Commercial Metals Company (CMC)

Interest coverage

		Aug 31, 2024	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	683,564	1,162,090	1,565,860	585,922	433,816
Interest expense	US$ in thousands	47,893	40,127	50,709	51,904	61,837
Interest coverage		14.27	28.96	30.88	11.29	7.02

August 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $683,564K ÷ $47,893K
= 14.27

The interest coverage ratio of Commercial Metals Company has shown a fluctuating trend over the past five years. In 2024, the interest coverage ratio stood at 14.27, indicating that the company generated operating income sufficient to cover its interest expenses by approximately 14 times. This is a decrease compared to the previous year, where the ratio was significantly higher at 28.96.

In 2023 and 2022, Commercial Metals Company exhibited strong interest coverage ratios of 28.96 and 30.88 respectively, signaling robust financial health and the capability to comfortably meet interest obligations through operating earnings. These high ratios suggest a low financial risk associated with debt repayment.

However, in 2021 and 2020, the interest coverage ratios decreased to 11.29 and 7.02 respectively, which might raise some concerns about the company's ability to cover interest expenses from operating income alone. A lower interest coverage ratio indicates increased financial risk and potential difficulty in meeting debt obligations.

Overall, while the company has shown strong interest coverage in some years, the fluctuating trend in recent years warrants a closer examination of its financial management and operating performance to ensure sustainable debt servicing capabilities in the future.