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.' 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. Importantly, Mathios Refractories S.A. (ATH:MATHIO) does carry debt. But the more important question is: how much risk is that debt creating?
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. If things get really bad, the lenders can take control of the business. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
How Much Debt Does Mathios Refractories Carry?
As you can see below, Mathios Refractories had €9.65m of debt at June 2025, down from €10.2m a year prior. However, it does have €375.3k in cash offsetting this, leading to net debt of about €9.27m.
A Look At Mathios Refractories' Liabilities
The latest balance sheet data shows that Mathios Refractories had liabilities of €12.2m due within a year, and liabilities of €3.66m falling due after that. Offsetting these obligations, it had cash of €375.3k as well as receivables valued at €4.72m due within 12 months. So its liabilities total €10.8m more than the combination of its cash and short-term receivables.
When you consider that this deficiency exceeds the company's €9.52m market capitalization, you might well be inclined to review the balance sheet intently. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Mathios Refractories will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.
Check out our latest analysis for Mathios Refractories
In the last year Mathios Refractories had a loss before interest and tax, and actually shrunk its revenue by 3.8%, to €13m. That's not what we would hope to see.
Caveat Emptor
Importantly, Mathios Refractories had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at €464k. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. It's fair to say the loss of €1.1m didn't encourage us either; we'd like to see a profit. In the meantime, we consider the stock to be risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Mathios Refractories is showing 2 warning signs in our investment analysis , and 1 of those is significant...
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.