HNI Corp (HNI)
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 | 206,500 | 90,300 | 155,200 | 85,453 | 61,390 |
| Interest expense | US$ in thousands | 27,200 | 25,500 | 8,800 | 7,153 | 6,990 |
| Interest coverage | 7.59 | 3.54 | 17.64 | 11.95 | 8.78 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $206,500K ÷ $27,200K
= 7.59
Interest coverage is a crucial financial ratio that indicates a company's ability to meet its interest payment obligations from its operating earnings. An interest coverage ratio above 1 signifies that the company is generating sufficient operating income to cover its interest expenses.
Analyzing the interest coverage trend of HNI Corp from 2020 to 2024 reveals fluctuations in its ability to cover interest expenses. In 2020, the interest coverage ratio was 8.78, indicating that the company's operating income was more than sufficient to cover its interest payments. This ratio improved significantly to 11.95 in 2021 and further increased to 17.64 in 2022, reflecting strong earnings relative to interest expenses during these years.
However, in 2023, there was a notable decline in the interest coverage ratio to 3.54, suggesting a decrease in operating income relative to interest obligations. This significant drop may raise concerns about the company's ability to comfortably cover its interest expenses. In 2024, the interest coverage ratio slightly improved to 7.59, but it remained below the levels seen in 2021 and 2022.
Overall, while HNI Corp demonstrated strong interest coverage in 2021 and 2022, the sharp decline in 2023 and the subsequent modest recovery in 2024 indicate some variability in the company's ability to service its interest payments. It is essential for stakeholders to monitor this ratio closely to ensure that the company maintains a healthy financial position and can meet its debt obligations effectively.