Hoffmann Green Cement Technologies Societe anonyme (EPA:ALHGR) Is Carrying A Fair Bit Of Debt

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Hoffmann Green Cement Technologies Societe anonyme (EPA:ALHGR) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

View our latest analysis for Hoffmann Green Cement Technologies Societe anonyme

What Is Hoffmann Green Cement Technologies Societe anonyme's Net Debt?

The image below, which you can click on for greater detail, shows that at June 2024 Hoffmann Green Cement Technologies Societe anonyme had debt of €23.9m, up from €18.7m in one year. However, it does have €13.1m in cash offsetting this, leading to net debt of about €10.8m.

A Look At Hoffmann Green Cement Technologies Societe anonyme's Liabilities

Zooming in on the latest balance sheet data, we can see that Hoffmann Green Cement Technologies Societe anonyme had liabilities of €10.0m due within 12 months and liabilities of €25.5m due beyond that. Offsetting this, it had €13.1m in cash and €8.18m in receivables that were due within 12 months. So it has liabilities totalling €14.3m more than its cash and near-term receivables, combined.

Given Hoffmann Green Cement Technologies Societe anonyme has a market capitalization of €76.1m, it's hard to believe these liabilities pose much threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Hoffmann Green Cement Technologies Societe anonyme can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Hoffmann Green Cement Technologies Societe anonyme wasn't profitable at an EBIT level, but managed to grow its revenue by 128%, to €7.6m. So there's no doubt that shareholders are cheering for growth

Caveat Emptor

Despite the top line growth, Hoffmann Green Cement Technologies Societe anonyme still had an earnings before interest and tax (EBIT) loss over the last year. Its EBIT loss was a whopping €8.2m. 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. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. However, it doesn't help that it burned through €13m of cash over the last year. So suffice it to say we consider the stock very risky. 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. Case in point: We've spotted 2 warning signs for Hoffmann Green Cement Technologies Societe anonyme you should be aware of.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.