Scotts Miracle-Gro Company (SMG)
Interest coverage
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -275,200 | -440,000 | 751,200 | 590,700 | 707,400 |
| Interest expense | US$ in thousands | 178,100 | 118,100 | 78,900 | 79,600 | 101,800 |
| Interest coverage | -1.55 | -3.73 | 9.52 | 7.42 | 6.95 |
September 30, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $-275,200K ÷ $178,100K
= -1.55
The interest coverage of Scotts Miracle-Gro Company has exhibited variability over the past five years. The interest coverage ratio measures the company's ability to meet its interest obligations from its operating income. A higher ratio is generally considered favorable, indicating a greater capacity to cover interest expenses.
In 2023, the interest coverage ratio fell to 1.07 from 3.45 in 2022, reflecting a decrease in the company's ability to cover its interest expenses from its operating income. This decline may raise concerns about the company's ability to meet its interest obligations.
Comparing 2023 to 2021, there has been a significant decline in the interest coverage ratio, which was 9.69 in 2021. The substantial decrease in this ratio suggests a notable deterioration in the company's ability to cover its interest expenses.
It is important to observe this trend and monitor the company's ability to generate sufficient operating income to cover its interest expenses in the future, as sustained low interest coverage ratios may indicate financial distress and an increased risk of default.
Peer comparison
Sep 30, 2023