Good morning. Thank you for waiting. Welcome for the conference call of Ultrapar for the first quarter 2023 results. The results simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br and through MZIQ platform. This presentation will be conducted by Mr. Rodrigo Pizzinatto, Ultrapar's Chief Financial Officer and Investor Relations Officer. In the Q&A session, we'll have the presence of Mr. Marcos Lutz, Ultrapar CEO, and the CEO of businesses, Mr. Tabajara Bertelli, Mr. Décio Amaral, and Mr. Leonardo Linden. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After Ultrapar's remarks, there will be a question and answer question. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator.
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 immediately after its closure for seven days. Before proceeding, we would like to state that forward-looking statements are being made under the safe harbor of the Securities Litigation Reform Act of 1995. Forward-looking statements are based on the beliefs and assumptions of Ultrapar management and on information currently available to the company. They involve risk, 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 also cause results to differ materially from those expressing such forward-looking statements.
Now, we would like to turn the conference over to Mr. Rodrigo Pizzinatto, who is going to start the conference call. Please, you can now proceed.
Good morning, everyone. It is a pleasure to be here once more to talk about Ultrapar's results. On slide number two, I want to remind you that at this moment, both the earnings release and this presentation consider Ultrapar's data from continuing operations in 2023, while for 2022, the company's data are presented in the pro forma view. That is, it considers the sum of continuing and discontinued operations as disclosed throughout last year, unless otherwise indicated. Moving now to slide number three with Ultrapar's consolidated results. As you can see in the chart in the upper left side, our EBITDA from continuing operations totaled BRL 1,079 million in the first quarter of 2023, 20% higher year-over-year due to the higher EBITDAs at Ultragaz and Ultracargo, partially offset by Ipiranga's lower EBITDA.
Ultrapar's net income was BRL 274 million in the first quarter, 41% lower year-over-year, mainly due to the deconsolidation of Oxiteno and Extrafarma's results, despite the greater EBITDA from continuing operations, lower financial expenses, and lower costs and expenses with depreciation. Investments from continuing operations totaled BRL 365 million in the first quarter of 2023, 20% higher than that of the first quarter of 2022, mainly due to higher investments at Ipiranga and Ultragaz.
We registered an operating cash consumption of BRL 711 million in the first quarter, compared to a consumption of BRL 1.183 billion in the same period of 2022, resulting from higher investments in working capital in the first quarter of last year, mainly due to the relevant increases of fuel prices at that quarter, partially offset by the reduction of BRL 897 million in the draft discount balance in the first quarter of 2023. Moving on to slide 4 to talk about our liability management. We ended the first quarter with a net debt of BRL 8.3 billion, an increase of BRL 1.6 billion compared to December 2022. This increase is mainly driven by two main effects.
The first is the effect of the end of year holiday, as December 31st was not a working day and therefore payments were postponed to the beginning of the year. The second effect is the consumption of operating cash in working capital, due mainly to the reduction in the draft discount operations in the first quarter of 2023 that I just mentioned. These two effects were attenuated by fuel prices reductions in recent months. With that, our leverage increased from 1.7 times in December 2022 to two times in March 2023 on the back of the net debt increase. I'd like to point out that the numbers of net debt do not include pending receivables of BRL 1.1 billion reais related to the sales of Oxiteno and Extrafarma.
As we presented in the annual conference call, to provide more visibility in relation to our numbers, we have included at the bottom of this slide a table with the total amount of draft discount and vendor lines. As well as pending receivables from the sales of Oxiteno and Extrafarma. All lines have highlighted in our balance sheet. The net debt of March 2023, adding draft discount vendor and divestment receivables, would be BRL 9.4 billion. Moving on to the next slide five, to talk about another excellent quarter of Ultragaz. The volume of LPG sold in the first quarter was 4% higher year-over-year, due to a 2% increase in the bottled segment on the back of greater market demand and a 10% increase in the bulk segment, with higher sales to industries, commerce and services segment.
Ultragaz SG&A in the first quarter of 2023 was 20% higher than that of the first quarter of 2022, due to higher expenses with personnel, mainly collected for gaining agreements and a larger headcount as a result of the recent acquisitions of NEOgás and Stella, along with higher expenses with sales commissions and freight due to higher sales volume. Ultragaz had another quarter of strong results. EBITDA totaled BRL 384 million, 80% higher than that of the first quarter of 2022. This growth is mainly explained by efficiency and productivity initiatives implemented in the last quarters by better sales mix, by inflation pass-through, and by higher sales volume despite higher expenses. For the current quarter, we expect results close to that of the last quarters. Moving now to slide number six to talk about another great quarter of Ultracargo.
The company's average stock capacity was 955,000 cubic meters in the first quarter of 2023, stable in relation to the first quarter of 2022. The cubic meters sold increased by 7%, mainly due to increased handling of fuels in Vila do Conde, in of ethanol in Suape, and of chemicals in Santos. Ultracargo's net revenues was BRL 236 million in the first quarter of 2023, 20% higher year-over-year as a result of contractual readjustments, spot sales, and higher cubic meters sold. Combined cost and expenses were 11% higher than those of the first quarter of 2022 as a result of higher expenses with personnel, mainly collective bar gaining agreement and consultancy services linked to expansion and profitability projects.
Ultracargo's EBITDA totaled BRL 142 million in the quarter, a growth of 25% year-over-year due to higher capacity occupancy with profitability gains, contractual readjustments, spot sales, and productivity and efficiency gains despite higher expenses. EBITDA margin was 60% in the first quarter of 2023, 3 percentage points above that of the first quarter of 2022. For the current quarter, we expect Ultracargo to continue its good operating performance with results similar to those of the first quarter. To conclude this presentation, moving now to slide seven, let's talk about Ipiranga's results. Volumes sold increased 2% year-over-year, with a 1% growth in diesel and a 4% growth in the Otto cycle.
We ended the quarter with a network of 6,526 service stations, 245 stations less than that of the fourth quarter of 2022, which is in line with our strategy of managing the legacy of low-potential service stations. A total of 49 new service stations were added to the network with an average volume contribution of 265 cubic meters per month, and 294 service stations were closed with an average volume contribution of 39 cubic meters per month. Despite the reduction of the number of service stations, the volume net effect was positive, reinforcing our strategy of higher density and improved standards in our service stations network. In addition, we ended the quarter with 1,555 AmPm stores with same-store sales growth of 13% year-over-year.
Ipiranga's SG&A increased 17% in the quarter due to higher personnel expenses and depreciation, as well as provisions for contingencies. The other operating results line totaled negative BRL 139 million in the first quarter of 2023, compared to a negative BRL 110 million in the first quarter of 2022, mainly reflecting higher costs with CBIO's Brazilian carbon tax. The disposal of assets line totaled BRL 56 million in the quarter, resulting from the sale of 10 real estate assets in the quarter. Ipiranga's EBITDA totaled BRL 596 million in the quarter, 4% lower than that of the first quarter of 2022. As expected, a good improvement over the fourth quarter 2022 results.
Recurring EBITDA was BRL 540 million, 9% lower year-over-year, due to more pressured margins resulting from inventory losses and higher expenses despite higher sales volume. Looking now to the second quarter, we expect seasonally higher volumes and, in the current market context, profitability levels close to those of the 1Q of 2023. With that, I now conclude my presentation. I appreciate your interest and attention, and let's now move to the Q&A session when we will be available to answer your questions. Thank you very much.
We are going to start now our Q&A session. The floor is now open for questions from investors and analysts. If you have a question, please press star one.
If your question is answered, you may remove yourself from the queue by pressing star two. Questions will be taken in the order they are received. We would like to ask you to pick up your headset when asking your question to provide optimum sound quality. Please hold while we poll for questions. If you are following the conference call via webcast, please click on Question to the Host to send your question to our executives. The first question comes from Monique Greco of Itaú BBA.
Good morning. Thank you for taking my questions. I would like to congratulate the team for the results. I'm going to take this opportunity to ask two questions.
First, maybe Linden can share with us a little bit about the recent dynamics in terms of competition, really, of fuel distribution in the second quarter, whether it's through open arbitration, a rearrangement of global flows because of the actions and the sanctions of the European Union against Russia. Secondly, about your strategy of closure of service stations. You've mentioned that you want to expand this network. Will it have one specific regional impact? Should we expect a change in the footprint of the company because of this strategy? Any regional specificity that it's worth highlighting?
Thank you.
Hi, Monique. Good morning. Speaking of the dynamic of the second quarter, I think you've emphasized what is characterizing the second quarter. Open arbitration, it's been the case since February. It's not something just specific to this quarter.
A market with a full of offer because then we have, when the market's open, you have greater offer of products, and it does bring us some challenges in terms of margins, for example. Our expectations is that this is going to be maintained as is for a while, a market with high offer, with imported product in the market, and this is going to apply pressure to our operations, of course. It's not very different from what we have observed since February, the first quarter. We just have to wait and see how Petrobras is going to behave in terms of pricing. This is the environment, and it's a given condition, right? In terms of closure of service stations, it's very much consistent with what we've been saying right from the beginning.
We are removing the low productivity tail. This is not something that's going to change our regional footprint of Ipiranga. It does bring some more productivity to our network because then we have more efficient service stations. There is no idea of being more or less concentrated on specific regions. Ipiranga is a Brazilian company where we can see opportunities in some regions more than in the others, but this elimination of the tail is something uniform that has to be done because of the characteristic of the business itself, much more than for any regional strategy, so to speak.
That's great. Thank you very much. Clear.
The next question comes from Leonardo Marcondes of Bank of America.
Good morning. Thank you for taking my questions. I have three quick questions.
First, concerning the sale of real estate lots by Ipiranga, we've seen some initiatives along these lines. How many land, real estate lands do you still have to sell? How much do you expect to get from that, and when do you expect to have them all sold? Now, concerning that closure of some service stations, how has it been affecting the P&L of Ipiranga, especially when we consider the SG&A? Now, concerning Ultragaz, we've seen that once again it has delivered results which were even exceeding the expectations. I would like to understand, what are the competitive advantages of Ultragaz that you believe are unique to the company and that other distributors do not have? What can we expect in terms of margins and ROIC from now on?
Thank you very much.
Good morning, Leonardo.
I'm going to answer the first two questions, and then Leonardo will talk about Ultragaz. In terms of sales of real estate, land, we've sold 10 units this quarter, BRL 140 million. We have 300 real estate assets at Ipiranga to sell. We intend to do that for the next 3 or 4 years. If we have the average sales, that would be BRL 3 million-BRL 4 million, so that would total BRL 1 billion to be acknowledged in the upcoming three or four years. It should be very careful because this is an opportunity to bring a more qualified network and more resellers. As to the closure of service stations, as Linden pointed out, we closed [250 Rio service stations]. Amortization was 140 greater than expected.
We estimate to have it all completed in the third quarter of this year, then this effect will no longer impact that line of depreciation and net income. Next question will be answered here.
Concerning your question about the results of Ultragaz, we go back to seeing it from a broader perspective. We've already talked about our long-term strategy, we've been building the design of a company which is focused on operational efficiency. We've been investing in it throughout the years, these things just get more, they turn into results throughout time. Really, company focused on clients, towards innovation, digital channels, we've been really trying to strike a balance between distribution of the markets and offer of additional services. These are the most recent moves we've been made, really to increase the offer of energy.
It is, it's not a short-term extraordinary movement. It's a long-term strategy that we've been put in place throughout the recent years, and we really believe in it. It is building a company that is closer to the customer, closer to retail, delivering additional solutions, which has a different perceived value to it.
That's great. Thank you all very much.
The next question comes from Pedro Soares of BTG Pactual.
Good morning, everyone. I have three quick questions. First, to Linden, most probably about Ipiranga and trying to address the discussion about margins and also ROIC. It was somewhat challenging in the quarter, which has led to some reduce of inventory levels, but still the margins proved to be very resilient. How much of that is due to your work with suppliers?
I've seen there was a substantial reduction in payment terms based on delivery. Is there really any fact of changing payment terms for price? Inventories, what can we expect that turnover and invested capital to try to think about the progression of Ipiranga's ROIC? The second question, based on what Pizzinatto has just said, you've said that the process is expected to evolve up to the third quarter this year. Finally, at Ultragaz, I would like to hear more about what has changed from the first quarter to the second quarter, or rather, the results of the fourth quarter last year to the first quarter this year. Why do I say that? In your last earnings conference call, you brought a very good perspective for the industry, closer to what was the second half last year.
The numbers were much better. Was it just a one-off situation? Have you done anything inside to produce this result? These are my questions. Thank you.
Hi, Pedro. Linden speaking. I think Rodrigo can make additional comments. Giving you the overview of the quarter, just to have the background, right? In January, it was a very weak month in terms of volume. There was a loss of inventory because of the end of the month of December. High branding. January was a complicated month, especially in terms of volume. Everyone had high inventory levels with expectations of the returns of PIS/Cofins in taxes. Things changed somewhat. There was an opening of arbitration. Then...
It has impacted the business. There is a better situation of volume and a better work with our actions. There was a decrease in inventory, but also some contributions in the first quarter. The PIS and COFINS, it was a partial return which helped the month of March. Basically, that's it. What we can see in terms of margin in Ipiranga reflect our best efforts really to have the business gain more consistency, more body and better margins. Something which is compatible with what we do in working within the four pillars. We have to learn how to deal with market volatility, and this is exactly what we've done in the first quarter. Concerning the financial impact, I would like to ask Rodrigo to jump in and complement. Concerning working capital and.
In January, after Americanas' case came to the market, our draft discount balance impact and was impacted, and we thought it was better to have long-term debt at more appropriate terms. There was a difference then in terms of draft discount balance. It increased our debt level, but impact our working capital, of course. In addition, in this first period, we have the calendar effect because as December finished in a non-working day, 31st of December is not a working day, a calendar day, so that has impacted our payment. Then the working capital of the first month was somewhat negative, which impact your second question. Because when you look working capital, it tends to generate more cash on the second half of the year historically. It is a period of the year which has much better leverage.
Businesses have higher volume in the second half of the year. This is why it generates more cash than the first half of the year. Concerning that closure of legacy, we expect to have it completed by the third quarter. As of the fourth quarter, we are going to have the normalized close, closure of stations as we would expect in a normal operation. You've also asked about the cost of the effect of draft discount in cost. In Ipiranga, it happened more in the end of the quarter, and the effect of the quarter was less than 2 BRL per cubic meter.
Pedro, about the progression of the past, two quarters, and I'm just building up on what I've said before.
We have been operating in line with our expectations and, if you really look closer, it is continuity of the last quarters, right? In the last quarter, I think we had conditions to deliver better results in terms of operating costs compared to previous quarter, better commercial performance when we look at traded volume. In our operation, then we can have some specific force that help us in the relationship with our traditional customers. A broader relationship with everyone. The combination of all these factors was positive and has given us this short-term understanding.
That's great and clear. Thank you very much, all of you, for your answers.
The next question comes from Gabriel Barra of Citibank.
Can you all hear me all right?
Yes, please.
Thank you for taking my questions.
I have three points that I would like to go over with you and then some follow-up. The first one, the acquisition of. Can you please tell us about the strategy of the company that's going to help us understand more about to what extent it can help the company build their competitiveness, especially with [FMO]? Second point about branded operations. Had really a very positive perspective of branded network, more favorable one and build up on what we've seen about you talking about competition and sourcing. With Russia, maybe we can have more competition with white labels and regional brands. Have you received any impact yet? Or maybe it's too early to talk about that. I'd like to hear more on it. Finally, it is a topic of the fourth quarter which has been discussed and brought to the attention.
You had tax credit in the fourth quarter. We see a transfer that you've had. There are two points here. Is there a possibility of having any more amount and more value to be added and given as credit in a exercise in the books? Is there any risk of feeling its impact during the year? Any trigger, so to speak, that we would have to pay attention to? These are my three points. Thank you.
Good morning, Gabriel. This is Décio speaking. First part of the strategy of Ultragaz of interiorization, of getting into the new market. It is a high capacity terminal with the integration of different modalities of transportation, railway, highway. It can get even more volume with expansion of railway system and getting connected to Santos, which is a project we've already addressed. We are waiting for authorization.
This will be the main channel of arrival of corn ethanol into Paulínia, and it also increases our exposure to biofuel. It's very much aligned with our strategy of being a logistic solution provider, dealing with the bottleneck of the country, and also aligned with sustainability. We want to transform that terminal into a better turnover, really terminal, which is our expertise and what we do the best. Concerning our branding stations, our pipeline of branding network is consistent with what we've been planned. It is a robust pipeline. This year, in addition to branding, we are going to rebrand some of our service stations, updating the image of our brand, and we expect it to produce positive results. To present, I have no expectations of any variations.
Quite to the contrary, what we see in Brazil in terms of supplies, Ipiranga has value to deliver in this situation. As a company which has a structure, commitment, with its business in Brazil, it's positive. We are within budget and plan, and we are going to follow through. In terms of market, competitiveness, you've talked about Russian fuel. We think that open operation as a whole impacts the market, as we've told you. There is oversupply, of course, but this is for all imported product, even coming from the Gulf. Products coming from the Gulf. It's expected volatility, things get more under control. We are not a company to speculate in the market, of course. We are here just to supply the needs of our customers in a well-structured way.
We are always going to get adjusted to the market and import if needed. The impacts within the market in terms of supply and operation is very volatile, and things are going to change eventually. Concerning Law 192, Rodrigo will say something.
Well, considering fiscal or tax credits, we've recognized it considering the total tax credits to be recovered for Ultragaz and Ipiranga. As profitability continues to increase, we can also include additional credits at Ipiranga. That may be done throughout time. The risk of having it reverted is really low in our understanding.
Great. Thank you very much for your answers.
The next question comes from Luiz Carvalho of UBS.
Thank you for taking my questions. I have two questions. The first, as we have Linden with us, Lutz with us, it's a question that I've been asking in all different calls.
Lutz, the company in recent years has been through relevant process when we think long-term history. Having you coming to the team and others, there was a significant relevant change in your board structure. Can you please tell us, watching the movement and the way you see the company today, not a snapshot, but the whole history we've seen in recent quarters in operational turnaround in some of your businesses. What was discussed when you got to the company was to speak about advanced capital allocation, reduction of the company's stake in some of its subsidiaries. What are the updated plans with the new board members in terms of capital allocation? Second question, probably to Linden. I know you don't talk about the traded strategy, especially for imports, but we are in contact with the market.
In 2 of the events that we've been together, at least, someone mentioned that Ipiranga would be bringing products from Russia. We've seen Gunvor importing the product into Brazil, 50 ships. I would like to understand whether there is any risk for investors there. How have you been mapping it as a specific opportunity? Do you think that this flow coming from Russia will be something more long staying in the market in general?
Thank you for the question, Luiz. The first part, yes. It is a history, right? Ultra is 85 years old, and it has been through different moments and a number of very specific achievements, of course. I joined the company when many things had already been taking place with renovation. There are many people here with me part of this process.
Pátria, join the team was good. It's the first time a private equity just become part of Ultra. A number of things have changed. Nothing disruptive or absolutely unexpected that have one single day, but what has-- happening is a natural progression. A different Brazil and a different world for the next 85 years, right? We are getting prepared for the next 85 years. It is a process of construction, of building operational quality. As Ultrapar, we are getting prepared to be a capital allocator. More active than we used to be in the past. We've had capital allocation. Ipiranga, for example, received capital allocation from us very successfully. There were some, not very successful initiatives, some correction of the course, but we have to improve our work in terms of assertiveness, efficacy. The process is not disruptive at all.
Rather, it is consistent towards modernization, renovation, and adaptation to a more modern digital world.
Concerning Russia supplies, Brazil as a country. Except for the restrictions of the UN, Brazil has been open to receive that supply. In the long term, it is, the Russian product will have more penetration. Part of what we are currently importing will be from this origin. It's been a decision of the Brazilian government. This month, 1.2 billion L of diesel coming into Brazil, more than half of that has come from Russia. You are right, we do not talk about our strategy. Clearly, we always state that we observe all the rules, we always follow compliance. There are investors.
We also have received a number of investments. All compliance rules will always be respected by our company. We always consider the market as London has had a market that's going to have high offer. Brazilian market will have to deal with distribution challenges. While we have that level of arbitration and Petrobras is the main regulating arm of it all. We have to really use Petrobras product as a reference and just arbitrate against that. Thank you very much.
To follow up in the first question, that plan of reducing your stakes in some companies, is it still something considered? What's happening now in Brazil, in the world, is it getting second priority?
Well, we are open to everything. We really have to look close at capital allocators then decide when is the right time to make such moves.
Something which is a fact is that we do not consider opening capital or having an IPO of a business as something independent. It's just going to be considered if we are going to create value by taking this step.
That's great. Thank you very much.
The next question. It comes from Vicente Falanga of Bradesco BBI.
Thank you, Ultragaz team. I have one question about LPG. This government of Brazil has been somewhat more clear, vocal in the market, while during President Bolsonaro, there was the price of LPG indexed on price from abroad. This government has been trying to create more stable prices. How have you perceived these movements on your side? Thank you.
Well, Vicente, Tabajara speaking here. Concerning pricing policies, Brazil has been evolving and we've had a free market for a while.
The case of LPG in Brazil is a national. It's an international reference. We have very modern regulation, pro-consumer, pro-client, with a lot of freedom. We believe there is room for improvement, of course. There are some restricted use issues. The government has been trying to analyze that. Our perspective is always to have a market that's going to get more and more competitive. We can see an expansion of the supplies. This is going to bring another side of competition to LPG. That's we expect to have, really, a highly competitive market which can give better offer to customer, to society at large. This is our perspective and what we work with.
Thank you very much, Tabajara.
The next question comes from Bruno Montanari of Morgan Stanley.
Good morning. Thank you for taking my questions.
I have two follow-ups and one question. First, about the draft discount terms. Have you already concluded the use of this instrument, or can we still have some migration of draft discount into more traditional debt, strategies? Now, concerning branding of the network, can you please tell us about the anticipated, payment or post-bonus payment? Finally, concerning the acquisitions you've made, although somewhat more shy, can they help with Ultragaz, Ultracargo and Ipiranga? Do you have any future perspective of acquisitions, small size acquisitions that can form muscles? Anything about timing of when we would have these businesses contributing more to the company results? Thank you very much.
Good morning, Bruno. Thank you.
Starting from the draft discount balance, there might be a decrease in terms of balance, but we have BRL 1.1 billion to get from the divestment if we analyze the indebtedness profile and the terms. This is also going to get into additional costs. Now let's speak about payment bonification. In terms of branding, let me see if I understand. Prepaid and postpaid, each negotiation differs. Each case is unique. We try to strike a balance between different concessions. We don't want to just have too much on one side or on the other side. We want to have everything aligned with what we plan in our budget. We do not expect to see any radical changes to either side, just maintain what we've been doing throughout time.
Great.
Now, speaking of Ultragaz and the acquisitions, as we've told you, for this year, our vision, that's not something that's going to be very relevant. It's a year where we are going to build these avenues as a platform, and that's how we've been operating together with the offer of LPG through resellers and through corporate clients. We are very enthusiastic with what we've built. It's a long-term perspective for the company, not something that's going to impact us in the short term.
That's clear. Thank you all very much.
Thank you. If there are no further questions, I'd like now to hand it over to Rodrigo Pizzinatto for his closing remarks. Pizzinatto, please.
Thank you all very much for your questions, for your interest. The questions which were asked through the webcast will be answered by our IR team.
I hope to see you next time. Thank you very much.
Thank you all. We are needing to close. Ultragaz close now. We disconnect now. Thank you all very much.