Smurfit WestRock plc (SW)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Dec 31, 2022 | Jun 30, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | -255,212 | 237,214 | 434,931 | 1,551,261 | 2,382,119 | 2,805,029 | 3,247,508 | 3,014,999 | 2,741,238 | 2,319,360 |
| Interest expense (ttm) | US$ in thousands | 440,414 | 344,079 | 181,079 | 210,193 | 294,292 | 290,810 | 315,606 | 300,382 | 289,461 | 288,975 |
| Interest coverage | -0.58 | 0.69 | 2.40 | 7.38 | 8.09 | 9.65 | 10.29 | 10.04 | 9.47 | 8.03 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-255,212K ÷ $440,414K
= -0.58
Smurfit WestRock plc's interest coverage ratio has shown a generally positive trend from December 31, 2021, to June 30, 2023, steadily increasing from 8.03 to a peak of 10.29. This indicates the company's ability to meet its interest payment obligations comfortably based on its operating income.
However, starting from September 30, 2023, there was a slight decline in the interest coverage ratio to 9.65 by the end of the year on December 31, 2023. The decrease continued into the next quarter, reaching 7.38 on March 31, 2024, indicating a potential strain on the company's ability to cover interest expenses with its operating income.
The most concerning period occurred in the following quarters, with a significant drop in the interest coverage ratio to 2.40 on June 30, 2024, followed by a sharp decline to 0.69 on September 30, 2024, and a negative interest coverage ratio of -0.58 by December 31, 2024. This alarming trend suggests that the company may be facing financial difficulties in meeting its interest obligations solely through its operating income.
In conclusion, Smurfit WestRock plc's interest coverage ratio has shown a pattern of improvement followed by a sudden deterioration, raising concerns about its ability to sustainably cover interest payments. Management should closely monitor the company's financial performance and take necessary actions to improve its interest coverage ratio to ensure long-term financial stability.
Peer comparison
Dec 31, 2024