Fertilizantes Heringer SA
BOVESPA:FHER3
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Fertilizantes Heringer SA
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[Interpreted]
Financial mixed product in spite of the increase in the 2 segments where the company operates, we may see that the main responsible for the growth in deliveries for the conventional segment, we understand that the conventional market has a higher growth still because of the lower margins in the sector and people looking for lower-priced product. There was increase of 95% in the half year of conventional products and for specialty products, the growth was 11.4%. Regarding our results well, the volume we have already referred to and regarding the results in the second quarter of '23, BRL 887.3 million, with a reduction of 18% in -- on a year-on-year basis, which was BRL 1.08 billion, mainly because of the reduction of prices in the first half of '23. It was practically in line with the first half of '22 closing the period with BRL 2.64 billion.
And the gross results in the second quarter of '23 was negative by BRL 79.7 million with a gross margin negative as well 9%, lower than the second quarter of '22 with a positive result of BRL 68.2 billion with a gross margin of 6.3% positive. In the first half year of '23, it was negative by BRL 136.1 million with a negative gross margin of 6% lower than the first half of '22 with a positive result of BRL 23.3 million with a positive gross margin of 8.8%.
The continuation of reduction in prices in the last few periods, continued pressuring the margin of the sale product because usually, the purchase of fertilizer occurs before -- months before the sale. And with relation of SG&A when compared to the quarter and the half year of last year, we saw an increase in expenses, mainly because of hiring advisers still because of the investigation process that ended in April as well as the increase in expenses related to the new company structure. -- in 2Q '23 was negative BRL 137.5 million negative margin over sales, 15.5% lower than 2Q '22, which was positive BRL 24.1 million with a positive margin of 2.2%. In the first half of '23, it was negative BRL 277 million with a negative margin of 12.2%, lower than the first half of '22, which was positive BRL 109.3 million with a positive margin of 4.7%, both peers impacted mainly by the gross results.
The financial results of the second quarter and consolidated the main indices were the exchange rate variation with an appreciation of over 5% of the BRL vis-a-vis the dollar into Q2, '23 and 8% year-to-date. And because of that, in the first half, we had a positive nonrealized exchange variation of BRL 100.9 million, mainly because of the debt of the court to provide reorganization and also suppliers.
I would like to mention that most of the debt in foreign currency under the court to provide organization is long term and the beginning of payments will be in December '23 of the principle on the interest on loans and other financial expenses, expenses in 2Q '23 were BRL 33.1 million, a reduction of 42% vis-a-vis BRL 56.8 million in 2Q '22. In One Half '23, BRL 62.9 million, a reduction of over 39% vis-a-vis BRL 103.5 million in 122. And this reduction is due mainly to the new financial structure of the company's working capital . Regarding our cash flow, we can see that the company closed with cash and cash equivalent of BRL 67.9 million in the period. of the court to provide reorganization and also suppliers. I would like to mention that most of the debt in foreign currency under the court to provide organization is long term and the beginning of payments will be in December 23 of the principle on the interest on loans and other financial expenses, expenses in 2Q '23 were EUR 33.1 million, a reduction of 42% vis-a-vis BRL 56.8 million in 2Q '22. Versal 23, BRL 62.9 million, a reduction of over 39% vis-a-vis BRL 103.5 million in 122. And this reduction is due mainly to the new financial structure of the company's working capital -- regarding our cash flow, we can see that the company closed with cash and cash equivalent of BRL 67.9 million in the period.
The main items that make up the variation of cash are the negative result before income tax and social contribution, which was BRL 21.8 million Noncash expenses amounted to BRL 16 million, mainly made up by provisions for inventory purposes. Reduction in the asset accounts, BRL 329.1 million, basically concentrated in the inventory accounts of the seasonality of the period.
A reduction in the liability accounts BRL 49.6 million, mainly made up by suppliers, net investment, BRL 48.8 million, mainly due to investments to support the activities in the plants, considering that the assets have not been substantially maintained for quite a long time because of the financial conditions of the company in the previous period and part of the maintenance had to do with safety norms.
We also had a positive net cash flow in financing activities, BRL 20.6 million. Therefore, at the end of the period, an increase in the company cash, BRL 5.5 million. Now I would like to give the floor to Eric, and he will be talking about the market outlook -
we see the evolution of prices of raw materials here on this slide that justify the result that were mentioned, and we have the evolution of the price of raw materials Ureia from December 22 to June 23, dropping 44%. And Cloreto de Potássio from December to June 23, 33% drop and MAP from December 22 to June 23, 29% drop.
So the international prices consistently dropping because of the situation of supply of raw materials and also the postponement of purchases on the part of producers who were waiting for a lower price to buy. And this is the reason why prices went down, and therefore, the sale of inventory was carried out at lower levels than the acquisition of the raw materials themselves.
And I would like to mention that from July on, we started to see a slight recovery in prices. So you can see here from July on, a slight improvement in the prices of raw materials. On Slide 14, talking about the domestic grain production and the consumption of fertilizers. We have information from CONAB for '22, '23. This harvest should be increasing over 16% in the production of grains, both related to the increase in the area planted and the increase in yield. As you can see on the chart, when compared to '21, '22, 16.5% increase with a record of over 317 million tons, a record harvest with an increase in the consumption of fertilizers with more attractive prices to producers.
Thank you, Eric. Thank you, Maeda. And now we will be opening for questions for investors and analysts only. Please stand by while we wait for questions. We have a question from Paulo Roberto Baliga. I'm going to get it.
As [ Rik ] said, we are before the reversal of the curve of raw material prices, do you expect the raw -- the gross margin to become positive in the third quarter of '23. So this is the question.
Paul, what Erik said was that the company we have the [ deli ] prices that are at the lower level, and we need to have a confirmation by the market what is happening exactly as we speak. -- but we do not offer guidance for results to be obtained in the next few quarters. What we can say is that as we have been seeing in the last few calls held by the company, we have an operational cycle first.
We buy the fertilizers and then we store them and then we sell them. Should this be confirmed, we might have positive results in the future. But I would like to remind you that this cycle lasts a certain time. It doesn't mean that when the prices of fertilizers go up right now, immediately, the company will be delivering positive results. We have a cycle and the inventory in order to be fully sold lots about a few months in order to have the complete turnover of the inventory.
Please continue to stand by. We are waiting for questions. We have another question by [ Paulo Roberto Ballinger Jr. ]
And still about the price of raw materials in other conference calls, you mentioned that there are hedging mechanisms for this difference or this gap between the purchase and the sale, did this mechanism have some sort of effect in the second quarter of '23,
Paolo, we would like to clarify that -- there isn't -- and this has to do with our sector, our industry. There isn't a perfect hedging mechanism for the fertilizer industry so that companies may protect themselves from price variations, 100%. What we try to do is mitigate the effect of these cycles, this lag time.
So we try to reduce our position in terms of fertilizers that we bought in 2 ways, trying to decrease the time -- we try to buy some merchandisers without a fixed price from some -- a handful of suppliers who do this. And on the other hand, we try to sell in the future, that is to say, to decrease this mismatch. And of course, this requires a restructuring of the company, and this is exactly what we have been doing, the enforcement of the credit and collection department so that we may have longer sales and this is something structural and this is something that the company has been doing consistently, and we can already feel the effects of the endeavors in the second quarter of '23, but we will be able to see this further more in the long run.
Please continue to stand by. We are still waiting for questions.
As there are no more questions, we would like to inform you about the Fertilizantes Heringer conference call has come to an end. Thank you very much for participating, and have a very good day.
[Statements in English on this transcript were
spoken by an interpreter present on the live call.]