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FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT | 6 Months Ended
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Jun. 30, 2023
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, 2023, there were no significant changes in the financial risk management policies and procedures compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 4). The Company maintained its conservative approach and strong cash and marketable securities position, as well as its hedging policy. 4.1.2.Classification All transactions with financial instruments are recognized for accounting purposes and classified in the following categories: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | June 30, | ​ | December 31,
​ |  | Note |  | 2023 |  | 2022
Assets | ​ | ​ | ​ | ​ | ​ | ​
Amortized cost | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 5 | ​ | 11,860,415 | ​ | 9,505,951
Trade accounts receivable | ​ | 7 | ​ | 6,488,192 | ​ | 9,607,012
Dividends receivable | ​ | 11 | ​ | ​ | ​ | 7,334
Other assets (1) | ​ | ​ | ​ | 788,401 | ​ | 931,173
​ | ​ | ​ | ​ | 19,137,008 | ​ | 20,051,470
Fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​
Investments - Celluforce | ​ | 14.1 | ​ | 23,541 | ​ | 24,917
​ | ​ | ​ | ​ | 23,541 | ​ | 24,917
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4.5.1 | ​ | 5,479,787 | ​ | 4,873,749
Marketable securities | ​ | 6 | ​ | 8,354,870 | ​ | 7,965,742
​ | ​ | ​ | ​ | 13,834,657 | ​ | 12,839,491
​ | ​ | ​ | ​ | 32,995,206 | ​ | 32,915,878
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Amortized cost | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payable | ​ | 17 | ​ | 6,347,954 | ​ | 6,206,570
Loans, financing and debentures | ​ | 18.1 | ​ | 74,532,331 | ​ | 74,574,591
Lease liabilities | ​ | 19.2 | ​ | 6,195,984 | ​ | 6,182,530
Liabilities for assets acquisitions and subsidiaries | ​ | 23 | ​ | 280,864 | ​ | 2,062,322
Dividends payable | ​ | 11 | ​ | 2,678 | ​ | 5,094
Other liabilities (1) | ​ | ​ | ​ | 137,148 | ​ | 147,920
​ | ​ | ​ | ​ | 87,496,959 | ​ | 89,179,027
Fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4.5.1 | ​ | 2,218,716 | ​ | 4,846,795
​ | ​ | ​ | ​ | 2,218,716 | ​ | 4,846,795
​ | ​ | ​ | ​ | 89,715,675 | ​ | 94,025,822
​ | ​ | ​ | ​ | 56,720,469 | ​ | 61,109,944
​ 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 | ​ | ​ | ​ | ​
​ | ​ | to discount/ | ​ | June 30, | ​ | December 31,
​ |  | methodology |  | 2023 |  | 2022
Quoted in the secondary market | ​ | ​ | ​ | ​ | ​ | ​
In foreign currency | ​ | ​ | ​ | ​ | ​ | ​
Bonds | ​ | Secondary Market | ​ | 37,361,853 | ​ | 40,309,832
Estimated present value | ​ | ​ | ​ | ​ | ​ | ​
In foreign currency | ​ | ​ | ​ | ​ | ​ | ​
Export credits (“Prepayment”) | ​ | LIBOR | ​ | 16,760,316 | ​ | 17,724,315
Assets Financing | ​ | SOFR | ​ | 217,540 | ​ | 138,644
IFC - International Finance Corporation | ​ | SOFR | ​ | 3,105,751 | ​ | ​
In local currency | ​ | ​ | ​ | ​ | ​ | ​
BNDES – TJLP | ​ | DI 1 | ​ | 230,227 | ​ | 292,487
BNDES – TLP | ​ | DI 1 | ​ | 1,971,409 | ​ | 1,393,010
BNDES – Fixed | ​ | DI 1 | ​ | 10,219 | ​ | 21,656
BNDES – SELIC (“Special Settlement and Custody System”) | ​ | DI 1 | ​ | 644,710 | ​ | 575,129
BNDES - Currency basket | ​ | DI 1 | ​ | 4,122 | ​ | 10,866
CRA (“Agribusiness Receivables Certificate”) | ​ | DI 1/IPCA | ​ | 1,264,031 | ​ | 1,835,336
Debentures | ​ | DI 1 | ​ | 6,663,101 | ​ | 5,643,440
NCE (“Export Credit Notes”) | ​ | DI 1 | ​ | 1,381,393 | ​ | 1,384,396
NCR (“Rural Credit Notes”) | ​ | DI 1 | ​ | 293,475 | ​ | 294,089
Export credits (“Prepayment”) | ​ | DI 1 | ​ | 1,303,156 | ​ | 1,320,415
​ | ​ | ​ | ​ | 71,211,303 | ​ | 70,943,615
​ The book values of loans and financing are disclosed in Note 18. Management considers that, for its other financial liabilities measured at amortized cost, their book values approximate their fair values, and therefore the fair value information is not being presented. 4.2.Liquidity risk management The Company’s purpose is to maintain a strong cash and marketable securities position to meet its financial and operating commitments. The amount held in cash is intended to cover the expected outflows in the normal course of its operations, while the cash surplus is generally invested in highly liquid financial investments according to the Cash Management Policy. The cash position is monitored by the Company’s Management, by means of management reports and participation in performance meetings with determined frequencies. During the six-month period ended June 30, 2023, the variations in cash and marketable securities were as expected, and the cash generated from operations was mostly used for investments and debt service. All derivative financial instruments were traded over the counter and do not require deposit guarantee margins. The remaining contractual maturities of financial liabilities are presented as of the balance sheet date. The amounts as set forth below consist of undiscounted cash flow, and include interest payments and exchange rate variations, and therefore may not reconcile with the amounts disclosed in the balance sheet. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Book | ​ | Future | ​ | Up to 1 | ​ | 1 - 2 | ​ | ​ | ​ | More than
​ |  | value |  | value |  | year |  | years |  | 2 - 5 years |  | 5 years
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payable | ​ | 6,347,954 | ​ | 6,347,954 | ​ | 6,347,954 | ​ | ​ | ​ | ​ | ​ | ​
Loans, financing and debentures | ​ | 74,532,331 | ​ | 101,685,556 | ​ | 9,107,311 | ​ | 12,248,908 | ​ | 29,960,769 | ​ | 50,368,568
Lease liabilities | ​ | 6,195,984 | ​ | 10,891,670 | ​ | 1,113,507 | ​ | 1,959,036 | ​ | 1,774,219 | ​ | 6,044,908
Liabilities for asset acquisitions and subsidiaries | ​ | 280,864 | ​ | 313,645 | ​ | 98,899 | ​ | 94,575 | ​ | 89,293 | ​ | 30,878
Derivative financial instruments | ​ | 2,218,716 | ​ | 3,125,242 | ​ | 527,889 | ​ | 827,564 | ​ | 1,740,146 | ​ | 29,643
Dividends payable | ​ | 2,678 | ​ | 2,678 | ​ | 2,678 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | 137,148 | ​ | 137,148 | ​ | 52,585 | ​ | 84,563 | ​ | ​ | ​ | ​
​ | ​ | 89,715,675 | ​ | 122,503,893 | ​ | 17,250,823 | ​ | 15,214,646 | ​ | 33,564,427 | ​ | 56,473,997
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31,
​ | ​ | 2022
​ | ​ | Book | ​ | Future | ​ | Up to 1 | ​ | 1 - 2 | ​ | ​ | ​ | More than
​ |  | value |  | value |  | year |  | years |  | 2 - 5 years |  | 5 years
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Trade accounts payable | ​ | 6,206,570 | ​ | 6,206,570 | ​ | 6,206,570 | ​ | ​ | ​ | ​ | ​ | ​
Loans, financing and debentures | ​ | 74,574,591 | ​ | 105,341,912 | ​ | 6,823,274 | ​ | 7,899,772 | ​ | 39,476,527 | ​ | 51,142,339
Lease liabilities | ​ | 6,182,530 | ​ | 11,053,487 | ​ | 1,050,947 | ​ | 992,379 | ​ | 2,668,855 | ​ | 6,341,305
Liabilities for asset acquisitions and subsidiaries | ​ | 2,062,322 | ​ | 2,203,302 | ​ | 1,986,633 | ​ | 99,331 | ​ | 57,421 | ​ | 59,917
Derivative financial instruments | ​ | 4,846,795 | ​ | 6,515,262 | ​ | 728,070 | ​ | 1,341,108 | ​ | 4,299,970 | ​ | 146,114
Dividends payable | ​ | 5,094 | ​ | 5,094 | ​ | 5,094 | ​ | ​ | ​ | ​ | ​ | ​
Other liabilities | ​ | 147,920 | ​ | 147,920 | ​ | 61,500 | ​ | 86,420 | ​ | ​ | ​ | ​
​ | ​ | 94,025,822 | ​ | 131,473,547 | ​ | 16,862,088 | ​ | 10,419,010 | ​ | 46,502,773 | ​ | 57,689,675
​ 4.3. Credit risk management In the six-month period ended June 30, 2023, there were no significant changes in the credit risk management policies compared to those disclosed in the annual financial statements for the year ended of December 31, 2022 (Note 4). 4.4.Market risk management In the six-month period ended June 30, 2023, there were no significant changes in the market risk management policies and procedures compared to those disclosed in the annual financial statements for the year ended December 31, 2022 (Note 4). 4.4.1.Exchange rate risk management As disclosed in the financial statements for the year ended December 31, 2022 (Note 4), the Company enters into 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 a 24-months’ time horizon and therefore, are matched to the availability of currency for sale in the short term. The Company’s Board of Directors approved the contracting of extraordinary hedge, in addition to the strategy mentioned above, for investments in the Cerrado Project, with a term of up to 36 months as of November 2021, in an amount of up to US$1,000,000. On July 27, 2022, the Board of Directors approved the expansion of the program, increasing the maximum amount (notional) to US$1,500,000, maintaining the previously established deadline. In order to provide transparency on the hedge program for the Cerrado Project, since December 31, 2021 the Company has started to prominently disclose the respective contracted operations. The assets and liabilities that are exposed to foreign currency, substantially in U.S. Dollars, are set forth below: ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2023 |  | 2022
Assets | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 11,248,274 | ​ | 8,039,218
Marketable securities | ​ | 4,826,627 | ​ | 4,510,652
Trade accounts receivable | ​ | 4,845,044 | ​ | 7,612,768
Derivative financial instruments | ​ | 4,202,786 | ​ | 3,393,785
​ | ​ | 25,122,731 | ​ | 23,556,423
Liabilities | ​ | ​ | ​ | ​
Trade accounts payable | ​ | (2,028,936) | ​ | (2,030,806)
Loans and financing | ​ | (60,176,982) | ​ | (61,216,140)
Liabilities for asset acquisitions and subsidiaries | ​ | (186,058) | ​ | (2,053,259)
Derivative financial instruments | ​ | (2,136,399) | ​ | (4,698,323)
​ | ​ | (64,528,375) | ​ | (69,998,528)
​ | ​ | (39,405,644) | ​ | (46,442,105)
​ 4.4.1.1.Sensitivity analysis – foreign exchange rate exposure – except for derivative financial instruments For market risk analysis, the Company uses scenarios to evaluate both its asset and liability positions in foreign currency, and the possible effects on its results. The probable scenario represents the amounts recognized, as they reflect the conversion into Brazilian Reais on the balance sheet date (R$ to U.S.$ = R$4.8192). This analysis assumes that all other variables, particularly interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the U.S. Dollar at the rates of 25% and 50% before taxes. The following table set forth the potential impacts at their absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Effect on profit or loss
​ | ​ | Probable | ​ | Possible | ​ | Remote
​ |  | (base value) |  | (25%) |  | (50%)
Cash and cash equivalents | ​ | 11,248,274 | ​ | 2,812,069 | ​ | 5,624,137
Marketable securities | ​ | 4,826,627 | ​ | 1,206,657 | ​ | 2,413,314
Trade accounts receivable | ​ | 4,845,044 | ​ | 1,211,261 | ​ | 2,422,522
Trade accounts payable | ​ | (2,028,936) | ​ | (507,234) | ​ | (1,014,468)
Loans and financing | ​ | (60,176,982) | ​ | (15,044,246) | ​ | (30,088,491)
Liabilities for asset acquisitions and subsidiaries | ​ | (186,058) | ​ | (46,515) | ​ | (93,029)
​ 4.4.1.2.Sensitivity analysis – foreign exchange rate exposure – derivative financial instruments The Company has sales operations in US$ in the futures markets, including strategies using options, to ensure attractive levels of operating margins for a portion of its revenue. These operations are limited to a percentage of the total exposure to US$ over a 24-month horizon, or to investments in the Cerrado Project, according to the extraordinary hedge described above, and are therefore pegged to the availability of ready-to-sell foreign exchange in the short term. In addition to the transaction described above, the Company also taken out derivative instruments linked to the US$ and subject to exchange fluctuations, seeking to adjust the debt’s currency indexation to the cash generation currency, as provided for in its financial policies. For the calculation of the mark-to-market (“MtM”) price, the exchange rate of the last business day of the period is used. These market movements caused a positive impact on the mark-to-market position entered into by the Company. This analysis below assumes that all other variables, particularly the interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the US$ by 25% and 50%, before taxes, based on the base scenario on June 30, 2023. The following table set out the possible impacts assuming these scenarios: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Effect on profit or loss
​ | ​ | Probable | ​ | Possible | ​ | Remote
​ |  | (base value) |  | 25% |  | 50%
Dollar/Real | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | ​ | ​ | ​
Derivative options | ​ | 3,201,865 | ​ | (3,777,232) | ​ | (7,621,974)
Derivative swaps | ​ | (450,678) | ​ | (1,728,220) | ​ | (3,442,041)
Derivative Non-Deliverable Forward (‘NDF’) Contracts | ​ | 159,434 | ​ | (286,048) | ​ | (572,176)
Embedded derivatives | ​ | 187,618 | ​ | (85,533) | ​ | (171,067)
NDF parity derivatives (1) | ​ | 140,411 | ​ | (47,180) | ​ | (84,699)
Commodity Derivatives | ​ | 22,421 | ​ | (5,607) | ​ | (11,212)
​ | ​ | ​ | ​ | ​ | ​ | ​
Dollar/Euro | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | ​ | ​ | ​
NDF parity derivatives (1) | ​ | 140,411 | ​ | (562,869) | ​ | (1,125,812)
​ (1)Long positions at US$/EUR parity in order to protect the Capex cash flow of the Cerrado Project against the appreciation of the Euro. ​ 4.4.2.Interest rate risk management Fluctuations in interest rates could increase or reduce the costs of new loans and existing contracted operations. The Company is constantly looking for alternatives for the use of financial instruments in order to avoid negative impacts on its cash flow. Considering that on March 5, 2021, the Financial Conduct Authority (“FCA”) announced the discontinuation date of the 3-month LIBOR as June 30, 2023, the Company initiated negotiations of the terms for swapping the indexers of its debt contracts and related derivatives upon this announcement. As of June 30, 2023, the Company had R$15,566 related to loan and financing contracts, and R$15,151 related to derivative contracts, and it conducted the contract amendment process with the counterparties of each contract to ensure that the terms and market best practices were adopted at the time of the index transition starting from June 2023. On July 1, 2023, the contracts will be indexed to SOFR, which has been adopted as the new reference interest rate by the capital market. This negotiation will not have a substantial impact on the balances presented in the loan and financing and derivative instrument categories. The Company understands that it will not be necessary to change the risk management strategy due to the change of indexation of its financial contracts linked to LIBOR. 4.4.2.1.Sensitivity analysis – exposure to interest rates – except for derivative financial instruments For its market risk analysis, the Company uses scenarios to evaluate the sensitivity of changes in operations impacted by the following 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 could impact the results. The probable scenario represents the amounts already booked, as they reflect Management’s best estimates. This analysis assumes that all other variables, particularly exchange rates, will remain constant. The other scenarios considered a depreciation of 25% and 50% in market interest rates. The following table set forth the possible impacts assuming these scenarios in absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Effect on profit or loss
​ | ​ | ​ | ​ | Possible | ​ | Remote
​ |  | Probable |  | (25%) |  | (50%)
CDI/SELIC | ​ | ​ | ​ | ​ | ​ | ​
Cash and cash equivalents | ​ | 560,985 | ​ | 19,144 | ​ | 38,287
Marketable securities | ​ | 3,528,243 | ​ | 120,401 | ​ | 240,803
Loans and financing | ​ | 8,125,522 | ​ | 277,283 | ​ | 554,567
TJLP | ​ | ​ | ​ | ​ | ​ | ​
Loans and financing | ​ | 277,763 | ​ | 5,055 | ​ | 10,111
LIBOR | ​ | ​ | ​ | ​ | ​ | ​
Loans and financing | ​ | 15,645,428 | ​ | 216,902 | ​ | 433,803
SOFR | ​ | ​ | ​ | ​ | ​ | ​
Loans and financing | ​ | 3,115,211 | ​ | 41,030 | ​ | 82,060
​ 4.4.2.2.Sensitivity analysis – exposure to interest rates – derivative financial instruments This analysis assumes that all other variables remain constant. The other scenarios considered a depreciation of 25% and 50% in market interest rates. ​ The following table sets out the possible impacts of these assumed scenarios: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Effect on profit or loss
​ | ​ | ​ | ​ | Probable | ​ | Remote
​ |  | Probable |  | 25% |  | 50%
CDI | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Derivative options | ​ | 3,201,865 | ​ | (388,599) | ​ | (747,669)
Derivative swaps | ​ | (450,678) | ​ | (5,108) | ​ | (11,749)
LIBOR | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
Derivative swaps | ​ | (450,678) | ​ | 260,364 | ​ | 520,442
​ 4.4.2.3.Sensitivity analysis to changes in the consumer price indices of the US economy For the measurement of the probable scenario, the United States Consumer Price Index (“US-CPI”) was considered on June 30, 2023. The probable scenario was extrapolated considering a depreciation of 25% and 50% in the US-CPI to define the possible and remote scenarios, respectively. ​ The following table sets out the possible impacts, assuming these scenarios in absolute amounts: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ | ​ | Effect on profit or loss
​ | ​ | Probable | ​ | Possible | ​ | Remote
​ |  | (base value) |  | (25%) |  | (50%)
Embedded derivative in a commitment to purchase standing wood, originating from a forest partnership agreement | ​ | 187,618 | ​ | (31,171) | ​ | (64,295)
​ 4.4.3.Commodity price risk management The Company is exposed to commodity prices, mainly in the selling price of pulp in the international market. The dynamics of rising and falling production capacities in the global market and macroeconomic conditions may impact the Company´s operating results. Through a specialized team, the Company monitors hardwood pulp prices and analyses future trends, adjusting the forecasts aimed at assisting with preventive measures to calculate the different scenarios. There is no sufficiently liquid financial market to mitigate the risk of a material portion of the Company’s operations. Hardwood pulp price protection instruments available on the market have low liquidity and low volume, and high levels of distortion in price formation. The Company is also exposed to international oil prices, reflected in logistical costs for selling in the export market, and indirectly in the costs of other supply, logistics and service contracts. In such cases, the Company evaluates whether to contract derivative financial instruments to mitigate the risk of price variations in its results. 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 the annual financial statements for the year ended December 31, 2022 (Note 4). 4.5.1.Outstanding derivatives by type of contract, including embedded derivatives The positions of outstanding derivatives are set forth below:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Notional value, net in U.S.$ | ​ | Fair value
​ | ​ | June 30, | ​ | December 31, | ​ | June 30, | ​ | December 31,
​ |  | 2023 |  | 2022 |  | 2023 |  | 2022
Instruments as part of protection strategy | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Operational hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
ZCC | ​ | 4,815,050 | ​ | 6,866,800 | ​ | 3,201,865 | ​ | 1,596,089
NDF (R$ x US$) | ​ | 243,100 | ​ | 248,100 | ​ | 159,434 | ​ | (2,474)
NDF (€ x US$) | ​ | 399,328 | ​ | 544,702 | ​ | 140,411 | ​ | 161,055
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Debt hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap LIBOR to Fixed (US$) | ​ | 3,143,877 | ​ | 3,200,179 | ​ | 927,104 | ​ | 1,052,546
Swap IPCA to CDI (notional in Brazilian Reais) | ​ | 2,130,618 | ​ | 1,741,787 | ​ | 245,159 | ​ | 278,945
Swap IPCA to Fixed (US$) | ​ | ​ | ​ | 121,003 | ​ | ​ | ​ | (29,910)
Swap CDI x Fixed (US$) | ​ | 1,265,004 | ​ | 1,863,534 | ​ | (1,262,085) | ​ | (2,566,110)
Pre-fixed Swap to US$ (US$) | ​ | 350,000 | ​ | 350,000 | ​ | (360,856) | ​ | (503,605)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Commodity Hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap US-CPI (US$) (1) | ​ | 130,810 | ​ | 124,960 | ​ | 187,618 | ​ | 40,418
Swap VLSFO/Brent | ​ | 128,307 | ​ | ​ | ​ | 22,421 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | 3,261,071 | ​ | 26,954
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Current assets | ​ | ​ | ​ | ​ | ​ | 3,747,881 | ​ | 3,048,493
Non-current assets | ​ | ​ | ​ | ​ | ​ | 1,731,906 | ​ | 1,825,256
Current liabilities | ​ | ​ | ​ | ​ | ​ | (483,512) | ​ | (667,681)
Non-current liabilities | ​ | ​ | ​ | ​ | ​ | (1,735,204) | ​ | (4,179,114)
​ | ​ | ​ | ​ | ​ | ​ | 3,261,071 | ​ | 26,954
​
(1) | The embedded derivative refers to a swap contract for the sale of price variations in United States Dollars and US-CPI within the term of a forest partnership with a standing wood supply contract.
​ The current contracts and the respective protected risks are set forth below:
| (i) | Swap CDI x Fixed US$: positions in conventional swaps exchanging the variation of the Interbank Deposit rate (“DI”) for a fixed rate in United States Dollars (“US$”). The objective is to change the debt indexed in Brazilian Reais to US$, in compliance with the Company’s natural exposure to US$ receivables.
| (ii) | Swap IPCA x CDI (notional in Brazilian Reais): positions in conventional swaps exchanging the variation of the Amplified Consumer Price Index (“IPCA”) for the DI rate. The objective is to change the debt indexed in reais, in compliance with the Company’s cash position in Brazilian Reais, which is also indexed to DI.
| (iii) | Swap IPCA x Fixed US$: positions in conventional swaps exchanging the variations of the IPCA for a fixed rate in US$. The objective is to change the debt indexed in Brazilian Reais to US$, in compliance with the Company’s natural exposure to US$ receivables.
| (iv) | Swap LIBOR x Fixed US$: positions in conventional swaps exchanging a post-fixed rate (LIBOR) for a fixed rate in US$. The objective is to protect the cash flow against changes in the US interest rate.
| (v) | Pre-Fixed Swap R$ x Fixed US$: positions in conventional swaps of a fixed rate in Reais for a fixed rate in US$. The objective is to change the exposure of debts in Brazilian Reais to US$, in compliance with the Company’s natural exposure to US$ receivables.
| (vi) | Zero-Cost Collar (“ZCC”): positions in an instrument that consists of the simultaneous combination of a purchase of put options and the sale of call options in US$, with the same principal amount and maturity, with the objective of protecting the cash flow of exports. Under this strategy, an interval is established where there is no deposit or receipt of financial margin at the option maturity. The objective is to protect the cash flow of exports against the depreciation of the Brazilian Real.
| (vii) | Non-Deliverable Forward contracts (“NDF”): ”): short positions in US$ futures contracts with the objective of protecting the cash flow from exports against the depreciation of the Brazilian Real.
| (viii) | Swap US-CPI: The embedded derivative refers to the swap contracts for selling price variations in US$ and the US-CPI in forest partnership with a standing wood supply contract.
| (ix) | Non-Deliverable Forward contracts: EUR and US$: call positions at EUR/US$ parity to protect the Capex cash flow of the Cerrado project against the appreciation of the Euro.
| (x) | Swap Very Low Sulphur Fuel Oil / Brent (“VLSFO”): Long positions in oil, aimed at hedging logistical costs related to maritime freight contracts against the increase in oil prices.
The variation in the fair values of derivatives on June 30, 2023 compared to the fair values measured on December 31, 2022 are explained substantially by the appreciation of the Brazilian Real against the US Dollar and by settlements during the period. There were also impacts caused by the variations in the Pre, Foreign Exchange Coupon and LIBOR curves in the operations. It is important to highlight that the outstanding agreements on June 30, 2023 are over-the-counter market operations, without any type of collateral margin or forced early settlement clause due to variations from market marking. 4.5.2.Fair value by maturity schedule ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2023 |  | 2022
2023 | ​ | 2,413,838 | ​ | 2,380,812
2024 | ​ | 1,785,080 | ​ | 297,156
2025 | ​ | (477,814) | ​ | (1,225,193)
2026 onwards | ​ | (460,033) | ​ | (1,425,821)
​ | ​ | 3,261,071 | ​ | 26,954
​ 4.5.3.Outstanding 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 |  | 2023 |  | 2022 |  | 2023 |  | 2022
Debt hedges | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Assets | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap CDI to Fixed (US$) | ​ | R$ | ​ | 4,623,091 | ​ | 7,081,545 | ​ | 368,657 | ​ | 617,835
Swap Pre-Fixed to US$ | ​ | R$ | ​ | 1,317,226 | ​ | 1,317,226 | ​ | ​ | ​ | 45,329
Swap LIBOR to Fixed (US$) | ​ | US$ | ​ | 3,143,877 | ​ | 3,200,000 | ​ | 927,104 | ​ | 1,052,546
Swap IPCA to CDI | ​ | IPCA | ​ | 2,294,552 | ​ | 2,041,327 | ​ | 325,275 | ​ | 427,417
Swap IPCA to US$ | ​ | IPCA | ​ | ​ | ​ | 610,960 | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 1,621,036 | ​ | 2,143,127
Liabilities | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap CDI to Fixed (US$) | ​ | US$ | ​ | 1,265,000 | ​ | 1,863,534 | ​ | (1,630,742) | ​ | (3,183,945)
Swap Pre-Fixed to US$ | ​ | US$ | ​ | 350,000 | ​ | 350,000 | ​ | (360,856) | ​ | (548,934)
Swap LIBOR to Fixed (US$) | ​ | US$ | ​ | 3,143,877 | ​ | 3,200,000 | ​ | ​ | ​ | ​
Swap IPCA to CDI | ​ | R$ | ​ | 2,130,618 | ​ | 1,741,787 | ​ | (80,116) | ​ | (148,472)
Swap IPCA to US$ | ​ | US$ | ​ | ​ | ​ | 121,003 | ​ | ​ | ​ | (29,910)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (2,071,714) | ​ | (3,911,261)
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | (450,678) | ​ | (1,768,134)
Operational hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Zero cost collar (US$ x R$) | ​ | US$ | ​ | 4,815,050 | ​ | 6,866,800 | ​ | 3,201,865 | ​ | 1,596,089
NDF (R$ x US$) | ​ | US$ | ​ | 243,100 | ​ | 248,100 | ​ | 159,434 | ​ | (2,474)
NDF (€ x US$) | ​ | US$ | ​ | 399,328 | ​ | 544,702 | ​ | 140,411 | ​ | 161,055
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3,501,710 | ​ | 1,754,670
Commodity hedge | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Swap US-CPI (standing wood) (1) | ​ | US$ | ​ | 130,810 | ​ | 124,960 | ​ | 187,618 | ​ | 40,418
Swap VLSFO/Brent | ​ | US$ | ​ | 128,307 | ​ | ​ | ​ | 22,421 | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 210,039 | ​ | 40,418
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | 3,261,071 | ​ | 26,954
​
(1) | The embedded derivative refers to the swap contracts for selling price variations in US$ and the US-CPI in forest partnership with a standing wood supply contract.
​ 4.5.4.Fair value settled amounts The settled derivatives positions are set forth below: ​
​ | ​ | ​ | ​ | ​
​ | ​ | June 30, | ​ | December 31,
​ |  | 2023 |  | 2022
Operational hedge | ​ | ​ | ​ | ​
Zero cost collar (R$ x US$) | ​ | 1,445,973 | ​ | 718,618
NDF (R$ x US$) | ​ | 18,538 | ​ | 8,301
NDF (€ x US$) | ​ | 50,679 | ​ | 7,113
​ | ​ | 1,515,190 | ​ | 734,032
​ | ​ | ​ | ​ | ​
Commodity hedge | ​ | 8,853 | ​ | ​
Swap VLSFO/other | ​ | 8,853 | ​ | ​
​ | ​ | ​ | ​ | ​
Debt hedge | ​ | ​ | ​ | ​
Swap CDI to Fixed (US$) | ​ | (283,888) | ​ | (261,570)
Swap IPCA to CDI (Brazilian Reais) | ​ | 158,092 | ​ | (5,180)
Swap IPCA to Fixed (US$) | ​ | (3,945) | ​ | 171
Swap Pre-Fixed to US$ | ​ | 52,746 | ​ | 54,128
Swap LIBOR to Fixed (US$) | ​ | 217,852 | ​ | (239,356)
​ | ​ | 140,857 | ​ | (451,807)
​ | ​ | 1,664,900 | ​ | 282,225
​ 4.6.Fair value hierarchy Financial instruments are measured at fair value, which considers the fair value as the price that would be received from selling an asset or paid to transfer a liability in an unforced transaction between market participants at the measurement date. ​ For the six-month period ended June 30, 2023, there were no changes between the 3 (three) levels of hierarchy and no transfers between levels 1, 2 and 3. ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | June 30,
​ | ​ | 2023
​ |  | Level 2 |  | Level 3 |  | Total
Assets | ​ | ​ | ​ | ​ | ​ | ​
At fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 5,479,787 | ​ | ​ | ​ | 5,479,787
Marketable securities | ​ | 8,354,870 | ​ | ​ | ​ | 8,354,870
​ | ​ | 13,834,657 | ​ | ​ | ​ | 13,834,657
​ | ​ | ​ | ​ | ​ | ​ | ​
At fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​
Other investments - CelluForce | ​ | ​ | ​ | 23,541 | ​ | 23,541
​ | ​ | ​ | ​ | 23,541 | ​ | 23,541
​ | ​ | ​ | ​ | ​ | ​ | ​
Biological assets | ​ | ​ | ​ | 16,914,120 | ​ | 16,914,120
​ | ​ | ​ | ​ | 16,914,120 | ​ | 16,914,120
Total assets | ​ | 13,834,657 | ​ | 16,937,661 | ​ | 30,772,318
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
At fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 2,218,716 | ​ | ​ | ​ | 2,218,716
​ | ​ | 2,218,716 | ​ | ​ | ​ | 2,218,716
Total liabilities | ​ | 2,218,716 | ​ | ​ | ​ | 2,218,716
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | December 31,
​ | ​ | 2022
​ | ​ | Level 2 | ​ | Level 3 | ​ | Total
Assets | ​ | ​ | ​ | ​ | ​ | ​
At fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4,873,749 | ​ | ​ | ​ | 4,873,749
Marketable securities | ​ | 7,965,742 | ​ | ​ | ​ | 7,965,742
​ | ​ | 12,839,491 | ​ | ​ | ​ | 12,839,491
​ | ​ | ​ | ​ | ​ | ​ | ​
At fair value through other comprehensive income | ​ | ​ | ​ | ​ | ​ | ​
Other investments - CelluForce | ​ | ​ | ​ | 24,917 | ​ | 24,917
​ | ​ | ​ | ​ | 24,917 | ​ | 24,917
​ | ​ | ​ | ​ | ​ | ​ | ​
Biological assets | ​ | ​ | ​ | 14,632,186 | ​ | 14,632,186
​ | ​ | ​ | ​ | 14,632,186 | ​ | 14,632,186
Total assets | ​ | 12,839,491 | ​ | 14,657,103 | ​ | 27,496,594
​ | ​ | ​ | ​ | ​ | ​ | ​
Liabilities | ​ | ​ | ​ | ​ | ​ | ​
At fair value through profit or loss | ​ | ​ | ​ | ​ | ​ | ​
Derivative financial instruments | ​ | 4,846,795 | ​ | ​ | ​ | 4,846,795
​ | ​ | 4,846,795 | ​ | ​ | ​ | 4,846,795
Total liabilities | ​ | 4,846,795 | ​ | ​ | ​ | 4,846,795
​ 4.7.Climate change In the annual financial statements for the year ended December 31, 2022, the risks and opportunities information linked to climate change and the sustainability strategy were disclosed, which did not change significant during the six-month period ended June 30, 2023, except for the items presented in Note 4.7.1. 4.7.1.Opportunities linked to climate change and the sustainability strategy 4.7.1.1 Biomas As disclosed in Note 1.2.6, Suzano and five other global companies created Biomas with objective of restoring, conserving and preserving native forests in Brazil. The initiative aims to restore and protect, over a period of 20 years, native forest in some of Brazil´s most valuable ecosystems, such as the Amazon, Atlantic Forest and Cerrado biomes – The area is equivalent to the territory of Switzerland or the state of Rio de Janeiro, in Brazil. The initiative aims to promote a sustainable business model from a financial perspective, enabling each restoration, conservation, and preservation projects to be viable through the commercialization of carbon credits, as removals and avoided emissions, reducing tons of CO2e from the atmosphere. The first stage will involve the identification and prospecting of areas, promoting nurseries for the large-scale production of native trees, engaging local communities in Biomas activities, discussing the application of the project in public areas, partnering with carbon certification platforms and implementing pilot projects. 4.7.1.2Generation of carbon credits The Company has ongoing carbon credit projects certifications, including:
| ● | Horizonte de Carbono Project, which aims to restore degraded areas through the reforestation of native and eucalyptus trees. On March 30, 2023, the certifier Verra completed the validation and verification of 1.9Mt CO2e of the Horizonte Project (VCS ID 3350), of which 10% will be allocated to the Verra reserve and 1.7Mt CO2e is eligible for the issuance of credits. The Company has not yet issued such credits.
The carbon credits are registered by Verra, an accredited company that holds a global platform, which is also responsible for the custody of the credits. This company has developed the Verified Carbon Standard (VCS) program, currently regarded as the global reference standard, in the best understanding of the company. 4.7.1.3Production of wood-based textile fiber In May 2023, Woodspin, located in Finland, inaugurated the first factory producing sustainable, recyclable and fully biodegradable textile fiber from responsibly grown wood, the result of the joint venture between Spinnova and Suzano. This new type of “green fabric” has the potential to replace less sustainable materials used in many products. This unit will be used for market development and technology improvement. For the construction and operation of textile fiber projects, Woodspin uses Suzano’s microfibrillated cellulose (MFC) as raw material. 4.8.Capital management The main objective is to strengthen the Company’s capital structure, aiming to maintain an appropriate level of financial leverage while mitigating risks that could affect the availability of capital for business development. The Company continuously monitors significant indicators, such as consolidated financial leverage, which is the ratio of total net debt to adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (“Adjusted EBITDA”).

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