Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar Second Quarter 2018 Results Conference Call. There is also a simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br, and the MZiQ platform. Please feel free to flip through the slides during the conference call. Today with us, we have Mr. André Pires, Chief Financial and Investor Relations Officer, together with other executives of Ultrapar. We would like to inform you that this event is being recorded. [Operator Instructions] A replay of this call will be available for 1 week. Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapar's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events, and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ultrapar and could cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Pires. Mr. Pires, you may begin the conference. André Pires : Thank you and good morning, everyone. It's a pleasure to be here with you to discuss Ultrapar's second quarter results and to give you some perspectives on the next quarters. Here with me are the officers from our businesses as well as our Investor Relations team to help answering your questions. I'd like to start with an overview of the events since our last call, Slide number 3. Earlier this week, on Tuesday night, we published a notice to…

[Operator Instructions] The first question comes from Bruno Montanari with Morgan Stanley.

Thanks for taking my questions. Andre I just want to double check something, you mentioned, you, if I understood correctly, that you do not expect major improvement in margins at Ipiranga despite gaining market share, just wanted to understand this, this is a result of Ipiranga, perhaps, doing the margins with existing customers? Or is this a changing mix more towards the clients and the TRRs? And also, could you give us an idea of what is the margin distinction between retail and large clients on a percentage base or on a nominal base? That would be super helpful. André Pires: Bruno, basically, thanks for the question. Basically, what we, I mean, we are observing at this point is that, the impact of the strike are still somewhat in the market, all right? So it's very difficult to have the right visibility to try to have a very correct expectation in terms of the evolution from now on. It's not a question about positioning in the market, it's a question that the market is under pressure, especially after the strike. As I mentioned in my call, we came in to the second quarter with very, let's say, very positive impressions at the beginning of the quarter in terms of volume and in terms of margins. And obviously, the strike created a big impact in the quarter. So you came out of the quarter with, let's say, we have different scenarios in terms of competition and difference scenarios in terms of margins as well. So that's why we don't see much evolution in the short term at this point, right. Obviously, we're going to work towards a normalization of debt, as the impact of the strike starts to dissipate. We have to take into consideration, obviously, that the price of diesel is too frozen at the refinery, so this is something that has an impact in the market. As for the mix, we have major change in the mix, basically, you saw very good volumes for Ipiranga especially in the B2B side. This is due to, let's say, the efforts we have been making to maintain some of the customers with somewhat loss in the next couple of years, especially, during a period where you had a very tough competitive environment for diesel because of imports. As you know most part of the imports came more for diesel than gasoline, and therefore, on the B2B side, which is more diesel, the competition was tougher. And last but not least, the difference between a B2B customer, or, for example, the margins, or the B2B margins versus the margins in the [indiscernible] is around 40%, but this is the same historical level that we have been observing over the years.

All right. And just a pre-follow-up. When you mentioned still intense competition. I understand that imports are no longer coming or are not coming at the same level of margin into they were before. So is the competition between the well-established players? Or is the competition still with the white flags? André Pires: No, imports are not, currently are not, at least not coming on our relevant way to the market. The competition, this is a very competitive market, so it's within everybody, and especially when you have in the case of diesel, a price that is somewhat frozen, the competition remains and the market becomes more rationale, let's put it like that.

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

If I could follow up on that question, I think, Ipiranga is probably the area where the most focus should be probably, in terms of the competitiveness of the market, I mean, it's been competitive like you said for a long time. It seems to be coming more competitive and I don't know if that's because of the franchisees are demanding more from you before or perhaps some other players as well? Is it because, there's more stability in the market, it's perhaps a more, somewhere more open market because imports can be a competitive threat. It's [indiscernible] if you could discuss that a bit and then secondly, when you're saying that, results are going to stay, continue to be impacted, are we talking about results staying, more or less, to the reported numbers for the second quarter, in line with that level or maybe a little bit better? Or are we talking about the adjusted number, taking out the strike effects of, and thinking that the results will stay at that higher level? André Pires: Well, thank you, Frank, thanks for your question. The market, I mean the competition of the market is very much related to the fact that, one, you have a frozen price at the refinery gate, which makes it difficult to expand margins on that particular situation, and two, a market where, what we had seen over the years, is more challenging economic scenarios with less opportunity to grow volumes, and also, in a sense, lower disposable incomes. So it becomes more competitive because the volumes are not there. I think that's, let's say, a very quick summary about what we do see. In terms of the evolution of margins and volumes, I mean, it's difficult to say, I would like to be so precise…

Okay. And in terms of like the third quarter, I know it's early to target a EBITDA number, but are you thinking it's going to be closer to the reported number of BRL402 million that you had in the second quarter this year? Or could we see a recovery that closer to the first quarter levels and then stabilize there? André Pires: Frank, I'll get to that. I mean, it's, I mean, I cannot give you a more precise estimate at this point.

Okay. Thank you.

[Operator Instructions] The next question comes from Luiz Carvalho with UBS. Please go ahead.

Hi there. Thank you for taking the question again. And the after reporting this call. Just quick, 2 quick follow-ups. The first one, a follow-up on a previous question, regarding imports. Just checking, did you have any impact? Or any gain from imports during the second quarter? And the second question is more about the leverage. You mentioned in the Portuguese call that, I mean, the current leverage are close to 2.6x, 2.5x, I now that at the beginning it's not that comfortable, and of course, that we do see some, I'll say, nonrecurring impact from that front. But how do you see the [indiscernible] let's say, a lower CapEx? And potentially also lower cash generation, the leverage is coming down over the next couple of quarters? Do you have any, I'm going to say, mid-targets or mid next year, late this year in terms of leverage? Thank you. André Pires : For the first question related to import gains, this was negligible. I mean, the number was very small in the second quarter. So completely negligible. Now in terms of, can you repeat your second question again, it was about leverage?

Yes, sure, in terms of leverage, I mean, you mentioned during the Portuguese call that the current net debt-to-EBITDA leverage is not comfortable or not where the company wants to be, right? And, I mean, you mentioned that your nonrecurring CapEx, as you announced earlier this year, are over the cash generation now, also could be lower, right? So the EBITDA could be lower. So how do you see the deleveraging process bringing the leverage back to, I don't know, 1.5x, 2x, over the next quarters? Do you think that, do you have any internal target, that you can share with us? André Pires : Thanks. Basically, all of measures that we have been taking in order to bring back this number, we don't have a target, but basically that, our objective is to be between 1.5x and 2x net debt-to-EBITDA. And then basically, I think the main and most efficient through is the most likely then on our CapEx process. As I mentioned in the call, the call in Portuguese, not all of it being selected but also using all the methods of bringing businesses to them especially, for example, looking at a more, let's say, earn outside of bonuses for resellers rather than the finance bonuses, which have been the norm for Ipiranga. Using third-party balance sheet is a way of financing, for example, our resellers. And therefore, working both on the CapEx and in working capital as well, as we need to improve our operating cash flow generation, and therefore, consequently, reduce our leverage. Obviously, there is an expectation in the next 12 months of a better EBITDA than in the last 12 months, because in the end, we have some important impact especially if you take into consideration the time period for the loan acquisition of EBITDA. But all in all, I mean, our focus is on the selectivity of investments and moving other methods of investments and optimizing working capital in order to improve or generation of operating cash flow.

This concludes the question-and-answer session. At this time, I'd like to turn the floor back to Mr. Pires for any closing remarks. André Pires: Well thanks everybody. Thanks for your attention and participating in our call. As always our IR team is available to answer your call or other questions you might have. And I hope to see everybody again on our next call for the third quarter results. Thank you very much and have a good afternoon. Bye-bye.

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