Is Saltlux (KOSDAQ:304100) Weighed On By Its Debt Load?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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. We can see that Saltlux Inc. (KOSDAQ:304100) does use debt in its business. But the more important question is: how much risk is that debt creating?

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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. 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, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Saltlux's Net Debt?

The chart below, which you can click on for greater detail, shows that Saltlux had ₩5.28b in debt in September 2025; about the same as the year before. But on the other hand it also has ₩38.5b in cash, leading to a ₩33.2b net cash position.

How Healthy Is Saltlux's Balance Sheet?

According to the last reported balance sheet, Saltlux had liabilities of ₩9.61b due within 12 months, and liabilities of ₩11.9b due beyond 12 months. Offsetting this, it had ₩38.5b in cash and ₩2.38b in receivables that were due within 12 months. So it actually has ₩19.3b more liquid assets than total liabilities.

This short term liquidity is a sign that Saltlux could probably pay off its debt with ease, as its balance sheet is far from stretched. Simply put, the fact that Saltlux has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Saltlux will need earnings to service that debt. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

View our latest analysis for Saltlux

Over 12 months, Saltlux made a loss at the EBIT level, and saw its revenue drop to ₩35b, which is a fall of 31%. That makes us nervous, to say the least.

So How Risky Is Saltlux?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Saltlux had an earnings before interest and tax (EBIT) loss, truth be told. And over the same period it saw negative free cash outflow of ₩5.4b and booked a ₩11b accounting loss. While this does make the company a bit risky, it's important to remember it has net cash of ₩33.2b. That kitty means the company can keep spending for growth for at least two years, at current rates. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. 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. For example - Saltlux has 1 warning sign we think you should be aware of.

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.