Is Sam-A Aluminium Company (KRX:006110) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' 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 Sam-A Aluminium Company, Limited (KRX:006110) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating?

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

Why Does Debt Bring Risk?

Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. When we think about a company's use of debt, we first look at cash and debt together.

What Is Sam-A Aluminium Company's Debt?

As you can see below, at the end of September 2025, Sam-A Aluminium Company had ₩197.5b of debt, up from ₩124.5b a year ago. Click the image for more detail. However, because it has a cash reserve of ₩17.2b, its net debt is less, at about ₩180.4b.

A Look At Sam-A Aluminium Company's Liabilities

The latest balance sheet data shows that Sam-A Aluminium Company had liabilities of ₩116.3b due within a year, and liabilities of ₩120.0b falling due after that. On the other hand, it had cash of ₩17.2b and ₩41.3b worth of receivables due within a year. So it has liabilities totalling ₩177.9b more than its cash and near-term receivables, combined.

Sam-A Aluminium Company has a market capitalization of ₩322.9b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But it is Sam-A Aluminium Company'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 Sam-A Aluminium Company

In the last year Sam-A Aluminium Company wasn't profitable at an EBIT level, but managed to grow its revenue by 5.9%, to ₩265b. That rate of growth is a bit slow for our taste, but it takes all types to make a world.

Caveat Emptor

Over the last twelve months Sam-A Aluminium Company produced an earnings before interest and tax (EBIT) loss. Indeed, it lost ₩14b at the EBIT level. 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 ₩98b of cash over the last year. So suffice it to say we consider the stock very risky. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Be aware that Sam-A Aluminium Company is showing 2 warning signs in our investment analysis , you should know about...

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.