Does K+S (ETR:SDF) Have A Healthy Balance Sheet?

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 K+S Aktiengesellschaft (ETR:SDF) does use debt in its business. But should shareholders be worried about its use of debt?

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Why Does Debt Bring Risk?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does K+S Carry?

The image below, which you can click on for greater detail, shows that K+S had debt of €494.5m at the end of June 2025, a reduction from €788.7m over a year. But it also has €593.5m in cash to offset that, meaning it has €99.0m net cash.

A Look At K+S' Liabilities

Zooming in on the latest balance sheet data, we can see that K+S had liabilities of €579.6m due within 12 months and liabilities of €2.26b due beyond that. Offsetting these obligations, it had cash of €593.5m as well as receivables valued at €741.5m due within 12 months. So its liabilities total €1.50b more than the combination of its cash and short-term receivables.

This is a mountain of leverage relative to its market capitalization of €2.02b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. While it does have liabilities worth noting, K+S also has more cash than debt, so we're pretty confident it can manage its debt safely. 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 K+S'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.

See our latest analysis for K+S

Over 12 months, K+S made a loss at the EBIT level, and saw its revenue drop to €3.6b, which is a fall of 2.4%. We would much prefer see growth.

So How Risky Is K+S?

Although K+S had an earnings before interest and tax (EBIT) loss over the last twelve months, it generated positive free cash flow of €1.4m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. When we look at a riskier company, we like to check how their profits (or losses) are trending over time. Today, we're providing readers this interactive graph showing how K+S's profit, revenue, and operating cashflow have changed over the last few years.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.