Estee Lauder Companies Inc (EL)

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	-1,614,000	1,155,000	1,617,000	3,072,000	3,504,000
Interest expense	US$ in thousands	404,000	378,000	255,000	167,000	173,000
Interest coverage		-4.00	3.06	6.34	18.40	20.25

June 30, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $-1,614,000K ÷ $404,000K
= -4.00

The interest coverage ratio for Estee Lauder Companies Inc. has exhibited a declining trend over the period from June 30, 2021, to June 30, 2025. Specifically, as of June 30, 2021, the ratio was notably high at 20.25, indicating a strong ability to meet interest obligations from earnings before interest and taxes (EBIT). By June 30, 2022, the ratio declined to 18.40, which, while lower, still reflected a comfortable coverage position.

However, a significant deterioration is evident in subsequent years. As of June 30, 2023, the ratio markedly decreased to 6.34, suggesting a reduced capacity to cover interest expenses with operating earnings, though it remained positive and potentially manageable. The downward trajectory continued into June 30, 2024, where the ratio decreased further to 3.06, approaching a less comfortable margin of coverage but still indicating some ability to cover interest obligations.

By June 30, 2025, the interest coverage ratio becomes negative at -4.00, signaling that the company's operating earnings are insufficient to meet its interest expenses, which may imply that interest costs exceed earnings before interest and taxes. This negative ratio indicates potential financial distress in terms of debt servicing and warrants a close examination of the company's overall financial health and liquidity position.

In summary, the declining interest coverage ratios suggest a trend of diminishing profitability and increasing financial pressure, culminating in a potential inability to service interest obligations without additional measures such as restructuring, refinancing, or improved earnings.