Hexcel Corporation (HXL)
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 | 186,100 | 215,300 | 175,200 | 51,800 | 12,500 |
| Interest expense | US$ in thousands | 31,200 | 34,000 | 36,200 | 38,300 | 41,800 |
| Interest coverage | 5.96 | 6.33 | 4.84 | 1.35 | 0.30 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $186,100K ÷ $31,200K
= 5.96
Interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt, indicating its financial health and capacity to handle debt.
In December 2020, Hexcel Corporation's interest coverage ratio was only 0.30, which suggests the company was barely able to cover its interest expenses from operating profits. This indicates a potential risk of insolvency if profitability doesn't improve.
However, the situation improved significantly in the following years. By December 2021, the interest coverage ratio increased to 1.35, indicating a slight improvement in the company's ability to meet its interest obligations.
Subsequently, Hexcel Corporation's interest coverage ratio continued to strengthen, reaching 4.84 by December 2022, which is a positive sign of enhanced financial stability and profitability.
The trend of improvement persisted with the interest coverage ratio rising to 6.33 by December 2023 and still remained strong at 5.96 by December 2024. These higher ratios indicate that Hexcel Corporation was generating sufficient operating income to comfortably cover its interest payments on outstanding debt.
Overall, the increasing trend in interest coverage ratios reflects a positive development in Hexcel Corporation's financial position and reflects its ability to manage debt obligations effectively, thereby reducing financial risk.
Peer comparison
Dec 31, 2024