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FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT | 6 Months Ended
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Jun. 30, 2021
FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT |
FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT | 4.FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT 4.1.Financial risks management 4.1.1.Overview In the six-month period ended June 30, 2021, there were no significant changes in the financial risk management policies and procedures compared to those disclosed in Note 4 to the annual financial statements for the year ended December 31, 2020. The Company maintained its conservative approach and strong cash and marketable securities position, as well as its hedge policy, during the crisis caused by the pandemic of COVID-19 and even though there were impacts on the fair value of its financial instruments due to the effects on all global economies, the impacts were as expected, according to sensitivity analyses disclosed in previous reports, and measures were taken in relation to the risks associated to the financial instruments, in particular to the risks of liquidity, credit and exchange rate variation, as set forth below. 4.1.2.Rating All transactions with financial instruments are recognized for accounting purposes and classified in the following categories: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | June 30, | ​ | December 31,
​ |  | Note |  | 2021 |  | 2020
Assets | ​ | ​ | ​ | ​ | ​ | ​
Amortized cost | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 5 | ​ | 8,585,570 | ​ | 6,835,057
Trade accounts receivable | ​ | 7 | ​ | 3,979,086 | ​ | 2,915,206
Other assets (1) | ​ | ​ | ​ | 780,449 | ​ | 974,265
​ | ​ | ​ | ​ | 13,345,105 | ​ | 10,724,528
Fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​
Other investments - Celluforce | ​ | 14.1 | ​ | 26,121 | ​ | 26,338
​ | ​ | ​ | ​ | 26,121 | ​ | 26,338
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4.5.1 | ​ | 1,968,997 | ​ | 1,341,420
Marketable securities | ​ | 6 | ​ | 2,685,612 | ​ | 2,396,857
​ | ​ | ​ | ​ | 4,654,609 | ​ | 3,738,277
​ | ​ | ​ | ​ | 18,025,835 | ​ | 14,489,143
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Amortized cost | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payable | ​ | 17 | ​ | 2,575,168 | ​ | 2,361,098
Loans, financing and debentures | ​ | 18.1 | ​ | 68,476,998 | ​ | 72,899,882
Lease liabilities | ​ | 19.2 | ​ | 5,366,994 | ​ | 5,191,760
Liabilities for assets acquisitions and associates | ​ | 23 | ​ | 509,369 | ​ | 502,228
Dividends payable | ​ | ​ | ​ | 11,185 | ​ | 6,232
Other liabilities (1) | ​ | ​ | ​ | 159,079 | ​ | 459,684
​ | ​ | ​ | ​ | 77,098,793 | ​ | 81,420,884
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4.5.1 | ​ | 6,071,817 | ​ | 8,117,400
​ | ​ | ​ | ​ | 6,071,817 | ​ | 8,117,400
​ | ​ | ​ | ​ | 83,170,610 | ​ | 89,538,284
​ | ​ | ​ | ​ | 65,144,775 | ​ | 75,049,141
​ 1)Does not include items not classified as financial instruments. ​ 4.1.3.Fair value of loans and financing The estimated fair values of loans and financing are set forth below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Yield used | ​ | June 30, | ​ | December 31,
​ |  | to discount |  | 2021 |  | 2020
Quoted in the secondary market | ​ | ​ | ​ | ​ | ​ | ​
In foreign currency | ​ | ​ | ​ | ​ | ​ | ​
Bonds | ​ | Secondary Market | ​ | 41,994,147 | ​ | 43,703,482
Estimated to present value | ​ | ​ | ​ | ​ | ​ | ​
In foreign currency | ​ | ​ | ​ | ​ | ​ | ​
Export credits ("Prepayment") | ​ | LIBOR | ​ | 19,097,350 | ​ | 20,546,778
In local currency | ​ | ​ | ​ | ​ | ​ | ​
BNDES – TJLP | ​ | DI 1 | ​ | 384,510 | ​ | 1,399,177
BNDES - TLP | ​ | DI 1 | ​ | 564,989 | ​ | 647,235
BNDES – Fixed | ​ | DI 1 | ​ | 60,143 | ​ | 76,732
BNDES – Selic ("Special Settlement and Custody System") | ​ | DI 1 | ​ | 574,915 | ​ | 960,215
BNDES - Currency basket | ​ | DI 1 | ​ | 24,977 | ​ | 27,239
CRA ("Agribusiness Receivables Certificate") | ​ | DI 1/IPCA | ​ | 3,284,039 | ​ | 3,286,792
Debentures | ​ | DI 1 | ​ | 5,570,538 | ​ | 5,498,793
NCE ("Export Credit Notes") | ​ | DI 1 | ​ | 1,330,402 | ​ | 1,322,813
NCR ("Rural Credit Notes") | ​ | DI 1 | ​ | 285,282 | ​ | 283,702
Export credits ("Prepayment") | ​ | DI 1 | ​ | 1,342,462 | ​ | 1,490,242
​ | ​ | ​ | ​ | 74,513,754 | ​ | 79,243,200
​ The Management considers that for its other financial liabilities measured at amortized cost, its book values approximate to their fair values and therefore the information on their fair values is not being presented. 4.2. Liquidity risk management As disclosed in note 4 to annual the financial statements as of December 31, 2020, the Company’s purpose is maintaining a strong cash and marketable securities position to meet its financial and operating obligations. The amount held as cash is used for payments expected in the normal course of its operations, while the cash surplus amount is invested in highly liquid financial investments according to Cash Management Policy. The cash position is monitored by the Company's senior management, by means of management reports and participation in performance meetings with determined frequency. In the six-month period ended June 30, 2021, the impacts in cash and marketable securities were as expected and the cash generated in the operation was used for the most part to debt redemption, including in advance. The remaining contractual maturities of financial liabilities are disclosed at the date of this financial information reporting date. The amounts as set forth below, consist in the undiscounted cash flows and include interest payments and exchange rate variation, and therefore may not be reconciled with the amounts disclosed in the balance sheet. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ | ​ | Book | ​ | Future | ​ | Up to 1 | ​ | 1 - 2 | ​ | ​ | ​ | More than
​ |  | value |  | value |  | year |  | years |  | 2 - 5 years |  | 5 years
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payables | ​ | 2,575,168 | ​ | 2,575,168 | ​ | 2,575,168 | ​ | ​ | ​ | ​ | ​ | ​
Loans, financing and debentures | ​ | 68,476,998 | ​ | 96,031,944 | ​ | 4,067,403 | ​ | 6,297,088 | ​ | 35,015,873 | ​ | 50,651,580
Lease liabilities | ​ | 5,366,994 | ​ | 9,826,733 | ​ | 875,227 | ​ | 818,769 | ​ | 1,534,836 | ​ | 6,597,901
Liabilities for asset acquisitions and associates | ​ | 509,369 | ​ | 569,469 | ​ | 115,495 | ​ | 134,525 | ​ | 228,985 | ​ | 90,464
Derivative financial instruments | ​ | 6,071,817 | ​ | 8,643,168 | ​ | 1,052,089 | ​ | 933,750 | ​ | 5,706,969 | ​ | 950,360
Dividends payable | ​ | 11,185 | ​ | 11,185 | ​ | 11,185 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | 473,085 | ​ | 473,085 | ​ | 361,197 | ​ | 111,888 | ​ | ​ | ​ | ​
​ | ​ | 83,484,616 | ​ | 118,130,752 | ​ | 9,057,764 | ​ | 8,296,020 | ​ | 42,486,663 | ​ | 58,290,305
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31,
​ | ​ | 2020
​ | ​ | Book | ​ | Future | ​ | Up to 1 | ​ | 1 - 2 | ​ | ​ | ​ | More than
​ |  | value |  | value |  | year |  | years |  | 2 - 5 years |  | 5 years
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payables | ​ | 2,361,098 | ​ | 2,361,098 | ​ | 2,361,098 | ​ | ​ | ​ | ​ | ​ | ​
Loans, financing and debentures | ​ | 72,899,882 | ​ | 101,540,320 | ​ | 4,034,595 | ​ | 6,619,518 | ​ | 36,751,023 | ​ | 54,135,184
Lease liabilities | ​ | 5,191,760 | ​ | 9,552,075 | ​ | 620,177 | ​ | 806,560 | ​ | 2,198,419 | ​ | 5,926,919
Liabilities for asset acquisitions and associates | ​ | 502,228 | ​ | 573,920 | ​ | 116,376 | ​ | 112,155 | ​ | 253,419 | ​ | 91,970
Derivative financial instruments | ​ | 8,117,400 | ​ | 10,868,858 | ​ | 1,999,811 | ​ | 1,296,199 | ​ | 4,133,320 | ​ | 3,439,528
Dividends payable | ​ | 6,232 | ​ | 6,232 | ​ | 6,232 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | 459,684 | ​ | 459,684 | ​ | 360,916 | ​ | 98,768 | ​ | ​ | ​ | ​
​ | ​ | 89,538,284 | ​ | 125,362,187 | ​ | 9,499,205 | ​ | 8,933,200 | ​ | 43,336,181 | ​ | 63,593,601
​ 4.3. Credit risk management In the six-month period ended June 30, 2021, there were no significant changes in the credit risk management policies compared to those disclosed in Note 4 to the annual financial statements for the year ended of December 31, 2020, except for set forth below. 4.3.1.Trade accounts receivable and advances to supplier The Company has commercial and credit policies aimed at mitigating any risks arising from its customers' default, mainly through hiring of credit insurance policies, bank guarantees provided by first-tier banks and collaterals according to liquidity. Moreover, portfolio customers are subject to internal credit analysis aimed at assessing the risk regarding payment performance, both for exports and for domestic sales. For customer credit assessment, the Company applies a matrix based on the analysis of qualitative and quantitative aspects to determine individual credit limits to each customer according to the identified risk. Each analyze is submitted for approval according to established hierarchy and, if applicable, to approval from the Management’s meeting and the Credit Committee. 4.3.2.Banks and financial institutions In the six-month period ended June 30, 2021, there were no significant changes in the credit risk management policies and procedures related to bank and financial institutions compared to those disclosed in note 4 to the annual financial statements for the year ended December 31, 2020. 4.4. Market risk management In the six-month period ended June 30, 2021, there were no significant changes in the market risk management policies and procedures compared to those disclosed in note 4 to the annual financial statements for the year ended December 31, 2020. 4.4.1.Exchange rate risk management As disclosed in note 4 of the annual financial statements for the year ended December 31, 2020, the Company hires U.S. Dollar selling transactions in the futures markets, including strategies involving options, to ensure attractive levels of operating margins for a portion of revenue. Such transactions are limited to a percentage of the net surplus foreign currency over an 18-months’ time horizon and therefore, are matched to the availability of currency for sale in the short term. The net exposure of assets and liabilities in foreign currency which is substantially in U.S. Dollars, is set forth below: ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2021 |  | 2020
Assets | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 8,412,710 | ​ | 6,370,201
Trade accounts receivables | ​ | 2,883,330 | ​ | 1,938,614
Derivative financial instruments | ​ | 1,360,976 | ​ | 621,385
​ | ​ | 12,657,016 | ​ | 8,930,200
Liabilities | ​ | ​ | ​ | ​
Trade accounts payables | ​ | (516,152) | ​ | (492,617)
Loans and financing | ​ | (55,187,953) | ​ | (58,145,087)
Liabilities for asset acquisitions and associates | ​ | (308,766) | ​ | (313,022)
Derivative financial instruments | ​ | (5,282,153) | ​ | (6,994,363)
​ | ​ | (61,295,024) | ​ | (65,945,089)
Net liability exposure | ​ | (48,638,008) | ​ | (57,014,889)
​ 4.4.1.1.Sensitivity analysis – foreign exchange rate exposure – except financial instruments derivatives For market risk analysis, the Company uses scenarios to jointly evaluate assets and liabilities positions in foreign currency, and the possible effects on its results. The probable scenario represents the amounts recognized, as they reflect the translation into Brazilian Reais on the base date of the balance sheet (R$ to U.S.$ = R$5.0022). This analysis assumes that all other variables, particularly, the interest rates, remains constant. The other scenarios considered the appreciation/depreciation of the Brazilian Real against the U.S. Dollar at the rates of 25% and 50%, before taxes. The following table set forth the potential impacts in absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ | ​ | Effect on profit or loss and equity
​ | ​ | Probable | ​ | Possible | ​ | Remote
​ |  | (base value) |  | (25%) |  | (50%)
Cash and cash equivalents | ​ | 8,412,710 | ​ | 2,103,178 | ​ | 4,206,355
Trade accounts receivable | ​ | 2,883,330 | ​ | 720,833 | ​ | 1,441,665
Trade accounts payable | ​ | (516,152) | ​ | 129,038 | ​ | 258,076
Loans and financing | ​ | (55,187,953) | ​ | 13,796,988 | ​ | 27,593,977
Liabilities for asset acquisitions and associates | ​ | (308,766) | ​ | 77,192 | ​ | 154,383
​ 4.4.1.2.Sensitivity analysis – foreign exchange rate exposure – financial instruments derivatives The Company hires sales operations of U.S. Dollar in the futures markets, including strategies with options, in order to ensure attractive levels of operating margins for a portion of revenue. These operations are limited to a percentage of the net foreign exchange surplus over the 18-month horizon and, therefore, are attached to the availability of ready-to-sell foreign exchange in the short term. Due to pandemic of COVID-19 and the effects on all global economies over the past few quarters, financial markets have experienced volatility throughout the period with a strong sense of aversion to risk, with a consequent substantial devaluation of the Real against the U.S. Dollars. For the calculation of mark-to-market (“MtM”), the PTAX of the penultimate business day of the quarter was used, in December 2020 it was R$5.1967 and in June 2021 it was R$5.0022, with an decrease of 3.74%. These market movements caused a positive impact on the mark-to-market hedge position entered by the Company. This analysis assumes that all other variables, particularly, the interest rates, remains constant. The other scenarios considered the appreciation/depreciation of the Brazilian Real against the U.S. Dollar at the rates of 25% and 50%, before taxes, from the base scenario of June 30, 2021. It is important to mention that the impact caused by fluctuations in the exchange rate, whether positive or negative, will also affect the hedged asset. Therefore, even though there was a negative impact on the fair value of derivative transactions in the period, this impact was partially offset by the positive effect on the Company’s cash flow and, if the exchange rate remains stable, it will be offset by the appreciation of the hedge object in the coming periods. In addition, considering that hedge contracts are limited by the policy in a maximum of 75% of the total exposure in U.S. Dollars, the exchange rate devaluation will always benefit, in a net way, the Company’s cash generation in the long run. The following table set forth the potential impacts assuming these scenarios: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ | ​ | Effect on profit or loss and equity
​ | ​ | Probable | ​ | Possible | ​ | Remote | ​ | Possible | ​ | Remote
​ |  | (base value) |  | (+25%) |  | (+50%) |  | (-25%) |  | (-50%)
​ | ​ | 4.9450 | ​ | 6.1813 | ​ | 7.4175 | ​ | 3.7088 | ​ | 2.4725
Financial instruments derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative Non-Deliverable Forward (‘NDF’) | ​ | 22,519 | ​ | (99,451) | ​ | (198,903) | ​ | 99,451 | ​ | 198,903
Derivative options | ​ | 837,444 | ​ | (2,825,652) | ​ | (7,098,368) | ​ | 4,150,388 | ​ | 8,806,643
Derivative swaps | ​ | (5,305,415) | ​ | (4,101,386) | ​ | (8,202,776) | ​ | 4,101,394 | ​ | 8,202,784
​ 4.4.2.Interest rate risk management Fluctuations in interest rates may imply effects of increased or reduced costs on new loans and operations already contracted. The Company is constantly looking for alternatives for the use of financial instruments in order to avoid negative impacts on its cash flow. Considering the extinction of LIBOR over the next few years, the Company is evaluating its contracts with clauses that envisage the discontinuation of the interest rate. Most debt contracts linked to LIBOR have some clause to replace this rate with a reference index or equivalent interest rate and, for contracts that do not have a specific clause, a renegotiation will be carried out between the parties. Derivative contracts linked to LIBOR provide for a negotiation between the parties for the definition of a new rate or an equivalent rate will be provided by the calculation agent. It is worth mentioning that the clauses related to replacement of the indexes in the Company's debt contracts indexed to LIBOR, establish that any replacement of the indexation rate in the contracts can only be evaluated in two circumstances (i) after the communication from an official government entity with formalization of the replacement/extinguishment of the effective rate of the contract, and this communication must define the exact date on which LIBOR will be extinguished and / or (ii) syndicated operations begin to be executed at a rate indexed to the Secured Overnight Financing Rate (“SOFR”). Considering that on March 5, 2021, the Financial Conduct Authority (“FCA”) announced the date of extinction of LIBOR 3M for June 30, 2023, the Company can, from this announcement, start negotiations terms of exchange of indexes for its debt contracts and related derivatives. The Company mapped all contracts subject to IBOR reform that have yet to transition to an alternative benchmark rate and for the six-month period ended June 30, 2021 the Company has R$18,542,667 related to loan and financing contracts and R$1,235,268 related to derivative contracts and, initiated contact with the respective counterparties of each contract, to ensure that the terms and good market practices are adopted at the time of the transition of the index until June 2023, and these terms are still under negotiation between the parties. The Company understands that it will not be necessary to change the risk management strategy due to the change in the indexes of the financial contracts linked to LIBOR. The Company believes it is reasonable to assume that the negotiation of the indexes in its contracts, will move towards to the replacement of LIBOR by SOFR, because the available information, so far, indicates that SOFR will be the new interest rate adopted by the capital market. Based on the information available, the Company does not expect to have significant impact on its debts and derivatives linked to LIBOR. 4.4.2.1.Sensitivity analysis – exposure to interest rates – except financial instruments derivatives For market risk analysis, the Company uses scenarios to evaluate the sensitivity that variations in operations impacted by the rates: Interbank Deposit Rate (“CDI”), Long Term Interest Rate (“TJLP”), Special System for Settlement and Custody ("SELIC") and the London Interbank Offered Rate (“LIBOR”) which may impact the results. The probable scenario represents the amounts already booked, as they reflect the best estimate of the Management. This analysis assumes that all other variables, particularly exchange rates, remain constant. The other scenarios considered appreciation/depreciation of 25% and 50% in the market interest rates. The following table set forth the potential impacts in absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ | ​ | Effect on profit or loss and equity
​ | ​ | ​ | ​ | Possible | ​ | Remote
​ |  | Probable |  | (25%) |  | (50%)
CDI/SELIC | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 17,302 | ​ | 180 | ​ | 359
Marketable securities | ​ | 2,681,431 | ​ | 27,820 | ​ | 55,640
Loans and financing | ​ | (9,363,931) | ​ | 97,151 | ​ | 194,302
​ | ​ | ​ | ​ | ​ | ​ | ​
TJLP | ​ | ​ | ​ | ​ | ​ | ​
Loans and financing | ​ | (397,245) | ​ | 4,578 | ​ | 9,156
​ | ​ | ​ | ​ | ​ | ​ | ​
LIBOR | ​ | ​ | ​ | ​ | ​ | ​
Loans and financing | ​ | (17,943,585) | ​ | 6,538 | ​ | 13,076
​ 4.4.2.2.Sensitivity analysis – exposure to interest rates – financial instruments derivatives This analysis assumes that all other variables remain constant. The other scenarios considered appreciation/depreciation of 25% and 50% in the market interest rates. The following table set forth the potential impacts assuming these scenarios: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ | ​ | Effect on profit or loss and equity
​ | ​ | ​ | ​ | Probable | ​ | Remote | ​ | Probable | ​ | Remote
​ |  | Probable |  | (+25%) |  | (+50%) |  | (-25%) |  | (-50%)
CDI | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial instruments derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative Non-Deliverable Forward (‘NDF’) | ​ | 22,519 | ​ | (2,045) | ​ | (4,050) | ​ | 2,087 | ​ | 4,218
Derivative options | ​ | 837,444 | ​ | (117,913) | ​ | (230,101) | ​ | 123,873 | ​ | 253,831
Derivative swaps | ​ | (5,305,415) | ​ | (27,707) | ​ | (54,491) | ​ | 28,618 | ​ | 58,092
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
LIBOR | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Financial instruments derivatives | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative swaps | ​ | (5,305,415) | ​ | 72,227 | ​ | 144,448 | ​ | (72,221) | ​ | (144,448)
​ 4.4.2.3.Sensitivity analysis for changes in the consumer price index of the US economy For the measurement of the probable scenario, the United States Consumer Price Index (US-CPI) was considered on December 31, 2020. The probable scenario was extrapolated considering an appreciation/depreciation of 25% and 50% in the US-CPI to define the possible and remote scenarios, respectively, in absolute amounts. The following table set forth the potential impacts in absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30, |
​ | ​ | 2021 |
​ | ​ | Effect on profit or loss and equity |
​ | ​ | Probable | ​ | Possible | ​ | Remote | ​
​ |  | (base value) |  | (25%) |  | (50%) | ​
​ | ​ | 2.5282% | ​ | 3.1603% | ​ | 3.7923% | ​
Embedded derivative in forestry partnership and standing wood supply agreements | ​ | 254,848 | ​ | 165,629 | ​ | 340,080 | ​
​ 4.4.3.Commodity price risk management The Company is exposed to commodity prices that reflect mainly on the pulp sale price in the foreign market. The dynamics of opening and closing production capacities in the global market and the macroeconomic conditions may have an impact on the Company´s operating results. Through a specialized team, the Company monitors the hardwood pulp price and analyses future trends, adjusting the forecast that aims to assisting preventive measures to properly conduct the different scenarios. There is no liquid financial market to sufficiently mitigate the risk of a material portion of the Company's operations. Hardwood pulp price protection operations available on the market have low liquidity and low volume and large distortion in price formation. No relevant changes were observed in relation to pulp prices and future markets related to this index due to the crisis caused by the pandemic of COVID-19. The Company is also exposed to international oil prices, which is reflected on logistical costs for selling to the export market and indirectly in the costs of other supplies. In this case, the Company evaluates the contracting of derivative financial instruments to mitigate the risk of price variation in its result. On June 30, 2021, the Company did not a hire position to hedge its logistics costs (US$37,757 as of December 31, 2020). 4.5. Derivative financial instruments The Company determines the fair value of derivative contracts, which differ from the amounts realized in the event of early settlement due to bank spreads and market factors at the time of quotation. The amounts presented by the Company are based on an estimate using market factors and use data provided by third parties, measured internally and compared to calculations performed by external consultants and by counterparties. Details of derivative financial instruments and their respective calculation methodologies are disclosed in note 4 to the annual financial statements for the year ended December 31, 2020. 4.5.1.Outstanding derivatives by type of contract, including embedded derivatives The positions of outstanding derivatives are set forth below:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Notional value in U.S.$ | ​ | Fair value
​ | ​ | June 30, | ​ | December 31, | ​ | June 30, | ​ | December 31,
​ |  | 2021 |  | 2020 |  | 2021 |  | 2020
Instruments hired with protection strategy | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operational Hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
ZCC | ​ | 3,777,250 | ​ | 3,212,250 | ​ | 837,500 | ​ | (780,457)
NDF (R$ x US$) | ​ | 80,000 | ​ | 80,000 | ​ | 22,519 | ​ | 7,948
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Debt hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Interest rate hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap LIBOR to Fixed (U.S.$) | ​ | 3,600,000 | ​ | 3,683,333 | ​ | (706,256) | ​ | (1,059,192)
Swap IPCA to CDI (notional in Brazilian Reais) | ​ | 843,845 | ​ | 843,845 | ​ | 269,764 | ​ | 285,533
Swap IPCA to Fixed (U.S.$) | ​ | 121,003 | ​ | 121,003 | ​ | (85,924) | ​ | (114,834)
Swap CDI x Fixed (U.S.$) | ​ | 2,267,057 | ​ | 2,267,057 | ​ | (4,166,257) | ​ | (4,977,309)
Pre-fixed Swap to U.S.$ (U.S.$) | ​ | 350,000 | ​ | 350,000 | ​ | (529,014) | ​ | (508,328)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity Hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap US-CPI (U.S.$) (1) | ​ | 612,650 | ​ | 646,068 | ​ | 254,848 | ​ | 354,900
Swap VLSFO (2) | ​ | ​ | ​ | 37,757 | ​ | ​ | ​ | 15,759
​ | ​ | ​ | ​ | ​ | ​ | (4,102,820) | ​ | (6,775,980)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current assets | ​ | ​ | ​ | ​ | ​ | 1,204,841 | ​ | 484,043
Non-current assets | ​ | ​ | ​ | ​ | ​ | 764,156 | ​ | 857,377
Current liabilities | ​ | ​ | ​ | ​ | ​ | (1,010,897) | ​ | (1,991,118)
Non-current liabilities | ​ | ​ | ​ | ​ | ​ | (5,060,920) | ​ | (6,126,282)
​ | ​ | ​ | ​ | ​ | ​ | (4,102,820) | ​ | (6,775,980)
​
1) | The embedded derivative refers to swap contracts for the sale of US-CPI variations within the term of the forest partnership and standing wood supply contracts.
2) | As of December 31, 2020, includes Swap Brent, whose contracts were fully settled in the subsequent period.
The current contracts and the respective protected risks are set forth below:
| (i) | Swap CDI x Fixed US$: positions in conventional swaps exchanging the variation in the Interbank Deposit rate (“DI”) for a fixed rate in United States Dollars (“US$”). The objective is to change the debt index in Brazilian Reais to US$, in compliance with the Company's natural exposure of receivables in US$.
| (ii) | Swap IPCA x CDI: positions in conventional swaps exchanging variation of the Amplified Consumer Price Index (“IPCA”) for DI rate. The objective is to change the debt index in Reais, in compliance with the Company's cash position in Brazilian Reais, which is also indexed to DI.
| (iii) | IPCA swap x Fixed US$: positions in conventional swaps exchanging variation of the IPCA for a fixed rate in US$. The objective is to change the debt index in Brazilian Reais to US$, in compliance with the Company's natural exposure of receivables in US$.
| (iv) | Swap LIBOR x Fixed US$: positions in conventional swaps exchanging post-fixed rate (LIBOR) for a fixed rate in US$. The objective is to protect the cash flow from changes in the US interest rate.
| (v) | Pre Fixed Swap R$ x Fixed US$: positions in conventional swaps a fixed rate in Reais for a fixed rate in US$. The objective is to change the exposure of debts in Brazilian Reais to US$, in compliance with the Company's natural exposure of receivables in US$.
| (vi) | Zero-Cost Collar (“ZCC”): positions in an instrument that consists of the simultaneous combination of purchase of put options and sale of call options of US$, with the same principal and maturity value, with the objective of protecting the cash flow of exports. In this strategy, an interval is established where there is no deposit or receipt of financial margin upon expiration of options. The objective is to protect the cash flow of exports against decrease Real.
| (vii) | Non Deliverable Forward (“NDF”): positions sold in futures contracts of US$ with the objective of protecting the cash flow of exports against the decrease in the Brazilian Real.
| (viii) | Swap Very Low Sulphur Fuel Oil (“VLSFO”) (oil): oil purchase positions, with the objective of protecting logistical costs related to ocean freight contracts, against the increase in oil prices.
| (ix) | Swap US-CPI: The embedded derivative refers to sale swap contracts of variations of US-CPI within the terms of the forest partnership and standing wood supply contracts.
The variation in the fair value of derivatives for the six-month period ended June 30, 2021 compared to the fair value measured on December 31, 2020 is explained substantially by appreciation of the Brazilian Real against the U.S. Dollar. There were also less significant impacts caused by the variation in the Pre, Foreign Exchange Coupon and LIBOR curves in transactions. It is important to highlight that, the outstanding agreements for the six-month period ended June 30, 2021, are over-the-counter market, without any kind of guaranteed margin or early settlement clause forced by changes from mark to market, including possible variations caused by the pandemic of COVID-19. 4.5.2.Fair value by maturity schedule ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2021 |  | 2020
2021 | ​ | 74,613 | ​ | (1,507,075)
2022 | ​ | (258,065) | ​ | (918,030)
2023 | ​ | (225,705) | ​ | (433,195)
2024 | ​ | (578,197) | ​ | (705,859)
2025 | ​ | (1,574,105) | ​ | (1,684,124)
2026 onwards | ​ | (1,541,361) | ​ | (1,527,697)
​ | ​ | (4,102,820) | ​ | (6,775,980)
​ 4.5.3.Outstanding of assets and liabilities derivatives positions The outstanding derivatives positions are set forth below: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Notional value | ​ | Fair value
​ | ​ | ​ | ​ | June 30, | ​ | December 31, | ​ | June 30, | ​ | December 31,
​ |  | Currency |  | 2021 |  | 2020 |  | 2021 |  | 2020
Debt hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap CDI to Fixed (U.S.$) | ​ | R$ | ​ | 8,594,225 | ​ | 8,594,225 | ​ | 102,173 | ​ | 719
Swap Pre-Fixed to U.S.$ | ​ | R$ | ​ | 1,317,226 | ​ | 1,317,226 | ​ | 88,105 | ​ | 136,192
Swap LIBOR to Fixed (U.S.$) | ​ | US$ | ​ | 3,600,000 | ​ | 3,683,333 | ​ | 83,408 | ​ | 61,120
Swap IPCA to CDI | ​ | IPCA | ​ | 1,019,028 | ​ | 974,102 | ​ | 269,764 | ​ | 285,533
Swap IPCA to U.S.$ | ​ | IPCA | ​ | 545,000 | ​ | 520,973 | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 543,450 | ​ | 483,564
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap CDI to Fixed (U.S.$) | ​ | US$ | ​ | 2,267,057 | ​ | 2,267,057 | ​ | (4,268,430) | ​ | (4,978,028)
Swap Pre-Fixed to U.S.$ | ​ | US$ | ​ | 350,000 | ​ | 350,000 | ​ | (617,119) | ​ | (644,520)
Swap LIBOR to Fixed (U.S.$) | ​ | US$ | ​ | 3,600,000 | ​ | 3,683,333 | ​ | (789,664) | ​ | (1,120,312)
Swap IPCA to CDI | ​ | R$ | ​ | 843,845 | ​ | 843,845 | ​ | ​ | ​ | ​
Swap IPCA to U.S.$ | ​ | US$ | ​ | 121,003 | ​ | 121,003 | ​ | (85,924) | ​ | (114,834)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (5,761,137) | ​ | (6,857,694)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (5,217,687) | ​ | (6,374,130)
Operational hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Zero cost collar (U.S.$ x R$) | ​ | US$ | ​ | 3,777,250 | ​ | 3,212,250 | ​ | 837,500 | ​ | (780,457)
NDF (R$ x U.S.$) | ​ | US$ | ​ | 80,000 | ​ | 80,000 | ​ | 22,519 | ​ | 7,948
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 860,019 | ​ | (772,509)
Commodity hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap US-CPI (standing wood) | ​ | US$ | ​ | 612,650 | ​ | 646,068 | ​ | 254,848 | ​ | 354,900
Swap VLSFO | ​ | US$ | ​ | ​ | ​ | 37,757 | ​ | ​ | ​ | 15,759
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 254,848 | ​ | 370,659
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (4,102,820) | ​ | (6,775,980)
​ 4.5.4.Fair value settled amounts The settled derivatives positions are set forth below: ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2021 |  | 2020
Operational hedge | ​ | ​ | ​ | ​
Zero cost collar (R$ x U.S.$) | ​ | (1,161,276) | ​ | (2,268,158)
NDF (R$ x U.S.$) | ​ | (37) | ​ | (60,815)
​ | ​ | (1,161,313) | ​ | (2,328,973)
Commodity hedge | ​ | ​ | ​ | ​
Swap Bunker (oil) | ​ | 53,840 | ​ | (85,468)
​ | ​ | 53,840 | ​ | (85,468)
Debt hedge | ​ | ​ | ​ | ​
Swap CDI to Fixed (U.S.$) | ​ | (184,748) | ​ | (1,888,906)
Swap IPCA to CDI (notional in Brazilian Reais) | ​ | 20,148 | ​ | 10,601
Swap IPCA to Fixed (U.S.$) | ​ | ​ | ​ | 10,054
Swap Pre-Fixed to U.S.$ | ​ | 49,562 | ​ | 59,351
Swap LIBOR to Fixed (U.S.$) | ​ | (211,777) | ​ | (242,299)
​ | ​ | (326,815) | ​ | (2,051,199)
​ | ​ | (1,434,288) | ​ | (4,465,640)
​ 4.6. Fair value hierarchy For the six-month period ended June 30, 2021, there were no changes between the 3 (three) levels of hierarchy and no transfers between levels 1, 2 and 3 during the periods disclosed. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2021
​ |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | 1,968,997 | ​ | ​ | ​ | 1,968,997
Marketable securities | ​ | 539,382 | ​ | 2,146,230 | ​ | ​ | ​ | 2,685,612
​ | ​ | 539,382 | ​ | 4,115,227 | ​ | ​ | ​ | 4,654,609
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other investments - CelluForce | ​ | ​ | ​ | ​ | ​ | 26,121 | ​ | 26,121
​ | ​ | ​ | ​ | ​ | ​ | 26,121 | ​ | 26,121
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Biological assets | ​ | ​ | ​ | ​ | ​ | 11,720,857 | ​ | 11,720,857
​ | ​ | ​ | ​ | ​ | ​ | 11,720,857 | ​ | 11,720,857
​ | ​ | 539,382 | ​ | 4,115,227 | ​ | 11,746,978 | ​ | 16,401,587
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | 6,071,817 | ​ | ​ | ​ | 6,071,817
​ | ​ | ​ | ​ | 6,071,817 | ​ | ​ | ​ | 6,071,817
​ | ​ | ​ | ​ | 6,071,817 | ​ | ​ | ​ | 6,071,817
​ ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31,
​ | ​ | 2020
​ | ​ | Level 1 | ​ | Level 2 | ​ | Level 3 | ​ | Total
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | 1,341,420 | ​ | ​ | ​ | 1,341,420
Marketable securities | ​ | 444,712 | ​ | 1,952,145 | ​ | ​ | ​ | 2,396,857
​ | ​ | 444,712 | ​ | 3,293,565 | ​ | ​ | ​ | 3,738,277
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other investments - CelluForce | ​ | ​ | ​ | ​ | ​ | 26,338 | ​ | 26,338
​ | ​ | ​ | ​ | ​ | ​ | 26,338 | ​ | 26,338
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Biological assets | ​ | ​ | ​ | ​ | ​ | 11,161,210 | ​ | 11,161,210
​ | ​ | ​ | ​ | ​ | ​ | 11,161,210 | ​ | 11,161,210
​ | ​ | 444,712 | ​ | 3,293,565 | ​ | 11,187,548 | ​ | 14,925,825
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | 8,117,400 | ​ | ​ | ​ | 8,117,400
​ | ​ | ​ | ​ | 8,117,400 | ​ | ​ | ​ | 8,117,400
​ | ​ | ​ | ​ | 8,117,400 | ​ | ​ | ​ | 8,117,400
​ 4.7. Capital management The main objective is to strengthen the Company’s capital structure, aiming to maintain an adequate financial leverage, and to mitigate risks that may affect the availability of capital in business development. The Company monitors constantly significant indicators, such as, consolidated financial leverage, which is the ratio of total net debt to its adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”).

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