Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar's Fourth 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. Fred Curado, Chief Executive Officer; and 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 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. At that time further instructions will be given. [Operator Instructions] We remind you that questions which will be answered during the Q&A session may be posted in advance in the webcast and 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, uncertainties and assumptions, because they can 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 cause results to differ materially from those expressed in such forward-looking statements. Now I'll turn the conference over to Mr. Curado. Mr. Curado, you may now begin the conference.

Thank you, and good morning. I just would like to say a few words on the brief assessment of the 2019 financial year, and also our vision for the coming years, noting that, of course, in two weeks, we will have our Ultra Day, our Investor Day, when we will be able to go a little bit deeper in those discussions. So 2019 was an important year for Ultra and we had improvements in our businesses. Some of those improvements, they have already resulted in better results, financial results, such as the EBITDA growth in Ipiranga and Ultracargo, and also the segment that in the great – we had a great second half at Ultragaz, which also had a very strong cash generation in the year. I would add also with a positive cash flow at Extrafarma from the third quarter on, which is a result of a significant change in our strategy in that company. But despite those improvements, we also had other improvements, which not necessarily translated into financial improvements yet, but they will certainly boost our future results. I would mention on development side of the organization, we successfully completed the succession at Ultracargo, so that we have a new CEO since January. We still continue very firmly to build a pipeline of business leaders and those – this new – the layer of our top management will certainly sustain the company's growth in the years ahead. Another important part in our, I call it ownership and accountability management model was the creation of our Shared Services Center. This was early January this year. And with that, we are going to segregate our – not only organization, but also the cost allocation to our businesses. So this will fundamentally give us more transparency in the way we…

Well, thanks, Fred. And good morning, everyone. Before beginning our presentation today, I'd like to highlight some important points on our results for the fourth quarter and the year of 2019. This was a year of transition with the implementation of the new accounting rule IFRS 16, which had a significant impact on our numbers. We have also chosen to include in this transition, a new format of publishing the corporate expenses, which are stated as holding expenses, segregating them from our business results. In both cases, we are showing tables not only in our earnings release, but also in the company's website separating each effect by business on a quarterly basis and reconciling the numbers. In 2019, we kept our disclosure in two formats using the criteria published in 2018 for comparability and accounting to the new rules. As from 2020, disclosure will be only using this new criteria with IFRS 16 and segregation of the holding expenses. In addition, during the year, there were some non-recurring items, as Fred mentioned, which influenced our results and will be explained throughout the year in our disclosures. You will notice that in our explanations today, we have excluded some of the non-recurring FX to examine the real operational performance of our businesses and of Ultrapar. We will explain the reasons and causes of this effect in the course of the presentation. Moving on now to Slide number 3 and talking about Ipiranga. Ipiranga ended the fourth quarter with a slight decrease in volume due to 2% reduction in diesel, mainly in the wholesale segment. On the other hand, Otto cycle increased 1%, especially due to a greater share of gasoline in the sales mix. In the year, consolidated volumes were down 1% with a larger drop in diesel in the large…

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

Okay. Thank you very much. I was wondering, just to go back to the refining issue and the potential to buy assets, just what your kind of bigger strategy is there? Really just could take a lot of different turns in terms of what the final results are, but what – how are you seeing the market changing or developing over the next three or four years that would make this type of acquisition advantageous to Ultrapar and Ipiranga?

Thank you, Frank, for the question. Well, we see actually a few opportunities with that process. One, if we understand that today we have fundamentally one player in the Brazilian refining system and downstream, which looks at the country as a single entity and counting on, I don't know, probably 15-plus refineries optimizing the whole, not optimizing each refinery for that specific region. So when you kind of break that monopoly, if you will, into different regions, you really release the opportunity for an optimization of, number one, inbound oil – crude oil, so which is the perfect diet for that specific refinery, not perfect diet for the combination of refineries. And number two, also what's the ideal output for the consumption in that specific region, not necessarily is the ideal of today's, let's say, global Brazil picture. So this is one. Two is the actual optimization of the asset itself, probably a more efficient operation. I would say probably a better use of capital in terms of investments and maintenance of the refinery, which has been the history of all the assets that we have seen, which were privatized in this country in the last 20 years. There is an intrinsic opportunity for higher efficiency and utilization of the assets. So, that's two. A third element, of course, when you think about the business that – so those too have been acquiring a refinery. You have that potential capture of value, obviously acquiring for – by the right value, for the right price, obviously. As far as synergies, today, the system is such in Brazil that you have a single price regardless of volume, regardless of long-term commitments, regardless of any – even regardless of creditworthiness. So, when you consider a private refinery, where a company like Ipiranga, a company like Ultragaz, even a company like Ultracargo is providing services. I'd say Ipiranga is the main element there, which has not only a significant amount of off take, but also the ability and – to commit for a longer-term contract. There will be obviously a differentiation in price, which today is not the case by design. So a second opportunity clearly, opportunity to optimize inventories when you have a better planning and better coordination of planning between the refinery and the distribution company. So this is a very, let's say, broad perspective where we see potential capture of value for whoever acquires those refineries.

Okay. Thank you very much. Very helpful.

And our next question will come from Pedro Soares of BTG Pactual. Please go ahead.

Hi, good morning, Fred. Good morning, Andre. My two questions regard Ipiranga operations. So the first one, we usually see a better seasonality during Q4 in gas station conversion, but at this time, not only the reduction wasn't smoother versus the previous quarters, but it actually accelerated quite a lot. So if you guys could provide a little bit of more color on that front and whether the new CapEx guidance which implies an important year-over-year growth could mean an improving cycle from now on in terms of having a net positive addition of gas stations in the end of the year. And could you also provide the breakdown of the net loss of 61 stations seen now in Q4? How many conversions and how many were debugged out of these 61 stations? And the second question regards margins in Q4 as well. In the previous Portuguese call, you guys mentioned that there were no major import gains worth highlighting that could explain margin improvements. But I wonder – I would like for you guys to comment on whether there were some inventory gains worth mentioning and that you might be able to quantify. And lastly, if you're already seeing the opposite effect now in Q4 with the several reductions in gasoline and diesel prices so far, should we expect some relevant inventory losses during Q1? And are you guys being able to somehow smoothen that? That's it. Thanks.

Hi Pedro, I'd like to – I'll try to take all your questions here. If I miss something, let me know. But in terms of seasonality and the performance in the fourth quarter, I think, yes, you are right, fourth quarter normally is a strong quarter seasonally. We continue to expand our margins in the fourth quarter. However, if you look at volumes, specifically in the diesel segment, you probably saw that there was a sharp decline, I would say, specifically in what we call TRR or large wholesale distributors, which are normally very low-margin type of customers, which impacted our volumes in the fourth quarter. However, we continued to expand our profitability in a sequential basis between the third and the fourth quarter. As for the CapEx, we can give you later a better breakdown in terms of the openings and closure, but basically, just highlighting that we had, in the fourth quarter of 2019, 80 openings, and 141 closures of – churn of gas stations, coming up to 61 negative churn in the fourth quarter. If you look to the year, it is 243 new additions, with 331 closures of gas stations. And this is part of the process of improving the quality of our network, focusing more on throughput and productivity, and by no means, giving up, I would say, of our growth strategy. You probably have seen that we have converted a very – I would say, a very – a relatively large white flag gas station network in the beginning of the year now, in January. It's called S3. It's 24 gas stations that are being branded by Ipiranga, with another four gas stations to be opened by this new operator that we brought to our network. Although we – it's a different type of…

Okay. That was pretty clear. Thank you.

And our next question will come from Julia Park of UBS. Please go ahead.

Hi, thank you for taking my questions. I have two quick questions here. First on Ipiranga. You have the am/pm stores, Abastece Ai and the Km de Vantagens program. Is that the company's scope to unlock value from these programs to investors? And the second question is regarding earnings growth. This year, we are seeing a stronger growth because of an improvement in the business segments. But in 2019 could be considered a weak comparison base. We have here CAGR of 10% to 12% between 2020 and 2023. Do you see that as a fair assumption looking to the mid to long term? Thank you.

Okay. So this is Fred. I'll take the first one and Andre will take the second. Well, the idea of looking at those adjacent businesses as business units, is really to, let's say, see and identify this value more clearly than in the – intertwined with the whole Ipiranga operation. So we do not have per se a strategy to seek for partners. Let's say the base case is that we're going to grow those businesses organically. But on the other hand, we are not closed to the idea of eventually considering a partner if and when that accelerates or improves the creation of value in those two businesses. So, it's not an objective per se, but it's something that might be considered down the road.

And Julia, I cannot really comment on your assumptions, I would say, or your expectations in terms of earnings growth or CAGR between 2020 and 2023. What I can tell you is that, given what we see today, let's say, looking at our businesses including Ipiranga, the improvement in results that we've seen in the last couple of quarters should continue throughout 2020. And for the other businesses in general, we are seeing a dynamic of, I would say, EBITDA growth in general for all the businesses when we look at 2020, especially taking into consideration the expectations of economic growth that we have in Brazil. And of course, we have to take into consideration the overall improvement that we've seen in all the businesses. I think we talked about that in the call Portuguese. Fred mentioned that in his initial speech. So we've been taking a lot of, I would say, efforts and actions. Some of them have already been clear in our results, some other still to mature. So only if we mention a couple of those, Extrafarma, which was an element of cash burn in the last few years, started to generate positive cash in the second semester of 2019. And Ipiranga, again, we sequentially have been improving our EBITDA measured by reais in cubic meter. If we look at return on capital employed in some of our businesses, Ipiranga, we went from 11.1% to 12.1%. So it was 100 basis points gain in return on invested capital. If you look at Ultragaz, we are talking about a return on invested capital above 17%. And last but not least, a lot of initiatives in, let's say, cost control. SG&A in Ipiranga reduced by 3% in 2018, still BRL 80 million to BRL 100 million of gains to be seen in the next 12 to 18 months. And Oxiteno expectation of BRL 40 million of reductions in SG&A for 2020 as well. So a lot of initiatives, some of those will be able to be seen in these results, some others will come as time progresses.

Thank you.

This concludes the 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.

Well, thanks, everyone. Thanks for the participation. Again, I hope to see you on our Ultra Day, which is going to happen in two weeks here in Sao Paulo. Thank you very much and have a good day. Bye-bye.

Thank you. This concludes today's Ultrapar's fourth quarter 2019 results conference call. You may disconnect your lines at this time.