GO ARMA CAR GAZ TRA TRA TRAF XITENO
ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and UL Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook
2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44
REPORT ANNUAL
ANNUAL REPORT 2013 ULTRAPAR GO ARMA CAR GAZ TRA TRA TRAF XITENO EX O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental IPIRANGA ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR 30 126 106
UGP
DOW DOW Dec/13 JONES 25
1,229 Oct/13
1,027 Sep/13 860 17 765
14 Aug/13
441 11
Jun/13 May/13
2011 2013 2012 2011 2010 NET INCOME NET INCOME (R$ million)
(R$ billion) MARKET CAPITALIZATION 2013 2012 2009 2010 2009 Apr/13
744 Feb/13 2,918 627
2,411 Dec/12 NYSE 525 90 110 130 120 140 2,048 100 1,855 429 1,450 85 121
279 Dec/13 UGPA3
IBOVESPA
Oct/13 Sep/13
2011 2013 2012 2011 EBITDA (R$ million) 2010
(R$ million) DIVIDENDS DECLARED 2013 2012 2010 2009 2009 Aug/13 1,310 60,940
53,869 Jun/13 1,089 1,089 48,629 1,004
42,482 May/13 848 36,097
585 Apr/13
Feb/13 Dec/12 60 80 120 140 100 2011 Excluding acquisitions (R$ million) Excluding INVESTMENTS 2011 2013 2012 EVOLUTION OF PRICES OF ULTRAPAR SHARES PRICES OF ULTRAPAR OF EVOLUTION (Base 100) BM&FBOVESPA 2010 NET REVENUE (R$ million) 2013 2012 2010 2009 2009 37 82 441 139 263 696 332 158 281 151 165 744 746 776 2.28 1.37 2013 1,696 3,982 55.95 23.65 2,918 1,229 1,119 9,235 2,030 3,278 69,874 60,940 24,758 53,384 82 71 352 115 236 614 294 143 246 157 146 627 942 761 1.90 1.17 2012 1,681 3,847 46.29 22.28 2,411 1,027 1,483 9,282 1,653 2,929 55,498 53,869 23,364 46,829 63 262 107 237 582 260 117 107 281 182 170 860 525 591 660 1.60 0.98 2011 1,652 3,767 32.01 17.20 2,048 1,081 9,055 1,366 2,409 34,646 48,629 21,701 42,222 62 57 218 227 181 552 293 145 300 157 187 765 815 429 383 684 1.43 0.80 1,608 3,661 26.28 16.16 1,855 8,883 1,149 2,083 2010 32,953 42,482 20,150 36,483 , 2011. , th 79 49 171 163 135 461 337 111 285 105 179 441 279 838 222 634 0.82 0.52 1,589 3,441 20.03 11.73 1,450 1,941 9,429 1,916 2009 26,961 36,097 17,214 30,486 ) 3 ) 3 ) 3 Price at NYSE (US$/ADR) (US$/ADR) NYSE at Price Productivity (EBITDA R$/ton) (EBITDA Productivity 000) (R$ volume daily trading Average (R$/share) BM&FBOVESPA at Price Sales volume ('000 ton) Sales volume sales and services from Net revenue EBITDA Investments Effective storage ('000 m storage Effective and services sales from Net revenue EBITDA Investments Sales volume ('000 ton) Sales volume and services sales from Net revenue EBITDA Investments US$/ton) (EBITDA Productivity Sales volume ('000 m Sales volume and services sales from Net revenue EBITDA Investments R$/m (EBITDA Productivity Dividends declared (R$) Earnings per share (R$) Dividends per share (end of the year) Number of employees Net revenue from sales and services from Net revenue EBITDA Net income Investments Capital markets Capital Ultragaz Ultracargo Oxiteno Ipiranga R$ million Ultrapar The number of earnings per share, dividends per share and share price was retroactively adjusted to reflect the 1:4 stock split of the shares adjusted to reflect retroactively was price and share dividends per share number of earnings per share, The 10 Meeting on February General Extraordinary by approved the Company issued by and the NYSE. on the BM&FBOVESPA trading the combined considers presented volume daily trading Average The financial information presented in this document has been prepared according to International Financial Reporting (IFRS) to International Standards according in this document has been prepared financial information presented The IAS19 and IFRS11 standards. reflect the adoption of 2011, the figures From with ICVM 527. in accordance prepared were and EBITDA figures ofThe financial information consolidated information. Ultragaz, company’s to the corresponds financial information of The Ultrapar figures otherwise where indicated, Except is reported transactions. without elimination of intercompany Oxiteno and Ultracargo Ipiranga, in R$ million. presented are KEY INDICATORS KEY GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR 30 126 106
UGP
DOW DOW Dec/13 JONES 25
1,229 Oct/13
1,027 Sep/13 860 17 765
14 Aug/13
441 11
Jun/13 May/13
2011 2013 2012 2011 2010 NET INCOME NET INCOME (R$ million)
(R$ billion) MARKET CAPITALIZATION 2013 2012 2009 2010 2009 Apr/13
744 Feb/13 2,918 627
2,411 Dec/12 NYSE 525 90 110 130 120 140 2,048 100 1,855 429 1,450 85 121
279 Dec/13 UGPA3
IBOVESPA
Oct/13 Sep/13
2011 2013 2012 2011 EBITDA (R$ million) 2010
(R$ million) DIVIDENDS DECLARED 2013 2012 2010 2009 2009 Aug/13 1,310 60,940
53,869 Jun/13 1,089 1,089 48,629 1,004
42,482 May/13 848 36,097
585 Apr/13
Feb/13 Dec/12 60 80 120 140 100 2011 Excluding acquisitions (R$ million) Excluding INVESTMENTS 2011 2013 2012 EVOLUTION OF PRICES OF ULTRAPAR SHARES PRICES OF ULTRAPAR OF EVOLUTION (Base 100) BM&FBOVESPA 2010 NET REVENUE (R$ million) 2013 2012 2010 2009 2009 37 82 441 139 263 696 332 158 281 151 165 744 746 776 2.28 1.37 2013 1,696 3,982 55.95 23.65 2,918 1,229 1,119 9,235 2,030 3,278 69,874 60,940 24,758 53,384 82 71 352 115 236 614 294 143 246 157 146 627 942 761 1.90 1.17 2012 1,681 3,847 46.29 22.28 2,411 1,027 1,483 9,282 1,653 2,929 55,498 53,869 23,364 46,829 63 262 107 237 582 260 117 107 281 182 170 860 525 591 660 1.60 0.98 2011 1,652 3,767 32.01 17.20 2,048 1,081 9,055 1,366 2,409 34,646 48,661 21,701 42,222 62 57 218 227 181 552 293 145 300 157 187 765 815 429 383 684 1.43 0.80 1,608 3,661 26.28 16.16 1,855 8,883 1,149 2,083 2010 32,953 42,482 20,150 36,483 , 2011. , th 79 49 171 163 135 461 337 111 285 105 179 441 279 838 222 634 0.82 0.52 1,589 3,441 20.03 11.73 1,450 1,941 9,429 1,916 2009 26,961 36,097 17,214 30,486 ) 3 ) 3 ) 3 Price at NYSE (US$/ADR) (US$/ADR) NYSE at Price Productivity (EBITDA R$/ton) (EBITDA Productivity 000) (R$ volume daily trading Average (R$/share) BM&FBOVESPA at Price Sales volume ('000 ton) Sales volume sales and services from Net revenue EBITDA Investments Effective storage ('000 m storage Effective and services sales from Net revenue EBITDA Investments Sales volume ('000 ton) Sales volume and services sales from Net revenue EBITDA Investments US$/ton) (EBITDA Productivity Sales volume ('000 m Sales volume and services sales from Net revenue EBITDA Investments R$/m (EBITDA Productivity Dividends declared (R$) Earnings per share (R$) Dividends per share (end of the year) Number of employees Net revenue from sales and services from Net revenue EBITDA Net income Investments Capital markets Capital Ultragaz Ultracargo Oxiteno Ipiranga R$ million Ultrapar The number of earnings per share, dividends per share and share price was retroactively adjusted to reflect the 1:4 stock split of the shares adjusted to reflect retroactively was price and share dividends per share number of earnings per share, The 10 Meeting in February General Extraordinary by approved the Company issued by and the NYSE. on the BM&FBOVESPA trading the combined considers presented volume daily trading Average The financial information presented in this document has been prepared according to International Financial Reporting (IFRS) to International Standards according in this document has been prepared financial information presented The IAS19 and IFRS11 standards. reflect the adoption of 2011, the figures From with ICVM 527. in accordance prepared were and EBITDA figures ofThe financial information consolidated information. Ultragaz, company’s to the corresponds financial information of The Ultrapar figures otherwise where indicated, Except is reported transactions. without elimination of intercompany Oxiteno and Ultracargo Ipiranga, in R$ millions. presented are KEY INDICATORS KEY HIGHLIGHTS IN 2013
Signing of an association agreement with Extrafarma, one of Brazil’s ten largest drugstore chains, marking Ultrapar’s entry into the retail pharmacy sector.
Expansion of Ipiranga’s reseller network by 265 service stations, 188 new am/pm stores and 144 Jet Oil and Jet Oil Motos franchises. Construction or expansion of 10 storage facilities.
Expansion of specialty chemicals plant in Mexico. Retrofit of specialty chemicals plant in the United States.
Conclusion of the expansion of the Aratu terminal.
Capture of new customers in Ultragaz’s bulk LPG segment with a focus on small and medium size clients. ULTRAPAR
In 2013, Ultrapar continued its trajectory marked by constant investments in its businesses with growing and resilient demand: fuel distribution through Ipiranga and Ultragaz, specialty chemicals through Oxiteno, and liquid bulk storage through Ultracargo.
Having completed 76 years of existence, ten drugstore chains, thus entering the company’s history was built with the Brazil’s significant growing retail an entrepreneurial spirit, differentiated pharmacy sector. products and services to its customers, consistent planning and execution of its Ultrapar’s businesses are present strategy, with growth and development throughout the whole Brazilian territory, opportunities for its employees. In 2013, with a widespread reach. Ultrapar also Ultrapar took decisive steps towards operates outside Brazil, through Oxiteno, entering a new segment through the with industrial plants in the United execution of an association agreement States, Mexico, Uruguay and Venezuela, with Extrafarma – one of Brazil’s top and commercial offices in Argentina,
2 ANNUAL REPORT 2013 EXTRAFARMA CORPORATE GOVERNANCE IPIRANGA
INNOVATION OXITENO ULTRACARGO SUSTAINABILITY ULTRAGAZ
Belgium, China and Colombia. By the end of a corporate governance structure designed 2013, Ultrapar had 9 thousand employees. for aligning interests and value creation that emphasizes the longtime values. Ultrapar ended the year reaching the mark of 30 consecutive quarters of earnings growth. Since 1999, Ultrapar’s shares have been listed This achievement results from remarkable at the BM&FBOVESPA (São Paulo Securities, traits of its corporate culture and market Commodities and Futures Exchange), joining strategy, that combine pioneering spirit and in 2011 the Novo Mercado listing segment, entrepreneurship to financial soundness and and at the New York Stock Exchange (NYSE) in-depth planning and execution of strategic with Level III ADRs. In 2013, Ultrapar’s shares steps. This business approach was built over appreciated 21%.
3 MESSAGE FROM THE MANAGEMENT
Ultrapar An organized, transparent succession and, at the same time, leveraged on the reported in process, combined with the company’s Brazilian economy, sector in early stage solid management system, allowed of consolidation and formalization; 2013 another the succession of the Chief Executive therefore, with room for Ultrapar to year of Officer in 2013, continuing the planning place itself among the leaders. Culture achievements and implementation of our growth and was another element of harmony, as value creation strategy, focused on the Extrafarma’s corporate governance had and earnings endurance of the company by means been designed to align interests and growth as of organic investments, acquisitions, professionalize management. Mr. Paulo differentiation, and operational Lazera, Extrafarma’s main executive, will a result of excellence. remain in charge of the retail pharmacy constant business as its Chief Executive Officer investments. Looking towards the good prospects of and will become a member of Ultrapar’s the retail pharmacy sector, the pursue executive board. We will accelerate for greater convenience for Ipiranga and Extrafarma’s expansion plan, ensuring Ultragaz’s customers and our capacity to increased investment capacity, access contribute to the business, in September for drugstore openings in Ipiranga’s 2013 we entered into an association service stations and Ultragaz’s resellers, agreement with Extrafarma, one of and the strengthening of Extrafarma’s Brazil’s ten largest drugstore chains. We experienced management team by found in Extrafarma the elements that implementing our mechanisms of we seek in our businesses: scope for corporate governance, incentives, and differentiation, a market that is resilient alignment of interests.
4 ANNUAL REPORT 2013 In 2013, we continued the strategy infrastructure sector, being the only of expanding Ipiranga’s distribution company specialized in liquid bulk storage network, focusing on the Midwest, that is located in six Brazilian ports. In Northeast and North regions of Brazil. 2013, we focused on consolidating our The continued growth of the Brazilian new operation at the Itaqui port, which MESSAGE FROM THE MANAGEMENT light vehicle fleet and the investments began after the acquisition made in 2012, in the expansion of its service station and we concluded the expansion of the network and logistics facilities made by terminal in Aratu. Ipiranga enabled the increase in sales. To this set of positive structural factors are At Ultragaz, we also obtained good added the results of the differentiation results in 2013, as a consequence of a strategy, based on convenience and strategy based on our strong brand, on on increasing the offer of services at the excellence of our resellers and of our Ipiranga service stations. As part of this bulk LPG distribution services, and on the strategy, ConectCar started its operations development of new applications for LPG. in April, aiming at providing electronic The permanent process of seeking for payment for tolls, parking and fuel, productivity gains also positively affected having Ipiranga service stations as the the results. main contact channel with customers. As a result of the corporate governance A pioneer in the Brazilian chemical practices and the results obtained, industry, Oxiteno completed 40 years the company received important in 2013, with a history of significant recognitions in 2013. We believe the expansion of the production capacity, reason for those recognitions is a culture innovation, and product and process of entrepreneurship with planned, detailed technology. The recent investments implementation, strict governance, and made in expanding its plants in Brazil continuous development of professionals and in the acquisition of new plants that are able to endure our way of doing abroad contributed for increased sales and conducting business. volume and a more favorable sales mix, with a focus on specialty chemicals. Paulo G. A. Cunha Chairman of the Board of Directors With a wide geographical presence, Ultracargo managed to understand Thilo Mannhardt the needs of its clients in the port Chief Executive Officer
5 MANAGEMENT FUNDAMENTALS
Ultrapar’s business strategy is marked by a combination of entrepreneurship – which is the main driver of the pioneering spirit that characterized its activity throughout its history – and a corporate culture marked by financial soundness and by detailed planning and implementation of strategic steps.
6 ANNUAL REPORT 2013 MANAGEMENT FUNDAMENTALS
7 CORPORATE GOVERNANCE
The governance The company’s corporate governance advantages: LPG distribution, chemicals built over the structure was designed to create an production and logistics services for increasingly solid, profitable and long- liquid bulk. With a new design for its years by Ultrapar lasting company, with provisions inspired businesses, in late 1990’s Ultrapar became the by international standards that exceed the conducted its IPO on BM&FBOVESPA and key element for requirements of BM&FBOVESPA’s highest the NYSE. corporate governance level. the growth and In 2000, Ultrapar would again pioneer endurance of the Ultrapar has a long track record of in its corporate governance by granting pioneering in the development of its tag along rights at 100% of the offer company and its corporate governance. Ultrapar’s corporate price, a practice that provides alignment businesses. governance structure is based on long- of interests among all the company’s term alignment between shareholders shareholders. and executives, in a process that started in the 1980’s by Pery Igel, then manager and Also to strengthen the alignment of main shareholder of Ultrapar. interests and governance, in 2002 Ultrapar implemented the use of the In the early 1980’s, Pery Igel established economic value added growth metric a deferred stock plan for the company’s EVA® (Economic Value Added) to set the executives and linked it to a 20-year variable compensation of its executives. vesting period. An “owner” mentality was then reinforced, by which executives Ultrapar then moved to a more ambitious become partners, acting under an expansion program, conducting alignment of interests that is deeply linked investment projects and acquisitions. to Ultrapar’s growth. Over the years, Ipiranga, Texaco and União Terminais, among others, were In the 1990’s, Ultrapar experienced a acquired. At the same time, Ultrapar restructuring process, under the command separated in 2007 the roles of chief of Paulo Cunha, who is currently the executive officer and chairman of the company’s Chairman of the Board of Board of Directors. Paulo Cunha began Directors. Businesses were discontinued, to devote himself exclusively to role such as engineering and agriculture, and of Chairman of the Board of Directors, the company focused on three segments while Pedro Wongtschowski assumed the where it had long-term competitive position of CEO.
8 ANNUAL REPORT 2013 The most significant step of recent Directors of Ultrapar. The company’s years was taken in 2011, when solid and strengthened management Ultrapar introduced its new corporate system enabled a planned and governance structure and joined organized transition process, a renewal BM&FBOVESPA’s Novo Mercado. without disruption. With this initiative, the company further deepened the process of One of the benefits of the increased professionalization and increased investment capacity resulting from its investment capacity in order to Ultrapar’s entry into BM&FBOVESPA’s continue pursuing its growth strategy. Novo Mercado materialized in 2013, with the association with Extrafarma. As of 2013, Thilo Mannhardt, then Ultrapar’s new corporate governance member of the Board of Directors, structure enabled it to carry out a became the company’s CEO, transaction in which Extrafarma’s succeeding Pedro Wongtschowski, shareholders became Ultrapar’s who had held the position since 2006 shareholders, a key factor for the and became a member of the Board of association to happen.
RECOGNITIONS
1st place in the “Best Companies for the Shareholders” award in the category of companies with market value over R$ 15 billion, by Revista Capital Aberto.
Best Corporate Governance in the IR Magazine Awards Brazil 2013.
2nd place in the World’s Most Admired Companies 2014 ranking in the energy sector, by Fortune Magazine.
One of the world’s 100 most innovative companies on Forbes World’s Most Innovative Companies award.
9 MANAGEMENT MODEL AND STRATEGY
With nearly Over its existence, Ultrapar consolidated Simplicity in the decision-making processes eight decades a unique corporate culture. The and lean management structure are also management system combines key characteristics of Ultrapar. In late 2013, of evolution entrepreneurial spirit, inherited from its Ultrapar’s executive board was comprised and growth, founders, and a structure that ensures of six officers: the Chief Executive Officer, Ultrapar the sharing and the thorough discussion the Chief Financial and Investor Relations of projects and ideas, as well as values Officer and the executive officers of developed a financial soundness and accurate each one of the four businesses. This management planning and implementation, in a way integrated decision-making structure allows that all its steps are carefully analyzed. The exchange of knowledge and best practices system that combination of pioneering spirit, careful among businesses and provides a more helps the planning, proven execution capability comprehensive view of changes in the company to and financial soundness is a strong economy and the strategy to be designed. characteristic of Ultrapar. efficiently and A characteristic that also shows up as a consistently Ultrapar has businesses that have fingerprint of Ultrapar is the effectiveness implement some common characteristics: they in the process of expansion through combine strong brands and scale as acquisitions. In the prospecting, the its corporate market differentiation factors, a culture company acts with promptness and, at strategy. of innovation, and concern about the same time, patience. The analysis and sustainability in all its streams. negotiation of a potential transaction involves identifying, dimensioning and, if Having intellectual capital as one of its possible, anticipating and mitigating risks. main assets, the company combines, in And, finally, Ultrapar conducts a detailed its management structure, a division of planning for integrating the operation, roles between its corporate center and the which is carried out by experienced teams. business units’ management. In addition This methodology has been applied in the to being in charge of the centralized 18 acquisitions made by Ultrapar since financial management and information its IPO. technology, the corporate center shares with the businesses the responsibility for strategic moves and for action planning. BUSINESS UNITS Centralization provides benefits of scale and promotes specialization as Ipiranga develops an expansion strategy a differential, in addition to ensuring divided into two main fronts. In one front, high standards of control and decision- Ipiranga promotes a strategy designed making processes with strict analysis and to expand its service station network discussion, thus forming a robust system and supporting logistics infrastructure of checks & balances. to ensure growing competitiveness and
10 ANNUAL REPORT 2013 profitability. In another front, Ipiranga renewable raw materials, ensuring greater executes a strategy strongly focused on progress in niches such as the production differentiation and innovation, which of cosmetics. In the last years, Oxiteno has resulted in the opening of new increased the production capacity of market niches associated with its reseller its sites in Brazil, and seized acquisition network that are characterized by offering opportunities in the United States and convenience and service to customers, Uruguay. and thus contributing for their loyalty. Among the initiatives undertaken in the Ultracargo is capturing the benefits last years as part of this differentiation and of a capacity expansion strategy innovation strategy stand out the loyalty that led it to a unique position. In program Km de Vantagens, the system of the last years, Ultracargo conducted buying fuel by internet Ipiranga Service significant expansions of its terminals Station on the Web (Posto Ipiranga na and completed important acquisitions, Web) and ConectCar, a company engaged motivated by the growing demand for in electronic payment for tolls, parking liquid bulk storage services and that allow and fuel, created in partnership with it to benefit from an increased operating Odebrecht in 2013. These initiatives result scale. As a result of these moves, it is the in a better value proposition for customers only company in its segment present and resellers, creating benefits for the in more than three Brazilian ports, thus whole chain – the client has access to ensuring it a proper positioning to seize differentiated, more convenient products, the opportunities created by the lack of the reseller has a more attractive business, port infrastructure in Brazil. and the service station has a differentiated positioning, contributing to the evolution Ultragaz relies on the strength of its of the company’s results. brand and the relationship established with its resellers network and with Oxiteno develops a differentiation its clients to compete in two market strategy strongly based on constant segments: the bottled segment, which investments in innovation, which result is supplied through its well-known blue in products and services that fit the bottles and serving basically households; needs of its customers. This approach and the bulk segment, focused mainly allows products with better value and a on commercial and industrial clients. lower exposure to the cyclicality of the Ultragaz leads by adopting a strategy petrochemical industry than chemical through which it makes use of innovation commodities, thus contributing to an to promote wide scale of its sales improved sales mix and the earnings channels, with greater convenience to progression. Another characteristic of consumers, as well as to develop new LPG this differentiation strategy is the use of applications in market niches.
11 Ultrapar’s Executive Board is composed by the Chief Executive Officer Thilo Mannhardt, by the Chief Financial and Investor Relations Officer André Covre, and the Chief Executive Officers of the business units: Ultracargo - Ricardo Isaac Catran, Oxiteno – João Benjamin Parolin, Ipiranga - Leocadio de Almeida Antunes Filho, Ultragaz - Pedro Jorge Filho and Extrafarma - Paulo Correa Lazera (from left to right)
ORGANIZATIONAL STRUCTURE SHAREHOLDERS
BOARD OF DIRECTORS FISCAL COUNCIL CHAIRMAN: Paulo G. A. Cunha VICE-CHAIRMAN: Lucio de Castro Andrade Filho
CHIEF EXECUTIVE OFFICER Thilo Mannhardt
CHIEF FINANCIAL CHIEF EXECUTIVE CHIEF EXECUTIVE CHIEF EXECUTIVE CHIEF EXECUTIVE CHIEF EXECUTIVE AND INVESTOR OFFICER OFFICER OFFICER OFFICER OFFICER RELATIONS EXTRAFARMA IPIRANGA OXITENO ULTRACARGO ULTRAGAZ OFFICER Leocadio de Paulo Correa João Benjamin Ricardo Isaac Almeida Antunes Pedro Jorge Filho André Covre Lazera Parolin Catran Filho
12 ANNUAL REPORT 2013 MANAGEMENT CORPORATE CENTER OXITENO – EXECUTIVE BOARD Chief Financial and Investor Chief Executive Officer BOARD OF DIRECTORS Relations Officer João Benjamin Parolin Chairman André Covre Controller Paulo Guilherme Aguiar Cunha Corporate Controller Ana Paula Santoro Coria Vice-Chairman Roberto Kutschat Neto Commercial Director Lucio de Castro Andrade Filho Director of Treasury, Andréa Campos Soares Communication and Investor Development Director Board members Relations André Luis Polo Ana Maria Levy Villela Igel Marcello De Simone² Industrial Director Ivan de Souza Monteiro Director of Information Flávio do Couto Bezerra Cavalcanti Nildemar Secches Technology Olavo Egydio Monteiro de Fredson Javurek de Oliveira² ULTRACARGO – EXECUTIVE BOARD Carvalho Chief Executive Officer Paulo Vieira Belotti EXTRAFARMA – EXECUTIVE BOARD Ricardo Isaac Catran Pedro Wongtschowski Chief Executive Officer Controller Renato Ochman Paulo Correa Lazera João Marcos Cazula Controller Business Director - North and FISCAL COUNCIL Miguel Jarros Northeast Commercial and Marketing President Helano Pereira Gomes Director Flavio César Maia Luz Business Director - South and Fábio Lima Southeast Expansion and Development Members Fernando Sérgio Martins Fontes Director Mario Probst Rodrigo de Almeida Pizzinatto¹ José Reinaldo Magalhães ULTRAGAZ – EXECUTIVE BOARD Director of Operations Chief Executive Officer Iara Rosso¹ ULTRAPAR – EXECUTIVE BOARD Pedro Jorge Filho Chief Executive Officer Controller IPIRANGA – EXECUTIVE BOARD Thilo Mannhardt Julio Cesar Nogueira Chief Executive Officer Officers Regional Sales Directors Leocadio de Almeida Antunes André Covre André Luiz Pedro Bregion Filho João Benjamin Parolin Leandro Del Corona Controller Leocadio de Almeida Antunes Tabajara Bertelli Costa José Manuel Alves Borges Filho Director of Operations Commercial Director Paulo Correa Lazera1 Plínio Laerte Bráz Flavio Coelho Dantas Pedro Jorge Filho Director of Lubricants ¹As from February/2014 Ricardo Isaac Catran Miguel Lacerda de Almeida 2As from April/2014 Director of Operations José Augusto Dutra Nogueira Director of Retail and Marketing Jerônimo José Merlo dos Santos
13 RISK MANAGEMENT
High control and CORPORATE RISKS This risks control structure was transparency strengthened in 2011 by the The management tools implemented implementation of the Investment standards provide by Ultrapar are key factors for the Committee, with the objective of Ultrapar with effectiveness of its risk management. evaluating investment projects that reach Through such tools, Ultrapar seeks to cause certain pre-established thresholds of efficiency in its managers to share with the company risks relevance for subsequent approval by decisions and and benefits of their decisions by requiring the Executive Board and by the Board in-depth analysis of the respective risks of Directors. The performance of this effectiveness in of each action taken. In order to promote committee contributes to ensure that the conduction autonomy and delegation, Ultrapar relies, investment decisions are aligned with in addition to alignment, on a robust Ultrapar’s strategy of growth, value of its businesses, control system described in the chapter creation and business responsibility. contributing to Management Model and Strategy, based the company’s on its management model that segregates certain functions of the corporate center OPERATIONAL RISKS AND growth trajectory. and the business units. SAFETY Ultrapar used the provisions of the A set of programs and initiatives Sarbanes-Oxley Act as one of the basis contributes for Ultrapar to have an efficient for its control tools, and then improved operational risk management. This those tools over the years. Ultrapar has a structure covers the company’s assets and differentiated risk matrix model to monitor professionals, as well as the stakeholders its internal controls. This model allows of its businesses, involving the value an efficient alignment of the activities of chain and the communities of its area of internal and external audits to the needs of influence. shareholders and managers. The initiative received external recognition in 2009 Ipiranga develops the Training and through the IBGC Award for Corporate Development Program for Truck Drivers, Governance, in the Innovation category. which aims at offering training and qualification in order to reduce the As part of a risk management mechanism, number of accidents, given that trucking Ultrapar relies for over fifteen years on a is an important stage of its operation. This Risk and Financial Investments Committee, program is applied to both its employees since maintaining long-term financial and contractors, and includes training on soundness is one of the company’s main actions such as loading and unloading attributes. The committee, comprised of and defensive driving, contributing for the chief financial officer, the corporate drivers to safely perform their activities. controller and the director of treasury, In 2013 Ipiranga launched the Road in addition to the executive officers of Transport Manual (Manual de Transporte each business, is in charge of monitoring Rodoviário Ipiranga - MTRI) to all its and supervising compliance with the contracted carriers, with the objective company’s policies.
14 ANNUAL REPORT 2013 Ultracargo is present at 6 ports in Brazil
of standardizing product transport Week for Occupational Accident operations. Another tool frequently used Prevention and the Environment by Ipiranga is the integrated system SIGA+ (Sipama). This initiative is carried out (Ipiranga’s Management System Applied annually and, in 2013, featured activities to Safety Health, the Environment, intended to disseminate knowledge Quality and Social Responsibility), that on quality of life, health and safety to via procedures, controls, and capabilities employees and partners. In this edition, trainings minimize the risk of accidents, the awareness effort was focused on thus providing safety to people and sustainable consumption practices, operations. recycling, waste disposal and confined spaces. In January 2013, Oxiteno inaugurated a new Health, Safety and Environment With the purpose of minimizing Training Center in the Mauá (SP) unit. the occurrence of accidents in its As Oxiteno is engaged in the chemical operations, Ultragaz keeps in place the industry, which is inherently sensitive to Safety Climbing Program (Programa health, safety and environmental matters, Escalada da Segurança), which proper training of its employees is one of disseminates prevention concepts the factors for the long-term success and such as the use of Personal Protective profitability of its operations. With the new Equipment (PPE) and organization. The center, the site now has a whole building program is present in 17 manufacturing with an area permanently dedicated facilities and reaches 4 thousand to trainings and simulations, which, in employees directly. In 2013, the the future, will also be able to receive program was strengthened with the employees from other units. theme “Behavioral Attitude” to raise awareness on the types of occupational Ultracargo held in April 2013, at the Santos accidents, which contributed to a 28% Terminal, another edition of the Internal reduction of accidents with leave.
15 INNOVATION
Innovation Ipiranga’s Eco-Efficient service station Oxiteno’s operation is strongly is one of the project (Posto Ecoeficiente) is one of the supported by innovation, which is differentiation initiatives that reflect the basis of a growing positioning in main drivers Ultrapar’s innovation philosophy. It specialty chemicals in the domestic and of the product aggregates, in a single project, innovative international markets, thus ensuring and service solutions and sustainable technologies, greater profitability to the business, in harmony with the profitability of the lower volatility and a closer relationship differentiation service station for the reseller. The Posto with customers. Of its staff, 7% are linked strategy Ecoeficiente project involves solutions to the development of new products, in the construction and operation of processes and technologies. In 2013, 22 adopted by service stations that result in better use of entirely new products were developed Ultrapar in its resources, such as water and electricity, and launched in the market, and revenues businesses, and reduction of wastage and residues. from new products launched in the last The Postos Ecoeficientes reached in 2013 five years accounted for 9% of its total and it presents the mark of 488 units spread over the revenues. a key role in Brazilian territory, in addition to 200 units the company’s under construction. This project attracted Among the products launched in the year, international attention and became the Oxiteno developed a product involving history. object of study from the Boston University innovative technology, indicated for School of Management, in the United different categories of cosmetics, such States. It was considered a Brazilian as body lotions and liquid soaps. One example of best practice regarding eco- of the main differentiators offered efficiency and competitiveness, aiming to by the new product is spreadability. enhance and ensure the longevity of the Another important attribute is the use business. of two renewable raw materials in the development of this new line: vegetable Another pioneering initiative in 2013 fatty acids and ethanol. was the Ipiranga Service Station on the Web (Posto Ipiranga na Web) application, In 2013, as part of the efforts towards the first of its kind launched in Brazil. encouraging innovation, Ultracargo used The application allows customers, using the “Design Thinking” methodology, smartphones, to purchase fuel credits, in a management approach to obtain the same manner they can do by visiting innovative solutions, in a pilot project the Posto Ipiranga na Web website, which aimed at restructuring the trailer truck completed two and a half years of activity, scheduling system at the Santos (SP) recording fuel credit purchases made by terminal. The objective of the project was over 130 thousand different customers. to develop a new way for the assignment
16 ANNUAL REPORT 2013 of spots for trucking operations, resulting pioneering spirit – the project is governed Of Oxiteno’s staff, in a more organized operation and, by the deployment of sustainability accordingly, increased competitiveness. concepts, incorporating actions that aim at improving the energy and 7% Since 2006, Ultragaz has been environmental efficiency of processes. are linked to the introducing, through the New Uses for In 2012, this process of opening new development of LPG Project (Projeto Novos Usos do GLP), applications for LPG involved, for example, new products new applications for the product, thus the development of solutions for the opening new business fronts. In addition agricultural sector, especially the use of to stimulating the creation of new market LPG for grain drying instead of firewood, niches – a typical trait of Ultragaz’s and for thermal control of plagues.
Oxiteno maintains a center of engineering and quality at its unit in Camaçari (BA)
17 RELATIONSHIP WITH STAKEHOLDERS
Ultrapar’s history The solidity of these relationships is the positive effects on talent retention. is based on result of shared principles and values and Ipiranga launched in 2013, for example, the alignment of goals and objectives. the “We are hiring” (“Temos vagas”) self- relationships application program, which facilitates the built over nearly PEOPLE MANAGEMENT development of its employees by means of eight decades internal job rotation. One of Ultrapar’s main foundations is the of existence Attracting talents to be developed and development of human capital. To this prepared, supporting the company’s with different purpose, it relies on a people strategy that growth, is one of Ultrapar’s central areas stakeholders. values meritocracy and features a variable of attention. Annually, the company offers compensation system linked to value opportunities for young talents through creation, as well as an effective system for internship and trainee programs. Every attraction, qualification and retention. A year about 320 young professionals are proof of the results of this strategy is the hired, who gain a broad overview of fact that many of Ultrapar’s and business Ultrapar’s businesses through job rotation units’ officers built their careers internally. and several training sessions. To contribute to this front, Ultrapar and its businesses Job rotation, through promotions participate annually in recruitment fairs or reassignment to different areas, is held by the main universities in Brazil. part of the development process, with
The Statement of Value Added contributed to its performance. reports the value of the wealth Ultrapar generated value added of generated by the company and the R$ 4.3 billion in 2013 and R$ 3.6 distribution among the agents that billion in 2012, distributed as follows:
2012 2013
29% Employees 29% Employees 28% Government 28% Government 15% Third parties 15% Third parties 17% Shareholders 17% Shareholders 11% Retained 11% Retained earnings earnings
18 ANNUAL REPORT 2013 PROGRAMS FOCUSED ON PEOPLE MANAGEMENT (examples)
üü Ipiranga’s General Training Program - IGT üü Ultragaz Academies – Resellers Academy, (Programa Geral de Treinamento Ipiranga) – Household Academy and Business Academy Following its track record of over 15 years, Ipiranga (Academias Ultragaz – Academia Revenda, submitted, in 2013, 73% of its staff from different Academia Domiciliar and Academia Empresarial) – levels to the program. The program is focused These are programs consisting of specific technical on professional qualification and development, and behavioral training focused on qualifying enabling the enhancement of different technical, Ultragaz’s sales force, including both resellers and behavioral and business knowledge skills. Over their employees as well as Ultragaz’s own staff. The the year, professionals had the opportunity to training programs are an important tool to ensure participate in programs whose contents were the high level of efficiency of the reseller network developed in partnership with Brazil’s major and Ultragaz’s operations in the bulk segment, educational institutions. The program features contributing for a more effective management of courses for both the internal public and the clients. the business. In 2013, over 23 thousand employees from clients üü Ultra Professionals Program (Programa Ultra were trained. Profissionais) – Internship program developed by üü Oxiteno’s People Management Committee Ultrapar’s corporate center for the administrative/ (Comitê de Gestão de Pessoas da Oxiteno) – financial and IT areas, focusing on students in the last Aiming at identifying potential talents and year of college. The program includes job rotation structuring succession plans at all levels, Oxiteno among the different areas of the corporate center relies on this committee, which is comprised and over 50 hours of training during the year. Since of members of the executive board, managers the inception of the program, the average retention from the different areas and human resources rate, that is, interns hired as analysts, is 76%. professionals and is in charge of evaluating üü Young Talents in Accounting Program (Programa employee performance and defining a Jovens Talentos na Contabilidade) – Implemented development plan. in 2012, the program provides knowledge of üü Ultracargo’s Knowledge Portal (Portal do Saber Ultrapar’s main accounting processes. Its main Ultracargo) – The program involves diversified objective is to attract and develop talents by channels for disseminating a wide range of means of knowledge exchange and job rotation, knowledge and relies on content produced by the enabling solid theoretical education and hands-on universities of Chicago and Harvard and on own experience during the 2 years of the program. In content. In 2013, 43% of Ultracargo’s employees 2012 and 2013, 10 accounting students attended adhered to the program. the program.
19 At Ultrapar, CLIENTS ensuring the necessary proximity to the major passion and multinational companies in this segment, As the largest loyalty program in Brazil, many of which are Oxiteno’s clients. respect for the Km de Vantagens is a case of success in client is the the differentiation strategy designed by For the second consecutive year, Oxiteno won base for a work Ipiranga with the aim of building customer the Paint & Pintura award, considered one loyalty. With 15 million participants by the most important awards in the coatings philosophy that the end of 2013, the program became the industry, in the category of Oxygenated th has guided the company’s main relationship platform, Solvents. The 17 edition event recorded the presence of about 900 professionals from the company over promoting a major evolution in Ipiranga’s actions towards and communication whole paint production chain, contesting its 76 years of with end consumers. Km de Vantagens in 50 award categories for best supplier existence. was the foundation for the launch of new practices, best paint manufacturers and products and services in the fuels resellers personalities of the year. segment, such as the Lances de Vantagens auction website and the 1st Ipiranga In order to enhance the interaction with Service Station on the Web Posto na Web clients and other stakeholders, Ultracargo (Posto na Web), through which fuel credits introduced this year the “Knowing Ultracargo may be purchased on Ipiranga’s portal, Better” (“Conhecendo Melhor a Ultracargo”) thus creating a closer relationship with program. The program made it possible to the customer and increasing customer set a more structured, standardized process satisfaction. for visits and tours to all the company’s facilities, increasing their effectiveness. Since The close relationship with the client is its inception, 32 visits were scheduled to one of the main pillars for the success the Suape, Aratu, Santos and Rio de Janeiro of Oxiteno’s strategy, as the process for terminals and to the headquarters. The the development of new formulations is initiative allows the feedbacks provided by intrinsically linked to the specific demands visitors to be used to enhance processes and of each client. In the agrochemical services. segment, this closeness becomes even more evident, resulting in a virtuous Anticipating trends related to consumer habits combination of shared efforts and has been one of the main focuses of Ultragaz’s results. The company’s geographical attention, and has generated adjustments to expansion process has also contributed operations, to assets and to customer service. for building closer relationships by In this context, Ultragaz ordered in 2013 a major market research from Instituto Gallup focused on changes in habits and needs of end consumers regarding service quality, as a result of the increase in the number of delivery channels and in service speed in the bulk and bottled segments, which allowed the company to begin testing initiatives to draw the company even closer to its clients and, thus, enhance the products and services offered.
Ultragaz is the leader in the Brazilian LPG distribution market, with a strong brand, large scale and a widespread reach SUPPLIERS AND RESELLERS
Ultrapar has a solid partnership with its wide range of suppliers and resellers network, based on ethics principles and on management focused on sustainable financial results. These characteristics contribute for the endurance of Ultrapar’s businesses, in addition to generating benefits that are extended to its partners.
The pursue for differentiation is a central part of Ipiranga’s strategy, implemented through the offering of products and services of higher value, generating benefits for its clients, retailers and for the company itself. One of the key enablers of this strategy Ipiranga’s Annual Convention gathers more than 5,000 resellers and clients of convenience and services of Ipiranga is the close relationship with the resellers, which is strongly supported by qualification In order to create benefits for its resellers, and training programs for service stations’ clients and for the company itself, owners and employees – the VIP (Vendedores Ultragaz has a supplier qualification Ipiranga de Pista), as pump attendants program in place that goes beyond are known at Ipiranga. In order to keep a the concern for the quality of the differentiated business model, Ipiranga seeks material or input supplied. The project to develop several pioneering initiatives consists of sharing with the suppliers’ The pursue for concepts and actions related to safety, in the sector. Among the initiatives, one of differentiation is the most well-known is the VIP Club (Clube health, and social and environmental VIP), an incentive program specifically responsibility. By using an indicator, a central part of focused on service stations’ employees that the Supplier Qualification Index, Ipiranga’s strategy, aims at engaging those employees and Ultragaz challenges its suppliers to, in implemented at encouraging the achievement of goals. addition to developing products and VIPs that achieve the goals are awarded processes, take part in projects with through the offering through the VIP Club Card (Cartão Clube VIP), the participation of communities and of products and a shopping card granted in partnership with disseminate good health, safety and Sodexo, or through credits for purchases at environmental practices within the services of higher the Ipirangashop.com virtual store. companies. Ultragaz also has an intensive value, generating qualification program for all its resellers benefits for its As signatories to the ABIQUIM Responsible that sets operation standards and, since Care program, Oxiteno and Ultracargo use 2012, features an on-line reseller portal clients, retailers and the parameters of this program in their that makes communication with this for the company relationship with suppliers, in addition to the audience more dynamic and enhances itself. specific requirements of their quality policies the relationship between resellers and and their codes of conduct. end consumers.
21 SOCIAL AND ENVIRONMENTAL PHILOSOPHY AND SUSTAINABILITY
One of the SOCIAL PERFORMANCE Endeavor, the world’s main institution in main pillars the generation and multiplication of high- The relationship with the communities impact entrepreneurs. of Ultrapar’s that surround Ultrapar’s operations is trajectory is also one of the key drivers of its vision Another example are the projects a vision of of sustainability. The company shares its supported by Ipiranga: the “Solidarity in principles and results, in its interfaces Literacy” (Alfabetização Solidária) program, sustainability with this audience, by means of programs which every year teaches reading and that pervades that disseminate education, culture, writing to 1,000 students in the North and Northeast regions of Brazil, areas actions and qualification, health, and well-being. The practices adopted by the company in with high illiteracy rates, and the Telesol attitudes in areas this front result in greater inclusion and Project, which allows youths and adults st that include from social development, in addition to bring that have not completed the 1 segment st th Ultrapar even closer to its consumers. of elementary school (1 to 5 grade) to relationship with return to studies. stakeholders to Interacting with the community of the the responsible Bela Vista neighborhood, in São Paulo, Oxiteno develops the “See from Inside Program” (Programa Ver de Dentro), by manner of where Ultrapar’s headquarters are located, the company opened in 2013 which it opens the doors of its premises conducting the 12th class of the Ultra Formare, a in Camaçari (BA) to the population, business. vocational training and free course for promoting dialogue between the parties. underprivileged young students from The program enables the dissemination public schools in the region. After a 33- of information about Oxiteno to groups week course, young students are able of students, teachers and neighborhood to act as administrative and commercial associations, keeping channels of assistants. This initiative helps social communication close to the communities. inclusion to these youngsters, creates specialized labor, and disseminates Ultracargo held, in partnership with the Ultrapar’s culture through its employees “A Tribuna” newspaper from Santos, the th that act as volunteer teachers. Currently, 11 Community in Action Award (Prêmio 34 professionals that work at the Comunidade em Ação), which highlights company’s headquarters are from this projects that disseminate and encourage program. voluntary work in Santos and the region. The action mobilizes public and private Ultrapar, whether directly or through its education institutions in the search for businesses, also contributes to a series of solutions that improve the quality of life other initiatives focused on education and of hundreds of people. In the 2013 edition training, such as by supporting Instituto – the third sponsored by Ultracargo –, 27
22 ANNUAL REPORT 2013 In 2013, Ultrapar’s 12th class of Ultra Formare graduated
projects were submitted, of which 15 made Recyclables Cooperatives, which relies it to the final. on the work of employees and resellers, aims at preserving the environment Through Ultragaz, Ultrapar develops, with and minimizing waste disposal. It the support of the Brazilian Development operates by improving infrastructure Bank (Banco Nacional de Desenvolvimento and providing training on cooperatives Econômico e Social – BNDES), social management. And there is also Grade and environmental projects in the A School (Escola Nota Dez), supported surroundings of the communities where it by the Ipojuca (PE) City Education operates. The Educational Campaigns, in Department, where Ultragaz sponsors partnership with the Federal Government the creation and implementation of and the Ministry of Health, are designed a Child Education Policy for the city, to provide preventive information by including qualification for education means of qualifying LPG dealers and coordinators. Concurrently to this work, have directly impacted nearly 25 million Ultragaz is refurbishing four rural schools people in 2013. The Development of in the region.
23 by the Federation of Industries of Rio de Janeiro (Federação das Indústrias do Rio de Janeiro - FIRJAN), in recognition for the project for identification and quantification of GHG covering all the company’s operations. Ipiranga conducts, since 2008, the Saúde na Estrada program (Health on the Road), which aims at bringing health information to truck drivers, important customers of the service stations Ipiranga Rodo Rede Since 2012, Oxiteno uses reclaimed water – which is not fit for human consumption but can be used to meet other needs – THE ENVIRONMENT from the Aquapolo Project, an initiative by the Aquapolo Ambiental S.A. special Proper treatment of the environment is part purpose company, organized by Sabesp of the company’s daily operations, through and Foz do Brasil. The project involves programs for continuous improvement the production of reclaimed water for of processes and efficiency in the use of industrial purposes, in partnership with resources. To supplement the environmental the companies of the petrochemical management of the operations, Ultrapar complex of the ABC region of São Paulo. develops projects for reduction of emissions of Being among the world’s top ten projects pollutants, rational use of raw materials, as well of its kind, it generates savings of 1 as for raising environmental awareness in the thousand liters of industrial use water per company’s stakeholders. second – equivalent to the consumption of a city with 500 thousand inhabitants. Ipiranga conducts since 2012 the Carbon The reclaimed water may be used for all Management program, designed to group all industrial applications in the Mauá plant. its actions related to Greenhouse Gases (GHG) and, thus, seeking to offset emissions through In 2013, Ultracargo held the Sustainable different initiatives. The program was built on Week (Semana Bem+Sustentável), three pillars: Measurement (assessment of GHG focused on disseminating knowledge emissions, covering 100% of activities under related to safety, health, environment, Ipiranga’s operational control), Reduction and quality. The event featured lectures (creation of projects to reduce GHG emissions) aiming at encouraging change of and Offsetting (actions directed to different behavior of employees and raising audiences to offset their emissions). The their awareness, considering matters main types of carbon offsets that Ipiranga related not only to the workplace, but makes available to consumers are: Ipiranga also to relationships with families and Zero Carbon Card, which allows the user to communities. Over 800 employees took offset emissions from the use of fuel in their part in the lectures. cars; Km de Vantagens Ipiranga, which allows participants to offset their emissions using Ultragaz is achieving important results points; and Ipiranga Service Station on the in a logistics program to reduce the Web, where Ipiranga consumers are granted fuel consumption of its fleet – reducing the option of purchasing on the web credits for accordingly emissions of pollutants fuel that has already been offset. into the atmosphere. The program minimizes gas emissions in the process In 2013, Ipiranga won the Environmental of refueling corporate clients, in Action Award (Prêmio Ação Ambiental) granted addition to reducing costs.
24 ANNUAL REPORT 2013 ULTRA SUSTAINABILITY MODEL GUIDELINES
üü To value the culture of citizenship and ethics in Human Rights, Labor Rights, Environmental business; Protection, and Anti-Corruption Practices, in all their forms, into the organizational culture; üü To safeguard the integrity of the corporate governance model, particularly the treatment üü To value employees by encouraging and transparency of relevant information professional growth and quality of life, and the continued management of risks and improving work environment and conditions; opportunities; üü To act selectively as an agent of progress üü To keep and improve financial capacity, of neighboring communities and society, flexibility, and operational excellence, so as through culture dissemination, education, and to minimize the vulnerability to economic social inclusion initiatives; fluctuations, seeking growth opportunities in each of its business segments; üü To adopt policies to keep the excellence in health, safety, and environmental standards; üü To orient products and services that meet clients’ and consumers’ needs and expectations; üü To identify, control, and mitigate risks inherent in the business through risk management and üü To keep active representation in trade crisis management policies and practices in associations and a good relationship with public the operational, regulatory, environmental, bodies in order to enhance and strengthen tax, legal, and social areas; businesses; üü To promote the management of greenhouse üü To keep a state of readiness, awareness and gases in order to mitigate their effect on education for the permanent appreciation climate changes; of economic, environmental, and social sustainability; üü To prepare periodic reports on sustainability, considering its economic, environmental, and üü To support, disseminate, and integrate the social dimensions. UN Global Compact principles related to
25 TOTAL EMISSIONS - SCOPES 1 AND 2
(in thousand metric tons of CO2 equivalent)
2011 2012 2013(1) Ipiranga 12 16 16 Oxiteno 586 494 558 Ultracargo 7 6 7 Ultragaz 19 21 26 Total 624 537 608
(1) Preliminary data
OXITENO – SHARE OF RENEWABLE RAW MATERIALS IN TOTAL RAW MATERIALS USED
2013 18%
2012 21%
2011 24%
2010 20%
2009 18%
EXPENSES IN HEALTH, SAFETY AND THE ENVIRONMENT (R$ million)
2013 127
2012 120
2011 108
2010 108
Ipiranga reached in 2013 the mark of 6,725 service stations, with 488 Eco-Efficient service stations 2009 102
26 ANNUAL REPORT 2013 Oxiteno has 11 industrial plants
SOCIAL BALANCE SHEET 2013
DECEMBER 2013 1) Calculation base Amount (R$ ‘000) Net sales and services (NSS) 60,940,246 Operating profit (OP) 2,144,033 Gross payroll (GP) 703,609 Amount 2) Internal social indicators (R$ ‘000) % of GP % of NSS Food 72,741 10.3% 0.1% Compulsory social charges 234,071 33.3% 0.4% Private pension 17,699 2.5% 0.0% Health 75,799 10.8% 0.1% Safety and medicine in the workplace 7,570 1.1% 0.0% Education 918 0.1% 0.0% Training and professional development 11,335 1.6% 0.0% Employee profit sharing 151,314 21.5% 0.2% Others 57,190 8.1% 0.1% Total - Internal social indicators 628,637 89.3% 1.0% Amount 3) External social indicators (R$ ‘000) % of GP % of NSS Education and Culture 1,862 0.1% 0.0% Other (Donations and compensation for damage) 7,125 0.3% 0.0% Total - Contributions to society 8,987 0.4% 0.0% Taxes (excluding social charges) 1,039,528 48.5% 1.7% Total - External social indicators 1,048,515 48.9% 1.7% Amount 4) Environmental indicators (R$ ‘000) % of GP % of NSS Related to the operation of the company 43,172 2.0% 0.1% Total investment in the environment 43,172 2.0% 0.1%
27 EXTRAFARMA
Continuing its growth trajectory, Ultrapar signed on September 30, 2013 an association agreement for the merger of 100% of the shares of Extrafarma, one of Brazil’s top ten drugstore chains.
28 ANNUAL REPORT 2013 EXTRAFARMA
In exchange, Extrafarma’s shareholders differentiation in the market, and the became Ultrapar’s shareholders, with establishment of close relationships with up to 2.9% of the company’s capital. The customers. association was based on businesses that are resilient and leveraged on the Brazilian Through this transaction, Ultrapar economy, with room for wide operational entered the retail pharmacy sector scale and consolidation, scope for and inaugurated its fifth business,
29 Extrafarma is the third specialized distribution and retail business of Ultrapar
30 ANNUAL REPORT 2013 The trends the company’s third business in the as the North American, the European and for the retail specialized distribution and retail the Japanese ones. segment, together with Ipiranga pharmacy and Ultragaz. Extrafarma’s business Strengthened by the association with sector point characteristics are strongly identified to Ultrapar, Extrafarma is positioned to be to a large Ultrapar’s. Headquartered in Belém (PA), one of the main players in the process of Extrafarma holds a leading position in consolidation and formalization of the expansion its market, where the growth potential is Brazilian retail pharmacy sector, still in its potential. higher than in the rest of Brazil. It relies early stages. on an experienced management team that is well recognized in its market The association with Ultrapar will allow and has consistently sought advances Extrafarma to accelerate its growth in its corporate governance, which has projects. At the end of 2013, Extrafarma undergone a deep revision in the last had 195 stores. In addition to capital years. for a faster growth, Ultrapar has over 11 thousand points of sale spread across the The trends for the retail pharmacy sector country, consisting of Ipiranga service still point to a large expansion potential. stations and Ultragaz resellers, which With total revenues of over R$ 60 billion represent a huge opportunity of points in 2012, the retail pharmacy sector has for quick establishment of new Extrafarma been registering an average real growth stores, with the advantage of allowing rate of over 10% per year, leveraged, an integrated approach to the consumer, among other factors, by an aging in addition to generating benefits to population and by increasing income. In Ipiranga’s and Ultragaz’s businesses. this movement, the generic medicines segment stands out – a segment which To support the accelerated growth, has been registering growth in sales of Ultrapar relies on the corporate over 30% per year – as it allows greater governance and management tools to access to drugs. The elements that promote alignment of interests, and on allowed the strong growth of this market its track record in business integration are still present, considering that Brazil’s processes and accelerated expansions, per capita medicines consumption is still with direct impact on the maximization of relatively low compared to markets such value creation.
LOW ANNUAL PER CAPITA BRAZILIAN POPULATION PHARMA SPENDING > 60 YEARS OLD (US$ per capita 2012) (million people)
USA 1,042 2030 40
Japan 800 2025 34
Europe 261 2020 28 CAGR: +4% p.a.
Argentina 123 2015 23
Brazil 110 2012 21
Source: ABIHPEC / IMS Health
31 IPIRANGA
Ipiranga continued in 2013 its growth trajectory, capturing the benefits of investments made in expanding its network and logistics infrastructure and in its differentiation strategy.
32 ANNUAL REPORT 2013 IPIRANGA
In 2013, fuel sales grew 6%, while EBITDA IPIRANGA - EBITDA increased by 23%, due to its growing (R$ million) scale and differentiation. 2013 2,030 Ipiranga, Brazil’s second largest fuel 2012 1,653 distributor with a 22% market share, is a leader in consumer convenience and 2011 1,366 service initiatives: it has, among others, the largest network of convenience 2010 1,149
stores, with 1,565 am/pm stores; the 2009 838
33 Ipiranga has the largest franchise network of convenience stores in Brazil, with 1,565 am/pm stores
largest loyalty program, with 15 To expand its distribution network, million consumers registered in Km de Ipiranga made significant investments Vantagens; the largest lubricant service in new service stations, conversion shop network in Brazil, with 1,235 Jet Oil of unbranded service stations, and stores; and the largest bakeries chain. expansion of logistics infrastructure. The main focus of this strategy are the Ipiranga continued to invest in Midwest, Northeast and North regions expanding its activities, thus capturing of Brazil, which offer the best expansion the opportunities arising from the prospects – consumption growth rate increase in Brazil’s light vehicle fleet, above that of the Brazilian average and which is estimated to have grown by greater potential for the opening of 7% in 2013, with a positive effect on service stations. In 2013, 265 new service the demand for fuels, and from the stations were added to the network, reduction of the grey market in the which, by the end of the year, was fuel market, especially in ethanol, composed of 6,725 units. which generated benefits to the formal participants and consumers and Ipiranga also continued the strategy increased tax revenues. of constant innovation in services and
34 ANNUAL REPORT 2013 LOGISTICS DISTRIBUTION INFRASTRUCTURE
Regions of operation
Ipiranga’s terminals
Joint operated
convenience, which generated increased convenience store network was increased revenues to franchisees and customer by 188 units. Bakeries of the am/pm satisfaction and loyalty. ConectCar, the stores continued to be an important most recent initiative in this strategy, is component of the strategy related to the the result of the partnership between ‘full service station’ concept. In 2013, the Ultrapar and Odebrecht. It started its number of bakeries at Ipiranga service operations in 2013, and has over 100 stations reached 277 units. Furthermore, thousand customers. another 37 Jet Oil Motos stores – a pioneer in the motorcycle oil changing Being one of the main initiatives in the segment – were added to the network, differentiation strategy, the am/pm reaching 241 units.
35 IPIRANGA – SALES VOLUME (‘000 m³)
HIGHLIGHTS IN 2013 2013 11,055 13,332 24,758
üüExpansion of the network by 265 service 2012 10,104 12,858 23,364 stations, 188 am/pm stores, 113 bakeries and 144 Jet Oil and Jet Oil Motos stores. 2011 9,208 12,069 21,701
ü üStart of operations of ConectCar, reaching 2010 8,653 11,032 20,150 over 100 thousand customers in the first year of activity. 2009 7,485 9,277 17,214
üüKm de Vantagens reached 15 million Otto Cycle (gasoline, ethanol and NGV) participants, establishing itself as the largest Diesel loyalty program in Brazil. Others
üüFuel credit purchases through Ipiranga service station on the Web were made by LIGHT VEHICLES FLEET over 130 thousand different customers. (million vehicles)
üüMarketing initiatives in the media spotlight 2013 37
in 2013: campaign “Ipiranga. A complete 2012 35 place waiting for you (Ipiranga. Um lugar completo esperando por você)”. This 2011 32 concept has become a reference for their 2010 30 consumers. Consistent with this proposal, 2009 28 the award-winning campaign brought great recognition for the brand, and turned into a Source: ANFAVEA - fleet of 2013 estimated based on the number jargon used daily by many Brazilians. of vehicles licensed in the year
üüConectCar Radio – Launch of a customized radio to promote ConectCar. The ConectCar CAR PENETRATION SP/Rio Radio 90.7 FM is an on-the-road radio (% of population) broadcasting to 12 toll plazas at the Ayrton Brazil* 18% Senna, Carvalho Pinto, Presidente Dutra and Dom Pedro highways. Argentina 27%
Mexico 28%
South Korea 38%
Czech Republic 50%
*estimated Source: ANFAVEA – 2011 data
36 ANNUAL REPORT 2013 OPERATIONAL INFRASTRUCTURE Oil derivatives
Pipeline
Cabotage
Oil refineries Primary storage terminal Service stations
Road Road Railway
Large consumers
Secondary storage terminal TRRs (Retail wholesale resellers)
Ethanol
Ethanol hub
Railway Railway Road Road Road Pipeline Cabotage Ethanol mills Service stations
Storage terminal
Primary terminal Secondary terminal It receives the product directly from the refinery, It receives the product from another terminal or imported via ship, without passing through (either primary or secondary terminal). another terminal.
37 OXITENO
Having completed 40 years of existence in 2013, Oxiteno also celebrated the good results of the year, which were made possible by a differentiation strategy based on innovation and the growing offer ofsustainable products, and by investments in expansion.
38 ANNUAL REPORT 2013 OXITENO
Oxiteno recorded in 2013 growth of 2% OXITENO - EBITDA in sales volume and EBITDA growth of (R$ million) 25%, with a more favorable sales mix and weaker Real. 2013 441
Oxiteno is the largest producer of 2012 352
specialty chemicals in Latin America and 2011 262 the only producer of ethylene oxide and fatty alcohols in Brazil. The company’s 2010 218 strategy is to develop new technologies 2009 171
39 for products, processes and raw materials, especially renewable ones. This strategy provides Oxiteno with significant differentiation, flexibility and agility to meet its clients’ demands.
In terms of operations, Oxiteno’s production capacity exceeds local demand. In addition, the focus on specialty chemicals has allowed sales volume to increase by a multiple of the GDP growth and with less susceptibility to the volatility of the global oil commodities industry.
This positioning guarantees important attributes to Oxiteno: broad coverage of markets and applications; good positioning to benefit from trends in different markets; and a sales mix with higher value-added products.
Oxiteno has an operations control center at the Camaçari unit (BA) In 2013, Oxiteno completed 10 years since the start of its international expansion process, with industrial plants or commercial offices in nine countries.
HIGHLIGHTS IN 2013 OXITENO – SALES VOLUME (‘000 ton) üü2% growth in sales volume and 25%
growth in EBITDA. 2013 89% 11% 776 üüDevelopment of 20 global brands as part of the international expansion strategy. 2012 84% 16% 761
üüDevelopment of new applications based 2011 91% 9% 660 on innovation and the use of renewable raw materials. 2010 93% 7% 684
üüLaunch of 22 new products. 2009 92% 8% 634
Specialty chemicals Commodities
40 ANNUAL REPORT 2013 OXITENO’S UNITS LOCATION MAP
Brussels
Montevideo
Offices Shanghai
Industrial plants
41 Oxiteno is the sole producer of ethylene oxide in Brazil and the sole producer of fatty alcohols in Latin America.
Oxiteno The geographical expansion offers the to increase the use of the capacity of its completed following benefits to the company: plant in Pasadena, USA. The expanded access to a broader market; access to capacity in Mexico is scheduled to start raw materials under more competitive operations in 2014. Investments are 10 years conditions; knowledge and technology part of a strategy to expand its business since the exchange; and closer relationship with the in the North American market, which start of its clients. size is significant and has favorable production cost conditions, including international As part of its internationalization strategy, natural gas-based raw materials. In expansion Oxiteno completed in 2013 the process of addition, Oxiteno completed in 2013 creating and developing global brands. the integration of the Uruguay unit, process Since April 2013, over 60 brands that were acquired in November 2012. regionally marketed by Oxiteno have been represented by 22 global brands, At Oxiteno, the use of renewable raw which became part of a global list of materials accounts for 18% of the total. products. This characteristic represents a strong appeal to its products, for example, in In 2013, Oxiteno began expanding the home and personal care segment, the production capacity of its plant in one of the pillars of Oxiteno’s marketing Coatzacoalcos, Mexico, and continued strategy.
42 ANNUAL REPORT 2013 OXITENO – POSITION IN THE PETROCHEMICAL CHAIN...
Refinery 1st generation 2nd generation Petrobras – Crackers – Oxiteno – naphtha ethylene ethylene oxide and its derivatives
...BROAD COVERAGE OF MARKETS AND APPLICATIONS OF ETHYLENE OXIDE AND DERIVATIVES
Cosmetics Detergents Crop protection Packaging
Food Leather Hydraulic fluids Resins
Textiles Coatings Oil Paper
43 ULTRACARGO
As a result of terminal expansions and acquisitions, Ultracargo’s average storage increased by 13% in 2013, which contributed to the growth of 10% in EBITDA.
44 ANNUAL REPORT 2013 ULTRACARGO
ULTRACARGO - EBITDA (R$ million)
The results obtained in 2013 helped 2013 47% 158 consolidate Ultracargo’s leadership in 2012 49% 143 the liquid bulk storage market, especially chemicals, fuels and vegetable oils. As 2011 45% 117
a consequence of planned terminal 2010 38% 49% 145 acquisitions and expansions, Ultracargo reached in 2013 an effective storage of 2009 31% 111
EBITDA margin
45 696 thousand cubic meters, obtaining a geographic distribution along HIGHLIGHTS IN 2013 the Brazilian coast that provides for competitive advantages in the üü13% growth in average storage and 10% dispute for customers. It is present in growth in EBITDA. the six main ports of Brazil – Santos (SP), Rio de Janeiro (RJ), Paranaguá ü (PR), Aratu (BA), Suape (PE) and üUse of the increased storage capacity, Itaqui (MA) –, thus making it the only resulting from acquisitions and expansions company in the segment with such a made in the last years. geographic footprint.
A significant part of the growth in Ultracargo’s average storage was the result of the acquisition of Temmar, located at the port of Itaqui (MA). Ultracargo assumed the operation ULTRACARGO – STORAGE and consolidation of the Itaqui CAPACITY terminal in August 2012. The results (‘000 m³) were also positively influenced by the expansions made at the Santos and 2013 787 Aratu ports, which were completed in
2012 765 2012 and 2013, respectively, but the benefits from such investments were 2011 664 consolidated in 2013 only.
2010 638 The year 2013 was also marked by 2009 540 new definitions in the market, with the advent of a new regulatory framework for Brazilian ports. To ULTRACARGO – EFFECTIVE Ultracargo, this new scenario has STORAGE the potential to bring business (‘000 m³) opportunities, contributing for an
2013 696 increased offer of port infrastructure in Brazil and, consequently, for the 2012 614 company’s growth.
2011 582
2010 552
2009 461
46 ANNUAL REPORT 2013 Ultracargo concluded in 2013 the expansion of the Aratu terminal (BA)
STRATEGICALLY LOCATED ASSETS
Terminals
47 ULTRAGAZ
Ultragaz leads the Brazilian LPG distribution market, with a market share of 23%, based on a strong brand, large scale, and widespread reach.
48 ANNUAL REPORT 2013 ULTRAGAZ
ULTRAGAZ - EBITDA (R$ million)
2013 281
In 2013, EBITDA grew by 14%, with the 2012 246 contribution of productivity gains and commercial initiatives. 2011 281
2010 300 Ultragaz’s market is divided into two segments: bottled and bulk. 2009 285
49 Ultragaz’s bottled segment serves about 11 million households
The bottled segment is characterized relationship channel; and Resellers by a proven resilience. In this segment, Academy (Academia Revenda), which LPG is used mainly for cooking, thus provides training to resellers and their considered an essential good. In view of employees. this, demand is virtually inelastic, even in an adverse economic environment. In the bulk LPG segment, Ultragaz has differentiated applications and services Ultragaz’s bottled segment reaches for customers in the business, service, about 11 million households, thus manufacturing and agribusiness areas, in allowing Ultragaz to be very close to addition to condominiums. Ultragaz has the Brazilian population and to know 46 thousand customers in this segment, its habits. Ultragaz has an established who consumed 33% of the LPG volume network of 4.8 thousand resellers to sold by the company. Ultragaz offers serve this segment. Some competitive end-to-end solutions to its customers, advantages contribute to Ultragaz’s going beyond LPG distribution. Ultragaz leadership position, such as the fact of deploys its expertise in the provision being the only distributor to work with of consulting services and customized an exclusive, highly qualified reseller energy solutions to the agricultural, network. To reach this, Ultragaz offers trade, service, manufacturing and support programs to its resellers, such condominium segments. The closeness as Gestão Azul, an information system to the customer allows the development that provides resellers with support on of solutions tailored to their needs, financial management; the new On-line drawing on innovation and deep market Reseller (Revenda Online), a direct reseller knowledge.
50 ANNUAL REPORT 2013 ULTRAGAZ’S UNITS LOCATION MAP
Headquarter
Regions of operation
Filling plants
HIGHLIGHTS IN 2013
üü1% growth in sales volume and for results recovery. 14% growth in EBITDA. üüExpansion of the reseller network by üüImplementation of commercial 124 points of sale. and higher productivity initiatives
51 Ultragaz has 46 thousand customers in the bulk LPG segment
Ultragaz’s strategy includes increasing Commercial initiatives, combined its scale in markets with higher growth with cost reductions resulting potential, mainly in the North and from its operational efficiency Northeast regions. With its growing improvement programs, contributed presence in the region, Ultragaz will to Ultragaz’s earnings recovery, as its build a filling plant in the state of EBITDA grew 14% in 2013. Maranhão, which will allow increased operational flexibility and logistical efficiency. ULTRAGAZ – SALES VOLUME In order to resume earnings (‘000 ton) growth, Ultragaz also implemented 2013 1,696 initiatives to increase operational efficiency, among which stand out 2012 1,681 the investment to enhance the automation of the company’s plants 2011 1,652
and the revision of its bottled gas 2010 1,608 distribution channels in the São Paulo city metropolitan area. 2009 1,589
52 ANNUAL REPORT 2013 LPG DISTRIBUTION IN BRAZIL
Bulk transport truck Imports
LPG storage
Pipelines Local refinery
Filling plants Delivery truck Home delivery
Bulk transport truck Satellite storage facility Points of sale
Independent dealers Primary storage facility
Small bulk delivery truck Small bulk client
Secondary storage facility
Large bulk delivery truck Large bulk client
53 RESULTS AND OUTLOOK
Ultrapar invested R$ 1,119 million in 2013 and reached EBITDA of R$ 2,918 million and R$ 1,229 million of consolidated net income.
54 ANNUAL REPORT 2013 RESULTS AND OUTLOOK
55 ANALYSIS OF FINANCIAL PERFORMANCE IN 2013
Standards The financial information presented in From 2013 onwards, the adoption of IFRS and criteria this results discussion has been prepared 11 and IAS (International Accounting according to International Financial Standard) 19 became mandatory in the adopted in Reporting Standards (IFRS). The financial presentation of financial statements of preparing the information of Ultrapar corresponds to publicly-traded companies, resulting information the company’s consolidated information. in the following changes: (i) results The financial information of Ultragaz, from joint ventures (“JV”) are no longer Ipiranga, Oxiteno and Ultracargo proportionally consolidated and will be is reported without elimination of recognized through the equity method intercompany transactions. Therefore, and (ii) actuarial gains and losses from the sum of such information may not post-employment benefits cease to correspond to the consolidated financial affect the operating results and start information of Ultrapar. In addition, to be recognized under shareholders’ except when otherwise indicated, the equity, and past service costs are amounts presented in this document recognized in retained earnings within are expressed in millions of Reais and, shareholders’ equity in the date of therefore, are subject to rounding transition. off. Consequently, the total amounts presented in the tables may differ from In order to provide comparability of the direct sum of the amounts that financial statements with periods prior precede them. to the adoption of the aforementioned accounting changes, the figures On October 4th, 2012, CVM issued presented in this document relating to the Instruction No. 527 (“ICVM 527”), 2012 have been updated in accordance which governs the disclosure by listed with ICVM 527, IFRS 11 and IAS 19. companies in Brazil of EBITDA — Earnings EBITDA according to ICVM 527, IFRS 11 Before Interest, Taxes, Depreciation and IAS 19 and net earnings according and Amortization, and EBIT — Earnings to IAS 19 differ from EBITDA and net Before Interest and Taxes, for the results earnings previously reported by the disclosed from January 1st, 2013 onwards. company, as shown below:
56 ANNUAL REPORT 2013 R$ million 2012 EBITDA prior to ICVM 527 2,401.6 (+) Income from disposal of assets 3.7 (+) Equity in earnings (losses) of affiliates 0.2 EBITDA after ICVM 527 2,405.4 (-) EBITDA JV (17.8) (+) Equity in earnings (losses) of JV 10.3 (+) Effects related to post- employment benefits 13.5 EBITDA after ICVM 527, IFRS 11 and IAS 19 2,411.4
R$ million 2012 Net income as previously reported 1,017.9 (+) Effects related to post- employment benefits 8.9 Net income after IAS 19 1,026.8
The information on EBIT and EBITDA included in Ultrapar combines, in its management structure, a division of roles between its corporate center and its businesses this document was prepared in accordance with ICVM 527.
COMPARATIVE PERFORMANCE 2013-2012 (R$ million)
2013 Ultrapar Ipiranga Oxiteno Ultracargo Ultragaz Net revenue from sales and services 60,940 53,384 3,278 332 3,982 Cost of products and services sold (56,165) (50,190) (2,480) (134) (3,398) Gross profit 4,775 3,194 798 198 584 Selling, marketing, general and administrative expenses (2,769) (1,760) (487) (94) (432) Other operating income, net 98 96 (3) 5 (1) Income from disposal of assets 40 44 0 (0) (4) Operating income 2,144 1,575 309 109 147 Share of profit of subsidiaries and associates (5) 1 0 1 - Depreciation and amortization 779 454 132 47 133 EBITDA 2,918 2,030 441 158 281
2012 Ultrapar Ipiranga Oxiteno Ultracargo Ultragaz Net revenue from sales and services 53,869 46,829 2,929 294 3,847 Cost of products and services sold (49,768) (44,055) (2,312) (117) (3,313) Gross profit 4,101 2,774 616 176 534 Selling, marketing, general and administrative expenses (2,471) (1,613) (387) (75) (410) Other operating income, net 74 81 (1) 4 (0) Income from disposal of assets 4 12 1 0 (10) Operating income 1,708 1,254 229 105 114 Share of profit of subsidiaries and associates 10 7 (0) 1 0 Depreciation and amortization 693 391 123 37 131 EBITDA 2,411 1,653 352 143 246
57 ECONOMIC AND growth of the economy. At Oxiteno, OPERATIONAL sales volume of specialty chemicals ENVIRONMENT reached 687 thousand tons in 2013, up 8% compared with the previous year, mainly due to (i) investments to expand In 2013, as in the recent past, the production capacity over the last macroeconomic environment remained years (ii) the growth of the segments difficult. In order to curb the rising served by Oxiteno in Brazil, in particular inflation rates observed throughout the cosmetics, detergents, agrochemicals year, the Brazilian government raised and coatings, and (iii) the acquisition the economy’s base interest rate, of the specialty chemicals plant in from 7.25% at the end 2012 to 10.0% Uruguay. Oxiteno’s total volume sold at the end of 2013. The GDP for increased by 2% in 2013, with the 2013 showed a growth of 2.3%. This strong growth of specialties partly performance of the Brazilian economy offset by lower sales of glycols in and the economic instability in the the second half of 2013, leading to a international market contributed to richer sales mix. Ultracargo’s average the weakening of the Real against the storage grew by 13% compared with dollar, with an average exchange rate 2012, driven by the acquisition of a of R$ 2.16/US$ in 2013 compared to terminal in the port of Itaqui, in August R$ 1.95/US$ in 2012. In 2013, 3.6 million 2012, and by the increased product light vehicles were licensed, practically handling at the Suape, Aratu and stable compared to the previous year. Santos terminals, which was enabled As a result, the fleet is estimated to by the investments carried out over have increased by 7% in 2013, keeping the last years. Ultragaz’s sales volume the progression trend of the last years. reached 1,696 thousand tons in 2013, up 1% over 2012, due to the 3% growth in the bulk segment, as a consequence SALES VOLUME of investments made to capture new customers, especially in the residential Ipiranga’s sales volume in 2013 grew by segment and in small- and medium- 6% over 2012, totaling 24,758 thousand sized companies. cubic meters. Sales volume of gasoline, ethanol and natural gas for vehicles increased by 9% in relation to 2012, NET REVENUE FROM SALES as a result of an estimated 7% growth AND SERVICES of the light vehicles fleet and strong investments in new service stations and Ultrapar’s net revenue from sales and in the conversion of unbranded service services amounted to R$ 60,940 million stations. Diesel volumes, in turn, grew in 2013, a 13% growth over 2012. In by 4% as a result of the 7% growth the same comparison, Ipiranga’s net in the volume sold in the reseller revenue increased by 14%, mainly due segment, derived from investments to (i) increased sales volume, (ii) the rise made in expanding the service station in diesel, gasoline and ethanol costs, network and, to a lesser extent, the and (iii) improved sales mix, resulting
58 ANNUAL REPORT 2013 EBITDA from investments in the service station increased by 3% over 2012, as a result grew network expansion, which enabled a of increased sales volume, the effects higher share of fuels for light vehicles of inflation on costs, and increased and diesel sold through the reseller requalification of LPG bottles, partially 21% segment (sales in service stations). offset by cost reduction initiatives in 2013 Oxiteno reported a 12% growth in implemented over the year. net revenue, as a result of the 10% weaker Real and the 2% growth of sales volume. Ultracargo’s net revenue SELLING, MARKETING, totaled R$ 332 million, up 13% over GENERAL AND 2012, mainly due to the increased average storage. Ultragaz’s net revenue ADMINISTRATIVE EXPENSES amounted to R$ 3,982 million in 2013, Ultrapar’s selling, marketing, general up 4% over 2012, mainly as a result and administrative expenses amounted of increased sales volume in the bulk to R$ 2,769 million in 2013, up 12% segment. over 2012. Ipiranga’s selling, marketing, general and administrative expenses presented a 9% increase over 2012, COST OF PRODUCTS AND mainly resulting from (i) increased sales SERVICES SOLD volume and increased unit expenses with freight, derived from the rise Ultrapar’s cost of products and in diesel costs and inflation (ii) the services sold amounted to R$ 56,165 expansion of the distribution network, million in 2013, growth of 13% over and (iii) the effects of inflation on 2012. Ipiranga’s cost of products sold personnel expenses. Oxiteno’s selling, increased by 14% over 2012, mainly marketing, general and administrative due to the growth in sales volume expenses grew by 26% over 2012, due and the cost increases by Petrobras to (i) increased logistics expenses, (i) in diesel, in January, March and resulting from the rise in diesel costs November 2013, and (ii) in gasoline, and the effect of the weaker Real, (ii) in January 2013. Oxiteno’s cost of the startup of the company’s operations products sold presented a 7% increase in Uruguay and in the United States, (iii) over 2012 mainly due to the effect an increase in variable compensation, of the 10% weaker Real on variable in line with earnings progression, and costs and the 2% growth in sales (iv) the effects of inflation on expenses. volume, effects partially offset by a Ultracargo’s selling, marketing, general 5% reduction in unit variable costs in and administrative expenses were up dollars. Ultracargo’s cost of services 27% compared to 2012, mainly as a presented a 14% increase over 2012 result of the acquisition of the terminal as a result of increased average in Itaqui, increased expenses with storage and increased depreciation, projects and the effects of inflation on as a consequence of the capacity expenses. Ultragaz’s selling, marketing, expansions and the acquisition of general and administrative expenses the terminal in Itaqui in August 2012. grew by 6% over 2012, mainly due to Ultragaz’s cost of products sold the effects of inflation on personnel
59 expenses and freight, partially offset FINANCIAL RESULT by expense reduction initiatives implemented over the year. Ultrapar reported net financial expenses of R$ 338 million in 2013, R$ 67 million above that of 2012, mainly due to the EBITDA increased average net debt and effects of the exchange rate over the year. Ultrapar’s consolidated EBITDA reached R$ 2,918 million in 2013, a 21% growth over 2012. Ipiranga NET INCOME reported an EBITDA of R$ 2,030 million in 2013, up 23% from 2012, Ultrapar’s consolidated net income in mainly due to (i) investments in 2013 reached R$ 1,229 million, 20% the resellers’ network expansion higher than that of 2012, mainly as a resulting in increased sales volume result of the growth in EBITDA between in the reseller segment (sales in the periods. service stations), (ii) the strategy of constant innovation in services and convenience in the service station, (iii) initiatives for reducing the grey INDEBTEDNESS market in the ethanol segment, and (iv) the inventory effects resulting Ultrapar closed the fiscal year 2013 with from the evolution of ethanol, diesel a gross debt of R$ 6,970 million, resulting and gasoline costs, partially offset by in a net debt of R$ 3,426 million, an higher expenses, mainly with freight. increase of R$ 342 million over 2012, Oxiteno’s EBITDA totaled R$ 441 mainly due to investments in expansion million, a growth of 25% over 2012, and maintenance in all businesses and as a result of (i) the effect of the 10% dividends distributed over the last 12 weaker Real, (ii) a richer sales mix in months. At the end of 2013 the net debt 2013, with increased share of specialty corresponded to 1.2 times EBITDA for the chemicals, and (iii) the 2% growth last 12 months, a reduction compared in sales volume, partially offset by to the ratio of 1.3 times EBITDA at the expenses related to the startup of the end of 2012, as a result of the earnings company’s operations in the United growth in all businesses. States and in Uruguay. Ultracargo reached an EBITDA of R$ 158 million in 2013, an increase of 10% over 2012, NET DEBT mainly due to the acquisition of the (R$ million) terminal in Itaqui and higher average
storage. Ultragaz’s EBITDA amounted 4T13 1.2 3,426 to R$ 281 million, 14% higher than that of 2012, mainly due to the costs 3T13 1.3 3,617
and expenses reduction initiatives 2T13 1.4 3,590 implemented over the year. 1T13 1.5 3,743
2012 1.3 3,084
Net debt / LTM EBITDA
60 ANNUAL REPORT 2013 CAPITAL MARKETS
Ultrapar Considering the period between the start 26% due to signs of recovery of the ended the of trading in Ultrapar shares, 1999, and the American economy. end of 2013, the shares recorded a yearly year 2013 return of 24%, with dividends reinvested. For 2013, Ultrapar declared dividends with a market In this period, this appreciation exceeded of 744 million, a 19% increase from the value of the appreciation of Ibovespa, which previous year. This amount represents was 11% per year, and the average CDI a dividend yield of 2.6% on the average R$ 30 billion, variation, which was 14% per year. share price in 2013. up 21% from The year 2013 was marked also by a Repeating the performance of the the previous strong increase in the trading liquidity of last years, in 2013, Ultrapar shares year. the company’s shares. Ultrapar’s average appreciated above the reference daily trading volume in 2013 reached indices of the Brazilian stock market. R$ 70 million/day, 26% higher than the The company’s favorable performance average in 2012 This volume considers has been supported by good trading on both the BMF&BOVESPA management practices, guided by and the NYSE. The number of trades of detailed planning, and operational Ultrapar’s shares reported a significant implementation capacity, as well as by increase of 30%, to a daily average of 4.3 the enhancement of its governance thousand trades. As from May, Ultrapar structure as a whole. shares were included in the portfolio of BM&FBOVESPA’s Brazil 50 Index (IBrX- In line with its philosophy of 50), an index composed of the 50 most transparency and close relationship liquid stocks traded on BM&FBOVESPA. with investors, in 2013 over 450 Ultrapar shares are among the 10 most interactions were made with representatives within the portfolio. representatives from the investor audience, in addition to 18 events held At BM&FBOVESPA, Ultrapar shares in Brazil and abroad. closed 2013 quoted at R$ 55.95, with an accumulated appreciation of 21%, while AVERAGE DAILY TRADING VOLUME the Ibovespa index depreciated 15% (BM&FBOVESPA + NYSE) and the Brazil Index (IBrX) depreciated (R$ million) 3%. At the NYSE, the stock had an annual appreciation of 6%, influenced by depreciation of the Real against the 2013 70 Dollar, while the Dow Jones appreciated 2012 55
2011 35
2010 33
2009 27
61 INVESTMENTS
Ultrapar Ultrapar’s investments, net of disposals, of its distribution network and the continued, totaled R$ 1,119 million, of which renovation of service stations. Out R$ 1,089 million were related to organic of the total amount invested, R$ 758 in 2013, its investments and R$ 29 million were million were related to property, plant, investment related to acquisitions. equipment and intangible assets, strategy partially offset by R$ 12 million related At Ipiranga, R$ 746 million were to repayments from clients, net of oriented to grow invested, of which (i) R$ 348 million financings to clients. At Oxiteno, the volume and in the expansion of its distribution total investments in 2013 amounted to R$ 139 million, mainly directed competitiveness, network (through the conversion of unbranded service stations, the to continue the expansion of the serving each opening of new gas stations and new production capacity in Pasadena, time better customers) and Jet Oil and am/pm United States, and in Coatzacoalcos, franchises, focused on the Midwest, Mexico, and to the maintenance of an increasing Northeast and North regions of Brazil, its plants. Ultracargo’s investments number of (ii) R$ 86 million in expanding its totaled R$ 37 million in 2013, mainly customers. logistics infrastructure to support allocated to the modernization and the growing demand, through the maintenance of its terminals. At construction and expansion of logistics Ultragaz, R$ 151 million were invested facilities, and (iii) R$ 312 million in mainly in new clients in the bulk the maintenance of its operations, segment, replacement of bottles and mainly in the renewal of contracts maintenance of its bottling facilities.
Ipiranga invested R$ 746 million in 2013 PLANNED INVESTMENTS
Ultrapar’s Organic investment plan1 Oxiteno plans to invest R$ 161 million investment (R$ million) 2014 (O) in the expansion of its production capacity, mainly in the conclusion of plan for 2014, Ipiranga 886 Oxiteno 244 the expansion in Coatzacoalcos, in Mexico, and in the potential expansion excluding Ultracargo 60 in Pasadena, in the United States. The acquisitions, Ultragaz 184 expansion in Mexico is planned to Extrafarma 67 amounts to be operational by 2014 and will add Other 44 R$ 1,484 30,000 tons per year of production Total 1,484 capacity. Additionally, Oxiteno will million, which 1 Net of disposals invest R$ 83 million in enhancing the demonstrates productivity and in the maintenance the continuity At Ipiranga, we plan to invest (i) R$ 366 of its plants and IT systems. Ultracargo million to maintain the pace of expansion will invest mainly in the modernization, of good of its distribution network (through the adjustment and maintenance of the opportunities conversion of unbranded service stations infrastructure of its terminals and in to grow through and the opening of new gas stations) and the potential expansion of the Itaqui of am/pm and Jet Oil franchises, focused terminal, which is planned to start increased scale on the Midwest, Northeast and North operating in 2015. and productivity regions of Brazil, (ii) R$ 121 million in the expansion of logistics infrastructure to gains, as well as At Ultragaz, investments will be support the growing demand, mainly focused mainly (i) on the construction modernization through the construction of new of a filling plant in São Luis, in the of existing logistics facilities, and (iii) R$ 400 million state of Maranhão, (ii) on UltraSystem in the maintenance of its activities, operations. (small bulk), due to the perspective mainly in the renewal of contracts of capturing new clients and (iii) on of its distribution network and the the replacement and purchase of LPG renovation of service stations, and in bottles. the modernization of operations. Out of Ipiranga’s total investment budget, At Extrafarma, investments will R$ 885 million refer to additions be directed to the opening of to property, plant, equipment and approximately 70 new drugstores, to intangible assets, and R$ 2 million refer the expansion of its infrastructure and to financing to clients, net of repayments. to the maintenance of its activities.
63 OUTLOOK
Ultrapar should At Ipiranga, strong and consistent from the ramp up of investments in continue to reap investments in expanding the service production capacity expansion in Brazil, station network and related logistics in a more favorable exchange rate the benefits of infrastructure, focused on the North, scenario. Additionally, the company investments Northeast and Midwest regions of Brazil, will continue the consolidation of its made in will continue to leverage the benefits international expansion plan. from the growth of the vehicle fleet in expanding its Brazil and the reduction of grey market. Ultracargo, in turn, will continue to businesses, in Additionally, the company will proceed focus on the benefits generated by the with its differentiation initiatives, based on expansion of existing terminals and will addition to the increasing the offer of products, services keep attentive to opportunities from the initiatives for and convenience, to further expand the growing demand for liquid bulk storage differentiation number of increasingly satisfied and loyal in Brazil, which includes evaluating consumers. expansions and participating in bidding and to establish processes that are expected to take a closer At Ultragaz, the benefits from recent place in 2014. relationship with investments in capturing new customers and the continued focus on managing In 2014, Ultrapar will incorporate the customers. costs and expenses will contribute to Extrafarma drugstore chain into its continue its growth. activities, focusing on integrating the new business and detailing the Oxiteno will keep the focus on innovation, accelerated expansion plan, which with the development of new products, should be developed more intensively and will act to maximize the benefits from 2015 onwards.
Extrafarma is one of Brazil’s ten largest drugstore chains GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 62 54 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR
Dragon Rouge Dragon Printing Aquarela Gráfica Acknowledgments all Ultrapar’s to Our deepest appreciation in the edition of who collaborated employees Report,this Annual especially those who kindly with their pictures. contributed The Financial Statements for the Year Year the for Statements Financial The available 31, 2013 are Ended December www.ultra.com.br on website Illustration ADR Depositary Mellon York Bank of New The Relations Shareholders 358015 PO Box 15252-8015 PA Pittsburgh, (1-800-231-5469) 1-800-BNY-ADRS Phone: calls outside the for Telephone US: 1-201-680-6825 E-mail: [email protected] http://www.bnymellon. Internet Address: com/shareowner/equityaccess Independent Auditors Auditores Tohmatsu Touche Deloitte Independentes 1981 Dumas, Rua Alexandre SP – 04717-906 São Paulo, 55 11 5186 1000 Phone: floor th Néctar Corporativa Comunicação Art Direction Design and Graphic Rouge / Dragon BrandBuilding Photographs Scatena Del Gaiso / Gustavo Pisco CREDITS - 2013 ANNUAL REPORT CREDITS - 2013 ANNUAL Coordination Project Department Relations Investor and Copywriting Consultancy Superintendência de Soluções para para de Soluções Superintendência Corporações – Térreo B – 111– Prédio Rua Ururaí, Tatuapé SP – 03084-010 São Paulo, 55 11 3003 9285 Phone: Fax: 55 11 3177 6107 Fax: E-mail: [email protected] www.ultra.com.br Bank Custodian Share S.A. Valores de Itaú Corretora Investor Relations Department Relations Investor 8 1343, Antônio, Luís Brigadeiro Av. – 01317-910 SP São Paulo, 55 11 3177 7014 Phone: CORPORATE CORPORATE INFORMATION S.A. Participações Ultrapar UGP / NYSE: UGPA3 BM&FBOVESPA: GO ARMA CAR GAZ TRA TRA TRAF XITENO ULTRAPAR MESSAGE FROM THE MANAGEMENT MANAGEMENT FUNDAMENTALS Corporate Governance Strategy Management Model and Risk Management Innovation Relationship with Stakeholders Philosophy and Sustainability Social and Environmental EX IPIRANGA O UL UL RESULTS AND OUTLOOK Analysis of Financial Performance in 2013 Capital Markets Investments Outlook 2 4 8 6 4 1 16 18 10 64 22 56 32 38 54 62 28 61 48 44 ANNUAL REPORT
ANNUAL REPORT 2013 ULTRAPAR