Ultrapar Participacoes SA

BOVESPA:UGPA3

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to Ultrapar's 1Q '19 Results Conference Call. There's also a simultaneous webcast that may be accessed through Ultrapar's website at ri.ultra.com.br in MZiQ platform. Please feel free to flip through the slides during the conference call.

Today with us we have Mr. André Pires, Chief Financial and Investor Relations Officer, together with other executives of Ultrapar.

We would like to inform you that this event is being recorded. [Operator Instructions]

We remind you that question which will be answered during the Q&A session may be posted in advance in the webcast. A replay of this call will be available for 1 week.

Before proceeding, let me mention that forward-looking statements are being made under the safe harbor in Securities Litigation Reform Act of 1996. Forward-looking statements are based on the beliefs and assumptions of Ultrapar management and other information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors can also affect the future results of Ultrapar and could cause results to differ materially from those expressed in such forward-looking statements.

Now I'll turn the conference call over to Mr. Pires. Mr. Pires, you may begin the conference.

[André de Oliveira Dias, executive]

Well, thank you very much. Good morning, everyone. It's a pleasure to be here with you to discuss Ultrapar's first quarter 2019 results and our perspective and priorities for the next quarters.

With me today are the officers from our businesses as well as our Investor Relations team.

Before I begin, I'd like to draw your attention to Slide #2, where we highlight some new criteria adopted for preparing the quarterly numbers, changes that are effective from 2019 on.

Starting with the first quarter, we have adopted the new IFRS 16 on a prospective basis, which has some impacts on the reporting of operational leases in our financial statements. In addition to the IFRS 16, we have decided to report the Corporate segment separately from the business units, thus providing greater transparency on our expenses as well as improving comparability among peer companies.

The Corporate line includes expenses related to the structure of the Ultrapar holding company. These 2 changes are described in detail in our earnings release together with comparative tables. In order to keep comparability since the changes have been made on a prospective basis or without changing past figures, we continued to present in this discussion the results according to the previous criteria already known to you.

Moving on to Slide #3. During the course of the first quarter, signs that the expected economic recovery was becoming more difficult became increasingly advanced with diminishing GDP forecasts for the year as well as weaker industrial performance.

In the table in the right-hand side, we can see some market indicators related to the sectors we operate in. Data published by the Brazilian Association of Pharmacies, Abrafarma, show a significant increase in competition in retail pharmacy sector with a strong expansion of other pharma members over the past few quarters in all geographic regions in Brazil. In the LPG distribution sector, there has been also a decline in domestic consumption. Among our businesses segments, the only one to report year-on-year growth was the fuel distribution business with a recovery of volumes in recent quarters. More specifically, in the first quarter of 2019, sales volumes of diesel and Otto cycle increased by 2% and 3%, respectively.

Looking at Ultrapar results in the quarter, adjusted EBITDA was BRL 782 million after the adoption of the IFRS 16. If the impacts of the new accounting standards were not to be considered, adjusted EBITDA was BRL 698 million, a growth of 37% over the amount reported in the first quarter of 2018. However, when adjusted for the Liquigás breakup fee settled last year, there was a 12% reduction in adjusted EBITDA.

We will provide greater detail for each business during the presentation.

Ultrapar's net earnings were BRL 251 million compared to BRL 73 million reported in the first quarter of 2018, this, again, a reflection of the Liquigás fine.

Cash flow generated from operational activities was BRL 462 million in the quarter, well above the first quarter of 2018.

Let's now move on to Ipiranga's performance in Slide #4. Continuing along the path of late 2018, sales volume in the first quarter of 2019 was 5.6 million cubic meters, an increase of 2% compared with the first quarter of 2018. There was an increase of 3.2% in Otto cycle, which was slightly above the market. Diesel sales volume rose 2%, in line with market growth. We ended the first quarter of 2019 with a network of 7,218 service stations. That's a net addition of 138 units compared with the first quarter of 2018 and stable in relation to the fourth quarter of 2018. In addition to the service station network, we continued to pursue our strategy of differentiation and innovation, including the expansion of our franchise network. Ipiranga's app, Abastece Ai, continues to gain customer traction, reaching 7.7 million transactions in the first quarter of 2019. There was also an additional 700,000 new customers in the quarter totaling 2.2 million registered individuals with transactions to date.

Ipiranga recorded a reduction of 8% in expenses compared with the first quarter of 2018. This is firstly due to a reduction at ICONIC related to higher initial expenses due to the integration of the businesses in 2018. Another factor was the reduction of expenses, particularly with advertising and marketing, while provisioning for losses was also lower, in line with an improvement in customer credit ratings.

Therefore, adjusted EBITDA amounted to BRL 538 million, a reduction of 8% compared with the first quarter of 2018. This performance was due to lower gross margins in Otto cycle partially offset by greater sales volumes and lower expenses in the period. Profitability indicators continued to show a recovery from the past few quarters, and unitary EBITDA was BRL 96 per cubic meter, a sequential evolution over the first quarter of 2018.

Despite the seasonal negative effects between periods -- sorry, despite the seasonal negative effects between periods. Considering the previously mentioned adjustments of IFRS 16 and the separation of the Corporate segment, Ipiranga's adjusted EBITDA was BRL 594 million.

The increase in international oil prices and its derivatives over the past few months, combined with a less favorable outlook for the economic environment, will pose challenges for a faster recovery. With a more cautious approach in the short term, we continue to work on various fronts to optimize operational efficiency and the capital allocation, including initiatives to reduce expenses. In addition, we are placing a greater focus on the development of convenience and digital initiatives with structures dedicated to each of these activities. For the current year, we are maintaining our forecast of sales volume growth above GDP as well as a recovery in EBITDA on a year-on-year basis.

Moving on to Oxiteno now in Slide #5. Oxiteno's total sales volumes in the first quarter of 2019 was 180,000 tonnes, stable compared to last year. Commodity volumes rose 12% compared with the first quarter last year, thanks to new sales agreements. On the other hand, specialty chemical volume was down 2% against the same quarter due to slowing of the Brazilian economy, impacting the mix of volumes sold by Oxiteno. Consequently, sales volumes in the domestic market reduced 2% year-on-year. However, in the international market, the ramp-up at the new Pasadena plant contributed to an increase of 4% in sales volume, particularly in the U.S.A. This was an atypical quarter for Oxiteno, probably the lowest profitability in a quarter in many years.

Regarding margins, the speed and intensity of the decrease in reference prices for petrochemicals, particularly related to the increase in the [ level of ] supply and high levels of inventories in the international market significantly impacted Oxiteno's profitability, as you can see in the graph on the lower left-hand side.

Therefore, Oxiteno recorded an EBITDA of BRL 34 million in the quarter, a decline of 33% when compared with the first quarter of 2018. The factors driving this result were at a lower level of unitary margins in dollars, the sales mix with a greater share of commodities as well as the higher cost of the Pasadena plant despite the 16% devaluation of the real against the dollar.

Considering the previously mentioned adjustments of IFRS 16 and the separation of the Corporate segment, Oxiteno's EBITDA was BRL 39 million.

We should see an increase in volumes in the second quarter. On the other hand, we are still facing pressure on margins of commodities. The combination of these effects should lead to a gradual improvement in the results although lower than the same period of 2018. We are working on initiatives to reduce expenses and capital in the face of the more challenging environment.

Moving on to Slide #6 and the performance of Ultragaz. During the first quarter, sales volume of Ultragaz was down 4% year-on-year while sales volumes for the market reduced approximately 2% in both segments. Bottled segment volume was 4% less also when compared with the first quarter of last year. This was due to a decline in consumption and to a temporary cutoff supply in LPG by some refineries. In the bulk segment, sales volume was down by 3%. Here, there was a reduction in consumption on the part of industrial clients and in line with the tendency we have seen in industrial activity as a whole.

Despite Ultragaz's customary cost discipline, we saw a BRL 33 million rise in SG&A expenses due to greater provisioning for loan losses, higher expenses in labor indemnifications related to adjustments in the organization and legal contingencies in the first quarter of 2019.

With this, EBITDA at Ultragaz was BRL 97 million in the quarter, 70% -- 17% less than the EBITDA reported in the first quarter of 2018, adjusted for the Liquigás fine.

Considering the previously mentioned adjustments of IFRS 16 and the separation of the Corporate segment, Ultragaz EBITDA was BRL 108 million.

The issues surrounding the supply of LPG, which I just mentioned, were resolved in April, so we do not expect any further significant impact. The outlook is for a gradual resumption in the moderate growth trajectory expected for the full year.

Going on to Ultracargo now in Slide #7. In the first quarter of 2019, Ultracargo's average storage increased by 5% in relation to the first quarter of 2019. This result is due to a greater movement at the Santos terminal, combined with additional ethanol handling activities, more than offsetting the decline in fuels handling at the terminals.

In the quarter, Ultracargo's EBITDA was BRL 52 million. That's 27% higher in relation to the same period last year, a combination of greater average storage, contractual readjustments at the terminals and an increase in operational efficiency.

Considering the previously mentioned adjustments of IFRS 16 and the separation of Corporate segment, Ultracargo's EBITDA was BRL 59 million.

For the year, we expect the current market dynamic to continue in a trajectory similar to the first quarter of 2019. In addition, we announced yesterday the outcome of an agreement with the public prosecutor's office about the fire incident at the Santos terminal in 2015. The total amount of the agreement is BRL 67.5 million to be disbursed up to September 2020. We had a provision of BRL 15 million related to this matter, and we will complement this provision in the remaining amount during the second quarter of 2019.

Let's move on now to Slide #8 and talk about Extrafarma. Extrafarma ended the first quarter of the first -- the first quarter of '19 with 440 drugstores, a gross addition of 65 stores in the past 12 months and 9 stores in the quarter. At the end of the period, 54% of the stores had been open for less than 3 years, the same level as the first quarter of 2018.

Extrafarma's gross revenue in the first quarter of 2019 increased by 1% compared to the first quarter of '18. This represents a 3% increase in retail sales and reflects a larger average number of stores and the annual adjustment in pharmaceutical prices. However, these effects were offset by the intensification in the competitive environment.

The expansion of competitors in Extrafarma's main markets had reduced its margins. Therefore, EBITDA for the quarter was a negative BRL 21 million, mainly reflecting the impact of an intensely competitive market and expansion of the network.

Considering the previously mentioned adjustments of IFRS 16 and the separation of the Corporate segment, Extrafarma's EBITDA after adjustments was BRL 1 million.

In the current quarter, we see no significant change in the competitive environment, which continues to be tight. But these effects should be gradually offset over the next quarters with the maturing of gross revenues and the annual adjustments of medicine prices, better sales arising from the stabilization of the new retail system, better management of expenses and closing of poorly performing stores.

To conclude, I would like to comment on some of the initiatives we have been taking at the beginning of the year as well as our priorities and perspectives for 2019.

We were successful in some port concessions actions organized by the government early in the year. Through a consortium, Ipiranga was successful in bids to invest and operate lots at the ports of Cabedelo in the state of Paraíba and Vitória in the state of Espírito Santo for a minimum term of 25 years. Ipiranga also won the concession for 2 areas in the port of Miramar in the state of Pará for a minimum period of 15 years. This is a strategic move for Ipiranga, which will now have its own storages and ports of Cabedelo and Vitória in addition to expand capacity at the port of Miramar. Therefore, it will expand its logistical efficiency in the distribution of fuels and the quality of the service provided in their respective regions.

Ultracargo won the bid for a terminal in the port of Vila do Conde also in the state of Pará for a minimum term of 25 years. The terminal will have a minimum capacity of 59,000 cubic meters, and operations are scheduled to begin in 2023. This will be Ultracargo's seventh terminal and a strategic initiative in an area with a growing demand for fuels. Investments in these concessions will be disbursed over the next 5 years.

We held our annual general meeting on April 10, and our shareholders approved some important matters including the election of the Board of Directors for the next 2 years with the entry of 4 new members. This will bring additional experience in a complementary way to the Board and the adjustment of the company's corporate bylaws for the new regulation of the Novo Mercado segment 2 years ahead of the deadline.

In spite of an operational performance which is still below historical levels, we are committed in taking steps to improve the profitability indicators of the businesses and maintaining our financial soundness. This will involve initiatives to reduce expenses and focus on capital allocation without sacrificing the company's long-term growth.

With this, I conclude my presentation for today. Thank you for all -- thank you all for participating on this call. We can now begin the Q&A session. Thank you very much.

[Operator]

[Operator Instructions] And our first question comes from Fernanda Cunha from Citibank.

[Fernanda Perez Da Cunha, analyst]

Some of my questions are going to be on the follow-up of the Portuguese call, okay? So the first one is related to the sequential sales that you had seen in Ipiranga. When we look at month over month this quarter, that means January against December 2018, February against January and then on, we see that sales volumes are performing behind your top 2 peers/competitors. Can you comment why this has happened and what you expect in upcoming quarters in terms of volume growth? And also, if you could provide a rough number of fuel station openings for 2019.

The second one is related to SG&A in Ipiranga. You mentioned in the last call that SG&A improved BRL 10 per cubic meter. But when we try to exclude the impact of ICONIC expenses, it seems that on a recurring basis, it has only improved around BRL 5. Could you help us quantify how much you have achieved in SG&A cost-cutting initiatives?

And at the third one is if you could comment on the returns expected in which you took the decision to participate in the port concessions auction. Given that you will be spending around with BRL 500 million in expansion CapEx for the next couple of years, I'm just wondering what drove that decision. And what can we expect in terms of better returns on this decision?

[André de Oliveira Dias, executive]

I'm going to start with the third question, Fernanda Thanks for the questions. But starting with the port concessions. Basically, the vision for these concessions were basically the same type of vision we have for Ultracargo and for Ipiranga, which is the fact that structurally, we see Brazil as a country that will, in the long run, be short on refined fuel products. Therefore, it's very important that you have logistics infrastructure to be able to provide for this increase in movement of fuels throughout the country. These investments -- I mean, the prices that we ended up committing both for Ipiranga and for Ultracargo is something that I can say that they ended being below what we were considering the maximum amount that we were -- that we would be willing to pay for these auctions. So clearly, the returns that we were already expecting were obviously above our weighted average cost of capital, although this is an information that we do not disclose. But we ended up paying -- or at least winning. The price for these bids was below what we were expecting. So therefore, our expected return will be higher. So significantly higher than to our weighted average cost of capital both for Ipiranga and Ultracargo.

Just a question about dividends -- second, about the volumes. Okay. If we look at the volumes, and we tend to look at the volumes more on a year-on-year basis -- on a longer-term basis, if we take the first quarter of 2019, right, our volume grew by 2.3% on a consolidated basis, basically Otto cycle plus diesel, while the overall market grew by 2.3%. So it grew exactly the same level as the total market. If we compare our growth with Plural, which is the -- basically the association of the 3 largest players, plural volume on a consolidated basis in the first quarter of '19 compared to the first quarter '18 grew by 0.5%. We grew by 2.3%. So -- and if we look at this on a sequential basis, quarter-by-quarter but on a year-on-year basis, we've been growing either in line or slightly above the market. So it's -- I don't think we should look at these numbers on a month-by-month basis. We should look at these numbers on a more longer period of time.

And if you look at market share, our market share has been stable over the last few quarters, and Ipiranga has been maintaining its position comparing with its peers and comparing with the markets in general terms.

As for the SG&A, let me just take a look here on the breakdown separating ICONIC. Just a second, please.

You are correct. So the BRL 5 per cubic meter belongs to ICONIC. So the recurring is BRL 5. But something I mentioned in the morning in the Portuguese call is that if you -- looking at the last 3 quarters, Ipiranga had been -- even excluding ICONIC, right, either reducing its SG&A or keeping it stable. So this quarter particularly, there was a reduction, and we see this strength continuing towards the year, right? So the focus is in some of the levers that we can control. And one of these levers is definitely SG&A. So there is a lot of initiative within Ipiranga to keep this type of performance on the following quarters.

[Operator]

Our next question comes from Leonardo Marcondes from Itaú BBA.

[Leonardo Marcondes, analyst]

So last year, we saw global companies joining their Brazilian fuel distribution markets through acquisitions. And in the last few months, we have seen, ex-Plural players increasing their volumes even with a reduction in imports. So I would like to know if you could evaluate the competitiveness on both pricing and branding gas station fronts in this new environment. Also on this, I would like to know if you guys track those stations that are not renewing with Ipiranga. I mean if there are -- if most of them are going to the other big fuel distributors or if they are choosing more regional or local distributors, if they are choosing to become white flags or even if they are shutting down. So that's my question.

[André de Oliveira Dias, executive]

All right. So Leonardo, thanks for the questions. In terms of the competitive environment with the new players that came into the market, I think you were referring to the new, let's say, international traders that ended up investing in distribution, we haven't seen any major change in their behaviors that we could interpret as a significant change in the competitive environment. The competitive environment remains, let's say, very tight, under pressure. You're right, I mean, the white-flag gas stations that -- I think everybody anticipated that when Petrobras reduced the arbitrage or contingent of this spread between local and international prices, this would, let's say, reduce their competitive advantage. But they've been proving very resilient, especially in a market where we do not see growth coming from the side of the consumers. So I think our business model has improved and resilient in an environment like that, but both our sales and our competitors remain also very competitive, although we are not seeing that -- such a strong market share gain from the part of independent or white flags, as we saw when we had this big arbitrage opportunity. So I think we are holding on fairly well, but the competitive environment remains under pressure.

As for the stations that are not renewing their contract with us, I mean, basically, their destiny -- it's -- I mean, basically, there are 3 different paths that they follow. Some of them basically leave the business. They eventually sell their real estate or invest in their real estate to do something else: a parking lot, a real estate development or something like -- a deposit or something like that. Some others -- or most of them, they go back to be a white flag. The vast minority of this churn goes to our, let's say, peers. I mean there's -- I mean traditionally, and it continues to be the case. And most part of the churn is either going back to white flags or even leaving the business and doing something else with their plot of land and not -- there is not -- I mean it's a vast minority of these players that are branded by our competitors.

[Operator]

Our next question comes from Gabriel Francisco from XP Investimentos.

[Gabriel Francisco, analyst]

Going down in the last question a little bit from my colleague, but if you are seeing a lower arbitrage opportunity, then I agree. Well, we all agree with that. Where does this resilience in the white flags and players that use imports is coming from? Because what I -- we would expect is that this would, at the end of the day, benefit those who are the traditional and big players and who have scale. And why are we -- what's keeping you from expanding market share and expanding margins if your competitor has a lower advantage? That's my #1 question. My number -- my second question regards -- it's a little bit of a Oxiteno and Ultracargo. We have seen disruptions in Braskem operations, and some have mentioned disruptions that could affect the Camaçari complex in terms of the supply chain. Are any of Oxiteno's operations indirectly affected by the disruptions with Braskem or Ultracargo's storage business in the region? That's my second question.

[André de Oliveira Dias, executive]

Thanks for the questions. The question number one, about the competitiveness of the white flags, well, they have a business model that is efficient especially in an environment that we do not see a lot of growth from the part of the consumer. The wallet effect in the fuel distribution business in an environment where unemployment remains high, disposable income remains low is very -- I would say, is very efficient for players that do have a business model that is more -- that are more lean. They have some scale in the areas that they operate, they have basically lower overhead, less investments in their gas stations. So when the main decision-making impact is price, I mean, they have a business model that remains very resilient and very competitive. We structurally believe that a gas station that offers differentiation through convenience, through innovation over time tends to recover those market share. But for that, we need an economic dynamic that is different than the economic dynamic we are living in. So to answer your question, the expected recovery in terms of market share from the big players versus the white flags, I think, are very dependent today on the recovery of the economic activity.

As for the issue with Braskem, there's no impact for Oxiteno whatsoever, and neither there is an impact for Ultracargo. So this is not related to any of these -- of our 2 businesses.

[Operator]

Our next question comes from a Frank McGann from Bank of America.

[Frank McGann, analyst]

Yes. Just continuing with Ipiranga. It appears that you didn't add any stores in the quarter now. And also for the company as a whole, CapEx was quite low. So I was just wondering what your thoughts are in terms of growth, in terms of service station this year as well as in the other businesses and overall CapEx. If you could provide a little bit of a view on that.

[André de Oliveira Dias, executive]

Okay. Frank, thanks for the question. Well, yes, I mean, basically, when we look at the first quarter of 2019, we have the same number of gross additions and churn. So we added 43 or inaugurated 43 new stations, and the churn was coincidentally also 43. The reason -- well, I mean, there are a few reasons for that. First, as you know, there is a seasonality in terms of inauguration of gas stations in our businesses here in as Brazil well. Normally, the seasonality is more towards the second semester of the year. So it was a weaker quarter in terms of inaugurations. Nevertheless, we reduced our backlog of -- from 300 to 250 -- reference the 250 gas stations that have been already contracted for or paid for and have to be inaugurated.

When you look at CapEx, CapEx was really below if -- what we would -- we were expecting for the first quarter, taking into consideration our budget, also partially due to some seasonality impact and partially due to waiting for the right moment and looking for the ideal returns in terms of the investments we were making.

It's important to mention that normally, during a regular year at Ultrapar, there is a catch-up after the first and the second quarters, towards the end of the year as well. However, it doesn't mean that we are necessarily going to basically have exactly the same number in terms of CapEx as expected in our budgets. There's a few changes in assumptions. The first change is related to the auctions, the ports that I mentioned during my speech. We won 2 bids, which represent a commitment around a BRL 1 billion for the next 5 years. But for 2019 specifically, there is a commitment -- an additional commitments of BRL 96 million, BRL 51 million for Ipiranga, BRL 45 million for Ultracargo, which were not budgeted to begin with, so that we are going to accommodate this BRL 96 million into the budget originally approved. But the second assumption is more related to the speed of economic recovery and the way the economy is performing in 2019. So that also might eventually entail some potential reductions if we see that the economy is not reacting the way we were expecting. The focus is to continue to generate -- to have better generation of operating cash flow also in 2019. And because of that, one of the important levers we have to pull is CapEx. The other important lever is working capital. Just to give you an example, and we had a very good performance in terms of working capital in the first quarter, again, as we did in the fourth quarter of 2018. Only in Ipiranga our cash conversion cycle was reduced by 3 days compared to the first quarter of 2018. So 3 days for Ipiranga is BRL 200 million each day, right? So it's BRL 600 million of working capital improvement despite the increase in prices, despite the pressure in terms of inventory -- of inventories. So we are using the levers of CapEx, using the levers of working capital to keep on increasing our operating cash flow generation. So making a long story short, I mean, if we had to be a little bit more conservative in terms of CapEx in order to achieve this objective, we will.

[Frank McGann, analyst]

Okay. Great. Very interesting. If I could follow up with just a kind of a bigger-picture question in terms of how are you seeing the downstream business. I mean you're obviously in a key portion now with distribution, and you've mentioned that potentially you could look at Petrobras refinery offerings. But whether you would do that or would end up doing anything on that on that front. Do you see the opening up of the refining business to potentially include more players as having -- as potentially affecting the business in a way that would positively or negatively potentially impact Ipiranga?

[André de Oliveira Dias, executive]

That's a very good question, Frank. I think conceptually, an environment where you do not have a monopolistic supplier, right, being the -- being among the largest retail players in a market like that would give us very important bargaining power when we're talking to a supplier, right? So a more diversified supply base, I think, is positive for a -- large distribution companies such as ourselves. It's also positive for the end consumer. It will become a more fully competitive environment. Obviously, today, I mean, we are in an environment where the fact that we are a very important and large player. And eventually, since specific regions of the country like the South or Southeast we are we are very big, doesn't yield us any advantage from a cost point of view, right? So an environment with very clear rules and more players, I mean, it's basically, technically or conceptually more positive for a player such as Ipiranga. Obviously, as I mentioned before, I mean, we have like an obligation, right, to be very close to this process, to investigate if it'd make sense for us to participate or not. But in any case, from a structural point of view, conceptually, a change such as this one is very positive.

[Operator]

Our next question comes from Luiz Carvalho from Banco UBS.

[Luiz Carvalho, analyst]

I'd just like to make one -- actually, 2 additional questions, 1 question and 1 follow-up. The first one in -- about Oxiteno. Well, I remember in the past you mentioning that for every cent of real depreciation, we should see around BRL 40 million of additional EBITDA in the company. But I'd just like to check with you if this correlation is still valid now because, despite of a weaker real, we do not see -- how can I say this -- this offset on the results as of now.

And the second one, I'd like to come back to one question made in the Portuguese call maybe in a different way in terms of the comparison on EBITDA growth for 2018. What numbers -- what the number you're using for, let's say -- for the, let's say, 2019 versus 2018? Can we use the official reported number or we should make the -- take any adjustment?

[André de Oliveira Dias, executive]

In terms of Oxiteno, yes, for each BRL 0.10 of currency devaluation, you can estimate BRL 40 million to BRL 50 million of additional EBITDA. This is absolutely -- remains absolutely the case. But what happened in the first quarter was that the acceleration of the devaluation happened more towards the end of the first quarter, if you compare to the first quarter of last year. And this impact was not enough, was not sufficient when compared to the impact of the very strong drop of the glycol -- or the price of the glycol, the margins of the commodity. But this remains the case, and this should help the results in the second quarter definitely. Even with the pressure on glycol margins, the currency devaluation should benefit the results on the second quarter.

As for your second question, that's a very -- I mean, basically, I'll try to repeat -- to answer the question the same way but eventually trying to explain a little bit more.

We see growth in our consolidated EBITDA. Comparing apples-to-apples, right, I mean, you saw in 2018 we had one-offs that some of them impacted negatively the EBITDA, some others impacted positively EBITDA. So if you take out these nonrecurring items, you'll see growth on the EBITDA is our expectation, in fact, to see EBITDA growing in 2019.

[Operator]

[Operator Instructions] Our next question comes from Lilyanna Yang from HSBC.

[Lilyanna Yang, analyst]

You mentioned the active portfolio management and its [ funnel ] of growth opportunities, right? So given your leverage at 2.65x today, there's slowly improvement in the economic environment. Could you give more color on the growth opportunities? It does not seem to be on refining. It looks like it could be more on logistics. Is there something else there? And how would you fund that growth, meaning, yes, how sizable that could be? Any color on that would be helpful.

And a second question is more on Ipiranga. So is it impossible to see Ipiranga causing the profitability gap to rise [ in currency base ]? And how do you think Ipiranga could achieve that?

[André de Oliveira Dias, executive]

Thanks for your questions. In terms of our vision for the portfolio, we see some opportunities that we started, in a way, to execute with the auctions that we won recently for terminals and ports. So basically, we see, in the short term in Brazil, opportunities that are related to logistics and infrastructure. So we are focusing on and executing on that. And we see, and we follow up very closely, the initiatives that Petrobras and -- that have been, in a way, either announced or commented by Petrobras as its objective to reduce some of its exposure in some sectors. So obviously, refining is one of them that we are following up. And I mentioned during the Portuguese call, I mean, we consider ourselves a pure distribution company. It's not part of our regional strategy to become a producer of refined fuel. But eventually, if the opportunity makes sense, we are going to investigate. As we are going to investigate other opportunities that are eventually available related to some other Petrobras assets.

Now in terms of funding this growth, I mean, basically, we've been already deleveraging since the end of last year. We continue to see a stronger, let's say, cash flow generation that will help on the deleveraging phase. And again, if we have an opportunity that makes sense that will generate important returns to our shareholders, that can generate returns from synergies as well, we might consider even going a little higher in terms of leveraging or to take advantage of these opportunities. But in any case, in the short term, we don't see any reason to increase or any opportunity that would require this increase in leveraging. I mean these as things much more towards the long term than the short term.

I think it is important also to mention that in addition to the issues related to logistics, infrastructure or Petrobras assets, to the initiatives that Ipiranga and ourselves have been dedicating to, let's say, the other digital and continuous initiatives of Ipiranga, we -- I mentioned in my speech that we're dedicating time and specific structures to evaluate these initiatives both in the case of the am/pm convenience store or the other digital initiatives, as mentioned in the speech, the traction that our app, Abastece Ai has been gaining and also the increase in the number of participants of our loyalty program. So this is also something that we're dedicating a lot of time and that we can obviously give more focus now and in the future.

[Lilyanna Yang, analyst]

Okay. And yes, maybe on the Ipiranga question and the profitability gap, so rise in earnings, if you can comment on how...

[André de Oliveira Dias, executive]

Yes, yes. I mean -- yes. Yes, in terms of the profitability gap, well, basically, I mean, as I mentioned there before, I mean, we've been improving our unitary SG&A per cubic meter. We've been sequentially improving our EBITDA since the second semester of last year. We don't have a focus specifically in closing the gap. Our focus is to keep on improving our profitability. So we think that we are on track for that. Profitability has been improving. EBITDA per cubic meter has been improving as well. And we see that this trajectory should continue. Obviously, this will happen more consistently on a more stronger way if we see the economy helping, right, if we see some headwinds -- some tailwinds from the economy. So -- and fortunately -- for the beginning of this year, this hasn't happened. But, I mean, we are focusing on this improvement, and we are very consistent in working towards that.

[Operator]

Ladies and gentlemen, this concludes today's question-and-answer session. At this time, I would like to turn the conference call back over to Mr. Pires for any closing remarks.

[André de Oliveira Dias, executive]

Well, thank you all for the participation on the call. As always, our IR team is available to answer some of your other questions. Thank you very much and hope to see you all on the second quarter results call in August. Thank you.

[Operator]

Thank you. This concludes today's Ultrapar's 1Q '19 Results Conference Call. You may now disconnect your lines at this time.