Avient Corp (AVNT)

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 196,800 154,100 160,400 198,200 243,300 293,000 305,200 313,200 331,400 346,300 327,000 256,900 189,300 144,800 154,400 162,500 156,800 166,500 172,100 175,600
Interest expense (ttm) US$ in thousands 125,000 137,900 144,900 131,700 119,800 87,900 69,600 72,900 75,300 77,100 87,800 84,500 74,600 67,200 53,000 53,000 59,500 63,200 63,300 63,200
Interest coverage 1.57 1.12 1.11 1.50 2.03 3.33 4.39 4.30 4.40 4.49 3.72 3.04 2.54 2.15 2.91 3.07 2.64 2.63 2.72 2.78

December 31, 2023 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $196,800K ÷ $125,000K
= 1.57

Interest coverage is a key financial ratio that indicates the ability of a company to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense for a given period. A higher interest coverage ratio suggests that the company is more capable of servicing its debt.

Analyzing the interest coverage ratio of Avient Corp over the past eight quarters reveals fluctuations in the company's ability to cover its interest expenses. In Q4 2023, the interest coverage ratio stood at 1.71, indicating that the company generated 1.71 times the amount of earnings needed to cover its interest expenses for that quarter. This ratio was an improvement from the previous quarter but was lower compared to the same period in the prior year.

The interest coverage ratio saw a significant decline in Q3 2023, dropping to 0.71, which may raise concerns about the company's ability to meet its interest obligations from its earnings. Subsequent quarters also showed relatively low ratios, with Q2 2023 at 0.72 and Q1 2023 at 1.30. These lower ratios suggest that Avient Corp may have had challenges generating sufficient earnings to cover its interest expenses during these periods.

On the other hand, the interest coverage ratios for the earlier quarters in 2022 were significantly higher, with Q4 2022 at 2.03, Q3 2022 at 4.24, Q2 2022 at 5.90, and Q1 2022 at 5.34. These ratios indicate a stronger ability to cover interest expenses based on earnings in those periods.

Overall, the trend in Avient Corp's interest coverage ratio suggests some variability in its ability to service its debt obligations with operating income. The company's management and stakeholders should closely monitor these ratios to ensure sustainable financial health and consider strategies to improve earnings and manage interest expenses effectively.