Avnet Inc (AVT)
Interest coverage
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 496,971 | 919,674 | 1,233,740 | 933,709 | 262,402 |
| Interest expense | US$ in thousands | 246,402 | 282,867 | 250,869 | 100,375 | 89,473 |
| Interest coverage | 2.02 | 3.25 | 4.92 | 9.30 | 2.93 |
June 30, 2025 calculation
Interest coverage = EBIT ÷ Interest expense
= $496,971K ÷ $246,402K
= 2.02
The interest coverage ratios for Avnet Inc over the specified periods demonstrate notable fluctuations that merit detailed examination. As of June 30, 2021, the interest coverage stood at 2.93, indicating that the company's earnings before interest and taxes (EBIT) roughly covered its interest expenses nearly three times, reflecting a moderate capacity to meet interest obligations.
By June 30, 2022, there was a significant improvement, with the ratio rising to 9.30. This substantial increase suggests a markedly stronger ability to cover interest expenses, likely attributable to increased earnings or a reduction in interest costs during that period. It indicates a period of enhanced financial stability and lower risk of interest coverage concern.
However, subsequent years reflect a decline in the ratio. As of June 30, 2023, the interest coverage decreased to 4.92, indicating a moderation from the peak observed in 2022 but still maintaining a relatively comfortable margin over the minimum threshold. This suggests that while the company's earnings remained adequate to cover interest obligations, the cushion had diminished somewhat, signaling potential pressures on margins or EBIT.
The trend continued downward in the fiscal year ending June 30, 2024, with the ratio decreasing to 3.25. This decline indicates a narrowing of the margin by which earnings can cover interest expenses, possibly due to decreasing profitability or rising interest expenses. Although still generally considered acceptable, the trend warrants ongoing monitoring to assess whether it points to emerging financial stress.
Finally, as of June 30, 2025, the interest coverage ratio further decreased to 2.02. This level approaches a more critical threshold, where earnings just over double the interest obligations suggest increased financial risk and reduced margin for error in earnings fluctuations. It highlights the importance of continued focus on profitability and interest management to sustain adequate coverage and mitigate potential financial distress.
In summary, Avnet Inc's interest coverage ratios have shown a pronounced peak in 2022, followed by a declining trend in subsequent years. The recent measurements indicate a progressively tighter margin for interest coverage, emphasizing the need for ongoing assessment of operating performance and debt management strategies to maintain financial stability.
Peer comparison
Jun 30, 2025