Welcome to the annual report of Ultra. This publication shows the activities, relationships and key results in 2017 for our businesses – Ipiranga, Oxiteno, Ultragaz, Ultracargo and Extrafarma.

For the second year, we present a more complete vision of the Company with the inclusion of new socio-environmental information reinforcing the disclosure of our results. Our Sustainability Model comprises five pillars (Safety, the Environment, People, Products and Services and the Value Chain), which are incorporated in the management of each company. Respecting the segment and the context in which they operate, each one of Ultra’s businesses also has their own indicators.

We are also mindful of the best reporting practices through the incorporation of the principles of the Global Reporting Initiative (GRI) and the International Integrated Reporting Council (IIRC). Institutional transparency for us is the way we can present a more comprehensive vision of the impact and the value that we generate for our stakeholders.

The information related to our sustainability pillars considers the degree of maturity of the Company in the raising and monitoring of this information and its relevance to the stakeholders.

Good reading!

In 2017, we celebrated 80 years of history at Ultra – a period characterized by the best practices of corporate governance and financial soundness. Our management model is focused on the creation of value and designed to constantly engage our team of more than 16 thousand and to serve our clients well through a strategy that prioritizes operational excellence, safety, the environment and the quality of our products and services. All this with sustainability as the indispensable ingredient in our strategic and operational actions, guaranteeing the Company’s longevity.

Indeed, as pioneers in the distribution of liquefied petroleum gas (LPG), the building of this legacy over 80 years has been inseparable from the development of Brazil itself. Over the period as one of the largest and diversified companies in Brazil with a footprint in nearly all the states in the federation and in 85% of the country’s municipalities in addition to eight other countries.

The year 2017 saw a slow recovery in economic activity in Brazil, following two years of deep recession, which, as with all Brazilian companies, had its impact on Ultra. We achieved one more year of consistent results, registering growing revenues at all the businesses, consolidated revenue improving by 3% to reach R$ 80 billion.

Two events during the period demanded flexibility and speed of reaction to allow us to proceed with our plans based on our vision of the future: the decision of the Brazilian Anti-Trust Authority (Cade) to reject the acquisitions of ALESAT (in 2017) and Liquigás (early 2018) and requiring us to revisit our investments’ strategies.

Our confidence in Brazil and in potential of our businesses is reflected in the approval of approximately R$ 2.7 billion in investments for this year, evidence of the continuing good opportunities that exist for the Company in organic growth and productivity gains.

As an important change during the year, we were required to adjust to the new model for petroleum derivatives pricing, now based on the international parity for oil with consequent frequent oscillations in refinery prices. This new dynamic required with it new ways of working at Ipiranga and Ultragaz, both of which were obliged to react rapidly in order to continue serving clients and resellers with quality and differentiation.

“Our management model is focused on the creation of value and designed to constantly engage our team of more than 16 thousand and enchant our clients”

Ipiranga in 2017 maintained the strategy of investing in additional service stations and convenience stores, in the strengthening of reseller partners and expanding the distribution infrastructure. We ended the year with 8,005 Ipiranga service stations, an increase of 442 over 2016. In conjunction with the expansion of the network and reinforcement of the one-stop service station concept, we added 250 new am/pm franchises, 141 Jet Oil units, 179 bakeries, 116 beer caves, among other initiatives for increasing the offer of products and services, generating increased customer flows through the service stations and greater value for our resellers.

We continued our internationalization strategy at Oxiteno with the expansion of the plant in USA, scheduled to begin operations in the first half of 2018, and permitting us to compete more effectively in the North American market – the largest for surfactants in the world. We also saw progress in activities relating to R&D and innovation, adding a further 29 new products to our portfolio.

At Ultragaz, the focus was on innovation and operational excellence, advancing the business strategy of improvements to the resellers network, service differentiation with the support of technological resources and the creation of new commercialization channels. These initiatives were critical to meeting the dynamics of the LPG supply market when set against the background of adaptation to pricing based on the international parity and feeding through to greater price oscillation, as informed before.

In June 2017, Ultracargo resumed partial operations at the Santos port terminal with 67.5 thousand m³ of capacity being returned to use. The company reported an improvement in its operating indicators with continuing strong fuel handling activity at the ports. Ultracargo now has one of the most modern fire protection systems in the country.

Following the relaunch of the Extrafarma brand in 2016, with a positioning which reinforces the characteristics of trust and proximity in relation to our clients, we accelerated the rate of expansion of the network with a new store model and opening 100 new units during 2017. We focused our expansion in the North and the Northeast regions where we are market leaders in the states of Pará, Maranhão and Amapá. We enhanced the density of our footprint in the states of Ceará, Rio Grande do Norte and Piauí, expanding operations in Pernambuco, Paraíba, Tocantins and São Paulo as well as making our debut in the states of Bahia and Sergipe. By year-end, we had a presence in 12 states with a total of 394 stores.

In this Annual Report, we invite all to learn a little about our trajectory and responsible for Ultra becoming a reference in the businesses management and committed to society and the environment. Our results would not have been possible without the support of our team which merits all our recognition and gratitude. We would also like to reiterate our commitment to our partners and investors. We intend to pursue our strategy in a responsible manner, continuing to contribute to the development of Brazil through innovative initiatives which ensure the long-term sustainability of the businesses, the continuing loyalty of our clients and the organic growth of the Company.

Pedro Wongtschowski (Chairman of the Board of Directors) and Frederico Curado (Chief Executive Officer)

Note: On May 02, 2018, Ultra announced the leadership succession for the Board of Directors. Pedro Wongtschowski will take over as chairman of the board in succession to Paulo G. A. Cunha, who held the position since 1988. In recognition of his contributions over more than 50 years, Cunha was appointed to the honorary and lifelong position of President Emeritus of Ultra’s Board of Directors. Wongtschowski joined Ultra's board of directors in 1985, served as chief executive officer between 2007 and 2012 and has been a member of the Board of Directors since 2013.

Ultra is a multi-business company present in nearly all the states in the federation and with operations in eight other countries. With a significant participation in the segments in which it operates and one of the largest business groups in Brazil, the organization has more than 16 thousand employees.

Its businesses are supported by the best practices of corporate governance and financial soundness, thus ensuring the longevity of the Company. For 18 years it has had shares listed on the B3 São Paulo exchange and on the New York stock exchange with a Level III ADR program. Since 2011, Ultra has had a Novo Mercado listing and a segment which requires a highly differentiated standard of corporate governance.

The Company taps the capital markets not only as a source of funds for investments but also as a catalyst for development and consolidation of its corporate culture, the foundations of which are shared responsibility based on meritocratic management and on the alignment of interests.

To celebrate its anniversary, Ultra has created a special hotsite which tells its history. See here

A Strategic Presence

Ultra is present in nearly all the Brazilian states and in the Federal District – corresponding to 85% of the municipalities in the country – in addition to eight countries. The businesses comprising the Company are:

Ipiranga – distributes and sells fuels and lubricants. The company ended 2017 with 74 storage terminals and distribution pools as well as 8,005 service stations nationwide.

Oxiteno – a transnational chemicals company with seven industrial units in Brazil – Mauá (SP), Suzano (SP), Tremembé (SP), Triunfo (RS) and three in Camaçari (BA) –, three in Mexico (Coatzacoalcos, Guadalajara and San Juan del Rio) and a further three in Uruguay, Venezuela and the United States. The company also has a presence in Argentina, Colombia, Belgium and China through commercial offices.

Ultragaz – the largest liquefied petroleum gas (LPG) distributor in Brazil with 18 filling plants, 25 plants for product storage and distribution and a network of about 5.8 thousand independent resellers serving more than 11 million households and 52 thousand corporate customers.

Ultracargo – a liquid bulk storage company with a presence in six Brazilian port terminals: Itaqui (MA), Suape (PE), Aratu (BA), Rio de Janeiro (RJ), Santos (SP) and Paranaguá (PR).

Extrafarma – a retail pharmacy business with 394 drugstores in 2017, present in 12 states with a marked concentration in the North and Northeast regions. Extrafarma is a leader in its segment in the states of Pará, Maranhão and Amapá.

7%

annual average growth of revenue in the last five years

9%

annual average growth of EBITDA in the last five years

6%

annual average growth in net income in the last five years

R$ 7.8 billion

invested in five years in the businesses

Financial Performance ¹ (R$ million)

1. The financial information presented in this document has been prepared according to International Financial Reporting Standards (IFRS). EBITDA figures were prepared pursuant to ICVM 527. Ultra’s financial information corresponds to the Company’s consolidated information. The financial information for Ipiranga, Oxiteno, Ultragaz, Ultracargo and Extrafarma is presented without eliminating intercompany transactions. Except where otherwise indicated, all figures are shown in R$ million.
2. Organic investments.
3. In 2014, figures relate to the eleven months from February to December.
4. Average daily trading volume presented considers the combined trading on B3 (Brasil, Bolsa, Balcão) and NYSE.

Distribution of value

The Statement of Value Added reports the value of wealth generated by the Company and its distribution among the different stakeholders that contributed to its performance. In 2017, Ultra generated value added of R$ 6,958,432,000 distributed as follows:

People

Number of employees per company ¹

1. No interns included.
2. The Ultra Corporate Center covers all the businesses, centralizing the activities of treasury, insurance, financial control, legal, mergers and acquisitions, investment control, planning, information technology, communication, investor relations, human resources, facilities & utilities, pensions and internal audit.

Safety

Accident rate requiring leave of absence (per million hours worked) ¹

1. Rate is calculated based on the number of accidents / MHs (Calculated pursuant to NBR 14280) of employee numbers as at December 31, 2017.
2. The numbers have been revised.

Environmental

Greenhouse gas emissions (scopes 1 and 2) – tCO₂e

1. Amounts correspond to emissions from all Oxiteno’s industrial units with the exception of Pasadena (USA). Since 2016, Oxiteno and White Martins have implemented a project for the sale and purification of CO₂ generated in the production of ethylene oxide.
2. In 2015, Ultracargo reported significantly higher emissions as a result of the Santos fire, therefore, the value has changed significantly.
3. The numbers have been revised.
4. Ipiranga’s GHG inventory is based on operational control and for this reason, the lubricants plant was included in the inventory until November 2017.
5. Increased emissions in 2017 is due to higher output during the year.