Is Hanwha Solutions (KRX:009830) Using Debt Sensibly?

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, Hanwha Solutions Corporation (KRX:009830) does carry debt. But the real question is whether this debt is making the company risky.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

When Is Debt Dangerous?

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. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is Hanwha Solutions's Debt?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Hanwha Solutions had ₩14t of debt, an increase on ₩11t, over one year. However, it also had ₩2.11t in cash, and so its net debt is ₩12t.

How Strong Is Hanwha Solutions' Balance Sheet?

The latest balance sheet data shows that Hanwha Solutions had liabilities of ₩12t due within a year, and liabilities of ₩7.90t falling due after that. On the other hand, it had cash of ₩2.11t and ₩2.82t worth of receivables due within a year. So it has liabilities totalling ₩15t more than its cash and near-term receivables, combined.

The deficiency here weighs heavily on the ₩6.50t company itself, as if a child were struggling under the weight of an enormous back-pack full of books, his sports gear, and a trumpet. So we'd watch its balance sheet closely, without a doubt. At the end of the day, Hanwha Solutions would probably need a major re-capitalization if its creditors were to demand repayment. When analysing debt levels, the balance sheet is the obvious place to start. But it is future earnings, more than anything, that will determine Hanwha Solutions's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Hanwha Solutions

Over 12 months, Hanwha Solutions reported revenue of ₩13t, which is a gain of 6.4%, although it did not report any earnings before interest and tax. 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 Hanwha Solutions produced an earnings before interest and tax (EBIT) loss. To be specific the EBIT loss came in at ₩57b. Considering that alongside the liabilities mentioned above make us nervous about the company. We'd want to see some strong near-term improvements before getting too interested in the stock. Not least because it burned through ₩2.3t 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. However, not all investment risk resides within the balance sheet - far from it. Be aware that Hanwha Solutions is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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.