Mercer International Inc (MERC)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -188,774 | 392,368 | 346,583 | 63,729 | 84,003 |
| Interest expense | US$ in thousands | 89,611 | 72,928 | 71,682 | 82,206 | 77,120 |
| Interest coverage | -2.11 | 5.38 | 4.84 | 0.78 | 1.09 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $-188,774K ÷ $89,611K
= -2.11
The interest coverage ratio for Mercer International Inc. has fluctuated over the past five years. In 2023, the company's interest coverage ratio was negative at -1.76, indicating the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses. This suggests a higher risk of financial distress due to the limited ability to meet interest payments.
In contrast, in 2022 and 2021, Mercer International Inc. demonstrated improved interest coverage ratios of 5.49 and 4.95, respectively, indicating a healthier financial position with more comfortable earnings to cover interest costs. This positive trend suggests stronger profitability or lower interest expenses during those years.
In 2020 and 2019, however, the interest coverage ratios were below 1, at 0.79 and 1.11, respectively, suggesting that Mercer International Inc. was barely able to cover its interest costs with its operating income. This could signal a higher risk of default on interest payments during those years.
Overall, Mercer International Inc.'s interest coverage ratio has shown variability, with some years demonstrating healthier financial strength and others indicating potential financial vulnerability. It would be important for investors and stakeholders to closely monitor the company's interest coverage ratio in relation to its overall financial performance and industry benchmarks to assess its ability to meet its debt obligations.