Sonoco Products Company (SON)
Interest coverage
| 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 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 411,727 | 589,823 | 648,677 | 658,463 | 698,176 | 701,061 | 692,849 | 703,634 | 687,042 | 647,555 | 592,235 | -41,533 | -74,749 | -65,919 | -68,573 | 487,979 | 493,153 | 493,270 | 511,098 | 529,633 |
| Interest expense (ttm) | US$ in thousands | 175,641 | 154,122 | 122,153 | 124,853 | 126,303 | 123,934 | 119,826 | 111,433 | 97,828 | 81,069 | 69,722 | 60,569 | 59,235 | 65,503 | 69,865 | 73,756 | 72,070 | 68,821 | 64,996 | 62,263 |
| Interest coverage | 2.34 | 3.83 | 5.31 | 5.27 | 5.53 | 5.66 | 5.78 | 6.31 | 7.02 | 7.99 | 8.49 | -0.69 | -1.26 | -1.01 | -0.98 | 6.62 | 6.84 | 7.17 | 7.86 | 8.51 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $411,727K ÷ $175,641K
= 2.34
Interest coverage is a financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense. A higher interest coverage ratio signifies a stronger ability to cover interest payments.
Analyzing the interest coverage data for Sonoco Products Company over the period from March 31, 2020, to December 31, 2024, reveals the following trends:
- In the beginning of the period, Sonoco Products Company had a healthy interest coverage ratio, with values ranging from 6.84 to 8.51, indicating a comfortable ability to cover its interest expenses.
- However, the interest coverage ratio started to decline in the middle of 2021, falling into negative territory in June 2021 and continuing to deteriorate through September 2021 and December 2021. Negative values indicate that the company's EBIT was insufficient to cover its interest expenses during these periods.
- The negative trend continued into the early part of 2022, with interest coverage ratios still in negative territory. This indicates a challenging financial situation for the company in terms of meeting its interest obligations.
- Starting from June 30, 2022, there was a notable improvement in the interest coverage ratio, with values of 8.49 and 7.99 recorded in the subsequent quarters. This improvement suggests a stronger ability to cover interest payments compared to the earlier periods of negative ratios.
- The interest coverage ratio fluctuated over the following quarters but generally remained above 3.0, indicating that the company's EBIT was generally sufficient to cover its interest expenses, albeit with some variability.
Overall, the analysis of Sonoco Products Company's interest coverage ratio highlights periods of both strength and weakness in its ability to meet interest payments. The company faced challenges with negative interest coverage ratios in 2021 and early 2022 but showed improvement in later periods. It will be important for investors and stakeholders to monitor future trends in the interest coverage ratio to assess the company's financial health and ability to manage its debt obligations effectively.
Peer comparison
Dec 31, 2024