Kimberly-Clark de México S. A. B. de C. V (BMV:KIMBERA) Has A Pretty Healthy Balance Sheet

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. We can see that Kimberly-Clark de México, S. A. B. de C. V. (BMV:KIMBERA) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. 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. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does Kimberly-Clark de México S. A. B. de C. V Carry?

You can click the graphic below for the historical numbers, but it shows that Kimberly-Clark de México S. A. B. de C. V had Mex$23.3b of debt in June 2025, down from Mex$27.4b, one year before. However, it also had Mex$11.0b in cash, and so its net debt is Mex$12.3b.

How Healthy Is Kimberly-Clark de México S. A. B. de C. V's Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Kimberly-Clark de México S. A. B. de C. V had liabilities of Mex$20.6b due within 12 months and liabilities of Mex$23.0b due beyond that. Offsetting these obligations, it had cash of Mex$11.0b as well as receivables valued at Mex$9.02b due within 12 months. So it has liabilities totalling Mex$23.6b more than its cash and near-term receivables, combined.

This deficit isn't so bad because Kimberly-Clark de México S. A. B. de C. V is worth Mex$108.5b, and thus could probably raise enough capital to shore up 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.

View our latest analysis for Kimberly-Clark de México S. A. B. de C. V

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

With net debt sitting at just 0.91 times EBITDA, Kimberly-Clark de México S. A. B. de C. V is arguably pretty conservatively geared. And it boasts interest cover of 8.9 times, which is more than adequate. But the other side of the story is that Kimberly-Clark de México S. A. B. de C. V saw its EBIT decline by 8.6% over the last year. That sort of decline, if sustained, will obviously make debt harder to handle. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Kimberly-Clark de México S. A. B. de C. V's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So we always check how much of that EBIT is translated into free cash flow. During the last three years, Kimberly-Clark de México S. A. B. de C. V produced sturdy free cash flow equating to 71% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to.

Our View

The good news is that Kimberly-Clark de México S. A. B. de C. V's demonstrated ability to convert EBIT to free cash flow delights us like a fluffy puppy does a toddler. But, on a more sombre note, we are a little concerned by its EBIT growth rate. All these things considered, it appears that Kimberly-Clark de México S. A. B. de C. V can comfortably handle its current debt levels. Of course, while this leverage can enhance returns on equity, it does bring more risk, so it's worth keeping an eye on this one. 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 Kimberly-Clark de México S. A. B. de C. V is showing 1 warning sign 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.

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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.