Ilsung Construction (KRX:013360) Has Debt But No Earnings; Should You Worry?

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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Ilsung Construction Co., Ltd. (KRX:013360) does use debt in its business. But is this debt a concern to shareholders?

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What Risk Does Debt Bring?

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. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Ilsung Construction's Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Ilsung Construction had ₩120.2b of debt, an increase on ₩108.5b, over one year. However, it does have ₩23.7b in cash offsetting this, leading to net debt of about ₩96.5b.

A Look At Ilsung Construction's Liabilities

The latest balance sheet data shows that Ilsung Construction had liabilities of ₩258.0b due within a year, and liabilities of ₩62.5b falling due after that. On the other hand, it had cash of ₩23.7b and ₩143.5b worth of receivables due within a year. So it has liabilities totalling ₩153.2b more than its cash and near-term receivables, combined.

This deficit casts a shadow over the ₩66.3b company, like a colossus towering over mere mortals. So we definitely think shareholders need to watch this one closely. At the end of the day, Ilsung Construction would probably need a major re-capitalization if its creditors were to demand repayment. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since Ilsung Construction 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.

View our latest analysis for Ilsung Construction

Over 12 months, Ilsung Construction made a loss at the EBIT level, and saw its revenue drop to ₩451b, which is a fall of 24%. To be frank that doesn't bode well.

Caveat Emptor

Not only did Ilsung Construction's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). Its EBIT loss was a whopping ₩50b. 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. Not least because it burned through ₩12b in negative free cash flow over the last year. So suffice it to say 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 Ilsung Construction is showing 2 warning signs in our investment analysis , and 1 of those doesn't sit too well with us...

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.