Ultrapar Participacoes SA (UGP) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar's First Quarter 2014 Results conference call. There is also a simultaneous webcast that may be accessed through Ultrapar's website at www.ultra.com.br/ri. Please feel free to flip through the slides during the conference call.

Today with us, we have Mr. Andre Covre, Chief Financial and Investor Relations officer, together with other executives of Ultrapar. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation.

After Ultrapar's remarks are completed, there will be a question-and-answer session. At that time further instructions will be given. Should any participants need assistance during this call, please press star then 0 to reach the operator.

We remind you that questions which will be answered during the Q&A session may be posted in advance in the webcast. A replay of this call will be available for one week.

Before proceeding, let me mention that forward-looking statements are being made under the Safe Harbor and -- of the Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapar management and on information currently available to the company. They involve risks, uncertainties and assumptions, because they relate to future events and therefore depend on circumstances that may or may not occur in the future.

Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Ultrapar and could cause results to differ materially from those expressed in such forward-looking statements.

Now, I'll turn the conference over to Mr. Covre, who will present Ultrapar's -- I'm sorry, present Ultrapar's results in the quarter and discuss about perspectives. Mr. Covre, you may now begin the conference.

Good morning to the folks in the U.S. Good afternoon in Europe, a great pleasure to be here with you once again.

Today, we will discuss Ultrapar's performance in the first quarter which was another quarter of positive results and the first one with Ultrapar � with Extrafarma, our third business in specialized distribution and retail.

Here with me to help answering your questions, I have Jose Manuel from Ipiranga; Ana Paula Santoro from Oxiteno; Julio Nogueira from Ultragaz; Joao Marcos Cazula from Ultracargo; and Miguel Jarros from Extrafarma. All of them executive officers of their respective businesses.

I also have here with the Investor Relations team and I'd like to take this opportunity to inform of some changes that we have made in the IR structure.

Rodrigo Pizzinatto who is director of Investor Relations, Corporate Planning and M&A has been -- has taken now a position at our new business, Extrafarma. Rodrigo was intensively involved in the transaction of Extrafarma and became a natural consequence for him to become one of our leading team members in Extrafarma.

To take his position in Investor Relations, we have appointed Marcello De Simone. Marcello is a long-time executive in Ultra. He helped in the IPO in 1999. Has held a number of different positions in Ultra and is currently responsible for treasury, insurance and corporate communications. He will absorb the IR functions and therefore will be responsible for all aspects of corporate communications.

Before we continue, I'd like to draw your attention to slide number 2, where we highlight the criteria adopted for the information disclosed. This slide also brings some information regarding the association of Extrafarma.

Starting our discussion of consolidated results on slide number 3, we started 2014 as planned with a quarter of earnings growth and closing the Extrafarma transaction on January 31st. Ultrapar's EBITDA reached BRL702 million, 14% growth over previous year, as a result of three initiatives.

First, the investments made in recent years in all of our businesses allowing for increased operating scale.

At Ipiranga and Ultragaz, we expanded the geographical footprint of the network of resellers with increasing quality of service stations and LPG shops and differentiation to customers.

At Oxiteno, we strengthened the focus on specialty chemicals with greater differentiation and operating scale.

Finally, at Ultracargo, we significantly increased our storage capacity with expanded terminals and wider geographical coverage.

Second initiative, the improved sales mix which was made possible by the investments and the focus on products with greater value added.

And third, enhance operational efficiencies in our businesses arising from the focus on productivity and quality.

Net earnings in the first quarter reached BRL249 million, up 1% over first quarter last year as a result of EBITDA growth. This EBITDA growth was partially offset by two elements.

First, higher financial expenses mainly as a result of the increase in the Brazilian-based interest rate, SELIC. As shown in the net earnings chart on the top of this slide, the SELIC rates soared by 3 1/2 percentage points between March 2013 and March 2014 from 7.25% per annum, 10.75% per annum. This rise in interest rates increased our financial expenses in the quarter by approximately BRL35 million.

In addition, the investments made in the last 12 months are still in their maturing process. On the other hand, the increases in depreciation and amortization and in net debt levels have immediate impact in net earnings.

The first quarter was also a period of recognitions and achievements. We were elected again one of the world's most admired companies in the energy sector in a survey conducted by Fortune Magazine with company executives, directors and market analysts.

We ranked two positions above last year being now recognized as the world's second most admired company in the energy sector for the quality of our team and corporate governance.

A great milestone for the quarter was the closing of the Extrafarma transaction which took place on January 31st. From there, we started to work on the deployment of our business plan, the one that paved the way toward our entering the sector.

In this plan, as we mentioned at the announcement, 2014 is the year of preparation for the more accelerated expansion. This preparation consists of two work streams. First, integration with Ultrapar both at the operation and cultural level, and second, structuring Extrafarma for more accelerated growth.

In both, we are advancing as planned and made significant advances during the quarter. For example, treasury, accounts payable and legal activities are already centralized in the corporate center starting the implementation of Ultrapar's management model and sharing its structures with the other businesses.

We expect the whole process of centralization, the financial activities and IP to be concluded in mid-2014.

By June, we expect to complete the implementation of the EVA management and variable compensation system therefore advancing also on the implementation of our corporate governance and alignment of the interests [too].

We have established a new organization structure at Extrafarma to allow us for greater specialization and agility with the creation of areas dedicated to expansion and operations. Currently, these areas are in the phrase of structuring their teams and as part of this process, we have also allocated managers and analysts from Ultrapar to Extrafarma strengthening its team and facilitating the integration process.

Finally, we concluded the detailing of the work plan that we need to perform to establish the necessary steps to start the accelerated openings of drug stores.

Moving now to slide 4 to comment in more detail on the performance of our businesses and starting with Ipiranga. The market trends seen in recent years with growth and volumes and redirection of the grey market remained present and positively impacted the volume for the first quarter.

The volume growth is boosted by an increase in the light vehicle fleet which positively affects the consumption of Otto cycle fuels and by the positive performance of certain segments of the economy particularly agribusiness and retail increasing the diesel consumption.

As you can see in the top left chart, the Brazilian vehicle fleet was estimated at 37 million in March 2014 which corresponds to a 6% growth compared to March 2013.

From our side, we continue to expand Ipiranga's service station network through significant investments in opening new service stations and converting unbranded ones. Our investments have a particular focus in the Midwest, Northeast and North of Brazil, regions where fuel consumption grows above the Brazilian average.

We ended the first quarter of the year with 6,828 stations, 5% growth over the end of March 2013. These investments have allowed the company to grow above the market and achieve improved sales mix with increased shares -- increased share of sales through service stations also known as the reseller segment.

The reduction of the grey market especially in ethanol brings benefits to customers, resellers and the company itself in addition to greater tax revenues for the government. An evidence of this is increased shares in ethanol sales by the Sindicom companies as compared to the total market. This share increased from 63% to 67% in the first quarter of this year as seen in the chart on the top right.

Initiatives such as the collection of PIS/Cofins taxes for the whole ethanol chain at the producer and investments in the conversion of unbranded service stations contributed to curve the grey market.

From a market positioning standpoint, Ipiranga continued to invest in differentiation through constant innovation and services and convenience helping to increase the flow of customers at the service station, their satisfaction and their loyalty to our gas stations.

This philosophy has been successfully developed through some marketing campaigns. The most famous campaign is, "Ask at the Ipiranga service station," which summarizes the value proposition to Ipiranga's clients.

With all these factors, we had a 9% growth in volumes and a 12% sales volume growth of fuels for light vehicles and a 6% growth in diesel volumes.

EBITDA reached BRL499 million in the first quarter, up 15% over the first quarter of 2013 as a result of the abovementioned factors.

Looking ahead, the trends seen in the first quarter and in the previous years, remained present, however, the second quarter of 2014 has some important specific events.

First, a calendar effect, few business days less which has a reducing effect on volume growth of approximately 3%. This effect does not consider any potential impact of the World Cup event.

Second, the World Cup itself is a high audience event which we will use to strengthen our market positioning with promotions and advertising campaigns thus incurring increased expenses for the quarter.

And third, we had an increase in diesel refinery price in March 2013 which carried benefits into the second quarter of 2013. With all of that, we expect a small EBITDA growth in this quarter compared to the last year.

Moving now to Oxiteno on slide number 5, the volume of specialty chemicals sold in Brazil grew by 4%, about two times the GDP growth estimated for the quarter. Such growth was made possible by the expansions in production capacity finalized in 2011 and the strong positioning of Oxiteno in segments of growing demand especially home and personal care, coatings and agrochemical segments, segment in which we have made constant investment in innovation and development of new products.

Specialty chemical sales in the foreign markets decreased by 5% in the quarter as a result of the reduction in the operating level in Venezuela due to limitations in importing raw materials in the country.

Total glycol sales volume was down 25%, a significant percentage change but that is not unusual in the case of this product. This occurs because as a commodity, glycols have greater volatility in prices and on average, lower profitability.

This leads to variations in the attractiveness of its sales and the four variations in our sales volumes. Market conditions in the first half of last year were more attractive than in the first half of this year.

Total sales volume decreased by 4% between quarters reaching 191,000 tons in the first quarter of 2014. With a different evolution by product type that I mentioned, we presented an improved sales mix with specialty chemicals accounting for 86% of the total four percentage points above that of last year.

The improved sales mix and the weaker real contributed to positive earnings progression. EBITDA reached BRL109 million, up 35% compared to the same period of last year. EBITDA margin reached $241 per ton.

Looking ahead, we expect the second quarter to present similar operational characteristics when compared to the first quarter. Thus, we expect a similar volume evolution between second quarters and same EBITDA margin in dollars per ton.

Moving now to Ultragaz on slide 6, as anticipated in the call in February, we have seen exceptionally hot weather in the first quarter which negatively affect LPG demand.

The graph on the top left shows the increase in average temperatures on the capitals of the South and Southeast regions of Brazil. Mainly due to such effects, sales volume in the first quarter was 1% lower than the first quarter of 2013.

This effect of the hot weather was partially offset by investment in capturing new customers mainly on the residential and small and medium sized company segments producing an improved sales mix.

Sales volume for these segments rose by 2% in the first quarter of this year as shown in the bottom chart of the slide. Ultragaz EBITDA amounted to BRL61 million, a 4% reduction from first quarter of 2013.

This increase was due mainly to the planned requalification of an increased number of LPG bottles which we also anticipated to you in the call in February and the lower sales volumes. These effects were partially offset by some commercial initiatives including the improvement in mix.

If we were to exclude the impact of the larger requalification of LPG bottles, Ultragaz EBITDA would have grown by 7%. Now, in the second quarter, we have not seen the high temperatures of the first quarter.

However, we have the effect of the reduction of two business days as mentioned earlier in Ipiranga. And in addition, the greater expenses with requalification should still be repeated in this quarter and as a consequence, we expect to reach an increase of EBITDA and volume similar to the one we had in the first quarters.

Moving to slide 7, in the first quarter, Ultracargo presented an average storage 16% higher than first quarter 2013. This growth was mainly due to an increase in demand for fuel oil for thermoelectric plants and greater demand in automotive fuels, lubricants and methanol. This last one is used in the production of biodiesel which is used in cars in Brazil as part of the diesel.

Increased demand allowed for greater handling in the terminals and as a consequence, EBITDA reached 41 million, 15% higher. For the current quarter, we expect EBITDA to have a lower increase than that observed in the first quarters, mainly a result of some expenses with expansion projects planned for this quarter.

Moving now to Extrafarma, we started to consolidate Extrafarma in our results on February 1st. Therefore, the results presented here refer to the months of February and March only as well as information for the first quarter in 2013 used as comparison basis.

One of our motivations to enter the drug store market was its strong organic growth. A recent indicator of such growth is a 17% sales increase of the Abrafarma member companies in the first quarter compared to the first quarter last year.

Extrafarma's revenues increased by 19% as compared to February and March 2013. Part of this growth is explained by the 11% increase in same-store sales. Another part of the growth in revenues is due to the investments in new drug store openings during the year.

Extrafarma ended the first quarter of this year with 200 stores in the North and Northeast regions of Brazil, an increase of 24 -- 25 stores or 14% when compared to March 2013. Expenses related to the process of integration and structuring amounted to BRL3 million in the quarter which led to an EBITDA of BRL10 million, a 7% reduction when compared to the same period of 2013.

However, excluding integration and structuring process, EBITDA reached BRL13 million, a 16% growth when compared to the same period of 2013 mainly due to the increase in gross revenues. EBITDA margin was 6.9%, just slightly below the margin presented in the same period of last year due to greater shares of drug store with less than one year in our store base and above inflation increases in personnel costs.

For the current quarter, we expect growth similar to that in the first quarter and the maintenance of EBITDA margin. Such growth is based on a gross revenue of BRL267 million for the second quarter of 2013 and it excludes the integration and structuring effects estimated at around BRL10 million for this quarter.

Moving now to the last slide, I'd like to share with you some of our priorities and some of our views on the longer term outlook.

At Ipiranga, we continue to invest in the expansion of its service station network, franchises and related logistics infrastructure focused on the North and Northeast and Midwest regions of Brazil.

Over the last 12 months, we added 319 service stations to our network, a 5% growth in the period. During the same period, we opened 328 new am/pm and Jet Oil stores, a 13% increase strengthening the differentiation strategy based on increasing the offering of product services and convenience.

We're also expanding the penetration of the bakeries in the am/pm and ConectCar in our service station network.

As I mentioned, we'll take the advantage of the strong audience to the World Cup to promote Ipiranga and run promotions and advertisers in the media in order to strengthen our consumer perception that Ipiranga station is a complete place waiting for you.

At Oxiteno, we'll continue to maximize the benefits from the production capacity expansions made in Brazil with growth in specialties at around two times GDP therefore allowing for an improved sales mix. In addition, we will continue our focus on innovation through proximity of our clients and development of new products and applications.

At Ultragaz, we're investing to capture new bulk segment customers focused on condominiums and small and medium sized companies, segments in which we have increasingly more differentiation proposition and therefore greater potential to add value. Additionally, we will continue to focus our management in costs and expenses.

At Ultracargo, we're focused on capturing the benefits related to the expansions of the terminals. And we will do that serving the growing demand of fuels in the country.

At Extrafarma in turn, our priorities are, as I mentioned, to analyzing its integration to Ultrapar and structuring it for an accelerated expansion which shall be developed more intensively starting at the end of 2014.

Lastly, we believe that our corporate governance structure is designed to endure the company's growth and value creation; allow us to pursue, select and implement secured investment opportunities and prepares us for new growth cycles.

I'll conclude here what we have presented -- prepared for the presentation today. I thank you all of your attention and I'm now available to any questions you may have.

Thank you. The floor is now open for questions. If you have a question, please press star then 1 on your touchtone phone at this or any time. If at any point your question is answered, you may remove yourself from the queue by pressing star then 2. In case you are following the conference call via webcast, please click on Question to the Host to send your question. Questions will be taken in the order they are received.

We do ask that when you pose your question that you pick up your handset to provide optimum sound quality. Please hold while we poll through your questions.

And our first question will come from Frank McGann of Bank of America Merrill Lynch.

Hi. Good afternoon. Just two things, one is in terms of the expansion going forward at Extrafarma, how you're thinking of that in terms of integration with the service station network or freestanding pharmacies. The impression I have is that it's mostly freestanding pharmacies but I was just wondering, you know, what your -- how you're thinking of that and what -- you know, what plans you have.

And then in Venezuela, the effects that you had in Oxiteno in the first quarter, I was wondering how you view those. Are those one-offs or just something that will continue to impact results going forward?

Hi, Frank, thanks for joining to the call. On the expansion of Extrafarma as far as choice of freestanding, or street stores versus service stations stores or LPG shop stores, our view that what should drive the choice is the customer. So it is the commercial attractiveness of the location that should determine what we place a drug store.

Now, given that we have 11,000 points of sale between gas stations and LPG stations, there will be many of those which will be very attractive. So without, at this moment, knowing an exact breakdown of percentages, our expectation is that we'll have drug stores in streets, in shopping malls, in service stations of Ipiranga, in LPG shops of Ultragaz, all driven by the attractiveness to the consumer.

It is -- part of this year is invested exactly in determining the answer to that question. If we're going to enter a new city or a new state which privileged locations we have and which locations we should look for. And that's why one of the reasons we will only start a more accelerated growth plan towards the end of the year.

As far as Venezuela goes, we have made -- we have had one event which is reducing the operating level in the country. But that carries consequences at least on the comparison basis for another three quarters.

In other words, we have now reduced the level of our operating -- operations in Venezuela and therefore will not generate the earnings that we were generating from previous quarters. So there will be nothing new in relation to this for the second, third and fourth quarter but we'll be comparing with quarters of last year which had the benefit of EBITDA from Venezuela that we now are going to have now.

Okay. If maybe I could just follow up just in terms of Extrafarma and how you're thinking about acquisitions to augment growth going forward even in the North to Northeast or moving into other regions as well.

And then sticking acquisitions, just in terms of Oxiteno in the United States and other potential markets where -- how were you seeing acquisitions in the most markets as well?

In Extrafarma, the priority for this year is the integration and the structuring process. Starting next year, acquisitions will be part of the plan. The pace at which they will happen whether they will happen obviously depends on third party negotiations. But we will have acquisition as part of our strategy as we go forward starting next year.

In Oxiteno, the expansion in NAFTA is -- the NAFTA region is a priority. We are in the process of finalizing our expansion in Mexico. It should be operational mid this year. We are in the process of ramping up the capacity that we put in the United States last year. And we remain attentive to any potential acquisitions in the region.

Okay, thank you very much.

And the next question will come from Christian Audi of Santander.

Hi, Andre. I had actually several questions so let me just give you the list so you can take one by one please.

The first one is just a big picture question related to your guidance -- EBITDA growth guidance, Andre. I know you've talked in the past about 15% growth more or less. But given what you have seen as of now sitting where you are today, there are some factors that are out of your control such as temperature impact in Ultragaz, World Cup and others. Would you say that the risk to your guidance of 15% is more in the downside or more in the upside, in other words, we're talking more about a 13% to 15% growth or a 15% to 17% growth?

The other question was on Ipiranga. You mentioned in your comments that the outlook for the second quarter after a 15% growth year-over-year in the first quarter, you're talking about much smaller growth in the second quarter.

And I was just trying to understand in EBITDA growth if you're talking about low single digit growth, Andre, or are we talking about 5% to 10% growth in the second quarter for Ipiranga?

At Oxiteno, I was just curious, when you look at the specialty chemicals volume, can it fall -- the mix, can it fall even to lower levels than what you saw in the first quarter?

Also on the topic of Venezuela, can you just remind us what's the EBITDA level that you get out of Venezuela right now or if you can give a specific number, what's the percentage of your consolidated EBITDA that comes from Venezuela? And is there a �- are we reaching capacity utilization levels there that you may not be breaking even anymore?

And then the last question on Ultragaz, you talked about in your outlook comments that the EBITDA in the second quarter will be similar to the first quarter? And I just wanted to clarify, you're talking about an EBITDA with a requalification which means BRL61 million as you've shown in your slides or an EBITDA of BRL68 million which is also on the charts that you used on page 6? Thank you.

All right, Christian, I hope I took note of all of them. If not --

Yes, sorry, I'll go over -- sure, sure, thanks.

So first, I guess on the main question about the guidance for the year, we -- when we guided the market, transmitted to the market our expectations for the year, we had in mind that 2014 was going to be a year of modest growth.

So I don't see a major modest growth in the economy. So I don't see a major change from the guidance that we gave. If you want me to judge if there is more risk on the downside than on the upside, there is probably more risk on the downside.

But the level of guidance hasn't changed. In other words, as I mentioned in the conference call in Portuguese that, you know, we're not a Swiss watch so it's not that we say 15 and 15 will happen. 15 is an indication of a corridor of an interval. It can be 12, it can be 13, it can be 17 or 18. On this current invest -- current moment, there is probably more downside to the forecast than upside.

On Ipiranga growth for the second quarter, just to remind, we're talking about three important effects which have an effect only in this quarter. It's a few working days less, it's the marketing expenses in relation to World Cup and as the comparison basis is the second quarter of last year that carried benefits from the refinery price increase of diesel.

All of this compound that it does have a significant impact on the quarter so it is somewhere between a low single digit and around 5%. That's as much as I know at this point in the product as much as I can tell you.

On Oxiteno, mix can be further improved because we still have some production capacity on specialty chemicals that can be used or production capacity for specialty chemicals which are currently used to export. And when we bring it to Brazil, that generates further mix gain.

Venezuela had a EBITDA contribution to Ultra last year around BRL40 million to BRL50 million and we are -- we have brought it down to zero now. So it is EBITDA breakeven.

And the last question, Ultragaz, I was referring to -- when I referred to similar EBITDA evolution, I was referring to similar reported EBITDA evolution. In other words, it should be a small decline in EBITDA in relation to last year.

Obviously, if you add back the requalification expenses, you probably get that gap a similar pro forma EBITDA growth as we had this -- end of -- in between first quarters.

Great. And just a quick follow-up on Oxiteno, energy reform in Mexico, is that something you're attentively looking at on -- in terms of potential opportunities for further growth in Mexico or you have your hand already so full in Brazil that that's an interesting event happened in Mexico but it doesn't change your plans much?

We are closely following it. It may open the possibility of having bigger supply of its ethylene oxide in the country and therefore allow us to have Mexico as the larger production base.

Now, this is all in very early stages and it's on the make by the Mexican government. So we're not taking any action on it, we're not doing anything about it. We're closely following what's happening with the government.

Excellent. Thank you very much, Andre.

Again, if you would like to ask a question, please press star then 1 at this time.

And our next question is from Andre Sobreira of Credit Suisse.

Hi, good afternoon, everyone. I had a couple of questions mostly on the Ipiranga side. You mentioned higher expenses related to the World Cup marketing. I was wondering, Andre, if you see any business impact on volumes due to the World Cup. That would be the first question.

Secondly, more generally, have you seen any changes in the competitive dynamics between you and the other main players or between you and the white flags in the recent quarters?

And maybe a third question would be what can the industry do further in both the ethanol side and on -- and on gasoline probably less than diesel to increase formality further, for example, it is probably more difficult but do you think -- do you think you could do to VAT taxes or the same thing that we did to the other taxes or are there any other initiatives that the industry is pursuing to try to increase formality? Thank you.

Andre, in relation to World Cup, we are keeping a positive view to it in the sense that, as I mentioned, is a high audience event and therefore an opportunity for us to further strengthen our market position.

Whether the World Cup will have an effect on volumes, it would largely depend on two things. First, the number of days off that are enacted in relation to the games. And second, if everything takes place on an orderly fashion or not. So we'll have to wait and see that, how it plays, and we will only know after the fact.

In relation to changes in the competitive dynamics between the branded players and the white flags, it's being now a relative long period where the branded players have competed very [peacefully] on who has the nicest gas stations, who has the best products, who's got more convenience in service.

It is a type of competition that puts the burden on us as we are generally seeing as the market innovator, the company that has a leading position in differentiation.

We consider this very healthy competition because the consumer gets a better service, a better product. Our gas station owners get a better business and ourselves, the distributors, also get a better business.

The story is a bit different with the white flags. The white flags, as you know, not all of them but a significant portion of them compete on the basis of unfair cost competitive advantages.

And their competitive edge has been diminishing over the last few years gradually and we have seen some indications of that during the last year particularly the graph that I showed demonstrating the increased participation of the Sindicom member companies in the total sales of ethanol. We expect that trend to continue.

And moving to your fourth -- third question, it would be of great impact in this issue if the ICMS tax, one of the VAT taxes that we have in Brazil would have the same percentage for all the states.

Currently, there are different ICMS taxes for the different states in Brazil in relation to ethanol. It will be even better if ICMS would have a regime where all the ICMS tax was levied at the producer.

These initiatives involve a number of different interests and have very complex implementation process. So in the short term, I think what we can focus on is ourselves, the distributors, converting as many white flags as possible and Sindicom working with the authorities to improve the fiscalization of the existing measures because I think fiscalization can still be improved in relation to the existing measures.

So we have short term potential actions and benefits and we have an agenda for the longer term which is a more complex agenda.

Okay, thank you.

And our next question comes from Frank McGann of Bank of America Merrill Lynch.

Yes, hi. Just to follow up on Venezuela again, and I know it's only a relatively small part of the business but if you're breakeven now, is there a risk that goes to a loss or do you see the opportunities at this stage that at some point becomes more profitable again and what does it take to get there?

We have sized it to be basically zero, Frank. So I think the downside risk is minimal. Unfortunately, I think the upside risk is also minimal because we could increase production very quickly should we have raw material and should the conditions of Venezuela improve. But unfortunately, that does not seem to be the current trend in which Venezuela is going.

Okay, great, thanks.

This concludes our question-and-answer session. At this time, I would like to turn the conference back over to Mr. Andre Covre, for any closing remarks.

Well, thank you very much for your presence. We look forward to seeing you in three months when we talk about the second quarter. Have all a great weekend.

Thank you. This concludes today's Ultrapar First Quarter 2014 Results conference call. You may disconnect your lines at this time.