Is Industrie De Nora (BIT:DNR) Using Too Much Debt?

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 Industrie De Nora S.p.A. (BIT:DNR) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together.

What Is Industrie De Nora's Net Debt?

The image below, which you can click on for greater detail, shows that Industrie De Nora had debt of €126.8m at the end of June 2025, a reduction from €134.0m over a year. But it also has €157.8m in cash to offset that, meaning it has €31.0m net cash.

How Strong Is Industrie De Nora's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Industrie De Nora had liabilities of €226.8m due within 12 months and liabilities of €169.5m due beyond that. Offsetting these obligations, it had cash of €157.8m as well as receivables valued at €251.9m due within 12 months. So it actually has €13.4m more liquid assets than total liabilities.

This state of affairs indicates that Industrie De Nora's balance sheet looks quite solid, as its total liabilities are just about equal to its liquid assets. So it's very unlikely that the €1.57b company is short on cash, but still worth keeping an eye on the balance sheet. Succinctly put, Industrie De Nora boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Industrie De Nora

But the bad news is that Industrie De Nora has seen its EBIT plunge 11% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Industrie De Nora 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.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. While Industrie De Nora has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Looking at the most recent three years, Industrie De Nora recorded free cash flow of 36% of its EBIT, which is weaker than we'd expect. That's not great, when it comes to paying down debt.

Summing Up

While we empathize with investors who find debt concerning, you should keep in mind that Industrie De Nora has net cash of €31.0m, as well as more liquid assets than liabilities. So we don't have any problem with Industrie De Nora's use of debt. 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. Case in point: We've spotted 1 warning sign for Industrie De Nora you should be aware of.

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.