Applied Industrial Technologies (AIT)
Interest coverage
| Jun 30, 2025 | Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 496,980 | 501,549 | 497,907 | 491,605 | 499,113 | 484,909 | 488,823 | 485,972 | 471,681 | 454,021 | 422,868 | 389,175 | 357,248 | 329,208 | 307,913 | 224,557 | 202,332 | 165,959 | 14,024 | 78,131 |
| Interest expense (ttm) | US$ in thousands | 7,392 | 23,112 | 18,870 | 19,851 | 20,544 | 10,854 | 15,362 | 19,630 | 24,790 | 23,974 | 25,053 | 25,875 | 26,785 | 27,922 | 29,678 | 30,329 | 30,592 | 31,007 | 32,204 | 34,129 |
| Interest coverage | 67.23 | 21.70 | 26.39 | 24.76 | 24.29 | 44.68 | 31.82 | 24.76 | 19.03 | 18.94 | 16.88 | 15.04 | 13.34 | 11.79 | 10.38 | 7.40 | 6.61 | 5.35 | 0.44 | 2.29 |
June 30, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $496,980K ÷ $7,392K
= 67.23
The analysis of Applied Industrial Technologies' interest coverage ratios from September 2020 through June 2025 reveals significant fluctuations over this period, indicating variability in its capacity to meet interest obligations.
Initially, the ratio was modest at 2.29 as of September 2020, suggesting a relatively thin margin of safety in covering interest expenses. This was followed by a substantial decline to 0.44 as of December 2020, implying that the company's earnings before interest and taxes (EBIT) were insufficient to cover interest expenses during this quarter, potentially signaling financial distress or significant operational challenges.
Subsequently, the ratio experienced a marked recovery, reaching 5.35 by March 2021 and continuing an upward trend thereafter. The ratios increased steadily through 2021 and into 2022, peaking at 19.03 in June 2023. This sustained improvement suggests a strengthening of earnings relative to interest obligations, enhancing the company's ability to service its debt.
Between September 2022 and March 2023, the ratios remained relatively high and stable, indicating consistent earnings capacity. The exceptional reading of 44.68 in March 2024 reflects very strong earnings relative to interest expenses, possibly attributable to increased profitability or reduced interest costs.
However, there was a notable decline to 24.29 in June 2024, and fluctuations persisted through the following quarters, with the ratio decreasing further to approximately 21.70 by March 2025. Despite this decline, the interest coverage remained well above critical thresholds, suggesting that the company retained a comfortable margin to meet its interest commitments, albeit with some reduction in safety buffer.
Overall, the trend indicates initial periods of financial strain or low profitability, followed by a period of robust earnings capable of comfortably covering interest expenses. Periodic fluctuations reflect changing operational conditions or strategic shifts, but the company consistently maintained ratios well above conservative safety margins after early difficulties.