Is Scandinavian Astor Group (FRA:Y73) Using Too Much Debt?

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 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. Importantly, Scandinavian Astor Group AB (publ) (FRA:Y73) does carry debt. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Scandinavian Astor Group Carry?

As you can see below, at the end of June 2025, Scandinavian Astor Group had kr63.6m of debt, up from kr56.4m a year ago. Click the image for more detail. But on the other hand it also has kr353.0m in cash, leading to a kr289.4m net cash position.

How Healthy Is Scandinavian Astor Group's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Scandinavian Astor Group had liabilities of kr135.6m due within 12 months and liabilities of kr145.6m due beyond that. Offsetting this, it had kr353.0m in cash and kr71.1m in receivables that were due within 12 months. So it can boast kr142.8m more liquid assets than total liabilities.

This surplus suggests that Scandinavian Astor Group has a conservative balance sheet, and could probably eliminate its debt without much difficulty. Simply put, the fact that Scandinavian Astor Group has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Scandinavian Astor Group

We also note that Scandinavian Astor Group improved its EBIT from a last year's loss to a positive kr11m. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Scandinavian Astor 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 business needs free cash flow to pay off debt; accounting profits just don't cut it. While Scandinavian Astor Group has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the last year, Scandinavian Astor Group saw substantial negative free cash flow, in total. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Scandinavian Astor Group has kr289.4m in net cash and a decent-looking balance sheet. So while Scandinavian Astor Group does not have a great balance sheet, it's certainly not too bad. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. For instance, we've identified 3 warning signs for Scandinavian Astor Group (2 are potentially serious) you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.