Allete Inc (ALE)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 160,100 | 355,800 | 233,300 | 211,400 | 187,600 |
| Interest expense | US$ in thousands | 81,700 | 80,800 | 75,200 | 69,100 | 65,600 |
| Interest coverage | 1.96 | 4.40 | 3.10 | 3.06 | 2.86 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $160,100K ÷ $81,700K
= 1.96
The interest coverage ratio of Allete Inc has shown some fluctuations over the years. In 2020, the interest coverage ratio was 2.86, indicating that the company's operating income was able to cover its interest expenses 2.86 times. This ratio improved slightly in 2021 to 3.06 and continued to increase in 2022 to 3.10, reflecting a positive trend in the company's ability to meet its interest obligations.
However, there was a significant improvement in the interest coverage ratio in 2023, reaching 4.40, which suggests a stronger ability to cover interest payments with operating income. This improvement could be attributed to higher operating income or lower interest expenses during that period.
The trend reversed in 2024, with the interest coverage ratio dropping to 1.96. A ratio below 2 indicates that the company's operating income may not be sufficient to cover its interest expenses, raising concerns about its financial health and ability to meet debt obligations.
Overall, while Allete Inc's interest coverage ratio has shown some variability, it is essential for the company to maintain a healthy ratio above 2 to ensure it can comfortably meet its interest payments and demonstrate financial stability to investors and creditors.
Peer comparison
Dec 31, 2024