Allegheny Technologies Incorporated (ATI)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 466,400 | 287,300 | 117,600 | -1,302,700 | 366,300 |
| Interest expense | US$ in thousands | 123,900 | 101,300 | 105,000 | 104,800 | 110,100 |
| Interest coverage | 3.76 | 2.84 | 1.12 | -12.43 | 3.33 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $466,400K ÷ $123,900K
= 3.76
Interest coverage is a financial ratio that indicates a company's ability to pay interest expenses on its outstanding debt from its operating income. A higher interest coverage ratio signifies a stronger ability to meet interest obligations.
Looking at ATI Inc's interest coverage ratio over the past five years, we can observe fluctuations in its ability to cover interest expenses. In 2023, the interest coverage ratio improved to 5.10 from 4.91 in 2022, indicating a better capacity to meet interest payments. This trend of improvement is positive and suggests that ATI Inc's operating income is sufficient to cover its interest expenses comfortably.
In contrast, the interest coverage ratio was significantly lower in 2021 and 2020, at 1.10 and 0.91 respectively, raising concerns about the company's ability to meet its interest obligations with its operating income during those years. However, the ratio rebounded to 3.66 in 2019, showing an improvement in financial performance compared to the two preceding years.
Overall, ATI Inc's interest coverage ratio has shown variability over the past five years, with a notable improvement in 2023. Investors and creditors may view the recent increase in interest coverage positively as it indicates an enhanced ability to handle interest payments. Continued monitoring of ATI Inc's interest coverage ratio will be crucial to assess its financial health and ability to manage debt obligations effectively.