Ultrapar (UGP) Earnings Call: Strategic Gains Amid Challenges

Ultrapar Participacoes ((UGP)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Ultrapar Participacoes presented a mixed sentiment, balancing significant strategic advancements with challenges in financial performance. The company showcased its strategic focus on long-term growth through capital increases and a strong emphasis on Hidrovias. However, these positive strides were tempered by declines in recurring EBITDA, net income, and increased SG&A expenses, highlighting the ongoing challenges in maintaining profitability.

Strong Performance of Hidrovias

Hidrovias emerged as a standout performer for Ultrapar, benefiting from improved navigability conditions and enhanced management strategies. A notable highlight was the BRL750 million sale agreement for the cabotage operation, coupled with a BRL1.2 billion capital increase. These achievements underscore Ultrapar’s strategic commitment to leveraging Hidrovias for future growth.

Capital Increase and Strategic Focus

Ultrapar successfully completed a BRL1.2 billion capital increase, which not only reinforced its strategic focus but also reduced financial leverage. By securing control of more than 50% of Hidrovias, Ultrapar signaled its confidence in the value-creation potential of this asset, aligning with its long-term growth objectives.

Debt Raised with Low Average Cost

The company raised BRL1.4 billion in debt at a low average cost equivalent to 101% of the CDI. This strategic move enhances Ultrapar’s financing capacity, positioning it well to navigate financial challenges and invest in future growth opportunities.

AmPm Stores Growth

Ipiranga’s AmPm stores reported a robust 12% growth in same-store sales during the first quarter of 2025. This growth reflects the successful execution of Ultrapar’s retail strategies and its ability to capture market share in a competitive landscape.

Lower Financial Expenses

Ultrapar managed to partially offset a 20% year-over-year drop in net income through lower financial expenses. This financial prudence demonstrates the company’s commitment to maintaining fiscal discipline amid challenging market conditions.

Recurring EBITDA Decrease

The recurring EBITDA for the quarter was BRL1.183 billion, marking a 9% decrease compared to the first quarter of 2024. This decline was primarily attributed to the negative impact from the share of loss of Hidrovias, highlighting the challenges in sustaining profitability.

Net Income Decline

Net income for the quarter stood at BRL502 million, reflecting a 20% year-over-year decline. This decrease was driven by the negative financial impact of Hidrovias, underscoring the need for strategic adjustments to improve financial outcomes.

CapEx Decrease

Capital expenditures for the period were BRL460 million, representing a 5% decrease from the first quarter of the previous year. This reduction aligns with Ultrapar’s strategic focus on optimizing capital allocation and enhancing operational efficiency.

Increased SG&A Expenses

Ipiranga’s SG&A expenses surged by 80% compared to the first quarter last year, driven by higher personnel expenses and one-time fleet mobilization costs. This increase highlights the operational challenges faced by the company in managing its cost structure.

Ultragaz EBITDA Decrease

Ultragaz reported an EBITDA of BRL393 million, a 2% decline from the first quarter last year. The decrease was attributed to worse margins and higher expenses, reflecting the competitive pressures in the market.

Forward-Looking Guidance

During the earnings call, Ultrapar provided forward-looking guidance, emphasizing its robust performance despite market volatility. The company reported a recurring EBITDA of BRL1.322 billion, although this was adjusted to BRL1.183 billion after accounting for losses from Hidrovias. Ultrapar’s strategic moves, including the BRL750 million sale agreement in Hidrovias and a BRL1.2 billion capital increase, affirm its focus on long-term growth. The company also noted an increase in leverage from 1.4x to 1.7x due to rising net debt and lower EBITDA over the past 12 months.

In conclusion, Ultrapar Participacoes’ earnings call highlighted a mixed performance, balancing strategic advancements with financial challenges. While the company made significant strides in its strategic focus and capital management, declines in EBITDA and net income underscore the need for continued efforts to enhance profitability. Investors will be keenly watching Ultrapar’s next steps as it navigates these challenges and pursues long-term growth opportunities.