The Clorox Company (CLX)
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 | — | 501,000 | 341,000 | 704,000 | 993,000 |
| Interest expense | US$ in thousands | 88,000 | 90,000 | 90,000 | 106,000 | 99,000 |
| Interest coverage | 0.00 | 5.57 | 3.79 | 6.64 | 10.03 |
June 30, 2025 calculation
Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $88,000K
= 0.00
The interest coverage ratio for The Clorox Company demonstrates notable fluctuations over the analyzed period from June 30, 2021, to June 30, 2025. As of June 30, 2021, the company exhibited a strong capacity to cover its interest expenses, with a ratio of 10.03, indicating that its earnings before interest and taxes (EBIT) were more than ten times its interest obligations. This suggests a comfortable financial position and low risk of default related to interest payments at that time.
By June 30, 2022, the ratio declined to 6.64, reflecting a reduction in the company's ability to cover interest expenses. Despite this decrease, the ratio remained well above 1.0, signifying that earnings continued to exceed interest obligations, albeit with a diminished margin of safety.
The decline persisted into June 30, 2023, where the ratio further contracted to 3.79. Although still indicating a relatively healthy coverage position, this suggests a tightening of the company's earnings relative to its interest commitments, potentially indicating increased financial stress or lower profitability margins.
In June 30, 2024, the interest coverage increased again to 5.57, partially reversing the prior decline. This improvement may be attributable to an increase in earnings or a reduction in interest expenses, indicating a potentially stabilizing financial outlook and better capacity to meet interest obligations.
However, by June 30, 2025, the ratio drops sharply to 0.00, indicating that the company's earnings before interest and taxes are insufficient to cover interest expenses entirely, or that interest expenses have become negligible or non-existent, possibly due to debt repayment, restructuring, or accounting adjustments. This points to a critical financial situation where the company may be unable to service its interest obligations through its operating earnings, raising concerns regarding liquidity and financial sustainability.
Overall, the trend of declining interest coverage ratios underscores increasing financial pressure over the period, with a significant deterioration observed by the end of the analysis period. The progression from a strong coverage position to a situation where earnings fail to cover interest expenses warrants close monitoring, as it may signal potential liquidity challenges and increased financial risk for The Clorox Company.