These 4 Measures Indicate That Ackermans & Van Haaren (EBR:ACKB) Is Using Debt Reasonably Well

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Ackermans & Van Haaren NV (EBR:ACKB) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Ackermans & Van Haaren's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Ackermans & Van Haaren had debt of €2.05b, up from €1.86b in one year. On the flip side, it has €1.96b in cash leading to net debt of about €92.5m.

How Strong Is Ackermans & Van Haaren's Balance Sheet?

The latest balance sheet data shows that Ackermans & Van Haaren had liabilities of €10.6b due within a year, and liabilities of €3.13b falling due after that. Offsetting these obligations, it had cash of €1.96b as well as receivables valued at €5.20b due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €6.54b.

This is a mountain of leverage relative to its market capitalization of €7.17b. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. Carrying virtually no net debt, Ackermans & Van Haaren has a very light debt load indeed.

See our latest analysis for Ackermans & Van Haaren

We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Ackermans & Van Haaren's net debt to EBITDA ratio is very low, at 0.078, suggesting the debt is only trivial. But EBIT was only 6.0 times the interest expense last year, so the borrowing is clearly weighing on the business somewhat. We note that Ackermans & Van Haaren grew its EBIT by 20% in the last year, and that should make it easier to pay down debt, going forward. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Ackermans & Van Haaren's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we always check how much of that EBIT is translated into free cash flow. During the last three years, Ackermans & Van Haaren generated free cash flow amounting to a very robust 91% of its EBIT, more than we'd expect. That positions it well to pay down debt if desirable to do so.

Our View

Ackermans & Van Haaren's conversion of EBIT to free cash flow suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14's goalkeeper. But, on a more sombre note, we are a little concerned by its level of total liabilities. Looking at all the aforementioned factors together, it strikes us that Ackermans & Van Haaren can handle its debt fairly comfortably. Of course, while this leverage can enhance returns on equity, it does bring more risk, so it's worth keeping an eye on this one. Above most other metrics, we think its important to track how fast earnings per share is growing, if at all. If you've also come to that realization, you're in luck, because today you can view this interactive graph of Ackermans & Van Haaren's earnings per share history for free.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.