Ultrapar Participaes S.A. November 2017 Considerations - - PowerPoint PPT Presentation

Ultrapar Participações S.A.

November 2017

 Forward-looking statements



This document may include “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” “project” and other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects and other aspects of the business of Ultrapar Participações S.A. (“Ultrapar”) are based on current expectations that are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Ultrapar is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. For this reason, readers should not place undue emphasis on these forward-looking statements.

 Standards and criteria adopted in preparing the 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 financial information of Ipiranga, Oxiteno, Ultragaz, Ultracargo and Extrafarma is reported without elimination of intercompany transactions. Therefore, the sum of such information may not correspond to the consolidated financial information of Ultrapar. In addition, the financial and operational information presented in this document is subject to rounding off and, consequently, the total amounts presented in the tables and charts may differ from the direct sum of the amounts that precede them.



EBITDA — Earnings Before Interest, Taxes, Depreciation and Amortization, and EBIT— Earnings Before Interest and Taxes, are presented in accordance with CVM Instruction No. 527, issued by CVM on October 4, 2012.

Considerations

Ultrapar and strategy of its businesses...........................................................................p.08 Financial performance.......................................................................................................p.15

Agenda

Priorities and recent strategic initiatives........................................................................p.23

Ultrapar – Multi-business company

• Ultrapar is one of the largest corporations in Brazil
• Engaged in specialized distribution and retail, specialty

chemicals and liquid bulk storage

• Leadership position in its markets, with long-term

competitive advantages

• Businesses leveraged on the economic growth and

resilient to economic downturns

• Best practices of corporate governance
• Strategy of differentiation and innovation

Shareholder Structure Ultrapar at a Glance

BB+ Ba1

Market Cap(1): R$42Bn

Operating Segments

Key Shareholders % Ultra S.A. Participações 22% Standard Life Aberdeen 8% Parth do Brasil Participações Ltda 8% Others 57%

Financial Highlights EBITDA Contribution(2)

76% 6% 13% 4%1%

(R$mm) 2014 2015 2016 3Q17 LTM Net Revenue 67,736 75,655 77,353 77,519

YoY Growth (%) 11.2% 11.7% 2.2%

• 1.7%

EBITDA 3,158 3,953 4,217 4,118

YoY Growth (%) 8.2% 25.2% 6.7%

• 3.6%

Net Income 1,251 1,513 1,571 1,609 Net Debt 3,975 4,928 5,715 6,767 Net Debt/EBITDA 1.3x 1.3x 1.4x 1.6x

(1) As of September 30, 2017 (2) For the last twelve months ended September 30, 2017 (3) Growth over 3Q16LTM

(3) (3)

Black Rock Inc. 5% 4

 2nd largest fuel distributor in Brazil  7,814 service stations  Largest convenience store network in Brazil  Leader in specialty chemicals derived from ethylene oxide in Latin America  12 production facilities in 5 countries  The largest LPG distributor in Brazil  Network of 6 thousand independent resellers  11 million households attended  52 thousand customers in the bulk segment  The largest provider of storage for liquid bulk in Brazil  6 terminals located in the main Brazilian ports  696 thousand m³ of storage capacity  Sixth largest drugstore chain in Brazil  366 stores in 11 different states  2 distribution centers  Leadership in NO and NE regions

Ultrapar is the 5th largest Brazilian group in terms of revenues¹ 16 thousand employees Market capitalization of R$ 42 billion

¹ Source: Valor 1000 2017 edition

Ultrapar – Multi-business company

5

Differentiation through innovation Resilient businesses Synergies among the businesses Markets under consolidation and formalization process Leveraged on the Brazilian economic growth

Ultrapar – Investments were leveraged by the attributes of our businesses

Corporate governance designed to sustainable value creation

6

Ultrapar – Corporate governance

• First Brazilian

company to be listed at B3 and NYSE simultaneously

• First Brazilian

company to grant 100% tag along rights to all shareholders

• Compensation

linked to economic value added

• Corporate

restructuring

• Stock ownership

program to executives of the new generation

• Separated roles
• f CEO and

Chairman of the Board of Directors

• New corporate

governance structure after joining the Novo Mercado

• Ultrapar

becomes a corporation

• Issuance of new

common shares as a result of the Extrafarma’s Merger

1999 2000 2002 2003 2007 2011 2014 1984/94

• Company’s first

and second stock ownership program

Ultrapar Corporate Governance Corporate Governance designed to value creation

Track record of prospecting, analyzing and executing  Continuous process  Engagement of the Company Alignment of interests

Accountability Agile decision- making processes

High standards of controls and transparency Lean management structure Long-term financial soundness Strong investment capacity  Capital  People  Processes

7

Ultrapar and strategy of its businesses

Ipiranga – Constant investments in the service station network and logistics infrastructure

Investments to capture the market growth potential, focused on N/MW/NE regions… ...and on the expansion of the logistics infrastructure ...resulted in the company’s growth

 83 logistics facilities* across Brazil

% of unbranded service stations vs. Ipiranga’s Car penetration by country (as a % of population)

14,000 (34%) service stations in Brazil, 27% of total sales volume

Source: Sindicom’s 2016 Annual Report and ANFAVEA’s 2017 Annual Report

Future inorganic growth: JV with Chevron in lubricants EBITDA and EBITDA margin Growth in the number of service stations and sales mix Investment in the network and logistics infrastructure

1 2 3 4

CAGR margin 15% CAGR EBITDA 16% CAGR 15% CAGR # stations 4%

* 54 owned terminals and pools

 R$ 712 million CAPEX for expansion and construction

• f terminals since 2011

# stations Sales volume in the reseller segment EBITDA (R$ M) EBITDA margin (R$/m³) Ipiranga Unbranded service stations

13% 23% 41% 29% N/MW/NE S/SE 20% 83% 63% 59% 29% 32% Brazil US Japan United Kingdom Mexico Argentina

1,330 3,104 61 134 2011 3Q17 LTM 6,086 7,814 70% 76% 2011 3Q17 LTM

591 1,327 2011 3Q17 LTM

9

19% 30% 60% 75% 81% 88% 90% 95%

26 37 5 12 3 7 7 4 Brazil Chile Canada Argentina US United Kingdom Uruguay Australia Stores/Service station Thousand people/store

 Relationship with resellers and final customers

 Clube do Milhão  Clube VIP  Km de Vantagens, loyalty program

 Marketing campaigns

 “Ask at the Ipiranga’s service station”  Marketing plan

 Novelties

 “Abastece Aí” app  DT Clean premium gasoline

 2,301stores  774 bakeries  431 Beer Cave  4 DCs in operation

Brazil’s largest loyalty program

 ~24 million members

JV with Itaú

 1 million tags

 1,434 franchises  247 Jet Oil Motos

Reduced environmental impacts and costs

 1,193 stations

am/pm is the largest convenience store network in Brazil present in 29%

• f Ipiranga’s service stations

Source: Sindicom’s 2016 Annual Report

Ipiranga – Differentiation in convenience and services

As of Sep/17 ¹Source: Valor Econômico, January, 18, 2016 (CVA Solutions consultants)

Diversification of products and services at Ipiranga service stations, with constant innovation Convenience stores penetration The strongest brand in the fuel market¹

Incentive programs

29%

10

 Differentiation in technology and innovation  ~ 90 new products launched in the last 3 years  4 R&D centers  Strong production capacity expansion cycle made between 2007 and 2011  Focus on higher value-added products

 Sole producer of ethylene oxide in Brazil and oleo- chemicals in Latin America, with production capacity ahead of domestic demand  Deep knowledge of surfactants technology  Scale comparable to the largest players in the world

 3rd largest ethoxylation company in the world  Camaçari unit: one of the world’s largest producer of ethylene

• xide

Leadership position Strategy

Wide presence in several segments of the economy

Sales Mix

Specialties Glycols

Investments in the U.S.

 Diversification of feedstock base  More competitive costs  Access to the world’s largest ethoxylates market  Beginning of pre-marketing sales  After ramp up: 10-15% of Oxiteno’s EBITDA

Oxiteno – Investments in innovation and international expansion to strengthen the company

82% 18%

3Q17 11

Expanding scale, geographical coverage and capillarity Focus on services differentiation, boosted by Ultra partnerships 79 years of tradition and commitment to the market

Pioneer in the Brazilian LPG market Excellence in services provided Close relationship with costumers Bottled Bulk

 Digital intelligence in new clients prospecting  Ultrapronto: 1/3 of time reduction in the installation process

 ~1,000 new installations in the last twelve months

 Diversification: solutions for different uses of LPG

 Synergies among Ultra’s businesses: car wash at Ipiranga service stations  Asphalt producers  Loyalty program: KMV  Integrated store: Ultragaz and Extrafarma (CE)  Vouchers sold in pharmacies  Supermarkets as a sales channel of LGP bottled  ~800 thousand vouchers sold per year  App for the costumer  162 thousand downloads  Sales team training program  6.1 thousand registered salespersons

Ultragaz – Differentiation through commercial initiatives

5.8 thousand resellers

Geographical footprint Volume

> 52 thousand customers in the bulk segment

Filling plants Satellite plants, affiliates and similar Geographical reach of Ultragaz network

UltraTop Ultragaz Connect E-Vale Ultra synergies

815 1,210 428 550

1,242 1,760

1999 3Q17 LTM Bottled Bulk 12

The largest provider

• f storage for liquid

bulk in Brazil

 Storage capacity of 696 thousand m³  Handling of liquid bulk ~8.2 ton LTM  Presence in the main Brazilian ports

Port of Santos

 The largest handling port in Latin America  Approximately 30% of Brazilian exports and imports

Positioning in strategic locations Competitive advantages

Operational excellence

 Flexibility  Agility  Quality

Strategic Focus

 Increase scale  Expand geographical coverage

Port of Aratu

 Approximately 20% of all cargo handled in maritime modal in Bahia  Serves the petrochemical Camaçari complex

Port of Itaqui

 Third largest Brazilian port in handling of liquid bulk, with approximately 15% share

1 2 3

Ultracargo – Strengthen port operations of bulk terminals

Itaqui Suape Paranaguá Santos Rio de Janeiro Aratu

28% of chemicals/corrosives 58% of fuels

Source: Brazilian Ministry of Foreign Trade and ABTL

Area of influence 13

Network expansion in a market with high growth potential Initiatives to raise stores quality standards

Launch of the new brand and new stores model  Customer receptiveness  Cost reduction  Partnership opportunities with the industry Category management

Nail Polish OTC¹ 108 13 60 15 92 5 19 12

Number of stores as of Sep/17 (366 stores)

High market growth – Revenues

(August LTM)

Aging population

in millions of people > 60 years old

Expansion in North and Northeast regions

Source: IBGE ¹ Over the Counter Medicines

Extrafarma – Initiatives in retail pharmacy management and accelerated stores opening

2.3% 3.3% 1.1% 7.9% Overall retail Clothing Books/newspapers/ magazines Retail pharmacy 20 24 29 35 42 2010 2015 2020 2025 2030

10 30 2 14

Financial performance

Accelerating investments in the network expansion

Ipiranga – 3Q17 performance

Sales volume resumes growth

 420 service stations added (71 QoQ)  297 new am/pm stores (42 QoQ)  172 new bakeries (25 QoQ)  121 new beer caves (16 QoQ)

Expansion and strengthening of the network - LTM “Ask at the Ipiranga service station”

13.7% 13.6% 13.3% 13.0% 12.8% 12.6% 12.4% 2% 2% 2% 3% 3% 2% 2% Mar/17 Apr/17 May/17 Jun/17 Jul/17 Aug/17 Sep/17

Unemployment D Average income - YoY

Economic indicators 2,040 2,159 657 592 2,762 2,814 3Q16 3Q17

+6%

Otto cycle

+2%

• 10%

Gasoline Ethanol NGV 000 m³ 3,072 3,156 3Q16 3Q17

Diesel

000 m³ +3%

 Total volume: 2% growth to 6,059 thousand m³ in 3Q17  Otto cycle: growth supported by network expansion and market share recovery  Diesel: growth influenced by economic recovery

7,563 7,648 7,743 7,814 4Q16 1Q17 2Q17 3Q17

# Ipiranga service stations

788 954 3Q16 3Q17

EBITDA

+21%

R$ million

Higher sales volume Inventories’ effects due to fuels costs’ volatility Higher expenses with freights and association in lubricants’ business Sign up to the Special Tax Renegotiation Program (PERT)

16

Oxiteno – 3Q17 performance

Stronger Real against the US Dollar and non-recurring events impacting EBITDA Record sales volume with growth in specialties and commodities

85% 82% 15% 18%

200 211 3Q16 3Q17

Specialties Glycols

+5% Total volume

000 ton

+21% +2%

115 119 54 54

169 173 3Q16 3Q17 Brazil International markets

Specialties

+1% +3%

+2%

000 ton

 Brazil: distribution, automotive fluids and HPC segments  International markets: increased exports to the US due to the pre- marketing  Glycols: volatility in product prices and demand

Reported EBITDA Non-recurring

Stronger Real (R$ 0.08/US$) R$ 26 million impact from PKO inventory loss and technical problems during the restart of Oleoquímica plant after scheduled stoppage at the end

• f 2Q17

Higher sales volume

99 34 74 37 26 71 100 3Q16 2Q17 3Q17 EBITDA (R$ million)

3.25 3.16

3Q16 3Q17

Average exchange rate (R$/US$)

17

EBITDA Volume

Ultragaz – 3Q17 performance

Bottled Bulk

315 317 152 143 467 460

3Q16 3Q17 +1%

• 6%
• 1%

000 ton

108 157

3Q16 3Q17

R$ million

+46%

Volume

 Bottled: investments to add new resellers  Bulk: increased sales volume to industrial clients in 3Q16 and migration of some clients to natural gas

EBITDA

 Commercial initiatives to capture new clients and resellers  Differentiation strategy based on innovation  Management of costs and expenses 3Q16 - R$ 15 million in marketing expenses 3Q17 - reduction in freight costs and LPG bottles requalification and maintenance costs

18

Ultracargo – 3Q17 performance

EBITDA Volume

Effective storage

(Monthly average) 683 729 3Q16 3Q17

+7%

000 m³

23 40 3Q16 3Q17

R$ million

+72%

Volume

 Increased fuels handling in the ports of Suape, Itaqui and Santos  Growth in vegetable oils handled at Paranaguá  93% capacity utilization

EBITDA

 Growth in average storage  Partial resumption of the operations at the Santos terminal  Increased productivity  Lower expenses related to the fire at Santos

19

Extrafarma – 3Q17 performance

Number of stores Gross revenue EBITDA

Mature stores 2 to 3 years Up to 1 year R$ million

Abrafarma +7%

R$ million

Gross revenue

18% revenue growth in the retail segment  Increased number of stores:  88 openings YoY  30 openings QoQ  SSS: +7% (mature stores +4%, mature stores ex-mobile phones +6%)  Annual price adjustment set by the Regulator: +3%

EBITDA

Initiatives to improve management standards in retail pharmacy Better results from productivity and trade marketing Revenues growth 57% 49% 21% 23% 22% 28% 293 366 Sep/16 Sep/17

+25%

43% 51%

6 7

3Q16 3Q17 +10%

433 501 3Q16 3Q17

+16%

Abrafarma +9%

Increased share of still maturing stores: 3Q17: 51% up to 3 years (43% in 3Q16)

20

Ultrapar – 3Q17

Strengthening and preparation of Ultra for a new growth cycle Gradual recovery in economic activity and earnings growth

Solid financial position and discipline in capital allocation:  R$ 1,511 million invested up to September 2017  Approval of R$ 355 million in additional investments to be allocated into Ipiranga’s network expansion and of R$ 123 million

• riginally allocated for Ale’s CAPEX

 Net debt/LTM EBITDA of 1.6x as of September 30, 2017 Opportunities: Organic: Ongoing expansion of Ipiranga, Ultragaz and Extrafarma’s networks and investments in the Oxiteno’s alkoxylation plant in the US Inorganic: acquisition of Liquigás under CADE’s analysis and creation of a new lubricants business with Chevron

 Operating figures reflecting economic recovery  Continuous investments in Ipiranga’s network expansion  Accelerated expansion pace of Extrafarma network with 30 new stores in the quarter  Growth in EBITDA at all the businesses with the exception of Oxiteno, impacted by specific events

1,029 1,239 3Q16 3Q17 380 556 3Q16 3Q17

+46% +20%

R$ million R$ million

EBITDA Net income

21

68,6% 3,4% 28,1%

Local currency Foreing currency Without hedge With hedge

31.4%

6,356 2,955 3,064 898 1,309 2,149 2,747 Cash and Equivalents Short term 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years > 5 years 1,253 1,640 1,819 2,306 2,557 1,979 1,858 1,486 1,227 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 5,659 4,928 5,902 5,506 5,838 5,715 6,286 6,216 6,767 1.5x 1.2x 1.5x 1.3x 1.4x 1.4x 1.5x 1.6x 1.6x 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Net Debt Net Debt/ EBITDA

Debt breakdown(1) (%) – 3Q17 Debt amortization profile(R$mm) – 3Q17

Ultrapar – Solid financial profile

(1) Does not include swap losses (2) Calculated as EBITDA - CAPEX - Change in Working Capital. Working capital includes short-term and long-term accounts receivable, inventories and suppliers

Duration: 4 years Average cost of debt: 96.4% of CDI

Net Debt (R$ mm) and Net Debt/ EBITDA (x) - LTM Operational cash flow - LTM (R$mm) (2)

22

Priorities and recent strategic initiatives

Priorities and recent strategic initiatives

Investments in expansion to boost earnings and profitability growth

Extrafarma

 Retail pharmacy management: roll out of the new store model for the network  Faster stores opening pace

Ultracargo

 Resuming activities in the Santos terminal  Focus on modernization of safety, reliability and integrity systems  Expansion to strengthen position as port operator

Ultragaz

 Focus on differentiation initiatives, creating new niche markets and sales channels

Oxiteno

 Aspire leadership in surfactants in the Americas  International expansion – construction of the new alkoxylation plant in Pasadena, Texas (USA)

Ipiranga

 Expansion of service stations, am/pm and Jet Oil networks  Expansion of the logistics infrastructure  Focus on differentiation through diversification and innovation in products and services

Strategic initiatives

 CADE’s authorization to create a joint venture with Chevron in the lubricants’ segment  Focus on the approval of Liquigás acquisition by CADE

24

25

Liquigás figures (2016)

5 thousand resellers Volume sold: 1,600 thousand tons EBITDA of R$ 320 million 25 million LPG bottles

Financial Operational

Liquigás – Overview

23 bottling facilities Market share  Bulk: 21%  Bottled: 20%

000 tons 1,251 1,263 1,255 1,218 410 405 398 383 22.7% 22.5% 22.6% 21.6%

2013 2014 2015 2016 Bottled Others Market share (%)

2.899 2.978 3.296 3.589 113 148 214 320 3,9% 5,0% 6,5% 8,9%

2013 2014 2015 2016 Net income EBITDA EBITDA margin (%)

R$ million

1,662 1,668 1,653 1,600

Accretive acquisition, generating benefits and value for the company

26

Enterprise Value: R$ 2.8 billion

 After-synergy multiple below 5x EV/EBITDA

Gross debt as of Dec/16: R$ 45 million

STRUCTURE RATIONALE

Improve efficiency and competitiveness, producing benefits to consumers, resellers and to the society

 Efficiency gains in logistics, in administrative management and in operating practices, resulting in better services

Strengthen the company and the relationship with resellers through Ultra’s investment capacity

ULTRAPAR 27

Strategic initiatives in Ipiranga

145 thousand m³ 44% of the JV capital

New company

JV with Chevron in lubricants

Non cash transaction 2nd largest lubricants company in Brazil 23% market share Sharing of best practices Optimization and increased capillarity of the sales channels More diversified product portfolio

204 thousand m³ 56% of the JV capital

Ultrapar Participações S.A. Investor Relations  55 11 3177-7014 invest@ultra.com.br ri.ultra.com.br