Element Solutions Inc (ESI)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 344,000 | 178,400 | 334,800 | 311,600 | 144,500 |
| Interest expense | US$ in thousands | 56,300 | 49,300 | 51,200 | 54,200 | 63,400 |
| Interest coverage | 6.11 | 3.62 | 6.54 | 5.75 | 2.28 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $344,000K ÷ $56,300K
= 6.11
The interest coverage ratios of Element Solutions Inc. over the specified periods demonstrate fluctuations in its ability to meet interest obligations from operating earnings. As of December 31, 2020, the ratio stood at 2.28, indicating that the company's operating income was just over twice its interest expenses, which suggests a moderate level of coverage but also some potential vulnerability to earnings volatility. By the end of 2021, the ratio increased significantly to 5.75, reflecting a notable improvement in the company's capacity to cover interest expenses, likely due to enhanced earnings or reduced interest costs.
This positive trend continued into 2022, with the ratio further ascending to 6.54, indicating stronger interest coverage and a more robust financial position in terms of servicing debt. However, in 2023, the ratio declined to 3.62, which, while still above the level seen in 2020, signals a deterioration in interest coverage, possibly stemming from lower operating income or increased debt service obligations.
In 2024, the interest coverage ratio rose again to 6.11, indicating an improved ability to meet interest expenses compared to the previous year. Overall, the company's interest coverage ratios show a pattern of significant improvement from 2020 through 2022, followed by a decline in 2023, and a recovery in 2024. This trend underscores periods of strengthened earnings capacity interspersed with temporary setbacks, emphasizing the importance of monitoring underlying operational performance and debt management strategies to assess long-term financial stability.
Peer comparison
Dec 31, 2024