Form 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 November, 2015

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 September 30, 2015 Report on Review of Interim Financial Information
  2. 3Q15 Earnings release
  3. Board of Directors Minutes
  4. Material Fact Disclosure Policy And Securities Trading Policy


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 Nine-Month Period

Ended September 30, 2015

Report on Review of Interim

Financial Information

Deloitte Touche Tohmatsu Auditores Independentes


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Individual and Consolidated Interim Financial Information

for the Nine-Month Period Ended September 30, 2015

 

Table of Contents

 

Report on Review of Interim Financial Information

  

3 – 4

 

Balance Sheets

  

5 – 6

 

Income Statements

  

7 – 8

 

Statements of Comprehensive Income

  

9 – 10

 

Statements of Changes in Equity

  

11 – 12

 

Statements of Cash Flows—Indirect Method

  

13 – 14

 

Statements of Value Added

  

15

 

Notes to the Interim Financial Information

   16 – 94


Table of Contents

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

REPORT ON REVIEW OF INTERIM FINANCIAL INFORMATION

To the Shareholders, Board of 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. (the “Company”), identified as Parent and Consolidated, respectively, included in the Interim Financial Information Form (ITR), for the three-month period ended September 30, 2015, which comprises the balance sheet as of September 30, 2015 and the related statements of income and comprehensive income for the three and nine-month periods then ended and changes in equity and cash flows for the nine-month period then ended, including the explanatory notes.

The Company’s Management is responsible for the preparation of the individual and consolidated interim financial information in accordance with technical pronouncement CPC 21 (R1)—Interim Financial Information and international standard IAS 34—Interim Financial Reporting, issued by the International Accounting Standards Board—IASB, as well as for the presentation of such information in accordance with the standards issued by the Brazilian Securities and Exchange Commission (CVM), applicable to the preparation of the Interim Financial Information (ITR). Our responsibility is to express a conclusion on this interim financial information based on our review.

Scope of review

We conducted our review in accordance with Brazilian and international standards on review of interim financial information (NBC TR 2410 and ISRE 2410—Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial 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 standards on auditing 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 interim financial information

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

 

3


Table of Contents

Other matters

Statements of value added

We have also reviewed the individual and consolidated statements of value added (“DVA”) for the nine—month period ended September 30, 2015, prepared under the responsibility of the Company’s Management, the presentation of which is required by the standards issued by the CVM applicable to the preparation of Interim Financial Information (ITR) and considered as supplemental information for International Financial Reporting Standards—IFRSs, which do not require the presentation of the DVA. These statements were subject to the same review procedures described above, and, based on our review, nothing has come to our attention that causes us to believe that they were not prepared, in all material respects, consistently with the individual and consolidated interim financial information taken as a whole.

The accompanying individual and consolidated interim financial information has been translated into English for the convenience of readers outside Brazil.

São Paulo, November 4, 2015

 

DELOITTE TOUCHE TOHMATSU

   Edimar Facco

Auditores Independentes

   Engagement Partner

 

4


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Balance Sheets

as of September 30, 2015 and December 31, 2014

(In thousands of Brazilian Reais)

 

 

          Parent      Consolidated  

Assets

   Note    09/30/2015      12/31/2014      09/30/2015      12/31/2014  

Current assets

        

Cash and cash equivalents

   4      62,725         119,227         2,217,921         2,827,369   

Financial investments

   4      10,261         67,864         1,464,313         1,441,813   

Trade receivables, net

   5      —           —           3,086,085         2,604,101   

Inventories, net

   6      —           —           2,495,131         1,925,002   

Recoverable taxes, net

   7      41,896         30,713         759,084         593,462   

Dividends receivable

        90,059         448,233         —           —     

Other receivables

        2,447         15,881         70,466         43,342   

Prepaid expenses, net

   10      123         39         75,283         67,268   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

        207,511         681,957         10,168,283         9,502,357   

Non-current assets

        

Financial investments

   4      —           —           400,187         130,940   

Trade receivables, net

   5      —           —           142,303         143,806   

Related parties

   8.a      750,000         806,456         490         10,858   

Deferred income and social contribution taxes

   9.a      15,742         1,479         556,736         462,573   

Recoverable taxes, net

   7      8,184         23,122         49,661         75,404   

Escrow deposits

   23      148         148         737,750         696,835   

Other receivables

        —           —           8,551         5,832   

Prepaid expenses, net

   10      —           —           132,454         131,228   
     

 

 

    

 

 

    

 

 

    

 

 

 
        774,074         831,205         2,028,132         1,657,476   

Investments

        

In subsidiaries

   11.a      7,653,683         7,099,524         —           —     

In joint-ventures

   11.a;11.b      39,922         24,076         83,961         54,508   

In associates

   11.c      —           —           21,101         13,143   

Other

        —           —           2,814         2,814   

Property, plant, and equipment, net

   12      —           —           5,314,045         5,091,971   

Intangible assets, net

   13      246,163         246,163         3,241,727         3,158,113   
     

 

 

    

 

 

    

 

 

    

 

 

 
        7,939,768         7,369,763         8,663,648         8,320,549   

Total non-current assets

        8,713,842         8,200,968         10,691,780         9,978,025   
     

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

        8,921,353         8,882,925         20,860,063         19,480,382   
     

 

 

    

 

 

    

 

 

    

 

 

 

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 September 30, 2015 and December 31, 2014

(In thousands of Brazilian Reais)

 

 

          Parent     Consolidated  

Liabilities

   Note    09/30/2015     12/31/2014     09/30/2015     12/31/2014  

Current liabilities

         

Loans

   14      —          —          2,098,397        2,554,730   

Debentures

   14.g      4,257        874,312        68,670        884,900   

Finance leases

   14.i      —          —          2,379        2,734   

Trade payables

   15      43        536        948,421        1,279,502   

Salaries and related charges

   16      194        158        388,719        294,579   

Taxes payable

   17      825        110        184,942        138,835   

Dividends payable

   20.g      16,213        213,301        19,199        218,375   

Income and social contribution taxes payable

        —          —          67,422        134,399   

Post-employment benefits

   24.b      —          —          8,963        11,419   

Provision for asset retirement obligation

   18      —          —          5,140        4,598   

Provision for tax, civil, and labor risks

   23.a      —          —          55,501        64,169   

Other payables

        12,126        236        75,726        80,392   

Deferred revenue

   19      —          —          23,319        23,450   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

        33,658        1,088,653        3,946,798        5,692,082   

Non-current liabilities

         

Loans

   14      —          —          5,328,860        3,489,586   

Debentures

   14.g      799,475        —          2,198,676        1,398,952   

Finance leases

   14.i      —          —          44,066        44,310   

Related parties

   8.a      1,381        —          4,372        4,372   

Subscription warrants – indemnification

   3.a      133,402        92,072        133,402        92,072   

Deferred income and social contribution taxes

   9.a      —          —          291,079        152,847   

Provision for tax, civil, and labor risks

   23.a      4,216        4,201        660,687        623,272   

Post-employment benefits

   24.b      —          —          120,810        108,372   

Provision for asset retirement obligation

   18      —          —          68,246        66,204   

Other payables

        —          —          76,038        74,009   

Deferred revenue

   19      —          —          8,843        7,709   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

        938,474        96,273        8,935,079        6,061,705   

Shareholders’ equity

         

Share capital

   20.a      3,838,686        3,838,686        3,838,686        3,838,686   

Capital reserve

   20.c      546,607        547,462        546,607        547,462   

Revaluation reserve

   20.d      5,653        5,848        5,653        5,848   

Profit reserves

   20.e      3,169,704        3,169,704        3,169,704        3,169,704   

Treasury shares

   20.b      (394,880     (103,018     (394,880     (103,018

Additional dividends to the minimum mandatory dividends

   20.g      —          188,976        —          188,976   

Retained earnings

        572,559        —          572,559        —     

Valuation adjustments

   2.c;2.o; 20.f      45,177        7,149        45,177        7,149   

Cumulative translation adjustments

   2.c;2.r;20.f      165,715        43,192        165,715        43,192   
     

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity attributable to:

         

Shareholders of the Company

        7,949,221        7,697,999        7,949,221        7,697,999   

Non-controlling interests in subsidiaries

        —          —          28,965        28,596   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

        7,949,221        7,697,999        7,978,186        7,726,595   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

        8,921,353        8,882,925        20,860,063        19,480,382   
     

 

 

   

 

 

   

 

 

   

 

 

 

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 nine-month period ended September 30, 2015 and 2014

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

 

 

          Parent     Consolidated  
     Note    01/01/2015 to
09/30/2015
    01/01/2014 to
09/30/2014
    01/01/2015 to
09/30/2015
    01/01/2014 to
09/30/2014
 

Net revenue from sales and services

   25      —          —          55,075,167        49,914,027   

Cost of products and services sold

   26      —          —          (50,299,900     (45,972,139
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        —          —          4,775,267        3,941,888   

Operating income (expenses)

         

Selling and marketing

   26      —          —          (1,834,548     (1,584,329

General and administrative

   26      (11     (29,582     (935,399     (833,521

Gain on disposal of property, plant and equipment and intangibles

   28        —          29,231        15,194   

Other operating income, net

   27      29,784        10,173        15,664        62,448   
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        29,773        (19,409     2,050,215        1,601,680   

Financial income

   29      135,677        95,481        309,467        263,996   

Financial expenses

   29      (125,792     (67,226     (851,012     (584,739

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

   11      983,250        866,650        (5,232     (10,820
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

        1,022,908        875,496        1,503,438        1,270,117   
     

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

         

Current

   9.b      (27,856     (2,476     (495,147     (436,932

Deferred

   9.b      14,264        (851     (51,069     (1,163

Tax incentives

   9.b;9.c        —          59,002        47,441   
     

 

 

   

 

 

   

 

 

   

 

 

 
        (13,592     (3,327     (487,214     (390,654

Net income for the period

        1,009,316        872,169        1,016,224        879,463   
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

         

Shareholders of the Company

        1,009,316        872,169        1,009,316        872,169   

Non-controlling interests in subsidiaries

        —          —          6,908        7,294   

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

         

Basic

   30      1.8536        1.5996        1.8536        1.5996   

Diluted

   30      1.8388        1.5874        1.8388        1.5874   

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

 

7


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Income Statements

For the three-month period ended September 30, 2015 and 2014

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

 

 

          Parent     Consolidated  
     Note    07/01/2015 to
09/30/2015
    07/01/2014 to
09/30/2014
    07/01/2015 to
09/30/2015
    07/01/2014 to
09/30/2014
 

Net revenue from sales and services

   25      —          —          19,160,848        17,299,930   

Cost of products and services sold

   26      —          —          (17,510,348     (15,929,882
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        —          —          1,650,500        1,370,048   

Operating income (expenses)

         

Selling and marketing

   26      —          —          (636,721     (556,706

General and administrative

   26      (2     (2,470     (337,814     (268,861

Gain on disposal of property, plant and

equipment and intangibles

   28      —          —          4,600        8,502   

Other operating income, net

   27      —          2,420        15,408        20,880   
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        (2     (50     695,973        573,863   

Financial income

   29      51,698        35,580        106,307        92,742   

Financial expenses

   29      (36,418     (22,828     (339,442     (200,142

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

   11      285,881        317,694        (5,760     (5,185
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

        301,159        330,396        457,078        461,278   
     

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

         

Current

   9.b      (6,626     (2,476     (110,354     (130,324

Deferred

   9.b      1,351        (1,739     (69,863     (16,662

Tax incentives

   9.b;9.c      —          —          21,680        14,486   
     

 

 

   

 

 

   

 

 

   

 

 

 
        (5,275     (4,215     (158,537     (132,500

Net income for the period

        295,884        326,181        298,541        328,778   
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

         

Shareholders of the Company

        295,884        326,181        295,884        326,181   

Non-controlling interests in subsidiaries

        —          —          2,657        2,597   

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

         

Basic

   30      0.5450        0.5971        0.5450        0.5971   

Diluted

   30      0.5406        0.5922        0.5406        0.5922   

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

 

8


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the nine-month period ended September 30, 2015 and 2014

(In thousands of Brazilian Reais)

 

 

          Parent     Consolidated  
     Note    01/01/2015 to
09/30/2015
     01/01/2014 to
09/30/2014
    01/01/2015
to
09/30/2015
     01/01/2014
to
09/30/2014
 

Net income for the period attributable to shareholders of the Company

        1,009,316         872,169        1,009,316         872,169   

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

        —           —          6,908         7,294   
     

 

 

    

 

 

   

 

 

    

 

 

 

Net income for the period

        1,009,316         872,169        1,016,224         879,463   
     

 

 

    

 

 

   

 

 

    

 

 

 

Items that are subsequently reclassified to profit or loss:

          

Fair value adjustments of available for sale financial
instruments

   2.c;20.f      38,028         10        38,028         10   

Cumulative translation adjustments, net of hedge of net investments in foreign operations

   2.c; 2.r;
20.f
     122,523         (18,351     122,523         (18,351
     

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive income for the period

        1,169,867         853,828        1,176,775         861,122   
     

 

 

    

 

 

   

 

 

    

 

 

 

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

        1,169,867         853,828        1,169,867         853,828   

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

        —           —          6,908         7,294   

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

 

9


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the three-month period ended September 30, 2015 and 2014

(In thousands of Brazilian Reais)

 

 

            Parent     Consolidated  
     Note      07/01/2015 to
09/30/2015
     07/01/2014 to
09/30/2014
    07/01/2015
to
09/30/2015
     07/01/2014
to
09/30/2014
 

Net income for the period attributable to shareholders of
the Company

        295,884         326,181        295,884         326,181   

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

        —           —          2,657         2,597   
     

 

 

    

 

 

   

 

 

    

 

 

 

Net income for the period

        295,884         326,181        298,541         328,778   
     

 

 

    

 

 

   

 

 

    

 

 

 

Items that are subsequently reclassified to profit or loss:

          

Fair value adjustments of available for sale financial instruments

     2.c;20.f         24,806         27        24,806         27   

Cumulative translation adjustments, net of hedge of net investments in foreign operations

    
 
 
2.c;
2.r;
20.f
  
  
  
     70,867         (32,207     70,867         (32,207
     

 

 

    

 

 

   

 

 

    

 

 

 

Total comprehensive income for the period

        391,557         294,001        394,214         296,598   
     

 

 

    

 

 

   

 

 

    

 

 

 

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

        391,557         294,001        391,557         294,001   

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

        —           —          2,657         2,597   

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

 

10


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Equity

For the nine-month period ended September 30, 2015 and 2014

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

 

 

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

Balance as of December 31, 2013

      3,696,773        20,246        6,107        335,099        1,038,467        1,333,066        5,428        38,076        —          (114,885     161,584        6,519,961        26,925        6,546,886   

Net income for the period

      —          —          —          —          —          —          —          —          872,169        —          —          872,169        7,294        879,463   

Other comprehensive income:

                             

Fair value adjustments of financial instruments

   
 
2.c;
20.f
  
  
    —          —          —          —          —          —          10        —          —          —          —          10        —          10   

Currency translation of foreign subsidiaries

   
 
 
2.c,
2.r;
20.f
  
  
  
    —          —          —          —          —          —          —          (18,351     —          —          —          (18,351     —          (18,351
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

      —          —          —          —          —          —          10        (18,351     872,169        —          —          853,828        7,294        861,122   

Increase in share capital

   
 
3.a;
20.a
  
  
    141,913        —          —          —          —          —          —          —          —          —          —          141,913        —          141,913   

Capital surplus on subscription of shares

   
 
3.a;
20.c
  
  
    —          498,812        —          —          —          —          —          —          —          —          —          498,812        —          498,812   

Share issue costs

   
 
3.a;
20.c
  
  
    —          (2,260     —          —          —          —          —          —          —          —          —          (2,260     —          (2,260

Sale of treasury shares

      —          9,289        —          —          —          —          —          —          —          3,364          12,653        —          12,653   

Realization of revaluation reserve of subsidiaries

    20.d        —          —          (194     —          —          —          —          —          194        —          —          —          —          —     

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

    20.d        —          —          —          —          —          —          —          —          (31     —          —          (31     —          (31

Interim dividends

    20.g        —          —          —          —          —          —          —          —          (389,554     —          —          (389,554     —          (389,554

Dividends attributable to non-controlling interests

      —          —          —          —          —          —          —          —          —          —          —          —          (113     (113

Acquisition of non-controlling interests

      —          —          —          —          —          —          —          —          —          —          —          —          (129     (129

Additional dividends attributable to non-controlling interests

      —          —          —          —          —          —          —          —          —          —          —          —          (5,159     (5,159

Approval of additional dividends by the Shareholders’ Meeting

    20.g        —          —          —          —          —          —          —          —          —          —          (161,584     (161,584     —          (161,584
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2014

      3,838,686        526,087        5,913        335,099        1,038,467        1,333,066        5,438        19,725        482,778        (111,521     —          7,473,738        28,818        7,502,556   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

11


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Equity

For the nine-month period ended September 30, 2015 and 2014

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

 

 

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

Balance as of December 31,

2014

        3,838,686         547,462        5,848        397,177         1,439,461         1,333,066         7,149         43,192         —          (103,018     188,976        7,697,999        28,596        7,726,595   

Net income for the period

        —           —          —          —           —           —           —           —           1,009,316        —          —          1,009,316        6,908        1,016,224   

Other comprehensive income:

                                     

Fair value adjustments of financial instruments

    
 
2.c;
20.f
  
  
     —           —          —          —           —           —           38,028         —           —          —          —          38,028        —          38,028   

Currency translation of foreign subsidiaries hedge of net investments in foreign operation

    
 
 
2.c;
2.r;
20.f
  
  
  
     —           —          —          —           —           —           —           122,523         —          —          —          122,523        —          122,523   
     

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —           —          —          —           —           —           38,028         122,523         1,009,316        —          —          1,169,867        6,908        1,176,775   

Acquisition of own shares to held in treasury

     20.b         —           (855     —          —           —           —           —           —           —          (291,862     —          (292,717     —          (292,717

Realization of revaluation reserve of subsidiaries

     20.d         —           —          (195     —           —           —           —           —           195        —          —          —          —          —     

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

     20.d         —           —          —          —           —           —           —           —           (110     —          —          (110     —          (110

Interim dividends

     20.g         —           —          —          —           —           —           —           —           (436,842     —          —          (436,842     —          (436,842

Dividends attributable to non-controlling interests

        —           —          —          —           —           —           —           —           —          —          —          —          (6,530     (6,530

Acquisition of non-controlling interests

        —           —          —          —           —           —           —           —           —          —          —          —          (9     (9

Approval of additional dividends by the Shareholders’ Meeting

     20.g         —           —          —          —           —           —           —           —           —          —          (188,976     (188,976     —          (188,976
     

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2015

        3,838,686         546,607        5,653        397,177         1,439,461         1,333,066         45,177         165,715         572,559        (394,880     —          7,949,221        28,965        7,978,186   
     

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

12


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows—Indirect Method

For the nine-month period ended September 30, 2015 and 2014

(In thousands of Brazilian Reais)

 

 

          Parent     Consolidated  
     Note    09/30/2015     09/30/2014     09/30/2015     09/30/2014  

Cash flows from operating activities

       

Net income for the period

        1,009,316        872,169        1,016,224        879,463   

Adjustments to reconcile net income to cash provided by operating activities

           

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

   11      (983,250     (866,650     5,232        10,820   

Depreciation and amortization

   12;13      —          —          731,447        651,466   

PIS and COFINS credits on depreciation

   12;13      —          —          9,167        9,436   

Asset retirement obligation

   18      —          —          (3,429     (3,080

Interest, monetary, and foreign exchange rate variations

        125,266        69,514        1,274,412        655,589   

Deferred income and social contribution taxes

   9.b      (14,264     851        51,069        1,163   

Gain on disposal of property, plant and equipment and intangibles

   28      —          —          (29,231     (15,194

Others

          —          3,393        2,952   

Dividends received from subsidiaries and joint-ventures

        931,860        1,068,334        6,127        2,039   

(Increase) decrease in current assets

           

Trade receivables

   5      —          —          (481,984     (150,860

Inventories

   6      —          —          (568,129     (194,502

Recoverable taxes

   7      (11,183     3,707        (165,622     (72,590

Other receivables

        13,434        55        (27,124     (30,031

Prepaid expenses

   10      (84     1,845        (8,015     11,628   

Increase (decrease) in current liabilities

           

Trade payables

   15      (493     (1,124     (331,081     (110,571

Salaries and related charges

   16      36        17        94,140        (26,538

Taxes payable

   17      715        (18     46,107        21,967   

Income and social contribution taxes

        —          —          301,455        303,445   

Provision for tax, civil, and labor risks

   23.a      —          —          (8,668     964   

Other payables

        11,890        (28     (8,094     (53,020

Deferred revenue

   19      —          —          (131     (2,586

(Increase) decrease in non-current assets

           

Trade receivables

   5      —          —          1,503        (13,209

Recoverable taxes

   7      14,938        (18,710     25,743        (43,830

Escrow deposits

        —          —          (40,915     (67,760

Other receivables

        —          —          (2,719     (1,509

Prepaid expenses

   10      —          —          (1,226     8,009   

Increase (decrease) in non-current liabilities

           

Post-employment benefits

   24.b      —          —          9,975        11,455   

Provision for tax, civil, and labor risks

   23.a      15        13        37,415        13,334   

Other payables

        —          —          2,029        (5,451

Deferred revenue

   19      —          —          1,134        (312

Income and social contribution taxes paid

        —          (559     (368,432     (320,519
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

        1,098,196        1,129,416        1,571,772        1,472,168   
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

13


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows—Indirect Method

For the nine-month period ended September 30, 2015 and 2014

(In thousands of Brazilian Reais)

 

 

          Parent     Consolidated  
     Note    09/30/2015     09/30/2014     09/30/2015     09/30/2014  

Cash flows from investing activities

         

Financial investments, net of redemptions

        57,603        (68,706     (20,065     (72,674

Cash and cash equivalents – Extrafama acquisition

   3.a      —          —          —          9,123   

Acquisition of property, plant, and equipment

   12      —          —          (486,267     (466,912

Acquisition of intangible assets

   13      —          —          (422,555     (338,891

Capital increase in subsidiaries

   11.a        (236,100     —          —     

Capital increase in joint ventures

   11.b      —          —          (31,000     (19,000

Proceeds from disposal of property, plant and equipment and intangibles

   28      —          —          67,564        58,343   
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

        57,603        (304,806     (892,323     (830,011
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

           

Loans and debentures

           

Borrowings

   14      799,042        —          2,121,856        1,591,867   

Repayments

   14      (800,000     —          (1,640,089     (700,231

Interest paid

   14      (153,557     (75,489     (682,162     (511,242

Payment of financial lease

   14.i      —          —          (3,985     (4,141

Dividends paid

        (822,906     (775,943     (831,461     (782,877

Acquisition of non-controlling interests of subsidiaries

        —          —          (9     —     

Acquisition of own shares to held in treasury

   20.b      (292,717     —          (292,717     —     

Sale of treasury shares

        —          12,653        —          —     

Share issue costs

   20.c      —          (2,260     —          (2,260

Related parties

        57,837        22,194        —          —     
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

        (1,212,301     (818,845     (1,328,567     (408,884
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        —          —          39,670        (23,553
     

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

        (56,502     5,765        (609,448     209,720   
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

   4      119,227        110,278        2,827,369        2,276,069   

Cash and cash equivalents at the end of the period

   4      62,725        116,043        2,217,921        2,485,789   

Additional information—transactions that do not affect cash and cash equivalents:

           

Extrafarma acquisition – capital increase and subscription warrants

   3.a      —          749,289        —          749,289   

Extrafarma acquisition – gross debt assumed on the closing date

   3.a      —          —          —          207,911   

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

 

14


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Value Added

For the nine-month period ended September 30, 2015 and 2014

(In thousands of Brazilian Reais, except percentages)

 

 

          Parent      Consolidated  
     Note    09/30/2015     %      09/30/2014     %      09/30/2015     %      09/30/2014     %  

Revenue

                      

Gross revenue from sales and services, except rents and royalties

   25      —             —             56,705,818           51,254,554     

Rebates, discounts, and returns

   25      —             —             (256,692        (227,636  

Allowance for doubtful accounts—Reversal (allowance)

        —             —             (18,840        (14,056  

Gain on disposal of property, plant and equipment and intangibles and other revenues

        29,784           —             59,015           15,194     
     

 

 

      

 

 

      

 

 

      

 

 

   
        29,784           —             56,489,301           51,028,056     

Materials purchased from third parties

                 

Raw materials used

        —             —             (3,066,672        (2,806,815  

Cost of goods, products, and services sold

        —             —             (47,190,103        (42,981,969  

Third-party materials, energy, services, and others

        (13,710        (25,799        (1,569,400        (1,355,645  

Reversal of impairment losses

        18,167           10,180           (3,736        (4,351  
     

 

 

      

 

 

      

 

 

      

 

 

   
        4,457           (15,619        (51,829,911        (47,148,780  

Gross value added

        34,241           (15,619        4,659,390           3,879,276     
     

 

 

      

 

 

      

 

 

      

 

 

   

Deductions

                      

Depreciation and amortization

   12;13      —             —             (731,447        (651,466  

PIS and COFINS credits on

depreciation

   12;13      —             —             (9,167        (9,440  
     

 

 

      

 

 

      

 

 

      

 

 

   
        —             —             (740,614        (660,906  

Net value added by the Company

        34,241           (15,619        3,918,776           3,218,370     
     

 

 

      

 

 

      

 

 

      

 

 

   

Value added received in transfer

                      

Share of profit of subsidiaries, joint-ventures, and associates

   11      983,250           866,650           (5,232        (10,820  

Dividends and interest on equity at cost

        3           —             3           —       

Rents and royalties

   25      —             —             83,436           72,022     

Financial income

   29      135,677           95,481           309,467           263,996     
     

 

 

      

 

 

      

 

 

      

 

 

   
        1,118,930           962,131           387,674           325,198     

Total value added available for distribution

        1,153,171           946,512           4,306,450           3,543,568     
     

 

 

      

 

 

      

 

 

      

 

 

   

Distribution of value added

                      

Labor and benefits

        3,768        —           3,180           1,228,394        29         1,025,816        29   

Taxes, fees, and contributions

        13,817        1         1,319           1,116,373        26         959,241        27   

Financial expenses and rents

        126,270        11         69,844        7         945,459        22         679,048        19   

Dividends paid

        436,842        38         389,554        41         443,372        10         394,826        11   

Retained earnings

        572,474        50         482,615        52         572,852        13         484,637        14   
     

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Value added distributed

        1,153,171        100         946,512        100         4,306,450        100         3,543,568        100   
     

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

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

 

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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)

 

 

 

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, by 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, as from January 31, 2014, trading of pharmaceutical, hygiene, beauty, and skincare products, through Imifarma Produtos Farmacêuticos e Cosméticos S.A. (“Extrafarma”) – see Note 3.a).

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 Standards (“IAS”) 34 as issued by the International Accounting Standards Board (“IASB”), and in accordance with CPC 21 (R1)—Interim Financial Reporting issued by the Accounting Pronouncements Committee (“CPC”) and presented in accordance with standards established by the Brazilian Securities and Exchange Commission (“CVM”).

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

a. Recognition of Income

Revenue is measured at the fair value of the consideration received or receivable, net of sales returns, discounts, and other deductions, if applicable.

Revenue from sales of fuels and lubricants is recognized when the products are delivered to gas stations and to large consumers. 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. 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. Revenue from sales of chemical products is recognized when the products are delivered to industrial customers, depending of the freight mode of delivery. The revenue provided from storage services is recognized through the performance of services. Costs of products sold and services provided include goods (mainly fuels, lubricants, LPG, and pharmaceutical products), raw materials (chemicals and petrochemicals) and production, distribution, storage, and filling costs.

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

In accordance with IAS 32, IAS 39, and International Financial Reporting Standards (“IFRS”) 7 (CPC 38, 39 and 40 (R1)), the financial assets of the Company and its subsidiaries are classified in accordance with the following categories:

 

  Measured at fair value through profit or loss: financial assets held for trading, that is, acquired or incurred principally for the purpose of selling or repurchasing in the near term, and derivatives. The balances are stated at fair value. The interest earned, the exchange variation, and changes in fair value are recognized in profit or loss.

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  Held to maturity: non-derivative financial assets with fixed or determinable payments, and fixed maturities for which the entity has the positive intention and ability to hold to maturity. 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.

 

  Available for sale: non-derivative financial assets that are designated as available for sale or that are not classified into other categories at initial recognition. 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 acquisition cost plus the interest earned are recognized in cumulative other comprehensive income in the shareholders’ equity portion of the balance sheet. Accumulated gains and losses recognized in the shareholders’ equity are reclassified to profit or loss in case of prepayment.

 

  Loans and receivables: non-derivative financial assets with fixed or determinable payments or receipts, not quoted in an active market, except: (i) those which the entity intends to sell immediately or in the near term and which the entity classified as measured at fair value through profit or loss; (ii) those classified as available for sale; or (iii) those for which the Company may not recover substantially all of its initial investment for reasons other than credit deterioration. The interest earned and the foreign currency exchange variation are recognized in profit or loss. The balances are stated at acquisition cost plus interest, using the effective interest rate method. Loans and receivables include cash and banks, trade receivables, dividends receivable, and other trade receivables.

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

 

  Hedge accounting—fair value hedge: derivative 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: derivative 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 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 in the same line of the income 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.

 

  Hedge accounting—hedge of net investments in foreign operation: derivative 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 Notes 4, 14, and 22.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

d. Trade Receivables

Trade receivables are recognized at the amount invoiced, adjusted to present value if applicable, and includes all direct taxes attributable to the Company and its subsidiaries. An allowance for 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 (see Notes 5 and 22—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 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 the Company and 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. Investments

Investments in subsidiaries are accounted for under the equity method of accounting in the individual interim financial information of the parent company.

A subsidiary is an investment in which the investor is exposed to, 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 11).

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 without 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.

g. 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.m and 18).

Depreciation is calculated using the straight-line method, for the periods mentioned in Note 12, taking into account the useful life 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

h. Leases

 

  Finance Leases

Certain lease contracts transfer substantially all the risks and benefits associated with the ownership of an asset to the Company and its 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 based on the useful lives applicable to each group of assets or the contract terms, as mentioned in Notes 12 and 13. 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 14.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 23.g).

i. Intangible Assets

Intangible assets include assets acquired by the Company and its subsidiaries from third parties, according to the criteria below (see Note 13):

 

  Goodwill is carried net of accumulated amortization as of December 31, 2008, when it ceased to be amortized. Goodwill generated since January 1, 2009 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, and is tested annually for impairment. Goodwill is allocated to the business segments, which represent the lower level that goodwill is monitored by the Company for impairment testing purposes.

 

  Bonus disbursements as provided in Ipiranga’s agreements with reseller service stations and major consumers are recognized as distribution rights when paid and amortized using the straight-line method according to the term of the agreement.

 

  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, for the periods mentioned in Note 13, taking into account their useful life, which is reviewed annually.

The Company and its subsidiaries have not recognized intangible assets that were created internally. The Company and its subsidiaries have not recognized other intangible assets that have an indefinite useful life, except for goodwill, the “am/pm” brand and “Extrafarma” brand.

j. 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 (see Note 2.u).

k. Financial Liabilities

The Company and its subsidiaries’ financial liabilities include trade payables and other payables, loans, debentures, finance leases and hedging 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 transaction costs, net of amortization. The charges are recognized in profit or loss using the effective interest rate method.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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 14.j). Transaction costs incurred and directly attributable to the issue of shares or other equity instruments are recognized in equity and are not amortized.

l. 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 reporting period. 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.

m. 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 tanks are installed. The estimated cost is recognized in property, plant, and equipment and depreciated over the respective useful life 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 18). 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 when they become known.

n. 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 evaluation of the outcomes of the legal proceedings (see Note 23 items a,b,c,d).

o. 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, using the projected unit credit method (see Note 24.b). The actuarial gains and losses are recognized in other comprehensive income and presented in the statement of shareholders’ equity. Past service cost is recognized in the income statement.

p. 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.

q. 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 end 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.

r. 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 period and shareholders’ equity is translated at the historic exchange rate of each transaction affecting shareholders’ equity. Gains and losses resulting from changes in these foreign investments are directly recognized in the statement of shareholders’ equity as 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, net of the exchange rate effect of hedge of net investments, as of September 30, 2015 was a gain of R$ 165,715 (gain of R$ 43,192 as of December 31, 2014).

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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 Andina, C.A.

   Bolivar    Venezuela

Oxiteno Uruguay S.A.

   U.S. Dollar    Uruguay

The subsidiary Oxiteno Uruguay S.A. (“Oxiteno Uruguay”) determined its functional currency as the U.S. dollar (“US$”), as its sales, purchases of goods, and financing activities are performed substantially in this currency.

According to IAS 29, Venezuela is classified as a hyperinflationary economy. As a result, the financial information of Oxiteno Andina, C.A. (“Oxiteno Andina”) were adjusted by the Venezuelan Consumer Price Index.

On February 10, 2015, the Venezuelan Central Bank issued Foreign Exchange Regulation No. 33 altering the Venezuelan foreign exchange markets and regulating the legal types recognized of exchange rates:

a) Oficial: Bolivar (“VEF”) is traded at an exchange rate of 6.30 VEF/US$. This rate is applied to importation of essential goods (medicines and food) channeled through CENCOEX—Centro Nacional de Comercio Exterior en Venezuela;

b) SICAD—Sistema Complementario de Administración de Divisas: Bolivar is traded at exchange rate of 13.50VEF/US$, last quotation of September 1, 2015. As the Foreign Exchange Regulation No. 25, only some transactions are allowed, for example, imports of goods, payment of dividends, among other operations.

c) SICAD-II—this foreign exchange market was eliminated with Foreign Exchange Regulation No. 33. The last quotation was 52.1013 VEF/US$; and

d) SIMADI—Sistema Marginal de Divisas: Bolivar is traded at variable exchange rate of approximately 199 VEF/US$ on September 30, 2015. This rate is applied to through of the bank market, retail market and securities market.

For the consolidation of the Oxiteno Andina in the Company, the amounts in Bolivar have been translated to the U.S. dollar at the exchange rate of SICAD and subsequently translated into Brazilian Reais using the official exchange rate published by the Central Bank of Brazil. In management’s judgment, the use of SICAD is the most suitable for conversion, since the exchange rate is the most likely rate for the payment of dividends and return of capital.

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 gain recognized in income for the nine-month period ended September 30, 2015 amounted to R$ 7,349 (R$ 716 gain for the nine-month period ended September 30, 2014).

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

s. 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.k, 4, 14 and 22), the determination of the allowance for doubtful accounts (Notes 2.d, 5 and 22), the determination of provisions for losses of inventories (Notes 2.e and 6), the determination of deferred income taxes amounts (Notes 2.l and 9), the determination of control in subsidiaries (Notes 2.f, 2.r, 3 and 11.a), the determination of joint control in joint venture (Notes 2.f, 11.a and 11.b), the determination of significant influence in associates (Notes 2.f and 11.c), the useful lives of property, plant, and equipment (Notes 2.g and 12), the useful lives of intangible assets, and the determination of the recoverable amount of goodwill (Notes 2.i and 13), provisions for assets retirement obligations (Notes 2.m and 18), provisions for tax, civil, and labor risks (Notes 2.n and 23 items a,b,c,d), estimates for the preparation of actuarial reports (Notes 2.o and 24.b) and the determination of fair value of subscription warrants – indemnification (Notes 3.a and 22). The actual result of the transactions and information may differ from their estimates.

t. Impairment of Assets

The Company and its subsidiaries review, at least annually, the existence of any indication that an asset may be impaired. 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, the 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 periods presented (see Note 13.i).

u. Adjustment to Present Value

Some of the Company’s subsidiaries recognized a present value adjustment to Tax on Goods and Services (“ICMS”, the Brazilian VAT) credit balances related to property, plant, and equipment (CIAP). Because recovery of these credits occurs over a 48 month period, the present value adjustment reflects, in the interim financial information, the time value of the ICMS credits to be recovered. The balance of these adjustment to present value totaled R$ 140 as of September 30, 2015 (R$ 279 as of December 31, 2014).

The Company and its subsidiaries reviewed all items classified as non-current and, when relevant, current assets and liabilities, and did not identify the need to recognize other present value adjustments.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

v. Business Combination

A business combination is accounted for under the acquisition method. The cost of the acquisition is measured by the consideration transferred and to be transferred, measured at fair value at the acquisition date. In the business combination, the assets acquired and liabilities assumed are valued 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 at fair value or 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 initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing purposes, goodwill is allocated to the Company’s business segment. When the consideration transferred and to be transferred is lower than the fair value of net assets acquired, the 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 IFRS, which does not require the presentation of DVA.

x. Cash Flow

The Company and its subsidiaries prepared its individual and consolidated cash flow statements, 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.

y. Adoption of the Pronouncements Issued by CPC and IFRS

The following standards, amendments, and interpretations to IFRS were issued by the IASB but are not yet effective and were not adopted as of September 30, 2015:

 

     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.

     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.

     2017 (*) 

 

(*) On September 11, 2015, the effective date of IFRS 15 was changed to January 1, 2018.

CPC has not yet issued pronouncements equivalent to IFRS 9 and IFRS 15, but is expected to do so before the date they become effective. The adoption of IFRS pronouncements is subject to prior approval by the CVM. The Company is assessing the potential effects of these standards.

z. Authorization for Issuance of the Interim Financial Information

These interim financial information were authorized for issue by the Board of Directors on November 4, 2015.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

3. Principles of Consolidation and Investments in Subsidiaries

The consolidated interim financial information were prepared following the basic principles of consolidation established by IFRS 10 (CPC 36 (R3)). Investments of one company in another, balances of asset and liability accounts, and revenues 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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

 

                 % interest in the share  
                 09/30/2015      12/31/2014  
                 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   

Conveniência Ipiranga Norte 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   

Companhia Ultragaz S.A.

   Brazil      Ultragaz         —           99         —           99   

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   

Isa-Sul Administração e Participações Ltda

   Brazil      Ipiranga         99         1         99         1   

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   

Barrington S.L.

   Spain      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 Overseas 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 Trading 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   

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

   Brazil      Others         —           100         —           100   

The percentages in the table above are rounded.

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

a) Business Combination – Acquisition of Extrafarma

On January 31, 2014 Extrafarma became a wholly-owned subsidiary of Ultrapar and the former shareholders of Extrafarma became long-term shareholders of Ultrapar (see Note 8.b). As a result, 7 subscription warrants – indemnification were issued that, if exercised, would lead to the issuance of 3,205,622 shares in 2020. The subscription warrants – indemnification are adjusted according to the changes in the amounts of provision for tax, civil, and labor risks and contingent liabilities related to the period previous to January 31, 2014. The subscription warrants – indemnification fair value are measured based on the share price of Ultrapar (UGPA3) and are 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. On the reporting date, the subscription warrants – indemnification were represented by 2,187,512 shares and totaled R$ 133,402 (as of December 31, 2014 they were represented by 2,002,773 shares and totaled R$ 92,072).

Additionally, the Company had a receivable from former shareholders in the amount of R$ 12,222 as of December 31, 2014 due to the adjustment of working capital and net debt, recognized in “Other receivables” in current assets. On June 22, 2015 the agreement on the final adjustment of working capital and net debt was formalized between the parties in the amount of R$ 26,006. The Company recognized the amount of R$ 13,784 in the second quarter of 2015 in “other operating income” (see Note 27) as a result of the difference between the final working capital and net debt adjustment and the amount recognized on December 31, 2014. The amount of R$ 26,006 was received by the Company in the third quarter of 2015.

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 Interbank Certificate of Deposit (“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 (iii) in currency and interest rate hedging instruments.

The financial assets were classified in Note 22, according to their characteristics and intention of the Company and its subsidiaries.

The balance of cash, cash equivalents and financial investments (consolidated) amounted to R$ 4,082,421 as of September 30, 2015 (R$ 4,400,122 as of December 31, 2014) 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  
     09/30/2015      12/31/2014      09/30/2015      12/31/2014  

Cash and bank deposits

  

In local currency

     105         96         58,535         47,426   

In foreign currency

     —           —           129,905         85,870   

Financial investments considered cash equivalents

           

In local currency

           

Fixed-income securities

     62,620         119,131         2,013,782         2,690,638   

In foreign currency

           

Fixed-income securities

     —           —           15,699         3,435   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     62,725         119,227         2,217,921         2,827,369   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the 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  
     09/30/2015      12/31/2014      09/30/2015      12/31/2014  

Financial investments

           

In local currency

           

Fixed-income securities and funds

     10,261         67,864         643,357         902,683   

In foreign currency

           

Fixed-income securities and funds

     —           —           842,255         505,574   

Currency and interest rate hedging instruments (a)

     —           —           378,888         164,496   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total financial investments

     10,261         67,864         1,864,500         1,572,753   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     10,261         67,864         1,464,313         1,441,813   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current

     —           —           400,187         130,940   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) Accumulated gains, net of income tax (see Note 22).

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

5. Trade Receivables (Consolidated)

The composition of trade receivables is as follows:

 

     09/30/2015     12/31/2014  

Domestic customers

     2,840,911        2,424,756   

Reseller financing—Ipiranga

     318,715        310,062   

Foreign customers

     268,523        191,533   

(-) Allowance for doubtful accounts

     (199,761     (178,444
  

 

 

   

 

 

 

Total

     3,228,388        2,747,907   
  

 

 

   

 

 

 

Current

     3,086,085        2,604,101   
  

 

 

   

 

 

 

Non-current

     142,303        143,806   
  

 

 

   

 

 

 

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 allowance for 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
 
                    

09/30/2015

     3,428,149         3,005,412         95,893         25,291         14,810         29,747         256,996   

12/31/2014

     2,926,351         2,515,782         128,778         25,479         12,457         23,542         220,313   

Movements in the allowance for doubtful accounts are as follows:

 

Balance as of December 31, 2014

     178,444   

Additions

     30,564   

Write-offs

     (9,247
  

 

 

 

Balance as of September 30, 2015

     199,761   
  

 

 

 

For further information about allowance for doubtful accounts see Note 22 – Customer credit risk.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

6. Inventories (Consolidated)

The composition of inventories is as follows:

 

     09/30/2015      12/31/2014  
     Cost      Provision
for losses
    Net
balance
     Cost      Provision
for losses
    Net
balance
 

Finished goods

     396,284         (6,521     389,763         345,255         (7,849     337,406   

Work in process

     3,814         —          3,814         986         —          986   

Raw materials

     282,554         (676     281,878         193,726         (2,661     191,065   

Liquefied petroleum gas (LPG)

     40,667         (5,761     34,906         41,616         (5,761     35,855   

Fuels, lubricants, and greases

     1,327,175         (853     1,326,322         907,466         (619     906,847   

Consumable materials and other items for resale

     89,721         (2,578     87,143         81,662         (3,594     78,068   

Pharmaceutical, hygiene, and beauty products

     261,980         (28,171     233,809         272,864         (25,841     247,023   

Advances to suppliers

     112,430         —          112,430         103,124         —          103,124   

Properties for resale

     25,066         —          25,066         24,628         —          24,628   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     2,539,691         (44,560     2,495,131         1,971,327         (46,325     1,925,002   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Movements in the provision for losses are as follows:

 

Balance as of December 31, 2014

     46,325   

Reversals to realizable value adjustment

     (1,344

Reversals of obsolescence and other losses

     (421
  

 

 

 

Balance as of September 30, 2015

     44,560   
  

 

 

 

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

 

     09/30/2015      12/31/2014  

Realizable value adjustment

     10,790         12,134   

Obsolescence and other losses

     33,770         34,191   
  

 

 

    

 

 

 

Total

     44,560         46,325   
  

 

 

    

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

7. Recoverable Taxes

Recoverable taxes are substantially represented by credits of ICMS, Taxes for Social Security Financing (COFINS), Employee’s Profit Participation Program (PIS), IRPJ, and CSLL.

 

     Parent      Consolidated  
     09/30/2015      12/31/2014      09/30/2015      12/31/2014  

IRPJ and CSLL

     50,080         53,835         247,661         182,602   

ICMS

     —           —           326,696         296,747   

Provision for ICMS losses (1)

     —           —           (66,372      (67,657

PIS and COFINS

     —           —           242,156         207,694   

Value-Added Tax (IVA) of subsidiaries Oxiteno Mexico, Oxiteno Andina and Oxiteno Uruguay

     —           —           48,222         40,035   

Excise tax—IPI

     —           —           4,226         4,157   

Other

     —           —           6,156         5,288   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     50,080         53,835         808,745         668,866   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     41,896         30,713         759,084         593,462   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-current

     8,184         23,122         49,661         75,404   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  The provision for ICMS losses relates to tax credits that the subsidiaries believe to be unable to offset in the future and its movements are as follows:

 

Balance as of December 31, 2014

     67,657   

Additions, net

     1,585   

Write-offs

     (2,870
  

 

 

 

Balance as of September 30, 2015

     66,372   
  

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

8. Related Parties

a. Related Parties

 

    Parent Company

 

     Assets
Debentures
(1)
     Liabilities
Loans
     Financial
income
 

Ipiranga Produtos de Petróleo S.A.

     750,000         1,287         108,061   

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

     —           94         —     
  

 

 

    

 

 

    

 

 

 

Total as of September 30, 2015

     750,000         1,381         108,061   
  

 

 

    

 

 

    

 

 

 

 

     Assets  
     Trade
receivables
(2)
     Debentures
(1)
     Total      Financial
income
 

Companhia Ultragaz S.A.

     14,685         —           14,685         —     

Terminal Químico de Aratu S.A.—Tequimar

     2,026         —           2,026         —     

Oxiteno S.A. Indústria e Comércio

     2,532         —           2,532         —     

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

     3,545         —           3,545         —     

Ipiranga Produtos de Petróleo S.A.

     7,090         776,578         783,668         88,537   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total as of December 31, 2014

     29,878         776,578         806,456      
  

 

 

    

 

 

    

 

 

    

Total as of September 30, 2014

              88,537   
           

 

 

 

 

(1) In March 2009, Ipiranga made its first private offering in a single series of 108 debentures at face value of R$ 10,000,000.00 (ten million Brazilian Reais), nonconvertible into shares, unsecured debentures. The Company subscribed 75 debentures with maturity on March 31, 2016 and semiannual remuneration linked to CDI.
(2) Refers to the Deferred Stock Plan (see Note 8.c).

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

    Consolidated

Balances and transactions between the Company and its subsidiaries have been eliminated on 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.

     —           —           —           1,636   

Química da Bahia Indústria e Comércio S.A.

     —           3,046         —           —     

ConectCar Soluções de Mobilidade Eletrônica S.A.

     —           —           5,238         1,681   

Refinaria de Petróleo Riograndense S.A.

     —           —           —           1,744   

Others

     490         1,326         —           2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total as of September 30, 2015

     490         4,372         5,238         5,063   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

Oxicap Indústria de Gases Ltda.

     10,368 (2)      —           —           1,061   

Química da Bahia Indústria e Comércio S.A.

     —          3,046         —           —     

ConectCar Soluções de Mobilidade Eletrônica S.A.

     —          —           10,499         1,494   

Others

     490        1,326         —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 

Total as of December 31, 2014

     10,858        4,372         10,499         2,555   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

(1)  Included in “trade receivables” and “trade payables,” respectively.
(2) On January 28, 2015, the subsidiary Oxiteno S.A. Indústria e Comércio (“Oxiteno S.A.”) capitalized this Advance for Future Capital Increase – “AFAC” (see Note 11.c).

 

     Commercial transactions  
     Sales and
services
     Purchases  

Oxicap Indústria de Gases Ltda.

     5         12,484   

Refinaria de Petróleo Riograndense S.A.

     —           466,963   

ConectCar Soluções de Mobilidade Eletrônica S.A.

     7,006         —     
  

 

 

    

 

 

 

Total as of September 30, 2015

     7,011         479,447   
  

 

 

    

 

 

 

 

     Commercial transactions  
     Sales and
services
     Purchases  

Oxicap Indústria de Gases Ltda.

     5         9,728   

Refinaria de Petróleo Riograndense S.A.

     —           18,093   

ConectCar Soluções de Mobilidade Eletrônica S.A.

     6,077         —     
  

 

 

    

 

 

 

Total as of September 30, 2014

     6,082         27,821   
  

 

 

    

 

 

 

 

32


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the 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 the adhesion to Ipiranga’s marketing plan and 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 14.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 is entitled to additional long term variable compensation relating to the Company’s shares’ performance between 2013 and 2018, reflecting the target of more than doubling the share value of the Company in 5 years. Further details about the Deferred Stock Plan are contained in Note 8.c) and about post-employment benefits in Note 24.b).

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

 

     09/30/2015      09/30/2014  

Short-term compensation

     28,403         21,352   

Stock compensation

     4,704         4,061   

Post-employment benefits

     2,144         1,285   

Long-term compensation

     1,701         1,232   
  

 

 

    

 

 

 

Total

     36,952         27,930   
  

 

 

    

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

c. Deferred Stock Plan

On April 27, 2001, the General Shareholders’ Meeting approved a benefit plan to members of management and employees in executive positions in the Company and its subsidiaries. On November 26, 2003, the Extraordinary General Shareholders’ Meeting approved certain amendments to the original plan of 2001 (the “Deferred Stock Plan”). In the Deferred Stock Plan, certain members of management of the Company and its subsidiaries have the voting and economic rights of shares and the ownership of these shares is retained by the subsidiaries of the Company. The Deferred Stock Plan provides for the transfer of the ownership of the shares to those eligible members of management after five to ten years from the initial concession of the rights subject to uninterrupted employment of the participant during the period. The total number of shares to be used for the Deferred Stock Plan is subject to the availability in treasury of such shares. It is incumbent on Ultrapar’s executive officers to select the members of management eligible for the plan and propose the number of shares in each case for approval by the Board of Directors. The fair value of the awards were determined on the grant date based on the market value of the shares on the BM&FBOVESPA S.A. – Bolsa de Valores, Mercadorias e Futuros (“BM&FBOVESPA”), the Brazilian Securities, Commodities and Futures Exchange and the amounts are amortized between five and ten years from the grant date.

The table below summarizes shares provided 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
 

December 9, 2014

     590,000         2019 to 2021         50.64         41,210         (5,833     35,377   

March 5, 2014

     83,400         2019 to 2021         52.15         5,999         (1,613     4,386   

February 3, 2014

     150,000         2018 to 2020         55.36         11,454         (3,924     7,530   

November 7, 2012

     320,000         2017 to 2019         42.90         19,098         (9,543     9,555   

December 14, 2011

     120,000         2016 to 2018         31.85         5,272         (3,432     1,840   

November 10, 2010

     260,000         2015 to 2017         26.78         9,602         (8,018     1,584   

December 16, 2009

     166,656         2014 to 2016         20.75         7,155         (6,691     464   

October 8, 2008

     192,008         2013 to 2015         9.99         8,090         (8,090     —     

November 9, 2006

     207,200         2016         11.62         3,322         (2,962     360   

December 14, 2005

     93,600         2015         8.21         1,060         (1,042     18   
  

 

 

          

 

 

    

 

 

   

 

 

 
     2,182,864               112,262         (51,148     61,114   
  

 

 

          

 

 

    

 

 

   

 

 

 

For the nine-month period ended September 30, 2015, the amortization in the amount of R$ 12,761 (R$ 8,855 for the nine-month period ended September 30, 2014) was recognized as a general and administrative expense.

The table below summarizes the changes of number of shares granted:

 

Balance as of December 31, 2014

     2,212,864   

Cancellation of shares due to termination of executive employment

     (30,000
  

 

 

 

Balance as of September 30, 2015

     2,182,864   
  

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the 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 tax credits and debits, 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. Credits are sustained by the continued profitability of their operations. Deferred IRPJ and CSLL are recognized under the following main categories:

 

     Parent      Consolidated  
     09/30/2015      12/31/2014      09/30/2015      12/31/2014  

Assets—Deferred income and social contribution taxes on:

     

Provision for impairment of assets

     —           —           53,707         55,527   

Provisions for tax, civil, and labor risks

     20         15         138,135         128,365   

Provision for post-employment benefit

     —           —           44,123         40,729   

Provision for differences between cash and accrual basis

     —           —           1,257         457   

Goodwill

     —           —           37,684         48,162   

Business combination – fiscal basis vs. accounting basis of goodwill

     —           —           71,825         68,458   

Provision for asset retirement obligation

     —           —           21,956         21,116   

Other provisions

     15,722         1,464         128,485         59,802   

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

     —           —           59,564         39,957   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     15,742         1,479         556,736         462,573   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities—Deferred income and social contribution taxes on:

           

Revaluation of property, plant, and equipment

     —           —           2,920         3,009   

Lease

     —           —           4,556         4,948   

Provision for differences between cash and accrual basis

     —           —           209,630         77,266   

Provision for goodwill/negative goodwill

     —           —           16,408         11,183   

Business combination – fair value of assets

     —           —           47,342         49,181   

Temporary differences of foreign subsidiaries

     —           —           8,043         5,097   

Other provisions

     —           —           2,180         2,163   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     —           —           291,079         152,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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

 

     09/30/2015     09/30/2014  

Initial balance

     309,726        274,633   

Deferred IRPJ and CSLL recognized in income of the period

     (51,069     (1,163

Initial balance of Extrafarma (January 31, 2014)

     —          41,384   

Others

     7,000        (933
  

 

 

   

 

 

 

Final balance

     265,657        313,921   
  

 

 

   

 

 

 

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

 

     Parent      Consolidated  

Up to 1 year

     —           172,449   

From 1 to 2 years

     3,041         95,471   

From 2 to 3 years

     3,020         47,927   

From 3 to 5 years

     6,040         76,213   

From 5 to 7 years

     3,269         112,843   

From 7 to 10 years

     372         51,832   
  

 

 

    

 

 

 
     15,742         556,736   
  

 

 

    

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the 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  
     09/30/2015     09/30/2014     09/30/2015     09/30/2014  

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

     39,658        8,846        1,508,670        1,280,937   

Statutory tax rates — %

     34        34        34        34   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes at the statutory tax rates

     (13,484     (3,008     (512,948     (435,519
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to the statutory income and social contribution taxes:

        

Nondeductible expenses (i)

     (127     (340     (48,581     (23,346

Nontaxable revenues (ii)

     —          —          2,803        1,948   

Adjustment to estimated income (iii)

     —          —          9,798        10,733   

Other adjustments

     19        21        2,712        8,089   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes before tax incentives

     (13,592     (3,327     (546,216     (438,095
  

 

 

   

 

 

   

 

 

   

 

 

 

Tax incentives — SUDENE

     —          —          59,002        47,441   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes in the income statement

     (13,592     (3,327     (487,214     (390,654
  

 

 

   

 

 

   

 

 

   

 

 

 

Current

     (27,856     (2,476     (495,147     (436,932

Deferred

     14,264        (851     (51,069     (1,163

Tax incentives — SUDENE

     —          —          59,002        47,441   

Effective IRPJ and CSLL rates — %

     34.3        37.6        32.3        30.5   

 

 

(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;
(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 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 Superintendency for the Development of the Northeast (“SUDENE”):

 

Subsidiary

  

Units

   Incentive — %    Expiration

Oxiteno Nordeste S.A. Indústria e Comércio

   Camaçari plant    75    2016

Bahiana Distribuidora de Gás Ltda.

   Caucaia base (1)    75    2012
   Mataripe base (1)    75    2013
   Aracaju base    75    2017
   Suape base    75    2018

Terminal Químico de Aratu S.A. – Tequimar

   Suape terminal    75    2020
   Aratu terminal    75    2022

Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.

   Camaçari plant    75    2021

On December 30, 2014, Terminal Químico de Aratu S.A. — Tequimar (“Tequimar”) filed a request at SUDENE requiring the income tax reduction incentive, due to the implementation of the Itaqui Terminal in São Luis — Maranhão.

(1) In the second semester of 2015, the subsidiary will request the extension of the recognition of tax incentive for another 10 years, due to the production increase in the Caucaia base.

(2) The subsidiary requested the extension of the recognition of tax incentive for another 10 years, due to modernization in the Mataripe base.

d. Income and Social Contribution Taxes Carryforwards

As of September 30, 2015, the Company and certain subsidiaries have loss carryforwards (income tax) amounting to R$ 191,614 (R$ 126,624 as of December 31, 2014) and negative basis of CSLL of R$ 129,560 (R$ 92,232 as of December 31, 2014), whose compensations are limited to 30% of taxable income, 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$ 59,564 as of September 30, 2015 (R$ 39,957 as of December 31, 2014).

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

10. Prepaid Expenses (Consolidated)

 

     09/30/2015      12/31/2014  

Rents

     112,173         99,285   

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

     49,308         61,183   

Advertising and publicity

     14,668         6,103   

Insurance premiums

     14,444         20,295   

Software maintenance

     10,892         6,790   

Purchases of meal and transportation tickets

     1,543         1,559   

Taxes and other prepaid expenses

     4,709         3,281   
  

 

 

    

 

 

 
     207,737         198,496   
  

 

 

    

 

 

 

Current

     75,283         67,268   
  

 

 

    

 

 

 

Non-current

     132,454         131,228   
  

 

 

    

 

 

 

 

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Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

11. 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:

 

     09/30/2015  
     Subsidiaries      Joint-venture  
     Ultracargo -
Operações
Logísticas e
Participações

Ltda.
    Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
     Isa-Sul
Administração
e Participações
Ltda.
     Refinaria
de Petróleo
Riograndense
S.A.
 

Number of shares or units held

     11,839,764        35,102,127        224,467,228,244         995,696,017         5,078,888   

Assets

     1,088,579        3,717,780        11,506,644         1,039,265         377,087   

Liabilities

     4,131        670,583        8,971,551         48,895         256,855   

Shareholders’ equity

     1,084,448        3,047,256(*     2,535,093         990,370         120,232   

Net revenue from sales and services

     —          890,755        47,437,973         13,490         726,730   

Net income (loss) for the period

     (445     335,500(*     632,909         6,866         25,432   

% of capital held

     100        100        100         99         33   

 

     12/31/2014  
     Subsidiaries      Joint-venture  
     Ultracargo -
Operações
Logísticas e
Participações

Ltda.
     Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
     Isa-Sul
Administração
e Participações
Ltda.
     Refinaria
de Petróleo
Riograndense
S.A.
 

Number of shares or units held

     11,839,764         35,102,127        224,467,228,244         995,696,017         5,078,888   

Assets

     1,168,896         3,546,989        10,668,027         995,028         263,527   

Liabilities

     84,003         526,423        8,654,065         11,524         191,018   

Shareholders’ equity

     1,084,893         3,020,625(*     2,013,962         983,504         72,509   

% of capital held

     100         100        100         99         33   

 

     09/30/2014  
     Subsidiaries     Joint-venture  
     Ultracargo -
Operações
Logísticas e
Participações

Ltda.
     Oxiteno S.A.
Indústria e
Comércio
    Ipiranga
Produtos de
Petróleo S.A.
     Imifarma
Produtos
Farmacêuticos
e Cosméticos
S.A.
    Refinaria
de Petróleo
Riograndense
S.A.
 

Number of shares or units held

     11,839,764         35,102,127        224,467,228,244         152,240,000        5,078,888   

Net revenue from sales and services

     —           752,507        43,300,101         782,841(**     145,254   

Net income (loss) for the period

     77,656         184,939(*     600,468         4,381(**     (2,391

% of capital held

     100         100        100         100        33   

 

(*) adjusted for intercompany unrealized profits.
(**) information of the period from February 1 to September 30, 2014

The percentages in the table above are rounded.

Operating financial information of the subsidiaries is detailed in Note 21.

 

40


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Ultrapar Participações S.A. and Subsidiaries

Notes to the 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.
    Imifarma
Produtos
Farmacêuticos
e Comésticos
S.A.
    Total     Refinaria de
Petróleo
Riograndense
S.A.
    Total  

Balance as of December 31, 2013

     1,064,959         2,892,330        2,154,904        -       6,112,193        22,751        6,134,944   

Share of profit (loss) of subsidiaries and joint ventures

     77,656         184,939        600,468        4,381        867,444        (794     866,650   

Dividends and interest on equity (gross)

     —           —          (771,416     —          (771,416     —          (771,416

Capital increase in cash

     —           —          —          236,100        236,100        —          236,100   

Acquisition of shares

     —           —          —          (46,440     (46,440     —          (46,440

Goodwill

     —           —          —          795,729        795,729        —          795,729   

Tax liabilities on equity- method revaluation reserve

     —           —          (31     —         (31     —          (31

Valuation adjustment of subsidiaries

     —           2        8        —         10        —          10   

Translation adjustments of foreign-based subsidiaries

     —           (18,351     —          —         (18,351     —          (18,351
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of September 30, 2014

     1,142,615         3,058,920        1,983,933        989,770        7,175,238        21,957        7,197,195   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

     Investments in subsidiaries     Joint-venture  
     Ultracargo—Operações
Logísticas e
Participações Ltda.
    Oxiteno S.A.—
Indústria e
Comércio
    Ipiranga
Produtos
de Petróleo
S.A.
    Isa-Sul
Administração
e
Participações
Ltda.
     Total     Refinaria de
Petróleo
Riograndense
S.A.
     Total  

Balance as of December 31, 2014

     1,084,893        3,020,625        2,013,962        980,044         7,099,524        24,076         7,123,600   

Share of profit (loss) of subsidiaries and joint ventures

     (445     335,500        632,909        6,842         974,806        8,444         983,250   

Dividends and interest on equity (gross)

     —          (431,383     (142,303     —           (573,686     —           (573,686

Tax liabilities on equity- method revaluation reserve

     —          —          (110     —           (110     —           (110

Valuation adjustment of subsidiaries and joint-venture

     —          (9     30,635        —           30,626        7,402         38,028   

Translation adjustments of foreign-based subsidiaries

     —          122,523        —          —           122,523        —           122,523   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

Balance as of September 30, 2015

     1,084,448        3,047,256        2,535,093        986,886         7,653,683        39,922         7,693,605   
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

 

 

41


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Ultrapar Participações S.A. and Subsidiaries

Notes to the 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 Ipiranga Produtos de Petróleo S.A (“IPP”) holds an interest in ConectCar, which is primarily engaged in electronic payment of tolls, parking and fuel. ConectCar, formed in November 2012 currently operates in the States of São Paulo, Rio Grande do Sul, Santa Catarina, Paraná, Minas Gerais, Rio de Janeiro, Espírito Santo, Pernambuco, Bahia, Alagoas, Mato Grosso, Mato Grosso do Sul, Goiás and Distrito Federal.

These investments are accounted for under the equity method of accounting based on their interim financial information as of September 30, 2015.

Balances and changes in joint ventures are as follows:

 

     Movements in investments  
     Uniăo
Vopak
     RPR      ConectCar      Total  

Balance as of December 31, 2014

     4,960         24,076         25,472         54,508   

Capital increase

     —           —           31,000         31,000   

Valuation adjustments

     —           7,402         —           7,402   

Share of profit (loss) of joint ventures

     654         8,444         (17,297      (8,199

Dividends received

     (750      —           —           (750
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of September 30, 2015

     4,864         39,922         39,175         83,961   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Movements in investments  
     Uniăo
Vopak
     RPR      ConectCar      Total  

Balance as of December 31, 2013

     5,916         22,751         15,719         44,386   

Capital increase

     —           —           19,000         19,000   

Share of profit (loss) of joint ventures

     478         (794      (11,926      (12,242

Dividends received

     (1,136      —           —           (1,136
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of September 30, 2014

     5,258         21,957         22,793         50,008   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

42


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Ultrapar Participações S.A. and Subsidiaries

Notes to the 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:

 

     09/30/2015  
     Uniăo
Vopak
    RPR     ConectCar  

Current assets

     3,988        270,983        41,241   

Non-current assets

     6,870        106,105        76,805   

Current liabilities

     1,130        181,169        39,696   

Non-current liabilities

     —          75,687        —     

Shareholders’ equity

     9,728        120,232        78,350   

Net revenue from sales and services

     9,184        726,730        12,134   

Costs and operating expenses

     (7,484     (683,251     (65,158

Net financial income and income and social contribution taxes

     (392     (18,047     (18,429

Net income (loss)

     1,308        25,432        (34,595

Number of shares or units held

     29,995        5,078,888        82,500,000   

% of capital held

     50        33        50   

The percentages in the table above are rounded.

 

     12/31/2014  
     Uniăo
Vopak
     RPR      ConectCar  

Current assets

     2,762         160,789         38,852   

Non-current assets

     8,066         102,738         53,236   

Current liabilities

     908         101,083         41,143   

Non-current liabilities

     —           89,935         —     

Shareholders’ equity

     9,920         72,509         50,945   

Number of shares or units held

     29,995         5,078,888         57,500,000   

% of capital held

     50         33         50   

 

     09/30/2014  
     Uniăo
Vopak
    RPR     ConectCar  

Net revenue from sales and services

     8,942        145,254        5,493   

Costs and operating expenses

     (7,618     (145,901     (41,593

Net financial income and income and social contribution taxes

     (368     (1,744     12,248   

Net income (loss)

     956        (2,391     (23,852

Number of shares or units held

     29,995        5,078,888        50,000,000   

% of capital held

     50        33        50   

The percentages in the table above are rounded.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the 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. 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 Companhia Ultragaz S.A. (“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 interim financial information as of August 31, 2015, while the other associates are valued based on the interim financial information as of September 30, 2015.

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.
    Total  

Balance as of December 31, 2014

     6,212        3,090        3,676         165        13,143   

Capital increase

     —          10,368 (1)      —           —          10,368   

Dividends received

     (1,923     (3,454     —           —          (5,377

Share of profit (loss) of associates

     1,255        1,746        4         (38     2,967   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of September 30, 2015

     5,544        11,750        3,680         127        21,101   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

(1) As mentioned in Note 8.a) – Consolidated, in the 1st quarter 2015, Oxiteno realized a capital increase in Oxicap. Thus the interest in the associate has been changed from 25% to 15% approximately.

 

     Movements in investments  
     Transportadora
Sulbrasileira de
Gás S.A.
    Oxicap
Indústria
de Gases
Ltda.
     Química
da Bahia

Indústria e
Comércio
S.A.
     Total  

Balance as of December 31, 2013

     5,962        2,144         3,635         11,741   

Share of profit (loss) of associates

     809        570         43         1,422   

Dividends received

     (725     —           —           (725
  

 

 

   

 

 

    

 

 

    

 

 

 

Balance as of September 30, 2014

     6,046        2,714         3,678         12,438   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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Notes to the 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:

 

     09/30/2015  
     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

     4,147        42,505        77        810        660   

Non-current assets

     19,074        71,969        10,392        1,682        2,830   

Current liabilities

     715        9,494        —          404        103   

Non-current liabilities

     331        4,199        3,109        1,708        3,004   

Shareholders’ equity

     22,175        100,781        7,360        380        383   

Net revenue from sales and services

     8,670        30,869        —          —          —     

Costs, operating expenses, and income

     (3,547     (4,922     (30     (121     538   

Net financial income and income and social contribution taxes

     (2     (8,948     38        8        7   

Net income (loss) for the period

     5,121        16,999        8        (113     545   

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.

 

     12/31/2014  
     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

     5,832         12,434         103         923         231   

Non-current assets

     19,978         77,199         10,358         1,682         2,830   

Current liabilities

     632         2,771         —           403         80   

Non-current liabilities

     332         74,502         3,109         1,708         3,144   

Shareholders’ equity

     24,846         12,360         7,352         494         (163

Number of shares or units held

     20,124,996         156         1,493,120         3,000         1,384,308   

% of capital held

     25         25         50         33         33   

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     09/30/2014  
     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

     6,745        25,150        —          —           —     

Costs, operating expenses, and income

     (3,422     (21,726     (30     388         379   

Net financial income and income and social contribution taxes

     (86     (1,146     116        965         (6

Net income for the period

     3,237        2,278        86        1,353         373   

Number of shares or units held

     20,124,996        156        1,493,120        3,000         1,384,308   

% of capital held

     25        25        50        33         33   

The percentages in the table above are rounded.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

12. Property, Plant, and Equipment (Consolidated)

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

 

     Weighted
average
useful
life
(years)
    

Balance

on 12/31/2014

    Additions      Depreciation     Transfer     Write-
offs and
disposals
    Effect of
foreign
currency
exchange
rate
variation
   

Balance

on 09/30/2015

 

Cost:

                  

Land

     —           476,107        9,657         —          3,061        (4,800     13,492        497,517   

Buildings

     30         1,275,728        4,740         —          61,084        (3,402     74,505        1,412,655   

Leasehold improvements

     10         631,342        12,489         —          40,861        (2,882     6        681,816   

Machinery and equipment

     13         3,909,475        81,145         —          36,139        (2,362     407,615        4,432,012   

Automotive fuel/lubricant distribution equipment and facilities

     14         2,096,563        66,591         —          39,763        (14,212     —          2,188,705   

LPG tanks and bottles

     12         494,691        73,660         —          2,617        (27,105     —          543,863   

Vehicles

     7         244,467        17,465         —          6,758        (11,340     3,405        260,755   

Furniture and utensils

     9         156,115        9,709         —          3,839        (349     14,223        183,537   

Construction in progress

     —           372,974        211,743         —          (180,628     (2,205     44,427        446,311   

Advances to suppliers

     —           19,527        4,740         —          (14,719     —          464        10,012   

Imports in progress

     —           59        379         —          (367     —          —          71   

IT equipment

     5         239,930        14,148         —          873        (3,971     1,719        252,699   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        9,916,978        506,466         —          (719     (72,628     559,856        10,909,953   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation:

                  

Buildings

        (565,308     —           (30,112     —          1,563        (45,664     (639,521

Leasehold improvements

        (313,647     —           (35,809     —          2,073        (6     (347,389

Machinery and equipment

        (2,158,390     —           (174,380     (359     1,332        (359,168     (2,690,965

Automotive fuel/lubricant distribution equipment and facilities

        (1,164,074     —           (86,116     —          6,965        —          (1,243,225

LPG tanks and bottles

        (231,001     —           (25,491     —          10,926        —          (245,566

Vehicles

        (90,004     —           (11,150     362        7,119        (2,840     (96,513

Furniture and utensils

        (105,483     —           (7,436     —          249        (12,330     (125,000

IT equipment

        (189,859     —           (12,430     (3     2,843        (1,216     (200,665
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (4,817,766     —           (382,924     —          33,070        (421,224     (5,588,844
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for losses:

                  

Land

        (197     —           —          —          —          —          (197

Leasehold improvements

        (462     —           —          —          —          (209     (671

Machinery and equipment

        (5,895     —           —          —          413        (708     (6,190

IT equipment

        (683     —           —          —          680        —          (3

Furniture and utensils

        (4     —           —          —          1        —          (3
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (7,241     —           —          —          1,094        (917     (7,064
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net amount

        5,091,971        506,466         (382,924     (719     (38,464     137,715        5,314,045   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

Advances to suppliers of property, plant, and equipment relate basically to manufacturing of equipment for expansion of plants, terminals and bases, modernization of service stations, and acquisition of real estate.

 

47


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

13. Intangible Assets (Consolidated)

Balances and changes in intangible assets are as follows:

 

     Weighted
average
useful life
(years)
     Balance on
12/31/2014
    Additions      Amortization     Transfer     Write-
offs and
disposals
    Effect of foreign
currency
exchange rate
variation
    Balance on
09/30/2015
 

Cost:

                  

Goodwill (i)

     —           1,456,179        —           —          —          —          —          1,456,179   

Software (ii)

     5         451,936        61,834         —          243        (3     5,485        519,495   

Technology (iii)

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

Commercial property rights (iv)

     10         31,881        2,144         —          —          —          —          34,025   

Distribution rights (v)

     5         2,762,985        358,427         —          17        —          —          3,121,429   

Brands (vi)

     —           105,458           —          2        —          16,327        121,787   

Others (vii)

     4         38,606        149         —          (95     —          2,252        40,912   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   
        4,879,662        422,554         —          167        (3     24,064        5,326,444   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization:

                

Software

        (303,780     —           (32,702     —          3        (2,885     (339,364

Technology

        (29,471     —           (1,339     —          —          —          (30,810

Commercial property rights

        (14,545     —           (1,974     —          —          —          (16,519

Distribution rights

        (1,366,128     —           (317,334     (1,147     —          —          (1,684,609

Others

        (7,625     —           (5,865     96        —          (21     (13,415
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
        (1,721,549     —           (359,214     (1,051     3        (2,906     (2,084,717
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net amount

        3,158,113        422,554         (359,214     (884     —          21,158        3,241,727   
     

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

i) Goodwill from acquisition of companies was amortized until December 31, 2008, when its amortization ceased. The net remaining balance is tested annually for impairment.

The Company has the following balances of goodwill:

 

     Segment      09/30/2015      12/31/2014  

Goodwill on the acquisition of:

        

Extrafarma

     Extrafarma         661,553         661,553   

Ipiranga

     Ipiranga         276,724         276,724   

Uniăo Terminais

     Ultracargo         211,089         211,089   

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   

Others

        2,278         2,278   
     

 

 

    

 

 

 
        1,456,179         1,456,179   
     

 

 

    

 

 

 

On December 31, 2014, 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, 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

The evaluation of the value in use is calculated for a period of five years, after which we calculate the perpetuity, considering the possibility of carrying the business on indefinitely.

On December 31, 2014, the discount and real growth rates used to extrapolate the projections ranged from 9.3% to 26.4% and 0% to 3.8% p.a., respectively, depending on the CGU analyzed.

The Company’s goodwill impairment tests did not result in the recognition of losses for the year ended December 31, 2014.

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 recorded in income.

v) Distribution rights refer mainly to bonus disbursements as provided in Ipiranga’s agreements with resellers and large customers. Bonus disbursements are recognized when paid and recognized as an expense in the income statement over the term of the agreement (typically 5 years), which is reviewed as per the changes occurred in the agreements.

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

vii) Other intangibles refers mainly to the loyalty program Club Extra.

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

 

     09/30/2015      09/30/2014  

Inventories and cost of products and services sold

     8,214         6,427   

Selling and marketing

     319,468         266,565   

General and administrative

     31,532         26,996   
  

 

 

    

 

 

 
     359,214         299,988   
  

 

 

    

 

 

 

 

49


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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

14 Loans, Debentures, and Finance Leases (Consolidated)

a. Composition

 

Description

   09/30/2015      12/31/2014      Index/Currency      Weighted average
financial charges
09/30/2015 –

% p.a.
     Maturity  

Foreign currency – denominated loans:

              

Foreign loan (c.1) (*)

     1,061,844         603,002         US$ + LIBOR (i)         +0.6         2017 to 2018   

Notes in the foreign market (b)

     1,012,738         664,078         US$         +7.3         2015   

Foreign loan (c.1) (*)

     553,232         —           US$         +2.1         2017 to 2018   

Advances on foreign exchange contracts

     303,760         184,057         US$         +1.4         < 352 days   

Foreign loan (c.2)

     237,997         158,039         US$ + LIBOR (i)         +1.0         2017   

Financial institutions (e)

     150,996         113,873         US$         +2.8         2015 to 2017   

Financial institutions (e)

     80,482         53,254         US$ + LIBOR (i)         +2.0         2016 to 2017   

Foreign currency advances delivered

     45,074         25,409         US$         +1.1         < 121 days   

BNDES (d)

     31,625         33,160         US$         +6.0         2015 to 2020   

Financial institutions (e)

     28,323         32,343         MX$ + TIIE (ii)         +1.0         2016   
  

 

 

    

 

 

          

Subtotal

     3,506,071         1,867,215            
  

 

 

    

 

 

          

Brazilian Reais – denominated loans:

              

Banco do Brasil – floating rate (f)

     3,022,660         2,873,622         CDI         105.0         2016 to 2019   

Debentures— IPP (g.2 and g.3)

     1,463,614         1,409,540         CDI         107.9         2017 to 2018   

Debentures—5th issuance (g.4)

     803,732         —           CDI         108.3         2018   

BNDES (d)

     439,079         530,983         TJLP (iii)         +2.6         2015 to 2021   

Export Credit Note – floating rate (h)

     158,647         —           CDI         101.5         2018   

Banco do Nordeste do Brasil

     70,823         85,068         R$         +8.5(v)         2015 to 2021   

FINEP

     64,981         74,774         R$         +4.0         2015 to 2021   

BNDES (d)

     54,912         62,581         R$         +4.7         2015 to 2022   

Finance leases (i)

     45,951         45,883         IGP-M (iv)         +5.6         2015 to 2031   

Export Credit Note (h) (*)

     26,515         25,744         R$         +8.0         2016   

BNDES (d)

     19,199         —           SELIC (vi)         +2.2         2015 to 2021   

FINEP

     8,445         9,078         TJLP (iii)         -1.3         2015 to 2023   

Working capital loans Extrafarma – fixed rate (i)

     1,738         3,445         R$         +10.3         2015 to 2016   

Floating finance leases (i)

     362         475         CDI         +2.8         2015 to 2017   

FINAME

     308         484         TJLP (iii)         +5.6         2015 to 2022   

Fixed finance leases (i)

     132         686         R$         +15.4         2015 to 2017   

Banco do Brasil – fixed rate (f) (*)

     —           503,898            

Debentures—4th issuance (g.1)

     —           874,312            
  

 

 

    

 

 

          

Subtotal

     6,181,098         6,500,573            
  

 

 

    

 

 

          

Currency and interest rate hedging instruments

     53,879         7,424            
  

 

 

    

 

 

          

Total

     9,741,048         8,375,212            
  

 

 

    

 

 

          

Current

     2,169,446         3,442,364            
  

 

 

    

 

 

          

Non-current

     7,571,602         4,932,848            
  

 

 

    

 

 

          

 

(*) These transactions were designated for hedge accounting (see Note 22 – Hedge Accounting).

 

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Notes to the 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 September 30, 2015, TJLP was fixed at 6.5% p.a.

 

(iv)

  

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

 

(v)

  

Contract linked to the rate of FNE (Northeast Constitutional Financing Fund) fund whose purpose is to foster the development of the industrial sector, administered by Banco do Nordeste do Brasil. On September 30, 2015, the FNE interest rate was 10% p.a. FNE grants a discount of 15% over the interest rate for timely payments.

 

(vi)

   SELIC = base interest rate set by the Brazilian Central Bank.

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

 

     09/30/2015      12/31/2014  

From 1 to 2 years

     2,634,896         571,991   

From 2 to 3 years

     2,588,297         2,390,747   

From 3 to 4 years

     2,248,825         894,301   

From 4 to 5 years

     46,135         1,006,869   

More than 5 years

     53,449         68,940   
  

 

 

    

 

 

 
     7,571,602         4,932,848   
  

 

 

    

 

 

 

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 14.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 22).

 

b. Notes in the Foreign Market

In December 2005, the subsidiary LPG International Inc. (“LPG Inc.”) issued US$ 250 million in notes in the foreign market, maturing in December 2015, with interest rate of 7.3% p.a., paid semiannually. The notes were guaranteed by the Company and its subsidiary Oxiteno S.A.

As a result of the issuance of these notes, the Company and its subsidiaries are required to undertake certain obligations, including:

 

  Limitation on transactions with shareholders that hold 5% or more of any class of stock of the Company, except upon fair and reasonable terms no less favorable than could be obtained in a comparable transaction with a third party.

 

  Required board approval for transactions with shareholders that hold 5% or more of any class of stock of the Company, or with their subsidiaries, in an amount higher than US$ 15 million (except transactions of the Company with its subsidiaries and between its subsidiaries).

 

  Restriction on sale of all or substantially all assets of the Company and subsidiaries LPG and Oxiteno S.A.

 

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

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

 

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Notes to the 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$ 440 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 102.1% of CDI (see Note 22). 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  

Mar/17

     70.0         99.5   

Sep/17

     150.0         103.7   

Jul/18

     60.0         103.0   

Sep/18

     80.0         101.5   

Nov/18 (1)

     80.0         101.4   
  

 

 

    

 

 

 

Total / average cost

     440.0         102.1   
  

 

 

    

 

 

 

 

(1) The subsidiary IPP renegotiated foreign loans which would mature in November 2015, in the notional amount of US$ 80 million changing its maturity to November 2018.

2) The subsidiary Oxiteno Overseas Corp. (“Oxiteno Overseas”) has a foreign loan in the amount of US$ 60 million with maturity in January 2017 and interest of LIBOR + 1.0% p.a., paid semiannually. The Company, through its subsidiary Cia. Ultragaz, contracted hedging instruments with floating interest rates in dollar and exchange rate variation, changing the foreign loan charge to 94.0% of CDI (see Note 22). The foreign loan is guaranteed by the Company and its subsidiary Oxiteno S.A.

As a result of these foreign loans, some obligations mentioned in Note 14.b) must also be maintained by the Company and its subsidiaries. Additionally, 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 is in compliance 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.

 

d. BNDES

The Company and its 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 is in compliance 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

e. Financial Institutions

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

 

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).

The subsidiary IPP renegotiated loans with Banco do Brasil, which would mature in February 2015, in the notional amount of R$ 333 million, changing the maturities to July 2017 and January 2018, with floating interest rate of 106% of CDI.

The subsidiary IPP renegotiated loans with Banco do Brasil, which would mature in May 2015, in the notional amount of R$ 200 million, changing the maturities to November 2017 and April 2018, with floating interest rate of 107% of CDI.

These loans mature, as follows (including interest until September 30, 2015):

Maturity

 

Feb/16

     218,356   

May/16

     128,906   

Jan/17

     1,107,408   

Jul/17

     171,343   

Nov/17

     105,136   

Jan/18

     171,343   

Apr/18

     105,136   

May/19

     1,015,032   
  

 

 

 

Total

     3,022,660   
  

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

g. Debentures

 

1) In March 2012, the Company made its fourth issuance of debentures, in a single series of 800 simple, nonconvertible into shares, unsecured debentures, and its main characteristics are as follows:

 

Face value unit:

   R$ 1,000,000.00

Final maturity:

   March 16, 2015

Payment of the face value:

   Lump sum at final maturity

Interest:

   108.3% of CDI

Payment of interest:

   Annually

Reprice:

   Not applicable

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

 

2) In December 2012, the subsidiary IPP made its first issuance of public debentures in single series of 60,000 simple, nonconvertible into shares, unsecured, nominative and registered debentures, and its main characteristics are as follows:

 

Face value unit:

   R$ 10,000.00

Final maturity:

   November 16, 2017

Payment of the face value:

   Lump sum at final maturity

Interest:

   107.9% of CDI

Payment of interest:

   Semiannually

Reprice:

   Not applicable

 

3) In January 2014, the subsidiary IPP made its second issuance of public debentures in single series of 80,000 simple nonconvertible into shares, unsecured, nominative and registered debentures, 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

 

4) In March 2015, the Company made its fifth issuance of debentures, in a single series of 80,000 simple, nonconvertible into shares, unsecured debentures, and its 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:

   Annually

Reprice:

   Not applicable

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

The resources of the issuance were used to manage liquidity of the issuer, in order to strengthen its cash and lengthen its debt profile, providing greater financial flexibility.

 

h. Export Credit Note

The subsidiary Oxiteno Nordeste has export credit note contracts in the amounts of R$ 17.5 million and R$ 10.0 million, with maturities in March and August 2016 respectively, and fixed interest rate of 8% p.a., paid quarterly. In May 2015, the subsidiary Oxiteno Nordeste contracted an export credit note in the amount of R$ 156.8 million, with maturity in May 2018 and floating interest rate of 101.5% of CDI, paid quarterly.

For the fixed interest rate contracts, the subsidiary Oxiteno Nordeste contracted interest hedging instruments, thus converting the fixed rates for these loans into 88.8% of CDI (see Note 22). Oxiteno Nordeste designated these hedging instruments as a fair value hedge; therefore, loans and hedging instruments are both measured at fair value from inception. Changes in fair value are recognized in profit or loss.

 

i. Finance Leases

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

Subsidiary Extrafarma has finance lease contracts related to IT equipment, vehicles, furniture, machinery and equipment, with terms between 24 to 60 months.

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

 

     09/30/2015  
     LPG
bottling
facilities
     IT
equipment
     Vehicles      Furniture,
machinery and
equipment
     Total  

Equipment and intangible assets, net of depreciation and amortization

     21,098         514         78         —           21,690   

Financing (present value)

     45,951         464         30         —           46,445   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Current

     2,083         266         30         —           2,379   

Non-current

     43,868         198         —           —           44,066   

 

     12/31/2014  
     LPG
bottling
facilities
     IT
equipment
     Vehicles      Furniture,
machinery and
equipment
     Total  

Equipment and intangible assets, net of depreciation and amortization

     24,720         883         1,483         1,283         28,369   

Financing (present value)

     45,883         874         163         124         47,044   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Current

     1,950         515         145         124         2,734   

Non-current

     43,933         359         18         —           44,310   

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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

 

     09/30/2015  
     LPG
bottling

facilities
     IT
equipment
     Vehicles      Total  

Up to 1 year

     4,371         296         32         4,699   

From 1 to 2 years

     4,371         218         —           4,589   

From 2 to 3 years

     4,371         11         —           4,382   

From 3 to 4 years

     4,371         —           —           4,371   

From 4 to 5 years

     4,371         —           —           4,371   

More than 5 years

     46,258         —           —           46,258   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     68,113         525         32         68,670   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     12/31/2014  
     LPG
bottling

facilities
     IT
equipment
     Vehicles      Furniture
and
utensils
     Total  

Up to 1 year

     4,238         566         155         123         5,082   

From 1 to 2 years

     4,238         288         18         —           4,544   

From 2 to 3 years

     4,238         155         —           —           4,393   

From 3 to 4 years

     4,238         —           —           —           4,238   

From 4 to 5 years

     4,238         —           —           —           4,238   

More than 5 years

     48,024         —           —           —           48,024   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     69,214         1,009         173         123         70,519   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

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
12/31/2014
     Incurred
cost
     Amortization     Balance on
09/30/2015
 

Banco do Brasil (f)

     0.3         14,474         600         (2.546     12,528   

Foreign Loans (c)

     0.3         3,016         3,151         (704     5,463   

Debentures (g)

     0.0         2,157         958         (1,164     1,951   

Notes in the foreign market (b)

     0.2         1,309         —           (819     490   

Other

     0.7         318         207         (66     459   
     

 

 

    

 

 

    

 

 

   

 

 

 

Total

        21,274         4,916         (5,299     20,891   
     

 

 

    

 

 

    

 

 

   

 

 

 

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  

Banco do Brasil (f)

     2,764         3,331         3,763         2,670         —           —           12,528   

Foreign Loans (c)

     2,624         1,835         905         99         —           —           5,463   

Debentures (g)

     626         701         533         91         —           —           1,951   

Notes in the foreign market (b)

     490         —           —           —           —           —           490   

Other

     156         210         55         27         11         —           459   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     6,660         6,077         5,256         2,887         11         —           20,891   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

K. Guarantees

The financings are guaranteed by collateral in the amount of R$ 51,631 as of September 30, 2015 (R$ 50,570 as of December 31, 2014) and by guarantees and promissory notes in the amount of R$ 5,343,754 as of September 30, 2015 (R$ 3,779,450 as of December 31, 2014).

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$ 182,937 as of September 30, 2015 (R$ 173,644 as of December 31, 2014) and guarantees related to raw materials imported by the subsidiary Ipiranga in the amount of R$ 60,785 as of September 30, 2015.

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$ 27,568 as of September 30, 2015 (R$ 26,684 as of December 31, 2014), with maturities of less than 213 days. As of September 30, 2015, 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$ 664 as of September 30, 2015 (R$ 646 as of December 31, 2014), which is recognized as profit or loss as customers settle their obligations with the financial institutions.

Some financing agreements of the Company and its subsidiaries have cross default clauses that require them to pay the debt assumed in case of default of other debts equal to or greater than US$ 15 million. Until September 30, 2015, there was no event of default of the debts of the Company and its subsidiaries.

 

15 Trade Payables (Consolidated)

 

     09/30/2015      12/31/2014  

Domestic suppliers

     854,592         1,196,876   

Foreign suppliers

     93,829         82,626   
  

 

 

    

 

 

 
     948,421         1,279,502   
  

 

 

    

 

 

 

The Company’s subsidiaries acquire oil based fuels and LPG from Petróleo Brasileiro S.A.—Petrobras and its subsidiaries and ethylene from Braskem S.A. These suppliers control almost all of the markets for these products in Brazil. The Company’s subsidiaries depend on the ability of those suppliers to deliver products in a timely manner and at acceptable prices and terms. The loss of any major supplier or a significant reduction in product availability from these suppliers could have a significant adverse effect on the Company and its subsidiaries. The Company and its subsidiaries believe that their relationship with suppliers is satisfactory.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

16 Salaries and Related Charges (Consolidated)

 

     09/30/2015      12/31/2014  

Provisions on payroll

     194,630         128,181   

Profit sharing, bonus and premium

     140,802         108,632   

Social charges

     32,787         44,747   

Salaries and related payments

     17,635         10,904   

Benefits

     2,141         1,617   

Others

     724         498   
  

 

 

    

 

 

 
     388,719         294,579   
  

 

 

    

 

 

 

 

17 Taxes Payable (Consolidated)

 

     09/30/2015      12/31/2014  

ICMS

     119,359         93,761   

Value-Added Tax (IVA) of subsidiaries Oxiteno Mexico, Oxiteno Andina and Oxiteno Uruguay

     19,386         14,822   

PIS and COFINS

     10,310         11,922   

ISS

     6,026         6,304   

IPI

     9,542         3,858   

National Institute of Social Security (INSS)

     2,488         2,991   

Income Tax Withholding (IRRF)

     13,201         2,267   

Others

     4,630         2,910   
  

 

 

    

 

 

 
     184,942         138,835   
  

 

 

    

 

 

 

 

18 Provision for Asset Retirement Obligation – Fuel Tanks (Consolidated)

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

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

 

     09/30/2015     09/30/2014  

Initial balance

     70,802        69,661   

Additions (new tanks)

     520        512   

Expense with tanks removed

     (3,429     (3,080

Accretion expense

     5,493        3,405   
  

 

 

   

 

 

 

Final balance

     73,386        70,498   
  

 

 

   

 

 

 

Current

     5,140        4,558   

Non-current

     68,246        65,940   

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

19. Deferred Revenue (Consolidated)

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

 

     09/30/2015      12/31/2014  

‘am/pm’ and Jet Oil franchising upfront fee

     14,113         14,785   

Loyalty program “Km de Vantagens”

     10,223         10,025   

Loyalty program “Club Extra”

     7,826         6,349   
  

 

 

    

 

 

 
     32,162         31,159   
  

 

 

    

 

 

 

Current

     23,319         23,450   

Non-current

     8,843         7,709   

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 are considered part of sales revenue.

Subsidiary Extrafarma has a loyalty program called Club Extra (www.clubextra.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 one year, for prizes offered by its partners. Points received by Extrafarma’s customers may be used with the partner Multiplus Fidelidade and as recharge credit on a mobile phone are considered part of 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. Deferred revenue is recognized in profit or loss when the points are redeemed, on which occasion the costs incurred are also recognized. Deferred revenue of unredeemed points is also recognized in profit or loss when the points expire.

Franchising Upfront Fee

am/pm is the convenience stores chain of the Ipiranga service stations. Ipiranga ended September 30, 2015 with 1,761 stores (1,708 stores as of December 31, 2014). Jet Oil is Ipiranga’s lubricant-changing and automotive service specialized network. Ipiranga ended September 30, 2015 with 1,374 stores (1,337 stores as of December 31, 2014). 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 Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

20 Shareholders’ Equity

 

a. Share Capital

The Company is a publicly traded company listed on BM&FBOVESPA 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”. As of September 30, 2015, 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 September 30, 2015, on BM&FBOVESPA was R$ 66.80.

As of September 30, 2015, 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 September 30, 2015, there were 30,188,597 common shares outstanding abroad in the form of ADRs (31,714,297 shares as of December 31, 2014).

 

b. 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.

On December 10, 2014, the Board of Directors approved Ultrapar’s Shares Repurchase Program (“Share Repurchase Program 2014/15”), with maximum period for the acquisition of 365 days, from December 12, 2014 and maximum acquisition number of 6,500,000 common shares. Until September 30, 2015, the Company acquired 4,717,200 common shares at an average cost of R$ 61.78 per share.

As of September 30, 2015, 11,895,356 common shares (7,148,156 as of December 31, 2014) were held in the Company’s treasury, acquired at an average cost of R$ 33.20 per share (R$ 14.42 as of December 31, 2014).

 

c. Capital Reserve

The capital reserve reflects the gain on the transfer of shares at market price to be held in treasury by the Company’s subsidiaries, at an average price of R$ 26.09 per share. Such shares were used in the Deferred Stock Plan granted to executives of these subsidiaries, as mentioned in Note 8.c).

 

d. 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

e. 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 amounts of retention of profits and investments reserve are free of distribution restrictions and totaled R$ 2,772,527 as of September 30, 2015 and December 31, 2014.

 

f. Other Comprehensive Income

Valuation Adjustments

The differences between the fair value and amortized cost of financial investments classified as available for sale are recognized directly in equity as valuation adjustments. The gains and losses recognized in the shareholders’ equity are reclassified to profit or loss in case the financial instruments are prepaid.

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.

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 and (ii) an independent administration, 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.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

Balance and changes in other comprehensive income of the Company are as follows:

 

     Valuation adjustments  
     Fair value of financial
investment available
for sale
     Actuarial gains of
post-employment
benefits
     Total      Cumulative
translation
adjustment
 

Balance as of December 31, 2014

     51         7,098         7,149         43,192   

Translation of foreign subsidiaries, including the exchange rate effect of hedge of investments

     —           —           —           122,523   

Changes in fair value

     38,028         —           38,028         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of September 30, 2015

     38,079         7,098         45,177         165,715   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Valuation adjustments  
     Fair value of financial
investment available
for sale
     Actuarial gains of
post-employment
benefits
     Total      Cumulative
translation
adjustment
 

Balance as of December 31, 2013

     5         5,423         5,428         38,076   

Translation of foreign subsidiaries, including the exchange rate effect of hedge of investments

     —           —           —           (18,351

Changes in fair value

     10         —           10         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of September 30, 2014

     15         5,423         5,438         19,725   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

g. Dividends

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 they are approved by the Shareholders. The proposed dividends payable as of December 31, 2014 in the amount of R$ 389,164 (R$ 0.71 – seventy one cents of Brazilian Real per share), were approved by the Board of Directors on February 25, 2015, and paid as of March 13, 2015, having been ratified in the Annual General Shareholders’ Meeting on April 15, 2015. On August 5, 2015, the Board of Directors approved the anticipation of 2015 dividends, in the amount of R$ 436,842 (R$ 0.80– eighty cents of Brazilian Real per share), paid as from August 21, 2015.

 

21 Segment Information

The Company operates five main business segments: gas distribution, fuel distribution, chemicals, storage and, as from January 31, 2014, 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 Pará, Amapá, Maranhão, Piauí, Ceará, and Rio Grande do Norte. 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 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:

 

     09/30/2015     09/30/2014  

Net revenue from sales and services:

    

Ultragaz

     3,373,158        3,035,665   

Ipiranga

     47,503,122        43,341,152   

Oxiteno

     2,996,220        2,525,639   

Ultracargo

     242,846        262,953   

Extrafarma

     997,806        782,841 (1) 

Others (2)

     32,611        29,887   

Intersegment sales

     (70,596     (64,110
  

 

 

   

 

 

 

Total

     55,075,167        49,914,027   
  

 

 

   

 

 

 

Intersegment sales:

    

Ultragaz

     2,327        1,400   

Ipiranga

     —          998   

Oxiteno

     1,713        1,253   

Ultracargo

     33,945        30,756   

Extrafarma

     —          —     

Others (2)

     32,611        29,703   
  

 

 

   

 

 

 

Total

     70,596        64,110   
  

 

 

   

 

 

 

Net revenue from sales and services, excluding intersegment sales:

    

Ultragaz

     3,370,831        3,034,265   

Ipiranga

     47,503,122        43,340,154   

Oxiteno

     2,994,507        2,524,386   

Ultracargo

     208,901        232,197   

Extrafarma

     997,806        782,841 (1) 

Others (2)

     —          184   
  

 

 

   

 

 

 

Total

     55,075,167        49,914,027   
  

 

 

   

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     09/30/2015     09/30/2014  

Operating income:

    

Ultragaz

     142,749        121,725   

Ipiranga

     1,448,784        1,185,417   

Oxiteno

     448,411        201,539   

Ultracargo

     (18,466     91,646   

Extrafarma

     3,487        17,641 (1) 

Others (2)

     25,250        (16,288
  

 

 

   

 

 

 

Total

     2,050,215        1,601,680   
  

 

 

   

 

 

 

Share of profit of joint-ventures and associates:

    

Ultragaz

     (38     —     

Ipiranga

     (16,042     (11,117

Oxiteno

     1,750        613   

Ultracargo

     654        478   

Others (2)

     8,444        (794
  

 

 

   

 

 

 

Total

     (5,232     (10,820
  

 

 

   

 

 

 

Financial income

     309,467        263,996   

Financial expenses

     (851,012     (584,739
  

 

 

   

 

 

 

Income before income and social contribution taxes

     1,503,438        1,270,117   
  

 

 

   

 

 

 

 

Additions to property, plant, and equipment and intangible assets:

  

Ultragaz

     197,238        177,313   

Ipiranga

     560,464        485,633   

Oxiteno

     91,044        85,855   

Ultracargo

     10,460        19,919   

Extrafarma

     49,351        21,568 (1) 

Others (2)

     20,463        21,144   
  

 

 

   

 

 

 

Total additions to property, plant, and equipment and intangible assets (see Notes 12 and 13)

     929,020        811,432   

Asset retirement obligation – fuel tanks (see Note 18)

     (520     (512

Capitalized borrowing costs

     (19,678     (5,117
  

 

 

   

 

 

 

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

     908,822        805,803   
  

 

 

   

 

 

 

 

Depreciation and amortization charges:  

Ultragaz

     105,693         102,027   

Ipiranga

     450,516         390,294   

Oxiteno

     109,503         103,765   

Ultracargo

     31,182         36,970   

Extrafarma

     16,522         8,825 (1) 

Others (2)

     18,031         9,585   
  

 

 

    

 

 

 

Total

     731,447         651,466   
  

 

 

    

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

     09/30/2015      12/31/2014  

Total assets (excluding intersegment account balances):

     

Ultragaz

     2,699,143         2,701,673   

Ipiranga

     10,259,907         9,138,758   

Oxiteno

     4,718,902         4,229,501   

Ultracargo

     1,278,081         1,382,969   

Extrafarma

     644,975         602,409   

Others (2)

     1,259,055         1,425,072   
  

 

 

    

 

 

 

Total

     20,860,063         19,480,382   
  

 

 

    

 

 

 

 

 

(1)  Information of the period from February 1 to September 30, 2014.
(2)  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:

 

     09/30/2015 (1)      12/31/2014  

United States of America

     205,705         137,470   

Mexico

     146,966         107,554   

Uruguay

     79,861         55,855   

Venezuela

     36,136         18,763   

 

(1)  The increase in fixed and intangible assets as of September 30, 2015 is substantially due to the devaluation of the Real against the functional currencies of the foreign subsidiaries used in the translation of information.

The Company generates 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:

 

     09/30/2015      09/30/2014  

Net revenue:

     

Brazil

     54,123,654         49,235,713   

Mexico

     148,344         102,546   

Venezuela

     107,382         36,726   

Other Latin American countries

     328,964         272,456   

United States of America and Canada

     131,688         114,452   

Far East

     124,022         40,927   

Europe

     68,208         61,618   

Others

     42,905         49,589   
  

 

 

    

 

 

 

Total

     55,075,167         49,914,027   
  

 

 

    

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

22. 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 conservative 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.

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

Currency Risk

Most transactions of the Company and 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 as of September 30, 2015 and December 31, 2014:

Assets and Liabilities in Foreign Currencies

 

In millions of Brazilian Reais

   09/30/2015     12/31/2014  

Assets in foreign currency

    

Cash, cash equivalents and financial investments in foreign currency (except hedging instruments)

     987.9        594.9   

Foreign trade receivables, net of allowance for doubtful accounts

     257.8        190.3   

Net investments in foreign subsidiaries (except cash, cash equivalents, financial investments, trade receivables, financing, and payables)

     690.0        507.3   
  

 

 

   

 

 

 
     1,935.7        1,292.5   
  

 

 

   

 

 

 

Liabilities in foreign currency

    

Financing in foreign currency

     (3,506.1     (1,867.2

Payables arising from imports, net of advances to foreign suppliers

     (66.2     (70.6
  

 

 

   

 

 

 
     (3,572.3     (1,937.8
  

 

 

   

 

 

 

Foreign currency hedging instruments

     1,982.2        783.3   
  

 

 

   

 

 

 

Net asset position – Total

     345.6        138.0   

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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 asset position of R$ 345.6 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         (21.7     (54.3     (108.6

(2) Shareholders’ equity effect

        56.3        140.7        281.4   
     

 

 

   

 

 

   

 

 

 

(1) + (2)

     Net effect         34.6        86.4        172.8   
     

 

 

   

 

 

   

 

 

 

(3) Income statement effect

     Real appreciation         21.7        54.3        108.6   

(4) Shareholders’ equity effect

        (56.3     (140.7     (281.4
     

 

 

   

 

 

   

 

 

 

(3) + (4)

     Net effect         (34.6     (86.4     (172.8
     

 

 

   

 

 

   

 

 

 

Gains (losses) directly recognized in equity in cumulative translation adjustments are due to changes in the exchange rate on equity of foreign subsidiaries (see Notes 2.r and 20.f — Cumulative Translation Adjustments).

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

Interest Rate Risk

The Company and its subsidiaries adopt conservative 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 14.

The Company does not actively manage risks associated with changes in the level of interest rates and attempts to maintain its financial interest assets and liabilities at floating rates. As of September 30, 2015, the Company and its subsidiaries had interest rate derivative financial instruments linked to domestic loans, in which the Company swapped the fixed interest rate of certain debts to floating interest rates (CDI).

The table below shows the financial assets and liabilities exposed to floating interest rates as of September 30, 2015 and December 31, 2014:

 

 

In millions of Brazilian Reais

   Note      09/30/2015     12/31/2014  

CDI

                   

Cash equivalents

     4         2,013.8        2,690.6   

Financial investments

     4         643.4        902.7   

Asset position of foreign exchange hedging instruments—CDI

     22         301.9        114.2   

Loans and debentures

     14         (5,449.0     (5,157.9

Liability position of foreign exchange hedging instruments—CDI

     22         (1,855.7     (749.6

Liability position of hedging instruments from pre-fixed interest to CDI

     22         (27.8     (486.1
     

 

 

   

 

 

 

Net liability position in CDI

        (4,373.4     (2,686.1
     

 

 

   

 

 

 

TJLP

       

Loans –TJLP

     14         (447.8     (540.5
     

 

 

   

 

 

 

Net liability position in TJLP

        (447.8     (540.5
     

 

 

   

 

 

 

LIBOR

       

Asset position of foreign exchange hedging instruments—LIBOR

     22         1,308.2        761.8   

Loans—LIBOR

     14         (1,380.3     (814.3
     

 

 

   

 

 

 

Net liability position in LIBOR

        (72.1     (52.5
     

 

 

   

 

 

 

TIIE

       

Loans—TIIE

     14         (28.3     (32.3
     

 

 

   

 

 

 

Net liability position in TIIE

        (28.3     (32.3
     

 

 

   

 

 

 

SELIC

       

Loans – SELIC

     14         (19.2     —     
     

 

 

   

 

 

 

Net liability position in SELIC

        (19.2     —     
     

 

 

   

 

 

 

Total net liability position exposed to floating interest

        (4,940.8     (3,311.4
     

 

 

   

 

 

 

 

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Notes to the 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 September 30, 2015, due to the effect of floating interest rate changes in different scenarios:

 

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         38.5        77.0        141.2   

Foreign exchange hedging instruments (assets in CDI) effect

     Increase in CDI         1.3        3.4        6.7   

Interest effect on debt in CDI

     Increase in CDI         (74.7     (155.2     (289.5

Interest rate hedging instruments (liabilities in CDI) effect

     Increase in CDI         (13.0     (32.6     (65.2
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (47.9     (107.4     (206.8
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in TJLP

     Increase in TJLP         (2.2     (5.4     (10.9
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (2.2     (5.4     (10.9
     

 

 

   

 

 

   

 

 

 

Foreign exchange hedging instruments (assets in LIBOR) effect

     Increase in LIBOR         0.2        0.5        1.0   

Interest effect on debt in LIBOR

     Increase in LIBOR         (0.2     (0.6     (1.1
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        —          (0.1     (0.1
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in TIIE

     Increase in TIIE         (0.1     (0.3     (0.5
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (0.1     (0.3     (0.5
     

 

 

   

 

 

   

 

 

 

Interest effect on debt in SELIC

     Increase in SELIC         (0.1     (0.2     (0.3
     

 

 

   

 

 

   

 

 

 

Incremental expenses

        (0.1     (0.2     (0.3
     

 

 

   

 

 

   

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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, and trade receivables.

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.

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.

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 allowances for doubtful accounts on trade receivables:

 

     09/30/2015      12/31/2014  

Ipiranga

     152,090         136,104   

Ultragaz

     23,715         24,140   

Oxiteno

     13,015         4,522   

Extrafarma

     7,970         11,067   

Ultracargo

     2,971         2,611   
  

 

 

    

 

 

 

Total

     199,761         178,444   
  

 

 

    

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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 to satisfy their current needs. The gross indebtedness due over the next twelve months totals R$ 2,613.9 million, including estimated interests on loans. Furthermore, the investment plan for 2015 totals R$ 1,418 million, and until September 30,2015 the amount of R$ 830 million had been realized. As of September 30, 2015, the Company and its subsidiaries had R$ 3,682.2 million in cash, cash equivalents, and short-term financial investments (for quantitative information, see Notes 4 and 14).

The table below presents a summary of financial liabilities as of September 30, 2015 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 September 30, 2015.

 

     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)

     12,100.0         2,613.9         6,302.8         3,109.9         73.4   

Currency and interest rate hedging instruments (3)

     404.0         187.1         216.9         —           —     

Trade payables

     948.4         948.4         —           —           —     

 

(1) To calculate the estimated interest on loans some macroeconomic assumptions were used, including averaging for the period the following: (i) CDI of 13.2 % p.a., (ii) exchange rate of the Real against the U.S. dollar of R$ 4.04in 2015, R$ 4.28 in 2016, R$ 4.67 in 2017, R$ 5.17 in 2018, and R$ 5.73 in 2019, (iii) TJLP of 6.5% p.a. and (iv) IGP-M of 8.5% in 2015, 7.1% in 2016, 6.1% in 2017, 6.4% in 2018, and 6.4% in 2019 (source: BM&FBOVESPA, 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 curve of DI x Pre contract quoted on BM&FBOVESPA on September 30, 2015 and on the futures curve of LIBOR (ICE—IntercontinentalExchange) on September 30, 2015. In the table above, only the hedging instruments with negative results at the time of settlement were considered.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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 14). 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 monitoring 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 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:

 

Hedging instruments

   Counterparty    Maturity    Notional amount1      Fair value      Amounts
receivable
     Amounts
payable
 
                 
               09/30/2015      12/31/2014      09/30/2015      12/31/2014      09/30/2015  
                 R$ million         R$ million         R$ million         R$ million   

a –Exchange rate swaps receivable in U.S. dollars

   Bradesco,
BTMU,
Citibank,
Itaú, JP
Morgan,
Santander,
Scotiabank
                    

Receivables in U.S. dollars (LIBOR)

      Oct 2015
to Nov
2018
     US$ 350.0         US$ 290.0         1,308.2         761.8         1,308.2         —     

Receivables in U.S. dollars (Fixed)

           US$ 251.3         US$ 50.6         970.5         136.6         970.5         —     

Payables in CDI interest rate

           US$ (601.3)         US$ (340.6)         (1,855.7)         (749.1)         —           1,855.7   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total result

           —           —           423.0         149.3         2,278.7         1,855.7   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

b.1 and b.2 – Exchange rate swaps payable in U.S. dollars + COUPON

   Bradesco,
Citibank,
Itaú,
Santander
   Oct 2015
to Dec
2015
                 

Receivables in CDI interest rates

           US$ 74.3         US$ 42.9         301.9         114.2         301.9         —     

Payables in U.S. dollars (Fixed)

           US$ (74.3)         US$ (42.9)         (296.5)         (115.6)         —           296.5   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total result

           —           —           5.4         (1.4)         301.9         296.5   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

c – Interest rate swaps in R$

   , Itaú    Mar 2016
to Aug
2016
                 

Receivables in fixed interest rate

           R$27.5         R$327.5         27.1         532.0         27.1         —     

Payables in CDI interest rate

           R$(27.5)         R$(327.5)         (27.8)         (486.1)         —           27.8   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total result

           —           —           (0.7)         45.9         27.1         27.8   
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

d – Exchange rate swaps receivable in Euros

                       

Receivables in Euros (Fixed)

      —        —         0.2         —           0.5         —           —     

Payables in CDI interest rate

           —         (0.2)         —           (0.5)         —           —     
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total result

           —           —           —           —           —           —     
        

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total gross result

                 427.7         193.8         2,607.7         2,180.0   

Income tax

                 (102.7)         (36.7)         (102.7)         —     
              

 

 

    

 

 

    

 

 

    

 

 

 

Total net result

                 325.0         157.1         2,505.0         2,180.0   
              

 

 

    

 

 

    

 

 

    

 

 

 

Positive result (see Note 4)

                 378.9         164.5         

Negative result (see Note 14)

                 (53.9)         (7.4)         

 

(1) In million. Currency as indicated.

All transactions mentioned above were properly registered with CETIP S.A.

Hedging instruments existing as of September 30, 2015 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, and (ii) 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 September 30, 2015, the Company and its subsidiaries had outstanding swap contracts totaling US$ 601.3 million in notional amount with a liability position, on average of 99.6 % of CDI, of which US$ 251.3million, on average, had an asset position at US$ + 1.82 % p.a. and US$ 350.0 million had an asset position at US$ + LIBOR + 0.76% p.a.

 

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(In thousands of Brazilian Reais, unless otherwise stated)

 

 

b.1—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 September 30, 2015, these swap contracts totaled US$ 10.3 million and, on average, had an asset position at 79.0% of CDI and a liability position at US$ + 0.0% p.a.

b.2—Hedging against foreign exchange exposure of net investments in foreign operations—The purpose of these contracts is to minimize the effect of exchange variation of investments in foreign subsidiaries with functional currencies different from the functional currency of the Company, turning them into investments in Brazilian Reais. As of September 30, 2015, the Company and its subsidiaries had outstanding swap contracts totaling US$ 64.0 million in notional amount with an asset position at 90.5% of CDI and a liability position of US$ + 0.0% p.a.

c—Hedging against the interest rate fixed in local financing—The purpose of these contracts is to convert the interest rate on financing contracted in Brazilian Reais from fixed into floating. As of September 30, 2015 these swap contracts totaled R$ 27.5 million of notional amount corresponding to principal amount of related debt, and on average had an asset position at 8.0% p.a. and a liability position at 88.8% of CDI.

d – Hedging against the foreign currency exchange exposure of liabilities—The purpose of these contracts is offset the effect of exchange variation of debts or firm commitments in euro, turning them into debts or firm commitments in Reais indexed to the CDI. As of September 30, 2015, the Company and its subsidiaries had no swap contracts.

Hedge Accounting

The Company and its subsidiaries test, throughout the duration of the hedge, the effectiveness of their derivatives, as well as the changes in their fair value. The Company and its subsidiaries designate as fair value hedges certain derivative 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 September 30, 2015, the notional amount of foreign exchange hedging instruments designated as fair value hedge totaled US$ 440.0 million. As of September 30, 2015, a gain of R$ 260.0 million related to the result of hedging instruments, a gain of R$ 91.0 million related to the fair value adjustment of debt, and a loss of R$ 426.2 million related to the financial expense of the debt were recognized in the income statements, transforming the average effective cost of the operation into 101.9% of CDI (see Note 14.c.1).

On September 30, 2015, the notional amount of exchange rate hedging instruments designated as cash flow hedges totaled US$ 70.4 million and a gain for the nine-month period ended September 30, 2015 of R$ 145.8 million was recognized through the income statement.

On September 30, 2015, the notional amount of exchange rate hedging instruments designated as hedges of net investment in a foreign operation totaled US$ 64.0 million relating to the portion of investments in entities which have functional currency different from the Real. For the nine-month period ended September 30, 2015, a loss of R$ 47.4 million was recorded. The exchange rate on investment and the hedging instrument effects were offset in equity.

On September 30, 2015, the notional amount of interest rate hedging instruments totaled R$ 27.5 million, referring to the principal of the pre-fixed loans in Brazilian Reais. As of September 30, 2015, a gain of R$ 1.9 million related to the result of hedging instruments, a loss of R$ 0.5 million related to the fair value adjustment of debt, and a loss of R$ 24.5 million related to the accrued interest rate of the debt were recognized in the income statement, transforming the average effective cost of the operations into 88.8% of CDI.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

Gains (losses) on Hedging Instruments

The following tables summarize the value of gains (losses) recognized, which affected the shareholders’ equity as of September 30, 2015 and December 31, 2014 and income statement as of September 30, 2015 and 2014 of the Company and its subsidiaries:

 

     R$ million  
     09/30/2015  
     Profit
or loss
    Equity  

a – Exchange rate swaps receivable in U.S. dollars (i) (ii)

     (106.9     30.6   

b – Exchange rate swaps payable in U.S. dollars (ii)

     (1.1     (47.4

c – Interest rate swaps in R$ (iii)

     1.4        —     
  

 

 

   

 

 

 

Total

     (106.6     (16.8
  

 

 

   

 

 

 

 

     R$ million  
     09/30/2014     12/31/2014  
     Profit or
loss
    Equity  

a – Exchange rate swaps receivable in U.S. dollars (i) (ii)

     (31.9     —     

b – Exchange rate swaps payable in U.S. dollars (ii)

     6.8        (7.3

c – Interest rate swaps in R$ (iii)

     11.3        —     
  

 

 

   

 

 

 

Total

     (13.8     (7.3
  

 

 

   

 

 

 

The table above: (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 and (iii) considers the designation effect of interest rate hedging in Brazilian Reais.

 

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Notes to the 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, as of September 30, 2015 and December 31, 2014, are stated below:

 

                 09/30/2015      12/31/2014  
     Category    Note      Carrying
value
     Fair
value
     Carrying
value
     Fair
value
 

Financial assets:

              

Cash and cash equivalents

              

Cash and bank deposits

   Loans and
receivables
     4         188,440         188,440         133,296         133,296   

Financial investments in local currency

   Measured at fair
value through
profit or loss
     4         2,013,782         2,013,782         2,690,638         2,690,638   

Financial investments in foreign currency

   Measured at fair
value through
profit or loss
     4         15,699         15,699         3,435         3,435   

Financial investments

              

Fixed-income securities and funds in local currency

   Available for
sale
     4         632,739         632,739         892,065         892,065   

Fixed-income securities and funds in local currency

   Held to
maturity
     4         10,618         10,618         10,618         10,618   

Fixed-income securities and funds in foreign currency

   Available for
sale
     4         842,255         842,255         505,574         505,574   

Currency and interest rate hedging instruments

   Measured at fair
value through
profit or loss
     4         378,888         378,888         164,496         164,496   
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           4,082,421         4,082,421         4,400,122         4,400,122   
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

              

Financing

   Measured at
fair value
through profit
or loss
     14         1,641,591         1,641,591         1,132,644         1,132,644   

Financing

   Measured at
amortized cost
     14         5,731,787         5,641,678         4,904,248         4,878,005   

Debentures

   Measured at
amortized cost
     14         2,267,346         2,241,063         2,283,852         2,281,353   

Finance leases

   Measured at
amortized cost
     14         46,445         46,445         47,044         47,044   

Currency and interest rate hedging instruments

   Measured at fair
value through
profit or loss
     14         53,879         53,879         7,424         7,424   

Subscription warrants – indemnification

   Measured at fair
value through
profit or loss
     3.a         133,402         133,402         92,072         92,072   
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           9,874,450         9,758,058         8,467,284         8,438,542   
        

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the 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 reporting period, 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, therefore, the Company believes their fair value corresponds to their carrying value.

 

  The fair value calculation of LPG Inc.’s notes in the foreign market (see Note 14.b) is based on the quoted prices in an active market.

 

  The subscription warrants – indemnification were measured based on the share price of Ultrapar (UGPA3) at the reporting date.

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 September 30, 2015 and December 31, 2014. 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 loans and receivables or financial 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 available for sale, which are 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 14), (v) guarantees to customers that have vendor arrangements (see Note 14.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. The financial investments classified as held-to-maturity are measured at amortized cost. Cash, banks, and trade receivables are classified as loans and receivables. Trade payables and other payables are classified as financial liabilities measured at amortized cost.

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

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).

The table below shows a summary of the financial assets and financial liabilities measured at fair value in the Company’s and its subsidiaries as of September 30, 2015 and December 31, 2014:

 

     Category    Note      09/30/2015      Level 1      Level 2      Level 3  

Financial assets:

                 

Cash equivalents

                 

Cash and banks

   Loans and receivables      4         188,440         188,440         —           —     

Financial investments in local currency

   Measured at fair value
through profit or loss
     4         2,013,782         2,013,782         —           —     

Financial investments in foreign currency

   Measured at fair value
through profit or loss
     4         15,699         15,699         —           —     

Financial investments

                 

Fixed-income securities and funds in local currency

   Available for sale      4         632,739         632,739         —           —     

Fixed-income securities and funds in local currency

   Held to maturity      4         10,618         10,618         —           —     

Fixed-income securities and funds in foreign currency

   Available for sale      4         842,255         678,373         163,882         —     

Currency and interest rate hedging instruments

   Measured at fair value
through profit or loss
     4         378,888         —           378,888         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           4,082,421         3,539,651         542,770         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

                 

Financing

   Measured at fair value
through profit or loss
     14         1,641,591         —           1,641,591         —     

Financing

   Measured at
amortized cost
     14         5,641,678         1,017,776         4,623,902         —     

Debentures

   Measured at
amortized cost
     14         2,241,063         —           2,241,063         —     

Finance leases

   Measured at
amortized cost
     14         46,445         —           46,445         —     

Currency and interest rate hedging instruments

   Measured at fair value
through profit or loss
     14         53,879         —           53,879         —     

Subscription warrants – indemnification (1)

   Measured at fair value
through profit or loss
     3.a         133,402         —           133,402         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           9,758,058         1,017,776         8,740,282         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

 

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Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

    

Category

   Note      12/31/2014      Level 1      Level 2      Level 3  

Financial assets:

                 

Cash equivalents

                 

Cash and banks

   Loans and receivables      4         133,296         133,296         —           —     

Financial investments in local currency

   Measured at fair value through profit or loss      4         2,690,638         2,690,638         —           —     

Financial investments in foreign currency

   Measured at fair value through profit or loss      4         3,435         3,435         —           —     

Financial investments

                 

Fixed-income securities and funds in local currency

   Available for sale      4         892,065         892,065         —           —     

Fixed-income securities and funds in local currency

   Held to maturity      4         10,618         10,618         —           —     

Fixed-income securities and funds in foreign currency

   Available for sale      4         505,574         146,782         358,792         —     

Currency and interest rate hedging instruments

   Measured at fair value through profit or loss      4         164,496         —           164,496         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           4,400,122         3,876,834         523,288         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities:

                 

Financing

   Measured at fair value through profit or loss      14         1,132,644         —           1,132,644         —     

Financing

   Measured at amortized cost      14         4,878,005         707,281         4,170,724         —     

Debentures

   Measured at amortized cost      14         2,281,353         —           2,281,353         —     

Finance leases

   Measured at amortized cost      14         47,044         —           47,044         —     

Currency and interest rate hedging instruments

   Measured at fair value through profit or loss      14         7,424         —           7,424         —     

Subscription warrants –
indemnification (1)

   Measured at fair value through profit or loss      3.a         92,072         —           92,072         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

Total

           8,438,542         707,281         7,731,261         —     
        

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Refers to subscription warrants issued by the Company in the Extrafarma acquisition that, if exercised, may lead to the issuance of up to 3,205,622 shares in the future, related to subscription warrants – indemnification. The subscription warrants are measured using the price of the shares issued by Ultrapar (UGPA3) on the reporting date and are adjusted to the Company’s dividend yield, since the exercise is only possible starting in 2020 onwards and are not entitled to dividends. 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. For further information of the Extrafarma acquisition, see Note 3.a) to the financial statements of the Company filed with the CVM on February 25, 2015.

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 BM&FBOVESPA as of September 30, 2015. As a reference, the exchange rate for the last maturity of foreign exchange hedging instruments is R$ 5.37 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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Based on the balances of the hedging instruments and hedged items as of September 30, 2015, the exchange rates were replaced, and the changes between the new balance in Brazilian Reais and the original balance in Brazilian Reais as of September 30, 2015 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      497,969        1,214,508        1,931,046   

(2) Debts/firm commitments in dollars

   appreciation      (497,958     (1,214,476     (1,930,994
     

 

 

   

 

 

   

 

 

 

(1)+(2)

   Net effect      11        32        52   
     

 

 

   

 

 

   

 

 

 

Currency swaps payable in U.S. dollars

         

(3) Real / U.S. Dollar swaps

   Dollar      (4,176     70,674        145,525   

(4) Gross margin of Oxiteno

   devaluation      4,176        (70,674     (145,525
     

 

 

   

 

 

   

 

 

 

(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 on BM&FBOVESPA as of September 30, 2015 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 results are shown in the table below:

 

    

Risk

   Scenario I
(likely)
     Scenario II     Scenario III  

Interest rate swap (in R$)

        

(1) Fixed rate swap—CDI

   Decrease in      —           497        1,032   

(2) Fixed rate financing

   Pre-fixed rate      —           (497     (1,032
     

 

 

    

 

 

   

 

 

 

(1)+(2)

   Net effect      —           —          —     
     

 

 

    

 

 

   

 

 

 

 

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23 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, and, when applicable, are backed by escrow deposits. Provisions for losses are estimated and updated by managements. Managements are supported by the opinion of the legal departments of the Company and its outside legal counsel.

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

 

Provisions

   Balance on
12/31/2014
     Additions      Write-
offs
    Monetary
restatement
    Balance on
09/30/2015
 

IRPJ and CSLL (i)

     406,478         —           —          24,563        431,041   

PIS and COFINS (ii)

     119,237         —           —          6,645        125,882   

ICMS

     20,829         1,456         (1,735     (298     20,252   

Social security

     10,483         233         —          596        11,312   

Civil litigation (iii)

     58,336         563         (739     74        58,234   

Labor litigation (iv)

     71,516         10,187         (13,613     866        68,956   

Other

     562         7         (71     13        511   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total

     687,441         12,446         (16,158     32,459        716,188   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Current

     64,169                55,501   

Non-current

     623,272                660,687   

Some of the tax provisions above involve escrow deposits in the amount of R$ 536,948 as of September 30, 2015 (R$ 505,650 as of December 31, 2014).

 

b. Tax Matters

Provisions

 

(i) On October 7, 2005, the subsidiaries Cia. Ultragaz and Bahiana Distribuidora de Gás Ltda. (“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 Brazilian Federal Revenue Service, 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$ 413,734 as of September 30, 2015 (R$ 388,675 as of December 31, 2014). 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 Company appealed this decision on February 3, 2015. Appeals were also presented to the respective higher courts (STJ and STF) whose trials are pending.

 

(i) The subsidiary IPP has a Declaratory Action discussing the constitutionality of Law No. 9316/1996, that denied the deduction of CSLL from the IRPJ tax basis. This claim was denied on 1st and 2nd instances, and the appeal presented to the Supreme Court awaits trial. The subsidiary has provision of R$ 21,503 as of September 30, 2015 (R$ 20,706 as of December 31, 2014) for this discussion.

 

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(ii) The subsidiaries Oxiteno S.A., Oxiteno Nordeste, Cia. Ultragaz, Tequimar, Tropical Transportes Ipiranga Ltda., Empresa Carioca de Produtos Químicos S.A. (“EMCA”), IPP and Extrafarma filed for a preliminary injunction seeking the deduction of ICMS from their PIS and COFINS tax bases. Oxiteno Nordeste and IPP paid the amounts into escrow deposits, and recognized a corresponding provision in the amount of R$ 97,905 as of September 30, 2015 (R$ 92,457 as of December 31, 2014).

Contingent Liabilities

The main tax claims of subsidiary IPP and its subsidiaries that are classified as having a possible risk of loss, and that have not been recognized in the interim financial information due to this assessment, are related to ICMS, and mainly, to: (a) the required proportional reversal of ICMS credits recognized on the purchase of ethanol that was later resold at lower prices as a result of PROÁLCOOL, a Federal Government program to encourage alcohol production. The Company has determined the anticipation of financial subsidy by the distributors to the mill owners and their subsequent reimbursement by the DNC (current National Oil Agency) as R$ 117,249 as of September 30, 2015 (R$ 116,480 as of December 31, 2014), (b) alleged undue ICMS credits for which the tax authorities understand that there was no proof of origin for R$ 41,003 as of September 30, 2015 (R$ 36,370 as of December 31, 2014), (c) assessments for alleged non-payment of ICMS totaling R$ 55,029 as of September 30, 2015 (R$ 52,011 as of December 31, 2014), (d) assessment issued in Ourinhos/SP in connection with the return of ethanol loans made with deferred tax, in the amount of R$ 37,071 as of September 30, 2015 (R$ 45,256 as of December 31, 2014), (e) assessments in the State of Rio de Janeiro demanding the reversal of ICMS credits on interstate sales made under Article 33 of ICMS Convention 66/88, which allowed the use of the ICMS credit but was suspended by an injunction granted by STF (the Brazilian Federal Court of Justice), totaling R$ 18,243 as of September 30, 2015 (R$ 17,806 as of December 31, 2014), (f) ICMS credits taken in relation to bills considered invalid, though the understanding of the STJ (the Brazilian High Court of Justice) is that it is possible to take credit, even if there is a defect in the document of the seller, as long as it is confirmed that the transaction occurred, for R$ 30,417 as of September 30, 2015 (R$ 28,811 as of December 31, 2014); (g) assessments arising from surplus or shortage of inventory, generated by differences in temperature or handling of the product, without the corresponding issuance of invoices, as of R$ 72,366 as of September 30, 2015 (R$ 60,412 as of December 31, 2014), (h) infraction relating to ICMS credits due to alleged non-compliance with legal formalities, for R$ 43,043 as of September 30, 2015 (R$ 40,224 as of December 31, 2014) and; (i) assessments arising from ICMS credits related to inputs of ethanol from certain States that had granted tax benefits to producers of alcohol in alleged disagreement with the law, in the amount of R$ 45,909 as of September 30, 2015 (R$ 36,396 as of December 31, 2014); (j) assessments that consider various possible breaches of auxiliary obligations, among them the alleged lack of issuance of invoices, the alleged failure of delivery, or delivery with errors of informative reports to the tax authorities, errors in the filling of DANFE—Auxiliary Document Electronic Invoice, among others, totaling R$ 10,474 as of September 30, 2015 (R$ 8,173 as of December 31, 2014); and (k) infraction notice for non-payment of ICMS related to the acquisition of basic lubricating oil, whose remittance was deferred to the time of the subsequent industrialized output relating to interstate transactions (covered by the constitutional non-incidence—article 155, X, ‘b’ of the Federal Constitution), totaling R$ 12,269 as of September 30, 2015 (R$ 11,579 as of December 31, 2014).

The subsidiary IPP has 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 non-provisioned amount of this contingency classified as a possible risk of loss, as of September 30, 2015, is R$ 147,022 (R$ 140,566 as of December 31, 2014).

The subsidiary Extrafarma was assessed by the State Treasury of Pará mainly due to an alleged uncollected special anticipated ICMS due on state operations of acquisition of goods. The amount involved of R$ 51,656, was not accrued given that the chances of loss were assessed as possible. This tax assessment is being defended by the former shareholders of Extrafarma and, in the case of a loss, Ultrapar will be indemnified through the subscription warrants—indemnification (see Note 3.a).

 

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Contingent Assets

The Company and its subsidiaries have favorable judgments to pay contributions to PIS and COFINS without the changes introduced by Law 9718/1998 in its original version. The ongoing questioning refers to the levy of these contributions on sources of income other than gross revenue. In 2005, the STF (the Brazilian Supreme Federal Court) decided the question in favor of the taxpayers. Although this has set a favorable precedent, the effect of this decision does not automatically apply to all companies, since they must await the formal decision in their own lawsuits. Certain lawsuits of the Company’s subsidiaries are currently pending trial and, in the event all such lawsuits are decided in favor of the subsidiaries, the Company estimates that the total positive effect on income before income and social contribution taxes may reach R$ 36,568, net of attorney’s fees.

 

c. Civil, Environmental and Regulatory Claims

Provisions

 

iii) 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$ 58,234 as of September 30, 2015 (R$ 58,336 as of December 31, 2014).

Contingent Liabilities

The subsidiary Cia. Ultragaz is party to an administrative proceeding before CADE (Brazilian antitrust authority) 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$ 23,104. The imposition of such administrative decision was suspended by a court order and its merit is being judicially reviewed. Based on the above elements and on the opinion of its legal counsel, the subsidiary did not recognize a provision for this contingency.

As a result of the fire on April 2nd, 2015 at the Santos Terminal of the subsidiary Tequimar, CETESB—Environmental Company of the State of São Paulo charged a fine of R$ 22,500, due to the environmental and urban impacts allegedly caused by the incident. Tequimar filed before such Environmental Agency its refutation under the first administrative jurisdiction, in which, among other things, it claimed the inapplicability of federal legislation due to the existence of state legislation that not only regulate the issue but also may cause the fine reduction. It also denied the unlawful conduct by Tequimar. The legal department of the Company evaluates the chance of loss of such assessment as possible. For more information see Note 31.

 

d. Labor Matters

Provisions

 

iv) The Company and its subsidiaries maintained provisions of R$ 68,956 as of September 30, 2015 (R$ 71,516 as of December 31, 2014) for labor litigation filed by former employees and by employees of our service providers mainly contesting the non-payment of labor rights.

 

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Contingent Liabilities

In 1990, the Petrochemical Industry Labor Union (Sindiquĺmica), 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 Sindiquĺmica, 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 Sindiquĺmica and reported the fact in the collective labor dispute. In October 2015, Sindiquĺmica filed enforcement lawsuits against all Camaçari Petrochemical Complex companies that have not yet made settlements, including Oxiteno Nordeste and EMCA. Based on the opinion of their legal advisors and the favorable outcome in the individuals claims involving the subsidiaries Oxiteno Nordeste and EMCA, the management of such subsidiaries believed that it was not necessary to recognize a provision as of September 30, 2015.

The Company and its subsidiaries have other pending administrative and legal proceedings of tax, civil, environmental, regulatory, and labor nature, which are individually less relevant, and were estimated by their legal counsel as having possible and/or remote risks (proceedings whose chance of loss is 50% or less). A such, the related potential losses were not provided for by the Company and its subsidiaries based on these opinions. The Company and its subsidiaries are also litigating for recovery of taxes and contributions, which were not recognized in the interim financial information due to their contingent nature.

 

e. Contracts

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

     100,000         2016   

Aratu

     900,000         2022   

Suape

     250,000         2027   

Suape

     400,000         2029   

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 September 30, 2015, these rates were R$ 6.99 per ton for Aratu and R$ 2.90 per ton for Suape. The subsidiary has met the minimum cargo movement required since the beginning of the contractual agreements.

 

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Subsidiary Oxiteno Nordeste has a supply agreement with Braskem S.A. which establishes a minimum quarterly consumption level of ethylene and conditions for the supply of ethylene until 2021. The minimum purchase commitment clause provides in 2015 a minimum annual consumption of 190 thousand tons and a maximum of 205 thousand tons and as from 2016 a minimum annual consumption of 205 thousand tons and a maximum of 220 thousand tons. The minimum purchase commitment and the actual demand accumulated to September 30, 2015 and 2014, expressed in tons of ethylene, are shown below. Should the minimum purchase commitment not be met, the subsidiary would be liable for a fine of 40% of the current ethylene price for the quantity not purchased. The subsidiary has met the minimum purchase required in the agreement.

 

     Minimum purchase commitment (*)      Accumulated demand (actual)  
     09/30/2015      09/30/2014      09/30/2015      09/30/2014  

In tons of ethylene

     132,229         151,723         143,971         151,871   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Adjusted for scheduled shutdowns in Braskem S.A. during the periods.

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. The minimum purchase commitment and the actual demand accumulated to September 30, 2015 and 2014, expressed in tons of ethylene, are shown below. Should the minimum purchase commitment not be met, the subsidiary would be liable for a fine of 30% of the current ethylene price for the quantity not purchased. In agreement with Braskem S.A., in the fisrt semester of 2015 the ethylene volume acquired jointly by Oxiteno S.A and Oxiteno Nordeste was considered for minimum purchase commitment purposes. Thus, the subsidiary met the minimum purchase required in the agreement.

 

     Minimum purchase commitment (*)      Accumulated demand (actual)  
     09/30/2015      09/30/2014      09/30/2015      09/30/2014  

In tons of ethylene

     31,128         30,330         30,343         30,679   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(*) Adjusted for scheduled shutdowns in Braskem S.A. during the periods.

 

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Notes to the Interim Financial Information

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f. Insurance Coverage in Subsidiaries

The Company maintains appropriate 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 maximum possible losses of certain locations are shown below:

 

     Maximum
compensation
value (*)
 

Oxiteno

     US$ 1,104   

Ipiranga

     R$769   

Ultracargo

     R$550   

Ultragaz

     R$300   

Extrafarma

     R$100   

 

(*) In millions. As of 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$ 50 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 maintained 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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g. Operating Lease Contracts

Subsidiaries Cia. Ultragaz, Tequimar, Serma, and Oxiteno S.A. have operating lease contracts for the use of IT equipment. These contracts have terms of 36 and 45 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  

September 30, 2015

     22,448         33,613         —           56,061   

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  

September 30, 2015

   payable      89,984        257,214        138,665        485,863   
   receivable      (49,793     (154,534     (88,678     (293,005

The expense recognized for the nine-month period ended September 30, 2015 for operating leases was R$ 74,167 (R$ 53,062 for the nine-month period ended September 30, 2014), net of income.

 

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24 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—Associaçăo 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 guarantee the amounts or the duration of the benefits received by each employee that retires. For the nine-month period ended September 30, 2015, the Company and its subsidiaries contributed R$ 16,353 (R$ 14,633 for the nine-month period ended September 30, 2014) to Ultraprev, which is recognized as expense in the income statement. The total number of participating employees as of September 30, 2015 was 8,930 active participants and 162 retired participants. In addition, Ultraprev had 28 former employees receiving benefits under the rules of a previous plan whose reserves are fully constituted.

 

b. Post-employment Benefits

The Company and its 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 as of December 31, 2014 and are recognized in the interim financial information in accordance with IAS 19 R2011 (CPC 33 R2).

 

     09/30/2015      12/31/2014  

Health and dental care plan

     30,989         28,521   

FGTS Penalty

     55,200         50,881   

Bonus

     27,221         25,288   

Life insurance

     16,363         15,101   
  

 

 

    

 

 

 

Total

     129,773         119,791   
  

 

 

    

 

 

 

Current

     8,963         11,419   

Non-current

     120,810         108,372   

 

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25 Revenue from Sale and Services (Consolidated)

 

     09/30/2015     09/30/2014  

Gross revenue from sale

     56,373,339        50,892,617   

Gross revenue from services

     416,918        431,077   

Sales tax

     (1,457,395     (1,184,915

Discounts and sales returns

     (256,692     (227,636

Deferred revenue (see Note 19)

     (1,003     2,884   
  

 

 

   

 

 

 

Net revenue from sales and services

     55,075,167        49,914,027   
  

 

 

   

 

 

 

 

26 Expenses by Nature (Consolidated)

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

 

     09/30/2015      09/30/2014  

Raw materials and materials for use and consumption

     49,456,049         45,220,128   

Personnel expenses

     1,404,009         1,182,626   

Freight and storage

     827,657         748,337   

Depreciation and amortization

     731,447         651,466   

Advertising and marketing

     131,954         160,664   

Services provided by third parties

     170,923         148,058   

Lease of real estate and equipment

     104,100         86,953   

Other expenses

     243,708         191,757   
  

 

 

    

 

 

 

Total

     53,069,847         48,389,989   
  

 

 

    

 

 

 

Classified as:

     

Cost of products and services sold

     50,299,900         45,972,139   

Selling and marketing

     1,834,548         1,584,329   

General and administrative

     935,399         833,521   
  

 

 

    

 

 

 

Total

     53,069,847         48,389,989   
  

 

 

    

 

 

 

Research and development expenses are recognized in the income statements and amounted to R$ 29,218 for the nine-month period ended September 30, 2015 (R$ 27,462 for the nine-month period ended September 30, 2014).

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

27 Other Operating Income, Net (Consolidated)

 

     09/30/2015     09/30/2014  

Commercial partnerships

     27,929        23,294   

Merchandising

     27,671        25,643   

Loyalty program

     12,363        4,517   

Adjustment of working capital and net debt – Extrafarma acquisition (see Note 3.a)

     13,784        —     

Ultracargo – fire accident in Santos (see Note 31)

     (85,682     —     

Compensation of undue use of Ultratecno brand

     16,000        —     

Others

     3,599        8,994   
  

 

 

   

 

 

 

Other operating income, net

     15,664        62,448   
  

 

 

   

 

 

 

 

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

The gain 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 nine-month period ended September 30, 2015, the gain was R$ 29,231 (gain of R$ 15,194 for the nine-month period ended September 30, 2014), represented primarily from disposal of property, plant, and equipment.

 

29 Financial Income (Expense)

 

     Parent     Consolidated  
     09/30/2015     09/30/2014     09/30/2015     09/30/2014  

Financial income:

    

Interest on financial investments

     135,670        95,477        247,370        213,842   

Interest from customers

     —          —          59,190        47,113   

Other financial income

     7        4        2,907        3,041   
  

 

 

   

 

 

   

 

 

   

 

 

 
     135,677        95,481        309,467        263,996   
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial expenses:

        

Interest on loans

     (4     —          (466,254     (379,516

Interest on debentures

     (84,130     (71,070     (226,434     (186,075

Interest on finance leases

     —          —          (3,384     (5,209

Bank charges, financial transactions tax, and other charges

     296        2,474        (29,452     (14,992

Exchange variation, net of gains and losses with derivative instruments

     —          —          (74,009     891   

Changes in subscription warranty—indemnification (see Note 3.a)

     (41,939     1,383        (41,939     1,383   

Monetary restatement of provisions, net, and other financial expenses

     (15     (13     (9,540     (1,221
  

 

 

   

 

 

   

 

 

   

 

 

 
     (125,792     (67,226     (851,012     (584,739
  

 

 

   

 

 

   

 

 

   

 

 

 

Financial income (expense)

     9,885        28,255        (541,545     (320,743
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

30 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 subscription warrants—indemnification and a deferred stock plan, as mentioned in Notes 3.a) and 8.c), respectively.

 

Basic Earnings per Share

   09/30/2015      09/30/2014  

Net income for the period of the Company

     1,009,316         872,169   
  

 

 

    

 

 

 

Weighted average shares outstanding (in thousands)

     544,523         545,255   

Basic earnings per share – R$

     1.8536         1.5996   
  

 

 

    

 

 

 

 

Diluted Earnings per Share

   09/30/2015      09/30/2014  

Net income for the period of the Company

     1,009,316         872,169   
  

 

 

    

 

 

 

Weighted average shares outstanding (in thousands), including deferred stock plan and subscription warrants—indemnification

     548,901         549,430   

Diluted earnings per share –R$

     1.8388         1.5874   
  

 

 

    

 

 

 

 

Weighted Average Shares Outstanding (in thousands)

   09/30/2015      09/30/2014  

Weighted average shares outstanding for basic per share calculation:

     544,523         545,255   

Dilution effect

     

Subscription warrants—indemnification

     2,178         2,091   

Deferred Stock Plan

     2,200         2,084   
  

 

 

    

 

 

 

Weighted average shares outstanding for diluted per share calculation:

     548,901         549,430   
  

 

 

    

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

31 Ultracargo – Fire accident in Santos

On April 2, 2015, part of the storage facilities operated by Ultracargo in Santos, in the State of São Paulo, endured a nine-day fire that spread to six ethanol and gasoline tanks. The six tanks represented 4% of Ultracargo’s overall capacity in Brazil as of December 31, 2014. There were no casualties and the cause of such accident and its impacts are still being investigated, including the extent of operational losses, damage to assets, potential environmental and other liabilities and reputational harm. The Company maintains insurance policies to cover certain risks to which the subsidiaries are exposed (see Note 23.f).

On April 9, 2015, the Santos municipal government suspended Ultracargo’s activities in that city. Ultracargo’s operations in Santos comprise two separate areas. On April 27, 2015, the authorization granted by the municipal government to Ultracargo to resume operations in the area not affected by the accident was published in the Santos Official Gazette (Diário Oficial de Santos). The still suspended operations correspond to 185 thousand cubic meters capacity, or 22.5% of Ultracargo’s overall capacity in Brazil.

Experts of the Criminalistics Institute are still working on the investigation to discover the causes of the incident. Ultracargo was granted with the required authorizations to perform the first stage of the decommissioning plan of the area, which consists of the removal, transfer and disposal of the products and waste. This stage will be followed by the execution of the second stage of the work, which consists of the removal of the equipment and the structures of the terminal affected by the fire, in order to resume the operations in the remaining unavailable area. The first stage was initiated in July and is still in progress.

 

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LOGO

ULTRAPAR PARTICIPAÇÕES S.A.

MD&A—ANALYSIS OF CONSOLIDATED EARNINGS

Third Quarter 2015

 

(1) Selected financial information:

 

(R$ million)

   3Q15     3Q14     2Q15     Variation
3Q15 X
3Q14
    Variation
3Q15 X
2Q15
    9M15     9M14     Variation
9M15 X
9M14
 
                

Net revenue from sales and services

     19,160.8        17,299.9        18,510.7        11     4     55,075.2        49,914.0        10

Cost of products and services sold

     (17,510.3     (15,929.9     (16,968.0     10     3     (50,299.9     (45,972.1     9

Gross profit

     1,650.5        1,370.0        1,542.7        20     7     4,775.3        3,941.9        21

Selling, marketing, general and administrative expenses

     (974.5     (825.6     (923.2     18     6     (2,769.9     (2,417.8     15

Other operating income, net

     15.4        20.9        (21.2     -26     -173     15.7        62.4        -75

Gain on disposal of property, plant and equipment and intangibles

     4.6        8.5        2.4        -46     94     29.2        15.2        92

Operating income

     696.0        573.9        600.6        21     16     2,050.2        1,601.7        28

Financial expenses, net

     (233.1     (107.4     (127.2     117     83     (541.5     (320.7     69

Share of profit of joint ventures and associates

     (5.8     (5.2     3.4        11     -267     (5.2     (10.8     -52

Income before income and social contribution taxes

     457.1        461.3        476.9        -1     -4     1,503.4        1,270.1        18

Income and social contribution taxes – current and deferred

     (180.2     (147.0     (167.5     23     8     (546.2     (438.1     25

Income and social contribution taxes – tax incentives

     21.7        14.5        21.7        50     0     59.0        47.4        24

Net income

     298.5        328.8        331.1        -9     -10     1,016.2        879.5        16

Net income attributable to Ultrapar

     295.9        326.2        328.6        -9     -10     1,009.3        872.2        16

Net income attributable to non-controlling interests in subsidiaries

     2.7        2.6        2.5        2     6     6.9        7.3        -5

EBITDA (*)

     944.1        789.5        845.8        20     12     2,776.4        2,242.3        24

Volume – LPG sales – thousand tons

     450.7        461.0        430.1        -2     5     1,284.0        1,281.4        0

Volume – Fuels sales – thousand of cubic meters

     6,574.1        6,538.8        6,432.7        1     2     19,136.7        18,898.5        1

Volume – Chemicals sales – thousand tons

     190.8        204.5        192.6        -7     -1     558.5        585.7        -5

 

(*) For further information on EBITDA, see note (1) on page 104.

 

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Considerations on the financial and operational information

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 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 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.

In September 2013, Ultrapar entered into an association agreement with Extrafarma. The transaction was closed on January 31, 2014 upon the approval of the association by the Extraordinary General Meetings of Ultrapar and Extrafarma. Extrafarma’s results were consolidated in Ultrapar’s financial statements as from February 1, 2014. Consequently, Ultrapar’s financial statements for the periods prior to February 1, 2014 do not include Extrafarma’s results and its operational data included in this release refer, for the first nine months of 2014, exclusively to the months from February to September 2014. As a consequence of the closing of the transaction, 12,021,100 new common, nominative book-entry shares with no par value of Ultrapar were issued, which corresponded to R$ 141.9 million of capital increase and R$ 498.8 million of increase in capital reserve, totaling an increase in equity of R$ 640.7 million. In addition, Ultrapar issued subscription warrants that, if exercised, would lead to the issuance of up to 4,007,031 shares in the future, broken down into 801,409 shares related to subscription warrants – working capital and 3,205,622 shares related to subscription warrants – indemnification. On June 30, 2014, in a preliminary assessment of the working capital and indebtedness adjustments the company identified that the subscription warrants – working capital shall not be exercised by the former shareholders of Extrafarma. Accordingly, the company reversed full provision for the issuance of 801,409 shares related to subscription warrants – working capital, which corresponded to R$ 42.1 million. On June 22, 2015, the agreement related to the final adjustment of working capital and net debt of the transaction was executed by and between the parties in the amount of R$ 26.0 million. Ultrapar recognized in 2Q15 income statement, under “Other operating results”, an income amounting R$ 13.8 million related to the difference between the final working capital and net debt adjustment and the amount of R$ 12.2 million recognized under “other accounts receivable” on December 31, 2014. Ultrapar received the amount of R$ 26.0 million in 3Q15. The number of shares of subscription warrants—indemnification may be exercised from 2020 and it is adjusted according to the variations of provisions for tax, civil and labor risks, and contingent liabilities related to the period beginning before January 31, 2014. The value of the association was R$ 719.9 million. For further information, see Note 3a and Note 22 to the Financial Statements for the year ended December 31, 2014.

 

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(2) Performance Analysis:

Ultrapar

Net revenue from sales and services: In 3Q15, Ultrapar’s consolidated net sales and services increased by 11% compared to 3Q14, reaching R$ 19,161 million, due to the revenues growth in Ipiranga, Oxiteno, Ultragaz and Extrafarma. Compared with 2Q15, net sales and services increased by 4%, mainly due to the seasonality between periods. During 9M15, Ultrapar’s net sales and services increased by 10% compared with 9M14, totaling R$ 55,075 million.

Cost of products sold and services provided: In 3Q15, Ultrapar’s cost of products sold and services provided increased by 10% compared to 3Q14, totaling R$ 17,510 million, due to the increased cost of products sold and services provided in all business units. Compared to 2Q15, Ultrapar’s cost of products sold and services provided increased by 3% due to the increased cost of products sold and services provided in Ipiranga, Oxiteno, Ultragaz and Ultracargo, remaining stable in Extrafarma. During 9M15, Ultrapar’s cost of products sold and services provided increased by 9% compared to 9M14, totaling R$ 50,300 million.

Gross profit: Ultrapar’s gross profit amounted to R$ 1,650 million in 3Q15, up 20% from 3Q14, as a consequence of the growth in the gross profit in Ipiranga, Oxiteno, Ultragaz and Extrafarma. Compared to 2Q15, Ultrapar’s gross profit increased by 7% in all business units, except for Ultracargo, due to the partial interruption of the Santos terminal. During 9M15, Ultrapar’s gross profit of totaled R$ 4,775 million, up 21% from 9M14.

Selling, marketing, general and administrative expenses: Ultrapar’s selling, marketing, general and administrative expenses totaled R$ 975 million in 3Q15, an increase of 18% from 3Q14, due to the effects of inflation, the expansion of Ipiranga’s distribution network, higher expenses with variable compensation, in line with the earnings progression in Oxiteno and Ultragaz and the addition of expenses for the structuring for a more accelerated growth of Extrafarma, including the beginning of the operation of the new distribution center of Ceará. Compared to 2Q15, Ultrapar’s selling, marketing, general and administrative expenses increased by 6%. During 9M15, Ultrapar’s selling, marketing, general and administrative expenses totaled R$ 2,770 million, up 15% from 9M14.

Other operating results, net: In 2Q15, “Other operating results, net” amounted to a net income of R$ 15 million compared to a net income of R$ 21 million in 3Q14 and a net expense of R$ 21 million in 2Q15, mainly due to expenses related to the fire accident at Ultracargo terminal in Santos, with an impact of R$ 10 million in 3Q15 and R$ 75 million in 2Q15, partially offset by higher revenues resulting from the strategy of constant innovation in services and convenience in Ipiranga. During 9M15, “Other operating results, net” totaled a net income of R$ 16 million, compared to net income of R$ 62 million in 9M14, due to the same factors mentioned in the comparisons above.

Depreciation and amortization: Total depreciation and amortization costs and expenses in 3Q15 amounted to R$ 254 million, a 15% increase over 3Q14, as a result of investments made during the last 12 months, specially in the strategy of constant innovation in services and convenience in Ipiranga’s service stations, generating greater customer satisfaction and loyalty. Compared with 2Q15, total depreciation and amortization costs and expenses increased by 5%. During 9M15, Ultrapar’s total depreciation and amortization costs and expenses amounted to R$ 731 million, up 12% over 9M14.

Operating income: Ultrapar’s operating income amounted to R$ 696 million in 3Q15, up 21% from 3Q14, as a result of the increase in the operating income of Ipiranga, Oxiteno and Ultragaz. Compared to 2Q15, Ultrapar’s operating income increased by 16%, as a result of the increase in the operating income of Ipiranga, Oxiteno and Ultragaz. In 9M15, Ultrapar’s operating income totaled R$ 2,050 million, up 28% from 9M14.

Financial result: Ultrapar’s net debt at the end of September 2015 was R$ 5.7 billion, consistent with our leverage levels (1.5 times LTM EBITDA), compared to R$ 4.4 billion in September 2014 (1.4 times LTM EBITDA). Ultrapar reported net financial expenses of R$ 233 million in 3Q15, a R$ 126 million increase compared to 3Q14, mainly due to (i) higher interest rates, (ii) higher net debt, (iii) the effects of exchange rate fluctuations in the period and (iv) PIS/COFINS contributions on financial revenue. As compared to 2Q15, net financial expenses increased R$ 106 million, mainly due to the same factors mentioned in the comparison with 3Q14. During 9M15, Ultrapar reported net financial expenses of R$ 542 million, R$ 221 million higher than that during 9M14.

 

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Income and social contribution taxes / Tax incentives: Ultrapar reported in 3Q15 income tax and social contribution expenses, net of benefit of tax holidays, of R$ 159 million, compared with expenses of R$ 133 million in 3Q14, an increase of 20%, mainly due to non-deductible financial expenses from international units. Compared to 2Q15, Ultrapar presented an increase of 9%, substantially due to the same factor mentioned in the comparison with 3Q14. In 9M15, Ultrapar reported income tax and social contribution expenses, net of benefit of tax holidays of R$ 487 million, R$ 97 million up from 9M14.

Net income: In 3Q15, net earnings totaled R$ 299 million, a 9% decrease compared to 3Q14, mainly due to the impact of financial results between periods. Compared with 2Q15, net earnings decreased by 10%. During 9M15, Ultrapar reported net earnings of R$ 1,016 million, up 16% over 9M14.

EBITDA: Throgh a period of worsening of the Brazilian macroeconomic scenario, following the trend observed since the beginning of the year, Ultrapar’s consolidated EBITDA totaled R$ 944 million in 3Q15, a 20% increase compared to 3Q14 as a result of the EBITDA growth in all business units, except in Ultracargo, which was affected by the partial interruption of the Santos terminal. Compared to 2Q15, Ultrapar reported a 12% in EBITDA. During 9M15, EBITDA amounted to R$ 2,776 million, up 24% over 9M14.

 

R$ million

   3Q15      3Q14      2Q15     Variation
3Q15 X
3Q14
    Variation
3Q15 X
2Q15
    9M15      9M14      Variation
9M15 X
9M14
 
                    

Ultrapar

     944.1         789.5         845.8        20     12     2,776.4         2,242.3         24

Ipiranga

     610.4         556.7         575.7        10     6     1,900.6         1,576.5         21

Oxiteno

     212.1         98.7         203.0        115     4     559.7         305.9         83

Ultragaz

     103.3         89.4         72.8        16     42     248.4         223.8         11

Ultracargo

     14.5         44.5         (48.8     -67     -130     13.4         129.1         -90

Extrafarma

     5.9         1.6         8.9        266     -34     20.0         26.5         -24

 

  (1) The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) presented in this document represents the net income before (i) income and social contribution taxes, (ii) net financial expense (income) and (iii) depreciation and amortization, in accordance with ICVM 527/12. The purpose of including EBITDA information is to provide a measure used by the management for internal assessment of our operating results, and because a portion of our employee profit sharing plan is linked directly or indirectly to EBITDA performance. It is also a financial indicator widely used by investors and analysts to measure our ability to generate cash from operations and our operating performance. We also calculate EBITDA in connection with covenants related to some of our financing, as described in Note 14 to our consolidated financial statements. We believe EBITDA allows a better understanding not only of our financial performance but also of our capacity of meeting the payment of interest and principal from our debt and of obtaining resources for our investments and working capital. Our definition of EBITDA may differ from, and, therefore, may not be comparable with similarly titled measures used by other companies, thereby limiting its usefulness as a comparative measure. Because EBITDA excludes net financial expense (income), income and social contribution taxes and depreciation and amortization, it provides an indicator of general economic performance that is not affected by debt restructurings, fluctuations in interest rates or changes in income and social contribution taxes, depreciation and amortization. EBITDA is not a measure of financial performance under accounting practices adopted in Brazil or IFRS, and it should not be considered in isolation, or as a substitute for net income, as a measure of operating performance, as a substitute for cash flows from operations or as a measure of liquidity. EBITDA has material limitations that impair its value as a measure of a company’s overall profitability since it does not address certain ongoing costs of our business that could significantly affect profitability such as financial expense (income), income and social contribution taxes and depreciation and amortization.

 

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The reconciliation of EBITDA to the net income of the period is presented below:

 

R$ million

   3Q15      3Q14      2Q15      9M15      9M14  

Net income

     298.5         328.8         331.1         1,016.2         879.5   

(+) Income tax and social contribution

     158.5         132.5         145.8         487.2         390.7   

(+) Net financial expenses

     233.1         107.4         127.2         541.5         320.7   

(+) Depreciation and amortization

     253.9         220.8         241.7         731.4         651.5   

EBITDA

     944.1         789.5         845.8         2,776.4         2,242.3   

The performance analysis for each segment is presented below:

Ipiranga

Operational performance: Ipiranga’s sales volume totaled 6,574 thousand cubic meters in 3Q15, 1% above 3Q14 volume. Sales volume of fuels for light vehicles (Otto cycle) increased by 3%, driven by the growth in the vehicle fleet, investments made in Ipiranga’s network expansion and the 54% increase in ethanol sales. The volume of diesel decreased by 2% as compared to 3Q14 due to the weak performance of the economy. Compared to 2Q15, sales volume increased by 2%, mainly due to seasonality between periods. During 9M15, Ipiranga accumulated sales volume of 19,137 thousand cubic meters, up 1% over 9M14.

Net revenue from sales and services: Ipiranga’s net sales and services reached R$ 16,409 million in 3Q15, up 10% over 3Q14, mainly as a result of (i) the rise in gasoline and diesel costs in the refinery in November 2014 and February 2015, (ii) increased sales volume and (iii) the strategy of constant innovation in services and convenience in the service station, generating greater customer satisfaction and loyalty. Compared with 2Q15, net sales and services increased by 3%, as a result of seasonally higher volume. During 9M15, net sales and services amounted to R$ 47,503 million, up 10% over 9M14.

Cost of products sold: Ipiranga’s cost of goods sold totaled R$ 15,457 million in 3Q15, up 10% compared to 3Q14, mainly due to the rise in gasoline and diesel costs in the refinery in November 2014 and February 2015 and sales volume growth. As compared to 2Q15, the cost of goods sold increased by 3% due to seasonally higher volume. During 9M15, cost of goods sold totaled R$ 44,627 million, up 9% over 9M14.

Selling, marketing, general and administrative expenses: Ipiranga´s sales, general and administrative expenses amounted to R$ 525 million in 3Q15, a 13% increase over 3Q14, mainly resulting from (i) higher freight expenses due to the sales volume growth and the rise in diesel costs, (ii) the expansion of the distribution network, (iii) higher expenses with studies and projects and (iv) the effects of inflation on expenses. Compared with 2Q15, sales, general and administrative expenses increased by 5% due to the higher sales volume and higher expenses with studies and projects, partially offset by lower civil contingencies. During 9M15, sales, general and administrative expenses totaled R$ 1,523 million, up 8% over 9M14.

EBITDA: Ipiranga reported EBITDA of R$ 610 million in 3Q15, an increase of 10% compared to 3Q14, mainly due to increased sales volume in Otto cycle, boosted by investments in network expansion, and the strategy of constant innovation in services and convenience in the service station, generating greater customer satisfaction and loyalty. Compared with 2Q15, EBITDA increased by 6%, mainly due to the seasonality between periods. During 9M15, EBITDA totaled R$ 1,901 million, up 21% over 9M14.

Oxiteno

Operational performance: Oxiteno’s sales volume in 3Q15 totaled 191 thousand tons, down 7% (14 thousand tons) compared to 3Q14. Total commodity sales decreased by 7% (2 thousand tons) due to volatility in prices and in demand. Specialty chemicals sales also decreased by 7% (12 thousand tons) compared to 3Q14, a result of the Brazilian economy downturn and the decision to discontinue a line of products for the leather market. Compared to 2Q15, sales volume decreased by 1% (2 thousand tons), with a 4% growth in sales of specialty chemicals. Sales volume during 9M15 totaled 559 thousand tons, down 5% from 9M14.

 

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Net revenue from sales and services: Oxiteno’s net sales and services totaled R$ 1,132 million in 3Q15, a 30% increase over 3Q14, due to a 56% weaker Real against the US dollar, partially offset by lower sales volume and the decrease in the prices of its main raw materials. Compared with 2Q15, net sales and services increased by 12%, mainly due to the 15% weaker Real against the US dollar, partially offset by lower sales volume of commodities. During 9M15, accumulated net sales and services totaled R$ 2,996 million, up 19% over 9M14.

Cost of products sold: Oxiteno’s cost of goods sold in 3Q15 amounted to R$ 775 million, a 14% increase compared to 3Q14, mainly due a 56% weaker Real against the US dollar and increased costs of utilities, partially offset by lower sales volume and variations of costs of raw materials, correlated to international oil prices. As compared to 2Q15, cost of products sold increased by 13% due to the 15% weaker Real against the US dollar. During 9M15, cost of goods sold totaled R$ 2,061 million, up 6% over 9M14.

Selling, marketing, general and administrative expenses: Oxiteno’s sales, general and administrative expenses amounted to R$ 183 million in 3Q15, a 44% increase over 3Q14, mainly resulting from (i) higher expenses with variable compensation, in line with the earnings progression, (ii) the effects of the weaker Real on logistics and international units’ expenses, (iii) higher expenses with studies and projects and (iv) the effects of inflation. As compared to 2Q15, sales, general and administrative expenses increased by 13% due to higher expenses with logistics and studies and projects. During 9M15, sales, general and administrative expenses totaled R$ 486 million, up 30% over 9M14.

EBITDA: Oxiteno reported EBITDA of R$ 212 million in 3Q15, 115% increase over 3Q14, equivalent to US$ 313/ton, mainly due to the effect of the weaker Real against the US dollar, partially offset by lower sales volume. As compared to 2Q15, EBITDA increased by 4%, mainly due to the same factors mentioned in the comparison with 3Q14. During 9M15, EBITDA totaled R$ 560 million, up 83% over 9M14.

Ultragaz

Operational performance: In 3Q15, Ultragaz’s sales volume reached 451 thousand tons, 2% decrease compared to 3Q14, mainly as a result of the economic downturn in the bulk segment, partially offset by commercial initiatives of new resellers. Compared with 2Q15, sales volume increased by 5%, mainly derived from the seasonality between periods. During 9M15, Ultragaz accumulated sales volume of 1,284 thousand tons, remaining at the same levels observed during 9M14.

Net revenue from sales and services: Ultragaz’s net sales and services was R$ 1,213 million in 3Q15, an 11% increase over 3Q14, mainly due to the implementation of commercial initiatives in segments with higher demand, such as condominiums, and due to the increase in the cost of LPG for use in the bulk segment by Petrobras in December 2014 and in September 2015 and for bottled segment in September 2015. As compared to 2Q15, net sales and services increased by 8%, mainly due to the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras in September 2015. During 9M15, net sales and services amounted to R$ 3,373 million, up 11% over 9M14.

Cost of products sold: Ultragaz’s cost of goods sold totaled R$ 1,017 million in 3Q15, a 10% increase compared to 3Q14, mainly due to the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras and the effects of inflation on personnel expenses. Compared with 2Q15, the cost of goods sold increased by 7%, mainly due to seasonally higher volume and the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras in September 2015. During 9M15, cost of goods sold totaled R$ 2,853 million, up 10% over 9M14.

Selling, marketing, general and administrative expenses: Ultragaz’s sales, general and administrative expenses totaled R$ 133 million in 3Q15, up 17% over 3Q14, mainly due to higher expenses with variable compensation and the effects of the inflation on expenses. As compared to 2Q15, sales, general and administrative expenses increased by 2% mainly due to the same factors mentioned in the comparison with 3Q14, partially offset by lower advertising and marketing expenses resulting from Ultragaz brand relaunch campaign in 2Q15. During 9M15, sales, general and administrative expenses totaled R$ 380 million, up 16% over 9M14.

 

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EBITDA: In 3Q15, Ultragaz’s EBITDA reached R$ 103 million, a 16% increase compared to 3Q14, mainly due to the commercial initiatives of new resellers in the bottled segment and increase in the cost of LPG by Petrobras, partially offset by the effects of economic downturn in the bulk segment. As compared to 2Q15, EBITDA grew by 42%, mainly due to seasonally higher volume and lower advertising and marketing expenses. During 9M15, EBITDA totaled R$ 248 million, up 11% over 9M14.

Ultracargo

Operational performance: Ultracargo’s average storage presented a 13% reduction from 3Q14, as a result of the partial interruption of the Santos terminal due to the fire accident occurred in the beginning of April, partially offset by the increased handling of fuels by the distributors. Compared to 2Q15, average storage increased by 4%, due to the gradual recovery of Santos, where activities were fully interrupted in April. Excluding Santos, Ultracargo’s other terminals reported a stable average storage in 3Q15 compared to the same period of the previous year and a 2% decrease compared to 2Q15, mainly due to the lower handling of chemicals. During 9M15, Ultracargo’s average storage decreased by 8% compared to 9M14.

Net revenue from sales and services: Ultracargo’s net sales and services totaled R$ 77 million in 3Q15, a 14% decrease compared to 3Q14, mainly due to the lower handling, resulting from the partial interruption of the Santos terminal as a result of the fire accident. As compared to 2Q15, net sales and services increased by 5%, mainly due to the gradual recovery of handling in Santos, where activities were fully interrupted in April. Excluding the operations in Santos, Ultracargo’s other terminals reported a 2% increase in net sales and services in 3Q15 compared to 3Q14 and a 1% decrease compared to 2Q15. During 9M15, net sales and services amounted to R$ 243 million, down 8% from 9M14.

Cost of services provided: Ultracargo’s cost of services provided in 3Q15 amounted to R$ 39 million, a 9% increase compared to 3Q14, mainly due to higher personnel costs. As compared to 2Q15, cost of services provided increased by 11%, mainly due to higher costs with port tariffs and concentration of maintenance costs. During 9M15, Ultracargo’s cost of services provided totaled R$ 109 million, up 3% over 9M14.

Selling, marketing, general and administrative expenses: Ultracargo’s sales, general and administrative expenses totaled R$ 24 million in 3Q15, a 2% increase compared to 3Q14, mainly due to the effects of inflation on expenses, partially offset by the end of the amortization of an intangible asset recorded in connection with the acquisition of the Itaqui terminal, in Maranhão. Compared with 2Q15, sales, general and administrative expenses increased by 1%. During 9M15, sales, general and administrative expenses totaled R$ 69 million, down 2% over 9M14.

Other operating results: In 3Q15, “Other operating results” line totaled net expenses of R$ 10 million compared to net expenses of R$ 2 million in 3Q14 and net expenses of R$ 74 million in 2Q15, mainly due to expenses related to the fire accident occurred in Santos.

EBITDA: Ultracargo’s EBITDA totaled R$ 14 million in 3Q15, a 67% decrease compared to 3Q14, mainly due to the lower handling, as a result of the partial stoppage of the Santos terminal and expenses related to the fire accident. Excluding the operations in Santos, Ultracargo’s other terminals reported an EBITDA of R$ 25 million, a 6% and 5% decrease compared to 3Q14 and 2Q15, respectively, mainly due to lower handling of chemicals and higher maintenance costs. During 9M15, Ultracargo reported EBITDA of R$ 13 million, mainly due to the impacts caused by the accident in Santos occurred in the beginning of April.

Extrafarma

As highlighted in “Considerations on the financial and operational information”, unless otherwise indicated, Extrafarma information for 9M14 refers to the months of February to September.

Operational performance: Extrafarma ended 3Q15 with 244 drugstores in the North and Northeast regions of Brazil, an increase of 34 drugstores (16%) compared to the end of 3Q14. By the end of 3Q15, 17% of the drugstores were under 1 year of operation, compared to 15% in 3Q14. There was an increase of 10 drugstores (13 openings and 3 closings) compared to 2Q15.

 

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Gross revenues: Extrafarma’s gross revenues totaled R$ 362 million in 3Q15, an 11% increase compared to 3Q14, mainly due to the increase in gross revenues in the retail segment resulting from the higher average number of drugstores and the 5% increase in same store sales, due to the maturation of drugstores and the annual adjustment in the prices of medicines, set by the Chamber for the Regulation of the Medical Pharmaceuticals Market (CMED), partially offset by lower sales of mobile phones. As compared to 2Q15, Extrafarma’s gross revenues increased by 1%, influenced mainly by the higher average number of drugstores in the retail segment. During 9M15, Extrafarma’s gross revenues totaled R$ 1,058 million, up 28% over 9M14.

Cost of products sold and gross profit: Extrafarma’s cost of goods sold totaled R$ 234 million in 3Q15, up 9% over 3Q14, mainly as a result of increased sales and the annual adjustment in the prices of medicines, set by CMED in 2Q15. In 3Q15, Extrafarma’s gross profit reached R$ 107 million, up 14% over 3Q14, mainly due to the growth in gross revenues in the retail segment. Compared with 2Q15, the cost of goods sold remained stable, while gross profit increased by 1%, mainly as a result of the concentration of trade promotion incentives in 3Q15. During 9M15, the cost of products sold and gross profit totaled R$ 689 million and R$ 309 million, both with a 27% increase as compared to 9M14.

Selling, marketing, general and administrative expenses: Extrafarma’s sales, general and administrative expenses totaled R$ 107 million in 3Q15, a 12% increase compared to 3Q14, mainly due to (i) the 16% growth in the number of drugstores, (ii) the effects of inflation on personnel expenses, (iii) the inclusion of expenses for the structuring for a more accelerated growth, (iv) the beginning of the operation of the new distribution center of Ceará, partially offset by lower integration expenses. As compared to 2Q15, sales, general and administrative expenses increased by 4% due to higher personnel expenses, resulting from annual collective wage agreement and the opening of new drugstores. During 9M15, sales, general and administrative expenses totaled R$ 307 million, up 36% over 9M14.

EBITDA: In 3Q15, Extrafarma’s EBITDA totaled R$ 6 million, an increase of R$ 4 million compared to 3Q14, mainly due to the increase in gross revenues and lower expenses with integration. Compared with 2Q15, Extrafarma’s EBITDA decreased by 34% mainly due to higher personnel expenses, resulting from annual collective wage agreement and the opening of new drugstores. During 9M15, EBITDA totaled R$ 20 million, 24% lower than that during 9M14.

We hereby inform that in accordance with the requirements of CVM Resolution 381/03, our independent auditors Deloitte Touche Tohmatsu Auditores Independentes have not performed during these nine months of 2015 any service other than the external audit of the financial statements for the year ended on December 31, 2014 and the review of interim financial information of Ultrapar and affiliated companies and subsidiaries for the quarter ended on September 30, 2014.

 

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São Paulo, November 4, 2015 – Ultrapar Participações S.A. (BM&FBOVESPA: UGPA3 / NYSE: 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 third quarter of 2015.

Results conference call

Brazilian conference call

November 6, 2015

09:30 a.m. (US EST)

Hotel Unique (Tavarua room)

São Paulo—SP

Telephone for connection: +55 11 2188 0155

Code: Ultrapar

 

International conference call

November 6, 2015

12:00 p.m. (US EST)

Participants in Brazil: 0800 891 0015

Participants in the USA: +1 877 317 6776

International participants: +1 412 317 6776

Code: Ultrapar

 

IR Contact

E-mail: invest@ultra.com.br

Telephone: + 55 11 3177 7014

Website: www.ultra.com.br

 

Ultrapar Participações S.A.

UGPA3 = R$ 66.80/share (09/30/15)

UGP = US$ 16.72/ADR (09/30/15)

  

Main highlights in 3Q15

 

•  ULTRAPAR’S NET REVENUES TOTAL R$ 19 BILLION
IN 3Q15, 11% GROWTH OVER 3Q14.

 

•  ULTRAPAR’S EBITDA REACHES R$ 944 MILLION IN
3Q15, 20% GROWTH OVER 3Q14.

 

•  SHARE REPURCHASE PROGRAM TOTALS 1.9
MILLION SHARES IN 3Q15, REACHING 4.7 MILLION
SHARES ACQUIRED DURING 9M15.

 

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“During the third quarter, the macroeconomic environment continued to impose challenges, which we could overcome due to consistent investments in resilient segments, to the improvement of processes and to the offering of products and services that suit our customer’s needs. Our multi-business positioning allows us to walk through adversity and continue to present sound results and implement our strategic initiatives. We have just opened our first Extrafarma drugstore in an Ipiranga service station, which marks the beginning of a more intense process of cross-fertilization among our specialized distribution and retail businesses.y.”

 

Thilo Mannhardt – CEO

 

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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 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 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.

In September 2013, Ultrapar entered into an association agreement with Extrafarma. The transaction was closed on January 31, 2014 upon the approval of the association by the Extraordinary General Meetings of Ultrapar and Extrafarma. Extrafarma’s results were consolidated in Ultrapar’s financial statements as from February 1, 2014. Consequently, Ultrapar’s financial statements for the periods prior to February 1, 2014 do not include Extrafarma’s results and its operational data included in this release refer, for the first nine months of 2014, exclusively to the months from February to September 2014. As a consequence of the closing of the transaction, 12,021,100 new common, nominative book-entry shares with no par value of Ultrapar were issued, which corresponded to R$ 141.9 million of capital increase and R$ 498.8 million of increase in capital reserve, totaling an increase in equity of R$ 640.7 million. In addition, Ultrapar issued subscription warrants that, if exercised, would lead to the issuance of up to 4,007,031 shares in the future, broken down into 801,409 shares related to subscription warrants – working capital and 3,205,622 shares related to subscription warrants – indemnification. On June 30, 2014, in a preliminary assessment of the working capital and indebtedness adjustments the company identified that the subscription warrants – working capital shall not be exercised by the former shareholders of Extrafarma. Accordingly, the company reversed full provision for the issuance of 801,409 shares related to subscription warrants – working capital, which corresponded to R$ 42.1 million. On June 22, 2015, the agreement related to the final adjustment of working capital and net debt of the transaction was executed by and between the parties in the amount of R$ 26.0 million. Ultrapar recognized in 2Q15 income statement, under “Other operating results”, an income amounting R$ 13.8 million related to the difference between the final working capital and net debt adjustment and the amount of R$ 12.2 million recognized under “other accounts receivable” on December 31, 2014. Ultrapar received the amount of R$ 26.0 million in 3Q15. The number of shares of subscription warrants—indemnification may be exercised from 2020 and it is adjusted according to the variations of provisions for tax, civil and labor risks, and contingent liabilities related to the period beginning before January 31, 2014. The value of the association was R$ 719.9 million. For further information, see Note 3a and Note 22 to the Financial Statements for the year ended December 31, 2014.

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. The calculation of EBITDA starting from net earnings is presented below:

 

R$ million    3Q15      3Q14      2Q15     

D%

3Q15v3Q14

 

D%

3Q15v2Q15

  9M15      9M14     

D%

9M15v9M14

Net earnings

     298.5         328.8         331.1       -9%   -10%     1,016.2         879.5       16%

(+) Income and social contribution taxes

     158.5         132.5         145.8             487.2         390.7        

(+) Financial expenses (income), net

     233.1         107.4         127.2             541.5         320.7        

(+) Depreciation and amortization

     253.9         220.8         241.7             731.4         651.5        

EBITDA

     944.1         789.5         845.8       20%   12%     2,776.4         2,242.3       24%

 

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Summary of 3rd quarter 2015

 

Ultrapar — Consolidated data    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

 

D (%)

3Q15v2Q15

  9M15    9M14   

D (%)

9M15v9M14

Net sales and services

   19,161    17,300    18,511    11%   4%   55,075    49,914    10%

Gross profit

   1,650    1,370    1,543    20%   7%   4,775    3,942    21%

Operating profit

   696    574    601    21%   16%   2,050    1,602    28%

EBITDA

   944    789    846    20%   12%   2,776    2,242    24%

Net earnings¹

   299    329    331    (9%)   (10%)   1,016    879    16%

Earnings per share attributable to Ultrapar shareholders²

   0.54    0.59    0.60    (8%)   (9%)   1.84    1.59    16%

Amounts in R$ million (except for EPS)

                                     
¹ Under IFRS, consolidated net earnings include net earnings attributable to non-controlling shareholders of the controlled companies.
2 Calculated based on the weighted average number of shares over the period, excluding shares held in treasury.

 

Ipiranga — Operational data    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

 

D (%)

3Q15v2Q15

   9M15    9M14   

D (%)

9M15v9M14

Total volume (000 m³)

   6,574    6,539    6,433    1%   2%    19,137    18,899    1%

Diesel

   3,411    3,473    3,300    (2%)   3%    9,754    9,943    (2%)

Gasoline, ethanol and NGV

   3,062    2,970    3,035    3%   1%    9,091    8,689    5%

Other3

   101    97    98    4%   3%    291    266    9%
3  Fuel oils, arla 32, kerosene, lubricants and greases.

 

Oxiteno — Operational data    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

 

D (%)

3Q15v2Q15

  9M15    9M14   

D (%)

9M15v9M14

Total volume (000 tons)

   191    204    193    (7%)   1%   559    586    (5%)

Product mix

                       

Specialty chemicals

   163    175    157    (7%)   4%   476    507    (6%)

Glycols

   27    30    35    (7%)   (22%)   83    79    5%

Geographical mix

                       

Sales in Brazil

   135    146    138    (7%)   (2%)   400    418    (4%)

Sales outside Brazil

   56    59    55    (5%)   2%   158    168    (5%)

 

Ultragaz — Operational data    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

 

D (%)

3Q15v2Q15

   9M15    9M14   

D (%)

9M15v9M14

Total volume (000 tons)

   451    461    430    (2%)   5%    1,284    1,281    0%

Bottled

   311    310    297    0%   5%    881    862    2%

Bulk

   140    151    133    (7%)   5%    403    419    (4%)

 

Ultracargo — Operational data    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

 

D (%)

3Q15v2Q15

   9M15    9M14   

D (%)

9M15v9M14

Effective storage4 (000 m3)

   639    731    609    (13%)   4%    668    727    (8%)
4  Monthly average.

 

Extrafarma — Operational data5    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

  

D (%)

3Q15v2Q15

   9M15    9M14   

D (%)

9M15v9M14

Gross revenues (R$ million)

   362    327    359    11%    1%    1.058    825    28%

Number of stores (end of period)

   244    210    234    16%    4%    244    210    16%
5  As highlighted in “Considerations on the financial and operational information”, unless otherwise indicated, Extrafarma information for 9M14 refers to the months from February to September.

 

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Macroeconomic indicators    3Q15    3Q14    2Q15   

D (%)

3Q15v3Q14

  

D (%)

3Q15v2Q15

   9M15    9M14   

D (%)

9M15v9M14

Average exchange rate (R$/US$)

   3.55    2.28    3.07    56%    15%    3.16    2.29    38%

Brazilian interbank interest rate (CDI)

   3.4%    2.7%    3.0%          10.8%    7.8%     

Inflation in the period (IPCA)

   1.4%    0.8%    2.3%              7.6%    4.6%     

 

    Highlights

 

 

ü Opening of the first Extrafarma’s drugstore in Ultra’s resellers network – As a further step that demonstrates opportunities among Ultra’s businesses, in 3Q15 Extrafarma opened the first drugstore in an Ipiranga’s service station in Belém (PA). Such fact represents the process of accelerated growth of the drugstore network through Ultra’s retail outlets, which today total more than 12 thousand points of sale represented by Ipiranga’s service stations and Ultragaz’s resellers, providing our customers with more convenience and quality and creating value for the company. The new store has 250 square meters and was built with the technology inspired by Ipiranga’s Posto Ecoeficiente (Eco-Efficient service station), focusing on the efficient use of natural resources.

 

ü Update about the fire in a terminal operated by Ultracargo in Santos (SP) – Ultracargo’s operations in the terminal affected by a fire accident in April 2015, in Santos (SP), remain suspended. The part of the terminal with suspended operations has a capacity of 185 thousand m³, 55% of Ultracargo’s capacity in Santos and 22.5% of company’s total capacity. The fire affected 6 tanks with a total capacity of 34 thousand m³. Ultracargo has been performing the first stage of the decommissioning plan of the affected area, which consists in removing, transferring and disposing of the remaining products and residues. In a parallel workstream, we have prepared planning of the second stage of the decommissioning to present it to the relevant authorities in order to obtain the approvals necessary to remove equipments and structures from the terminal affected by the fire.

 

ü Ultra will have a new strategic partner in ConectCar – In October, Itaú Unibanco entered into an agreement with Odebrecht Transport to acquire, for R$ 170 million, 50% of ConectCar, a company that operates in the segment of electronic payment for tolls, parking lots and fuel. Such transaction will give ConectCar the opportunity to expand its services to new markets, continuing with its purpose of providing the customers with mobility, convenience, flexibility and, above all, differentiated benefits. Ipiranga holds the remaining 50% interest of the company and the governance will be shared between Ultra and Itaú Unibanco.

 

ü Ultrapar receives important awards – In September 2015, Ultrapar was ranked number one for its investor relations by Institutional Investor magazine, including the best CEO, the best CFO, the best IR professionals and IR team, and the best analysts day, in the segment of Oil, Gas and Petrochemicals in Latin America. Additionally, in October 29, 2015, Thilo Mannhardt, Ultrapar’s CEO, received the 2015 Bravo Awards “Latin America CEO of the year” by Latin Trade.

 

ü Expansion of Oxiteno in the United States – Ultrapar’s Board of Directors approved on November 4, 2015, the expansion of Oxiteno’s specialty chemicals’ capacity in Pasadena (TX), in the U.S., by building an ethoxylation unit at its current site. The plant is located in one of the world’s most important chemical hubs, taking advantage of attractive conditions of raw materials, as well as highly efficient logistics infrastructure. The total investment, estimated at US$ 113 million, will expand Oxiteno’s footprint in the U.S., focusing on local markets of agrochemicals, personal care, household and industrial cleaning, coatings and oil and gas.

 

 

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    Executive summary of the results

During 3Q15, the worsening of the Brazilian macroeconomic scenario followed the same trend seen since the beginning of the year, with the combination of inflation above the target, increasingly weak economic activity, soaring interest rates, rise in the unemployment rate and depreciation of the Real. Such environment became even worse in the last quarter due to the increasing political instability during the last months, with hurdles to approve tax adjustments necessary to Brazil, leading to the downgrade of Brazil’s credit rating by the agencies. In the international scenario, oil prices remained at levels much lower than those observed in the last years, ending the quarter at US$ 47/barrel (Brent), 51% lower than the closing price in 3Q14. The base interest rate increased from 13.75% at the end of the second quarter to 14.25% at the end of the third quarter of 2015, as compared to 11.0% in September 2014. The average Real to dollar exchange rate in 3Q15 was of R$ 3.55/US$ as compared to R$ 2.28/US$ in 3Q14, a 56% variation between the compared periods. According to Anfavea, the number of light vehicles licensed totaled 613 thousand vehicles in 3Q15, a 26% reduction when compared to the same period of the previous year. If we assume the 26% reduction for the full year 2015, the estimated growth of the light vehicles fleet in 2015 would be 4% compared to 2014. In the retail pharmacy sector, according to data from members of Abrafarma, sales continue to grow, though at a lower pace, ending the 3Q15 with an 11% increase compared to 3Q14.

At Ipiranga, fuel sales volume for light vehicles (Otto cycle) presented a 3% growth as compared to 3Q14, driven by a growth in the light vehicles fleet, investments made over the last years to expand the distribution network (opening of new service stations and conversion of unbranded ones) and the 54% increase in ethanol sales. The growth of Otto cycle was partially offset by lower diesel sales, following the weak performance of the Brazilian economy. EBITDA reached R$ 610 million, an increase of 10% compared to 3Q14, due to increased sales volume in Otto cycle, boosted by investments in the network expansion, and to the strategy of constant innovation in services and convenience in the service station, generating greater customer satisfaction and loyalty.

At Oxiteno, sales volume reached 191 thousand tons, down 7% from 3Q14, due to lower commodity sales, resulting from its volatility in prices and in demand, and the effects of the economic slowdown on the volume of specialty chemicals in the domestic market. EBITDA totaled R$ 212 million in 3Q15, up 115% over 3Q14, mainly due to a 56% weaker Real against the US dollar, which contributed to the increase in EBITDA/ton from US$ 212/ton in 3Q14 to US$ 313/ton in 3Q15.

In 3Q15, Ultragaz reported a 2% decrease in sales volume compared to 3Q14, mainly as a result of the economic slowdown over the bulk segment, partially offset by commercial initiatives of new resellers in the bottled segment. In 3Q15, Ultragaz’s EBITDA reached R$ 103 million, a 16% increase compared to 3Q14, mainly due to the commercial initiatives of new resellers in the bottled segment and increase in the cost of LPG for use in bottled and bulk segments by Petrobras.

Ultracargo’s average storage presented a 13% reduction over 3Q14, as a result of the partial interruption of the Santos terminal due to the fire accident occurred in April, partially offset by the increased handling of fuels by the distributors. Ultracargo’s EBITDA reached R$ 14 million in 3Q15, a 67% decrease over 3Q14, mainly due to the lower handling resulting from the partial interruption of the Santos terminal and expenses related to the fire accident, partially offset by the increased handling of fuels. Excluding Santos operations, other Ultracargo’s terminals reported an EBITDA of R$ 25 million in 3Q15, a 6% decrease compared to 3Q14.

Extrafarma ended 3Q15 with 244 company-owned stores in the North and Northeast regions of Brazil, an increase of 34 stores compared to 3Q14. Extrafarma’s gross revenues totaled R$ 362 million in 3Q15, an 11% increase compared to 3Q14, mainly due to the increase in gross revenues in the retail segment resulting from the higher average number of drugstores and the increase in same store sales. In 3Q15, EBITDA totaled R$ 6 million, an increase of R$ 4 million compared to 3Q14, due to the increase in gross revenues and lower expenses with integration.

The resilient performance of Ultrapar’s businesses resulted in a consolidated EBITDA of R$ 944 million in 3Q15, up 20% over 3Q14. In 3Q15, net earnings amounted to R$ 299 million, a 9% decrease compared to 3Q14, mainly due to the impact of the financial results between periods, influenced by the higher interest rates and by the strong devaluation of the Real against the US dollar.

 

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    Ipiranga

Operational performance – Ipiranga’s sales volume totaled 6,574 thousand cubic meters in 3Q15, 1% above 3Q14 volume. Sales volume of fuels for light vehicles (Otto cycle) increased by 3%, driven by the growth in the vehicle fleet, investments made in Ipiranga’s network expansion and the 54% increase in ethanol sales. The volume of diesel decreased by 2% as compared to 3Q14 due to the weak performance of the economy. Compared to 2Q15, sales volume increased by 2%, mainly due to seasonality between periods. During 9M15, Ipiranga accumulated sales volume of 19,137 thousand cubic meters, up 1% over 9M14.

Ipiranga – Sales volume (000 m³)

 

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Net sales and services – Ipiranga’s net sales and services reached R$ 16,409 million in 3Q15, up 10% over 3Q14, mainly as a result of (i) the rise in gasoline and diesel costs in the refinery in November 2014 and February 2015, (ii) increased sales volume and (iii) the strategy of constant innovation in services and convenience in the service station, generating greater customer satisfaction and loyalty. Compared with 2Q15, net sales and services increased by 3%, as a result of seasonally higher volume. During 9M15, net sales and services amounted to R$ 47,503 million, up 10% over 9M14.

Cost of goods sold – Ipiranga’s cost of goods sold totaled R$ 15,457 million in 3Q15, up 10% compared to 3Q14, mainly due to the rise in gasoline and diesel costs in the refinery in November 2014 and February 2015 and sales volume growth. As compared to 2Q15, the cost of goods sold increased by 3% due to seasonally higher volume. During 9M15, cost of goods sold totaled R$ 44,627 million, up 9% over 9M14.

Sales, general and administrative expenses – Ipiranga´s sales, general and administrative expenses amounted to R$ 525 million in 3Q15, a 13% increase over 3Q14, mainly resulting from (i) higher freight expenses due to the sales volume growth and the rise in diesel costs, (ii) the expansion of the distribution network, (iii) higher expenses with studies and projects and (iv) the effects of inflation on expenses. Compared with 2Q15, sales, general and administrative expenses increased by 5% due to the higher sales volume and higher expenses with studies and projects, partially offset by lower civil contingencies. During 9M15, sales, general and administrative expenses totaled R$ 1,523 million, up 8% over 9M14.

EBITDA – Ipiranga reported EBITDA of R$ 610 million in 3Q15, an increase of 10% compared to 3Q14, mainly due to increased sales volume in Otto cycle, boosted by investments in network expansion, and the strategy of constant innovation in services and convenience in the service station, generating greater customer satisfaction and loyalty. Compared with 2Q15, EBITDA increased by 6%, mainly due to the seasonality between periods. During 9M15, EBITDA totaled R$ 1,901 million, up 21% over 9M14.

 

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    Oxiteno

Operational performance – Oxiteno’s sales volume in 3Q15 totaled 191 thousand tons, down 7% (14 thousand tons) compared to 3Q14. Total commodity sales decreased by 7% (2 thousand tons) due to volatility in prices and in demand. Specialty chemicals sales also decreased by 7% (12 thousand tons) compared to 3Q14, a result of the Brazilian economy downturn and the decision to discontinue a line of products for the leather market. Compared to 2Q15, sales volume decreased by 1% (2 thousand tons), with a 4% growth in sales of specialty chemicals. Sales volume during 9M15 totaled 559 thousand tons, down 5% from 9M14.

Oxiteno – Sales volume (000 tons)

 

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Net sales and services – Oxiteno’s net sales and services totaled R$ 1,132 million in 3Q15, a 30% increase over 3Q14, due to a 56% weaker Real against the US dollar, partially offset by lower sales volume and the decrease in the prices of its main raw materials. Compared with 2Q15, net sales and services increased by 12%, mainly due to the 15% weaker Real against the US dollar, partially offset by lower sales volume of commodities. During 9M15, accumulated net sales and services totaled R$ 2,996 million, up 19% over 9M14.

Cost of goods sold – Oxiteno’s cost of goods sold in 3Q15 amounted to R$ 775 million, a 14% increase compared to 3Q14, mainly due a 56% weaker Real against the US dollar and increased costs of utilities, partially offset by lower sales volume and variations of costs of raw materials, correlated to international oil prices. As compared to 2Q15, cost of products sold increased by 13% due to the 15% weaker Real against the US dollar. During 9M15, cost of goods sold totaled R$ 2,061 million, up 6% over 9M14.

Sales, general and administrative expenses – Oxiteno’s sales, general and administrative expenses amounted to R$ 183 million in 3Q15, a 44% increase over 3Q14, mainly resulting from (i) higher expenses with variable compensation, in line with the earnings progression, (ii) the effects of the weaker Real on logistics and international units’ expenses, (iii) higher expenses with studies and projects and (iv) the effects of inflation. As compared to 2Q15, sales, general and administrative expenses increased by 13% due to higher expenses with logistics and studies and projects. During 9M15, sales, general and administrative expenses totaled R$ 486 million, up 30% over 9M14.

EBITDA – Oxiteno reported EBITDA of R$ 212 million in 3Q15, 115% increase over 3Q14, equivalent to US$ 313/ton, mainly due to the effect of the weaker Real against the US dollar, partially offset by lower sales volume. As compared to 2Q15, EBITDA increased by 4%, mainly due to the same factors mentioned in the comparison with 3Q14. During 9M15, EBITDA totaled R$ 560 million, up 83% over 9M14.

 

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    Ultragaz

Operational performance – In 3Q15, Ultragaz’s sales volume reached 451 thousand tons, 2% decrease compared to 3Q14, mainly as a result of the economic downturn in the bulk segment, partially offset by commercial initiatives of new resellers. Compared with 2Q15, sales volume increased by 5%, mainly derived from the seasonality between periods. During 9M15, Ultragaz accumulated sales volume of 1,284 thousand tons, remaining at the same levels observed during 9M14.

Ultragaz – Sales volume (000 tons)

 

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Net sales and services – Ultragaz’s net sales and services was R$ 1,213 million in 3Q15, an 11% increase over 3Q14, mainly due to the implementation of commercial initiatives in segments with higher demand, such as condominiums, and due to the increase in the cost of LPG for use in the bulk segment by Petrobras in December 2014 and in September 2015 and for bottled segment in September 2015. As compared to 2Q15, net sales and services increased by 8%, mainly due to the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras in September 2015. During 9M15, net sales and services amounted to R$ 3,373 million, up 11% over 9M14.

Cost of goods sold – Ultragaz’s cost of goods sold totaled R$ 1,017 million in 3Q15, a 10% increase compared to 3Q14, mainly due to the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras and the effects of inflation on personnel expenses. Compared with 2Q15, the cost of goods sold increased by 7%, mainly due to seasonally higher volume and the increase in the cost of LPG for use in the bottled and bulk segments by Petrobras in September 2015. During 9M15, cost of goods sold totaled R$ 2,853 million, up 10% over 9M14.

Sales, general and administrative expenses – Ultragaz’s sales, general and administrative expenses totaled R$ 133 million in 3Q15, up 17% over 3Q14, mainly due to higher expenses with variable compensation and the effects of the inflation on expenses. As compared to 2Q15, sales, general and administrative expenses increased by 2% mainly due to the same factors mentioned in the comparison with 3Q14, partially offset by lower advertising and marketing expenses resulting from Ultragaz brand relaunch campaign in 2Q15. During 9M15, sales, general and administrative expenses totaled R$ 380 million, up 16% over 9M14.

EBITDA – In 3Q15, Ultragaz’s EBITDA reached R$ 103 million, a 16% increase compared to 3Q14, mainly due to the commercial initiatives of new resellers in the bottled segment and increase in the cost of LPG by Petrobras, partially offset by the effects of economic downturn in the bulk segment. As compared to 2Q15, EBITDA grew by 42%, mainly due to seasonally higher volume and lower advertising and marketing expenses. During 9M15, EBITDA totaled R$ 248 million, up 11% over 9M14.

 

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    Ultracargo

Operational performance – Ultracargo’s average storage presented a 13% reduction from 3Q14, as a result of the partial interruption of the Santos terminal due to the fire accident occurred in the beginning of April, partially offset by the increased handling of fuels by the distributors. Compared to 2Q15, average storage increased by 4%, due to the gradual recovery of Santos, where activities were fully interrupted in April. Excluding Santos, Ultracargo’s other terminals reported a stable average storage in 3Q15 compared to the same period of the previous year and a 2% decrease compared to 2Q15, mainly due to the lower handling of chemicals. During 9M15, Ultracargo’s average storage decreased by 8% compared to 9M14.

Ultracargo – Average storage (000 m³)

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Net sales and services – Ultracargo’s net sales and services totaled R$ 77 million in 3Q15, a 14% decrease compared to 3Q14, mainly due to the lower handling, resulting from the partial interruption of the Santos terminal as a result of the fire accident. As compared to 2Q15, net sales and services increased by 5%, mainly due to the gradual recovery of handling in Santos, where activities were fully interrupted in April. Excluding the operations in Santos, Ultracargo’s other terminals reported a 2% increase in net sales and services in 3Q15 compared to 3Q14 and a 1% decrease compared to 2Q15. During 9M15, net sales and services amounted to R$ 243 million, down 8% from 9M14.

Cost of services provided – Ultracargo’s cost of services provided in 3Q15 amounted to R$ 39 million, a 9% increase compared to 3Q14, mainly due to higher personnel costs. As compared to 2Q15, cost of services provided increased by 11%, mainly due to higher costs with port tariffs and concentration of maintenance costs. During 9M15, Ultracargo’s cost of services provided totaled R$ 109 million, up 3% over 9M14.

Sales, general and administrative expenses – Ultracargo’s sales, general and administrative expenses totaled R$ 24 million in 3Q15, a 2% increase compared to 3Q14, mainly due to the effects of inflation on expenses, partially offset by the end of the amortization of an intangible asset recorded in connection with the acquisition of the Itaqui terminal, in Maranhão. Compared with 2Q15, sales, general and administrative expenses increased by 1%. During 9M15, sales, general and administrative expenses totaled R$ 69 million, down 2% over 9M14.

Other operating results – In 3Q15, “Other operating results” line totaled net expenses of R$ 10 million compared to net expenses of R$ 2 million in 3Q14 and net expenses of R$ 74 million in 2Q15, mainly due to expenses related to the fire accident occurred in Santos.

EBITDA – Ultracargo’s EBITDA totaled R$ 14 million in 3Q15, a 67% decrease compared to 3Q14, mainly due to the lower handling, as a result of the partial stoppage of the Santos terminal and expenses related to the fire accident. Excluding the operations in Santos, Ultracargo’s other terminals reported an EBITDA of R$ 25 million, a 6% and 5% decrease compared to 3Q14 and 2Q15, respectively, mainly due to lower handling of chemicals and higher maintenance costs. During 9M15, Ultracargo reported EBITDA of R$ 13 million, mainly due to the impacts caused by the accident in Santos occurred in the beginning of April.

 

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    Extrafarma

As highlighted in “Considerations on the financial and operational information”, unless otherwise indicated, Extrafarma information for 9M14 refers to the months from February to September.

Operational performance – Extrafarma ended 3Q15 with 244 drugstores in the North and Northeast regions of Brazil, an increase of 34 drugstores (16%) compared to the end of 3Q14. By the end of 3Q15, 17% of the drugstores were under 1 year of operation, compared to 15% in 3Q14. There was an increase of 10 drugstores (13 openings and 3 closings) compared to 2Q15.

Extrafarma – Number of stores and maturation profile

 

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Gross revenues – Extrafarma’s gross revenues totaled R$ 362 million in 3Q15, an 11% increase compared to 3Q14, mainly due to the increase in gross revenues in the retail segment resulting from the higher average number of drugstores and the 5% increase in same store sales, due to the maturation of drugstores and the annual adjustment in the prices of medicines, set by the Chamber for the Regulation of the Medical Pharmaceuticals Market (CMED), partially offset by lower sales of mobile phones. As compared to 2Q15, Extrafarma’s gross revenues increased by 1%, influenced mainly by the higher average number of drugstores in the retail segment. During 9M15, Extrafarma’s gross revenues totaled R$ 1,058 million, up 28% over 9M14.

Cost of goods sold and gross profit – Extrafarma’s cost of goods sold totaled R$ 234 million in 3Q15, up 9% over 3Q14, mainly as a result of increased sales and the annual adjustment in the prices of medicines, set by CMED in 2Q15. In 3Q15, Extrafarma’s gross profit reached R$ 107 million, up 14% over 3Q14, mainly due to the growth in gross revenues in the retail segment. Compared with 2Q15, the cost of goods sold remained stable, while gross profit increased by 1%, mainly as a result of the concentration of trade promotion incentives in 3Q15. During 9M15, the cost of products sold and gross profit totaled R$ 689 million and R$ 309 million, both with a 27% increase as compared to 9M14.

Sales, general and administrative expenses – Extrafarma’s sales, general and administrative expenses totaled R$ 107 million in 3Q15, a 12% increase compared to 3Q14, mainly due to (i) the 16% growth in the number of drugstores, (ii) the effects of inflation on personnel expenses, (iii) the inclusion of expenses for the structuring for a more accelerated growth, (iv) the beginning of the operation of the new distribution center of Ceará, partially offset by lower integration expenses. As compared to 2Q15, sales, general and administrative expenses increased by 4% due to higher personnel expenses, resulting from annual collective wage agreement and the opening of new drugstores. During 9M15, sales, general and administrative expenses totaled R$ 307 million, up 36% over 9M14.

EBITDA – In 3Q15, Extrafarma’s EBITDA totaled R$ 6 million, an increase of R$ 4 million compared to 3Q14, mainly due to the increase in gross revenues and lower expenses with integration. Compared with 2Q15, Extrafarma’s EBITDA decreased by 34% mainly due to higher personnel expenses, resulting from annual collective wage agreement and the opening of new drugstores. During 9M15, EBITDA totaled R$ 20 million, 24% lower than that during 9M14.

 

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Ultrapar

Net sales and services – Ultrapar’s consolidated net sales and services in 3Q15 increased by 11% compared to 3Q14, reaching R$ 19,161 million, due to the revenues growth in Ipiranga, Oxiteno, Ultragaz and Extrafarma. Compared with 2Q15, net sales and services increased by 4%, mainly due to the seasonality between periods. During 9M15, Ultrapar’s net sales and services increased by 10% compared with 9M14, totaling R$ 55,075 million.

EBITDA – Through a period of worsening of the Brazilian macroeconomic scenario, following the trend observed since the beginning of the year, Ultrapar’s consolidated EBITDA totaled R$ 944 million in 3Q15, a 20% increase compared to 3Q14 as a result of the EBITDA growth in all business units, except in Ultracargo, which was affected by the partial interruption of the Santos terminal. Compared to 2Q15, Ultrapar reported a 12% in EBITDA. During 9M15, EBITDA amounted to R$ 2,776 million, up 24% over 9M14.

EBITDA (R$ million)

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Depreciation and amortization – Total depreciation and amortization costs and expenses in 3Q15 amounted to R$ 254 million, a 15% increase over 3Q14, as a result of investments made during the last 12 months, specially in the strategy of constant innovation in services and convenience in Ipiranga’s service stations, generating greater customer satisfaction and loyalty. Compared with 2Q15, total depreciation and amortization costs and expenses increased by 5%. During 9M15, Ultrapar’s total depreciation and amortization costs and expenses amounted to R$ 731 million, up 12% over 9M14.

Financial results – Ultrapar’s net debt at the end of September 2015 was R$ 5.7 billion, consistent with our leverage levels (1.5 times LTM EBITDA), compared to R$ 4.4 billion in September 2014 (1.4 times LTM EBITDA). Ultrapar reported net financial expenses of R$ 233 million in 3Q15, a R$ 126 million increase compared to 3Q14, mainly due to (i) higher interest rates, (ii) higher net debt, (iii) the effects of exchange rate fluctuations in the period and (iv) PIS/COFINS contributions on financial revenue. As compared to 2Q15, net financial expenses increased R$ 106 million, mainly due to the same factors mentioned in the comparison with 3Q14. During 9M15, Ultrapar reported net financial expenses of R$ 542 million, R$ 221 million higher than that during 9M14.

Net earnings – In 3Q15, net earnings totaled R$ 299 million, a 9% decrease compared to 3Q14, mainly due to the impact of financial results between periods. Compared with 2Q15, net earnings decreased by 10%. During 9M15, Ultrapar reported net earnings of R$ 1,016 million, up 16% over 9M14.

 

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Investments – Total investments, net of disposals and repayments, amounted to R$ 374 million in 3Q15, allocated as follows:

 

    At Ipiranga, R$ 237 million were invested, mainly in the expansion and maintenance of the service stations and franchises network.

 

    At Oxiteno, R$ 39 million were invested, mainly in the maintenance of its production units.

 

    At Ultragaz, R$ 54 million were invested, mainly in new clients in the bulk and LPG bottles segments.

 

    Ultracargo invested R$ 4 million, mainly directed towards maintenance of terminals.

 

    At Extrafarma, R$ 18 million were invested, mainly in the opening of new drugstores and renovation of existing drugstores.

 

 

R$ million    3Q15      2015    

Total investments, net of disposals and repayments

(R$ million)

Additions to fixed and intangible assets

           

 

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Ipiranga

     237         500     

Oxiteno

     39         87     

Ultragaz

     54         175     

Ultracargo

     4         10     

Extrafarma

     18         49     

Total — additions to fixed and intangible assets¹

     361         841     

Financing to clients² – Ipiranga

     2         (11  

Acquisition (disposal) of equity interest

     11         31     

Total investments, net of disposals and repayments

     374         861     

 

¹ Includes the consolidation of corporate IT
² Financing to clients is included as working capital in the Cash Flow Statement

 

 

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    Ultrapar in capital markets

Ultrapar’s average daily trading volume in 3Q15 was R$ 140 million, 63% higher than the daily average of R$ 86 million in 3Q14, considering the combined trading volumes on the BM&FBOVESPA and the NYSE. Ultrapar’s share price closed 3Q15 quoted at R$ 66.80/share on the BM&FBOVESPA, with an appreciation of 2% in the quarter, while the Ibovespa index depreciated by 15% in the same period. At the NYSE, Ultrapar’s shares depreciated by 20% in 3Q15, while the Dow Jones index depreciated by 8% in the same period. Ultrapar closed 3Q15 with a market value of R$ 37 billion, up 29% over 3Q14.

 

Performance of UGPA3 vs. Ibovespa—3Q15

(Base 100)

 

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Average daily trading volume

(R$ million)

 

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    Outlook

The characteristics and diversity of our businesses, as well as our management discipline when seeking efficiency, reaffirm the prospects of continuing to grow our results, even considering the lack of visibility of economic recovery in Brazil. Ipiranga will continue to capture the benefits from the growth of the vehicle fleet in Brazil and the expansion of Midwest, Northeast and North regions of Brazil through investments in the expansion of its distribution network and related logistics infrastructure. Additionally, it will continue with its differentiation initiatives, based on increasing the offer of products, services and convenience, to further increase customer loyalty and expand the number of clients, who are offered higher value-added products and services, while the reseller is provided with an additional source of revenue and differentiated positioning, thus maximizing the profitability of the chain as a whole, including Ipiranga’s. Oxiteno will continue with focus on innovation, with the development of new products, reaping the benefits from the maturation of investments in Brazil in a more favorable foreign exchange scenario, as well as intensify the international expansion. Ultragaz will continue focused on obtaining the benefits from the investments in capturing new customers and on managing costs and expenses constantly, which will contribute to the earnings progression. Ultracargo’s priority continues to be the clarification and management of the impacts derived from the accident in Santos, without ceasing to assess the opportunities from the growing demand for liquid bulk storage in Brazil. At Extrafarma, we will continue focused on the more accelerated expansion of the company.

 

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Forthcoming events

Conference call / Webcast: November 6, 2015

Ultrapar will be holding a conference call for analysts on November 6, 2015 to comment on the company’s performance in the third quarter of 2015 and outlook. The presentation will be available for download on the company’s website 30 minutes prior to the conference call.

Brazilian: 09:30 a.m. (US EST)

Hotel Unique (public meeting with investors)

(Tavarua room)

São Paulo – SP

Telephone for connection: +55 11 2188 0155

Code: Ultrapar

International: 12:00 p.m. (US EST)

Participants in the US: +1 877 317 6776

Participants in Brazil: 0800 891 0015

Participants in other countries: +1 412 317 6776

Code: Ultrapar

WEBCAST live via Internet at www.ultra.com.br. Please connect 15 minutes in advance.

 

This document may contain forecasts of future events. Such predictions merely reflect the expectations of the Company’s management. Words such as: “believe”, “expect”, “plan”, “strategy”, “prospects”, “envisage”, “estimate”, “forecast”, “anticipate”, “may” and other words with similar meaning are intended as preliminary declarations regarding expectations and future forecasts. Such declarations are subject to risks and uncertainties, anticipated by the Company or otherwise, which could mean that the reported results turn out to be significantly different from those forecasts. Therefore, the reader should not base investment decisions solely on these estimates.

 

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Operational and market information

 

Financial focus

     3Q15         3Q14         2Q15         9M15         9M14   

EBITDA margin Ultrapar

     4.9%         4.6%         4.6%         5.0%         4.5%   

Net margin Ultrapar

     1.6%         1.9%         1.8%         1.8%         1.8%   

Focus on human resources

     3Q15         3Q14         2Q15         9M15         9M14   

Number of employees – Ultrapar

     14,569         13,613         14,307         14,569         13,613   

Number of employees – Ultragaz

     3,628         3,651         3,628         3,628         3,651   

Number of employees – Ipiranga

     2,851         2,744         2,789         2,851         2,744   

Number of employees – Oxiteno

     1,812         1,826         1,799         1,812         1,826   

Number of employees – Ultracargo

     593         623         605         593         623   

Number of employees – Extrafarma

     5,223         4,344         5,032         5,223         4,344   

Focus on capital markets

     3Q15         3Q14         2Q15         9M15         9M14   

Number of shares (000)

     556,405         556,405         556,405         556,405         556,405   

Market capitalization¹ – R$ million

     36,314         30,116         38,217         35,286         30,021   

BM&FBOVESPA

     3Q15         3Q14         2Q15         9M15         9M14   

Average daily volume (shares)

     1,485,663         1,222,346         1,503,695         1,556,760         1,213,916   

Average daily volume (R$ 000)

     96,951         66,228         103,328         98,612         65,518   

Average share price (R$/share)

     65.3         54.2         68.7         63.3         54.0   

NYSE

     3Q15         3Q14         2Q15         9M15         9M14   

Quantity of ADRs² (000 ADRs)

     30,189         32,769         30,604         30,189         32,769   

Average daily volume (ADRs)

     657,291         361,089         441,078         517,563         336,422   

Average daily volume (US$ 000)

     12,018         8,548         9,840         10,235         7,924   

Average share price (US$/ADR)

     18.28         23.67         22.31         19.78         23.55   

Total

     3Q15         3Q14         2Q15         9M15         9M14   

Average daily volume (shares)

     2,142,954         1,583,436         1,944,773         2,074,323         1,550,338   

Average daily volume (R$ 000)

     139,862         85,704         133,580         131,549         83,649   

 

All financial information is presented according to the accounting principles laid down in the Brazilian Corporate Law. All figures are expressed in Brazilian Reais, except for Oxiteno’s margins on page 21, which are expressed in US dollars and were obtained using the average exchange rate (commercial dollar rate) for the corresponding periods.

For additional information, please contact:

Investor Relations—Ultrapar Participações S.A.

+55 11 3177 7014

invest@ultra.com.br

www.ultra.com.br

1 Calculated based on the weighted average price in the period.
2 1 ADR = 1 common share.

 

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ULTRAPAR

CONSOLIDATED BALANCE SHEET

In millions of Reais

 

 
     QUARTERS ENDED IN  
     SEP     SEP     JUN  
     2015     2014     2015  

ASSETS

      

Cash, cash equivalents and financial investments

     3,682.2        3,696.9        3,258.7   

Trade accounts receivable

     3,086.1        2,542.7        2,863.6   

Inventories

     2,495.1        1,941.3        2,367.9   

Taxes

     759.1        558.6        635.9   

Other

     145.7        110.9        192.2   
  

 

 

   

 

 

   

 

 

 

Total Current Assets

     10,168.3        8,850.4        9,318.2   
  

 

 

   

 

 

   

 

 

 

Investments

     107.9        65.3        99.7   

Property, plant and equipment and intangibles

     8,555.8        7,991.7        8,328.3   

Financial investments

     400.2        129.2        226.0   

Trade accounts receivable

     142.3        137.7        145.3   

Deferred income tax

     556.7        412.3        514.7   

Escrow deposits

     737.8        684.0        719.8   

Other

     191.2        199.8        189.7   
  

 

 

   

 

 

   

 

 

 

Total Non-Current Assets

     10,691.8        9,620.0        10,223.4   
  

 

 

   

 

 

   

 

 

 

TOTAL ASSETS

     20,860.1        18,470.5        19,541.7   
  

 

 

   

 

 

   

 

 

 

LIABILITIES

      

Loans, financing and debentures

     2,169.4        2,570.4        2,002.8   

Suppliers

     948.4        975.6        958.3   

Payroll and related charges

     388.7        287.7        297.9   

Taxes

     252.4        238.6        289.1   

Other

     187.8        169.7        191.7   
  

 

 

   

 

 

   

 

 

 

Total Current Liabilities

     3,946.8        4,241.9        3,739.8   
  

 

 

   

 

 

   

 

 

 

Loans, financing and debentures

     7,571.6        5,622.3        6,465.5   

Provision for contingencies

     660.7        629.2        645.0   

Post-retirement benefits

     120.8        110.8        116.7   

Other

     582.0        363.6        469.1   
  

 

 

   

 

 

   

 

 

 

Total Non-Current Liabilities

     8,935.1        6,726.0        7,696.2   
  

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES

     12,881.9        10,967.9        11,436.0   
  

 

 

   

 

 

   

 

 

 

STOCKHOLDERS’ EQUITY

      

Capital

     3,838.7        3,838.7        3,838.7   

Reserves

     3,722.0        3,238.6        3,722.0   

Treasury shares

     (394.9     (111.5     (270.4

Others

     783.5        507.9        789.0   

Non-controlling interest

     29.0        28.8        26.4   
  

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     7,978.2        7,502.6        8,105.7   
  

 

 

   

 

 

   

 

 

 

TOTAL LIAB. AND STOCKHOLDERS’ EQUITY

     20,860.1        18,470.5        19,541.7   
  

 

 

   

 

 

   

 

 

 

Cash and financial investments

     4,082.4        3,826.1        3,484.7   

Debt

     (9,741.0     (8,192.7     (8,468.3
  

 

 

   

 

 

   

 

 

 

Net cash (debt)

     (5,658.6     (4,366.6     (4,983.6

 

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ULTRAPAR

CONSOLIDATED INCOME STATEMENT

In millions of Reais (except per share data)

 

 
     QUARTERS ENDED IN     ACCUMULATED  
     SEP     SEP     JUN     SEP     SEP  
     2015     2014     2015     2015     2014  

Net sales and services

     19,160.8        17,299.9        18,510.7        55,075.2        49,914.0   

Cost of sales and services

     (17,510.3     (15,929.9     (16,968.0     (50,299.9     (45,972.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     1,650.5        1,370.0        1,542.7        4,775.3        3,941.9   

Operating expenses

          

Selling

     (636.7     (556.7     (613.6     (1,834.5     (1,584.3

General and administrative

     (337.8     (268.9     (309.6     (935.4     (833.5

Other operating income (expenses), net

     15.4        20.9        (21.2     15.7        62.4   

Income from sale of assets

     4.6        8.5        2.4        29.2        15.2   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     696.0        573.9        600.6        2,050.2        1,601.7   

Financial results

          

Financial income

     106.3        92.7        99.7        309.5        264.0   

Financial expenses

     (339.4     (200.1     (226.9     (851.0     (584.7

Equity in earnings (losses) of affiliates

     (5.8     (5.2     3.4        (5.2     (10.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

     457.1        461.3        476.9        1,503.4        1,270.1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Provision for income and social contribution taxes

          

Current

     (110.4     (130.3     (223.9     (495.1     (436.9

Deferred

     (69.9     (16.7     56.4        (51.1     (1.2

Benefit of tax holidays

     21.7        14.5        21.7        59.0        47.4   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net Income

     298.5        328.8        331.1        1,016.2        879.5   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to:

          

Shareholders of Ultrapar

     295.9        326.2        328.6        1,009.3        872.2   

Non-controlling shareholders of the subsidiaries

     2.7        2.6        2.5        6.9        7.3   

EBITDA

     944.1        789.5        845.8        2,776.4        2,242.3   

Depreciation and amortization

     253.9        220.8        241.7        731.4        651.5   

Total investments, net of disposals and repayments¹

     374.0        372.2        328.5        860.8        759.0   

RATIOS

          

Earnings per share—R$

     0.54        0.59        0.60        1.84        1.59   

Net debt / Stockholders’ equity

     0.71        0.58        0.61        0.71        0.58   

Net debt / LTM EBITDA

     1.53        1.42        1.41        1.53        1.42   

Net interest expense / EBITDA

     0.25        0.14        0.15        0.20        0.14   

Gross margin

     8.6%        7.9%        8.3%        8.7%        7.9%   

Operating margin

     3.6%        3.3%        3.2%        3.7%        3.2%   

EBITDA margin

     4.9%        4.6%        4.6%        5.0%        4.5%   

1        Does not include association with Extrafarma

          

 

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ULTRAPAR

CONSOLIDATED CASH FLOW STATEMENT

In millions of Reais

 

 
     JAN—SEP  
     2015      2014  

Cash Flows from (used in) operating activities

     1,883.1         1,448.6   

Net income

     1,016.2         879.5   

Depreciation and amortization

     731.4         651.5   

Working capital

     (1,157.1)         (302.7)   

Financial expenses (A)

     1,585.8         632.0   

Deferred income and social contribution taxes

     51.1         1.2   

Income from sale of assets

     (29.2)         (15.2)   

Cash paid for income and social contribution taxes

     (368.4)         (320.5)   

Other (B)

     53.4         (77.1)   

Cash Flows from (used in) investing activities

     (872.3)         (766.5)   

Additions to fixed and intangible assets, net of disposals

     (841.3)         (747.5)   

Acquisition and sale of equity investments

     (31.0)         (19.0)   

Cash Flows from (used in) financing activities

     (1,328.6)         (408.9)   

Debt raising

     2,121.9         1,591.9   

Amortization of debt

     (1,640.1)         (700.2)   

Interest paid

     (682.2)         (511.2)   

Payment of financial lease

     (4.0)         (4.1)   

Shares acquired by the Company kept in treasury

     (292.7)         —     

Related parties

     —           —     

Dividends paid (C)

     (831.5)         (782.9)   

Other (D)

     —           (2.3)   

Net increase (decrease) in cash and cash equivalents

     (317.7)         273.3   

Cash from subsidiaries acquired

     —           9.1   

Cash and cash equivalents at the beginning of the period (E)

     4,400.1         3,543.7   
  

 

 

    

 

 

 

Cash and cash equivalents at the end of the period (E)

     4,082.4         3,826.1   
  

 

 

    

 

 

 

Supplemental disclosure of cash flow information

     

Extrafarma—capital increase with the merger of shares and subscription warrants (F)

     —           749.3   

Extrafarma—gross debt assumed at the closing (F)

     —           207.9   

 

(A) Comprised of interest and exchange rate and inflationary variation expenses on loans and financing. Does not include revenues from interest and exchange rate and inflationary variation on cash equivalents.
(B) Comprised mainly of noncurrent assets and liabilities variations net.
(C) Includes dividends paid by Ultrapar and its subsidiaries to third parties.
(D) Corresponds to the transaction cost for the issuance of shares in 2014.
(E) Includes cash, cash equivalents and short and long term financial investments.
(F) As a result of the association with Extrafarma. For more information, see Note 3.a and Note 22 to our Interim Financial Information for 2Q14.

 

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IPIRANGA

CONSOLIDATED INVESTED CAPITAL

In millions of Reais

 

 
     QUARTERS ENDED IN  
     SEP      SEP      JUN  
     2015      2014      2015  

OPERATING ASSETS

        

Trade accounts receivable

     2,105.6         1,753.1         2,036.6   

Trade accounts receivable—noncurrent portion

     111.5         109.1         117.2   

Inventories

     1,536.9         1,164.4         1,498.3   

Taxes

     319.5         260.3         296.4   

Other

     289.5         242.2         288.9   

Property, plant and equipment, intangibles and investments

     3,803.9         3,448.7         3,705.1   

TOTAL OPERATING ASSETS

     8,166.8         6,977.7         7,942.4   
  

 

 

    

 

 

    

 

 

 
        

OPERATING LIABILITIES

        

Suppliers

     614.8         650.2         647.7   

Payroll and related charges

     102.4         85.3         79.3   

Post-retirement benefits

     104.2         101.0         103.0   

Taxes

     110.3         81.7         90.1   

Provision for contingencies

     108.8         137.0         111.2   

Other accounts payable

     168.0         153.2         176.7   

TOTAL OPERATING LIABILITIES

     1,208.6         1,208.5         1,208.0   
  

 

 

    

 

 

    

 

 

 

IPIRANGA

CONSOLIDATED INCOME STATEMENT

In millions of Reais

 

     QUARTERS ENDED IN      ACCUMULATED  
     SEP      SEP      JUN      SEP      SEP  
     2015      2014      2015      2015      2014  

Net sales

     16,409.4         14,946.1         15,975.4         47,503.1         43,341.2   

Cost of sales and services

     (15,457.3)         (14,082.7)         (15,072.9)         (44,627.0)         (40,819.7)   

Gross profit

     952.2         863.4         902.5         2,876.1         2,521.5   

Operating expenses

              

Selling

     (364.6)         (327.4)         (349.8)         (1,067.1)         (978.8)   

General and administrative

     (160.6)         (138.8)         (152.0)         (456.3)         (427.2)   

Other operating income (expenses), net

     24.2         19.0         22.2         66.7         54.7   

Income from sale of assets

     2.9         9.6         2.7         29.4         15.2   

Operating income

     454.0         425.8         425.6         1,448.8         1,185.4   

Equity in earnings (losses) of affiliates

     0.2         0.2         0.8         1.3         0.8   

EBITDA

     610.4         556.7         575.7         1,900.6         1,576.5   

Depreciation and amortization

     156.2         130.8         149.2         450.5         390.3   

RATIOS

              

Gross margin (R$/m3)

     145         132         140         150         133   

Operating margin (R$/m3)

     69         65         66         76         63   

EBITDA margin (R$/m3)

     93         85         89         99         83   

EBITDA margin (%)

     3.7%         3.7%         3.6%         4.0%         3.6%   

 

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OXITENO

CONSOLIDATED INVESTED CAPITAL

In millions of Reais

 

 
     QUARTERS ENDED IN  
     SEP      SEP      JUN  
     2015      2014      2015  

OPERATING ASSETS

        

Trade accounts receivable

     610.4         465.2         479.1   

Inventories

     659.1         515.9         579.8   

Taxes

     109.2         109.0         106.1   

Other

     119.5         108.4         120.3   

Property, plant and equipment, intangibles and investments

     1,793.1         1,663.6         1,695.6   

TOTAL OPERATING ASSETS

     3,291.3         2,862.2         2,980.9   
  

 

 

    

 

 

    

 

 

 

OPERATING LIABILITIES

        

Suppliers

     169.5         141.5         156.0   

Payroll and related charges

     121.6         64.6         85.1   

Taxes

     51.8         36.4         39.0   

Provision for contingencies

     95.5         93.2         98.0   

Other accounts payable

     26.6         18.3         25.3   

TOTAL OPERATING LIABILITIES

     465.1         354.0         403.3   
  

 

 

    

 

 

    

 

 

 

OXITENO

CONSOLIDATED INCOME STATEMENT

In millions of Reais

 

     QUARTERS ENDED IN     ACCUMULATED  
     SEP     SEP     JUN     SEP     SEP  
     2015     2014     2015     2015     2014  
Net sales      1,131.8        872.0        1,011.7        2,996.2        2,525.6   

Cost of goods sold

          

Variable

     (638.0     (582.9     (564.3     (1,688.9     (1,645.8

Fixed

     (101.7     (66.3     (86.7     (272.7     (211.2

Depreciation and amortization

     (35.1     (33.1     (32.4     (98.9     (93.8

Gross profit

     356.9        189.7        328.3        935.7        574.9   

Operating expenses

          

Selling

     (93.3     (68.4     (84.2     (249.1     (188.0

General and administrative

     (89.9     (59.0     (78.4     (236.9     (185.1

Other operating income (expenses), net

     (0.5     0.1        (1.2     (1.8     (0.2

Income from sale of assets

     0.1        (0.2     0.1        0.4        (0.1

Operating income

     173.3        62.1        164.5        448.4        201.5   

Equity in earnings (losses) of affiliates

     0.1        0.3        2.6        1.7        0.6   

EBITDA

     212.1        98.7        203.0        559.7        305.9   

Depreciation and amortization

     38.7        36.3        35.9        109.5        103.8   

RATIOS

          

Gross margin (R$/ton)

     1,870        927        1,705        1,675        982   

Gross margin (US$/ton)

     527        408        555        530        429   

Operating margin (R$/ton)

     908        304        854        803        344   

Operating margin (US$/ton)

     256        134        278        254        150   

EBITDA margin (R$/ton)

     1,111        483        1,054        1,002        522   

EBITDA margin (US$/ton)

     313        212        343        317        228   

 

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ULTRAGAZ  
CONSOLIDATED INVESTED CAPITAL  
In millions of Reais  
     QUARTERS ENDED IN  
     SEP      SEP      JUN  
     2015      2014      2015  

OPERATING ASSETS

        

Trade accounts receivable

     228.0         189.1         204.2   

Trade accounts receivable—noncurrent portion

     30.5         28.3         27.8   

Inventories

     62.0         57.7         61.7   

Taxes

     51.5         41.3         49.1   

Escrow deposits

     202.2         178.8         193.0   

Other

     48.9         38.6         51.0   

Property, plant and equipment, intangibles and investments

     851.8         786.2         832.0   

TOTAL OPERATING ASSETS

     1,474.9         1,320.0         1,418.6   
  

 

 

    

 

 

    

 

 

 

OPERATING LIABILITIES

        

Suppliers

     35.6         45.5         37.6   

Payroll and related charges

     112.2         92.4         84.8   

Taxes

     7.5         5.9         6.8   

Provision for contingencies

     96.6         88.8         93.7   

Other accounts payable

     30.6         25.5         30.1   

TOTAL OPERATING LIABILITIES

     282.6         258.2         252.9   
  

 

 

    

 

 

    

 

 

 

 

ULTRAGAZ
CONSOLIDATED INCOME STATEMENT
In millions of Reais

 

    

QUARTERS ENDED IN

    ACCUMULATED  
    

SEP

  

SEP

   JUN     SEP     SEP  
    

2015

  

2014

   2015     2015     2014  

Net sales

   1,213.3    1,095.2      1,122.0        3,373.2        3,035.7   

Cost of sales and services

   (1,016.6)    (926.1)      (953.4     (2.852.6     (2,589.4

Gross profit

   196.7    169.2      168.6        520.6        446.3   

Operating expenses

            

Selling

   (88.6)    (79.1)      (91.7     (256.6     (222.9

General and administrative

   (44.8)    (35.1)      (39.4     (123.0     (103.8

Other operating income (expenses), net

   1.4    0.2      0.9        2.2        1.3   

Income from sale of assets

   1.8    (0.5)      (0.5     (0.4     0.9   

Operating income

   66.6    54.7      38.0        142.7        121.7   

Equity in earnings (losses) of affiliates

   0.0    0.0      (0.1     (0.0     —     

EBITDA

   103.3    89.4      72.8        248.4        223.8   

Depreciation and amortization

   36.7    34.7      34.9        105.7        102.0   

RATIOS

            

Gross margin (R$/ton)

   437    367      392        405        348   

Operating margin (R$/ton)

   148    119      88        111        95   

EBITDA margin (R$/ton)

   229    194      169        193        175   

 

 

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ULTRACARGO  
CONSOLIDATED INVESTED CAPITAL  
In millions of Reais  
     QUARTERS ENDED IN  
     SEP      SEP      JUN  
     2015      2014      2015  

OPERATING ASSETS

        

Trade accounts receivable

     22.9         29.2         25.6   

Inventories

     2.6         1.6         2.6   

Taxes

     10.8         10.2         9.9   

Other

     24.1         18.3         32.2   

Property, plant and equipment, intangibles and investments

     898.1         926.6         905.6   

TOTAL OPERATING ASSETS

     958.5         985.9         976.0   
  

 

 

    

 

 

    

 

 

 
        

OPERATING LIABILITIES

        

Suppliers

     10.3         8.9         17.5   

Payroll and related charges

     16.6         16.8         14.5   

Taxes

     4.4         5.2         5.9   

Provision for contingencies

     13.8         11.3         12.7   

Other accounts payable¹

     43.1         42.2         41.1   

TOTAL OPERATING LIABILITIES

     88.3         84.4         91.7   
  

 

 

    

 

 

    

 

 

 

 

¹ Includes the long term obligations with clients account and the extra amount related to the acquisition of Temmar, in the port of Itaqui
ULTRACARGO
CONSOLIDATED INCOME STATEMENT
In millions of Reais

 

    

QUARTERS ENDED IN

    ACCUMULATED  
    

SEP

  

SEP

   JUN     SEP     SEP  
    

2015

  

2014

   2015     2015     2014  

Net sales

   77.2    89.7      73.4        242.8        263.0   

Cost of sales and services

   (39.2)    (35.9)      (35.4     (109.3     (106.4

Gross profit

   37.9    53.8      38.0        133.6        156.5   

Operating expenses

            

Selling

   (1.8)    (3.9)      (1.4     (5.2     (11.8

General and administrative

   (21.8)    (19.3)      (21.9     (63.6     (58.4

Other operating income (expenses), net

   (10.4)    1.5      (74.1     (83.0     5.9   

Income from sale of assets

   (0.2)    0.0      (0.0     (0.2     (0.6

Operating income

   3.7    32.2      (59.4     (18.5     91.6   

Equity in earnings (losses) of affiliates

   0.3    (0.1)      0.2        0.7        0.5   

EBITDA

   14.5    44.5      (48.8     13.4        129.1   

Depreciation and amortization

   10.4    12.3      10.4        31.2        37.0   

RATIOS

            

Gross margin

   49%    60%      52     55     60

Operating margin

   5%    36%      -81     -8     35

EBITDA margin

   19%    50%      -67     6     49

 

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EXTRAFARMA  
CONSOLIDATED INVESTED CAPITAL  
In millions of Reais  
    

QUARTERS ENDED IN

 
    

SEP

  

SEP

   JUN  
    

2015

  

2014

   2015  

OPERATING ASSETS

        

Trade accounts receivable

   121.9    109.6      123.6   

Inventories

   234.5    201.7      225.4   

Taxes

   69.6    36.2      63.9   

Other

   10.7    11.3      12.1   

Property, plant and equipment, intangibles and investments

   137.8    73.0      125.9   

TOTAL OPERATING ASSETS

   574.6    431.8      550.9   
  

 

  

 

  

 

 

 

OPERATING LIABILITIES

        

Suppliers

   118.2    132.1      102.4   

Payroll and related charges

   35.6    28.3      34.1   

Taxes

   9.6    12.1      10.7   

Provision for contingencies

   55.7    46.8      55.5   

Other accounts payable

   16.4    16.5      16.1   

TOTAL OPERATING LIABILITIES

   235.6    235.8      218.8   
  

 

  

 

  

 

 

 

 

EXTRAFARMA
CONSOLIDATED INCOME STATEMENT
In millions of Reais

 

     QUARTERS ENDED IN     ACCUMULATED  
     SEP     SEP     JUN     SEP     SEP1  
     2015     2014     2015     2015     2014  

Gross revenues

     361.8        326.7        358.9        1,058.4        824.5   

Sales returns, discounts and taxes

     (21.1     (17.7     (20.4     (60.6     (41.7

Net sales

     340.7        309.0        338.6        997.8        782.8   

Cost of sales and services

     (234.0     (215.0     (233.3     (688.8     (540.3

Gross profit

     106.7        94.0        105.3        309.0        242.6   

Operating expenses

     (107.0     (95.5     (102.8     (306.9     (225.5

Other operating income (expenses), net

     0.2        0.0        1.1        1.3        0.8   

Income from sale of assets

     (0.0     (0.4     (0.0     0.1        (0.2

Operating income

     (0.1     (1.9     3.5        3.5        17.6   

Equity in earnings (losses) of affiliates

     —          —          —          —          —     

EBITDA

     5.9        1.6        8.9        20.0        26.5   

Depreciation and amortization

     6.0        3.5        5.4        16.5        8.8   

RATIOS²

          

Gross margin (%)

     30     29     29     29     29

Operating margin (%)

     0     -1     1     0     2

EBITDA margin (%)

     2     0     2     2     3

 

¹Relative to the months of February to September
³Calculated based on gross revenues

 

24


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LOGO

 

ULTRAPAR PARTICIPAÇÕES S/A
LOANS

In millions of Reais — IFRS

 

LOANS

   Balance in September/20151                 
     Ipiranga      Oxiteno      Ultragaz      Ultracargo      Extrafarma      Ultrapar
Parent
Company
/ Other
    Ultrapar
Consolidated
     Index/
Currency
   Weighted
average
interest
rate
(% p.y.)2
   Maturity

Foreign Currency

                            

Foreign loan3

     1,061.8         —           —           —           —           —          1,061.8       US$ + LIBOR    +0,6    2017 to 2018

Notes

     —           —           1,012.7         —           —           —          1,012.7       US$    +7,3    2015

Foreign loan5

     553.2         —           —           —           —           —          553.2       US$    +2,1    2017 to 2018

Advances on foreign exchange contracts

     —           303.8         —           —           —           —          303.8       US$    +1,4    < 352 days

Foreign loan

     —           238.0         —           —           —           —          238.0       US$ + LIBOR    +1,0    2017

Financial institutions

     —           151.0         —           —           —           —          151.0       US$    +2,8    2015 to 2017

Financial institutions

     —           80.5         —           —           —           —          80.5       US$ + LIBOR    +2,0    2016 to 2017

Foreign currency advances delivered

     —           45.1         —           —           —           —          45.1       US$    +1,1    < 121 days

BNDES

     4.7         19.9         7.0         —           —           —          31.6       US$    +6,0    2015 to 2020

Financial institutions

     —           28.3         —           —           —           —          28.3       MX$+ TIIE    +1,0    2016

Subtotal

     1,619.8         866.6         1,019.7         —           —           —          3,506.1            

Local Currency

                            

Banco do Brasil floating rate

     3,022.7         —           —           —           —           —          3,022.7       CDI    105.0    2016 to 2019

Debentures — 1st and 2nd issuances IPP

     1,463.6         —           —           —           —           —          1,463.6       CDI    107.9    2017 to 2018

Debentures — 5th issuance

     —           —           —           —           —           803.7        803.7       CDI    108.3    2018

BNDES

     170.8         73.0         134.5         60.7         —           —          439.1       TJLP    +2,6    2015 to 2021

Export Credit Note floating rate

     —           158.6         —           —           —           —          158.6       CDI    101.5    2018

Banco do Nordeste do Brasil

     —           36.4         —           34.4         —           —          70.8       R$    +8,5    2015 to 2021

Research and projects financing (FINEP)

     24.9         40.1         —           —           —           —          65.0       R$    +4,0    2015 to 2021

BNDES

     43.6         3.6         5.5         1.0         1.2         —          54.9       R$    +4,7    2015 to 2022

Financial leasing

     —           —           46.0         —           —           —          46.0       IGPM    +5,6    2015 to 2031

Export Credit Note4

     —           26.5         —           —           —           —          26.5       R$    +8,0    2016

BNDES

     19.2         —           —           —           —           —          19.2       SELIC    +2,2    2015 to 2021

Research and projects financing (FINEP)

     2.4         2.7         3.3         —           —           —          8.4       TJLP    -1.3    2015 to 2023

Working capital loan — fixed rate

     —           —           —           —           1.7         —          1.7       R$    +10,3    2015 to 2016

Financial leasing floating rate

     —           —           —           —           0.4         —          0.4       CDI    +2,8    2015 to 2017

Agency for Financing Machinery and Equipment (FINAME)

     —           —           —           —           0.3         —          0.3       TJLP    +5,6    2015 to 2022

Financial leasing fixed rate

     —           —           —           —           0.1         —          0.1       R$    +15,4    2015 to 2017

Subtotal

     4,747.2         341.0         189.3         96.1         3.7         803.7        6,181.1            

Check

                            

Unrealized losses on swaps transactions

     45.3         5.2         3.4         —           —           —          53.9            

Total

     6,412.3         1,212.8         1,212.4         96.1         3.7         803.7        9,741.0            

Composition per maturity

                            

Up to 1 year

     505.2         546.1         1,077.5         33.6         2.8         4.3        2,169.4            

From 1 to 2 years

     2,154.5         411.5         41.5         27.2         0.5         (0.3     2,634.9            

From 2 to 3 years

     1,529.6         218.4         26.0         14.3         0.2         799.8        2,588.3            

From 3 to 4 years

     2,196.2         18.8         26.0         7.6         0.2         —          2,248.8            

From 4 to 5 years

     23.6         8.8         6.3         7.4         0.0         —          46.1            

Thereafter

     3.2         9.2         35.1         6.0         0.0         —          53.4            

Total

     6,412.3         1,212.8         1,212.4         96.1         3.7         803.7        9,741.0            
                            
Libor = London Interbank Offered Rate / MX$ = Mexican Peso / TIIE = Mexican Interbank Interest Rate Even / CDI = interbank certificate of deposit rate / TJLP = basic financing cost of BNDES (set by National Monetary Council). On September 30, 2015, TJLP was fixed at 6.5% p.a. / IGPM = General Index of Market Prices / SELIC = base interest rate set by Brazilian Central Bank
 
     Balance in September/20151                 
     Ipiranga      Oxiteno      Ultragaz      Ultracargo      Extrafarma      Ultrapar
Parent
Company
/ Other
     Ultrapar
Consolidated
                

CASH AND LONG TERM INVESTMENTS

     1,775.9         1,242.1         734.7         251.3         5.1         73.2         4,082.4            

1 As provided in IAS 39, transaction costs incurred in obtaining financial resources were deducted from the value of the financial instrument.

2 Certain loans are hedged against foreign currency and interest rate exposure (see note 22 to financial statements).

3 For this loan, a hedging instrument was hired with the objective of swapping the fixed to floating rate, equivalent to 102.66% of CDI on average.

4 For this loan, a hedging instrument was hired with the objective of swapping the fixed to floating rate, equivalent to 88.80% of CDI on average.

5 For this loan, a hedging instrument was hired with the objective of swapping the fixed to floating rate, equivalent to 100.63% of CDI on average.

 

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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 (10/2015)

Date, Time and Location:

November 4, 2015, 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:

(i) Members of the Board of Directors; and (ii) member of the Fiscal Council, pursuant to the terms of article 163, §3, of the Brazilian Corporate Law.

Decisions:

 

  1. Pursuant to article 25, sole paragraph, of the Company’s Bylaws and considering the absence of the Chairman of the Board of Directors, Mr. Paulo Guilherme Aguiar Cunha, Mr. Lucio de Castro Andrade Filho, Vice-Chairman of the Board of Directors, assumed the presidency of the meeting.

 

  2. After having analyzed and discussed the performance of the Company in the third quarter of the current fiscal year, the respective financial statements were approved.

 

  3. The members of the Board of Directors were updated on strategic and expansion projects of the Company.


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(Minutes of the Meeting of the Board of Directors of Ultrapar Participações S.A. , held on November 4th, 2015)

 

  4. The members of the Board of Directors examined and approved, in accordance with Ultrapar’s Investment Approval Policy, the proposal for investments to increase the production capacity by 170 thousand tons per year in the United States of America by Oxiteno, the Company’s business in the chemicals segment, in the total amount of USD 113 million.

 

  5. By reason of the recent instructions of CVM nr 567/15 and nr 568/15, the Board of Directors approved the proposed amendment of the text of the Material Fact Disclosure Policy and Securities Trading Policy submitted by the Executive Officers.

Observations: The deliberations were approved, with no amendments or qualifications, by all the Board Members present.

As there were no further matters to be discussed, the meeting was closed, and the minutes of this meeting were written, read and approved by all the undersigned Board Members present, as well as by the member of the Fiscal Council.

Lucio de Castro Andrade Filho – Vice-Presidente

Alexandre Gonçalves Silva

Jorge Marques de Toledo Camargo

José Maurício Pereira Coelho

Nildemar Secches

Olavo Egydio Monteiro de Carvalho

Pedro Wongtschowski

Flavio César Maia Luz –President of the Fiscal Council


Table of Contents

Draft – February 20, 2015

 

 

LOGO


Table of Contents

Draft – February 20, 2015

 

TABLE OF CONTENT

» SECTION I - GENERAL RULES

1.1. - INTRODUCTION

1.2. - GENERAL PURPOSES

1.3. - PERSONS SUBJECT TO THE POLICIES

1.4. - DISCLOSURE AND TRADING COMMITTEE

»SECTION II - DISCLOSURE POLICY

2.1. - SPECIFIC PURPOSES

2.2. - DISCLOSURE OF MATERIAL FACTS

2.3. - EXCEPTION FOR IMMEDIATE DISCLOSURE

2.4. - DUTIES OF THE INVESTOR RELATIONS OFFICER

2.5. - DUTY OF CONFIDENTIALITY

2.6. - COMMUNICATION AND DISCLOSURE WITH RESPECT TO DISPOSAL OR ACQUISITION OF MATERIAL OWNERSHIP INTEREST

»SECTION III - TRADING POLICY

3.1. - SPECIFIC PURPOSES

3.2. - GENERAL RULES

3.3. - TRADING PROHIBITIONS

3.4. - EXCEPTIONS FOR TRADING PROHIBITIONS

3.5. - INDIVIDUAL INVESTMENT PROGRAMS

3.6. - ACCREDITTED STOCKBROKERS

»SECTION IV - INFRACTIONS AND SANCTIONS

»SECTION V - FINAL PROVISIONS

ATTACHMENT I - DEFINITIONS

ATTACHMENT II - INSTRUMENT OF ADHESION


Table of Contents

Draft – February 20, 2015

 

I. GENERAL RULES

1.1.—INTRODUCTION

1.1.1. This document sets forth the Material Fact Disclosure Policy and Trading Policy of Securities issued by Ultrapar (“Policies”), which were prepared pursuant to Instruction No. 358/02 and the best market practices, which must be acknowledged, adhered and complied with by all Persons Subject to the Policies.

1.1.2. Capitalized terms used herein, in plural or singular, shall have the meaning attributed to them in Attachment I—Definitions.

1.2.—GENERAL PURPOSES

1.2.1. The general purpose of the Policies is to establish the rules with respect to disclosure of information and trading of Securities by any person holding or who may hold information owned by or of the interest of Ultra.

1.2.2. For purposes of the Policies, information that may be held by Persons Subject to the Policies or third parties are classified as follows:

“Material Fact”: any decision made by the controlling shareholder, if any, resolution made by the General Shareholders´ Meeting or the management bodies of Ultra or any other political-administrative, technical, business or economic-financial act or fact occurred or related to Ultra’s business, that may reasonably influence: (a) the price of the Securities; (b) the decision of investors to buy, sell or maintain the Securities; or (c) the decision of investors to exercise any rights inherent to their condition as holders of Securities. Potentially material acts or facts are, amongst others, described in article 2 of Instruction No. 358/02. For purposes of the Policies, and without prejudice to the provisions set forth in items 3.2 and 3.3., the Arrangements shall not be deemed Material Facts;

“Privileged Information”: (i) undisclosed Material Facts; and (ii) undisclosed information not related to a Material Fact, but which may become a Material Fact, such as the Arrangements and other events of this nature; and

“Sensitive Information”: any sensitive information, which does not constitute a Privileged Information and still not disclosed to the public or which is usually not disclosed to the public, such as information on sales per unit, distributor or region. A Sensitive Information may become a Privileged Information if the content of such Sensitive Information has no longer the standard or expectation of a Sensitive Information and if such Sensitive Information materially impacts, or may impact, Ultra’s business.

1.2.2.1. For purposes of the Policies, “Arrangements” refer to the understandings for the execution of agreements or other legal transactions before their conclusion, including the execution of related instruments, such as confidentiality agreements, unbinding proposals, powers of attorneys to third parties and assistants. Without prejudice to the provisions set forth in items 3.2. and 3.3., the Arrangements are not deemed Material Facts.

1.2.3. The Policies set forth several consequences by virtue of the existence and holding of information, depending on the classification of such information. Thus, in sum:

 

(i) all Material Facts must be immediately disclosed, except when the postponing of such disclosure is permitted;


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Draft – February 20, 2015

 

(ii) Privileged Information shall only be disclosed when they become Material Facts or in other special events in which such information, to the best interest of Ultra, must be disclosed to the public;

(iii) knowledge of undisclosed Material Fact or Privileged Information (a) prevents the person holding or aware of such information from trading and (b) authorizes the Committee to establish an Extraordinary Trading Restriction to the Persons Subject to the Policies; and

(iv) knowledge of Sensitive Information (a) does not prevent the person holding or aware of such information from trading, but (b) subjects the disclosure of such information to third parties to the execution of a confidentiality agreement.

1.3.—PERSONS SUBJECT TO THE POLICIES

1.3.1. The following persons (“Persons Subject to the Policies”) shall comply with the rules and guidelines established in the Policies:

 

(a) Controlling Shareholders, if any;

 

(b) Managers;

 

(c) all persons that hold management positions at Ultra or Ultra’s affiliates; and

(d) other persons indicated by the Committee, at its sole discretion, holding or that may hold information related to Ultra.

1.3.2. The Persons Subject to the Policies must represent to be fully of and adhere to the terms of the Policies as sets forth in item 5.2.; however, potential omission to represent such awareness and perform such adhesion does not exempt the Persons Subject to the Policies from the duty to comply with the Policies.

1.3.3. The Persons Subject to the Policies may only share information related to Ultra, which they have access to, with other Persons Subject to the Policies.

1.3.4. Exceptionally, the Persons Subject to the Policies may share information with other persons, at the sole discretion of the Committee, and upon prior authorization by the Committee, who evidently adopt their own policy having substantially a similar content and effects to these Policies, always subject to Ultra’s convenience that such sharing of information may occur.

1.3.5. The Persons Subject to the Policies must ensure that the rules of the Policies are complied with by the persons under their influence, including companies or investment funds controlled by them, affiliated to or under common control, directly or indirectly, by Spouses and Dependents, provided that the Persons Subject to the Policies shall be held jointly liable with those persons in the event of non-compliance with the Policies arising out of failure of compliance with such duty.

1.4.—DISCLOSURE AND TRADING COMMITTEE

1.4.1. The Company shall have a Disclosure and Trading Committee (“Committee”) with the following duties:

(a) assist the Investor Relations Officer as to the decision to disclose information to the market, through any means, amongst which the Reference Form, forms to be filed with SEC, material facts, notices to the market, notice to shareholders and press releases;


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(b) advise the Investor Relations Officer with respect to decisions attributed to him/her by the Policies or Regulation;

(c) resolve on non-disclosure of Material Facts, for the events set forth in item 2.3., with the consequent comunication of trading prohibition to the Persons Subject to the Policies;

(d) resolve on the establishment of Extraordinary Trading Restrictions, as provided for in item 3.3.2.;

(e) provide clarifications as to the application or interpretation of the provisions set forth in the Policies, law and Regulation, including with respect to the necessary disclosure of certain information;

(f) analyze the content of Individual Investment Programs received from by Persons Subject to the Policies, in order to safekeep and ensure compliance with the purposes set forth in the Policies;

(g) analyze, at the request of the Investor Relations Officer, doubts related to compliance with the Policies, including as a result of the analysis of information provided by the Accredited Stockbrokers, as provided for in item 3.6.4.;

(h) resolve on the applicable measures in cases of non-compliance with the Policies, as well as on the need to inform of this matter to the Board of Directors of the Company in order to adopt additional measures potentially applicable, as set forth in item 4.2.;

(i) indicate other persons that have or may have access to information related to Ultra, who must be subject to the terms set forth in these Policies, as provided for in item 1.3.1.(d);

(j) authorize, at its sole discretion, provided that convinced on Ultra’s convenience, the Persons Subject to the Policies to share information with third parties, as provided for in items 1.3.3. and 1.3.4.;

(k) indicate up to five (5) Accredited Stockbrokers who must intermediate, with exclusivity, all Securities traded by the Persons Subject to the Policies, informing the Persons Subject to the Policies with respect to any changes to the list of Accredited Stockbrokers; and

(l) submit semiannual report to the Board of Directors of the Company in order to verify if the transactions performed by the beneficiaries are in accordance with the Individual Investment Program duly filed by them within the Company.

1.4.2. The Committee shall be comprised up to six (6) members, including, necessarily, the Chief Executive Officer, the Chief Financial and Investor Relations Officer, who shall appoint the other members.

1.4.3. The Committee shall meet whenever called by the Investor Relations Officer, or any of the other members, provided that all decisions of the Committee shall depend on the majority of the members of the Committee, without prejudice to the prerogatives set forth in the Policies and Regulation to the Investor Relations Officer.

1.4.4. Call notices shall be made through electronic communication to be sent with the advance required and permitted by the subject matter of the meeting, and the meetings shall be held at the Company’s headquarters, except when another place is required by exceptional conditions. Meetings may be attended through conference call, video conference or through any other remote mean of communication, being the electronic vote permitted.


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Draft – February 20, 2015

 

II. DISCLOSURE POLICY

2.1.—SPECIFIC PURPOSES

2.1.1. The purposes of the Disclosure Policy are to:

(a) rule the disclosure to the market of information which, according to its nature and characteristics, must be classified as Material Fact, setting forth the rules and guidelines to be complied with by the Investor Relations Officer and by the other Persons Subject to the Policies with respect to the disclosure of such information and secrecy of such information, while not disclosed;

(b) establish the general and conduct rules to be adopted by the Company in order to classify information as Material Facts, and to disclose such information, constituting, for the benefit of investors and the market in general, predictability to the conducts to be adopted by the Company; and

(c) prevent the selective disclosure of information on Material Facts and Privileged Information.

2.2.—DISCLOSURE OF MATERIAL FACTS

2.2.1. The verification of the occurrence of Material Facts shall always consider: (i) the materiality of such Material Facts under Ultra’s activities and size, and not individually, (ii) the presence of reasonable influence criteria described in the definition of Material Fact, (iii) the historical of disclosure of material information by the Company and not unspecifically, in order to avoid the non-relevant disclosure of Material Facts to the detriment of the quality of the analysis, by the market, of Ultra’s perspectives.

2.2.2. The Investor Relations Officer and the Committee shall ensure that the Material Facts are disclosed as provided by law, the Regulation and this Disclosure Policy, in a clear and accurate form, in accessible language to investors, as well as ensure that Material Facts are widely and immediately disclosed to all markets in which the Securities are traded.

2.2.3. Whenever possible, the disclosure of any Material Facts shall occur before the commencement or after the closure of business at Stock Markets, provided that, in the event of incompatible times with other markets, the time of operation of the Brazilian Stock Market shall prevail.

2.2.4. The Persons Subject to the Policies shall inform any Material Facts they are aware of, in writing, to the Investor Relations Officer, so his/her may take the measures necessary in order to disclose the information, as provided by law, Regulation and in this Disclosure Policy, except for the events in which such information must not be disclosed, as set forth in item 2.3.

2.2.4.1 If the Persons Subject to the Policies are personally aware of a Material Fact and verify the omission, by the Investor Relations Officer, in complying with his/her duty of communication and disclosure, including in the event set forth in the sole paragraph of article 6 of Instruction No. 358/02, they shall only be exempt from liability if they immediately notify such Material Fact to CVM.

2.2.4.2. The communication referred to in item 2.2.4. shall be dismissed upon proven awareness of such Material Fact by the Investor Relations Officer and the decision of not disclose such information, taken pursuant to the provisions set forth in this Disclosure Policy.

2.2.5. The Company (i) does not comment, rumors or speculations originated in the market, except under extreme situations that imply or may imply the significant volatility of the Company’s Securities; and (ii) does not disclose or


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provide prospective information (guidance), except in extraordinary cases in which Company’s management deems necessary to do so.

2.2.6. When the information to be disclosed is not classified as a Material Fact, other disclosure means shall be used such as notices to the market, press releases, notices to shareholders, as the case may be, subject to, to the extent possible, item 2.2.3.

2.3.—EXCEPTION FOR IMMEDIATE DISCLOSURE

2.3.1. The disclosure of Material Facts may be postponed in exceptional situations if such disclosure implies in putting Ultra’s lawful interest at risk.

2.3.2. The postponing of disclosure of Material Facts shall be subject to the decision (a) by Controlling Shareholders, if any, and provided that such information is restricted to such shareholders, or (b) by the Committee.

2.3.3. If information related to an undisclosed Material Fact gets out of control, or in the events of atypical fluctuation of the price of the Securities or traded volume, such Material Fact must be disclosed to the market, subject to, to the extent possible, item 2.2.3.

2.3.4. If an information is restricted to the Controlling Shareholders, if any, and such Controlling Shareholders decide not to disclose such information, they shall notify the Investor Relations Officer, and he/she shall notify the Committee, with respect to the existing Material Fact, whether due to atypical fluctuation of the price or traded volume of the Securities or due to examination by the Investor Relations Officer, so that the necessary immediate disclosure is analyzed.

2.4.—DUTIES OF THE INVESTOR RELATIONS OFFICER

2.4.1. The Investor Relations Officer shall:

(a) disclose the Material Fact, simultaneously to the CVM, SEC and the Stock Markets and markets in general, immediately after the occurrence thereof, subject to item 2.2.3.;

(b) ensure the wide and immediate dissemination of such Material Facts in all markets where the Securities are authorized to trade, except for the provision of item 2.3.;

(c) render all additional clarifications as to such Material Fact, when requested to do so by the appropriate authorities or by any Stock Markets;

(d) should there be an unusual oscillation in the price or trading volume of the Company’s Securities, the Investor Relations Officer must question the persons with potential access to Privileged Information in order to establish whether they are aware of any information that must be disclosed to the market;

(e) electronically communicate any existing Ordinary and Extraordinary Trading Restrictions;

(f) follow up on information received from the Accredited Stockbrokers as to Securities traded by Persons Subject to the Policies, submitting his/her conclusions to the Committee whenever doubts arise with respect to compliance with the Policies;

(g) provide the Stock Market with information related to any disposal or acquisition of Material Ownership Interest, as provided for in item 2.6.3.; and


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(h) instruct the Accredited Stockbrokers, in writing, not to register the transactions undertaken by the Persons Subject to the Policies, during the periods of Ordinary Trading Restriction referred to in item 3.3.1.(b), (c) (d) and (e).

2.5. –DUTY OF CONFIDENTIALITY

2.5.1. The Persons Subject to the Policies and all persons that may have access to Privileged Information or Sensitive Information must keep the confidentiality of such Privileged Information or Sensitive Information still not disclosed by the Company.

2.5.2. The Persons Subject to the Policies and all persons that may have access to Privileged Information or Sensitive Information must not discuss any Privileged Information or Sensitive Information at public places or in the presence of third parties.

2.5.3. Privileged Information or Sensitive Information may only be discussed with those who are required to be aware of them, subject to item 2.5.5., and to the extent legally permitted.

2.5.4. The Persons Subject to the Policies who, inadvertently or without authorization, communicate, in any way, personally or through third parties, any Privileged Information or Sensitive Information to any third party, before such Privileged Information or Sensitive Information is disclosed to the market, must immediately inform such act to the Investor Relations Officer so that he/she may take the applicable measures.

2.5.5. Sensitive Information may only be disclosed to third parties upon the execution of agreements that obligate the receiving party (i) to keep the confidentiality of such information, and (ii) not to trade Securities based on such information. This provisions is not applicable to the disclosure of information to a person who is required by law to comply with such duties.

2.5.6. In addition to the Persons Subject to the Policies, all persons that have access to information owned by or of the interest of Ultra must keep the confidentiality of such information and adopt discretion and sobriety when such information has to be disclosed to third parties at Ultra’s interest, or when such information has to be disclosed as provided by the Disclosure Policy, by law or Regulation.

2.6. –COMMUNICATION AND DISCLOSURE WITH RESPECT TO DISPOSAL OR ACQUISITION OF MATERIAL OWNERSHIP INTEREST

2.6.1. The Controlling Shareholders, if any, and the shareholders who elect members of the Board of Directors or member of the Fiscal Council of the Company, as well as any individual or legal entity, or group of persons, acting jointly or representing the same interest, that held a Material Ownership Interest, must inform the Company with respect to the disposal or acquisition of Material Ownership Interest.

2.6.2. Upon the intention to change the composition of the shareholding control or administrative structure of the Company, or upon an acquisition that results in the obligation to perform a public offer, the acquiror must disclose the information required by Instruction No. 358/02 by the press.

2.6.3. The Investor Relations Officer shall send information to the CVM, SEC and the Stock Market.


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III. TRADING POLICY

 

3.1. SPECIFIC PURPOSES

3.1.1. The purposes of the Trading Policy are to:

 

  (a) prevent and prohibit the improper use of Privileged Information and Sensitive Information owned by Ultra; and

 

  (b) provide the rules and guidelines to be adopted for Securities traded by the Persons Subject to the Policies, including with respect to periods of trading restriction or conditions to be complied with for the trading of Securities to be permitted in such periods.

 

3.2. GENERAL RULES

3.2.1. The Persons Subject to the Policies may not use Privileged Information in order to obtain, directly or indirectly, for themselves or to third parties, any pecuniary advantages, including through the trading of Securities.

3.2.2. Before the disclosure to the public of Privileged Information pursuant to the Policies, Securities may not be traded by Persons Subject to the Policies that are aware of such Privileged Information or of the date of disclosure thereof.

3.2.3. The Securities may not be traded by Persons Subject to the Policies (i) in the event of public offer for distribution of Securities, until the disclosure of the announcement of its closing, subject to the exceptions set forth in Instruction No. 400/03; and (ii) in the event of public offering for distribution of Securities with restricted efforts, during the period of ninety (90) days counted as from the subscription or acquisition of certain Securities by the investor, pursuant to the terms of Instruction No. 476/09.

3.2.4. Short swing transaction with the Securities may not be carried out by the Persons Subject to the Policies, who may not dispose the Securities acquired by them over the last six (6) months.

3.2.5. The restrictions set forth in this Trading Policy are not applicable to trading performed by investment funds whose Persons Subject to the Policies are quotaholders of, provided that:

 

  (a) such investment funds are not exclusive; and

 

  (b) trading decisions made by the manager of such investment fund are not influenced by quotaholders.

3.2.6. The Company or the Persons Subject to the Policies may only trade Securities through the Accredited Stockbrokers.

3.2.7. The Accredited Stockbrokers must be instructed by the Investor Relations Officer to inform him/her, on a daily basis, or at his/her request, all Securities traded by Persons Subject to the Policies. The Investor Relations Officer shall, based on such information, monitor and analyze Securities traded by Persons Subject to the Policies, in order to verify compliance with the Policies.

3.2.8. The repurchase of shares issued by the Company shall be subject to to previous approval by general shareholders meeting whenever:


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  (a) performed outside organized markets of Securities, (i) envolves, even by several single operations, more than five per cent (5%) of type or class of shares in less than eighteen (18) months; (ii) the price is ten per cent (10%) over, in case of adquiring, or ten per cent (10%) less in case of disposal, than the average weight for last stock exchange prices; or (iii) the counterparty is related to the Company; or

 

  (b) if it has the purpose to modify or to preserve the composition of the shareholding control or administrative structure of the Company.

 

3.3. TRADING RESTRICTIONS

3.3.1. The Persons Subject to the Policies and the Company itself may not trade Securities, regardless of determination by the Investor Relations Officer or the Committee (“Ordinary Trading Restrictions”):

(a) whenever any Material Fact which the Persons Subject to the Policies and the Company are aware of is pending of disclosure;

 

(b) in the period of fifteen (15) days prior to the disclosure of ITR and SFS forms;

(c) whenever any periods of trading restriction related to the event of public offering for distribution of Securities, as provided for in item 3.2.3.;

(d) as from the time they have access to information with respect to the intention to perform a merger, total or partial spin-off, transformation or consolidation involving the Company; and

 

(e) during any share acquisition or disposal program undertaken by the Company itself.

3.3.1.1. The restriction set forth in item “e” above shall only be effective during the days in which repurchase is actually performed by the Company, provided that: (i) the week days in which the Company will trade in the market are established; and (ii) the Investor Relations Officer informs the Persons Subject to the Policies of such days and instructs the Accredited Stockbrokers on the days the restriction will be effective.

3.3.2. Without prejudice to the Ordinary Trading Restrictions, the Committee may establish other Securities’ trading restriction periods (“Extraordinary Trading Restrictions”), applicable to the Persons Subject to the Policies or to a part of them, whether due to the holding of Privileged Information, or to protect Ultra’s image.

3.3.3. In the event of an Extraordinary Trading Restriction, the Investor Relations Officer shall immediately electronically communicate the Persons Subject to the Policies or those subject to the restriction, the period in which the trading of Securities will be restricted, without providing the reasons for such restriction.

3.3.4. The Committee will not be required to justify the decision to establish an Extraordinary Trading Restriction, and information on the existence of such Extraordinary Trading Restriction must be treated with confidentiality by the persons subject to such restriction.

3.3.5. The Board of Directors of the Company may not deliberate on the acquisition or disposal of shares issued by the Company itself in the event any agreement or contract has been entered into in order to transfer shareholding control (direct or indirect) of the Company, or in the event an option or power of attorney has been granted for this purpose, as well as upon the existence of the firm intention to promote a merger, total or partial spin-off, consolidation, transformation or corporate reorganization of the Company, and while such transaction is not disclosed to the public as Material Fact.


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3.4. EXCEPTIONS TO TRADING PROHIBITIONS

3.4.1. The trading restrictions shall not apply to: (a) transactions with shares held in treasury, through a private trading, or the subscription of new shares, provided that such private trading or subscription result from the exercise of a call option arising out of, and pursuant to, the stock option plan approved at general shareholders’ meeting; and (b) potential repurchases by the Company, also through a private trading, of shares referred to in sub-item “a” of this item.

3.4.2. The trading restrictions set forth in item 3.3.1. shall not apply to Persons Subject to the Policies when their transactions are carried out as long-term investment through Individual Investment Programs approved by the Committee, and as from the date of its approval.

3.5. — INDIVIDUAL INVESTMENT PROGRAMS

3.5.1. The Persons Subject to the Policies may request Individual Investment Programs to be filed at the Company, which shal be submitted to the analysis of the Committee with respect to their compatibility with the provisions set forth in the Policies and Regulation, provided that such programs are submitted when no Material Fact is pending disclosure

3.5.2. The Individual Investment Programs will be duly filed at the Company and shall follow the specifications below:

(a)  before the Individual Investment Programs are filed, the calendar including the specific disclosure dates of ITR and SFS forms must be approved;

(b)  the Individual Investment Programs may not be filed during (a) the period of any trading restriction, respecting item 3.5.3., and (b) the period of fifteen (15) days before disclosure of ITR and SFS forms;

(c)  the beneficiaries may only trade the Securities covered by Individual Investment Programs, or by a modification in a program, six (6) months after the Committee’s approval;

 

(d) the Individual Investment Programs shall establish:

(i)  the irrevocable and irreversible commitment of participants to trade Securities as of the dates established in the Individual Investment Programs, previously indicating the volume of proper funds to be traded;

(ii)  the type and the class of Securities subject to the investment or divestiture;

(iii)  the obligation to extend the purchase commitment, even after the lapse of the period originally established to bind the participant to the plan, upon a pending Material Fact not disclosed to the market; and

(iv)  the obligation of the beneficiaries of the Individual Investment Program to revert to the Company any losses prevented or gains at trading with Securities, arising out of the potential change of the disclosure dates of ITR and SFS forms, ascertained based on reasonable criteria to be established by such Individual Investment Program.

 

(e) the beneficiaries shall not:

(i)  maintain simultaneously more than one Individual Investment Program; and


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(ii) perform transactions that shall nullify or mitigate economic effects of the transactions determined by the Individual Investment Program.

3.5.3. The Individual Investment Programs may be filed at the Company during the effectiveness of a stock repurchase program approved by the Company, provided that participants must comply with all trading rules applicable according to these Policies.

3.6.—ACCREDITTED STOCKBROKERS

3.6.1. In order to assure proper Security trading standards and compliance with the rules provided for in the Policies, the Persons Subject to the Policies may only trade the Securities upon intermediation by the Accredited Stockbrokers indicated by the Committee.

3.6.3. The Company must provide the Accredited Stockbrokers with a list of the Persons Subject to the Policies, as set forth in item 5.2.1., also providing, in case of changes, any necessary update. The Accredited Stockbrokers will not be informed by the Company with respect to (i) the occurrence of the event set forth in item 3.3.1.(a); and (ii) Extraordinary Trading Restrictions, but will be informed on any other event of Ordinary Trading Restriction.

3.6.4. The Accredited Stockbrokers will be instructed, in writing, by the Investor Relations Officer not to register the transactions carried out by the Persons Subject to the Policies during the periods of Ordinary Trading Restriction referred to in item 3.3.1.(b), (c) (d) and (e), and the Accredited Stockbrokers must daily inform to the Company, in writing or by electronic means, all transactions with Securities carried out by the Persons Subject to the Policies.

IV. INFRACTIONS AND SANCTIONS

4.1. Any violations to the rules set forth in the Policies verified by the Persons Subject to the Policies must be immediately reported to the Investor Relations Officer.

4.2. Without prejudice of legal sanctions (administrative, civil or criminal), the Committee shall adopt applicable measures, upon non-compliance with the Policies, including, as the case may be, (a) communication to the competent authorities, (b) dismissal of the Persons Subject to the Policies, without prejudice to the other legal applicable measures, and (c) reporting such matter to the Board of Directors, so that additional measures potentially applicable may be adopted.

4.3. Without prejudice of the applicable sanctions, the Persons Subject to the Policies responsible for non-compliance with any provision set forth in the Policies shall reimburse Ultra, fully and without limitation, of all losses resulting from such non-compliance.

V. FINAL PROVISIONS

5.1. The Policies shall be in full force as of the date they are approved by the Board of Directors of the Company for indefinite term. These Policies may only be amended upon resolution by the Board of Directors of the Company, provided that no amendments may be performed during a pending Material Fact to be disclosed to the market.

5.2. After the approval of the Policies by the Board of Directors, the Company must obtain the express adhesion by the Persons Subject to the Policies upon the execution of the Instrument of Adhesion, pursuant to Attachment II.


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5.2.1. The Investor Relations Officer shall maintain a file with the name, qualification, position, function or relation to the Company, address, e-mail, Individual Taxpayer Registry (CPF) or Corporate Taxpayer Registry (CNPJ) of the Persons Subject to the Policies, which file must be updated whenever changes occur.

5.2.2. The file referred to in item 5.2.1. must be kept at Company’s headquarters and must be made available to the CVM.

5.3. In case the Persons Subject to the Policies are not subject to them anymore, they should refrain from trading Securities (i) before the public disclosure of Privileged Information related to the business or to the fact initiated during their relationship with Ultra, or (ii) for six (6) months counted as of their removal, whichever occurs first.

5.4. The rules set forth in the Policies:

I – apply both to trading carried out at stock market or over the counter market, organized or not, and to trading carried out without the intermediation by an institution comprising the distribution system; and

II – apply to trading directly or indirectly carried out by the Persons Subject to the Policies, whether such trading occur through a controlled company, or a third party with whom a fiduciary or share or portfolio management agreement is entered into.


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ATTACHMENT I – DEFINITIONS

For purposes of the Policies, the following terms shall have the following meaning:

“Controlling Shareholders”: Shareholder or Group of Shareholders holding and exercising control of the Company directly or indirectly, as defined in the Bylaws;

“Managers”: with respect to the Company and its Subsidiaries, the members of the Board of Directors, statutory officers, the members of the Fiscal Council, if any, and the members of any other bodies with technical or advisory functions aventually constituted by statutory provision;

“Stock Market”: BM&FBovespa, NYSE and any other Stock Market or organized over the counter market in which Company’s Securities are admitted for trading, in Brazil or abroad;

“BM&FBovespa”: BM&F BOVESPA S.A.—BOLSA DE VALORES, MERCADORIAS E FUTUROS;

“Committee”: is the Disclosure and Trading Committee, defined in item 1.4.1.;

“Company” or “Ultrapar”: Ultrapar Participações S.A.;

“Accredited Stockbrokers”: stockbrokers especially accredited by the Company for its Securities to be traded by Persons Subject to the Policies;

“Spouse”: the spouses or companion(s);

“CVM”: Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários);

“Dependents”: any dependent included in the annual tax return provided by Persons Subject to the Policies;

“SFS”: the Standard Financial Statements of the Company;

“Investor Relations Officer”: Ultrapar’s Investor Relations Officer;

“Bylaws”: Ultrapar’s bylaws.

“Material Notice”: has the meaning attributed to it in item 1.2.2.;

“Privileged Information”: has the meaning attributed to it in item 1.2.2.;

“Sensitive Information”: has the meaning attributed to it in item 1.2.2.;

“ITR”: Company’s quarterly information;

“Instruction No. 358/02”: means CVM Instruction No. 358, dated January 3, 2002;

“Instruction No. 400/03”: means CVM Instruction No. 400, dated December 29, 2003;

“Instruction No. 476/09”: means CVM Instruction No. 476, dated January 16, 2009;


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“NYSE”: the New York Stock Exchange;

“Material Ownership Interest”: direct or indirect interest corresponding to 5% (five percent) or more of shares issued by the Company, as well as the rights attributed to the shares and other Securities issued by the Company;

“Persons Subject to the Policies”: has the meaning attributed to it in item 1.3.;

“Policies”: has the meaning attributed to it in item 1.1.1.;

“Disclosure Policy”: Ultra’s Material Notice Disclosure Policy;

“Trading Policy”: Ultra’s Securities Trading Policy;

“Individual Investment Programs”: the written instrument through which a Person Subject to the Policies undertakes to, voluntarily, irrevocably and irreversibly, invest or divest Securities at pre-established dates or periods, or upon the occurrence of certain conditions which implementation it not under its control, prepared pursuant to the provisions set forth in paragraph 3 of article 15 of Instruction No. 358/02;

“Regulation”: the rules issued by CVM and other regulatory and self-regulatory bodies which the Company is subject to;

“SEC”: the U.S. Securities and Exchange Commission;

“Instrument of Adhesion”: the document to be entered into pursuant to Attachment II;

“Arrangements”: has the meaning attributed to it in item 1.2.2.;

“Ultra”: Ultrapar and its subsidiaries in Brazil and abroad;

“Ultrapar”: Ultrapar Participações S.A.;

“Securities”: all and any securities issued by the Company or related to such Securities;

“Ordinary Trading Restrictions”: has the meaning attributed to it in item 3.3.1.; and

“Extraordinary Trading Restrictions”: has the meaning attributed to it in item 3.3.2.


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ATTACHMENT II – INSTRUMENT OF ADHESION

INSTRUMENT OF ADHESION

By this instrument (“Instrument of Adhesion”) [name, qualification and e-mail], undersigned below, as [indicated relation with Ultra], hereby adheres to the MATERIAL NOTICE DISCLOSURE POLICY and the TRADING POLICY OF SECURITIES ISSUED BY ULTRAPAR PARTICIPAÇÕES S.A. (“Policies” and “Company”, respectively), which copies are hereby delivered, and represents:

(i) to be fully aware of all terms set forth in the Policies, and to comply with the rules set forth therein;

(ii) to be aware that Trading Restrictions of securities issued by the Company will be informed, pursuant to the Policies, through the e-mail indicated in this Instrument of Adhesion; and

(iii) to be aware that he/she is responsible for non-compliance with any provision set forth in the Policies, and that he/she shall reimburse, without prejudice to the applicable sanctions, Ultra, as defined in the Policies, fully and without limitation, of all losses arising out of such non-compliance.

..............., ..............., ........., ..........

 

 

XXXXXXXXXXXXXXXXX


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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: November 4, 2015

 

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 September 30, 2015 Report on Review of Interim Financial Information; 3Q15 Earnings release; Board of Directors Minutes and Material Fact Disclosure Policy And Securities Trading Policy)