The Clorox Company (CLX)
Interest coverage
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 501,000 | 341,000 | 704,000 | 993,000 | 1,278,000 |
| Interest expense | US$ in thousands | 90,000 | 90,000 | 106,000 | 99,000 | 99,000 |
| Interest coverage | 5.57 | 3.79 | 6.64 | 10.03 | 12.91 |
June 30, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $501,000K ÷ $90,000K
= 5.57
The interest coverage ratio of The Clorox Company has shown a declining trend over the past five years, indicating a weakening ability to cover interest expenses with operating income. The ratio stood at 5.29 as of June 30, 2024, lower than the previous year's figure of 3.51. This downward trend suggests that the company may be facing challenges in generating sufficient operating income to comfortably meet its interest obligations.
Furthermore, the current interest coverage ratio of 5.29 is substantially lower compared to the ratios reported in the prior years. In Jun 30, 2023, the ratio was 3.51, then notably higher at 6.64 in Jun 30, 2022, 10.00 in Jun 30, 2021, and 12.97 in Jun 30, 2020. This indicates that the company's ability to service its interest payments has deteriorated significantly over time.
A declining interest coverage ratio can be a cause for concern for investors and creditors, as it suggests that The Clorox Company may be at a higher risk of defaulting on its debt obligations in the future. It is crucial for the company to closely monitor and manage its interest expenses and seek ways to improve profitability to enhance its ability to cover interest costs effectively.