 2021 and semiannual interest linked to CDI.
(2) Refers to the Deferred Stock Plan (see Note 8.c).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

    Consolidated

Balances and transactions between the Company and its subsidiaries have been eliminated in consolidation and are not disclosed in this note. The balances and transactions between the Company and its subsidiaries with other related parties are disclosed below:

 

     Loans      Commercial transactions  
     Assets      Liabilities      Receivables(1)      Payables(1)  

Oxicap Indústria de Gases Ltda.

     —          —          —          4,305  

Química da Bahia Indústria e Comércio S.A.

     —          2,946        —          —    

ConectCar Soluções de Mobilidade Eletrônica S.A.

     —          —          4,457        213  

Refinaria de Petróleo Riograndense S.A.

     —          —          —          15,123  

Others

     490        1,230        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total as of March 31, 2018

     490        4,176        4,457        19,641  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Loans      Commercial transactions  
     Assets      Liabilities      Receivables(1)      Payables(1)  

Oxicap Indústria de Gases Ltda.

     —          —          —          1,489  

Química da Bahia Indústria e Comércio S.A.

     —          2,946        —          —    

ConectCar Soluções de Mobilidade Eletrônica S.A.

     —          —          1,067        31  

Refinaria de Petróleo Riograndense S.A.

     —          —          —          22,199  

Others

     490        1,239        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total as of December 31, 2017

     490        4,185        1,067        23,719  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Included in “trade receivables” and “trade payables,” respectively.

 

     Commercial transactions  
     Sales and services      Purchases  

Oxicap Indústria de Gases Ltda

     2        4,305  

Refinaria de Petróleo Riograndense S.A.

     —          251,851  

ConectCar Soluções de Mobilidade Eletrônica S.A.

     1,431        720  
  

 

 

    

 

 

 

Total as of March 31, 2018

     1,433        256,876  
  

 

 

    

 

 

 

 

     Commercial transactions  
     Sales and services      Purchases  

Oxicap Indústria de Gases Ltda

     2        4,026  

Refinaria de Petróleo Riograndense S.A.

     —          174,142  

ConectCar Soluções de Mobilidade Eletrônica S.A.

     567        729  
  

 

 

    

 

 

 

Total as of March 31, 2017

     569        178,897  
  

 

 

    

 

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Purchase and sale transactions relate substantially to the purchase of raw materials, feedstock, transportation, and storage services based on similar market prices and terms with customers and suppliers with comparable operational performance. The above operations related to ConectCar Soluções de Mobilidade Eletrônica S.A. (“ConectCar”) refer to services provided. Borrowing agreements are for an indeterminate period and do not contain interest clauses. In the opinion of the Company and its subsidiaries’ management, transactions with related parties are not subject to credit risk, which is why no allowance for doubtful accounts or collateral is provided. Collateral provided by the Company in loans of subsidiaries and affiliates are mentioned in Note 15.k). Intercompany loans are contracted in light of temporary cash surpluses or deficits of the Company, its subsidiaries, and its associates.

 

b. Key executives (Consolidated)

The Company’s compensation strategy combines short and long-term elements, following the principles of alignment of interests and of maintaining a competitive compensation, and is aimed at retaining key officers and remunerating them adequately according to their attributed responsibilities and the value created to the Company and its shareholders.

Short-term compensation is comprised of: (a) fixed monthly compensation paid with the objective of rewarding the executive’s experience, responsibility, and his/her position’s complexity, and includes salary and benefits such as medical coverage, check-up, life insurance, and others; (b) variable compensation paid annually with the objective of aligning the executive’s and the Company’s objectives, which is linked to: (i) the business performance measured through its economic value creation and (ii) the fulfillment of individual annual goals that are based on the strategic plan and are focused on expansion and operational excellence projects, people development and market positioning, among others. In addition, the chief executive officer in office until October 2, 2017 was entitled to additional long term variable compensation, which was terminated with the succession of the chief executive officer announced by the Company in June, 2017. Further details about the Deferred Stock Plan are contained in Note 8.c) and about post-employment benefits in Note 19.b).

The Company and its subsidiaries recognized expenses for compensation of its key executives (Company’s directors and executive officers) as shown below:

 

     03/31/2018      03/31/2017  

Short-term compensation

     10,588        10,770  

Stock compensation

     1,558        1,373  

Post-employment benefits

     547        807  

Long-term compensation

     —          1,123  
  

 

 

    

 

 

 

Total

     12,693        14,073  
  

 

 

    

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

c. Deferred Stock Plan (Consolidated)

Since 2003, Ultrapar has adopted a stock plan in which the executive has the usufruct of shares held in treasury. The Deferred Stock Plan provides for the transfer of the ownership of the shares to those eligible members of management after five to seven years from the initial concession of the rights subject to uninterrupted employment of the participant during the period. The volume of shares and the executives eligible are determined by the Board of Directors, and there is no mandatory annual grant. The total number of shares to be used in the plan is subject to the number of shares in treasury. Ultrapar’s Board of Directors does not have a stock plan. The fair value of the awards were determined on the grant date based on the market value of the shares on the B3 S.A. – Brasil, Bolsa, Balcão (“B3”), the Brazilian Securities, Commodities and Futures Exchange and the amounts are amortized between five to seven years from the grant date.

The table below summarizes shares granted to the Company and its subsidiaries’ management:

 

Grant date

   Balance of
number of
shares granted
     Vesting period      Market price of
shares on the
grant date
(in R$ per share)
     Total
grant costs,
including taxes
     Accumulated
recognized
grant costs
    Accumulated
unrecognized
grant costs
 

March 13, 2017

     100,000        2022 to 2024        67.99        9,378        (1,725     7,653  

March 4, 2016

     190,000        2021 to 2023        65.43        17,147        (6,067     11,080  

December 9, 2014

     570,000        2019 to 2021        50.64        39,814        (22,540     17,274  

March 5, 2014

     83,400        2019 to 2021        52.15        5,999        (4,160     1,839  

November 7, 2012

     199,998        2017 to 2019        42.90        18,309        (16,395     1,914  

December 14, 2011

     40,000        2016 to 2018        31.85        5,272        (5,104     168  
  

 

 

          

 

 

    

 

 

   

 

 

 
     1,183,398              95,919        (55,991     39,928  
  

 

 

          

 

 

    

 

 

   

 

 

 

For the three-month period ended March 31, 2018, the amortization in the amount of R$ 3,591 (R$ 4,508 for the three-month period ended March 31, 2017) was recognized as a general and administrative expense.

In addition, on April 19, 2017, the Ordinary and Extraordinary General Shareholders’ Meeting (“OEGM”) of approved a new incentive plan based on shares (“Plan”), which establishes the general terms and conditions for the concession of common shares issued by the Company and held in treasury, that may or may not involve the granting of usufruct of part of these shares for later transfer of the ownership of the shares, in periods of 3 to 6 years, to directors or employees of the Company or its subsidiaries. The information in this incentive plan reflect both plans.

As a result of the Plan, common shares representing at most 1% of the Company’s share capital may be delivered to the Participants, which corresponds, at the date of approval of this Plan, to 5,564,051 common shares.

The Board of Directors approved the 1st Restricted stock program and the 1st Restricted stock and performance program, as follows:

 

Program

  

Grant date

   Balance of
number of
shares
granted
    

Vesting period

   Market price of
shares on the
grant date
(in R$ per share)
     Total
grant costs,
including taxes
     Accumulated
recognized
grant costs
    Accumulated
unrecognized
grant costs
 

Restricted

   October 1, 2017      120,000      2023      76.38        12,642        (1,054     11,588  

Restricted and Performance

   November 8, 2017      46,270      2020 to 2022      76.38        5,901        (642     5,259  
     

 

 

          

 

 

    

 

 

   

 

 

 
        166,270              18,543        (1,696     16,847  
     

 

 

          

 

 

    

 

 

   

 

 

 

For the three-month period ended March, 2018, a general and administrative expense in the amount of R$ 912 was recognized in relation to the Plan.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

9. Income and Social Contribution Taxes

 

a. Deferred Income and Social Contribution Taxes

The Company and its subsidiaries recognize deferred tax assets and liabilities which are not subject to the statute of limitations, resulting from tax loss carryforwards, temporary differences, negative tax bases and revaluation of property, plant, and equipment, among others. Deferred tax assets are sustained by the continued profitability of their operations. Deferred IRPJ and CSLL are recognized under the following main categories:

 

     Parent      Consolidated  
     03/31/2018     12/31/2017      03/31/2018     12/31/2017  
                        Restated  

Assets—Deferred income and social contribution taxes on:

         

Provision for impairment of assets

     —         —          106,994       103,092  

Provisions for tax, civil, and labor risks

     —         —          145,468       145,767  

Provision for post-employment benefits

     —         —          83,132       81,199  

Provision for differences between cash and accrual basis

     —         —          31,698       40,755  

Goodwill

     —         —          15,393       14,234  

Business combination – fiscal basis vs. accounting basis of goodwill

     —         —          75,138       74,972  

Provision for asset retirement obligation

     —         —          17,974       19,111  

Other provisions

     29,551       29,158        134,314       158,952  

Tax losses and negative basis for social contribution carryforwards (9.d)

     —         —          343,928       201,471  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     29,551       29,158        954,039       839,553  
  

 

 

   

 

 

    

 

 

   

 

 

 

Offset the liabilities balance

     (70     —          (243,189     (225,492
  

 

 

   

 

 

    

 

 

   

 

 

 

Net balance of assets

     29,481       29,158        710,850       614,061  
  

 

 

   

 

 

    

 

 

   

 

 

 

Liabilities—Deferred income and social contribution taxes on:

         

Revaluation of property, plant, and equipment

     —         —          2,079       2,109  

Lease

     —         —          3,363       3,361  

Provision for differences between cash and accrual basis

     —         —          47,314       44,440  

Provision for goodwill/negative goodwill

     —         —          147,353       131,811  

Business combination – fair value of assets

     —         —          45,217       45,414  

Temporary differences of foreign subsidiaries

     —         —          324       955  

Other provisions

     70       —          35,365       35,926  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     70       —          281,015       264,016  
  

 

 

   

 

 

    

 

 

   

 

 

 

Offset the assets balance

     (70     —          (243,189     (225,492
  

 

 

   

 

 

    

 

 

   

 

 

 

Net balance of liabilities

     —         —          37,826       38,524  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Changes in the net balance of deferred IRPJ and CSLL are as follows:

 

     03/31/2018      03/31/2017  
            Restated  

Initial balance

     507,087        409,699  

IFRS 9 and 15 adoption

     68,450        42,275  

Deferred IRPJ and CSLL recognized in income of the year

     92,531        12,294  

Deferred IRPJ and CSLL recognized in other comprehensive income

     3,510        (29,015

Deferred IRPJ and CSLL recognized in business combination (see Note 3.d)

     1,054        —    

Others

     392        (476
  

 

 

    

 

 

 

Final balance

     673,024        434,777  
  

 

 

    

 

 

 

The estimated recovery of deferred tax assets relating to IRPJ and CSLL is stated as follows:

 

     Parent      Consolidated  

Up to 1 Year

     —          183,904  

From 1 to 2 Years

     9,851        121,283  

From 2 to 3 Years

     9,850        177,760  

From 3 to 5 Years

     9,850        115,873  

From 5 to 7 Years

     —          233,909  

From 7 to 10 Years

     —          121,310  
  

 

 

    

 

 

 

Total of deferred tax assets relating to IRPJ and CSLL

     29,551        954,039  
  

 

 

    

 

 

 

The technical study on Extrafarma’s projection of taxable profits for the realization of deferred tax assets was reviewed by the Fiscal Council on February 20, 2018 and approved by the Company’s Board of Directors on February 21, 2018, taking into account implementation of the actions proposed by the subsidiary’s management, among them, the operational restructuring and the expansion of stores.

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b. Reconciliation of Income and Social Contribution Taxes

IRPJ and CSLL are reconciled to the statutory tax rates as follows:

 

     Parent     Consolidated  
     03/31/2018     03/31/2017(1)     03/31/2018(1)     03/31/2017  
                       Restated  

Income (loss) before taxes and share of profit (loss) of subsidiaries, joint ventures, and associates

     (868     (6,210     105,364       526,174  

Statutory tax rates—%

     34       34       34       34  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes at the statutory tax rates

     295       2,111       (35,824     (178,899
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to the statutory income and social contribution taxes:

        

Nondeductible expenses (i)

     (79     (27     (17,829     (12,704

Nontaxable revenues (ii)

     11       —         3,596       1,244  

Adjustment to estimated income (iii)

     —         —         2,655       3,211  

Other adjustments

     6       7       1,398       1,725  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes before tax incentives

     233       2,091       (46,004     (185,423
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax incentives—SUDENE

     —         —         16,472       7,527  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes in the income statement

     233       2,091       (29,532     (177,896
  

 

 

   

 

 

   

 

 

   

 

 

 

Current

     (89     (1,121     (122,063     (190,190

Deferred

     322       3,212       92,531       12,294  

Effective IRPJ and CSLL rates—%

     26.8       33.7       28.0       33.8  

 

(i) Nondeductible expenses consist of certain expenses that cannot be deducted for tax purposes under applicable tax legislation, such as expenses with fines, donations, gifts, losses of assets, negative effects of foreign subsidiaries and certain provisions;
(ii) Nontaxable revenues consist of certain gains and income that are not taxable under applicable tax legislation, such as the reimbursement of taxes and the reversal of certain provisions; and
(iii) Brazilian tax law allows for an alternative method of taxation for companies that generated gross revenues of up to R$ 78 million in their previous fiscal year. Certain subsidiaries of the Company adopted this alternative form of taxation, whereby income and social contribution taxes are calculated on a basis equal to 32% of operating revenues, as opposed to being calculated based on the effective taxable income of these subsidiaries. The adjustment to estimated income represents the difference between the taxation under this alternative method and the income and social contribution taxes that would have been paid based on the effective statutory rate applied to the taxable income of these subsidiaries.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

c. Tax Incentives—SUDENE

The following subsidiaries are entitled to federal tax benefits providing for IRPJ reduction under the program for development of northeastern Brazil operated by the Superintendence for the Development of the Northeast (“SUDENE”):

 

Subsidiary

   Units   Incentive—%    Expiration

Bahiana Distribuidora de Gás Ltda.

   Aracaju base(1)   75    2017
   Suape base   75    2018
   Mataripe base   75    2024
   Caucaia base   75    2025
   Juazeiro base(2)   75    2026

Terminal Químico de Aratu S.A. – Tequimar

   Suape terminal   75    2020
   Aratu terminal   75    2022
   Itaqui terminal   75    2025

Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.

   Camaçari plant   75    2021

Oxiteno Nordeste S.A. Indústria e Comércio

   Camaçari plant   75    2026

Empresa Carioca de Produtos Químicos S.A.

   Camaçari plant   75    2026

 

(1) The first semester of 2018, the subsidiary will request to SUDENE the extension of the tax incentive for another 10 years.
(2) On July 3, 2017, the subsidiary Bahiana Distribuidora de Gás Ltda. (“Bahiana”), filed a request at SUDENE requiring the 75% income tax reduction incentive, due to productive unit implementation for its Juazeiro plant – Bahia. SUDENE approved the incentive until 2026 through an appraisal report issued on November 7, 2017. The constitutive benefit appraisal report was forwarded to the Brazilian Federal Revenue Service (“RFB”), on November 27, 2017, for approval within a term of 120 days. As a result of the expiration of the statutes of limitation for the RFB to approve the constitutive benefit appraisal report, the income tax reduction was recognized by the subsidiary in the income statement in 2018, in the total amount of R$ 149 with retroactive effect to January 2017.

 

d. Income and Social Contribution Taxes Carryforwards

As of March 31, 2018, certain subsidiaries of the Company had tax loss carryforwards related to income tax (IRPJ) of R$ 1,016,512 (R$ 598,183 as of December 31, 2017) and negative basis of CSLL of R$ 997,773 (R$ 576,949 as of December 31, 2017), whose compensations are limited to 30% of taxable income in a given tax year, which do not expire. Based on these values, the Company and its subsidiaries recognized deferred income and social contribution tax assets in the amount of R$ 343,928 as of March 31, 2018 (R$ 201,471 as of December 31, 2017).

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

10. Prepaid expenses (Consolidated)

 

     03/31/2018      12/31/2017  

Rents(1)

     361,380        329,421  

Advertising and publicity

     67,743        67,321  

Deferred Stock Plan, net (see Note 8.c)

     33,267        37,591  

Insurance premiums

     30,170        39,629  

Software maintenance

     7,437        8,237  

Other prepaid expenses

     23,574        14,733  
  

 

 

    

 

 

 
     523,571        496,932  
  

 

 

    

 

 

 

Current

     146,576        150,046  

Non-current

     376,995        346,886  

 

(1) Refers substantially to the rental advance of service stations of IPP, which are subsequently subleased and operated by the resellers.

 

11. Contractual Assets with customers – exclusive rights (Consolidated)

Refers to exclusive rights disbursements of Ipiranga’s agreements with reseller service stations and major consumers that are recognized at the time of their occurrence and recognized as a reduction of the sales revenue in the income statement according to the conditions established in the agreement (amortization in weighted average term of 5 years) and are reviewed as changes occur under the terms of the agreements. Balance and changes are shown below:

 

     03/31/2018     03/31/2017  
           Restated  

Initial balance

     —         —    

IFRS 15 adoption

     1,502,360       1,438,084  
  

 

 

   

 

 

 

Initial balance – restated

     1,502,360       1,438,084  

Additions

     95,866       146,038  

Amortizations

     (104,513     (128,218

Transfers

     213       (1,326
  

 

 

   

 

 

 

Final balance

     1,493,926       1,454,578  
  

 

 

   

 

 

 
    

Current

     456,811       452,843  

Non-current

     1,037,115       1,001,735  

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

12. Investments

 

a. Subsidiaries and Joint Venture (Parent Company)

The table below presents the full amounts of balance sheets and income statements of subsidiaries and joint venture:

 

     03/31/2018  
     Subsidiaries      Joint-venture  
     Ultracargo—Operações
Logísticas e
Participações Ltda.
     Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
    Ultrapar
International

S.A.
     Refinaria de
Petróleo
Riograndense S.A.
 

Number of shares or units held

     11,839,764        35,102,127       224,467,228,244       49,995        5,078,888  

Assets

     1,191,122        5,425,288       16,784,096       2,519,049        524,323  

Liabilities

     2,502        2,848,017       11,701,700       2,505,533        355,817  

Shareholders’ equity

     1,188,620        2,577,271 (*)      5,082,396 (*)      13,516        168,506  

Net revenue from sales and services

     —          287,631       16,992,310       —          458,656  

Net income (loss)

     23,341        20,415 (*)      29,828 (*)      395        6,822  

% of capital held

     100        100       100       100        33  

 

     12/31/2017—Restated  
     Subsidiaries      Joint-venture  
     Ultracargo—Operações
Logísticas e
Participações Ltda.
     Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
    Ultrapar
International

S.A.
     Refinaria de
Petróleo
Riograndense S.A.
 

Number of shares or units held

     11,839,764        35,102,127       224,467,228,244       49,995        5,078,888  

Assets

     1,167,912        5,434,041       17,092,490       2,472,924        517,439  

Liabilities

     2,486        2,752,027       11,684,775       2,459,803        352,583  

Shareholders’ equity

     1,165,426        2,682,014 (*)      5,407,715 (*)      13,121        164,856  

% of capital held

     100        100       100       100        33  

 

     03/31/2017—Restated  
     Subsidiaries      Joint-venture  
     Ultracargo—Operações
Logísticas e
Participações Ltda.
     Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
    Ultrapar
International

S.A.
     Refinaria de
Petróleo
Riograndense S.A.
 

Number of shares or units held

     11,839,764        35,102,127       224,467,228,244       49,995        5,078,888  

Net revenue from sales and services

     —          273,814       15,668,427       —          341,232  

Net income (loss)

     11,724        101,606 (*)      231,614 (*)      1,723        30,159  

% of capital held

     100        100       100       100        33  

 

(*) adjusted for intercompany unrealized profits.

The percentages in the table above are rounded.

The financial information from our business segments is detailed in Note 32.

 

43


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Balances and changes in subsidiaries and joint venture are as follows:

 

     Investments in subsidiaries     Joint-venture         
     Ultracargo –
Operações
Logísticas e
Participações
Ltda.
    Oxiteno
S.A.
Indústria e
Comércio
    Ipiranga
Produtos
de Petróleo
S.A.
    Ultrapar
International
S.A.
     Total     Refinaria
de Petróleo
Riograndense
S.A.
     Total  

Balance as of December 31, 2017

     1,165,430       2,684,541       5,535,397       13,121        9,398,489       54,739        9,453,228  

Effects of IFRS adoption

     (4     (2,526     (127,698     —          (130,228     —          (130,228
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of January 1, 2018

     1,165,426       2,682,015       5,407,699       13,121        9,268,261       54,739        9,323,000  

Share of profit (loss) of subsidiaries and joint venture

     23,341       20,415       29,813       395        73,964       526        74,490  

Dividends and interest on equity (gross)

     —         (97,849     (353,824     —          (451,673     —          (451,673

Tax liabilities on equity—method revaluation reserve

     —         —         (1     —          (1     —          (1

Equity instrument granted

     7       20       586       —          613       —          613  

Valuation adjustment of subsidiaries

     (154     (8,214     (1,612     —          (9,980     686        (9,294

Translation adjustments of foreign-based subsidiaries

     —         (19,116     (280     —          (19,396     —          (19,396
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of March 31, 2018

     1,188,620       2,577,271       5,082,381       13,516        8,861,788       55,951        8,917,739  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

     Investments in subsidiaries     Joint-venture         
     Ultracargo –
Operações
Logísticas e
Participações
Ltda.
    Oxiteno
S.A.
Indústria e
Comércio
    Ipiranga
Produtos
de Petróleo
S.A.
    Ultrapar
International
S.A.
     Total     Refinaria
de Petróleo
Riograndense
S.A.
     Total  

Balance as of December 31, 2016

     1,194,739       2,549,859       4,434,954       10,548        8,190,100       45,409        8,235,509  

Effects of IFRS adoption

     (111     (3,253     (79,063     —          (82,427     —          (82,427
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of January 1, 2017—Restated

     1,194,628       2,546,606       4,355,891       10,548        8,107,673       45,409        8,153,082  

Share of profit (loss) of subsidiaries and joint venture

     11,724       101,606       231,614       1,723        346,667       10,014        356,681  

Dividends and interest on equity (gross)

     (105,913     —         —         —          (105,913     —          (105,913

Tax liabilities on equity—method revaluation reserve

     —         —         (10     —          (10     —          (10

Valuation adjustment of subsidiaries

     —         34,097       14,239       —          48,336       596        48,932  

Translation adjustments of foreign-based subsidiaries

     —         1,322       —         —          1,322       —          1,322  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of March 31, 2017—Restated

     1,100,439       2,683,631       4,601,734       12,271        8,398,075       56,019        8,454,094  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b. Joint Ventures (Consolidated)

The Company holds an interest in Refinaria de Petróleo Riograndense (“RPR”), which is primarily engaged in oil refining.

The subsidiary Ultracargo – Operações Logísticas e Participações Ltda. (“Ultracargo Participações”) holds an interest in União Vopak – Armazéns Gerais Ltda. (“União Vopak”), which is primarily engaged in liquid bulk storage in the port of Paranaguá.

The subsidiary IPP holds an interest in ConectCar, which is primarily engaged in electronic payment of tolls and parking in the States of Alagoas, Bahia, Ceará, Espírito Santo, Goiás, Maranhão, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Pernambuco, Rio de Janeiro, Rio Grande do Sul, Santa Catarina, São Paulo and Distrito Federal.

These investments are accounted for under the equity method of accounting based on their interim financial information as of March 31, 2018.

Balances and changes in joint ventures are as follows:

 

     Movements in investments  
     União Vopak      RPR      ConectCar     Total  

Balance as of December 31, 2017

     6,096        54,739        61,226       122,061  

Capital increase

     —          —          8,000       8,000  

Valuation adjustments

     —          686        —         686  

Share of profit (loss) of joint ventures

     634        526        (4,679     (3,519
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2018

     6,730        55,951        64,547       127,228  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

     Movements in investments  
     União Vopak      RPR      ConectCar     Total  

Balance as of December 31, 2016

     4,518        45,409        66,215       116,142  

Valuation adjustments

     —          596        —         596  

Share of profit (loss) of joint ventures

     296        10,014        (4,342     5,968  
  

 

 

    

 

 

    

 

 

   

 

 

 

Balance as of March 31, 2017

     4,814        56,019        61,873       122,706  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

45


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below presents the full amounts of balance sheets and income statements of joint ventures:

 

     03/31/2018  
     União Vopak     RPR     ConectCar  

Current assets

     8,754       387,886       97,995  

Non-current assets

     6,786       136,437       137,873  

Current liabilities

     1,824       289,431       105,451  

Non-current liabilities

     256       66,386       1,324  

Shareholders’ equity

     13,460       168,506       129,093  

Net revenue from sales and services

     4,448       458,656       13,450  

Costs, operating expenses and income

     (2,629     (449,488     (27,977

Net financial income and income and social contribution taxes

     (550     (2,346     5,170  

Net income (loss)

     1,269       6,822       (9,357

Number of shares or units held

     29,995       5,078,888       193,768,000  

% of capital held

     50       33       50  

 

     12/31/2017  
     União Vopak      RPR      ConectCar  

Current assets

     7,110        389,022        90,242  

Non-current assets

     6,627        128,417        132,785  

Current liabilities

     1,210        297,762        100,564  

Non-current liabilities

     336        54,821        12  

Shareholders’ equity

     12,191        164,856        122,451  

Number of shares or units held

     29,995        5,078,888        169,860,500  

% of capital held

     50        33        50  

 

     03/31/2017  
     União Vopak     RPR     ConectCar  

Net revenue from sales and services

     3,342       341,232       5,780  

Costs, operating expenses and income

     (2,508     (298,428     (19,996

Net financial income and income and social contribution taxes

     (242     (12,644     5,532  

Net income (loss)

     592       30,159       (8,684

Number of shares or units held

     29,995       5,078,888       145,860,500  

% of capital held

     50       33       50  

The percentages in the table above are rounded.

 

46


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

c. Associates (Consolidated)

Subsidiary IPP holds an interest in Transportadora Sulbrasileira de Gás S.A., which is primarily engaged in natural gas transportation services.

Subsidiary Oxiteno S.A. Indústria e Comércio (“Oxiteno S.A”) holds an interest in Oxicap Indústria de Gases Ltda. (“Oxicap”), which is primarily engaged in the supply of nitrogen and oxygen for its shareholders in the Mauá petrochemical complex.

Subsidiary Oxiteno Nordeste S.A. Indústria e Comércio (“Oxiteno Nordeste”) holds an interest in Química da Bahia Indústria e Comércio S.A., which is primarily engaged in manufacturing, marketing, and processing of chemicals. The operations of this associate are currently suspended.

Subsidiary Cia. Ultragaz holds an interest in Metalúrgica Plus S.A., which is primarily engaged in the manufacture and trading of LPG containers. The operations of this associate are currently suspended.

Subsidiary IPP holds an interest in Plenogás Distribuidora de Gás S.A., which is primarily engaged in the marketing of LPG. The operations of this associate are currently suspended.

The investment of subsidiary Oxiteno S.A. in the associate Oxicap is accounted for under the equity method of accounting based on its financial information as of February 28, 2018, while the other associates are valued based on the interim financial information as of March 31, 2018.

Balances and changes in associates are as follows:

 

     Movements in investments  
     Transportadora
Sulbrasileira de
Gás S.A.
    Oxicap
Indústria de
Gases Ltda.
     Química da
Bahia
Indústria e
Comércio
S.A.
     Metalúrgica
Plus S.A.
    Plenogás
Distribuidora
de Gás S.A.
    Total  

Balance as of December 31, 2017

     6,348       14,458        3,618        340       577       25,341  

Dividends

     (245     —          —          —         (100     (345

Share of profit (loss) of associates

     217       291        —          (50     80       538  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2018

     6,320       14,749        3,618        290       557       25,534  
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

 

     Movements in investments  
     Transportadora
Sulbrasileira de
Gás S.A.
    Oxicap
Indústria de
Gases Ltda.
     Química da
Bahia
Indústria e
Comércio
S.A.
    Metalúrgica
Plus S.A.
    Plenogás
Distribuidora
de Gás S.A.
     Total  

Balance as of December 31, 2016

     6,001       12,981        3,678       71       —          22,731  

Dividends

     (287     —          —         —         —          (287

Share of profit (loss) of associates

     260       237        (1     (36     —          460  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

Balance as of March 31, 2017

     5,974       13,218        3,677       35       —          22,904  
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

 

 

47


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below presents the full amounts of balance sheets and income statements of associates:

 

     03/31/2018  
     Transportadora
Sulbrasileira de
Gás S.A.
    Oxicap
Indústria de
Gases Ltda.
    Química da
Bahia
Indústria e
Comércio
S.A.
    Metalúrgica
Plus S.A.
    Plenogás
Distribuidora
de Gás S.A.
 

Current assets

     10,291       39,913       68       19       715  

Non-current assets

     16,166       77,146       10,278       1,311       2,821  

Current liabilities

     849       7,566       1       32       403  

Non-current liabilities

     332       8,148       3,109       427       1,460  

Shareholders’ equity

     25,276       101,345       7,236       871       1,673  

Net revenue from sales and services

     2,585       13,082       —         —         —    

Costs, operating expenses and income

     (1,567     (10,083     (5     (155     242  

Net financial income and income and social contribution taxes

     (56     (1,079     6       5       (1

Net income (loss)

     962       1,920       1       (150     241  

Number of shares or units held

     20,124,996       1,987       1,493,120       3,000       1,384,308  

% of capital held

     25       15       50       33       33  

 

     12/31/2017  
     Transportadora
Sulbrasileira de
Gás S.A.
     Oxicap
Indústria de
Gases Ltda.
     Química da
Bahia
Indústria e
Comércio
S.A.
     Metalúrgica
Plus S.A.
     Plenogás
Distribuidora
de Gás S.A.
 

Current assets

     11,218        45,061        67        175        505  

Non-current assets

     16,464        74,621        10,278        1,695        2,821  

Current liabilities

     1,960        12,338        —          422        93  

Non-current liabilities

     332        7,920        3,110        427        1,500  

Shareholders’ equity

     25,390        99,424        7,235        1,021        1,733  

Number of shares or units held

     20,124,996        1,987        1,493,120        3,000        1,384,308  

% of capital held

     25        15        50        33        33  

 

     03/31/2017  
     Transportadora
Sulbrasileira de
Gás S.A.
    Oxicap
Indústria de
Gases Ltda.
    Química da
Bahia
Indústria e
Comércio
S.A.
    Metalúrgica
Plus S.A.
    Plenogás
Distribuidora
de Gás S.A.
 

Net revenue from sales and services

     2,596       11,735       —         —         —    

Costs, operating expenses and income

     (1,541     (12,422     (17     (56     31  

Net financial income and income and social contribution taxes

     11       2,256       14       (9     22  

Net income (loss)

     1,066       1,569       (3     (65     53  

Number of shares or units held

     20,124,996       1,987       1,493,120       3,000       1,384,308  

% of capital held

     25       15       50       33       33  

The percentages in the table above are rounded.

 

48


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

13.     Property, Plant, and Equipment (Consolidated)

Balances and changes in property, plant, and equipment are as follows:

 

     Weighted
average useful
life (years)
     Balance
on
12/31/2017
    Reclassifications
and
adjustments
    Balance on
12/31/2017—Restated
    Additions      Depreciation     Transfer     Write-
offs and
disposals
    Effect of foreign
currency
exchange rate
variation
    Opening
balance
TEAS(*)
    Balance
on
03/31/2018
 

Cost:

                        

Land

     —          579,174       —         579,174       —          —         1,926       —         (3,827     32,718       609,991  

Buildings

     30        1,639,867       —         1,639,867       754        —         35,371       (371     (25,970     20,847       1,670,498  

Leasehold improvements

     9        912,555       —         912,555       890        —         22,630       (28     2       —         936,049  

Machinery and equipment

     12        4,721,931       —         4,721,931       31,528        —         29,521       514       (259,347     36,934       4,561,081  

Automotive fuel/lubricant distribution equipment and facilities

     13        2,721,075       —         2,721,075       28,693        —         23,435       (9,108     —         —         2,764,095  

LPG tanks and bottles

     11        643,697       49,158       692,855       27,131        —         2,552       (8,282     —         —         714,256  

Vehicles

     6        287,295       —         287,295       8,656        —         5,761       (6,520     (1,765     —         293,427  

Furniture and utensils

     9        266,494       —         266,494       2,610        —         1,748       (133     (9,858     56       260,917  

Construction in progress

     —          929,000       —         929,000       183,884        —         (121,337     (582     5,917       —         996,882  

Advances to suppliers

     —          112,167       —         112,167       1,141        —         (2,690     —         (4,163     —         106,455  

Imports in progress

     —          786       —         786       60        —         (310     —         —         —         536  

IT equipment

     5        353,022       —         353,022       3,828        —         590       (585     387       6       357,248  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        13,167,063       49,158       13,216,221       289,175        —         (803     (25,095     (298,624     90,561       13,271,435  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation:

                        

Buildings

        (724,408     —         (724,408     —          (13,201     (450     371       27,052       (4,434     (715,070

Leasehold improvements

        (475,651     —         (475,651     —          (18,719     846       29       —         —         (493,495

Machinery and equipment

        (2,980,166     —         (2,980,166     —          (65,599     1,979       162       258,811       (10,229     (2,795,042

Automotive fuel/lubricant distribution equipment and facilities

        (1,545,806     —         (1,545,806     —          (38,526     5       8,470       —         —         (1,575,857

LPG tanks and bottles

        (305,965     (22,418     (328,383     —          (22,432     (2,347     5,300       —         —         (347,862

Vehicles

        (112,200     —         (112,200     —          (7,032     —         3,732       1,778       —         (113,722

Furniture and utensils

        (148,575     —         (148,575     —          (4,204     (149     121       9,670       (20     (143,157

IT equipment

        (260,859     —         (260,859     —          (7,262     132       576       (458     (6     (267,877
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (6,553,630     (22,418     (6,576,048     —          (176,975     16       18,761       296,853       (14,689     (6,452,082
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for losses:

                        

Advances to suppliers

        (83     —         (83     —          —         —         —         —         —         (83

Land

        (104     —         (104     —          —         —         —         —         —         (104

Leasehold improvements

        (564     —         (564     —          —         —         —         (3     —         (567

Machinery and equipment

        (4,724     —         (4,724     —          —         —         —         (8     —         (4,732

Automotive fuel/lubricant distribution equipment and facilities

        (169     —         (169     —          —         —         3       —         —         (166

Furniture and utensils

        (1     —         (1     —          —         —         —         —         —         (1
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (5,645     —         (5,645     —          —         —         3       (11     —         (5,653
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net amount

        6,607,788       26,740       6,634,528       289,175        (176,975     (787     (6,331     (1,782     75,872       6,813,700  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*) See Note 3.d.

Construction in progress relates substantially to expansions, renovations, construction and upgrade of industrial facilities, terminals, stores, service stations and distribution bases.

Advances to suppliers is related basically to manufacturing of assets for expansion of plants, terminals, stores, bases, and acquisition of real estate.

 

49


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

14. Intangible Assets (Consolidated)

Balances and changes in intangible assets are as follows:

 

     Weighted
average useful
life (years)
     Balance on
12/31/2017
    IFRS 15
adoption
    Balance on
12/31/2017 –
Restated
    Additions      Amortization     Transfer     Write-
offs and
disposals
    Effect of foreign
currency
exchange rate
variation
    Opening
balance
TEAS
(*)
    Balance on
03/31/2018
 

Cost:

                        

Goodwill(i)

     —          1,578,157       —         1,578,157       —          —         —         —         —         6,240       1,584,397  

Software(ii)

     5        853,079       —         853,079       69,061        —         798       (16     (319     49       922,652  

Technology(iii)

     5        32,617       —         32,617       —          —         —         —         —         —         32,617  

Commercial property rights(iv)

     10        55,069       —         55,069       1,805        —         —         (917     —         —         55,957  

Distribution rights

     2        4,273,379       (4,145,189     128,190       —          —         (347     —         —         —         127,843  

Brands(v)

     —          113,543       —         113,543       —          —         —         —         196       —         113,739  

Others(vi)

     20        40,514       —         40,514       43        —         —         —         203       —         40,760  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        6,946,358       (4,145,189     2,801,169       70,909        —         451       (933     80       6,289       2,877,965  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization:

                        

Software

        (456,799     —         (456,799     —          (16,909     (14     16       574       (49     (473,181

Technology

        (32,541     —         (32,541     —          (18     —         —         —         —         (32,559

Commercial property rights

        (21,292     —         (21,292     —          (1,145     —         917       —         —         (21,520

Distribution rights

        (2,677,057     2,580,354       (96,703     —          (2,596     124       —         —         —         (99,175

Others

        (31,196     —         (31,196     —          (1,453     —         —         (4     —         (32,653
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (3,218,885     2,580,354       (638,531     —          (22,121     110       933       570       (49     (659,088
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        3,727,473       (1,564,835     2,162,638       70,911        (22,121     561       —         648       6,240       2,218,877  
     

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(*) See Note 3.d.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

i) The balance of the goodwill is tested annually for impairment and presents the following balances:

 

     Segment      03/31/2018      12/31/2017  

Goodwill on the acquisition of:

        

Extrafarma

     Extrafarma        661,553        661,553  

Ipiranga(1)

     Ipiranga        276,724        276,724  

União Terminais

     Ultracargo        211,089        211,089  

CBLSA(2)

     Ipiranga        123,673        123,673  

Texaco

     Ipiranga        177,759        177,759  

Oxiteno Uruguay

     Oxiteno        44,856        44,856  

Temmar

     Ultracargo        43,781        43,781  

DNP

     Ipiranga        24,736        24,736  

Repsol

     Ultragaz        13,403        13,403  

TEAS(3)

     Ultracargo        6,240        —    

Others

     Oxiteno        583        583  
     

 

 

    

 

 

 
        1,584,397        1,578,157  
     

 

 

    

 

 

 

 

(1) Including R$ 246,163 in the parent.
(2) See Note 3.c.
(3) See Note 3.d.

On December 31, 2017, the Company tested the balances of goodwill shown in the table above for impairment. The determination of value in use involves assumptions, judgments, and estimates of cash flows, such as growth rates of revenues, costs and expenses, estimates of investments and working capital, and discount rates. The assumptions about growth projections and future cash flows are based on the Company’s business plan of its operating segments, as well as comparable market data, and represent management’s best estimate of the economic conditions that will exist over the economic life of the various CGUs, to which goodwill is related. The main key-assumptions used by the Company to calculate the value in use are described below:

Period of evaluation: the evaluation of the value in use is calculated for a period of five years (except the Extrafarma segment), after which we calculate the perpetuity, considering the possibility of carrying the business on indefinitely. For the Extrafarma segment, a period of 10 years was used due to its expansion plan and a four-year period to maturity of new stores were considered.

Discount and real growth rates: on December 31, 2017, the discount and real growth rates used to extrapolate the projections ranged from 9.6% to 12.7% and from 0% to 1% p.a., respectively, depending on the CGU analyzed. For the subsidiary Oxiteno Andina, due to the macroeconomic scenario in Venezuela, the discount rate used was 803.8%.

Revenue from sales and services, costs and expenses, and gross margin: for 2018, the budget prepared by management and approved by the Board of Directors was considered. In subsequent periods, the Company considers the forecast of the general inflation or price index predicted in the contracts.

Opening of new commercial points (investments): for 2018, the budget prepared by the management and approved by the Board of Directors was considered. In subsequent periods, the Company considers the expansion plans of each business unit, which also considers the commercial establishments closed in the previously years.

The goodwill impairment tests and net assets of the Company and its subsidiaries did not result in the recognition of impairment for the year ended December 31, 2017. The Company assessed a sensitivity analysis of discount and growth rate of perpetuity, due to their significant impact on cash flows and value in use. An increase of 0.5 percentage points in the discount rate or a decrease of 0.5 percentage points in the growth rate of the perpetuity of the cash flow of each business segment would not result in the recognition of impairment.

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

ii) Software includes user licenses and costs for the implementation of the various systems used by the Company and its subsidiaries, such as: integrated management and control, financial management, foreign trade, industrial automation, operational and storage management, accounting information, and other systems.

iii) The subsidiaries Oxiteno S.A., Oxiteno Nordeste and Oleoquímica Indústria e Comércio de Produtos Químicos Ltda. (“Oleoquímica”) recognize as technology certain rights of use held by them. Such licenses include the production of ethylene oxide, ethylene glycols, ethanolamines, glycol ethers, ethoxylates, solvents, fatty acids from vegetable oils, fatty alcohols, and specialty chemicals, which are products that are supplied to various industries.

iv) Commercial property rights include those described below:

 

  Subsidiary Tequimar has an agreement with CODEBA – Companhia das Docas do Estado da Bahia, which allows it to explore the area in which the Aratu Terminal is located for 20 years, renewable for a similar period. The price paid by Tequimar was R$ 12,000, which is being amortized from August 2002 to July 2042.

 

  Subsidiary Tequimar has a lease contract for an area adjacent to the Port of Santos for 20 years from December 2002, renewable for a similar period, which allows the construction, operation, and use of a terminal for liquid bulk unloading, tank storage, handling, and distribution. The price paid by Tequimar was R$ 4,334, which is being amortized from August 2005 to December 2022.

 

  Subsidiary Extrafarma pays key money to obtain certain commercial establishments to open drugstores which is stated at the cost of acquisition, amortized using the straight-line method, considering the lease contract terms. In the case of the closedown of stores, the residual amount is written off.

v) Brands are represented by the acquisition cost of the ‘am/pm’ brand in Brazil and of the Extrafarma brand.

vi) Other intangibles refer mainly to the loyalty program “Clube Extrafarma”.

The amortization expenses were recognized in the interim financial information as shown below:

 

     03/31/2018      03/31/2017  
            Restated  

Inventories and cost of products and services sold

     2,911        4,023  

Selling and marketing

     3,199        3,286  

General and administrative

     16,011        13,078  
  

 

 

    

 

 

 
     22,121        20,387  
  

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

15. Loans, Debentures, and Finance Leases (Consolidated)

 

a. Composition

 

Description

   03/31/2018      12/31/2017     

Index/Currency

   Weighted average
financial charges
03/31/2018 –% p.a.
     Maturity  

Foreign currency – denominated loans:

              

Notes in the foreign market (b) (*)

     2,500,130        2,454,142      US$      +5.3        2026  

Foreign loan (c.1) (*)

     795,546        788,794      US$ + LIBOR (i)      +1.0        2018 to 2022  

Foreign loan (c.2 and c.3)

     300,537        298,927      US$ + LIBOR (i)      +2.0        2018  

Foreign loan (c.1) (*)

     259,647        259,015      US$      +2.2        2018  

Financial institutions (e)

     534,051        330,755      US$ + LIBOR (i)      +2.1        2019 to 2023  

Financial institutions (e)

     114,567        106,745      US$      +2.8        2018 to 2022  

Financial institutions (e)

     33,452        27,048      MX$(ii)      +8.5        2018  

Foreign currency advances delivered

     38,522        26,080      US$      +2.6        < 70 days  

Advances on foreign exchange contracts

     66,859        44,515      US$      +2.9        < 79 days  

BNDES (d)

     3,819        4,460      US$      +6.4        2018 to 2020  

Financial institutions (e)

     18,282        3,382      MX$ + TIIE (ii)      +1.5        2018  

Financial institutions (e)

     40        593      Bs$(vii)      +24.0        2018  
  

 

 

    

 

 

          

Subtotal foreign currency

     4,665,452        4,344,456           
  

 

 

    

 

 

          

Brazilian Reais – denominated loans:

              

Debentures—Ipiranga (g.1, g.3,and g.5)

     2,885,202        2,836,741      CDI      105.8        2018 to 2022  

Banco do Brasil – floating rate (f)

     2,646,193        2,794,272      CDI      107.4        2018 to 2022  

Debentures – 5th and 6th issuance (g.2 and g.7)

     1,728,137        817,654      CDI      105.3        2023  

Debentures – CRA (g.4 and g.6)

     1,403,289        1,380,852      CDI      95.0        2022  

Debentures – CRA (g.4 and g.6) (*)

     580,213        554,402      IPCA      +4.6        2024  

BNDES (d)

     217,101        206,423      TJLP (iii)      +2.4        2018 to 2023  

Export Credit Note – floating rate (h)

     157,648        157,749      CDI      101.5        2018  

BNDES (d)

     65,325        69,422      SELIC (vi)      +2.3        2018 to 2023  

BNDES EXIM

     62,866        62,754      TJLP (iii)      +3.5        2018  

Finance leases (i)

     47,893        48,515      IGP-M (v)      +5.6        2018 to 2031  

FINEP

     32,346        35,611      R$      +4.0        2018 to 2021  

FINEP

     32,163        32,682      TJLP (iii)      +1.1        2018 to 2023  

Banco do Nordeste do Brasil

     23,390        28,136      R$      +8.5        2018 to 2021  

BNDES EXIM

     31,346        30,850      SELIC (vi)      +3.9        2018  

BNDES (d)

     22,862        26,270      R$      +5.6        2018 to 2022  

FINAME

     53        56      TJLP (iii)      +5.7        2018 to 2022  
  

 

 

    

 

 

          

Subtotal Brazilian Reais

     9,936,027        9,082,389           
  

 

 

    

 

 

          

Total foreign currency and Brazilian Reais

     14,601,479        13,426,845           

Currency and interest rate hedging instruments (**)

     178,832        163,749           
  

 

 

    

 

 

          

Total

     14,780,311        13,590,594           
  

 

 

    

 

 

          

Current

     2,890,358        3,503,675           
  

 

 

    

 

 

          

Non-current

     11,889,953        10,086,919           
  

 

 

    

 

 

          

 

(*) These transactions were designated for hedge accounting (see Note 33 – Hedge Accounting).
(**) Accumulated losses (see Note 33).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

(i) LIBOR = London Interbank Offered Rate.

 

(ii) MX$ = Mexican Peso; TIIE = the Mexican interbank balance interest rate.

 

(iii) TJLP (Long-term Interest Rate) = set by the National Monetary Council, TJLP is the basic financing cost of Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”), the Brazilian Development Bank. On March 31, 2018, TJLP was fixed at 6.75% p.a.

 

(iv) Contract linked to the rate of FNE (Northeast Constitutional Financing Fund) fund whose purpose is to promote the development of the industrial sector, managed by Banco do Nordeste do Brasil. On March 31, 2018, the FNE interest rate was 10% p.a. FNE grants a discount of 15% on the interest rate for timely payments.

 

(v) IGP-M = General Market Price Index is a measure of Brazilian inflation, calculated by the Getúlio Vargas Foundation.

 

(vi) SELIC = basic interest rate set by the Brazilian Central Bank.

 

(vii) Bs$ = Bolívar.

The changes in loans, debentures and finance leases are shown below:

 

Balance as of December 31, 2017

     13,426,845  

New loans and debentures with cash effect

     2,081,068  

Interest accrued

     203,432  

Principal payment and financial leases

     (1,075,281

Interest payment

     (84,273

Monetary variation

     33,312  

Change in fair value

     16,376  
  

 

 

 

Balance as of March 31, 2018

     14,601,479  
  

 

 

 

The long-term consolidated debt had the following principal maturity schedule:

 

     03/31/2018      12/31/2017  

From 1 to 2 years

     1,713,168        1,826,907  

From 2 to 3 years

     1,643,024        894,640  

From 3 to 4 years

     618,034        1,302,450  

From 4 to 5 years

     4,843,436        3,016,406  

More than 5 years

     3,072,291        3,046,516  
  

 

 

    

 

 

 
     11,889,953        10,086,919  
  

 

 

    

 

 

 

As provided in IAS 39 (CPC 8 (R1)), the transaction costs and issuance premiums associated with debt issuance by the Company and its subsidiaries were added to their financial liabilities, as shown in Note 15.j).

The Company’s management entered into hedging instruments against foreign exchange and interest rate variations for a portion of its debt obligations (see Note 33).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b. Notes in the Foreign Market

On October 6, 2016, the subsidiary Ultrapar International S.A. (“Ultrapar International”) issued US$ 750 million in notes in the foreign market, maturing in October 2026, with interest rate of 5.25% p. a., paid semiannually. The issue price was 98.097% of the face value of the note. The notes were guaranteed by the Company and its subsidiary IPP. The Company has designated hedge relationships for this transaction (see Note 33 – Hedge accounting: cash flow hedge and net investment hedge in foreign entities).

As a result of the issuance of the notes in the foreign market, the Company and its subsidiaries are required to perform certain obligations, including:

 

  Restriction on sale of all or substantially all assets of the Company and subsidiaries Ultrapar International and IPP.

 

  Restriction on encumbrance of assets exceeding US$ 150 million or 15% of the amount of the consolidated tangible assets.

The Company and its subsidiaries are in compliance with the levels of covenants required by this debt. The restrictions imposed on the Company and its subsidiaries are customary in transactions of this nature and have not limited their ability to conduct their business to date.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

c. Foreign Loans

 

1) The subsidiary IPP has foreign loans in the amount of US$ 320 million. IPP also contracted hedging instruments with floating interest rate in U.S. dollar and exchange rate variation, changing the foreign loans charges, on average, to 102.9% of CDI (see Note 33). IPP designated these hedging instruments as a fair value hedge; therefore, loans and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss. The foreign loans are secured by the Company.

The foreign loans have the maturity distributed as follows:

 

Maturity

   US$(million)      Cost in % of CDI  

Jul/18

     60.0        103.0  

Sep/18

     80.0        101.5  

Nov/18

     80.0        101.4  

Jun/22

     100.0        105.0  
  

 

 

    

 

 

 

Total / average cost

     320.0        102.9  
  

 

 

    

 

 

 

 

2) The subsidiary LPG International Inc. has a foreign loan in the amount of US$ 30 million with maturity in December 2018 and interest rate of LIBOR + 1.85% p.a., paid quarterly. The foreign loan is guaranteed by the Company and its subsidiary IPP.

During these contracts, the Company shall maintain the following financial ratios, calculated based on its audited consolidated interim financial information:

 

  Maintenance of a financial ratio, determined by the ratio between consolidated net debt and consolidated Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), at less than or equal to 3.5.

 

  Maintenance of a financial ratio determined by the ratio between consolidated EBITDA and consolidated net financial expenses, higher than or equal to 1.5.

The Company complies with the levels of covenants required by these loans. The restrictions imposed on the Company and its subsidiaries are usual for this type of transaction and have not limited their ability to conduct their business to date.

 

3) The subsidiary Global Petroleum Products Trading Corporation (“GPPTC”) has a foreign loan in the amount of US$ 60 million with maturity on June 22, 2020 and interest of LIBOR + 2.0% p.a., paid quarterly. The Company, through the subsidiary Cia. Ultragaz, contracted hedging instruments subject to floating interest rates in dollar and exchange rate variation, changing the foreign loan charge to 105.9% of CDI. The foreign loan is guaranteed by the Company and its subsidiary Oxiteno Nordeste.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

d. BNDES

The subsidiaries have financing from BNDES for some of their investments and for working capital.

During the term of these agreements, the Company must maintain the following capitalization and current liquidity levels, as determined in the annual consolidated audited balance sheet:

 

  Capitalization level: shareholders’ equity / total assets equal to or above 0.3; and

 

  Current liquidity level: current assets / current liabilities equal to or above 1.3.

The Company complies with the levels of covenants required by these loans. The restrictions imposed on the Company and its subsidiaries are usual for this type of transaction and have not limited their ability to conduct their business to date.

 

e. Financial Institutions

The subsidiaries Oxiteno Mexico S.A. de C.V., Oxiteno USA LLC (“Oxiteno USA”), Oxiteno Uruguay and Oxiteno Andina have loans to finance investments and working capital.

The subsidiary Oxiteno USA has loans with bearing interest of LIBOR + 2.1% and maturity as shown below:

 

     US$  

Maturity

   Millions  

2020-Sep

     20.0  

2021-Feb

     40.0  

2022-Oct

     40.0  

2023-Mar

     60.0  
  

 

 

 

Total

     160.0  
  

 

 

 

The proceeds of this loan are being used in the working capital and to fund the construction of a new alkoxylation plant in the state of Texas.

 

f. Banco do Brasil

The subsidiary IPP has floating interest rate loans with Banco do Brasil to finance the marketing, processing, or manufacturing of agricultural goods (ethanol).

These loans mature, as follows (accrued interest until March 31, 2018):

 

Maturity

      

2018-Apr

     102,311  

2019-Feb

     168,239  

2019-May

     1,362,117  

2020-May

     337,842  

2021-May

     337,842  

2022-May

     337,842  
  

 

 

 

Total

     2,646,193  
  

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

g. Debentures

 

1) In January 2014, the subsidiary IPP made its second issuance of public debentures, in a single series of 80,000 simple, nominative, registered debentures, nonconvertible into shares and unsecured, which main characteristics are as follows:

 

Face value unit:    R$10,000.00
Final maturity:    December 20, 2018
Payment of the face value:    Lump sum at final maturity
Interest:    107.9% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

 

2) In March 2015, the Company made its fifth issuance of debentures, in a single series of 80,000 simple, nonconvertible into shares, unsecured debentures, which main characteristics are as follows:

 

Face value unit:    R$10,000.00
Final maturity:    March 16, 2018
Payment of the face value:    Lump sum at final maturity
Interest:    108.25% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

The debentures were settled by the Company on the maturity date.

 

3) In May 2016, the subsidiary IPP made its fourth issuance of public debentures, in one single series of 500 simple, nominative, registered debentures, nonconvertible into shares and unsecured, which main characteristics are as follows:

 

Face value unit:    R$1,000,000.00
Final maturity:    May 25, 2021
Payment of the face value:    Annual as from May 2019
Interest:    105.0% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

4) In April 2017, the subsidiary IPP carried out its fifth issuance of debentures, in two single series of 660,139 and 352,361, simple, nonconvertible into shares, nominative, book-entry and unsecured debentures. The debentures have been subscribed by Eco Consult – Consultoria de Operações Financeiras Agropecuárias Ltda. The proceeds from this issuance has been used exclusively for the purchase of ethanol.

The debentures were later assigned and transferred to Eco Securitizadora de Direitos Creditórios do Agronegócio S.A. that acquired these agribusiness credit rights with the purpose to bind the issuance of Certificates of Agribusiness Receivables (CRA). The debentures have an additional guarantee from Ultrapar and the main characteristics of the debentures are as follows:

 

Face value unit:    R$1,000.00
Final maturity:    April 18, 2022
Payment of the face value:    Lump sum at final maturity
Interest:    95% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

 

Face value unit:    R$1,000.00
Final maturity:    April 15, 2024
Payment of the face value:    Lump sum at final maturity
Interest:    IPCA + 4.7%
Payment of interest:    Annually
Reprice:    Not applicable

The subsidiary IPP contracted hedging instruments subjected to IPCA variation, changing the debentures charges linked to IPCA to 93.9% of CDI. IPP designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.

 

5) In July 2017, the subsidiary IPP made its sixth issuance of public debentures, in one single series of 1,500,000 simple, nonconvertible into shares and unsecured debentures, which main characteristics are as follows:

 

Face value unit:    R$1,000.00
Final maturity:    July 28, 2022
Payment of the face value:    Annual as from July 2021
Interest:    105.0% of CDI
Payment of interest:    Annually
Reprice:    Not applicable

 

6) In October 2017, the subsidiary IPP carried out its seventh issuance of debentures in the amount of R$ 944,077, in two single series of 730,384 and 213,693, simple, nonconvertible into shares, nominative, book-entry and unsecured debentures. The debentures have been subscribed by Vert Companhia Securitizadora. The proceeds from this issuance has been used exclusively for the purchase of ethanol.

The debentures were later assigned and transferred to Vert Créditos Ltda, that acquired these agribusiness credit rights with the purpose to bind the issuance of Certificates of Agribusiness Receivables (CRA). The financial settlement occurred on November 1, 2017. The debentures have an additional guarantee from Ultrapar and the main characteristics of the debentures are as follows:

 

Face value unit:    R$1,000.00
Final maturity:    October 24, 2022
Payment of the face value:    Lump sum at final maturity
Interest:    95% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Face value unit:    R$1,000.00
Final maturity:    October 24, 2024
Payment of the face value:    Lump sum at final maturity
Interest:    IPCA + 4.33%
Payment of interest:    Annually
Reprice:    Not applicable

The subsidiary IPP contracted hedging instruments subjected to IPCA variation, changing the debentures charges linked to IPCA to 97.3% of CDI. IPP designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.

 

7) In March 2018, the Company made its sixth issuance of public debentures, in a single series of 1,725,000 simple, nonconvertible into shares and unsecured debentures, which main characteristics are as follows:

 

Face value unit:    R$1,000.00
Final maturity:    March 5, 2023
Payment of the face value:    Lump sum at final maturity
Interest:    105.25% of CDI
Payment of interest:    Semiannually
Reprice:    Not applicable

The debentures have maturity dates distributed as shown below (accrued interest until March 31, 2018).

 

Maturity

      

2018-Dec

     814,865  

2021-May

     507,800  

2022-Apr

     666,738  

2022-Jul

     1,562,536  

2022-Oct

     736,550  

2023-Mar

     1,728,138  

2024-Apr

     366,931  

2024-Oct

     213,283  
  

 

 

 

Total

     6,596,841  
  

 

 

 

 

h. Export Credit Note

The subsidiary Oxiteno Nordeste has export credit note contract in the amount of R$ 156.8 million, with maturity in May 2018, and floating rate of 101.5% of CDI, paid quarterly.

 

i. Finance Leases

The subsidiary Cia. Ultragaz has a finance lease contract related to LPG bottling facilities, maturing in April 2031.

The amounts of equipment and intangible assets, net of depreciation and amortization, and the amounts of the corresponding liabilities are shown below:

 

     03/31/2018      12/31/2017  

Equipment and intangible assets, net of depreciation and amortization

     14,847        15,732  

Financing (present value)

     47,893        48,515  
  

 

 

    

 

 

 

Current

     2,743        2,710  

Non-current

     45,150        45,805  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The future disbursements (installments) assumed under these contracts are presented below:

 

     03/31/2018      12/31/2017  

Up to 1 year

     5,113        5,113  

From 1 to 2 years

     5,113        5,113  

From 2 to 3 years

     5,113        5,113  

From 3 to 4 years

     5,113        5,113  

From 4 to 5 years

     5,113        5,113  

More than 5 years

     41,334        42,611  
  

 

 

    

 

 

 

Total

     66,899        68,176  
  

 

 

    

 

 

 

The above amounts include Services Tax (“ISS”) payable on the monthly installments, except for disbursements for the LPG bottling facilities.

 

j. Transaction Costs

Transaction costs incurred in issuing debt were deducted from the value of the related financial instruments and are recognized as an expense according to the effective interest rate method, as follows:

 

     Effective rate
of transaction
costs (% p.a.)
     Balance on
12/31/2017
     Incurred
cost
     Amortization     Balance on
03/31/2018
 

Notes in the foreign market (15.b)

     0.0        15,298        —          (341     14,957  

Banco do Brasil (15.f)

     0.2        8,065        —          (1,101     6,964  

Debentures (15.g)

     0.2        44,709        3,740        (2,287     46,162  

Foreign loans (15.c)

     0.1        1,213        —          (280     933  

Other

     0.2        2,801        366        (226     2,941  
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        72,086        4,106        (4,235     71,957  
     

 

 

    

 

 

    

 

 

   

 

 

 

The amount to be appropriated to profit or loss in the future is as follows:

 

     Up to 1
year
     1 to 2
years
     2 to 3
years
     3 to 4
years
     4 to 5
years
     More
than 5
years
     Total  

Notes in the foreign market (15.b)

     1,406        1,484        1,567        1,654        1,747        7,099        14,957  

Banco do Brasil (15.f)

     4,760        1,262        548        326        68        —          6,964  

Debentures (15.g)

     9,827        9,794        9,877        9,686        4,801        2,177        46,162  

Foreign loans (15.c)

     691        174        68        —          —          —          933  

Other

     775        932        684        360        190        —          2,941  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     17,459        13,646        12,744        12,026        6,806        9,276        71,957  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

k. Guarantees

The financings are guaranteed by collateral in the amount of R$ 67,152 as of March 31, 2018 (R$ 66,337 as of December 31, 2017) and by guarantees and promissory notes in the amount of R$ 9,917,088 as of March 31, 2018 (R$ 9,587,971 as of December 31, 2017).

In addition, the Company and its subsidiaries offer collateral in the form of letters of credit for commercial and legal proceedings in the amount of R$ 280,849 as of March 31, 2018 (R$ 237,537 as of December 31, 2017) and did not have guarantees related to raw materials imported by the subsidiary IPP as of March 31, 2018 (R$ 81,046 as of December 31, 2017).

Some subsidiaries of Oxiteno issue collateral to financial institutions in connection with the amounts owed by some of their customers to such institutions (vendor financing). If a subsidiary is required to make any payment under these collaterals, this subsidiary may recover the amount paid directly from its customers through commercial collection. The maximum amount of future payments related to these collaterals is R$ 2,741 as of March 31, 2018 (R$ 8,224 as of December 31, 2017), with maturities of up to 90 days. Until March 31, 2018, the subsidiaries did not have losses in connection with these collaterals. The fair value of collaterals recognized in current liabilities as other payables is R$ 68 as of March 31, 2018 (R$ 205 as of December 31, 2017), which is recognized as profit or loss as customers settle their obligations with the financial institutions.

 

16. Trade Payables (Consolidated)

 

     03/31/2018      12/31/2017  

Domestic suppliers

     1,686,211        1,973,668  

Foreign suppliers

     173,579        181,830  
  

 

 

    

 

 

 
     1,859,790      2,155,498  
  

 

 

    

 

 

 

Some Company’s subsidiaries acquire oil based fuels and LPG from Petrobras and its subsidiaries and ethylene from Braskem S.A. These suppliers control almost all of the markets for these products in Brazil.

 

17. Salaries and Related Charges (Consolidated)

 

     03/31/2018      12/31/2017  

Provisions on salaries

     179,579        179,120  

Profit sharing, bonus and premium

     50,720        125,006  

Social charges

     70,518        64,524  

Others

     3,660        19,468  
  

 

 

    

 

 

 
     304,477      388,118  
  

 

 

    

 

 

 

 

18. Taxes Payable (Consolidated)

 

     03/31/2018      12/31/2017  
            Restated  

ICMS

     151,705        128,571  

PIS and COFINS

     25,981        25,319  

PERT (*)

     1,832        19,584  

Value-Added Tax (IVA) of foreign subsidiaries

     17,179        17,992  

ISS

     10,139        11,211  

Others

     14,861        18,852  
  

 

 

    

 

 

 
     221,697      221,529  
  

 

 

    

 

 

 

 

(*) Refers to federal tax debits of the subsidiary IPP that were included in the Special Program of Tax Regularization (PERT).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

19. Employee Benefits and Private Pension Plan (Consolidated)

 

a. ULTRAPREV- Associaçăo de Previdência Complementar

In February 2001, the Company’s Board of Directors approved the adoption of a defined contribution pension plan to be sponsored by the Company and each of its subsidiaries. Participating employees have been contributing to this plan, managed by Ultraprev—Associação de Previdência Complementar (“Ultraprev”), since August 2001. Under the terms of the plan, every year each participating employee chooses his or her basic contribution to the plan. Each sponsoring company provides a matching contribution in an amount equivalent to each basic contribution, up to a limit of 11% of the employee’s reference salary, according to the rules of the plan. As participating employees retire, they may choose to receive either (i) a monthly sum ranging between 0.5% and 1.0% of their respective accumulated fund in Ultraprev or (ii) a fixed monthly amount which will exhaust their respective accumulated fund over a period of 5 to 25 years. The sponsoring company does not take responsibility for guaranteeing amounts or the duration of the benefits received by the retired employee. For the three-month period ended March 31, 2018, the subsidiaries contributed R$ 6,166 (R$ 6,145 for the three-month period ended March 31, 2017) to Ultraprev, which is recognized as expense in the income statement. The total number of participating employees as of March 31, 2018 was 8,416 active participants and 254 retired participants. In addition, Ultraprev had 27 former employees receiving benefits under the rules of a previous plan whose reserves are fully constituted.

 

b. Post-employment Benefits

The subsidiaries recognized a provision for post-employment benefits mainly related to seniority bonus, payment of Government Severance Indemnity Fund (“FGTS”), and health, dental care, and life insurance plan for eligible retirees.

The amounts related to such benefits were determined based on a valuation conducted by an independent actuary and reviewed by management as of December 31, 2017 and are recognized in the interim financial information in accordance with IAS 19 R2011 (CPC 33 R2).

 

     03/31/2018      12/31/2017  

Health and dental care plan (1)

     102,156        99,767  

FGTS Penalty

     84,176        81,831  

Bonus

     41,416        40,254  

Life insurance (1)

     16,016        15,671  
  

 

 

    

 

 

 

Total

     243,764        237,523  
  

 

 

    

 

 

 

Current

     30,059        30,059  

Non-current

     213,705        207,464  

 

(1) Only IPP, IpiLubs and CBLSA.

 

20. Provision for Asset Retirement Obligation – Fuel Tanks (Consolidated)

The provision corresponds to the legal obligation to remove the subsidiary IPP’s underground fuel tanks located at Ipiranga-branded service stations after a certain use period (see Note 2.n).

Changes in the provision for asset retirement obligation are as follows:

 

     03/31/2018     03/31/2017  

Initial balance

     64,773       77,564  

Additions (new tanks)

     104       158  

Expense with tanks removed

     (4,157     (525

Accretion expense

     663       783  
  

 

 

   

 

 

 

Final balance

     61,383       77,980  
  

 

 

   

 

 

 

Current

     4,439       4,812  

Non-current

     56,944       73,168  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

21. Provisions, Contingencies and Commitments (Consolidated)

 

a. Provisions for tax, civil, and labor risks

The Company and its subsidiaries are parties in tax, civil, environmental, regulatory, and labor disputes at the administrative and judiciary levels, which, when applicable, are backed by escrow deposits. Provisions for losses are estimated and updated by Management based on the opinion of the Company’s legal department and its external legal advisors.

The table below demonstrates the breakdown of provisions by nature and its movement:

 

Provisions

   Balance on
12/31/2017
     Additions      Write-offs     Monetary
restatement
     Balance on
03/31/2018
 

IRPJ and CSLL (21.a.1.1)

     515,829        —          —         4,181        520,010  

PIS and COFINS (21.a.1.2)

     34,927        —          (5,360     251        29,818  

ICMS

     111,784        564        (869     105        111,584  

Civil, environmental and regulatory claims (21.a.2.1)

     89,296        1,417        (2,627     20        88,106  

Labor litigation (21.a.3.1)

     82,425        3,906        (4,406     311        82,236  

IPI

     78,067        —          —         —          78,067  

Other

     13,468        —          (129     244        13,583  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total

     925,796        5,887        (13,391     5,112        923,404  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Current

     64,550                57,437  

Non-current

     861,246                865,967  

Some of the provisions above involve, in whole or in part, escrow deposits.

Balances of escrow deposits are as follows:

 

     03/31/2018      12/31/2017  

Tax matters

     657,932        659,062  

Labor litigation

     71,618        71,074  

Civil and other

     100,767        92,524  
  

 

 

    

 

 

 

Total – non-current assets

     830,317        822,660  
  

 

 

    

 

 

 

 

a.1) Provisions for Tax Matters and Social Security

a.1.1) On October 7, 2005, the subsidiaries Cia. Ultragaz and Bahiana filed for and obtained a preliminary injunction to recognize and offset PIS and COFINS credits on LPG purchases, against other taxes levied by the RFB, notably IRPJ and CSLL. The decision was confirmed by a trial court on May 16, 2008. Under the preliminary injunction, the subsidiaries made escrow deposits for these debits which amounted to R$ 487,733 as of March 31, 2018 (R$ 483,485 as of December 31, 2017). On July 18, 2014, a second instance unfavorable decision was published and the subsidiaries suspended the escrow deposits, and started to pay income taxes from that date. To revert the court decision, the subsidiaries presented a writ of prevention which was dismissed on December 30, 2014, and the subsidiaries appealed this decision on February 3, 2015. Appeals were also presented to the respective higher courts (STJ and STF) whose final trial are pending.

a.1.2) The subsidiaries Oxiteno S.A., Oxiteno Nordeste, Cia. Ultragaz, Tequimar, Tropical Transportes Ipiranga Ltda., EMCA, IPP and Extrafarma filed for a preliminary injunction seeking the deduction of ICMS from their PIS and COFINS tax bases. On March 15, 2017, in a decision with general repercussion, the Federal Supreme Court (STF) decided that the ICMS does not make up the calculation of PIS and COFINS tax bases. Therefore, supported by its legal advisors, on March 31, 2017, Oxiteno Nordeste and IPP reversed the provision in the amount of R$ 109,463.

The Company emphasizes that it is possible for the STF to restrict the effects of the judgment or to decide that the effectiveness will be reached after its final decision or other time that may be fixed. Despite the favorable context, until there is effective final decision, the causes may be reassessed, which could result in the recognition of new provisions in the future.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

a.2) Provisions for Civil, Environmental and Regulatory Claims

a.2.1) The Company and its subsidiaries maintained provisions for lawsuits and administrative proceedings, mainly derived from contracts entered into with customers and former services providers, as well as proceedings related to environmental and regulatory issues in the amount of R$ 88,106 as of March 31, 2018 (R$ 89,296 as of December 31, 2017).

 

a.3) Provisions for Labor Matters

a.3.1) The Company and its subsidiaries maintained provisions of R$ 82,236 as of March 31, 2018 (R$ 82,425 as of December 31, 2017) for labor litigation filed by former employees and by employees of our service providers mainly contesting the non-payment of labor rights.

 

b. Contingent Liabilities (Possible)

The Company and its subsidiaries are parties in tax, civil, environmental, regulatory, and labor claims whose loss prognosis is assessed as possible (proceedings whose chance of loss is 50% or less). by the Company’s legal departments based on the opinion of its external legal advisors and, based on this assessment, these claims were not recognized in the interim financial information. The estimated amount of this contingency is R$ 2,663,966 as of March 31, 2018 (R$ 2,576,583 as of December 31, 2017).

 

b.1) Contingent Liabilities for Tax Matters and Social Security

The Company and its subsidiaries have contingent liabilities for tax matters and social security in the amount of R$ 1,773,636 as of March 31, 2018 (R$ 1,709,435 as of December 31, 2017), mainly represented by:

b.1.1) The subsidiary IPP and its subsidiaries have assessments invalidating the offset of excise tax (“IPI”) credits in connection with the purchase of raw materials used in the manufacturing of products which sales are not subject to IPI under the protection of tax immunity. The amount of this contingency is R$ 165,506 as of March 31, 2018 (R$ 166,003 as of December 31, 2017).

b.1.2) The subsidiary IPP and its subsidiaries have legal proceedings related to ICMS. The total amount involved in these proceedings, was R$ 666,480 as of March 31, 2018 (R$ 618,774 as of December 31, 2017). Such proceedings arise mostly of the disregard of ICMS credits amounting to R$ 305,361 as of March 31, 2018 (R$ 307,255 as of December 31, 2017), of which R$ 122,352 (R$ 121,891 as of December 31, 2017) refer to proportional reversal requirement of ICMS credits related to the acquisition of hydrated alcohol; of alleged non-payment in the amount of R$ 116,132 (R$ 113,999 as of December 31, 2017); and inventory differences in the amount of R$ 191,757 (R$ 149,171 as of December 31, 2017) related to the leftovers or faults due to temperature changes or product handling.

b.1.3) The Company and its subsidiaries are parties to administrative and judicial suits involving Income Tax, Social Security Contribution, PIS and COFINS, substantially about denials of offset claims and credits disallowance which total amount is R$ 644,882 as of March 31, 2018 (R$ 645,868 as of December 31, 2017), mainly represented by:

b.1.3.1) In the first quarter of 2017, the subsidiary IPP received a tax assessment related to the IRPJ and CSLL resulting from the supposedly undue amortization of the goodwill paid on acquisition of a subsidiary, in the amount of R$ 188,707 as of March 31, 2018 (R$ 187,027 as of December 31, 2017), which includes the amount of the income taxes, interest and penalty. Management assessed the likelihood of the tax assessment, supported by the opinion of its legal advisors, as “possible”, and therefore did not recognize a provision for this contingent liability.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b.2) Contingent Liabilities for Civil, Environmental and Regulatory Claims

The Company and its subsidiaries have contingent liabilities for civil, environmental and regulatory claims in the amount of R$ 607,781, totaling 2,894 lawsuits as of March 31, 2018 (R$ 593,437, totaling 2,783 lawsuits as of December 31, 2017), mainly represented by:

b.2.1) The subsidiary Cia. Ultragaz is party to an administrative proceeding before CADE based on alleged anti-competitive practices in the State of Minas Gerais in 2001. The CADE entered a decision against Cia. Ultragaz and imposed a penalty of R$ 32,484 as of March 31, 2018 (R$ 32,315 as of December 31, 2017). The imposition of such administrative decision was suspended by a court order and its merit is being judicially reviewed.

b.2.2) In 2016, the subsidiary Cia. Ultragaz became party to two administrative proceedings filed by CADE, related to allegations of anti-competitive practices: i) one of the proceedings relate to practices in the State of Paraíba and other Northeast States, in which the subsidiary Bahiana is part along with Cia. Ultragaz. On this proceeding, Cia. Ultragaz and Bahiana signed a Cessation Commitment Agreement (TCC) with CADE, approved on November 22, 2017, in the amount of R$ 95,987, to be paid in 8 (eight) equal installments updated semiannualy by SELIC, with maturity of the first one in 180 (one hundred and eighty) days from the date of publication of the approval. Three employees and one former employee signed TCC in the total amount of R$ 1,100. With the TCC, the administrative proceeding will be suspended in relation to the Cia. Ultragaz and Bahiana until final decision.; ii) the second proceeding relate to practices in the Federal District and around, in which only Cia. Ultragaz is part. On this proceeding, Cia. Ultragaz signed a TCC with CADE, approved on September 6, 2017, in the amount of R$ 2,154, to be paid in a single installment, with maturity in 180 (one hundred and eighty) days from the date of publication of the approval. Two former employees signed TCC in the amount of R$ 50 each. With the TCC, the administrative proceeding will be suspended in relation to the Cia. Ultragaz until final decision.

b.2.3) The subsidiary IPP became party to two administrative proceedings filed by CADE, related to allegations of anti-competitive practices in the city of Joinville, State of Santa Catarina and around the city of Belo Horizonte, State of Minas Gerais. As of March 31, 2018, as a result of these administrative proceedings, no fine had been imposed to the subsidiary. Supported by the opinion of external legal counsel that classified the probability of loss as “remote”, Management did not recognize a provision for this contingency as of March 31, 2018.

b.2.4) On November 29, 2016, a technical opinion was issued by the Operational Support Center for Execution (Centro de Apoio Operacional à Execução—CAEX), a technical body linked to the São Paulo State Public Prosecutor (“MPE”), presenting a proposal of compensation for the alleged environmental damages caused by the fire on April 2nd, 2015 at the Santos Terminal of the subsidiary Tequimar. This technical opinion is non-binding, with no condemnatory or sanctioning nature, and will still be evaluated by the authorities and parties. The subsidiary disagrees with the methodology and the assumptions adopted in the proposal and is negotiating an agreement with the MPE and the Brazilian Federal Public Prosecutor (“MPF”), and currently there is no civil lawsuit filed on the matter. The negotiations relate to in natura repair of the any damages. In case of adverse conclusion of the negotiations with the MPE and MPF, the payments related to the project costs may affect the future Company’s interim financial information, in addition to the amounts already recognized. In addition, the MPF denounced the subsidiary Tequimar in the criminal sphere, which shall wait for the court summons in order to take the necessary measures for its defense. In addition, as of March 31, 2018, there are contingent liabilities not recognized related to lawsuits and extrajudicial lawsuits in the amount of R$ 83,075 and R$ 23,459 (R$ 88,075 and R$ 25,852 as of December 31, 2017), respectively. For more information see Note 22.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

b.3) Contingent Liabilities for Labor Matters

The Company and its subsidiaries have contingent liabilities for labor matters in the amount of R$ 282,549, totaling 1,893 lawsuits as of March 31, 2018 (R$ 273,711, totaling 1,899 lawsuits as of December 31, 2017), mainly represented by:

b.3.1) In 1990, the Petrochemical Industry Labor Union (Sindiquímica), of which the employees of Oxiteno Nordeste and EMCA, companies located in the Camaçari Petrochemical Complex, are members, filed separate lawsuits against the subsidiaries demanding the compliance with the fourth section of the collective labor agreement, which provided for a salary adjustment in lieu of the salary policies practiced. In the same year, a collective labor dispute was also filed by the Union of Employers (SINPEQ) against Sindiquímica, requiring the recognition of the loss of effectiveness of such fourth section. The decisions rendered on the individual claims which were favorable to the subsidiaries Oxiteno Nordeste and EMCA are final and unappealable. The collective labor dispute remains pending trial by STF. In 2010, some companies in the Camaçari Petrochemical Complex signed an agreement with Sindiquímica and reported the fact in the collective labor dispute. In October 2015, Sindiquímica filed enforcement lawsuits against all Camaçari Petrochemical Complex companies that have not yet made settlements, including Oxiteno Nordeste and EMCA. The decisions of 1st instance were favorable to the companies, which are waiting for judgment of the Regional Labor Court of the 5th Region. In addition to collective actions, individual claims containing the same object have been filed.

 

c. Lubricants operation between IPP and Chevron

In the process of transaction of the lubricants operation in Brazil between Chevron and subsidiary IPP (see Note 3.c), it was agreed that each shareholder is responsible for any claims arising out of acts, facts or omissions prior to the transaction. The liability provisions of the Chevron shareholder in the amount of R$ 3,452 are reflected in the consolidation of these interim financial information, as well as the contingent liabilities identified in the date of acquisition, whose provision amount of R$ 198,900 was recognized as a business combination on December 1, 2017. The amounts of provisions of Chevron’s liability recognized in the business combination will be reimbursed to subsidiary CBLSA in the event of losses and an indemnity asset was hereby constituted in the same amount, without the need to establish a provision for uncollectible amounts.

 

22. Trade payables – customers and third parties’ indemnification

In April 2015, a fire occurred in six ethanol and gasoline tanks operated by Ultracargo in Santos, which represented 4% of the subsidiary’s overall capacity as of December 31, 2014. The Civil and Federal Police investigated the accident and its impacts, and concluded that it is not possible to determine the cause of the accident and neither to individualize active or passive conduct related to the cause, and there was no criminal charge against either individual or the subsidiary, by both authorities. Notwithstanding that, the Brazilian Federal Public Prosecutor denounced the subsidiary Tequimar in the criminal sphere, which shall wait for the court summons in order to take the necessary measures for its defense.

The decommissioning stage of the affected area were completed. In June 2017, the licensing required for the return to operation of 67.5 thousands cubic meters from the total of 150 thousands cubic meters affected by the fire was obtained. The remaining tanks continue to be paralyzed and in the process of recovery for subsequent licensing and start of operation.

The remaining balance of customers and third parties’ indemnification is shown below:

 

     Balance on
12/31/2017
     Additions      Write-offs     Payments     Balance on
03/31/2018
 

Current total

     72,216        152        (17,270     (6,705     48,393  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

23. Deferred Revenue (Consolidated)

The Company’s subsidiaries have recognized the following deferred revenue:

 

     03/31/2018      12/31/2017  

‘am/pm’ and Jet Oil franchising upfront fee

     20,243        19,537  

Loyalty program “Km de Vantagens”

     9,531        9,134  

Loyalty program “Clube Extrafarma”

     2,375        2,638  
  

 

 

    

 

 

 
     32,149      31,309  
  

 

 

    

 

 

 

Current

     18,779        18,413  

Non-current

     13,370        12,896  

Loyalty Programs

Subsidiary Ipiranga has a loyalty program called Km de Vantagens (www.kmdevantagens.com.br) under which registered customers are rewarded with points when they buy products at Ipiranga service stations or at its partners. The customers may exchange these points, during the period of one year, for discounts on products and services offered by Ipiranga and its partners. Points received by Ipiranga’s customers that may be used with the partner Multiplus Fidelidade and for discounts of fuel in Ipiranga’s website (www.postoipiranganaweb.com.br) and discounted from sales revenue.

Subsidiary Extrafarma has a loyalty program called Clube Extrafarma (www.clubeextrafarma.com.br) under which registered customers are rewarded with points when they buy products at its drugstore chain. The customers may exchange these points, during the period of six months, for discounts in products at its drugstore chain, recharge credit on a mobile phone, and prizes offered by partners Multiplus Fidelidade and Ipiranga, through Km de Vantagens. Points received by Extrafarma’s customers are discounted from sales revenue.

Deferred revenue is estimated based on the fair value of the points granted, considering the value of the prizes and the expected redemption of points.

Franchising Upfront Fee

am/pm is the convenience stores chain of the Ipiranga service stations. Ipiranga ended March 31, 2018 with 2,437 stores (2,414 stores as of December 31, 2017). Jet Oil is Ipiranga’s lubricant-changing and automotive service specialized network. Ipiranga ended March 31, 2018 with 1,747 stores (1,735 stores as of December 31, 2017).

 

24. Subscription warrants – indemnification

Because of the association between the Company and Extrafarma on January 31, 2014, 7 subscription warrants – indemnification were issued, corresponding to up to 3,205,622 shares of the Company. The subscription warrants – indemnification may be exercised beginning 2020 by the former shareholders of Extrafarma and are adjusted according to the changes in the amounts of provisions for tax, civil, and labor risks and contingent liabilities related to the period prior to January 31, 2014. The subscription warrants – indemnification’s fair value is measured based on the share price of Ultrapar (UGPA3) and is reduced by the dividend yield until 2020, since the exercise is possible only from 2020, and they are not entitled to dividends until that date. As of March 31, 2018, the subscription warrants – indemnification were represented by 2,505,210 shares and amounted to R$ 169,865 (as of December 31, 2017, they were represented by 2,415,848 and totaled R$ 171,459). Due to the final adverse decision of some of these lawsuits, on March 31, 2018, the maximum number of shares that could be issued related to the subscription warrants – indemnification was up to 3,002,363 (3,035,499 shares as of December 31, 2017). For further information on Extrafarma’s acquisition, see Note 3.a to the Financial Statements of the Company filed with the CVM on February 17, 2016.

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

25. Shareholders’ Equity

 

a. Share Capital

The Company is a publicly traded company listed on B3 in the Novo Mercado listing segment under the ticker “UGPA3” and on the New York Stock Exchange (NYSE) in the form of level III American Depositary Receipts (“ADRs”) under the ticker “UGP”. On March 31, 2018, the subscribed and paid-in capital stock consists of 556,405,096 common shares with no par value and the issuance of preferred shares and participation certificates is prohibited. Each common share entitles its holder to one vote at Shareholders’ Meetings.

The price of the shares issued by the Company as of March 31, 2018, on B3 was R$ 70.92.

As of March 31, 2018, the Company is authorized to increase capital up to the limit of 800,000,000 common shares, without amendment to the Bylaws, by resolution of the Board of Directors.

As of March 31, 2018, there were 30,280,060 common shares outstanding abroad in the form of ADRs (28,935,260 shares as of December 31, 2017).

 

b. Equity instrument granted

On April 19, 2017, a new share-based incentive plan was approved, which establishes the general terms and conditions for the concession of common shares issued by the Company held in treasury (see Note 8.c).

 

c. Treasury Shares

The Company acquired its own shares at market prices, without capital reduction, to be held in treasury and to be subsequently disposed of or cancelled, in accordance with CVM Instructions 10, of February 14, 1980 and 268, of November 13, 1997.

As of March 31, 2018, 13,174,689 common shares (13,041,356 shares as of December 31, 2017) were held in the Company’s treasury, acquired at an average cost of R$ 36.61 per share (R$ 36.98 as of December 31, 2017).

 

d. Capital Reserve

The capital reserve reflects the gain on the transfer of shares at market price used in the Deferred Stock Plan granted to executives of the subsidiaries of the Company, as mentioned in Note 8.c).

Because of Extrafarma’s association in 2014, the Company recognized an increase in the capital reserves in the amount of R$ 498,812, due to the difference between the value attributable to share capital and the market value of the Ultrapar shares on the date of issue, deducted by R$ 2,260 related to the incurred costs directly attributable to issuing new shares. For further information about the Extrafarma acquisition, see Note 3.a. to the Financial Statements of the Company filed with the CVM on February 17, 2016.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

e. Revaluation Reserve

The revaluation reserve reflects the revaluation of assets of subsidiaries and is based on depreciation, write-off, or disposal of the revalued assets of the subsidiaries, as well as the tax effects recognized by these subsidiaries.

 

f. Profit Reserves

Legal Reserve

Under Brazilian Corporate Law, the Company is required to appropriate 5% of net annual earnings to a legal reserve, until the balance reaches 20% of capital stock. This reserve may be used to increase capital or absorb losses, but may not be distributed as dividends.

Retention of Profits

Reserve recognized in previous fiscal years and used for investments contemplated in a capital budget, mainly for expansion, productivity, and quality, acquisitions and new investments, in accordance with Article 196 of Brazilian Corporate Law.

Investments Reserve

In compliance with Article 194 of the Brazilian Corporate Law and Article 55.c) of the Bylaws this reserve is aimed to protect the integrity of the Company’s assets and to supplement its capital stock, in order to allow new investments to be made. As provided in its Bylaws, the Company may allocate up to 45% of net income to the investments reserve, up to the limit of 100% of the share capital.

The investments reserve is free of distribution restrictions and totaled R$ 3,000,707 as of March 31, 2018.

 

g. Valuation Adjustments and Cumulative Translation Adjustments

Valuation Adjustments

 

(i) Actuarial gains and losses relating to post-employment benefits, calculated based on a valuation conducted by an independent actuary, are recognized in shareholders’ equity under the title “valuation adjustments”. Actuarial gains and losses recorded in equity are not reclassified to profit or loss in subsequent periods.

 

(ii) Gains and losses on the hedging instruments of exchange rate related to firm commitment and highly probable transactions designated as cash flows hedges are recognized in shareholders’ equity as “valuation adjustments”. Gains and losses are reclassified to initial cost of non-financial assets.

 

(iii) The differences between the fair value of financial investments measured at fair value through other comprehensive income and the initial amount of financial investments plus the interest earned and the foreign currency exchange variation are recognized in shareholders’ equity as valuation adjustments. Gains and losses are reclassified to income statements when the financial investment is settled.

 

(iv) The Company recognizes in this item the effect of changes in the non-controlling interest in subsidiaries that do not result in loss of control. This amount corresponds to the difference between the amount by which the non-controlling interest was adjusted and the fair value of the consideration received or paid and represents a transaction with shareholders.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Cumulative Translation Adjustments

The change in exchange rates on assets, liabilities, and income of foreign subsidiaries that have (i) functional currency other than the presentation currency of the Company, (ii) an independent administration and (iii) notes in the foreign market (see Note 33—net investment hedge in foreign entities), is directly recognized in the shareholders’ equity. This accumulated effect is reflected in profit or loss as a gain or loss only in case of disposal or write-off of the investment.

Balance and changes in valuation adjustments and cumulative translation adjustments of the Company are as follows:

 

     Valuation adjustments        
     Fair value
of cash flow
hedging
instruments
    Fair value
of financial
instruments
    Actuarial gains
(losses) of
post-employment
benefits
    Non-controlling
shareholders
interest change
     Total     Cumulative
translation
adjustment
 

Balance on December 31, 2017

     (27,364     —         (15,181 )      202,188        159,643       53,061  

Translation of foreign subsidiaries, net of income tax

     —         —         —         —          —         (19,396

Changes in fair value of financial instruments

     (8,011     (6,232     —         —          (14,243     —    

Income and social contribution taxes on fair value

     2,957       —         —         —          2,957       —    

Actuarial losses of post-employment benefits

     —         —         (299     —          (299     —    
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance on March 31, 2018

     (32,418     (6,232     (15,480     202,188        148,058       33,665  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

     Valuation adjustments        
     Fair value
of cash flow
hedging
instruments
    Actuarial gains
(losses) of
post-employment
benefits
    Total     Cumulative
translation
adjustment
 

Balance on December 31, 2016

     (26,883     2,896       (23,987     7,519  

Translation of foreign subsidiaries, net of income tax

     —         —         —         1,322  

Changes in fair value of hedge instruments

     73,870       —         73,870       —    

Income and social contribution taxes on fair value

     (24,914     —         (24,914     —    

Actuarial losses of post-employment benefits

     —         (24     (24     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance on March 31, 2017

     22,073       2,872       24,945       8,841  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

h. Dividends and Allocation of Net Income

The shareholders are entitled, under the Bylaws, to a minimum annual dividend of 50% of adjusted net income calculated in accordance with Brazilian Corporate Law. The dividends and interest on equity in excess of the obligation established in the Bylaws are recognized in shareholders’ equity until the Shareholders approve them. The proposed dividends payable as of December 31, 2017 in the amount of R$ 489,027 (R$ 0.90 – ninety cents of Brazilian Real per share), were approved by the Board of Directors on February 21, 2018, and paid beginning March 12, 2018.

 

26. Revenue from Sale and Services (Consolidated)

 

     03/31/2018     03/31/2017
Restated
 

Gross revenue from sale

     21,440,614       19,195,468  

Gross revenue from services

     179,250       183,058  

Sales taxes

     (550,072     (483,713

Discounts and sales returns

     (214,094     (222,374

Amortization of contractual assets with customers (see Note 11)

     (104,513     (128,218

Deferred revenue (see Note 23)

     (63     349  
  

 

 

   

 

 

 

Net revenue from sales and services

     20,751,122       18,544,570  
  

 

 

   

 

 

 

 

27. Expenses by Nature (Consolidated)

The Company presents its expenses by function in the consolidated income statement and presents below its expenses by nature:

 

     03/31/2018      03/31/2017
Restated
 

Raw materials and materials for use and consumption

     18,882,407        16,683,719  

Personnel expenses

     604,400        529,378  

Freight and storage

     287,540        272,768  

Depreciation and amortization

     194,243        165,044  

Advertising and marketing

     45,156        54,949  

Services provided by third parties

     87,888        70,892  

Lease of real estate and equipment

     57,403        44,479  

Other expenses

     114,803        125,974  
  

 

 

    

 

 

 

Total

     20,273,840        17,947,203  
  

 

 

    

 

 

 

Classified as:

     

Cost of products and services sold

     19,229,825        16,987,475  

Selling and marketing

     671,447        597,150  

General and administrative

     372,568        362,578  
  

 

 

    

 

 

 

Total

     20,273,840        17,947,203  
  

 

 

    

 

 

 

Research and development expenses are recognized in the income statements and amounted to R$ 12,422 for the three-month period ended March 31, 2018 (R$ 13,494 for the three-month period ended March 31, 2017).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

28. Gain (loss) on Disposal of Property, Plant and Equipment and Intangibles (Consolidated)

The gain or loss is determined as the difference between the selling price and residual book value of the investment, property, plant, and equipment, or intangible asset disposed of. For the three-month period ended March 31, 2018, the loss was R$ 2,230 (loss of R$ 6,353 for the three-month period ended March 31, 2017), represented primarily from disposal of property, plant, and equipment.

 

29. Other Operating Income, Net (Consolidated)

 

     03/31/2018     03/31/2017  

Commercial partnerships(1)

     5,108       10,707  

Merchandising(2)

     5,885       4,657  

Loyalty program(3)

     11,010       6,056  

Ultracargo – fire accident in Santos(4)

     (724     (15,672

Reversal of provision – ICMS from PIS and COFINS tax bases (see Note 21.a.1.2)

     —         49,152  

Fine for unrealized acquisition(5)

     (286,160     —    

Others

     2,158       1,435  
  

 

 

   

 

 

 

Other operating income, net

     (262,723     56,335  
  

 

 

   

 

 

 

 

(1) Refers to contracts with service providers and suppliers which establish trade agreements for convenience stores and gas stations.
(2) Refers to contracts with suppliers of convenience stores, which establish, among other agreements, promotional campaigns.
(3) Refers to sales of “Km de Vantagens” to partners of the loyalty program. Revenue is recognized at the time that the partners transfer the points to their customers.
(4) For more information about the fire accident in Ultracargo, see Note 22.
(5) For more information about the fine see Note 3.e.

 

30. Financial Income (Expense)

 

     Parent     Consolidated  
     03/31/2018     03/31/2017     03/31/2018     03/31/2017  

Financial income:

        

Interest on financial investments

     19,613       30,754       79,879       137,944  

Interest from customers

     —         —         31,343       25,311  

Other financial income

     —         —         1,222       1,106  
  

 

 

   

 

 

   

 

 

   

 

 

 
     19,613       30,754       112,444       164,361  
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial expenses:

        

Interest on loans

     —         —         (118,803     (218,937

Interest on debentures

     (18,806     (27,233     (104,118     (90,335

Interest on finance leases

     —         —         (655     (661

Bank charges, financial transactions tax, and other charges

     (551     (516     (23,795     (22,197

Exchange variation, net of gains and losses with derivative instruments

     —         —         27,897       14,399  

Reversal of provision – ICMS from PIS and COFINS tax bases (see Note 21.a.1.2)

     —         —         —         43,411  

Changes in subscription warranty—indemnification (see Note 24)

     (1,156     (9,804     (1,156     (9,804

Monetary restatement of provisions, net, and other financial expenses

     —         588       1,221       (1,412
  

 

 

   

 

 

   

 

 

   

 

 

 
     (20,513     (36,965     (219,409     (285,536
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial income (expense)

     (900     (6,211     (106,965     (121,175
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

31. Earnings per Share (Parent and Consolidated)

The table below presents a reconciliation of numerators and denominators used in computing earnings per share. The Company has a deferred stock plan and subscription warrants—indemnification, as mentioned in Notes 8.c and 24, respectively.

 

Basic Earnings per Share

   03/31/2018      03/31/2017
Restated
 

Net income for the year of the Company

     73,855        352,562  

Weighted average shares outstanding (in thousands)

     541,881        541,774  

Basic earnings per share – R$

     0.1363        0.6508  

Diluted Earnings per Share

     

Net income for the year of the Company

     73,855        352,562  

Weighted average shares outstanding (in thousands), including –dilution effects

     545,745        545,672  

Diluted earnings per share – R$

     0.1353        0.6461  

Weighted Average Shares Outstanding (in thousands)

     

Weighted average shares outstanding for basic per share calculation

     541,881        541,774  

Dilution effect

     

Subscription warrants – indemnification

     2,514        2,365  

Deferred Stock Plan

     1,350        1,533  
  

 

 

    

 

 

 

Weighted average shares outstanding for diluted per share calculation

     545,745        545,672  
  

 

 

    

 

 

 

 

32. Segment Information

The Company operates five main business segments: gas distribution, fuel distribution, chemicals, storage and drugstores. The gas distribution segment (Ultragaz) distributes LPG to residential, commercial, and industrial consumers, especially in the South, Southeast, and Northeast regions of Brazil. The fuel distribution segment (Ipiranga) operates the distribution and marketing of gasoline, ethanol, diesel, fuel oil, kerosene, natural gas for vehicles, and lubricants and related activities throughout all the Brazilian territory. The chemicals segment (Oxiteno) produces ethylene oxide and its main derivatives and fatty alcohols, which are raw materials used in the home and personal care, agrochemical, paints, varnishes, and other industries. The storage segment (Ultracargo) operates liquid bulk terminals, especially in the Southeast and Northeast regions of Brazil. The drugstores segment (Extrafarma) trades pharmaceutical, hygiene, and beauty products through its own drugstore chain in the states of Amapá, Amazonas, Bahia, Ceará, Maranhão, Pará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, São Paulo, Sergipe and Tocantins. The segments shown in the interim financial information are strategic business units supplying different products and services. Intersegment sales are at prices similar to those that would be charged to third parties.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The main financial information of each of the Company’s segments are stated as follows:

 

     03/31/2018     03/31/2017
Restated
 

Net revenue from sales and services:

    

Ultragaz

     1,625,848       1,352,326  

Ipiranga

     17,516,292       15,735,622  

Oxiteno

     999,294       912,427  

Ultracargo

     115,984       100,684  

Extrafarma

     511,554       449,801  
  

 

 

   

 

 

 
     20,768,972       18,550,860  

Others(1)

     12,002       10,642  

Intersegment sales

     (29,852     (16,932
  

 

 

   

 

 

 

Total

     20,751,122       18,544,570  
  

 

 

   

 

 

 

Intersegment sales:

    

Ultragaz

     438       516  

Ipiranga

     198       —    

Oxiteno

     —         702  

Ultracargo

     17,237       5,122  

Extrafarma

     —         —    
  

 

 

   

 

 

 
     17,873       6,340  

Others(1)

     11,979       10,592  
  

 

 

   

 

 

 

Total

     29,852       16,932  
  

 

 

   

 

 

 

Net revenue from sales and services, excluding intersegment sales:

    

Ultragaz

     1,625,410       1,351,810  

Ipiranga

     17,516,094       15,735,622  

Oxiteno

     999,294       911,725  

Ultracargo

     98,747       95,562  

Extrafarma

     511,554       449,801  
  

 

 

   

 

 

 
     20,751,099       18,544,520  

Others(1)

     23       50  
  

 

 

   

 

 

 

Total

     20,751,122       18,544,570  
  

 

 

   

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

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     03/31/2018     03/31/2017
Restated
 

Operating income (expense):

    

Ultragaz

     (223,452     71,444  

Ipiranga

     413,919       499,535  

Oxiteno

     10,111       75,410  

Ultracargo

     27,844       9,957  

Extrafarma

     (17,209     (9,921
  

 

 

   

 

 

 
     211,213       646,425  

Others(1)

     1,116       924  
  

 

 

   

 

 

 

Total

     212,329       647,349  
  

 

 

   

 

 

 

Share of profit (loss) of joint-ventures and associates:

    

Ultragaz

     30       (36

Ipiranga

     (4,462     (4,082

Oxiteno

     291       236  

Ultracargo

     634       296  
  

 

 

   

 

 

 
     (3,507     (3,586

Others(1)

     526       10,014  
  

 

 

   

 

 

 

Total

     (2,981     6,428  
  

 

 

   

 

 

 

Financial result, net

     (106,965     (121,175

Income before income and social contribution taxes

     102,383       532,602  
  

 

 

   

 

 

 

Additions to property, plant, and equipment and intangible assets (excluding intersegment account balances):

    

Ultragaz

     65,874       84,853  

Ipiranga

     115,280       84,224  

Oxiteno

     138,040       74,776  

Ultracargo

     22,796       10,681  

Extrafarma

     16,139       21,709  
  

 

 

   

 

 

 
     358,129       276,243  

Others(1)

     1,955       4,703  
  

 

 

   

 

 

 

Total additions to property, plant, and equipment and intangible assets (see Notes 13 and 14)

     360,084       280,946  

Asset retirement obligation – fuel tanks (see Note 20)

     (104     (158

Capitalized borrowing costs

     (4,618     (6,041
  

 

 

   

 

 

 

Total investments in property, plant, and equipment and intangible assets (cash flow)

     355,362       274,747  
  

 

 

   

 

 

 

Payments of contractual assets with customers – exclusive rights (see Note 11):

    

Ipiranga

     95,866       146,038  
  

 

 

   

 

 

 

 

Depreciation and amortization charges:

     

Ultragaz

     53,410        41,180  

Ipiranga

     66,713        58,881  

Oxiteno

     40,803        35,900  

Ultracargo

     12,510        11,652  

Extrafarma

     17,017        13,901  
  

 

 

    

 

 

 
     190,453        161,514  

Others(1)

     3,790        3,530  
  

 

 

    

 

 

 

Total

     194,243        165,044  
  

 

 

    

 

 

 

Amortization of contractual assets with customers – exclusive rights (see Note 11):

     

Ipiranga

     104,513        128,218  

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     03/31/2018      12/31/2017
Restated
 

Total assets (excluding intersegment account balances):

     

Ultragaz

     2,586,060        2,408,600  

Ipiranga

     14,410,990        15,309,811  

Oxiteno

     6,716,507        6,557,456  

Ultracargo

     1,375,564        1,394,083  

Extrafarma

     2,046,153        1,948,808  
  

 

 

    

 

 

 
     27,135,274        27,618,758  

Others(1)

     1,413,432        586,753  
  

 

 

    

 

 

 

Total

     28,548,706        28,205,511  
  

 

 

    

 

 

 

 

(1)  Composed of the parent company Ultrapar (including goodwill of certain acquisitions) and subsidiaries Serma—Associação dos Usuários de Equipamentos de Processamento de Dados e Serviços Correlatos (“Serma”) and Imaven Imóveis Ltda.

Geographic Area Information

The fixed and intangible assets of the Company and its subsidiaries are located in Brazil, except those related to Oxiteno’ plants abroad, as shown below:

 

     03/31/2018      12/31/2017  

United States of America (*)

     585,493        511,912  

Mexico

     118,289        109,034  

Uruguay

     65,532        65,876  

Venezuela

     4,507        22,480  
  

 

 

    

 

 

 
     773,821        709,302  
  

 

 

    

 

 

 

 

(*) The increase refers to the construction of a new plant in Pasadena, Texas.

The subsidiaries generate revenue from operations in Brazil, Mexico, United Stated of America, Uruguay and Venezuela, as well as from exports of products to foreign customers, as disclosed below:

 

     03/31/2018      03/31/2017
Restated
 

Net revenue:

     

Brazil

     20,405,131        18,284,504  

Mexico

     44,456        41,339  

Uruguay

     9,586        11,507  

Venezuela

     7,472        5,668  

Other Latin American countries

     93,135        100,144  

United States of America and Canada

     117,986        43,243  

Far East

     20,518        14,235  

Europe

     38,467        26,651  

Others

     14,371        17,279  
  

 

 

    

 

 

 

Total

     20,751,122        18,544,570  
  

 

 

    

 

 

 

Sales to the foreign market are made substantially by the Oxiteno segment.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

33. Risks and Financial Instruments (Consolidated)

Risk Management and Financial Instruments—Governance

The main risks to which the Company and its subsidiaries are exposed reflect strategic/operational and economic/financial aspects. Operational/strategic risks (including, but not limited to, demand behavior, competition, technological innovation, and material changes in the industry structure) are addressed by the Company’s management model. Economic/financial risks primarily reflect default of customers, behavior of macroeconomic variables, such as exchange and interest rates, as well as the characteristics of the financial instruments used by the Company and its subsidiaries and their counterparties. These risks are managed through control policies, specific strategies, and the establishment of limits.

The Company has a policy for the management of resources, financial instruments, and risks approved by its Board of Directors (“Policy”). In accordance with the Policy, the main objectives of financial management are to preserve the value and liquidity of financial assets and ensure financial resources for the development of the business, including expansions. The main financial risks considered in the Policy are risks associated with currencies, interest rates, credit, and selection of financial instruments. Governance of the management of financial risks and financial instruments follows the segregation of duties below:

 

  Implementation of the management of financial assets, instruments, and risks is the responsibility of the financial area, through its treasury department, with the assistance of the tax and accounting departments.

 

  Supervision and monitoring of compliance with the principles, guidelines, and standards of the Policy is the responsibility of the Risk and Investment Committee, which is composed of members of the Company’s Executive Board (“Committee”). The Committee holds regular meetings and is in charge, among other responsibilities, of discussing and monitoring the financial strategies, existing exposures, and significant transactions involving investment, fundraising, or risk mitigation. The Committee monitors the risk standards established by the Policy through a monitoring map on a monthly basis.

 

  Changes in the Policy or revisions of its standards are subject to the approval of the Board of Directors of Ultrapar.

 

  Continuous improvement of the Policy is the joint responsibility of the Board of Directors, the Committee, and the financial area.

 

  The internal audit department audits the compliance with the requirements of the Policy.

Currency Risk

Most transactions of the Company, through its subsidiaries, are located in Brazil and, therefore, the reference currency for risk management is the Brazilian Real. Currency risk management is guided by neutrality of currency exposures and considers the transactional, accounting, and operational risks of the Company and its subsidiaries and their exposure to changes in exchange rates. The Company considers as its main currency exposures the assets and liabilities in foreign currency and the short-term flow of net sales in foreign currency of Oxiteno.

The Company and its subsidiaries use exchange rate hedging instruments (especially between the Brazilian Real and the U.S. dollar) available in the financial market to protect their assets, liabilities, receipts, and disbursements in foreign currency and net investments in foreign operations. Hedge is used in order to reduce the effects of changes in exchange rates on the Company´s income and cash flows in Brazilian Reais within the exposure limits under its Policy. Such foreign exchange hedging instruments have amounts, periods, and rates substantially equivalent to those of assets, liabilities, receipts, and disbursements in foreign currencies to which they are related. Assets and liabilities in foreign currencies are stated below, translated into Brazilian Reais:

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Assets and Liabilities in Foreign Currencies

 

In millions of Brazilian Reais

   03/31/2018     12/31/2017  

Assets in foreign currency

    

Cash, cash equivalents and financial investments in foreign currency (except hedging instruments)

     399.2       236.4  

Foreign trade receivables, net of allowance for doubtful accounts and advances to foreign customers

     209.8       214.9  

Net investments in foreign subsidiaries (except cash, cash equivalents, financial investments, trade receivables, financing, and payables)

     1,004.6       930.0  
  

 

 

   

 

 

 
     1,613.6       1,381.3  
  

 

 

   

 

 

 

Liabilities in foreign currency

    

Financing in foreign currency, gross of transaction costs and discount

     (4,732.2     (4,416.2

Payables arising from imports, net of advances to foreign suppliers

     (163.5     (173,1
  

 

 

   

 

 

 
     (4,895.7     (4,589.3
  

 

 

   

 

 

 

Foreign currency hedging instruments

     1,537.8       1,777.6  
  

 

 

   

 

 

 

Net asset (liability) position – Total

     (1,744.3     (1,430.4

Net asset (liability) position – Income statement effect

     (72.6     (26.1

Net asset (liability) position – Shareholders’ equity effect

     (1,671.7     (1,404.3

Sensitivity Analysis of Assets and Liabilities in Foreign Currency

The table below shows the effect of exchange rate changes in different scenarios, based on the net liability position of R$ 1,744.3 million in foreign currency:

 

In millions of Brazilian Reais

   Risk    Scenario I     Scenario II     Scenario III  
          10%     25%     50%  

(1) Income statement effect

   Real devaluation      (7.3     (18.2     (36.3

(2) Shareholders’ equity effect

        (167.1     (417.9     (835.8
     

 

 

   

 

 

   

 

 

 

(1) + (2)

   Net effect      (174.4     (436.1     (872.1
     

 

 

   

 

 

   

 

 

 

(3) Income statement effect

   Real
appreciation
     7.3       18.2       36.3  

(4) Shareholders’ equity effect

        167.1       417.9       835.8  
     

 

 

   

 

 

   

 

 

 

(3) + (4)

   Net effect      174.4       436.1       872.1  
     

 

 

   

 

 

   

 

 

 

The shareholders’ equity effect refers to cumulative translation adjustments of changes in the exchange rate on equity of foreign subsidiaries (see Notes 2.s and 25.g—Cumulative Translation Adjustments), net investments hedge in foreign entities, cash flow hedge of firm commitment and highly probable transaction (see Note 2.c and Hedge Accounting below).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Interest Rate Risk

The Company and its subsidiaries adopt policies for borrowing and investing financial resources and for capital cost minimization. The financial investments of the Company and its subsidiaries are primarily held in transactions linked to the CDI, as set forth in Note 4. Borrowings primarily relate to financing from Banco do Brasil, BNDES, and other development agencies, as well as debentures and borrowings in foreign currency, as shown in Note 15.

The Company attempts to maintain its financial interest assets and liabilities at floating rates.

The table below shows the financial assets and liabilities exposed to floating interest rates:

In millions of Brazilian Reais

 

     Note      03/31/2018     12/31/2017  

CDI

       

Cash equivalents

     4        4,386.5       4,821.6  

Financial investments

     4        1,202.2       1,153.0  

Asset position of foreign exchange hedging instruments—CDI

     33        26.8       29.9  

Loans and debentures

     15        (8,820.5     (7,987.3

Liability position of foreign exchange hedging instruments—CDI

     33        (1,590.0     (1,877.4

Liability position of fixed interest instruments + IPCA – CDI

     33        (595.3     (586.6
     

 

 

   

 

 

 

Net liability position in CDI

        (5,390.3     (4,446.8
     

 

 

   

 

 

 

TJLP

       

Loans –TJLP

     15        (312.2     (301.9
     

 

 

   

 

 

 

Net liability position in TJLP

        (312.2     (301.9
     

 

 

   

 

 

 

LIBOR

       

Asset position of foreign exchange hedging instruments—LIBOR

     33        993.2       984.3  

Loans—LIBOR

     15        (1,630.1     (1,418.5
     

 

 

   

 

 

 

Net liability position in LIBOR

        (636.9     (434.2
     

 

 

   

 

 

 

TIIE

       

Loans—TIIE

     15        (18.3     (3.4
     

 

 

   

 

 

 

Net liability position in TIIE

        (18.3     (3.4
     

 

 

   

 

 

 

SELIC

       

Loans – SELIC

     15        (96.7     (100.3
     

 

 

   

 

 

 

Net liability position in SELIC

        (96.7     (100.3
     

 

 

   

 

 

 

Total net liability position exposed to floating interest

        (6,454.4     (5,286.6
     

 

 

   

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Sensitivity Analysis of Floating Interest Rate Risk

The table below shows the incremental expenses and income that would be recognized in financial income as of March 31, 2018, due to the effect of floating interest rate changes in different scenarios.

For sensitivity analysis of floating interest rate risk, the Company used the accumulated amount of the reference indexes (CDI, TJLP, LIBOR, TIIE and SELIC) as a base scenario up to March 31, 2018. Scenarios I, II and III were based on of 10%, 25% and 50% variation, respectively, in the floating interest rate of the base scenario:

 

In millions of Brazilian Reais                          
     Risk      Scenario
I
    Scenario
II
    Scenario
III
 
            10%     25%     50%  

Exposure of interest rate risk

         

Interest effect on cash equivalents and financial investments

     Increase in CDI        8.5       21.0       42.1  

Foreign exchange hedging instruments (assets in CDI) effect

     Increase in CDI        —         —         —    

Interest effect on debt in CDI

     Increase in CDI        (13.4     (33.5     (67.0

Interest rate hedging instruments (liabilities in CDI) effect

     Increase in CDI        (6.5     (15.9     (31.6
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (11.4     (28.4     (56.5
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in TJLP

     Increase in TJLP        (2.1     (5.1     (10.3
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (2.1     (5.1     (10.3
     

 

 

   

 

 

   

 

 

 

Foreign exchange hedging instruments (assets in LIBOR) effect

     Increase in LIBOR        0.6       1.5       3.0  

Interest effect on debt in LIBOR

     Increase in LIBOR        (0.7     (1.8     (3.5
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (0.1     (0.3     (0.5
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in TIIE

     Increase in TIIE        (0.01     (0.02     (0.04
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (0.01     (0.02     (0.04
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in SELIC

     Increase in SELIC        (0.2     (0.4     (0.8
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (0.2     (0.4     (0.8
     

 

 

   

 

 

   

 

 

 

Credit Risks

The financial instruments that would expose the Company and its subsidiaries to credit risks of the counterparty are basically represented by cash and bank deposits, financial investments, hedging instruments (see Note 4), and trade receivables (see Note 5).

Credit risk of financial institutions - Such risk results from the inability of financial institutions to comply with their financial obligations to the Company and its subsidiaries due to insolvency. The Company and its subsidiaries regularly conduct a credit review of the institutions with which they hold cash and cash equivalents, financial investments, and hedging instruments through various methodologies that assess liquidity, solvency, leverage, portfolio quality, etc. Cash and cash equivalents, financial investments, and hedging instruments are held only with institutions with a solid credit history, chosen for safety and soundness. The volume of cash and cash equivalents, financial investments, and hedging instruments are subject to maximum limits by each institution and, therefore, require diversification of counterparties.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Government credit risk—The Company’s policy allows investments in government securities from countries classified as investment grade AAA or Aaa by specialized credit rating agencies and in Brazilian government bonds. The volume of such financial investments is subject to maximum limits by each country and, therefore, requires diversification of counterparties.

The credit risk of cash, cash equivalents and financial investments is summarized below:

 

     Fair value  

Counterparty credit rating

   03/31/2018      12/31/2017  

AAA

     62,884        29,003  

AA

     5,808,717        6,076,520  

A

     310,036        192,638  

BBB

     57,625        71,767  
  

 

 

    

 

 

 

Total

     6,239,262        6,369,928  
  

 

 

    

 

 

 

Customer credit risk - Such risks are managed by each business unit through specific criteria for acceptance of customers and their credit rating and are additionally mitigated by the diversification of sales. No single customer or group accounts for more than 10% of total revenue.

The Company maintained the following estimated losses on doubtful accounts on trade receivables:

 

     03/31/2018      12/31/2017  
            Restated  

Ipiranga

     383,447        350,594  

Ultragaz

     77,337        83,627  

Oxiteno

     12,199        10,755  

Extrafarma

     5,614        5,623  

Ultracargo

     2,155        2,179  
  

 

 

    

 

 

 

Total

     480,752        452,778  
  

 

 

    

 

 

 

Liquidity Risk

The Company and its subsidiaries’ main sources of liquidity derive from (i) cash, cash equivalents, and financial investments, (ii) cash generated from operations and (iii) financing. The Company and its subsidiaries believe that these sources are sufficient to satisfy their current funding requirements, which include, but are not limited to, working capital, capital expenditures, amortization of debt, and payment of dividends.

The Company and its subsidiaries periodically examine opportunities for acquisitions and investments. They consider different types of investments, either directly, through joint ventures, or through associated companies, and finance such investments using cash generated from operations, debt financing, through capital increases, or through a combination of these methods.

The Company and its subsidiaries believe to have enough working capital and sources of financing to satisfy their current needs. The gross indebtedness due over the next twelve months totals R$ 3,236.5 million, including estimated interests on loans (for quantitative information, see Note 15). Furthermore, the investment plan for 2018 totals R$ 2,676 million, and until March 31, 2018, the amount of R$ 603.5 million had been realized. As of March 31, 2018, the Company and its subsidiaries had R$ 6,149.6 million in cash, cash equivalents, and short-term financial investments (for quantitative information, see Note 4).

The table below presents a summary of financial liabilities as of March 31, 2018 to be settled by the Company and its subsidiaries, listed by maturity. The amounts disclosed in this table are the contractual undiscounted cash outflows, and, therefore, these amounts may be different from the amounts disclosed on the balance sheet as of March 31, 2018.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     In millions of Brazilian Reais  

Financial liabilities

   Total      Less
than 1
year
     Between
1 and 3
years
     Between
3 and 5
years
     More
than 5
years
 

Loans including future contractual interest(1)(2)

     18,758.1        3,236.5        4,780.7        6,686.4        4,054.5  

Currency and interest rate hedging instruments(3)

     326.0        138.5        79.5        85.2        22.8  

Trade payables

     1,859.8        1,859.8        —          —          —    

 

(1) To calculate the estimated interest on loans some macroeconomic assumptions were used, including averaging for the period the following: (i) CDI of 6.28% in 2018, 7.34% from 2019 to 2021, 8.73% from 2022 to 2023, 9.84% from 2024 to 2033, (ii) exchange rate of the Real against the U.S. dollar of R$ 3.31 in 2018, R$ 3.61 in 2019, R$ 3.92 in 2020, R$ 4.24 in 2021, R$ 4.59 in 2022, R$ 4.96 in 2023, R$ 5.34 in 2024, R$ 5.75 in 2025, R$ 6.14 in 2026 and R$ 6.56 in 2027 (iii) TJLP of 6.75% p.a. and (iv) IGP-M of 4.30% in 2018, 4.32% in 2019, 4.0% from 2020 to 2033 (v) IPCA of 3.54% (source: B3, Bulletin Focus and financial institutions).
(2)  Includes estimated interest payments on short-term and long-term loans until the payment date.
(3) The currency and interest rate hedging instruments were estimated based on projected U.S dollar futures contracts and the futures curves of DI x Pre and Pre x IPCA contracts quoted on B3 on March 29, 2018 and on the futures curve of LIBOR (ICE—IntercontinentalExchange) on March 29, 2018. In the table above, only the hedging instruments with negative results at the time of settlement were considered.

Capital Management

The Company manages its capital structure based on indicators and benchmarks. The key performance indicators related to the capital structure management are the weighted average cost of capital, net debt / EBITDA, interest coverage, and indebtedness / equity ratios. Net debt is composed of cash, cash equivalents, and financial investments (see Note 4) and loans, including debentures (see Note 15). The Company can change its capital structure depending on the economic and financial conditions, in order to optimize its financial leverage and capital management. The Company seeks to improve its return on invested capital by implementing efficient working capital management and a selective investment program.

Selection and Use of Financial Instruments

In selecting financial investments and hedging instruments, an analysis is conducted to estimate rates of return, risks involved, liquidity, calculation methodology for the carrying value and fair value, and a review is conducted of any documentation applicable to the financial instruments. The financial instruments used to manage the financial resources of the Company and its subsidiaries are intended to preserve value and liquidity.

The Policy contemplates the use of derivative financial instruments only to cover identified risks and in amounts consistent with the risk (limited to 100% of the identified risk). The risks identified in the Policy are described in the above sections, and are subject to risk management. In accordance with the Policy, the Company and its subsidiaries can use forward contracts, swaps, options, and futures contracts to manage identified risks. Leveraged derivative instruments are not permitted. Because the use of derivative financial instruments is limited to the coverage of identified risks, the Company and its subsidiaries use the term “hedging instruments” to refer to derivative financial instruments.

As mentioned in the section “Risk Management and Financial Instruments – Governance”, the Committee monitors compliance with the risk standards established by the Policy through a risk map, including the use of hedging instruments, on a monthly basis. In addition, the internal audit department verifies the compliance with the requirements of the Policy.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below summarizes the position of hedging instruments entered into by the Company and its subsidiaries:

 

    

 

     Notional amount(1)     Fair value     Amounts
receivable
    Amounts
payable
 

Hedging instruments

   Maturity      03/31/2018     12/31/2017     03/31/2018     12/31/2017     03/31/2018  
                        R$ million     R$ million     R$ million     R$ million  

Designated as hedge accounting

               

a –Exchange rate swaps receivable in U.S. dollars

               

Receivables in U.S. dollars (LIBOR)

    
Apr 2018 to
Jun 2022
 
 
   US$ 240.0     US$ 240.0       796.2       788.6       796.2       —    

Receivables in U.S. dollars (Fixed)

      US$ 104.2     US$ 203.6       342.8       665.6       342.8       —    

Payables in CDI interest rate

      US$ (344.2   US$ (443.6     (1,234.9     (1,568.6     —         1,234.9  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total result

        —         —         (95.9     (114.4     1,139.0       1,234.9  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

b – Interest rate swaps in Brazilian Reais

               

Receivables in fixed interest rates + IPCA

    
Apr 2024 to
Oct 2024
 
 
   R$ 566.1     R$ 566.1       599.0       583.3       599.0       —    

Payables in CDI interest rates

      R$ (566.1   R$ (566.1     (595.3     (586.6     —         595.3  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total result

        —         —         3.7       (3.3     599.0       595.3  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Not designated as hedge accounting

               

c –Exchange rate swaps receivable in U.S. dollars

               

Receivables in U.S. dollars (LIBOR)

    
Jun 2020 to
Oct 2026
 
 
   US$ 60.0     US$ 60.0       197.0       195.7       197.0       —    

Receivables in U.S. dollars (Fixed)

      US$ 753.0     US$ 753.0       228.8       157.5       228.8       —    

Payables in CDI interest rate

      US$ (813.0   US$ (813.0     (355.1     (308.8     —         355.1  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total result

        —         —         70.7       44.4       425.8       355.1  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

d – Exchange rate swaps payable in U.S. dollars + COUPON

               

Receivables in CDI interest rates

    
Apr 2018 to
Jun 2018
 
 
   US$ 8.2     US$ 9.1       26.8       29.9       26.8       —    

Payables in U.S. dollars (Fixed)

      US$ (8.2   US$ (9.1     (27.0     (29.8     —         27.0  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total result

        —         —         (0.2     0.1       26.8       27.0  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross result

            (21.7     (73.2     2,190.6       2,212.3  

Income tax

            (7.6     (4.7     (7.6     —    
         

 

 

   

 

 

   

 

 

   

 

 

 

Total net result

            (29.3     (77.9     2,183.0       2,212.3  
         

 

 

   

 

 

   

 

 

   

 

 

 

Positive result (see Note 4)

            149.5       85.8      

Negative result (see Note 15)

            (178.8     (163.7    

 

(1) In million. Currency as indicated.

All transactions mentioned above were properly registered with CETIP S.A.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Hedging instruments existing as of December 31, 2017 are described below, according to their category, risk, and hedging strategy:

a – Hedging against foreign exchange exposure of liabilities in foreign currency—The purpose of these contracts is (i) to offset the effect of the change in exchange rates of debts or firm commitments in U.S. dollars by converting them into debts or firm commitments in Brazilian Reais linked to CDI, (ii) firm commitments in U.S. dollars, changing them into debts or firm commitments in Reais indexed to the CDI and (iii) change a financial investment linked to the CDI and given as a guarantee to a loan in the U.S. dollar into a financial investment linked to the U.S. dollar. As of March 31, 2018, the Company and its subsidiaries had outstanding swap contracts totaling US$ 1,157.2 million in notional amount with a liability position, on average of 82.9% of CDI, of which US$ 124.2 million, had an asset position at US$ + 2.11% p.a., US$ 300.0 million had an asset position at US$ + LIBOR + 1.29% p.a. and US$ 733.0 million in interest rate swap with an asset position at US$ + 5.65% p.a. This amount includes US$ 320.0 million related to the fair value of hedging instruments of Ipiranga’s debt (see Notes 15.c and “hedge accounting” below) and US$ 24.2 million related to hedging instruments of cash flow of firm commitment (see “hedge accounting” below).

b – Hedging against foreign exchange exposure of operations—The purpose of these contracts is to make the exchange rate of the revenues of subsidiaries Oleoquímica, Oxiteno S.A. and Oxiteno Nordeste equal to the exchange rate of the cost of their main raw materials during their operating cycles. As of March 31, 2018, these swap contracts totaled US$ 8.2 million and, on average, had an asset position at 54.3% of CDI and a liability position at US$ + 0.0% p.a.

c – Hedging against fixed interest rate + IPCA in Brazilian Reais – The purpose of this contract is to change fixed interest rate + IPCA of debentures issued in Brazilian Reais to floating interest. As of March 31, 2018 this swap contract totaled R$ 566.1 million of notional amount, corresponding to the principal amount of the debt and had an asset position at 4.55% p.a. + IPCA and a liability position at 95.2% of CDI.

Hedge Accounting

The Company and its subsidiaries use derivative and non-derivative financial instruments for hedging purposes and test, throughout the duration of the hedge, their effectiveness, as well as the changes in their fair value.

Fair value hedge

The Company and its subsidiaries designate as fair value hedges certain financial instruments used to offset the variations in interest and exchange rates, which are based on the market value of financing contracted in Brazilian Reais and U.S. dollars.

On March 31, 2018, the notional amount of foreign exchange hedging instruments designated as fair value hedge totaled US$ 320.0 million. In 2018, a loss of R$ 1.7 million related to the result of hedging instruments, a loss of R$ 1.0 million related to the fair value adjustment of debt, and a loss of R$ 12.7 million related to the financial expense of the debt were recognized in the income statements, transforming the average effective cost of the operation into 102.7% of CDI (see Note 15.c.1).

On March 31, 2018, the notional amount of interest rate hedging instruments designated as fair value hedges totaled R$ 566.1 million. As of March 31, 2018, a gain of R$ 7.0 million related to the result of hedging instruments, a loss of R$ 12.8 million related to the fair value adjustment of debt, and a loss of R$ 12.6 million related to the financial expense of the debt were recognized in the income statements, transforming the average effective cost of the operations into 95.2% of CDI.

Cash flow hedge

The Company and its subsidiaries designate, as cash flow hedge of firm commitment and highly probable transactions, derivative financial instruments to hedge “firm commitments” and non-derivative financial instruments to hedge “highly probable future transactions”, to hedge against fluctuations arising from changes in exchange rate.

On March 31, 2018, the notional amount of exchange rate hedging instruments of firm commitments designated as cash flow hedges totaled US$ 24.2 million, and a loss of R$ 10.5 million was recognized in the income statement. On March 31, 2018, the unrealized gain of “Other comprehensive income” is R$ 0.8 million (gain of R$ 5.3 million on December 31, 2017), net of deferred income and social contribution taxes.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

On March 31, 2018, the notional amount of foreign exchange hedging instruments for highly probable future transactions designated as fair value hedge, related to notes in the foreign market totaled US$ 570.0 million. On March 31, 2018, the unrealized loss of “Other comprehensive income” is R$ 36.4 million (loss of R$ 30.5 million on December 31, 2017), net of deferred income and social contribution taxes.

Net investment hedge in foreign entities

The Company and its subsidiaries designate, as net investment hedge in foreign entities, notes in the foreign market, for hedging net investment in foreign entities, to offset changes in exchange rates.

On March 31, 2018, the balance of foreign exchange hedging instruments designated as net investments hedge in foreign entities, related to part of the investments made in entities which functional currency is other than the Brazilian Real, totaled US$ 103.0 million. On March 31, 2018, the unrealized loss of “Other comprehensive income” is R$ 7.3 million (loss of R$ 6.2 million on December 31, 2017), net of deferred income and social contribution taxes. The effects of exchange rate changes on investments and hedging instruments were offset in shareholders’ equity.

Gains (losses) on Hedging Instruments

The following tables summarize the value of gains (losses) recognized, which affected the shareholders’ equity of the Company and its subsidiaries:

 

     R$ million  
     03/31/2018  
     Profit or loss     Equity  

a – Exchange rate swaps receivable in U.S. dollars (i) (ii)

     26.8       0.8  

b – Exchange rate swaps payable in U.S. dollars (ii)

     0.1       —    

c – Interest rate swaps in R$ (iii)

     (5.9     —    

d – Non-derivative financial instruments (iv)

     21.5       (43.7
  

 

 

   

 

 

 

Total

     42.5       (42.9
  

 

 

   

 

 

 

 

     R$ million  
     03/31/2018     12/31/2017  
     Profit or
loss
    Equity  

a – Exchange rate swaps receivable in U.S. dollars (i) (ii)

     (19.7     5.3  

b – Exchange rate swaps payable in U.S. dollars (ii)

     3.4       —    

c – Interest rate swaps in R$ (iii)

     —         —    

d – Non-derivative financial instruments (iv)

     (3.5     (36.7
  

 

 

   

 

 

 

Total

     (19.8     (31.4
  

 

 

   

 

 

 

 

(i) Does not consider the effect of exchange rate variation of exchange swaps receivable in U.S. dollars when this effect is offset in the gain or loss of the hedged item (debt/firm commitments).
(ii) Considers the designation effect of foreign exchange hedging.
(iii) Considers the designation effect of interest rate hedging in Brazilian Reais.
(iv) Considers the results of notes in the foreign market.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Fair Value of Financial Instruments

The fair values and the carrying values of the financial instruments, including currency and interest rate hedging instruments, are stated below:

 

                   03/31/2018      12/31/2017  
                  

 

     Restated  
     Category      Note      Carrying
value
     Fair value      Carrying
value
     Fair value  

Financial assets:

                 

Cash and cash equivalents

                 

Cash and bank deposits

     Measured at amortized cost        4        220,958        220,958        147,926        147,926  

Financial investments in local currency

    
Measured at fair value through
other comprehensive income
 
 
     4        4,386,481        4,386,481        4,821,605        4,821,605  

Financial investments in foreign currency

    
Measured at fair value through
profit or loss
 
 
     4        60,190        60,190        32,473        32,473  

Financial investments:

                 

Fixed-income securities and funds in local currency

    
Measured at fair value through
profit or loss
 
 
     4        1,125,022        1,125,022        1,076,849        1,076,849  

Fixed-income securities and funds in local currency

    
Measured at fair value through
other comprehensive income
 
 
     4        2,831        2,831        2,720        2,720  

Fixed-income securities and funds in local currency

     Measured at amortized cost        4        74,321        74,321        73,471        73,471  

Fixed-income securities and funds in foreign currency

    
Measured at fair value through
other comprehensive income
 
 
     4        219,991        219,991        129,131        129,131  

Currency and interest rate hedging

instruments

    
Measured at fair value through
profit or loss
 
 
     4        149,468        149,468        85,753        85,753  
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           6,239,262        6,239,262        6,369,928        6,369,928  
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

                 

Financing

    
Measured at fair value through
profit or loss
 
 
     15        1,055,193        1,055,193        1,047,809        1,047,809  

Financing

     Measured at amortized cost        15        6,901,552        6,849,590        6,740,872        6,761,907  

Debentures

     Measured at amortized cost        15        6,016,628        6,017,641        5,035,247        5,037,072  

Debentures

    
Measured at fair value through
profit or loss
 
 
     15        580,213        580,213        554,402        554,402  

Finance leases

     Measured at amortized cost        15        47,893        47,893        48,515        48,515  

Currency and interest rate hedging instruments

    
Measured at fair value through
profit or loss
 
 
     15        178,832        178,832        163,749        163,749  

Subscription warrants – indemnification

    
Measured at fair value through
profit or loss
 
 
     24        169,865        169,865        171,459        171,459  
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           14,950,176        14,899,227        13,762,053        13,784,913  
        

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The fair value of financial instruments, including currency and interest hedging instruments, was determined as follows:

 

  The fair value of cash and bank deposit balances are identical to their carrying values.

 

  Financial investments in investment funds are valued at the value of the fund unit as of the date of the interim financial information, which corresponds to their fair value.

 

  Financial investments in CDBs (Bank Certificates of Deposit) and similar investments offer daily liquidity through repurchase at the “yield curve” and the Company calculates their fair value through methodologies commonly used for mark to the market.

 

  The fair value of trade receivables and trade payables are approximate to their carrying values.

 

  The subscription warrants – indemnification were measured based on the share price of Ultrapar (UGPA3) at the interim financial information date and are adjusted to the Company’s dividend yield, since the exercise is only possible starting in 2020 onwards and they are not entitled to dividends until then. The number of shares of subscription warrants – indemnification is also adjusted according to the changes in the amounts of provision for tax, civil, and labor risks and contingent liabilities related to the period prior to January 31, 2014. (See Note 24).

 

  The fair value calculation of notes in the foreign market (see Note 15.b) is based on the quoted price in an active market.

The fair value of other financial investments and financing was determined using calculation methodologies commonly used for mark-to-market reporting, which consist of calculating future cash flows associated with each instrument adopted and adjusting them to present value at the market rates as of March 29, 2018 and December 31, 2017. For some cases where there is no active market for the financial instrument, the Company and its subsidiaries can use quotes provided by the transaction counterparties.

The interpretation of market information on the choice of calculation methodologies for the fair value requires considerable judgment and estimates to obtain a value deemed appropriate to each situation. Consequently, the estimates presented do not necessary indicate the amounts that may be realizable in the current market.

Financial instruments were classified as financial assets or liabilities measured at amortized cost, except (i) all exchange rate and interest rate hedging instruments, which are measured at fair value through profit or loss, (ii) financial investments classified as measured at fair value through profit or loss, (iii) financial investments that are classified as measured at fair value through other comprehensive income (see Note 4), (iv) loans and financing measured at fair value through profit or loss (see Note 15), (v) guarantees to customers that have vendor arrangements (see Note 15.k), which are measured at fair value through profit or loss, and (vi) subscription warrants – indemnification, which are measured at fair value through profit or loss (see Note 24). Cash, banks, and trade receivables are classified as measured at amortized cost. Trade payables and other payables are classified as financial liabilities measured at amortized cost.

Fair Value Hierarchy of Financial Instruments

The financial instruments are classified in the following categories:

 

  (a) Level 1—prices negotiated (without adjustment) in active markets for identical assets or liabilities;

 

  (b) Level 2—inputs other than prices negotiated in active markets included in Level 1 and observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

 

  (c) Level 3—inputs for the asset or liability which are not based on observable market variables (unobservable inputs).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below shows a summary of the financial assets and financial liabilities measured at fair value:

 

     Category      Note      03/31/2018      Level 1      Level 2      Level 3  

Financial assets:

                 

Cash equivalents

                 

Cash and banks

     Measured at amortized cost        4        220,958        220,958        —          —    

Financial investments in local currency

    
Measured at fair value through
other comprehensive income
 
 
     4        4,386,481        —          4,386,481        —    

Financial investments in foreign currency

    
Measured at fair value through
profit or loss
 
 
     4        60,190        60,190        —          —    

Financial investments:

                 

Fixed-income securities and funds in local currency

    
Measured at fair value through
profit or loss
 
 
     4        1,125,022        1,125,022        —          —    

Fixed-income securities and funds in local currency

    
Measured at fair value through
other comprehensive income
 
 
     4        2,831        —          2,831        —    

Fixed-income securities and funds in local currency

     Measured at amortized cost        4        74,321        —          74,321        —    

Fixed-income securities and funds in foreign currency

    
Measured at fair value through
other comprehensive income
 
 
     4        219,991        37,692        182,299        —    

Currency and interest rate hedging instruments

    
Measured at fair value through
profit or loss
 
 
     4        149,468        —          149,468        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           6,239,262        1,443,862        4,795,400        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

                 

Financing

    
Measured at fair value through
profit or loss
 
 
     15        1,055,193        —          1,055,193        —    

Financing

     Measured at amortized cost        15        6,849,590        2,464,462        4,385,128        —    

Debentures

     Measured at amortized cost        15        6,017,641        —          6,017,641        —    

Debentures

    
Measured at fair value through
profit or loss
 
 
     15        580,213        —          580,213        —    

Finance leases

     Measured at amortized cost        15        47,893        —          47,893        —    

Currency and interest rate hedging instruments

    
Measured at fair value through
profit or loss
 
 
     15      178,832        —          178,832        —    

Subscription warrants – indemnification(1)

    
Measured at fair value through
profit or loss
 
 
     24        169,865        —          169,865        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           14,899,227        2,464,462        12,434,765        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     Category      Note      12/31/2017      Level 1      Level 2      Level 3  

Financial assets:

                 

Cash equivalents

                 

Cash and banks

     Measured at amortized cost        4        147,926        147,926        —          —    

Financial investments in local currency

    
Measured at fair value through
profit or loss
 
 
     4        4,821,605        —          4,821,605        —    

Financial investments in foreign currency

    
Measured at fair value through
profit or loss
 
 
     4        32,473        32,473        —          —    

Financial investments:

                 

Fixed-income securities and funds in local currency

    
Measured at fair value through
profit or loss
 
 
     4        1,076,849        1,076,849        —          —    

Fixed-income securities and funds in local currency

    
Measured at fair value through
other comprehensive income
 
 
     4        2,720        —          2,720        —    

Fixed-income securities and funds in local currency

     Measured at amortized cost        4        73,471        —          73,471        —    

Fixed-income securities and funds in foreign currency

    
Measured at fair value through
other comprehensive income
 
 
     4        129,131        40,556        88,575        —    

Currency and interest rate hedging instruments

    
Measured at fair value through
profit or loss
 
 
     4        85,753        —          85,753        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           6,369,928        1,297,804        5,072,124        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

                 

Financing

    
Measured at fair value through
profit or loss
 
 
     15        1,047,809        —          1,047,809        —    

Financing

     Measured at amortized cost        15        6,761,907        2,523,643        4,238,264        —    

Debentures

     Measured at amortized cost        15        5,037,072        —          5,037,072        —    

Debentures

    
Measured at fair value through
profit or loss
 
 
     15        554,402        —          554,402        —    

Finance leases

     Measured at amortized cost        15        48,515        —          48,515        —    

Currency and interest rate hedging instruments

    
Measured at fair value through
profit or loss
 
 
     15      163,749        —          163,749        —    

Subscription warrants – indemnification(1)

    
Measured at fair value through
profit or loss
 
 
     24        171,459        —          171,459        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           13,784,913        2,523,643        11,261,270        —    
        

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Refers to subscription warrants issued by the Company in the Extrafarma acquisition.

The fair value of trade receivables and trade payables are classified as level 2.

Sensitivity Analysis

The Company and its subsidiaries use derivative financial instruments only to hedge against identified risks and in amounts consistent with the risk (limited to 100% of the identified risk). Thus, for purposes of sensitivity analysis of market risks associated with financial instruments, as required by CVM Instruction 475/08, the Company analyzes the hedging instrument and the hedged item together, as shown on the charts below.

For the sensitivity analysis of foreign exchange hedging instruments, management adopted as a likely scenario the Real/U.S. dollar exchange rates at maturity of each swap, projected by U.S dollar futures contracts quoted on B3 as of March 29, 2018. As a reference, the exchange rate for the last maturity of foreign exchange hedging instruments is R$ 5.15 in the likely scenario. Scenarios II and III were estimated with a 25% and 50% additional appreciation or depreciation of the Brazilian Real against the likely scenario, according to the risk to which the hedged item is exposed.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

Based on the balances of the hedging instruments and hedged items as of March 29, 2018, the exchange rates were replaced, and the changes between the new balance in Brazilian Reais and the original balance in Brazilian Reais as of March 29, 2018 were calculated in each of the three scenarios. The table below shows the change in the values of the main derivative instruments and their hedged items, considering the changes in the exchange rate in the different scenarios:

 

     Risk      Scenario I
(likely)
    Scenario
II
    Scenario
III
 

Currency swaps receivable in U.S. dollars

         

(1) U.S. Dollar / Real swaps

     Dollar        138,077       543,245       948,413  

(2) Debts/firm commitments in dollars

     appreciation        (138,065     (543,213     (948,360
     

 

 

   

 

 

   

 

 

 

(1)+(2)

     Net effect        12       32       53  
     

 

 

   

 

 

   

 

 

 

Currency swaps payable in U.S. dollars

         

(3) Real / U.S. Dollar swaps

     Dollar        103       6,882       13,662  

(4) Gross margin of Oxiteno

     devaluation        (103     (6,882     (13,662
     

 

 

   

 

 

   

 

 

 

(3)+(4)

     Net effect                     
     

 

 

   

 

 

   

 

 

 

For sensitivity analysis of hedging instruments for interest rates in Brazilian Reais, the Company used the futures curve of the DI x Pre contract quoted on B3 as of March 29, 2018 for each of the swap and debt (hedged item) maturities, to determine the likely scenarios. Scenarios II and III were estimated based on a 25% and 50% deterioration, respectively, of the likely scenario pre-fixed interest rate.

Based on the three scenarios of interest rates in Brazilian Reais, the Company estimated the values of its debt and hedging instruments according to the risk which is being hedged (variations in the pre-fixed interest rates in Brazilian Reais), by projecting them to future value at the contracted rates and bringing them to present value at the interest rates of the estimated scenarios. The result are shown in the table below:

 

     Risk      Scenario
I (likely)
    Scenario
II
    Scenario
III
 

Interest rate swap (in Brazilian Reais) – Debentures—CRA

         

(1) Fixed rate swap—CDI

     Decrease in        12,865       86,754       172,793  

(2) Fixed rate debt

     Pre-fixed rate        (12,865     (86,754     (172,793
     

 

 

   

 

 

   

 

 

 

(1) + (2)

     Net effect        —         —         —    
     

 

 

   

 

 

   

 

 

 

 

34. Commitments (Consolidated)

 

a. Contracts

i) Subsidiary Tequimar has agreements with CODEBA and Complexo Industrial Portuário Governador Eraldo Gueiros, in connection with its port facilities in Aratu and Suape, respectively. Such agreements establish a minimum cargo movement of products, as shown below:

 

Port

   Minimum movement
in tons per year
     Maturity  

Aratu

     397,000        2031  

Aratu

     900,000        2022  

Suape

     250,000        2027  

Suape

     400,000        2029  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

If the annual movement is less than the minimum contractual movement, the subsidiary is liable to pay the difference between the effective movement and the minimum contractual movement, based on the port tariff rates in effect on the date established for payment. As of March 31, 2018, these rates were R$ 6.99 per ton for Aratu and R$ 2.54 per ton for Suape. The subsidiary has met the minimum cargo movement required since the beginning of the contractual agreements.

ii) Subsidiary Oxiteno Nordeste has a supply agreement with Braskem S.A. which establishes a minimum annually consumption level of ethylene, and conditions for the supply of ethylene until 2021. The minimum purchase commitment clause provided for a minimum annual consumption of 205 thousand tons in 2018. Should the minimum purchase commitment not be met, the subsidiary would be liable for a fine based on the current ethylene price for the quantity not purchased. According to contractual conditions and tolerances, there are no material issues regarding the minimum purchase commitment.

iii) Subsidiary Oxiteno S.A. has a supply agreement with Braskem S.A., valid until 2023, which establishes and regulates the conditions for supply of ethylene to Oxiteno based on the international market for this product. The minimum purchase is 22,050 tons of ethylene semiannually. Should the minimum purchase commitment not be met, the subsidiary would be liable for a fine based on the current ethylene price for the quantity not purchased. According to contractual conditions and tolerances, there are no material issues regarding the minimum purchase commitment.

 

b. Insurance Coverage in Subsidiaries

The Company maintains insurance policies with the objective of covering several risks to which it is exposed, including loss of profits, losses and damage from fire, lightning, explosion of any kind, gale, aircraft crash, electric damage, and other risks, covering the industrial plants and distribution bases and branches of all subsidiaries. The maximum compensation values based on the risk analysis of certain locations are shown below:

 

     Maximum
compensation
value (*)
 

Oxiteno

   US$ 1,142  

Ipiranga

   R$ 989  

Ultracargo

   R$ 740  

Ultragaz

   R$ 150  

Extrafarma

   R$ 160  

 

(*) In millions. In accordance with policy conditions.

The General Liability Insurance program covers the Company and its subsidiaries with a maximum aggregate coverage of US$ 400 million against losses caused to third parties as a result of accidents related to commercial and industrial operations and/or distribution and sale of products and services.

The Company maintains liability insurance policies for directors and executive officers (D&O) to indemnify the members of the Board of Directors, fiscal council and executive officers of Ultrapar and its subsidiaries (“Insured”) in the total amount of US$ 80 million, which cover any of the Insured liabilities resulting from wrongful acts, including any act or omission committed or attempted, except if the act, omission or the claim is consequence of gross negligence or willful misconduct.

In addition, group life and personal accident, health and national and international transportation and other insurance policies are also maintained.

The coverage and limit of the insurance policies are based on a careful study of risks and losses conducted by independent insurance advisors. The type of insurance is considered by management to be sufficient to cover potential losses based on the nature of the business conducted by the companies.

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

c. Operating Lease Contracts

Subsidiaries Cia. Ultragaz, Bahiana, Tequimar, Serma, and Oxiteno S.A. have operating lease contracts for the use of IT equipment. These contracts have terms from 36 to 48 months. The subsidiaries have the option to purchase the assets at a price equal to the fair market price on the date of option, and management does not intend to exercise such option. Subsidiaries Cia. Ultragaz and Bahiana have operating lease contracts related to vehicles in their fleet. These contracts have terms of 24 to 60 months and there is no purchase option. The future disbursements (installments), assumed under these contracts, amount approximately to:

 

     Up to 1 year      Between 1 and
5 years
     More than
5 years
     Total  

03/31/2018

     27,696        41,082        —          68,778  

The subsidiaries IPP, Extrafarma, and Cia. Ultragaz have operating lease contracts related to land and building of service stations, drugstores, and stores, respectively. The future disbursements and receipts (installments), arising from these contracts, amount approximately to:

 

            Up to 1 year     Between 1 and
5 years
    More than
5 years
    Total  

03/31/2018

     payable        170,156       540,053       453,708       1,163,917  
     receivable        (60,312     (178,027     (142,607     (380,946

The expense recognized for the three-month period ended March 31, 2018 for operating leases was R$ 39,464 (R$ 27,201 for the three-month period ended March 31, 2017), net of sublease income.

 

93


Table of Contents

MD&A—ANALYSIS OF CONSOLIDATED EARNINGS

First quarter of 2018

 

(R$ million)

   1Q18     1Q17     4Q17     D
1Q18 X 1Q17
    D
1Q18 X 4Q17
 

Net revenue from sales and services

     20,751.1       18,544.6       21,347.6       12     -3

Cost of products and services sold

     (19,229.8     (16,987.5     (19,543.5     13     -2

Gross profit

     1,521.3       1,557.1       1,804.1       -2     -16

Selling, marketing, general and administrative expenses

     (1,044.0     (959.7     (1,045.3     9     0

Other operating income, net

     (262.7     56.3       (19.3     -566     1262

Gain on disposal of property, plant and equipment and intangibles

     (2.2     (6.4     (1.5     -65     50

Operating income

     212.3       647.3       738.0       -67     -71

Financial expenses, net

     (107.0     (121.2     (119.4     -12     -10

Share of profit of joint ventures and associates

     (3.0     6.4       4.6       -146     -165

Income before income and social contribution taxes

     102.4       532.6       623.1       -81     -84

Income and social contribution taxes – current and deferred

     (46.0     (185.4     (255.3     -75     -82

Income and social contribution taxes – tax incentives

     16.5       7.5       21.6       119     -24

Net income

     72.9       354.7       389.4       -79     -81

Net income attributable to Ultrapar

     73.9       352.6       393.7       -79     -81

Net income attributable to non-controlling interests in subsidiaries

     (1.0     2.1       (4.3     -147     -77

Adjusted EBITDA

     508.1       947.0       1,046.9       -46     -51

Volume—LPG sales (000 tons)

     410.1       414.5       425.7       -1     -4

Volume—Fuels sales (000 m³)

     5,461.0       5,553.8       5,907.6       -2     -8

Volume—Chemicals sales (000 tons)

     180.0       195.8       201.3       -8     -11


Table of Contents

Considerations on the financial and operational information

 

 

The financial information presented in this document has been prepared according to International Financial Reporting Standards (IFRS). The financial information of Ultrapar corresponds to the company’s consolidated information. The information on Ipiranga, Oxiteno, Ultragaz, Ultracargo and Extrafarma is reported without the elimination of intercompany transactions. Therefore, the sum of such information may not correspond to Ultrapar’s consolidated information. Additionally, the financial and operational information presented in this document is subject to rounding and consequently the total amounts presented in the tables and charts may differ from the direct sum of the amounts that precede them. Except when otherwise indicated, the information presented in this document compares 1Q18 to 1Q17.

As from 2018, the IFRS 9 and 15 standards were adopted, amendments to the IFRS rules and interpretations issued by the IASB. In order to provide a comparative basis for the financial statements, the information for the first and fourth quarter of 2017 shown in this document incorporates these accounting changes, consequently differing from the values previously reported in the respective publications of results. Additional information can be found in Note 2.y of the quarterly financial statements of March 31, 2018 and in the financial spreadsheets, both available from the Ultrapar website (ri.ultra.com.br).

Information denominated EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization, Adjusted EBITDA — adjusted for the amortization of contractual assets with customers – exclusive rights and EBIT – Earnings Before Interest and Taxes are presented in accordance with CVM Instruction 527 of October 04, 2012. Shown below the calculation of EBITDA, based on net earnings:

 

R$ million

   1Q18      1Q17¹      4Q17¹  

Net income

     72.9        354.7        389.4  

(+) Income and social contribution taxes

     29.5        177.9        233.7  

(+) Financial result

     107.0        121.2        119.4  

(+) Depreciation and amortization

     194.2        165.0        187.5  

EBITDA

     403.6        818.8        930.1  

Adjustments

        

(+) Amortization of contractual assets with customers—exclusive rights (Ipiranga)

     104.5        128.2        116.9  

Adjusted EBITDA

     508.1        947.0        1,046.9  

 

¹ 1Q17 and 4Q17 proforma amounts, contemplating the adoption of IFRS 9 and 15, as mentioned previously for comparison purposes.


Table of Contents

Ultrapar

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Net sales and services

    20,751       18,545       21,348       12     (3 %) 

Net earnings1

    73       355       389       (79 %)      (81 %) 

Earnings per share attributable to the shareholders2

    0.14       0.65       0.72       (79 %)      (81 %) 

Adjusted EBITDA

    508       947       1,047       (46 %)      (51 %) 

Adjusted EBITDA ex-nonrecurring items³

    794       898       1,047       (12 %)      (24 %) 

Investments

    604       485       798       24     (24 %) 

 

Amounts in R$ million (except EPS)
¹ Under IFRS, consolidated net earnings includes net earnings attributable to non-controlling shareholders of the controlled companies
² Calculated in Reais based on the weighted average of the number of shares over the period, net of shares held in treasury
3  Adjusted EBITDA and excluding the R$ 286 million fine following the decision of CADE to reject the acquisition of Liquigás. In the annual comparison, the EBITDA of 1Q17 does not consider the reversal of provision in the amount of R$ 49 million reported

Net revenues – Total of R$ 20,751 million (+12%) due to growth in revenues at all the businesses. Compared with 4Q17, net revenues reported a drop of 3% due to lower revenues at all the businesses with the exception of Extrafarma.

Adjusted EBITDA – Total of R$ 508 million (-46%) due to reduced EBITDA at Ultragaz, affected by the payment of a R$ 286 million fine following CADE’s decision not to approve the acquisition of Liquigás, as well as the reduction in EBITDA at all the businesses with the exception of Ultracargo. It should be pointed out that Oxiteno’s EBITDA was affected by the reversal of a provision in 1Q17 in the amount of R$ 49 million. Compared with 4Q17, EBITDA was down 51%, with a reduction at all the businesses except Ultracargo, the comparison also being effected by the payment of the fine. In comparable basis, Adjusted EBITDA excluding non-recurrent items presented a drop of 12% over 1Q17.

Depreciation and amortization4 Total of R$ 299 million (+2%) due to the investments over the past 12 months, with particular emphasis on the expansion of the Ipiranga service station and Extrafarma drugstore networks as well as preparations for the operational startup of the new Oxiteno plant in Pasadena. Compared with 4Q17, depreciation and amortization costs and expenses were down by 2%.

Financial results – Ultrapar reported a net debt on March 31, 2018 of R$ 8.5 billion (2.4x LTM Adjusted EBITDA) compared with R$ 6.3 billion on March 31, 2017 (1.5x LTM Adjusted EBITDA), principally due to the lower EBITDA in the quarter, affected by the fine of R$ 286 million related to Liquigás’ acquisition, and higher investments in the period. Ultrapar’s net financial expense was R$ 107 million, R$ 14 million less than compared with 1Q17, due to the lower CDI Interbank Rate on a year-over-year comparison, despite the higher net debt, exchange rate effects between periods and the effect of the reversal of the provision resulting from the exclusion of ICMS from the base for calculating PIS/Cofins charges in 1Q17. Compared with 4Q17, the net financial expense was down R$ 12 million due to the decline of CDI between quarters, in spite of higher net debt, and the exchange rate effects between periods.

Net earnings – Total of R$ 73 million (-79%) due to the reduction in EBITDA and higher depreciation and amortization, despite the reduction in financial expenses. In relation to 4Q17, net earnings registered a reduction of 81% due to the same factors already mentioned above.

Operating cash flow – Total of -R$ 113 million in 1Q18 compared to a total of R$ 254 million in 1Q17 due to the payment of the fine following CADE’s decision not to approve the acquisition of Liquigás and insurance recoveries in 1Q17. Excluding the impact of the fine net of taxes, operating cash flow totaled R$ 76 million in 1Q18.

 

 

4  Includes amortization of contractual assets with customers – exclusive rights

 


Table of Contents

Ipiranga

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Total volume (000 m³) ¹

    5,461       5,554       5,908       (2 %)      (8 %) 

Diesel

    2,626       2,718       2,887       (3 %)      (9 %) 

Otto cycle

    2,723       2,753       2,931       (1 %)      (7 %) 

Others²

    112       83       89       34     25

EBITDA Adjusted (R$ million)

    585       687       878       (15 %)      (33 %) 

 

1Starting in Dec/17, total volume includes that from Iconic, the lubricants JV with Chevron
²Fuel oils, arla 32, kerosene, lubricants and greases

Operational performance – Volume totaled 5,461 thousand m³ (-2%), reflecting the still tight competitive scenario with smaller growth in the fuels market. The Otto cycle registered a 1% drop compared with 1Q17, in line with overall market performance. In addition, diesel volume was down 3% due to the challenging competitive environment. Compared with 4Q17, volume was down by 8% with reductions of 7% in the Otto cycle and 9% in diesel, principally due to seasonal factors between the consecutive quarters.

Net revenues – Total of R$ 17,516 million (+11%), due principally to variations in fuel costs, including the increase in PIS/Cofins taxes levied on fuel products since July/17, and the strategy of constant innovation in services and convenience at the service station. The effects were partially offset by lower sales volume and by the more favorable mix in 1Q17. Compared with 4Q17, net revenues fell by 2% due to lower sales volume, partially mitigated by variations in fuel costs.

Cost of goods sold – Total of R$ 16,574 million (+12%) due mainly to variations in fuel costs, including the increase in PIS/Cofins taxes on products in July 2017, partially offset by lower sales volume and the sales mix in the period. Compared with 4Q17, cost of goods sold posted a reduction of 1%, in line with the decline in volumes, despite variations in fuel costs.

Sales, general and administrative expenses – Total of R$ 549 million (+14%), largely due to greater expenditures with Iconic, the association in lubricants with Chevron that started operations in December 2017, and higher rental expenses, partially offset by lower advertising and marketing expenses. Compared with 4Q17, sales, general and administrative expenses were up by 10%, mainly due to: (i) higher expenses with Iconic, (ii) higher marketing expenses, a typical increase between the first and the fourth quarters due to the annual resellers convention in February, (iii) lower reversal of provision for the removal of fuel tanks, and (iv) higher rental expenses with the expansion of the network. The effects were partially offset by reduced contingencies and lower freight expenses due to the decline in sales volume.

Adjusted EBITDA – Total of R$ 585 million (-15%), mainly due to the decline in volumes, the tight operating environment and the higher overall level of expenses, this quarter being affected by the startup in operations of Iconic, including indentations. Compared with 4Q17, EBITDA posted a reduction of 33% due to the same factors as mentioned above.

Investments – A total of R$ 257 million was invested, allocated mainly to expansion and maintenance of the service stations and franchises. Out of total investments, R$ 111 million went to property, plant and equipment and additions to intangible assets, R$ 96 million to contractual assets with customers and R$ 49 million to financing of clients and rental advances, net of repayments. Ipiranga ended 1Q18 with 8,039 service stations (+5%), adding 391 service stations to the network in 12 months (556 additions and 165 reductions).


Table of Contents

Oxiteno

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Total Volume (000 tons)

    180       196       201       (8 %)      (11 %) 

Specialty Chemicals

    152       157       164       (4 %)      (7 %) 

Commodities

    28       38       38       (26 %)      (25 %) 

Sales in Brazil

    126       140       146       (10 %)      (14 %) 

Sales outside Brazil

    54       56       55       (4 %)      (2 %) 

EBITDA (R$ million)

    51       112       77       (54 %)      (33 %) 

Operational performance – Oxiteno reported sales volume of 180 thousand tons (-8% or 16 thousand tons). The sales of specialty chemicals were down 4% year-over-year, posting a reduction of 4% in the domestic market, declines being registered in the agrochemical and distribution segments. Specialty chemicals sales outside Brazil presented a 2% drop, a reflection of a more challenging operational environment in spite of higher sales from pre-marketing of the new plant in the United States. Commodities recorded a decrease of 26% in relation to 1Q17 due essentially to the effects of scheduled stoppages at Camaçari during the quarter. Compared with 4Q17, total sales volume reported a drop of 11% (21 thousand tons), with a reduction of 7% and 25% in specialty chemicals and commodities respectively, in large part due to the same factors already mentioned.

Net revenues – Total of R$ 999 million (+10%) due to: (i) a 15% higher average price in US Dollars, a result of the increase in raw material costs year-over-year, (ii) a 3% weaker Real against the US Dollar (R$ 0.10/US$), and (iii) the higher share of specialty chemicals in the overall sales mix. These effects were mitigated by the lower sales volume in the period. Compared with 4Q17, net revenues posted a 12% reduction due principally to the decline in sales volume in the period, partially offset by the better sales mix with a higher percentage of specialty chemicals.

Cost of goods sold – Total R$ 824 million (+13%) due to: (i) the increase in raw material costs year-over-year, (ii) a 3% weaker Real against the US Dollar, (iii) the costs relative to the stoppages and (iv) higher pre-operational costs at the new Pasadena plant. These effects were partially offset by lower sales volumes year-over-year. Compared with 4Q17, the cost of goods sold reported a reduction of 10% in line with the 11% decline in volume.

Sales, general and administrative expenses – Total of R$ 167 million (+7%), mainly due to higher international freight expenses, reflecting an increase in unit freight costs in US Dollar and a 3% weaker Real against the US Dollar, and higher expenses with pre-marketing for the new Pasadena plant. Compared with 4Q17, sales, general and administrative expenses were down 9%, mainly due to reduced freight expenses, a reflection of lower sales volume and an improved route mix, and lower overheads with consultancies.

Other operational results – The “Other operational results” line amounted to a net revenue of R$ 2 million in 1Q18, compared with R$ 49 million in 1Q17 and a neutral result in 4Q17. In 1Q17, the amount represents a reversal of a provision set aside for the exclusion of the ICMS sales tax from the base for the calculation of PIS/Cofins charges.

EBITDA – Oxiteno’s EBITDA amounted to 51 million (-54%), the comparison being distorted by the reversal of the provision made in 1Q17 of R$ 49 million. Excluding the effects of this reversal, Oxiteno’s EBITDA presented a reduction of 18% due to: (i) lower sales volume in the period, (ii) pre-operational expenditure at the new unit in Pasadena, and (iii) costs related to the scheduled stoppages. The effects were partially offset by a 3% weaker Real compared with the US Dollar. In relation to 4Q17, EBITDA posted a reduction of 33% due to lower sales volumes, partially offset by the reduction in expenses mentioned above.

Investments – Oxiteno invested R$ 137 million, mainly directed to new alkoxylation plant in the United States, scheduled for operational startup in 2018, and maintenance of its productive units.

 


Table of Contents

Ultragaz

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

Total volume (000 tons)

    410       414       426       (1%)     (4%)

Bottled

    281       282       295       0%     (5%)

Bulk

    129       132       131       (2%)     (1%)

EBITDA (R$ million)

    (170)       113       48       n.a.     n.a.

Operational performance – Total sales volume was 410 thousand tons (-1%), with a flat performance in the bottled segment and a decline in the bulk segment. Volume in the bottled segment was flat year-over-year, with 1% growth per business day. The bulk segment posted a decline in volume of 2% (a drop of 1% per business day), mainly due to the programmed volume reduction of an industrial customer, partially offset by growth in sales to the industrial segment and condominiums. Compared with 4Q17, sales volume recorded a decline of 4%, bottled and bulk segments falling 5% and 1% respectively, due to seasonal factors between periods.

Net revenues – Total of R$ 1,626 million (+20%) due to readjustments in LPG costs and Ultragaz’s strategy of differentiation and innovation, both effects being offset by lower sales volume. Compared with 4Q17, net revenues posted a reduction of 3%, reflecting the decline of 4% posted in sales volume, despite the readjustments in the costs of LPG.

Cost of goods sold – Total of R$ 1,432 million (+26%), mainly due to LPG cost readjustments, attenuated by lower freight costs due to lower sales volume and shorter routes to source products. Compared with 4Q17, the cost of goods sold was up by 1% due to readjustments in LPG costs and higher expenditures with gas bottle requalification, this partially compensated by the decline in volume sold.

Sales, general and administrative expenses Total of R$ 131 million (-12%) due mainly to the reduction in the provision for doubtful debts in 1Q18 and lower freight expenses, a result of lower sales volume and the shorter routes to source products. Compared with 4Q17, sales, general and administrative expenses posted a decline of 23% due to: (i) the reduction in the provision for doubtful debts, (ii) lower marketing expenses in the quarter, (iii) lower freight expenses, reflecting the decline in volumes and the migration of customers with the type of delivery CIF to FOB, and (iv) lower expenses with strategic and planning consultants.

EBITDA – Total of -R$ 170 million. In 1Q18, Ultragaz’s EBITDA was affected by the payment of a fine of R$ 286 million following the decision of the anti-trust authority (CADE) to reject the acquisition of Liquigás. The fine, which represents 10% of the amount offered in the acquisition plus the net debt of Liquigás in December 2015, was integrally paid on March 1, 2018, the date CADE published its decision. Excluding the effect of the fine, Ultragaz’s EBITDA totaled R$ 116 million (+3%) due mainly to the initiatives mentioned above to reduce the expenses, despite lower sales volume. Compared with 4Q17, Ultragaz’s EBITDA also reported a reduction, with the result of 1Q18 being affected by the payment of the fine and 4Q17 by an agreement with CADE in November 2017 in the amount of R$ 84 million. Excluding both effects, Ultragaz’s EBITDA would have reported a reduction of 12% quarter-over-quarter due to seasonal effects between periods.

Investments – Ultragaz invested R$ 62 million, allocated mainly to clients in the bulk segment, gas bottles and IT with a focus on differentiation and innovation.


Table of Contents

Ultracargo

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Effective storage1 (000 m³)

    722       695       745       4     (3 %) 

EBITDA (R$ million)

    41       22       37       87     12

 

1  Monthly average

Operational performance – Ultracargo’s average storage was up by 4% compared with 1Q17. This result was due to increased fuel and ethanol handling at Itaqui and Santos port terminals and the partial resumption in June 2017 of 67.5 thousand m³ out of 151.5 thousand m³ of the latter terminal shut down since the April 2015 incident. These effects were mitigated by a reduction in fuel handling activity at Aratu port terminal. Compared with 4Q17, average storage at Ultracargo’s terminals was down 3%, largely due to a decrease in fuel handling at Aratu, Itaqui and Santos terminals, despite the increase in ethanol operation at Aratu and Suape terminals.

Net revenues – Total of R$ 116 million in 1Q18 (+15%), due to increased average storage following the partial resumption of activities at the Santos terminal mentioned above, as well as greater fuel handling activity and higher average prices at all terminals. Compared with 4Q17, net revenues posted a reduction of 3%, in line with the decline in the average storage performance due to reduced fuel handling activity at the terminals.

Cost of services provided – Total of R$ 59 million (+17%). Cost of services provided was impacted by a retroactive one-off payment of IPTU (urban property tax) in Aratu in the amount of R$ 3 million, as well as higher expenditures with third party services and personnel, as a result of complementary activities required for the partial resumption of operations at the Santos terminal. Compared with 4Q17, the cost of services presented a drop of 1% due to lower expenditures with third party services, in line with reduced handling operations at the terminals, partially mitigated by the retroactive payment of IPTU in Aratu already described.

Sales, general and administrative expenses – Total of R$ 29 million (+15%), principally due to higher personnel expenses in the form of increased physical workforce and expenses with strategic and planning consultants. Compared with 4Q17, sales, general and administrative expenses recorded a reduction of 12% due to lower personnel, legal advice and maintenance services expenses.

Other operating results – The “Other operating results” line reported net expenses of R$ 1 million in 1Q18 compared with R$ 16 million in 1Q17 and net expense of R$ 3 million in 4Q17. All quarters include amounts associated with expenses for the commissioning and licensing of the Santos terminal.

EBITDA – Total of R$ 41 million (+87%) due mainly to higher average storage in the period, reflecting the partial resumption of activities at the Santos terminal, greater fuel handling activity, higher average prices at the terminals and the effect of R$ 16 million in fire-related expenses in Santos terminal in 1Q17. In 1Q18, lower fire-related expenses also had a positive impact on Ultracargo’s EBITDA year-over-year. Compared with 4Q17, EBITDA was up by 12% due to lower expenditures, a result of efforts implemented to reduce expenses and increase productivity, as well as the decline in expenses with the Santos incident. These effects were offset by reduced fuel handling at the port terminals.

Investments – Ultracargo invested R$ 22 million, mainly allocated to expansion at the Itaqui terminal, maintenance and modernization of terminal safety systems and processes.

 


Table of Contents

Extrafarma

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

Gross revenues (R$ million)

    542       476       522       14%     4%

Drugstores (end of period)

    401       321       394       25%     2%

% of mature stores (+3 years)

    46%       55%       45%       (9.6 p.p.)     0.5 p.p.

EBITDA (R$ million)

    0       4       3       n.a.     n.a.

Operational performance – Extrafarma ended 1Q18 with 401 stores (+25%, with 100 openings and 20 closures in the past 12 months). At the end of 1Q18, 54% of the stores had been operating for less than three years compared with 45% in 1Q17, reflecting the accelerated expansion of the network. Compared with 4Q17, Extrafarma opened 12 new drugstores (closing 5) and continued its expansion in São Paulo as well as making its debut in the state of Amazonas, the 13th state in the federation with an Extrafarma presence.

Gross revenue – Total of R$ 542 million (+14%) due to an increase of 13% in retail sales, reflecting the 26% increase in the average number of stores as well as greater promotional activities in the period. The effects were attenuated by the stronger comparative base in 1Q17—when Extrafarma retail sales posted a 36% increase – and by smaller growth in the market. Compared with 4Q17, gross revenue reported growth of 4% due to the larger average number of stores and promotional activity in the quarter.

Cost of goods sold and gross profit – Cost of goods sold was R$ 359 million (+18%), principally due to stronger sales volume and the annual readjustment in medicine prices. Gross profit was R$ 153 million (+5%), mainly due to increased retail sales in the period, reflecting Extrafarma’s strategy of expansion with an increase in the network of drugstores, this effect being partially offset by the greater promotional activity already mentioned. Compared with 4Q17, cost of goods sold and gross profit registered respectively, a growth of 5% and 1% due to the same factors mentioned above.

Sales, general and administrative expenses – Total of R$ 170 million (+13%). The increase reflects the 26% higher average number of stores in operation. Excluding the expenses of new stores, sales, general and administrative expenses were down 7% lower year-over-year, principally due to the non-recurring expenses in 1Q17 of R$ 6 million with the transfer of the Belém DC to the city of Benevides and associated indemnity payments. The decline in SG&A expenses is also due to initiatives implemented by Extrafarma for increasing productivity and reducing expenses. Compared with 4Q17, sales, general and administrative expenses recorded a growth of 3% due to the larger average number of stores.

Result from disposal of property – The result from the disposal of property by Extrafarma was neutral in 1Q18, against a net expense of R$ 6 million in 1Q17 and a neutral result in 4Q17. In 1Q17, the result reflects the write-off of non-depreciated assets following the transfer of the DC.

EBITDA – Extrafarma posted a near zero EBITDA in the quarter, compared to a reported EBITDA of R$ 4 million in 1Q17, impacted by the smaller growth of the market and a larger number of maturing stores. Excluding the effects of new stores, EBITDA totaled R$ 11 million in this quarter compared to a R$ 15 million EBITDA excluding non-recurrent effects in 1Q17. Compared with 4Q17, EBITDA was down due to the same factors already mentioned.

Investments – Extrafarma invested R$ 16 million, mainly in the opening of 12 new stores and IT focused on improving the shopping experience and operational excellence.


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São Paulo, May 2, 2018—Ultrapar Participações S.A. (Brazil: UGPA3/USA: UGP), a multi-business company engaged in specialized distribution and retail (Ipiranga/Ultragaz/Extrafarma), specialty chemicals (Oxiteno) and storage for liquid bulk (Ultracargo), hereby reports its results for the first quarter of 2018.

 

Net Revenues

 

  Adjusted EBITDA¹   Net earnings

R$21

billion

 

 

R$794

million

 

R$73

million

12% YoY            -3% QoQ

 

  -12% YoY            -24% QoQ   -79% YoY            -81% QoQ

Investments

 

  Operational Cash Flow²   Market cap

R$604

million

 

R$ 76

million

 

R$39

billion

 

¹ Adjusted EBITDA and excluding the R$ 286 million fine following the decision of CADE to reject the acquisition of Liquigás. In the annual comparison, the EBITDA of 1Q17 does not consider the reversal of provision in the amount of R$ 49 million reported
² Accumulated Jan-Mar 18 excluding the R$ 286 million fine net of taxes following the decision of CADE to reject the acquisition of Liquigás

Highlights:

 

  Ultrapar issued R$ 1.725 billion in debentures at 105.25% of the CDI and a five-year term.

 

  Extrafarma ended the quarter with 401 stores, inaugurating its first unit in the state of Amazonas, the 13th state with the network’s presence.

 

  Ipiranga increased the number of service stations by 56 in the quarter and ends 1Q18 with 8,039 service stations, continuing the accelerated expansion of the network.

Following three consecutive years of recession sustaining growing results thanks to the resilience and continuous investments in our businesses, we begin 2018 with important challenges reflecting a slower recovery in our markets and structural changes to our value chain, which have contributed to a reduction in our consolidated results this quarter. On the inorganic front, we have confronted changes in the regulatory environment that made us readjust our strategic plans. We are convinced of the potential of our businesses and our people and we have strong capacity to adapt to different scenarios. With this, we are working to follow the path of growth and value creation to our stakeholders.

 

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Conference Call 1Q18

 

 

Ultrapar will be holding a conference call for analysts on May 3, 2018 to comment on the company’s performance in the first quarter of 2018 and outlook. The presentation will be available for download on the company’s website 30 minutes prior to the conference call.

Brazilian: 10h00 (US EST) / 11h00 (Brasília time)

Telephone for connection: +55 (11) 2188-0155

Code: Ultrapar

Replay: +55 (11) 2188-0400 (available for 7 days)

Code: Ultrapar

International: 11h30 (US EST) / 12h30 (Brasília time)

International Participants: +1 (412) 317-5430

Code: Ultrapar

Replay: +1 (412) 317-0088 (available for 7 days)

Code: 10118493

WEBCAST live via internet at ri.ultra.com.br. Please connect 15 minutes in advance.

Considerations on the financial and operational information

 

 

The financial information presented in this document has been prepared according to International Financial Reporting Standards (IFRS). The financial information of Ultrapar corresponds to the company’s consolidated information. The information on Ipiranga, Oxiteno, Ultragaz, Ultracargo and Extrafarma is reported without the elimination of intercompany transactions. Therefore, the sum of such information may not correspond to Ultrapar’s consolidated information. Additionally, the financial and operational information presented in this document is subject to rounding and consequently the total amounts presented in the tables and charts may differ from the direct sum of the amounts that precede them. Except when otherwise indicated, the information presented in this document compares 1Q18 to 1Q17.

As from 2018, the IFRS 9 and 15 standards were adopted, amendments to the IFRS rules and interpretations issued by the IASB. In order to provide a comparative basis for the financial statements, the information for the first and fourth quarter of 2017 shown in this document incorporates these accounting changes, consequently differing from the values previously reported in the respective publications of results. In order to understand the effects of the new accounting rules, the “Summary of changes resulting from the application of IFRS 9 and 15” contain explanations of the impacts on the principal accounts of the financial statements for the first and fourth quarters 2017 compared with amounts published previously. Additional information can be found in Note 2.y of the quarterly financial statements of March 31, 2018, available from the Ultrapar website (ri.ultra.com.br).

 

 

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Information denominated EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization, Adjusted EBITDA — adjusted for the amortization of contractual assets with customers – exclusive rights and EBIT – Earnings Before Interest and Taxes are presented in accordance with CVM Instruction 527 of October 04, 2012. Shown below the calculation of EBITDA, based on net earnings:

 

R$ million

   1Q18      1Q17¹      4Q17¹  

Net income

     72.9        354.7        389.4  

(+) Income and social contribution taxes

     29.5        177.9        233.7  

(+) Financial result

     107.0        121.2        119.4  

(+) Depreciation and amortization

     194.2        165.0        187.5  

EBITDA

     403.6        818.8        930.1  

Adjustments

        

(+) Amortization of contractual assets with customers—exclusive rights (Ipiranga)

     104.5        128.2        116.9  

Adjusted EBITDA

     508.1        947.0        1,046.9  

 

¹ 1Q17 and 4Q17 proforma amounts, contemplating the adoption of IFRS 9 and 15, as mentioned previously for comparison purposes.

Summary of the changes resulting from the application of IFRS 9 and 15

 

 

In the following chart, the principal effects of the adoption of IFRS 9 and 15 on the financial statements for 1Q17 and 4Q17, are shown, resulting in the following changes:

 

  Financial instruments – IFRS 9: (i) recognition of expected credit loss: provisions are now to be made with the constitution of the credit in line with the expectation of loss established in accordance with the characteristics of the client portfolio (previously, provisioning was effected in accordance with the maturity term of the credits).

 

  Recognition of revenue – IFRS 15: mainly reclassification of selling and commercial expenses with amortization of exclusivity rights with service stations (Ipiranga) as a reduction of revenue.

Additional information on the alterations is available in Note 2.y of the financial statements of March 31, 2018 and the complete tables are to be found in Ultrapar’s website (ri.ultra.com.br).

Effects in 1Q17

 

R$ million

   Ultrapar     Ipiranga     Oxiteno     Ultragaz     Ultracargo     Extrafarma  

Reported EBITDA

     973.1       705.2       111.5       120.4       21.7       4.1  

IFRS 9

     (24.3     (16.6     —         (7.8     0.2       (0.1

IFRS 15

     (129.9     (129.9     —         —         —         —    

EBITDA

     818.8       558.7       111.5       112.6       21.9       4.0  

Amortization of contractual assets with customers - exclusive rights (Ipiranga)

     (128.2     (128.2     —         —         —         —    

Adjusted EBITDA

     947.0       686.9       111.5       112.6       21.9       4.0  
                                      

R$ million

   EBITDA     Taxes and
social
contribution
    Net
income
    Assets     Liabilities     Stockholders’
equity
 

Reported amounts

     973.1       (186.0     370.3       23,027.1       14,206.8       8,820.3  

IFRS 9

     (24.3     8.3       (16.1     (72.0     —         (72.0

IFRS 15

     (129.9     (0.2     0.4       (21.7     —         (21.7

Reclassification and adjustments

     —         —         —         (7.1     (2.6     (4.5

Amounts after IFRS 9 e 15

     818.8       (177.9     354.7       22,926.3       14,204.1       8,722.2  

 

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Effects in 4Q17

 

R$ million

   Ultrapar     Ipiranga     Oxiteno     Ultragaz     Ultracargo     Extrafarma  

Reported EBITDA

     1,067.1       894.9       75.6       51.8       36.6       3.1  

IFRS 9

     (16.7     (12.2     —         (4.4     0.0       (0.0

IFRS 15

     (120.3     (121.9     1.1       0.7       —         (0.0

EBITDA

     930.1       760.8       76.7       48.1       36.6       2.8  

Amortization of contractual assets with customers - exclusive rights (Ipiranga)

     (116.9     (116.9     —         —         —         —    

Adjusted EBITDA

     1,046.9       877.7       76.7       48.1       36.6       2.8  
            

R$ million

   EBITDA     Taxes and
social
contribution
    Net
income
    Assets     Liabilities     Stockholders’
equity
 

Reported amounts

     1,067.1       (240.5     400.7       28,340.3       18,619.5       9,720.8  

IFRS 9

     (16.7     5.7       (11.0     (103.8     —         (103.8

IFRS 15

     (120.3     1.1       (0.3     (23.6     —         (23.6

Reclassification and adjustments

     —         —         —         (7.5     (4.3     (3.2

Amounts after IFRS 9 e 15

     930.1       (233.7     389.4       28,205.5       18,615.2       9,590.3  

 

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Executive Summary

 

 

 

Indicators   1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Average exchange rate (R$/US$)

    3.24       3.14       3.25       3%       0%  

Brazilian Interbank Interest Rate (CDI)

    1.6%       3.0%       1.8%                  

Inflation in the period (IPCA)

    0.7%       1.0%       1.1%                  

IBC—Br¹

    137.9       135.2       136.9       2%       1%  

Average Brent crude oil (US$/barrel)

    67       54       61       24%       9%  

 

1  Seasonally adjusted quarterly average. Considers the first two months of the quarters (Jan-Feb and Oct- Nov)

The first quarter of 2018 was more challenging than expected with our markets growing in a slower pace. In this context, Ultrapar reported an Adjusted EBITDA of R$ 508 million and net income of R$ 73 million, both with the important impact of the contractual fine related to Liquigás’ acquisition in the amount of R$ 286 million. Excluding the fine’s effect, the Adjusted EBITDA ex-non-recurring items would have totaled R$ 794 million, a 12% reduction over 1Q17.

Ipiranga

Reflecting a still tight operating environment, Ipiranga’s volume presented a decline of 2% over 1Q17, with a decrease of 1% in the Otto cycle and 3% in diesel. Adjusted EBITDA totaled R$ 585 million, a drop of 15% compared with the same period of the previous year, principally due to weaker sales volume, the tight operating environment and the higher level of expenses, including expenses with indentation due to our new company in lubricants, Iconic. .

Oxiteno

Oxiteno reported volume of 180 thousand tons in 1Q18, an 8% drop year-over-year due to stoppages at Camaçari, despite the additional sales volumes relating to the pre-marketing activities of the new Pasadena alkoxylation plant in the USA, which is set to start operations in the middle of 2018. Oxiteno’s EBITDA totaled R$ 51 million, an 18% reduction over 1Q17, excluding the extraordinary gain of R$ 49 million related to the reversal of provision reported in 1Q17, due to (i) the reduced sales volume, (ii) the pre-operational expenditures with the new Pasadena unit and (iii) the costs related to stoppages.

Ultragaz

Ultragaz’s volume was down 1% year-over-year, with a decline in the bulk segment and flat in the bottled segment. The bulk segment was affected by the programmed reduction in the volumes of an industrial customer. In this quarter, Ultragaz’s EBITDA was affected by the payment of a R$ 286 million fine following a decision by the Anti-Trust Authority—CADE to reject the acquisition of Liquigás. Excluding the fine’s impact, EBITDA totaled R$ 116 million (+3%) due largely to initiatives for reducing expenses despite the reduced sales volume in the period.

Ultracargo

Ultracargo’s average storage was up by 4% from 1Q17, reflecting greater fuel and ethanol handling at the Itaqui and Santos terminals and the partial resumption of activities in the Santos terminal in June 2017. Ultracargo’s EBITDA amounted to R$ 41 million in the quarter, an increase of 87% compared with the same period of the previous year, largely due to greater average storage, higher average prices in the terminals and the amount of R$ 16 million in fire-related expenses in 1Q17.

Extrafarma

Extrafarma ended 1Q18 with 401 stores, opening 12 new units in the quarter and 100 in the last 12 months. In March 2018, Extrafarma opened its first drugstore in the state of Amazonas, the 13th state with the presence of the network. The smaller growth in retail sales due to the strong comparative base of 1Q17 and a less favorable operating environment combined with the accelerated expansion strategy resulted in an approximately zero EBITDA in this quarter. Excluding the effect of the stores opened in the last 12 months, EBITDA would amount to R$ 11 million in 1Q18.

 

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Ipiranga

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Total volume (000 m³)¹

    5,461       5,554       5,908       (2%     (8%

Diesel

    2,626       2,718       2,887       (3%     (9%

Otto cycle

    2,723       2,753       2,931       (1%     (7%

Others²

    112       83       89       34%       25%  

EBITDA Adjusted (R$ million)

    585       687       878       (15%     (33%

 

1  Starting in Dec/17, total volume includes that from Iconic, the lubricants JV with Chevron
² Fuel oils, arla 32, kerosene, lubricants and greases

Operational performance – Volume totaled 5,461 thousand m³ (-2%), reflecting the still tight competitive scenario with smaller growth in the fuels market. The Otto cycle registered a 1% drop compared with 1Q17, in line with overall market performance. In addition, diesel volume was down 3% due to the challenging competitive environment. Compared with 4Q17, volume was down by 8% with reductions of 7% in the Otto cycle and 9% in diesel, principally due to seasonal factors between the consecutive quarters.

Net revenues – Total of R$ 17,516 million (+11%), due principally to variations in fuel costs, including the increase in PIS/Cofins taxes levied on fuel products since July 2017, and the strategy of constant innovation in services and convenience at the service station. The effects were partially offset by lower sales volume and by the more favorable mix in 1Q17. Compared with 4Q17, net revenues fell by 2% due to lower sales volume, partially mitigated by variations in fuel costs.

Cost of goods sold – Total of R$ 16,574 million (+12%) due mainly to variations in fuel costs, including the increase in PIS/Cofins taxes on products in July 2017, partially offset by lower sales volume and the sales mix in the period. Compared with 4Q17, cost of goods sold posted a reduction of 1%, in line with the decline in volumes, despite variations in fuel costs.

Sales, general and administrative expenses – Total of R$ 549 million (+14%), largely due to greater expenditures with Iconic, the association in lubricants with Chevron that started operations in December 2017, and higher rental expenses, partially offset by lower advertising and marketing expenses. Compared with 4Q17, sales, general and administrative expenses were up by 10%, mainly due to: (i) higher expenses with Iconic, (ii) higher marketing expenses, a typical increase between the first and the fourth quarters due to the annual resellers convention in February, (iii) lower reversal of provision for the removal of fuel tanks, and (iv) higher rental expenses with the expansion of the network. The effects were partially offset by reduced contingencies and lower freight expenses due to the decline in sales volume.

Adjusted EBITDA – Total of R$ 585 million (-15%), mainly due to the decline in volumes, the tight operating environment and the higher overall level of expenses, this quarter being affected by the startup in operations of Iconic, including indentations. Compared with 4Q17, EBITDA posted a reduction of 33% due to the same factors as mentioned above.

Investments – A total of R$ 257 million was invested, allocated mainly to expansion and maintenance of the service stations and franchises. Out of total investments, R$ 111 million went to property, plant and equipment and additions to intangible assets, R$ 96 million to contractual assets with customers (exclusive rights) and R$ 49 million to financing of clients and rental advances, net of repayments. Ipiranga ended 1Q18 with 8,039 service stations (+5%), adding 391 service stations to the network in 12 months (556 additions and 165 reductions).

 

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Oxiteno

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Total Volume (000 tons)

    180       196       201       (8%     (11%

Specialty Chemicals

    152       157       164       (4%     (7%

Commodities

    28       38       38       (26%     (25%

Sales in Brazil

    126       140       146       (10%     (14%

Sales outside Brazil

    54       56       55       (4%     (2%

EBITDA (R$ million)

    51       112       77       (54%     (33%

Operational performance – Oxiteno reported sales volume of 180 thousand tons (-8% or 16 thousand tons). The sales of specialty chemicals were down 4% year-over-year, posting a reduction of 4% in the domestic market, declines being registered in the agrochemical and distribution segments. Specialty chemicals sales outside Brazil presented a 2% drop, a reflection of a more challenging operational environment in spite of higher sales from pre-marketing of the new plant in the United States. Commodities recorded a decrease of 26% in relation to 1Q17 due essentially to the effects of scheduled stoppages at Camaçari during the quarter. Compared with 4Q17, total sales volume reported a drop of 11% (21 thousand tons), with a reduction of 7% and 25% in specialty chemicals and commodities respectively, in large part due to the same factors already mentioned.

Net revenues – Total of R$ 999 million (+10%) due to: (i) a 15% higher average price in US Dollars, a result of the increase in raw material costs year-over-year, (ii) a 3% weaker Real against the US Dollar (R$ 0.10/US$), and (iii) the higher share of specialty chemicals in the overall sales mix. These effects were mitigated by the lower sales volume in the period. Compared with 4Q17, net revenues posted a 12% reduction due principally to the decline in sales volume in the period, partially offset by the better sales mix with a higher percentage of specialty chemicals.

Cost of goods sold – Total R$ 824 million (+13%) due to: (i) the increase in raw material costs year-over-year, (ii) a 3% weaker Real against the US Dollar, (iii) the costs relative to the stoppages and (iv) higher pre-operational costs at the new Pasadena plant. These effects were partially offset by lower sales volumes year-over-year. Compared with 4Q17, the cost of goods sold reported a reduction of 10% in line with the 11% decline in volume.

Sales, general and administrative expenses – Total of R$ 167 million (+7%), mainly due to higher international freight expenses, reflecting an increase in unit freight costs in US Dollar and a 3% weaker Real against the US Dollar, and higher expenses with pre-marketing for the new Pasadena plant. Compared with 4Q17, sales, general and administrative expenses were down 9%, mainly due to reduced freight expenses, a reflection of lower sales volume and an improved route mix, and lower overheads with consultancies.

Other operational results – The “Other operational results” line amounted to a net revenue of R$ 2 million in 1Q18, compared with R$ 49 million in 1Q17 and a neutral result in 4Q17. In 1Q17, the amount represents a reversal of a provision set aside for the exclusion of the ICMS sales tax from the base for the calculation of PIS and Cofins charges.

EBITDA – Oxiteno’s EBITDA amounted to 51 million (-54%), the comparison being distorted by the reversal of the provision made in 1Q17 of R$ 49 million. Excluding the effects of this reversal, Oxiteno’s EBITDA presented a reduction of 18% due to: (i) lower sales volume in the period, (ii) pre-operational expenditure at the new unit in Pasadena, and (iii) costs related to the scheduled stoppages. The effects were partially offset by a 3% weaker Real compared with the US Dollar. In relation to 4Q17, EBITDA posted a reduction of 33% due to lower sales volumes, partially offset by the reduction in expenses mentioned above.

Investments – Oxiteno invested R$ 137 million, mainly directed to new alkoxylation plant in the United States, scheduled for operational startup in 2018, and maintenance of its productive units.

 

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Ultragaz

 

 

 

      1Q18     1Q17      4Q17     

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Total volume (000 tons)

     410       414        426        (1%     (4%

Bottled

     281       282        295        0%       (5%

Bulk

     129       132        131        (2%     (1%

EBITDA (R$ million)

     (170     113        48        n.a.       n.a.  

Operational performance – Total sales volume was 410 thousand tons (-1%), with a flat performance in the bottled segment and a decline in the bulk segment. Volume in the bottled segment was flat year-over-year, with 1% growth per business day. The bulk segment posted a decline in volume of 2% (a drop of 1% per business day), mainly due to the programmed volume reduction of an industrial customer, partially offset by growth in sales to the industrial segment and condominiums in 1Q18. Compared with 4Q17, sales volume recorded a decline of 4%, bottled and bulk segments falling 5% and 1% respectively, due to seasonal factors between periods.

Net revenues – Total of R$ 1,626 million (+20%) due to readjustments in LPG costs and Ultragaz’s strategy of differentiation and innovation, both effects being offset by lower sales volume. Compared with 4Q17, net revenues posted a reduction of 3%, reflecting the decline of 4% posted in sales volume, despite the readjustments in the costs of LPG.

Cost of goods sold – Total of R$ 1,432 million (+26%), mainly due to LPG cost readjustments, attenuated by lower freight costs due to lower sales volume and shorter routes to source products. Compared with 4Q17, the cost of goods sold was up by 1% due to readjustments in LPG costs and higher expenditures with gas bottle requalification, this partially compensated by the decline in volume sold.

Sales, general and administrative expenses Total of R$ 131 million (-12%) due mainly to the reduction in the provision for doubtful debts in 1Q18 and lower freight expenses, a result of lower sales volume and the shorter routes to source products. Compared with 4Q17, sales, general and administrative expenses posted a decline of 23% due to: (i) the reduction in the provision for doubtful debts, (ii) lower marketing expenses in the quarter, (iii) lower freight expenses, reflecting the decline in volumes and the migration of customers with the type of delivery CIF to FOB, and (iv) lower expenses with strategic and planning consultants.

EBITDA – Total of -R$ 170 million. In 1Q18, Ultragaz’s EBITDA was affected by the payment of a fine of R$ 286 million following the decision of the anti-trust authority (CADE) to reject the acquisition of Liquigás. The fine, which represents 10% of the amount offered in the acquisition plus the net debt of Liquigás in December 2015, was integrally paid on March 1, 2018, the date CADE published its decision. Excluding the effect of the fine, Ultragaz’s EBITDA totaled R$ 116 million (+3%) due mainly to the initiatives mentioned above to reduce the expenses, despite lower sales volume. Compared with 4Q17, Ultragaz’s EBITDA also reported a reduction, with the result of 1Q18 being affected by the payment of the fine and 4Q17 by an agreement with CADE in November 2017 in the amount of R$ 84 million. Excluding both effects, Ultragaz’s EBITDA would have reported a reduction of 12% quarter-over-quarter due to seasonal effects between periods.

Investments – Ultragaz invested R$ 62 million, allocated mainly to clients in the bulk segment, gas bottles and IT with a focus on differentiation and innovation.

 

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Ultracargo

 

 

 

     1Q18     1Q17     4Q17    

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Effective storage1 (000 m³)

    722       695       745       4%       (3%

EBITDA (R$ million)

    41       22       37       87%       12%  

1Monthly average

Operational performance – Ultracargo’s average storage was up by 4% compared with 1Q17. This result was due to increased fuel and ethanol handling at Itaqui and Santos port terminals and the partial resumption in June 2017 of 67.5 thousand m³ out of 151.5 thousand m³ of the latter terminal shut down since the April 2015 incident. These effects were mitigated by a reduction in fuel handling activity at Aratu port terminal. Compared with 4Q17, average storage at Ultracargo’s terminals was down 3%, largely due to a decrease in fuel handling at Aratu, Itaqui and Santos terminals, despite the increase in ethanol operation at Aratu and Suape terminals.

Net revenues – Total of R$ 116 million in 1Q18 (+15%), due to increased average storage following the partial resumption of activities at the Santos terminal mentioned above, as well as greater fuel handling activity and higher average prices at all terminals. Compared with 4Q17, net revenues posted a reduction of 3%, in line with the decline in the average storage performance due to reduced fuel handling activity at the terminals.

Cost of services provided – Total of R$ 59 million (+17%). Cost of services provided was impacted by a retroactive one-off payment of IPTU (urban property tax) in Aratu in the amount of R$ 3 million, as well as higher expenditures with third party services and personnel, as a result of complementary activities required for the partial resumption of operations at the Santos terminal. Compared with 4Q17, the cost of services presented a drop of 1% due to lower expenditures with third party services, in line with reduced handling operations at the terminals, partially mitigated by the retroactive payment of IPTU in Aratu already described.

Sales, general and administrative expenses – Total of R$ 29 million (+15%), principally due to higher personnel expenses in the form of increased physical workforce and expenses with strategic and planning consultants. Compared with 4Q17, sales, general and administrative expenses recorded a reduction of 12% due to lower personnel, legal advice and maintenance services expenses.

Other operating results – The “Other operating results” line reported net expenses of R$ 1 million in 1Q18 compared with net expense of R$ 16 million in 1Q17 and net expense of R$ 3 million in 4Q17. All quarters include amounts associated with expenses for the commissioning and licensing of the Santos terminal.

EBITDA – Total of R$ 41 million (+87%) due mainly to higher average storage in the period, reflecting the partial resumption of activities at the Santos terminal, greater fuel handling activity, higher average prices at the terminals and the effect of R$ 16 million in fire-related expenses in Santos terminal in 1Q17. In 1Q18, lower fire-related expenses also had a positive impact on Ultracargo’s EBITDA year-over-year. Compared with 4Q17, EBITDA was up by 12% due to lower expenditures, a result of efforts implemented to reduce expenses and increase productivity, as well as the decline in expenses with the Santos incident. These effects were offset by reduced fuel handling at the port terminals.

Investments – Ultracargo invested R$ 22 million, mainly allocated to expansion at the Itaqui terminal, maintenance and modernization of terminal safety systems and processes.

 

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Extrafarma

 

 

 

      1Q18      1Q17      4Q17     

D (%)

1Q18 v 1Q17

   

(%)

1Q18 v 4Q17

 

Gross revenues (R$ million)

     542        476        522        14%       4%  

Drugstores (end of period)

     401        321        394        25%       2%  

% of mature stores (+3 years)

     46%        55%        45%        (9.6 p.p.     0.5 p.p.  

EBITDA (R$ million)

     0        4        3        n.a.       n.a.  

Operational performance – Extrafarma ended 1Q18 with 401 stores (+25%, with 100 openings and 20 closures in the past 12 months). At the end of 1Q18, 54% of the stores had been operating for less than three years compared with 45% in 1Q17, reflecting the accelerated expansion of the network. Compared with 4Q17, Extrafarma opened 12 new drugstores (closing 5) and continued its expansion in São Paulo as well as making its debut in the state of Amazonas, the 13th state in the federation with an Extrafarma presence.

Gross revenue – Total of R$ 542 million (+14%) due to an increase of 13% in retail sales, reflecting the 26% increase in the average number of stores as well as greater promotional activities in the period. The effects were attenuated by the stronger comparative base in 1Q17 – when Extrafarma retail sales posted a 36% increase – and by smaller growth in the market. Compared with 4Q17, gross revenue reported growth of 4% due to the larger average number of stores and promotional activity in the quarter.

Cost of goods sold and gross profit – Cost of goods sold was R$ 359 million (+18%), principally due to stronger sales volume and the annual readjustment in medicine prices. Gross profit was R$ 153 million (+5%), mainly due to increased retail sales in the period, reflecting Extrafarma’s strategy of expansion with an increase in the network of drugstores, this effect being partially offset by the greater promotional activity already mentioned. Compared with 4Q17, cost of goods sold and gross profit registered respectively, a growth of 5% and 1% due to the same factors mentioned above.

Sales, general and administrative expenses – Total of R$ 170 million (+13%). The increase reflects the 26% higher average number of stores in operation. Excluding the expenses of new stores, sales, general and administrative expenses were down 7% lower year-over-year, principally due to the non-recurring expenses in 1Q17 of R$ 6 million with the transfer of the Belém DC to the city of Benevides and associated indemnity payments. The decline in SG&A expenses is also due to initiatives implemented by Extrafarma for increasing productivity and reducing expenses. Compared with 4Q17, sales, general and administrative expenses recorded a growth of 3% due to the larger average number of stores.

Result from disposal of property – The result from the disposal of property by Extrafarma was neutral in 1Q18, against a net expense of R$ 6 million in 1Q17 and a neutral result in 4Q17. In 1Q17, the result reflects the write-off of non-depreciated assets following the transfer of the distribution center.

EBITDA – Extrafarma posted a near zero EBITDA in the quarter, compared to a reported EBITDA of R$ 4 million in 1Q17, impacted by the smaller growth of the market and a larger number of maturing stores. Excluding the effects of new stores, EBITDA totaled R$ 11 million in this quarter compared to a R$ 15 million EBITDA excluding non-recurrent effects in 1Q17. Compared with 4Q17, EBITDA was down due to the same factors already mentioned.

Investments – Extrafarma invested R$ 16 million, mainly in the opening of 12 new stores and IT focused on improving the shopping experience and operational excellence.

 

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Ultrapar

 

 

 

      1Q18      1Q17      4Q17     

D (%)

1Q18 v 1Q17

   

D (%)

1Q18 v 4Q17

 

Net sales and services

     20,751        18,545        21,348        12%       (3%

Net earnings1

     73        355        389        (79%     (81%

Earnings per share attributable to the shareholders2

     0.14        0.65        0.72        (79%     (81%

Adjusted EBITDA

     508        947        1,047        (46%     (51%

Adjusted EBITDA ex-non-recurring items³

     794        898        1,047        (12%     (24%

Investments

     604        485        798        24%       (24%

 

Amounts in R$ million (except EPS)

¹ Under IFRS, consolidated net earnings includes net earnings attributable to non-controlling shareholders of the controlled companies
² Calculated in Reais based on the weighted average of the number of shares over the period, net of shares held in treasury
3  Adjusted EBITDA and excluding the R$ 286 million fine following the decision of CADE to reject the acquisition of Liquigás. In the annual comparison, the EBITDA of 1Q17 does not consider the reversal of provision in the amount of R$ 49 million reported

Net revenues – Total of R$ 20,751 million (+12%) due to growth in revenues at all the businesses. Compared with 4Q17, net revenues reported a drop of 3% due to lower revenues at all the businesses with the exception of Extrafarma.

Adjusted EBITDA – Total of R$ 508 million (-46%) due to reduced EBITDA at Ultragaz, affected by the payment of a R$ 286 million fine following CADE’s decision not to approve the acquisition of Liquigás, as well as the reduction in EBITDA at all the businesses with the exception of Ultracargo. It should be pointed out that Oxiteno’s EBITDA was affected by the reversal of a provision in 1Q17 in the amount of R$ 49 million. Compared with 4Q17, Adjusted EBITDA was down 51%, with a reduction at all the businesses except Ultracargo, the comparison also being effected by the payment of the fine. In comparable basis, Adjusted EBITDA excluding non-recurrent items presented a drop of 12% over 1Q17.

Depreciation and amortization4 Total of R$ 299 million (+2%) due to the investments over the past 12 months, with particular emphasis on the expansion of the Ipiranga service station and Extrafarma drugstore networks as well as preparations for the operational startup of the new Oxiteno plant in Pasadena. Compared with 4Q17, depreciation and amortization costs and expenses were down by 2%.

Financial results – Ultrapar reported a net debt on March 31, 2018 of R$ 8.5 billion (2.4x LTM Adjusted EBITDA) compared with R$ 6.3 billion on March 31, 2017 (1.5x LTM Adjusted EBITDA), principally due to the lower EBITDA in the quarter, affected by the fine of R$ 286 million related to Liquigás’ acquisition, and higher investments in the period. Ultrapar’s net financial expense was R$ 107 million, R$ 14 million less than compared with 1Q17, due to the lower CDI Interbank Rate on a year-over-year comparison, despite the higher net debt, exchange rate effects between periods and the effect of the reversal of the provision resulting from the exclusion of ICMS from the base for calculating PIS and Cofins charges in 1Q17. Compared with 4Q17, the net financial expense was down R$ 12 million due to the decline of CDI between quarters, in spite of higher net debt, and the exchange rate effects between periods.

Net earnings – Total of R$ 73 million (-79%) due to the reduction in EBITDA and higher depreciation and amortization, despite the reduction in financial expenses. In relation to 4Q17, net earnings registered a reduction of 81% due to the same factors already mentioned above.

Operating cash flow – Total of -R$ 113 million in 1Q18 compared to a total of R$ 254 million in 1Q17 due to the payment of the fine following CADE’s decision not to approve the acquisition of Liquigás and insurance recoveries in 1Q17. Excluding the impact of the fine net of taxes, operating cash flow totaled R$ 76 million in 1Q18.

 

 

4  Includes amortization of contractual assets with customers – exclusive rights

 

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Capital markets

 

 

Ultrapar’s financial volume was R$ 123 million/day (+4%) in 1Q18 including trading on both B3 and the NYSE. The Company’s share price closed 1Q18 at R$ 70.92 on B3, a decline of 5% in the quarter while the Ibovespa index reported an appreciation of 12% in the same period. Ultrapar’s shares on the NYSE depreciated by 5% in 1Q18, while the Dow Jones Industrial Average depreciated by 2% in 1Q18. Ultrapar ended 1Q18 with R$ 39 billion market capitalization (-1%).

 

Capital markets   1Q18     1Q17     4Q17  

Number of shares (000)

    556,405       556,405       556,405  

Market capitalization1 (R$ million)

    39,460       39,850       41,730  

B3

                       

Average daily volume (shares)

    1,122,070       1,238,374       1,239,097  

Average daily volume (R$ 000)

    85,424       83,665       91,988  

Average share price (R$/shares)

    76.13       67.56       74.24  

NYSE

                       

Quantity of ADRs2 (000 ADRs)

    30,280       29,619       30,635  

Average daily volume (ADRs)

    489,799       516,404       470,775  

Average daily volume (US$ 000)

    11,534       11,084       10,816  

Average share price (US$/ADRs)

    23.55       21.46       22.97  

Total

                       

Average daily volume (shares)

    1,611,869       1,754,778       1,709,871  

Average daily volume (R$ 000)

    122,828       118,467       127,136  

 

¹ Calculated based on the closing price for the period
2 1 ADR = 1 common share

 

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Debt (R$ million)

 

 

 

Ultrapar consolidated   1Q18     1Q17     4Q17  

Gross Debt

    (14,780.3     (11.038,9     (13.590,6

Cash and cash equivalents

    6,239.3       4,753.1       6,369.9  

Net debt

    (8,541.0     (6,285.8     (7,220.7

Net debt/Adjusted EBITDA LTM

    2.41       1.53       1.81  

Average cost of debt (% CDI)

    97.5%       93.5%       97.1%  

Average cash yield (% CDI)

    96.4%       92.5%       96.5%  

Debt amortization profile:

 

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Debt breakdown:

 

Local currency

    9,936.0  

Foreign currency

    4,665.5  

Result from currency and interest hedge instruments

    178.8  

Total

    14,780.3  

 

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ULTRAPAR

In million Reais

CONSOLIDATED BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18     MAR 17     DEC 17  

ASSETS

  

Cash and cash equivalents

     4,667.6       3,572.7       5,002.0  

Financial investments

     1,482.0       1,173.0       1,283.5  

Trade accounts receivables and reseller financing

     4,351.3       3,385.7       4,147.9  

Inventories

     3,338.1       2,626.7       3,513.6  

Taxes

     899.1       562.4       881.6  

Contractual assets with customers—exclusive rights

     456.8       452.8       456.2  

Other

     242.5       247.2       205.2  

Total Current Assets

     15,437.4       12,020.5       15,490.0  

Investments

     155.6       148.4       150.2  

Property, plant and equipment and intangibles

     9,032.6       7,785.2       8,797.2  

Financial investments

     89.6       7.4       84.4  

Trade accounts receivables and reseller financing

     347.6       242.9       330.0  

Deferred income tax

     710.8       442.8       614.1  

Escrow deposits

     830.3       788.9       822.7  

Contractual assets with customers—exclusive rights

     1,037.1       1,001.7       1,046.1  

Other

     907.7       488.5       870.9  

Total Non-Current Assets

     13,111.3       10,905.8       12,715.5  

TOTAL ASSETS

     28,548.7       22,926.3       28,205.5  

LIABILITIES

  

Loans, financing and debentures

     2,890.4       2,944.2       3,503.7  

Suppliers

     1,859.8       1,195.3       2,155.5  

Payroll and related charges

     304.5       286.9       388.1  

Taxes

     221.7       184.0       221.5  

Other

     358.9       409.7       740.9  

Total Current Liabilities

     5,635.2       5,020.1       7,009.7  

Loans, financing and debentures

     11,890.0       8,094.7       10,086.9  

Judicial provisions

     866.0       637.7       861.2  

Post-retirement benefits

     213.7       123.2       207.9  

Other

     478.4       328.4       449.9  

Total Non-Current Liabilities

     13,448.1       9,184.0       11,605.5  

TOTAL LIABILITIES

     19,083.2       14,204.1       18,615.2  

STOCKHOLDERS’ EQUITY

  

Capital

     5,171.8       3,838.7       5,171.8  

Reserves

     4,314.7       5,026.8       4,314.8  

Treasury shares

     (482.3     (480.2     (482.3

Others

     126.6       304.0       246.8  

Non-controlling interest

     334.7       32.9       339.3  

Total shareholders’ equity

     9,465.5       8,722.2       9,590.3  

TOTAL LIAB. AND STOCKHOLDERS’ EQUITY

     28,548.7       22,926.3       28,205.5  

Cash and financial investments

     6,239.3       4,753.1       6,369.9  

Debt

     (14,780.3     (11,038.9     (13,590.6

Net cash (debt)

     (8,541.0     (6,285.8     (7,220.7

 

 

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ULTRAPAR

In million Reais

CONSOLIDATED INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Net sales and services

     20,751.1       18,544.6       21,347.6  

Cost of products and services sold

     (19,229.8     (16,987.5     (19,543.5

Gross profit

     1,521.3       1,557.1       1,804.1  

Operating expenses

      

Selling

     (671.4     (597.1     (629.4

General and administrative

     (372.6     (362.6     (416.0

Other operating income (expenses), net

     (262.7     56.3       (19.3

Income from sale of assets

     (2.2     (6.4     (1.5

Operating income

     212.3       647.3       738.0  

Financial results

      

Financial income

     112.4       164.4       133.8  

Financial expenses

     (219.4     (285.5     (253.3

Equity in earnings (losses) of affiliates

     (3.0     6.4       4.6  

Income before income and social contribution taxes

     102.4       532.6       623.1  

Provision for income and social contribution taxes

      

Current

     (138.5     (197.7     (255.6

Deferred

     92.5       12.3       0.3  

Benefit of tax holidays

     16.5       7.5       21.6  

Net Income

     72.9       354.7       389.4  

Net income attributable to:

      

Shareholders of Ultrapar

     73.9       352.6       393.7  

Non-controlling shareholders of the subsidiaries

     (1.0     2.1       (4.3

Adjusted EBITDA

     508.1       947.0       1,046.9  

Depreciation and amortization¹

     298.8       293.3       304.4  

Total investments²

     603.5       485.3       798.2  

RATIOS

      

Earnings per share—R$

     0.14       0.65       0.72  

Net debt / Stockholders’ equity

     0.90       0.72       0.75  

Net debt / LTM Adjusted EBITDA

     2.41       1.53       1.81  

Net interest expense / Adjusted EBITDA

     0.21       0.13       0.11  

Gross margin

     7.3%       8.4%       8.5%  

Operating margin

     1.0%       3.5%       3.5%  

Adjusted EBITDA margin

     2.4%       5.1%       4.9%  

Number of employees

     16,991       15,388       16,448  

 

¹ Includes amortization with contractual assets with customers – exclusive rights
² Includes property, plant and equipment and additions to intangible assets, contractual assets with customers, financing of clients and rental advances (net of repayments)

 

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ULTRAPAR

In million Reais

CONSOLIDATED CASH FLOW

 

     JAN—MAR     JAN—MAR  
     2018     2017  

Cash flows from operating activities

    

Net income for the year

     72.9       354.7  

Adjustments to reconcile net income to cash provided by operating activities

    

Share of loss (profit) of subsidiaries, joint ventures and associates

     3.0       (6.4

Amortization of assets arising from costs to obtain or fulfill a contract

     104.5       128.2  

Depreciation and amortization

     194.2       165.0  

PIS and COFINS credits on depreciation

     4.3       3.2  

Interest, monetary, and foreign exchange rate variations

     223.2       169.0  

Deferred income and social contribution taxes

     (92.5     (12.3

(Gain) loss on disposal of property, plant and equipment and intangibles

     2.2       6.4  

Estimated losses on doubtful accounts

     27.5       15.1  

Provision for losses in inventories

     (0.1     2.5  

Provision for post-employment benefits

     5.7       2.7  

Other provisions and adjustments

     (1.3     0.3  
     543.6       828.5  

(Increase) decrease in current assets

    

Trade receivables and reseller financing

     (230.9     (12.6

Inventories

     175.6       153.9  

Recoverable taxes

     (13.6     (20.6

Dividends received from subsidiaries and joint-ventures

     (25.2     305.1  

Insurance and other receivables

     3.5       (29.2

Contractual assets with customers – exclusive rights

     (0.6     (4.5

Increase (decrease) in current liabilities

    

Trade payables

     (295.7     (514.3

Salaries and related charges

     (83.6     (75.8

Taxes payable

     0.2       15.6  

Income and social contribution taxes

     6.0       169.4  

Post-employment benefits

     —         (1.3

Provision for tax, civil, and labor risks

     (7.1     (1.2

Insurance and other payables

     (32.6     63.9  

Deferred revenue

     0.4       (0.1

(Increase) decrease in non-current assets

    

Trade receivables and reseller financing

     (17.6     (15.7

Recoverable taxes

     (12.3     (30.6

Escrow deposits

     (7.7     (10.1

Other receivables

     5.6       1.6  

Prepaid expenses

     (30.1     (47.5

Contractual assets with customers – exclusive rights

     0.4       5.9  

Increase (decrease) in non-current liabilities

    

Post-employment benefits

     0.3       0.7  

Provision for tax, civil, and labor risks

     4.7       (89.4

Other payables

     33.4       (6.3

Deferred revenue

     0.5       0.3  

Payments of assets arising from costs to obtain or fulfill a contract

     (95.9     (146.0

Income and social contribution taxes paid

     (34.3     (285.0

Net cash provided by operating activities

     (113.1     254.4  

Cash flows from investing activities

    

Financial investments, net of redemptions

     (203.5     246.2  

Cash and cash equivalents of subsidiary acquired

     3.7       —    

Acquisition of property, plant, and equipment

     (284.5     (241.8

Acquisition of intangible assets

     (70.9     (32.9

Acquisiton of companies

     (100.0     —    

Capital increase in joint ventures

     (8.0     —    

Proceeds from disposal of property, plant and equipment and intangibles

     4.9       5.5  

Net cash used in investing activities

     (658.3     (23.1

Cash flows from financing activities

    

Loans and debentures

    

Proceeds

     2,081.1       283.3  

Repayments

     (1,074.0     (606.1

Interest paid

     (84.3     (153.3

Payments of financial lease

     (1.3     (1.3

Dividends paid

     (488.1     (470.8

Sale of treasury shares

     (0.0     —    

Net cash provided by (used in) financing activities

     433.4       (948.2

Effect of exchange rate changes on cash and cash equivalents in foreign currency

     3.6       15.4  

Increase (decrease) in cash and cash equivalents

     (334.4     (701.5

Cash and cash equivalents at the beginning of the year

     5,002.0       4,274.2  

Cash and cash equivalents at the end of the year

     4,667.6       3,572.7  

 

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IPIRANGA

In million Reais

CONSOLIDATED BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18      MAR 17      DEC 17  

OPERATING ASSETS

        

Trade accounts receivable

     3,259.8        2,449.9        3,100.8  

Trade accounts receivable—noncurrent portion

     313.3        208.4        297.4  

Inventories

     1,938.3        1,448.6        2,101.5  

Taxes

     534.9        269.6        526.0  

Contractual assets with customers—exclusive rights

     1,493.9        1,454.6        1,502.4  

Other

     824.6        523.5        739.9  

Property, plant and equipment, intangibles and investments

     3,356.2        2,746.8        3,309.0  

TOTAL OPERATING ASSETS

     11,721.0        9,101.3        11,576.9  

OPERATING LIABILITIES

        

Suppliers

     1,251.3        737.0        1,495.5  

Payroll and related charges

     85.0        73.7        122.9  

Post-retirement benefits

     192.8        106.0        188.8  

Taxes

     153.6        109.2        155.2  

Judicial provisions

     326.9        102.5        326.1  

Other accounts payable

     246.2        259.4        195.2  

TOTAL OPERATING LIABILITIES

     2,255.9        1,387.8        2,483.7  

CONSOLIDATED INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Net sales

     17,516.3       15,735.6       17,947.4  

Cost of products and services sold

     (16,574.1     (14,775.9     (16,818.2

Gross profit

     942.2       959.7       1,129.2  

Operating expenses

      

Selling

     (363.3     (301.2     (285.6

General and administrative

     (185.3     (179.1     (211.3

Other operating income (expenses), net

     21.2       20.5       66.4  

Income from sale of assets

     (0.8     (0.4     (1.1

Operating income

     413.9       499.5       697.6  

Equity in earnings (losses) of affiliates

     0.2       0.3       0.3  

Adjusted EBITDA

     585.4       686.9       877.7  

Depreciation and amortization¹

     171.2       187.1       179.7  

RATIOS

      

Gross margin (R$/m3)

     173       173       191  

Operating margin (R$/m3)

     76       90       118  

Adjusted EBITDA margin (R$/m3)

     107.2       123.7       148.6  

Adjusted EBITDA margin (%)

     3.3%       4.4%       4.9%  

Number of service stations

     8,039       7,648       8,005  

Number of employees

     3,386       2,953       3,051  

 

¹ Includes amortization with contractual assets with customers—exclusive rights

 

17


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LOGO

 

OXITENO

In million Reais

CONSOLIDATED BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18      MAR 17      DEC 17  

OPERATING ASSETS

        

Trade accounts receivable

     523.0        508.3        530.1  

Inventories

     804.0        686.8        851.7  

Taxes

     151.0        125.3        181.6  

Other

     140.8        136.3        162.5  

Property, plant and equipment, intangibles and investments

     2,207.6        1,811.1        2,114.5  

TOTAL OPERATING ASSETS

     3,826.5        3,267.8        3,840.5  

OPERATING LIABILITIES

        

Suppliers

     268.4        182.9        300.3  

Payroll and related charges

     62.4        60.4        86.0  

Taxes

     30.8        35.7        29.9  

Judicial provisions

     15.8        13.5        16.4  

Other accounts payable

     41.6        44.1        60.7  

TOTAL OPERATING LIABILITIES

     419.0        336.6        493.3  

CONSOLIDATED INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Net sales

     999.3       912.4       1,131.9  

Cost of goods sold

      

Variable

     (684.5     (608.5     (780.9

Fixed

     (103.2     (89.3     (97.7

Depreciation and amortization

     (36.3     (32.3     (35.9

Gross profit

     175.3       182.4       217.4  

Operating expenses

      

Selling

     (78.0     (71.0     (88.2

General and administrative

     (88.8     (84.4     (94.3

Other operating income (expenses), net

     1.9       49.4       0.3  

Income from sale of assets

     (0.4     (0.9     (0.6

Operating income

     10.1       75.4       34.6  

Equity in earnings (losses) of affiliates

     0.3       0.2       0.4  

EBITDA

     51.2       111.5       76.7  

Depreciation and amortization

     40.8       35.9       41.7  

RATIOS

      

Gross margin (R$/ton)

     974       931       1,080  

Gross margin (US$/ton)

     300       296       333  

Operating margin (R$/ton)

     56       385       172  

Operating margin (US$/ton)

     17       123       53  

EBITDA margin (R$/ton)

     284       570       381  

EBITDA margin (US$/ton)

     88       181       117  

Number of employees

     1,931       1,906       1,901  

 

18


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LOGO

 

ULTRAGAZ

In million Reais

CONSOLIDATED BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18      MAR 17      DEC 17  

OPERATING ASSETS

        

Trade accounts receivable

     367.2        261.0        340.4  

Trade accounts receivable—noncurrent portion

     34.0        34.1        32.3  

Inventories

     105.6        101.0        137.1  

Taxes

     66.7        68.1        69.2  

Escrow deposits

     211.3        204.9        208.4  

Other

     55.8        57.7        63.9  

Property, plant and equipment, intangibles and investments

     973.2        968.7        966.3  

TOTAL OPERATING ASSETS

     1,813.7        1,695.5        1,817.5  

OPERATING LIABILITIES

        

Suppliers

     74.7        53.0        69.9  

Payroll and related charges

     85.7        89.1        111.0  

Taxes

     10.4        9.4        8.8  

Judicial provisions

     110.1        106.2        109.6  

Other accounts payable

     141.4        44.0        145.7  

TOTAL OPERATING LIABILITIES

     422.3        301.7        445.0  

CONSOLIDATED INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Net sales

     1,625.8       1,352.3       1,669.8  

Cost of sales and services

     (1,432.3     (1,133.7     (1,422.7

Gross profit

     193.5       218.6       247.0  

Operating expenses

      

Selling

     (81.9     (98.9     (111.1

General and administrative

     (49.4     (51.0     (58.9

Other operating income (expenses), net

     (284.9     2.2       (83.2

Income from sale of assets

     (0.8     0.5       3.4  

Operating income (loss)

     (223.5     71.4       (2.7

Equity in earnings (losses) of affiliates

     0.0       (0.0     0.4  

EBITDA

     (170.0     112.6       48.1  

Depreciation and amortization

     53.4       41.2       50.4  

RATIOS

      

Gross margin (R$/ton)

     472       528       580  

Operating margin (R$/ton)

     (545     172       (6

EBITDA margin (R$/ton)

     (415     272       113  

Number of employees

     3,586       3,631       3,633  

 

19


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LOGO

 

ULTRACARGO

In million Reais

CONSOLIDATED BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18      MAR 17      DEC 17  

OPERATING ASSETS

        

Trade accounts receivable

     43.9        37.2        34.6  

Inventories

     5.6        6.4        5.6  

Taxes

     2.5        0.7        0.5  

Other

     13.6        23.1        16.0  

Property, plant and equipment, intangibles and investments

     1,068.9        930.5        976.6  

TOTAL OPERATING ASSETS

     1,134.5        997.9        1,033.4  

OPERATING LIABILITIES

        

Suppliers

     22.5        15.2        34.6  

Payroll and related charges

     26.3        23.0        26.3  

Taxes

     5.9        5.9        6.9  

Judicial provisions

     25.0        25.6        26.4  

Other accounts payable¹

     100.4        178.1        119.8  

TOTAL OPERATING LIABILITIES

     180.2        247.7        213.9  

 

¹ Includes the long term obligations with clients account and the extra amount related to the acquisition of Temmar, in the port of Itaqui and payables—indemnification clients

CONSOLIDATED INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Net sales

     116.0       100.7       119.0  

Cost of sales and services

     (58.8     (50.2     (59.3

Gross profit

     57.2       50.5       59.7  

Operating expenses

      

Selling

     (1.9     (1.5     (2.3

General and administrative

     (26.8     (23.4     (30.1

Other operating income (expenses), net

     (0.7     (15.7     (3.1

Income from sale of assets

     0.0       0.1       (0.1

Operating income

     27.8       10.0       24.1  

Equity in earnings (losses) of affiliates

     0.6       0.3       0.2  

EBITDA

     41.0       21.9       36.6  

Depreciation and amortization

     12.5       11.7       12.3  

RATIOS

      

Gross margin

     49.3     50.1     50.2

Operating margin

     24.0     9.9     20.3

EBITDA margin

     35.3     21.8     30.8

Number of employees

     731       650       715  

 

20


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LOGO

 

EXTRAFARMA

In million Reais

BALANCE SHEET

 

     QUARTERS ENDED IN  
     MAR 18      MAR 17      DEC 17  

OPERATING ASSETS

        

Trade accounts receivable

     166.5        138.5        149.9  

Inventories

     484.6        384.1        417.7  

Taxes

     132.4        101.8        121.7  

Other

     19.9        19.5        17.4  

Property, plant and equipment and intangibles

     1,130.0        1,029.6        1,131.3  

TOTAL OPERATING ASSETS

     1,933.5        1,673.5        1,837.9  

OPERATING LIABILITIES

        

Suppliers

     247.8        212.2        254.9  

Payroll and related charges

     44.7        40.5        41.7  

Taxes

     20.2        22.9        20.0  

Judicial provisions

     48.8        59.6        53.7  

Other accounts payable

     13.0        11.5        13.1  

TOTAL OPERATING LIABILITIES

     374.5        346.6        383.3  

INCOME STATEMENT

 

     1Q18     1Q17     4Q17  

Gross Revenues

     542.0       476.0       522.0  

Sales returns, discounts and taxes

     (30.4     (26.2     (29.9

Net sales

     511.6       449.8       492.2  

Cost of products and services sold

     (358.5     (303.9     (341.3

Gross profit

     153.0       145.9       150.9  

Operating expenses

     (169.7     (150.2     (164.4

Other operating income (expenses), net

     (0.2     0.0       (0.0

Income from sale of assets

     (0.3     (5.6     (0.2

Operating income (loss)

     (17.2     (9.9     (13.8

EBITDA

     (0.2     4.0       2.8  

Depreciation and amortization

     17.0       13.9       16.6  

RATIOS1

      

Gross margin (%)

     28.2     30.7     28.9

Operating margin (%)

     -3.2     -2.1     -2.6

EBITDA margin (%)

     0.0     0.8     0.5

Number of employees

     6,902       5,798       6,698  

 

1  Calculated base on gross revenues

 

21


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ULTRAPAR PARTICIPAÇÕES S.A.

Publicly Traded Company

 

CNPJ nº 33.256.439/0001- 39

   NIRE 35.300.109.724

MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS (05/2018)

Date, Time and Location:

May 5, 2018, at 2:30 p.m., at the Company’s headquarters, located at Av. Brigadeiro Luís Antônio, nr 1343, 9th floor, in the City and State of São Paulo.

Attendance:

Members of the Board of Directors, duly signed, and the members of the Fiscal Board in relation to the item number 1 of the agenda, pursuant to the terms of paragraph 3 of article 163 of the Brazilian Corporate Law (“Lei das Sociedades por Ações”), all of whom herein signed.

Agenda and Decisions:

 

1. After having analyzed and discussed the performance of the Company in the first quarter of this fiscal year, were approved the financial statements of the Company.

 

2. The Directors verified, under the terms of the Disclosure and Securities Trading Policy of the Company, the adherence of the transactions performed by the beneficiaries of the individual investment programs filed at the Company to the programs formalized by them.

 

3. The Directors were updated about the strategic and expansion programs of the Company.

 

4. The Directors analyzed the proposal submitted by the Company’s Executive Board on the participation of Bahiana Distribuidora de Gás Ltda., a subsidiary of the Company (“Bahiana”), in the biding process of “Grant of Pecuniary Usage of Public Areas and Infrastructure not Affected by the Port Operations, Designated to Liquefied Petroleum Gas—LPG Warehouse and Distribution, Located Inside Miramar Petrochemical Terminal, in Pará State, named MIR01, BEL06 and BEL05”, as defined in the competitive bidding notice Auction nr 01/2018-CDP (“Auction”).


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(Minutes of the Meeting of the Board of Directors of Ultrapar Participações S.A., held on May 2, 2018)

After having analyzed the proposal above, the Directors enacted the participation of Bahiana in the Auction and authorized the practice all acts necessary to the participation of Bahiana, including but not limited to, the settlement of guarantees (surety bond or guarantee) for the bidding process and/or for meeting the demands of the agreement, document signing and practice all acts required or necessary prior to, during or after the Auction, if applicable, to settle the respective concession, in the event the Company wins the process.

 

5. The Chief Executive Officer of the Company, Mr. Frederico Curado, informed that Mr. André Covre, Executive Officer of the Company and Chief Executive Officer of Extrafarma, has decided to leave the positions occupied in the Company to dedicate himself in new personal and professional projects.

To occupy such position, the Chief Executive Officer of the Company submitted to the Board of Directors the name of Mr. Rodrigo de Almeida Pizzinatto, Brazilian, married, businessman, with identity bearer nº 27.715.764-X, and enrolled in CPF/MF under the nº 270.708.278-0, with commercial address at Avenida Brigadeiro Luiz Antonio, 1343, 9th floor, in the city and State of São Paulo.

The Board of Directors decided to appoint Mr. Pizzinatto for a term with beginning on June 2nd, 2018, when he will sign the deed of investiture, until the remaining period of the other members of the Board of Officers of the Company. Mr. Rodrigo de Almeida Pizzinatto, previously consulted, informed that (a) is not incurred in any offense that prevents him to carrying out the duties to the position of which he was appointed; (b) does not have positions in companies that may be considered competitors with the Company; and (c) has no conflict of interest with the Company, in accordance to the article 147 of the Law nº 6,404/76.

Mr. André Covre will have his resignation effective on May 31th, 2018 and will have a transition period with Mr. Rodrigo Pizzinatto until this date. The members of the Board of Directors expressed their gratitude to Mr. André Covre for the 14 years of great contributions to the Company.


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(Minutes of the Meeting of the Board of Directors of Ultrapar Participações S.A., held on May 2, 2018)

 

6. The Chairman of the Board of Directors, Mr. Paulo Guilherme Aguiar Cunha, expressed his understanding that now it is the time to complete the process of his succession and thus secure a further step to ensure the Company’s perpetuity. In this sense, Mr. Paulo Guilherme Aguiar Cunha presented his letter of resignation as a member of the Board of Directors.

The other Directors highlighted the relevance of Mr. Paulo Guilherme Aguiar Cunha to construct the values of the Company in the last 50 years of relentless dedication to Ultrapar. The Directors expressed that these values will remain as an example to be followed and perpetuated by the Company and as a basis for the continuous learning of its executives. Then, the Directors expressed its gratitude for the guidance, the integrity and respect with which Mr. Paulo Guilherme Aguiar Cunha has always conducted the business of the Company, paving the way that become possible raised it to the levels of performance and governance achieved throughout these decades.

 

7. In recognition of the inestimable value of his contributions, the Board of Directors resolved to create an honorific, lifelong and personally position of Chairman Emeritus of the Board of Directors, appointing Mr. Paulo Cunha to occupy this position as of this date.

This position will not have administrative functions, not being considered an effective position of the Board of Directors of the Company.

The Directors also resolved that the Internal Bylaws of the Board of Directors shall be modified in order to reflect the creation of this position, and the redaction shall be submitted to the approval in the next meeting of the Board of Directors.

 

8. Immediately thereafter, the Board of Directors decided to elect Mr. Pedro Wongtschowski, the Vice-Chairman of the Board of Directors, to succeed Mr. Paulo Cunha as a Chairman of the Board of Directors, and Mr. Lucio de Castro Andrade Filho as the Vice-Chairman of the Board of Directors. The both elected members will initiate its functions as of this date for the remaining period of its terms as Directors of the Company. The Directors will eventually appoint a new member who will serve until the next Annual General Meeting of the Company, pursuant its Bylaws.


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(Minutes of the Meeting of the Board of Directors of Ultrapar Participações S.A., held on May 2, 2018)

As there were no further matters to be discussed, the meeting was closed, the minutes of this meeting were written, read and approved by all the undersigned members present, and by the member of the Fiscal Council.

Paulo Guilherme Aguiar Cunha – Chairman

Pedro Wongtschowski – Vice-Chairman

Lucio de Castro Andrade Filho

Alexandre Gonçalves Silva

Carlos Tadeu da Costa Fraga

Jorge Marques de Toledo Camargo

José Maurício Pereira Coelho

Nildemar Secches

Olavo Egydio Monteiro de Carvalho

Flavio Cesar Maia Luz – Chairman of the Fiscal Council


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 2, 2018    

 

ULTRAPAR HOLDINGS INC.

By:   /s/Andre Pires de Oliveira Dias
 

Name: Andre Pires de Oliveira Dias

 

Title: Chief Financial and Investor Relations Officer

(Individual and Consolidated Interim Financial Information for the Three-Month Period Ended March 31, 2018 Report on Review of Interim Financial Information, 1Q18 Earnings release and Board of Directors Minutes)