6-K 1 d576829d6k.htm 6-K 6-K
Table of Contents

Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report Of Foreign Private Issuer

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

The Securities Exchange Act Of 1934

For the month of August, 2018

Commission File Number: 001-14950

ULTRAPAR HOLDINGS INC.

(Translation of Registrant’s Name into English)

 

 

Avenida Brigadeiro Luis Antonio, 1343, 9º Andar

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        

 


Table of Contents

ULTRAPAR HOLDINGS INC.

TABLE OF CONTENTS

 

ITEM

    
1.   

Individual and Consolidated Interim Financial Information for the Three-Month Period Ended June 30, 2018 Report on Review of Interim Financial Information

2.   

2Q18 Earnings release

3.   

Board of Directors Minutes

4.   

Notice to shareholders

 


Table of Contents

(Convenience Translation into English from

the Original Previously Issued in Portuguese)

Ultrapar Participações S.A.

Individual and Consolidated

Interim Financial Information

for the Six-Month Period

Ended June 30, 2018 and

Report on Review of Interim

Financial Information

KPMG Auditores Independentes

 

 

1


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Individual and Consolidated

Interim Financial Information

for the Six-Month Period Ended June 30, 2018

 

Table of Contents

 

Report on the Review of Quarterly Information

     3  

Balance Sheets

     4 –5  

Income Statements

     6 – 7  

Statements of Comprehensive Income

     8 – 9  

Statements of Changes in Shareholders’ Equity

     10 –11  

Statements of Cash Flows—Indirect Method

     12 – 13  

Statements of Value Added

     14  

Notes to the Interim Financial Information

     15 –109  

 

 

2


Table of Contents

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

Report on the review of quarterly information—ITR

To the Shareholders, Directors and Management of

Ultrapar Participações S.A.

São Paulo, SP

Introduction

We have reviewed the accompanying individual and consolidated interim financial information of Ultrapar Participações S.A. (“Company”), comprised in the Quarterly Financial Information—ITR Form for the quarter ended June 30, 2018, which comprise the balance sheet as of June 30, 2018 and related statements of income, comprehensive income for the three and six-month period then ended and changes in shareholders’ equity and cash flows for the six-month period then ended, including the explanatory notes.

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

Scope of the review

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

Conclusion on the interim financial information

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

Other matters

Interim statements of value added

The individual and consolidated statements of value added for the six-month period ended June 30, 2018, prepared under the responsibility of the Company’s management, and presented as supplementary information for the purposes of IAS 34, were submitted to the same review procedures followed together with the review of the Company’s interim financial information. In order to form our conclusion, we evaluated whether these statements are reconciled to the interim financial information and to the accounting records, as applicable, and whether their form and content are in accordance with the criteria set on Technical Pronouncement CPC 09—Statement of Value Added. Based on our review, nothing has come to our attention that causes us to believe that the accompanying statements of value added are not prepared, in all material respects, in accordance with the individual and consolidated interim financial information taken as a whole.

São Paulo, August 1st, 2018

KPMG Auditores Independentes

CRC 2SP014428/O-6

Original report in Portuguese signed by

Wagner Bottino

Accountant CRC 1SP196907/O-7

 

 

3


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Balance Sheets

as of June 30, 2018 and December 31, 2017

(In thousands of Brazilian Reais)

 

 

 

 

            Parent      Consolidated  

Assets

   Note      06/30/2018      12/31/2017      06/30/2018      12/31/2017  
                   Restated             Restated  

Current assets

              

Cash and cash equivalents

     4        474,503        93,174        3,940,363        5,002,004  

Financial investments and hedging instruments

     4        579,491        21,657        2,029,689        1,283,498  

Trade receivables and reseller financing, net

     5        —          —          4,403,577        4,147,894  

Inventories, net

     6        —          —          3,076,539        3,513,577  

Recoverable taxes, net

     7        39,982        33,070        965,672        881,584  

Dividends receivable

        5,842        27,930        5,842        11,137  

Other receivables

        3,087        2,404        113,233        44,025  

Prepaid expenses, net

     10        1,603        1,597        155,192        150,046  

Contractual assets with customers – exclusive rights, net

     11        —          —          471,084        456,213  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

        1,104,508        179,832        15,161,191        15,489,978  

Non-current assets

              

Financial investments and hedging instruments

     4        —          —          149,215        84,426  

Trade receivables and reseller financing, net

     5        —          —          350,820        329,991  

Related parties

     8.a        761,454        762,562        490        490  

Deferred income and social contribution taxes

     9.a        5,181        29,158        727,949        614,061  

Recoverable taxes, net

     7        48,685        48,685        403,712        313,242  

Escrow deposits

     21.a        —          148        839,255        822,660  

Indemnity asset – business combination

     21.c        —          —          202,415        202,352  

Other receivables

        —          —          2,119        7,918  

Prepaid expenses, net

     10        35        —          372,421        346,886  

Contractual assets with customers – exclusive rights, net

     11        —          —          1,012,215        1,046,147  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total long term assets

        815,355        840,553        4,060,611        3,768,173  

Investments

              

In subsidiaries

     12.a        8,923,689        9,268,261        —          —    

In joint-ventures

     12.a; 12.b        25,589        54,739        101,987        122,061  

In associates

     12.c        —          —          24,116        25,341  

Other

        —          —          2,793        2,792  

Property, plant, and equipment, net

     13        —          —          7,062,571        6,634,528  

Intangible assets, net

     14        246,163        246,163        2,259,649        2,162,638  
     

 

 

    

 

 

    

 

 

    

 

 

 
        9,195,441        9,569,163        9,451,116        8,947,360  

Total non-current assets

        10,010,796        10,409,716        13,511,727        12,715,533  
     

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

        11,115,304        10,589,548        28,672,918        28,205,511  
     

 

 

    

 

 

    

 

 

    

 

 

 

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

 

4


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Balance Sheets

as of June 30, 2018 and December 31, 2017

(In thousands of Brazilian Reais)

 

 

 

 

 

            Parent     Consolidated  

Liabilities

   Note      06/30/2018     12/31/2017     06/30/2018     12/31/2017  
                  Restated           Restated  

Current liabilities

           

Loans and hedging instruments

     15        —         —         3,013,326       1,819,766  

Debentures

     15.g        34,325       817,654       1,112,508       1,681,199  

Finance leases

     15.i        —         —         2,781       2,710  

Trade payables

     16        85       461       1,650,995       2,155,498  

Salaries and related charges

     17        235       244       344,007       388,118  

Taxes payable

     18        758       343       257,435       221,529  

Dividends payable

     25.h        13,069       335,930       14,532       338,845  

Income and social contribution taxes payable

        —         —         31,192       86,836  

Post-employment benefits

     19.b        —         —         30,059       30,059  

Provision for asset retirement obligation

     20        —         —         4,416       4,799  

Provision for tax, civil, and labor risks

     21.a        —         —         60,889       64,550  

Trade payables – customers and third parties’ indemnification

     22        —         —         41,018       72,216  

Other payables

        6,210       7,439       111,130       125,150  

Deferred revenue

     23        —         —         17,750       18,413  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

        54,682       1,162,071       6,692,038       7,009,688  

Non-current liabilities

           

Loans and hedging instruments

     15        —         —         5,373,387       6,113,545  

Debentures

     15.g        1,722,427       —         5,498,156       3,927,569  

Finance leases

     15.i        —         —         44,576       45,805  

Related parties

     8.a        5,201       4,003       4,139       4,185  

Deferred income and social contribution taxes

     9.a        —         —         35,761       38,524  

Post-employment benefits

     19.b        —         —         218,334       207,464  

Provision for asset retirement obligation

     20        —         —         54,319       59,975  

Provision for tax, civil, and labor risks

     21.a; 21.c        982       982       871,335       861,246  

Deferred revenue

     23        —         —         12,704       12,896  

Subscription warrants – indemnification

     24        97,738       171,459       97,738       171,459  

Other payables

        —         —         202,722       162,834  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

        1,826,348       176,444       12,413,171       11,605,502  

Shareholders’ equity

           

Share capital

     25.a; 25.f        5,171,752       5,171,752       5,171,752       5,171,752  

Equity instrument granted

     25.b        2,180       536       2,180       536  

Capital reserve

     25.d        545,396       549,778       545,396       549,778  

Treasury shares

     25.c        (484,085     (482,260     (484,085     (482,260

Revaluation reserve on subsidiaries

     25.e        4,813       4,930       4,813       4,930  

Profit reserves

     25.f        3,629,851       3,629,851       3,629,851       3,629,851  

Retained earnings

        315,559       —         315,559       —    

Valuation adjustments

     25.g        (48,641     159,643       (48,641     159,643  

Cumulative translation adjustments

     25.g        97,449       53,061       97,449       53,061  

Additional dividends to the minimum mandatory dividends

     25.h        —         163,742       —         163,742  
     

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity attributable to:

           

Shareholders of the Company

        9,234,274       9,251,033       9,234,274       9,251,033  

Non-controlling interests in subsidiaries

        —         —         333,435       339,288  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

        9,234,274       9,251,033       9,567,709       9,590,321  
     

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

        11,115,304       10,589,548       28,672,918       28,205,511  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

5


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Income Statements

For the six-month period ended June 30, 2018 and 2017

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

 

 

 

            Parent     Consolidated  
     Note      01/01/2018
to 06/30/2018
    01/01/2017
to 06/30/2017
    01/01/2018
to 06/30/2018
    01/01/2017
to 06/30/2017
 
                  Restated           Restated  

Net revenue from sales and services

     26        —         —         43,396,707       37,540,770  

Cost of products and services sold

     27        —         —         (40,416,361     (34,523,784
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        —         —         2,980,346       3,016,986  

Operating income (expenses)

           

Selling and marketing

     27        —         —         (1,333,919     (1,212,318

General and administrative

     27        —         —         (770,129     (751,820

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

     28        —         —         (4,584     (150

Other operating income, net

     29        (255     —         (227,853     62,911  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        (255     —         643,861       1,115,609  

Financial income

     30        119,137       55,416       304,599       301,299  

Financial expenses

     30        (49,275     (76,367     (475,983     (535,319
     

 

 

   

 

 

   

 

 

   

 

 

 

Financial result, net

        69,862       (20,951     (171,384     (234,020

Share of profit of subsidiaries, joint ventures and associates

     12        270,159       602,920       (6,377     12,087  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

        339,766       581,969       466,100       893,676  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

           

Current

     9.b; 9c        (345     (2,187     (140,270     (308,416

Deferred

     9.b        (23,977     8,322       (12,310     6,050  
     

 

 

   

 

 

   

 

 

   

 

 

 
        (24,322     6,135       (152,580     (302,366

Net income for the period

        315,444       588,104       313,520       591,310  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

           

Shareholders of the Company

        315,444       588,104       315,444       588,104  

Non-controlling interests in subsidiaries

        —         —         (1,924     3,206  

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

           

Basic

     31        0.5819       1.0855       0.5819       1.0855  

Diluted

     31        0.5780       1.0777       0.5780       1.0777  

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

 

6


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Income Statements

For the three-month period ended June 30, 2018 and 2017

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

 

 

 

 

 

            Parent     Consolidated  
     Note      04/01/2018
to 06/30/2018
    04/01/2017
to 06/30/2017
    04/01/2018
to 06/30/2018
    04/01/2017
to 06/30/2017
 
                  Restated           Restated  

Net revenue from sales and services

     26        —         —         22,645,585       18,996,200  

Cost of products and services sold

     27        —         —         (21,186,536     (17,536,309
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        —         —         1,459,049       1,459,891  

Operating income (expenses)

           

Selling and marketing

     27        —         —         (662,472     (615,168

General and administrative

     27        —         —         (397,561     (389,242

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

     28        —         —         (2,354     6,203  

Other operating income, net

     29        (287     (1     34,870       6,576  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        (287     (1     431,532       468,260  

Financial income

     30        99,524       24,662       192,155       136,938  

Financial expenses

     30        (28,762     (39,402     (256,574     (249,783
     

 

 

   

 

 

   

 

 

   

 

 

 

Financial result, net

        70,762       (14,740     (64,419     (112,845

Share of profit of subsidiaries, joint ventures and associates

     12        195,669       246,239       (3,396     5,659  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

        266,144       231,498       363,717       361,074  
     

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

           

Current

     9.b; 9c        (256     (1,066     (18,207     (118,226

Deferred

     9.b        (24,299     5,110       (104,841     (6,244
     

 

 

   

 

 

   

 

 

   

 

 

 
        (24,555     4,044       (123,048     (124,470

Net income for the period

        241,589       235,542       240,669       236,604  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

           

Shareholders of the Company

        241,589       235,542       241,589       235,542  

Non-controlling interests in subsidiaries

        —         —         (920     1,062  

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

           

Basic

     31        0.4457       0.4347       0.4457       0.4347  

Diluted

     31        0.4427       0.4316       0.4427       0.4316  

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

 

7


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the six-month period ended June 30, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

 

 

 

            Parent     Consolidated  
     Note      01/01/2018
to 06/30/2018
    01/01/2017
to 06/30/2017
    01/01/2018
to 06/30/2018
    01/01/2017
to 06/30/2017
 
                  Restated           Restated  

Net income for the period attributable to shareholders of the Company

        315,444       588,104       315,444       588,104  

Net income for the period attributable to non-controlling interests in subsidiaries

        —         —         (1,924     3,206  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

        315,444       588,104       313,520       591,310  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that are subsequently reclassified to profit or loss:

           

Fair value adjustments of financial instruments of subsidiaries, net

     25.g        (210,532     (5,158     (210,532     (5,158

Fair value adjustments of financial instruments of joint ventures, net

     25.g        2,547       3,762       2,547       3,762  

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

     25.g        44,388       3,944       44,388       3,944  

Items that are not subsequently reclassified to profit or loss:

           

Losses of post-employment benefits of subsidiaries, net

     25.g        (299     (24     (299     (24
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        151,548       590,628       149,624       593,834  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        151,548       590,628       151,548       590,628  

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

        —         —         (1,924     3,206  

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

 

8


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Comprehensive Income

For the three-month period ended June 30, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

 

 

 

            Parent     Consolidated  
     Note      04/01/2018
to 06/30/2018
    04/01/2017
to 06/30/2017
    04/01/2018
to 06/30/2018
    04/01/2017
to 06/30/2017
 
                  Restated           Restated  

Net income for the period attributable to shareholders of the Company

        241,589       235,542       241,589       235,542  

Net income for the period attributable to non-controlling interests in subsidiaries

        —         —         (920     1,062  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period

        241,589       235,542       240,669       236,604  
     

 

 

   

 

 

   

 

 

   

 

 

 

Items that are subsequently reclassified to profit or loss:

           

Fair value adjustments of financial instruments of subsidiaries, net

     25.g        (198,560     (53,520     (198,560     (53,520

Fair value adjustments of financial instruments of joint ventures, net

     25.g        1,861       3,168       1,861       3,168  

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

     25.g        63,784       2,622       63,784       2,622  

Items that are not subsequently reclassified to profit or loss:

           

Losses of post-employment benefits of subsidiaries, net

     25.g        —         —         —         —    
     

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        108,674       187,812       107,754       188,874  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        108,674       187,812       108,674       187,812  

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

        —         —         (920     1,062  

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

 

 

9


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Shareholders’ Equity

For the six-month period ended June 30, 2018 and 2017

(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        3,130,935       159,643       53,061        —         163,742       9,381,261       339,571       9,720,832  

Effects of IFRS adoption

     2.y        —          —          —         —         —         —          (130,228     —         —          —         —         (130,228     (283     (130,511
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2017—Restated

        5,171,752        536        549,778       (482,260     4,930       629,144        3,000,707       159,643       53,061        —         163,742       9,251,033       339,288       9,590,321  

Net income for the period

        —          —          —         —         —         —          —         —         —          315,444       —         315,444       (1,924     313,520  

Other comprehensive income:

                                   

Fair value adjustments of available for sale, net of income taxes

     25.g        —          —          —         —         —         —          —         (207,985     —          —         —         (207,985     —         (207,985

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

     25.g        —          —          —         —         —         —          —         (299     —          —         —         (299     —         (299

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

     25.g        —          —          —         —         —         —          —         —         44,388        —         —         44,388       —         44,388  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          —         —         —         —          —         (208,284     44,388        315,444       —         151,548       (1,924     149,624  

Equity instrument granted

     25.b        —          1,644        —         —         —         —          —         —         —          —         —         1,644       —         1,644  

Stock plan

     8.c; 25.c        —          —          (4,382     (1,825     —         —          —         —         —          —         —         (6,207     —         (6,207

Realization of revaluation reserve of subsidiaries

     25.e        —          —          —         —         (117     —          —         —         —          117       —         —         —         —    

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

     25.e        —          —          —         —         —         —          —         —         —          (2     —         (2     —         (2

Additional dividends attributable to non-controlling interests

        —          —          —         —         —         —          —         —         —          —         —         —         (3,929     (3,929

Approval of additional dividends by the Shareholders’ Meeting

     25.h        —          —          —         —         —         —          —         —         —          —         (163,742     (163,742     —         (163,742
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2018

        5,171,752        2,180        545,396       (484,085     4,813       629,144        3,000,707       (48,641     97,449        315,559       —         9,234,274       333,435       9,567,709  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

10


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Changes in Shareholders’ Equity

For the six-month period ended June 30, 2018 and 2017

(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
    Retention
of profits
    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, 2016

        3,838,686        —          552,038        (483,879     5,339       550,428        2,582,898       1,333,066       (23,987     7,519        —         165,515       8,527,623       30,935       8,558,558  

Effects of IFRS adoption

     2.y        —          —          —          —         —         —          (82,427     —         —         —          —         —         (82,427     (81     (82,508
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of December 31, 2016—Restated

        3,838,686        —          552,038        (483,879     5,339       550,428        2,500,471       1,333,066       (23,987     7,519        —         165,515       8,445,196       30,854       8,476,050  

Net income for the period

        —          —          —          —         —         —          —         —         —         —          588,104       —         588,104       3,206       591,310  

Other comprehensive income:

                                      

Fair value adjustments of available for sale, net of income taxes

     25.g        —          —          —          —         —         —          —         —         (1,396     —          —         —         (1,396     —         (1,396

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

     25.g        —          —          —          —         —         —          —         —         (24     —          —         —         (24     —         (24

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

     25.g        —          —          —          —         —         —          —         —         —         3,944        —         —         3,944       —         3,944  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the period

        —          —          —          —         —         —          —         —         (1,420     3,944        588,104       —         590,628       3,206       593,834  

Capital increase with reserves

     25.f        1,333,066        —          —          —         —         —          —         (1,333,066     —         —          —         —         —         —         —    

Sale of treasury shares

     25.c        —          —          3,114        3,685       —         —          —         —         —         —          —         —         6,799       —         6,799  

Realization of revaluation reserve of subsidiaries

     25.e        —          —          —          —         (285     —          —         —         —         —          285       —         —         —         —    

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

     25.e        —          —          —          —         —         —          —         —         —         —          (75     —         (75     —         (75

Additional dividends attributable to non-controlling interests

        —          —          —          —         —         —          —         —         —         —          —         —         —         (7,479     (7,479

Approval of additional dividends by the Shareholders’ Meeting

     25.h        —          —          —          —         —         —          —         —         —         —          —         (165,515     (165,515     —         (165,515
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2017—Restated

        5,171,752        —          555,152        (480,194     5,054       550,428        2,500,471       —         (25,407     11,463        588,314       —         8,877,033       26,581       8,903,614  
     

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

 

11


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows—Indirect Method

For the six-month period ended June 30, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

 

 

 

            Parent     Consolidated  
     Note      06/30/2018     06/30/2017     06/30/2018     06/30/2017  
                  Restated           Restated  

Cash flows from operating activities

           

Net income for the period

        315,444       588,104       313,520       591,310  

Adjustments to reconcile net income to cash provided by operating activities

           

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

     12        (270,159     (602,920     6,377       (12,087

Amortization of contractual assets with customers – exclusive rights

     11        —         —         196,680       247,577  

Depreciation and amortization

     13;14        —         —         392,030       337,333  

PIS and COFINS credits on depreciation

     13;14        —         —         8,079       6,510  

Interest, monetary, and foreign exchange rate variations

        (27,625     73,511       523,658       397,423  

Deferred income and social contribution taxes

     9.b        23,977       (8,322     12,310       (6,050

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

     28        —         —         4,584       150  

Estimated losses on doubtful accounts

        —         —         49,299       74,983  

Provision for losses in inventories

        —         —         965       (104

Provision for post-employment benefits

        —         —         8,878       6,116  

Other provisions and adjustments

        3       2       (316     145  
     

 

 

   

 

 

   

 

 

   

 

 

 
        41,640       50,375       1,516,064       1,643,306  

(Increase) decrease in current assets

           

Trade receivables and reseller financing

     5        —         —         (305,592     86,275  

Inventories

     6        —         —         439,281       177,577  

Recoverable taxes

     7        (6,912     10,151       (80,258     (13,147

Dividends received from subsidiaries and joint-ventures

        504,934       465,804       37,515       15,333  

Insurance and other receivables

        (683     2,054       (64,347     296,486  

Prepaid expenses

     10        (6     (76     (5,146     (26,430

Contractual assets with customers – exclusive rights

     11        —         —         (14,871     (6,702

Increase (decrease) in current liabilities

           

Trade payables

     16        (378     (209     (504,503     (544,229

Salaries and related charges

     17        (9     39       (44,111     (37,457

Taxes payable

     18        415       (134     35,906       (8,638

Income and social contribution taxes

        —         —         24,929       271,360  

Post-employment benefits

     19.b        —         —         —         (1,729

Provision for tax, civil, and labor risks

     21.a        —         —         (3,661     (2,222

Insurance and other payables

        (7,439     —         (61,605     33,303  

Deferred revenue

     23        —         —         (663     (1,023

(Increase) decrease in non-current assets

           

Trade receivables and reseller financing

     5        —         —         (20,829     (25,210

Recoverable taxes

     7        —         (15,849     (90,470     (75,788

Escrow deposits

        148       —         (16,504     (23,123

Other receivables

        —         —         5,799       1,273  

Prepaid expenses

     10        (35     —         (25,535     (71,749

Contractual assets with customers – exclusive rights

     11        —         —         14,260       11,452  

Increase (decrease) in non-current liabilities

           

Post-employment benefits

     19.b        —         —         1,693       1,411  

Provision for tax, civil, and labor risks

     21.a        —         (589     10,108       (78,918

Other payables

        —         —         39,888       (2,879

Deferred revenue

     23        —         —         (192     345  

Payments of contractual assets with customers – exclusive rights

        —         —         (177,008     (282,801

Income and social contribution taxes paid

        —         —         (80,573     (366,074
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

        531,675       511,566       629,575       970,002  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

 

12


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Statements of Cash Flows—Indirect Method

For the six-month period ended June 30, 2018 and 2017

(In thousands of Brazilian Reais)

 

 

 

 

 

            Parent     Consolidated  
     Note      06/30/2018     06/30/2017     06/30/2018     06/30/2017  
                  Restated           Restated  

Cash flows from investing activities

           

Financial investments, net of redemptions

        (557,834     (65,304     (794,682     (124,153

Cash and cash equivalents of subsidiary acquired

     3.c        —         —         3,662       —    

Acquisition of property, plant, and equipment

     13        —         —         (575,436     (513,808

Acquisition of intangible assets

     14        —         —         (125,317     (91,731

Acquisition of companies

     3.c        —         —         (103,373     —    

Capital increase in joint ventures

     12.b        —         —         (16,000     —    

Capital reduction in associates

     12.c        —         —         1,250       —    

Proceeds from disposal of property, plant and equipment and intangibles

     28        —         —         10,884       32,899  
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

        (557,834     (65,304     (1,599,012     (696,793
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

           

Loans and debentures

           

Proceeds

     15        1,721,596       —         2,219,826       1,697,757  

Repayments

     15        (800,000     —         (1,543,952     (796,114

Interest paid

     15        (29,811     (55,578     (307,082     (410,442

Payments of financial lease

     15.i        —         —         (2,558     (2,612

Dividends paid

        (486,603     (470,801     (488,055     (480,477

Sale of treasury shares

     25.c        —         6,799       —         —    

Related parties

     8.a        2,306       (2,076     (46     —    
     

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

        407,488       (521,656     (121,867     8,112  
     

 

 

   

 

 

   

 

 

   

 

 

 

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

        —         —         29,663       33,879  
     

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

        381,329       (75,394     (1,061,641     315,200  
     

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     4        93,174       127,944       5,002,004       4,274,158  

Cash and cash equivalents at the end of the period

     4        474,503       52,550       3,940,363       4,589,358  

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

 

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Ultrapar Participações S.A. and Subsidiaries

Statements of Value Added

For the six-month period ended June 30, 2018 and 2017

(In thousands of Brazilian Reais, except percentages)

 

 

 

 

 

            Parent     Consolidated  
     Note      06/30/2018      %      06/30/2017     %     06/30/2018     %      06/30/2017     %  

Revenue

              Restated              Restated    

Gross revenue from sales and services, except rents and royalties

     26        —             —           45,074,685          38,906,977    

Rebates, discounts, and returns

     26        —             —           (507,020        (461,002  

Estimated losses on doubtful accounts—allowance

        —             —           (49,299        (74,983  

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

     28;29        —             —           (232,437        62,761    
     

 

 

       

 

 

     

 

 

      

 

 

   
        —             —           44,285,929          38,433,753    

Materials purchased from third parties

                      

Raw materials used

        —             —           (2,995,333        (2,421,100  

Cost of goods, products, and services sold

        —             —           (37,312,066        (31,810,367  

Third-party materials, energy, services, and others

        3,600           3,546         (897,374        (1,161,441  

Losses of assets

        —             —           (4,795        (7,688  
     

 

 

       

 

 

     

 

 

      

 

 

   
        3,600           3,546         (41,209,568        (35,400,596  

Gross value added

        3,600           3,546         3,076,361          3,033,157    
     

 

 

       

 

 

     

 

 

      

 

 

   

Deductions

                      

Depreciation and amortization

     13;14        —             —           (392,030        (337,333  

PIS and COFINS credits on depreciation

     13;14        —             —           (8,079        (6,510  
     

 

 

       

 

 

     

 

 

      

 

 

   
        —             —           (400,109        (343,843  

Net value added by the Company

        3,600           3,546         2,676,252          2,689,314    
     

 

 

       

 

 

     

 

 

      

 

 

   

Value added received in transfer

                      

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

     12        270,159           602,920         (6,377        12,087    

Rents and royalties

     26        —             —           70,393          67,255    

Financial income

     30        119,137           55,416         304,599          301,299    
     

 

 

       

 

 

     

 

 

      

 

 

   
        389,296           658,336         368,615          380,641    

Total value added available for distribution

        392,896           661,882         3,044,867          3,069,955    
     

 

 

       

 

 

     

 

 

      

 

 

   

Distribution of value added

                      

Labor and benefits

        3,191        1        2,968       —         1,079,143       35        936,860       31  

Taxes, fees, and contributions

        26,521        7        (4,971     (1     1,056,730       35        888,348       29  

Financial expenses and rents

        47,740        12        75,781       12       595,474       20        653,437       21  

Retained earnings

        315,444        80        588,104       89       313,520       10        591,310       19  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Value added distributed

        392,896        100        661,882       100       3,044,867       100        3,069,955       100  
     

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

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

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(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 Săo Paulo – SP, Brazil.

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, through Imifarma Produtos Farmacêuticos e Cosméticos S.A. (“Extrafarma”). For further information about segments, see Note 32.

 

2. Presentation of Interim Financial Information and Summary of Significant Accounting Policies

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

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

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

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

 

a. Recognition of Income

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 breakdown of revenue from sales and services is shown in Note 26.

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 as a deduction of the sales revenue in the income statement 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).

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

The franchising upfront fee received by Ipiranga is deferred and recognized in profit or loss on the straight-line accrual basis throughout the terms of the agreements with the franchisees. For more information, see Note 23—Franchising upfront fee.

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.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

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. See Note 4 for further details on cash and cash equivalents of the Company and its subsidiaries.

 

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 other comprehensive income in the “Valuation adjustments”. Accumulated gains and losses recognized in shareholders’ 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 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 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 profit or loss. The hedge accounting must be discontinued when the hedge becomes ineffective.

 

  Hedge accounting—cash flow hedge: financial instruments used to hedge the exposure to variability in cash flows that is attributable to a risk associated with an asset or liability or highly probable transaction or firm commitment that may affect the income statements. 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 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 Company cancels the hedging relationship; (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 other comprehensive income in equity are reclassified to 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 other comprehensive income in equity shall be recognized immediately in profit or loss.

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  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 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 income upon disposal of the foreign operation.

For further detail on financial instruments of the Company and its subsidiaries, see Note 33.

 

d. Trade Receivables

Trade receivables are recognized at the amount invoiced of the counterparty that the Company subsidiaries are entitled. The estimated losses take into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the useful life of the contract when the deterioration or improvement of the customers’ credit quality (see Notes 5 and 33—Customer Credit Risk), considering the customers’ characteristics in each business segment. The amount of the allowance for estimated losses on doubtful accounts is deemed by management to be sufficient to cover any probable loss on realization of trade receivables.

 

e. Inventories

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

 

f. Contractual assets with customers – exclusive rights

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

 

g. Investments

Investments in subsidiaries are accounted for under the equity method of accounting in the individual interim financial information of the parent company (see Notes 3.b and 12). 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 individual and consolidated interim financial information (see Note 12). 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.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

h. Property, Plant, and Equipment

Property, plant, and equipment is recognized at acquisition or construction cost, including financial charges incurred on property, plant, and equipment under construction, as well as maintenance costs resulting from scheduled plant outages and estimated costs to remove, to decommission, or to restore assets (see Notes 2.n and 20), less accumulated depreciation and, when applicable, less provision for losses (see Note 13).

Depreciation is calculated using the straight-line method, over the periods mentioned in Note 13, 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.

 

i. Leases

 

  Finance Leases

Certain lease contracts transfer substantially all the risks and benefits associated with the ownership of an asset to the subsidiaries. These contracts are characterized as finance leases, and assets thereunder are capitalized at lease commencement at their fair value or, if lower, present value of the minimum lease payments under the contracts. The items recognized as assets are depreciated and amortized using the lower of the straight-line method over the lower of the useful lives applicable to each group of assets or the contract terms, as mentioned in Notes 13 and 14. Financial charges under the finance lease contracts are allocated to profit or loss over the lease contract term, based on the amortized cost and the effective interest rate method of the related lease obligation (see Note 15.i).

 

  Operating Leases

There are lease transactions where the risks and benefits associated with the ownership of the asset are not transferred and where there is no purchase option, or the purchase option at the end of the contract is equivalent to the market value of the leased asset. Payments made under an operating lease contract are recognized as cost or expense in the income statement on a straight-line basis over the term of the lease contract (see Note 34.c).

 

j. Intangible Assets

Intangible assets include assets acquired by the Company and its subsidiaries from third parties, according to the criteria below (see Note 14):

 

  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 by the Company for impairment testing purposes (see Note 14.i).

 

  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 14, taking into account their useful life, which is 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 14 items i and v).

 

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Notes to the Individual and Consolidated Interim Financial Information

(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 Company and its subsidiaries’ financial liabilities include trade payables and other payables, loans, debentures, finance leases 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, 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 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 to profit or loss over its term, using the effective interest rate method (see Note 15.j).

 

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, considering the value of tax incentives. Taxes are recognized based on the rates of IRPJ and CSLL provided for by the laws enacted on the last day of the interim financial information. The current rates in Brazil are 25% for IRPJ and 9% for CSLL. For further details 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 taxation 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 property, plant, and equipment and depreciated over the respective useful lives of the tanks. The amounts recognized as a liability are monetarily restated using the National Consumer Price Index (“IPCA”) until the respective tank is removed (see Note 20). An increase in the estimated cost of the obligation to remove the tanks could result in negative impact in future results. 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 income statements when they become known.

 

o. Provisions for Tax, Civil, and Labor Risks

A provision for tax, civil and labor risks is recognized for quantifiable risks, when the chance of loss is more-likely-than-not in the opinion of management and internal and external legal counsel, and the amounts are recognized based on the evaluation of the outcomes of the legal proceedings (see Note 21).

 

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 19.b). The actuarial gains and losses are recognized in cumulative other comprehensive income in the “Valuation adjustments” and presented in the statement of shareholders’ equity.

 

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Notes to the Individual and Consolidated Interim Financial Information

(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, monetary restatement, 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 reporting period. The effect of the difference between those exchange rates is recognized in profit or loss until the conclusion of each transaction.

 

s. Basis for Translation of Interim Financial Information of Foreign Subsidiaries

Assets and liabilities of the foreign subsidiaries, denominated in currencies other than that of the Company (functional currency: Brazilian Real), which have administrative autonomy, are translated using the exchange rate at the end of the reporting period. Revenues and expenses are translated using the average exchange rate of each year and shareholders’ equity is translated at the historical exchange rate of each transaction affecting shareholders’ equity. Gains and losses resulting from changes in these foreign investments are directly recognized in shareholders’ 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 and presented in the shareholders’ equity as cumulative translation adjustments on June 30, 2018 was a gain of R$ 97,449 (gain of R$ 53,061 on December 31, 2017)—see Note 25.g—Cumulative Translation Adjustments.

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 de C.V.

   Mexican Peso    Mexico

Oxiteno USA LLC

   U.S. Dollar    United States

Oxiteno Uruguay S.A. (i)

   U.S. Dollar    Uruguay

Oxiteno Andina, C.A. (ii)

   Bolivar    Venezuela

 

(i) The subsidiary Oxiteno Uruguay S.A. (“Oxiteno Uruguay”) determined its functional currency as the U.S. dollar (“US$”), as its inventory sales, purchases of raw material inputs, and financing activities are performed substantially in this currency.
(ii) According the definition and general guidance of IAS 29, the characteristics of the economic environment of Venezuela indicate that this country is a hyperinflationary economy. As a result, the financial information of Oxiteno Andina, C.A. (“Oxiteno Andina”) was adjusted by the Venezuelan Consumer Price Index. On January 26, 2018, the Venezuelan Central Bank issued Foreign Exchange Regulation No. 39, altering the Venezuelan foreign exchange markets and regulating the DICOM—Tipo de Cambio Complementario Flotante de Mercado Supplemental (Floating Market Exchange) as the legally recognized type of exchange rate, being the Bolivar traded as of June 30, 2018 at the variable exchange rate of 115,000.00 VEF/US$ for sale and 114,712.50 VEF/US$ for purchase.

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 end of the reporting period. Gains and losses resulting from changes in these foreign investments are directly recognized as financial income or loss. The loss recognized in income for the six-month period ended June 30, 2018 amounted to R$ 6,105 (R$ 3,455 gain for the six-month period ended June 30, 2017).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

t. Use of Estimates, Assumptions and Judgments

The preparation of the interim financial information requires the use of estimates, assumptions, and judgments for the accounting of certain assets, liabilities, and income. Therefore, the Company and subsidiaries’ management use the best information available at the time of preparation of the interim financial information, as well as the experience of past and current events, also considering assumptions regarding future events. The interim financial information therefore include estimates, assumptions, and judgments related mainly to determining the fair value of financial instruments (Notes 2.c, 2.l, 4, 15 and 33), the determination of the estimated losses on doubtful accounts (Notes 2.d, 5 and 33), the determination of provisions for losses of inventories (Notes 2.e and 6), the determination of deferred IRPJ and CSLL amounts (Notes 2.m and 9), the determination of control in subsidiaries (Notes 2.g, 2.s, 3 and 12.a), the determination of joint control in joint venture (Notes 2.g, 12.a and 12.b), the determination of significant influence in associates (Notes 2.g and 12.c), the determination of exchange rate used to translation of Oxiteno Andina’ information (Note 2.s), the useful lives of property, plant, and equipment (Notes 2.h and 13), the useful lives of intangible assets, and the determination of the recoverable amount of goodwill (Notes 2.j and 14), provisions for assets retirement obligations (Notes 2.n and 20), provisions for tax, civil, and labor risks (Notes 2.o and 21), estimates for the preparation of actuarial reports (Notes 2.p and 19.b) and the determination of fair value of subscription warrants – indemnification (Notes 24 and 33). The actual result of the transactions and information may differ from their estimates.

 

u. Impairment of Assets

The Company and its subsidiaries review, 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 flow 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 of disposal 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 Company and its subsidiaries consider the projections of future cash flows, trends, and outlooks, as well as the effects of obsolescence, demand, competition, and other economic factors. 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.

No impairment was recognized in the present period (see Note 14.i).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

v. Business Combination

A business combination is accounted applying the acquisition method. The cost of the acquisition is measured based on the consideration transferred and to be transferred, measured at fair value at the acquisition date. In a business combination, the assets acquired and liabilities assumed are measured in order to classify and allocate them accordingly to the contractual terms, economic circumstances and relevant conditions on the acquisition date. The non-controlling interest in the acquired 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 income statement. Costs related to the acquisition are recorded in the income statement when incurred.

 

w. Statements of Value Added

As required by Brazilian Corporate Law, the Company and its subsidiaries prepare the individual and consolidated statements of value added (“DVA”) according to CPC 09 – Statement of Value Added, as an integral part of the interim financial information as applicable to publicly-traded companies, and as supplemental information for the International Financial Reporting Standards (“IFRS”), which does not require the presentation of DVA.

 

x. Statements of Cash Flows Indirect Method

The Company and its subsidiaries prepared its individual and consolidated statements of cash flows in accordance with IAS 7 (CPC 03)—Cash Flow Statement. The Company and its subsidiaries present the interest paid on loans and debentures in financing activities. The Company and its subsidiaries present financial investments on a net basis of income and redemptions in the investment 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, 2018:

 

     Equivalent
CPC
     Effective
date
 

•   IFRS 9 – Financial instrument classification and measurement: includes new requirements for the classification and measurement of financial assets and liabilities, derecognition requirements, new impairment methodology for financial instruments, and new hedge accounting guidance.

     48        2018  

•   IFRS 15—Revenue from contracts with customers: establish the principles of nature, amount, timing and uncertainty of revenue and cash flow arising from a contract with a customer.

     47        2018  

The Company and its subsidiaries disclosed the information to the impacts on the adoption of IFRS 9 (CPC 48) and 15 (CPC 47), in accordance with the new accounting practices introduced by the IASB and immaterial reclassifications and adjustments to the better presentation of the interim financial information: i) the sales revenue previously recognized at the issuance of the invoice, was adjusted to the time of the delivery of the products and ii) segregation of sales and purchase taxes between the sales revenue and the cost of products.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

(1) IFRS 9 adoption (CPC 48)—Financial instruments

 

  a) Classification and measurement of financial instruments:

The Company and its subsidiaries evaluated the classification and measurement of financial instruments and, based on its business model, concluded that the target is achieved, receiving contractual cash flows and selling financial assets (hold for collect and sell). Accordingly, most part of the financial investments are classified as measured at fair value through other comprehensive income, except for funds that are classified as measured at fair value through profit or loss and financial investments given as collateral for loans that are classified as amortized cost (see Note 2.c).

 

    

12/31/2017

 
    

Classification as previously reported
according to IAS 39 / CPC 38

     New classification according to
IFRS 9 / CPC 48
 
    

Category

   Carrying
value
     Measured at fair
value through
profit or loss
     Measured at fair
value through other
comprehensive income
     Measured at
amortized cost
 

Financial assets:

              

Cash and cash equivalents

              

Cash and bank deposits

   Loans and receivables      147,926        —          —          147,926  

Financial investments in local currency

   Measured at fair value through profit or loss      4,821,605        —          4,821,605        —    

Financial investments in foreign currency

   Measured at fair value through profit or loss      32,473        32,473        —          —    

Financial investments:

              

Fixed-income securities and funds in local currency

   Available for sale      68,742        —          2,720        66,022  

Fixed-income securities and funds in local currency

   Measured at fair value through profit or loss      1,076,849        1,076,849        —          —    

Fixed-income securities and funds in local currency

   Held to maturity      7,449        —          —          7,449  

Fixed-income securities and funds in foreign currency

   Available for sale      129,131        —          129,131        —    

Currency and interest rate hedging instruments

   Measured at fair value through profit or loss      85,753        85,753        —          —    
     

 

 

    

 

 

    

 

 

    

 

 

 

Total

        6,369,928        1,195,075        4,953,456        221,397  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

  b) Estimated losses on doubtful accounts

The Company and its subsidiaries assessed the estimated credit losses on doubtful accounts on trade receivables, taking into account, at the initial recognition of the contract, the expected losses for the next 12 months and for the useful life of the contract when the deterioration or improvement of customers’ credit quality (see Note 2.d).

 

  c) Derivative financial instruments

The Company and its subsidiaries have not identified impacts arising from this change keeping the permanence of the application of IAS 39.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

(2) IFRS 15 adoption (CPC 47)—Revenue recognition from contracts with customers

The Company and its subsidiaries evaluated all the stages for the recognition of their revenues from contracts with customers and based on their diagnosis did not identify material measurement impacts resulting from the adoption of this standard (see Note 2.a).

In relation to the presentation in the income statement, the Company and its subsidiaries evaluated that certain expenses, allocated as selling and marketing until December 31, 2017, should be better presented as a reduction of revenue, substantially in relation to the amortization expenses of exclusive contracts to operate Ipiranga service station.

The Company and its subsidiaries adopted retrospectively the impacts of the IFRS 9 and 15.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The table below summarizes the effects of the IFRS 9 (CPC 48) and 15 (CPC 47) adoption, immaterial reclassifications and adjustments:

Balance sheets as of December 31, 2017

 

Assets

   As previously
reported
     IFRS 9
adoption (1)
    IFRS 15
adoption (2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Current assets

           

Cash and cash equivalents

     5,002,004        —         —         —         5,002,004  

Financial investments and hedging instruments

     1,283,498        —         —         —         1,283,498  

Trade receivables and reseller financing, net

     4,337,118        (157,198     —         (32,026     4,147,894  

Inventories, net

     3,491,879        —         —         21,698       3,513,577  

Recoverable taxes, net

     881,584        —         —         —         881,584  

Dividends receivable

     11,137        —         —         —         11,137  

Other receivables

     44,025        —         —         —         44,025  

Prepaid expenses, net

     150,046        —         —         —         150,046  

Contractual assets with customers – exclusive rights, net

     —          —         456,213       —         456,213  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     15,201,291        (157,198     456,213       (10,328     15,489,978  

Non-current assets

           

Financial investments and hedging instruments

     84,426        —         —         —         84,426  

Trade receivables and reseller financing, net

     329,991        —         —         —         329,991  

Related parties

     490        —         —         —         490  

Deferred income and social contribution taxes

     545,611        53,447       12,150       2,853       614,061  

Recoverable taxes, net

     313,242        —         —         —         313,242  

Escrow deposits

     822,660        —         —         —         822,660  

Indemnity asset – business combination

     202,352        —         —         —         202,352  

Other receivables

     7,918        —         —         —         7,918  

Prepaid expenses, net

     346,886        —         —         —         346,886  

Contractual assets with customers – exclusive rights, net

     —          —         1,046,147       —         1,046,147  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total long term assets

     2,653,576        53,447       1,058,297       2,853       3,768,173  

Investments

           

In joint-ventures

     122,061        —         —         —         122,061  

In associates

     25,341        —         —         —         25,341  

Other

     2,792        —         —         —         2,792  

Property, plant, and equipment, net

     6,607,788        —         —         26,740       6,634,528  

Intangible assets, net

     3,727,473        —         (1,538,095     (26,740     2,162,638  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     10,485,455        —         (1,538,095     —         8,947,360  

Total non-current assets

     13,139,031        53,447       (479,798     2,853       12,715,533  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     28,340,322        (103,751     (23,585     (7,475     28,205,511  
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

Balance sheets as of December 31, 2017

 

Liabilities

   As previously
reported
    IFRS 9
adoption (1)
    IFRS 15
adoption (2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Current liabilities

          

Loans and hedging instruments

     1,819,766       —         —         —         1,819,766  

Debentures

     1,681,199       —         —         —         1,681,199  

Finance leases

     2,710       —         —         —         2,710  

Trade payables

     2,155,498       —         —         —         2,155,498  

Salaries and related charges

     388,118       —         —         —         388,118  

Taxes payable

     225,829       —         —         (4,300     221,529  

Dividends payable

     338,845       —         —         —         338,845  

Income and social contribution taxes payable

     86,836       —         —         —         86,836  

Post-employment benefits

     30,059       —         —         —         30,059  

Provision for asset retirement obligation

     4,799       —         —         —         4,799  

Provision for tax, civil, and labor risks

     64,550       —         —         —         64,550  

Trade payables – customers and third parties’ indemnification

     72,216       —         —         —         72,216  

Other payables

     125,150       —         —         —         125,150  

Deferred revenue

     18,413       —         —         —         18,413  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     7,013,988       —         —         (4,300     7,009,688  

Non-current liabilities

          

Loans and hedging instruments

     6,113,545       —         —         —         6,113,545  

Debentures

     3,927,569       —         —         —         3,927,569  

Finance leases

     45,805       —         —         —         45,805  

Related parties

     4,185       —         —         —         4,185  

Deferred income and social contribution taxes

     38,524       —         —         —         38,524  

Post-employment benefits

     207,464       —         —         —         207,464  

Provision for asset retirement obligation

     59,975       —         —         —         59,975  

Provision for tax, civil, and labor risks

     861,246       —         —         —         861,246  

Deferred revenue

     12,896       —         —         —         12,896  

Subscription warrants – indemnification

     171,459       —         —         —         171,459  

Other payables

     162,834       —         —         —         162,834  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     11,605,502       —         —         —         11,605,502  

Shareholders’ equity

          

Share capital

     5,171,752       —         —         —         5,171,752  

Equity instrument granted

     536       —         —         —         536  

Capital reserve

     549,778       —         —         —         549,778  

Treasury shares

     (482,260     —         —         —         (482,260

Revaluation reserve on subsidiaries

     4,930       —         —         —         4,930  

Profit reserves

     3,760,079       (103,468     (23,585     (3,175     3,629,851  

Valuation adjustments

     159,643       —         —         —         159,643  

Cumulative translation adjustments

     53,061       —         —         —         53,061  

Additional dividends to the minimum

mandatory dividends

     163,742       —         —         —         163,742  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity attributable to:

          

Shareholders of the Company

     9,381,261       (103,468     (23,585     (3,175     9,251,033  

Non-controlling interests in subsidiaries

     339,571       (283     —         —         339,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total shareholders’ equity

     9,720,832       (103,751     (23,585     (3,175     9,590,321  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and shareholders’ equity

     28,340,322       (103,751     (23,585     (7,475     28,205,511  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

Income Statements for the six-month period ended June 30, 2017

 

     As previously
reported
    IFRS 9
adoption (1)
    IFRS 15
adoption (2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Net revenue from sales and services

     37,900,928       —         (252,532     (107,626     37,540,770  

Cost of products and services sold

     (34,631,410     —         —         107,626       (34,523,784
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     3,269,518       —         (252,532     —         3,016,986  

Operating income (expenses)

          

Selling and marketing

     (1,424,447     (39,754     251,883       —         (1,212,318

General and administrative

     (751,820     —         —         —         (751,820

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

     (150     —         —         —         (150

Other operating income, net

     62,911       —         —         —         62,911  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     1,156,012       (39,754     (649     —         1,115,609  

Financial income

     301,299       —         —         —         301,299  

Financial expenses

     (535,319     —         —         —         (535,319
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Financial result, net

     (234,020     —         —         —         (234,020

Share of profit of joint ventures and associates

     12,087       —         —         —         12,087  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income and social contribution taxes

     934,079       (39,754     (649     —         893,676  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income and social contribution taxes

          

Current

     (308,416     —         —         —         (308,416

Deferred

     (8,149     13,978       221       —         6,050  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     (316,565     13,978       221       —         (302,366

Net income for the period

     617,514       (25,776     (428     —         591,310  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the period attributable to:

          

Shareholders of the Company

     614,270       (25,776     (390     —         588,104  

Non-controlling interests in subsidiaries

     3,244       —         (38     —         3,206  

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

          

Basic

     1.1338             1.0855  

Diluted

     1.1255             1.0777  

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

Statements of Cash Flows for the six-month period ended June 30, 2017

 

     As previously
reported
    IFRS 9
adoption (1)
    IFRS 15
adoption (2)
    Reclassification
and adjustments
    After adoption
IFRS 9 and 15
 

Cash flows from operating activities

          

Net income for the period

     617,514       (25,776     (428     —         591,310  

Adjustments to reconcile net income to cash provided by operating activities

          

Share of loss (profit) of joint ventures and associates

     (12,087     —         —         —         (12,087

Amortization of contractual assets with customers – exclusive rights

     —         —         247,577       —         247,577  

Depreciation and amortization

     589,216       —         (251,883     —         337,333  

PIS and COFINS credits on depreciation

     6,510       —         —         —         6,510  

Asset retirement obligation

     (1,329     —         —         1,329       —    

Interest, monetary, and foreign exchange rate variations

     397,423       —         —         —         397,423  

Deferred income and social contribution taxes

     8,149       (13,978     (221     —         (6,050

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

     150       —         —         —         150  

Estimated credit losses on doubtful accounts

     —         —         —         74,983       74,983  

Provision for losses in inventories

     —         —         —         (104     (104

Provision for post-employment benefits

     —         —         —         6,116       6,116  

Other provisions and adjustments

     145       —         —         —         145  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     1,605,691       (39,754     (4,955     82,324       1,643,306  

(Increase) decrease in current assets

          

Trade receivables and reseller financing

     126,254       39,754       (4,750     (74,983     86,275  

Inventories

     177,473       —         —         104       177,577  

Contractual assets with customers – exclusive rights

     —         —         (6,702     —         (6,702

Other current asset items

     272,242       —         —         —         272,242  

Increase (decrease) in current liabilities

          

Insurance and other payables

     34,632       —         —         (1,329     33,303  

Other current liabilities items

     (323,938     —         —         —         (323,938

(Increase) decrease in non-current assets

          

Contractual assets with customers – exclusive rights

     —         —         11,452       —         11,452  

Other non-current asset items

     (194,597     —         —         —         (194,597

Increase (decrease) in non-current liabilities

          

Post-employment benefits

     7,527       —         —         (6,116     1,411  

Other non-current liabilities items

     (81,452     —         —         —         (81,452

Payments of contractual assets with customers – exclusive rights

     —         —         (282,801     —         (282,801

Income and social contribution taxes paid

     (366,074     —         —         —         (366,074
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     1,257,758       —         (287,756     —         970,002  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

          

Acquisition of intangible assets

     (379,487     —         287,756       —         (91,731

Other investing activities items

     (605,062     —         —         —         (605,062
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (984,549     —         287,756       —         (696,793
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by financing activities

     8,112       —         —         —         8,112  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     33,879       —         —         —         33,879  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Decrease in cash and cash equivalents

     315,200       —         —         —         315,200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at the beginning of the period

     4,274,158       —         —         —         4,274,158  

Cash and cash equivalents at the end of the period

     4,589,358       —         —         —         4,589,358  

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The following standards, amendments, and interpretations to IFRS were issued by the IASB are not effective as of June 30, 2018:

 

     Equivalent
CPC
    Effective
date
 

•   IFRS 16—Lease: requires lessees’ record, in the financial statements, a liability reflecting future payments of a lease and the right to use an asset for the lease contracts, except for certain short-term leases and low asset value contracts. The criteria for recognition and measurement of leases in the financial statements of lessors are substantially maintained.

     06  (R2)      2019  

The Company and its subsidiaries are quantifying the potential effects of this pronouncement, and it is expected to have a relevant impact on the recognition of the right of use and debt related to lease contracts of the land and building of service stations, drugstores and stores due to the number of operating lease contracts of the subsidiaries (see Note 34.c).

 

z. Authorization for Issuance of the Interim Financial Information

These interim financial information were authorized for issue by the Board of Directors on August 1st, 2018.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

3. Principles of Consolidation, Investments in Subsidiaries and Acquisition

 

  a) Principles of Consolidation

In the preparation of the consolidated interim financial information the investments of one company in another, balances of asset and liability accounts, revenues transactions, costs and expenses were eliminated, as well as the effects of transactions conducted between the companies. Non-controlling interests in subsidiaries are presented within consolidated shareholders’ 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 income statement and other 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 income statement and other comprehensive income until the date the parent company loses control.

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

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  b) Investments in Subsidiaries

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

 

               % interest in the share  
               06/30/2018      12/31/2017  
               Control      Control  
     Location    Segment    Direct
control
     Indirect
control
     Direct
control
     Indirect
control
 

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  

Chevron Brasil Lubrificantes S.A. (see Note 3.c)

   Brazil    Ipiranga      —          56        —          56  

Ipiranga Lubrificantes S.A. (see Note 3.c)

   Brazil    Ipiranga      —          100        —          100  

Integra Frotas Ltda.

   Brazil    Ipiranga      —          100        —          100  

Companhia Ultragaz S.A.

   Brazil    Ultragaz      —          99        —          99  

Ultragaz Comercial Ltda.

   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

   Brazil    Oxiteno      —          99        —          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.

   Venezuela    Oxiteno      —          100        —          100  

Oxiteno Europe SPRL

   Belgium    Oxiteno      —          100        —          100  

Oxiteno Colombia S.A.S

   Colombia    Oxiteno      —          100        —          100  

Oxiteno Shanghai LTD.

   China    Oxiteno      —          100        —          100  

Empresa Carioca de Produtos Químicos S.A.

   Brazil    Oxiteno      —          100        —          100  

Ultracargo—Operações Logísticas e Participações Ltda.

   Brazil    Ultracargo      100        —          100        —    

Terminal Químico de Aratu S.A. – Tequimar

   Brazil    Ultracargo      —          99        —          99  

TEAS – Terminal Exportador de Álcool de Santos Ltda. (see Note 3.d)

   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.

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

  c) Association with Chevron Brasil Lubrificantes S.A.

On August 4, 2016, the Company through its subsidiary Ipiranga Produtos de Petróleo S.A. (“IPP”) entered into an association agreement with Chevron Brasil Lubrificantes Ltda. (“Chevron”) to create a new company in the lubricants market. The association is formed by Ipiranga and Chevron’s lubricants operations in Brazil. On February 2017, this transaction was approved without restrictions through an opinion issued by the General Superintendence (“SG”) of the Brazilian Antitrust Authority (“CADE”) and published in the Brazilian Federal Official Gazette. On December 1, 2017, the association was concluded, through the contribution of the subsidiary Ipiranga Lubrificantes S.A. (“IpiLubs”) to Chevron Brasil Lubrificantes S.A. (“CBLSA”) and consequently IPP obtained direct control of CBLSA. IPP and Chevron hold 56% and 44%, respectively, of the CBLSA.

The Company is measuring the open balance, fair value of assets and liabilities, and, consequently, the goodwill of their transaction. The purchase price allocation will be concluded in 2018. During the process of identification of assets and liabilities, intangible assets, which are not recognized in the acquired entity’s books, will also be taken into account. The Company, supported by a third party company specialized in valuations, estimated the temporary amount for the purchase price allocation and calculated the temporary goodwill in the amount of R$ 123,673. The temporary goodwill is based on the synergy between the lubricant operations of CBLSA and IpiLubs.

The table below summarizes the temporary assets acquired and liabilities assumed as of the acquisition date (December 1, 2017), subject to the customary final adjustments of purchase price allocation and calculation of goodwill:

 

Current assets

         

Current liabilities

      

Cash and cash equivalents

     73,316      Trade payables      33,453  

Trade receivables

     157,016      Salaries and related charges      18,251  

Inventories

     112,998      Taxes payable      20,089  

Recoverable taxes

     5,595      Other payables      28,743  

Other receivables

     15,497        
  

 

 

       

 

 

 
     364,422           100,536  

Non-current assets

         

Non-current liabilities

      

Related parties

     7,077      Provision for tax, civil, and labor risks      202,352  

Indemnity asset

     202,352      Deferred income and social contribution taxes      3,300  

Escrow deposits

     4,095      Post-employment benefits      44,478  

Other receivables

     5,257        

Property, plant, and equipment

     172,526        

Intangible assets

     9,944        
  

 

 

       

 

 

 
     401,251           250,130  
        

Total assets acquired

     765,673      Total liabilities assumed      350,666  
  

 

 

       

 

 

 

Temporary goodwill

     123,673      Participation of non-controlling interests      182,603  
  

 

 

       

Total assets acquired and temporary goodwill

     889,346      Temporary consideration transferred      356,077  

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

The calculation of the temporary goodwill is shown below:

 

Temporary consideration transferred

     356,077  

Total assets acquired

     (765,673

Total liabilities assumed

     350,666  

Non-controlling interest

     182,603  
  

 

 

 

Temporary goodwill (see Note 14.i)

     123,673  
  

 

 

 

 

  d) TEAS – Terminal Exportador de Álcool de Santos Ltda. Acquisition

On January 30, 2018, the Company through its subsidiary Terminal Químico de Aratu S.A. – Tequimar (“Tequimar”) entered into a sale and purchase agreement for the acquisition of 100% of the quotas of TEAS Terminal Exportador de Álcool de Santos Ltda. (“TEAS”), owned by Raízen Energia S.A. and Raízen Araraquara Açúcar e Álcool Ltda., which had already been operated by the subsidiary Tequimar in the Port of Santos. The purchase price of the acquisition was R$103,373. On February 14, 2018, this transaction was approved without restrictions through an opinion issued by the SG of CADE. On March 2, 2018, CADE issued a certificate, attesting to the approval of the transaction. On March 29, 2018, the acquisition was concluded through the closing of the operation.

The Company is measuring the open balance, fair value of assets and liabilities, and, consequently, the goodwill of their transaction. The purchase price allocation will be concluded in 2018. During the process of identification of assets and liabilities, intangible assets, which are not recognized in the acquired entity’s books, will also be taken into account. The Company, supported by a third party company specialized in valuations, estimated the temporary amount for the purchase price allocation and calculated the temporary goodwill in the amount of R$ 6,253.

The table below summarizes the temporary assets acquired and liabilities assumed as of the acquisition date, subject to the customary final adjustments of purchase price allocation and calculation of goodwill:

 

Current assets

         

Current liabilities

      

Cash and cash equivalents

     3,662      Trade payables      14  
        

 

 

 

Recoverable taxes

     3,830           14  

Other receivables

     4,861        
  

 

 

       
     12,353        

Non-current assets

        

Deferred income and social contribution taxes

     1,054      Contingent consideration      2,880  

Escrow deposits

     72        

Property, plant, and equipment

     86,535        
  

 

 

       
     87,661        
  

 

 

       

 

 

 

Total assets acquired

     100,014      Total liabilities assumed      2,894  
  

 

 

       

 

 

 

Temporary goodwill

     6,253        
  

 

 

       

Total assets acquired and temporary goodwill

     106,267      Consideration transferred      103,373  

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

 

The calculation of the temporary goodwill is shown below:

 

Consideration transferred

     103,373  

Total assets acquired

     (100,014

Total liabilities assumed

     2,894  
  

 

 

 

Temporary goodwill (see Note 14.i)

     6,253  
  

 

 

 

For further details of property, plant, and equipment assets acquired, see Note 13.

 

  e) Unrealized Acquisition

On November 17, 2016, the Company through its subsidiary Companhia Ultragaz S.A. (“Cia Ultragaz”), entered into a sale and purchase agreement for the acquisition of 100% of the capital stock of Liquigás Distribuidora S.A (“Liquigás”). The total transaction amount is R$ 2,665 million and will be adjusted by the Interbank Certificate of Deposit (“CDI”), between the execution date and transaction closing date. The amount will still be subject to adjustments related to the variations in Liquigás’ working capital and net debt between December 31, 2015 and the closing date of the transaction. On January 23, 2017, the Extraordinary General Shareholders’ Meeting (“EGM”) of Ultrapar approved the transaction. The closing of the acquisition were subject to certain usual conditions precedent in transactions of similar nature, mainly the approval by CADE. On February 28, 2018, the Court of Appeals of CADE voted the transaction and despite all the efforts endeavored by the applicants throughout the analysis of the process and the negotiations conducted with the Court of Appeals decided to reject the transaction with the majority of votes. Due to non-compliance of one of the precedent conditions to the consummation of the transaction, Cia. Ultragaz paid a fine of R$ 286,160 in favor of Petróleo Brasileiro S.A. – Petrobras (“Petrobras”) on March 9, 2018 (see Note 29).

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

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 first-rate financial institutions linked to the CDI, in repurchase agreement and in short term investments funds, whose portfolio comprised of Brazilian Federal Government bonds and in certificates of deposit of first-rate financial institutions; (ii) outside Brazil, in certificates of deposit of first-rate financial institutions and in short term investments funds, whose portfolio comprised of Federal Government bonds; and (iii) in currency and interest rate hedging instruments.

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

The balance of cash, cash equivalents and financial investments (consolidated) amounted to R$ 6,119,267 as of June 30, 2018 (R$ 6,369,928 as of December 31, 2017) and are distributed as follows:

 

    Cash and Cash Equivalents

Cash and cash equivalents are considered: (i) cash and bank deposits, and (ii) highly-liquid short-term investments that are readily convertible into a known amount of cash and are subject to an insignificant risk of change in value.

 

     Parent      Consolidated  
     06/30/2018      12/31/2017      06/30/2018      12/31/2017  

Cash and bank deposits

           

In local currency

     304        143        84,457        73,128  

In foreign currency

     —          —          112,543        74,798  

Financial investments considered cash equivalents

           

In local currency

           

Fixed-income securities

     474,199        93,031        3,705,463        4,821,605  

In foreign currency

           

Fixed-income securities

     —          —          37,900        32,473  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash and cash equivalents

     474,503        93,174        3,940,363        5,002,004  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

    Financial Investments

The financial investments of the Company and its subsidiaries, which are not classified as cash and cash equivalents, are distributed as follows:

 

     Parent      Consolidated  
     06/30/2018      12/31/2017      06/30/2018      12/31/2017  

Financial investments

           

In local currency

           

Fixed-income securities and funds

     579,491        21,657        1,740,824        1,153,040  

In foreign currency

           

Fixed-income securities and funds

     —          —          231,682        129,131  

Currency and interest rate hedging instruments (a)

     —          —          206,398        85,753  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total financial investments

     579,491        21,657        2,178,904        1,367,924  
  

 

 

    

 

 

    

 

 

    

 

 

 

Current

     579,491        21,657        2,029,689        1,283,498  

Non-current

     —          —          149,215        84,426  

 

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

 

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Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

5. Trade Receivables and Reseller Financing (Consolidated)

The composition of trade receivables and reseller financing is as follows:

 

     06/30/2018     12/31/2017  
           Restated  

Domestic customers

     4,230,281       4,025,726  

Reseller financing – Ipiranga (i)

     746,052       675,236  

Foreign customers

     281,885       229,701  

(-) Estimated losses on doubtful accounts

     (503,821     (452,778
  

 

 

   

 

 

 

Total

     4,754,397       4,477,885  
  

 

 

   

 

 

 

Current

     4,403,577       4,147,894  

Non-current

     350,820       329,991  

 

(i) 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 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
 
06/30/2018     5,258,218       4,323,935       154,989       65,550        52,947        100,570        560,227  
12/31/2017     4,930,663       4,070,523       200,939       46,491        48,197        87,812        476,701  

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

 

Balance as of December 31, 2017

     295,580  

IFRS 9 adoption

     157,198  
  

 

 

 

Balance as of December 31, 2017—Restated

     452,778  

Additions

     65,719  

Write-offs

     (14,676
  

 

 

 

Balance as of June 30, 2018

     503,821  
  

 

 

 

For further information about the allowance for estimated losses on doubtful accounts, see Note 33 – Customer credit risk.

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

6. Inventories (Consolidated)

The composition of inventories is as follows:

 

     06/30/2018      12/31/2017  
            Restated  
     Cost      Provision
for losses
    Net
balance
     Cost      Provision
for losses
    Net
balance
 

Fuels, lubricants and greases

     1,343,942        (3,651     1,340,291        1,626,449        (3,074     1,623,375  

Finished goods

     513,054        (22,379     490,675        500,223        (18,495     481,728  

Work in process

     1,590        —         1,590        1,637        —         1,637  

Raw materials

     420,230        (2,091     418,139        492,029        (1,835     490,194  

Liquefied petroleum gas (LPG)

     90,904        (5,761     85,143        102,748        (5,761     96,987  

Consumable materials and other items for resale

     146,869        (4,060     142,809        160,024        (5,380     154,644  

Pharmaceutical, hygiene, and beauty products

     467,582        (4,083     463,499        417,726        (2,447     415,279  

Purchase for future delivery (1)

     107,011        —         107,011        222,808        —         222,808  

Properties for resale

     27,489        (107     27,382        27,032        (107     26,925  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 
     3,118,671        (42,132     3,076,539        3,550,676        (37,099     3,513,577  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(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

     239  

Additions of obsolescence and other losses

     4,794  
  

 

 

 

Balance as of June 30, 2018

     42,132  
  

 

 

 

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

 

     06/30/2018      12/31/2017  

Net realizable value adjustment

     20,056        19,817  

Obsolescence and other losses

     22,076        17,282  
  

 

 

    

 

 

 

Total

     42,132        37,099  
  

 

 

    

 

 

 

 

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Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

7. Recoverable Taxes

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

 

     Parent      Consolidated  
     06/30/2018      12/31/2017      06/30/2018     12/31/2017  

ICMS

     —          —          637,996       580,630  

Provision for ICMS losses (1)

     —          —          (70,850     (72,076

PIS and COFINS

     —          —          322,786       348,333  

IRPJ and CSLL

     88,667        81,755        402,643       295,172  

Value-Added Tax (IVA) of foreign subsidiaries

     —          —          34,439       27,180  

Others

     —          —          42,370       15,587  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

     88,667        81,755        1,369,384       1,194,826  
  

 

 

    

 

 

    

 

 

   

 

 

 

Current

     39,982        33,070        965,672       881,584  

Non-current

     48,685        48,685        403,712       313,242  

 

(1)  The provision for ICMS losses relates to tax credits that the subsidiaries believe will not be utilized or offset in the future based on its estimative, and its movements are as follows:

 

Balance as of December 31, 2017

     72,076  

Additions, write-offs and reversals, net

     (1,226
  

 

 

 

Balance as of June 30, 2018

     70,850  
  

 

 

 

 

39


Table of Contents

Ultrapar Participações S.A. and Subsidiaries

Notes to the Individual and Consolidated Interim Financial Information

(In thousands of Brazilian Reais, unless otherwise stated)

 

 

 

8. Related Parties

 

a. Related Parties

 

    Parent Company

 

     Assets      Liabilities         
     Debentures (1)      Other
payables (2)
     Account
payable