Ultrapar Participacoes SA (UGP) Q2 2025 Earnings Call Highlights: Record Net Income and ...

Operational Cash Flow: Strong generation despite BRL900 million reduction due to IOF tax burden. Net Income: BRL1.151 billion, a 134% increase year-over-year. Total EBITDA: BRL2.07 billion, significant growth driven by extraordinary tax credits. Recurring EBITDA: BRL1.468 billion, a 15% increase from the previous year. CapEx: BRL544 million, a 14% increase year-over-year. Operating Cash Generation: BRL1.848 billion, a 73% increase year-over-year. Net Debt: BRL12.635 billion, with a leverage ratio of 1.9 times net debt to EBITDA. Ipiranga Volume Sold: 2% decrease year-over-year. Ipiranga EBITDA: BRL1.199 billion, with recurring EBITDA down 13% year-over-year. AmPm Stores: 1,460 stores with 10% revenue growth in same-store sales. Ultragaz Volume Sold: 1% decrease year-over-year. Ultragaz Recurring Adjusted EBITDA: BRL442 million, an 11% increase year-over-year. Ultracargo Net Revenue: BRL247 million, a 6% decrease year-over-year. Ultracargo EBITDA: BRL141 million, a 15% decrease year-over-year. Hidrovias Volume: 10% increase year-over-year. Hidrovias Recurring Adjusted EBITDA: BRL348 million, a 39% increase year-over-year.

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Release Date: August 14, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Ultrapar Participacoes SA (NYSE:UGP) achieved strong operational cash flow generation despite a BRL900 million reduction in draft discount due to the IOF tax burden. The company reported record results at Hidrovias, which has been consolidated into Ultrapar's financials since May 2025. Ultrapar recognized BRL677 million in extraordinary tax credits from historical ICMS tax credits in the PIS/COFINS calculation basis. Ultragaz reported an 11% increase in recurring adjusted EBITDA, reflecting a better sales mix and greater efficiency in the Bulk segment. Ultrapar completed a buyback program of 25 million shares and announced interim dividends of BRL326 million, equivalent to BRL0.30 per share.

Negative Points

Ipiranga's EBITDA was 13% lower than the previous year, impacted by irregularities in naphtha and biodiesel blending and Petrobras price adjustments. Ultracargo's EBITDA decreased by 15% compared to the same period last year, due to lower cubic meters sold and initial costs with expansion projects. The volume of LPG sold by Ultragaz was 1% lower than the second quarter of 2024, affected by competitive market dynamics. Ultrapar's net debt increased to BRL12.635 billion, equivalent to 1.9 times net debt to EBITDA, due to the reduction in draft discount and consolidation of Hidrovias. The proposal by ANP to end brand respect and allow partial LPG refilling poses risks to safety and investments, potentially leading to illegal activities.

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Q & A Highlights

Q: Can you elaborate on the dynamics of margins in the industry and the impact of informal practices? Also, how would Petrobras re-entering the LPG market affect competition? A: Leonardo Linden, CEO of Ipiranga: The single-phase taxation initially impacts margins negatively but is expected to improve over time. The CBIOs initiative is positive, but legal challenges remain. The solidarity principle in tax collection is a significant step forward. Tabajara Bertelli Costa, CEO of Ultragaz: Petrobras is a reputable player and its return could support market regulation. We expect them to adhere to existing rules, which would not change the competitive landscape significantly in the near term.

Q: What is the strategy regarding working capital and the draft discount in light of the IOF tax discussion? A: Alexandre Palhares, CFO: We have access to long-term funding at competitive rates, which we use to manage short-term working capital needs, reducing reliance on draft discounts.

Q: Can you provide insights into the regulatory discussions with ANP regarding LPG and the potential changes? A: Rodrigo de Almeida Pizzinatto, CFO: In the prehearing stage, most inputs were against changes to LPG regulations. Tabajara Bertelli Costa, CEO of Ultragaz: We are actively participating in discussions to ensure regulations advance rather than regress.

Q: What are Ultrapar's leverage targets and plans for capital allocation? A: Rodrigo de Almeida Pizzinatto, CFO: We aim for a leverage level between 1.5 and 2 times EBITDA. As cash flow improves, we will consider investments or increasing dividends, depending on market conditions and opportunities.

Q: How does Ultrapar plan to enhance returns on investment and market share for Ipiranga? A: Rodrigo de Almeida Pizzinatto, CFO: We focus on selective investments with a target return of about 20%. As regulatory conditions improve, we expect better margins and volumes, but investments will remain disciplined.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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