ESAB Corp (ESAB)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 302,618 | 409,901 | 408,161 | 414,290 | 410,860 | 387,359 | 365,872 | 335,204 | 328,711 | 326,141 | 326,244 | 333,962 | 325,168 |
| Interest expense (ttm) | US$ in thousands | 64,890 | 79,733 | 78,156 | 81,035 | 83,454 | 111,112 | 107,960 | 97,048 | 78,094 | 21,546 | 9,590 | 1,997 | 1,666 |
| Interest coverage | 4.66 | 5.14 | 5.22 | 5.11 | 4.92 | 3.49 | 3.39 | 3.45 | 4.21 | 15.14 | 34.02 | 167.23 | 195.18 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $302,618K ÷ $64,890K
= 4.66
ESAB Corp's interest coverage ratio, which measures the company's ability to meet its interest payments on outstanding debt, has shown a general downward trend over the reporting periods. As of December 31, 2021, the interest coverage ratio stood at a healthy 195.18, indicating a strong ability to cover interest expenses. However, this ratio has steadily decreased to 4.66 as of December 31, 2024.
The significant decline in the interest coverage ratio suggests that ESAB Corp may be facing challenges in generating sufficient earnings to cover its interest obligations. A ratio below 1 indicates that the company is not generating enough operating income to cover its interest expenses, which could raise concerns among creditors and investors about the company's financial stability.
It is important for ESAB Corp to closely monitor its interest coverage ratio and take appropriate measures to improve it, such as increasing profitability, reducing debt levels, or refinancing debt at lower interest rates. Failure to address declining interest coverage could lead to increased financial risk and potential difficulties in meeting debt obligations in the future.
Peer comparison
Dec 31, 2024