Phibro Animal Health Corporation (PAHC)

Interest coverage

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	102,595	48,429	72,020	82,113	73,619
Interest expense	US$ in thousands	34,602	37,513	28,546	9,786	10,401
Interest coverage		2.97	1.29	2.52	8.39	7.08

June 30, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $102,595K ÷ $34,602K
= 2.97

The interest coverage ratios for Phibro Animal Health Corporation over the specified periods reflect notable fluctuations, indicating changing capacity to meet interest obligations through operating earnings. As of June 30, 2021, the interest coverage ratio stood at 7.08, suggesting a robust ability to service interest expenses, with earnings more than sufficient to cover interest costs approximately seven times over. This high level of coverage persisted into June 30, 2022, with the ratio increasing to 8.39, further indicating a strengthened capacity to meet interest commitments during that period.

However, a significant decline is observed by June 30, 2023, when the ratio decreased sharply to 2.52. This substantial drop signifies a diminished cushion for covering interest expenses, implying that operating earnings had become only about two and a half times the interest expense, raising concerns about the company's ability to comfortably meet interest obligations amid possibly reduced profitability or increased interest expenses.

The downward trend continues into June 30, 2024, with the ratio falling below a critical threshold to 1.29. This suggests that in that period, operating earnings barely exceeded interest expenses, indicating a precarious financial position where earnings barely cover interest costs, increasing the risk associated with interest payments. Such a low ratio is typically viewed as a warning sign by creditors and analysts, highlighting potential liquidity vulnerabilities.

Interestingly, by June 30, 2025, the interest coverage ratio exhibits a partial recovery to 2.97. This improvement indicates an easing of financial stress, with earnings again approaching a level nearly three times the interest expense, strengthening the company's ability to meet its interest obligations, though it remains below the historically high levels seen in 2021 and 2022.

In summary, the trend in interest coverage ratios over the analyzed period reveals a significant deterioration starting from 2022, reaching a low in 2024, with a subsequent modest recovery. The overall pattern suggests increased financial strain in recent years, emphasizing the importance of monitoring earnings capacity and interest obligations to assess financial stability and sustainability.