Alcoa Corp (AA)
Interest coverage
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | -541,000 | -572,000 | -1,076,000 | -210,000 | 647,000 | 770,000 | 1,973,000 | 1,647,000 | 1,253,000 | 1,378,000 | 890,000 | 283,000 | 163,000 | -114,000 | -244,000 | -380,000 | -589,000 | -126,000 | 257,000 | 713,000 |
| Interest expense (ttm) | US$ in thousands | 107,000 | 105,000 | 104,000 | 107,000 | 106,000 | 108,000 | 141,000 | 178,000 | 195,000 | 210,000 | 193,000 | 158,000 | 146,000 | 134,000 | 123,000 | 121,000 | 121,000 | 121,000 | 124,000 | 126,000 |
| Interest coverage | -5.06 | -5.45 | -10.35 | -1.96 | 6.10 | 7.13 | 13.99 | 9.25 | 6.43 | 6.56 | 4.61 | 1.79 | 1.12 | -0.85 | -1.98 | -3.14 | -4.87 | -1.04 | 2.07 | 5.66 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-541,000K ÷ $107,000K
= -5.06
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt obligations using its operating income. A higher interest coverage ratio indicates a company is more capable of servicing its debt.
Looking at the data provided for Alcoa Corp's interest coverage ratio over the past eight quarters, we can see a fluctuating trend. In Q4 2023 and Q3 2023, the interest coverage ratios were significantly low at -3.62 and -4.42 respectively, indicating that Alcoa Corp's operating income was insufficient to cover its interest expenses during these periods.
In contrast, in Q1 2023, the interest coverage ratio improved to 3.70, meaning that the company's operating income was 3.70 times its interest expenses for that quarter, signaling a healthier financial position. However, this positive trend was not sustained as the ratio dropped to -3.67 in Q2 2023, indicating another period of inadequate coverage of interest expenses.
Comparing the recent figures with those from the previous year, we observe a stark decline in Alcoa Corp's interest coverage ratio. In Q4 2022, the ratio was notably higher at 12.82, suggesting the company was in a much stronger position to meet its interest obligations compared to the recent quarters.
Overall, the fluctuating and inconsistent trend in Alcoa Corp's interest coverage ratio over the past eight quarters reveals potential financial challenges in servicing its debt obligations. It is essential for the company to focus on improving its operating income to ensure a more stable and sustainable financial position in the future.
Peer comparison
Dec 31, 2023