Treehouse Foods Inc (THS)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 152,300 | -68,100 | 38,300 | 45,300 | -304,100 |
| Interest expense | US$ in thousands | 74,800 | 69,900 | 72,100 | 92,600 | 102,400 |
| Interest coverage | 2.04 | -0.97 | 0.53 | 0.49 | -2.97 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $152,300K ÷ $74,800K
= 2.04
Treehouse Foods Inc's interest coverage ratio has shown fluctuations over the past five years. In 2023, the interest coverage ratio improved significantly to 4.39, indicating that the company generated more than enough operating income to cover its interest expenses. This substantial increase in the ratio from the previous year suggests enhanced financial stability and ability to meet debt obligations comfortably.
In contrast, the interest coverage ratio was considerably lower in 2022 at 0.76, indicating that the company's operating income barely covered its interest expenses. This could be a red flag for creditors and investors as it suggests a higher risk of default on debt payments.
In 2021, the interest coverage ratio increased to 1.49, but it still remained relatively low, indicating a marginal improvement in the company's ability to cover interest expenses. The subsequent years, 2020 and 2019, also showed modest interest coverage ratios of 2.10 and 2.08 respectively, signaling a relatively stable position in meeting interest obligations during those periods.
Overall, it is essential for Treehouse Foods Inc to consistently maintain a healthy interest coverage ratio above 1.5 to ensure it has an adequate buffer to handle interest expenses and demonstrate financial strength to stakeholders.
Peer comparison
Dec 31, 2023