Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to the Ultrapar Second Quarter 2019 Results Conference Call. There is also a simultaneous webcast that may be accessed through the Ultrapar's website at ri.ultra.com.br and MZIQ platform. Please feel free to flip through the slides during the conference call. Today with us, we have Mr. Andre 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 and that all participants will be in listen-only mode during the company's presentation. After Ultrapar's remarks are completed, there will be a question-and-answer session. At that time, further instructions will be given. [Operator Instructions] We remind you that questions which will be answered in the Q&A session may be posted in advance on the webcast. A replay of this call will be available for one week. Before proceeding, let me mention that forward-looking statements are made under the Safe Harbor of Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapar 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 would like to turn the conference over to Mr. Pires. Mr. Pires, you may begin your conference.

Thank you very much. Good morning, everyone. It's a pleasure to be here with you to discuss Ultrapar's second quarter 2019 results and our perspectives and priorities for the upcoming quarters. With me today are the executives from all of our businesses as well as our Investor Relations team. Before moving on to the discussion of the second quarter of 2019 results, I would like to draw your attention again to the changes in accounting rules that we are going through this year. As this is a transition year, we are reporting results in two forms -- before and after IFRS 16 -- so that we can maintain comparability of numbers. In addition, we now separately report a corporate line, providing more transparency regarding our expenses, especially from Ultrapar's corporate structure. These two adjustments are presented separately in the financial statements available on our earnings release and on the company's website and the IR team is available at any time to answer any questions regarding the disclosure format. Starting next year, if there are no relevant new accounting rule changes, we would be able to present all numbers in a single format. Let's start now with Ipiranga's performance, Slide No. 3. We ended the second quarter of 2019 with a total network of 7,186 service stations, a net additional 44 units compared with the second quarter of 2018, and a net reduction of 32 units in relation to the first quarter of 2019. This decline is due to a more selective approach of the commercial area through the renewal of contracts. During the quarter, we continued implementation of our new model for am/pm and jet oil contracts, both of which are being managed as business units since the beginning of the year. We ended June with 2,409 am/pm stores, a…

Thank you. [Operator Instructions] And our first question today comes from Frank McGann with Bank of America. Please go ahead.

Okay. Thank you very much. Two questions. One, just focusing on Ipiranga a bit, one thing I was surprised at, I guess, was the real weak performance of volumes in what should, you would have thought, have been a pretty easy comparison against a very weak quarter last year. So, I just wondered if you could just provide a little bit more color on that and the size of the change, particularly with diesel, with the loss of some of the business that you have there. And then, secondly, just to follow-up on some other questions that you've been asked about the potential to invest in refining and what you see as the key benefits, if you were to make such a decision. I know it's probably not made yet, but if you were to make such a decision, what you see could be the positive effects of such an investment.

Okay. Hi, Frank. Thanks for your questions. Starting with Ipiranga, clearly the weak volumes -- I mean, they were obviously relative to a still weak environment from an economic point of view. But if we break down those volumes, in diesel and Otto cycle, we see that the underperformance was much more on the diesel segment. Of the 4% of volume decline, we had a 9% diesel volume decline and a 2% increase in Otto cycle. So, the decline in diesel was basically somewhat a decision that Ipiranga ended up having to not clearly agree with a strong deterioration in prices in the B2B segments. So, consciously, we decided not to do some deals in the B2B segment, especially what we call the TRR segment, which are some further retail players that sell to small consumers or other consumers. And the deals in these sectors were well below what we consider rational for that market. So, consciously, we decided to stay out and this clearly impacted, significantly, our volumes. So, that's the reason why you see that our deterioration, in terms of margins, kind of outperformed our peers. Right? I mean, our deterioration was lower than the deterioration of our peers. And this was a consequence of a conscious decision to not do some deals in this segment. But this is not clearly the way we see the performance going forward and we are committed to retake some of this market share. As you know, the B2B business is essentially a spot business. So, clearly, if we have competitive prices, we'll be back in those markets. I think that the recent weakness of international oil prices tend to help and, therefore, we believe that performance is more a one-off, especially the difference between ourselves and our competitors are a one-off…

Okay. Thank you very much.

And our next question comes from Pedro Medeiros with Citigroup. Please go ahead.

Okay. Thank you so much for taking the questions. Andre, I have two questions just to understand a little bit more about opportunities ahead and how your strategy is evolving. Okay. The first one is do you mind to give extra color and comment on the ongoing debate to promote regulatory changes in LPG distribution in Brazil and vertical integration provisions -- liquid fuel distribution. How is Ipiranga and Ultragaz positioning themselves for these potential changes and can you walk us through whether they pose any threats to volumes, margins, or any opportunity as well? The second question is, in the presentation, you mentioned considerations to add value on your am/pm convenience store base. Okay. Do you mind to give us some extra color and any more objective goals in how you add value from your convenience store base? Maybe perhaps in terms of the number of new store openings you're planning to perform this year or throughout 2020? And how is this strategy evolving considering that your peers are crafting partnerships with retail-dedicated companies and are looking to even expand operations outside the service station network? Okay. And I have a couple other very objective questions. Okay? The first one is do you mind to give us a more objective financial leverage goal, if you do have any, or any potential cap to financial leverage and the evolution of financial leverage? And the second one is, within the presentation, when you mentioned you're exploring opportunities on the oil and gas business in Brazil and the divestments that are taking place -- this is more of a confirmation and a theme that is relatively unexplored -- but considering that shareholders of other petrochemical operations in Brazil have publicly stated an interest to divest from control of these assets, is Ultrapar in any way willing or considering to participate in this process? These are my questions. Thanks.

Okay, Pedro. Thanks for the questions. I'll try to go over them according to the sequence that you mentioned. For the first one, related to the regulation changes, I think we have two different, let's say, approaches or two different phases of these discussions, both for LPG and for liquid fuels. Starting with LPG, basically what is happening right now, it is like a public audience in the sense that the CNPE and some other government bodies have been basically raising questions about potential changes to simplify the LPG distribution segment. Today, obviously, it's not available for the English-speaking people, but there is a very good article on the Valor newspaper about this situation, trying to organize a little bit the information. Clearly, we think that what CNPE is alluding to, which is to fill up gas bottles on a fractionable way -- I mean, having many different players able to fill up a single gas bottle. Right? LPG bottle. This is one. And the second one talking about the possibility of other distributors filling up bottles from someone else. We believe that those two things are maybe not viable for many reasons. I think the first reason is about, let's say, the reliability on the quality of the products and the bottle that someone is acquiring. So, if you do not have a single responsible for that possibility, the reliability goes away. And second, and most importantly, on filling up bottles in the street or on a fractionable way, then there's an issue of safety that is very -- it's something very complicated to go around. Only three countries in the world have this type of regulation -- Nigeria, Ghana, and Paraguay. All other countries operate similar to the way we operate. So, I think there has been a…

[Operator Instructions] I'm going to move to the next question, which comes from Christian Audi with Santander. Please go ahead.

Thank you. Hi, Andre and team. A couple of questions. The first one on the ethanol distribution space. The white flags continue to show resilience, competitiveness, but we know that one aspect of it is their reliance on ethanol and then there's tax evasion related issues. But this keeps happening. Is there anything taking place from a kind of government movement point of view to address this more strongly? Or is this the same as we've seen in the past? In other words, is there anything, a new initiative or anything, that could maybe address this dynamic? Because otherwise, obviously, given the strong demand for ethanol, this is likely to continue and therefore help the white flags. My second question has to do with volume growth. Should we expect the second quarter to have been the worst for the year? In other words, are you seeing any signs that July and August of the Brazilian economy truly accelerating or not yet, whether it's in chemicals or in distribution? Or it's been too early to really make a statement that you're seeing an improvement in economic conditions? Thanks.

Hi, Christian. Thanks for the questions. First question -- I think you're correct. I mean, the white flags, they've continued to show resilience. I think there are many reasons there. I think the first reason is the overall weakness of the economy. The fact that if you have a value proposition which is low price, this keeps an advantage for people that have -- or for places that are discount players. Other than that -- and then you mentioned, you talked about tax evasion. That's one of the reasons, or maybe the main reason, why most part of the players of the market have been strongly against the direct sales of ethanol to gas stations. Just to mention that, basically, everybody -- well, obviously the Association of Fuel Distributors has been clearly against. But also the Association of Resellers -- I mean, the owners of the gas stations -- have been against that. The IRS has been against it, obviously, not only on the federal level but also on the state level. And last but not least, the Association of Ethanol Producers has also been against that and has been trying to show that that would not be a very good idea. But even so, I think this is going forward. And, again, especially because the CNPE has recommended its application. But, obviously, we have to have a significant change in the tax structure first. But, again, we're going to have to keep on dealing with that. Obviously, again, if we see an improvement in the economic activity, I think their competitive advantage starts to reduce. Right? In terms of jumping to the second question, I think, yes, the second quarter is the worst, is the bottom. We've been seeing in all of our businesses in the beginning of the third quarter a recovery in terms of volumes. I think this is true for Ipiranga. It is true, certainly, for Ultragaz. It is true of Oxiteno, especially when we see agro performing very well. In fact, Oxiteno has been somewhat marred by the glycol business, by the MEG business, but in some segments of Oxiteno, especially agro, if we were able to produce more, we would be selling more. Right? The demand is very strong on the specialty chemicals and on the agro side. But, again, the sheer drop in the MEG price has been impacting results. But on the other segments, we see a consistent recovery in the third quarter.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Mr. Pires for any closing remarks.

Okay. Thanks, everyone. Thanks for the participation and we will see you again on our third quarter conference call next November. Thank you very much and have a good afternoon.

Thank you. This concludes today's Ultrapar 2019 Second Quarter Results Conference Call. You maybe disconnect.