Ultrapar Holdings Inc 6-K/A, filed Mar 17, 2020
Ultrapar Holdings Inc (UGP)
About this 6-K/A
Ultrapar Holdings Inc filed this 6-K/A on March 17, 2020.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K/A
Report Of Foreign Private Issuer
Pursuant To Rule 13a-16 Or 15d-16 Of
The Securities Exchange Act Of 1934
For the month of March, 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
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EXPLANATORY NOTE
“Ultrapar restated its 2019 Financial Statements at CVM on March 16, 2020, to amend explanatory note 26.h, which is presented below. There was no further adjustment and the other sections of the document remains the same.”
Table of Contents
(Convenience Translation into English from
the Original Previously Issued in Portuguese)
Ultrapar Participações S.A.
Parent and Consolidated
Financial Statements
for the Year Ended
December 31, 2019 and
Independent Auditor’s Report
Financial Information
KPMG Auditores Independentes
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Parent and Consolidated
Financial Statements
for the Years Ended December 31, 2019 and 2018
| Report in the Individual and Consolidated Financial Statements |
3– 6 | |||
| 7–8 | ||||
| 9 | ||||
| 10 | ||||
| 11–12 | ||||
| 13–14 | ||||
| 15 | ||||
| 16–104 | ||||
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(Convenience Translation into English from the Original Previously Issued in Portuguese)
Independent Auditor’s Report in the Individual and Consolidated Financial Statements
To the Shareholders of the
Ultrapar Participações S.A.
São Paulo – SP
Opinion
We have audited the individual and consolidated financial statements of Ultrapar Participações S.A. (“the Company”), respectively referred to as Parent and Consolidated, which comprise the statement of financial position as at December 31, 2019, the statements of income and other comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements present fairly, in all material respects, the individual and consolidated financial position of the Ultrapar Participações S.A. as at December 31, 2019, and of its individual and consolidated financial performance and its cash flows for the year then ended in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB).
Basis for Opinion
We conducted our audit in accordance with Brazilian and International Standards on Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Individual and Consolidated Financial Statements section of our report. We are independent of the Company and its subsidiaries in accordance with the relevant ethical requirements included in the Accountant Professional Code of Ethics (“Código de Ética Profissional do Contador”) and in the professional standards issued by the Brazilian Federal Accounting Council (“Conselho Federal de Contabilidade”) and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the current period. These matters were addressed in the context of our audit of the individual and consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of recoverable amount of goodwill on business combination
In accordance with accounting practices adopted in Brazil and with international financial reporting standards, the Company is required to annually perform the impairment test of the amounts recorded as intangible assets with indefinite useful lives, including goodwill for future profitability (“goodwill”). The acquisition of the operations of Imifarma Produtos Farmacêuticos S.A. (Extrafarma), resulted on the recognition of goodwill in the amount of R$ 661,553 thousand, as disclosed in the explanatory note 15, the recoverable amount of which must be evaluated annually. On December 31, 2019, the Company recorded an impairment of the recoverable amount of R$ 593,280 related to the goodwill recorded in Extrafarma.
The assessment of the need or not to reduce the recoverable amount is supported by an estimate of future profitability based on the business plan and budget prepared by the Company and approved by the Board of Directors, which are based on methodologies and assumptions involving estimates, such as: revenue growth rate, costs and expenses, investments, future working capital and discount rates. Assumptions about projected growth in future cash flows are based on the business plan of the Company’s segments, as well as on comparable market data.
Due to uncertainties related to assumptions and estimates that have a significant risk of resulting in a material adjustment to the accounting balances of the individual and consolidated financial statements, we consider this matter to be significant for our audit.
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Our response
Our audit procedures included, among others:
Evaluation of the design, implementation and effectiveness of the internal control of financial projections related to the identification and measurement of the recoverable value of the cash-generating unit where the goodwill is allocated.
Within the involvement of our corporate finance specialists, for the methodology adopted by the Company and the assumptions used in the calculation of discounted cash flows, including growth and discount rates, comparison with historical information and testing of the arithmetic accuracy of the formulas used in discounted cash flow models.
Evaluation of the sensitivity analysis of significant assumptions and comparison with the budgets approved in the previous period with the actual values calculated in the current year.
Comparison of the recoverable amount calculated based on discounted cash flows, with the book value and evaluation of the disclosures made in the financial statements.
As a result of the evidence obtained through the audit procedures summarized above, we consider that the amount of goodwill on business combinations and the respective disclosures are acceptable in the context of the individual and consolidated financial statements taken as a whole.
Realization of deferred tax assets
As of December 31, 2019, the individual and consolidated financial statements include deferred tax asset amounts equivalent to R $ 1,076,223 thousand, of which R$ 278,140 thousand are related to temporary differences and R$ 798,083 thousand are related to tax losses, considered recoverable based on the generation of future taxable profits.
Estimates of future taxable income generation include the use of assumptions, judgments and estimates on cash flows, such as growth rates of revenues, costs and expenses, estimates of future investments and working capital and discount rates, which involve high degree of complexity and judgments that impact the expectation of realization of deferred tax assets in the coming years. Therefore, we consider this matter to be significant for our audit.
Our Response
Our audit procedures included, among others:
Evaluation of the design, implementation and effectiveness of the internal control of financial projections related to the realization of the registered deferred taxes.
Within the involvement of our corporate finance specialists, for the assumptions and data used by the Company in preparing the study of future taxable profits considering the projections of future cash flows. Also to assess the accuracy of the recorded balances.
Comparison of the budgets approved in the previous year with the actual values calculated in the current year.
Assessment whether the disclosures in the individual and consolidated financial statements consider all relevant information regarding deferred tax assets.
As a result of the evidence obtained through the audit procedures summarized above, we consider that the amount of deferred tax assets recorded and the respective disclosures are acceptable in the context of the individual and consolidated financial statements taken as a whole.
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Other matters - Statements of value added
The individual and consolidated statements of value added (DVA) for the year ended December 31, 2019 prepared under the responsibility of the Company’s management, and presented herein as supplementary information for IFRS purposes, have been subject to audit procedures jointly performed with the audit of the Company’s financial statements. In order to form our opinion, we assessed whether those statements are reconciled with the financial statements and accounting records, as applicable, and whether their format and contents are in accordance with criteria determined in the Technical Pronouncement 09 (CPC 09) - Statement of Value Added. In our opinion, the statements of value added have been fairly prepared, in all material respects, in accordance with the criteria determined by the aforementioned Technical Pronouncement and are consistent with the overall individual and consolidated financial statements.
Other information accompanying the individual and consolidated financial statements and the auditor’s report
Management is responsible for the other information comprising the management report.
Our opinion on the individual and consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the individual and consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the individual and consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Individual and Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the individual and consolidated financial statements in accordance with Accounting Practices Adopted in Brazil and with International Financial Reporting Standards (IFRS), issued by the International Accounting Standards Board (IASB) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the individual and consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company and subsidiaries or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and subsidiaries financial reporting process.
Auditors’ Responsibilities for the Audit of the Individual and Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the individual and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Brazilian and international standards on auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Brazilian and international standards on auditing, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| – | Identify and assess the risks of material misstatement of the individual and consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
| – | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s and its subsidiaries internal control. |
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| – | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| – | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s and its subsidiaries ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the individual and consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company and subsidiaries to cease to continue as a going concern. |
| – | Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the individual and consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
| – | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. |
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the individual and consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
São Paulo, February 19, 2020
KPMG Auditores Independentes
CRC 2SP014428/O-6
Original report in Portuguese signed by
Marcio Serpejante Peppe
Accountant CRC 1SP233011/O-8
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Ultrapar Participações S.A. and Subsidiaries
Statements of Financial Position
as of December 31, 2019 and December 31, 2018
(In thousands of Brazilian Reais)
| Parent | Consolidated | |||||||||||||||||||
| Assets |
Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||||
| Current assets |
||||||||||||||||||||
| Cash and cash equivalents |
4.a | 42,580 | 172,315 | 2,115,379 | 3,938,951 | |||||||||||||||
| Financial investments and hedging instruments |
4.b | 95,829 | 565,930 | 3,090,212 | 2,853,106 | |||||||||||||||
| Trade receivables |
5.a | — | — | 3,635,834 | 4,069,307 | |||||||||||||||
| Reseller financing |
5.b | — | — | 436,188 | 367,262 | |||||||||||||||
| Inventories |
6 | — | — | 3,715,560 | 3,354,532 | |||||||||||||||
| Recoverable taxes |
7.a | — | — | 1,122,335 | 639,699 | |||||||||||||||
| Recoverable income and social contribution taxes |
7.b | 49,750 | 39,705 | 325,343 | 257,182 | |||||||||||||||
| Dividends receivable |
3,074 | 260,483 | 3,630 | 1,064 | ||||||||||||||||
| Other receivables |
4,258 | 1,527 | 36,765 | 58,561 | ||||||||||||||||
| Prepaid expenses |
10 | 2,135 | 1,962 | 111,355 | 187,570 | |||||||||||||||
| Contractual assets with customers – exclusive rights |
11 | — | — | 465,454 | 484,473 | |||||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||||
| Total current assets |
197,626 | 1,041,922 | 15,058,055 | 16,211,707 | ||||||||||||||||
| Non-current assets |
||||||||||||||||||||
| Financial investments and hedging instruments |
4.b | — | — | 506,506 | 202,349 | |||||||||||||||
| Trade receivables |
5.a | — | — | 53,666 | 81,569 | |||||||||||||||
| Reseller financing |
5.b | — | — | 364,748 | 348,268 | |||||||||||||||
| Related parties |
8.a | 759,123 | 761,288 | 490 | 490 | |||||||||||||||
| Deferred income and social contribution taxes |
9.a | 41,613 | 14,034 | 653,694 | 514,187 | |||||||||||||||
| Recoverable taxes |
7.a | — | — | 767,360 | 747,180 | |||||||||||||||
| Recoverable income and social contribution taxes |
7.b | 39,447 | 48,685 | 104,947 | 105,602 | |||||||||||||||
| Escrow deposits |
22.a | 17 | — | 921,443 | 881,507 | |||||||||||||||
| Indemnification asset – business combination |
22.c | — | — | 193,496 | 194,719 | |||||||||||||||
| Other receivables |
— | — | 3,430 | 1,411 | ||||||||||||||||
| Prepaid expenses |
10 | 255 | 30 | 69,216 | 399,095 | |||||||||||||||
| Contractual assets with customers – exclusive rights |
11 | — | — | 1,000,535 | 1,034,004 | |||||||||||||||
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|
|
|
|
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|
|||||||||||||
| Total long term assets |
840,455 | 824,037 | 4,639,531 | 4,510,381 | ||||||||||||||||
| Investments |
||||||||||||||||||||
| In subsidiaries |
12.a | 10,058,456 | 9,509,480 | — | — | |||||||||||||||
| In joint-ventures |
12.b | 18,792 | 20,118 | 153,076 | 101,954 | |||||||||||||||
| In associates |
12.c | — | — | 25,750 | 24,338 | |||||||||||||||
| Other |
— | — | 2,793 | 2,795 | ||||||||||||||||
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|
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| 10,077,248 | 9,529,598 | 181,619 | 129,087 | |||||||||||||||||
| Right to use assets |
13 | 5,799 | — | 1,980,912 | — | |||||||||||||||
| Property, plant, and equipment |
14 | 2,532 | — | 7,572,762 | 7,278,865 | |||||||||||||||
| Intangible assets |
15 | 246,163 | 246,163 | 1,762,593 | 2,369,355 | |||||||||||||||
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|
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| Total non-current assets |
11,172,197 | 10,599,798 | 16,137,417 | 14,287,688 | ||||||||||||||||
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|
|
|
|
|
|
|
|
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| Total assets |
11,369,823 | 11,641,720 | 31,195,472 | 30,499,395 | ||||||||||||||||
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The accompanying notes are an integral part of the financial statements.
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Ultrapar Participações S.A. and Subsidiaries
Statements of Financial Position
as of December 31, 2019 and December 31, 2018
(In thousands of Brazilian Reais)
| Parent | Consolidated | |||||||||||||||||||
| Liabilities |
Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||||
| Current liabilities |
||||||||||||||||||||
| Loans and hedging instruments |
16 | — | — | 867,871 | 2,007,430 | |||||||||||||||
| Debentures |
16.g | 28,713 | 34,504 | 249,570 | 263,718 | |||||||||||||||
| Trade payables |
17 | 2,173 | 272 | 2,158,478 | 2,551,607 | |||||||||||||||
| Trade payables – agreement |
17 | — | — | 541,593 | 180,070 | |||||||||||||||
| Salaries and related charges |
18 | 958 | 228 | 405,636 | 428,192 | |||||||||||||||
| Taxes payable |
19 | 389 | 11,563 | 269,922 | 268,005 | |||||||||||||||
| Dividends payable |
26.h | 14,689 | 282,334 | 16,694 | 284,024 | |||||||||||||||
| Income and social contribution taxes payable |
— | 9,238 | 164,757 | 55,477 | ||||||||||||||||
| Post-employment benefits |
20.b | — | — | 28,951 | 45,655 | |||||||||||||||
| Provision for asset retirement obligation |
21 | — | — | 3,847 | 4,382 | |||||||||||||||
| Provision for tax, civil, and labor risks |
22.a | — | — | 40,455 | 77,822 | |||||||||||||||
| Trade payables – customers and third parties’ indemnification |
23 | — | — | — | 3,501 | |||||||||||||||
| Leases payable |
13 | 144 | — | 206,396 | 2,849 | |||||||||||||||
| Other payables |
3 | 3,975 | 213,273 | 137,494 | ||||||||||||||||
| Deferred revenue |
24 | — | — | 27,626 | 26,572 | |||||||||||||||
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| Total current liabilities |
47,069 | 342,114 | 5,195,069 | 6,336,798 | ||||||||||||||||
| Non-current liabilities |
||||||||||||||||||||
| Loans and hedging instruments |
16 | — | — | 6,907,113 | 6,487,400 | |||||||||||||||
| Debentures |
16.g | 1,723,368 | 1,722,450 | 6,368,168 | 6,401,535 | |||||||||||||||
| Related parties |
8.a | 4,220 | 5,158 | 3,925 | 4,071 | |||||||||||||||
| Deferred income and social contribution taxes |
9.a | — | — | 7,531 | 9,297 | |||||||||||||||
| Post-employment benefits |
20.b | — | — | 243,916 | 204,160 | |||||||||||||||
| Provision for asset retirement obligation |
21 | — | — | 47,395 | 50,285 | |||||||||||||||
| Provision for tax, civil, and labor risks |
22.a; 22.c | 399 | 798 | 884,140 | 865,249 | |||||||||||||||
| Leases payable |
13 | 5,855 | — | 1,382,277 | 43,217 | |||||||||||||||
| Deferred revenue |
24 | — | — | — | 11,850 | |||||||||||||||
| Subscription warrants – indemnification |
25 | 130,657 | 123,095 | 130,657 | 123,095 | |||||||||||||||
| Other payables |
— | — | 190,106 | 162,409 | ||||||||||||||||
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|||||||||||||
| Total non-current liabilities |
1,864,499 | 1,851,501 | 16,165,228 | 14,362,568 | ||||||||||||||||
| Equity |
||||||||||||||||||||
| Share capital |
26.a; 26.f | 5,171,752 | 5,171,752 | 5,171,752 | 5,171,752 | |||||||||||||||
| Equity instrument granted |
26.b | 11,970 | 4,309 | 11,970 | 4,309 | |||||||||||||||
| Capital reserve |
26.d | 542,400 | 542,400 | 542,400 | 542,400 | |||||||||||||||
| Treasury shares |
26.c | (485,383 | ) | (485,383 | ) | (485,383 | ) | (485,383 | ) | |||||||||||
| Revaluation reserve on subsidiaries |
26.e | 4,522 | 4,712 | 4,522 | 4,712 | |||||||||||||||
| Profit reserves |
26.f | 3,995,414 | 4,099,092 | 3,995,414 | 4,099,092 | |||||||||||||||
| Valuation adjustments |
26.g.1 | (146,317 | ) | (63,989 | ) | (146,317 | ) | (63,989 | ) | |||||||||||
| Cumulative translation adjustments |
26.g.2 | 102,427 | 65,857 | 102,427 | 65,857 | |||||||||||||||
| Additional dividends to the minimum mandatory dividends |
26.h | 261,470 | 109,355 | 261,470 | 109,355 | |||||||||||||||
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| Equity attributable to: |
||||||||||||||||||||
| Shareholders of the Company |
9,458,255 | 9,448,105 | 9,458,255 | 9,448,105 | ||||||||||||||||
| Non-controlling interests in subsidiaries |
— | — | 376,920 | 351,924 | ||||||||||||||||
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| Total equity |
9,458,255 | 9,448,105 | 9,835,175 | 9,800,029 | ||||||||||||||||
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|
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|
|||||||||||||
| Total liabilities and equity |
11,369,823 | 11,641,720 | 31,195,472 | 30,499,395 | ||||||||||||||||
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The accompanying notes are an integral part of the financial statements.
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Ultrapar Participações S.A. and Subsidiaries
Statements of Profit or Loss
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais, except earnings per share)
| Parent | Consolidated | |||||||||||||||||||
| Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||||
| Net revenue from sales and services |
27 | — | — | 89,297,975 | 90,697,983 | |||||||||||||||
| Cost of products and services sold |
28 | — | — | (83,187,109 | ) | (84,537,368 | ) | |||||||||||||
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| Gross profit |
— | — | 6,110,866 | 6,160,615 | ||||||||||||||||
| Operating income (expenses) |
||||||||||||||||||||
| Selling and marketing |
28 | — | — | (2,610,384 | ) | (2,601,617 | ) | |||||||||||||
| Estimated losses on doubtful accounts |
— | — | (30,003 | ) | (69,250 | ) | ||||||||||||||
| General and administrative |
28 | — | — | (1,726,253 | ) | (1,625,839 | ) | |||||||||||||
| Loss on disposal of property, plant and equipment and intangibles |
29 | — | — | (30,019 | ) | (22,088 | ) | |||||||||||||
| Impairment of assets |
15.a; 29 | — | — | (593,280 | ) | — | ||||||||||||||
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| Other operating income, net |
30 | 312 | (313 | ) | 179,625 | 57,533 | ||||||||||||||
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| Operating income before financial income (expenses) and share of profit (loss) of subsidiaries, joint ventures and associates |
312 | (313 | ) | 1,300,552 | 1,899,354 | |||||||||||||||
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| Share of profit (loss) of subsidiaries, joint ventures and associates |
12 | 394,793 | 1,174,985 | (12,145 | ) | (14,779 | ) | |||||||||||||
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| Operating income before financial income (expenses) and income and social contribution taxes |
395,105 | 1,174,672 | 1,288,407 | 1,884,575 | ||||||||||||||||
| Financial income |
31 | 73,201 | 146,137 | 457,289 | 681,235 | |||||||||||||||
| Financial expenses |
31 | (122,359 | ) | (119,900 | ) | (964,143 | ) | (794,771 | ) | |||||||||||
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| Financial result, net |
(49,158 | ) | 26,237 | (506,854 | ) | (113,536 | ) | |||||||||||||
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| Income before income and social contribution taxes |
345,947 | 1,200,909 | 781,553 | 1,771,039 | ||||||||||||||||
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| Income and social contribution taxes |
||||||||||||||||||||
| Current |
9.b; 9.c | — | (35,363 | ) | (476,074 | ) | (476,302 | ) | ||||||||||||
| Deferred |
9.b | 27,579 | (15,125 | ) | 97,465 | (162,417 | ) | |||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||||
| 27,579 | (50,488 | ) | (378,609 | ) | (638,719 | ) | ||||||||||||||
| Net income for the year |
373,526 | 1,150,421 | 402,944 | 1,132,320 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|||||||||||||
| Net income for the year attributable to: |
||||||||||||||||||||
| Shareholders of the Company |
373,526 | 1,150,421 | 373,526 | 1,150,421 | ||||||||||||||||
| Non-controlling interests in subsidiaries |
— | — | 29,418 | (18,101 | ) | |||||||||||||||
| Earnings per share (based on weighted average number of shares outstanding) – R$ |
||||||||||||||||||||
| Basic |
32 | 0.3438 | 1.0611 | 0.3438 | 1.0611 | |||||||||||||||
| Diluted |
32 | 0.3422 | 1.0541 | 0.3422 | 1.0541 | |||||||||||||||
The accompanying notes are an integral part of the financial statements.
9
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Comprehensive Income
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais)
| Parent | Consolidated | |||||||||||||||||||
| Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||||
| Net income for the year |
373,526 | 1,150,421 | 402,944 | 1,132,320 | ||||||||||||||||
| Items that are subsequently reclassified to profit or loss: |
||||||||||||||||||||
| Fair value adjustments of financial instruments of subsidiaries, net |
26.g.1 | (51,340 | ) | (213,916 | ) | (51,319 | ) | (213,937 | ) | |||||||||||
| Fair value adjustments of financial instruments of joint ventures, net |
26.g.1 | (978 | ) | (2,329 | ) | (978 | ) | (2,329 | ) | |||||||||||
| Cumulative translation adjustments, net of hedge of net investments in foreign operations and income and social contribution taxes |
26.g.2 | 36,570 | 12,796 | 36,570 | 12,796 | |||||||||||||||
| Items that are not subsequently reclassified to profit or loss: |
||||||||||||||||||||
| Actuarial gain (losses) of post-employment benefits of subsidiaries, net |
26.g.1 | (23,219 | ) | (1,193 | ) | (29,996 | ) | (5,282 | ) | |||||||||||
| Actuarial gain (losses) of post-employment benefits of joint-ventures, net |
26.g.1 | (6,791 | ) | (1,375 | ) | (6,791 | ) | (1,375 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive income for the year |
327,768 | 944,404 | 350,430 | 922,193 | ||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||
| Total comprehensive income for the year attributable to shareholders of the Company |
327,768 | 944,404 | 327,768 | 944,404 | ||||||||||||||||
| Total comprehensive income for the year attributable to non-controlling interest in subsidiaries |
— | — | 22,662 | (22,211 | ) | |||||||||||||||
The accompanying notes are an integral part of the financial statements.
10
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Changes in Equity
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais)
| Profit reserve | Shareholders’ 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 shareholders’ 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 year |
— | — | — | — | — | — | — | — | — | 373,526 | — | 373,526 | 29,418 | 402,944 | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustments of available for sale, net of income taxes |
26.g.1 | — | — | — | — | — | — | — | (52,318 | ) | — | — | — | (52,318 | ) | 21 | (52,297 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Actuarial gain of post-employment benefits, net of income taxes |
26.g.1 | — | — | — | — | — | — | — | (30,010 | ) | — | — | — | (30,010 | ) | (6,777 | ) | (36,787 | ) | |||||||||||||||||||||||||||||||||||||||||
| Currency translation of foreign subsidiaries, including the effect of net investments hedge |
26.g.2 | — | — | — | — | — | — | — | — | 36,570 | — | — | 36,570 | — | 36,570 | |||||||||||||||||||||||||||||||||||||||||||||
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|
|
|
|
|
|||||||||||||||||||||||||||||||||
| Total comprehensive income for the year |
— | — | — | — | — | — | — | (82,328 | ) | 36,570 | 373,526 | — | 327,768 | 22,662 | 350,430 | |||||||||||||||||||||||||||||||||||||||||||||
| Shareholder transaction – gain in reimbursement of shares pref. B from Oxiteno Nordeste |
3.b.2 | — | — | — | — | — | — | — | — | — | 1,489 | — | 1,489 | (1,489 | ) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Equity instrument granted |
26.b | — | 7,661 | — | — | — | — | — | — | — | — | — | 7,661 | — | 7,661 | |||||||||||||||||||||||||||||||||||||||||||||
| Realization of revaluation reserve of subsidiaries |
26.e | — | — | — | — | (190 | ) | — | — | — | — | 190 | — | |
— |
|
— | — | ||||||||||||||||||||||||||||||||||||||||||
| Income and social contribution taxes on realization of revaluation reserve of subsidiaries |
26.e | — | — | — | — | — | — | — | — | — | (31 | ) | — | (31 | ) | — | (31 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Transfer to statutory reserve |
— | — | — | — | — | — | 1,648 | — | — | (1,648 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Additional dividends attributable to non-controlling interests |
— | — | — | — | — | — | — | — | — | — | — | — | (993 | ) | (993 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Redemption of non-controlling shares of Oxiteno Nordeste |
3.b.2 | — | — | — | — | — | — | — | — | — | — | — | — | (2,180 | ) | (2,180 | ) | |||||||||||||||||||||||||||||||||||||||||||
| Capital increase from Iconic non-controlling shareholders |
— | — | — | — | — | — | — | — | — | — | — | — | 6,996 | 6,996 | ||||||||||||||||||||||||||||||||||||||||||||||
| Approval of additional dividends by the Shareholders’ Meeting |
26.h | — | — | — | — | — | — | — | — | — | — | (109,355 | ) | (109,355 | ) | — | (109,355 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Allocation of net income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Legal reserve |
26.f; 26.h | — | — | — | — | — | 18,676 | — | — | — | (18,676 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Interim dividends (R$ 0.20 per share of the Company) |
26.h | — | — | — | — | — | — | — | — | — | (217,382 | ) | — | (217,382 | ) | — | (217,382 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Proposed dividends (R$ 0.24 per share of the Company) |
26.h | — | — | — | — | — | — | (124,002 | ) | — | — | (137,468 | ) | 261,470 | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||
| 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 | 9,835,176 | ||||||||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
11
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Changes in Equity
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais)
| Profit reserve | Shareholders’ 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 shareholders’ equity |
||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2017 |
5,171,752 | 536 | 549,778 | (482,260 | ) | 4,930 | 629,144 | 3,000,707 | 154,824 | 53,061 | — | 163,742 | 9,246,214 | 377,824 | 9,624,038 | |||||||||||||||||||||||||||||||||||||||||||||
| Net income for the year |
— | — | — | — | — | — | — | — | — | 1,150,421 | — | 1,150,421 | (18,101 | ) | 1,132,320 | |||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value adjustments of financial assets, net of income taxes |
26.g.1 | — | — | — | — | — | — | — | (216,245 | ) | — | — | — | (216,245 | ) | (21 | ) | (216,266 | ) | |||||||||||||||||||||||||||||||||||||||||
| Actuarial losses of post-employment benefits, net of income taxes |
26.g.1 | — | — | — | — | — | — | — | (2,568 | ) | — | — | — | (2,568 | ) | (4,089 | ) | (6,657 | ) | |||||||||||||||||||||||||||||||||||||||||
| Currency translation of foreign subsidiaries, including the effect of net investments hedge |
26.g.2 | — | — | — | — | — | — | — | — | 12,796 | — | — | 12,796 | — | 12,796 | |||||||||||||||||||||||||||||||||||||||||||||
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|
|||||||||||||||||||||||||||||||||
| Total comprehensive income for the year |
— | — | — | — | — | — | — | (218,813 | ) | 12,796 | 1,150,421 | — | 944,404 | (22,211 | ) | 922,193 | ||||||||||||||||||||||||||||||||||||||||||||
| Equity instrument granted |
26.b | — | 3,773 | — | — | — | — | — | — | — | — | — | 3,773 | — | 3,773 | |||||||||||||||||||||||||||||||||||||||||||||
| Stock plan |
8.c; 26.c | — | — | (7,378 | ) | (3,123 | ) | — | — | — | — | — | — | — | (10,501 | ) | — | (10,501 | ) | |||||||||||||||||||||||||||||||||||||||||
| Realization of revaluation reserve of subsidiaries |
26.e | — | — | — | — | (218 | ) | — | — | — | — | 218 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Income and social contribution taxes on realization of revaluation reserve of subsidiaries |
26.e | — | — | — | — | — | — | — | — | — | (3 | ) | — | (3 | ) | — | (3 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Expired dividends |
— | — | — | — | — | — | — | — | — | 3,170 | — | 3,170 | — | 3,170 | ||||||||||||||||||||||||||||||||||||||||||||||
| Transfer to investments reserve |
— | — | — | — | — | — | 3,385 | — | — | (3,385 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Additional dividends attributable to non-controlling interests |
— | — | — | — | — | — | — | — | — | — | — | — | (3,689 | ) | (3,689 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Approval of additional dividends by the Shareholders’ Meeting |
26.h | — | — | — | — | — | — | — | — | — | — | (163,742 | ) | (163,742 | ) | — | (163,742 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Allocation of net income: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Legal reserve |
26.f; 26.h | — | — | — | — | — | 57,521 | — | — | — | (57,521 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Interim dividends (R$ 0.56 per share of the Company) |
26.f; 26.h | — | — | — | — | — | — | — | — | — | (304,241 | ) | — | (304,241 | ) | — | (304,241 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Proposed dividends (R$ 0.70 per share of the Company) |
26.h | — | — | — | — | — | — | — | — | — | (380,324 | ) | 109,355 | (270,969 | ) | — | (270,969 | ) | ||||||||||||||||||||||||||||||||||||||||||
| Statutory reserve |
26.h | — | — | — | — | — | — | 408,335 | — | — | (408,335 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||
| Balance as of December 30, 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 | ||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
12
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Cash Flows—Indirect Method
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais)
| Parent | Consolidated | |||||||||||||||||||
| Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||||
| Cash flows from operating activities |
||||||||||||||||||||
| Net income for the year |
373,526 | 1,150,421 | 402,944 | 1,132,320 | ||||||||||||||||
| Adjustments to reconcile net income to cash provided by operating activities |
||||||||||||||||||||
| Share of loss (profit) of subsidiaries, joint ventures and associates |
12 | (394,793 | ) | (1,174,985 | ) | 12,145 | 14,779 | |||||||||||||
| Amortization of contractual assets with customers – exclusive rights |
11 | — | — | 355,250 | 371,825 | |||||||||||||||
| Amortization of right to use assets |
13.a | — | — | 300,058 | — | |||||||||||||||
| Depreciation and amortization |
14; 15 | — | — | 844,647 | 812,489 | |||||||||||||||
| PIS and COFINS credits on depreciation |
14; 15 | — | — | 14,918 | 15,721 | |||||||||||||||
| Interest and foreign exchange rate variations |
65,346 | 1,776 | 1,248,741 | 1,026,515 | ||||||||||||||||
| Deferred income and social contribution taxes |
9.b | (27,579 | ) | 15,125 | (97,465 | ) | 162,417 | |||||||||||||
| Loss on disposal of property, plant, and equipment and intangibles |
29 | — | — | 30,019 | 22,088 | |||||||||||||||
| Impairment of assets |
15.a; 29 | — | — | 593,280 | — | |||||||||||||||
| Estimated losses on doubtful accounts |
5 | — | — | 30,003 | 69,250 | |||||||||||||||
| Provision for losses in inventories |
6 | — | — | (816 | ) | (1,498 | ) | |||||||||||||
| Provision for post-employment benefits |
20.b | — | — | 10,682 | 4,854 | |||||||||||||||
| Equity instrument granted |
8.c | — | — | 7,661 | 3,773 | |||||||||||||||
| Other provisions and adjustments |
— | (6 | ) | 2,364 | (3,908 | ) | ||||||||||||||
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|
|
|
|
|
|||||||||||||
| 16,500 | (7,669 | ) | 3,754,431 | 3,630,625 | ||||||||||||||||
| (Increase) decrease in current assets |
||||||||||||||||||||
| Trade receivables and reseller financing |
5 | — | — | 361,563 | (355,854 | ) | ||||||||||||||
| Inventories |
6 | — | — | (357,553 | ) | 168,704 | ||||||||||||||
| Recoverable taxes |
7 | (10,045 | ) | (6,635 | ) | (550,805 | ) | (11,467 | ) | |||||||||||
| Dividends received from subsidiaries and joint-ventures |
1,521,209 | 528,778 | 4,108 | 42,436 | ||||||||||||||||
| Insurance and other receivables |
(2,731 | ) | 877 | 21,737 | (14,536 | ) | ||||||||||||||
| Prepaid expenses |
10 | (173 | ) | (365 | ) | (15,507 | ) | (37,525 | ) | |||||||||||
| Increase (decrease) in current liabilities |
||||||||||||||||||||
| Trade payables |
17 | 1,901 | (190 | ) | (31,605 | ) | 576,164 | |||||||||||||
| Salaries and related charges |
18 | 730 | (16 | ) | (22,556 | ) | 40,074 | |||||||||||||
| Taxes payable |
19 | (11,174 | ) | 11,220 | 1,917 | 46,476 | ||||||||||||||
| Income and social contribution taxes |
(9,238 | ) | 9,238 | 250,486 | 166,527 | |||||||||||||||
| Post-employment benefits |
20.b | — | — | (16,704 | ) | 15,596 | ||||||||||||||
| Provision for tax, civil, and labor risks |
22.a | — | — | (37,367 | ) | 13,272 | ||||||||||||||
| Insurance and other payables |
(3,970 | ) | (3,466 | ) | 66,819 | (59,237 | ) | |||||||||||||
| Deferred revenue |
24 | — | — | 1,054 | 8,159 | |||||||||||||||
| (Increase) decrease in non-current assets |
||||||||||||||||||||
| Trade receivables and reseller financing |
5 | — | — | 11,422 | (99,622 | ) | ||||||||||||||
| Recoverable taxes |
7 | 9,238 | — | (19,526 | ) | (539,539 | ) | |||||||||||||
| Escrow deposits |
(17 | ) | 148 | (39,936 | ) | (58,757 | ) | |||||||||||||
| Other receivables |
— | — | (797 | ) | 6,350 | |||||||||||||||
| Prepaid expenses |
10 | (225 | ) | (30 | ) | (4,379 | ) | (58,735 | ) | |||||||||||
| Increase (decrease) in non-current liabilities |
||||||||||||||||||||
| Post-employment benefits |
20.b | — | — | (15,415 | ) | (8,457 | ) | |||||||||||||
| Provision for tax, civil, and labor risks |
22.a; 22.c | (399 | ) | (184 | ) | 18,891 | 11,811 | |||||||||||||
| Other payables |
(939 | ) | (2,818 | ) | 27,698 | (4,397 | ) | |||||||||||||
| Deferred revenue |
24 | — | — | (11,850 | ) | (1,046 | ) | |||||||||||||
| Payments of contractual assets with customers – exclusive rights |
11 | — | — | (330,068 | ) | (390,177 | ) | |||||||||||||
| Income and social contribution taxes paid |
— | — | (141,206 | ) | (197,886 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash provided by operating activities |
1,510,667 | 528,888 | 2,924,852 | 2,888,959 | ||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of the financial statements.
13
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Cash Flows—Indirect Method
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais)
| Parent | Consolidated | |||||||||||||||||||
| Note | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | ||||||||||||||||
| Cash flows from investing activities |
||||||||||||||||||||
| Financial investments, net of redemptions |
4b | 470,101 | (544,273 | ) | (555,378 | ) | (1,669,937 | ) | ||||||||||||
| Cash and cash equivalents of subsidiary acquired |
3.c | — | — | — | 3,662 | |||||||||||||||
| Acquisition of property, plant, and equipment |
14 | (2,532 | ) | — | (1,020,042 | ) | (1,178,312 | ) | ||||||||||||
| Acquisition of intangible assets |
15 | — | — | (151,997 | ) | (237,593 | ) | |||||||||||||
| Acquisition of companies |
3.c | — | — | — | (103,373 | ) | ||||||||||||||
| Capital increase in subsidiary |
12.a | (1,453,964 | ) | — | — | — | ||||||||||||||
| Capital increase in joint ventures |
12.b | — | — | (79,124 | ) | (31,908 | ) | |||||||||||||
| Capital reduction in associates |
12.c | — | — | — | 1,250 | |||||||||||||||
| Initial direct costs of right to use assets |
13.a | — | — | (68,007 | ) | — | ||||||||||||||
| Proceeds from disposal of property, plant, and equipment and intangibles |
29 | — | — | 39,287 | 38,578 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash used in investing activities |
(986,395 | ) | (544,273 | ) | (1,835,261 | ) | (3,177,633 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash flows from financing activities |
||||||||||||||||||||
| Loans and debentures |
||||||||||||||||||||
| Proceeds |
16 | — | 1,721,596 | 2,105,737 | 4,461,112 | |||||||||||||||
| Repayments |
16 | — | (800,336 | ) | (2,644,704 | ) | (3,710,718 | ) | ||||||||||||
| Interest paid |
16 | (112,675 | ) | (86,806 | ) | (1,469,780 | ) | (737,564 | ) | |||||||||||
| Payments of lease |
13.b | — | — | (321,716 | ) | (5,120 | ) | |||||||||||||
| Dividends paid |
26.h | (594,381 | ) | (789,378 | ) | (596,436 | ) | (808,603 | ) | |||||||||||
| Redemption of non-controlling shares of Oxiteno Nordeste |
3.b.2 | — | — | (2,180 | ) | — | ||||||||||||||
| Capital increase from Iconic non-controlling shareholders |
— | — | 6,996 | — | ||||||||||||||||
| Acquisition of treasury shares |
24.c | — | (6,526 | ) | — | — | ||||||||||||||
| Related parties |
8.a | 53,049 | 55,976 | (146 | ) | (114 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net cash (used in) provided by financing activities |
(654,007 | ) | 94,526 | (2,922,229 | ) | (801,007 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Effect of exchange rate changes on cash and cash equivalents in foreign currency |
— | — | 9,066 | 26,628 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Decrease (increase) in cash and cash equivalents |
(129,735 | ) | 79,141 | (1,823,572 | ) | (1,063,053 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Cash and cash equivalents at the beginning of the year |
4.a | 172,315 | 93,174 | 3,938,951 | 5,002,004 | |||||||||||||||
| Cash and cash equivalents at the end of the year |
4.a | 42,580 | 172,315 | 2,115,379 | 3,938,951 | |||||||||||||||
| Transactions without cash effect: |
||||||||||||||||||||
| Addition on right to use assets and leases payable |
13.a | — | — | 334,857 | — | |||||||||||||||
The accompanying notes are an integral part of the financial statements.
14
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Statements of Value Added
For the years ended December 31, 2019 and 2018
(In thousands of Brazilian Reais, except percentages)
| Parent | Consolidated | |||||||||||||||||||||||||||||||||||
| Note | 12/31/2019 | % | 12/31/2018 | % | 12/31/2019 | % | 12/31/2018 | % | ||||||||||||||||||||||||||||
| Revenue |
||||||||||||||||||||||||||||||||||||
| Gross revenue from sales and services, except rents and royalties |
27 | — | — | 95,034,980 | 95,297,114 | |||||||||||||||||||||||||||||||
| Rebates, discounts, and returns |
27 | — | — | (1,494,814 | ) | (1,342,799 | ) | |||||||||||||||||||||||||||||
| Estimated losses on doubtful accounts |
— | — | (30,003 | ) | (69,250 | ) | ||||||||||||||||||||||||||||||
| Amortization of contractual assets with customers – exclusive rights |
11 | — | — | (355,250 | ) | (371,825 | ) | |||||||||||||||||||||||||||||
| Gain (loss) on disposal of property, plant, and equipment and intangibles and other operating income, net |
29; 30 | — | — | 149,606 | 35,445 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| — | — | 93,304,519 | 93,548,685 | |||||||||||||||||||||||||||||||||
| Materials purchased from third parties |
||||||||||||||||||||||||||||||||||||
| Raw materials used |
— | — | (5,621,164 | ) | (6,173,615 | ) | ||||||||||||||||||||||||||||||
| Cost of goods, products, and services sold |
— | — | (77,651,614 | ) | (78,330,739 | ) | ||||||||||||||||||||||||||||||
| Third-party materials, energy, services, and others |
12,255 | 7,306 | (2,657,370 | ) | (2,351,100 | ) | ||||||||||||||||||||||||||||||
| Impairment of assets |
15.a; 29 | — | — | (593,280 | ) | — | ||||||||||||||||||||||||||||||
| Provisions for losses of assets |
— | — | 29,876 | (23,141 | ) | |||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 12,255 | 7,306 | (86,553,304 | ) | (86,878,595 | ) | |||||||||||||||||||||||||||||||
| Gross value added |
12,255 | 7,306 | 6,751,215 | 6,670,090 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Deductions |
||||||||||||||||||||||||||||||||||||
| Depreciation and amortization |
14; 15 | — | — | (1,144,705 | ) | (812,489 | ) | |||||||||||||||||||||||||||||
| PIS and COFINS credits on depreciation |
14; 15 | — | — | (14,918 | ) | (15,721 | ) | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| — | — | (1,159,623 | ) | (828,210 | ) | |||||||||||||||||||||||||||||||
| Net value added by the Company |
12,255 | 7,306 | 5,591,592 | 5,841,880 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Value added received in transfer |
||||||||||||||||||||||||||||||||||||
| Share of profit (loss) of subsidiaries, joint-ventures, and associates |
12 | 394,793 | 1,174,985 | (12,145 | ) | (14,779 | ) | |||||||||||||||||||||||||||||
| Rents and royalties |
27 | — | — | 144,354 | 143,090 | |||||||||||||||||||||||||||||||
| Financial income |
31 | 73,201 | 146,137 | 457,289 | 681,235 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| 467,994 | 1,321,122 | 589,498 | 809,546 | |||||||||||||||||||||||||||||||||
| Total value added available for distribution |
480,249 | 1,328,428 | 6,181,090 | 6,651,426 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||
| Distribution of value added |
||||||||||||||||||||||||||||||||||||
| Labor and benefits |
9,890 | 2 | 6,218 | — | 2,098,706 | 34 | 2,187,994 | 33 | ||||||||||||||||||||||||||||
| Taxes, fees, and contributions |
(23,016 | ) | (5 | ) | 66,114 | 5 | 2,798,355 | 45 | 2,312,328 | 35 | ||||||||||||||||||||||||||
| Financial expenses and rents |
119,849 | 25 | 105,675 | 8 | 881,085 | 14 | 1,018,784 | 15 | ||||||||||||||||||||||||||||
| Dividends distributed |
354,850 | 74 | 684,565 | 52 | 355,843 | 6 | 688,254 | 10 | ||||||||||||||||||||||||||||
| Retained earnings |
18,676 | 4 | 465,856 | 35 | 47,101 | 1 | 444,066 | 7 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Value added distributed |
480,249 | 100 | 1,328,428 | 100 | 6,181,090 | 100 | 6,651,426 | 100 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
The accompanying notes are an integral part of the financial statements.
15
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 33.
| 2. | Presentation of Financial Statements and Summary of Significant Accounting Policies |
The Company’s Parent and consolidated financial statements (“financial statements”) were prepared in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and the accounting policies adopted in Brazil.
The accounting policies adopted in Brazil include those in the Brazilian corporate law and in the Pronouncements, Orientations and Interpretations issued by the Accounting Pronouncements Committee (“CPC”) and approved by the Brazilian Federal Accounting Council (“CFC”) and the Brazilian Securities and Exchange Commission (“CVM”).
All relevant specific information of the financial statements, 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 financial statements 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 years presented in this financial statements except for the adoption of IFRS 16/CPC 06 (R2), as of January 1, 2019 as described in Note 2.h and y.
| 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 27 and 33.
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 24.a.
16
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 24.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 filling 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$ 61,589 in 2019 (R$ 63,085 in 2018).
| 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. |
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 must be discontinued when the hedge becomes ineffective. |
17
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| • | 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. Gains or losses on the hedging instrument relating to the effective portion of this hedge that had been recognized directly in accumulated other comprehensive income shall be 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 shall be 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 shall be 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 shall be recognized in the statements of profit or loss when the disposal of the foreign subsidiary occurs. |
For further information on financial instruments, see Note 34.
| 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 34.d.3). The estimated losses take into account, (i) at the initial recognition of the contract, the expected losses for the next 12 months or (ii) for the lifetime of the contract when the deterioration or improvement of the customers’ credit quality, considering the customers’ 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).
18
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| g. | Investments |
Investments in subsidiaries are accounted for under the equity method of accounting in the financial statements of the parent 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 financial statements (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.
| 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 liability is increased for interest and net of payments. The charges 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.
Right to use assets include amounts related to port concession grants (see Note 35.c).
The subsidiaries of the Company apply the exemptions for recognition of 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. |
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).
19
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 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 account 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 financial statements. 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.
| n. | Provision for Asset Retirement Obligation – Fuel Tanks |
The subsidiary Ipiranga has the legal obligation to remove the underground fuel tanks located at Ipiranga-branded 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 National 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. An increase in the estimated cost of the obligation to remove the tanks could result in negative impact in future results.
| 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”.
20
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| q. | Other Liabilities |
Other liabilities are stated at known or measurable amounts plus, if applicable, related charges, 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 financial statements. The effect of the difference between those exchange rates is recognized in financial results until the conclusion of each transaction.
| s. | Basis for Translation of Financial Statements 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 financial statements. 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 December 31, 2019 was a gain of R$ 102,427 (gain of R$ 65,857 in 2018) — see Note 26.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$”), as its inventory sales, purchases of raw material inputs, and financing activities are performed substantially in this currency. |
| s.2. | Subsidiaries without self-administrative autonomy |
Assets and liabilities of the other foreign subsidiaries, which do not have administrative autonomy, are considered an extension of the activities of their parent company and are translated using the exchange rate at the date of the financial statements. Gains and losses resulting from changes in these foreign investments are directly recognized as financial result. The gain recognized in income in 2019 amounted to R$ 2,444 (gain of R$ 4,090 in 2018).
| t. | Use of Estimates, Assumptions and Judgments |
The preparation of the financial statements 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 financial statements, as well as the experience of past and current events, also considering assumptions regarding future events. The estimates and assumptions are reviewed periodically.
21
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 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).
| 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 34), the determination of the estimated losses on doubtful accounts (Notes 2.d, 5 and 34.d.3), the determination of provisions for losses of inventories (Notes 2.e and 6), 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 25 and 34.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 report 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, the Company and its subsidiaries estimate the recoverable amount of the asset. Assets that cannot be 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 may be 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.
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).
| 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.
22
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| w. | Statements of Value Added |
The statements of value added (“DVA”) are presented as an integral part of the financial statements as applicable to publicly-traded companies, 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, debentures, and leases payable in financing activities. The Company and its subsidiaries 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 |
The following standards, amendments, and interpretations to IFRS were issued by the IASB, which are effective as of January 1, 2019:
(i) IFRS 16/CPC 06 (R2) — Lease:
With the adoption of IFRS 16/CPC 06 (R2), the leases contracted by the Company’s subsidiaries, identified and effective at the date of transition and with maturities of more than 12 months, were accounted in the financial statements:
- recognition of right to use assets and lease liabilities in financial position, initially measured at the present value of future lease payments; and
- recognition of amortization expenses of right to use assets and interest expenses on the lease payable in the financial result in the statements of profits or loss.
The Company selected as transition method the modified retrospective approach, with the cumulative effect of initial application of this new pronouncement recorded as an adjustment to the opening balance of equity and without restatement of comparative periods.
In the analysis of the adoption, the Company’s management, with the assistance of specialized consulting, carried out the inventory of the contracts, evaluating whether or not each agreement contains a lease in accordance with IFRS 16/CPC 06 (R2). This analysis identified impacts mainly related to the lease of properties from third parties, port areas and lower amounts arising from other operations where the existence of leased assets individually or combined in service contracts was identified.
As allowed in the standard, short-term leases with a term of 12 months or less, variable amounts, indefinite term and leases of low amount assets such as computers and office furniture, are recognized as lease expenses on a straight-line basis in the statements of profit or loss.
In addition, the following practical expedients were used to transition to new lease accounting requirements:
| • | application of the IFRS 16/CPC 06 (R2) to all contracts initiated before January 1, 2019 that were identified as leases in accordance with IAS 7/CPC 06 (R1) and IFRIC 4/ICPC 03; |
| • | use of discount rate according to the lease term and similar characteristics; |
| • | contracts with a term of 12 months from the date of the initial adoption of the standard or with indefinite term were not recorded; |
| • | exclusion of the initial direct costs of the measurement of the opening balance from right to use asset; and |
| • | options for extension of the term or termination were considered, when applicable. |
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below summarizes the effects on the initial adoption of the IFRS 16/CPC 06 (R2):
| 01/01/2019 | ||||
| Current assets |
||||
| Prepaid expenses |
(39,066 | ) | ||
| Non-current assets |
||||
| Prepaid expenses |
(288,630 | ) | ||
| Right to use assets |
1,731,427 | |||
| Intangible assets |
(39,928 | ) | ||
|
|
|
|||
| Total assets |
1,363,803 | |||
|
|
|
|||
| Current liabilities |
||||
| Leases payable |
13,827 | |||
| Non-current liabilities |
||||
| Leases payable |
1,349,976 | |||
|
|
|
|||
| Total liabilities |
1,363,803 | |||
|
|
|
|||
The analysis associated with the measurement and accounting of the lease agreements are completed.
To measurement, the Company used a nominal discount rate, and estimated the payment flows for the gross portion of taxes.
(ii) IFRIC 23/ICPC 22—Uncertainty over income tax treatments:
IFRS 23 (ICPC 22) clarifies how to apply the recognition and measurement when there is uncertainty over income tax treatments, that means, there are doubts about acceptance of the treatments adopted by the fiscal authority, applying the requirements in IAS 12 (CPC 32).
In the evaluation of management, no significant impacts were identified as a result of the adoption of IFRIC 23/ICPC 22, since all the procedures adopted for the determination and collection of income taxes are supported by the legislation and precedents from Administrative and Judicial Courts.
| z. | Authorization for Issuance of the Financial Statements |
This financial statements were authorized for issue by the Board of Directors on February 19, 2020.
| 3. | Principles of Consolidation and Investments in Subsidiaries |
| a. | Principles of Consolidation |
In the preparation of the consolidated financial statements 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 financial statements of subsidiaries to bring their accounting policies into line with the Company’s accounting policies.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Investments in Subsidiaries |
The consolidated financial statements includes the following direct and indirect subsidiaries:
| % interest in the share | ||||||||||||||||||||
| 12/31/2019 | 12/31/2018 | |||||||||||||||||||
| 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 | ||||||||||||||
| Centro de Conveniências Millennium Ltda. |
Brazil | Ipiranga | — | 100 | — | 100 | ||||||||||||||
| Icorban – Correspondente Bancário Ltda. |
Brazil | Ipiranga | — | 100 | — | 100 | ||||||||||||||
| Ipiranga Trading Limited |
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 | ||||||||||||||
| Oxiteno S.A. Indústria e Comércio |
Brazil | Oxiteno | 100 | — | 100 | — | ||||||||||||||
| Oxiteno Nordeste S.A. Indústria e Comércio (2) |
Brazil | Oxiteno | — | — | — | 99 | ||||||||||||||
| 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 Andina, C.A. (3) |
Venezuela | Oxiteno | — | — | — | 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. (4) |
Brazil | Ultracargo | — | 100 | — | — | ||||||||||||||
| Ultrapar International S.A. |
Luxembourg | Others | 100 | — | 100 | — | ||||||||||||||
| SERMA – Ass. dos usuários equip. proc. de dados |
Brazil | Others | — | 100 | — | 100 | ||||||||||||||
The percentages in the table above are rounded.
| (1) | Non operating company in closing phase. |
| (2) | On April 30, 2019, the shareholders of Oxiteno Nordeste S.A. Indústria e Comércio (“Oxiteno Nordeste”) approved the rescue of all of its preferred shares class “B”, with consequent cancellation. On December 2, 2019, in order to simplify the corporate structure, the subsidiary Oxiteno Nordeste was incorporated by its parent Oxiteno S.A. Indústria e Comércio (“Oxiteno S.A.”). |
| (3) | On October 15, 2019, the subsidiary Oxiteno S.A. approved the asset write-offs of Oxiteno Andina C.A. (“Oxiteno Andina”). |
| (4) | Company constituted on May 20, 2019 due the concession of the port of Vila do Conde (see Note 35.c). |
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| c. | TEAS – Terminal Exportador de Álcool de Santos Ltda. Acquisition |
The Company through its subsidiary Terminal Químico de Aratu S.A. – Tequimar (“Tequimar”) acquired 100% of the quotas of TEAS Terminal Exportador de Álcool de Santos Ltda. (“TEAS”). On March 29, 2018, the acquisition was concluded through the closing of the operation. For further details of TEAS business combination, see Note 3.d of financial statements as of and for the year ended December 31, 2018 filed on CVM on February 20, 2019.
| 4. | Cash and Cash Equivalents and Financial Investments |
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 (“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 34.j, based on business model of financial assets of the Company and its subsidiaries.
Cash, cash equivalents and financial investments (consolidated) amounted to R$ 5,712,097 as of December 31, 2019 (R$ 6,994,406 as of December 31, 2018) are as follows:
| a. | Cash and Cash Equivalents |
Cash and cash equivalents of the Company and its subsidiaries are presented as follows:
| Parent | Consolidated | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Cash and bank deposits |
||||||||||||||||
| In local currency |
381 | 381 | 182,237 | 117,231 | ||||||||||||
| In foreign currency |
— | — | 102,755 | 88,251 | ||||||||||||
| Financial investments considered cash equivalents |
||||||||||||||||
| In local currency |
||||||||||||||||
| Fixed-income securities |
42,199 | 171,934 | 1,780,939 | 3,722,308 | ||||||||||||
| In foreign currency |
||||||||||||||||
| Fixed-income securities |
— | — | 49,448 | 11,161 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total cash and cash equivalents |
42,580 | 172,315 | 2,115,379 | 3,938,951 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Financial investments |
||||||||||||||||
| In local currency |
||||||||||||||||
| Fixed-income securities and funds |
95,829 | 565,930 | 2,610,686 | 2,537,315 | ||||||||||||
| In foreign currency |
||||||||||||||||
| Fixed-income securities and funds |
— | — | 303,417 | 154,811 | ||||||||||||
| Currency and interest rate hedging instruments (a) |
— | — | 682,615 | 363,329 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total financial investments |
95,829 | 565,930 | 3,596,718 | 3,055,455 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current |
95,829 | 565,930 | 3,090,212 | 2,853,106 | ||||||||||||
| Non-current |
— | — | 506,506 | 202,349 | ||||||||||||
| (a) | Accumulated gains, net of income tax (see Note 34.j). |
| 5. | Trade Receivables and Reseller Financing (Consolidated) |
| a. | Trade Receivables |
The composition of trade receivables is as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Domestic customers |
3,867,902 | 4,290,996 | ||||||
| Foreign customers |
226,484 | 244,960 | ||||||
| (-) Estimated losses on doubtful accounts |
(404,886 | ) | (385,080 | ) | ||||
|
|
|
|
|
|||||
| 3,689,500 | 4,150,876 | |||||||
|
|
|
|
|
|||||
| Current |
3,635,834 | 4,069,307 | ||||||
| Non-current |
53,666 | 81,569 | ||||||
The breakdown of trade receivables, gross of estimated 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 |
||||||||||||||||||||||
| 12/31/2019 |
4,094,386 | 3,199,315 | 159,350 | 27,320 | 12,245 | 61,489 | 634,667 | |||||||||||||||||||||
| 12/31/2018 |
4,535,956 | 3,739,601 | 121,622 | 53,864 | 49,629 | 84,920 | 486,320 | |||||||||||||||||||||
The breakdown of estimated 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 |
||||||||||||||||||||||
| 12/31/2019 |
404,886 | 28,861 | 1,456 | 1,625 | 3,749 | 23,698 | 345,497 | |||||||||||||||||||||
| 12/31/2018 |
385,080 | 39,226 | 4,094 | 3,754 | 5,533 | 46,783 | 285,690 | |||||||||||||||||||||
27
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
Movements in the allowance for estimated losses on doubtful accounts are as follows:
| Balance as of December 31, 2017 |
347,801 | |||
| Additions |
287,566 | |||
| Write-offs |
(250,287 | ) | ||
|
|
|
|||
| Balance as of December 31, 2018 |
385,080 | |||
| Additions |
189,192 | |||
| Write-offs |
(169,386 | ) | ||
|
|
|
|||
| Balance as of December 31, 2019 |
404,886 | |||
|
|
|
For further information about the allowance for estimated losses on doubtful accounts, see Note 34.d.3.
| b. | Reseller financing |
The composition of reseller financing is as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Reseller financing – Ipiranga |
956,942 | 855,229 | ||||||
| (-) Estimated losses on doubtful accounts |
(156,006 | ) | (139,699 | ) | ||||
|
|
|
|
|
|||||
| 800,936 | 715,530 | |||||||
|
|
|
|
|
|||||
| Current |
436,188 | 367,262 | ||||||
| Non-current |
364,748 | 348,268 | ||||||
Reseller financing is provided 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 substantially from 12 months to 60 months, with an average term of 40 months. The minimum and maximum interest rates are 0% per month and 1% per month, respectively.
The breakdown of reseller financing, gross of estimated 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 |
||||||||||||||||||||||
| 12/31/2019 |
956,942 | 644,488 | 26,262 | 10,481 | 12,616 | 30,144 | 232,951 | |||||||||||||||||||||
| 12/31/2018 |
855,229 | 633,183 | 11,262 | 14,869 | 9,377 | 20,783 | 165,755 | |||||||||||||||||||||
The breakdown of estimated 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 |
||||||||||||||||||||||
| 12/31/2019 |
156,006 | 21,337 | 2,519 | 1,063 | 1,313 | 14,639 | 115,135 | |||||||||||||||||||||
| 12/31/2018 |
139,699 | 26,982 | 1,250 | 1,642 | 1,131 | 12,176 | 96,518 | |||||||||||||||||||||
28
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
Movements in the allowance for estimated losses on doubtful accounts are as follows:
| Balance as of December 31, 2017 |
104,977 | |||
| Additions |
34,722 | |||
| Balance as of December 31, 2018 |
139,699 | |||
| Additions |
30,601 | |||
| Write-offs |
(14,294 | ) | ||
|
|
|
|||
| Balance as of December 31, 2019 |
156,006 | |||
|
|
|
For further information about the allowance for estimated losses on doubtful accounts, see Note 34.d.3.
6. Inventories (Consolidated)
The composition of inventories is as follows:
| 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
| Cost | Provision for losses |
Net balance |
Cost | Provision for losses |
Net balance |
|||||||||||||||||||
| Fuels, lubricants and greases |
1,843,257 | (2,073 | ) | 1,841,184 | 1,367,015 | (1,804 | ) | 1,365,211 | ||||||||||||||||
| Finished goods |
541,689 | (22,048 | ) | 519,641 | 581,504 | (20,923 | ) | 560,581 | ||||||||||||||||
| Work in process |
1,971 | — | 1,971 | 1,412 | — | 1,412 | ||||||||||||||||||
| Raw materials |
365,960 | (2,552 | ) | 363,408 | 383,161 | (1,894 | ) | 381,267 | ||||||||||||||||
| Liquefied petroleum gas (LPG) |
101,715 | (5,761 | ) | 95,954 | 109,362 | (5,761 | ) | 103,601 | ||||||||||||||||
| Consumable materials and other items for resale |
140,058 | (2,587 | ) | 137,471 | 150,188 | (3,770 | ) | 146,418 | ||||||||||||||||
| Pharmaceutical, hygiene, and beauty products |
549,191 | (2,877 | ) | 546,314 | 583,060 | (5,364 | ) | 577,696 | ||||||||||||||||
| Purchase for future delivery (1) |
183,170 | (2,719 | ) | 180,451 | 193,928 | (2,964 | ) | 190,964 | ||||||||||||||||
| Properties for resale |
29,273 | (107 | ) | 29,166 | 27,489 | (107 | ) | 27,382 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| 3,756,284 | (40,724) | 3,715,560 | 3,397,119 | (42,587) | 3,354,532 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| (1) | Refers substantially to ethanol, biodiesel and advance of fuels. |
Movements in the provision for losses are as follows:
| Balance as of December 31, 2017 |
37,099 | |||
| Additions to net realizable value adjustment |
600 | |||
| Additions of obsolescence and other losses |
3,903 | |||
| Oxiteno Andina (i) |
985 | |||
|
|
|
|||
| Balance as of December 31, 2018 |
42,587 | |||
| Reversals to net realizable value adjustment |
(5,174 | ) | ||
| Additions of obsolescence and other losses |
4,296 | |||
| Oxiteno Andina (ii) |
(985 | ) | ||
|
|
|
|||
| Balance as of December 31, 2019 |
40,724 | |||
|
|
|
| (i) | Refers to the impairment for subsidiary Oxiteno Andina (see Note 2.s.1.ii of financial statements as of and for the year ended December 31, 2018 filed on CVM on February 20, 2019). |
| (ii) | Refers to the asset write-offs of Oxiteno Andina (see Note nº 3.b.3). |
The breakdown of provisions for losses related to inventories is shown in the table below:
| 12/31/2019 | 12/31/2018 | |||||||
| Net realizable value adjustment |
15,243 | 21,402 | ||||||
| Obsolescence and other losses |
25,481 | 21,185 | ||||||
|
|
|
|
|
|||||
| Total |
40,724 | 42,587 | ||||||
|
|
|
|
|
|||||
29
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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”).
| 12/31/2019 | 12/31/2018 | |||||||
| ICMS (a.1) |
914,066 | 710,669 | ||||||
| Provision for ICMS losses (a.1) |
(41,396 | ) | (99,187 | ) | ||||
| PIS and COFINS (a.2) |
930,570 | 720,731 | ||||||
| Value-Added Tax (IVA) of foreign subsidiaries |
29,707 | 31,678 | ||||||
| Others |
56,748 | 22,988 | ||||||
|
|
|
|
|
|||||
| Total |
1,889,695 | 1,386,879 | ||||||
|
|
|
|
|
|||||
| Current |
1,122,335 | 639,699 | ||||||
| Non-current |
767,360 | 747,180 | ||||||
| a.1 | The recoverable ICMS is substantially related to the following subsidiaries and operations: |
| (i) | The subsidiary Oxiteno Nordeste predominantly carries out export operations, interstate outflow or deferred ICMS of products purchased within the State of Bahia; |
| (ii) | The subsidiary Ipiranga Produtos de Petróleo S.A. (“IPP”) has 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 (mainly ethanol); |
| (iii) | The subsidiary Extrafarma has credits of ICMS 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. |
Management estimates the realization of these credits within up to 10 years.
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 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 20.d.1). |
30
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
b. Recoverable Income Tax and Social Contribution Taxes
Represented by recoverable IRPJ and CSLL.
| Parent | Consolidated | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| IRPJ and CSLL |
89,197 | 88,390 | 430,290 | 362,784 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
89,197 | 88,390 | 430,290 | 362,784 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current |
49,750 | 39,705 | 325,343 | 257,182 | ||||||||||||
| Non-current |
39,447 | 48,685 | 104,947 | 105,602 | ||||||||||||
Relates to IRPJ and CSLL to be recovered by the Company and its subsidiaries arising from the tax advances of previous years, with management estimating the realization of these credits within up to 5 years.
8. Related Parties
The balances and transactions between the Company and its related parties are disclosed below:
a. Related Parties
a.1 Parent
| Assets | Liabilities | |||||||||||
| Debentures (1) | Account payable |
Financial income (1) |
||||||||||
| Ipiranga Produtos de Petróleo S.A. |
759,123 | — | 50,884 | |||||||||
| Imifarma Produtos Farmacêuticos e Cosméticos S.A. |
— | 4,220 | — | |||||||||
|
|
|
|
|
|
|
|||||||
| Total as of December 31, 2019 |
759,123 | 4,220 | 50,884 | |||||||||
|
|
|
|
|
|
|
|||||||
| Assets | Liabilities | Financial income (1) |
||||||||||||||
| Debentures (1) | Other payables (2) |
Account payable |
||||||||||||||
| Ipiranga Produtos de Petróleo S.A. |
761,288 | — | — | 54,702 | ||||||||||||
| Companhia Ultragaz S.A. |
— | 3,975 | — | — | ||||||||||||
| Imifarma Produtos Farmacêuticos e Cosméticos S.A. |
— | — | 5,158 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total as of December 31, 2018 |
761,288 | 3,975 | 5,158 | 54,702 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (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. |
| (2) | Refers to the Deferred Stock Plan (see Note 8.c). |
31
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 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 | 1,050 | ||||||
|
|
|
|
|
|||||
| Total as of December 31, 2019 |
490 | 3,925 | ||||||
|
|
|
|
|
|||||
| Loans | ||||||||
| Assets | Liabilities | |||||||
| Química da Bahia Indústria e Comércio S.A. |
— | 2,925 | ||||||
| Others |
490 | 1,146 | ||||||
|
|
|
|
|
|||||
| Total as of December 31, 2018 |
490 | 4,071 | ||||||
|
|
|
|
|
|||||
Loans agreements have indeterminate terms and do not contain interest clauses. These are carried out due temporary excess or necessity cash of the Company, its subsidiaries, and its associates.
| Commercial transactions | ||||||||||||||||||||
| Receivables (1) | Payables (1) | Sales and services |
Purchases | Expenses | ||||||||||||||||
| Oxicap Indústria de Gases Ltda. |
— | 1,545 | 1 | 18,565 | — | |||||||||||||||
| Refinaria de Petróleo Riograndense S.A. |
— | 264,602 | — | 1,019,108 | — | |||||||||||||||
| ConectCar Soluções de Mobilidade Eletrônica S.A. |
739 | 113 | 7,385 | 121 | — | |||||||||||||||
| LA’7 Participações e Empreend. Imob. Ltda. (a) |
— | 124 | — | — | 1,477 | |||||||||||||||
| Chevron Latin America Marketing LLC |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total as of December 31, 2019 |
739 | 266,384 | 7,386 | 1,037,794 | 1,477 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Commercial transactions | ||||||||||||||||||||
| Receivables (1) | Payables (1) | Sales and services |
Purchases | Expenses | ||||||||||||||||
| Oxicap Indústria de Gases Ltda. |
— | 567 | 6 | 9,032 | — | |||||||||||||||
| Refinaria de Petróleo Riograndense S.A. |
— | 24,630 | — | 1,008,860 | — | |||||||||||||||
| ConectCar Soluções de Mobilidade Eletrônica S.A. |
1,042 | 136 | 3,844 | 186 | — | |||||||||||||||
| LA’7 Participações e Empreend. Imob. Ltda. (a) |
— | 117 | — | — | 1,469 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total as of December 31, 2018 |
1,042 | 25,450 | 3,850 | 1,018,078 | 1,469 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| (1) | Included in “domestic trade receivables”, “domestic trade payables” and “domestic trade payables — agreement”, respectively. |
| (a) | Refers to rental contracts of 15 drugstores owned by LA’7 as of December 31, 2019 (15 drugstores as of December 31, 2018), a company of the former shareholders of Extrafarma that are current shareholders of Ultrapar. |
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.i.
32
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 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:
| 12/31/2019 | 12/31/2018 | |||||||
| Short-term compensation |
41,659 | 36,504 | ||||||
| Stock compensation |
9,881 | 1,407 | ||||||
| Post-employment benefits |
2,640 | 2,278 | ||||||
| Termination benefit |
— | 905 | ||||||
|
|
|
|
|
|||||
| Total |
54,180 | 41,094 | ||||||
|
|
|
|
|
|||||
| 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. Ultrapar’s Board of Directors does not have a stock plan. The fair value of the awards were 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.
33
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 13, 2017 |
200,000 | 2022 to 2024 | 34.00 | 9,378 | (4,513 | ) | 4,865 | |||||||||||||||||
| March 4, 2016 |
380,000 | 2021 to 2023 | 32.72 | 17,147 | (11,164 | ) | 5,983 | |||||||||||||||||
| December 10, 2014 |
533,324 | 2019 to 2021 | 25.32 | 27,939 | (23,967 | ) | 3,972 | |||||||||||||||||
| March 5, 2014 |
111,200 | 2020 to 2021 | 26.08 | 5,999 | (5,610 | ) | 389 | |||||||||||||||||
| November 7, 2012 |
— | 2019 | 21.45 | 16,139 | (16,139 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 1,224,524 | 76,602 | (61,393) | 15,209 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
In 2019, the amortization in the amount of R$ 10,321 (R$ 3,922 in 2018) was recognized as a general and administrative expense.
The table below summarizes the changes of number of shares granted:
| Balance on December 31, 2017 |
2,366,796 | |||
| Cancellation of granted shares due to termination of executive employment |
(433,332 | ) | ||
| Shares vested and transferred |
(233,336 | ) | ||
|
|
|
|||
| Balance on December 31, 2018 |
1,700,128 | |||
| Shares vested and transferred |
(475,604 | ) | ||
|
|
|
|||
| Balance on December 31, 2019 |
1,224,524 | |||
|
|
|
The information above were adjusted retrospectively as disclosure in Note 26.a.
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.
34
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 | (4,741 | ) | 7,901 | ||||||||||||||||
| Restricted and performance |
November 8, 2017 | 75,876 | 2020 to 2022 | 38.19 | 5,014 | (2,850 | ) | 2,164 | ||||||||||||||||
| Restricted and performance |
April 4, 2018 | 184,076 | 2021 to 2023 | 34.35 | 12,066 | (5,539 | ) | 6,527 | ||||||||||||||||
| Restricted |
September 19, 2018 | 160,000 | 2024 | 19.58 | 4,321 | (900 | ) | 3,421 | ||||||||||||||||
| Restricted |
September 24, 2018 | 80,000 | 2024 | 18.40 | 2,030 | (423 | ) | 1,607 | ||||||||||||||||
| Restricted and performance |
April 3, 2019 | 558,708 | 2022 to 2024 | 23.25 | 24,096 | (4,729 | ) | 19,367 | ||||||||||||||||
| Restricted |
September 2, 2019 | 440,000 | 2025 | 16.42 | 10,074 | (560 | ) | 9,514 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 1,738,660 | 70,243 | (19,742) | 50,501 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
In 2019, a general and administrative expense in the amount of R$ 12,893 was recognized in relation to the Plan (R$ 6,001 in 2018).
| Balance on December 31, 2017 |
332,540 | |||
| Shares granted on April 9, 2018 |
207,184 | |||
| Shares granted on September 19, 2018 |
160,000 | |||
| Shares granted on September 24, 2018 |
80,000 | |||
| Cancellation of granted shares due to termination of executive employment |
(39,772 | ) | ||
|
|
|
|||
| Balance on December 31, 2018 |
739,952 | |||
| Shares granted on April, 3, 2019 |
567,876 | |||
| Shares granted on September 2, 2019 |
440,000 | |||
| Cancellation of granted shares due to termination of executive employment |
(9,168 | ) | ||
|
|
|
|||
| Balance on December 31, 2019 |
1,738,660 | |||
|
|
|
The information above were adjusted retrospectively as disclosure in Note 26.a.
35
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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, temporary differences, negative tax bases and revaluation of PP&E, 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 | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Assets — Deferred income and social contribution taxes on: |
||||||||||||||||
| Provision for impairment of assets |
— | — | 72,377 | 116,191 | ||||||||||||
| Provisions for tax, civil, and labor risks |
— | — | 150,085 | 154,516 | ||||||||||||
| Provision for post-employment benefits |
— | — | 92,199 | 85,575 | ||||||||||||
| Provision for differences between cash and accrual basis |
— | — | 224,065 | 147,376 | ||||||||||||
| Goodwill |
— | — | 8,161 | 12,258 | ||||||||||||
| Business combination – fiscal basis vs. accounting basis of goodwill |
— | — | 75,745 | 75,838 | ||||||||||||
| Provision for asset retirement obligation |
— | — | 14,762 | 15,801 | ||||||||||||
| Provision for suppliers |
439 | — | 35,214 | 38,339 | ||||||||||||
| Provision for profit sharing and bonus |
— | — | 44, 818 | 49,621 | ||||||||||||
| Leases payable |
— | — | 19,003 | — | ||||||||||||
| Change in fair value of subscription warrants |
— | — | 16,338 | 13,700 | ||||||||||||
| Other provisions |
16,542 | 14,034 | 45,316 | 42,694 | ||||||||||||
| Tax losses and negative basis for social contribution carryforwards (d) |
24,632 | — | 278,140 | 208,036 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
41,613 | 14,034 | 1,076,223 | 959,945 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Offset the liabilities balance |
— | — | (422,529 | ) | (445,758 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net balance of deferred taxes assets |
41,613 | 14,034 | 653,694 | 514,187 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Liabilities — Deferred income and social contribution taxes on: |
||||||||||||||||
| Revaluation of PP&E |
— | — | 1,866 | 1,981 | ||||||||||||
| Lease payable |
— | — | 2,356 | 2,858 | ||||||||||||
| Provision for differences between cash and accrual basis |
— | — | 257,718 | 138,332 | ||||||||||||
| Provision for goodwill |
— | — | 39,186 | 187,845 | ||||||||||||
| Business combination – fair value of assets |
— | — | 114,125 | 117,352 | ||||||||||||
| Other provisions |
— | — | 14,809 | 6,687 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total |
— | — | 430,060 | 455,055 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Offset the assets balance |
— | — | (422,529 | ) | (445,758 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net balance of deferred taxes liabilities |
— | — | 7,531 | 9,297 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
36
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
Changes in the net balance of deferred IRPJ and CSLL are as follows:
| Parent | Consolidated | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Initial balance |
14,034 | 29,159 | 504,890 | 530,419 | ||||||||||||
| Deferred IRPJ and CSLL recognized in income of the year |
27,579 | (15,125 | ) | 97,465 | (162.417 | ) | ||||||||||
| Deferred IRPJ and CSLL recognized in other comprehensive income |
— | — | 40,497 | 133,124 | ||||||||||||
| Deferred IRPJ and CSLL recognized in business combination (i) |
— | — | — | 1,054 | ||||||||||||
| Others |
— | — | 3,311 | 2,710 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Final balance |
41,613 | 14,034 | 646,163 | 504,890 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (i) | For further details of TEAS business combination, see Note 3.d of financial statements filed on CVM on February 20, 2019. |
The estimated recovery of deferred tax assets relating to IRPJ and CSLL is stated as follows:
| Parent | Consolidated | |||||||
| Up to 1 Year |
13,209 | 178,127 | ||||||
| From 1 to 2 Years |
4,211 | 54,814 | ||||||
| From 2 to 3 Years |
4,265 | 141,105 | ||||||
| From 3 to 5 Years |
8,652 | 136,029 | ||||||
| From 5 to 7 Years |
6,354 | 353,806 | ||||||
| From 7 to 10 Years |
4,922 | 212,342 | ||||||
|
|
|
|
|
|||||
| Total of deferred tax assets relating to IRPJ and CSLL |
41,613 | 1,076,223 | ||||||
|
|
|
|
|
|||||
In order to evaluate the realization of deferred tax assets, the taxable income projections from business plans of each segment of the Company, approved by Company’s Board of Directors, 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.
The main key assumptions used to calculate the realization of deferred tax assets are: growth in Gross Domestic Product (“GDP”), exchange rate, basic interest rate (SELIC) and DI, inflation rate, commodity price index , among others. The balance of R$ 1,076,223 was supported by the technical study on taxable income projections for the realization of deferred tax assets, reviewed by the Fiscal Council and by the Audit and Risks Committee and approved by Company’s Board of Directors.
37
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Income before taxes and share of profit (loss) of subsidiaries, joint ventures, and associates |
(48,846 | ) | 25,924 | 793,698 | 1,785,818 | |||||||||||
| Statutory tax rates – % |
34 | 34 | 34 | 34 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income and social contribution taxes at the statutory tax rates |
16,608 | (8,814 | ) | (269,857 | ) | (607,178 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Adjustments to the statutory income and social contribution taxes: |
||||||||||||||||
| Nondeductible expenses (i) |
11,023 | (372 | ) | (68,795 | ) | (82,784 | ) | |||||||||
| Nontaxable revenues (ii) |
11 | 13 | 28,235 | 32,523 | ||||||||||||
| Adjustment to estimated income (iii) |
— | — | 10,511 | 9,706 | ||||||||||||
| Interest on equity (iv) |
— | (41,338 | ) | — | (538 | ) | ||||||||||
| Unrecorded deferred Income and Social Contribution Taxes Carryforwards deferred (v) |
|
— |
|
— | (146,820 | ) | (95,480 | ) | ||||||||
| Other adjustments |
(63 | ) | 23 | 24,873 | (2,634 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income and social contribution taxes before tax incentives |
27,579 | (50,488 | ) | (421,853 | ) | (746,385 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Tax incentives – SUDENE |
— | — | 43,244 | 107,666 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Income and social contribution taxes in the income statement |
27,579 | (50,488 | ) | (378,609 | ) | (638,719 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Current |
— | (35,363 | ) | (476,074 | ) | (476,302 | ) | |||||||||
| Deferred |
27,579 | (15,125 | ) | 97,465 | (162,417 | ) | ||||||||||
| Effective IRPJ and CSLL rates – % |
56.5 | 194.8 | 47.7 | 35.8 | ||||||||||||
| (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) | Interest on equity is an option foreseen in Brazilian corporate law to distribute profits to shareholders, calculated based on the long-term interest rate (“TJLP”), which does not affect the income statement, but is deductible for purposes of IRPJ and CSLL, being taxable to the beneficiary and deductible to the entity that pays; |
| (v) | See Note 9.d. |
38
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(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 (1) |
75 | 2027 | ||||
| Suape base (2) | 75 | 2027 | ||||
| Terminal Químico de Aratu S.A. – Tequimar |
Suape terminal | 75 | 2020 | |||
| Aratu terminal | 75 | 2022 | ||||
| Itaqui terminal | 75 | 2025 | ||||
| Oleoquímica Indústria e Comércio de Produtos Químicos Ltda. |
Camaçari plant | 75 | 2021 | |||
| Oxiteno S.A. Indústria e Comércio (3) |
Camaçari plant | 75 | 2026 | |||
| Empresa Carioca de Produtos Químicos S.A. |
Camaçari plant | 75 | 2026 |
| (1) | The subsidiary Bahiana Distribuidora de Gás Ltda. (“Bahiana”), obtained 75% income tax reduction incentive recognized by SUDENE, through an appraisal report on October 22, 2018, until 2027, due to the modernization for its Aracaju plant – Sergipe. Due to the tacit approval by the RFB the constitutive benefit appraisal report the subsidiary recognized income tax reduction retroactive effect in January 2018 in the amount of R$ 1,067. |
| (2) | The subsidiary Bahiana had the 75% income tax reduction incentive recognized by SUDENE, through an appraisal report on January 14, 2019, until 2027, due to the modernization for its Suape plant – Pernambuco. The constitutive benefit appraisal report was approved in May 2019 by the RFB. |
| (3) | The request to transfer the right to reduce the IRPJ to Oxiteno S.A. will be submitted to SUDENE due to the incorporation of the subsidiary Oxiteno Nordeste. |
d. Income and Social Contribution Taxes Carryforwards
In December 31, 2019, the Company and certain subsidiaries had tax loss carryforwards related to income tax (IRPJ) of R$ 1,268,964 (R$ 873,718 as of December 31, 2018) and negative basis of CSLL of R$ 1,270,714 (R$ 876,315 as of December 31, 2018), whose compensations are limited to 30% of taxable income in a given tax year, which do not expire.
In addition, certain offshore subsidiaries had tax loss carryforwards of R$ 878,470 (R$ 620,906 as of December 31, 2018).
The amount of deferred income and social contribution tax assets are as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Cia. Ultragaz |
12,808 | 37,332 | ||||||
| Oxiteno S.A. |
148,306 | 43,645 | ||||||
| Iconic |
17,657 | 28,256 | ||||||
| Extrafarma |
72,318 | 98,803 | ||||||
| Ultrapar |
24,632 | — | ||||||
| Ultrapar International |
2,419 | — | ||||||
|
|
|
|
|
|||||
| 278,140 | 208,036 | |||||||
|
|
|
|
|
|||||
39
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The amount of deferred income and social contribution and social contribution tax assets are as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Extrafarma |
237,664 | 94,115 | ||||||
| Integra Frotas |
4,636 | 1,365 | ||||||
| Oxiteno Argentina |
— | 22 | ||||||
| Oxiteno USA |
127,992 | 124,864 | ||||||
| Oxiteno Andina |
— | 466 | ||||||
|
|
|
|
|
|||||
| 370,292 | 220,832 | |||||||
|
|
|
|
|
|||||
The technical study of the realization of deferred tax assets was approved by the Company’s CA, according Note 9.a.
10. Prepaid Expenses (Consolidated)
| 12/31/2019 | 12/31/2018 | |||||||
| Rents(1) |
37,106 | 413,799 | ||||||
| Advertising and publicity |
24,857 | 54,011 | ||||||
| Deferred Stock Plan, net (see Note 8.c) |
15,965 | 22,737 | ||||||
| Insurance premiums |
61,884 | 52,607 | ||||||
| Software maintenance |
21,759 | 21,667 | ||||||
| Other prepaid expenses |
19,000 | 21,844 | ||||||
|
|
|
|
|
|||||
| 180,571 | 586,665 | |||||||
|
|
|
|
|
|||||
| Current |
111,355 | 187,570 | ||||||
| Non-current |
69,216 | 399,095 | ||||||
| (1) | After the adoption of IFRS16/CPC 06 (R2), some agreements were transferred to right to use assets (see Note 2.y). |
11. Contractual Assets with Customers – Exclusive Rights (Consolidated)
Refers to exclusive rights disbursements of Ipiranga’s agreements with reseller service stations and major consumers that are recognized at the time of their occurrence and recognized as a reduction of the revenue from sales and services in the statement of profit or loss according to the conditions established in the agreement (amortization in weighted average term of five years), being reviewed as changes occur under the terms of the agreements.
Balance and changes are shown below:
| Balance as of December 31, 2017 |
1,502,360 | |||
| Additions |
390,177 | |||
| Amortization |
(371,825 | ) | ||
| Transfer |
(2,235 | ) | ||
|
|
|
|||
| Balance as of December 31, 2018 |
1,518,477 | |||
| Additions |
330,068 | |||
| Amortization |
(355,250 | ) | ||
| Transfer |
(27,306 | ) | ||
|
|
|
|||
| Balance as of December 31, 2019 |
1,465,989 | |||
| Current |
465,454 | |||
| Non-current |
1,000,535 |
40
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
12. Investments
a. Subsidiaries and Joint Venture (Parent Company)
The table below presents the full amounts of statements of financial position and statements of profit or loss of subsidiaries and joint venture:
| 12/31/2019 | ||||||||||||||||||||
| Subsidiaries | Joint-venture | |||||||||||||||||||
| Ultracargo – Operações Logísticas e Participações Ltda. |
Oxiteno S.A. Indústria e Comércio |
Ipiranga Produtos de Petróleo S.A. |
Ultrapar International S.A. |
Refinaria de Petróleo Riograndense S.A. |
||||||||||||||||
| Number of shares or units held |
11,839,764 | 35,102,127 | 224,467,228,244 | 49,995 | 5,078,888 | |||||||||||||||
| Assets |
1,264,707 | 6,475,473 | 18,052,890 | 4,192,235 | 562,445 | |||||||||||||||
| Liabilities |
2,710 | 4,672,264 | 11,032,143 | 4,219,735 | 505,851 | |||||||||||||||
| Equity |
1,261,997 | 1,803,209 (*) | 7,020,747 (*) | (27,500 | ) | 56,594 | ||||||||||||||
| Net revenue from sales and services |
— | 1,514,022 | 73,679,913 | — | 2,156,432 | |||||||||||||||
| Net income (loss) |
35,529 | 23,895 (*) | 365,680 (*) | (41,055 | ) | 32,346 | ||||||||||||||
| % of capital held |
100 | 100 | 100 | 100 | 33 | |||||||||||||||
| 12/31/2018 | ||||||||||||||||||||
| Subsidiaries | Joint-venture | |||||||||||||||||||
| Ultracargo – Operações Logísticas e Participações Ltda. |
Oxiteno S.A. Indústria e Comércio |
Ipiranga Produtos de Petróleo S.A. |
Ultrapar International S.A. |
Refinaria de Petróleo Riograndense S.A. |
||||||||||||||||
| Number of shares or units held |
11,839,764 | 35,102,127 | 224,467,228,244 | 49,995 | 5,078,888 | |||||||||||||||
| Assets |
1,279,932 | 6,222,795 | 17,850,422 | 2,904,188 | 517,304 | |||||||||||||||
| Liabilities |
2,509 | 3,416,140 | 12,434,610 | 2,894,598 | 456,714 | |||||||||||||||
| Equity |
1,277,423 | 2,806,655 (*) | 5,415,812 (*) | 9,590 | 60,590 | |||||||||||||||
| Net revenue from sales and services |
— | 1,380,519 | 74,312,071 | — | 2,092,548 | |||||||||||||||
| Net income (loss) |
111,145 | 553,236 (*) | 512,987(*) | (3,531 | ) | 8,695 | ||||||||||||||
| % of capital held |
100 | 100 | 100 | 100 | 33 | |||||||||||||||
| (*) | adjusted for intercompany unrealized profits. |
The percentages in the table above are rounded.
The financial information from our business segments is detailed in Note 33.
41
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
Balances and changes in subsidiaries and joint venture are as follows:
| Investments in subsidiaries | Joint-venture | |||||||||||||||||||||||||||
| Ultracargo – Operações Logísticas e Participações Ltda. |
Oxiteno S.A. Indústria e Comércio |
Ipiranga Produtos de Petróleo S.A. |
Ultrapar International S.A. |
Total | Refinaria de Petróleo Riograndense S.A. |
Total | ||||||||||||||||||||||
| Balance as of December 31, 2017 |
1,165,426 | 2,682,015 | 5,402,880 | 13,121 | 9,263,442 | 54,739 | 9,318,181 | |||||||||||||||||||||
| Share of profit (loss) of subsidiaries and joint venture |
111,145 | 553,236 | 512,987 | (3,531 | ) | 1,173,837 | 1,148 | 1,174,985 | ||||||||||||||||||||
| Dividends and interest on equity (gross) |
— | (229,243 | ) | (500,023 | ) | — | (729,266 | ) | (32,065 | ) | (761,331 | ) | ||||||||||||||||
| Tax liabilities on equity — method revaluation reserve |
— | — | (7 | ) | — | (7 | ) | — | (7 | ) | ||||||||||||||||||
| Equity instrument granted |
65 | 269 | 3,439 | — | 3,773 | — | 3,773 | |||||||||||||||||||||
| Valuation adjustment of subsidiaries |
787 | (212,698 | ) | (3,184 | ) | — | (215,095 | ) | (3,704 | ) | (218,799 | ) | ||||||||||||||||
| Translation adjustments of foreign-based subsidiaries |
— | 13,076 | (280 | ) | — | 12,796 | — | 12,796 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance as of December 31, 2018 |
1,277,423 | 2,806,655 | 5,415,812 | 9,590 | 9,509,480 | 20,118 | 9,529,598 | |||||||||||||||||||||
| Share of profit (loss) of subsidiaries and joint venture |
35,529 | 23,895 | 365,680 | (41,051 | ) | 384,053 | 10,740 | 312 | ||||||||||||||||||||
| Dividends and interest on equity (gross) |
(50,015 | ) | (1,011,490 | ) | (198,000 | ) | — | (1,259,505 | ) | (4,295 | ) | (1,263,800 | ) | |||||||||||||||
| Tax liabilities on equity — method revaluation reserve |
— | — | (31 | ) | — | (31 | ) | — | (31 | ) | ||||||||||||||||||
| Equity instrument granted |
303 | 687 | 6,671 | — | 7,661 | — | 7,661 | |||||||||||||||||||||
| Valuation adjustment of subsidiaries |
(1,605 | ) | (52,854 | ) | (19,385 | ) | — | (73,844 | ) | (7,771 | ) | (81,615 | ) | |||||||||||||||
| Translation adjustments of foreign-based subsidiaries |
— | 36,570 | — | — | 36,570 | — | 36,570 | |||||||||||||||||||||
| Capital increase in cash |
— | — | 1,450,000 | 3,964 | 1,453,964 | — | 1,453,964 | |||||||||||||||||||||
| Redemption of subsidiary shares of Oxiteno Nordeste |
362 | (254 | ) | — | — | 108 | — | 108 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Balance as of December 31, 2019 |
1,261,997 | 1,803,209 | 7,020,747 | (27,497 | ) | 10,058,456 | 18,792 | 10,077,248 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
42
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
b. Joint Ventures (Consolidated)
The Company holds an interest in Refinaria de Petróleo Riograndense (“RPR”), which is primarily engaged in oil refining.
The subsidiary Ultracargo – Operações Logísticas e Participações Ltda. (“Ultracargo Participações”) holds an interest in União Vopak – Armazéns Gerais Ltda. (“União Vopak”), which is primarily engaged in liquid bulk storage in the port of Paranaguá.
The subsidiary IPP holds an interest in ConectCar, which is primarily engaged in automatic payment of tolls and parking in the States of Bahia, Ceará, Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Pernambuco, Rio de Janeiro, Rio Grande do Sul, Santa Catarina, São Paulo and Distrito Federal.
On September 23, 2019, for the port concession BEL02A at the port of Miramar, Latitude Logística Portuária S.A. (“Latitude”) was constituted. On August 5, 2019, Navegantes Logística Portuária S.A. (“Navegantes”) was constituted for the port of Vitória. On August 19, 2019, in the city of Cabedelo, Nordeste Logística I S.A. (“Nordeste Logística I”), Nordeste Logística II S.A. (“Nordeste Logística II”) and Nordeste Logística III S.A. (“Nordeste Logística III”) (see Note 35.c) were constituted.
These investments are accounted for under the equity method of accounting based on their financial statements as of December 31, 2019.
Balances and changes in joint ventures are as follows:
| |
União Vopak |
|
RPR | ConectCar | |
Latitude Logística |
|
|
Navegantes Logística |
|
|
Nordeste Logística I |
|
|
Nordeste Logística II |
|
|
Nordeste Logística III |
|
Total | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance as of December 31, 2017 | 6,096 | 54,739 | 61,226 | — | — | — | — | — | 122,061 | |||||||||||||||||||||||||||
| Capital increase | — | — | 31,908 | — | — | — | — | — | 31,908 | |||||||||||||||||||||||||||
| Valuation adjustments | — | (3,704 | ) | — | — | — | — | — | — | (3,704 | ) | |||||||||||||||||||||||||
| Dividends and interest on equity (gross) | — | (32,065 | ) | — | — | — | — | — | — | (32,065 | ) | |||||||||||||||||||||||||
| Share of profit (loss) of joint ventures | 1,350 | 1,148 | (18,744 | ) | — | — | — | — | — | (16,246 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance as of December 31, 2018 | 7,446 | 20,118 | 74,390 | — | — | — | — | — | 101,954 | |||||||||||||||||||||||||||
| Capital increase | — | — | 35,000 | 10,351 | 23,581 | 1,930 | 4,183 | 4,079 | 79,124 | |||||||||||||||||||||||||||
| Valuation adjustments | — | (7,771 | ) | — | — | — | — | — | — | (7,771 | ) | |||||||||||||||||||||||||
| Dividends and interest on equity (gross) | (1,474 | ) | (4,295 | ) | — | — | — | — | — | — | (5,769 | ) | ||||||||||||||||||||||||
| Share of profit (loss) of joint ventures | 1,370 | 10,740 | (26,572 | ) | — | — | — | — | — | (14,462 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Balance as of December 31, 2019 | 7,342 | 18,792 | 82,818 | 10,351 | 23,581 | 1,930 | 4,183 | 4,079 | 153,076 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below presents the statements of financial position and statements of profit or loss of joint ventures:
| 12/31/2019 | ||||||||||||
| União Vopak | RPR | ConectCar | ||||||||||
| Current assets |
6,818 | 428,880 | 159,972 | |||||||||
| Non-current assets |
9,182 | 133,565 | 161,817 | |||||||||
| Current liabilities |
1,116 | 418,289 | 155,542 | |||||||||
| Non-current liabilities |
200 | 87,562 | 612 | |||||||||
| Equity |
14,684 | 56,594 | 165,635 | |||||||||
| Net revenue from sales and services |
15,400 | 2,156,432 | 80,387 | |||||||||
| Costs, operating expenses and income |
(12,083 | ) | (2,130,323 | ) | (136,764 | ) | ||||||
| Net financial income and income and social contribution taxes |
(577 | ) | 6,237 | 3,234 | ||||||||
| Net income (loss) |
2,740 | 32,346 | (53,143 | ) | ||||||||
| Number of shares or units held |
29,995 | 5,078,888 | 228,768,000 | |||||||||
| % of capital held |
50 | 33 | 50 | |||||||||
| 12/31/2018 | ||||||||||||
| União Vopak | RPR | ConectCar | ||||||||||
| Current assets |
8,432 | 370,250 | 129,152 | |||||||||
| Non-current assets |
8,552 | 147,054 | 150,054 | |||||||||
| Current liabilities |
1,814 | 385,079 | 130,414 | |||||||||
| Non-current liabilities |
280 | 71,635 | 14 | |||||||||
| Equity |
14,890 | 60,590 | 148,778 | |||||||||
| Net revenue from sales and services |
16,938 | 2,092,548 | 57,506 | |||||||||
| Costs, operating expenses and income |
(13,154 | ) | (2,083,592 | ) | (114,336 | ) | ||||||
| Net financial income and income and social contribution taxes |
(1,084 | ) | (261 | ) | 19,343 | |||||||
| Net income (loss) |
2,700 | 8,695 | (37,487 | ) | ||||||||
| Number of shares or units held |
29,995 | 5,078,888 | 193,768,000 | |||||||||
| % of capital held |
50 | 33 | 50 | |||||||||
The percentages in the table above are rounded.
44
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
c. Associates (Consolidated)
Subsidiary IPP holds an interest in Transportadora Sulbrasileira de Gás S.A., which is primarily engaged in natural gas transportation services.
Subsidiary Oxiteno S.A. holds an interest in Oxicap Indústria de Gases Ltda. (“Oxicap”), which is primarily engaged in the supply of nitrogen and oxygen for its shareholders in the Mauá petrochemical complex.
Due to incorporation of the subsidiary Oxiteno Nordeste, the subsidiary Oxiteno S.A. holds an interest in Química da Bahia Indústria e Comércio S.A., which is primarily engaged in manufacturing, marketing, and processing of chemicals. The operations of this associate are currently suspended.
Subsidiary Companhia Ultragaz S.A. (“Cia Ultragaz”) holds an interest in Metalúrgica Plus S.A., which is primarily engaged in the manufacture and trading of LPG containers. The operations of this associate are currently suspended.
Subsidiary Cia. Ultragaz holds an interest in Plenogás Distribuidora de Gás S.A., which is primarily engaged in the marketing of LPG. The operations of this associate are currently suspended.
The investment of subsidiary Oxiteno S.A. in the associate Oxicap is accounted for under the equity method of accounting based on its financial information as of November 30, 2019, while the other associates are valued based on the financial statements as of December 31, 2019.
Balances and changes in associates are as follows:
| |
Transportadora Sulbrasileira de Gás S.A. |
|
|
Oxicap Indústria de Gases Ltda. |
|
|
Química da Bahia Indústria e Comércio S.A. |
|
|
Metalúrgica Plus S.A. |
|
|
Plenogás Distribuidora de Gás S.A. |
|
Total | |||||||||
| Balance as of December 31, 2017 |
6,348 | 14,458 | 3,618 | 340 | 577 | 25,341 | ||||||||||||||||||
| Capital reduction |
(1,250 | ) | — | — | — | — | (1,250 | ) | ||||||||||||||||
| Dividends |
(984 | ) | — | — | — | (236 | ) | (1,220 | ) | |||||||||||||||
| Share of profit (loss) of associates |
575 | 908 | (28 | ) | (112 | ) | 124 | 1,467 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of December 31, 2018 |
4,689 | 15,366 | 3,590 | 228 | 465 | 24,338 | ||||||||||||||||||
| Dividends |
(818 | ) | — | — | — | (87 | ) | (905 | ) | |||||||||||||||
| Share of profit (loss) of associates |
1,790 | 568 | (36 | ) | (90 | ) | 85 | 2,317 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Balance as of December 31, 2019 |
5,661 | 15,934 | 3,554 | 138 | 463 | 25,750 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
45
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below presents the statements of financial position and statements of profit or loss of associates:
| 12/31/2019 | ||||||||||||||||||||
| Transportadora Sulbrasileira de Gás S.A. |
Oxicap Indústria de Gases Ltda. |
Química da Bahia Indústria e Comércio S.A. |
Metalúrgica Plus S.A. |
Plenogás Distribuidora de Gás S.A. |
||||||||||||||||
| Current assets |
12,172 | 45,178 | 71 | 40 | 151 | |||||||||||||||
| Non-current assets |
14,041 | 84,705 | 10,147 | 703 | 2,440 | |||||||||||||||
| Current liabilities |
2,944 | 11,041 | — | 25 | 34 | |||||||||||||||
| Non-current liabilities |
626 | 9,634 | 3,110 | 302 | 1,167 | |||||||||||||||
| Equity |
22,643 | 109,208 | 7,108 | 416 | 1,390 | |||||||||||||||
| Net revenue from sales and services |
12,348 | 43,463 | — | — | — | |||||||||||||||
| Costs, operating expenses and income |
(4,815 | ) | (36,791 | ) | (84 | ) | (213 | ) | 285 | |||||||||||
| Net financial income and income and social contribution taxes |
(157 | ) | (2,483 | ) | 12 | (57 | ) | (29 | ) | |||||||||||
| Net income (loss) |
7,376 | 4,189 | (72 | ) | (270 | ) | 256 | |||||||||||||
| Number of shares or units held |
20,124,996 | 1,987 | 1,493,120 | 3,000 | 1,384,308 | |||||||||||||||
| % of capital held |
25 | 15 | 50 | 33 | 33 | |||||||||||||||
| 12/31/2018 | ||||||||||||||||||||
| Transportadora Sulbrasileira de Gás S.A. |
Oxicap Indústria de Gases Ltda. |
Química da Bahia Indústria e Comércio S.A. |
Metalúrgica Plus S.A. |
Plenogás Distribuidora de Gás S.A. |
||||||||||||||||
| Current assets |
7,803 | 38,714 | 51 | 19 | 64 | |||||||||||||||
| Non-current assets |
15,254 | 85,395 | 10,238 | 990 | 2,791 | |||||||||||||||
| Current liabilities |
3,963 | 9,777 | — | 21 | 123 | |||||||||||||||
| Non-current liabilities |
332 | 8,888 | 3,109 | 302 | 1,334 | |||||||||||||||
| Equity |
18,762 | 105,444 | 7,180 | 686 | 1,398 | |||||||||||||||
| Net revenue from sales and services |
10,595 | 53,288 | — | — | — | |||||||||||||||
| Costs, operating expenses and income |
(7,957 | ) | (43,814 | ) | (78 | ) | (266 | ) | 399 | |||||||||||
| Net financial income and income and social contribution taxes |
(211 | ) | (3,453 | ) | 22 | (69 | ) | (27 | ) | |||||||||||
| Net income (loss) |
2,427 | 6,021 | (56 | ) | (335 | ) | 372 | |||||||||||||
| Number of shares or units held |
20,124,996 | 1,987 | 1,493,120 | 3,000 | 1,384,308 | |||||||||||||||
| % of capital held |
25 | 15 | 50 | 33 | 33 | |||||||||||||||
The percentages in the table above are rounded.
46
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 13. | Right to Use Assets and Leases payable (Consolidated) |
Some of the subsidiaries of the Company have real estate leases, substantially related to: (i) Ipiranga: fuel stations and distribution center; (ii) Extrafarma: pharmacies and distribution center; (iii) Ultragaz: points of sale and bottling base; (iv) Ultracargo: port areas; and (v) Oxiteno: industrial plant. Some subsidiaries also have lease agreements relating to vehicles.
| a. | Right to Use Assets |
| Weighted average useful life (years) |
Adoption IFRS 16 / CPC 06 (R2) |
Additions and remeasurement |
Write-offs | Transfer | Effect of foreign currency exchange rate variation |
Amortization | Balance on 12/31/2019 |
|||||||||||||||||||||||||
| Cost: |
||||||||||||||||||||||||||||||||
| Real estate |
7 | 1,636,330 | 308,622 | (55,605 | ) | 98,043 | 80,930 | — | 2,068,320 | |||||||||||||||||||||||
| Port area (*) |
— | — | 68,007 | — | — | — | — | 68,007 | ||||||||||||||||||||||||
| Other |
4 | 95,097 | 26,235 | (1,981 | ) | 27,847 | 4,272 | — | 151,470 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| 1,731,427 | 402,864 | (57,586 | ) | 125,890 | 85,202 | — | 2,287,797 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Accumulated amortization: |
||||||||||||||||||||||||||||||||
| Real estate |
— | — | 6,682 | — | 36 | (262,750 | ) | (256,032 | ) | |||||||||||||||||||||||
| Port area |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
| Other |
— | — | 442 | (14,068 | ) | 81 | (37,308 | ) | (50,853 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| — | — | 7,124 | (14,068 | ) | 117 | (300,058 | ) | (306,885 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| Net amount |
1,731,427 | 402,864 | (50,462 | ) | 111,822 | 85,319 | (300,058 | ) | 1,980,912 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
| (*) | Refers to the port concession grants, of which R$ 68,007 was paid by subsidiaries of the Company until the 4th quarter of 2019 (see Note 35.c). |
The amortization expenses were recognized in the financial statements as shown below:
| 12/31/2019 | ||||
| Inventories and cost of products and services sold |
48,134 | |||
| Selling and marketing |
244,974 | |||
| General and administrative |
6,950 | |||
|
|
|
|||
| 300,058 | ||||
|
|
|
|||
| b. | Leases Payable |
The changes in leases payable are shown below:
| Balance as of December 31, 2018 |
46,066 | |||
| Adoption IFRS 16/CPC 06 (R2) |
1,363,803 | |||
| Interest accrued |
128,996 | |||
| Payments |
(321,716 | ) | ||
| Additions and remeasurement |
334,857 | |||
| Write-offs |
(52,129 | ) | ||
| Effect of foreign currency exchange rate variation |
88,796 | |||
|
|
|
|||
| Balance as of December 31, 2019 |
1,588,673 | |||
|
|
|
|||
| Current |
206,396 | |||
| Non-current |
1,382,277 |
47
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The future disbursements (installments) assumed under leases contracts are presented below:
| 12/31/2019 | ||||
| Up to 1 year |
309,977 | |||
| From 1 to 2 years |
508,976 | |||
| From 2 to 3 years |
395,743 | |||
| From 3 to 4 years |
316,682 | |||
| From 4 to 5 years |
192,017 | |||
| More than 5 years |
320,357 | |||
|
|
|
|||
| Total |
2,043,752 | |||
|
|
|
|||
The contracts related to the leases payable are substantially indexed by the IGP-M (General Market Price Index is a measure of Brazilian inflation, calculated by the Getúlio Vargas Foundation).
| c. | Lease Contracts of Low Amount Assets |
Subsidiaries Cia. Ultragaz, Bahiana, Tequimar, Serma, and Oxiteno S.A. have operating lease contracts for the use of IT equipment. These contracts have terms from 36 to 48 months. The subsidiaries have the option to purchase the assets at a price equal to the fair market price on the date of option, and management does not intend to exercise such option. The future disbursements (installments), assumed under these contracts, amount approximately to:
| Up to 1 year |
Between 1 and 5 years |
More than 5 years |
Total | |||||||||||||
| 12/31/2019 |
3,474 | 6,028 | — | 9,502 | ||||||||||||
The expense recognized in 2019 was R$ 11,400 (R$ 11.386 in 2018).
| d. | Inflation effect |
The effects of inflation are as follows:
| Net right to use assets |
Parent | Consolidated | ||||||
| Nominal base |
5,799 | 1,980,912 | ||||||
| Inflated base |
7,012 | 2,220,614 | ||||||
|
|
|
|
|
|||||
| 20.9% | 14.8% | |||||||
|
|
|
|
|
|||||
| Lease liability |
Parent | Consolidated | ||||||
| Nominal base |
5,999 | 1,588,673 | ||||||
| Inflated base |
7,012 | 1,828,870 | ||||||
|
|
|
|
|
|||||
| 16.9% | 18.6% | |||||||
|
|
|
|
|
|||||
| Financial expenses |
Parent | Consolidated | ||||||
| Nominal base |
200 | 128,996 | ||||||
| Inflated base |
280 | 159,135 | ||||||
|
|
|
|
|
|||||
| 39.8% | 23.4% | |||||||
|
|
|
|
|
|||||
| Depreciation expenses |
Parent | Consolidated | ||||||
| Real base |
— | 300,058 | ||||||
| Inflated base |
— | 301,284 | ||||||
|
|
|
|
|
|||||
| — | 0.4% | |||||||
|
|
|
|
|
|||||
48
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 14. | Property, Plant, and Equipment (Consolidated) |
Balances and changes in PP&E are as follows:
| Weighted average useful life (years) |
Balance on 12/31/2018 |
Additions | Depreciation | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Oxiteno Andina (*) |
Balance on 12/31/2019 |
||||||||||||||||||||||||||||
| Cost: |
||||||||||||||||||||||||||||||||||||
| Land |
— | 620,879 | 43,420 | — | 4,785 | (2,017 | ) | 1,059 | (261 | ) | 667,865 | |||||||||||||||||||||||||
| Buildings |
32 | 1,801,073 | 18,117 | — | 105,861 | (4,339 | ) | 7,023 | (1,789 | ) | 1,925,946 | |||||||||||||||||||||||||
| Leasehold improvements |
10 | 1,015,640 | 19,191 | — | 129,234 | (42,552 | ) | 15 | — | 1,121,528 | ||||||||||||||||||||||||||
| Machinery and equipment |
13 | 5,219,256 | 131,831 | — | 365,953 | (4,967 | ) | 9,596 | (13,948 | ) | 5,707,721 | |||||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
14 | 2,864,333 | 103,288 | — | 81,038 | (57,187 | ) | — | — | 2,991,472 | ||||||||||||||||||||||||||
| LPG tanks and bottles |
10 | 743,016 | 65,351 | — | (6,993 | ) | (45,914 | ) | — | — | 755,460 | |||||||||||||||||||||||||
| Vehicles |
7 | 308,756 | 24,686 | — | 7,564 | (20,353 | ) | (394 | ) | (98 | ) | 320,161 | ||||||||||||||||||||||||
| Furniture and utensils |
9 | 279,016 | 15,009 | — | 4,399 | (2,665 | ) | 198 | (353 | ) | 295,604 | |||||||||||||||||||||||||
| Construction in progress |
— | 922,799 | 591,525 | — | (695,301 | ) | (108 | ) | 8,344 | (173 | ) | 827,086 | ||||||||||||||||||||||||
| Advances to suppliers |
— | 14,088 | 7,378 | — | (8,921 | ) | — | (1 | ) | — | 12,544 | |||||||||||||||||||||||||
| Imports in progress |
— | 41 | 9,513 | — | (9,304 | ) | — | — | — | 250 | ||||||||||||||||||||||||||
| IT equipment |
5 | 395,063 | 21,771 | — | 872 | (5,249 | ) | 352 | — | 412,809 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 14,183,960 | 1,051,080 | — | (20,813 | ) | (185,351 | ) | 26,192 | (16,622 | ) | 15,038,446 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Accumulated depreciation: |
||||||||||||||||||||||||||||||||||||
| Buildings |
(743,117 | ) | — | (58,158 | ) | 187 | 4,681 | 893 | 1,679 | (793,835 | ) | |||||||||||||||||||||||||
| Leasehold improvements |
(558,042 | ) | — | (84,664 | ) | 2,040 | 26,291 | (4 | ) | — | (614,379 | ) | ||||||||||||||||||||||||
| Machinery and equipment |
(2,969,209 | ) | — | (298,767 | ) | 2,983 | 3,510 | 16,340 | 13,516 | (3,231,627 | ) | |||||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
(1,657,608 | ) | — | (159,961 | ) | — | 50,691 | — | — | (1,766,878 | ) | |||||||||||||||||||||||||
| LPG tanks and bottles |
(401,056 | ) | — | (57,890 | ) | 4,467 | 28,925 | — | — | (425,554 | ) | |||||||||||||||||||||||||
| Vehicles |
(123,650 | ) | — | (27,106 | ) | 28 | 11,274 | 311 | 98 | (139,045 | ) | |||||||||||||||||||||||||
| Furniture and utensils |
(155,339 | ) | — | (18,944 | ) | (12 | ) | 2,280 | 204 | 336 | (171,475 | ) | ||||||||||||||||||||||||
| IT equipment |
(288,083 | ) | — | (34,782 | ) | 50 | 5,061 | (309 | ) | — | (318,063 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (6,896,104 | ) | — | (740,272 | ) | 9,743 | 132,713 | 17,435 | 15,629 | (7,460,856 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
49
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Balance on 12/31/2018 |
Additions | Depreciation | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Oxiteno Andina (*) |
Balance on 12/31/2019 |
|||||||||||||||||||||||||
| Provision for losses: |
||||||||||||||||||||||||||||||||
| Advances to suppliers |
(83 | ) | (27 | ) | — | — | — | — | — | (110 | ) | |||||||||||||||||||||
| Buildings |
(306 | ) | — | — | — | — | — | 306 | — | |||||||||||||||||||||||
| Land |
(827 | ) | — | — | — | — | — | 681 | (146 | ) | ||||||||||||||||||||||
| Leasehold improvements |
(1,385 | ) | (1,528 | ) | — | — | 111 | 1,203 | — | (1,599 | ) | |||||||||||||||||||||
| Machinery and equipment |
(6,117 | ) | — | — | — | 769 | 1,138 | 1,335 | (2,875 | ) | ||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
(165 | ) | — | — | — | 67 | — | — | (98 | ) | ||||||||||||||||||||||
| Construction in progress |
(38 | ) | — | — | — | — | — | 38 | — | |||||||||||||||||||||||
| Furniture and utensils |
(70 | ) | — | — | — | 1 | — | 69 | — | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (8,991 | ) | (1,555 | ) | — | — | 948 | 2,341 | 2,429 | (4,828 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Net amount |
7,278,865 | 1,049,525 | (740,272 | ) | (11,070 | ) | (51,690 | ) | 45,968 | 1,436 | 7,572,762 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| (*) | Refers to the asset write-offs of Oxiteno Andina (see Note nº 3.b.3). |
50
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Weighted average useful life (years) |
Balance on 12/31/2017 |
Additions | Depreciation | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Balance acquisition TEAS (ii) |
Balance on 12/31/2018 |
||||||||||||||||||||||||||||
| Cost: |
||||||||||||||||||||||||||||||||||||
| Land |
— | 576,642 | 3,994 | — | 9,261 | (895 | ) | (1,238 | ) | 33,115 | 620,879 | |||||||||||||||||||||||||
| Buildings |
32 | 1,637,871 | 7,041 | — | 151,937 | (2,929 | ) | (10,914 | ) | 18,067 | 1,801,073 | |||||||||||||||||||||||||
| Leasehold improvements |
8 | 912,555 | 11,931 | — | 103,371 | (12,273 | ) | 56 | — | 1,015,640 | ||||||||||||||||||||||||||
| Machinery and equipment |
13 | 4,721,931 | 115,171 | — | 588,696 | (4,895 | ) | (261,955 | ) | 60,308 | 5,219,256 | |||||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
13 | 2,729,522 | 98,478 | — | 98,573 | (62,240 | ) | — | — | 2,864,333 | ||||||||||||||||||||||||||
| LPG tanks and bottles |
8 | 692,856 | 78,995 | — | 2,552 | (31,387 | ) | — | — | 743,016 | ||||||||||||||||||||||||||
| Vehicles |
6 | 287,295 | 29,141 | — | 18,061 | (23,996 | ) | (1,745 | ) | — | 308,756 | |||||||||||||||||||||||||
| Furniture and utensils |
8 | 265,909 | 18,417 | — | 6,078 | (863 | ) | (10,570 | ) | 45 | 279,016 | |||||||||||||||||||||||||
| Construction in progress |
— | 929,000 | 796,909 | — | (883,994 | ) | (578 | ) | 81,462 | — | 922,799 | |||||||||||||||||||||||||
| Advances to suppliers |
— | 112,167 | 6,317 | — | (100,233 | ) | — | (4,163 | ) | — | 14,088 | |||||||||||||||||||||||||
| Imports in progress |
— | 786 | 699 | — | (1,446 | ) | — | 2 | — | 41 | ||||||||||||||||||||||||||
| IT equipment |
5 | 352,986 | 34,921 | — | 7,942 | (1,953 | ) | 1,161 | 6 | 395,063 | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 13,219,520 | 1,202,014 | — | 798 | (142,009 | ) | (207,904 | ) | 111,541 | 14,183,960 | |||||||||||||||||||||||||||
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|||||||||||||||||||||
51
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Weighted average useful life (years) |
Balance on 12/31/2017 |
Additions | Depreciation | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Balance acquisition TEAS (ii) |
Balance on 12/31/2018 |
||||||||||||||||||||||||||||
| Accumulated depreciation: |
||||||||||||||||||||||||||||||||||||
| Buildings |
(724,408 | ) | — | (53,462 | ) | 10,046 | 2,608 | 26,533 | (4,434 | ) | (743,117 | ) | ||||||||||||||||||||||||
| Leasehold improvements |
(475,651 | ) | — | (83,208 | ) | (4,574 | ) | 5,398 | (7 | ) | — | (558,042 | ) | |||||||||||||||||||||||
| Machinery and equipment |
(2,980,166 | ) | — | (271,867 | ) | 1,143 | 3,449 | 288,461 | (10,229 | ) | (2,969,209 | ) | ||||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
(1,545,806 | ) | — | (162,815 | ) | (7,232 | ) | 58,245 | — | — | (1,657,608 | ) | ||||||||||||||||||||||||
| LPG tanks and bottles |
(328,384 | ) | — | (88,308 | ) | (2,347 | ) | 17,983 | — | — | (401,056 | ) | ||||||||||||||||||||||||
| Vehicles |
(112,200 | ) | — | (28,792 | ) | 498 | 15,002 | 1,842 | — | (123,650 | ) | |||||||||||||||||||||||||
| Furniture and utensils |
(148,575 | ) | — | (18,482 | ) | (292 | ) | 513 | 11,517 | (20 | ) | (155,339 | ) | |||||||||||||||||||||||
| IT equipment |
(260,859 | ) | — | (30,659 | ) | 2,702 | 1,819 | (1,080 | ) | (6 | ) | (288,083 | ) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (6,576,049 | ) | — | (737,593 | ) | (56 | ) | 105,017 | 327,266 | (14,689 | ) | (6,896,104 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|||||||||||||||||||||
| Provision for losses: |
||||||||||||||||||||||||||||||||||||
| Advances to suppliers |
(83 | ) | — | — | — | — | — | — | (83 | ) | ||||||||||||||||||||||||||
| Buildings |
— | (306) (*) | — | — | — | — | — | (306 | ) | |||||||||||||||||||||||||||
| Land |
(104 | ) | (723) (*) | — | — | — | — | — | (827 | ) | ||||||||||||||||||||||||||
| Leasehold improvements |
(564 | ) | (733) | — | — | 2 | (90 | ) | — | (1,385 | ) | |||||||||||||||||||||||||
| Machinery and equipment |
(4,724 | ) | (1,532) (*) | — | — | 444 | (305 | ) | — | (6,117 | ) | |||||||||||||||||||||||||
| Automotive fuel/lubricant distribution equipment and facilities |
(169 | ) | — | — | — | 4 | — | — | (165 | ) | ||||||||||||||||||||||||||
| Construction in progress |
— | (38) (*) | — | — | — | — | — | (38 | ) | |||||||||||||||||||||||||||
| Furniture and utensils |
(1 | ) | (69) (*) | — | — | — | — | — | (70 | ) | ||||||||||||||||||||||||||
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|
|
|
|
|
|
|
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|
|||||||||||||||||||||
| (5,645 | ) | (3,401) | — | — | 450 | (395 | ) | — | (8,991 | ) | ||||||||||||||||||||||||||
| Net amount |
6,637,826 | 1,198,613 | (737,593 | ) | 742 | (36,542 | ) | 118,967 | 96,852 | 7,278,865 | ||||||||||||||||||||||||||
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|
|||||||||||||||||||||
| (i) | Refers to amounts transferred to intangible assets, inventories and right to use assets, stating in 2019. |
| (ii) | See Note 3.c. |
| (*) | Refers to the impairment for subsidiary Oxiteno Andina (see Note 2.s.1.ii of financial statements as of and for the year ended December 31, 2018 filed on CVM on February 20, 2019). |
Construction in progress relates substantially to expansions, renovations, constructions and upgrade of industrial facilities, terminals, stores, service stations and distribution bases.
Advances to suppliers is related, basically, to manufacturing of assets for expansion of plants, terminals, stores, service stations and bases and acquisition of real estate.
The depreciation expenses were recognized in the financial statements as shown below:
| 12/31/2019 | 12/31/2018 | |||||||
| Inventories and cost of products and services sold |
405,966 | 406,002 | ||||||
| Selling and marketing |
285,671 | 279,023 | ||||||
| General and administrative |
48,635 | 52,568 | ||||||
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|
|
|
|||||
| 740,272 | 737,593 | |||||||
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|||||
52
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 15. | Intangible Assets (Consolidated) |
Balances and changes in intangible assets are as follows:
| Weighted average useful life (years) |
Balance on 12/31/2018 |
Adoption IFRS 16 / CPC 06 (R2) |
Additions | Amortization | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Oxiteno Andina (*) |
Balance on 12/31/2019 |
|||||||||||||||||||||||||||||||
| Cost: |
||||||||||||||||||||||||||||||||||||||||
| Goodwill (a) |
— | 1,525,088 | — | — | — | — | — | — | — | 1,525,088 | ||||||||||||||||||||||||||||||
| Software (b) |
3 | 1,062,486 | — | 145,004 | — | 2,553 | (784 | ) | 1,551 | (281 | ) | 1,210,529 | ||||||||||||||||||||||||||||
| Technology (c) |
5 | 32,617 | — | — | — | — | — | — | — | 32,617 | ||||||||||||||||||||||||||||||
| Commercial property rights |
10 | 64,032 | (56,114 | ) | 3,820 | — | (1,401 | ) | (2,403 | ) | — | — | 7,934 | |||||||||||||||||||||||||||
| Distribution rights |
6 | 142,989 | — | 1,505 | — | (10,895 | ) | — | — | — | 133,599 | |||||||||||||||||||||||||||||
| Brands (d) |
— | 120,571 | — | — | — | — | — | 1,933 | — | 122,504 | ||||||||||||||||||||||||||||||
| Trademark rights (d) |
35 | 114,792 | — | — | — | — | — | — | — | 114,792 | ||||||||||||||||||||||||||||||
| Others (e) |
10 | 43,281 | — | 1,668 | — | (355 | ) | — | 306 | — | 44,900 | |||||||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| 3,105,856 | (56,114 | ) | 151,997 | — | (10,098 | ) | (3,187 | ) | 3,790 | (281 | ) | 3,191,963 | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Accumulated amortization: |
||||||||||||||||||||||||||||||||||||||||
| Software |
(537,438 | ) | — | — | (110,088 | ) | 13 | (611 | ) | (998 | ) | 261 | (648,861 | ) | ||||||||||||||||||||||||||
| Technology |
(32,613 | ) | — | — | (3 | ) | — | — | — | — | (32,616 | ) | ||||||||||||||||||||||||||||
| Commercial property rights |
(23,931 | ) | 16,186 | — | (848 | ) | (669 | ) | 2,878 | — | — | (6,384 | ) | |||||||||||||||||||||||||||
| Distribution rights |
(106,597 | ) | — | — | (6,511 | ) | 4,176 | — | — | — | (108,932 | ) | ||||||||||||||||||||||||||||
| Trademark rights |
(3,182 | ) | — | — | (2,937 | ) | — | — | — | — | (6,119 | ) | ||||||||||||||||||||||||||||
| Others |
(32,740 | ) | — | — | (105 | ) | 136 | — | (4 | ) | — | (32,713 | ) | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (736,501 | ) | 16,186 | — | (120,492 | ) | 3,656 | 2,267 | (1,002 | ) | 261 | (835,625 | ) | ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Provision for losses and impairment: |
||||||||||||||||||||||||||||||||||||||||
| Goodwill (a) |
— | — | (593,280 | ) | — | — | — | — | — | (593,280 | ) | |||||||||||||||||||||||||||||
| Commercial property rights |
— | — | (465 | ) | — | — | — | — | — | (465 | ) | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| — | — | (593,745 | ) | — | — | — | — | — | (593,745 | ) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Net amount |
2,369,355 | (39,928 | ) | (441,748 | ) | (120,492 | ) | (6,442 | ) | (920 | ) | 2,788 | (20 | ) | 1,762,593 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| (*) | Refers to the asset write-offse of Oxiteno Andina (see Note 3.b.3). |
53
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Weighted average useful life (years) |
Balance on 12/31/2017 |
Additions | Amortization | Transfer (i) | Write-offs and disposals |
Effect of foreign currency exchange rate variation |
Balance acquisition TEAS (ii) |
Balance on 12/31/2018 |
||||||||||||||||||||||||||||
| Cost: |
||||||||||||||||||||||||||||||||||||
| Goodwill (a) |
— | 1,524,291 | — | — | — | — | — | 797 | 1,525,088 | |||||||||||||||||||||||||||
| Software (b) |
5 | 853,079 | 223,964 | — | (1,258 | ) | (15,401 | ) | 2,053 | 49 | 1,062,486 | |||||||||||||||||||||||||
| Technology (c) |
5 | 32,617 | — | — | — | — | — | — | 32,617 | |||||||||||||||||||||||||||
| Commercial property rights (d) |
10 | 55,069 | 11,117 | — | — | (2,154 | ) | — | — | 64,032 | ||||||||||||||||||||||||||
| Distribution rights |
8 | 142,669 | 690 | — | (350 | ) | — | (20 | ) | — | 142,989 | |||||||||||||||||||||||||
| Brands (e) |
— | 113,543 | — | — | — | — | 7,028 | — | 120,571 | |||||||||||||||||||||||||||
| Trademark rights (e) |
39 | 114,792 | — | — | — | — | — | — | 114,792 | |||||||||||||||||||||||||||
| Others (f) |
10 | 40,514 | 1,822 | — | — | — | 945 | — | 43,281 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| 2,876,574 | 237,593 | — | (1,608 | ) | (17,555 | ) | 10,006 | 846 | 3,105,856 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Accumulated amortization: |
||||||||||||||||||||||||||||||||||||
| Software |
(456,799 | ) | — | (79,845 | ) | 59 | 28 | (832 | ) | (49 | ) | (537,438 | ) | |||||||||||||||||||||||
| Technology |
(32,541 | ) | — | (72 | ) | — | — | — | — | (32,613 | ) | |||||||||||||||||||||||||
| Commercial property rights |
(21,292 | ) | — | (4,679 | ) | — | 2,040 | — | — | (23,931 | ) | |||||||||||||||||||||||||
| Distribution rights |
(96,704 | ) | — | (10,018 | ) | 125 | — | — | — | (106,597 | ) | |||||||||||||||||||||||||
| Trademark rights |
— | — | (3,182 | ) | — | — | — | — | (3,182 | ) | ||||||||||||||||||||||||||
| Others |
(31,196 | ) | — | (1,538 | ) | — | — | (6 | ) | — | (32,740 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (638,532 | ) | — | (99,334 | ) | 184 | 2,068 | (838 | ) | (49 | ) | (736,501 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| Net amount |
2,238,042 | 237,593 | (99,334 | ) | (1,424 | ) | (15,487 | ) | 9,168 | 797 | 2,369,355 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
| (i) | Refers to amounts transferred to PP&E and right to use assets as from 2019. |
| (ii) | See Note 3.c. |
54
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The amortization expenses were recognized in the financial statements as shown below:
| 12/31/2019 | 12/31/2018 | |||||||
| Inventories and cost of products and services sold |
11,183 | 15,044 | ||||||
| Selling and marketing |
3,872 | 8,920 | ||||||
| General and administrative |
105,437 | 75,370 | ||||||
|
|
|
|
|
|||||
| 120,492 | 99,334 | |||||||
|
|
|
|
|
|||||
| a. | Goodwill |
The balance of the goodwill is tested annually for impairment and is represented by the following acquisitions:
| Segment | 12/31/2019 | 12/31/2018 | ||||||||||
| Goodwill on the acquisition of: |
||||||||||||
| Extrafarma |
Extrafarma | 661,553 | 661,553 | |||||||||
| Extrafarma – impairment |
Extrafarma | (593,280 | ) | — | ||||||||
| Extrafarma – net |
Extrafarma | 68,273 | 661,553 | |||||||||
| Ipiranga(1) |
Ipiranga | 276,724 | 276,724 | |||||||||
| União Terminais |
Ultracargo | 211,089 | 211,089 | |||||||||
| Texaco |
Ipiranga | 177,759 | 177,759 | |||||||||
| Iconic (CBLSA) |
Ipiranga | 69,807 | 69,807 | |||||||||
| Oxiteno Uruguay |
Oxiteno | 44,856 | 44,856 | |||||||||
| Temmar |
Ultracargo | 43,781 | 43,781 | |||||||||
| DNP |
Ipiranga | 24,736 | 24,736 | |||||||||
| Repsol |
Ultragaz | 13,403 | 13,403 | |||||||||
| TEAS |
Ultracargo | 797 | 797 | |||||||||
| Others |
Oxiteno | 583 | 583 | |||||||||
|
|
|
|
|
|||||||||
| 931,808 | 1,525,088 | |||||||||||
|
|
|
|
|
|||||||||
| (1) | Including R$ 246,163 at Ultrapar. |
On December 31, 2019, the Company tested the balances of goodwill shown in the table above for impairment. The determination of value in use involves assumptions, judgments, and estimates of cash flows, such as growth rates of revenues, costs and expenses, estimates of investments and working capital, and discount rates. The assumptions about growth projections and future cash flows are based on the Company’s business plan of its operating segments, as well as comparable market data, and represent management’s best estimate of the economic conditions that will exist over the economic life of the various CGUs, to which goodwill is related.
The main key-assumptions used by the Company to calculate the value in use are described below:
Period of evaluation: the evaluation of the value in use is calculated for a period of five years (except the Extrafarma segment), after which the Company calculated the perpetuity, considering the possibility of carrying the business on indefinitely. For the Extrafarma segment, a period of ten years was used due to a four-year period to maturity of new stores were considered.
Discount and real growth rates: on December 31, 2019, the discount and real growth rates used to extrapolate the projections ranged from 8.9% to 12.1% and from 0% to 1% p.a., respectively, depending on the CGU analyzed.
Revenue from sales and services, costs and expenses, and gross margin: considers the budget prepared for 2020 and the long-term strategic plan prepared by management and approved by the Board of Directors.
55
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The goodwill impairment tests and net assets of the Company and its subsidiaries result in the recognition of impairment in the amount of R$ 593,280 for subsidiary Extrafarma for the year ended December 31, 2019 (see Note 2.u).
The Company assessed a sensitivity analysis of discount and growth rate of perpetuity, due to their significant impact on cash flows and value in use. An increase of 0.5 percentage points in the discount rate or a decrease of 0.5 percentage points in the growth rate of the perpetuity of the cash flow of each business segment would not result in the recognition of impairment.
| b. | Software |
Includes user licenses and costs for the implementation of the various systems used by the Company and its subsidiaries, such as: integrated management and control, financial management, foreign trade, industrial automation, operational and storage management, accounting information, and other systems.
| c. | Technology |
The subsidiaries Oxiteno S.A. and Oleoquímica recognize as technology certain rights of use held by them. Such licenses include the production of ethylene oxide, ethylene glycols, ethanolamines, glycol ethers, ethoxylates, solvents, fatty acids from vegetable oils, fatty alcohols, and specialty chemicals, which are products that are supplied to various industries.
| d. | Brands and Trademark rights |
Brands are represented by the acquisition cost of the ‘am/pm’ brand in Brazil and of the Extrafarma brand, acquired in the business combination, and Chevron and Texaco trademark rights.
| e. | Other intangibles |
Refers mainly to the loyalty program “Clube Extrafarma”.
56
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 16. | Loans and Debentures |
a. Composition
| a.1 | Parent |
| Description |
12/31/2019 | 12/31/2018 | Index/Currency | Weighted average financial charges 12/31/2019 – % p.a. |
Maturity | |||||||||||||||
| Brazilian Reais: |
||||||||||||||||||||
| Debentures –6th issuance (g.5) |
1,752,081 | 1,756,954 | DI | 105.3 | 2023 | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| Current |
28,713 | 34,504 | ||||||||||||||||||
| Non-current |
1,723,368 | 1,722,450 | ||||||||||||||||||
| a.2 | Consolidated |
| Description |
12/31/2019 | 12/31/2018 | Index/Currency | Weighted average financial charges 12/31/2019 – % p.a. |
Maturity | |||||||||||||||
| Foreign currency – denominated loans: |
||||||||||||||||||||
| Notes in the foreign market (b) (*) |
4,213,662 | 2,889,631 | US$ | 5.3 | 2026 to 2029 | |||||||||||||||
| Foreign loan (c.1) (*) |
1,057,407 | 985,268 | US$ | 3.9 | 2021 to 2023 | |||||||||||||||
| Foreign loan (c.1) (*) |
608,685 | 582,106 | US$ + LIBOR | 0.9 | 2022 to 2023 | |||||||||||||||
| Financial institutions (e) |
604,741 | 620,605 | US$ + LIBOR | 2.0 | 2020 to 2023 | |||||||||||||||
| Foreign loan (c.2) |
243,837 | 234,363 | US$ + LIBOR | 2.0 | 2020 | |||||||||||||||
| Financial institutions (e) |
132,417 | 127,288 | US$ | 2.8 | 2020 to 2022 | |||||||||||||||
| Financial institutions (e) |
41,164 | 27,845 | MX$ (2) | 8.9 | 2020 | |||||||||||||||
| BNDES (d) |
208 | 2,596 | US$ | 7.0 | 2020 | |||||||||||||||
| Financial institutions (e) |
— | 3,950 | MX$ + TIIE (2) | — | — | |||||||||||||||
| Foreign currency advances delivered |
— | 1,485 | US$ | — | — | |||||||||||||||
| Advances on foreign exchange contracts |
— | 11,702 | US$ | — | — | |||||||||||||||
|
|
|
|
|
|||||||||||||||||
| Total foreign currency |
6,902,121 | 5,486,839 | ||||||||||||||||||
|
|
|
|
|
|||||||||||||||||
57
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Description |
12/31/2019 |
12/31/2018 | Index/Currency | Weighted average financial charges 12/31/2019 – % p.a. |
Maturity | |||||||||||||
| Brazilian Reais – denominated loans: |
||||||||||||||||||
| Debentures – CRA (g.2, g.4 and g.6) |
2,036,647 | 2,029,545 | DI | 95.8 | 2022 to 2023 | |||||||||||||
| Debentures – Ipiranga (g.1 and g.3) |
1,868,612 | 2,039,743 | DI | 105.0 | 2020 to 2022 | |||||||||||||
| Debentures – 6th issuance (g.5) |
1,752,080 | 1,756,954 | DI | 105.3 | 2023 | |||||||||||||
| Banco do Brasil floating rate (f) |
611,276 | 2,614,704 | DI | 110.9 | 2020 to 2022 | |||||||||||||
| Debentures – CRA (g.2, g.4 and g.6) (*) |
941,614 | 833,213 | IPCA | 4.6 | 2024 to 2025 | |||||||||||||
| Debentures – Tequimar (g.7) |
89,278 | — | R$ | 6.5 | 2024 | |||||||||||||
| BNDES (d) |
62,578 | 147,922 | TJLP (3) | 2.3 | 2020 to 2023 | |||||||||||||
| FINEP |
41,345 | 53,245 | TJLP (3) | 1.6 | 2020 to 2023 | |||||||||||||
| BNDES (d) |
30,392 | 51,467 | SELIC (5) | 2.3 | 2020 to 2023 | |||||||||||||
| FINEP |
12,820 | 22,553 | R$ | 4.0 | 2020 to 2021 | |||||||||||||
| Banco do Nordeste do Brasil |
10,039 | 15,776 | R$ (4) | 8.5 | 2020 to 2021 | |||||||||||||
| BNDES (d) |
3,913 | 14,071 | R$ | 7.6 | 2020 to 2022 | |||||||||||||
| FINAME |
22 | 32 | TJLP (3) | 5.7 | 2020 to 2022 | |||||||||||||
| Bank Credit Bill |
— | 50,075 | DI | 124.0 | 2019 | |||||||||||||
|
|
|
|
||||||||||||||||
| Total Brazilian Reais |
7,460,616 | 9,629,300 | ||||||||||||||||
|
|
|
|
||||||||||||||||
| Total foreign currency and Brazilian Reais |
14,362,737 | 15,116,139 | ||||||||||||||||
| Currency and interest rate hedging instruments (**) |
29,985 | 43,944 | ||||||||||||||||
|
|
|
|
||||||||||||||||
| Total |
14,392,722 | 15,160,083 | ||||||||||||||||
|
|
|
|
||||||||||||||||
| Current |
1,117,441 | 2,271,148 | ||||||||||||||||
| Non-current |
13,275,281 | 12,888,935 | ||||||||||||||||
| (*) | These transactions were designated for hedge accounting (see Note 34.h). |
| (**) | Accumulated losses (see Note 34.i). |
| (1) | LIBOR = London Interbank Offered Rate. |
| (2) | MX$ = Mexican Peso; TIIE = the Mexican interbank balance interest rate. |
| (3) | TJLP (Long-term Interest Rate) = set by the National Monetary Council, TJLP is the basic financing cost of Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”), the Brazilian Development Bank. On December 31, 2019, TJLP was fixed at 5.57% p.a. |
| (4) | Contract linked to the rate of FNE (Northeast Constitutional Financing Fund) fund whose purpose is to promote the development of the industrial sector, managed by Banco do Nordeste do Brasil. On December 31, 2019, the FNE interest rate was 10% p.a. FNE grants a discount of 15% on the interest rate for timely payments. |
| (5) | SELIC = basic interest rate set by the Brazilian Central Bank. |
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Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The changes in loans and debentures are shown below:
| Balance as of December 31, 2017 |
13,426,845 | |||
| New loans and debentures with cash effect |
4,461,112 | |||
| Interest accrued |
873,202 | |||
| Principal payment/ installments for financial leasing |
(3,715,838 | ) | ||
| Interest payment |
(737,564 | ) | ||
| Monetary and exchange rate variation |
804,273 | |||
| Change in fair value |
50,175 | |||
| Adoption IFRS 16/CPC 06 (R2) – transfer to Note 13.b |
(46,066 | ) | ||
|
|
|
|||
| Balance as of December 31, 2018 |
15,116,139 | |||
| New loans and debentures with cash effect | 2,105,737 | |||
| Interest accrued | 845,844 | |||
| Principal payment | (2,644,704 | ) | ||
| Interest payment | (1,469,780 | ) | ||
| Monetary and exchange rate variation | 296,441 | |||
| Change in fair value | 113,060 | |||
|
|
|
|||
| Balance as of December 31, 2019 |
14,362,737 | |||
|
|
|
The long-term consolidated debt had the following principal maturity schedule:
| 12/31/2019 | 12/31/2018 | |||||||
| From 1 to 2 years |
1,424,775 | 960,038 | ||||||
| From 2 to 3 years |
3,115,495 | 1,548,092 | ||||||
| From 3 to 4 years |
3,451,988 | 3,216,293 | ||||||
| From 4 to 5 years |
765,263 | 3,428,130 | ||||||
| More than 5 years |
4,517,760 | 3,736,382 | ||||||
|
|
|
|
|
|||||
| 13,275,281 | 12,888,935 | |||||||
|
|
|
|
|
|||||
The transaction costs and issuance premiums associated with debt issuance were added to their financial liabilities, as shown in Note 16.h.
The Company’s management entered into hedging instruments against foreign exchange and interest rate variations for a portion of its debt obligations (see Note 34.h).
| b. | Notes in the Foreign Market |
On October 6, 2016, the subsidiary Ultrapar International S.A. (“Ultrapar International”) issued US$ 750 million (equivalent to R$ 3,023.0 million as of December 31, 2019) in notes in the foreign market, maturing in October 2026, with interest rate of 5.25% p.a., paid semiannually. The issue price was 98.097% of the face value of the note. The notes were guaranteed by the Company and its subsidiary IPP. The Company has designated hedge relationships for this transaction (see Note 34.h.3).
59
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
On June 6, 2019, the subsidiary Ultrapar International issued US$ 500 million (equivalent to R$ 2,015.4 million as of December 31, 2019) in notes in the foreign market, maturing in June 2029, with interest rate of 5.25% p. a., paid semiannually. The issue price was 100% of the face value of the note. The notes were guaranteed by the Company and its subsidiary IPP. The Company has designated hedge relationships for part of this transaction (see Note 34.h.3).
On June 21, 2019, the subsidiary Ultrapar International repurchased US$ 200 million (equivalent to R$ 806.1 million as of December 31, 2019) in notes in the foreign market maturing in October 2026. As a result of the issuance of the notes in the foreign market, the Company and its subsidiaries are required to perform certain obligations, including:
• Restriction on sale of all or substantially all assets of the Company and subsidiaries Ultrapar International and IPP.
• Restriction on encumbrance of assets exceeding US$ 150 million (equivalent to R$ 604.6 million as of December 31, 2019) or 15% of the amount of the consolidated tangible assets.
The Company and its subsidiaries are in compliance with the levels of covenants required by this debt. The restrictions imposed on the Company and its subsidiaries are customary in transactions of this nature and have not limited their ability to conduct their business to date.
c. Foreign Loans
c.1 The subsidiary IPP has foreign loans in the amount of US$ 395,000 (equivalent to R$ 1,592,127 as of December 31, 2019). IPP also contracted hedging instruments with floating interest rate in U.S. dollar and exchange rate variation, changing the foreign loans charges, on average, to 104.4% of DI. IPP designated these hedging instruments as a fair value hedge (see Note 34.h.1); therefore, loans and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss. The foreign loans are secured by the Company.
The foreign loans have the maturity distributed as follows:
| Maturity |
US$ (thousands) |
R$ (thousands) |
Cost in % of DI |
|||||||||
| Charges (1) |
18,351 | 73,965 | — | |||||||||
| Jul/2021 |
60,000 | 241,842 | 101.8 | |||||||||
| Jun/2022 |
100,000 | 403,070 | 105.0 | |||||||||
| Jul/2023 |
50,000 | 201,535 | 104.8 | |||||||||
| Sep/2023 |
60,000 | 241,842 | 105.0 | |||||||||
| Sep/2023 |
65,000 | 261,996 | 104.7 | |||||||||
| Nov/2023 |
60,000 | 241,842 | 104.5 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total / average cost |
413,351 | 1,666,092 | 104.4 | |||||||||
|
|
|
|
|
|
|
|||||||
| (1) | Includes interest, transaction costs, mark to market and hedge initial recognition. |
During these contracts, the Company shall maintain the following financial ratios, calculated based on its audited consolidated financial statements:
| • | Maintenance of a financial ratio, determined by the ratio between consolidated net debt and consolidated Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), at less than or equal to 3.5. |
| • | Maintenance of a financial ratio determined by the ratio between consolidated EBITDA and consolidated net financial expenses, higher than or equal to 1.5. |
The Company complies with the levels of covenants required by these loans. The restrictions imposed on the Company and its subsidiaries are usual for this type of transaction and have not limited their ability to conduct their business to date.
60
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
c.2 The subsidiary Global Petroleum Products Trading Corporation has a foreign loan in the amount of US$ 60 million (equivalent to R$ 241.8 million as of December 31, 2019) with maturity on June 22, 2020 and interest of LIBOR + 2.0% p.a., paid quarterly. The Company, through the subsidiary Cia. Ultragaz, contracted hedging instruments subject to floating interest rates in dollar and exchange rate variation, changing the foreign loan charge to 105.9% of DI. The foreign loan is guaranteed by the Company and its subsidiary Oxiteno S.A. (by the incorporation of Oxiteno Nordeste).
d. BNDES
The subsidiaries have financing from BNDES for some of their investments and for working capital.
During the term of these agreements, the Company must maintain the following capitalization and current liquidity levels, as determined in the annual consolidated audited balance sheet:
| • | Capitalization level: equity / total assets equal to or above 0.3; and |
| • | Current liquidity level: current assets / current liabilities equal to or above 1.3. |
The Company complies with the levels of covenants required by these loans. The restrictions imposed on the Company and its subsidiaries are usual for this type of transaction and have not limited their ability to conduct their business to date.
e. Financial Institutions
The subsidiaries Oxiteno Mexico S.A. de C.V., Oxiteno USA LLC (“Oxiteno USA”) and Oxiteno Uruguay have loans for investments and working capital.
The subsidiary Oxiteno USA has loans with bearing interest of LIBOR + 2.0% and maturity as shown below:
| US$ | R$ | |||||||
| Maturity |
Thousands | Thousands | ||||||
| Charges (1) |
156 | 627 | ||||||
| Feb/2020 |
10,000 | 40,274 | ||||||
| Aug/2020 |
10,000 | 40,274 | ||||||
| Sep/2020 |
20,000 | 80,549 | ||||||
| Feb/2021 |
10,000 | 40,274 | ||||||
| Mar/2022 |
30,000 | 120,823 | ||||||
| Oct/2022 |
40,000 | 161,097 | ||||||
| Mar/2023 |
30,000 | 120,823 | ||||||
|
|
|
|
|
|||||
|
|
|
|
|
|||||
| Total |
150,156 | 604,741 | ||||||
|
|
|
|
|
|||||
| (1) | Includes interest and transaction costs. |
The proceeds of this loan were used in the working capital and to fund the construction of a new alkoxylation plant in the state of Texas.
During these contracts, the Company shall maintain the following financial ratios, calculated based on its audited consolidated financial statements:
| • | Maintenance of a financial ratio, determined by the ratio between consolidated net debt and consolidated Earnings before Interest, Taxes, Depreciation, and Amortization (EBITDA), at less than or equal to 3.5. |
| • | Maintenance of a financial ratio determined by the ratio between consolidated EBITDA and consolidated net financial expenses, higher than or equal to 1.5. |
The Company complies with the levels of covenants required by these loans. The restrictions imposed on the Company and its subsidiaries are usual for this type of transaction and have not limited their ability to conduct their business to date.
61
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| f. | Banco do Brasil |
The subsidiary IPP has floating interest rate loans with Banco do Brasil to marketing, processing, or manufacturing of agricultural goods (ethanol). The subsidiary IPP paid off in advance the amount of R$ 400 million of such loans in December 2019.
These loans mature, as follows (includes accrued interest through December 31, 2019):
| Maturity |
12/31/2019 | |||
| May/2020 |
205,274 | |||
| May/2021 |
202,910 | |||
| May/2022 |
203,092 | |||
|
|
|
|||
| Total |
611,276 | |||
|
|
|
|||
62
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| g. | Debentures |
| g.1. | In May 2016, the subsidiary IPP made its fourth issuance of public debentures, in one single series of 500 simple, nominative, registered debentures, nonconvertible into shares and unsecured, which main characteristics are as follows: |
| Face value unit: | R$ 1,000,000.00 | |
| Final maturity: | May 25, 2021 | |
| Payment of the face value: | Annual as from May 2019 | |
| Interest: | 105.0% of DI | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
| g.2. | In April 2017, the subsidiary IPP carried out its fifth issuance of debentures, in two series, being one of 660,139 and another of 352,361, simple, nonconvertible into shares, nominative, book-entry and unsecured debentures. The debentures have been subscribed by Eco Consult – Consultoria de Operações Financeiras Agropecuárias Ltda. The proceeds from this issuance were used exclusively for the purchase of ethanol by subsidiary IPP. |
The debentures were later assigned and transferred to Eco Securitizadora de Direitos Creditórios do Agronegócio S.A. that acquired these agribusiness credit rights with the purpose to bind the issuance of Certificates of Agribusiness Receivables (CRA). The debentures have an additional guarantee from Ultrapar and the main characteristics of the debentures are as follows:
| Amount: | 660,139 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | April 18, 2022 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | 95% of DI | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
| Amount: | 352,361 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | April 15, 2024 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | IPCA + 4.68% | |
| Payment of interest: | Annually | |
| Reprice: | Not applicable |
The subsidiary IPP contracted hedging instruments subjected to IPCA variation, changing the debentures charges linked to IPCA to 93.9% of DI. IPP designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| g.3. | In July 2017, the subsidiary IPP made its sixth issuance of public debentures, in one single series of 1,500,000 simple, nonconvertible into shares and unsecured debentures, which main characteristics are as follows: |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | July 28, 2022 | |
| Payment of the face value: | Annual as from July 2021 | |
| Interest: | 105.0% of DI | |
| Payment of interest: | Annually | |
| Reprice: | Not applicable |
| g.4. | In October 2017, the subsidiary IPP carried out its seventh issuance of debentures in the amount of R$ 944,077, in two series, being on of 730,384 and another of 213,693, simple, nonconvertible into shares, nominative, book-entry and unsecured debentures. The debentures have been subscribed by Vert Companhia Securitizadora. The proceeds from this issuance were used exclusively for the purchase of ethanol by subsidiary IPP. |
The debentures were later assigned and transferred to Vert Créditos Ltda., that acquired these agribusiness credit rights with the purpose to bind the issuance of Certificates of Agribusiness Receivables (CRA). The financial settlement occurred on November 1, 2017. The debentures have an additional guarantee from Ultrapar and the main characteristics of the debentures are as follows:
| Amount: | 730,384 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | October 24, 2022 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | 95% of DI | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
| Amount: | 213,693 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | October 24, 2024 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | IPCA + 4.34% | |
| Payment of interest: | Annually | |
| Reprice: | Not applicable |
The subsidiary IPP contracted hedging instruments subjected to IPCA variation, changing the debentures charges linked to IPCA to 97.3% of DI. IPP designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.
64
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| g.5. | In March 2018, the Company made its sixth issuance of public debentures, in a single series of 1,725,000 simple, nonconvertible into shares and unsecured debentures, which main characteristics are as follows: |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | March 5, 2023 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | 105.25% of DI | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
| g.6. | In December 2018, the subsidiary IPP carried out its eighth issuance of debentures in the amount of R$ 900,000, in two series, being one of 660,000 and another of 240,000, simple, nonconvertible into shares, nominative, book-entry and unsecured debentures. The debentures have been subscribed by Vert Companhia Securitizadora. The proceeds from this issuance were used exclusively for the purchase of ethanol by subsidiary IPP. The debentures were subscribed with the purpose to bind the issuance of CRA. The financial settlement occurred on December 21, 2018. The debentures have an additional guarantee from Ultrapar and the main characteristics of the debentures are as follows: |
| Amount: | 660,000 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | December 18, 2023 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | 97.5% of DI | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
| Amount: | 240,000 | |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | December 15, 2025 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | IPCA + 4.61% | |
| Payment of interest: | Annually | |
| Reprice: | Not applicable |
The subsidiary IPP contracted hedging instruments subjected to IPCA variation, changing the debentures charges linked to IPCA to 97.1% of DI. IPP designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.
| g.7. | In November 2019, the subsidiary Tequimar made its first issuance of debentures, in a single series of 90,000 simple, nonconvertible into shares and unsecured debentures, which main characteristics are as follows: |
| Face value unit: | R$ 1,000.00 | |
| Final maturity: | November 19, 2024 | |
| Payment of the face value: | Lump sum at final maturity | |
| Interest: | 6.47% | |
| Payment of interest: | Semiannually | |
| Reprice: | Not applicable |
65
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The subsidiary Tequimar contracted hedging instruments subjected interest rate variation, changing the debentures fixed for 99.94% of the DI. Tequimar designated these hedging instruments as fair value hedges; therefore, debentures and hedging instruments are both measured at fair value from inception, with changes in fair value recognized through profit or loss.
The debentures have maturity dates distributed as shown below (includes accrued interest through December 31, 2019).
| Maturity |
12/31/2019 | |||
| Charges (1) |
183,304 | |||
| May/2020 |
166,650 | |||
| May/2021 |
166,700 | |||
| Jul/2021 |
750,000 | |||
| Apr/2022 |
660,139 | |||
| Jul/2022 |
750,000 | |||
| Oct/2022 |
730,384 | |||
| Mar/2023 |
1,725,000 | |||
| Dec/2023 |
660,000 | |||
| Apr/2024 |
352,361 | |||
| Oct/2024 |
213,693 | |||
| Nov/2024 |
90,000 | |||
| Dec/2025 |
240,000 | |||
|
|
|
|||
| Total |
6,688,231 | |||
|
|
|
|||
| (1) | Includes interest, transaction cost and mark to market. |
| h. | Transaction Costs |
Transaction costs incurred in issuing debt were deducted from the value of the related financial instruments and are recognized as an expense according to the effective interest rate method, as follows:
| Effective rate of transaction costs (% p.a.) |
Balance on 12/31/2018 |
Incurred cost |
Amortization | Balance on 12/31/2019 |
||||||||||||||||
| Debentures (g) |
0.2 | 56,376 | 692 | (15,662 | ) | 41,406 | ||||||||||||||
| Notes in the foreign market (b) |
0.1 | 13,881 | 18,442 | (4,209 | ) | 28,114 | ||||||||||||||
| Banco do Brasil (f) |
0.2 | 3,437 | — | (2,667 | ) | 770 | ||||||||||||||
| Foreign loans (c) |
0.0 | 331 | — | (237 | ) | 94 | ||||||||||||||
| Other |
0.2 | 2,432 | — | (1,050 | ) | 1,382 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
76,457 | 19,134 | (23,825 | ) | 71,766 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Effective rate of transaction costs (% p.a.) |
Balance on 12/31/2017 |
Incurred cost |
Amortization | Balance on 12/31/2018 |
||||||||||||||||
| Debentures (g) |
0.2 | 44,709 | 21,308 | (9,641 | ) | 56,376 | ||||||||||||||
| Notes in the foreign market (b) |
— | 15,298 | — | (1,417 | ) | 13,881 | ||||||||||||||
| Banco do Brasil (f) |
0.2 | 8,065 | — | (4,628 | ) | 3,437 | ||||||||||||||
| Foreign loans (c) |
0.1 | 1,213 | — | (882 | ) | 331 | ||||||||||||||
| Other |
0.2 | 2,801 | 366 | (735 | ) | 2,432 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
72,086 | 21,674 | (17,303 | ) | 76,457 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
66
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The amount to be appropriated to profit or loss in the future is as follows:
| Up to 1 year |
1 to 2 years |
2 to 3 years |
3 to 4 years |
4 to 5 years |
More than 5 years |
Total | ||||||||||||||||||||||
| Debentures (g) |
13,058 | 12,403 | 9,274 | 5,318 | 1,139 | 214 | 41,406 | |||||||||||||||||||||
| Notes in the foreign market (b) |
3,428 | 3,421 | 3,423 | 3,425 | 3,437 | 10,980 | 28,114 | |||||||||||||||||||||
| Banco do Brasil (f) |
439 | 256 | 75 | — | — | — | 770 | |||||||||||||||||||||
| Foreign loans (c) |
94 | — | — | — | — | — | 94 | |||||||||||||||||||||
| Other |
597 | 416 | 367 | 2 | — | — | 1,382 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
17,616 | 16,496 | 13,139 | 8,745 | 4,576 | 11,194 | 71,766 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| i. | Guarantees |
The financings are guaranteed by collateral in the amount of R$ 73,536 as of December 31, 2019 (R$ 69,822 as of December 31, 2018) and by guarantees and promissory notes in the amount of R$ 11,833,294 as of December 31, 2019 (R$ 10,667,175 as of December 31, 2018).
The Company and its subsidiaries offer collateral in the form of letters of credit for commercial and legal proceedings in the amount of R$ 293,509 as of December 31, 2019 (R$ 271,162 as of December 31, 2018).
Some subsidiaries of Company issue collateral to financial institutions in connection with the amounts owed by some of their customers to such institutions (vendor financing) as follows:
| IPP | Oxiteno | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Maximum amount of future payments related to these collaterals |
81,344 | — | 2,753 | 2,750 | ||||||||||||
| Maturities of up to |
60 months | — | 4 months | 3 months | ||||||||||||
| Fair value of collaterals |
1,237 | — | 68 | 68 | ||||||||||||
If a subsidiary is required to make any payment under these collaterals, this subsidiary may recover the amount paid directly from its customers through commercial collection. Until December 31, 2019, the subsidiaries did not have losses in connection with these collaterals. The fair value of collaterals is recognized in current liabilities as “other payables”, which is recognized in the statement of profit or loss as customers settle their obligations with the financial institutions.
| 17. | Trade Payables (Consolidated) |
| 12/31/2019 | 12/31/2018 | |||||||
| Domestic suppliers |
1,897,256 | 2,079,010 | ||||||
| Domestic suppliers – agreement (i) |
455,950 | 73,169 | ||||||
| Foreign suppliers |
261,222 | 472,597 | ||||||
| Foreign suppliers – agreement (i) |
85,643 | 106,901 | ||||||
|
|
|
|
|
|||||
| 2,700,071 | 2,731,677 | |||||||
|
|
|
|
|
|||||
| (i) | Suppliers – agreement: some subsidiaries of the Company entered into an agreements with a financial institutions, which consists of the anticipation of receipt of the trade payables by the supplier, in which the financial institutions prepay a certain amount from the supplier, and receives on the maturity date the amount payable by the subsidiaries of the Company. The decision to join this transaction is solely and exclusively of the supplier. The agreement does not substantially change the main characteristics of the commercial conditions previously established between the subsidiaries of the Company and the suppliers. These operations are presented in operating activities in the statements of cash flow. |
Some Company’s subsidiaries acquire oil-based fuels and LPG from Petrobras and its subsidiaries and ethylene from Braskem S.A. These suppliers control almost all the markets for these products in Brazil.
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 18. | Salaries and Related Charges (Consolidated) |
| 12/31/2019 | 12/31/2018 | |||||||
| Provisions on salaries |
184,716 | 186,200 | ||||||
| Profit sharing, bonus and premium |
133,533 | 147,170 | ||||||
| Social charges |
70,228 | 67,043 | ||||||
| Others |
17,159 | 27,779 | ||||||
|
|
|
|
|
|||||
| 405,636 | 428,192 | |||||||
|
|
|
|
|
|||||
| 19. | Taxes Payable (Consolidated) |
| 12/31/2019 | 12/31/2018 | |||||||
| ICMS |
149,547 | 166,038 | ||||||
| PIS and COFINS |
40,676 | 38,055 | ||||||
| ISS |
26,986 | 22,339 | ||||||
| Value-Added Tax (IVA) of foreign subsidiaries |
25,619 | 21,306 | ||||||
| Others |
27,094 | 20,267 | ||||||
|
|
|
|
|
|||||
| 269,922 | 268,005 | |||||||
|
|
|
|
|
|||||
| 20. | Employee Benefits and Private Pension Plan (Consolidated) |
| a. | ULTRAPREV - Associaçăo de Previdência Complementar |
In February 2001, the Company’s Board of Directors approved the adoption of a defined contribution pension plan to be sponsored
by the Company and each of its subsidiaries. Participating employees have been contributing to this plan, managed by Ultraprev — Associação de Previdência Complementar (“Ultraprev”), since August 2001. Under the terms of the plan, every year each participating employee chooses his or her basic contribution to the plan. Each sponsoring company provides a matching contribution in an amount equivalent to each basic contribution, up to a limit of 11% of the employee’s reference salary, according to the rules of the plan. As participating employees retire, they may choose to receive either (i) a monthly sum ranging between 0.3% and 1.0% of their respective accumulated fund in Ultraprev or (ii) a fixed monthly amount, which will exhaust their respective accumulated fund over a period of 5 to 35 years. The sponsoring company does not take responsibility for guaranteeing amounts or the duration of the benefits received by the retired employee. In 2019, the subsidiaries contributed R$ 21,357 (R$ 24,323 in 2018) to Ultraprev, which is recognized as expense in the income statement. The total number of participating employees as of December 31, 2019 was 8,008 active participants and 328 retired participants. In addition, Ultraprev had 26 former employees receiving benefits under the rules of a previous plan whose reserves are fully constituted.
| b. | Post-employment Benefits |
The subsidiaries recognized a provision for post-employment benefits mainly related to seniority bonus, payment of Government Severance Indemnity Fund (“FGTS”), and health, dental care, and life insurance plan for eligible retirees.
The amounts related to such benefits were determined based on a valuation conducted by an independent actuary and reviewed by management as of December 31, 2019.
| 12/31/2019 | 12/31/2018 | |||||||
| Health and dental care plan (1) |
154,142 | 112,628 | ||||||
| Indemnification of FGTS |
66,309 | 83,781 | ||||||
| Seniority bonus |
34,485 | 37,397 | ||||||
| Life insurance (1) |
17,931 | 16,009 | ||||||
|
|
|
|
|
|||||
| Total |
272,867 | 249,815 | ||||||
|
|
|
|
|
|||||
| Current |
28,951 | 45,655 | ||||||
| Non-current |
243,916 | 204,160 | ||||||
| (1) | Only IPP and Iconic Lubrificantes S.A. (“Iconic”). |
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The change in the present value of the post-employment benefit obligation is as follows:
| 12/31/2019 | 31/12/2018 | |||||||
| Opening balance |
249,815 | 237,523 | ||||||
| Current service cost |
(10,704 | ) | 6,092 | |||||
| Interest cost |
21,386 | 21,466 | ||||||
|
|
|
|
|
|||||
| Expense for the year |
10,682 | 27,558 | ||||||
| Losses from changes in actuarial assumptions |
44,489 | 7,934 | ||||||
| Benefits paid directly by Company and its subsidiaries |
(33,510 | ) | (23,604 | ) | ||||
| Exchange rates from post employment benefits |
1,391 | 404 | ||||||
|
|
|
|
|
|||||
| Ending balance |
272,867 | 249,815 | ||||||
|
|
|
|
|
|||||
The total of expense in each period is presented below:
| 12/31/2019 | 31/12/2018 | |||||||
| Health and dental care plan |
10,442 | 9,559 | ||||||
| Indemnification of FGTS |
(5,818 | ) | 11,159 | |||||
| Seniority bonus |
4,765 | 5,460 | ||||||
| Life insurance |
1,293 | 1,380 | ||||||
|
|
|
|
|
|||||
| Total |
10,682 | 27,558 | ||||||
|
|
|
|
|
|||||
The main actuarial assumptions used are:
| Economic factors |
31/12/2019 | 31/12/2018 | ||||||
| % a.a. | %a.a. | |||||||
| Discount rate for the actuarial obligation at present value |
8.79 | 9.00 | ||||||
| Average projected salary growth rate |
7.64 | 7.85 | ||||||
| Inflation rate (long term) |
3.80 | 4.00 | ||||||
| Growth rate of medical services |
7.95 | 8.16 | ||||||
| Demographic factors |
| Mortality Table for the life insurance benefit – CSO-80 |
| Mortality Table for other benefits—AT 2000 Basic decreased by 10% |
| Disabled Mortality Table—RRB 1983 |
| Disability Table – Weak light |
Sensitivity analysis
The significant actuarial assumptions to determine the provision for post-employment benefits are: discount rate, wage and medical costs increases. The following sensitivity analyses on December 31, 2019 were determined based on reasonably possible changes of assumptions occurring at the reporting date of the financial statements, keeping all other assumptions constant.
| Assumption |
Change in assumptions |
Decrease in liability |
Change in assumptions |
Increase in liability |
||||||||||||
| Discount rate |
increase by 1.0 p.p | 26,741 | decrease by 1.0 p.p | 49,344 | ||||||||||||
| Wage growth rate |
decrease by 1.0 p.p | 34,978 | increase by 1.0 p.p | 39,030 | ||||||||||||
| Medical services growth rate |
decrease by 1.0 p.p | 7,137 | increase by 1.0 p.p | 8,492 | ||||||||||||
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The sensitivity analyses presented may not represent the real change in the post-employment benefits obligation, since it is unlikely that changes occur in just one assumption alone, considering that some of these assumptions may be correlated.
Inherent risks related to post-employment benefits
Interest rate risk: a long-term interest rate is used to calculate the present value of post-employment liabilities. A reduction in this interest rate will increase the corresponding liability.
Wage growth risk: the present value of the liability is calculated using as reference the wages of the plan participants, projected with the average nominal wage growth rate. An increase in the real wages of plan participants will increase the corresponding liability.
Medical costs growth risk: the present value of the liability is calculated using as reference the medical cost by age based on actual healthcare costs, projected based on the growth rate of medical services costs. An increase in the real medical costs will increase the corresponding liability.
| 21. | Provision for Asset Retirement Obligation – Fuel Tanks (Consolidated) |
The provision corresponds to the legal obligation to remove the subsidiary IPP’s underground fuel tanks located at Ipiranga-branded service stations after a certain use period (see Note 2.n).
Changes in the provision for asset retirement obligation are as follows:
| Balance as of December 31, 2017 |
64,774 | |||
| Additions (new tanks) |
264 | |||
| Expense with tanks removed |
(12,752 | ) | ||
| Accretion expense |
2,381 | |||
|
|
|
|||
| Balance as of December 31, 2018 |
54,667 | |||
| Additions (new tanks) |
290 | |||
| Expense with tanks removed |
(5,456 | ) | ||
| Accretion expense |
1,741 | |||
|
|
|
|||
| Balance as of December 31, 2019 |
51,242 | |||
|
|
|
|||
| Current |
3,847 | |||
| Non-current |
47,395 |
| 22. | Provisions and Contingencies (Consolidated) |
| a. | Provisions for tax, civil, and labor risks |
The Company and its subsidiaries are parties in tax, civil, environmental, regulatory, and labor disputes at the administrative and judiciary levels, which, when applicable, are backed by escrow deposits. Provisions for losses are estimated and updated by management based on the opinion of the Company’s legal department and its external legal advisors.
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below demonstrates the breakdown of provisions by nature and its movement:
| Provisions |
Balance on 12/31/2018 |
Additions | Write-offs | Payments | Interest | Balance on 12/31/2019 |
||||||||||||||||||
| IRPJ and CSLL (a.1.1) |
532,341 | 221 | (6,600 | ) | — | 15,319 | 541,281 | |||||||||||||||||
| PIS and COFINS |
26,271 | — | (16,771 | ) | — | 655 | 10,155 | |||||||||||||||||
| ICMS |
100,823 | 1,204 | (5,521 | ) | (614 | ) | 580 | 96,472 | ||||||||||||||||
| Civil, environmental and regulatory claims (a.2.1) |
90,932 | 18,009 | (17,318 | ) | (8,979 | ) | 3,211 | 85,855 | ||||||||||||||||
| Labor litigation (a.3.1) |
101,173 | 29,103 | (19,970 | ) | (15,487 | ) | 3,191 | 98,010 | ||||||||||||||||
| Others |
91,531 | 1,355 | (2,190 | ) | — | 2,126 | 92,822 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total |
943,071 | 49,892 | (68,370 | ) | (25,080 | ) | 25,082 | 924,595 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Current |
77,822 | 40,455 | ||||||||||||||||||||||
| Non-current |
865,249 | 884,140 | ||||||||||||||||||||||
Some of the provisions above involve, in whole or in part, escrow deposits.
Balances of escrow deposits are as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Tax matters |
753,810 | 727,493 | ||||||
| Labor litigation |
71,605 | 69,978 | ||||||
| Civil and other |
96,028 | 84,036 | ||||||
|
|
|
|
|
|||||
| Total – non-current assets |
921,443 | 881,507 | ||||||
|
|
|
|
|
|||||
| a.1 | Provisions for Tax Matters and Social Security |
a.1.1 On October 7, 2005, the subsidiaries Cia. Ultragaz and Bahiana filed for and obtained a preliminary injunction to recognize and offset PIS and COFINS credits on LPG purchases, against other taxes levied by the RFB, notably IRPJ and CSLL. The decision was confirmed by a trial court on May 16, 2008. Under the preliminary injunction, the subsidiaries made escrow deposits for these debits which amounted to R$ 515,825 as of December 31, 2019 (R$ 500,260 as of December 31, 2018). On July 18, 2014, a second instance unfavorable decision was published, and the subsidiaries suspended the escrow deposits, and started to pay income taxes from that date. To revert the court decision, the subsidiaries presented a writ of prevention which was dismissed on December 30, 2014, and the subsidiaries appealed this decision on February 3, 2015. Appeals were also presented to the respective higher courts Superior Court of Justice (“STJ”) and Federal Supreme Court (“STF”) whose final trial are pending.
| a.2 | Provisions for Civil, Environmental and Regulatory Claims |
a.2.1 The Company and its subsidiaries maintained provisions for lawsuits and administrative proceedings, mainly derived from contracts entered into with customers and former services providers, as well as proceedings related to environmental and regulatory issues in the amount of R$ 85,855 as of December 31, 2019 (R$ 90,932 as of December 31, 2018).
| a.3 | Provisions for Labor Matters |
a.3.1 The Company and its subsidiaries maintained provisions of R$ 98,010 as of December 31, 2019 (R$ 101,173 as of December 31, 2018) for labor litigation filed by former employees and by employees of our service providers, mainly, contesting the non-payment of labor rights.
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Contingent Liabilities (Possible) |
The Company and its subsidiaries are parties in tax, civil, environmental, regulatory, and labor claims whose loss prognosis is assessed as possible (proceedings whose chance of loss is more than 25% and less or equal than 50%) by the Company and its subsidiaries’ legal departments, based on the opinion of its external legal advisors and, based on this assessment, these claims were not recognized in the interim financial information. The estimated amount of this contingency is R$ 2,840,086 as of December 31, 2019 (R$ 2,839,219 as of December 31, 2018).
| b.1 | Contingent Liabilities for Tax Matters and Social Security |
The Company and its subsidiaries have contingent liabilities for tax matters and social security in the amount of R$ 2,028,159 as of December 31, 2019 (R$ 1,941,749 as of December 31, 2018), mainly represented by:
b.1.1 The subsidiary IPP and its subsidiaries have assessments invalidating the offset of excise tax (“IPI”) credits in connection with the purchase of raw materials used in the manufacturing of products which sales are not subject to IPI under the protection of tax immunity. The amount of this contingency is R$ 173,738 as of December 31, 2019 (R$ 168,391 as of December 31, 2018).
b.1.2 The subsidiary IPP and its subsidiaries have legal proceedings related to ICMS. The total amount involved in these proceedings, was R$ 836,822 as of December 31, 2019 (R$ 836,393 as of December 31, 2018), Such proceedings arise mostly of the disregard of ICMS credits amounting to R$ 319,849 as of December 31, 2019 (R$ 318,550 as of December 31, 2018), of which R$ 126,772 (R$ 126,639 as of December 31, 2018) refer to proportional reversal requirement of ICMS credits related to the acquisition of hydrated alcohol; of alleged non-payment in the amount of R$ 92,567 as of December 31, 2019 (R$ 125,703 as of December 31, 2018); of conditioned fruition of fiscal incentive in the amount of R$ 117,753 as of December 31, 2019 (R$ 121,745 as of December 31, 2018); and inventory differences in the amount of R$ 172,736 as of December 31, 2019 (R$ 185,512 as of December 31, 2018) related to the leftovers or faults due to temperature changes or product handling.
b.1.3 The Company and its subsidiaries are parties to administrative and judicial suits involving Income Tax, Social Security Contribution, PIS and COFINS, substantially about denials of offset claims and credits disallowance which total amount is R$ 699,360 as of December 31, 2019 (R$ 674,126 as of December 31, 2018), mainly represented by:
b.1.3.1The subsidiary IPP received a tax assessment related to the IRPJ and CSLL resulting from the supposedly undue amortization of the goodwill paid on acquisition of a subsidiary, in the amount of R$ 208,449 as of December 31, 2019 (R$ 193,771 as of December 31, 2018), which includes the amount of the income taxes, interest and penalty. Management assessed the likelihood of the tax assessment, supported by the opinion of its legal advisors, as “possible”, and therefore did not recognize a provision for this contingent liability.
| b.2 | Contingent Liabilities for Civil, Environmental and Regulatory Claims |
The Company and its subsidiaries have contingent liabilities for civil, environmental and regulatory claims in the amount of R$ 549,664, totaling 3,109 lawsuits as of December 31, 2019 (R$ 624,457, totaling 3,520 lawsuits as of December 31, 2018), mainly represented by:
b.2.1 The subsidiary Cia. Ultragaz is party to an administrative proceeding before CADE based on alleged anti-competitive practices in the State of Minas Gerais in 2001. The CADE entered a decision against Cia. Ultragaz and imposed a penalty of R$ 33,603 as of December 31, 2019 (R$ 32,983 as of December 31, 2018). The imposition of such administrative decision was suspended by a court order and its merit is being judicially reviewed.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
b.2.2 In 2016, the subsidiary Cia. Ultragaz became party to two administrative proceedings filed by CADE, related to allegations of anti-competitive practices: i) one of the proceedings relate to practices in the State of Paraíba and other Northeast States, in which the subsidiary Bahiana is part along with Cia. Ultragaz. On this proceeding, Cia. Ultragaz and Bahiana signed a Cessation Commitment Agreement (“TCC”) with CADE, approved on November 22, 2017, in the amount of R$ 95,987, paid in 8 (eight) equal installments updated semiannually by SELIC, with maturity of the first one in 180 (one hundred and eighty) days from the date of publication of the approval. Three employees and one former employee signed TCC in the total amount of R$ 1,100. With the TCC, the administrative proceeding will be suspended in relation to the Cia. Ultragaz and Bahiana until final decision; ii) the second proceeding relate to practices in the Federal District and around, in which only Cia. Ultragaz is part. On this proceeding, Cia. Ultragaz signed a TCC with CADE, approved on September 6, 2017, in the amount of R$ 2,154, paid in a single installment in March 8, 2018. Two former employees signed TCC in the amount of R$ 50 each. With the TCC, the administrative proceeding will be suspended in relation to the Cia. Ultragaz until final decision.
b.2.3 The subsidiary IPP became party to two administrative proceedings filed by CADE, related to allegations of anti-competitive practices in the city of Joinville, State of Santa Catarina and around the city of Belo Horizonte, State of Minas Gerais, and for the latter, an administrative award was imposed for allegedly influencing uniform commercial conduct among fuel resellers, in the amount of R$ 40,693. The subsidiary IPP will continue to exercise its defense by appealing in all administrative and judicial instances. Supported by the opinion of external legal counsel that classified the probability of loss as “remote”, Management did not recognize a provision for this contingency as of December 31, 2019.
b.2.4 On November 29, 2016, a technical opinion was issued by the Operational Support Center for Execution (Centro de Apoio Operacional à Execução—CAEX), a technical body linked to the São Paulo State Public Prosecutor (“MPE”), presenting a proposal of compensation for the alleged environmental damages caused by the fire on April 2nd, 2015 at the Santos Terminal of the subsidiary Tequimar. This technical opinion is non-binding, with no condemnatory or sanctioning nature, and will still be evaluated by the authorities and parties. The subsidiary disagrees with the methodology and the assumptions adopted in the proposal and is negotiating an agreement with the MPE and the Brazilian Federal Public Prosecutor (“MPF”), since the beginning of the investigation and currently there is no civil lawsuit filed on the matter. The negotiations relate to in natura repair of the any damages. Thus, on May 15, 2019, the subsidiary Tequimar signed a Partial Conduct Adjustment Commitment Agreement (“TAC”) in the amount of R$ 67,539 with the MPE and MPF to compensate for diffuse and collective damages of any kind arising from the fish mortality and the damage caused to the ichthyofauna. The negotiations on compensation for other alleged damages are still ongoing and once concluded, the payments related to the project costs may affect the future Company’s financial statements. In the criminal sphere, the MPF denounced the subsidiary Tequimar, which was summoned and replied to the complaint on June 19, 2018. On September 12, 2019, at a hearing in the federal court of Santos, the MPF and Tequimar agreed, and the judicial authority approved, the conditional suspension of the criminal proceedings for a period of 2 years, when Tequimar shall then prove compliance with the execution of the Partial TAC signed, with the obligation of a complementary allocation of R$ 13,000 to the Fisheries Management Project, to obtain the definitive filing of the process. In addition, in December 31, 2019, there are contingent liabilities not recognized related to lawsuits in the amount of R$ 11,403 (R$ 62,930 as of December 31, 2018). On December 31, 2019 there are no extrajudicial lawsuits (R$ 3,426 as of December 31,2018). For more information, see Note 23.
| b.3 | Contingent Liabilities for Labor Matters |
The Company and its subsidiaries have contingent liabilities for labor matters in the amount of R$ 262,263, totaling 1,649 lawsuits as of December 31, 2019 (R$ 273,013, totaling 1,726 lawsuits as of December 31, 2018), mainly represented by:
b.3.1 In 1990, the Petrochemical Industry Labor Union (Sindiquímica), of which the employees of Oxiteno S.A (due to incorporation of its the subsidiary Oxiteno Nordeste) and Empresa Carioca de Produtos Químicos S.A. (“EMCA”), companies located in the Camaçari Petrochemical Complex, are members, filed collective lawsuits against the subsidiaries demanding the compliance with the fourth section of the collective labor agreement, which provided for a salary adjustment in lieu of the salary policies practiced. In the same year, a collective labor dispute was also filed by the Union of Employers (SINPEQ) against Sindiquímica, requiring the recognition of the loss of effectiveness of such fourth section. The decisions rendered on the collective claims which were favorable to the subsidiaries Oxiteno S.A. and EMCA are final and unappealable. The collective labor from Sindiquímica against SINPEQ became final in STF in October 2019 and remained unfavorable to SINPEQ. In 2010, some companies in the Camaçari Petrochemical Complex signed an agreement with Sindiquímica. In October 2015, Sindiquímica filed enforcement lawsuits against Oxiteno S.A and, in 2017, EMCA, as these companies did not sign the 2010 agreement with Sindiquímica. A favorable decision was issued for Oxiteno S.A., awaiting judgment of the Sindiquimica appeal and Oxiteno S.A adhesive appeal. at the Regional Labor Court of the 5th Region. For EMCA, the decision of 1st instance favorable to the company was reversed at the Regional Labor Court of the 5th Region, it’s pending a final judgment in this instance. In addition to collective actions, individual claims containing the same object have been filed.
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| c. | Lubricants operation between IPP and Chevron |
In the process of transaction of the lubricants’ operation in Brazil between Chevron and subsidiary IPP (see Note 3.c of financial statements of 2018 filed on CVM February 20, 2019), it was agreed that each shareholder is responsible for any claims arising out of acts, facts or omissions prior to the transaction. The liability provisions of the Chevron shareholder in the amount of R$ 5,423 (R$ 3,609 as of December 31, 2018) are reflected in the consolidation of these financial statements. Additionally, in connection with the business combination, a provision in the amount of R$ 198,900 was recognized on December 1, 2017 due contingent liabilities, amounted to R$ 188,073 as of December 31, 2019 (R$ 191,110 as of December 31, 2018). The amounts of provisions of Chevron’s liability recognized in the business combination will be reimbursed to subsidiary Iconic in the event of losses and an indemnity asset was hereby constituted in the same amount, without the need to establish a provision for uncollectible amounts.
| d. | Contingent Assets |
| d.1 | Exclusion of ICMS from the calculation basis of PIS and COFINS |
In March 15, 2017, STF decided that ICMS is not included in the PIS and COFINS basis. All subsidiaries have actions aimed at obtaining this right, as long as applicable. For the subsidiaries Oxiteno S.A., Extrafarma and Tequimar, have final and unappealable decision, and the respective subsidies to prove the amounts to be refunded were duly confirmed by management and recorded in results, up to the present year of 2019, the amount of R $ 338,110 (up to R $ 291,278 in 2018). As a result of injunctions obtained, some subsidiaries have already excluded ICMS from the PIS and COFINS calculation base in the amount of R $ 141,618 until December 31, 2019. The amounts to be recovered from the other subsidiaries will be recognized to the extent that concomitantly, there are the final and unappealable decision of the individual action and confirmation of the evidences.
The Company’s management emphasizes that it is possible for the STF to modulate the effects of the judgment, either by restricting its effectiveness or determining when the decision will become effective, or by reinterpreting the value of ICMS to be excluded. After the decision of the STF has become final and unappealable, the Company’s management will assess the impact on the shares of its subsidiaries, which may result in a reduction in the claimed tax credits.
| 23. | Trade payables – customers and third parties’ indemnification |
In April 2015, a fire occurred in six ethanol and gasoline tanks operated by Ultracargo in Santos. The tanks that were affected by the fire, obtained, in phases, the necessary licenses for the return to operation. Therefore the area rehabilitation process ended in August 2019.
The balance of customers and third parties’ indemnification as of December 31, 2018 in the amount of R$ 3,501 were settled on 2nd quarter of 2019.
| 24. | Deferred Revenue (Consolidated) |
The subsidiaries of the Company have recognized the following deferred revenue:
| 12/31/2019 | 12/31/2018 | |||||||
| ‘am/pm’ and Jet Oil franchising upfront fee (a) |
956 | 18,668 | ||||||
| Loyalty program “Km de Vantagens” (b) |
25,096 | 18,465 | ||||||
| Loyalty program “Clube Extrafarma” (b) |
1,574 | 1,289 | ||||||
|
|
|
|
|
|||||
| 27,626 | 38,422 | |||||||
|
|
|
|
|
|||||
| Current |
27,626 | 26,572 | ||||||
| Non-current |
— | 11,850 | ||||||
| a. | Franchising Upfront Fee |
am/pm is the convenience stores chain of the Ipiranga service stations. Ipiranga ended December 31, 2019 with 2,377 stores (2,493 as of December 31, 2018). Jet Oil is Ipiranga’s lubricant-changing and automotive service specialized network. Ipiranga ended December 31, 2019 with 1,492 stores (1,772 stores as of December 31, 2018).
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Loyalty Programs |
Subsidiary Ipiranga has a loyalty program called Km de Vantagens (www.kmdevantagens.com.br) under which registered customers are rewarded with points when they buy products at Ipiranga service stations or at its partners. The customers may exchange these points, during the period of one year, for discounts on products and services offered by Ipiranga and its partners. Points received by Ipiranga’s customers that may be used with the partner Multiplus Fidelidade and for discounts of fuel in Ipiranga’s website (www.postoipiranganaweb.com.br) and recognized as a reduction of revenue from sales and services.
Subsidiary Extrafarma has a loyalty program called Clube Extrafarma (www.clubeextrafarma.com.br) under which registered customers are rewarded with points when they buy products at its drugstore chain. The customers may exchange these points, during the period of six months, for discounts in products at its drugstore chain, recharge credit on a mobile phone, and prizes offered by partners Multiplus Fidelidade and Ipiranga, through Km de Vantagens. Points received by Extrafarma’s customers are recognized as a reduction of revenue from sales and services.
Deferred revenue is estimated based on the fair value of the points granted, considering the value of the prizes and the expected redemption of these points.
| 25. | Subscription warrants – indemnification |
Because of the association between the Company and Extrafarma on January 31, 2014, 7 subscription warrants – indemnification could be issued, corresponding to up to 6,411,244 shares of the Company. The subscription warrants – indemnification may be exercised beginning 2020 by the former shareholders of Extrafarma and are adjusted according to the changes in the amounts of provisions for tax, civil, and labor risks and contingent liabilities related to the period prior to January 31, 2014. The subscription warrants – indemnification’s fair value is measured based on the share price of Ultrapar (UGPA3) and is reduced by the dividend yield until 2020, since the exercise is possible only from 2020, and they are not entitled to dividends until that date. As of December 31, 2019, the subscription warrants – indemnification were represented by 5,192,919 shares and amounted to R$ 130,657 (as of December 31, 2018, they were represented by 4,824,238 that totaled R$ 123,095). Due to the final adverse decision of some of these lawsuits, on December 31, 2019, the maximum number of shares that could be issued in 2020 related to the subscription warrants – indemnification was up to 5,920,425 (5,976,316 shares as of December 31, 2018).
The information above were adjusted retrospectively as disclosure in Note 26.a.
In February 19, 2020, the Company’s Board of Directors confirmed the issuance of 2,108,542 common shares due to the partial exercise of the rights conferred by the subscription warrants. For more information on the partial issue, see note 36.
| 26. | Equity |
| a. | Share Capital |
On December 31, 2019, the subscribed and paid-in capital stock consists of 1,112,810,192 common shares with no par value and the issuance of preferred shares and participation certificates is prohibited. Each common share entitles its holder to one vote at Shareholders’ Meetings.
The price of the shares issued by the Company as of December 31, 2019, on B3 was R$ 25.48 (R$ 26.60 as of December 31, 2018).
As of December 31, 2019, the Company is authorized to increase capital up to the limit of 1,600,000,000 common shares, without amendment to the Bylaws, by resolution of the Board of Directors. In February 19, 2020, the Company’s Board of Directors confirmed the issuance of 2,108,542 common shares due to the partial exercise of the rights conferred by the subscription warrants. For more information on the partial issue, see note 36.
As of December 31, 2019, there were 46,518,315 common shares outstanding abroad in the form of ADRs (55,725,974 shares as of December 31, 2018).
On April 10, 2019, the Company’s extraordinary and annual general meeting approved the stock split of common shares issued by Ultrapar, at a ratio of one currently existing share to two shares of the same class and type as well as the changing of the number of shares in which the capital stock of the Company is divided. The stock split approved herein shall not imply in any change in the Ultrapar’s capital stock. The new shares and ADRs resulting from the stock split approved herein are of the same class and type and granted to its holders the same rights of the current shares and ADRs. All information was adjusted retrospectively in this financial statements.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Equity instrument granted |
The Company has a share-based incentive plan, which establishes the general terms and conditions for the concession of common shares issued by the Company held in treasury (see Note 8.c).
| c. | Treasury Shares |
The Company acquired its own shares at market prices, without capital reduction, to be held in treasury and to be subsequently disposed of or cancelled, in accordance with CVM Instructions 10, issued on February 14, 1980 and 268, issued on November 13, 1997.
As of December 31, 2019, and December 31, 2018, 26,780,298 common shares were held in the Company’s treasury, acquired at an average cost of R$ 18.12.
| d. | Capital Reserve |
The capital reserve reflects the gain on the transfer of shares at market price used in the Deferred Stock Plan granted to executives of the subsidiaries of the Company, as mentioned in Note 8.c.
Because of Extrafarma’s association in 2014, the Company recognized an increase in the capital reserves in the amount of R$ 498,812, due to the difference between the value attributable to share capital and the market value of the Ultrapar shares on the date of issue, deducted by R$ 2,260 related to the incurred costs directly attributable to issuing new shares.
| e. | Revaluation Reserve |
The revaluation reserve, recognized prior to the adoption of the international accounting standards (CPC / IFRS) instituted by Law 11,638/07, reflects the revaluation of assets of subsidiaries and is based on depreciation, write-off, or disposal of the revalued assets of the subsidiaries, as well as the tax effects recognized by these subsidiaries.
| f. | Profit Reserves |
| f.1 | Legal Reserve |
Under Brazilian Corporate Law, the Company is required to allocate 5% of net annual earnings to a legal reserve, until the balance reaches 20% of capital stock. This reserve may be used to increase capital or to absorb losses but may not be distributed as dividends.
| f.2 | Investments Reserve |
In compliance with Article 194 of the Brazilian Corporate Law and Article 55.c) of the Bylaws this reserve is aimed to protect the integrity of the Company’s assets and to supplement its capital stock, in order to allow new investments to be made. As provided in its Bylaws, the Company may allocate up to 45% of the annual net income to the investments reserve, up to the limit of 100% of the share capital.
The investments reserve is free of distribution restrictions and totaled R$ 3,290,073 as of December 31, 2019 (R$ 3,412,427 as of December 31, 2018).
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| g. | Valuation Adjustments and Cumulative Translation Adjustments |
g.1 Valuation Adjustments
| (i) | Actuarial gains and losses relating to post-employment benefits, calculated based on a valuation conducted by an independent actuary, are recognized in equity under the title “valuation adjustments”. Actuarial gains and losses recorded in equity are not reclassified to profit or loss in subsequent periods. |
| (ii) | Gains and losses on the hedging instruments of exchange rate related to firm commitment and highly probable transactions designated as cash flows hedges are recognized in equity as “valuation adjustments”. Gains and losses are reclassified to initial cost of non-financial assets. |
| (iii) | The differences between the fair value of financial investments measured at fair value through other comprehensive income and the initial amount of financial investments plus the interest earned and the foreign currency exchange variation are recognized in equity as valuation adjustments. Gains and losses are reclassified to statements of profit or loss when the financial investment is settled. |
| (iv) | The Company also recognizes in this item the effect of changes in the non-controlling interest in subsidiaries that do not result in loss of control. This amount corresponds to the difference between the amount by which the non-controlling interest was adjusted and the fair value of the consideration received or paid and represents a transaction with shareholders. |
Balance and changes in valuation adjustments of the Company are as follows:
| Valuation adjustments | ||||||||||||||||||||
| Fair value of cash flow hedging instruments |
Fair value of financial instruments |
Actuarial gains (losses) of post- employment benefits |
Non-controlling shareholders interest change |
Total | ||||||||||||||||
| Balance as of December 31, 2017 |
(27,364 | ) | — | (15,181 | ) | 197,369 | 154,824 | |||||||||||||
| Changes in fair value of financial instruments |
(326,030 | ) | (273 | ) | — | — | (326,303 | ) | ||||||||||||
| Income and social contribution taxes on fair value |
110,058 | — | — | — | 110,058 | |||||||||||||||
| Actuarial losses of post-employment benefits |
— | — | (2,810 | ) | — | (2,810 | ) | |||||||||||||
| Income and social contribution taxes on actuarial losses |
— | — | 242 | — | 242 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance as of December 31, 2018 |
(243,336 | ) | (273 | ) | (17,749 | ) | 197,369 | (63,989 | ) | |||||||||||
| Changes in fair value of financial instruments |
(76,479 | ) | 478 | — | — | (76,001 | ) | |||||||||||||
| IRPJ and CSLL on fair value |
23,683 | — | — | — | 23,683 | |||||||||||||||
| Actuarial losses of post-employment benefits |
— | — | (41,794 | ) | — | (41,794 | ) | |||||||||||||
| Income and social contribution taxes on actuarial losses |
— | — | 11,784 | — | 11,784 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Balance as of December 31, 2019 |
(296,132 | ) | 205 | (47,759 | ) | 197,369 | (146,317 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
g.2 Cumulative Translation Adjustments
The change in exchange rates on assets, liabilities, and income of foreign subsidiaries that have functional currency other than the presentation currency of the Company and an independent administration (see Note 2.s.1) and the exchange rate variation on notes in the foreign market (see Note 34.h.3) is directly recognized in the equity. This accumulated effect is reflected in profit or loss as a gain or loss only in case of disposal or write-off of the investment.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
Balance and changes in cumulative translation adjustments of the Company are as follows:
| 12/31/2019 | ||||
| Balance as of December 31, 2017 |
53,061 | |||
| Currency translation of foreign subsidiaries |
52,531 | |||
| Effect of foreign currency exchange rate variation on financial instruments |
(60,204 | ) | ||
| IRPJ and CSLL — IRPJ and CSLL on exchange variation |
20,469 | |||
|
|
|
|||
| Balance as of December 31, 2018 |
65,857 | |||
| Currency translation of foreign subsidiaries |
46,330 | |||
| Effect of foreign currency exchange rate variation on financial instruments |
(14,788 | ) | ||
| IRPJ and CSLL — IRPJ and CSLL on exchange variation |
5,028 | |||
|
|
|
|||
| Balance as of December 31, 2019 |
102,427 | |||
|
|
|
|||
| h. | Dividends and Allocation of Net Income |
The shareholders are entitled, under the Bylaws, to a minimum annual dividend of 50% of adjusted net income calculated in accordance with Brazilian Corporate Law. The dividends and interest on equity in excess of the obligation established in the Bylaws are recognized in equity until the Shareholders approve them. The proposed dividends payable as of December 31, 2018 in the amount of R$ 380,324 (R$ 0.70 – seventy cents of Brazilian Real per share), were approved by the Board of Directors on February 20, 2019, and paid beginning March 13, 2019. On August 14, 2019, the Board of Directors approved the anticipation of dividends of 2019, in the amount of R$ 217,382 (R$ 0.20 – twenty cents of Brazilian Real per share), paid as from August 30, 2019. The proposed dividends payable as of December 31, 2019, in the amount of R$ 261,470 (R$ 0.24 – twenty-four cents of Brazilian Real per share), were approved by the Board of Directors on February 19, 2020, and will be paid as of March 06, 2020.
Balances and changes in dividends payable are as follows:
| Parent | Consolidated | |||||||
| Balance as of December 31, 2018 |
282,334 | 284,024 | ||||||
| Provisions |
326,736 | 329,106 | ||||||
| Payments |
(594,381 | ) | (596,436 | ) | ||||
|
|
|
|
|
|||||
| Balance as of December 31, 2019 |
14,689 | 16.694 | ||||||
|
|
|
|
|
|||||
The management proposal for the allocation of net income for 2019 and for distribution of dividends is as follow:
| 12/31/2019 | ||||
| Allocation of net income |
||||
| Net income for the period attributable to shareholders of Ultrapar |
373,526 | |||
|
|
|
|||
| Minimum mandatory dividends for the period (50% of the net income) |
186,763 | |||
| Legal reserve (5% of the net income) |
18,676 | |||
| Additional dividends to minimum mandatory dividends |
168,087 | |||
|
|
|
|||
| Total allocation of net income |
373,526 | |||
| Allocation of dividends |
||||
| Minimum mandatory dividends for the period (50% of the net income) |
186,763 | |||
| Additional dividends to minimum mandatory dividends |
168,087 | |||
| Dividends on statutory reserve |
124,002 | |||
|
|
|
|||
| Total allocation |
478,852 | |||
| (-) Interim dividends paid (R$ 0.20 per share) |
(217,382 | ) | ||
|
|
|
|||
| Dividends payable (R$ 0.24 per share) — Equity |
261,470 | |||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 27. | Net Revenue from Sale and Services (Consolidated) |
| 12/31/2019 | 12/31/2018 | |||||||
| Gross revenue from sale |
94,296,759 | 94,693,178 | ||||||
| Gross revenue from services |
869,084 | 750,791 | ||||||
| Sales taxes |
(4,031,295 | ) | (3,027,597 | ) | ||||
| Discounts and sales returns |
(1,494,814 | ) | (1,342,799 | ) | ||||
| Amortization of contractual assets with customers (see Note 11) |
(355,250 | ) | (371,825 | ) | ||||
| Deferred revenue (see Note 24) |
13,491 | (3,765 | ) | |||||
|
|
|
|
|
|||||
| Net revenue from sales and services |
89,297,975 | 90,697,983 | ||||||
|
|
|
|
|
|||||
| 28. | Expenses by Nature (Consolidated) |
The Company presents its expenses by function in the consolidated statement of profit or loss and presents below its expenses by nature:
| 12/31/2019 | 12/31/2018 | |||||||
| Raw materials and materials for use and consumption |
81,819,820 | 83,116,950 | ||||||
| Personnel expenses |
2,415,581 | 2,513,586 | ||||||
| Freight and storage |
1,170,870 | 1,178,990 | ||||||
| Depreciation and amortization |
844,647 | 812,489 | ||||||
| Amortization of right to use assets |
300,058 | — | ||||||
| Advertising and marketing |
206,103 | 173,988 | ||||||
| Services provided by third parties |
322,589 | 328,361 | ||||||
| Other expenses |
474,081 | 709,710 | ||||||
|
|
|
|
|
|||||
| Total |
87,553,749 | 88,834,074 | ||||||
|
|
|
|
|
|||||
| Classified as: |
||||||||
| Cost of products and services sold |
83,187,109 | 84,537,368 | ||||||
| Selling and marketing |
2,640,387 | 2,670,867 | ||||||
| General and administrative |
1,726,253 | 1,625,839 | ||||||
|
|
|
|
|
|||||
| Total |
87,553,749 | 88,834,074 | ||||||
|
|
|
|
|
|||||
| 29. | Gain (loss) on Disposal of PP&E and Impairment (Consolidated) |
The gain or loss is determined as the difference between the selling price and residual book value of the investment, PP&E, or intangible asset disposed of. In 2019, the loss was R$ 30,019 (loss of R$ 22,088 as of December 31, 2018), represented primarily from sale of PP&E and closing stores of Extrafarma. Additionally, in 2019, impairment testing purposes identify the recognition of impairment in the amount of R$ 593,280 for goodwill of Extrafarma.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 30. | Other Operating Income, Net (Consolidated) |
| 12/31/2019 | 12/31/2018 | |||||||
| Commercial partnerships (1) | 40,816 | 53,671 | ||||||
| Merchandising (2) | 44,396 | 52,092 | ||||||
| Loyalty program (3) | 12,943 | 25,682 | ||||||
| Ultracargo – fire accident in Santos(4) | (3,733 | ) | (4,951 | ) | ||||
| Fine for unrealized acquisition (5) | — | (286,160 | ) | |||||
| Extraordinary tax credits (6) | 144,949 | 208,038 | ||||||
| Conduct adjustment commitment – Tequimar(7) | (65,539 | ) | — | |||||
| Others | 5,793 | 9,161 | ||||||
|
|
|
|
|
|||||
| Other operating income, net |
179,625 | 57,533 | ||||||
|
|
|
|
|
|||||
| (1) | Refers to contracts with service providers and suppliers, which establish trade agreements for convenience stores and gas stations. |
| (2) | Refers to contracts with suppliers of convenience stores, which establish, among other agreements, promotional campaigns. |
| (3) | Refers to sales of “Km de Vantagens” to partners of the loyalty program. Revenue is recognized at the time that the partners transfer the points to their customers. |
| (4) | For more information about the fire accident in Ultracargo, see Notes 22.b.2.4 and 23. |
| (5) | Refers to a contractual fine paid in 2018 by Cia. Ultragaz in favor of Petrobras due to the non-closing of the acquisition of Liquigás Distribuidora S.A (“Liquigás”) transaction rejected to the CADE. |
| (6) | Refers substantially to Extrafarma and Ipiranga credits (see Note 7.a.2) and Iconic. |
| (7) | For more information see Note 22.b.2.4. |
| 31. | Financial Income (Expense) |
| Parent | Consolidated | |||||||||||||||
| 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||
| Financial income: |
||||||||||||||||
| Interest on financial investments |
73,201 | 101,653 | 302,793 | 328,625 | ||||||||||||
| Interest from customers |
— | — | 138,462 | 135,514 | ||||||||||||
| Changes in subscription warranty – indemnification (see Note 25) |
— | 44,484 | — | 44,484 | ||||||||||||
| Selic interest over PIS and COFINS credits (see Note 22.d.1) |
— | — | — | 168,564 | ||||||||||||
| Other financial income |
— | — | 16,034 | 4,048 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 73,201 | 146,137 | 457,289 | 681,235 | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial expenses: |
||||||||||||||||
| Interest on loans |
— | — | (388,897 | ) | (440,641 | ) | ||||||||||
| Interest on debentures |
(111,732 | ) | (105,424 | ) | (482,361 | ) | (441,394 | ) | ||||||||
| Interest on leases payable |
(200 | ) | — | (132,994 | ) | (2,670 | ) | |||||||||
| Bank charges, financial transactions tax, and other charges |
(2,692 | ) | (14,476 | ) | (62,687 | ) | (92,558 | ) | ||||||||
| Exchange variation, net of gains and losses with derivative financial instruments |
25 | — | 134,544 | 172,701 | ||||||||||||
| Changes in subscription warranty – indemnification (see Note 25) |
(7,760 | ) | — | (7,760 | ) | — | ||||||||||
| Interest of provisions, net, and other financial expenses |
— | — | (23,988 | ) | 9,791 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (122,359 | ) | (119,900 | ) | (964,143 | ) | (794,771 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Financial income (expense) |
(49,158 | ) | 26,237 | (506,854 | ) | (113,536 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 32. | Earnings per Share (Parent and Consolidated) |
The table below presents a reconciliation of numerators and denominators used in computing earnings per share. The Company has a deferred stock plan and subscription warrants — indemnification, as mentioned in Notes 8.c and 25, respectively.
| 12/31/2019 | 12/31/2018 | |||||||
| Basic Earnings per Share | ||||||||
| Net income for the year of the Company |
373,526 | 1,150,421 | ||||||
| Weighted average shares outstanding (in thousands) |
1,086,485 | 1,086,237 | ||||||
| Basic earnings per share – R$ |
0.3438 | 1.0591 | ||||||
| Diluted Earnings per Share | ||||||||
| Net income for the year of the Company |
373,526 | 1,150,421 | ||||||
| Weighted average shares outstanding (in thousands), including dilution effects |
1,091,653 | 1,091,335 | ||||||
| Diluted earnings per share – R$ |
0.3422 | 1.0541 | ||||||
| Weighted Average Shares Outstanding (in thousands) | ||||||||
| Weighted average shares outstanding for basic per share calculation |
1,086,485 | 1,086,237 | ||||||
| Dilution effect |
||||||||
| Subscription warrants — indemnification |
2,554 | 2,496 | ||||||
| Deferred Stock Plan |
2,614 | 2,602 | ||||||
|
|
|
|
|
|||||
| Weighted average shares outstanding for diluted per share calculation |
1,091,653 | 1,091,335 | ||||||
|
|
|
|
|
|||||
Earnings per share were adjusted retrospectively as disclosure in Note 26.a. and by the issue of 2,108,542 common shares due to the partial exercise of the rights conferred by the subscription warrants disclosed in note 36.
| 33. | Segment Information |
The Company operates five main business segments: gas distribution, fuel distribution, chemicals, storage and drugstores. The gas distribution segment (Ultragaz) distributes LPG to residential, commercial, and industrial consumers, especially in the South, Southeast, and Northeast regions of Brazil. The fuel distribution segment (Ipiranga) operates the distribution and marketing of gasoline, ethanol, diesel, fuel oil, kerosene, natural gas for vehicles, and lubricants and related activities throughout all the Brazilian territory. The chemicals segment (Oxiteno) produces ethylene oxide and its main derivatives and fatty alcohols, which are raw materials used in the home and personal care, agrochemical, paints, varnishes, and other industries. The storage segment (Ultracargo) operates liquid bulk terminals, especially in the Southeast and Northeast regions of Brazil. The drugstores segment (Extrafarma) trades pharmaceutical, hygiene, and beauty products through its own drugstore chain in the North, Northeast and Southeast regions of the country. The segments shown in the financial statements are strategic business units supplying different products and services. Intersegment sales are at prices similar to those that would be charged to third parties.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| a. | Financial information related to segments |
The main financial information of each of the Company’s segments are stated as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Net revenue from sales and services: |
||||||||
| Ultragaz |
7,094,823 | 7,043,246 | ||||||
| Ipiranga |
75,452,481 | 76,477,640 | ||||||
| Oxiteno |
4,254,237 | 4,748,428 | ||||||
| Ultracargo |
540,758 | 493,649 | ||||||
| Extrafarma |
2,060,568 | 2,027,988 | ||||||
|
|
|
|
|
|||||
| 89,402,867 | 90,790,951 | |||||||
| Others (1) |
44,770 | 46,937 | ||||||
| Intersegment sales |
(149,662 | ) | (139,905 | ) | ||||
|
|
|
|
|
|||||
| Total |
89,297,975 | 90,697,983 | ||||||
|
|
|
|
|
|||||
| Intersegment sales: |
||||||||
| Ultragaz |
3,794 | 2,879 | ||||||
| Ipiranga |
535 | 2,919 | ||||||
| Oxiteno |
22,265 | 6,325 | ||||||
| Ultracargo |
78,390 | 82,573 | ||||||
| Extrafarma |
— | — | ||||||
|
|
|
|
|
|||||
| 104,984 | 94,696 | |||||||
| Others (1) |
44,678 | 45,209 | ||||||
|
|
|
|
|
|||||
| Total |
149,662 | 139,905 | ||||||
|
|
|
|
|
|||||
| Net revenue from sales and services, excluding intersegment sales: |
||||||||
| Ultragaz |
7,091,029 | 7,040,367 | ||||||
| Ipiranga |
75,451,946 | 76,474,721 | ||||||
| Oxiteno |
4,231,971 | 4,742,103 | ||||||
| Ultracargo |
462,368 | 411,076 | ||||||
| Extrafarma |
2,060,569 | 2,027,988 | ||||||
|
|
|
|
|
|||||
| 89,297,883 | 90,696,255 | |||||||
| Others (1) |
92 | 1,728 | ||||||
|
|
|
|
|
|||||
| Total |
89,297,975 | 90,697,983 | ||||||
|
|
|
|
|
|||||
| Operating income (expense): |
||||||||
| Ultragaz |
368,975 | 35,567 | ||||||
| Ipiranga |
1,674,439 | 1,396,574 | ||||||
| Oxiteno |
(12,833 | ) | 457,128 | |||||
| Ultracargo |
83,171 | 124,720 | ||||||
| Extrafarma |
(720,252 | ) | (118,329 | ) | ||||
| Corporation (2) |
(96,432 | ) | — | |||||
|
|
|
|
|
|||||
| 1,297,068 | 1,895,660 | |||||||
| Others (1) |
3,484 | 3,694 | ||||||
|
|
|
|
|
|||||
| Total |
1,300,552 | 1,899,354 | ||||||
|
|
|
|
|
|||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 12/31/2019 | 12/31/2018 | |||||||
| Share of profit (loss) of joint-ventures and associates: |
||||||||
| Ultragaz |
(5 | ) | 12 | |||||
| Ipiranga |
(24,782 | ) | (18,169 | ) | ||||
| Oxiteno |
532 | 880 | ||||||
| Ultracargo |
1,370 | 1,350 | ||||||
|
|
|
|
|
|||||
| (22,885 | ) | (15,927 | ) | |||||
| Others (1) |
10,740 | 1,148 | ||||||
|
|
|
|
|
|||||
| Total |
(12,144 | ) | (14,779 | ) | ||||
|
|
|
|
|
|||||
| Income before financial result, income and social contribution taxes |
1,288,407 | 1,884,575 | ||||||
| Financial result, net |
(506,854 | ) | (113,536 | ) | ||||
|
|
|
|
|
|||||
| Income before income and social contribution taxes |
781,553 | 1,771,039 | ||||||
|
|
|
|
|
|||||
| Additions to PP&E and intangible assets (excluding intersegment account balances): |
||||||||
| Ultragaz |
249,784 | 245,069 | ||||||
| Ipiranga |
370,864 | 417,519 | ||||||
| Oxiteno |
255,016 | 473,026 | ||||||
| Ultracargo |
217,377 | 167,034 | ||||||
| Extrafarma |
89,850 | 118,577 | ||||||
|
|
|
|
|
|||||
| 1,182,891 | 1,421,225 | |||||||
| Others (1) |
20,186 | 18,382 | ||||||
|
|
|
|
|
|||||
| Total additions to PP&E and intangible assets (see Notes 14 and 15) |
1,203,077 | 1,439,607 | ||||||
| Asset retirement obligation – fuel tanks (see Note 21) |
(290 | ) | (264 | ) | ||||
| Capitalized borrowing costs |
(30,748 | ) | (23,438 | ) | ||||
|
|
|
|
|
|||||
| Total investments in PP&E and intangible assets (cash flow) |
1,172,039 | 1,415,905 | ||||||
|
|
|
|
|
|||||
| Payments of contractual assets with customers – exclusive rights (see Note 11): |
||||||||
| Ipiranga |
330,068 | 390,177 | ||||||
|
|
|
|
|
|||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 12/31/2019 | 12/31/2018 | |||||||
| Depreciation of PP&E and amortization of intangible assets charges: |
||||||||
| Ultragaz |
186,221 | 222,527 | ||||||
| Ipiranga |
290,747 | 283,426 | ||||||
| Oxiteno |
212,328 | 167,357 | ||||||
| Ultracargo |
59,618 | 52,414 | ||||||
| Extrafarma |
80,550 | 71,552 | ||||||
|
|
|
|
|
|||||
| 829,464 | 797,276 | |||||||
| Others (1) |
15,183 | 15,213 | ||||||
|
|
|
|
|
|||||
| Total |
844,647 | 812,489 | ||||||
|
|
|
|
|
|||||
| Amortization of contractual assets with customers – exclusive rights (see Note 11): |
||||||||
| Ipiranga |
355,055 | 371,825 | ||||||
| Ultragaz |
195 | — | ||||||
|
|
|
|
|
|||||
| 355,250 | 371,825 | |||||||
|
|
|
|
|
|||||
| Amortization of right to use assets: |
||||||||
| Ultragaz |
31,264 | — | ||||||
| Ipiranga |
164,543 | — | ||||||
| Oxiteno |
9,676 | — | ||||||
| Ultracargo |
20,673 | — | ||||||
| Extrafarma |
73,774 | — | ||||||
|
|
|
|
|
|||||
| 299,930 | — | |||||||
| Others (1) |
128 | — | ||||||
|
|
|
|
|
|||||
| Total |
300,058 | — | ||||||
|
|
|
|
|
|||||
| Total assets (excluding intersegment account balances): |
||||||||
| Ultragaz |
2,998,623 | 2,719,425 | ||||||
| Ipiranga |
16,278,320 | 15,381,887 | ||||||
| Oxiteno |
7,453,476 | 7,452,331 | ||||||
| Ultracargo |
1,871,799 | 1,478,697 | ||||||
| Extrafarma |
2,060,182 | 2,107,901 | ||||||
|
|
|
|
|
|||||
| 30,662,400 | 29,140,241 | |||||||
| Others (1) |
533,072 | 1,359,154 | ||||||
|
|
|
|
|
|||||
| Total |
31,195,472 | 30,499,395 | ||||||
|
|
|
|
|
|||||
| (1) | Composed of the parent company Ultrapar (including goodwill of certain acquisitions) and Subsidiaries Serma — Associação dos Usuários de Equipamentos de Processamento de Dados e Serviços Correlatos (“Serma”) and Imaven Imóveis Ltda. |
| (2) | Expenses related to Ultrapar’s holding structure, including the Presidency, Board of Directors and, fiscal council, advisory committees to Board of Directors and Human Capital and Audit and Compliance directories. |
| b. | Geographic Area Information |
The fixed and intangible assets of the Company and its subsidiaries are located in Brazil, except those related to Oxiteno’ plants abroad, as shown below:
| 12/31/2019 | 12/31/2018 | |||||||
| United States of America |
909,787 | 857,049 | ||||||
| Mexico |
124,809 | 124,037 | ||||||
| Uruguay |
74,732 | 72,345 | ||||||
| Venezuela (*) |
— | 2,427 | ||||||
|
|
|
|
|
|||||
| 1,109,328 | 1,055,858 | |||||||
|
|
|
|
|
|||||
| (*) | See Note 3.b.3. |
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The subsidiaries generate revenue from operations in Brazil, United Stated of America, Mexico, Uruguay and Venezuela, as well as from exports of products to foreign customers, as disclosed below:
| 12/31/2019 | 12/31/2018 | |||||||
| Net revenue from sale and services: |
||||||||
| Brazil |
87,927,198 | 89,183,342 | ||||||
| Mexico |
220,021 | 207,615 | ||||||
| Uruguay |
41,648 | 48,096 | ||||||
| Venezuela (*) |
2,293 | 68,877 | ||||||
| Other Latin American countries |
418,368 | 425,973 | ||||||
| United States of America and Canada |
437,669 | 465,840 | ||||||
| Far East |
74,093 | 96,394 | ||||||
| Europe |
118,917 | 138,347 | ||||||
| Others |
57,768 | 63,499 | ||||||
|
|
|
|
|
|||||
| Total |
89,297,975 | 90,697,983 | ||||||
|
|
|
|
|
|||||
Sales to the foreign market are made substantially by the Oxiteno segment.
| (*) | See Note 3.b.3. |
| 34. | Risks and Financial Instruments (Consolidated) |
| a. | Risk Management and Financial Instruments—Governance |
The main risks to which the Company and its subsidiaries are exposed reflect strategic/operational and economic/financial aspects. Operational/strategic risks (including, but not limited to, demand behavior, competition, technological innovation, and material changes in the industry structure) are addressed by the Company’s management model. Economic/financial risks primarily reflect default of customers, behavior of macroeconomic variables, such as exchange and interest rates, as well as the characteristics of the financial instruments used by the Company and its subsidiaries and their counterparties. These risks are managed through control policies, specific strategies, and the establishment of limits.
The Company has a policy for the management of resources, financial instruments, and risks approved by its CA (“Policy”). In accordance with the Policy, the main objectives of financial management are to preserve the value and liquidity of financial assets and ensure financial resources for the development of the business, including expansions. The main financial risks considered in the Policy are market risks (currencies, interest rates and commodities), liquidity and credit. The governance of the management of financial risks follows the segregation of duties below:
The execution of the Policy has done by corporate financial board, through its treasury department, with the assistance of the accounting, legal and tax departments.
The monitoring of compliance of the Policy and possible issues is the responsibility of the Risk and Investment Committee, (“Committee”), which is composed of CFO, Treasury Director, Controller and others directors designated by the CFO. The Committee holds quartely meetings and monitors the risk standards established by the Policy through a monitoring map on a monthly basis.
Approval of the Policy and the periodic assessment of Company exposure to financial risks are subject to the approval of the CAof Ultrapar.
The Audit and Risks Committee (“CAR”) advises the CA in the assessment of controls, management and exposure of financial risks and revision of Policy. The Risk, Compliance and Audit board monitors of standards compliance of the Policy and reports to the CAR the risks exposure and compliance or noncompliance of the Policy.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Currency Risk |
Most transactions of the Company, through its subsidiaries, are located in Brazil and, therefore, the reference currency for risk management is the Brazilian Real. Currency risk management is guided by neutrality of currency exposures and considers the transactional, accounting, and operational risks of the Company and its subsidiaries and their exposure to changes in exchange rates. The Company considers as its main currency exposures the changes in assets and liabilities in foreign currency and the short-term flow of net sales in foreign currency of Oxiteno.
The Company and its subsidiaries use exchange rate hedging instruments (especially between the Brazilian Real and the U.S. dollar) available in the financial market to protect their assets, liabilities, receipts, and disbursements in foreign currency and net investments in foreign operations. Hedge is used in order to reduce the effects of changes in exchange rates on the Company´s income and cash flows in Brazilian Reais within the exposure limits under its Policy. Such foreign exchange hedging instruments have amounts, periods, and rates substantially equivalent to those of assets, liabilities, receipts, and disbursements in foreign currencies to which they are related.
Assets and liabilities in foreign currencies are stated below, translated into Brazilian Reais:
| b.1 | Assets and Liabilities in Foreign Currencies |
| In millions of Brazilian Reais |
12/31/2019 | 12/31/2018 | ||||||
| Assets in foreign currency |
||||||||
| Cash, cash equivalents and financial investments in foreign currency (except hedging instruments) |
455.6 | 254.2 | ||||||
| Foreign trade receivables, net of allowance for doubtful accounts and advances to foreign customers |
213.5 | 235.1 | ||||||
| Other net assets in foreign (except cash, cash equivalents, financial investments, trade receivables, financing, and payables) |
1,445.0 | 1,384.9 | ||||||
|
|
|
|
|
|||||
| 2,114.1 | 1,874.2 | |||||||
|
|
|
|
|
|||||
| Liabilities in foreign currency |
||||||||
| Financing in foreign currency, gross of transaction costs and discount |
(6,895.1 | ) | (5,515.6 | ) | ||||
| Payables arising from imports, net of advances to foreign suppliers |
(344.5 | ) | (567.7 | ) | ||||
|
|
|
|
|
|||||
| (7,239.6 | ) | (6,083.3 | ) | |||||
|
|
|
|
|
|||||
| Foreign currency hedging instruments |
3,636.4 | 2,483.0 | ||||||
|
|
|
|
|
|||||
| Net liability position – Total |
(1,489.1 | ) | (1,726.1 | ) | ||||
|
|
|
|
|
|||||
| Net asset (liability) position – Income statement effect |
452.0 | 282.7 | ||||||
| Net liability position – Equity effect |
(1,941.1 | ) | (2,008.8 | ) | ||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b.2 | Sensitivity Analysis of Assets and Liabilities in Foreign Currency |
Scenarios I, II and III were based on 10%, 25% and 50% variations, respectively, applied on the net position of the Company exposed to the currency risk, simulating the effects of appreciation and devaluation of the Real in the income statement and the equity:
The table below shows, in the three scenarios, the effects of exchange rate changes on the net liability position of R$ 1,489.1 million in foreign currency as of December 31, 2019:
| In millions of Brazilian Reais |
Risk | Scenario I | Scenario II | Scenario III | ||||||||||
| Likely | 25% | 50% | ||||||||||||
| (1) Income statement effect (2) Equity effect |
Real devaluation | |
45.2 (194.1 |
) |
|
113.0 (485.3 |
) |
|
226.0 (970.6 |
) | ||||
|
|
|
|
|
|
|
|||||||||
| (1) + (2) |
Net effect | (148.9 | ) | (372.3 | ) | (744.6 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| (3) Income statement effect (4) Equity effect |
Real appreciation | |
(45.2 194.1 |
)
|
|
(113.0 485.3 |
)
|
|
(226.0 970.6 |
)
| ||||
|
|
|
|
|
|
|
|||||||||
| (3) + (4) |
Net effect | 148.9 | 372.3 | 744.6 | ||||||||||
|
|
|
|
|
|
|
|||||||||
The table below shows, in the three scenarios, the effects of exchange rate changes on the net liability position of R$ 1,726.1 million in foreign currency as of December 31, 2018:
| In millions of Brazilian Reais |
Risk | Scenario I | Scenario II | Scenario III | ||||||||||
| Likely | 25% | 50% | ||||||||||||
| (1) Income statement effect (2) Equity effect |
Real devaluation | |
28.3 (200.9 |
) |
|
70.7 (502.2 |
) |
|
141.4 (1.004.4 |
) | ||||
|
|
|
|
|
|
|
|||||||||
| (1) + (2) |
Net effect | (172.6 | ) | (431.5 | ) | (863.0 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
| (3) Income statement effect (4) Equity effect |
Real appreciation | |
(28.3 200.9 |
)
|
|
(70.7 502.2 |
)
|
|
(141.4 1.004.4 |
)
| ||||
|
|
|
|
|
|
|
|||||||||
| (3) + (4) |
Net effect | 172.6 | 431.5 | 863.0 | ||||||||||
|
|
|
|
|
|
|
|||||||||
The equity effect refers to cumulative translation adjustments of changes in the exchange rate on equity of foreign subsidiaries (see Notes 2.s.1 and 26.g.2), net investments hedge in foreign entities, cash flow hedge of firm commitment and highly probable transaction (see Note 2.c and “h. Hedge Accounting” below).
| c. | Interest Rate Risk |
The Company and its subsidiaries adopt policies for borrowing and investing financial resources and for capital cost minimization. The financial investments of the Company and its subsidiaries are primarily held in transactions linked to the DI, as set forth in Note 4. Borrowings primarily relate to financing from Banco do Brasil, as well as debentures and borrowings in foreign currency, as shown in Note 16.
The Company attempts to maintain most of its financial interest assets and liabilities at floating rates.
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Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| c.1 | Assets and liabilities exposed to floating interest rates |
The financial assets and liabilities exposed to floating interest rates are demonstrated below:
| In millions of Brazilian Reais |
Note | 12/31/2019 | 12/31/2018 | |||||||||
| DI |
||||||||||||
| Cash equivalents |
4.a | 1,780.9 | 3,722.3 | |||||||||
| Financial investments |
4.b | 2,610.7 | 2,537.3 | |||||||||
| Asset position of foreign exchange hedging instruments — DI |
34.g | 19.3 | 33.9 | |||||||||
| Loans and debentures |
16.a | (6,268.6 | ) | (8,440.9 | ) | |||||||
| Liability position of foreign exchange hedging instruments — DI |
34.g | (3,318.3 | ) | (2,205.5 | ) | |||||||
| Liability position of fixed interest instruments + IPCA — DI |
34.g | (821.9 | ) | (823.5 | ) | |||||||
|
|
|
|
|
|||||||||
| Net liability position in DI |
(5,997.9 | ) | (5,176.4 | ) | ||||||||
|
|
|
|
|
|||||||||
| TJLP |
||||||||||||
| Loans — TJLP |
16.a | (103.9 | ) | (201.2 | ) | |||||||
|
|
|
|
|
|||||||||
| Net liability position in TJLP |
(103.9 | ) | (201.2 | ) | ||||||||
|
|
|
|
|
|||||||||
| LIBOR |
||||||||||||
| Asset position of foreign exchange hedging instruments — LIBOR |
34.g | 850.3 | 811.6 | |||||||||
| Loans — LIBOR |
16.a | (1,457.3 | ) | (1,437.1 | ) | |||||||
|
|
|
|
|
|||||||||
| Net liability position in LIBOR |
(607.0 | ) | (625.5 | ) | ||||||||
|
|
|
|
|
|||||||||
| TIIE |
||||||||||||
| Loans — TIIE |
16.a | — | (4.0 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net liability position in TIIE |
— | (4.0 | ) | |||||||||
|
|
|
|
|
|||||||||
| SELIC |
||||||||||||
| Loans — SELIC |
16.a | (30.4 | ) | (51.5 | ) | |||||||
|
|
|
|
|
|||||||||
| Net liability position in SELIC |
(30.4 | ) | (51.5 | ) | ||||||||
|
|
|
|
|
|||||||||
| Total net liability position exposed to floating interest |
(6,739.2 | ) | (6,058.6 | ) | ||||||||
|
|
|
|
|
|||||||||
| c.2 | Sensitivity Analysis of Floating Interest Rate Risk |
For sensitivity analysis of floating interest rate risk, the Company used the accumulated amount of the reference indexes (DI, TJLP, LIBOR, TIIE and SELIC) as a base scenario. Scenarios I, II and III were based on 10%, 25% and 50% variations, respectively, applied in the floating interest rate of the base scenario:
88
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The tables below show the incremental expenses and income that would be recognized in financial income, due to the effect of floating interest rate changes in different scenarios.
| 12/31/2019 | ||||||||||||||||
| In millions of Brazilian Reais |
Risk | Scenario I | Scenario II | Scenario III | ||||||||||||
| Likely | 25% | 50% | ||||||||||||||
| Exposure of interest rate risk |
||||||||||||||||
| Interest effect on cash equivalents and financial investments |
Increase in DI | 29.3 | 73.3 | 146.5 | ||||||||||||
| Foreign exchange hedging instruments (assets in DI) effect |
Increase in DI | 0.1 | 0.1 | 0.3 | ||||||||||||
| Interest effect on debt in DI |
Increase in DI | (44.5 | ) | (111.2 | ) | (222.3 | ) | |||||||||
| Interest rate hedging instruments (liabilities in DI) effect |
Increase in DI | (39.2 | ) | (85.6 | ) | (162.9 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(54.3 | ) | (123.4 | ) | (238.4 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in TJLP |
Increase in TJLP | (1.2 | ) | (3.0 | ) | (6.1 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(1.2 | ) | (3.0 | ) | (6.1 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Foreign exchange hedging instruments (assets in LIBOR) effect |
Increase in LIBOR | 1.7 | 4.3 | 8.6 | ||||||||||||
| Interest effect on debt in LIBOR |
Increase in LIBOR | (3.6 | ) | (8.9 | ) | (17.8 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
1.9 | 4.6 | 9.2 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in TIIE |
Increase in TIIE | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
— | — | — | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in SELIC |
Increase in SELIC | (0.3 | ) | (0.6 | ) | (1.3 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(0.3 | ) | (0.6 | ) | (1.3 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| 12/31/2018 | ||||||||||||||||
| In millions of Brazilian Reais |
Risk | Scenario I | Scenario II | Scenario III | ||||||||||||
| Likely | 25% | 50% | ||||||||||||||
| Exposure of interest rate risk |
||||||||||||||||
| Interest effect on cash equivalents and financial investments |
Increase in DI | 32.7 | 81.7 | 163.3 | ||||||||||||
| Foreign exchange hedging instruments (assets in DI) effect |
Increase in DI | 0.1 | 0.2 | 0.5 | ||||||||||||
| Interest effect on debt in DI |
Increase in DI | (55.0 | ) | (137.4 | ) | (274.9 | ) | |||||||||
| Interest rate hedging instruments (liabilities in DI) effect |
Increase in DI | (33.7 | ) | (73.4 | ) | (139.6 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(55.9 | ) | (128.9 | ) | (250.7 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in TJLP |
Increase in TJLP | (1.7 | ) | (4.2 | ) | (8.3 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(1.7 | ) | (4.2 | ) | (8.3 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Foreign exchange hedging instruments (assets in LIBOR) effect |
Increase in LIBOR | 2.8 | 6.9 | 13.9 | ||||||||||||
| Interest effect on debt in LIBOR |
Increase in LIBOR | (3.6 | ) | (9.1 | ) | (18.1 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(0.8 | ) | (2.2 | ) | (4.2 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in TIIE |
Increase in TIIE | (0.1 | ) | (0.3 | ) | (0.5 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(0.1 | ) | (0.3 | ) | (0.5 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
| Interest effect on debt in SELIC |
Increase in SELIC | (0.4 | ) | (1.0 | ) | (2.0 | ) | |||||||||
|
|
|
|
|
|
|
|||||||||||
| Incremental expenses |
(0.4 | ) | (1.0 | ) | (2.0 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
89
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| d. | Credit Risks |
The financial instruments that would expose the Company and its subsidiaries to credit risks of the counterparty are basically represented by cash and bank deposits, financial investments, hedging instruments (see Note 4), and trade receivables (see Note 5).
| d.1 | Credit risk of financial institutions |
Such risk results from the inability of financial institutions to comply with their financial obligations to the Company and its subsidiaries due to insolvency. The Company and its subsidiaries regularly conduct a credit review of the institutions with which they hold cash and cash equivalents, financial investments, and hedging instruments through various methodologies that assess liquidity, solvency, leverage, portfolio quality, etc. Cash and cash equivalents, financial investments, and hedging instruments are held only with institutions with a solid credit history, chosen for safety and soundness. The volume of cash and cash equivalents, financial investments, and hedging instruments are subject to maximum limits by each institution and, therefore, require diversification of counterparties.
| d.2 | Government credit risk |
The Company’s policy allows investments in government securities from countries classified as investment grade AAA or aaa by specialized credit rating agencies (S&P, Moody’s and Fitch) and in Brazilian government bonds. The volume of such financial investments is subject to maximum limits by each country and, therefore, requires diversification of counterparties.
The credit risk of financial institution and government of cash, cash equivalents and financial investments is summarized below:
| Fair Value | ||||||||
| Counterparty credit rating |
12/31/2019 | 12/31/2018 | ||||||
| AAA |
4,906,077 | 5,933,671 | ||||||
| AA |
331,512 | 707,358 | ||||||
| A |
418,020 | 262,553 | ||||||
| BBB |
56,488 | 90,824 | ||||||
|
|
|
|
|
|||||
| Total |
5,712,097 | 6,994,406 | ||||||
|
|
|
|
|
|||||
| d.3 | Customer credit risk |
The credit policy establishes the analysis of the profile of each new customer, individually, regarding their financial condition. The review carried out by the subsidiaries of the Company includes the evaluation of external ratings, when available, financial statements, credit bureau information, industry information and, when necessary, bank references. Credit limits are established for each customer and reviewed periodically, in a shorter period the greater the risk, depending on the approval of the responsible area in cases of sales that exceed these limits.
In monitoring credit risk, customers are grouped according to their credit characteristics and depending on the business the grouping takes into account, for example, whether they are natural or legal clients, whether they are wholesalers, resellers or final customers, considering also the geographic area.
The estimates of credit losses are calculated by the expected loss approach, based on the probability of default rates. Loss rates are calculated on the basis of the average probability of a receivable amount to advance through successive stages of default until full write-off. The probability of default calculation takes into account a credit risk score for each exposure, based on data considered to be capable of foreseeing the risk of loss (external classifications, audited financial statements, cash flow projections, customer information available in the press, for example), with addition of the credit assessment based on experience.
Such credit risks are managed by each business unit through specific criteria for acceptance of customers and their credit rating and are additionally mitigated by the diversification of sales. No single customer or group accounts for more than 10% of total revenue.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The subsidiaries of the Company maintained the following allowance for estimated losses on doubtful accounts balances on trade receivables:
| 12/31/2019 | 12/31/2018 | |||||||
| Ipiranga |
447,235 | 442,486 | ||||||
| Ultragaz |
94,985 | 61,975 | ||||||
| Oxiteno |
13,252 | 12,371 | ||||||
| Extrafarma |
3,419 | 5,858 | ||||||
| Ultracargo |
2,001 | 2,089 | ||||||
|
|
|
|
|
|||||
| Total |
560,892 | 524,779 | ||||||
|
|
|
|
|
|||||
The table below presents information about credit risk exposure:
| 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
| Weighted average rate of losses |
Accouting balance |
Provision for losses |
Weighted average rate of losses |
Accouting balance |
Provision for losses |
|||||||||||||||||||
| Current |
1.3% | 3,843,803 | 50,198 | 1.5% | 4,372,784 | 66,208 | ||||||||||||||||||
| less than 30 days |
2.1% | 185,612 | 3,975 | 4.0% | 132,884 | 5,344 | ||||||||||||||||||
| 31-60 days |
7.1% | 37,801 | 2,688 | 7.9% | 68,733 | 5,396 | ||||||||||||||||||
| 61-90 days |
20.4% | 24,861 | 5,062 | 11.3% | 59,006 | 6,664 | ||||||||||||||||||
| 91-180 days |
41.8% | 91,633 | 38,337 | 55.8% | 105,703 | 58,959 | ||||||||||||||||||
| more than 180 days |
53.1% | 867,618 | 460,632 | 58.6% | 652,075 | 382,208 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 5,051,328 | 560,892 | 5,391,185 | 524,779 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The information about estimated losses on doubtful accounts balances by geographic area are as follows:
| 12/31/2019 | 12/31/2018 | |||||||
| Brasil |
550,928 | 513,136 | ||||||
| México |
1,123 | 621 | ||||||
| Uruguai |
267 | 257 | ||||||
| Outros paĺses da América Latina |
561 | 1,750 | ||||||
| Estados Unidos e Canadá |
889 | 1,394 | ||||||
| Europa |
7,075 | 6,842 | ||||||
| Outros |
49 | 779 | ||||||
|
|
|
|
|
|||||
| 560,892 | 524,779 | |||||||
|
|
|
|
|
|||||
For further information about the allowance for estimated losses on doubtful accounts, see Notes 5.a and 5.b.
| e. | Liquidity Risk |
The Company and its subsidiaries’ main sources of liquidity derive from (i) cash, cash equivalents, and financial investments, (ii) cash generated from operations and (iii) financing. The Company and its subsidiaries believe that these sources are sufficient to satisfy their current funding requirements, which include, but are not limited to, working capital, capital expenditures, amortization of debt, and payment of dividends.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The Company and its subsidiaries periodically examine opportunities for acquisitions and investments. They consider different types of investments, either directly, through joint ventures, or through associated companies, and finance such investments using cash generated from operations, debt financing, through capital increases, or through a combination of these methods.
The Company and its subsidiaries believe to have enough working capital and sources of financing to satisfy their current needs. The gross indebtedness due over the next twelve months totals R$ 1,532.0 million, including estimated interests on loans (for quantitative information, see Note 16.a). Furthermore, the investment plan for 2020 totals R$ 1,771 million. On December 31, 2019, the Company and its subsidiaries had R$ 5,205.6 million in cash, cash equivalents, and short-term financial investments (for quantitative information, see Note 4).
The table below presents a summary of financial liabilities as of December 31, 2019 by the Company and its subsidiaries, listed by maturity. The amounts disclosed in this table are the contractual undiscounted cash outflows, and, therefore, these amounts may be different from the amounts disclosed on the balance sheet.
| In millions of Brazilian Reais | ||||||||||||||||||||
| Financial liabilities |
Total | Less than 1 year |
Between 1 and 3 years |
Between 3 and 5 years |
More than 5 years |
|||||||||||||||
| Loans including future contractual interest (1) (2) |
17,224.8 | 1,532.0 | 5,954.9 | 4,686.3 | 5,051.5 | |||||||||||||||
| Currency and interest rate hedging instruments (3) |
588.4 | 131.1 | 143.7 | 129.3 | 184.3 | |||||||||||||||
| Trade payables |
2,700.1 | 2,700.1 | — | — | — | |||||||||||||||
| Leases payable |
2,043.8 | 310.0 | 904.7 | 508.7 | 320.4 | |||||||||||||||
| (1) | To calculate the estimated interest on loans some macroeconomic assumptions were used, including averaging for the period the following: (i) DI of % 4.40% to 2020, 4.95% to 2021, 5.57% to 2022 and 6.01% to 2023, (ii) exchange rate of the Real against the U.S. dollar of R$ 4.05 in 2020, R$ 4.17 in 2021, R$ 4.33 in 2022, R$ 4.52 in 2023, R$ 4.73 in 2024, R$ 4.93 in 2025, R$ 5.13 in 2026, R$ 5.34 in 2027, R$ 5.56 in 2028 and R$ 5.78 in 2029 (iii) TJLP of 5.57%, (iv) IGP-M of 4.18% in 2020, 3.99% in 2021, 3.75% in 2022, 3.58% as from 2023 and (v) IPCA of 3.46% in 2020, 3.45% in 2021, 3.50% in 2022 and 3.25% as from 2023(source:B3, Bulletin Focus and financial institutions). |
| (2) | Includes estimated interest payments on short-term and long-term loans until the payment date. |
| (3) | The currency and interest rate hedging instruments were estimated based on projected U.S dollar futures contracts and the futures curves of DI x Pre and Pre x IPCA contracts quoted on B3 on 28, 2019 and on the futures curve of LIBOR (ICE — IntercontinentalExchange) and commodities heating oil contracts and RBOB quoted on New York Mercantile Exchange (“NYMEX”) on December 31, 2019. In the table above, only the hedging instruments with negative results at the time of settlement were considered. |
| f. | Capital Management |
The Company manages its capital structure based on indicators and benchmarks. The key performance indicators related to the capital structure management are the weighted average cost of capital, net debt / EBITDA, interest coverage, and indebtedness / equity ratios. Net debt is composed of cash, cash equivalents, and financial investments (see Note 4) and loans, including debentures (see Note 16). The Company can change its capital structure depending on the economic and financial conditions, in order to optimize its financial leverage and capital management. The Company seeks to improve its return on invested capital by implementing efficient working capital management and a selective investment program.
| g. | Selection and Use of Financial Instruments |
In selecting financial investments and hedging instruments, an analysis is conducted to estimate rates of return, risks involved, liquidity, calculation methodology for the carrying value and fair value, and a review is conducted of any documentation applicable to the financial instruments. The financial instruments used to manage the financial resources of the Company and its subsidiaries are intended to preserve value and liquidity.
The Policy contemplates the use of derivative financial instruments only to cover identified risks and in amounts consistent with the risk (limited to 100% of the identified risk). The risks identified in the Policy are described in the above sections, and are subject to risk management. In accordance with the Policy, the Company and its subsidiaries can use forward contracts, Swaps, options, and futures contracts to manage identified risks. Leveraged derivative instruments are not permitted. Because the use of derivative financial instruments is limited to the coverage of identified risks, the Company and its subsidiaries use the term “hedging instruments” to refer to derivative financial instruments.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below summarizes the position of hedging instruments entered by the Company and its subsidiaries:
Designated as hedge accounting
| Product |
Hedged object | Rates agreement | Maturity | Notional amount1 | Fair value | |||||||||||||||||||||||||||
| Assets | Liabilities | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||||||
| R$ million | R$ million | |||||||||||||||||||||||||||||||
| Foreign exchange swap |
Debt | USD + 4.51 % | 104.0% DI | nov-23 | USD 245.0 | USD 245.0 | 69.3 | (10.3 | ) | |||||||||||||||||||||||
| Foreign exchange swap |
Debt | LIBOR-3M + 1.11% = 4.1% | 105.0% DI | jul-23 | USD 150.0 | USD 150.0 | 75.0 | 45.6 | ||||||||||||||||||||||||
| Interest rate swap |
Debt | 4.57% + IPCA | 95.8% DI | oct-24 | R$ 806.1 | R$ 806.1 | 144.1 | 35.6 | ||||||||||||||||||||||||
| Interest rate swap |
Debt | 6.47% | 100% DI | nov-24 | R$ 90.0 | — | 0.6 | — | ||||||||||||||||||||||||
| Zero Cost Collar |
Operating margin | Put USD 3.68 | Call USD 4.60 | dec-20 | USD 60.0 | USD 149.4 | (0.1 | ) | 0.3 | |||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| 288.9 | 71.2 | |||||||||||||||||||||||||||||||
Not designated as hedge accounting
| Product |
Hedged object | Rates agreement | Maturity | Notional amount1 | Fair value | |||||||||||||||||||||||||||
| Assets | Liabilities | 12/31/2019 | 12/31/2018 | 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||||||
| R$ million | R$ million | |||||||||||||||||||||||||||||||
| Foreign exchange swap |
Debt | USD + 3.60% | 65.0% DI | jun-29 | USD 853.0 | USD 758.3 | 353.5 | 246.5 | ||||||||||||||||||||||||
| Foreign exchange swap |
Debt | LIBOR-3M + 2.0% = 4.3% | 105.9% DI | jun-20 | USD 60.0 | USD 60.0 | 48.5 | 38.0 | ||||||||||||||||||||||||
| Foreign exchange swap |
Firm commitments | USD + 0.00% | 39.9% DI | oct-19 | USD 17.9 | USD 98.5 | (2.2 | ) | (8.6 | ) | ||||||||||||||||||||||
| Foreign exchange swap |
Operating margin | 34.8% DI | USD + 0.00% | feb-20 | USD 4.7 | USD 8.9 | 0.6 | 0.1 | ||||||||||||||||||||||||
| NDF |
Firm commitments | BRL | USD | jan-20 | USD 71.6 | — | (1.1 | ) | — | |||||||||||||||||||||||
| Term |
Firm commitments | BRL | Heating oil / RBOB | jan-20 | USD 56.0 | — | (1.3 | ) | — | |||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||||||||||
| 398.0 | 276.0 | |||||||||||||||||||||||||||||||
| (1) | In million. Currency as indicated. |
All transactions mentioned above were properly registered with CETIP S.A.
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Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| h. | Hedge Accounting |
The Company and its subsidiaries use derivative and non-derivative financial instruments for hedging purposes and test, throughout the duration of the hedge, their effectiveness, as well as the changes in their fair value.
| h.1 | Fair value hedge |
The Company and its subsidiaries designate as fair value hedges certain financial instruments used to offset the variations in interest and exchange rates, which are based on the market value of financing contracted in Brazilian Reais and U.S. dollars.
The foreign exchange hedging instruments designated as fair value hedge are:
| In millions, except the DI % |
12/31/2019 | 12/31/2018 | ||||||
| Notional amount – US$ |
395.0 | 395.0 | ||||||
| Result of hedging instruments – gain/(loss) – R$ |
79.5 | 149.2 | ||||||
| Fair value adjustment of debt – R$ |
(36.8 | ) | (28.5 | ) | ||||
| Financial expense in the statements of profit or loss – R$ |
(130.3 | ) | (215.9 | ) | ||||
| Average effective cost – DI % |
104.4 | 104.4 |
For more information, see Note 16.c.1.
The interest rate hedging instruments designated as fair value hedge are:
| In millions, except the DI % |
12/31/2019 | 12/31/2018 | ||||||
| Notional amount – R$ |
806.1 | 806.1 | ||||||
| Result of hedging instruments – gain/(loss) – R$ |
73.0 | 25.8 | ||||||
| Fair value adjustment of debt – R$ |
(77.0 | ) | (13.3 | ) | ||||
| Financial expense in the statements of profit or loss – R$ |
(68.1 | ) | (50.2 | ) | ||||
| Average effective cost – DI % |
95.8 | 95.8 |
For more information, see Note 16.g.2, 16.g.4 and 16.g.6.
| In millions, except the DI % |
12/31/2019 | 12/31/2018 | ||||||
| Notional amount – R$ |
90.0 | — | ||||||
| Result of hedging instruments – gain/(loss) – R$ |
0.6 | — | ||||||
| Fair value adjustment of debt – R$ |
(0.2 | ) | — | |||||
| Financial expense in the statements of profit or loss – R$ |
(0.4 | ) | — | |||||
| Average effective cost – DI % |
99.9 | — |
For more information, see Note 16.g.7.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
h.2 Cash flow hedge
The Company and its subsidiaries designate, as cash flow hedge of firm commitment and highly probable transactions, derivative financial instruments to hedge firm commitments and non-derivative financial instruments to hedge highly probable future transactions, to hedge against fluctuations arising from changes in exchange rate.
On December 31, 2019, the Company had no exchange rate and commodities hedging instruments of firm commitments designated as cash flow hedges. For the exchange rate and commodities hedging instruments settled in 2019, a loss of R$ 29.1 million (a gain of R$ 10.7 million for the period ended on December 31, 2018) was recognized in the statement of profit or loss.
On December 31, 2019, the notional amount of foreign exchange hedging instruments for highly probable future transactions designated as cash flow hedge, related to notes in the foreign market totaled US$ 550.0 million (US$ 570.0 million on December 31, 2018). On December 31, 2019, the unrealized loss of “Other comprehensive income” is R$ 293.3 million (loss of R$ 243.7 million on December 31, 2018), net of deferred IRPJ and CSLL.
On December 31, 2019, the notional amount of foreign exchange hedging instruments for highly probable future transactions designated as cash flow hedge, related to future sales revenues of Oxiteno (zero cost collars) totaled US$ 60.0 million (US$ 149.4 million on December 31, 2018). On December 31, 2019, the unrealized loss of “Other comprehensive income” is R$ 0.1 million (gain of R$ 0.2 million on December 31, 2018), net of deferred IRPJ and CSLL.
h.3 Net investment hedge in foreign entities
The Company and its subsidiaries designate, as net investment hedge in foreign entities, notes in the foreign market, for hedging net investment in foreign entities, to offset changes in exchange rates.
On December 31, 2019, the balance of foreign exchange hedging instruments designated as net investments hedge in foreign entities, related to part of the investments made in entities which functional currency is other than the Brazilian Real, totaled US$ 95.0 million (US$ 96.0 million on December 31, 2018). On December 31, 2019, the unrealized loss of “Other comprehensive income” is R$ 55.7 million (loss of R$ 45.9 million on December 31, 2018), net of deferred income and social contribution taxes. The effects of exchange rate changes on investments and hedging instruments were offset in equity.
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
i. Gains (losses) on Hedging Instruments
The following tables summarize the value of gains (losses) recognized, which affected the equity of the Company and its subsidiaries:
| 12/31/2019 | ||||||||
| R$ million | ||||||||
| Profit or loss | Equity | |||||||
| a – Exchange rate swaps receivable in U.S. dollars (i) (ii) |
230.0 | 0.0 | ||||||
| b – Exchange rate swaps payable in U.S. dollars (ii) |
(1.7 | ) | (0.1 | ) | ||||
| c – Interest rate swaps in R$ (iii) |
(4.0 | ) | — | |||||
| d – Non-derivative financial instruments (iv) |
(262.1 | ) | (349.0 | ) | ||||
|
|
|
|
|
|||||
| Total |
(37.8 | ) | (349.0 | ) | ||||
|
|
|
|
|
|||||
| 12/31/2018 | ||||||||
| R$ million | ||||||||
| Profit or loss | Equity | |||||||
| a – Exchange rate swaps receivable in U.S. dollars (i) (ii) |
181.5 | — | ||||||
| b – Exchange rate swaps payable in U.S. dollars (ii) |
(3.8 | ) | 0.2 | |||||
| c – Interest rate swaps in R$ (iii) |
12.5 | — | ||||||
| d – Non-derivative financial instruments (iv) |
(134.0 | ) | (289.6 | ) | ||||
|
|
|
|
|
|||||
| Total |
56.2 | (289.4 | ) | |||||
|
|
|
|
|
|||||
| (i) | Does not consider the effect of exchange rate variation of exchange Swaps receivable in U.S. dollars when this effect is offset in the gain or loss of the hedged item (debt/firm commitments); |
| (ii) | Considers the designation effect of foreign exchange hedging; |
| (iii) | Considers the designation effect of interest rate hedging in Brazilian Reais; and |
| (iv) | Considers the results of notes in the foreign market (for further information see Note 16.b). |
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
j. Fair Value of Financial Instruments
The fair values and the carrying values of the financial instruments, including currency and interest rate hedging instruments, are stated below:
| 12/31/2019 | 12/31/2018 | |||||||||||||||||||||||
| Category | Note | Carrying value | Fair value | Carrying value | Fair value | |||||||||||||||||||
| Financial assets: |
||||||||||||||||||||||||
| Cash and cash equivalents |
||||||||||||||||||||||||
| Cash and bank deposits |
Measured at amortized cost | 4.a | 284,992 | 284,992 | 205,482 | 205,482 | ||||||||||||||||||
| Financial investments in local currency |
|
Measured at fair value through other comprehensive income |
|
4.a | 1,780,939 | 1,780,939 | 3,722,308 | 3,722,308 | ||||||||||||||||
| Financial investments in foreign currency |
|
Measured at fair value through profit or loss |
|
4.a | 49,448 | 49,448 | 11,161 | 11,161 | ||||||||||||||||
| Financial investments: |
||||||||||||||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through profit or loss |
|
4.b | 1,937,967 | 1,937,967 | 2,462,018 | 2,462,018 | ||||||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 595,816 | 595,816 | 2,208 | 2,208 | ||||||||||||||||
| Fixed-income securities and funds in local currency |
Measured at amortized cost | 4.b | 76,904 | 76,904 | 73,089 | 73,089 | ||||||||||||||||||
| Fixed-income securities and funds in foreign currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 303,417 | 303,417 | 154,811 | 154,811 | ||||||||||||||||
| Currency and interest rate hedging and commodities instruments |
|
Measured at fair value through profit or loss |
|
4.b | 682,615 | 682,615 | 363,329 | 363,329 | ||||||||||||||||
| Reseller Financing |
Measured at amortized cost | 5.b | 800,936 | 839,090 | 715,530 | 752,471 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
10,202,533 | 10,214,435 | 11,860,812 | 11,858,848 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Financial liabilities: |
||||||||||||||||||||||||
| Financing |
|
Measured at fair value through profit or loss |
|
16.a | 1,666,092 | 1,666,092 | 1,567,374 | 1,567,374 | ||||||||||||||||
| Financing |
Measured at amortized cost | 16.a | 6,008,415 | 7,268,742 | 6,889,310 | 6,840,079 | ||||||||||||||||||
| Debentures |
Measured at amortized cost | 16.a | 5,657,339 | 5,603,669 | 5,826,242 | 5,770,979 | ||||||||||||||||||
| Debentures |
|
Measured at fair value through profit or loss |
|
16.a | 1,030,892 | 1,030,891 | 833,213 | 833,213 | ||||||||||||||||
| Leases payable |
Measured at amortized cost | 13 | 1,588,673 | 1,588,673 | 46,066 | 46,066 | ||||||||||||||||||
| Commodities, currency and interest rate hedging instruments |
|
Measured at fair value through profit or loss |
|
16 | 29,985 | 29,985 | 43,944 | 43,944 | ||||||||||||||||
| Trade payables |
Measured at amortized cost | 17 | 2,700,071 | 2,678,808 | 2,731,677 | 2,710,352 | ||||||||||||||||||
| Subscription warrants – indemnification |
|
Measured at fair value through profit or loss |
|
25 | 130,657 | 130,657 | 123,095 | 123,095 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Total |
18,812,123 | 19,997,517 | 18,060,921 | 17,935,102 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The fair value of financial instruments, including currency and interest hedging instruments, was determined as follows:
| • | The fair value of cash and bank deposit balances are identical to their carrying values. |
| • | Financial investments in investment funds are valued at the value of the fund unit as of the date of the financial statements, which corresponds to their fair value. |
| • | Financial investments in CDBs (Bank Certificates of Deposit) and similar investments offer daily liquidity through repurchase at the “yield curve” and the Company calculates their fair value through methodologies commonly used for mark to the market. |
| • | The fair value of trade receivables and trade payables are approximate to their carrying values. |
| • | The subscription warrants –indemnification were measured based on the share price of Ultrapar (UGPA3) at the financial statements date and are adjusted to the Company’s dividend yield, since the exercise is only possible starting in 2020 onwards and they are not entitled to dividends until then. The number of shares of subscription warrants – indemnification is also adjusted according to the changes in the amounts of provision for tax, civil, and labor risks and contingent liabilities related to the period prior to January 31, 2014. (See Note 25). |
| • | The fair value calculation of notes in the foreign market (see Note 16.b) is based on the quoted price in an active market. |
The fair value of other financial investments, financing and leases payable was determined using calculation methodologies commonly used for mark-to-market reporting, which consist of calculating future cash flows associated with each instrument adopted and adjusting them to present value at the market rates as of the date of the financial statements. For some cases where there is no active market for the financial instrument, the Company and its subsidiaries can use quotes provided by the transaction counterparties.
The interpretation of market information on the choice of calculation methodologies for the fair value requires considerable judgment and estimates to obtain a value deemed appropriate to each situation. Consequently, the estimates presented do not necessary indicate the amounts that may be realizable in the current market.
Financial instruments were classified as financial assets or liabilities measured at amortized cost, except (i) all exchange rate and interest rate hedging instruments, which are measured at fair value through profit or loss, financial investments classified as measured at fair value through profit or loss and financial investments that are classified as measured at fair value through other comprehensive income (see Note 4.b), (ii) loans and financing measured at fair value through profit or loss (see Note 16.a), (iii) guarantees to customers that have vendor arrangements (see Note 16.i), which are measured at fair value through profit or loss, and (iv) subscription warrants – indemnification, which are measured at fair value through profit or loss (see Note 25). Cash, banks, trade receivables and reseller financing are classified as measured at amortized cost. Trade payables, leases payable and other payables are classified as financial liabilities measured at amortized cost.
| j.1 | Fair Value Hierarchy of Financial Instruments |
The financial instruments are classified in the following categories:
| (a) | Level 1—prices negotiated (without adjustment) in active markets for identical assets or liabilities; |
| (b) | Level 2—inputs other than prices negotiated in active markets included in Level 1 and observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). |
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
The table below shows the categories of the financial assets and financial liabilities:
| Category | Note | 12/31/2019 | Level 1 | Level 2 | ||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash equivalents |
||||||||||||||||||||
| Cash and banks |
Measured at amortized cost | 4.a | 284,992 | 284,992 | — | |||||||||||||||
| Financial investments in local currency |
|
Measured at fair value through other comprehensive income |
|
4.a | 1,780,939 | — | 1,780,939 | |||||||||||||
| Financial investments in foreign currency |
|
Measured at fair value through profit or loss |
|
4.a | 49,448 | 49,448 | — | |||||||||||||
| Financial investments: |
||||||||||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through profit or loss |
|
4.b | 1,937,967 | 1,937,967 | — | |||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 595,816 | — | 595,816 | |||||||||||||
| Fixed-income securities and funds in local currency |
Measured at amortized cost | 4.b | 76,904 | — | 76,904 | |||||||||||||||
| Fixed-income securities and funds in foreign currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 303,417 | 18,985 | 284,432 | |||||||||||||
| Currency and interest rate hedging instruments |
|
Measured at fair value through profit or loss |
|
4.b | 682,615 | — | 682,615 | |||||||||||||
| Trade Receivables |
Measured at amortized cost | 5.a | 3,663,247 | — | 3,663,247 | |||||||||||||||
| Reseller Financing |
Measured at amortized cost | 5.b | 839,090 | — | 839,090 | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total |
10,214,435 | 2,291,392 | 7,923,043 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Financing |
|
Measured at fair value through profit or loss |
|
16 | 1,666,092 | — | 1,666,092 | |||||||||||||
| Financing |
Measured at amortized cost | 16 | 7,268,742 | 4,587,932 | 2,680,810 | |||||||||||||||
| Debentures |
Measured at amortized cost | 16 | 5,603,669 | — | 5,603,669 | |||||||||||||||
| Debentures |
|
Measured at fair value through profit or loss |
|
16 | 1,030,891 | — | 1,030,891 | |||||||||||||
| Leases payable |
Measured at amortized cost | 13 | 1,588,673 | — | 1,588,673 | |||||||||||||||
| Currency and interest rate hedging instruments |
|
Measured at fair value through profit or loss |
|
16 | 29,985 | — | 29,985 | |||||||||||||
| Trade payables |
Measured at amortized cost | 17 | 2,678,808 | — | 2,678,808 | |||||||||||||||
| Subscription warrants – indemnification (1) |
|
Measured at fair value through profit or loss |
|
25 | 130,657 | — | 130,657 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total |
19,997,517 | 4,587,932 | 15,409,585 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
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Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| Category | Note | 12/31/2019 | Level 1 | Level 2 | ||||||||||||||||
| Financial assets: |
||||||||||||||||||||
| Cash equivalents |
||||||||||||||||||||
| Cash and banks |
Measured at amortized cost | 4.a | 205,482 | 205,482 | — | |||||||||||||||
| Financial investments in local currency |
|
Measured at fair value through other comprehensive income |
|
4.a | 3,722,308 | — | 3,722,308 | |||||||||||||
| Financial investments in foreign currency |
|
Measured at fair value through profit or loss |
|
4.a | 11,161 | 11,161 | — | |||||||||||||
| Financial investments: |
||||||||||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through profit or loss |
|
4.b | 2,462,018 | 2,462,018 | — | |||||||||||||
| Fixed-income securities and funds in local currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 2,208 | — | 2,208 | |||||||||||||
| Fixed-income securities and funds in local currency |
Measured at amortized cost | 4.b | 73,089 | — | 73,089 | |||||||||||||||
| Fixed-income securities and funds in foreign currency |
|
Measured at fair value through other comprehensive income |
|
4.b | 154,811 | 1,666 | 153,145 | |||||||||||||
| Currency and interest rate hedging instruments |
|
Measured at fair value through profit or loss |
|
4.b | 363,329 | — | 363,329 | |||||||||||||
| Trade Receivables |
Measured at amortized cost | 5.a | 4,111,971 | — | 4,111,971 | |||||||||||||||
| Reseller Financing |
Measured at amortized cost | 5.b | 752,471 | — | 752,471 | |||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total |
11,858,848 | 2,680,327 | 9,178,521 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Financial liabilities: |
||||||||||||||||||||
| Financing |
|
Measured at fair value through profit or loss |
|
16.a | 1,567,374 | — | 1,567,374 | |||||||||||||
| Financing |
Measured at amortized cost | 16.a | 6,840,079 | 2,841,436 | 3,998,643 | |||||||||||||||
| Debentures |
Measured at amortized cost | 16.a | 5,770,979 | — | 5,770,979 | |||||||||||||||
| Debentures |
|
Measured at fair value through profit or loss |
|
16.a | 833,213 | — | 833,213 | |||||||||||||
| Leases payable |
Measured at amortized cost | 13 | 46,066 | — | 46,066 | |||||||||||||||
| Currency and interest rate hedging instruments |
|
Measured at fair value through profit or loss |
|
16.a | 43,944 | — | 43,944 | |||||||||||||
| Trade payables |
Measured at amortized cost | 17 | 2,710,352 | — | 2,710,352 | |||||||||||||||
| Subscription warrants – indemnification (1) |
|
Measured at fair value through profit or loss |
|
25 | 123,095 | — | 123,095 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| Total |
15,935,102 | 2,841,436 | 15,093,666 | |||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Refers to subscription warrants issued by the Company in the Extrafarma acquisition. |
The fair value of trade receivables and trade payables are classified as level 2.
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Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| k. | Sensitivity Analysis of Derivative Financial Instruments |
The Company and its subsidiaries use derivative financial instruments only to hedge against identified risks and in amounts consistent with the risk (limited to 100% of the identified risk). Thus, for purposes of sensitivity analysis of market risks associated with financial instruments, as required by CVM Instruction 475/08, the Company analyzes the hedging instrument and the hedged item together, as shown on the charts below.
For the sensitivity analysis of foreign exchange hedging instruments as of December 31, 2019 and December 31, 2018, management adopted as a likely scenario the Real/U.S. dollar exchange rates at maturity of each swap, projected by U.S dollar futures contracts quoted on B3. As a reference, the exchange rate for the last maturity of foreign exchange hedging instruments is R$ 5.76 (R$ 5.86 as of December 31, 2018) in the likely scenario. Scenarios II and III were estimated with a 25% and 50% additional appreciation or depreciation of the Brazilian Real against the likely scenario, according to the risk to which the hedged item is exposed.
Based on the balances of the hedging instruments and hedged items as of December 31, 2019 and December 31, 2018, the exchange rates were replaced, and the changes between the new balance in Brazilian Reais and the original balance in Brazilian Reais were calculated in each of the three scenarios. The table below shows the change in the values of the main derivative instruments and their hedged items, considering the changes in the exchange rate in the different scenarios:
| 12/31/2019 |
Risk | Scenario I Likely | Scenario II | Scenario III | ||||||||||||
| Currency swaps receivable in U.S. dollars |
||||||||||||||||
| (1) U.S. Dollar / Real swaps (2) Debts/firm commitments in dollars |
|
Dollar appreciation |
|
|
700,499 (700,465 |
) |
|
1,668,202 (1,668,031 |
) |
|
2,635,905 (2,635,596 |
) | ||||
|
|
|
|
|
|
|
|||||||||||
| (1)+(2) |
Net effect | 34 | 172 | 309 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Currency swaps payable in U.S. dollars |
||||||||||||||||
| (3) Real / U.S. Dollar swaps (4) Gross margin of Oxiteno |
|
Dollar devaluation |
|
|
376 (376 |
) |
|
62,559 (62,559 |
) |
|
124,742 (124,742 |
) | ||||
|
|
|
|
|
|
|
|||||||||||
| (3)+(4) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Options |
||||||||||||||||
| (5) Options Real / U.S. Dollar swaps (6) Gross margin of Oxiteno |
|
Dollar devaluation |
|
|
— — |
|
|
42,101 (42,101 |
) |
|
102,917 (102,917 |
) | ||||
|
|
|
|
|
|
|
|||||||||||
| (5)+(6) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
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Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| 12/31/2018 |
Risk | Scenario I Likely | Scenario II | Scenario III | ||||||||||||
| Currency swaps receivable in U.S. dollars |
||||||||||||||||
| (1) U.S. Dollar / Real swaps (2) Debts/firm commitments in dollars |
|
Dollar appreciation |
|
372,022 | 1,039,669 | 1,707,316 | ||||||||||
| (372,019 | ) | (1,039,661 | ) | (1,707,303 | ) | |||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1)+(2) |
Net effect | 3 | 8 | 13 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Currency swaps payable in U.S. dollars |
||||||||||||||||
| (3) Real / U.S. Dollar swaps (4) Gross margin of Oxiteno |
|
Dollar devaluation |
|
(65 | ) | 8,545 | 17,154 | |||||||||
| 65 | (8,545 | ) | (17,154 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| (3)+(4) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Options |
||||||||||||||||
| (5) Options Real / U.S. Dollar swaps (6) Gross margin of Oxiteno |
|
Dollar devaluation |
|
— | 97,938 | 244,572 | ||||||||||
| — | (97,938 | ) | (244,572 | ) | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| (5)+(6) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
For sensitivity analysis of hedging instruments for interest rates in Brazilian Reais as of December 31, 2019 and 2018, the Company used the futures curve of the DI x Pre contract quoted on B3 as of December 31, 2019 for each of the swap and debt (hedged item) maturities, to determine the likely scenarios. Scenarios II and III were estimated based on a 25% and 50% deterioration, respectively, of the likely scenario pre-fixed interest rate.
Based on the three scenarios of interest rates in Brazilian Reais, the Company estimated the values of its debt and hedging instruments according to the risk which is being hedged (variations in the pre-fixed interest rates in Brazilian Reais), by projecting them to future value at the contracted rates and bringing them to present value at the interest rates of the estimated scenarios. The results are shown in the table below:
| 12/31/2019 |
Risk | Scenario I Likely |
Scenario II |
Scenario III |
||||||||||||
| Interest rate swap (in Brazilian Reais) – Debentures—CRA |
||||||||||||||||
| (1) Fixed rate swap—DI (2) Fixed rate debt |
|
Decrease in Pre-fixed rate |
|
(195,123 | ) | (137,260 | ) | (74,027 | ) | |||||||
| 195,123 | 137,260 | 74,027 | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) + (2) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| 12/31/2018 |
Risk | Scenario I Likely |
Scenario II |
Scenario III |
||||||||||||
| Interest rate swap (in Brazilian Reais) – Debentures—CRA |
||||||||||||||||
| (1) Fixed rate swap—DI (2) Fixed rate debt |
|
Decrease in Pre-fixed rate |
|
(311,993 | ) | (254,409 | ) | (188,047 | ) | |||||||
| 311,993 | 254,409 | 188,047 | ||||||||||||||
|
|
|
|
|
|
|
|||||||||||
| (1) + (2) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
102
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
For the sensitivity analysis of the commodity price swings hedging instruments on December 31, 2019, the Company used the futures heating oil and gasoline (RBOB) contracts quoted on NYMEX. Scenarios II and III were estimated based on 25% and 50% deterioration, respectively, of the likely scenario commodity price.
Based on the balances of the hedging instruments and the objects hedged on December 31, 2019, prices were substituted and the variations between the new balance in Reais and the balance in Reais in the report date were calculated in each of the three scenarios. The table below shows the variation of the amounts of the derivative instruments and their objects of hedge, considering the variations in commodity prices in the different scenarios:
| 12/31/2019 |
Risk | Scenario I Likely |
Scenario II | Scenario III | ||||||||||||
| NDF Commodities |
||||||||||||||||
| (1) NDF of Commodities (2) Gross margin from Ipiranga |
|
Decrease in Commodities Price |
|
|
100,542 (100,542 |
) |
|
1,490,893 (1,490,893 |
) |
|
2,881,245 (2,881,245 |
) | ||||
|
|
|
|
|
|
|
|||||||||||
| (1)+(2) |
Net effect | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| 35. | Commitments (Consolidated) |
| a. | Contracts |
a.1 Subsidiary Tequimar has agreements with CODEBA and Complexo Industrial Portuário Governador Eraldo Gueiros, in connection with its port facilities in Aratu and Suape, respectively. Such agreements establish a minimum cargo movement of products, as shown below:
| Port |
Minimum movement in tons per year |
Maturity | ||||||
| Aratu |
397,000 | 2031 | ||||||
| Aratu |
900,000 | 2022 | ||||||
| Suape |
250,000 | 2027 | ||||||
| Suape |
400,000 | 2029 | ||||||
If the annual movement is less than the minimum contractual movement, the subsidiary is liable to pay the difference between the effective movement and the minimum contractual movement, based on the port tariff rates in effect on the date established for payment. As of December 31, 2019, these rates were R$ 8.37 per ton for Aratu and R$ 2.54 per ton for Suape. The subsidiary has met the minimum cargo movement required since the beginning of the contractual agreements.
a.2 Subsidiary Oxiteno S.A. has a supply agreements with Braskem S.A. which establishes and regulates the conditions for the supply of ethylene to Oxiteno based on the international market for this product.. These contracts establish a minimum commitment to according to the table below:
| Plant |
Minimum purchase (tons) per year |
Maturity | ||||||
| Camaçari |
205,000 | 2021 | ||||||
| Mauá |
44,100 | 2023 | ||||||
Should the minimum purchase commitment not be met, the subsidiary would be liable for a fine based on the current ethylene price for the quantity not purchased. According to contractual conditions and tolerances, there are no material issues regarding the minimum purchase commitment.
103
Table of Contents
Ultrapar Participações S.A. and Subsidiaries
Notes to the Parent and Consolidated Financial Statements
(In thousands of Brazilian Reais, unless otherwise stated)
| b. | Insurance Coverage |
The Company maintains insurance policies with the objective of covering several risks to which it is exposed, including loss of profits, losses and damage from fire, lightning, explosion of any kind, gale, aircraft crash, electric damage, and other risks, covering the industrial plants and distribution bases and branches of all subsidiaries. The maximum compensation values based on the risk analysis of certain locations are shown below:
| Maximum compensation value (*) | ||||||||
| Oxiteno |
US$ | 1,142 | (equivalent to R$ | 4,603 millions as of 12/31/2019) | (*) | |||
| Ipiranga |
R$ | 1,025 | ||||||
| Ultracargo |
R$ | 949 | ||||||
| Ultragaz |
R$ | 266 | ||||||
| Extrafarma |
R$ | 160 | ||||||
| (*) | In millions. In accordance with policy conditions. |
The General Liability Insurance program covers the Company and its subsidiaries with a maximum aggregate coverage of US$ 400 million (equivalent to R$ 1,612 million as of December 31, 2019), against losses caused to third parties as a result of accidents related to commercial and industrial operations and/or distribution and sale of products and services.
The Company maintains liability insurance policies for directors and executive officers to indemnify the members of the Board of Directors (D&O), fiscal council, directors and executive officers of Ultrapar and its subsidiaries (“Insured”) in the total amount of US$ 80 million (equivalent to R$ 322 million as of December 31, 2019), which cover any of the Insured liabilities resulting from wrongful acts, including any act or omission committed or attempted, except if the act, omission or the claim is consequence of gross negligence or willful misconduct.
In addition, group life and personal accident, health and national and international transportation and other insurance policies are also maintained.
The coverage and limit of the insurance policies are based on a careful study of risks and losses conducted by independent insurance advisors. The type of insurance is considered by management to be sufficient to cover potential losses based on the nature of the business conducted by the companies.
| c. | Port concessions |
On March 22, 2019, Ultrapar, through its subsidiary IPP, won the port concessions of three areas with minimum storage capacity of 64 thousand m³ located at the port of Cabedelo, in the state of Paraíba, and one area with minimum storage capacity of 66 thousand m³ at the port of Vitória, in the state of Espírito Santo, which will be designated for handling, storage and distribution of fuels. These concessions were carried out by two consortiums of which IPP holds one third of the total participation. For the port of Cabedelo, the companies Nordeste Logística I, Nordeste Logística II and Nordeste Logística III were constituted, together with Raízen Combustível S.A. and Petrobrás Distribuidora S.A. For the port of Vitória, Navegantes was constituted, together with Raízen Combustível S.A. and Petrobrás Distribuidora S.A. The total investments regarding IPP’s stake sums up to R$160 million for a concession term of 25 years.
On April 5, 2019, Company, through its subsidiary IPP and Tequimar, also won three concessions. IPP won two concessions in the port of Miramar, in Belém, state of Pará: (i) area BEL02A, through a consortium 50% owned by IPP, that shall have minimum storage capacity of 41 thousand m³, and (ii) area BEL04A, which is currently operated by IPP with minimum storage capacity of 23 thousand m³. Such areas will be operated for at least 15 years, according to the auction notice. For the area BEL02, Latitude was constituted, together with Petróleo Sabbá S.A.. Tequimar won the concession of area VDC12 in the port of Vila do Conde, in Barcarena, state of Pará. The minimum storage capacity will be 59 thousand m³. The area will be operated by Tequimar for at least 25 years, according to the auction notice. For the area VDC12, Tequimar Vila do Conde Logística Portuária S.A. was constituted (see Note 3.b). The estimated investments regarding the participation of IPP and Tequimar sums up to R$ 450 million, approximately, to be disbursed throughout the next five years including the auction grants and the minimum investment required for these areas.
| 36. | Subsequent Events |
In February 19, 2020, the Company’s Board of Directors confirmed the issuance of 2,108,542 common shares within the authorized capital limit provided by the art. 6 of the Bylaws, due to the partial exercise of the rights conferred by the subscription warrants (see note 25) issued by the Company when the merger of all Extrafarma shares by the Company, approved by the extraordinary general meeting of the Company held in January 31, 2014. The share capital of the Company will therefore be represented by 1,114,918,734 common shares, all of which are registered and with no par value.
104
Table of Contents
ANNUAL REPORT OF THE AUDIT AND RISK COMMITTEE
THE COMMITTEE’S DUTIES
The Ultrapar Audit and Risk Committee is a permanent statutory advisory body directly linked to the Board of Directors, with operational independence and own budget, and subject to applicable laws and regulations, in particular the Regulation of the Novo Mercado segment of B3 S.A. - Brasil, Bolsa, Balcão, the Company’s Bylaws and its Internal Regulations.
According to the Bylaws, the Committee aims to assist the Board of Directors in overseeing (1) the integrity and quality of the Company’s financial statements, (2) the Company’s compliance with the legal and regulatory requirements, (3) the qualifications and independence of the independent auditor, (4) the performance of the functions of the Company’s internal audit and independent auditors, and (5) the Company’s risk management.
The Ultrapar Audit and Risks Committee currently has three independent members of the Board of Directors and one independent external member, who is the Committee Coordinator.
The Committee provides its opinion on the hiring and dismissal of independent auditors and advises the Board of Directors in the supervision of its activities, qualifications and independence, evaluating and previously approving the provision of services permitted by law that are not related to the audit. KPMG Auditores Independentes is the company currently responsible for the annual audit of the financial statements, their quarterly reviews and the evaluation of the structure of internal controls applicable to the preparation of the financial statements in order to comply with the rules of the Brazilian Securities Commission (CVM - Comissão de Valores Imobiliários) and B3 – Brasil, Bolsa, Balcão, in Brazil, and the SEC - Security Exchange Commission and NYSE - New York Stock Exchange, in the United States of America, including in relation to compliance with the requirements of the Sarbanes-Oxley Act. The Committee is responsible for reviewing, together with the independent auditors, the quality and integrity of the financial statements, and reporting the relevant issues to the Board of Directors.
The Committee is responsible for following-up the activities of the Risk, Compliance and Audit Executive Board, evaluating its structure, procedures and effectiveness of the internal audit. The Committee shall review, together with the Board of Directors, its performance and any recommendations for improving the Company’s procedures.
In addition, the Audit and Risk Committee analyzes and monitors the risk exposures identified by the Company’s Executive Board, under the provisions of the Corporate Risk Management Policy, commenting on any revision of said policy, advising the Board of Directors in the definition of acceptable risk levels and assessing the quality and effectiveness of risk management procedures.
The Committee shall also ensure that the Company has specific means for receiving and confidentially handling information and complaints about non-compliance with legal provisions, code of conduct and other internal regulations applied to the Company, its employees and other stakeholders.
Quarterly, on an ordinary basis and extraordinarily whenever necessary, the Audit and Risk Committee attends a joint meeting with the Board of Directors, and reports the progress of their works. This activity report is prepared annually and sent to the Board of Directors and disclosed by the Company to the market. At each term of office, the Committee self-assesses its performance, and the findings are presented and discussed with the Board of Directors.
Since its establishment in May 2019, the Audit and Risk Committee has met ten times. During this period, the Committee was granted free access to all of the Company’s governance bodies, as well as to all of its officers, and, whenever necessary, the representatives of KPMG Auditores Independentes were requested to attend their meetings.
THE COMMITTEE’S ACTIVITIES
Governance
| • | Investiture of members elected by the Board of Directors into their respective offices |
| • | Preparation and submission of the Internal Regulations of the Audit and Risks Committee to the Board of Directors for approval |
| • | Election of the Chief Risk, Compliance and Audit Officer as Secretary of the Committee |
| • | Development of the Committee’s thematic calendar of activities |
| • | Discussion and approval of the Committee’s annual budget |
| • | Analysis of changes in the Reference Form sent to the CVM |
| • | Preparation and presentation of quarterly activity reports to the Board of Directors, including recommendations for approving interim financial statements |
| • | Preparation, submission and discussion of this Annual Report of the Audit and Risks Committee with the Board of Directors |
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Independent Auditors
| • | Verification of the qualification and independence of the independent auditor |
| • | Analysis of the annual work planning of the independent auditors |
| • | Discussion and recommendation on the fees of independent auditors |
| • | Joint work meetings and private sessions with independent auditors |
Internal Controls and Financial Statements
| • | Monitoring the environment of internal controls for the preparation of financial statements, together with external and internal audits |
| • | Analysis of the letter on internal controls issued by KPMG Auditores Independentes with recommendations for improvements and discussion with management about the action plans to address the identified issues |
| • | Periodic and specific monitoring of IT action plans for the implementation of new access management controls and interventions in systems and databases |
| • | Assessment of the adequacy of accounting practices and estimates used in the preparation of the Company’s financial statements |
| • | Analysis and discussion of the tax, civil and labor litigation of the Company and its subsidiaries |
| • | Review and discussion of the assumptions used by the Company’s management in the preparation of financial projections to identify the need for asset impairment and tax recovery |
| • | Analysis of the corporate and tax effects resulting from the merger of Oxiteno Nordeste by Oxiteno S.A. |
| • | Quarterly reviews of the interim financial statements together with the Company’s management and independent auditors |
| • | Review of the audited annual financial statements, management report and independent auditors’ report, with the presence of representatives of the Company and KPMG Auditores Independentes for the presentation and discussion of comments and analyses on the main audit matters and other issues that are relevant for the quality and integrity of said financial statements |
Internal Audit
| • | Evaluation of the organizational structure and annual budget of the Risk, Compliance and Audit Executive Board |
| • | Follow-up of the results of the internal audit work carried out in the period and any action plans in order to forward the recommendations presented |
| • | Follow-up of specific audits on transactions with related parties |
| • | Evaluation of the annual internal audit work plan for 2020 |
Integrated Risk Management
| • | Analysis of the Corporate Risk Management Policy |
| • | Review and referral of the new General Risk System (Matriz Sistêmica de Riscos) for approval by the Board of Directors |
| • | Analysis of the update of the Impact and Vulnerability of the General Risk System of businesses and Ultrapar, after approval of the new General Risk System |
| • | Meeting with the Coordinator of the Financial Risk Committee |
| • | Review of the Corporate Financial Risk Management Policy and its subsequent forwarding to the Board of Directors for approval |
Compliance
| • | Follow-up of the number, distribution and types of complaints received by the Ultra Complaint Channel (Canal Aberto Ultra) |
| • | Analysis and discussion on the results of investigations of complaints and measures taken to address the identified issues |
| • | Follow-up of the Company’s Compliance Program |
| • | Analysis of the Company’s compliance plan with the General Data Protection Law |
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CONCLUSION OF THE REPORT
Considering the responsibilities of the Audit and Risks Committee, described in the Company’s Bylaws and in the Committee’s Internal Regulations, with the natural restrictions of the scope of its performance in the activities that are carried out, the Committee provides its opinion below:
| • | The coverage and quality of the internal audit work carried out with adequate independence are satisfactory; |
| • | The internal control environment, the compliance policies and the integrated risk management are consistent with the size and complexity of the Company; |
| • | The information provided by management and the independent auditors was sufficient for the recommendations of this Committee. There has been no divergence between the teams and auditors carried out their work independently. |
Based on the work and analyses carried out and the unqualified report of KPMG Auditores Independentes, the Audit and Risk Committee recommends the Board of Directors approves the Financial Statements of Ultrapar S.A. for the year ended as of December 31, 2019.
São Paulo, February 19, 2020
Flavio Cesar Maia Luz
Coordinator, Audit and Risk Committee
Ana Paula Vitali Janes Vescovi
Member of the Audit and Risks Committee
Joaquim Pedro Monteiro de Carvalho Collor de Mello
Member of the Audit and Risks Committee
José Maurĺcio Pereira Coelho
Member of the Audit and Risks Committee
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 16, 2020
| ULTRAPAR HOLDINGS INC. | ||
| By: | /s/ Andre Pires de Oliveira Dias | |
| Name: Andre Pires de Oliveira Dias Title: Chief Financial and Investor Relations Officer | ||
(Shareholders’ Meeting Manual, Remote voting form – Annual General Shareholders’ Meeting and Remote voting form – Extraordinary Shareholders’ Meeting)