Fertilizantes Heringer SA
BOVESPA:FHER3
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Fertilizantes Heringer SA
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Good morning, everybody. Thank you for waiting. Welcome to Fertilizantes Heringer conference call to discuss the results of the second quarter of 2021.
Today, with us, we have with us Dalton Carlos Heringer, CEO and Investor Relations Officer; and Ricardo Cavalcanti Alves, Head of Finance and Controller of the company. We would like to inform you that this event is being recorded. [Operator Instructions]
Before proceeding, we would like to clarify that forward-looking statements that might be made during this call in relation to the company's business outlook, operating and financial projections and targets are beliefs and assumptions of the company's management as well as information currently available to the company.
Forward-looking statements are no guarantee of performance, involve risks, uncertainties and assumptions as they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and the other operating factors may also affect the future results of the company and could cause results to differ materially from those expressed in such forward-looking statements.
Now we would like to turn the conference over to Mr. Heringer, Fertilizantes Heringer's CEO and Investor Relations Officer, who will start the presentation. Mr. Heringer, you may begin.
Good morning, everybody. Thank you for participating in this call about the results of the second quarter of 2021. Today, we will have 2 speakers. I will be talking about the company in general and afterwards, there will be Ricardo talking about the financial performance of the company, and then I will come back with the closing remarks and with future outlook of the company.
On Slide #4, please. I would like to mention that the company has been maintaining a diversity of its sales to a very large number of crops. Right now, the other crops represent about 50 overall, and they are under others and this is the yarded volume of deliveries of this company with 84,000 tonnes in this quarter of 2021, we ended second quarter of 2020 with 73,000 tonnes.
If you look at this quarter, on a year-on-year basis, we saw an increase of 29% in the volume delivered. Then we had sales for coffee with 46,000 tonnes, corn 42,000, sugarcane 27,000, and 29,000 for soybean. So you can see that the distribution of the crops is very diverse. We do have one single specific crop with the degree relevant that might bring more break or difficulties in the possibility of weather problem or a bad price cycle. We are able to mitigate risk with a diversity -- a very broad diversity of crops in our sales.
More talking about half year on Slide #5. We can see that the diversity of crops was contained as well. However, we had an increase in sales higher than the quarter. The 34% increase half year over half year with 614,000 tonnes overall volume. So the first half of 2021 -- in this first half, the company delivered 614,000 tonnes to its clients vis-a-vis 457,000 tonnes in the previous year.
In terms of crops, other cultures -- other crops received highest inventory with 203,000 very close then we had coffee with 151,000, then corn with 150,000 very close and then sugarcane came at 70,000 and soybean 40,000.
On Slide #6, we give you the mix of the product delivered and as those of you know, those who follow us regularly, we have this division between conventional and specialty products. And I would like to mention that specialty products, most of them are products that are exclusive of our company and normally, they have very or much superior economic properties, much higher than the market.
And it always leads to an increase in production and increase in yield in the corps and the benefit for the company in the higher return -- financial return on sales because we are able to claim better margins, while the product has superior economic characteristic in this first quarter and the half year.
We saw a very big increase in the sale of specialty products, overall. In the second quarter of 2021, specialty products, overall were 52% of the total sold. So we sold 123,000 tonnes, representing 52% of the total sold vis-a-vis 115,000 of the conventional product with 48%.
And I would also like to mention that in the half year, specialty products, reached almost 50% with 304,000 and conventional with 310,000 tonnes. In terms of half year, we had an increase in specialty product of 53%, whereas conventional products grew only 20%. And this is very important to increase the loyalty of our clients because we have this characteristic of better margins in specialty products and the company is able to obtain -- to deliver much higher sales as we have already explained in the quarter in our specialty products category.
Now let's continue to Slide #7 now. On the slide we see 2 verticals: One is the volume of deliveries from 2017 to 2021; going from 1.617 million in the first half of '17. In 2018, we saw a drop to 1.588 million in 2019, which was marked by filing for Judicial Recovery, and the first half was extremely tough for the company. So we filed for Judicial Recovery and we hibernated many of our plants and we started to operate with only 7 plants, so a very steep decrease.
And then in the first half of 2020 last year and also in the first half of 2021, we saw a very vibrant recovery as you can see here. But I would like to mention that the number of clients that the company operates today is proportionally to the amount sold is higher than the number that you saw in 2017 and in 2018, which means that the company has been maintaining a very strong retail profile. And this can be seen with the following figures.
The company sold to 9,300 clients approximately in 2021 and 8,800 approximately in 2020 for volumes of 457,000 tonnes in 2020 and 614,000 tonnes in 2021. So you can see here clearly that the company has been working very strongly in terms of catering to the small and medium-sized client that very often they require services, and they require products from the company. And they are -- they're well served and this contributes to the businesses of theirs and the profitability of their sales.
On Slide #8, we bring you a snapshot of the company's operation. The company has right now 14 like units of which still are in operation in this first half. And when that resumed operations recently for the Sergipe in Rosário do Catete municipality that started its mixing and selling process in July 2021.
So we are planning for the reopening of another unit in August, the Rio Verde unit. And when it resumes operation now in August, the company will have [indiscernible] of the 14 unit in operation.
I would like to mention that when we filed for the Judicial Recovery, the company started operations after filing for Judicial Recovery with 47 units in operation. So we have already been able to recover our operations and resume our operations in 4 units included Rio Verde, which is already starting now in August.
And this recovery is very successful. The company is able to recover sales in all the regions where we have to stop our sales and we are serving our clients very well again. And we also have the capacity of buying our raw materials, our supplies and bringing them to these units in order to be able to combine with all the sales. So right now we have an installed capacity of practically 4 million and the storage capacity of 600,000 tonnes.
Now I would like to turn the floor over to Ricardo. He is the Head of Finance for Fertilizantes Heringer, and he will talk about the financials of the company.
Thank you very much, Dalton. It's a great pleasure to be able to cover the company's financials for Fertilizantes.
We're talking about the second quarter of 2021. So please turn to Slide #10. In the second quarter, our volume exceeded the same period in 2020 by 29% in terms of volume. Our net revenue, also with a major increase, and this is due to the fact that we are maintaining our margins, which is always a very big concern on the part of the company.
Our suppliers are more expensive then -- in spite of that. We are keeping our margins. You can see BRL 105 million of gross profit, freight and commission or variable expenses and SG&A. With -- in advantageous participations, the comparison period and we can see that it is lower than the percentage of the net revenue of last year. So 18.6% EBITDA margin, a much more significant than our historical performance. And the net financial result in the quarter at BRL 88.910 million, and net income, BRL 144.729 million. And there is an observation here that I would like to cover in a few minutes.
And now talking about the half year as a whole, on Slide #11, we see a volume, while the trends are the same as the trends in the third quarter -- for the second quarter. So in the first half, comparing on a year-on-year basis, we have the same kind of situation -- higher volume by 34%, the cost of our supplies considerably higher and our net revenue following this increase with significant preservation of our margins, variable expenses, freight and commission and SG&A.
As you can see, there is a gain in productivity because they are growing much less than our revenues. And because of that, we are able to obtain a significant EBITDA margin. And one thing that we mentioned here in other operating revenues is that this is due to the capital gain with the sale of our Uberaba unit.
And this capital gain of BRL 33 million corresponds to the almost total of the other operating revenues line, and it also contributed to our EBITDA, very positive in the period. Net of this effect, the EBITDA would still be very positive.
Net financial result due to the exchange rate variation in the half year, as you can see here, and I will be expanding on that. And the net income, therefore, BRL 137.272 million for the year or up to now.
On Slide #12, we have the chart on the left, we are talking about the quarters and the comparison of this quarter, the last few years. And on the right, the half year being compared with the last few years.
So we can see the performance shown on this chart, on these lines, 18.6% gross profit in the quarter. And if we compare with the other quarters, it is the best in this historic series and the adjusted EBITDA net of the capital gain with the sale of one of our units, 13% in the quarter, which is the gray line.
Now if we look at the right. For the half year, we see a gross profit in the half year, also being the highest in the historical series, 19.5% of the revenue. And the EBITDA margin already adjusted net of the one-off effect of the sale of this asset and the capital gain coming from that of 13.6% in the gray line for those who are following the presentation on Slide #12.
On Slide 13, I would like to consolidate the financial effect in the large groups of impact. On the upper part of the slide, we have the second quarter. So we are showing the EBITDA of BRL 105.869 million and the financial impact of BRL 88.910 million, which is broken down in this quarter into a non-realized net exchange variation. This is a strong gain on non-realized because the exchange rate variation in our company.
If the adjustment of the -- reflects of the debt of the Judicial Recovery that are denominated in foreign currency and the real appreciated in the quarter. And this is why we have this positive exchange rate variation that we see of BRL 106 million.
The second relevant financial impact, the debt charges of the Judicial Recovery, BRL 19 million in the quarter. Now third impact on our financials is the cost of loans and financing. Fundings that remain for the quarter BRL 3.387 million. And the fourth block, so to say, of other financial expenses that make up the BRL 88.910 million, which is the total financial expenses in the quarter is a gain of BRL 5.257 million, basically, the adjustment to the present value and accounts receivable, which is an accounting effect only.
And if we look on the lower part of the slide, with the figures for the half year to BRL 17.777 million financial expenses made up of a non-realized net exchange rate variation of BRL 21 million for the reasons that we have already referred to. Charges on the debt of the Judicial Recovery, BRL 39 million. Cost of loans and funding over the quarter about BRL 8 million.
And finally, the fourth impact on our financial result is a gain of BRL 8.435 million that we see on the lower part of the slide and basically made up of the adjustment to present value or present value adjustment, which is a decapitalization of accounts receivables' present value because we have future maturities. So this is accounting -- for accounting purposes.
And now talking about the 12 months, let's turn to Page 14 of the presentation. The last 12 months that include the second half of 2020 and the first half of 2021, we see a net revenue of BRL 2.8 billion; gross margin, 17.5%; EBITDA margin, 13.1%, almost BRL 372 million. And the net result, 6.7% or BRL 190 million. For the year-to-date -- and the last 12 months, which is a very important metric and that we are showing you here for investors.
Let's turn to Page 15 of our presentation with our balance sheet. Comparing to the right column, in the first quarter of '21, which is the middle column. We have just a few variations. And the biggest variation or the highlight here, so to say, in this situation of the company's balance sheet in the inventory formation in order to cater to the stronger seasonal demand, which is typical of the second half, which can be twice the activity of the first one.
And the inventory formation or inventory buildup, BRL 723 million, an important increase vis-a-vis what we had before, which comes from the end of 2020 and the first quarter of 2021. And this inventory buildup or inventory formation part of it was obtained with loans and financing and we see this on the left side of the balance sheet. And in part, the results of the company or the company's net income in the period. Besides the inventory information, we have a stability of accounts with no bigger highlight. The only highlight is really inventories and nothing that deserves to be mentioned right now.
Talking about our working capital. We have a need for working capital on Page 16 of the presentation. Inventories combined with accounts receivable, so you can see your inventories at the quite significant level in order to cater to the higher demand that always comes in the second half. And accounts receivable of the sales and this is the reason why we have this need for working capital that you can see here in the first half.
You can see that it's a very low structure of accounts payable, and the working capital total is BRL 824.396 million. So we managed our needs of working capital with some funds coming from the financial market, and that we raised and also combined with the net income of the company, that has been quite high.
Our cash flow on Page 17. As we can see on Slide #17 of the presentation, we have 3 columns. The first one is the first quarter, then we have the second quarter and then a combination of growth, which is the first half of 2021. In the first quarter result before tax is BRL 178 million.
We reconciled here noncash effect of BRL 10.931 million. In here we have the exchange rate variation of non-realized -- the noncash effect, which is the biggest weight here as a noncash effect, which is reconciled here. So we have the adjusted result of BRL 167 million.
Assets due to the inventory increase represent BRL 109 million reduction in our asset account. The gains based on liability that can be paid afterwards, BRL 56 million, which brings us to a flow of BRL 114 million in operating activities. CapEx BRL 40 million, free cash flow BRL 73.952 million, which is the free cash flow for financial activities.
And these funds were used in order to pay part of the loans and financing that the company had at the beginning of the year, BRL 86.118 million was the payment of these financing activities when you compare with the beginning of the year and the closing of 2020. And the cash at the beginning of the period already paying BRL 86 million. It goes from the -- it goes to BRL 27 million when we closed the quarter.
Thank you very much.
Thank you very much, Ricardo. And before talking about the company's outlook, I would like to reinforce that the cash generation that we had in the last few periods by the company have already proven to be enough to gradually build up our need for working capital, and this is what we have been seeing, and as well as the continuation of this performance. And this will lead us to have the future payments that are approved in our shareholders' meetings, may occur on a regular basis as they are approved.
And I would like to highlight that the remedy that we had to adopt in our case, is a very better one, a Judicial Recovery. And of course, it brings very difficult consequences for the employees of the company that had to be laid off and for suppliers, for banks that had to have their payments being made on a very -- on a longer period, but all that helped the company to restructure itself and go back on track and go back to generate cash, and it certainly will bring about opportunities for new contracts that are already happening. And for the payment of all the debt that have been rolled over and that have been approved in our shareholders' meeting.
Now let's talk a little bit about our outlook. So let's turn to Slide #19. As you can see, there is a very important price increase in the main nutrition change of our fertilizers. Nitrogen represented by urea. In the case of potassium represented by the potassium chloride here. And in the case of phosphorus represented by MAP.
So if you take a shorter period, you can see that the percentages are very high. However, if you take a longer period you can see that the prices are stronger. If you take a 1-year period from June '20 to June 2021, in the case of phosphorus, for instance, represented by MAP, we can see an increase of 129%; in the case of urea, 97%; and in the case of potassium chloride 105% in U.S. dollars of price increases.
And the price increases of these raw materials is a worldwide effect that we see of these 3 commodities, mainly due to the very strong demand that we saw in the main markets, agriculture producers. So it is driven by demand, so there was no decrease in the supply. There was, on the other hand, a very strong increase in the demand driven by agricultural production.
So agricultural product today represent a very high level of profitability for producers, and they are always seeking technologies in order to increase their yields. And these price levels are supported by the current price levels of these commodities -- these agricultural commodities.
So producers, although, of course, they suffer because of these price hikes because they had increases in their costs, on the other hand, they are supported by the use of the fertilizers. Once they follow these hikes in commodity prices, and they represent a very favorable barter ratio for them.
I would like to mention that over half of the production of food in the world would not exist if fertilizers were not used in the adequate manner. So it is impossible in the situation of food supply in the world, you need to have agriculture production in order to feed the whole population of the earth, and this is only possible if you use fertilizer adequately.
And the last page of our presentation, those of you who are following us on Slide #20. Last year, we had an increase of 40.6 million tonnes. This is a total record, an all-time high. On the top of the presentation -- on the top of the slide, you'll see the red line that shows the increase from the 2012-'13 harvest year, 29.5 million tonnes to over 40 million tonnes in the 2021 harvest year. So we are talking about an increase of over 10 million tonnes in the consumption of fertilizers from '12-'13 to 2021.
Unfortunately, the weather condition had a negative impact, and we could have had an even higher increase based on the last estimate for the harvest this year. Agricultural production of grain is estimated at almost 261 million tonnes vis-a-vis 250 million tonnes last year.
We would have the potential to produce even more, but the summer crop was planted later this year and the main summer crop in Brazil is soybean. And because of that, the planting of corn was also postponed. In some regions, there were very difficult climate conditions such as dry season -- a long dry season and 3 weeks ago, we had the first frost in some regions. And last week, we had a second frost -- a very strong one, and that impacted many regions in Brazil.
So we will see an increase in production, yes. However, probably, this increase will be lower than the initial expectations because of the late planting and the use of the technology used in the crops in the plantations. And we could reach over 270,000, but this did not occur because of that and will not occur because of that.
And part of that is being offset by the agricultural prices. And of course, for domestic consumers in Brazil and also for commodities that are exported in dollars, this brings about an increase in food inflation. And this doesn't happen only in Brazil. This is something that is happening in other countries as well -- in all countries, in fact.
This is a reality that has to do with a very high consumption and the world production that can meet the demand, but with no major surpluses. So the world inventories of the main grains are very low. And due to this reason, we see that prices are higher, and this brings about a very strong inflation all over the world, over food and Brazil included, of course.
Okay. So this was what we wanted to bring to you today. And now, we would like to open for questions. Thank you very much.
[Operator Instructions] [indiscernible], impact of frost and dry season on sales and are you maintaining the exit from the Judicial Recovery process in 2022?
Thank you very much for the questions. I will start by talking about the low rainfall and the frost. And I would like to say that, yes, this is an adverse climatic effect on agriculture. The current very low level of rainfall and also in April, May and June in the second cycle of the corn in some regions that do the second and we used to call it Safrinha, which would mean a small crop, but it can no longer be called small crop of Safrinha because it has become very big. So the second cycle -- so we no longer use Safrinha. So it's the second agricultural crop, and it is very strong and mainly in corn in the main Brazilian regions. So there is an adverse weather effect that really hinders agricultural production and agricultural yield. And as I said during the presentation, in part, this effect is being mitigated by a better prices reality. So producers, although they are producing less in some cases, because of the dry season, the dry climate and because of the frost, this is being partially offset by the prices that they receive when they sell the product.
And I will talk about a few scenarios here. Talking about corn, this has been offset with the prices. We see a decrease of production because of the dry season and because of frost. And talking about fruit and vegetables, this is mitigated because most of the plantations have irrigation in the case of fruit and vegetables, but there was a very big impact of frost. In fact, these products have a very quick cycle. And if you plant again very quickly you have a new production coming onstream and, of course, the prices will be higher in order to bring some kind of compensation to producers and the worst effects are on coffee and sugarcane.
Now in the case of coffee, with the frost, you have a cycle that is lost. 2 years to recover production in the areas where you had strong frost. And likewise, in the case of sugarcane -- sugarcane that was planted in January and February this year, in some regions, there was a very strong frost, and they will have to be replanted in the summer cycle again. And because of that, there will be a 2-year delay in the production.
Both in coffee and in sugarcane, there will be some compensation in prices. Very possibly, we will see higher prices for ethanol, for sugar and for coffee because of the weather problems in coffee. And in sugarcane and more specifically, talking about sugar, Brazil has an extremely high production compared to the rest of the world, and it has a very big bearing on sugar prices and in coffee as well. And due to the fact that we had a strong negative effect of the weather it will be compensated in prices.
And the producer -- well, if the producer doesn't have the financial capacity to cope with the nonproduction cycle up to the moment when new production comes on board, this is not something that we see as a very big risk, because Brazilian crops as a whole, they bring the very good profitability to producers and producers are very well capitalized right now.
I would like to mention that the agricultural financing policy that we see on the part of our public agent, Banco do Brasil and the Caixa, they are very effective. And this drives costs down at a reasonable level -- at a reasonable market level, so to say. And this will help producers that might not have the financial capacity to use this for their cause, and there will clearly be the demand that we are projecting for the second half. Thank you.
Now talking about your second question about the exit from the Judicial Recovery process. In the first quarter of 2022, the company will be filing for this, because 2 years have -- will have -- 2 years will have elapsed since the moment that we filed for the Judicial Recovery. So this is in the law, and we will file for the conclusion of the process. And of course, this will have to be studied. And if the company maintains all the approvals on a timely basis on the part of their shareholders, such as in the case today, then we will be exiting, or we'll be coming to the end of the Judicial Recovery process in this time frame. Thank you.
[indiscernible] Regarding the hedge position for the next few quarters, I would like to mention that the company has been buying all the raw materials cash. So you fixed the price in reals, you lock the price in reals. So the product, before they come to the units of the company, we already have the price locked. So our hedging policy is being done in this way. And of course, we do have a debt in the Judicial Recovery process that is dollar-denominated, but it's very long term.
Payments will start in December 2023, and there will be 25 years for us to pay this debt. And this debt in dollars, that is under the Judicial Recovery, we are not hedging this right now. And as I said before, the raw materials are being paid cash. All the supplies are being paid cash and because of that, we are not subject to exchange rate variation in our inventory. So this is the way we have been protecting ourselves.
Thank you for the question. And there is a second part of the question as well, asking about the company's exposure to coffee.
I would like to mention that coffee right now. Well, the regions that were affected by frost, as I said, answering the previous question, will have a whole cycle affected. That is to say the harvest next year, that would be a very strong harvest. In some regions there will be a very steep drop in this harvest, depending on the impact of the -- part of the characteristic of non-production will be offset by the prices on the production that happened this year.
I would like to mention that the production of this year will not be affected, and the production that will be affected, as far as coffee is concerned is next year's and in some cases, delayed by 2 years. So producers who have their field affected by frost will have to obtain financing. Some of them do have their own capital for that or they will have to resort to banks in the case, Banco do Brasil and Caixa Economica, in order to wait for the production for the next cycle.
It is important to mention that most of the coffee producing regions were not affected by frost. There are many regions in the south of Minas and Zona da Mata of Minas, and Conilon and Espirito Santo, they were not subject to frost. So their harvest will not be affected. They will have the normal production next year. Coffee in some regions of Sao Paulo, Parana in the south of Minas, some of the fields are suffering the consequences of the frost. Thank you.
[indiscernible]
How do you see the arrival of Indorama to the Brazilian market with the acquisition of Adufertil?
I would like to mention that in our investor calls, we have been saying repeatedly that the sector is undergoing a transformation. No longer being a domestic sector because we see domestic companies have a relationship with multinational and Indorama is a huge company that produces nitrogen in the world. It does not produce the other 2 main nutrients, which are phosphorus and potassium. And with this acquisition, they will be operating in the Brazilian market. I would not say that there will be any big changes, because the sector already works and it is there in its vision of competition already see the reality of living together and coexisting with multinational companies and other domestic companies also operate in Brazil. We are a fertilizer retail company. We have a selling profile of specialty products that differentiates us from most of the other companies. So we are able to compete in our market because of that. Thank you.
Thank you for the question.
In the first 12 months after the approval of the plan, we paid BRL 30 million as labor expenses and Class 4 which is related to small companies and individual creditors, we have 5 years to pay them in half year payment, BRL 1.8 million -- BRL 1.8 million in each one of the half years. So we have a very long debt profile. And talking about Classes 2 and 3, which are the large creditors, in December 2023 -- as of December 2023, secured and non-secured. So we have the BRL 30 million already paid for the labor expenses in the beginning of the half year tranches of Class 4 -- BRL 30 million labor, BRL 1.8 million per semester Class 4. And in terms of percentage, between 1% and 2% of the total of our debt. Thank you, Douglas, for your question.
This is the [indiscernible] We have another question from [indiscernible].
There was a variation of 6 to 50 and in a few days, it lost 50% of the value. Have you received any proposal for acquisition?
The company always communicates immediately with the market by means of material information and the CVM, the Brazilian SEC and the B3 state exchange, they are always kept informed of any fact that might be considered as relevant or important by means of the regular communication channels.
With relation of the price oscillations of our shares, we have been answering the questions asked by the CVM, the Brazilian SEC, that the company is a small cap. We are under Judicial Recovery process, which I'll say has a bearing on prices. Until then, we had a level of operation of trade that was quite low, and this has a very big impact on prices. And in the last few trading sessions in the last 2, 3 weeks, we have been seeing more stable behavior.
A few weeks ago, we saw from 50% -- or from 5% to 50% and now we have a level of 15% and this is due to the factors that I have already referred to. And I repeat myself any facts are communicated immediately by means on the communication channel. That is to say, notice to the market and material information to the market. Thank you.
[indiscernible] the veto of exports of fertilizers by China, does it favor Heringer?
And what the Chinese government did, I don't have access to information. I don't have any real information. But I believe it's because they want to keep these fertilizers inside the company. The biggest volumes of exports are nitrogen by means of urea and phosphorus means of some phosphate product. They're trying to maintain the domestic market well supplied for their summer crop. And, of course, this is a variant prices, and this is already occurring. Those of you who have followed our presentation on Slide 19, you can see very clearly the impact of the higher demand on prices. That is to say the prices are going up consistently. The cost in dollars is going up, because of the demand that we see. So I do not have any other information to give you.
And regarding the second part of your question about Indorama and about acquisitions, in the case of Heringer, no, we have a manufacturing capacity that is quite large, as you saw on our slides. Right now, we have practically 4 million tonnes installed for the volume that we are making now. So we are very comfortable with this volume, and we continue to maintain a growth in volumes and also our deliveries to our clients. And also, there is a growth in the number of clients that come to us. So this is not relevant in the case of Heringer once the market is also growing. Thank you.
[indiscernible] last question.
What is your schedule for the payment of your debt? If I have understood, are you talking about new products in our specialty line?
We are, yes, developing a new product, and we have been able to improve some of the existing products. We already have a very wide-ranging portfolio. And in the first half of the year, we were able to reach 52% of our overall sales coming from our specialty line. So we have a very important participation of specialty products in our selling portfolio.
And regarding the first part of your question, well, it depends on the class of the debt. The labor class and small creditors of the label, one is already 100% paid and small creditors will come to an end in the next 3 years -- 4 years, I would say. And 1 year, we have already paid this debt to small creditors, and they benefit from the law, because they have shorter terms for the payment of our debt.
And then we have Classes 3 and 2, up to 25 years for us to pay. For Class 2, the ones that have -- they are secured, so 10 years, and Class 3, which is unsecured -- unsecured class, up to 25 years. And I would like to mention that according to what we saw in the presentation -- the presentation -- the current cash generation of the company allows us to -- if we maintain the performance that we have been delivering every single quarter, this will allow us to keep forming our own capital, building our own capital. And within what has been approved by the shareholders' meetings, also the payment of the debts that have been restructured.
So this is what we had for our presentation. Thank you very much. And now we are going to close our meeting. Thank you very much.
As there are no more questions, Mr. Heringer will come back for the closing remarks.
Once again, thank you very much for participating in our call about the results of the second quarter of 2021. I would like to mention that we delivered very important results, and they show the level of recovery that we are delivering and that we are striving for with a recovery in our volumes, the recovery in the operation of our plants that were hibernating, resuming these operations and the characteristic of having results that allow us to continue our business.
Thank you very much, everybody, and we wish you a very good day.
Fertilizantes Heringer's conference call has come to an end. Please disconnect your lines, and have a very good day. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]