Element Solutions Inc (ESI)
Interest coverage
| Mar 31, 2025 | 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 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 398,400 | 346,100 | 332,300 | 237,800 | 194,200 | 182,800 | 165,800 | 248,100 | 286,000 | 315,600 | 337,900 | 327,200 | 307,700 | 311,600 | 325,700 | 315,800 | 284,300 | 239,000 | 248,400 | 258,400 |
| Interest expense (ttm) | US$ in thousands | 56,700 | 56,300 | 54,700 | 53,800 | 51,500 | 49,300 | 48,600 | 47,600 | 48,800 | 51,200 | 54,200 | 55,700 | 55,400 | 54,200 | 52,300 | 55,600 | 59,600 | 63,400 | 67,700 | 68,000 |
| Interest coverage | 7.03 | 6.15 | 6.07 | 4.42 | 3.77 | 3.71 | 3.41 | 5.21 | 5.86 | 6.16 | 6.23 | 5.87 | 5.55 | 5.75 | 6.23 | 5.68 | 4.77 | 3.77 | 3.67 | 3.80 |
March 31, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $398,400K ÷ $56,700K
= 7.03
The interest coverage ratio of Element Solutions Inc exhibits a pattern of fluctuation over the observed period from June 30, 2020, through March 31, 2025. Initially, in mid-2020, the ratio was around 3.80, indicating the company's ability to cover its interest expenses approximately 3.8 times with its earnings before interest and taxes (EBIT). Throughout 2020 and into early 2021, the ratio displayed a modest upward trend, reaching a peak of approximately 4.77 in March 2021, which suggests an improvement in the company's capacity to meet interest obligations.
From mid-2021 onward, the ratio continued to strengthen, reaching levels over 6.0 in several quarters (notably 6.23 in September 2021 and December 2021). Such levels indicate a robust ability to service interest expenses, reflecting a favorable financial position and possibly improved earnings or reduced interest costs.
However, there is a noticeable decline in the interest coverage ratio in the period following this peak. By September 2023, the ratio decreased to 3.41, signaling a reduction in the company's EBIT relative to its interest expenses. This decrease warrants attention, as a lower coverage ratio implies a potentially increased risk of difficulty in meeting interest obligations solely from operational earnings.
Subsequent quarters show some recovery, with ratios rising again to above 4.0 in March and June 2024 (4.42 and 6.07, respectively), then stabilizing around 6.15 in December 2024 and further increasing to 7.03 in March 2025. This upward trend suggests that the company's ability to cover interest expenses has improved once more, highlighting a strengthening financial profile in these recent periods.
Overall, the interest coverage ratio of Element Solutions Inc has experienced periods of both improvement and contraction within the timeframe analyzed. The ratios remained generally above 3.0, historically considered a minimally acceptable threshold, but the dip near 3.41 in September 2023 indicates a moment of increased concern regarding the company's leverage and earnings capacity to support its interest obligations. The subsequent recovery in the ratio suggests a positive trajectory in financial health moving into early 2025.
Peer comparison
Mar 31, 2025