Health Check: How Prudently Does Cognor Holding (WSE:COG) Use Debt?

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. Importantly, Cognor Holding S.A. (WSE:COG) does carry debt. But should shareholders be worried about its use of debt?

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When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. If things get really bad, the lenders can take control of the business. 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 step when considering a company's debt levels is to consider its cash and debt together.

What Is Cognor Holding's Net Debt?

You can click the graphic below for the historical numbers, but it shows that as of June 2025 Cognor Holding had zł781.9m of debt, an increase on zł695.1m, over one year. However, because it has a cash reserve of zł98.5m, its net debt is less, at about zł683.4m.

How Strong Is Cognor Holding's Balance Sheet?

According to the last reported balance sheet, Cognor Holding had liabilities of zł1.33b due within 12 months, and liabilities of zł259.8m due beyond 12 months. Offsetting this, it had zł98.5m in cash and zł388.7m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by zł1.10b.

This deficit is considerable relative to its market capitalization of zł1.29b, so it does suggest shareholders should keep an eye on Cognor Holding's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. 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 Cognor Holding 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 Cognor Holding

Over 12 months, Cognor Holding made a loss at the EBIT level, and saw its revenue drop to zł2.2b, which is a fall of 4.9%. We would much prefer see growth.

Caveat Emptor

Importantly, Cognor Holding had an earnings before interest and tax (EBIT) loss over the last year. To be specific the EBIT loss came in at zł61m. 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. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through zł471m of cash over the last year. So suffice it to say we consider the stock very risky. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should be aware of the 1 warning sign we've spotted with Cognor Holding .

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.