Ultrapar's Q2 2025 Earnings: Navigating Contradictions in LPG Margins, Arbitration Strategies, and Capital Allocation

Regulatory impact on LPG margins, Ipiranga's open arbitration strategy, regulatory impact on margins, capital allocation and investment strategy are the key contradictions discussed in Ultrapar Participações S.A.'s latest 2025Q2 earnings call.



Operational Cash Flow and Working Capital Management:
- Ultrapar reported strong operational cash flow generation, despite a BRL 900 million reduction in draft discount due to IOF tax burden.
- This performance was driven by disciplined focus on working capital management, resulting in reduced working capital requirements.

Hidrovias Results and Strategic Growth:
- Hidrovias, now consolidated into Ultrapar's financials, reported record results with a 10% increase in total volume and 39% rise in recurring adjusted EBITDA compared to the previous year.
- The growth was attributed to improved navigation conditions, higher volumes, and tariff adjustments, reflecting strategic investments and operational improvements.

Ipiranga's Market Challenges and Regulatory Progress:
- Ipiranga's volume sold in the second quarter was 2% lower than the previous year, with diesel and auto cycle volumes decreasing by 3% and 1%, respectively.
- The decrease was due to irregularities in fuel imports, biodiesel blend, and illegal activities, but regulatory improvements, such as single-phase taxation and tax solidarity principle, are expected to address these issues.

Ultragaz Performance and Regulatory Concerns:
- Ultragaz's LPG volume sold was 1% lower, with the bottle segment declining by 2%, reflecting competitive dynamics and increased Petrobras auction costs.
- The company expressed concerns about potential regulatory changes that could negatively impact safety and investments in LPG infrastructure, while emphasizing the importance of maintaining brand respect and efficient supply chains.