Norwegian Cruise Line Holdings Ltd (NCLH)

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 1,520,130 881,907 -1,532,940 -2,547,660 -3,534,810
Interest expense US$ in thousands 747,223 727,531 801,512 2,072,920 482,313
Interest coverage 2.03 1.21 -1.91 -1.23 -7.33

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $1,520,130K ÷ $747,223K
= 2.03

The interest coverage ratio of Norwegian Cruise Line Holdings Ltd has shown a concerning trend over the past few years. As of December 31, 2020, the interest coverage was -7.33, indicating that the company's operating income was insufficient to cover its interest expenses, raising a red flag for potential financial distress.

The situation improved slightly by December 31, 2021, with the interest coverage ratio at -1.23. However, the ratio remained below 1, suggesting that the company still struggled to meet its interest obligations from its operating profits.

By December 31, 2022, the interest coverage ratio was -1.91, indicating a further deterioration in the company's ability to cover its interest expenses. This continued weakness in financial health raised concerns about the company's long-term viability.

The trend finally turned positive by December 31, 2023, with an interest coverage ratio of 1.21. Although the ratio was still relatively low, it indicated that the company's operating income was now sufficient to cover its interest expenses, signaling a potential improvement in its financial position.

As of December 31, 2024, the interest coverage ratio further improved to 2.03, reaching a healthier level compared to the previous years. This increase in the ratio suggested that Norwegian Cruise Line Holdings Ltd was in a better position to meet its interest obligations from its operating profits.

In conclusion, Norwegian Cruise Line Holdings Ltd experienced a challenging period with low and even negative interest coverage ratios in the past, indicating financial distress. However, the slight recovery in the most recent years suggests a potential turnaround in the company's financial health. Continued monitoring of the interest coverage ratio will be essential to assess the company's ability to meet its debt obligations in the future.