We Think Crystal International Group (HKG:2232) Can Manage Its Debt With Ease

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Crystal International Group Limited (HKG:2232) does use debt in its business. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. 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.

What Is Crystal International Group's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Crystal International Group had US$121.5m of debt, an increase on US$9.36m, over one year. But on the other hand it also has US$638.0m in cash, leading to a US$516.5m net cash position.

How Strong Is Crystal International Group's Balance Sheet?

According to the last reported balance sheet, Crystal International Group had liabilities of US$744.4m due within 12 months, and liabilities of US$52.8m due beyond 12 months. Offsetting this, it had US$638.0m in cash and US$422.7m in receivables that were due within 12 months. So it actually has US$263.5m more liquid assets than total liabilities.

This short term liquidity is a sign that Crystal International Group could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Crystal International Group has more cash than debt is arguably a good indication that it can manage its debt safely.

See our latest analysis for Crystal International Group

In addition to that, we're happy to report that Crystal International Group has boosted its EBIT by 34%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Crystal International Group 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.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. Crystal International Group 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. During the last three years, Crystal International Group produced sturdy free cash flow equating to 68% of its EBIT, about what we'd expect. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Crystal International Group has net cash of US$516.5m, as well as more liquid assets than liabilities. And it impressed us with its EBIT growth of 34% over the last year. So is Crystal International Group's debt a risk? It doesn't seem so to us. 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. For example - Crystal International Group has 1 warning sign we think you should be aware of.

Of course, if you're the type of investor who prefers buying stocks without the burden of debt, then don't hesitate to discover our exclusive list of net cash growth stocks, today.

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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.