Procter & Gamble Company (PG)
Interest coverage
| Mar 31, 2025 | Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 20,428,000 | 20,367,000 | 19,026,000 | 19,685,000 | 20,070,000 | 19,764,000 | 20,026,000 | 19,109,000 | 18,401,000 | 18,071,000 | 18,410,000 | 18,434,000 | 18,350,000 | 18,153,000 | 17,828,000 | 18,117,000 | 18,054,000 | 17,669,000 | 17,281,000 | 16,299,000 |
| Interest expense (ttm) | US$ in thousands | 915,000 | 931,000 | 939,000 | 926,000 | 946,000 | 935,000 | 858,000 | 756,000 | 631,000 | 518,000 | 453,000 | 439,000 | 441,000 | 438,000 | 475,000 | 502,000 | 542,000 | 536,000 | 493,000 | 465,000 |
| Interest coverage | 22.33 | 21.88 | 20.26 | 21.26 | 21.22 | 21.14 | 23.34 | 25.28 | 29.16 | 34.89 | 40.64 | 41.99 | 41.61 | 41.45 | 37.53 | 36.09 | 33.31 | 32.96 | 35.05 | 35.05 |
March 31, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $20,428,000K ÷ $915,000K
= 22.33
The interest coverage ratio of Procter & Gamble (P&G) demonstrates a stable and generally high capacity to meet interest obligations over the analyzed period. As of June 30, 2020, the ratio stood at 35.05, indicating that the company's earnings before interest and taxes (EBIT) significantly exceeded its interest expenses, approximately 35 times, reflecting a robust capacity to service debt. This high level persisted through September 30, 2020, maintaining the same ratio.
Throughout the remainder of 2020 and into 2021, the ratio exhibited slight fluctuations but remained notably high, averaging above 30.0. In particular, the ratio increased to a peak of 41.45 at the end of 2021, suggesting an even stronger ability to cover interest obligations during this period. This elevated coverage points to conservative leverage levels and prudent financial management, with ample earnings buffers.
However, starting in 2022, a gradual decline in the interest coverage ratio becomes apparent. By December 31, 2022, the ratio had decreased to 34.89, and further reductions were observed in 2023, reaching 29.16 at the end of March 2023 and continuing downward to 21.14 by December 31, 2023. This declining trend indicates a diminishing margin of safety, as EBIT relative to interest expenses is decreasing, potentially signaling that the company's earnings are being pressured or that interest expenses have increased relative to earnings.
In 2024, the ratio stabilized somewhat, with values around the low twenties—specifically, 21.88 at December 31, 2024, and slightly increasing to 22.33 by March 31, 2025. The sustained figure above 20 times interest coverage suggests that while the company's ability to meet interest obligations remains adequate, the margin has contracted substantially from historical levels, necessitating attention to earnings sustainability and debt management.
Overall, Procter & Gamble maintains a strong interest coverage historically, indicating sound financial stability and low risk of default concerning interest payments. The downward trend observed in recent years warrants ongoing monitoring; however, current ratios still reflect a comfortable buffer over debt servicing obligations.