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UGP Ultrapar Participacoes

Filed: 4 Nov 20, 7:00pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 


Form 6-K


  

Report Of Foreign Private Issuer

 

Pursuant To Rule 13a-16 Or 15d-16 Of

 

The Securities Exchange Act Of 1934

 

For the month of November, 2020

 

Commission File Number: 001-14950

 

ULTRAPAR HOLDINGS INC.

(Translation of Registrant’s Name into English)


 Brigadeiro Luis Antonio Avenue, 1343, 9th Floor

São Paulo, SP, Brazil 01317-910

(Address of Principal Executive Offices)



 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

 

Form 20-F ____X____                                                         Form 40-F ________

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

 

Yes ________                                                                       No ____X____

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

 

Yes ________                                                                       No ____X____

  





ULTRAPAR HOLDINGS INC.


TABLE OF CONTENTS


ITEM



1.

Parent’s Separate and Consolidated Interim Financial Information as of and the Three-month period Ended September 30, 2020 and Report on Review of Interim Financial Information


2.3Q20 Earnings Release

3.Board of Directors minutes

4.Corporate Nomination Policy for Members of The Board Of Directors, Advisory Committees and Executive Officers Board









 

 


(Convenience Translation into English from

the Original Previously Issued in Portuguese)

 

 

Ultrapar Participações S.A.

 

 

Parent’s Separate and Consolidated

Interim Financial Information

as of and the Nine-month Period

Ended September 30, 2020 and

Report on Review of Interim

Financial Information

 

 

KPMG Auditores Independentes



Ultrapar Participações S.A. and Subsidiaries

Parent’s Separate and Consolidated

Interim Financial Information 

As of and the Nine-month Period Ended September 30, 2020

 

Table of Content


Report on the Review of Quarterly Information3-4
Statements of Financial Position5-6
Statements of Profit or Loss7-8
Statements of Comprehensive Income9-10
Statements of Changes in Equity11-12
Statements of Cash Flows – Indirect Method13-14
Statements of Value Added15
Notes to the Interim Financial Information16-129

 




(Convenience Translation into English from the Original Previously Issued in Portuguese)

 

Report on the Review of quarterly Information – ITR

 

 

To the Shareholders, Directors and Management of

Ultrapar Participações S.A.

São Paulo, SP

 

 

Introduction

We have reviewed the accompanying individual and consolidated interim financial information of Ultrapar Participações S.A. (“Company”), comprised in the Quarterly Financial Information - ITR Form for the quarter ended September 30, 2020, which comprise the statements of financial position as of September 30, 2020 and related statements of income, comprehensive income for the three and nine-month period then ended and changes in shareholder´s equity and cash flows for the nine-month  period then ended, including explanatory notes.

 

The Company´s Management is responsible for the preparation of the interim financial information in accordance with Technical Pronouncement CPC 21 (R1)  Interim Financial Information and with International Standard IAS 34 – Interim Financial Reporting, issued by the International Accounting Standards Board - IASB, such as for the presentation of these information in a manner consistent with the standards issued by the Brazilian Securities and Exchange Commission, applicable to the preparation of the Quarterly Financial Information - ITR.  Our responsibility is to express a conclusion on these interim financial information based on our review.

 

Scope of Review

Our review was conducted in accordance with the Brazilian and International Review Standards of interim information (NBC TR 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with the auditing standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.




Conclusion on the individual and consolidated interim financial information

Based on our review, nothing has come to our attention that causes us to believe that the individual and consolidated interim financial information included in the quarterly information referred to above was not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, issued by the Accounting Committee and by IASB applicable to the preparation of Quarterly Financial Information – ITR and presented in accordance with the standards issued by the Brazilian Securities Exchange Commission - CVM. 

 

Other matters

 

Interim statements of value added

The individual and consolidated interim statements of value added (DVA) for the nine-month period ended September 30, 2020, prepared under the responsibility of the Company's management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company's interim financial information. In order to form our conclusion, we evaluated whether these statements are reconciled to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09 - Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added are not prepared, in all material respects, according to the criteria defined in this Standard and consistently in accordance with the individual and consolidated interim financial information taken as a whole.

 

 

São Paulo, November 04, 2020

 

 

KPMG Auditores Independentes

CRC 2SP014428/O-6

(Original report in Portuguese signed by)

Márcio Serpejante Peppe

Accountant CRC 1SP233011/O-8

 

 


Ultrapar Participações S.A. and Subsidiaries

As of September 30, 2020 and December 31, 2019

(In thousands of Brazilian Reais)

 

 

 

Parent

 

Consolidated

 

Note

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

4.a

936,880

 

42,580

 

2,996,333

 

2,115,379

Financial investments and hedging instruments

4.b

109,888

 

95,829

 

5,582,703

 

3,090,212

Trade receivables

5.a

-

 

-

 

3,303,691

 

3,635,834

Reseller financing

5.b

-

 

-

 

497,853

 

436,188

Inventories

6

-

 

-

 

3,539,607

 

3,715,560

Recoverable taxes

7.a

-

 

-

 

890,852

 

1,122,335

Recoverable income and social contribution taxes

7.b

51,557

 

49,750

 

253,700

 

325,343

Dividends receivable

 

213

 

3,074

 

269

 

3,630

Other receivables

 

30,896

 

6,321

 

69,134

 

36,765

Prepaid expenses

10

4,450

 

72

 

136,357

 

111,355

Contractual assets with customers – exclusive rights

11

-

 

-

 

481,130

 

465,454

Total current assets

 

1,133,884

 

197,626

 

17,751,629

 

15,058,055

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

Financial investments and hedging instruments

4.b

-

 

-

 

1,218,753

 

506,506

Trade receivables

5.a

-

 

-

 

86,864

 

53,666

Reseller financing

5.b

-

 

-

 

428,334

 

364,748

Related parties

8.a

750,000

 

759,123

 

490

 

490

Deferred income and social contribution taxes

9.a

50,566

 

41,613

 

1,068,244

 

653,694

Recoverable taxes

7.a

-

 

-

 

1,321,336

 

767,360

Recoverable income and social contribution taxes

7.b

39,447

 

39,447

 

251,749

 

104,947

Escrow deposits

22.a

2

 

17

 

952,396

 

921,443

Indemnification asset – business combination

22.c

-

 

-

 

193,738

 

193,496

Other receivables

 

-

 

-

 

2,753

 

3,430

Prepaid expenses

10

4,417

 

255

 

79,819

 

69,216

Contractual assets with customers – exclusive rights

11

-

 

-

 

1,183,448

 

1,000,535

Total long term assets

 

844,432

 

840,455

 

6,787,924

 

4,639,531

Investments

 

 

 

 

 

 

 

 

  In subsidiaries

12.a

10,132,390

 

10,085,953

 

-

 

-

  In joint ventures

12.a; 12.b

-

 

18,792

 

142,611

 

153,076

  In associates

12.c

-

 

-

 

25,788

 

25,750

  Others

 

-

 

-

 

2,793

 

2,793

 

 

10,132,390

 

10,104,745

 

171,192

 

181,619

Right to use assets

13

36,281

 

5,799

 

2,162,951

 

1,980,912

Property, plant, and equipment

14

12,948

 

2,532

 

7,976,109

 

7,572,762

Intangible assets

15

251,516

 

246,163

 

1,762,248

 

1,762,593

Total non-current assets

 

11,277,567

 

11,199,694

 

18,860,424

 

16,137,417

Total assets

 

12,411,451

 

11,397,320

 

36,612,053

 

31,195,472

 

The accompanying notes are an integral part of the interim financial information



Ultrapar Participações S.A. and Subsidiaries 

Statements of Financial Position

As of September 30, 2020 and December 31, 2019

(In thousands of Brazilian Reais) 

 

 

 

Parent

 

Consolidated

 

Note

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Loans, financing and hedge derivative financial instruments

16

1,024,548

 

-

 

3,004,368

 

867,871

Debentures

16.g

1,422

 

28,713

 

960,088

 

249,570

Trade payables

17

4,385

 

2,173

 

2,578,498

 

2,158,478

Trade payables – reverse factoring

17

-

 

-

 

868,894

 

541,593

Salaries and related charges

18

36,287

 

958

 

513,987

 

405,636

Taxes payable

19

842

 

389

 

310,332

 

269,922

Dividends payable

25.h

14,750

 

14,689

 

16,469

 

16,694

Income and social contribution taxes payable

 

-

 

-

 

109,358

 

164,757

Post-employment benefits

20.b

-

 

-

 

29,522

 

28,951

Provision for asset retirement obligation

21

-

 

-

 

4,655

 

3,847

Provision for tax, civil, and labor risks

22.a

505

 

-

 

41,968

 

40,455

Leases payable

13

4,585

 

144

 

247,678

 

206,396

Other payables

 

9,891

 

3

 

290,370

 

213,273

Deferred revenue

23

-

 

-

 

26,901

 

27,626

Total current liabilities

 

1,097,215

 

47,069

 

9,003,088

 

5,195,069

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

Loans, financing and hedge derivative financial instruments

16

-

 

-

 

9,240,591

 

6,907,113

Debentures

16.g

1,723,928

 

1,723,368

 

5,550,879

 

6,368,168

Related parties

8.a

5,199

 

4,220

 

3,853

 

3,925

Deferred income and social contribution taxes

9.a

-

 

-

 

52,177

 

7,531

Post-employment benefits

20.b

4,111

 

-

 

234,408

 

243,916

Provision for asset retirement obligation

21

-

 

-

 

47,866

 

47,395

Provision for tax, civil, and labor risks

22.a; 22.c

280

 

399

 

844,621

 

884,140

Leases payable

13

34,294

 

5,855

 

1,584,095

 

1,382,277

Subscription warrants – indemnification

24

70,481

 

130,657

 

70,481

 

130,657

Provision for short-term liabilities of subsidiaries and joint venture

12.a; 12.b

47,969

 

27,497

 

884

 

-

Other payables

 

3,639

 

-

 

151,810

 

190,106

Total non-current liabilities

 

1,889,901

 

1,891,996

 

17,781,665

 

16,165,228

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Share capital

25.a; 25.f

5,171,752

 

5,171,752

 

5,171,752

 

5,171,752

Equity instrument granted

25.b

16,479

 

11,970

 

16,479

 

11,970

Capital reserve

25.d

594,049

 

542,400

 

594,049

 

542,400

Treasury shares

25.c

(489,068)

 

(485,383)

 

(489,068)

 

(485,383)

Revaluation reserve on subsidiaries

25.e

4,383

 

4,522

 

4,383

 

4,522

Profit reserves

25.f

3,995,414

 

3,995,414

 

3,995,414

 

3,995,414

Retained earnings

 

467,022

 

-

 

467,022

 

-

Valuation adjustments

25.g.1

(636,801)

 

(146,317)

 

(636,801)

 

(146,317)

Cumulative translation adjustments

25.g.2

301,105

 

102,427

 

301,105

 

102,427

Additional dividends to the minimum mandatory dividends

25.h

-

 

261,470

 

-

 

261,470

      Equity attributable to:

 

 

 

 

 

 

 

 

       Shareholders of the Company

 

9,424,335

 

9,458,255

 

9,424,335

 

9,458,255

       Non-controlling interests in subsidiaries

 

-

 

-

 

402,965

 

376,920

Total equity

 

9,424,335

 

9,458,255

 

9,827,300

 

9,835,175

Total liabilities and equity

 

12,411,451

 

11,397,320

 

36,612,053

 

31,195,472


The accompanying notes are an integral part of the interim financial information. 


Ultrapar Participações S.A. and Subsidiaries

For the nine-month period ended September 30, 2020 and 2019 

(In thousands of Brazilian Reais, except earnings per share)

 

 

 

Parent

 

Consolidated

 

Note

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Net revenue from sales and services

26

-

 

-

 

58,025,450

 

65,635,188

Cost of products and services sold

27

-

 

-

 

(53,925,516)

 

(61,161,756)

Gross profit

 

-

 

-

 

4,099,934

 

4,473,432

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

 

 

 

 

 

 

Selling and marketing

27

-

 

-

 

(1,854,841)

 

(1,961,011)

Expected reversion (losses) on doubtful accounts

 

-

 

-

 

(29,078)

 

(27,505)

General and administrative

27

-

 

-

 

(1,076,974)

 

(1,245,013)

Gain (loss) on disposal of property, plant and equipment and intangibles

28

-

 

-

 

35,926

 

908

Other operating income, net

29

1,192

 

316

 

114,247

 

100,034

 

 

 

 

 

 

 

 

 

Operating income before financial income (expenses) and share of profit (loss) of subsidiaries, joint ventures and associates

 

1,192

 

316

 

1,289,214

 

1,340,845

Share of profit (loss) of subsidiaries, joint ventures and associates

12

503,960

 

627,153

 

(30,515)

 

(18,295)

Operating income before financial income (expenses) and income and social contribution taxes

 

505,152

 

627,469

 

1,258,699

 

1,322,550

Financial income

30

33,850

 

100,451

 

306,813

 

401,880

Financial expenses

30

(80,427)

 

(90,967)

 

(712,639)

 

(656,629)

Financial result, net

30

(46,577)

 

9,484

 

(405,826)

 

(254,749)

Income before income and social contribution taxes

 

458,575

 

636,953

 

852,873

 

1,067,801

Income and social contribution taxes

 

 

 

 

 

 

 

 

Current

9.b; 9.c

(170)

 

-

 

(403,482)

 

(306,692)

Deferred

9.b

8,953

 

3,109

 

46,804

 

(90,500)

 

 

8,783

 

3,109

 

(356,678)

 

(397,192)

Net income for the period

 

467,358

 

640,062

 

496,195

 

670,609

Income attributable to:

 

 

 

 

 

 

 

 

    Shareholders of the Company

 

467,358

 

640,062

 

467,358

 

640,062

    Non-controlling interests in subsidiaries

 

-

 

-

 

28,837

 

30,547

Earnings per share (based on weighted average number of shares outstanding) – R$

 

 

 

 

 

 

 

 

    Basic

31

0.4293

 

0.5903

 

0.4293

 

0.5903

    Diluted

31

0.4268

 

0.5869

 

0.4268

 

0.5869

 

The accompanying notes are an integral part of the interim financial information.


Ultrapar Participações S.A. and Subsidiaries

Statements of Profit or Loss

For the three-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais, except earnings per share)

 

 

 

Parent

 

Consolidated

 

Note

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Net revenue from sales and services

26

-

 

-

 

20,762,078

 

23,203,290

Cost of products and services sold 

27

-

 

-

 

(19,123,322)

 

(21,580,190)

Gross profit

 

-

 

-

 

1,638,756

 

1,623,100

 

 

 

 

 

 

 

 

 

Operating income (expenses)

 

 

 

 

 

 

 

 

Selling and marketing

27

-

 

-

 

(658,104)

 

(651,592)

Expected reversion (losses) on doubtful accounts

 

-

 

-

 

27,438

 

38,135

General and administrative

27

-

 

-

 

(373,853)

 

(445,539)

Gain (loss) on disposal of property, plant and equipment and intangibles

28

-

 

-

 

15,016

 

1,963

Other operating income, net

29

636

 

(104)

 

(45,907)

 

53,214

 

 

 

 

 

 

 

 

 

Operating income before financial income (expenses) and share of profit (loss) of subsidiaries, joint ventures and associates

 

636

 

(104)

 

603,346

 

619,281

Share of profit (loss) of subsidiaries, joint ventures and associates

12

285,818

 

302,596

 

(4,817)

 

(8,247)

Operating income before financial income (expenses) and income and social contribution taxes

 

286,454

 

302,492

 

598,529

 

611,034

Financial income

30

2,081

 

24,112

 

71,649

 

125,592

Financial expenses

30

(28,794)

 

(31,504)

 

(229,517)

 

(288,993)

Financial result, net

30

(26,713)

 

(7,392)

 

(157,868)

 

(163,401)

Income before income and social contribution taxes

 

259,741

 

295,100

 

440,661

 

447,633

Income and social contribution taxes

 

 

 

 

 

 

 

 

Current

9.b; 9.c

-

 

-

 

(183,850)

 

(47,244)

Deferred

9.b

5,692

 

2,700

 

20,490

 

(93,066)

 

 

5,692

 

2,700

 

(163,360)

 

(140,310)

Net income for the period

 

265,433

 

297,800

 

277,301

 

307,323

Income attributable to:

 

 

 

 

 

 

 

 

    Shareholders of the Company

 

265,433

 

297,800

 

265,433

 

297,800

    Non-controlling interests in subsidiaries

 

-

 

-

 

11,868

 

9,523

Earnings per share (based on weighted average number of shares outstanding) – R$

 

 

 

 

 

 

 

 

    Basic

31

0.2437

 

0.2746

 

0.2437

 

0.2746

    Diluted

31

0.2422

 

0.2730

 

0.2422

 

0.2730

 

The accompanying notes are an integral part of the interim financial information.

  


Ultrapar Participações S.A. and Subsidiaries

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)

 

 

Note

Parent

 

Consolidated

 

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Net income for the period

 

467,358

 

640,062

 

496,195

 

670,609

Items that are subsequently reclassified to profit or loss:

 

 

 

 

 

 

 

 

Fair value adjustments of financial instruments, net

25.g.1

274

 

(57)

 

274

 

(57)

Fair value adjustments of financial instruments of subsidiaries, net

25.g.1

(491,544)

 

(103,062)

 

(491,544)

 

(103,041)

Fair value adjustments of financial instruments of joint ventures, net

25.g.1

786

 

83

 

786

 

83

Cumulative translation adjustments, net of hedge of net investments in foreign operations and income and social contribution taxes

25.g.2

198,678

 

23,388

 

198,678

 

23,388

Items that are not subsequently reclassified to profit or loss:

 

 

 

 

 

 

 

 

Actuarial gain (losses) of post-employment benefits of subsidiaries, net

25.g.1

-

 

238

 

-

 

238

Total comprehensive income for the period

 

175,552

 

560,652

 

204,389

 

591,220

Total comprehensive income for the period attributable to shareholders of the Company

 

175,552

 

560,652

 

175,552

 

560,652

Total comprehensive income for the period attributable to non-controlling interest in subsidiaries

 

-

 

-

 

28,837

 

30,568

 

The accompanying notes are an integral part of the interim financial information. 



Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the three-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)

 

 

Note

Parent

 

Consolidated

 

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Net income for the period

 

265,433

 

297,800

 

277,301

 

307,323

Items that are subsequently reclassified to profit or loss:

 

 

 

 

 

 

 

 

Fair value adjustments of financial instruments, net

25.g.1

(158)

 

238

 

(158)

 

238

Fair value adjustments of financial instruments of subsidiaries, net

25.g.1

(14,771)

 

(119,042)

 

(14,771)

 

(119,042)

Fair value adjustments of financial instruments of joint ventures, net

25.g.1

(1,075)

 

2,450

 

(1,075)

 

2,450

Cumulative translation adjustments, net of hedge of net investments in foreign operations and income and social contribution taxes

25.g.2

62,556

 

29,274

 

62,556

 

29,274

Items that are not subsequently reclassified to profit or loss:

 

 

 

 

 

 

 

 

Actuarial gain (losses) of post-employment benefits of subsidiaries, net

25.g.1

-

 

-

 

-

 

-

Total comprehensive income for the period 

 

311,985

 

210,720

 

323,853

 

220,243

Total comprehensive income for the period attributable to shareholders of the Company

 

311,985

 

210,720

 

311,985

 

210,720

Total comprehensive income for the period attributable to non-controlling interest in subsidiaries

 

-

 

-

 

11,868

 

9,523

 

The accompanying notes are an integral part of the interim financial information.



Ultrapar Participações S.A. and Subsidiaries

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)



 

 

 

 

 

 

 

 

 

 

 

 

Profit reserve

 

 

 

 

 

 

 

 

 

Equity attributable to:

 

 

 

Note

 

Share

capital

 

Equity instrument granted

 

Capital reserve

 

Treasury shares

 

Revaluation reserve on subsidiaries

 

Legal reserve

 

Investments statutory reserve

 

Valuation adjustments

 

Cumulative translation adjustments

 

Retained

earnings

 

Additional dividends to the minimum mandatory dividends

 

Shareholders of the Company

 

Non-controlling interests in subsidiaries

 

Consolidated

equity

Balance as of December 31, 2019

 

 

5,171,752

 

11,970

 

542,400

 

(485,383)

 

4,522

 

705,341

 

3,290,073

 

(146,317)

 

102,427

 

 

261,470

 

9,458,255

 

376,920

 

9,835,175

Net income for the period

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

467,358

 

-

 

467,358

 

28,837

 

496,195

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value adjustments of available for financial instruments, net of income taxes

25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

274

 

-

 

-

 

-

 

274

 

-

 

274

Fair value adjustments of available for financial instruments, net of income taxes (subsidiaries)

12.a; 25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(490,758)

 

-

 

-

 

-

 

(490,758)

 

-

 

(490,758)

Currency translation of foreign subsidiaries, including the effect of net investments hedge

25.g.2

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

198,678

 

-

 

-

 

198,678

 

-

 

198,678

Total comprehensive income for the period

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(490,484)

 

198,678

 

467,358

 

-

 

175,552

 

28,837

 

204,389

Issuance of shares related to the subscription warrants - indemnification - Extrafarma acquisition

25.d

 

-

 

-

 

54,763

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

54,763

 

-

 

54,763

Stock plan

8.c

 

-

 

-

 

(3,114)

 

(3,685)

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(6,799)

 

-

 

(6,799)

Equity instrument granted

25.b

 

-

 

2,906

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

2,906

 

-

 

2,906

Equity instrument granted (subsidiaries)

12.a; 25.b

 

-

 

1,603

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

1,603

 

-

 

1,603

Income and social contribution taxes on realization of revaluation reserve of subsidiaries

25.e

 

-

 

-

 

-

 

-

 

(139)

 

-

 

-

 

-

 

-

 

139

 

-

 

-

 

-

 

-

Loss due to the payments fixed dividends to preferred shares

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(516)

 

-

 

(516)

 

-

 

(516)

Shareholder transaction – changes of investiments

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

41

 

-

 

41

 

-

 

41

Additional dividends attributable to non-controlling interests

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(2,792)

 

(2,792)

Approval of additional dividends by the Shareholders’ Meeting

25.h

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(261,470)

 

(261,470)

 

-

 

(261,470)

Balance as of September 30, 2020

 

 

5,171,752

 

16,479

 

594,049

 

(489,068)

 

4,383

 

705,341

 

3,290,073

 

(636,801)

 

301,105

 

467,022

 

 

9,424,335

 

402,965

 

9,827,300

 

The accompanying notes are an integral part of the interim financial information.



Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Equity

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)



 

 

 

 

 

 

 

 

 

 

 

 

Profit reserve

 

 

 

 

 

 

 

 

 

Equity attributable to:

 

 

 

Note

 

Share

capital

 

Equity instrument granted

 

Capital reserve

 

Treasury shares

 

Revaluation reserve on subsidiaries

 

Legal

reserve

 

Investments statutory reserve

 

Valuation adjustments

 

Cumulative translation adjustments

 

Retained earnings

 

Additional dividends to the minimum mandatory dividends

 

Shareholders of the Company

 

Non-controlling interests in subsidiaries

 

Consolidated equity

Balance as of December 31, 2018

 

 

5,171,752

 

4,309

 

542,400

 

(485,383)

 

4,712

 

686,665

 

3,412,427

 

(63,989)

 

65,857

 

 

109,355

 

9,448,105

 

351,924

 

9,800,029

Net income for the period

 

 

 

 

 

 

 

 

 

 

 

640,062

 

 

640,062

 

30,547

 

670,609

Other comprehensive income: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value adjustments of available for financial instruments, net of income taxes

25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(57)

 

-

 

-

 

-

 

(57)

 

-

 

(57)

Fair value adjustments of available for financial instruments, net of income taxes (subsidiaries)

25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(102,979)

 

-

 

-

 

-

 

(102,979)

 

21

 

(102,958)

Actuarial gain of post-employment benefits, net of income taxes

12.a; 25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

238

 

-

 

-

 

-

 

238

 

-

 

238

Currency translation of foreign subsidiaries, including the effect of net investments hedge

25.g.1

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

23,388

 

-

 

-

 

23,388

 

-

 

23,388

Total comprehensive income for the period

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(102,798)

 

23,388

 

640,062

 

-

 

560,652

 

30,568

 

591,220

Equity instrument granted

25.b

 

-

 

5,387

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

5,387

 

-

 

5,387

Shareholder transaction - gain in reimbursement of shares pref. B from Oxiteno Nordeste

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

208

 

-

 

208

 

(208)

 

-

Realization of revaluation reserve of subsidiaries

25.e

 

-

 

-

 

-

 

-

 

(144)

 

-

 

-

 

-

 

-

 

144

 

-

 

-

 

-

 

-

Income and social contribution taxes on realization of revaluation reserve of subsidiaries

25.e

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(27)

 

-

 

(27)

 

-

 

(27)

Additional dividends attributable to non-controlling interests

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,521)

 

(1,521)

Redemption of non-controlling shares of Oxiteno Nordeste

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(2,180)

 

(2,180)

Capital increase from Iconic non-controlling shareholders

 

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

6,996

 

6,996

Approval of additional dividends by the Shareholders’ Meeting

25.h

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(109,355)

 

(109,355)

 

-

 

(109,355)

Interim dividends (R$ 0.20 per share of the Company)

25.h

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(217,382)

 

-

 

(217,382)

 

-

 

(217,382)

Balance as of September 30, 2019

 

 

5,171,752

 

9,696

 

542,400

 

(485,383)

 

4,568

 

686,665

 

3,412,427

 

(166,787)

 

89,245

 

423,005

 

 

9,687,588

 

385,579

 

10,073,167

 

The accompanying notes are an integral part of the interim financial information.

17


Ultrapar Participações S.A. and Subsidiaries

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)

 

 

Note

Parent

 

Consolidated

 

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income for the period

 

467,358

 

640,062

 

496,195

 

670,609

Adjustments to reconcile net income to cash provided by operating activities

 

 

 

 

 

 

 

 

Share of loss (profit) of subsidiaries, joint ventures and associates

12

(503,960)

 

(627,153)

 

30,515

 

18,295

Amortization of contractual assets with customers – exclusive rights

11

-

 

-

 

224,441

 

273,383

Amortization of right to use assets

13.a

3,238

 

-

 

242,147

 

219,225

Depreciation and amortization

14; 15

1,877

 

-

 

698,363

 

623,620

PIS and COFINS credits on depreciation

14; 15

-

 

-

 

11,487

 

11,134

Interest and foreign exchange rate variations

 

68,251

 

4,433

 

768,843

 

1,083,929

Deferred income and social contribution taxes

9.b

(8,953)

 

(3,109)

 

(46,804)

 

90,500

(Loss) Gain on disposal of property, plant, and equipment and intangibles

28

-

 

-

 

(35,926)

 

(908)

Expected losses on doubtful accounts

5

-

 

-

 

29,078

 

27,505

Provision for losses in inventories

6

-

 

-

 

(829)

 

3,039

Provision for post-employment benefits

20.b

(1,490)

 

-

 

(18,626)

 

(1,888)

Equity instrument granted

8.c

2,906

 

-

 

4,509

 

5,387

Other provisions and adjustments

 

1,164

 

657

 

(1,044)

 

(2,098)

 

 

30,391

 

14,890

 

2,402,349

 

3,021,732

(Increase) decrease in current assets

 

 

 

 

 

 

 

 

Trade receivables and reseller financing

5

-

 

-

 

255,238

 

225,745

Inventories

6

-

 

-

 

180,834

 

71,197

Recoverable taxes

7

(1,807)

 

1,617

 

303,126

 

(406,277)

Dividends received from subsidiaries and joint ventures

 

299,746

 

1,521,209

 

4,718

 

3,729

Other receivables

 

(24,575)

 

(1,794)

 

(32,371)

 

(17,950)

Prepaid expenses

10

(4,378)

 

(114)

 

(65,045)

 

12,681

Increase (decrease) in current liabilities

 

 

 

 

 

 

 

 

Trade payables

17

2,212

 

766

 

607,361

 

(344,167)

Salaries and related charges

18

35,329

 

730

 

108,351

 

3,889

Taxes payable

19

453

 

(11,238)

 

40,410

 

2,207

Income and social contribution taxes

 

-

 

(9,238)

 

171,870

 

118,411

Post-employment benefits

20.b

-

 

-

 

571

 

(3,418)

Provision for tax, civil, and labor risks

22.a

505

 

-

 

1,513

 

15,014

Other payables

 

3,089

 

(3,975)

 

66,381

 

87,063

Deferred revenue

23

-

 

-

 

(725)

 

(5,692)

(Increase) decrease in non-current assets

 

 

 

 

 

 

 

 

Trade receivables and reseller financing

5

-

 

-

 

(96,784)

 

39,915

Recoverable taxes

7

-

 

9,238

 

(700,778)

 

7,067

Escrow deposits

 

15

 

(16)

 

(30,953)

 

(38,636)

Other receivables

 

-

 

-

 

436

 

51

Prepaid expenses

10

(4,162)

 

(1)

 

5,264

 

(11,772)

 

The accompanying notes are an integral part of the interim financial information.

 


Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows – Indirect Method

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais)

 

 

 

Parent

 

Consolidated

 

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Increase (decrease) in non-current liabilities

 

 

 

 

 

 

 

 

Post-employment benefits

20.b

5,602

 

-

 

9,118

 

257

Provision for tax, civil, and labor risks

22.a; 22.c

(119)

 

(399)

 

(39,519)

 

(12,753)

Other payables

 

4,618

 

213

 

(37,011)

 

43,283

Deferred revenue

23

-

 

-

 

-

 

(11,850)

Payments of contractual assets with customers – exclusive rights

11

-

 

-

 

(296,765)

 

(231,737)

Income and social contribution taxes paid

 

-

 

-

 

(227,269)

 

(118,924)

Net cash provided by operating activities

 

346,919

 

1,521,888

 

2,630,320

 

2,449,065

Cash flows from investing activities

 

 

 

 

 

 

 

 

Financial investments, net of redemptions

4.b

(14,059)

 

487,073

 

(1,567,079)

 

(841,235)

Acquisition of property, plant, and equipment

14

(7,575)

 

(641)

 

(587,087)

 

(669,805)

Acquisition of intangible assets

15

(10,071)

 

-

 

(112,335)

 

(75,839)

Capital increase in subsidiary

12.a

(90,580)

 

(1,453,964)

 

-

 

-

Capital increase in joint venture

12.b

-

 

-

 

(20,000)

 

(22,939)

Initial direct costs of right to use assets

13

-

 

-

 

-

 

(69,490)

Proceeds from disposal of property, plant, and equipment and intangibles

28

-

 

-

 

86,012

 

28,661

Net cash used in investing activities

 

(122,285)

 

(967,532)

 

(2,200,489)

 

(1,650,647)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Loans and debentures 

 

 

 

 

 

 

 

 

Proceeds

16

994,996

 

-

 

3,591,624

 

2,016,429

Repayments

16

-

 

-

 

(2,280,152)

 

(2,160,567)

Interest paid

16

(68,788)

 

(112,675)

 

(478,755)

 

(1,220,707)

Payments of lease

13

(4,256)

 

-

 

(266,490)

 

(237,225)

Dividends paid

25.h

(261,409)

 

(594,380)

 

(264,487)

 

(596,479)

Redemption of non-controlling shares of Oxiteno Nordeste

3.b.2

-

 

-

 

-

 

(2,180)

Capital increase from Iconic non-controlling shareholders

 

-

 

-

 

-

 

6,996

Related parties

8.a

9,123

 

51,439

 

(72)

 

(122)

Net cash provided by (used in) financing activities

 

669,666

 

(655,616)

 

301,668

 

(2,193,855)

Effect of exchange rate changes on cash and cash equivalents in foreign currency

 

-

 

-

 

149,455

 

9,780

Increase (decrease) in cash and cash equivalents

 

894,300

 

(101,260)

 

880,954

 

(1,385,657)

Cash and cash equivalents at the beginning of the period

4.a

42,580

 

172,315

 

2,115,379

 

3,938,951

Cash and cash equivalents at the end of the period

4.a

936,880

 

71,055

 

2,996,333

 

2,553,294

Transactions without cash effect:

 

 

 

 

 

 

 

 

Addition on right to use assets and leases payable

13.a

33,890

 

-

 

407,148

 

244,650

Initial direct costs of right to use assets

13.a

-

 

-

 

-

 

20,374

Addition on contractual assets with customers – exclusive rights

11

-

 

-

 

139,960

 

-

Reversion fund – private pension

10

-

 

-

 

47,088

 

-

 

The accompanying notes are an integral part of the interim financial information.



Ultrapar Participações S.A. and Subsidiaries

For the nine-month period ended September 30, 2020 and 2019

(In thousands of Brazilian Reais, except percentages)

 

 

Note

Parent

 

Consolidated

 

 

09/30/2020

 

%

 

09/30/2019

 

%

 

09/30/2020

 

%

 

09/30/2019

 

%

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross revenue from sales and services, except rents and royalties 

26

-

 

 

 

-

 

 

 

62,473,739

 

 

 

69,823,702

 

 

Rebates, discounts, and returns

26

-

 

 

 

-

 

 

 

(1,237,466)

 

 

 

(1,114,791)

 

 

Expected losses on doubtful accounts

 

-

 

 

 

-

 

 

 

(29,078)

 

 

 

(27,505)

 

 

Amortization of contractual assets with customers – exclusive rights 

11

-

 

 

 

-

 

 

 

(224,441)

 

 

 

(273,383)

 

 

Gain (loss) on disposal of property, plant, and equipment and intangibles and other operating income, net

28; 29

-

 

 

 

-

 

 

 

150,173

 

 

 

100,942

 

 

 

 

-

 

 

 

-

 

 

 

61,132,927

 

 

 

68,508,965

 

 

Materials purchased from third parties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Raw materials used

 

-

 

 

 

-

 

 

 

(4,344,264)

 

 

 

(4,278,154)

 

 

Cost of goods, products, and services sold

 

-

 

 

 

-

 

 

 

(49,526,025)

 

 

 

(57,022,478)

 

 

Third-party materials, energy, services, and others

 

121,517

 

 

 

8,065

 

 

 

(1,926,454)

 

 

 

(2,009,651)

 

 

Provisions for losses of assets

 

-

 

 

 

-

 

 

 

(35,038)

 

 

 

(20,007)

 

 

 

 

121,517

 

 

 

8,065

 

 

 

(55,831,781)

 

 

 

(63,330,290)

 

 

Gross value added

 

121,517

 

 

 

8,065

 

 

 

5,301,146

 

 

 

5,178,675

 

 

Deductions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

14; 15

(5,115)

 

 

 

-

 

 

 

(940,510)

 

 

 

(842,845)

 

 

PIS and COFINS credits on depreciation

14; 15

-

 

 

 

-

 

 

 

(11,487)

 

 

 

(11,134)

 

 

 

 

(5,115)

 

 

 

-

 

 

 

(951,997)

 

 

 

(853,979)

 

 

Net value added by the Company

 

116,402

 

 

 

8,065

 

 

 

4,349,149

 

 

 

4,324,696

 

 

Value added received in transfer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share of profit (loss) of subsidiaries, joint ventures, and associates

12

503,960

 

 

 

627,153

 

 

 

(30,515)

 

 

 

(18,295)

 

 

Rents and royalties

26

-

 

 

 

-

 

 

 

82,147

 

 

 

111,861

 

 

Financial income

30

33,850

 

 

 

100,451

 

 

 

306,813

 

 

 

401,880

 

 

 

 

537,810

 

 

 

727,604

 

 

 

358,445

 

 

 

495,446

 

 

Total value added available for distribution

 

654,212

 

 

 

735,669

 

 

 

4,707,594

 

 

 

4,820,142

 

 

Distribution of value added

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Labor and benefits

 

93,657

 

15

 

6,369

 

1

 

1,432,270

 

30

 

1,609,804

 

34

Taxes, fees, and contributions

 

6,913

 

1

 

655

 

-

 

2,195,537

 

47

 

1,941,113

 

40

Financial expenses and rents

 

86,284

 

13

 

88,583

 

12

 

583,592

 

12

 

598,616

 

12

Dividends distributed

 

-

 

-

 

217,382

 

30

 

-

 

-

 

218,903

 

5

Retained earnings

 

467,358

 

71

 

422,680

 

57

 

496,195

 

11

 

451,706

 

9

Value added distributed

 

654,212

 

100

 

735,669

 

100

 

4,707,594

 

100

 

4,820,142

 

100

 

The accompanying notes are an integral part of the interim financial information.



Ultrapar Participações S.A. and Subsidiaries

 

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

 1. Operations

 

Ultrapar Participações S.A. (“Ultrapar” or “Company”) is a publicly-traded company headquartered at the Brigadeiro Luis Antônio Avenue, 1343 in the city of São Paulo – SP, Brazil, listed on B3 S.A. – Brasil, Bolsa, Balcão (“B3”), in the Novo Mercado listing segment under the ticker “UGPA3” and on the New York Stock Exchange (“NYSE”) in the form of level III American Depositary Receipts (“ADRs”) under the ticker “UGP”.

 

The Company engages in the investment of its own capital in services, commercial, and industrial activities, through the subscription or acquisition of shares of other companies. Through its subsidiaries, it operates in the segments of liquefied petroleum gas - LPG distribution (“Ultragaz”), fuel distribution and related businesses (“Ipiranga”), production and marketing of chemicals (“Oxiteno”), and storage services for liquid bulk (“Ultracargo”) and retail distribution of pharmaceutical, hygiene, beauty, and skincare products (“Extrafarma”). The information about segments are disclosed in Note 32.

 

a. Clarifications on the impacts of COVID-19

 

The World Health Organization (“WHO”) declared a coronavirus pandemic (COVID-19) on March 11, 2020. To contain a spread of the virus in Brazil, the Ministry of Health (“MH”) and the state governments announced several actions to reduce the agglomeration and movement of people, including the closing of commerce, parks and common areas. In this context, the Company created a Crisis Committee to keep up with it and monitor the main risks and adopt preventive and emergency measures to reduce the pandemic effects.

 

Since the beginning of the crisis, the Company and its subsidiaries have been working on numerous initiatives to ensure the safety of its employees, the stability and continuity of its operations and the financial solidity of the Company. All the activities of the companies controlled by the Company are classified as essential in the context of the measures adopted to face the pandemic, in the terms to Decree No. 10,282/20.

 

The Company and its subsidiaries quickly adopted the work at home (expressed by home office) for the administrative public, offering all the necessary support for the progress of activities. In addition to basic safety concerns with employees, companies realizes several initiatives aimed at welfare, such as virtual meetings, psychological support and concern for ergonomics, following our principle of valuing people.

 

Through a multidisciplinary committee, a plan for the gradual resumption of employees from administrative areas to offices was structured, due to adoption of numerous preventive measures and intensification of cleaning and safety, according to the guidelines of the state governments and municipal.

 

For the purpose to preserve the commitment to keep their employees in their respective jobs and mitigate the impacts of the crisis, use resources made available by the government, such as reduced working hours and/or wages, suspension of contracts and reorganization of the vacation plan, as required.

 

The management of the Company and its subsidiaries finished the third quarter of 2020 confirming the expectation that the worst moment of the crisis is over. The emergency measures and speed in answer to the first effects of the crisis, as well as initiatives to support the supply chain, were effective to keep the activities of the subsidiaries in operation, ensuring the delivery of essential services to the population and preserving the health of employees.




Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Remains uncertain to what extent the quarterly information, after September 30, 2020, may still be affected by the commercial, operational and financial impacts of the pandemic, because it will depend on its duration and the impacts on economic activities, as well as government, business in response to the crisis. In this context, some financial risk assessments, projections and impairment tests, in connection with the preparation of this quarterly information, may be impacted by the pandemic, and may adversely affect the financial position of the Company and its subsidiaries.

 

Operational impacts

 

The restrictions on the movement of people and the operation of certain businesses significantly impacted economic activity in Brazil.

 

Ultragaz presented in the second quarter a reduction in the volume sold in the bulk segment, because to the lower demand from industries and small and medium-sized companies, that were directly impacted by the social isolation measures. However, this effect was compensated by the increase in sales in the bottled segment, due to the higher demand for LPG for residential use. In terms of costs and expenses, Ultragaz incurred additional freight expenses, due to the need to remove LPG on more distant supply bases, protection materials and temporary workers, in addition to numerous donations to hospitals focused in the pandemic and needy communities. There was no record of an increase in defaults in the period. In the third quarter, Ultragaz had a recovery in volume in the bulk segment, due the resumption of the industry, while sales in the bottled segment continued resilient, gradually returning to pre-pandemic levels.

 

Ultracargo recorded a lower movement of fuels in the second quarter, due to the retraction in demand, and a reduction in spot contracts. Addittionaly, approximately R$ 2 million was recorded in extra expenses with protective materials and donations. The performance of measures to increase productivity and recover tax credits contributed to the improvement in results in the second quarter. In the third quarter, Ultracargo showed an increase in product movement and m3 invoiced compared to the previous quarter.

 

At Oxiteno, the paint, automotive and oil & gas segments suffered a retraction in demand in the second quarter, an effect that was partially compensated by the higher sales volume in the Home & Personal Care and Crop Solutions segments. To minimize the effects of the pandemic, Oxiteno's management operated quickly in measures to limit costs and expenses, contributing to an improvement in results. In the third quarter, Oxiteno had a recovery in sales volume for the automotive fluids, paint and varnishes with maintenance of increasing volumes for the hygiene and beauty sector.

 

Ipiranga was the business most impacted by the crisis due to the measures of social distance. In April, volumes sold for the Otto cycle and diesel registered a reduction of 37% and 17%, respectively, compared to the same period of the last year. In May and June, volumes sold improved gradually compared to April. In addition, the strong volatility in the prices of oil and oil products since the end of March, combined with a abrupt fall in the price of ethanol in April, caused significant inventories losses in the quarter. To mitigate these effects, the company and their subsidiaries realized initiatives to contain cash and reduce expenses in several areas, which made it possible to reduce general, administrative and sales expenses by 32% in the annual comparison. The level of default recorded a slight increase and remained at acceptable levels for the period. In the third quarter, it is observed a gradual evolution in the volumes sold of fuels over the quarter and an improvement in the operating environment, which enabled a significant recovery of the results compared to the second quarter.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Extrafarma presented a reduction in revenues approximately of R$ 45 million in the second quarter, mainly due to the temporary closure of stores located in malls, and of the reduction of operation hours in stores that remained open. To oppose this effect, sales were implemented through alternative delivery channels and partnerships with delivery applications. In addition, the extension of Provisional Measure 936 by the government, involving the suspension of contracts and temporary reduction in wages, other internal productivity gain initiatives, contributed to the reduction of expenses in the amount of R$ 8 million, minimizing the impact on the quarter’s result. In the third quarter, Extrafarma reopened the stores located in malls, contributing to an increase in revenue and cost dilution.

 

Main risks and associated measures

 

Credit risk - the subsidiary Ipiranga implemented a help package for Ipiranga resellers, including anticipation of sales credits through the Abastece Aí application, postponement of lease and financing payments and temporary suspension of volume performance clauses. These actions softened the impacts of the pandemic on your clients' financial condition and, consequently, mitigated its potential effects on Ipiranga's default rates. The effects of expected losses on doubtful accounts as of and the nine-month period ended September 30, 2020 are disclosed in Notes 5 and 33.d.

 

Risk of impairment and intangible assets of indefinite useful life - the Company reviewed the projections used in impairment tests and assets allocated to cash generation units, considering the current impacts of the pandemic. The review did not result in the need for additional recognition of a provision for losses as of September 30, 2020.

 

Risk of realization of deferred tax assets - the Company reviewed the constitution and realization of deferred tax credits, considering the current revised projections for each business segment due to the pandemic, and did not identify the need for write-offs for the period ended on September 30, 2020.

 

Risks in financial instruments - the increase in volatility in financial markets may impact financial results according to sensitivity analyzes presented in Note 33.

 

Liquidity risk - the impact on the volumes of operations and on the results of the Company and its subsidiaries may adversely affect the generation of operating cash. Thus, in order to strengthen the Company's liquidity and cash position, in view of the uncertainty generated by the pandemic, at the end of March and start April 2020, the Company and the subsidiary IPP contracted R$ 1.5 billion in new financing maturing in one year. Of this total, R$ 1.3 billion was obtained through the issuance of promissory notes with credit in April. In addition, as a measure of cash containment, the Company announced in April a reduction of approximately 30% in its investment plan for 2020 and in August, the management opted to not pay interim dividends for the current year. As stated in the Bylaws, the minimum mandatory dividends will be paid after the disclosure of the year's results.

 

In July 2020, the Company reopened bonds issued on the market maturing in 2029 and raised US$ 350 million with a coupon of 5.25% per year. The proceeds will be used to pay debts maturing in the short term, allowing the Company's debt profile to be lengthened, in addition to strengthening its cash position.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

The management of the Company and its subsidiaries maintained discipline in control of costs and expenses to preserve cash in all business and selectivity in the allocation of capital. As a result, the Company had a quarter of strong operating cash generation, with reduced leverage, reinforcing its commitment to financial strength and demonstrating the resilience of our portfolio.

2. Presentation of interim financial information and summary of significant accounting policies

 

The parent’s separate and consolidated interim financial information (“interim financial information”) were prepared in accordance with the International Accounting Standard (“IAS”) 34 – Interim Financial Reporting issued by the International Accounting Standards Board (“IASB”) and in accordance with the pronouncement CPC 21 (R1) issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Securities and Exchange Commission (“CVM”).

 

All relevant specific information of the interim financial information , and only this information, were presented and correspond to that used by the Company’s and its subsidiaries’ Management.


The presentation currency of the Company’s interim financial information is the Brazilian Real (“R$”), which is the Company’s functional currency.

 

The Company and its subsidiaries applied the accounting policies described below in a consistent manner for all periods presented in this interim financial information.

 

a. Recognition of revenue

 

Revenue of sales and services rendered is measured at the value of the consideration that the Company's subsidiaries expect to be entitled to, net of sales returns, discounts, amortization of contractual assets with customers and other deductions, if applicable, being recognized as the entity fulfills its performance obligation. At Ipiranga, the revenue from sales of fuels and lubricants is recognized when the products are delivered to gas stations and to large consumers. At Ultragaz, revenue from sales of LPG is recognized when the products are delivered to customers at home, to independent dealers and to industrial and commercial customers. At Extrafarma, the revenue from sales of pharmaceuticals is recognized when the products are delivered to end user customers in own drugstores and when the products are delivered to independent resellers. At Oxiteno, the revenue from sales of chemical products is recognized when the products are delivered to industrial customers, depending of the freight mode of delivery. At Ultracargo, the revenue provided from storage services is recognized as services are performed. The breakdowns of revenues from sales and services are shown in Notes 26 and 32.

 

Amortization of contractual assets with customers for the exclusive rights in Ipiranga’s reseller service stations and the bonuses paid in performance obligation sales are recognized in the income statement as a deduction of the revenue from sale according to the conditions established in the agreements which is reviewed as per the changes occurred in the agreements (see Notes 2.f and 11).

 

The am/pm franchising upfront fee received by Ipiranga is deferred and recognized in profit or loss as the entity fulfills its performance obligation throughout the terms of the agreements with the franchisees. For more information, see Note 23.a.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Deferred revenue from loyalty program is recognized in the income statement when the points are redeemed, on which occasion the costs incurred are also recognized in profit or loss. Deferred revenue of unredeemed points is also recognized in profit or loss when points expire. For more information, see Note 23.b.

 

Costs of products sold and services provided include goods (mainly fuels, lubricants, LPG, and pharmaceutical products), raw materials (chemicals and petrochemicals) and production, distribution, storage, and fulfillment costs.

 

Exchange variations and the results of derivative financial instruments are presented in the statement of profit and loss on financial expenses.

 

Research and development expenses are recognized in the statements of profit or loss in general and administrative expenses and amounted to R$ 44,829 for the nine-month period ended September 30, 2020 (R$ 44,793 for the nine-month period ended September 30, 2019). 

 

b. Cash and cash equivalents

 

Includes cash, banks deposits, and short-term, highly liquid investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of change in value. For further information on ‚cash and cash equivalents of the Company and its subsidiaries, see Note 4.a.

 

c. Financial assets  

 

The Company and its subsidiaries evaluated the classification and measurement of financial assets based on its business model of financial assets as follows:

 

  • Amortized cost: financial assets held in order to collect contractual cash flows, solely principal and interest. The interest earned and the foreign currency exchange variation are recognized in profit or loss, and balances are stated at acquisition cost plus the interest earned, using the effective interest rate method. Financial investments in guarantee of loans are classified as amortized cost.

 

  • Measured at fair value through other comprehensive income: financial assets that are acquired or originated for the purpose of collecting contractual cash flows or selling financial assets. The balances are stated at fair value, and the interest earned, and the foreign currency exchange variation are recognized in profit or loss. Differences between fair value and initial amount of financial investments plus the interest earned are recognized in equity in other comprehensive income in the “Valuation adjustments”. Accumulated gains and losses recognized in equity are reclassified to profit or loss at the time of their settlement. Substantially the financial investments in Bank Certificates of Deposit (“CDB”) and repurchase agreements are classified as measured at fair value through other comprehensive income.

 

  • Measured at fair value through profit or loss: financial assets that were not classified as amortized cost or measured at fair value through other comprehensive income. The balances are stated at fair value and both the interest earned and the exchange variations and changes in fair value are recognized in the income statement. Investment funds and derivatives are classified as measured at fair value through profit or loss.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


The Company and its subsidiaries use financial instruments for hedging purposes, applying the concepts described below:

 

  • Hedge accounting – fair value hedge: financial instruments used to hedge exposure to changes in the fair value of an item, attributable to a particular risk, which can affect the entity’s statements of profit or loss. In the initial designation of the fair value hedge, the relationship between the hedging instrument and the hedged item is documented, including the objectives of risk management, the strategy in conducting the transaction, and the methods to be used to evaluate its effectiveness. Once the fair value hedge has been qualified as effective, the hedge item is also measured at fair value. Gains and losses from hedge instruments and hedge items are recognized in the statements of profit or loss. The hedge accounting is discontinued when the hedge becomes ineffective.

 

  • Hedge accounting – cash flow hedge: financial instruments used to hedge the exposure to variability in cash flows that is attributable to a risk associated with an asset or liability or highly probable transaction or firm commitment that may affect the statements of profit or loss. The portion of the gain or loss on the hedging instrument that is determined to be effective relating to the effects of exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as “Valuation adjustments” while the ineffective portion is recognized in the statements of profit or loss. Gain or loss on the hedging instrument relating to the effective portion of this hedge that had been recognized directly in accumulated other comprehensive income is recognized in profit or loss in the period in which the hedged item is recognized in profit or loss or as initial cost of non- financial assets, in the same line of the statement that the hedged item is recognized. The hedge accounting is discontinued when (i) the hedging relationship is canceled; (ii) the hedging instrument expires; and (iii) the hedging instrument no longer qualifies for hedge accounting. When hedge accounting is discontinued, gains and losses recognized in equity in other comprehensive income are reclassified to the statements of profit or loss in the period which the hedged item is recognized in profit or loss. If the transaction hedged is canceled or is not expected to occur, the cumulative gains and losses in equity in other comprehensive income are recognized immediately in profit or loss.

 

  • Hedge accounting - hedge of net investments in foreign operation: financial instruments used to hedge exposure on net investments in foreign subsidiaries due to the fact that the local functional currency is different from the functional currency of the Company. The portion of the gain or loss on the hedging instrument that is determined to be effective, referring to the exchange rate effect, is recognized directly in equity in accumulated other comprehensive income as cumulative translation adjustments, while the ineffective portion and the operating costs are recognized in the statements of profit or loss. The gain or loss on the hedging instrument that has been recognized directly in accumulated other comprehensive income is recognized in the statements of profit or loss when the disposal of the foreign subsidiary occurs.

 

For further information on financial instruments, see Note 33.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


d. Trade receivables and reseller financing

 

Trade receivables are recognized at the amount invoiced of the counterparty that the Company subsidiaries are entitled (see Notes 5 and 33.d.3). The expected losses take into account, (i) at the initial recognition of the contract, the expected losses for the next 12 months or (ii) the lifetime of the contract considering the deterioration or improvement of the customers’ credit quality  and its characteristics in each business segment. The amount of the expected credit losses is deemed by management to be sufficient to cover any probable loss on realization of trade receivables.

 

e. Inventories

Inventories are stated at the lower of acquisition cost or net realizable value (see Note 6). The cost value of inventory is measured using the weighted average cost and includes the costs of acquisition and processing directly and indirectly related to the units produced based on the normal capacity of production. Estimates of net realizable value are based on the average selling prices at the end of the reporting period, net of applicable direct selling expenses. Subsequent events related to the fluctuation of prices and costs are also considered, if relevant. If net realizable values are below inventory costs, a provision corresponding to this difference is recognized. Provisions are also made for obsolescence of products, materials, or supplies that (i) do not meet its subsidiaries’ specifications, (ii) have exceeded their expiration date, or (iii) are considered slow-moving inventory. This classification is made by management with the support of its industrial and operations teams.

 

f. Contractual assets with customers – exclusive rights

 

Exclusive rights disbursements as provided in Ipiranga’s agreements with reseller service stations and major consumers are recognized as contractual assets when paid and amortized according to the conditions established in the agreements (see Note 2.a and 11).

 

g. Investments

 

Investments in subsidiaries are accounted for under the equity method of accounting in the interim financial information of the parent’s separate company (see Notes 3.b and 12.a). A subsidiary is an investee in which the investor is entitled to variable returns on investment and has the ability to interfere in its financial and operational activities. Usually the equity interest in a subsidiary is more than 50%.

 

Investments in associates and joint ventures are accounted for under the equity method of accounting in the interim financial information (see Note 12 items b and c). An associate is an investment, in which an investor has significant influence, that is, has the power to participate in the financial and operating decisions of the investee but does not exercise control. A joint venture is an investment in which the shareholders have the right to net assets on behalf of a joint control. Joint control is the agreement, which establish that decisions about the relevant activities of the investee require the consent from the parties that share control.

 

Other investments are stated at acquisition cost less provision for losses, unless the loss is considered temporary.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

h. Right to use assets and lease payable

 

The Company and its subsidiaries recognized in the financial position, a right to use assets and the respective lease liabilities initially measured at the present value of future lease payments, considering the related contract costs (see Note 13). The amortization expenses of right to use assets is recognized in statement of profit or loss over the lease contract term. The Company and its subsidiaries have no intention of purchasing the underlying asset. The liability is increased for interest and decreased by lease payments made. The interests are recognized in the statement of profit or loss using the effective interest rate method. The remeasurement of assets and liabilities based on the contractual index is recognized in the financial position, not having an effect in the result. In case of cancellation of the contract, the assets and respective liabilities are written off to the result, considering, if it is the case, any penalties provided in contractual clauses. The Company and its subsidiaries periodically review the existence of an indication that the rights to use assets may be impaired (see Note 2.u).

 

Right to use assets include amounts related to area port leases grants (see Note 34.c).

 

The Company and its subsidiaries apply the recognition’s exemptions to short-term leases of 12 months or less, and leases of low amount assets such. In these cases, the recognition of the lease expense in the statements of profit or loss is on a straight-line basis.

 

i. Property, plant, and equipment

 

Property, plant, and equipment (“PP&E”) is recognized at acquisition or construction cost, including financial charges incurred on PP&E under construction, as well as qualifying maintenance costs resulting from scheduled plant outages and estimated costs to remove, to decommission, or to restore assets (see Notes 2.n and 21), less accumulated depreciation and, when applicable, less provision for losses (see Note 14).

 

Depreciation is calculated using the straight-line method, over the periods mentioned in Note 14, taking into account the estimated useful lives of the assets, which are reviewed annually.

 

Leasehold improvements are depreciated over the shorter of the lease contract term and useful life of the property.

 

j. Intangible assets

 

Intangible assets include assets acquired by the Company and its subsidiaries from third parties, according to the criteria below:

 

  • Goodwill is shown as intangible assets corresponding to the positive difference between the amount paid or payable to the seller and the fair value of the identified assets and liabilities assumed of the acquired entity. Goodwill is tested annually for impairment. Goodwill is allocated to the business segments, which represent the lowest level that goodwill is monitored for impairment testing purposes (see Note 15.a).

 

  • Other intangible assets acquired from third parties, such as software, technology, and commercial property rights, are measured at the total acquisition cost and amortized using straight-line method, over the periods mentioned in Note 15, taking into account their useful lives, which are reviewed annually.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


The Company and its subsidiaries have not recognized intangible assets that were generated internally. The Company and its subsidiaries have goodwill and brands acquired in business combinations, which are evaluated as intangible assets with indefinite useful life (see Note 15 items a and e).

 

k. Other assets

 

Other assets are stated at the lower of cost and realizable value, including, if applicable, interest earned, monetary changes and changes in exchange rates incurred or less a provision for loss and, if applicable, adjustment to present value.

 

l. Financial liabilities

 

The financial liabilities include trade payables and other payables, loans, debentures, leases payable and derivative financial instruments. Financial liabilities are classified as “financial liabilities at fair value through profit or loss” or “financial liabilities at amortized cost”. The financial liabilities at fair value through profit or loss refer to derivative financial instruments, subscription warrants - indemnification, and financial liabilities designated as hedged items in a fair value hedge relationship upon initial recognition (see Note 2.c – Fair Value Hedge). The financial liabilities at amortized cost are stated at the initial transaction amount plus related charges and net of amortization and transaction costs. The charges are recognized in the statement of profit or loss using the effective interest rate method.

 

Transaction costs incurred and directly attributable to the activities necessary for contracting loans or for issuing bonds, as well as premiums and discounts upon issuance of debentures and other debt, are allocated to the instrument and amortized in the statement of profit or loss taking into its term, using the effective interest rate method (see Note 16.h).

 

m. Income and social contribution taxes on income

 

Current and deferred income tax (“IRPJ”) and social contribution on net income tax (“CSLL”) are calculated based on their current rates. For the calculation of current IRPJ, the value of tax incentives is also considered. Taxes are recognized based on the rates of IRPJ and CSLL provided for by the laws enacted on the last day of the interim financial information. The current rates in Brazil are 25% for IRPJ and 9% for CSLL. For further information about recognition and realization of IRPJ and CSLL, see Note 9.

 

For purposes of disclosure, deferred tax assets were offset against the deferred tax liability, IRPJ and CSLL, in the same taxable entity and the same tax authority.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

n. Provision for asset retirement obligation – fuel tanks

 

The subsidiary Ipiranga has the legal obligation to remove the underground fuel tanks owned by Ipiranga-branded located at service stations after a certain period. The estimated cost of the obligation to remove these fuel tanks is recognized as a liability when the tanks are installed. The estimated cost is recognized in PP&E and depreciated over the respective useful lives of the tanks. The amounts recognized as a liability accrue interest using the Amplified Consumer Price Index (“IPCA”) until the tank is removed (see Note 21). The estimated removal cost is reviewed and updated annually or when there is significant change in its amount and change in the estimated costs are recognized in statements of profit or loss when they become known.

 

o. Provisions for tax, civil, and labor risks

 

A provision for tax, civil and labor risks is recognized for quantifiable risks, when the chance of loss is more-likely-than-not in the opinion of management and internal and external legal counsel, and the amounts are recognized based on the evaluation of the outcomes of the legal proceedings (see Note 22).

 

p. Post-employment benefits

 

Post-employment benefits granted and to be granted to employees, retirees, and pensioners are based on an actuarial calculation prepared by an independent actuary and reviewed by management, using the projected unit credit method (see Note 20.b). The actuarial gains and losses are recognized in equity in cumulative other comprehensive income in the “Valuation adjustments”.

 

q. Other liabilities

 

Other liabilities are stated at known or measurable amounts and changes in exchange rates incurred. When applicable, other liabilities are recognized at present value, based on interest rates that reflect the term, currency, and risk of each transaction.

 

r. Foreign currency transactions

 

Foreign currency transactions carried out by the Company or its subsidiaries are remeasured into their functional currency at the exchange rate prevailing at the date of each transaction. Outstanding monetary assets and liabilities of the Company and its subsidiaries are translated using the exchange rate at the date of the interim financial information. The effect of the difference between those exchange rates is recognized in financial results until the conclusion of each transaction.

 


Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

s. Basis for translation of interim financial information of foreign subsidiaries

 

s.1 Subsidiaries with administrative autonomy

 

Assets and liabilities of the foreign subsidiaries, denominated in currencies other than Brazilian Real, which have administrative autonomy, are translated using the exchange rate at the date of the interim financial information. Revenues and expenses are translated using the average exchange rate of each year and equity is translated at the historical exchange rate of each transaction affecting equity. Gains and losses resulting from changes in these foreign investments are directly recognized in equity in cumulative other comprehensive income in the “cumulative translation adjustments” and will be recognized in profit or loss if these investments are disposed of. The balance in cumulative other comprehensive income on September 30, 2020 was a gain of R$ 301,105 (gain of R$ 102,427 on December 31, 2019) - see Note 25.g.2.

 

The foreign subsidiaries with functional currency different from the Company and which have administrative autonomy are listed below:

 

Subsidiary

Functional currency

Location

Oxiteno México S.A. de C.V.

Mexican Peso

Mexico

   Oxiteno Servicios Corporativos S.A. de C.V.

Mexican Peso

Mexico

   Oxiteno Servicios Industriales S.A. de C.V.

Mexican Peso

Mexico

   Oxiteno USA LLC

U.S. Dollar

United States

Oxiteno Uruguay S.A. (i)

U.S. Dollar

Uruguay

 

(i) The subsidiary Oxiteno Uruguay S.A. (“Oxiteno Uruguay”) determined its functional currency as the U.S. dollar (“US$”), as its inventory sales, purchases of raw material inputs, and financing activities are performed substantially in this currency.

 

s.2 Subsidiaries without self-administrative autonomy

 

Assets and liabilities of the other foreign subsidiaries, which do not have administrative autonomy, are considered an extension of the activities of their parent company and are translated using the exchange rate at the date of the interim financial information. Gains and losses resulting from changes in these foreign investments are directly recognized as financial result. The gain recognized in income for the nine-month period ended September 30, 2020 amounted to R$ 40,747 (gain of R$ 5,005 for the nine-month period ended September 30, 2019).

 

t. Use of estimates, assumptions and judgments

 

The preparation of the interim financial information requires the use of estimates, assumptions, and judgments for the accounting and disclosure of certain assets, liabilities, and profit or loss. Therefore, the Company and subsidiaries’ management use the best information available at the date of preparation of the interim financial information, as well as the experience of past and current events, also considering assumptions regarding future events. The estimates and assumptions are reviewed periodically.

 

t.1 Judgments

 

Information on the judgments is included: in the determination of control in subsidiaries (Notes 2.g, 2.s.1, 3 and 12.a), the determination of joint control in joint venture (Notes 2.g, 12.a and 12.b) and the determination of significant influence in associates (Notes 2.g and 12.c).



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


t.2 Uncertainties related to the assumptions and estimates

 

The information regarding uncertainties related to the assumptions and estimates are included: in determining the fair value of financial instruments (Notes 2.c, 2.l, 4, 16 and 33), the determination of the expected losses on doubtful accounts (Notes 2.d, 5 and 33.d.3), the determination of provisions for losses of inventories (Notes 2.e and 6), the estimative of realization of deferred IRPJ and CSLL amounts (Notes 2.m and 9.a), the useful lives and discount rate of right to use assets (Notes 2.h and 13), the useful lives of PP&E (Notes 2.i and 14), the useful lives of intangible assets, and the determination of the recoverable amount of goodwill (Notes 2.j and 15.a), provisions for assets retirement obligations (Notes 2.n and 21), provisions for tax, civil, and labor risks (Notes 2.o and 22), estimates for the preparation of actuarial reports (Notes 2.p and 20.b) and the determination of fair value of subscription warrants – indemnification (Notes 24 and 33.j). The actual result of the transactions and information may differ from their estimates.

 

u. Impairment of assets

 

The Company and its subsidiaries review, in every reporting period, the existence of any indication that an asset may be impaired and annually test intangible assets with undefined useful life. If there is an indication of impairment, the Company and its subsidiaries estimate the recoverable amount of the asset. Assets that are not evaluated individually are grouped in the smallest group of assets that generate cash inflow from continuous use and that are largely independent of cash flows of other assets (cash generating units “CGU”). The recoverable amount of assets or CGUs corresponds to the greater of their fair value net of applicable direct selling costs and their value in use.

 

The fair value less costs to sell is determined by the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, net of costs of removing the asset, and direct incremental costs to bring an asset into condition for its sale, legal costs, and taxes.

 

To assess the value in use, the projections of future cash flows, trends, and outlooks, as well as the effects of obsolescence, demand, competition, and other economic factors were considered. Such cash flows are discounted to their present values ​​using the discount rate before tax that reflects market conditions for the period of impairment testing and the specific risks of the asset or CGU being evaluated. In cases where the expected discounted future cash flows are less than their carrying amount, an impairment loss is recognized for the amount by which the carrying value exceeds the fair value of these assets. Losses for impairment of assets are recognized in profit or loss. In case goodwill has been allocated to a CGU, the recognized losses are first allocated to reduce the corresponding goodwill. If the goodwill is not enough to absorb such losses, the surplus is allocated to the assets on a pro-rata basis. An impairment of goodwill cannot be reversed. For other assets, impairment losses are reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if the impairment had not been recognized.

 

No impairment was recognized for the nine-month period ended September 30, 2020 and 2019. On December 31, 2019, the Company recognized an impairment loss for the subsidiary Imifarma Produtos Farmacêuticos e Cosméticos S.A. (“Extrafarma”) (see Note 15.a).

 


Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


v. Business combination

 

A business combination is accounted applying the acquisition method. The cost of the acquisition is measured based on the consideration transferred and to be transferred, measured at fair value at the acquisition date. In a business combination, the assets acquired, and liabilities assumed are measured in order to classify and allocate them accordingly to the contractual terms, economic circumstances and relevant conditions on the acquisition date. The non-controlling interest in the acquire is measured based on its interest in identifiable net assets acquired. Goodwill is measured as the excess of the consideration transferred and to be transferred over the fair value of net assets acquired (identifiable assets and liabilities assumed, net). After the initial recognition, goodwill is measured at cost less any accumulated impairment losses. For impairment testing purposes, goodwill is allocated to the Company’s operating segments. When the cost of the acquisition is lower than the fair value of net assets acquired, a gain is recognized directly in the statement of profit or loss. Costs related to the acquisition are recorded in the statement of profit or loss when incurred.

 

w. Statements of value added

 

The statements of value added (“DVA”) are presented as an integral part of the interim financial information as applicable to publicly traded companies in Brazil and as supplemental information for the IFRS, which does not require the presentation of DVA.

 

x. Statements of cash flows indirect method  

 

The Company and its subsidiaries present the interest paid on loans, financing, debentures, and leases payable in financing activities and present financial investments on a net basis of income and redemptions in the investing activities.

 

y. Adoption of the pronouncements issued by CPC and IASB

 

There are not standards, amendments and interpretations to IFRS issued by the IASB, which are effective, that have not been adopted by the Company and could have impact in this interim financial information to September 30, 2020.

 

z. Authorization for issuance of the interim financial information

 

This interim financial information was authorized for issue by the Board of Directors on November 4, 2020.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

3. Principles of consolidation and investments in subsidiaries


a. Principles of consolidation

 

In the preparation of the consolidated interim financial information the investments of one company in another, balances of asset and liability accounts, revenues transactions, costs and expenses were eliminated, as well as the effects of transactions conducted between the companies. Non-controlling interests in subsidiaries are presented within consolidated equity and net income.

 

Consolidation of a subsidiary begins when the parent company obtains direct or indirect control over a company and ceases when the parent company loses control of a company. Income and expenses of a subsidiary acquired are included in the consolidated statement of profit or loss and comprehensive income from the date the parent company gains the control. Income and expenses of a subsidiary, in which the parent company loses control, are included in the consolidated statement of profit or loss and comprehensive income until the date the parent company loses control.

 

When necessary, adjustments are made to the interim financial information of subsidiaries to bring their accounting policies into line with the Company’s accounting policies. 


Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

b. Investments in subsidiaries

 

The consolidated interim financial information includes the following direct and indirect subsidiaries: 

 

 

 

 

% interest in the share

 

 

 

 

09/30/2020

 

12/31/2019

 

 

 

 

Control

 

Control

 

Location

Segment

 

Direct

 

Indirect

 

Direct

 

Indirect

Ipiranga Produtos de Petróleo S.A.

Brazil

Ipiranga

 

100

 

-

 

100

 

-

am/pm Comestíveis Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Icorban – Correspondente Bancário Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Ipiranga Trading Limited

British Virgin Islands

Ipiranga

 

-

 

100

 

-

 

100

Tropical Transportes Ipiranga Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Ipiranga Imobiliária Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Ipiranga Logística Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Oil Trading Importadora e Exportadora Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Iconic Lubrificantes S.A.

Brazil

Ipiranga

 

-

 

56

 

-

 

56

Integra Frotas Ltda.

Brazil

Ipiranga

 

-

 

100

 

-

 

100

Companhia Ultragaz S.A.

Brazil

Ultragaz

 

-

 

99

 

-

 

99

Ultragaz Comercial Ltda.

Brazil

Ultragaz

 

-

 

100

 

-

 

100

Nova Paraná Distribuidora de Gás Ltda. (1)

Brazil

Ultragaz

 

-

 

100

 

-

 

100

Bahiana Distribuidora de Gás Ltda.

Brazil

Ultragaz

 

-

 

100

 

-

 

100

Utingás Armazenadora S.A.

Brazil

Ultragaz

 

-

 

57

 

-

 

57

LPG International Inc.

Cayman Islands

Ultragaz

 

-

 

100

 

-

 

100

Imaven Imóveis Ltda.

Brazil

Others

 

-

 

100

 

-

 

100

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

Brazil

Extrafarma

 

-

 

100

 

-

 

100

L.I.Z.S.P.E. Empreendimentos e Participações Ltda. (2)

Brazil

Others

 

-

 

99

 

-

 

-

Centro de Conveniências Millennium Ltda. and subsidiaries (3)

Brazil

Ipiranga

 

100

 

-

 

-

 

100

Oxiteno S.A. Indústria e Comércio

Brazil

Oxiteno

 

100

 

-

 

100

 

-

Oxiteno Argentina Sociedad de Responsabilidad Ltda.

Argentina

Oxiteno

 

-

 

100

 

-

 

100

Oleoquímica Indústria e Comércio de Produtos Químicos Ltda.

Brazil

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Uruguay S.A.

Uruguay

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno México S.A. de C.V.

Mexico

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Servicios Corporativos S.A. de C.V.

Mexico

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Servicios Industriales S.A. de C.V.

Mexico

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno USA LLC

United States

Oxiteno

 

-

 

100

 

-

 

100

Global Petroleum Products Trading Corp.

Virgin Islands

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Europe SPRL

Belgium

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Colombia S.A.S

Colombia

Oxiteno

 

-

 

100

 

-

 

100

Oxiteno Shanghai LTD.

China

Oxiteno

 

-

 

100

 

-

 

100

Empresa Carioca de Produtos Químicos S.A.

Brazil

Oxiteno

 

-

 

100

 

-

 

100

Ultracargo - Operações Logísticas e Participações Ltda.

Brazil

Ultracargo

 

100

 

-

 

100

 

-

Terminal Químico de Aratu S.A. – Tequimar

Brazil

Ultracargo

 

-

 

99

 

-

 

99

TEAS – Terminal Exportador de Álcool de Santos Ltda.

Brazil

Ultracargo

 

-

 

100

 

-

 

100

Tequimar Vila do Conde Logística Portuária S.A.

Brazil

Ultracargo

 

-

 

100

 

-

 

100

Ultrapar International S.A.

Luxembourg

Others

 

100

 

-

 

100

 

-

SERMA - Ass. dos usuários equip. proc. de dados

Brazil

Others

 

-

 

100

 

-

 

100

UVC - Fundo de investimento em participações multiestratégia investimento no exterior (4)

Brazil

Others

 

100

 

-

 

-

 

-

Eai Clube Automobilista S.A. (5)

Brazil

Abastece Aí

 

100

 

-

 

-

 

-

 

The percentages in the table above are rounded. 


(1) Non operating company in closing phase. 

(2) Subsidiary constituted in January 2020, the L.I.Z.S.P.E has as finality the consulting in valuation, business management, economic and financial advisory, among other. 

(3) In May 2020, there was a change in the participation of the capital of the Subsidiary Millennium becoming a direct subsidiary of the Company. 

(4) Fund constituted on January 2020, the UVC has as purpose to provide capital resources for disruptive technological initiatives that are related to the Company’s business lines. 

(5) Subsidiary created in July 2020 in the basis of the Abastece Aí and Km de Vantagens programs to operate in the digital payments segment under the Abastece Aí brand.


Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


4. Cash and cash equivalents, financial investments and hedge derivative financial instruments


Cash equivalents and financial investments, excluding cash and bank deposits, are substantially represented by investments: (i) in Brazil, in certificates of deposit of financial institutions linked to interest rate of the Interbank Deposits Interest Rate (“DI”), in repurchase agreement, financial bills, and in short term investments funds, whose portfolio comprised of Brazilian Federal Government bonds and in certificates of deposit of financial institutions; (ii) outside Brazil, in certificates of deposit of financial institutions and in short term investments funds, whose portfolio comprised of Federal Government bonds; and (iii) in currency and interest rate hedging instruments.

 

The financial assets were classified in Note 33.j, based on business model of financial assets of the Company and its subsidiaries.

 

Cash, cash equivalents and financial investments (consolidated) amounted to R$ 9,797,789 as of September 30, 2020 (R$ 5,712,097 as of December 31, 2019) are as follows:

 

a. Cash and cash equivalents

 

Cash and cash equivalents of the Company and its subsidiaries are presented as follows:

 

 

Parent

 

Consolidated

 

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

Cash and bank deposits

 

 

 

 

 

 

 

In local currency

1,429

 

381

 

194,385

 

182,237

In foreign currency

-

 

-

 

112,399

 

102,755

Financial investments considered cash equivalents

 

 

 

 

 

 

 

In local currency

 

 

 

 

 

 

 

Fixed-income securities

935,451

 

42,199

 

2,639,355

 

1,780,939

In foreign currency

 

 

 

 

 

 

 

Fixed-income securities

-

 

-

 

50,194

 

49,448

Total cash and cash equivalents

936,880

 

42,580

 

2,996,333

 

2,115,379



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


b. Financial investments and currency and interest rate hedging instruments

 

The financial investments, which are not classified as cash and cash equivalents, are presented as follows:

 

 

Parent

 

Consolidated

 

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

Financial investments

 

 

 

 

 

 

 

In local currency

 

 

 

 

 

 

 

Fixed-income securities and funds

109,888

 

95,829

 

3,073,361

 

2,610,686

In foreign currency

 

 

 

 

 

 

 

Fixed-income securities and funds

-

 

-

 

2,425,276

 

303,417

Currency and interest rate hedging instruments (a)

-

 

-

 

1,302,819

 

682,615

Total financial investments

109,888

 

95,829

 

6,801,456

 

3,596,718

Current

109,888

 

95,829

 

5,582,703

 

3,090,212

Non-current

-

 

-

 

1,218,753

 

506,506

 

(a) Accumulated gains, net of income tax (see Note 33.i).


5. Trade receivables and reseller financing (Consolidated)


a. Trade receivables

 

The composition of trade receivables is as follows:

 

 

 

09/30/2020

 

12/31/2019

Domestic customers

 

3,447,352

 

3,867,163

Domestic customers – related parties (see Note 8.a.2)

 

356

 

739

Foreign customers

 

349,841

 

226,484

(-) Expected losses on doubtful accounts

 

(406,994)

 

(404,886)

 

 

3,390,555

 

3,689,500

Current

 

3,303,691

 

3,635,834

Non-current

 

86,864

 

53,666



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

The breakdown of trade receivables, gross of expected losses on doubtful accounts, is as follows:

 

 

 

 

 

Past due

 

Total

 

Current

less than 30 days

31-60 days

61-90 days

91-180 days

more than 180 days

09/30/2020

3,797,549

 

2,916,452

130,293

29,572

41,111

56,397

623,724

12/31/2019

4,094,386

 

3,199,315

159,350

27,320

12,245

61,489

634,667

 

The breakdown of expected losses on doubtful accounts, is as follows:

 

 

 

 

 

Past due

 

Total

 

Current

less than 30 days

31-60 days

61-90 days

91-180 days

more than 180 days

09/30/2020

406,994

 

28,540

1,561

1,869

1,982

12,921

360,121

12/31/2019

404,886

 

28,861

1,456

1,625

3,749

23,698

345,497

 

Movements in the allowance for expected losses on doubtful accounts are as follows:

 

Balance as of December 31, 2019

 

404,886

Additions

 

159,757

Reversals

 

(148,585)

Write-offs

 

(9,064)

Balance as of September 30, 2020

 

406,994

 

For further information about the allowance for expected losses on doubtful accounts, see Note 33.d.3.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


b. Reseller financing

 

The composition of reseller financing is as follows:

 

 

 

09/30/2020

 

12/31/2019

Reseller financing – Ipiranga

 

1,115,098

 

956,942

(-) Expected losses on doubtful accounts

 

(188,911)

 

(156,006)

 

 

926,187

 

800,936

Current

 

497,853

 

436,188

Non-current

 

428,334

 

364,748

 

Reseller financing is provided at subsidized rate for renovation and upgrading of service stations, purchase of products, and development of the automotive fuels and lubricants distribution market. The terms of reseller financing range between 12 and 60 months, with an average term of 40 months. The minimum and maximum subsisted interest rates are 0% per month and 1% per month, respectively. These financing are remeasured at a market rate for working capital loans and the remeasurement adjustment between the market rate and the rate subsidized is recognized as a reduction to the reseller’s revenue at the beginning of the contract. Throughout the contract, the interest appropriated by the market rate is recognized to the financial result.

 

The breakdown of reseller financing, gross of expected losses on doubtful accounts, is as follows:

 

 

 

 

 

Past due

 

Total

 

Current

less than 30 days

31-60 days

61-90 days

91-180 days

more than 180 days

09/30/2020

1,115,098

 

764,660

9,243

13,809

9,848

27,465

290,073

12/31/2019

956,942

 

644,488

26,262

10,481

12,616

30,144

232,951

 

The breakdown of expected losses on doubtful accounts, is as follows:

 

 

 

 

 

Past due

 

Total

 

Current

less than 30 days

31-60 days

61-90 days

91-180 days

more than 180 days

09/30/2020

188,911

 

30,078

812

1,406

1,046

13,826

141,743

12/31/2019

156,006

 

21,337

2,519

1,063

1,313

14,639

115,135



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Movements in the allowance for expected losses on doubtful accounts are as follows:

 

Balance as of December 31, 2019

 

156,006

Additions

 

58,323

Reversals

 

(23,733)

Write-offs

 

(1,685)

Balance as of September 30, 2020

 

188,911

 

For further information about the allowance for expected losses on doubtful accounts, see Note 33.d.3.


6. Inventories (Consolidated)

 

 The composition of inventories is as follows:

 

 

09/30/2020

 

12/31/2019

 

Cost

 

Provision  for losses

 

Net

balance

 

Cost

 

Provision

for losses

 

Net

balance

Fuels, lubricants and greases

1,612,005

 

(2,283)

 

1,609,722

 

1,843,257

 

(2,073)

 

1,841,184

Finished goods

560,415

 

(22,195)

 

538,220

 

541,689

 

(22,048)

 

519,641

Work in process

927

 

-

 

927

 

1,971

 

-

 

1,971

Raw materials

508,942

 

(3,436)

 

505,506

 

365,960

 

(2,552)

 

363,408

Liquefied petroleum gas (LPG)

92,544

 

(5,761)

 

86,783

 

101,715

 

(5,761)

 

95,954

Consumable materials and other items for resale

136,725

 

(2,516)

 

134,209

 

140,058

 

(2,587)

 

137,471

Pharmaceutical, hygiene, and beauty products

469,971

 

(3,133)

 

466,838

 

549,191

 

(2,877)

 

546,314

Purchase for future delivery (1)

170,363

 

(464)

 

169,899

 

183,170

 

(2,719)

 

180,451

Properties for resale

27,610

 

(107)

 

27,503

 

29,273

 

(107)

 

29,166

 

3,579,502

 

(39,895)

 

3,539,607

 

3,756,284

 

(40,724)

 

3,715,560

 

(1) Refers substantially to ethanol, biodiesel and advance of fuels.

 

Movements in the provision for losses are as follows:

 

Balance as of December 31, 2019

40,724

Reversals to net realizable value adjustment

(540)

Reversals of obsolescence and other losses

(289)

Balance as of September 30, 2020

39,895

 

The breakdown of provisions for losses related to inventories is shown in the table below:

 

 

09/30/2020

 

12/31/2019

Net realizable value adjustment

14,703

 

15,243

Obsolescence and other losses

25,192

 

25,481

Total

39,895

 

40,724



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

7. Taxes to recover

 

a. Recoverable taxes (Consolidated)

 

Recoverable taxes are substantially represented by credits of Tax on Goods and Services (“ICMS”, the Brazilian VAT), Contribution for Social Security Financing (“COFINS”) and Social Integration Program (“PIS”).

 

 

09/30/2020

 

12/31/2019

ICMS (a.1)

1,108,425

 

914,066

Provision for ICMS losses (a.1)

(50,372)

 

(41,396)

PIS and COFINS (a.2)

1,056,154

 

930,570

Value-added tax (IVA) of foreign subsidiaries

37,396

 

29,707

Others

60,585

 

56,748

Total

2,212,188

 

1,889,695

Current

890,852

 

1,122,335

Non-current

1,321,336

 

767,360

 

a.1 The recoverable ICMS is substantially related to the following subsidiaries and operations:


(i)The subsidiary Oxiteno S.A. accumulates credits once predominantly carries out export operations, interstate outflow or deferred ICMS of products purchased within the State of Bahia; 
(ii)The subsidiaries Ipiranga Produtos de Petróleo S.A. (“IPP”) and Cia Ultragaz S.A. (“Cia Ultragaz”) have credits arising from interstate outflows of oil-related products, whose ICMS was prepaid by the supplier (Petróleo Brasileiro S.A. (“Petrobras”)), and credits arising from the difference between transactions of inflows and outflows of products subject to ICMS taxation; 
(iii)The subsidiary Extrafarma has ICMS credits and ICMS-ST (tax substitution) advances on the inflow and outflow of operations carried out by its distribution centers, mostly in the North and Northeast.

 

The amounts of recoverable ICMS credits are classified as current assets and consumed by the operations itself, being a revolving credit, which means that the credits are monthly offset with the tax payable on sales and new credits are generated by the acquisition of inputs, as well as by the State's refund on tax substitution operations. Management estimates the realization of the credits classified in non-current assets within up to 10 years.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


The estimated recovery of ICMS credits assets is stated as follows:

 

Up to 1 year

346,990

From 1 to 2 years

364,216

From 2 to 3 years

196,479

From 3 to 5 years

86,154

From 5 to 7 years

30,070

From 7 to 10 years

34,144

Total of recoverable ICMS

1,058,053

 

The provision for ICMS losses relates to tax credits of the subsidiaries whose amounts are not included within the term determined by its policy.

 

a.2 Refers, mainly, to the PIS and COFINS credits recorded under Laws 10,637/2002 and 10,833/2003, whose consumption will occur through the offset of debts administered by the Brazilian Federal Revenue Service (“RFB”) in an estimated term of 2 years by management. The subsidiaries Extrafarma, Tequimar, Tropical and Oxiteno S.A. have credits resulting from a definitive favorable decision on the exclusion of ICMS from the calculation basis of PIS and COFINS. For these cases, management estimates the realization of these credits within up to 5 years. (see Note 22.d.1).

 

b. Recoverable income tax and social contribution taxes

 

Represented by recoverable IRPJ and CSLL.

 

 

Parent

 

Consolidated

 

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

IRPJ and CSLL

91,004

 

89,197

 

505,449

 

430,290

Current

51,557

 

49,750

 

253,700

 

325,343

Non-current

39,447

 

39,447

 

251,749

 

104,947

 

Relates to IRPJ and CSLL to be recovered by the Company and its subsidiaries arising from the tax advances of previous periods, with management estimating the realization of these credits within up to 5 years.

 

Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


8. Related parties

 

a. Related parties

 

The balances and transactions between the Company and its related parties are disclosed below:

 

a.1 Parent

 

 

Assets

 

Liabilities

 

Financial

income (1)

 

Debentures (1)

 

Account payable

 

 

Ipiranga Produtos de Petróleo S.A.

750,000

 

 

19,742

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

 

5,199

 

Total as of September 30, 2020

750,000

 

5,199

 

19,742

 

 

Assets

 

Liabilities

 

Financial

income (1)

 

Debentures (1)

 

Account payable

 

 

Ipiranga Produtos de Petróleo S.A.

759,123

 

 

40,151

Imifarma Produtos Farmacêuticos e Cosméticos S.A.

 

4,220

 

Total as of December 31, 2019

759,123

 

4,220

 

 

Total as of September 30, 2019

 

 

 

 

40,151

 

(1) In March 2016, the subsidiary IPP made ​​its second private offering in one single series of 75 debentures at face value of R$ 10,000,000.00 (ten million Brazilian Reais) each, nonconvertible into shares and unsecured. The Company subscribed the total debentures with maturity on March 31, 2021 and semiannual interest linked to DI.

  

a.2 Consolidated

 

Balances and transactions between the Company and its subsidiaries and between subsidiaries have been eliminated in consolidation and are not disclosed in this note. The balances and transactions between the Company and its subsidiaries with other related parties are disclosed below:

 

 

Loans

 

Assets

 

Liabilities

Química da Bahia Indústria e Comércio S.A.

-

 

2,875

Others

490

 

978

Total as of September 30, 2020

490

 

3,853



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


 

Loans

 

Assets

 

Liabilities

Química da Bahia Indústria e Comércio S.A.

-

 

2,875

Others

490

 

1,050

Total as of December 31, 2019

490

 

3,925

 

Loans agreements have indeterminate terms and do not contain interest clauses.

 

 

Commercial transactions

 

Receivables
(1)

 

Payables
(1)

 

Other payables (1)

 

Sales and services

 

Purchases

 

Expenses

Oxicap Indústria de Gases Ltda.

 

3,217

 

 

45

 

14,246

 

Refinaria de Petróleo Riograndense S.A.

 

62,943

 

 

 

227,455

 

ConectCar Soluções de Mobilidade Eletrônica S.A.

356

 

104

 

250

 

2,283

 

118

 

LA’7 Participações e Empreend. Imob. Ltda. (a)

 

 

 

 

 

1,206

Total as of September 30, 2020

356

 

66,264

 

250

 

2,328

 

241,819

 

1,206

 

 

Commercial transactions

 

Receivables
(1)

 

Payables
(1)

 

Sales and
services

 

Purchases

 

Expenses

Oxicap Indústria de Gases Ltda.

 

1,545

 

2

 

14,240

 

Refinaria de Petróleo Riograndense S.A.

 

264,602

 

 

733,806

 

ConectCar Soluções de Mobilidade Eletrônica S.A.

739

 

113

 

3,657

 

109

 

LA’7 Participações e Empreend. Imob. Ltda. (a)

 

124

 

 

 

1,106

Total as of December 31, 2019

739

 

266,384

 

 

 

 

 

 

Total as of September 30, 2019

 

 

 

 

3,659

 

748,155

 

1,106

 

(1) Included in “domestic trade receivables”, “domestic trade payables” and “domestic trade payables – reverse factoring”, respectively.

 

(a) Refers to rental contracts of 15 drugstores owned by LA’7 as of September 30, 2020 and December 31, 2019, a company owned by Extrafarma’s former shareholders and current shareholders of Ultrapar.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Purchase and sale transactions relate substantially to the purchase of raw materials, feedstock, transportation, and storage services based on similar market prices and terms with customers and suppliers with comparable operational performance. The above operations related to ConectCar Soluções de Mobilidade Eletrônica S.A. (“ConectCar”) refer to services provided. In the opinion of the Company and its subsidiaries’ management, transactions with related parties are not subject to credit risk, which is why no an estimated loss or collateral is provided. Collateral provided by the Company in loans of subsidiaries and affiliates are mentioned in Note 16.j.

 

b. Key executives (Consolidated)

 

The Company’s compensation strategy combines short and long-term elements, following the principles of alignment of interests and of maintaining a competitive compensation, and is aimed at retaining key officers and remunerating them adequately according to their attributed responsibilities and the value created to the Company and its shareholders.

 

Short-term compensation is comprised of: (a) fixed monthly compensation paid with the objective of rewarding the executive’s experience, responsibility, and his/her position’s complexity, and includes salary and benefits such as medical coverage, check-up, life insurance, and others; (b) variable compensation paid annually with the objective of aligning the executive’s and the Company’s objectives, which is linked to: (i) the business performance measured through its economic value creation and (ii) the fulfillment of individual annual goals that are based on the strategic plan and are focused on expansion and operational excellence projects, people development and market positioning, among others. Further details about the Deferred Stock Plan are contained in Note 8.c and about post-employment benefits in Note 20.b.

 

The expenses for compensation of its key executives (Company’s directors and executive officers) as shown below:

 

 

09/30/2020

 

09/30/2019

Short-term compensation

34,470

 

36,944

Stock compensation

1,714

 

7,313

Post-employment benefits

2,029

 

1,934

Total

38,213

 

46,191

 

c. Deferred stock plan (Consolidated)

 

Since 2003, Ultrapar has adopted a stock plan in which the executive has the usufruct of shares held in treasury until the transfer of the full ownership of the shares to those eligible members of management after five to seven years from the initial concession of the rights subject to uninterrupted employment of the participant during the period. The volume of shares and the executives eligible are determined by the Board of Directors, and there is no mandatory annual grant. The total number of shares to be used in the plan is subject to the number of shares in treasury. The members of the Ultrapar’s Board of Directors do not eligible for the stock plan. The fair value of the awards was determined on the grant date based on the market value of the shares on the B3, the Brazilian Securities, Commodities and Futures Exchange and the amounts are amortized between five to seven years from the grant date.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


The table below summarizes shares granted to the Company and its subsidiaries’ management:

 

Grant date

Balance of number of shares granted

Vesting period

Market price of shares on the grant date (in R$ per share)

Total grant costs, including taxes

 

Accumulated recognized grant costs

 

Accumulated unrecognized grant costs

March 4, 2016

380,000

2021 to 2023

32.72

17,147

 

(13,348)

 

3,799

December 10, 2014

533,324

2020 to 2021

25.32

27,939

 

(26,128)

 

1,811

March 5, 2014

55,600

2021

26.08

5,999

 

(5,880)

 

119

 

968,924

 

 

51,085

 

(45,356)

 

5,729

 

For the nine-month period ended September 30, 2020, the amortization in the amount of R$ 963 (R$ 7,955 for the nine-month period ended September 30, 2019) was recognized as a general and administrative expense.

 

The table below summarizes the changes of number of shares granted:

 

Balance on December 31, 2019

 

1,224,524

Cancellation of granted shares due to termination of executive employment

 

(200,000)

Shares vested and transferred

 

(55,600)

Balance on September 30, 2020

 

968,924

 

In addition, on April 19, 2017, the Ordinary and Extraordinary General Shareholders’ Meeting (“OEGM”) of approved a new incentive plan based on shares (”Plan”), which establishes the general terms and conditions for the concession of common shares issued by the Company and held in treasury, that may or may not involve the granting of usufruct of part of these shares for later transfer of the ownership of the shares, in periods of three to six years, to directors or employees of the Company or its subsidiaries.

 

As a result of the Plan, common shares representing at most 1% of the Company's share capital may be delivered to the participants, which corresponds, at the date of approval of this Plan, to 11,128,102 common shares.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


The table below summarizes the restricted and performance stock programs:

 

Program

Grant date

Balance of number of shares granted

Vesting period

Market price of shares on the grant date (in R$ per share)

Total grant costs, including taxes

 

Accumulated recognized grant costs

 

Accumulated unrecognized grant costs

Restricted

October 1, 2017

240,000

2023

38.19

12,642

 

(6,321)

 

6,321

Restricted and performance

November 8, 2017

33,638

2020 to 2022

38.19

2,723

 

(1,751)

 

972

Restricted and performance

April 4, 2018

126,360

2021 to 2023

34.35

8,451

 

(5,132)

 

3,319

Restricted

September 19, 2018

80,000

2024

19.58

3,691

 

(1,350)

 

2,341

Restricted

September 24, 2018

80,000

2024

18.40

2,030

 

(677)

 

1,353

Restricted and performance

April 3, 2019

494,202

2022 to 2024

23.25

20,900

 

(8,330)

 

12,570

Restricted

September 2, 2019

440,000

2025

16.42

9,965

 

(1,800)

 

8,165

Restricted and performance

April 1, 2020

790,455

2023 to 2025

12.53

18,653

 

(2,428)

 

16,225

Restricted

September 16, 2020

700,000

2026

23.03

22,236

 

(309)

 

21,927

 

 

2,984,655

 

 

101,291

 

(28,098)

 

73,193

 

For the nine-month period ended September 30, 2020, a general and administrative expense in the amount of R$ 8,362 was recognized in relation to the Plan (R$ 9,048 for the nine-month period ended September 30, 2019).

 

Balance on December 31, 2019

 

1,738,660

Shares granted on April 1, 2020

 

877,788

Shares granted on September 16, 2020

 

700,000

Cancellation of granted shares due to termination of executive employment

 

(278,801)

Cancellation of performance shares

 

(52,992)

Balance on September 30, 2020

 

2,984,655

 


Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


9. Income and social contribution taxes 


a. Deferred income (IRPJ) and social contribution taxes (CSLL)

 

The Company and its subsidiaries recognize deferred tax assets and liabilities, which are not subject to the statute of limitations, resulting from tax loss carryforwards, negative tax bases, temporary additions, among others. Deferred tax assets are sustained by the continued profitability of their operations. Deferred IRPJ and CSLL are recognized under the following main categories:

 

 

Parent

 

Consolidated

 

09/30/2020

 

12/31/2019

 

09/30/2020

 

12/31/2019

Assets - deferred income and social contribution taxes on:

 

 

 

 

 

 

 

Provision for impairment of assets

-

 

-

 

51,900

 

72,377

Provisions for tax, civil, and labor risks

172

 

-

 

138,115

 

150,085

Provision for post-employment benefits

1,398

 

-

 

88,893

 

92,199

Provision for differences between cash and accrual basis (i)

-

 

-

 

711,208

 

224,065

Goodwill

-

 

-

 

6,039

 

8,161

Business combination – tax basis vs. accounting basis of goodwill

-

 

-

 

75,707

 

75,745

Provision for asset retirement obligation

-

 

-

 

15,355

 

14,762

Provision for suppliers

928

 

439

 

65,503

 

35,214

Provision for profit sharing and bonus

5,284

 

-

 

46,623

 

44,818

Leases payable

884

 

-

 

37,174

 

19,003

Change in fair value of subscription warrants

13,699

 

16,338

 

13,699

 

16,338

Other provisions

94

 

204

 

42,085

 

45,316

Tax losses and negative basis for social contribution carryforwards (9.d)

32,063

 

24,632

 

405,440

 

278,140

Total

54,522

 

41,613

 

1,697,741

 

1,076,223

Offset the liability balance of deferred IRPJ and CSLL

(3,956)

 

-

 

(629,497)

 

(422,529)

Net balance of deferred taxes assets

50,566

 

41,613

 

1,068,244

 

653,694

 

 

 

 

 

 

 

 

Liabilities - deferred income and social contribution taxes on:

 

 

 

 

 

 

 

Revaluation of PP&E

-

 

-

 

1,799

 

1,866

Leases payable

-

 

-

 

2,034

 

2,356

Provision for differences between cash and accrual basis (i)

877

 

-

 

461,229

 

257,718

Provision for goodwill

-

 

-

 

78,978

 

39,186

Business combination – fair value of assets

-

 

-

 

112,284

 

114,125

Temporary differences in foreign subsidiary

3,079

 

-

 

9,371

 

-

Other provisions

-

 

-

 

15,979

 

14,809

Total

3,956

 

-

 

681,674

 

430,060

Offset the asset balance of deferred IRPJ and CSLL

(3,956)

 

-

 

(629,497)

 

(422,529)

Net balance of deferred taxes liabilities

-

 

-

 

52,177

 

7,531

 

(i) Refers mainly to the income tax on the exchange variation of the derivate hedging instruments.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


Changes in the net balance of deferred IRPJ and CSLL are as follows:

 

 

Parent

 

Consolidated

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Initial balance

41,613

 

14,034

 

646,163

 

504,890

Deferred IRPJ and CSLL recognized in income of the period

8,953

 

3,109

 

46,804

 

(90,500)

Deferred IRPJ and CSLL recognized in other comprehensive income

-

 

-

 

305,204

 

64,310

Others

-

 

-

 

17,896

 

3,248

Final balance

50,566

 

17,143

 

1,016,067

 

481,948

 

The estimated recovery of deferred tax assets relating to IRPJ and CSLL is stated as follows:

 

 

Parent

 

Consolidated

Up to 1 year

19,154

 

254,651

From 1 to 2 years

12,070

 

81,529

From 2 to 3 years

2,869

 

141,760

From 3 to 5 years

5,710

 

156,334

From 5 to 7 years

8,572

 

660,802

From 7 to 10 years

6,147

 

402,665

Total of deferred tax assets relating to IRPJ and CSLL

54,522

 

1,697,741

 

In order to evaluate the realization of deferred tax assets, the taxable income projections from business plans of each segment of the Company, which indicates trends and perspectives, demand effects, competition and other economic factors that represent the management’s best estimate about the economic conditions existing during the period of realization of the deferred tax asset were taken into account.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)

 

b. Reconciliation of income and social contribution taxes

 

IRPJ and CSLL are reconciled to the statutory tax rates as follows:

 

 

Parent

 

Consolidated

 

09/30/2020

 

09/30/2019

 

09/30/2020

 

09/30/2019

Income (loss) before taxes and share of profit (loss) of subsidiaries, joint ventures, and associates

(45,385)

 

9,800

 

883,388

 

1,086,096

Statutory tax rates – %

34

 

34

 

34

 

34

Income and social contribution taxes at the statutory tax rates

15,431

 

(3,332)

 

(300,352)

 

(369,273)

Adjustments to the statutory income and social contribution taxes:

 

 

 

 

 

 

 

Nondeductible expenses (i)

(6,657)

 

(594)

 

(25,991)

 

(41,228)

Nontaxable revenues (ii)

-

 

7,098

 

22,398

 

24,568

Adjustment to estimated income (iii)

-

 

-

 

6,908

 

8,245

Unrecorded deferred income and social contribution taxes carryforwards deferred (iv)

-

 

-

 

(119,686)

 

(64,769)

Other adjustments

9

 

(63)

 

3,415

 

14,374

Income and social contribution taxes before tax incentives

8,783

 

3,109

 

(413,308)

 

(428,083)

Tax incentives - SUDENE

-

 

-

 

56,630

 

30,891

Income and social contribution taxes in the income statement

8,783

 

3,109

 

(356,678)

 

(397,192)

 

 

 

 

 

 

 

 

Current

(170)

 

-

 

(403,482)

 

(306,692)

Deferred

8,953

 

3,109

 

46,804

 

(90,500)

Effective IRPJ and CSLL rates – %

19.4

 

(31.7)

 

40.4

 

36.6

 

(i)Consist of certain expenses that cannot be deducted for tax purposes under applicable tax legislation, such as expenses with fines, donations, gifts, losses of assets, negative effects of foreign subsidiaries and certain provisions.
(ii)Consist of certain gains and income that are not taxable under applicable tax legislation, such as the reimbursement of taxes and the reversal of certain provisions.
(iii)Brazilian tax law allows for an alternative method of taxation for companies that generated gross revenues of up to R$ 78 million in their previous fiscal year. Certain subsidiaries of the Company adopted this alternative form of taxation, whereby income and social contribution taxes are calculated on a basis equal to 32% of operating revenues, as opposed to being calculated based on the effective taxable income of these subsidiaries. The adjustment to estimated income represents the difference between the taxation under this alternative method and the income and social contribution taxes that would have been paid based on the effective statutory rate applied to the taxable income of these subsidiaries.
(iv)See Note 9.d.



Ultrapar Participações S.A. and Subsidiaries

 

Notes to the Parent’s Separate and Consolidated Interim Financial Information

 

(In thousands of Brazilian Reais, unless otherwise stated)


c. Tax incentives – SUDENE

 

The following subsidiaries are entitled to federal tax benefits providing for IRPJ reduction under the program for development of northeastern Brazil operated by the Superintendence for the Development of the Northeast (“SUDENE”), as shown below:

 

Subsidiary

Units

Incentive - %

Expiration

Bahiana Distribuidora de Gás Ltda.

Mataripe base

75

2024

 

Caucaia base

75

2025

 

Juazeiro base

75

2026

 

Aracaju base

75

2027

 

Suape base

75

2027

 

 

 

 

Terminal Químico de Aratu S.A. – Tequimar

Suape terminal

75

2020

 

Aratu terminal

75

2022

 

Itaqui terminal

75

2025

 

 

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