These 4 Measures Indicate That Colruyt Group (EBR:COLR) 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.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Colruyt Group N.V. (EBR:COLR) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

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What Risk Does Debt Bring?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Colruyt Group's Net Debt?

As you can see below, Colruyt Group had €553.6m of debt at March 2025, down from €666.9m a year prior. But it also has €692.1m in cash to offset that, meaning it has €138.5m net cash.

How Healthy Is Colruyt Group's Balance Sheet?

We can see from the most recent balance sheet that Colruyt Group had liabilities of €2.36b falling due within a year, and liabilities of €933.8m due beyond that. Offsetting this, it had €692.1m in cash and €605.3m in receivables that were due within 12 months. So its liabilities total €2.00b more than the combination of its cash and short-term receivables.

Colruyt Group has a market capitalization of €4.59b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. While it does have liabilities worth noting, Colruyt Group also has more cash than debt, so we're pretty confident it can manage its debt safely.

Check out our latest analysis for Colruyt Group

On the other hand, Colruyt Group's EBIT dived 12%, over the last year. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Colruyt Group can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Colruyt Group may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Happily for any shareholders, Colruyt Group actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Summing Up

Although Colruyt Group's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €138.5m. And it impressed us with free cash flow of €260m, being 127% of its EBIT. So we don't have any problem with Colruyt Group's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 2 warning signs for Colruyt Group that you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.