These 4 Measures Indicate That Kuehne + Nagel International (VTX:KNIN) Is Using Debt Reasonably Well

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that 'Volatility is far from synonymous with risk.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Kuehne + Nagel International AG (VTX:KNIN) does use debt in its business. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Kuehne + Nagel International's Debt?

As you can see below, at the end of March 2025, Kuehne + Nagel International had CHF291.0m of debt, up from CHF223.0m a year ago. Click the image for more detail. But it also has CHF891.0m in cash to offset that, meaning it has CHF600.0m net cash.

A Look At Kuehne + Nagel International's Liabilities

According to the last reported balance sheet, Kuehne + Nagel International had liabilities of CHF6.80b due within 12 months, and liabilities of CHF2.89b due beyond 12 months. Offsetting this, it had CHF891.0m in cash and CHF5.11b in receivables that were due within 12 months. So it has liabilities totalling CHF3.69b more than its cash and near-term receivables, combined.

Of course, Kuehne + Nagel International has a titanic market capitalization of CHF21.5b, so these liabilities are probably manageable. Having said that, it's clear that we should continue to monitor its balance sheet, lest it change for the worse. While it does have liabilities worth noting, Kuehne + Nagel International also has more cash than debt, so we're pretty confident it can manage its debt safely.

View our latest analysis for Kuehne + Nagel International

Fortunately, Kuehne + Nagel International grew its EBIT by 3.3% in the last year, making that debt load look even more manageable. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Kuehne + Nagel International'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. Kuehne + Nagel International 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. Over the last three years, Kuehne + Nagel International recorded free cash flow worth a fulsome 91% of its EBIT, which is stronger than we'd usually expect. That puts it in a very strong position to pay down debt.

Summing Up

Although Kuehne + Nagel International's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of CHF600.0m. And it impressed us with free cash flow of CHF1.5b, being 91% of its EBIT. So is Kuehne + Nagel International's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with Kuehne + Nagel International .

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.