Mercer International Inc (MERC)
Interest coverage
| 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 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | -188,774 | -85,116 | 27,033 | 249,896 | 392,368 | 475,068 | 480,100 | 417,905 | 346,583 | 232,236 | 132,217 | 90,696 | 63,729 | -17,993 | -12,095 | 16,651 | 87,180 | 234,244 | 277,697 | 275,980 |
| Interest expense (ttm) | US$ in thousands | 89,611 | 81,198 | 77,270 | 74,511 | 72,928 | 71,382 | 70,329 | 70,127 | 71,682 | 75,181 | 78,163 | 81,141 | 82,206 | 82,073 | 80,392 | 78,653 | 77,120 | 70,595 | 64,141 | 57,900 |
| Interest coverage | -2.11 | -1.05 | 0.35 | 3.35 | 5.38 | 6.66 | 6.83 | 5.96 | 4.84 | 3.09 | 1.69 | 1.12 | 0.78 | -0.22 | -0.15 | 0.21 | 1.13 | 3.32 | 4.33 | 4.77 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-188,774K ÷ $89,611K
= -2.11
The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A ratio below 1 indicates that the company is not generating enough operating income to cover its interest expenses, which could be a concern for creditors and investors.
Based on the data provided for Mercer International Inc., the interest coverage ratio has been fluctuating over the past eight quarters. In Q4 2023 and Q3 2023, the company's interest coverage was below 1, at -1.76 and -1.07, respectively, suggesting that its operating income was insufficient to cover its interest expenses during these periods. This indicates a potential risk of financial distress, as the company may struggle to meet its interest payments.
The interest coverage improved in Q2 2023 to 0.36, but was still below 1, reflecting ongoing challenges in generating enough operating income to comfortably cover interest costs. However, the ratio rebounded in Q1 2023 to 3.42, indicating a stronger ability to cover interest obligations with operating income.
Comparing the latest data to the same quarter in the previous year, there has been a notable decline in interest coverage for Mercer International Inc. In Q4 2022, the company had a much healthier interest coverage ratio of 5.49, which continued to be above 5 in the subsequent quarters of 2022, indicating a stronger financial position. However, the ratio has since deteriorated, raising concerns about the company's ability to service its debt obligations.
Overall, Mercer International Inc. has experienced volatility in its interest coverage ratio, with recent quarters showing a concerning trend of declining coverage levels. Investors and creditors should closely monitor the company's financial performance and debt management strategies to assess the potential risks associated with its ability to meet interest payments in the future.