American Axle & Manufacturing (AXL)

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	248,800	177,200	240,800	294,900	-412,200
Interest expense	US$ in thousands	186,000	201,700	174,500	195,200	212,300
Interest coverage		1.34	0.88	1.38	1.51	-1.94

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $248,800K ÷ $186,000K
= 1.34

Interest coverage ratio measures a company's ability to pay interest expenses on its outstanding debt. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. Looking at American Axle & Manufacturing's interest coverage over the past five years, we observe the following trend:

1. December 31, 2020: An interest coverage ratio of -1.94 indicates that the company's EBIT was insufficient to cover its interest expenses, which raises concerns about its ability to meet debt obligations solely from operating income.

2. December 31, 2021: The interest coverage improved to 1.51, suggesting that the company's earnings were able to cover its interest expenses. However, the ratio is still relatively low, indicating a moderate level of financial risk.

3. December 31, 2022: The interest coverage slightly decreased to 1.38, which may raise concerns as it is approaching a level where the company may face challenges in meeting interest payments from its operating earnings alone.

4. December 31, 2023: The interest coverage further decreased to 0.88, indicating a notable decline in the company's ability to cover interest expenses with its earnings. This level raises red flags as it suggests a significant strain on the company's financial health.

5. December 31, 2024: The interest coverage ratio improved to 1.34, but it still remains at a relatively low level. Although the ratio increased from the previous year, it is essential for the company to continue monitoring and improving its ability to cover interest expenses.

In summary, American Axle & Manufacturing's interest coverage has shown fluctuations over the past five years, with periods of improvement and decline. It is crucial for the company to maintain a healthy interest coverage ratio to ensure it can meet its debt obligations comfortably and mitigate financial risks.