Is PETRONAS Chemicals Group Berhad (KLSE:PCHEM) A Risky Investment?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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 can see that PETRONAS Chemicals Group Berhad (KLSE:PCHEM) does use debt in its business. But the real question is whether this debt is making the company risky.

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What Risk Does Debt Bring?

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 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.

How Much Debt Does PETRONAS Chemicals Group Berhad Carry?

The chart below, which you can click on for greater detail, shows that PETRONAS Chemicals Group Berhad had RM3.46b in debt in June 2025; about the same as the year before. However, its balance sheet shows it holds RM9.71b in cash, so it actually has RM6.24b net cash.

How Healthy Is PETRONAS Chemicals Group Berhad's Balance Sheet?

According to the last reported balance sheet, PETRONAS Chemicals Group Berhad had liabilities of RM10.8b due within 12 months, and liabilities of RM8.69b due beyond 12 months. Offsetting this, it had RM9.71b in cash and RM4.03b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by RM5.79b.

Of course, PETRONAS Chemicals Group Berhad has a market capitalization of RM35.6b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward. While it does have liabilities worth noting, PETRONAS Chemicals Group Berhad also has more cash than debt, so we're pretty confident it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if PETRONAS Chemicals Group Berhad can strengthen its balance sheet over time. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

View our latest analysis for PETRONAS Chemicals Group Berhad

In the last year PETRONAS Chemicals Group Berhad's revenue was pretty flat, and it made a negative EBIT. While that's not too bad, we'd prefer see growth.

So How Risky Is PETRONAS Chemicals Group Berhad?

While PETRONAS Chemicals Group Berhad lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow RM2.0b. So taking that on face value, and considering the net cash situation, we don't think that the stock is too risky in the near term. With revenue growth uninspiring, we'd really need to see some positive EBIT before mustering much enthusiasm for this business. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 2 warning signs we've spotted with PETRONAS Chemicals Group Berhad .

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.

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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.