Compass Minerals International Inc (CMP)

Interest coverage

		Sep 30, 2023	Sep 30, 2022	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Earnings before interest and tax (EBIT)	US$ in thousands	88,400	65,100	127,700	140,000	128,300
Interest expense	US$ in thousands	55,500	55,200	62,700	68,400	51,200
Interest coverage		1.59	1.18	2.04	2.05	2.51

September 30, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $88,400K ÷ $55,500K
= 1.59

Certainly! The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. It is calculated by dividing the earnings before interest and taxes (EBIT) by the amount of interest expense. A higher ratio indicates a greater ability to cover interest expenses.

Looking at the historical trend of Compass Minerals International Inc's interest coverage ratio, we can observe fluctuations over the past five years. In December 2018, the interest coverage ratio was 2.10, indicating that the company generated earnings 2.10 times the amount of its interest expense, reflecting a solid ability to cover interest payments.

Subsequently, in December 2019, the interest coverage ratio slightly decreased to 2.40, still indicating a healthy ability to cover interest expenses. However, by the end of December 2020, the ratio declined to 1.64, suggesting a reduction in the company's ability to cover interest payments compared to the previous year.

The trend continued into September 2022, with the interest coverage further decreasing to 0.68, indicating a significant decrease in the ability to cover interest expenses. This substantial decline may raise concerns about the company's financial stability and its ability to meet its debt obligations.

However, there was a marginal improvement in the interest coverage ratio by September 2023, which stood at 1.51. While an increase from the previous year, this ratio still indicates a relatively constrained ability to cover interest expenses.

In summary, the trend in Compass Minerals International Inc's interest coverage ratio reflects fluctuations, with a notable decrease in 2022 raising concerns about the company's ability to meet its interest payments. It would be important to monitor future financial results to assess if the company can improve its interest coverage and strengthen its financial position.