Ecopro Materials (KRX:450080) Is Carrying A Fair Bit Of Debt

Warren Buffett famously said, 'Volatility is far from synonymous with risk.' 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 note that Ecopro Materials Co., Ltd. (KRX:450080) does have debt on its balance sheet. But should shareholders be worried about its use of debt?

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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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. 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. 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.

What Is Ecopro Materials's Debt?

The image below, which you can click on for greater detail, shows that at June 2025 Ecopro Materials had debt of ₩520.0b, up from ₩292.7b in one year. However, it does have ₩151.7b in cash offsetting this, leading to net debt of about ₩368.3b.

How Strong Is Ecopro Materials' Balance Sheet?

The latest balance sheet data shows that Ecopro Materials had liabilities of ₩358.2b due within a year, and liabilities of ₩230.2b falling due after that. Offsetting this, it had ₩151.7b in cash and ₩78.3b in receivables that were due within 12 months. So its liabilities total ₩358.5b more than the combination of its cash and short-term receivables.

Since publicly traded Ecopro Materials shares are worth a total of ₩4.23t, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. There's no doubt that we learn most about debt from the balance sheet. But it is Ecopro Materials's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for Ecopro Materials

In the last year Ecopro Materials had a loss before interest and tax, and actually shrunk its revenue by 36%, to ₩368b. To be frank that doesn't bode well.

Caveat Emptor

Not only did Ecopro Materials's revenue slip over the last twelve months, but it also produced negative earnings before interest and tax (EBIT). To be specific the EBIT loss came in at ₩92b. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much 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 ₩298b of cash over the last year. So in short it's a really risky stock. 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. For example Ecopro Materials has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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.