Here's Why Hiab Oyj (HEL:HIAB) Can Manage Its Debt Responsibly

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. We note that Hiab Oyj (HEL:HIAB) does have debt on its balance sheet. But is this debt a concern to shareholders?

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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 usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Hiab Oyj's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Hiab Oyj had €191.4m of debt in March 2025, down from €276.6m, one year before. However, its balance sheet shows it holds €387.5m in cash, so it actually has €196.1m net cash.

How Healthy Is Hiab Oyj's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Hiab Oyj had liabilities of €1.20b due within 12 months and liabilities of €259.4m due beyond that. Offsetting this, it had €387.5m in cash and €372.2m in receivables that were due within 12 months. So it has liabilities totalling €701.7m more than its cash and near-term receivables, combined.

This deficit isn't so bad because Hiab Oyj is worth €3.50b, and thus could probably raise enough capital to shore up 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, Hiab Oyj also has more cash than debt, so we're pretty confident it can manage its debt safely.

See our latest analysis for Hiab Oyj

But the other side of the story is that Hiab Oyj saw its EBIT decline by 5.6% over the last year. That sort of decline, if sustained, will obviously make debt harder to handle. 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 Hiab Oyj's ability to maintain a healthy balance sheet going forward. 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. Hiab Oyj 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, Hiab Oyj actually produced more free cash flow than EBIT. There's nothing better than incoming cash when it comes to staying in your lenders' good graces.

Summing Up

Although Hiab Oyj's balance sheet isn't particularly strong, due to the total liabilities, it is clearly positive to see that it has net cash of €196.1m. And it impressed us with free cash flow of €361m, being 160% of its EBIT. So we don't have any problem with Hiab Oyj's use of debt. Over time, share prices tend to follow earnings per share, so if you're interested in Hiab Oyj, you may well want to click here to check an interactive graph of its earnings per share history.

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.