We Think Sempio Foods (KRX:248170) Can Manage Its Debt With Ease

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. Importantly, Sempio Foods Company (KRX:248170) does carry debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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.

What Is Sempio Foods's Net Debt?

The chart below, which you can click on for greater detail, shows that Sempio Foods had ₩73.5b in debt in September 2025; about the same as the year before. But it also has ₩81.2b in cash to offset that, meaning it has ₩7.63b net cash.

How Healthy Is Sempio Foods' Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Sempio Foods had liabilities of ₩127.1b due within 12 months and liabilities of ₩5.93b due beyond that. Offsetting these obligations, it had cash of ₩81.2b as well as receivables valued at ₩46.1b due within 12 months. So its liabilities total ₩5.72b more than the combination of its cash and short-term receivables.

Of course, Sempio Foods has a market capitalization of ₩139.5b, so these liabilities are probably manageable. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Sempio Foods boasts net cash, so it's fair to say it does not have a heavy debt load!

See our latest analysis for Sempio Foods

Better yet, Sempio Foods grew its EBIT by 694% last year, which is an impressive improvement. If maintained that growth will make the debt even more manageable in the years ahead. When analysing debt levels, the balance sheet is the obvious place to start. But it is Sempio Foods'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Sempio Foods 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. Over the most recent three years, Sempio Foods recorded free cash flow worth 54% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

We could understand if investors are concerned about Sempio Foods's liabilities, but we can be reassured by the fact it has has net cash of ₩7.63b. And it impressed us with its EBIT growth of 694% over the last year. So is Sempio Foods's debt a risk? It doesn't seem so to us. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Sempio Foods (of which 1 is significant!) you should know about.

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.