Outokumpu Oyj (HEL:OUT1V) Has Debt But No Earnings; Should You Worry?

Warren Buffett famously said, '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 Outokumpu Oyj (HEL:OUT1V) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

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 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Outokumpu Oyj's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Outokumpu Oyj had €607.0m of debt, an increase on €414.0m, over one year. However, it also had €354.0m in cash, and so its net debt is €253.0m.

A Look At Outokumpu Oyj's Liabilities

According to the last reported balance sheet, Outokumpu Oyj had liabilities of €1.62b due within 12 months, and liabilities of €687.0m due beyond 12 months. Offsetting these obligations, it had cash of €354.0m as well as receivables valued at €625.0m due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by €1.33b.

This is a mountain of leverage relative to its market capitalization of €1.51b. Should its lenders demand that it shore up the balance sheet, shareholders would likely face severe dilution. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Outokumpu Oyj 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.

Check out our latest analysis for Outokumpu Oyj

In the last year Outokumpu Oyj had a loss before interest and tax, and actually shrunk its revenue by 6.9%, to €6.0b. We would much prefer see growth.

Caveat Emptor

Over the last twelve months Outokumpu Oyj produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at €54m. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. So we think its balance sheet is a little strained, though not beyond repair. Another cause for caution is that is bled €100m in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. Be aware that Outokumpu Oyj is showing 1 warning sign in our investment analysis , you should know about...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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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.