Disclosure of financial instruments [text block] | 4 FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT 4.1 Financial risks management 4.1.1 Overview As a result of its activities, the Company is exposed to various financial risks, which are managed in accordance with the Financial Risk Management, Counterparty and Issuer Risk, Debt, Derivative and Cash Management Policies (“Financial Policies”) approved at the Board of Directors' meeting. The main factors considered by Management are: (i) Liquidity; (ii) Credit; (iii) Exchange rate; (iv) Interest rate; (v) Fluctuations of pulp selling and commodity prices; and (vi) Capital. Management are focused on generating consistent and sustainable results over time, however, arising from external risk factors, unintended levels of volatility can influence the Company’s cash flow and income statement. The Company has policies and procedures for managing market risk which aims to: (i) Reduce, mitigate or transfer exposure with the aim of protecting the Company’s cash flow and assets against fluctuations in the market prices of raw material and products, exchange rates and interest rates, price and adjustment indices ("market risk") or other assets or instruments traded in liquid or illiquid markets to which the value of the assets, liabilities and cash flow are exposed; (ii) Establish limits and instruments with the purpose of allocating the Company's cash to financial institutions falling within acceptable credit risk exposure parameters; and (iii) Optimize the process of contracting financial instruments for protection against exposure to risk, drawing on natural hedges and correlations between the prices of different assets and markets, avoiding any waste of funds for inefficient transactions. All financial transactions entered into by the Company aim to protect existing exposures, with the assumption of new risks being prohibited, except those arising from its operating activities. Hedging instruments are contracted exclusively for hedging purposes and are based on the following terms: (i) Protection of cash flow against currency mismatches; (ii) Protection of revenue flows for debt settlement and interest payments against fluctuations in interest rates and currencies; and (iii) Protection against fluctuations in the prices of pulp and other supplies related to production. The Treasury team is responsible for identification, evaluating and seeking protection against possible financial risks. The Board of Directors approves financial policies that establish the principles and guidance for global risk management, the areas involved in these activities, the use of derivative and non-derivative financial instruments, and the allocation of a cash surplus. The Company only uses the most liquid financial instruments, and: (i) Does not enter into leveraged transactions or other forms of embedded options that change the purpose of protection (hedge); (ii) Does not have double-indexed debt or other forms of implied options; and (iii) Does not have any transactions requiring margin deposits or other forms of collateral for counterparty credit risk. The Company does not use hedge accounting. Therefore, gains and losses from derivative operations are fully recognized in the statements of income, as disclosed in Note 26. 4.1.2 Classification All transactions with financial instruments are recognized for accounting purposes and classified in the following categories: Note 12/31/2024 12/31/2023 Assets Amortized cost Cash and cash equivalents 5 9,018,818 8,345,871 Marketable securities 6 Trade accounts receivable 7 9,132,860 6,848,454 Other assets (1) 628,275 737,222 18,779,953 15,931,547 Fair value through other comprehensive income Investments 14.1 1,138,066 23,606 1,138,066 23,606 Fair value through profit or loss Derivative financial instruments 4.5.1 3,887,100 4,430,454 Marketable securities 6 13,363,511 13,267,286 17,250,611 17,697,740 37,168,630 33,652,893 Liabilities Amortized cost Trade accounts payable 17 6,033,285 5,572,219 Loans, financing and debentures 18.1 101,435,531 77,172,692 Lease liabilities 19.2 6,972,915 6,243,782 Liabilities for assets acquisitions and subsidiaries 23 120,490 187,187 Dividends and interests on own capital payable 2,200,917 1,316,528 Other liabilities (1) 143,330 116,716 116,906,468 90,609,124 Fair value through profit or loss Derivative financial instruments 4.5.1 10,454,820 2,436,072 10,454,820 2,436,072 127,361,288 93,045,196 90,192,658 59,392,303 (1) Does not include items not classified as financial instruments. 4.1.3 Fair value of loans and financing The financial instruments are recognized at their contractual amounts. In order to determine the market values of financial instruments traded in public and liquid markets, the market closing prices were used at the balance sheet dates. The fair values of interest rate and index swaps are calculated based on the present value of their future cash flow, discounted at the current interest rates available for transactions with similar remaining terms to maturity. This calculation is based on the quotations of B3 and ANBIMA for interest rate transactions in Brazilian Reais, and the Federal Reserve Bank of New York and Bloomberg for Secured Overnight Financing Rate (“SOFR”) transactions. The fair value of forward or forward exchange agreements is determined using the forward exchange rates prevailing at the balance sheet dates, in accordance with B3 prices. In order to determine the fair values of financial instruments traded in over-the-counter or unliquidated markets, a number of assumptions and methods based on normal market conditions and not for liquidation or forced sale, are used at each balance sheet date, including the use of option pricing models such as Garman-Kohlhagen, and estimates of discounted future cash flow. The fair value of agreements for the fixing of oil bunker prices is obtained based on the Platts index. The estimated fair values of loans and financing are set forth below: Yield used to discount/methodology 12/31/2024 12/31/2023 Quoted in the secondary market In foreign currency Bonds Secondary Market 48,734,909 38,703,379 Estimated present value In foreign currency Export credits (“Prepayment”) SOFR 22,740,891 17,783,760 Assets Financing SOFR 422,115 278,107 ECA - Export Credit Agency SOFR 864,202 IFC - International Finance Corporation SOFR 6,261,715 3,198,761 Panda Bonds - CNH Fixed 951,125 In local currency BNDES – TJLP DI 1 171,109 215,458 BNDES – TLP DI 1 3,275,012 2,712,762 BNDES – Fixed DI 1 3,903 BNDES – TR DI 1 33,466 BNDES – Selic (“Special Settlement and Custody System”) DI 1 645,139 686,798 BNDES – UMBNDES DI 2 106,966 Assets Financing DI 1 60,566 75,622 Debentures DI 1/IPCA 12,002,992 8,881,277 NCE (“Export Credit Notes”) DI 1 108,308 110,396 NCR (“Rural Credit Notes”) DI 1 2,424,457 2,228,806 Export credits (“Prepayment”) DI 1 824,035 98,802,972 75,703,064 The book values of loans and financing are disclosed in Note 18. Management considers that, for its other financial assets and 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. In the year ended December 31, 2024, 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. 12/31/2024 Book value Undiscounted cash flow Up to 1 year 1 - 2 years 2 - 5 years More than 5 years Liabilities Trade accounts payables 6,033,285 6,033,285 6,033,285 Loans, financing and debentures 101,435,531 142,028,543 13,599,011 14,235,170 50,858,667 63,335,695 Lease liabilities 6,972,915 12,099,294 1,302,590 1,176,832 3,094,493 6,525,379 Liabilities for asset acquisitions and subsidiaries 120,490 146,082 23,425 22,400 100,257 Derivative financial instruments 10,454,820 13,878,150 1,676,180 957,540 1,489,357 9,755,073 Dividends and interests on own capital payable 2,200,917 2,200,917 2,200,917 Other liabilities 143,330 143,330 60,892 82,438 127,361,288 176,529,601 24,896,300 16,474,380 55,542,774 79,616,147 12/31/2023 Book Undiscounted cash flow Up to 1 year 1 - 2 years 2 - 5 years More than 5 years Liabilities Trade accounts payables 5,572,219 5,572,219 5,572,219 Loans, financing and debentures 77,172,692 105,526,852 7,648,237 12,983,542 31,355,362 53,539,711 Lease liabilities 6,243,782 11,021,519 1,172,568 1,045,795 2,743,793 6,059,363 Liabilities for asset acquisitions and subsidiaries 187,187 215,891 94,948 18,314 87,520 15,109 Derivative financial instruments 2,436,072 2,801,258 66,433 1,278,953 1,191,014 264,858 Dividends and interests on own capital payable 1,316,528 1,316,528 1,316,528 Other liabilities 116,716 116,716 58,955 57,761 93,045,196 126,570,983 15,929,888 15,384,365 35,377,689 59,879,041 4.3 Credit risk management Related to the possibility of non-compliance with the counterparties’ commitments as part of a transaction. Credit risk is managed on a group basis and arises from cash equivalents, marketable securities, derivative financial instruments, bank deposits, Bank Deposit Certificates ("CDB"), fixed income box, repurchase agreements, letters of credit, insurance, receivable terms of customers, and advances to suppliers for new projects, among others. 4.3.1 Trade accounts receivable The Company has commercial and credit policies aimed at mitigating any risks arising from defaults by its customers, mainly through contracting credit insurance policies, bank guarantees provided by first-tier banks, and collateral based on liquidity. Moreover, portfolio customers are subject to internal credit analysis aimed at assessing the risks 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 the individual credit limits to each customer according to the identified risks. Each analysis is submitted for approval according to an established hierarchy and, if applicable, for approval at a Management meeting and by the Credit Committee. The risk classification of trade accounts receivable is set forth below: Consolidated 12/31/2024 12/31/2023 Low (1) 8,899,516 6,549,975 Average (2) 174,048 156,883 High (3) 89,596 173,558 9,163,160 6,880,416 1) Current and overdue up to 30 days. 2) Overdue between 30 and 90 days. 3) Overdue more than 90 days. A portion of the amounts above does not consider the expected credit losses calculated based on the provision matrix of R$30,300 and R$31,962 as of December 31, 2024 and 2023, respectively. 4.3.2 Banks and financial institutions The Company, in order to mitigate its credit risk, ensures its financial operations are diversified among banks, with a main focus on first-tier financial institutions classified as high-grade by the main risk rating agencies. The book value of financial assets representing exposure to credit risk is set forth below: Consolidated 12/31/2024 12/31/2023 Cash and cash equivalents 9,018,818 8,345,871 Marketable securities 13,363,511 13,267,286 Derivative financial instruments (1) 3,887,100 4,199,982 26,269,429 25,813,139 1) Does not include the derivative embedded in a forest partnership agreement for the supply of standing wood, which is not a transaction with a financial institution. The counterparties, mainly financial institutions, with whom the transactions are performed classified under cash and cash equivalents, marketable securities and derivatives financial instruments, are rated by the main ratings agencies. The risk ratings are set forth below: Cash and cash equivalents and marketable securities Derivative financial instruments 12/31/2024 12/31/2023 12/31/2024 12/31/2023 Risk rating (1) AAA 232,908 878,241 AA- 286,906 1,007,537 A+ 148,029 136,864 A 55,547 brAAA 20,830,651 20,856,072 2,747,948 1,682,513 brAA+ 658,880 511,589 439,280 brAA 755 6,565 brAA- 19 2,169 brA 31,504 brBBB- 3 3 brBB 710 1,132 brBB- 750,359 385 156,450 Others 109,448 235,242 314,859 22,382,329 21,613,157 3,887,100 4,199,982 1) We use the Brazilian Risk Ratings issued by the agencies Fitch Ratings, Standard & Poor’s and Moody’s. 4.4 Market risk management The Company is exposed to several market risks, mainly related to fluctuations in exchange rate variations, interest rates, inflation rates, pulp selling prices and commodity prices that could affect its results and financial situation. To mitigate the impacts, the Company has processes to monitor its exposure and policies that could support the implementation of risk management. These policies establish the limits and the instruments to be implemented for the purpose of: (i) Protecting cash flow due to currency mismatch; (ii) Mitigating exposure to interest rates; (iii) Reducing the impacts of fluctuations in commodity’s prices; and (iv) Changes to debt indexes. Market risk management involves the identification, assessment and implementation of the strategy, with the effective contracting of adequate financial instruments. 4.4.1 Exchange rate risk management The fundraising, financing and currency hedging policies of the Company are guided by the fact that a substantial part of the net revenue arises from exports with prices negotiated in US Dollars, while a substantial part of the production costs are in Brazilian Reais. This structure allows the Company to enter into export financing arrangements in US Dollars, and to reconcile the financing payments with the cash flow of receivables from sales in foreign markets, using the international bond market as an important portion of its capital structure, and providing a natural cash hedge for these commitments. Moreover, the Company enters into US$ 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$1,500,000, maintaining the previously established deadline. In order to provide transparency on the hedge program for the Cerrado Project, since December 31, 2021 the Company has started to prominently disclose the respective contracted operations. The assets and liabilities that are exposed to foreign currency, substantially in US$, are set forth below: 12/31/2024 12/31/2023 Assets Cash and cash equivalents 6,496,039 6,432,557 Marketable securities 70,255 7,378,277 Trade accounts receivable 7,090,160 5,049,609 Derivative financial instruments 3,887,100 3,070,594 17,543,554 21,931,037 Liabilities Trade accounts payable (1,350,763) (1,625,011) Loans and financing (83,004,915) (61,304,673) Liabilities for asset acquisitions and subsidiaries (93,308) (127,598) Derivative financial instruments (10,448,379) (1,867,882) (94,897,365) (64,925,164) (77,353,811) (42,994,127) 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 US$ = R$6.1923). This analysis assumes that all other variables, particularly interest rates, remain constant. The other scenarios considered the depreciation of the Brazilian Real against the US$ at the rates of 25% and 50% before taxes. The following table set forth the potential impacts at their absolute amounts: 12/31/2024 Effect on profit or loss Probable (base value) Possible (25%) Remote (50%) Cash and cash equivalents 6,496,039 1,624,010 3,248,020 Marketable securities 70,255 17,564 35,128 Trade accounts receivable 7,090,160 1,772,540 3,545,080 Trade accounts payable (1,350,763) (337,691) (675,382) Loans and financing (83,004,915) (20,751,229) (41,502,458) Liabilities for asset acquisitions and subsidiaries (93,308) (23,327) (46,654) 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, 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 negative 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 December 31, 2024. The following table set out the possible impacts assuming these scenarios: 12/31/2024 Effect on profit or loss Probable (base value) Possible 25% Remote 50% Dollar/Real Derivative financial instruments Derivative options (4,328,970) (9,226,995) (19,121,860) Derivative swaps (1,843,087) (2,604,422) (4,992,835) Derivative Non-Deliverable Forward (‘NDF’) Contracts (331,876) (896,742) (1,788,477) Embedded derivatives (80,759) (183,663) (367,326) Commodity Derivatives 16,973 4,236 8,478 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 due to fluctuations in interest rates in Brazil or abroad. 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”), Long Term Rate ("TLP"), Special System for Settlement and Custody (“SELIC”) and SOFR, 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: 12/31/2024 Effect on profit or loss Probable Possible (25%) Remote (50%) CDI/SELIC Cash and cash equivalents 2,422,308 73,578 147,155 Marketable securities 13,293,256 403,783 807,565 Loans and financing 9,290,595 282,202 564,404 TJLP/TLP Loans and financing 202,961 3,770 7,540 SOFR Loans and financing 28,534,005 320,294 640,588 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: 12/31/2024 Effect on profit or loss Probable Probable 25% Remote 50% CDI Derivative financial instruments Liabilities Derivative options (4,328,970) (943,363) (1,868,091) Derivative swaps (1,843,087) (91,012) (178,459) SOFR Derivative financial instruments Liabilities Derivative swaps (1,843,087) (136,036) (261,559) 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 December 31, 2024. 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: 12/31/2024 Effect on profit or loss Probable (base value) Possible (25%) Remote (50%) Embedded derivative in a commitment to purchase standing wood, originating from a forest partnership agreement (80,759) (32,607) (66,859) 4.4.3 Pulp and commodity price risk management The Company is exposed to the selling price of pulp and commodity prices 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. The fair value does not represent an obligation to make an immediate disbursement or receipt of cash, given that such an effect will only occur on the dates of contractual fulfillment or upon the maturity of each transaction, when the result will be determined, depending on the case and on the market conditions on the agreed dates. A summary of the methodologies used for the purpose of determining the fair value by type of instrument is presented below: (i) Swaps: the future value of the asset and liability is estimated based on the cash flows projected using the market interest rate of the currency in which the tip of the swap is denominated. The present value of the US Dollar-denominated tip is measured using the discount based on the exchange coupon curve (the remuneration, in US Dollars, of the Reais invested in Brazil) and in the case of the R$-denominated tip, the discount is made using Brazil's interest curve, being the future curve of the DI, considering the credit risk of both the Company and the counterparty. The exception is pre-fixed contracts x US$, for which the present value of the tip denominated in US$ is measured through a discount using the SOFR curve disclosed by Bloomberg. The fair value of the contract is the difference between these two points. Interest rate curves were obtained from B3. (ii) Options (Zero Cost Collar): the fair value was calculated based on the Garman Kohlhagen model, considering both the Company’s and the counterparty credit risk. Volatility information and interest rates are observable and obtained from the B3 exchange and are used to calculate the fair values. (iii) Non-deliverable forward (“NDF”) contracts: a projection of the future currency quote is made, using the exchange coupon curves and the future DI curve for each maturity. Next, the difference between this quotation and the rate at which the operation was contracted is verified, considering the credit risk of the Company and the counterparty. This difference is multiplied by the notional value of each contract and brought to its present value based on the future DI curve. Interest rate curves were obtained from B3. (iv) Swap US-CPI: liability cash flows are projected based on the US inflation curve US-CPI, obtained based on the implicit rates for inflation-linked US securities (Treasury Protected against Inflation – “TIPS”), disclosed by Bloomberg. Cash flows from the asset components are projected at the fixed rates implicit in the embedded derivatives. The fair value of an embedded derivative is the difference between the two components, adjusted to present value base on the curve of the exchange coupon obtained from B3. (v) Swap VLSFO (marine fuel): a future projection of the asset price is made, using the future price curve disclosed by Bloomberg. Next, the difference between this projection and the rate at which the operation was contracted is verified, considering both of Company’s and the counterparty’s credit risk. This difference is multiplied by the notional value of each contract and adjusted to present value using the SOFR curve disclosed by Bloomberg. The yield curves used to calculate the fair value as of December 31, 2024 are as set forth below: Interest rate curves Term Brazil (1) United States of America (2) US Dollar coupon (1) 1M 12.15% p.a 4.33% p.a 8.46% p.a 6M 14.19% p.a 4.25% p.a 6.37% p.a 1Y 15.41% p.a 4.17% pa. 6.41% p.a 2Y 15.94% p.a 4.16% p.a 6.29% p.a 3Y 15.89% p.a 4.21% pa. 6.22% p.a 5Y 15.60% p.a 4.36% p.a 6.41% p.a 10Y 14.96% p.a 4.88% p.a 7.31% p.a 1) Source: B3 2) Source: Bloomberg 4.5.1 Outstanding derivatives by contract type, including embedded derivatives The positions of outstanding derivatives are set forth below: Notional value, net in U.S.$ Fair value in R$ 12/31/2024 12/31/2023 12/31/2024 12/31/2023 Instruments as part of cash flow protection strategy Cash flow hedge Zero Cost Collar 6,852,200 4,500,200 (4,328,970) 1,968,337 NDF (R$ x US$) 581,000 505,000 (331,876) 162,776 NDF (€ x US$) 262,088 100,362 Debt hedges Swap SOFR to Fixed (US$) 1,973,705 2,555,626 394,129 741,492 Swap IPCA to CDI (notional in Brazilian Reais) 8,128,395 4,274,397 (825,899) 47,645 Swap CNH to Fixed (US$) 165,815 (6,440) Swap CDI x Fixed (US$) 909,612 1,025,000 (776,261) (1,081,964) Pre-fixed Swap R$ to US$ (US$) 200,000 (203,045) Swap CDI x SOFR (US$) 610,171 125,000 (590,764) 25,774 Swap SOFR to SOFR (US$) 150,961 150,961 (37,850) (16,615) Commodity Hedge Swap US$ e US-CPI (1) 138,439 131,510 (80,759) 230,471 Zero Cost Collar (Brent) 163,941 163,100 6,097 (3,148) Swap VLSFO/Brent 39,706 142,794 10,873 22,297 (6,567,720) 1,994,382 Current assets 1,006,427 2,676,526 Non-current assets 2,880,673 1,753,928 Current liabilities (2,760,273) (578,763) Non-current liabilities (7,694,547) (1,857,309) (6,567,720) 1,994,382 (1) The embedded derivative refers to a swap contract for the sale of price variations in US$ 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$: positions in conventional swaps exchanging the variation of the Interbank Deposit rate (“DI”) for a fixed rate in US$. 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 SOFR x Fixed US$: positions in conventional swaps exchanging a post-fixed rate (SOFR) for a fixed rate in US$. The objective is to protect the cash flow against changes in the US interest rate. (iv) 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. (v) SOFR x SOFR Swap: swap position exchanging a fixed rate added to SOFR for another fixed rate added to SOFR. The objective is to generate a fee discount for Prepayment with the banking institution, allowing for reversal mechanisms. (vi) CDI x SOFR Swap: positions in conventional swaps exchanging the variation in the Interbank Deposit rate (“DI”) for a post-fixed rate (“SOFR”) US$. The objective is to change the debt index in reais to US$, aligning with the natural exposure of the Company's US$ receivables and capturing a lower cost of debt through the fluctuation of SOFR rate projections. (vii) Swap CNH x USD: swap positions exchanging a fixed rate in Chinese yuan for a fixed rate in US$. The objective is to change the exposure of debts in yuan to US$, aligning with the natural exposure of the Company's receivables in US$. (viii) Zero Cost Collar: positions in an instrument that consists of the simultaneous combination of a purchase of put options and the sale of call options in US$, 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. (ix) 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. (x) 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. (xi) 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. (xii) 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. (xiii) Zero Cost Collar (Brent): positions in an instrument that consists of the simultaneous combination of buying call options and selling put options for oil - Brent, with the same principal value and maturity, with the objective of protecting input costs of oil derivatives. In this strategy, an interval is established where there is no deposit or receipt of financial margin at the expiration of the options. The objective is to protect costs against rising oil prices. The variation in the fair values of derivatives on December 31, 2024 compared to the fair values measured on December 31, 2023 are explained substantially by the depreciation of the Brazilian Real against the US$ and by settlements during the year. There were also impacts caused by the variations in the Pre Fixed, Foreign Exchange Coupon and SOFR curves in the operations. It is important to h |