Vibra Energia S A : 4Q22 Earnings Release

4Q22 PERFORMANCE

4Q22 WEBCAST

Vibra Energia is hosting a Webcast with simultaneous translation on March 22, 2023 to discuss the Company's earnings for the fourth quarter of 2022. The presentation can be downloaded from the Company's website one hour before the teleconferences commence.

Time

11:00 AM (Brasília time) / 10:00 AM (New York)

Link to access Webcast: Click here

For queries or if you are unable to connect to the call, please contact us on the e-mail

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The transcription, presentation and audio will be made available after the teleconference/webcast on the Company's site: ri.vibraenergia.com.br

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MESSAGE FROM MANAGEMENT

We concluded 2022 by showcasing results that once again confirm Vibra's consolidation as a leading player in the Fuel Distribution Sector, achieving our goals in terms of volumes, Adjusted EBITDA and enviable margins in the industry.

For 4Q22 we report an Adjusted EBITDA of R$ 1.581 billion (+70.9% QoQ and -1.1% YoY) and a sales volume of 10.050 million m³, corresponding to an EBITDA margin of R$ 157/m³. With this result for 4Q22 we closed 2022 with an Adjusted EBITDA of R$ 5.3 billion, a volume of 38.553 million m³ and an Adjusted EBITDA margin of R$ 137/m³, maintaining its consistent market share averaging 28.2%.

These results were achieved amid rampant volatility in commodity prices and fuel demand in 2022, compounded by a supply squeeze domestically and the mismatch between domestic and imported product prices. This situation was further complicated by unprecedented actions implemented by the federal government, lawmakers, state governments and regulatory agencies aiming to push down fuel prices, culminating in significant reductions in the taxes levied on our products and the postponement of CBIO acquisition targets, with wide-reaching impacts on our operations. At the beginning of 2022 demand was also hit by the third wave of the pandemic and the torrential rainfall that blighted several regions of Brazil.

The challenges faced 4Q22 produced a series of effects on our results that we believe are nonrecurring, while we were able to make gains in fronts that we can also consider temporary. If we were to normalize the adjusted EBITDA for 4Q22 for negative non-recurring effects, notably related to commodity price changes and the Company's initiatives that positively affected results in a non-recurring way, we would have achieved a normalized Ebitda of approximately R$ 1.4 billion corresponding to a normalized EBITDA margin of R$ 135/m3.

We are compelled to point out just as important as the impressive results achieved is the fact that Vibra has been able to weather the most diverse market conditions imaginable, sustaining consecutive consistent gains and overcoming challenges in tough times, as we saw in 2022 and before.

And, as we do in all periods, we understand it is important to share with our investors our vision of the competitive and market dynamics present during the quarter, especially in order to make it possible to connect the business environment, the Company's performance and its impacts with the results presented, which we will now discuss.

4Q22

4Q22 saw rampant volatility in our commodity prices, with diesel prices throughout October experiencing new increases in crack spreads and leading to a new mismatch between domestic and international prices. This situation was compounded by a temporary market surplus of products, with players having prepared for the seasonal peak demand for diesel in October, but with demand proving to be lower than expected in that month. This combination exerted pressure on margins in the sector at the beginning of the quarter, a trend that we reversed at the end of the year.

Historically, we have observed the occurrence of a seasonal peak in diesel demand in October, especially due to the effect of crop harvesting. This expected demand for early 4Q is already sufficient reason to replenish inventories, and the marginal supply in the market is provided by increasing imported volumes, since domestic refining does not have the capacity to fully serve the market, notably for low-sulfur diesel.

However, specifically for 4Q22, we were expecting even higher volumes than indicated by typical seasonality, considering that sales made in August and September exceeded expectations, indicating a possible short-term spike in demand.

By the end of 3Q22 we had already noticed the various market players preparing for this expected peak in demand in October, mainly by increasing imports, which at that time were attractively priced.

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Throughout October, however, two concurrent movements occurred: a sudden detachment of international prices from domestic ones, with diesel crack spread expanding again and leading to higher hedging expenses, without a corresponding increase in domestic prices, which would compensate these costs by appreciating the Company's inventories; and an actual demand for products lower than that expected by the players, leading to a temporary oversupply of products in the market and consequently tighter margins.

Further into 4Q22, in November and December we saw demand sustained at the same level as in previous months. Our inventories were higher so we sought to normalize inventory levels by the end of the year by reducing imports. We believed that the oversupply would normalize within a reasonable time, allowing us to quickly resume healthier margin levels. Firstly, because the industry operates with relatively short inventory levels, and secondly, because the mismatch of domestic prices in relation to international ones would eventually discourage imports. The possible return of Pis/Cofins taxes on fuels at the beginning of 2023 was also hanging in the air, which could drive up demand to some extent at the end of the year, by customers seeking to profit from the appreciation of their own inventories due to this tax increase. This more intense demand at the end of 2022 did indeed materialize. Thus, throughout November and December our expectations were confirmed, bringing a more favorable competitive environment for us to raise our margins.

As major non-recurring effects, it is worth noting the reduction in fuel prices that occurred in the domestic market in early December, causing inventory devaluation, coupled with hedging expenses in early 4Q22. The combined effects of hedge expenses and inventory losses affected our adjusted Ebitda by -R$756 million in the quarter, impacting our Ebitda margin by -R$75/m³.

Moreover, we were able to make significant progress in our divestment drive for properties and bases, fulfilling one of the objectives we had set for this year, achieving an Ebitda of R$ 325 million, or R$ 32/m³ in 4Q22. In addition, it was also possible to recognize gains from extemporaneous Pis/Cofins tax credits, which provide an immediate positive impact of approximately R$ 680 million on our Ebitda in 4Q22, or R$ 68/m³, when we consider these credits accumulated over the last 5 years, resulting from essential operating expenses. We will also be able to credit ourselves with about R$ 40 million per quarter in current expenses.

In short, 4Q22 had significant non-recurring effects influencing results. However, as occurred in several previous periods, the net balance of these effects ended up being less relevant than any of these effects considered individually. Overall, we had non-recurring hedging expenses of -R$ 482 million (or -R$ 48/m³) and inventory losses of -R$ 274 million (or -R$ 27/m³). We obtained PIS and COFINS tax recoveries of +R$ 680 million (or +R$ 68/m³) for the Company and concluded sales of properties and bases for +R$ 325 million (or +R$ 32/m³). This accordingly yielded a net impact of approximately R$ 224 million (or +R$ 22/m³). After disregarding all non- recurring effects in order to have a clearer view of the Company's margin levels, the normalized adjusted EBITDA of R$ 1.4 billion leads us to a normalized EBITDA margin of approximately R$ 135/m³.

It is worth commenting that 4Q22 volumes are extremely positive (+0.8% YoY), although the typical seasonal peak in October did not materialize. For Vibra, this recovery in sales volumes is noteworthy when considering that in 2022 there was no contribution from fuel supply for the emergency thermal generation segment, which in 2021 reached approximately 1.7 million m³. When adjusting for these thermal volumes, we observed YoY growth of over 5% in our sales. A total return of economic activity in the markets in which we operate is therefore noted, with no apparent further consequences of the recent pandemic on our sales.

It is also important to note that the normalization of inventory levels at the end of 2022 helped us free up working capital, leading us to a leverage ratio of 2.6x (net debt/LTM Ebitda), starting from the 2.8x in place at the end of 3Q22.

Our Multi-Energy Platform

We are quickly advancing in our agenda to transform Vibra into a multi-energy platform ready to meet the demands of our customers as they themselves embark on their energy transition journeys. In doing this, we add our efforts to those of other leading players in convenience, electricity, biofuels and biogas. We are setting in motion our ability to drive these new partnerships via our unique access to over 18,000 corporate customers and our network of over 8,000 service stations, along with our brands, our reputation, and our financial robustness to support this growth.

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Last quarter we began evidencing the development of the main indicators of our multi-energy platform, under the name "Renewables", detailing the information of Comerc and Evolua, which have made important progress, as is the case of Zeg Biogás, which we will begin to detail further on.

Comerc

Comerc continues to consistently expand its vast portfolio of renewable generation projects, which should culminate in the implementation of at least 1,876 MWp in (Distributed and Centralized) solar energy, and 281 MW in wind energy by 2024.

In Centralized Wind Generation projects, we have already reached 175MWp @stake in March 2023, with contributions from the Babilônia project of 63 MW @stake and Rio dos Ventos Expansion (RDVF2) with 11 MW @stake.

Following the star-up of operations of the Castilho (267MWp @stake) and Coromandel (23MWp @stake) plants in 4Q22, we now have 515 MWp of centralized solar generation installed capacity @stake.

And, with the Helio Valgas plant, the largest project in the portfolio, there will be another 655MWp @stake, with works progressing as planned and full operation expected in 3Q23. Additionally, we have the Paracatu (271 MWp @stake) and Várzea (115 MWp @stake) plants scheduled to come on stream in 1Q24.

There were also advances on the Distributed Generation front, which already has 150MW of installed capacity @stake. We acquired 50% of iGreen Energy in Jan/23, a company focused on customer acquisition for enrollment in DG joint operations.

The Trading traded a volume of 3.1 GWm and R$ 753.5 million of MtM of energy futures contracts in 4Q22. The energy solutions vertical had R$ 125 million in efficiency projects and 4,200 consumption units under management in 4Q22, +23% vs. 4Q21.

Evolua

Evolua, a Joint Venture with Copersucar, made progress on its structuring process, signing contracts with Plants and Vibra. In this period the partnering firms also played an important role in product loading strategies. Its results do not therefore reflect the potential that is this important JV has in the ethanol trading market. The company's governance has been structured by defining Management, Boards and Committees and the JV is expected to begin operating fully in the next crop season (April/23 to March/24).

Zeg Biogás

The Zeg Biogás JV owns technology to implement projects producing biomethane from vinasse, a byproduct of the ethanol production process at sugarcane mills and has been building its administrative structure. The company's organizational structure has been approved and its ownership will be structured over 2023.

Operational start-up of the first plants is scheduled for the end of the first half this year. Important advances were also made in signing contracts with ethanol plants, to implement plants making biogas from vinasse.

Zeg has the potential to produce over 2 million m3 of biomethane a day within 5 years. By using highly efficient proprietary technology, we could offer our clients an alternative to proceed with the decarbonization of their production operations and align around ESG practices.

EZvolt

Our electromobility partner, EZvolt is the leading provider of charging solutions for corporate fleets, gated communities and retailers. The company is continuing with its expansion plan, and has now achieved more than 450 contracted recharging stations in 11 Brazilian states, and more than 7000 monthly recharges.

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