Earnings Call: Q1 2021

May 6, 2021

Good morning, ladies and gentlemen. Thank you for waiting. Welcome everyone to Ultrapar's First Quarter 2021 Results. This is also being simultaneously streamed through webcast and you can reach through ri.ultra.com.br and MZiQ platform. Today's teleconference will be led by Mr. Frederic Corrado, Chief Executive Officer of Ultrapar and Mr. Rodrigo Pizzinato, Chief Financial Investor Relations Officer, together with other executives. 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 are completed, there will be a question and answer session. At that time, further instructions will be given. A replay of this call will be available for 1 week right after it's over. Before proceeding, let me mention that forward looking statements are being made under the Safe Harbor of the Securities Litigation Reform Act of 1996. That is important to note. Forward looking statements are based on the beliefs and assumptions of Ultramar Management and our 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. Frederico Corrado. Mr. Corrado will start our teleconference. Good morning, everyone, and welcome to our conference. Let me start by saying that the Q1 of this year was an improvement over last year and also was slightly better than what we had anticipated, representing a great start for Ultrapar in 2021. I can't start another earnings call without highlighting the competence that our teams have continuously demonstrated throughout those 15 months of pandemic, both from the point of view of the safety of our people, but also the continuity of our operations, which have not suffered any interruption and we maintained a high level of service to our customers and consumers. So congratulations to the more than 16,000 people of Ultrapar. Well, all of our businesses presented a great operational and financial performance this beginning of 2021. Ultragaz, starting with Ultragaz, the company continues its journey of innovation and growing productivity with another good quarter of great balance between healthy margins and market share. By the way, this is the best Q1 of Ultragaz history. Ultracargo also had another excellent quarter, so did Oxiteno, which continues to show great competence and take advantage of opportunities derived from a favorable exchange rate and substitution of imports in Brazil. Ipiranga also had a great quarter, beginning to reap the fruits of investments that have been made in developing internal competence in trading and also the improvements in our operational performance. By the way, as you may have seen, we are restructuring Ipiranga's commercial area. We have created a new position of the Commercial Vice President, which will be dedicated to the network to managing the network of resellers and also our corporate clients. And very happy to confirm that Leonardo Linden, who is an industry vet and until now he was the CEO of our JV with Chevron, iconic and Linden. So Linden will transition from our JV to this new VP commercial position on 1st May. I did last week. So final comment on ExtraPharma, another good sequential result. And despite the impact of the 2nd wave of the pandemic in Brazil, which of course again had an effect on its stores, which are located in shopping centers. So many were closed with several strong strict restrictions. All in all, allowed the EBITDA of Ultrapara to have come close to BRL1 1,000,000,000 this quarter on revenues which are similar to those of the Q1 of last year, which means an expansion of margins. Our net income was negatively impacted by the financial costs associated with the mark into market of our cash flow hedges and our debt denominated in the U. S. Dollars, but the net income did remain within our expectations, thanks to our strong operating performance. We also had a relevant dividend payment in this quarter relative to the year 2020. Let me remind you that we had not made any advanced payments last year. Therefore, we disbursed 100% of the dividend's value in March. Even with that payment, we kept our debt leverage at the same level as last year. So on that aspect, our expectation is to see a gradual decline of this leverage throughout the year and our goal is to achieve a range between 2x and 2.5x our last 12 months EBITDA. From the point of view of the strategic agenda, we hope to reach the end of the year having significantly advanced in the rationalization of our portfolio of companies. Note about the negotiation with Petrobras regarding the acquisition of Refap. They are progressing normally without interruption or without any change due to the transition to senior management of Petrobras, which is good news. We hope to be able to sign the purchase agreement in the coming months along with the various ancillary contracts which are associated. So in summary, we remain on course and on schedule in implementation of the strategy designed in 2018. We have the expectation that in 2021, we will continue to reap the fruits of what we have been planting in the last 3 years. Before closing, I'd like to just reiterate our growing focus on the ESG agenda of the Ultra Group, which will gain form and greater objectivity this year. By the end of this year, we will define and disclose our ESG goals for 2,030 aligned with our strategy, of course, including the action plans and the intermediate goals that will enable us to achieve these results. Well, I appreciate thank you again. I appreciate the attention of all of you and pass the floor to Rodrigo who will present our results in further details. Thank you very much. Thank you, Fred, and good morning, everyone. It's a pleasure to be here with you once more to talk about Ultrapar's results. And starting with Slide number 4, let's begin with Ultrapar's consolidated results. As Fred just mentioned, we started the year with positive news despite the worsening of the pandemic in Brazil and a more volatile economic environment. Our EBITDA reached BRL996 million in the first quarter, representing a 13% increase over the EBITDA we reported in the Q1 of 2020. As you may recall, in the Q1 of last year, we had a BRL71 million of non recurring tax credits from Oxiteno. If we exclude this effect, recurring EBITDA grew 23% in this quarter, demonstrating the resilience of our portfolio with growing results across all business segments. Despite the EBITDA growth, net income was 19% below that of the Q1 of 2020 due mainly to two factors. We had BRL149 million of non recurring tax credits in the Q1 of 2020, of which BRL 71 million positively affected EBITDA, as I already mentioned, and BRL 78 million benefited financial results. The other factor refers to the negative mark to market effect of FX hedging instruments, which negatively impacted our financial results. In this Q1, the more turbulent economic environment affected the mark to market of long term hedging instruments contracted to protect our bonds that mature in 20262029. As we intend to hold these instruments to maturity, these effects are only temporary as mark to market gains or losses will be neutralized over time. I remind you that in the Q4 and in the Q1 of 2020, the mark to market effect was positive given the better economic environment in those quarters. It's worth mentioning the relevant investment in working capital we had this Q1, as you can see in the bottom left graph. Typically, 1st quarters are seasonal cash consumers since the year end payments to suppliers undergo a natural increase as a result of the holidays in December. Besides that, in March, we annually have a mandatory increase in Anidra's ethanol inventories. In addition to these effects, fuel and LPG prices rose significantly in the Q1 of 2021, which resulted in increased cash outflows compared to price reductions we had in the Q1 of 2020. Another cash effect in this Q1 was the payment of dividends. Last year, as you may recall, we halted the dividend payment usually made in August and we paid out all dividends from 2020 in a single installment in March this year. Even with a significant investment in working capital, we had a positive cash flow from operations in this Q1 of 2021 of BRL 128 million. Moving now to Slide number 5, let's talk about liability management. We closed the quarter with a net debt of BRL11.9 billion, an increase of BRL1.4 billion over the net debt of December 2020. This increase is due to the aspects I just mentioned, working capital investment, dividends and negative mark to market from hedging instruments, and also to FX fluctuation over a portion of our bonds designated as hedge accounting. As a result, our leverage increased from 3 times net debt to EBITDA in the Q4 of 2020 to 3.3 times in this Q1, which we expect to be the peak leverage for 2021. The trend is a gradual leverage reduction starting in the next quarter. It's also worth pointing out that since the Q1 of 2020, we have been adding the leases payable line item to the net debt calculation following the implementation of IFRS 16. This inclusion contributed to the increase in leverage even though these leases are not financial debt. Still in this Q1 of 2021, we issued 2 infrastructure linked debentures or incentive bonds in Brazil through Ultracargo, totaling for BRL160 1,000,000, both with a 7 year maturity and a cost equivalent to 111 percent of the CDI rate. Moving now to slide number 6 to talk about Ultragaz. Sales volume in the Q1 of 2020 was 4% lower than what we had in the Q1 of 2020, with a 5% decrease in the bottles segment and a 1% decrease in the bulk segment. The reduction in the bottles segment was mainly a result of the increase in demand for LPG bottles during March 2020, influenced by the social distancing effect at the beginning of the pandemic. The reduction in the bulk segment, on the other hand, is related to lower sales to commercial and services segments, the most affected by the restrictions imposed in response to the pandemic in this Q1, partially offset by increased sales to industries. Ultragaz SG and A expenses were 5% lower than that in the Q1 of 2020 due to lower expenses with provisions for doubtful accounts into freight as a result of logistics optimization, in addition to initiatives to reduce expenses in several lines. Ultragaz EBITDA was BRL150 1,000,000 in the quarter, a 2% growth over the same quarter in 2020 as we predicted in the last earnings call. Given the context, it was a very good quarter, especially considering the strong comparison base. This progression is due to expenses reduction and the focus on efficiency, despite a lower sales volume and increased costs of LPG in the period. The prospects for the 2nd quarter are of a slight growth in volumes and EBITDA over the Q1 of 2021, given the seasonally stronger Q2. The Q2 of 2021 performance, however, is likely to be lower than that of the Q2 of 2020 period that was the most benefited by the effects of social distancing when we had unusually stronger demand in the bottled segment. Let's now move to truck cargo on slide number 7. Average installed capacity reached 843,000 cubic meters in the Q1 this year, a 3% growth year over year, a result of the tankage capacity expansions we implemented at Itaquiport in the last 12 months. The cubic meters sold remained flat year over year, with increased handling in Itaquip due to the capacity expansions I just mentioned, offset by lower fuel handling in Swati, Santos and Naratu terminals as a result of lower import volumes. Net revenues for Ultracargo totaled BRL172 1,000,000 in the Q1 of 2021, a 5% growth over the Q1 last year due to the expansions, contract readjustments and a greater number of spot operations. Combined costs and expenses increased 8% during the quarter, mainly on the back of increased expenses with leasing readjustments, depreciation resulting from capacity expansions, variable compensation aligned with results progression, and IT related to initiatives for productivity gains. It is worth mentioning that in the Q1 of 2020, we had a R4 $1,000,000 gain from the refunding of a previous compulsory load to Eletrobras that was recorded as other operating results, a one off non recurring effect last year. Still, we achieved a record level of EBITDA through Ultracargo of BRL93 1,000,000 in the quarter, 2% above that of the Q1 of 2020, as a result of higher sales revenues, partially offset by increased costs and expenses. Ultracargo continues to follow its expansion with profitability plan. For this second quarter, we expect a higher than usual increase in operating costs to concentrate maintenance and services at our terminals. Nevertheless, we project EBITDA growth in relation to the BRL80 million recurring EBITDA of the Q2 of 2020, approaching the reported EBITDA of the Q1 this year. I also wanted to highlight, as you can see in this slide, that in early April, we won an auction bid for the concession of an additional area in the Port of Itaqui, in line with our strategy of expansion with profitability. Such concession will allow us to expand our overall tankage capacity by another 9%, as well as to consolidate our position in the Itaqui terminal in a single continuous area together with our existing operations there, generating scale and productivity gains. Moving on to next slide, number 8, to talk about another great quarter of OxyChem. Sales volume in the Q1 this year was flat over the Q1 of 2020, but with an improved sales mix. The share of the specialty chemicals grew from 82% to 90% year over year. The specialty chemicals volume was 9% higher than that of the Q1 of 2020 due to increased sales across all segments in Brazil, especially Crop Solutions and Home and Personal Care, in addition to increased sales of our international units. Oxiteno's U. S. Operations was impacted by the hard winter that hit Texas in February, when it remained closed for about 30 days. Even with the closing, we had a 5% growth in volumes there. The volume in commodities, on the other hand, decreased by 42% as we prioritize specialty chemicals given that we are in a period of scheduled shutdowns. SG and A expenses increased 15% during the quarter due to the exchange rate fluctuations of international units to provisions for waste disposal at our plant in Uruguay and increased freight expenses. It is worth mentioning that during the Q1 of 2020, Occitano's results were positively impacted by the non recurring tax credits in the amount of BRL 71,000,000, as I already mentioned. EBITDA totaled BRL 227,000,000 in the quarter, a recurring record level for Oxiteno and a growth of 87% over the recurring EBITDA in the Q1 of 2020 that excludes the tax credit gains I just mentioned. This performance was above what we expected for the quarter, leveraged by an improved sales mix and margins and by the devaluation of the real year over year. And now looking ahead, should the exchange rate remain at the current levels, we expect to have in the Q2 this year an EBITDA similar to that we had in the Q1 of 2021. In the next slide, number 9, let's talk now about Ipiranga. Sales volume were 2% lower than that of the Q1 of 2020. There was a decrease of 6% in the auto cycle volume, a result of the restrictive measures imposed by the pandemic and reduced vehicle traffic, while diesel volumes increased by 1%. The graph on the right hand side shows the progression of fuel consumption for the last 12 months, where you can see the gradual recovery of volumes since the Q2 of 2020 that was most impacted by social isolation. We ended the quarter with a network of 7,107 service stations, mainly flat in relation to that of the Q1 of 2020 with 81 stations openings and the same number of closings in the quarter, in continuity with the evolution of our network. The price increases on fuels, products and ethanol along the Q1 of 2021 impacted the results in the quarter despite the unfavorable parity in imports. As for gasoline, the increase during the Q1 was around BRL 7 50 per cubic meter, while for diesel it was BRL 400 per cubic meter, already accounting for the reductions in the PISCOFINS taxes. SG and A expenses increased 4% compared to the Q1 of 2020, mainly due to increased freight expenses reflecting higher diesel prices, one off civil court contingencies and to the additions of AMPM company operated stores. These effects were partially offset by lower provisions for doubtful accounts. The other operating results showed a R64 $1,000,000 reduction over the Q1 of 2020. This difference is mainly due to the provisioning for the Renova bill certificates in the amount of BRL33 1,000,000 in this quarter and extraordinary Piscofin's tax credits in the amount of BRL39 1,000,000 in the Q1 of 2020. With this, the EBITDA for Ipiranga totaled BRL563 1,000,000 in the Q1, 17% above that of the Q1 of 2020 and above what we expected for the quarter due to improved margins with inventory and trading gains and a gradual recovery in market share. These effects were partially offset by the reduction in other operating results. Looking at the current quarter, we expect volume growth over the Q1 of 2021 despite the impact from the pandemic. In April, we had inventory losses in ethanol on the back of price reductions in late March, and we do not anticipate significant inventory and trading gains throughout the quarter. Our EBITDA level as a consequence will be way above that of the Q2 of 2020, which was severely impacted by the pandemic, but below the EBITDA we had in the Q1 of 2021, given the price movements we have experienced so far. Now moving to the last slide, number 10, to talk about Extra Pharma. We ended the quarter with 4 0 2 stores, 2% lower than that in the Q1 of 2020, reflecting a more rigorous approach to non performance stores and greater selectivity in expansion. Along the Q1 of 2021, nearly 5% of the stores, those located in shopping malls, remain temporarily closed due to more restrictive measures to tackle the pandemic. It is also worth noting that 20% of the stores are still at a ramp up phase. Gross revenues at Extra Pharma were BRL570 1,000,000 in the quarter, 1% below the revenues in the Q1 of 2020. Extra Pharma was our business most impacted by the cyber attack occurring in January 2021, which affected the in store and distribution center IT systems for 1 week. The estimated impact on Extra Pharma gross revenues was R25 $1,000,000 due to the attack. This effect, combined with the lower number of stores and the temporary closing of stores located in shopping malls, was partially offset by the same store sales growth and by the expansion of sales through digital channels. Same store sales grew by 3.9% in the quarter despite the negative effect of the cyber attack. SG and A expenses were 4% lower in the quarter, the result of a smaller number of stores and our initiatives towards productivity gains, logistics optimization and expenses reduction. Extrafarma's EBITDA totaled BRL12 1,000,000 in the quarter, a 30% growth over the Q1 of 2020 due to the process of closing underperforming stores and the greater profitability of the existing network, with same store sales growth, productivity gains and reduction in expenses. These effects were partially offset by the cyber attack, which had an estimated impact of BRL6 1,000,000 on EBITDA. I remind you that we have an insurance against cyber attacks that should recover most of that amount throughout this year. For the current quarter, we project a strong recovery in results, returning to a similar level we observed from July to December of 2020, in the 2nd semester of last year. And before we end this presentation, I would like to invite everyone to join us in our Ultra Day, which will take place next Friday, May 14. It will be an online event, and now the Ultrapar executive officers will be in attendance. We will talk about our strategies and initiatives for our businesses, and we would appreciate to have you there. Thank you very much for your attention, and we can now start the Q and A session. We will now start the Q and A sessions only for investors and analysts. The questions will be answered as they come in. So please make sure you ask the question and we will have specific sound quality there and wait till we get all the questions in. So if you are here through webcast, please click on question to the host to send your question to the executives of the company. So the first question comes from Mr. Guilherme Levy, Morgan Stanley. Good morning, everyone. Thank you for accepting my question. I have actually 2. The first one in terms of fuel, I understand that the window for exports was a bit narrow for the Q1. So I would like to understand from you what is your expectation for the next quarters when we consider the level of price that Petrobras is practicing at this moment? And if you could also tell us a bit how that could change to have that more in the long run to have a refinery coming into the portfolio of the group? And the second question is for Xuchiano. And you said that you had a specific EBITDA continuation. So I would like to know a bit about the expectation till the end of the year. And if you could tell us also to what extent the Texas plant is already running since the first closing? Thank you. Good morning. Guilherme, thank you for the questions and talking about imports. You are right. For this Q1, we had a very narrow window, especially for gasoline. And right now, for diesel, it's a quite stable one. And for gasoline, it's still closed. So we're still following up on the progress of the internal price compared to imports. Our level of importation in the Q1 was less because we anticipated this close window for the Q1. For the second question, Oxygeno, the outlook is positive for this year where we will be keeping the reference of values that we have for and the plants in the U. S. For the Q1, as it was already mentioned, is pretty much it was pretty much closed because of the climate in the region and impacted the other operations in the region as well. For the U. S, obviously, there is a negative impact, although there is increase in volume. In terms of the Q1, it had a negative impact in the U. S. But overall, for T10, it was positive because the effect in the U. S. And also the shift in the Suez channel, I mean, in the trough, all of that had an impact. Thank you. Our next question comes from Andres Harshim Itau. Thank you. Thank you. I mean, first for T10, of course, there were many questions saying that there would be a possibility of investment. So with this petrochemical scenario where we have something much more heated up and when we talk about the current scenario, how do you see this whole dynamic? What would you say? Do you have any expectation for this year or something that would be further to the next? That's the first question. Then I'll get my second question in. Well, thank you, Andre, for your question. This is Fred here. Well, our big process is of analysis and allocation of capital and to understand what is the portfolio that has a more possibility of generating value. So the investment is a possibility to be able to get the portfolio right. So this won't change with this current scenario. This is more about a long term. And the company has an exceptional performance for 2020 and in beginning of 2021. For that reason, this is a discussion that in terms of valuation that also comes into play and also the portfolio to the value of the company. But there's nothing specific decided on to talk about here. And once we do, we will release that information to the market. Thank you. Thank you, Fred, for that. And the second question related to Ipiranga, I'd like to understand a bit more. You had a shared dynamic, was a bit of a change. You had a recovery at the end of the year. So I would like to understand, was there any support in terms of volume of Ipiranga? And the second question for Ipiranga, I would like to understand a bit more how was the inventory effect, although there was the tax piece in companies that does affect, I understand that there was a balance that was positive at the end. So I'd like to understand a bit about that. Good morning, Andre. Thank you for your question. So, for Ipiranga, there was a cyber attack that had a very small impact in the beginning of the quarter. The operations was 1 or 2 days off and then was back right away. So the effect in the results of Ipiranga was very small. That's why we just highlighted the fact that there was an impact in the market of extra pharma where there was a greater one. And January, when there was a cyber attack, the most impacted market was the white label And we were able to recover in February, March with gains of trading positioning and allowed us to take steps forward. So to answer already the second question, when you talked about inventory, the price oscillation is part of the day to day of a distribution business. So price difference of the magnitude and speed that we had in this quarter allowed us to have the immediate response to it. So it's important to take a look in the long run more than in the short. So from the gains we had in terms of inventory and trading, we are talking about BRL100 1000000, BRL150 1,000,000. Okay, great. Very clear. Thank you. Our next question comes from Christian Alge, Santander. Thank you. I would like to ask 2 questions. First, in terms of Octane, Tenno, I was just trying to see if you could tell us how was the progress of margin of OxyContino for the Q1 when it comes to the margins in March were better than in January or vice versa or how you see the progress for the Q2? What is your outlook into margin? And the second question, Fred, this is mostly for you strategic wise. I would like to understand how do you reconciliate when it comes to the potential purchase of the refinery in terms of present elections next year, understanding that this brings to light the topic about pricing? And also when it comes to OxyContino, how do you reconciliate what you said about the results of the company doing quite well? And at the same time, before it was a company that you were analyzing if it was worth to be sold or not. We can see that by capital allocation. And the third point, if you are more excited about the opportunities for natural gas energy now than 3 months ago, because Brazil has changed greatly when we talk about the macro political economic status? Thank you. Good morning, Christian. Thank you for your question. Well, starting here with the first question about the margin of Oxiteno, the Q1, we had really good throughout the quarter, which varies mostly for total margin and that's why we talked about it. I mean, we had a volume of commodities was quite under what we usually have when it comes to the priority we had to be able to have the market with the supply of what the agribusiness demanded. So thinking about the frost in the American market in the Suez Canal ship issue that really brought greater issues there. But for the Q2, we were talking about a greater participation, I mean, of the commodities in terms of it's dropping. And Fred, the second question is for you. Hello, Christian. Thank you very much. I mean, I think there are 3 questions there, is that right? Let me try to go to the first one about refinery. We had a negotiation with Petrobras, with Refapi in terms of all the contracts and some complementary contracts. And there was no halt to the negotiations. With a change of leaders in the company, our perception and what we realized is that there was even a confirmation or even a speeding up, I would say, of the whole process. So you most likely saw the press releasing the information that Petrobras was able to really have a supplement in terms of the target of due dates to have the contract signed and the choice of the buyer in the case it's us. And also for the bidding of the assets that haven't really been sold for both cases. So, Refapi and the others, so we believe that Petrobras, when it comes to this, is reaffirming these investments. And the second question is about price policy. That is definitely a threat in Brazil. But let's recall that this is one of the big motivators and drivers to break the monopoly of Petrobras when it comes to downstream of refining, which is exactly that point. That is one of the drivers definitely from the agency standpoint and that won't be very different. I mean, if you were going to have the increase in Brazil, so if we think about Ravi and Rilland together, we're talking about 20% of the capacity. And we have a Cap and Rafa, I mean, these are the 4 big ones. So we're getting to 50% if we add them all. So this is quite relevant. And the other relevant factor is that Brazil is a quarter, we know that there won't be big investments on refineries, maybe on smaller ones with a bit question technology in any case, but a refac of more than 200,000 barrels a day, I think it's most likely there will not be any, not only in Brazil, but around the world. So this is very interesting when it comes to demand greater than supply. So I think this thing about imports have an effect when it comes to bringing the price to the market. And on the other hand, let's remind ourselves that the bylaws of Petrobras made it very clear after all that went on in 2015, and now there's no legislation about that as well, about the non interference. So the government cannot interfere in the price of Petrobras and that is something that we even were able to realize very recently. Other than what we saw with all the confusions, but what we see is that prices are kept as we see the oscillation according to the market. So it is, I would say, a very confident moment where we're taking the right path for that and we're working on it. And for Oxiteno, well, as I mentioned before, we see the portfolio of Oxiteno. We have focused clearly and we have been trying to focus where we have scalability, which is on downstream, where we have ultra card, ultra guys in Ipiranga and they're refining brings us closer of scalability when it comes to that. And OxyContino is not that far from it. When it comes to this wealth we have, I would say. So it's not a matter of portfolio. The other aspect is that we need to see as ultra par, we are the best shareholder enough for the company. This is analysis that is not black and white. It really depends, I mean, on the market. So these 2 are answers that must be taken into consideration before we think about investments or not. The matter of the fact is that the company is a very competent one where there is a major positive reputation in the market, there is technology, there is an operations where there is an industrial one that is quite efficient. For that reason, I would say that the alternatives are all very good and you can still have value generated on that. And if it's for the shareholders definitely and we would like to see a suitable compensation for such. And I mean in terms of the analysis definitely we have a focus on refining I mean, this is a focus of all of us, but we have taken progress in the analysis of such. In that way, we will be getting into this at some point and it's very early to detail exactly how, but this is an intention that is very clear to us to get into it, definitely. That is very clear, Fred. Thank you for all the details and thank you for answering my questions. Thank you. Thank you, Christian. Thank you, Christian. Our next question is in English from Frank McGann, Bank of America. Okay. Just to follow-up a little bit on the last question, and I'm not sure if I heard exactly what you were saying. But the as you look and you talk about becoming much more of a company focused on downstream and on in the fuel market and such and restructure the business a little bit to accomplish that. I'm just wondering what beyond refining, what types of businesses or segments of the business could you potentially find attractive to expand and any thoughts you have on that? And then just a couple detailed questions. One, with Oxiteno, any is maintenance going to have any effect on production levels of in the next several quarters for the rest of this year? And in ExtraPharma, you mentioned that the $6,000,000 cyber attack effect on EBITDA could potentially be covered by insurance. When you reported the numbers, are we to assume that the $6,000,000 hit was already in the included in the Q1 and that the recovery then will be an addition to earnings later on? I should remind you all that this call we have in Portuguese with the simultaneous translation. Fred, please, you can answer the first question, and you can repeat the question in Portuguese. Well, the question is to other than refining, what else we are looking into when it comes to the downstreaming sector for oil and gas. And the answer here is that natural gas is a focus we have that is in our analysis. We've been over a year now focusing on analyzing to understand the whole chain of natural gas and understanding at what point in the chain we can use the competencies of our group and the synergies we have with other parts of the portfolio to be able, therefore, to take a decision for investment and to get into that specific sector. Obviously, as a background, that Petrobras will leave the monopoly is being more and more reduced and the possibility of a new private investment in oil and gas and natural gas are increasing. Also, associated to that, to the infrastructure, we have a major company, which is ultra cargo on infrastructure where we are focused on the fuel and chemical sectors. And when we look into this downstream chain, we look not only into the synergies with Ipiranga and with Ultragaz, but obviously, although Ultracargo. Rodrigo, the question is for Oxyteno and Ultra Extra Pharma is on you, please. Okay, Fred. So Frank, starting with the volume of oxyteno, when we think about the Q2, we see a maintenance and a similar volume of specialties and an increase and come back in terms of volumes for the commodities. Therefore, we see a greater volume in the Q2 than what we see in the Q1. And we shall recall that our management of results of the 2nd quarter with exchange rate that we are at right now, we will most likely have EBITDA similar to what we had in the Q1. And your second question about the negative impact of the BRL6 million of ExtraPharma after the cyber attack and the expectation of recovery in terms of the impact. Well, we have the policy of insurance against cyber attack and our expectation is to have a recovery of most of that value since we have a premium to pay and we have a discussion now to talk about exactly what would be the right amount for it, for this recovery. So once we do, it will have a positive impact on Extra Pharma results for this year. Okay. Thank you very much. Our next question comes from Thiago Duarte, BTG Pactual. Good morning. Good morning, Fred and Rodrigo and everyone. I'd like to get back to the discussion with referring to productivity of Ipiranga's network and market share progress. Have you you've already made it clear along the last quarters that more than network expansion, the focus is on increase of productivity. On the other hand, when we look into the numbers, I mean, we see something very high, something that is similar to the last 2 years. I mean, my question then is to understand at what stage are you in this process and understanding of improving the productivity of the network. When we think about market share for the quarter, as it was already mentioned, it was more month over month. But when we look at the resale share, we see with auto cycle, it didn't evolve as much as we saw with the diesel. So for that reason, within such context, it would be interesting to know what you have to say about what stage it's on. And in terms of convenience store, that's my second question. There was an increase of 2 stores, but there was a 24 stores of AMPM that you showed there. Also, if you can talk about the results, the initial results in terms of what you had and how you see the results of own stores as well, and that would be quite interesting to see. Thank you. Good morning, Thiago. Thank you for your questions. Let's talk about Ipiranga then. Ipiranga has followed a strategy to have stations with a greater number of gallons and to filter out the ones that do not have the number of gallons that fits what we need. So we're still in the process. So that's why we have the filtering process that is similar to what we have. I mean, we have a positive program there, just so that you can have a better understanding of the process. The stations we have, the new ones from 2019 2020, they have about 300 to 450 cubic meters per month, 2 20 19, 350 for 2020. So we see an increase when it comes to screening the best stations to have our brand. But the ones that are being filtered out for the Q1, we have a throughput of 50 or less than 100 cubic meters per month. So we are going from a low gallon performance network to have a higher one and with a greater potential as well, which is good for the reseller and something healthy for Ipiranga. Obviously, that has an impact over time in market share. The market share has an impact that is very specific. We had at the start of the year with the pandemic where we didn't sell to white labels because of margins at some point. And in the Q1, we had greater opportunities to have a good result selling in these markets and we have an evolution because we're working in trading with ethanol that is a bit further on than fossil fuel. When it comes a bit about our own stores, oh, and let me explain to you about productivity. We are at a very stable level with the pandemic since we have this impact when there's a greater social distancing that there is an impact, obviously, which is something that you would naturally have. In terms of APM stores, we have a plan of expanding it to have 6 80 stores for this year. We already have 50 stores, I mean, where we have now 80 of our own management, so we want to end the year with 150 of stores with our own management. So that's why we have a specific focus on AMPM company operated by us. And why do we focus on that? Because once we do that, we learn better what are the pains of these convenience stores and the opportunities and that's something that's quite good for us, but also for the franchisees that can have a better operation of their AAMPM stores. And second, the stores that we already operate, we realize that there is a profitability and also EBITDA that is greater than what we had before. So it's 5% to 10% of greater EBITDA than what we had before the operation. This is what has made us quite optimistic in terms of having our own operation because it also has an important element when it comes to meeting what Ipiranga needs. It contributes to have a full station where you can have not only the selling of fuel, but you can have other products being sold. But there are resellers that do not want to operate a convenience store or doesn't do it appropriately. And when they do not want to, and we believe there is a potential for a convenience store at that station, we have now the option of having an AMPM and we can operate ourselves. So this has been the strategy for AMPM stores and we have the intention by mid year, most likely in July, to have a specific event with all investors and shareholders as we had in March with Ultra Cargo to be able to have more conversation about the plans for AMPM stores. Our next question comes from Mr. Luis Caballero UBS. Hello, Fred, Rodrigo. Thank you for all the questions. And we have 2 here. Brett, the first one for you in terms of capital allocation, when we do the we see the leverage of the company, we see something closest 3 times EBITDA over EBITDA. And this is something we see over time and we've been seeing it, although in the last quarters, we can see something a bit better when it comes to the operation. We haven't seen the leverage being reduced to a level of what we had before. If we think about a further path from now. I would like to understand how you see the leverage and when it comes also to the investment that you want for refining and also the potential of the investments. As you have mentioned, Oxiteno, I mean, ExtraPharma, is there anything that we can see something a bit greater if there is an unmatched of the investments? I mean, and the second, I'm not sure if you've already mentioned in the call because I came in a bit late. When we look at the margins of Ipiranga for this quarter, you said 105 percent and thinking about what we had last year and where there wasn't a big impact, we would expect them to be around 111 percent. But we did calculate here, we see the spot gain. I mean, I know there was a closed window there for imports, but I understand that it was most relevant in terms of BRL 20 per cubic meter. So the question is, if this makes sense? And with that in mind, I want to know if the margin would be something close to 85%, which is a bit even under that you had guided. If we believe that the volume will be back to what we had in 2019, by this year, we're talking about a margin from 90,000 to 100 and 5 rice per cubic meter. Just to understand if that makes sense, this whole rationale here. Thank you. Good morning, Louise. Let me get you the first question. Well, I believe just to say quickly, in terms of investments and cash when it comes to leverage, we and the inertia of the company is quite big. So from 2018, we started to have a specific attention to cash generation, cash flow. And we therefore had some inertia that was quite important in terms of investments that were about to come through for OPTIONO in the U. S. We still had some major contributions and we had a concentration action in Ipiranga in 2017 of brands, branded stations, as Rodrigo said, filtering out the network and having the improvements of the gallons per station. So this is a response from what we had in 2017 where there were many that were stations that came with our brand and increased the number of stations and this all brought more to the network. And by 2018, I would say mid-twenty 18, the cash usage was very high in ExtraPharma until we changed the expansion plan that was accelerated to one that would concentrate on the network. So this is when it comes to the capital. And for EBITDA, last year, we wanted to have the leverage in the second quarter. We got in the way, I would say, because the Q2 of 2020 is has been with us for a year now. So this is the last quarter where we still have that being part of the calculation. So this will definitely be a relief. So we have a guidance for this year where you already know, where it's a bit open because ultrapar, I mean, we'll have that, but we will have an increase from what we had last year. So you'll see an average for the quarter of EBITDA that would be superior to what we had and with all our efforts to contain or better to discipline ourselves when it comes to CapEx, Ultra Cargo is being able to do the expansion projects with less CapEx than we had foreseen. So that is our common denominator and this is the current portfolio and it will drop. And then there's a second part of your question, which is more about the portfolio structure itself. So definitely, right when we decided to focus on investments, I mean, we know that leverage will decrease together with EBITDA. And but focusing on your question, if there is an unmatched or even, let's say, I mean, we know there's an investment to get a refinery in our group. So you have a spike of leverage at that point. But at that moment, if you do a pro form a with the EBITDA that comes with the refinery, then the peak is much more digestible and smoother, I would say, considering that. So it would be even an incorrect calculation as if the asset did not generate EBITDA. The refinery has a characteristic of generating strongly cash. So, we believe that even if there is an unmatched, we believe we have an indebtedness capability for that and leverage would be quite fast as well. Otherwise, if there would not be the accumulation and if we have the investments before the process, we believe that it will be less of a volatility situation and smoother and heading towards what we've said of getting 3 point something or 2.5, which is something that is more suitable for a company that wants to get to where we want to. And your questions about if you're in the margin, when it comes to imports in the first quarter, there was a negative impact on it. But if we could take into consideration in your rationale what was additional to what we have, the BRL 20 per cubic meter that makes sense. And we shall remind you that we consider when we do the forecast for the year price oscillation over time. And when we built this whole guidance, we use that as a reference and we are still taking that into consideration to bring that all the way to the end of the year. So the forecast of margins are still the ones we have already shown you for the guidance. Thank you. Thank you, everyone. Thank you. Our next question comes from Regis Cardoso, Credit Suisse. Good morning, Fred. Do you have for the question? We've talked most of the points here, but I have some quick follow ups. First, the one that has to do with what Ipiranga said for OxyContino. And on the other hand, Oxiteno had also a very strong quarter. And my question here is more about organic. So the question is if we're seeing a forecast for weaker quarters for Occidental when it comes to the spread and if there is that when it comes to the guidance of the year? And the second question, going back to the leverage and capital allocation, Fred, maybe if you could also tell us a bit of how you see the increase of the Saliq increase. So there is the floating debt there. In my concern, when you have a high rate with the fluctuation if it would not take up your future cash generation. So it boils down to this question, how much of a priority is to reduce the leverage? What would be your tools to take that on? Or if it's not the case, maybe the answer should be that this is not a concern at all. Thank you. Good morning, Regis. And the first question for Occidental, we see that we don't expect a big contribution of MEG for the rest of the year. It's something that's very important to define the result of Axiteno is the exchange rate. And when we decided the guidance interval, we took the exchange rate into consideration. So when we think about the next quarters, I mean, the exchange rate progression and the margin and leverage are the top elements to think about the guidance and something depending on what we would have for it. So in terms of leverage being very objective, it's a priority. Definitely it is. I mean, we are far from being in a situation in being fully concerned with liquidity. I mean, we don't have any of that in our debt. So it's much more a matter of restoring the possibility of having new investments. So there is a portfolio, it's true that's very important, but there's also a liability managed work that Rodrigo has been on and structuring it. So there is a concern, yes, it's a priority, but it's not one where it surprises us. But we're very focused on having the leverage brought down. If I could add to that, when it comes to the financial results, this oscillation that we had in the market that had a negative impact, we shall remember that in the Q4, it would be a positive one. If it was positive in terms of financial results in the Q4, that could be an impact in the balance of the debt because the hedge is within the balance of the debt. And when it comes to other topics, which the idea is to bring that together with the debt that was contracted and most of them have oscillations and when we think about 2026, 2029, there is a short term oscillation, but they neutralize over time until the due date with the null effect. That is very clear. Thank you, Fred. Thank you, everyone. Thank you. Since there are no more questions, I would like to pass the floor for Mr. Rodrigo Guzzinato for your final considerations. Thank you. Thank you, everyone, for your questions, for your participation. I should say again that we will have our Ultra Day. And because of the time of the session, we will be answering the questions that we got on the webcast through e mail. Our RI team will be answering you. So thank you, everyone, and have a great day. And I will see you on our Ultra Day on 14th. Thank you. Thank you. The call release of Ultrapar is over. Thank you, everyone, for your participation.