Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar's Third Quarter 2019 Results Conference Call. There is a simultaneous webcast that can be accessed through 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. Fred Curado, Chief Executive Officer; and 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 and all participants will be in a listen-only mode. During the company’s presentation, after Ultrapar’s remarks are completed, there will be a question-and-answer session. [Operator Instructions] We remind you that questions, which will be answered during the Q&A session, may be posted in advance in the webcast. A replay of this call will be available for one 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 beliefs and assumptions of Ultrapar management and on information currently available to the company. They involve risks and 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 call over to Mr. Curado. Mr. Curado, you may begin.

Thank you and good morning to everyone. It's a pleasure to be here. It's my first participation in one of the earnings calls. And I just had to do this because a year ago in November last year, we shared in our Ultra Day here in São Paulo, we shared bit of a vision towards the future of our strategic direction. So I think it's a good opportunity to update all of you in where we are in that aspect. So I will quickly over the company and then talk a little bit about the consolidated picture. So starting with Ipiranga, I think Marcelo has been doing a very good job in terms of bolstering the team and the organization, reducing costs also being closer and closer to our resellers. There's tremendous effort as well on the pricing models to get more artificial intelligence as far as our optimization of pricing. And last but not least, the focus on having the adjacent businesses being managed and the whole follow-up of the business in a dedicated way with experienced management, dedicated management, which is responsible for their own P&L, I mean, management P&L. So as a result of all that, what I see in Ipiranga is a company, which is getting more agile, is getting more efficient and more competitive faster. It's, of course, it's a long-term process but I think definitely we are in the right direction. So quickly over to Extrafarma, I was particularly pleased with the positive cash flow for the first time ever I mean ever under our hands, in our hands, which is not by chance. It's a consequence of the turnaround that Ultragaz is leading since mid-last year. And we do see a continuous improvement in terms of not only economical results but also our…

[Operator Instructions] And our first question will come from Frank McGann of Bank of America. Please go ahead.

Thank you. If I could two questions. One, Ipiranga in terms of the cost performance seems to be quite good in the quarter. And I was just wondering if you could perhaps go into a little bit more details of where the cost improvements were coming and how sustainable you think they are? And then secondly just in terms of the broader distribution markets. The white flag volumes continue to be very strong when we look at the industry data. And I was just wondering what -- how you're seeing the overall competitive environment and how you expect it to develop over the next 12 months? André Pires: Hi, Frank, this is André here. Well talking to -- beginning with the performance of Ipiranga in terms of costs. In fact, I mean, Ipiranga has been implementing a series of measures to control costs and expenses and to adjust its expenses to let's say the market reality. So part of this reduction has to do with those initiatives. In addition to that, specifically in the third quarter, there was a reversion of provisions for bad debt in the amount of BRL20 million. This reversion is basically an adjustment that is relative to the improvement of the quality of the credit portfolio -- the clients' portfolio of Ipiranga. So taking all this into consideration, we believe that this is pretty sustainable. Obviously if we look on a -- from a unitary point of view per cubic meter the reduction also reflects the volume improvement from the second to the third quarter of 2019 basically using some operational leverage to dilute fixed costs. So in general, this is again a reflection of the initiatives that Ipiranga has initiated although the process is still going. We believe that there will be more, let's say…

Okay. Thank you, very helpful.

Our next question will come from Lilyanna Yang of HSBC. Please go ahead.

Hi, thank you for taking the questions. Could you please comment on Petrobras' downstream assets that are put for sale? You indicated the synergy gains and the change in dynamics for the sector. So could you highlight where you think adding these assets could be beneficial for you and/or even for the sector in case you end up not eyeing or buying them? And also can you -- on the second question, could you comment on how you plan to monetize your non-fuel segment in your convenience store model? How different do you see yourselves from BRD and from Raizen Combustiveis? Thank you.

Thank you for the question. We -- the way we see the Brazilian market, the Petrobras has been the only player it's not only but, -- almost 100% of the refining capacity in the country. And of course as such it optimizes the country as a whole the combination of the several refineries. And also keeping in mind, the obligation to supply the whole country, I mean so they have it on one side the monopoly -- the quasi monopoly of refinery, but also on the other side they have the responsibility of making sure that the whole country is properly supplied. So when you break that structure in regions, so they are privatizing two refineries in the south of the country, two refineries in the northeast of the country. They're preserving the cluster in the southeast. And they also sell the one in the Amazon and a few of smaller ones. That's where we believe there will be a fundamental change in the dynamics, once of course every new player which refinery will try to optimize its own refining operation. Keep in mind as well, that along with the refinery the whole midstream infrastructure comes along in that -- the inbound and outbound infrastructure comes with the refinery. So it's this combination. Again then when you look at the value chain we have not only Ipiranga, but we also have Ultragaz and Ultracargo play in that sector. So there is a strategic alignment. So we see among those three companies and they all three are quite well positioned in that value chain which will probably have a more, let's say, regionally optimization -- optimization work towards every region of the country as we -- by the way as we see in the U.S. and Europe. So that's more or…

If I may just follow-up. I wonder if it makes sense for Ultrapar I mean today to go more asset -- asset light without having a partner with expertise in the refining business ahead of the potential acquisition of Petrobras assets?

We -- I mean we see that there are some skills in that operation. So it is downstream an integrated deal. Refining is a clear skill in operating refinery. Trading is another one, distribution and retail. We kind of believe, we are good in distribution and retail. We do have experience in operating a large and complex petrochemical and biomechanical industrial operation. We do not have specific industry experience in running refineries and we have limited experience in trading. So a partner is probably -- would be an alternative. It's very early stage to define what's the ultimate strategy and what's the ultimate let's say structure to Ultragaz opportunities. But that's something we are contemplating as a possibility. It would be probably good alternative for us to have a partner, but I would not say that this is a mandatory requirement.

Perfect. Thank you.

And our next question will come from Gustavo Allevato with Retail. Please go ahead. Mr. Allevato?

Can you hear me?

Yes, I can -- we can hear you now. The floor is yours. Mr. Allevato, do you have a question to ask?

Okay, can you hear me? Okay. So, thanks for the opportunity. So, in the previous call, you mentioned that the SG&A tariff reversion were BRL150 million to BRL200 million for the next 18 months. So, looking the results, we noticed that there was some reduction already in third quarter. So, among these tariffs, I would like to know how much more can we expect? This BRL150 million BRL200 million is additional regarding what the company achieved in the third quarter or is something already embedded in the third quarter results? Also in the SG&A reduction on a qualitative basis, if you could provide some guidance regarding what the company is doing. And moving to Oxiteno so -- the results are slightly improving, especially in the U.S. So, when can you expect the units in the U.S. regarding the expansion of the company compared to last year should be breakeven regarding -- in terms of EBITDA? Thank you. André Pires: Hi Gustavo, thanks for the question. As for the SG&A opportunities in Ipiranga, we have already started to implement those changes some time ago. There is still more to come. The overall potential is around BRL150 million per year. But part of that has already happened or is already happening in the second or third quarter of this year. So, we don't have any number for the next quarters of course. But I mean when this is all said and done and taking into consideration, especially, the improvement in the logistics part, it's something on a yearly basis sustainable BRL150 million to BRL200 million a year something like that. In terms of Oxiteno, the U.S.A. operations, we have an expectation of improved results for 2020. The breakeven should be achieved at some point between the second and third quarter of 2020 on a monthly basis. But on a full year basis, it's a 2021 expectation, right? But crossing the line, I would say some time during 2020.

Okay, very clear. And if I can ask another question regarding Ipiranga. So I know you guys don't like to record on monthly basis, so we noticed like strong volumes in July and August, but likely reduction in September going to the fourth quarter. So, can we expect the same trend of the third quarter or should the deceleration in September should prevail? Thank you.

Hi Gustavo. Yes, well basically, as we normally say, right, I mean, we should try not to look specifically at given short periods like monthly views, right? From our perspective, the trend that we saw in the third quarter which is improving volumes and for Ipiranga itself improving market share should prevail also in the fourth quarter. I mean we have seen an improved market dynamic and improved economic dynamic throughout the end let's say the third quarter -- the end of the third quarter going through the fourth quarter as well. So, yes, we believe it should prevail.

Thank you.

Our next question will come from Pedro Medeiros of Citigroup. Please go ahead.

Good morning guys. Thank you so much for taking the question. Congrats on the results. I have a couple of follow-ups. I think most of the questions were already answered in the prior call and this one. My first one is coming back to the topic of Oxiteno. If you look at the broad business, you've shown already sequential margin improvements taking outside the typical seasonality. So, I just wanted to understand the outlook for the fourth quarter, okay? Should we continue to expect on a margin basis sequential margin gains? So, just trying to understand a bit of the recurrence of the third quarter results. My second question is well you have been commenting about the targets for recovering returns at Ipiranga. And considering the comments of the recurring nature of Ipiranga's margin this quarter and cost improvements that were already achieved do you -- can you give us like some additional color on how do you think Ipiranga returns spend? And how far are we from the corporate targets and perhaps when do you expect to achieve that? Is that already visible considering the performance in the third quarter? So, I would appreciate if you can comment on that. And just one last point okay. I apologize. So, coming back to the topic of the September sales apparently most of the changes in volumes were driven by the diesel market. So, can you get us some additional color on what's happening on the diesel market and why do we expect it to be reversed in the fourth quarter. Thank you. André Pires: Okay Pedra, thanks for the questions. Starting with Oxiteno. I mean, again, there is some seasonality, right? I mean the third quarter seems -- tends to be the best quarter in the year as Oxiteno I…

Okay. Thank you. Thanks, André. Congrats for the results.

And our next question will come from Christian Audi of Santander. Please go ahead.

Thank you, André. I have three follow-up questions. Fred going back on to the refinery, potential refinery acquisition. Are you looking at that more as a defensive maneuver in the sense of you needing to be there to protect the refinery elements or part of your chain or more as an opportunistic one in the sense of you seeing synergies, attractive synergies to be had that could really add upside for your business? The second question André was going back to Ipiranga on the competitive front. You already touched on the white flags but can you just comment a little bit about the behavior you have been seeing from both BR Distribuidora and the newly entrant foreigner -- foreign companies that bought smaller players. What type of aggressive, non-aggressive type of behavior you've seen from them from a pricing or competitive point of view? And then lastly, if you could just provide an update on the potential regulatory changes in the fuel distribution which ones you think may pass may not pass. Just a general update would be very helpful, please. Thanks.

So welcome back Christian. So no we don't see the senses no. We see it as a value creation opportunity. Ipiranga, whoever acquires refineries, we have in Ipiranga a large customer. So I think the stake that Ipiranga has as a large distributor throughout the country is there in any case. So Ipiranga we believe will benefit from the same reasons that we already talked about in a few questions ago. Scale and the volume pricing, probably there will be the norm under a let's say market -- normal market condition. So the benefit is there. But we also see the refining itself -- the refineries itself. There is value there we believe. Structurally, Brazil will be more and more long in crude oil. So as the pre-salt exploration goes up, the surplus of oil will increase and Brazil become a higher, higher net exporter of oil. On the other hand we do not foresee, at least now, any new investments in new refineries in the country. We don't see quite frankly in the world and the movement is the other way around. And Brazil has a structural deficit in refining products, more specifically diesel and gasoline. So you have the very unique combination which is a country where geographically we are kind of a far from let's say the major markets. And number two, we have a country which has a very large domestic market with a situation where we are long in crude and short in refined products. So that business we see with potential by itself. So we see that business as a Ultrapar business not necessarily as Ipiranga business. We see Ipiranga Ultracargo and Ultragaz again in this ecosystem as benefiting from those changes. So it's not a defensive movement. It's a value creation movement for…

Great. Thank you very much.

This concludes our question-and-answer section. At this time, I would like to turn the floor back to Mr. Pires for any closing remarks. Please go ahead sir. André Pires: Okay. So thanks everybody for the interest in participation in our call. Hope to see you again in our fourth quarter results late February. And we're going to have an Ultra Day here in São Paulo Brazil early March, March 5. So see you all then. Thank you very much. Have a good afternoon. Thanks.

Thank you. This concludes today's Ultrapar's Third Quarter 2019 Results Conference Call. You may now disconnect your lines at this time.