Is Andfjord Salmon Group (OB:ANDF) A Risky Investment?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Andfjord Salmon Group AS (OB:ANDF) makes use of debt. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free 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 common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. 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 Andfjord Salmon Group Carry?

As you can see below, at the end of March 2025, Andfjord Salmon Group had kr830.8m of debt, up from kr65.3m a year ago. Click the image for more detail. On the flip side, it has kr178.9m in cash leading to net debt of about kr651.9m.

How Healthy Is Andfjord Salmon Group's Balance Sheet?

We can see from the most recent balance sheet that Andfjord Salmon Group had liabilities of kr486.2m falling due within a year, and liabilities of kr836.2m due beyond that. On the other hand, it had cash of kr178.9m and kr22.0k worth of receivables due within a year. So its liabilities outweigh the sum of its cash and (near-term) receivables by kr1.14b.

While this might seem like a lot, it is not so bad since Andfjord Salmon Group has a market capitalization of kr2.71b, and so it could probably strengthen its balance sheet by raising capital if it needed to. However, it is still worthwhile taking a close look at its ability to pay off debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Andfjord Salmon Group 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 Andfjord Salmon Group

Given it has no significant operating revenue at the moment, shareholders will be hoping Andfjord Salmon Group can make progress and gain better traction for the business, before it runs low on cash.

Caveat Emptor

While Andfjord Salmon Group's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Indeed, it lost kr74m at the EBIT level. When we look at that and recall the liabilities on its balance sheet, relative to cash, it seems unwise to us for the company to have any debt. Quite frankly we think the balance sheet is far from match-fit, although it could be improved with time. Another cause for caution is that is bled kr1.3b in negative free cash flow over the last twelve months. So in short it's a really risky stock. 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. For instance, we've identified 3 warning signs for Andfjord Salmon Group (2 can't be ignored) you should be aware of.

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.