JM Smucker Company (SJM)
Interest coverage
| Apr 30, 2025 | Apr 30, 2024 | Apr 30, 2023 | Apr 30, 2022 | Apr 30, 2021 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -1,176,400 | 1,260,700 | 142,800 | 1,004,700 | 1,349,000 |
| Interest expense | US$ in thousands | 388,700 | 264,300 | 152,000 | 160,900 | 177,100 |
| Interest coverage | -3.03 | 4.77 | 0.94 | 6.24 | 7.62 |
April 30, 2025 calculation
Interest coverage = EBIT ÷ Interest expense
= $-1,176,400K ÷ $388,700K
= -3.03
The interest coverage ratio of JM Smucker Company has exhibited significant variability over the specified periods. As of April 30, 2021, the company maintained a relatively healthy interest coverage ratio of 7.62, indicating that its earnings before interest and taxes (EBIT) were more than seven times its interest expenses, reflecting strong capacity to meet interest obligations. By April 30, 2022, this ratio declined to 6.24, suggesting a modest deterioration in coverage but still indicating sufficient earnings relative to interest obligations.
A notable decline is observed by April 30, 2023, when the ratio sharply dropped to 0.94. This value approaches unity, implying that earnings are nearly just sufficient to cover interest expenses, raising concerns about the company's ability to meet its interest commitments comfortably. Such a low ratio signals a potential liquidity or profitability concern and warrants closer examination of the company's earnings and debt management during this period.
Further, by April 30, 2024, the ratio increases to 4.77, indicating a substantial improvement and a return to a more comfortable level of earnings coverage. However, projections for April 30, 2025, indicate a negative interest coverage ratio of -3.03, implying that the company's earnings before interest and taxes are expected to be negative, thus unable to cover interest expenses. This negative projection may signal potential financial distress or significant operational challenges unless mitigated by other factors.
In summary, the interest coverage ratio data reveals a trend of declining financial robustness over the analyzed periods, culminating in a projected negative ratio. The company experienced a decline from strong coverage in 2021 to critical levels in 2023, with partial recovery in 2024, but facing estimated difficulties in 2025. These fluctuations highlight the importance of monitoring earnings and interest obligations closely in the context of JM Smucker Company's overall financial health.