What Ultrapar Participacoes (UGP) Said on Its Q3 Earnings Call

Key Points

• Ultrapar reported Q3 net income of BRL 2.697 billion, including BRL 1.5 billion in extraordinary tax credits, while recurring EBITDA rose 74% year over year to BRL 3.103 billion.
• Fuel distributor Ipiranga drove the improvement: sales volume rose 9% and recurring EBITDA increased to BRL 2.28 billion. Ultrapar expects Ipiranga’s Q4 margins to exceed Q3 levels.
• Ultrapar approved an additional BRL 1.085 billion dividend payable in December. Net debt ended the quarter at BRL 11 billion, with leverage of 1.0 times; working-capital needs weighed on reported operating cash generation.

Ultrapar Participacoes NYSE: UGP reported third-quarter net income of BRL 2.697 billion, boosted by BRL 1.5 billion in extraordinary tax credits and stronger operating results at fuel distributor Ipiranga.

Recurring earnings before interest, taxes, depreciation and amortization, or EBITDA, rose 74% from a year earlier to BRL 3.103 billion, Chief Financial Officer Alexandre Palhares said on the company’s earnings call. He attributed the improvement primarily to Ipiranga, where sales volumes and margins increased.

Chief Executive Officer Rodrigo Pizzinatto said Ultrapar approved an additional BRL 1.085 billion dividend related to 2026 results, payable in December. The company paid BRL 1.086 billion in dividends in September and repurchased shares during the quarter.

Ipiranga Gains Volume and Market Share

Ipiranga sold 6.735 million cubic meters of fuel in the quarter, up 9% from a year earlier. Diesel volume increased 9%, while auto-cycle volume rose 10%. Palhares said the Brazilian fuel market grew 2% during the period.

Recurring EBITDA at Ipiranga climbed to BRL 2.28 billion from BRL 892 million a year earlier. Palhares attributed the increase to volume growth and scale gains, improvements in the competitive environment as authorities combat irregular practices, and market conditions associated with the conflict in the Middle East. Higher operating expenses partially offset those benefits.

Ipiranga more than doubled its imports during the quarter, Palhares said. The company also participated in Brazil’s imported diesel subsidy program, which Pizzinatto said helped support fuel supplies and mitigate the impact of international conditions on domestic prices.

For the fourth quarter, Palhares said Ultrapar expects Ipiranga’s margins to exceed third-quarter levels and be closer to those recorded in the second quarter, which he described as the year’s peak. Ipiranga Chief Executive Officer Leonardo Linden said import economics had become more favorable at the start of the fourth quarter, though subsequent conditions would depend partly on international markets.

Linden declined to give a numerical estimate for a normalized long-term margin. He said he expected it to be above prewar levels but below those seen during the war.

Cash Flow and Capital Allocation

Operating cash generation was BRL 140 million in the quarter. Palhares said higher operating earnings were offset by working-capital investment at Ipiranga, including the settlement of approximately BRL 2 billion in supplier draft-discount operations and the recognition of BRL 661 million in receivables tied to the imported diesel subsidy.

Excluding those two effects, operating cash generation would have been BRL 2.784 billion, compared with BRL 2.129 billion a year earlier, Palhares said. Ultrapar ended the quarter with BRL 11 billion in net debt and leverage of 1.0 times, up from 0.9 times in the prior quarter.

Asked about capital allocation, Pizzinatto said Ultrapar continues to seek investment opportunities with attractive returns and growth potential. He added that higher long-term interest rates and volatility require the company to adjust its return expectations for risk.

Other Businesses Report Mixed Results

Ultragaz sold 458,000 tons of liquefied petroleum gas, up 3% from a year earlier, as bulk sales rose 7%. Recurring EBITDA increased 1% to BRL 467 million. Higher volumes and a more favorable sales mix were partly offset by lower LPG margins and higher logistics costs. Palhares said fourth-quarter recurring EBITDA is expected to be in line with the third quarter despite seasonally lower volumes.

At storage business Ultracargo, average installed capacity rose 12%, while cubic meters sold increased 16%. Adjusted EBITDA grew 6% to BRL 142 million. New capacity began operating at Itaqui and Suape between July and August, completing the company’s current expansion cycle, Palhares said.

Hidrovias handled 3.933 million tons, down 24%, primarily because of the sale of its coastal navigation business. In continuing operations, volume declined 8% and recurring EBITDA also fell 8% from a year earlier. Palhares said fourth-quarter navigation conditions were similar to those a year ago, although the effects of El Niño remained uncertain.

About Ultrapar Participacoes (NYSE:UGP)

Ultrapar Participações S.A. is a Brazilian holding company with businesses focused on fuel distribution, liquefied petroleum gas (LPG) and bulk liquid storage. Its operations serve customers across Brazil, including consumers, businesses and industrial clients. The company's main businesses include Ipiranga, which distributes and markets fuels and related products, and Ultragaz, a supplier of LPG for residential, commercial and industrial use. Through Ultracargo, Ultrapar also provides storage and handling services for bulk liquids, including fuels and chemicals.

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